Cross-national differences in effects of social embeddedness on trust : a comparative study of German and Dutch business transactions

Embeddedness theory stresses the importance of concrete personal relations and networks of relations in economic life. Recent sociological research shows that effects of embeddedness may differ between social settings, and recent experimental anthropological findings reveal that levels of cooperation and norm-enforcement differ between cultural settings. We extent these lines of research by examining whether effects of embeddedness on trust differ between two social settings, namely Germany and The Netherlands. To examine our research question we use a comprehensive database consisting of 925 Dutch and 929 German purchase transactions. We find evidence that some aspects of social embeddedness indeed have different effects in the two countries. In Germany sharing a history of previous transaction and the existence of alternative partners had a larger effect on trust than in the Netherlands. We offer a potential explanation and discuss its implications for future research on embeddedness.