This study, published in the *Academy of Management Journal* in 1997, investigates the effects of trust and governance on relational risk in alliances. The authors, Bart Nooteboom, Hans Berger, and Niels G. Noorderhaven, focus on two dimensions of relational risk: the probability of something going wrong and the size of the loss incurred. They use survey data from ten suppliers of electrical/electronic components to test hypotheses related to trust and governance. The study argues that trust, which is defined as the subjective probability that a partner will not abuse one's dependence, plays a significant role in reducing relational risk. Trust is seen as a source of cooperation that coexists with self-interest and coercion. The authors propose two dimensions of trust: institutionalization (shared norms and values) and habitualization (familiarity and bonding through positive experiences). The study also examines various governance instruments, including legal and private ordering, and their impact on perceived relational risk. Hypotheses are derived from an analytical framework that considers the potential loss, switching costs, and the propensity for opportunism. The results suggest that trust and governance choices have significant effects on perceived relational risk, challenging the notion that trust is redundant or misleading in transaction cost economics. The study concludes that trust and governance are crucial in managing relational risk, and that the optimal governance package depends on various contingencies, including the objectives of the alliance, market structure, and technical and cultural conditions.This study, published in the *Academy of Management Journal* in 1997, investigates the effects of trust and governance on relational risk in alliances. The authors, Bart Nooteboom, Hans Berger, and Niels G. Noorderhaven, focus on two dimensions of relational risk: the probability of something going wrong and the size of the loss incurred. They use survey data from ten suppliers of electrical/electronic components to test hypotheses related to trust and governance. The study argues that trust, which is defined as the subjective probability that a partner will not abuse one's dependence, plays a significant role in reducing relational risk. Trust is seen as a source of cooperation that coexists with self-interest and coercion. The authors propose two dimensions of trust: institutionalization (shared norms and values) and habitualization (familiarity and bonding through positive experiences). The study also examines various governance instruments, including legal and private ordering, and their impact on perceived relational risk. Hypotheses are derived from an analytical framework that considers the potential loss, switching costs, and the propensity for opportunism. The results suggest that trust and governance choices have significant effects on perceived relational risk, challenging the notion that trust is redundant or misleading in transaction cost economics. The study concludes that trust and governance are crucial in managing relational risk, and that the optimal governance package depends on various contingencies, including the objectives of the alliance, market structure, and technical and cultural conditions.