Paper presented at the EMNet 2011December 1 – 3, 2011, Limassol, Cyprus

(http://emnet.univie.ac.at/)

Trust, Social Capital and the Coordination of Relationships

between the Members of Cooperatives

Isabella Hatak – Richard Lang – Dietmar RoesslRiCC – Research Institute for Co-operation and Co-operatives

WU Vienna University of Economics and BusinessAugasse 2-6, 1090 Vienna, Austria

Abstract

Due to a regulatory change cooperatives in Germany and Austria are not restricted anymore to

benefitting their members solely, but also are allowed to serve the needs of third parties. From an

organizational theoretical point of view this seemingly small change led to the development of

two different types of organizations, namely members-focused cooperatives (MFC) and third-

parties-focused cooperatives (3PFC). Against this background the paper aims at analyzing the

mechanisms coordinating the relation between actors forming these two types of cooperatives.

On the one hand, there is a wide range of literature relating the cooperatives to coordination

mechanisms with special emphasis on trust. On the other hand, cooperatives are described as

organizations building on social capital. Therefore, the capacity of the diverse coordination

mechanisms – market / hierarchy / maxim-based trust / norm-based trust – and their interaction

and linkages with social capital will be analyzed.

Keywords: cooperatives, coordination, maxim-based trust, norm-based trust, social capital, ,

1

Introduction

Until 2006 in Germany and until 2008 in Austria cooperatives were solely dedicated to benefit

their members. Since then, due to regulatory changes in the course of adapting to the SCE

(Societas Cooperativa Europaea), cooperatives are also allowed to redound to the advantages of

third parties. From an organizational theoretical point of view this seemingly small change led to

the development of two different types of organizations, namely members-focused cooperatives

(MFC) and third-parties-focused cooperatives (3PFC).

Besides their potential to better incorporate actors into the planning and provision process,

cooperatives are also seen as major contributors with regard to the establishment of communities

and resident empowerment on the neighborhood level (Reed/Stanley 2005; Gonzales 2007;

Somerville 2007; Pestoff 2009). In this respect, the newly established 3PFC which strongly build

on Gemeinschaft conditions could play an important role for the further enhancement of social

inclusion (cf. Somerville 2007; Lang/Roessl 2011; Nilsson/Hendrikse 2011).

Referring to the conceptual argument, which we want to put forward in this paper,

cooperatives are seen as organizations being built on (various forms of) trust and social capital.

Our integrative approach aims at overcoming the risks of conceptualizing cooperatives as being

either purely trust-based or purely social-capital-based organizations. Rather, we hypothesize that

there are linkages between these two conceptualizations. This is fundamental for gaining a more

holistic understanding of cooperatives. However, in order to make this relation explicit, it is

necessary to untangle the concept of social capital and bring it back to its theoretical roots, which

lie in the social relations between individuals. Likewise, it is necessary to distinguish between

different types of coordination mechanisms with special attention given to forms of trust.

Against this background, the paper aims at analyzing the mechanisms coordinating the relation

between actors forming members-focused cooperatives (MFC) and third-parties-focused

cooperatives (3PFC). On the one hand, there is a wide range of literature relating cooperatives to 2

coordination mechanisms with special emphasis on trust. On the other hand, cooperatives are

described as organizations building on social capital. Therefore, the capacity of the diverse

coordination mechanisms – market / hierarchy / maxim-based trust / norm-based trust – and their

interaction and linkages with social capital will be analyzed.

Thus, first, we discuss the specific nature of cooperatives from a social capital perspective.

The relational perspective of social capital (Durkheim 1893/1997) points to the relevance of

social and moral obligations for coordinating relations between cooperatives’ members.

Consequently, based on the analysis of the deficits of the classical coordination mechanisms

market and hierarchy, trust is presented as a third ideal-typical mechanism for coordinating

cooperative relations. The discussion of the effectiveness of trust concerning the establishment

and maintenance of highly complex transaction relationships based on long-term objectives leads

to the delineation of relationship-related maxim-based trust and context-related norm-based

trust. Finally, the two separate streams of discussion on social capital and on trust in the context

of cooperatives are related to each other.

Cooperatives and Social Capital

Member-based organizations like cooperatives obtain vital resources from their members (Zerche

et al. 1998; Valentinov 2004): access to buying market in the case of marketing cooperatives, to

sales markets in the case of purchasing cooperatives, access to workforce in the case of producer

cooperatives, etc. Therefore, founding and maintaining a cooperative organization requires a

group of potential members, who provide the cooperative with resources, so that cooperatives

build on social capital. And in utilizing these social relationships and in strengthening the group

of members cooperatives enhance social capital.

Governance research has early on highlighted the social embeddedness of cooperative

organizations, as put forward in Draheim’s concept of the dual nature of cooperatives (Draheim 3

1952) and Toennies’ work on Gemeinschaft und Gesellschaft (Toennies 1963). An aspect of this

social embeddedness of cooperatives is not only the mobilization of social capital as the key

resource of this type of organization, but also the reproduction of social capital (Evers 2001;

Valentinov 2004; Zhao 2011). In this chapter, we will focus on the resource character of social

capital for cooperatives. Therefore, we have to clarify the meaning of social capital, which is a

difficult task, given its omnipresence in policy debates and academic discourses.

Despite the controversy about its definition, conceptualization and measurement, most

researchers in the field agree that social capital refers to more or less institutionalized social

relations and their embedded resources, which can be beneficial to both individuals and groups

(Lin 1999). However, due to its relational character, it cannot be exclusively claimed by a person

or an organization. If the relationship is dissolved, the social capital is gone. For Putnam (1993,

2000) and scholars that build on his arguments (see for example Evers 2001; Offe/Fuchs 2001),

social capital is merely a container term for various “social resources” differentiated from

governmental (e.g., public grants) or market-related resources (remunerations from the sales of

services).1 Putnam’s macro-perspective might deliver useful insights into the reproduction of

social capital by cooperatives and their contribution to socio-economic development. According

to this “collective” approach, elements of social capital range from trust and civicness to

solidarity and associations. However, though Putnam highlights the links between trust2 and the

development of social capital, the concrete relation remains unclear (cf. Portes 1998). Thus,

having a look at scholars from the field of economic sociology, who have defined the relationship

between the different elements of social capital more precisely, may be beneficial.

Following Granovetter’s conceptualization of social embeddedness (Granovetter 1985), we

can distinguish a structural from a relational dimension of social capital (Krishna/Uphoff 2002;

Moran 2005; Rutten et al. 2010):

The structural dimension is basically focusing on the number of connections individuals have

with other individuals. While a dense network structure can be described as bonding social 4

capital, bridging social capital results from actors , who act as a bridge out of one dense

network to another one (Burt 1992).3 A cooperative can be seen as such a structural form of

social capital that is associated with a dense network or bonding social capital (Valentinov

2004). The structuralist position, however, is less concerned with what is going on in these

social networks, though the quality of social relations is considered as being crucial for the

creation of social capital.

The relational dimension focuses on institutions, which are underlying or governing the

network (rules, norms, values, trust, shared identity, etc.) (Durkheim 1893/1997; Granovetter

1985). These institutions are maintained and reproduced through social interactions (Giddens

1984; Granovetter 1985). The transactions between individuals occurring in a cooperative

network structure have to be coordinated by social and moral obligations in order to enable

resource mobilization and capitalization on social relations. In this process, trust seems to be a

suitable coordination mechanism within a cooperative network structure, which creates the

necessary reciprocal obligations among actors (Roessl 1996; Adler 2001; Anheier/Kendall

2002).

In the next chapter, we dwell on the relational aspect of social capital and focus on the specific

nature of trust as a coordination mechanism (Brunie 2009) in cooperative transaction

relationships.

Cooperatives and trust

The advantages of cooperative relationships arise from the functioning coordination of the

members’ behavior. Only when each member in a cooperative relationship forgoes short-term

opportunism in favor of common long-term objectives, the cooperative relationship can lead to

advantages for each member (Roessl 1996). How is it, then, that members are able to ensure that

their partners in the cooperative relationship behave according to the rules stipulated ex ante? We

5

have identified three ideal-typical mechanisms for governing cooperative relationships: (1)

spontaneous behavioral governance on the basis of the market mechanism, (2) hierarchical or

mechanistic governance on the basis of regulation and sanctions, and (3) heterarchical or organic

governance on the basis of trust (Roessl 1996; Osterloh/Weibel, 2000; Adler 2001).

From the transaction cost economic perspective, market and hierarchy possess “distinctive

strengths and weaknesses, where hierarchy enjoys the advantage for managing cooperative

adaptations and the market for autonomous adaptations” (Williamson 2005: 6). The

coordination capacity of the market mechanism originates from the self-organization of the

individual market members, who strive to realize their own interests as quickly as possible.

Thus, this mechanism overcomes any uncertainty about the other’s behavior as the actors

know that the other will behave opportunistically! However, as the ideal-typical market

functions only in timeless situations (simultaneous exchange), the market mechanism focuses

on the pursuit of short-term advantages, as it cannot ensure that the exchange partners refrain

from behaving opportunistically. Thus, it cannot be the dominant coordination mechanism in

long-term transaction relationships (see e.g. Ouchi 1979).

The behavioral determination by hierarchical governance (Noorderhaven 1995) is equally

limited with respect to cooperatives. Credible sanction threats require sufficient sanctioning

powers on the part of the members, as well as the ex-ante knowledge of the desired behavior

of the partner and its consequences (Eberl 2004) and the ex-post identification of this behavior

(Spremann 1990). Furthermore, the successful hierarchical governance requires a consistent

monitoring of the partner's behavior. However, due to their heterarchical structure,

“hierarchy”, or in other words, overcoming the short-term orientation of market-based

interactions by restricting the leeway for opportunistic behavior, is not applicable as a

dominant coordination mechanism within cooperatives.

Therefore, classical transaction-cost theory knowing just these two coordination mechanisms

(market and hierarchy) encounters difficulties in explaining the governance of cooperative

6

relationships (Valentinov 2004). Cooperatives can neither – due to their long-term orientation –

be sufficiently coordinated by the market mechanism nor – due to the absence of a hierarchical

authority – by hierarchy (Moulaert/Nussbaumer 2005; Lang/Roessl 2011). Therefore, a

mechanism other than market or hierarchy has to be in place in coordinating these relationships

between the cooperative’s members (Furubotn 2001). But in the absence of a hierarchical

authority, which mechanism can coordinate the actors’ behavior in complex and uncertain

cooperative relationships?

Facing the deficits of market and hierarchy as coordination mechanisms within cooperative

arrangements, an alternative mechanism referred to as ‘trust’ (e.g., Roessl 1996; Adler 2001;

Fink/Kessler 2010; Hatak/Roessl 2011) has been suggested for coordinating highly complex and

uncertain cooperative relationships.

In order to further develop the line of argument of Osterloh/Weibel (2000) respectively Adler

(2001) a differentiation between instrumental, maxim-based and norm-based trust is required:

Instrumental trust can be specified as behavior based on rational considerations (Luhmann

2000). The trustor trusts the trustee because of control and sanctions. Other possible behavior

than the expected one is less attractive for the latter. In other words: the costly sanctions in

place for breach of trust exceed any potential benefits from opportunistic behavior so that

uncertainties regarding the behavior of the other are reduced (Bradach/Eccles 1989).

Therefore, some have raised the issue that instrumental trust is not trust at all or maybe can be

seen as trust at its narrowest bandwidth (Sitkin/Roth 1993; Luhmann 2000). As instrumental

trust requires controllable behavior and definable outcomes (for contingent claim contracts,

see Heide/John 1988), this mechanism is confronted with organizational failure in the case of

complex cooperative arrangements. Thus, instrumental trust is congruent with hierarchical

coordination. Therefore, we refrain from using the term “instrumental trust” but rather use the

label “hierarchical coordination”.

7

Referring to maxim-based trust, the trustor neglects the existing latitude of opportunistic

behavior of the other and behaves in a cooperative manner. This implies that he behaves in a

way that will prove beneficial only if the other does not take the chance to prey upon him but

rather responds cooperatively in turn. By rendering himself unprotected towards the partner,

the trustor reduces the trustee’s inclination to behave opportunistically, and thus uncertainty is

further reduced. Based on specific reciprocity norms4 referring to direct exchange (Enjolras

2009: 764) the actor expects the other not to strive for short-term advantages but to behave

cooperatively in order not to endanger the potential valuable relationship. Therefore, maxim-

based trust is able to coordinate relationships within MFC effectively. Repeated cycles of

exchange, risk-taking and successful fulfillment of expectations strengthen the willingness of

the parties to rely upon each other and increase the resources brought into the relationship

(Lewicki/Bunker 1996; Rousseau et al. 1998). Therefore, information available to the trustor

from within the relationship itself constitutes the basis of maxim-based trust. The amount of

knowledge necessary for trust based upon experiences gained within relationships is

somewhere between complete information and complete ignorance (Simmel 1964). In the case

of complete information, there is no need to trust, and given complete ignorance, there is no

basis upon which to trust (McAllister 1995). Basically maxim-based trust draws its

coordinating power from the advantages the cooperative arrangement redounds to its

members. Whereas hierarchical coordination (instrumental trust) is based on cost-effectiveness

considerations, maxim-based trust involves a broader array of resource exchange including

socio-emotional support. Repeated interactions create expanded resources, including shared

information, status and concern. These expanded resources can, in turn, enable the

development of a psychological identification (Gaertner et al. 1996). The MFC’s members

may come to characterize themselves in relationship to the other members or the organization

as “we”, and may derive expressive benefits from being part of their cooperative. That way,

the value of the relations of the members with their MFC increases, thus benefitting the level

8

of maxim-based trust. Nevertheless, as maxim-based trust is based on the value of the relation

it cannot explain community-based enterprises focusing on advantages of third parties (3PFC).

In contrast, norm-based trust is intrinsically motivated: The trustor trusts the trustee because of

collective norms (Dale 2002) embedded in a concrete spatial and historical context (time-

space embeddedness). Norm-based trust stems from the trustor’s and trustee’s interpretation of

the social context in which their relation is embedded (Moellering 2005). Here, based on

“generalized reciprocity” which “constitutes the solidary extreme, referring to transactions that

are altruistic” (Enjolras 2009: 764) a trustor can trust a trustee without establishing trust in a

specific personal relationship (Zucker 1986). Or as Moellering (2006: 373) puts it: “[…]

institutions are a basis for trust between actors, because they imply a high degree of taken-for-

grantedness which enables shared expectations even between actors who have no mutual

experience or history of interaction. In the first instance this approach is based on the

phenomenological assumption that actors are ‘looking at the world from within the natural

attitude’ (Schuetz 1932/1967: 98) relying on […] the validity of institutionalized rules, roles

and routines. However, this approach does afford the actor an active role in interpreting […]

institutions.” However, as the actors cannot be seen as passive reproducers of structure, norm-

based trust between the cooperative’s members requires that the institutions, on which such

trust is based, are trusted themselves. Therefore, institutions are both source and an object of

norm-based trust (Giddens 1990; Moellering 2006). Norm-based trust involves the

development of interpretative schemes, social resources and place-bounded norms to which

the actors refer in trustful and trustworthy interaction, thereby (re)producing the social

structure of signification, domination, legitimation in which norm-based trust is constituted

(Sydow 1998). Based on this assumption, the cooperative’s members (re)produce collectively

the institutional framework which then serves as a source for trust (in other members)

(Moellering 2006).

9

Citizenship behavior from the cooperative’s members and socio-economic support from the

cooperative organization are characteristic of high levels of norm-based trust (Eisenberger et al.

1986; Organ 1990). Thus, only norm-based trust can coordinate relations within 3PFC and is able

to explain such community-based enterprises focusing on advantages of third parties.

The role of cooperatives in reproducing trust and social capital

Bringing in the concept of trust and distinguishing between maxim-based and norm-based trust

benefits the understanding of how these types of trust coordinate the actions of the cooperative’s

members which do not take place at the same time and how they are rooted in relational social

capital and generalized social capital respectively (Brunie 2009). Relational social capital refers

to relationships among groups and organizations, thus providing individual benefits, such as

acquiring resources by calling upon friends. Generalized social capital is an orientating attitude

that is not related to specific networks and as such it binds society together (Brunie 2009: 253,

257).

Basically, the governance structure of a cooperative organization is designed to protect and

enhance the building of social capital among its members and the pooling of social resources by

strengthening the reciprocity norms, which underlie the trust-based relations in cooperatives.

Coleman (1990) perceives a norm on a specific action to be a socially defined right by others to

control an individual’s action. Norms are more likely to be internalized when an individual

clearly identifies with a particular group as it is the case for member-based cooperative

organizations (Berg et al. 1995). Thus, in the case of 3PFC community orientation being based to

a large extent on generalized reciprocity allows for the pooling of resources – such as

volunteering or donating. Generalized reciprocity can be understood as a motivation to repay

generous actions by completing actions which are generous or helpful for others.

10

As it is the case for all relations (Roessl 1996) relations within cooperatives are actually

coordinated by a mixture of all four coordination mechanisms (market-based coordination,

hierarchical coordination, heterarchical coordination by maxim-based trust and heterarchical

coordination by norm-based trust). Whereas in MFC heterarchical coordination by maxim-based

trust (rooted in the specific reciprocity related to the value of the relationship for the individual

member) is most important, in 3PFC heterarchical coordination by norm-based trust (rooted in

generalized reciprocity related to the interpretation of the social context in which this relation is

embedded) plays the key role for mobilizing a variety of resources and for attaining multiple

goals (e.g., economic, social and political goals) (Enjolras 2009). That way, the cooperative’s

governance structure is based on different compliance and incentive instruments – often referred

to as “cooperative principles” (cf. Somerville 2007) – which allow them to mitigate the

coordination failures of hierarchy and market. This is the reason why cooperatives are

comparatively more efficient in the course of pursuing multiple goals and managing complex

resource structures (Evers 2001; Enjolras 2009).

Thus, by emphasizing their ideal-typical coordination mechanism, cooperatives have the

potential to realize the desired socio-political effects for society, which Putnam prominently

highlighted within his social capital theory (Evers 2001). Besides pursuing economic and social

objectives, the distinct governance structure enables cooperatives to achieve civic and democratic

objectives. As Evers (2001: 301) notes, “a certain level of social capital resources is absolutely

critical for their survival as social and civic organizations”.

Nevertheless, just as it is the case for other organizations, cooperatives are threatened by

governance failure (Ben-Ner/Van Hoomissen 1994). The potential advantages of a social capital

based organization only hold true for a moderate number of members (Bowles/Gintis 2002). With

greater size, cooperatives are threatened by “degeneration” towards either hierarchical

organizations or corporate enterprises (Valentinov 2004; Purtschert 1990). Due to the increasing

difficulties regarding democratic decision making and the generation of returns on investment in

11

social capital, members rather confine themselves to acting as investors or customers (Somerville

2007). In this case, the malfunctioning of democratic participation mechanisms, adequate control

mechanisms, intrinsic incentives for members and the opportunistic behavior of board and

management undermine the cooperative organization’s reputation of being trustworthy (Enjolras

2009). However, it is exactly this trustworthiness, which is critical for the mobilization of social

capital.

Trust is a fragile mechanism, and if members feel betrayed, they do not easily give a

relationship a fresh start, because betrayed trust produces distrust between social actors

(Bachmann 2006). In general, if the institutional arrangements of a cooperative organization are

unreliable and patchy, the development of trust is hampered, exacerbating the mobilization of

social capital. Additionally, on the one hand, maxim-based trust appears to be no option at all if

the actors do not take enough time and effort for developing a viable relation and for gaining the

experiences within the relationship necessary for trust development. On the other hand, norm-

based trust is no option if shared interpretations of the social context in which this relation is

embedded do not emerge.

List of References

Adler, P.S. (2001). Market, Hierarchy and Trust: The Knowledge Economy and the Future of

Capitalism. Organization Science, 12 (2), 215-234.

Anheier, H., & Kendall, J. (2002). Interpersonal Trust and Voluntary Associations. British

Journal of Sociology, 53, 343-362.

Bachmann, R. (2006). Trust and/or power: towards a sociological theory of organizational

relationships. In R. Bachmann, & A. Zaheer (Eds.), Handbook of trust research. Cheltenham:

Edward Elgar, pp 393-408.

12

Ben-Ner, A. & Van Hoomissen, T. (1994). The governance of nonprofit organizations: law and

public policy, Nonprofit Management & Leadership, 4 (4), 393-414.

Berg, J., Dickhaut, J., & McCabe, K. (1995). Trust, Reciprocity, and Social History, Games and

Economic Behavior, 10 (1), July, 122-142.

Bowles S., & Gintis H. (2002). Social Capital and Community Governance. Economic Journal,

112, 419-436.

Bradach, J.L., & Eccles, R.G. (1989). Price, authority and trust: From ideal types to plural forms.

Annual Review of Sociology, 15, 97-118.

Brunie, A. (2009). Meaningful Distinctions within a Concept: Relational, Collective, and

Generalized Social Capital. Social Science Research, 38 (2), 251-265.

Burt, R. (1992). Structural Holes: The Social Structure of Competition. Cambridge, MA: Harvard

University Press.

Coleman, J. (1990). Foundations of Social Choice Theory. Cambridge, MA: Harvard University

Press.

Dale, B. (2002). An Institutionalist Approach to Local Restructuring: The Case of Four

Norwegian Mining Towns. European Urban and Regional Studies, 9 (1), 5-20.

Draheim, G. (1952). Die Genossenschaft als Unternehmungstyp. Goettingen: Vandenhoeck &

Ruprecht.

Durkheim, E. (1893/1997). The Division of Labor in Society. New York: The Free Press.

Eberl, P. (2004). The development of Trust and Implications for Organizational Design: A Game-

and Attribution-theoretical Framework. Schmalenbachs Business Review, 5, 258-273.

Eisenberger, R., Huntington, R., Hutchinson, S., & Sowa, D. (1986). Perceived organizational

support. Journal of Applied Psychology, 71, 500-507.

13

Enjolras, B. (2009). A Governance-Structure Approach to Voluntary Organizations. Nonprofit

and Voluntary Sector Quarterly, 38 (5), 761-783.

Evers, A. (2001). The significance of social capital in the multiple goal and resource structure of

social enterprises. In C. Borzaga, & J. Defourny (Eds.), Social Enterprises in Europe. London:

Routledge, pp 296-311.

Fink, M., & Kessler, A. (2010). Cooperation, Trust and Performance: Empirical Results from

Three Countries. British Journal of Management, 21 (2), 469-483.

Furubotn, E. (2001). The new institutional economics and the theory of the firm. Journal of

Economic Behavior & Organization, 45, 133-153.

Gaertner, S.L., Dovidio, J.F., & Bachmann, B.A. (1996). Revising the contact hypothesis: The

induction of a common group identity. International Journal of Intercultural Relations, 20,

271-290.

Giddens, A. (1984). The Constitution of Society. Cambridge: Polity Press.

Gonzales, V. (2007). Social enterprises, institutional capacity and social inclusion. In A. Noya &

E. Clarence (Eds.), The social economy: Building inclusive economies. Paris: OECD, pp 119-

153.

Granovetter, M. (1985). Economic Action and Social Structure: The Problem of Embeddedness.

American Journal of Sociology, 91(3), 481-510.

Hatak, I., & Roessl, D. (2011). Correlating Relational Competence with Trust. Journal of

Information Processing, 19, 221-230.

Heide, J., & John, G. (1988). The Role of Dependence Balancing in Safeguarding Transaction-

Specific Assets in Conventional Channels. Journal of Marketing, 52, 20-35.

14

Krishna, A., & Uphoff, N. (2002). Mapping And Measuring Social Capital. In C. Grootaert, & T.

van Bastelaer (Eds.), The Role of Social Capital in Development: An Empirical Assessment.

New York: Cambridge University Press, pp 85-124.

Lang, R. & Roessl, D. (2011) Contextualizing the Governance of Community Co-operatives:

Evidence from Austria and Germany, Voluntas: International Journal of Voluntary and

Nonprofit Organizations, DOI 10.1007/s11266-011-9210-8.

Lewicki, R., & Bunker, B. (1996). Developing and Maintaining Trust in Work Relationships. In

T. Tyler, & R. Kramer (Eds.), Trust in organizations: frontiers of theory and research.

Thousand Oaks: Sage, pp 114-139.

Lin, N. (1999). Building a Network Theory of Social Capital, Connections, 22(1), 28–51.

Luhmann, N. (2000). Vertrauen: Ein Mechanismus der Reduktion sozialer Komplexitaet. Vol. 4.

Stuttgart: Lucius & Lucius.

McAllister, D.J. (1995). Affect and Cognition-Based Trust as Foundations for Interpersonal

Cooperation in Organizations. Academy of Management Journal, 38, 24-58.

Moellering, G. (2005). The trust/control duality: An integrative perspective on positive

expectations of others. International Sociology, 20 (3), 283-305.

Moellering, G. (2006). Trust, institutions, agency: towards a neoinstitutional theory of trust. In R.

Bachmann, & A. Zaheer (Eds.), Handbook of trust research. Cheltenham: Edward Elgar, pp

355-376.

Moran, P. (2005). Structural vs. relational embeddedness: Social capital and managerial

performance, Strategic Management Journal, 20 (4), 403–426.

Moulaert, F., & Nussbaumer, J. (2005). Defining the social economy and its governance at the

neighbourhood level: A methodological reflection. Urban Studies, 42, 2037-2053.

15

Nilsson, J., & Hendrikse, G. (2011). Gemeinschaft and Gesellschaft in cooperatives. In M.

Tuunanen, J. Windsperger, G. Cliquet, & G. Hendrikse (Eds.), New developments in the theory

of networks. Heidelberg: Physica-Verlag, pp 339-352.

Noorderhaven, N. (1995). Trust and transaction – toward transaction cost analysis with

differential behavioral assumption. Tijdschrift voor Economie en Management, 15, 5-18.

Offe, C., & Fuchs, S. (2001). Schwund des Sozialkapitals? Der Fall Deutschland. In: R.D.

Putnam (Ed.), Gesellschaft und Gemeinsinn. Sozialkapital im internationalen Vergleich.

Gütersloh: Verlag Bertelsmann Stiftung, pp 417-511.

Osterloh, M., & Weibel, A. (2000). Ressourcensteuerung in Netzwerken: Eine Tragoedie der

Allmende?. In J. Sydow, & A. Windeler (Eds.), Steuerung von Netzwerken – Konzepte und

Praktiken. Wiesbaden: Opladen, pp 88-106.

Organ, D.W. (1990). The motivational basis of organizational citizenship behaviour. In L.L.

Cummings, & B.M. Staw (Eds.), Research in organizational behaviour. Greenwich: JAI

Press, pp 43-72.

Ouchi, W. (1979). A Conceptual Framework for the Design of Organizational Control

Mechanisms. Management Science, 25, 833-848.

Pestoff, V. (2009). Towards a paradigm of democratic participation: Citizen participation and

coproduction of personal social services in Sweden. Annals of Public and Cooperative

Economics, 80 (2), 197–224.

Portes, A. (1998). Social Capital: Its Origins and Applications in Modern Sociology. Annual

Review of Sociology, 24, 1-24.

Purtschert, R. (1990): Zur Oekonomisierung der genossenschaftlich organisierten Wirtschaft. In:

Laurinkari, J. (Ed.), Genossenschaftswesen: Hand- und Lehrbuch. Munich: Oldenbourg, pp

264-275.

16

Putnam, R.D. (1993). Making Democracy Work. Civic Traditions in Modern Italy. Princeton:

Princeton University Press.

Putnam, R.D. (2000). Bowling Alone: The Collapse and Revival of American Community. New

York: Simon & Schuster.

Reed, H., & Stanley, K. (2005). Co-operative Social Enterprise and its Potential in Public

Service Delivery. London: Institute for Public Policy Research.

Roessl, D. (1996). Selbstverpflichtung als alternative Koordinationsform von komplexen

Austauschbeziehungen. Zeitschrift fuer betriebswirtschaftliche Forschung, 48 (4), 311-334.

Rousseau, D.M., Sitkin, S.B., Burt, R.S., & Camerer, C. (1998). Not so different after all: A

cross-discipline view of trust. Academy of Management Review, 23 (3), 393-404.

Rutten, R., Westlund, H., & Boekema, F. (2010). The Spatial Dimension of Social Capital,

European Planning Studies, 18(6), 863-871.

Schuetz, A. (1932). Der sinnhafte Aufbau der sozialen Welt. Eine Einleitung in die verstehende

Soziologie. Vienna: Springer.

Schuetz, A. (1967). The phenomenology of the social world. Evanston, Il.: North Western Univ.

Press.

Sitkin, S.B., & Roth, N.L. (1993). Explaining the Limited Effectiveness of Legalistic “Remedies”

for Trust/Distrust. Organization Science, 4 (3), 367-393.

Simmel, G. (1964). The sociology of Georg Simmel. New York: Free Press.

Somerville, P. (2007). Co-operative identity, Journal of Cooperative Studies, 40 (1), 5-17.

Spremann, K. (1990). Asymmetrische Information. Zeitschrift fuer Betriebswirtschaft, 60 (5/6),

561-586.

Sydow, J. (1998). Understanding the constitution of inter-organizational trust. In C. Lane, & R.

Bachmann (Eds.)., Trust Within and Between Organizations. Oxford: Oxford University Press,

pp 31-53.17

Toennies, F. (1963). Gemeinschaft und Gesellschaft. Darmstadt: Wissenschaftliche

Buchgesellschaft.

Valentinov, V. (2004). Toward a social capital theory of cooperative organization. Journal of

Cooperative Studies, 37, 5-20.

Williamson, O.E. (2005). The economics of governance. AEA Papers and Proceedings, 95, 1-18.

Zerche, J., Schmale, I. & Blome-Drees, J. (1998). Einführung in die Genossenschaftslehre:

Genossenschaftstheorie und Genossenschaftsmanagement. München: Oldenbourg.

Zhao, L. (2011). Capital Formation in New Co-operatives in China: Policy and Practice, Euricse

Working Papers, No.015/11.

Zucker, L.G. (1986). Production of trust: Institutional sources of economic structure, 1840-1920.

In B.M. Staw, & L.L. Cummings (Eds.), Research in organizational behaviour. Greenwich:

JAI Press, pp 53-111.

18

1 Evers (2001) points to the problems when differentiating between governmental and market resources, as cooperatives and third sector organizations can also realize remunerations from selling to government actors. Thus, Evers refers to governmental reciprocal resources which cooperatives receive in return for their contribution to the common good (cf. cooperatives in the social housing sector).2 Based on his work on the socio-economic development in Italian regions, Putnam, in contrast to Coleman (1988), finds only a specific form of trust decisive for social capital building, that is trust directed to the public sphere and not trust which can be observed in family networks or clans (Putnam 1993; Evers 2001). As a political scientist and public policy researcher, Putnam conceptualizes social capital as a productive resource for the society as a whole which “makes democracy work” (Putnam 1993: 185). 3 In this paper, we will only focus on the horizontal dimension of social capital, which is basically about the discussion on bonding vs. bridging capital, or weak vs. strong ties. For a discussion on the vertical dimension of social capital in the context of cooperatives see Lang and Novy (2011).4 In contrast to Enjolras (2009: 764) we use the term “specific reciprocity” instead of “balanced reciprocity” to underline the distinct nature of “specific reciprocity” referring to direct exchange relations versus “generalized reciprocity” which refers to the compensation of the benefits received from the society and thus justifies altruistic behaviour towards others.