Nooteboom, B., Berger, H., & Noorderhaven, N. G. (1997). Effects of trust and governance on relational risk. Academy of Management Journal, 40(2), 308-338. This study examines the effects of trust and governance on relational risk in alliances. Relational risk is defined as the probability of something going wrong and the size of the loss incurred when it does. The research tested hypotheses using survey data from ten suppliers of electrical/electronic components, finding that trust-related variables and other factors significantly affect perceived relational risk. The study highlights the importance of trust and governance in managing relational risk in alliances. Trust is defined as the subjective probability that a partner will not act opportunistically. Two dimensions of trust are identified: institutionalization (shared norms and values) and habitualization (familiarization, habit formation, and bonding). Trust is seen as a significant source of cooperation, alongside coercion and self-interest. The study also explores the role of governance in managing relational risk. Governance includes mechanisms such as legal ordering (contracts, monitoring, hostages) and private ordering (reputation, incentives). The research finds that trust, along with governance mechanisms, can reduce the perceived probability of loss rather than the size of loss. The study proposes that trust and governance are critical in managing relational risk in alliances. Trust is seen as a key factor in reducing the probability of loss, while governance mechanisms help manage the size of loss. The study also considers factors such as firm size, uncertainty avoidance, and the continuity of the relationship, which can affect the perceived probability and size of loss. The findings suggest that trust and governance are essential in managing relational risk in alliances. Trust contributes to cooperation and reduces the probability of loss, while governance mechanisms help manage the size of loss. The study emphasizes the importance of trust and governance in managing relational risk in alliances.Nooteboom, B., Berger, H., & Noorderhaven, N. G. (1997). Effects of trust and governance on relational risk. Academy of Management Journal, 40(2), 308-338. This study examines the effects of trust and governance on relational risk in alliances. Relational risk is defined as the probability of something going wrong and the size of the loss incurred when it does. The research tested hypotheses using survey data from ten suppliers of electrical/electronic components, finding that trust-related variables and other factors significantly affect perceived relational risk. The study highlights the importance of trust and governance in managing relational risk in alliances. Trust is defined as the subjective probability that a partner will not act opportunistically. Two dimensions of trust are identified: institutionalization (shared norms and values) and habitualization (familiarization, habit formation, and bonding). Trust is seen as a significant source of cooperation, alongside coercion and self-interest. The study also explores the role of governance in managing relational risk. Governance includes mechanisms such as legal ordering (contracts, monitoring, hostages) and private ordering (reputation, incentives). The research finds that trust, along with governance mechanisms, can reduce the perceived probability of loss rather than the size of loss. The study proposes that trust and governance are critical in managing relational risk in alliances. Trust is seen as a key factor in reducing the probability of loss, while governance mechanisms help manage the size of loss. The study also considers factors such as firm size, uncertainty avoidance, and the continuity of the relationship, which can affect the perceived probability and size of loss. The findings suggest that trust and governance are essential in managing relational risk in alliances. Trust contributes to cooperation and reduces the probability of loss, while governance mechanisms help manage the size of loss. The study emphasizes the importance of trust and governance in managing relational risk in alliances.