Making long-term cooperation decision based on bilateral inter-organizational trust: Evidence of Mongolian SMEs

Abstract

This paper investigates inter-organizational bilateral trust is important phenomenon for long-term cooperation. In order to be stable or permanent the cooperation, inter-organizational trust should be reciprocal as well as similar concept of ‘Prisoner Dilemma game theory’. Also, we considered reasons of why transaction costs are higher in developing markets are related with inter-organizational lower level trust. The hypothesized model tested on a sample 411 firms with a Mongolian SMEs. In conclusion, a result of the study demonstrates whether partner firms’ trust with other partner would be higher, the firms willing to continue their cooperation for a longer time.