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Does Trust Promote Entrepreneurship In A Developing Country?

Author

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  • KITAE SOHN

    (Department of Economics, Konkuk University, 120 Neungdong-ro, Gwangjin-gu, Seoul 05029, South Korea)

  • ILLOONG KWON

    (Graduate School of Public Administration, Seoul National University, 1 Gwanak-ro, Gwanak-gu, Seoul 08826, South Korea)

Abstract

Trust was found to promote entrepreneurship in the US. We investigated whether this was true in a developing country, Indonesia. We failed to replicate this; this failure was true whether trust was estimated at the individual or community level or whether ordinary least squares (OLS) or two stage least squares (2SLS) was employed. We reconciled the difference between our results and those for the US by arguing that the weak enforcement of property rights in developing countries and the consequent hold-up problem make it more efficient for entrepreneurs to produce generic goods than relationship-specific goods—producing generic goods does not depend on trust.

Suggested Citation

  • Kitae Sohn & Illoong Kwon, 2018. "Does Trust Promote Entrepreneurship In A Developing Country?," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 63(05), pages 1385-1403, December.
    • Handle: RePEc:wsi:serxxx:v:63:y:2018:i:05:n:s0217590816500144
    DOI: 10.1142/S0217590816500144
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    Cited by:

    1. Kimlong Chheng & Budy P. Resosudarmo, 2021. "Land property rights and food insecurity in rural Cambodia," Regional Science Policy & Practice, Wiley Blackwell, vol. 13(6), pages 1911-1929, December.
    2. Illoong Kwon & Kitae Sohn, 2021. "Trust or distrust: entrepreneurs vs. self-employed," Small Business Economics, Springer, vol. 56(4), pages 1553-1570, April.

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