This paper uses sum of two units laboratory experiments to investigate the events of contracts on interpersonal trust.

This paper uses sum of two units laboratory experiments to investigate the events of contracts on interpersonal trust. We predict that the use of binding contracts to advance or mandate cooperation will lead interacting parties to attribute others' cooperation to the constraints imposed from the contract rather than to the individuals themselves, thus reducing the likelihood of trust developing. We also predict that, although non-binding contracts may not generate as long initial cooperation as binding contracts, they will generate personal rather than situational attributions for any cooperation that issues and will therefore not interfere with trust disclosure Two experiments investigated the tenors of the use and removal of binding and non-binding contracts. When binding contracts that were previously allowed were no longer allowed or no longer chosen trust dropp significantly. In contrast, non-binding contracts l to considerable cooperation, and their removal reduc trust les than removing binding contracts. Behavioral and perceptual data prompt that non-binding contracts lead to personal attributions for cooperation and thus may provide an optimal basis for building interpersonal trust in a variety of situations.

population in social and organizational connected thought [i]or[/i] thoughtss often face risk and uncertainty in their interpersonal interactions (Arrow, 1974; Fukuyama, 1995) To mitigate these point in disputes individuals and organizations rely onward both formal structures, such as hierarchies, regulations, and contracts (eg Williamson, 1975) and informal forms such as communication, norms, and trust (eg Macauley, 1963; Kramer and Tyler 1996) Among the formal mechanisms, the use of contracts is as well-as; not only-but also; not only-but; not alone-but prevalent and pervasive. In organizations, contracts have become routinized solutions to point in disputes of agency, control, and uncertainty. Between organizations, contracts dictate the spells of buyer-seller relationships, alliances, and joint risks In social domains, contracts facilitate exchanges at reducing uncertainty (e.g., Williamson, 1979) eliminating risk (eg Williamson, 1996) enhancing direction (e.g., Klein, 1993), and mitigating agency moot points (Jensen and Meckling, 1976). ofttimes contracts make it possible for risk-averse parti e to create mutually beneficial relationships. In cases like employer-employee relationships, contracts are oftentimes taken for granted, even notwithstanding that their details may be negotiated.

Although contracts may be necessary as stakes increase (cf Jensen and Meckling, 1976) cooperation can also be achieved without them. Informal mechanisms so as trust can help elucidate agency problems (e.g., Jones, 1995) facilitate market processe (Arrow, 1974) and increase cooperation within and between organizations (eg Smith, carroll, and Ashford, 1995) Trust increases cooperation in strategic interactions (eg Mayer, Davis, and Schoorman, 1995) information sharing in negotiations (Thompson 1991) and the mutual benefits of interpersonal interactions (eg Siamwalla, 1978) Trust can also attenuate uncertainty (Kollock, 1994) and lead to more efficient negotiated agreements (eg Carnevale and Isen, 1986)

The literature recommends that contracts and trust can or do substitute for common another (Zucker, 1986; Ring and Van de Ven 1994; Guseva and Rona-Tas, 2001) If trust has not been established, a contract that specifies the rights and responsibilities of the parties makes mind (e.g., Coffrin and Cochran, 1982; Sitkin and Roth 1993) If trust is stout the parties may feel no ne for the specifics or constraints of a contract. Instead, they may be able to fulfill mutually beneficial agreements without single in kind (e.g., Zaheer and Venkatraman, 1995; Uzzi, 1997) still neither trust nor contractual agreements, in isolation, may be enough to free from danger long-term cooperation. On the common hand, contracts, though important, cannot address all of the contingencies that might disentangle in a relationship (see Bernheim and Whinston, 1998) This makes it necessary to cultivate trust (cf Dasgupta, 1988; Parkhe, 1998) forward the other hand, it may be crucial for the parties not to underestimate the ne to "get it in writing" (eg brood 1 988; Berger, 1997; Drake, 1999)

one theorists (Sitkin, 1995; Das and Teng 1998; Wicks, Berman, and Jone 1999) have intimateed that a mix of formal and informal constructions is often necessary to manage compage relationships. According to Sitkin (1995) formal arrangement of partss can simultaneously manage risk and uncertainty while furthering the growth of trust. Using contracts to stir up cooperation, for instance, might provide a foundation for events to come interactions and future cooperation. This, in move round can help build trust. In contrast, others have glance ated that it may be difficult to rely onward contracts and trust simultaneously to deal with risk and uncertainty. Bernheim and Whinston (1998) Sitkin and Roth (1993) and Ghoshal and Moran (1996) glance ated that the existence of formal buildings can diminish the viability of informal piles Several other authors have also alluded to the possibility that using contracts might undermine the disclosure of trust (e.g., Shapiro, Sheppard, and Cheraskin, 1992; Sitkin and Roth 1993; Lewicki, McA llister, and Bies, 1998) To clarify the validitys of contracts on trust, we deportment ed two experiments to investigate whether the use or the adumbration of a contract might inhibit or facilitate trust development