The effect of interorganizational trust on make-or-cooperate decisions: Disentangling opportunism-dependent and opportunism-independent effects of trust

This paper seeks to analyze the effects of interorganizational trust on the decision to vertically integrate a strategically important activity (‘make’) or sign a long‐term agreement with an external exchange partner to perform such an activity in collaboration (‘cooperate’). On the basis of the literature available on interorganizational trust in economics and sociology, we aim at theoretically and empirically disentangling opportunism‐based and opportunism‐independent effects of trust on governance choices. We develop a set of hypotheses on the moderating and direct roles of trust, which are tested using a sample of integration/collaboration decisions made by Austrian and German automotive suppliers. The results confirm both an opportunism‐mitigating effect of trust that lowers the transaction costs of a collaborative exchange and an opportunism‐independent effect that increases the transaction value of a collaborative exchange and also encompasses non‐economic motives for collaboration.