Profit, Trust, and Contract : Alternative or Complimentary Logics in Market Exchange?

Economic sociologists have concluded that social embeddedness, characterized by trust and reciprocity, is widespread in organization-to-organization exchange. There remains, however, a tension between theorists who pose trust as an alternative logic to asocial price negotiations or contractual arrangements and empirical work that suggests that these theoretically distinct logics generally occur simultaneously in exchange relationships. We use data on a representative sample of Australian organizations, observing the multiplex content in network ties among suppliers and buyers and thereby generating generalizable evidence on both the extent of exchange embeddedness and the tension between alternative and complementary logics of exchange. We focus on price/profit expectations, trust, and formal contracts as all potentially flowing through and organizing market exchange ties. We find that while embeddedness is fairly widespread, it is not an exchange logic in opposition to the price/profit calculus or even contractual arrangements. On the contrary embeddedness and price/profit expectations tend to reinforce one another, while contracts rarely inhibit or substitute for trust. Only on the margins do expectations of trade-offs between price and trust appear