Entrepreneurs, formalization of social ties, and trustbuilding in Europe (fourteenth to twentieth centuries)

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Abstract

The establishment of trust is a key component of economic activity and social ties can make business dealings work better. However, we do not know much about how economic actors created new social ties deliberately in order to pursue their objectives. This article analyses the way in which merchants and entrepreneurs used specific rituals to establish formal social ties, with the intent of protecting their business relationships. It focuses on relational instruments that until now had been neglected, particularly godparenthood and marriage witnessing. It shows that formalization, ritualization, and publicity of ties were used by entrepreneurs to establish trust with their business associates, for example when information was asymmetric or when institutions were perceived as inefficient in guaranteeing mutual good behaviour. The analysis covers a long period, from the late middle ages to today. It pays particular attention to the consequences of the Reformation in the sixteenth and seventeenth centuries and of the industrial revolution in the nineteenth. Contrary to the received wisdom, it suggests that formal social ties such as godparenthood continued to play an important role in economic activity during and after the industrial revolution. New databases on early modern Italy and nineteenth-century France are used.

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