The Role of Emotion and Calculative Self-Interest in Trust Perception:Case of the Dairy Value Chain

ABSTRACT Trust among actors plays an important role in contracting decisions and cooperative membership. There is, however, a concern to understand trust development and the determinants of trust perception. In this paper, trust perception is explained by emotions and calculative self-interest along with other predictors, namely transaction costs in the value chain exchange. We assume that emotional non-calculative trust and calculative self-interest are both present in local rural economies, making this context appropriate to test our hypothesis regarding the importance of emotional links in networking and contracting along the value chain. We used a sample of breeders in a local community to construct the emotional non-calculative self-interest and the calculative self-interest components and investigated how these two indicators contribute to generate trust perception. In addition, transaction costs related to opportunism, uncertainty and, dependency have strong effect on trust perception. The results provide support that emotional non-calculative self-interest fosters trust perception; despite opportunistic behavior and distrust, breeders are able to build trusty links using close relationships. Smallholder dairy farmers could use existing social networks to control high transaction costs, to foster trust and institute sustainable contracts as a way to coordinate transactions.