A Review of Trust: Creating the Foundation for Entrepreneurship in Developing Countries

Building a Web of Trust

by | Dec 7, 2019

Trust: Creating the Foundation for Entrepreneurship in Developing Countries by Tarun Khanna New York: Berrett-Koehler Publishers, Inc., 2018

This book will deepen your understanding of how for-profit, nonprofit, or governmental entrepreneurship can be a powerful force for economic and social progress in developing countries.

The book is conceptually insightful in placing a distinctive spotlight on the critical role of trust inthe entrepreneurial process.The conceptual cornerstone is context-rooted entrepreneurship and the contextual distinctiveness of developing countries. While there is a plethora of differences in the enterprise environments between developing and more developed nations, the author singles out trust as a core determinative factor. In advanced nations this intangible asset is omnipresent and vital to the efficient functioning of their economies. In contrast, developing countries tend to be low-trust environments that create significant organizational barriers and transactional burdens that hinder development.

This distinctive context leads the author to assert that entrepreneurs’ taskmust be more than focusing exclusively on the specific entrepreneurial opportunity. Rather, the entrepreneur must also address the series of other weaknesses and barriers in the larger context, with special attention to those that affect the trust dimensions that can directly or indirectly impinge on and constrain the entrepreneurial undertaking. In effect, a holistic mindset that recognizes the larger interconnectedness in the operating environment is required. These ambient inadequacies must be addressed in order to “create the conditions to create” which is the author’s mantra through out the book. Building the essential “web of trust” that supports risk-taking is seen as a vital part of the entrepreneurial undertakings.

This broader contextual mindset means that the scope of engagement goes beyond the specific enterprise to the entire industry and even the larger society. In effect, strategy follows context. This will often mean collaborating with competitors and across sectors. While some might contend that this would increase transaction costs, these interactions might develop gre ater trust, with the resulting social capital producing a valuable asset. Rather than simply being a cost, it is an investment. The book wisely counsels that trust- building should leverage existing social norms and practices.

The book richly supports and illustrates the trust factor with seven detailed company cases from Mexico, Brazil, China, India and Bangladesh. The case studies vary across industries, size, and organizational form. The cases reveal that for – profit corporations, nonprofits, social enterprise, and public sector undertakings, while different, can all be effective. They do illustrate that major impact can be achieved, how trust and trust – building institutions can be developed, and their significant role in the entrepreneurial scaling process. They also provide examples of the fragility of trust, how it can be dramatically lost, and what is required to regain it.

A bonus of the case studies is that the author brings the protagonists to life with rich and detailed descriptions. You will be engagingly transported into the entrepreneurial organizations and settings. The author’s own entrepreneurial experiences lend insight and credibility to the studies.

You will learn from and enjoy this wonderful book.

James E. Austin holds the Eliot I. Snider and Family Professor of Business Administration, Emeritus at the Harvard Business School. He has been a member of the Harvard University faculty since 1972 and was the Co-Founder and Chair of the HBS Social Enterprise Initiative.

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