Journal of Business & Economic Policy

ISSN 2375-0766 (Print), 2375-0774 (Online) DOI: 10.30845/jbep

How Calculative are Managers When Evaluating Signals? An Empirical Examination of Signaling Theory in Trust Formation
Pook Carson

In this research, we examine how calculative managers are when deciding whether or not to trust a channel partner. We distinguish between fully-calculative, non-calculative, and signaling models of trust formation based on credibility. The results show that interpretations of cooperative and non-cooperative actions are influenced by credibility. Credibility overwhelms past history in that the history (number) of positive interactions has no effect on trust when there is at least one credible signal. Partner replaceability decreases the level of trust from credible signals as subjects attribute the cooperative behavior to external market incentives rather than type. While participants attend to credibility, they do not distinguish between signals in the form of past behavior and signals created by credible commitments to bonds regulating incentives for future behavior. Hence, managers are more calculative than current non-calculative theories of trust would suggest, but less rational and less forward-looking than predicted by strong-form fully-calculative approaches.

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