Co-operation in Inter-Firm Relations in Britain and Germany: The Role of Social Institutions

The first part of the paper will theoretically examine the social function of trust, the preconditions of the production of trust and the possibility of reconstructing power as a mechanism functionally similar to trust. The second part of the paper is based on empirical research and will elaborate from a comparative perspective (Britain and Germany) how industry associations and legal regulations influence the quality of inter-firm relations. Our central argument is that trust is more reliably produced when these institutions are strong and consistent and business relations are deeply embedded into their institutional environment. We will argue that power is more likely to function as an alternative mode of co-ordinating social expectations and interaction when the institutional framework and the embeddedness of social interaction is weak. But power produced by a comprehensive and stable institutional environment - what we call system power - appears to be fostering the production of trust rather than being detrimental to it.