Generalized Trust, External Sourcing, and Firm Performance in Economic Downturns

Going beyond prior research that has focused on dyadic, party-specific trust, this study investigates the importance of generalized which is not specific to a counterparty and originates from broader context. We analyze how trust at regional level affects extent firm relies external suppliers performance effects doing so. Furthermore, we assess these relationships are impacted by an economic downturn. exploit differences in across 145 regions 12 European countries use data more than million small- medium-sized enterprises (SMEs) before during Great Financial Crisis (from 2008 2010). Control variables selected via double-selection procedure based machine learning. find firms high regions, compared with those low source externally (but do reduce sourcing less downturn) benefit