Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/274643 
Year of Publication: 
2023
Citation: 
[Journal:] IZA World of Labor [ISSN:] 2054-9571 [Article No.:] 507 [Year:] 2023
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
It is not possible for a formal employment contract to detail everything an employee should do and when. Informal relationships, in particular trust, allow managers to arrange a business in a more productive way; high-trust firms are both more profitable and faster growing. For example, if they are trusted, managers can delegate decisions to employees with confidence that employees will believe the promised rewards. This is important because employees are often better informed than their bosses. Consequently, firms that rely solely on formal contracts will miss profitable opportunities.
Subjects: 
management
trust
productivity
profitability
JEL: 
J24
J5
M12
M54
Persistent Identifier of the first edition: 
Document Type: 
Article

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