The Role of Trust in New SME Creation

Abstract

Small and medium-sized enterprises (SMEs) are key to economic growth, and yet comparatively little research has examined the relationship between the level of societal trust and the motivations and opportunities of entrepreneurs starting new SMEs. The author tests the impact of trust on new firm formation using the Global Entrepreneurship Monitor (GEM) survey data for 2001–2003. Trust is found to be significant for starting SMEs that pursue Schumpeterian opportunities. Trust is also significant for overall levels of entrepreneurship and for opportunity entrepreneurs in developing countries. These findings add nuance to previous literature suggesting that trust is significant for all forms of entrepreneurial activity.

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