Trust and Adaptation in Relational Contracting

Trust, which occurs at the organizational and interpersonal levels, is generally believed to be important for the success ol interfirm relationships. We explore the effects of interaction between the two types of trust on negotiators' motivation to solve problems of adaptation in relational contracting. What we find is that too much trust is as bad as too little. Solutions are furthest from optimal when both organizational and interpersonal trust are high or both are low.