Electronic Journal of Sociology (2002)

ISSN: 1198 3655

Elements of Trust: The Cultural Dimension

of Internet Diffusion Revisited1

Thomas Volken University of Zurich

Switzerland

Abstract

For quite some time sociologists have been discussing information and communication

technologies (ICT) as the heart and engine of societal change. But only recently have

researchers begun to investigate the cultural preconditions of technological change. Trust as a

cultural resource not only acts as a lubricant for transactions and fosters economic growth,

which has been empirically demonstrated by recent research, but also facilitates more, and

more innovative, actions. Bornschier in his seminal work on Internet diffusion in 34

developed countries finds strong empirical evidence that generalized trust is a necessary

precondition for successful technological change. The context in which Bornschier (2001a)

considered this question, however, as well as the conceptualization of trust, may have

seriously affected his findings. Trust is a complex construct with multiple dimensions, and

their relative effects on innovative actions may be highly dependent on their respective social

context. The latter may be especially relevant in the highly fragile context of Eastern

European transformation societies. This paper leads to the thesis that institutional properties

(trust in systems) – rather than interpersonal generalized trust – substantially account for the

differences in the diffusion of ICT not only between the transformation societies, but between

developed societies as well. Using data of 47 countries from the World Values Survey and

other sources, I can present strong empirical support for this thesis. Effects remain persistent

even after controlling for material wealth, Internet access cost, early proliferation of tertiary

education and density of scientists and engineers in research and development.

1 Introduction

Since the beginning of the 1990s the general concept of social capital and one of its specific

forms, trust, has attracted substantial interest among the research community. In the field of

economic sociology, generalized trust has been found in comparative studies to be a potent

predictor of economic efficiency besides the conventional growth factors (Knack/Keefer

1997; Bornschier 2000; Leicht 2000; Whitely 2000; Zak/Knack 2001). Theoretically, it is

argued that generalized trust functions as a cultural resource, which makes economic

exchange and transactions more productive by allowing for more, and more encompassing,

actions (networking), by reducing transaction costs and costly controls as well as by

enhancing the flow of information.

However, trust is also important to innovation. Bornschier (2001a), in line with others

(Humphrey/Schmitz 1998; Lorenz 1999; Moore 1999; Maskell 2000), argues that trust is

likely to favor technological innovation and change. He empirically tested this claim by using

trust as a predictor for cross-country differences in the diffusion of Internet hosts (1997 and

1999) and found statistically robust effects, which for his sample of rich countries were

substantial. The context in which Bornschier (2001a) considered this question, however, as

well as the conceptualization of trust, may have seriously affected his findings. Trust is a

complex construct with multiple dimensions, and their relative effects on innovative actions

may be highly dependent on their respective social context. The latter may be especially

relevant in the highly fragile context of Eastern European transformation societies where trust

in systems as compared to trust in generalized others may prove to be much more conductive

to innovative actions. In this paper I shall explore these issues.

Section 2 outlines why trust must be considered important for innovative actions and

addresses two conceptually different dimensions of trust and considers how different social

contexts intersect with these dimensions. Section 3 presents the samples and data, section 4

presents the model as well as the method of analysis. Section 5 discusses the empirical

findings and section 6 concludes with some remarks on further research.

2 Theory

2.1 The Importance of Trust as a Prerequisite for

Innovative Actions

Trust fulfills various and important societal functions. Most importantly for our concerns

here, it facilitates innovative actions. However, this implicitly supposes that innovative

actions are in need of the cultural resource of trust. Why is this? The argument here is

inherently linked to the concept of a discontinuous technological change, as first formulated

by Joseph Schumpeter (1912) and then further developed by other authors (Freeman, Clark,

and Soete 1982; Perez 1983, 1985; Bornschier 1988, 1996, 1998, 2000; Freeman 1992). In

short, the basic idea is that innovations2 are not a continuous but a discontinuous phenomenon

over time. Falling profit rates enforce a re-allocation of capital and motivate entrepreneurs to

search for new business opportunities. Once a radical innovation – that is, an innovation with

the potential of a quantum leap in productivity, which transcends all spheres of society (Perez

1983, 1985) – emerges, there tends to be a clustering or swarming of further innovations,

since entrepreneurs are attracted by the high profits involved with the new products. As a

result, a new technological style or technological paradigm is born. This new technological

style may act as the engine of a new Kondratiev upswing but, at the same time, it is the

catalyst of what Schumpeter termed creative destruction. The commercialization of the

Internet may well be regarded as a phase where such a new technological paradigm emerged.

It is the high degree of market uncertainties and the absence of established “best practices”

(Perez 1983) which make innovative action for entrepreneurs extremely risky. These risks,

which have their origin in the very logic of the economic sphere (the socio-economic sub-

system), are, moreover, reinforced by the lack of institutional arrangements. According to

Perez (1983, 1985), this mismatch between the socio-economic and the socio-institutional

sub-systems must be overcome and the two spheres synchronized in order to allow the new

technological style to unfold its full potential.

Faced with this double risk, capital destruction due to market uncertainties and the lack of

adequate institutional arrangements, entrepreneurs must have substantial trust in order to

overcome these risks and innovate.

Finally it is clearly not sufficient that only the supply side develops the necessary amount of

trust to innovate. The demand side has to trust as well in order to take up and use the

innovation. This might be especially problematic in the purely digital arena of the Internet, as

Brinkmann and Seifert (2001) have pointed out in their study of Internet auctioning at eBay.

Trust, one can summarize, is of fundamental importance for the diffusion of a new

technological style in the knowledge society. Firstly, trust expands the scope of action and

allows firms to enter into cooperative exchange under contingent conditions. More and new

actions become possible because cooperative networks are effective and efficient channels for

the flow of information and new ideas (Granovetter 1973). At the same time, trust

substantially reduces transaction, control, monitoring and enforcement costs and therefore

makes available more resources for productive use. Innovative networks with a high level of

trust tend to reinforce not only the innovate capacity but also trust (Fecker 2001). Secondly,

the critical phase of creative destruction imperatively demands trust in the self-transforming

capacity of the socio-institutional sub-system. If agents believe that efficient and effective

institutions are able to produce public goods, that is, infrastructure, rights, liabilities and

regulations, which facilitate and secure the diffusion of the new technological style, they will

be more prone to supply as well as demand the goods and services of the new technological

era. Trust as a cultural resource raises the overall innovative capacity of a social system, since

it allows economic and also political agents to take advantage of their extended potential for

action. The matching process between the socio-economic and the socio-instititonal sub-

systems may therefore be substantially accelerated, leading to a faster diffusion of the new

technological style.

2.2 Towards a Heuristic Model of Trust

While the central problem of contemporary theories of trust is their rather static character,

empirical research tends to underestimate the complexity of the concept. On the one hand, the

dynamics of trust relations on various levels of society have so far attracted only marginal

theoretical attention and the link between trust and time in particular has been substantially

under-reflected. Of course, many scholars have pointed to historical processes of social

change which resulted in a fundamental restructuring of trust relations (Simmel [1908] 1992b;

Luhmann [1968] 1989; Giddens 1991). Alas, these authors, in concentrating on the object, fail

to adequately address the subject of trust and the time-related character of their expectations.

On the other hand, empirical studies tend to neglect the fact that trust may have different

sources and these sources may substantially vary in their effects on innovative actions.

I therefore propose a simple heuristic model of trust which tries to capture two different

sources of expectations – rationality and morality. They are the elements of trust; thus I shall

speak of rational and moral trust whenever I focus on the trustor and his expectations.

Rational Trust

The basis of all forms of trust is experience. Trust needs a historical background and is

impossible without empirical evidence (Simmel [1908] 1992b; Luhmann [1968] 1989). In the

situation of rational trust, agents behave rationally insofar as they consciously take into

account the expected costs and benefits when they decide whether to trust or not. Trust here

may gradually evolve when agents repeatedly interact and get to know each other’s

preferences better; very often this situation reflects the iterated prisoner’s dilemma game

(Axelrod 1984). Since the production of trust through repeated interaction is very time

consuming, rational trust based on interaction between individuals cannot easily generalize,

and exchange relations under conditions of high risks tend to remain very limited (Kollock

1994; Yamagishi, Cook, and Watabe 1998) and may even resemble Granovetter’s (1973)

strong ties. Therefore, to some degree, rational trust is always a situation of minimal trust

(Humphrey/Schmitz 1998). However, introducing a powerful, external sanctioning apparatus

which is able to modify agents’ motive structures can substantially expand the aggregate level

of rational trust. On the one hand, sanctions change the costs perceived by the object of trust

when he/she assesses the benefits resulting from breaking trust. And at the same time the

general level of trustworthiness, as perceived by the subject of trust, is increased. Of course

these mechanisms require that agents perceive the sanctioning apparatus itself as trustworthy.

On the aggregated societal level, sanctions help the trustor to save time, since less time is

required to gather information and accumulate experience through repeated interaction with

potential exchange partners. This in turn substantially stimulates the expansion of exchange

relations. In yet another sense, time is crucial. Since rational trust is based on experience

which is mediated through the behavior of others, as well as rational cost-benefit calculations,

it has two advantages. It may be monitored and influenced more easily by an external

sanctioning instance; and it can be learned much faster, because no complex adaptation of

intrinsic motives is needed. A trustworthy, effective and efficient sanctioning apparatus can

for this very reason succeed in modifying the external costs-benefit structure of agents in a

fairly small amount of time. Through the building and enforcement of rules that favor

cooperative behavior and punish opportunistic behavior, trust can substantially be expanded.

To be sure, rational trust, even in the presence of a powerful sanctioning apparatus, is still

minimal trust, because agents in the absence of sanctions would very often have strong

incentives to behave opportunistically.

Moral Trust

Values, norms and attitudes, as they are understood here, are patterns of shared orientations,

which are culturally transmitted through processes of socialization and enculturation and

remain relatively stable over time (Parsons [1939] 1994; Inglehart 1977, 1990; 1998;

Inglehart/Baker 2000; Kunz 2000). Although those habitualized moral maps may influence

the structure of motives and behavior, they cannot survive without periodic empirical support

in the long run. This means that cultural patterns have to be reproduced through behavior.

This is why a cooperative ethos in an environment of rampant opportunism is doomed to fail

(Rothstein 2000) and other forms of moral maps develop, e.g. Banfield’s (1958) well-known

amoral familialism, which optimizes the short-term utility of the core family, might evolve as

the dominant ethos. Socialization, with regard to time, on the one hand points to a long period

of cultural learning, which typically takes place in the formative years of childhood and

youth. On the other hand, although the process of socialization must be understood as a life-

long endeavor, moral maps stabilize and may not easily be changed. Common norms, values,

and attitudes – in short, a generalized moral – help agents to recognize the goals and

preferences of others; they structure expectations. However, a generalized moral need not

necessarily result in the generalization of trust, since the expansion of trust is inherently

dependent on a cooperative and inclusive ethos. The term moral trust, as it is used here,

therefore refers to norms, values, and attitudes which enable and foster the generalization of

cooperative actions. Once a cooperative moral diffuses in a society it develops its productive

potential by acting as a substitute and catalyst of the norms, regulations and controls of the

sanctioning apparatus. Agents will refrain from negatively-sanctioned opportunistic actions,

even if their actions would not be detected. Since aspects of the common good are

internalized, norm enforcement by the state is of subsidiary character, because agents feel that

their common interests are adequately represented by the political and legal institutions.

The Aggregate Level of Trust in a Society

In harsh contrast to rational trust, moral maps cannot be authoritatively enforced, because this

would threaten their intrinsic status. The elements of trust can only productively cumulate if

they complement and are related to each other. A society will ideally reach a maximum level

of trust if its socially sanctioned practices represent a common cooperative moral ethos and

group solidarity is inclusive. In such societies, the sanctioning apparatus commands

substantial reputation and legitimacy, and it works efficiently and effectively. The time

horizon of agents is typically long term and agents’ motivations not only follow economic

principles but moral and social ones as well (Korczynski 2000). Exchange relations in these

contexts can be extended, even if in a particular relation an objective basis for trust is absent.

The trustworthiness of agents is set as an apriori. This also permits the further production of

collective goods, which add to the productive and adaptive capacity of the society as a whole

and may strengthen the collective myth. However well coordinated and well developed the

elements of trust in a given society are, their aggregated level of trust may be substantially

lower than other societies’ or a historical period. The form, function, and power of a

sanctioning apparatus as well as its legitimacy, efficiency, and effectiveness may change

substantially and therefore influence the radius of rational trust in a society. The moral base of

a society can shift over time and either motivate or hinder the extension of cooperative

actions.

Since it has been rightfully argued by many authors (Seligman/Füzer 1994; Sztompka 1995,

1996; Misztal 1996) that the Eastern European transformation process is accompanied by

widespread syndromes of anomie, such as low levels of shared cooperative orientations and

attitudes, exploding rates of homicide and suicide, and increasing deaths from liver diseases,

it may be argued that countries involved in this process of radical economic, political and

social change face a situation, which may be characterized as a “start from scratch”. The

specific problem which transformation countries face is the creation of two major institutions

of modernity at the same time: markets and democracy. This, however, means that agents

must learn to trust a completely new institutional framework as well as their fellow agents’

trust in it. This learning process takes time and advances step by step. When assuming a

hypothetical “start from scratch” (approximately 1990) for all transformation countries, it then

follows that those which were able to systematically promote rational trust will be better off in

terms of cooperative and innovative capabilities. Because rational trust is grounded in agents’

experiences and does not need to be intrinsically motivated, it is safe to suggest that with

regard to the object of trust, rational trust in modernity is fundamentally related to and secured

by systems (Luhmann [1968] 1989; Giddens 1991).

Since we have no coherent data on how the trustors evaluate and perceive the new systemic

properties, the object of trust – that is systems and their potential to extend trust – has to be

taken as a proxy. As transformation countries put into practice effective and efficient

democratic procedures and bureaucracies, follow the rule of law, fight corruption, welcome a

free and independent press and promote economic freedom, they create a systemic

environment which promotes rational trust (trustors’ perspective) and therefore strives for the

realization of its own potential (trustees’ perspective). Rational trust and trust in systems are

thus simply different aspects of the same coin. While trust in systems may be easily and

relatively quickly promoted and learned by experience, trust in generalized others, as

structured by moral expectations and feelings of identity and solidarity, is much more difficult

to achieve. With regard to transformation societies, one can expect there to be trust in

generalized others of subordinate importance, as compared to trust in systems, since the

structure as well as the production of moral maps and solidarity is bound to processes of

socialization and enculturation, which by definition consume time (Inglehart 1998;

Inglehart/Baker 2000).

If notoriously social disorder and anomie plague a social context the best strategy might be to

improve trust in systems, since, as stated earlier, it is far easier to learn, and can be produced

fairly quickly, when sanctioning agents act efficiently and effectively (see also Knack/Keefer

1997; Humphrey/Schmitz 1998; Moore 1999). According to many scholars (Seligman/Füzer

1994; Sztompka 1995, 1996; Misztal 1996; Govier 1997), the situation of anomie – a result of

the radical transformation process - is the prevailing scenario in transformation society.

One would therefore hypothesize that those countries which succeeded in building up trust in

systems after the collapse of communist rule have more resources available for innovation.

Accordingly, the effect of generalized trust in these transformation contexts should only be of

minor importance as compared to trust in systems.

With regard to advanced countries, the influence structure and effects of trust are expected to

change considerably. The importance of trust in systems as compared to generalized trust, it is

suggested, should be substantially lower in advanced countries. More formally, one would

expect the net effects of aggregated generalized trust G * and aggregated system trust S * in

the context of transformation societies T and advanced democracies A to be3 :

Hypothesis I: (GT * ≠ 0) ∧ (ST * ≠ 0) ∧ (GA* ≠ 0) ∧ (SA * ≠ 0)

Both dimensions of trust will be significant across all country samples.

Hypothesis II: ST * >> GT * Ù ((ST * : GT * ) > (SA * : GA * ))

Trust in systems will be more important in transformation societies as compared to advanced

democracies.

3 Sample and Data4

In order to test the differential effects of trust in systems and generalized trust on innovative

action, as measured by the diffusion of Internet hosts, four samples have been established.

The first sample consists of twenty advanced democracies5 , the second sample is entirely

reserved for the eighteen transformation countries6 , and the third sample is a pooled sample

of the previous two (n=38). Finally, the fourth sample adds nine developing countries to the

third sample, so that the maximum sample size of forty-seven countries is reached. Cross-

sectional regression parameters have been estimated for all four samples in order to

substantiate the claim that the effect of the different forms of trust might vary depending on

the general conditions in the context.

As suggested, the commercialization of the Internet can well be regarded as the emergence of

a new technological paradigm. The diffusion of Internet hosts, relative to a country’s

population (Internet Software Consortium 2000), may therefore serve as a proxy of its

innovative capacity. Although it is not entirely unproblematic to use the number of Internet

hosts as a measurement for the diffusion of Internet technology as a whole, it still seems to be

safe, because it has been demonstrated (Bornschier 2001a) that the diffusion of Internet hosts

is part of a broader syndrome which goes together with a corresponding diffusion of personal

computers, telephone mainlines and Internet client computers7 .

A principal component analysis (PCA) has been used to construct the two distinct dimensions

of trust – the independent variables under study. As indicated by the PCA in table 1, two

factors, which explain 75 percent of the variance, could be extracted. The item loading on

both of the two factors clearly follows the theoretical distinction between trust in systems and

trust in generalized others8 . The first dimension, which reflects trust in systems, shows a high

correlation with those indicators, which point to a high degree of bureaucratic efficiency, the

rule of law, absence of corruption, and the functioning of democratic procedures. A certain

path dependence of these systemic properties is demonstrated by the high loading of

autocracy and democracy between 1900 and 1945.

And this may substantiate the claim that trust in systems is to some degree historically

transported (Putnam 1993; Rothstein 2000). The second dimension extracted by the principal

component analysis can clearly be identified as trust in generalized others. Here items which

mirror the parts of the moral map load high.

Table 1: Modern forms of trust: generalized trust and trust in systems

The living tolerance of liberal individualism substantially fosters trust in generalized others,

while a culture of amoral egoism with its reckless opportunism reduces generalized trust, as

indicated by the negative item loading9 . Moral determinism also has a substantial negative

loading on the second component. Finally it shows that trust, as measured by the well-known

question of the World Values Survey10 , seems to be more associated with values, attitudes,

and moral orientations than with institutions. This certainly has to be kept in mind for further

analysis.

4 The Model

The productive link between the innovative capacity of a society and its aggregate level of

generalized trust and trust in systems has already been discussed. Yet, since countries may

vary greatly in their resources, several control variables must be introduced. These are briefly

discussed here.

Countries may vary in their asset of material resources, and therefore in their capacity to

influence demand as well as the supply side factors of the diffusion process, the level of

development or average wealth must be controlled for. Another factor, which may

substantially affect the innovative capacity of a context, is the availability of human capital

(Romer 1990; Stern, Porter, and Furman 2000; Fecker 2001). Not only are the roots of the

early diffusion of Internet technologies tightly coupled with the academic community but, at

the same time, the Internet favors those who are used to abstract symbol processing, as has

been substantiated by various studies which examine the so called digital divide11 . The

availability of human capital is therefore relevant in two ways. First of all, knowledge

workers are a fundamental requirement for technological development. They provide the

supplies that entrepreneurs can exploit. On the other hand, human capital is needed in order to

productively use this new technology; in economic terms, it is also a demand-side factor. For

these two important reasons, one would want to control for human resources, since it may be

rightfully expected that the diffusion of Internet hosts is to some degree dependent on it.

Finally, it can be argued that it is not just the average wealth in a context which considerably

influences the diffusion of Internet technologies. Whether agents can afford the new

technologies is essentially dependent on the relative costs of access. Where these costs are

high in relation to average income, the diffusion of Internet hosts is expected to be hampered.

Thus, it may not be the absence of adequate monetary resources alone which limit the

possibility of financing important infrastructure projects (backbones, telephone mainlines

etc.), and therefore hinder the exploitation of the new technological paradigm’s potential. It

may as well simply be the extraordinarily high prices involved in the consumption of the new

goods. Hence it seems reasonable that those relative Internet access costs are controlled for.

The model used to estimate the diffusion of Internet hosts follows a production function of the

Cobb-Douglas type because it is supposed that various multiplier effects are present and

predictors directly and indirectly influence each other. This is also true for the control

variabels. For example, one may suppose that the different forms of trust directly affect the

diffusion of Internet hosts through their potential to reduce all sorts of transaction costs, and

indirectly have an effect on the diffusion by influencing the propensity to invest in human

capital. In societies with low levels of trust, investments in human capital might prove to be

inefficient and ineffective if ascriptive attributes, such as membership in an exclusive group,

are used to allocate (management) jobs (Whiteley 2000). However interesting and fruitful

these effects may be, they are beyond the theoretical scope of this paper.

The model used to estimate the diffusion of Internet hosts is as following:

Ii = b1Si b2 Gi

b3 Wi b4 Ti

b5 Bi b6 Vi

b7 e ui

In order to specify a linear model, the estimation model is transformed as following:

log Ii = log b1 + b2 log Si + b3 log G + b4 log W + b5 log T + b6 log B + b7 log V + ui

The dependent variable I is the diffusion of Internet host per 10,000 inhabitants, S stands for

trust in systems, G for generalized trust, W refers to the average wealth in the country, T

reflects the technical competence and B the proliferation of tertiary education. Finally V is the

relative Internet access costs and u i is the residual12 .

5 Results of the Parameter Estimation

Tables 2 and 3 show the results of the parameter estimates for each of the four samples. While

Table 2 allows the detailed examination of the influence structure (all predictors are included

here), Table 3 shows the results when only the significant predictors make part of the model

(stepwise exclusion of predictors, which are statistically not insignificant). First of all, Table 2

shows that the influence structure of the variables nearly perfectly reflects the theoretical

reasoning. And this is true for all models. The diffusion of Internet hosts increases together

with increasing trust resources. Both, generalized trust and trust in systems display significant

and positive effects across all samples. Thus hypothesis I gains substantial support.

Table 2: Diffusion of Internet hosts, January 2000 - Linear regression with inclusion of all

variables

The control variables also display a coherent pattern. They are briefly discussed here in order

to strengthen the plausibility of the model. The diffusion of Internet hosts increases with

average wealth, and the proliferation of tertiary education, and it decreases with increasing

access costs. However, the latter cannot be substantiated in the sample of the advanced

democracies (see Sample 1). There the control variable points in precisely the opposite

direction. However, this may be explained by the extraordinarily low relative access costs. In

addition its influence is statistically not significant. Furthermore, one does not find the

suggested effects of technical competence in the two pooled samples. This reflects the fact

that, in these heterogeneous samples, the very high level of technical competence in Eastern

European countries is accompanied by only moderate or low levels of Internet diffusion as

compared to the advanced economies.

Table 3: Diffusion of Internet hosts, January 2000 - Linear regression with stepwise

exclusion of variables

When looking at the models in Table 3, one can reveal, for the sample of advanced

democracies, a substantial and significant effect of trust in systems (b=.61) and generalized

trust (b=.57). The relative influence of the two discrete resources of trust is approximately the

same, whereas the relative effect of education is of considerable minor importance and

remains the only control variable, which reaches statistical significance.

In the sample of transformation societies one can find a substantial influence of trust in

systems (b=.94), generalized trust (b=.52) and education as well. As compared to the

advanced democracies, and in line with hypothesis II, the relative importance of the predictors

has substantially changed in the context of post-communist countries. While in the sample of

advanced democracies the relative effect of both resources of trust is approximately equal

(b=.61 and b=.57), the relative effect of trust in systems (b=.94) is much more important in

the social context of the transformation societies. In the highly fragile situation of these

countries, the existence of trustworthy institutions is central. The more agents perceive the

rational basis of trust as secured, the more they will innovate. The influence of trust in

systems as well as generalized trust remains stable even when the two samples of the

advanced democracies and transformation societies are joined (see Sample 3), or extended to

include nine additional developing countries (Sample 4). In these very heterogeneous

samples, the influence of the control variables — average wealth and Internet access costs —

now prove to be important and significant. The higher the average wealth in a country and the

lower the Internet access costs, the higher the rate of diffusion of Internet hosts.

This finding mirrors, on the one hand, the fact that relative Internet access costs in

transformation societies are still extremely high. On the other hand, the limited financial

resources of these countries circumscribe the capacity to provide the necessary infrastructure

to boost the new technologies. Additionally, one can observe a decrease of the relative

importance of the education effect in Sample 3. In the pooled sample, containing all

observations, the effect disappears completely. This may be read as an indicator that here the

digital divide is more a result of monetary restrictions than of human capital. Yet the cultural

resources of trust both remain the most important factors which explain the diffusion of

Internet hosts.

6 Conclusion

Since the beginning of the 1990s the concept of trust has attracted substantial interest among

the research community. In the field of economic sociology, trust has been found in

comparative studies to be a potent predictor of economic efficiency besides the conventional

growth factors. But trust not only enhances the productivity of existing actions in an economy

but also is likely to favor innovation and change. However, empirical research so far has not

adequately addressed the complexity of the concept.

I argue that trust should be seen as plural expectation. Within my simple heuristic model of

trust, I am constructing and linking two different sources of expectations – experience

(rational trust) and moral (moral trust) – to the two specific objects of trust in modernity: trust

in generalized others (generalized trust) and trust in systems. While on the personal level

generalized trust facilitates weak ties and makes social interactions more inclusive, thus

allowing long chains of action, systems permit agents to learn trust more easily because trust

in systems is stabilized through experience. A trustworthy, effective and efficient sanctioning

apparatus can for this very reason succeed in modifying the expectations of agents in a fairly

small amount of time. Through the building and enforcement of rules that favor cooperative

behavior and punish opportunistic behavior, trust can substantially be expanded. On the other

hand, generalized trust inherently relies on a cooperative ethos and a collective moral map,

which structure expectations and actions. Moral maps, however, are far more difficult to

create since these patterns of shared orientations are culturally transmitted through processes

of socialization and remain relatively stable over time.

To sum up, the more countries resemble each other in terms of their material resources, the

less can the considerable and persistent differences in the rate of Internet diffusion be

explained by these factors. While I find strong and significant positive effects of both

dimensions of trust across all samples, the relative effects of trust in systems and generalized

trust vary substantially. For societies in transition to a new social, political, and economic

order, trust in systems is the most relevant resource promoting innovative actions, as

measured by the diffusion of Internet hosts. However, generalized trust is still important in

these countries. This suggests that it is not the absence of a cooperative moral ethos or the

persistence of pre-modern forms of trust (Seligman/Füzer 1994) per se which accounts for

low levels of innovation, but that the cooperative ethos needs to be backed by an adequate

institutional framework which fosters such behavior. In the stable contexts of advanced

democracies, trust in systems and generalized trust are of equal importance. Generalized trust,

as a general expectation of an ethos of non-opportunistic behavior, may however be much

more cost effective and become a substantial competitive advantage.

The findings presented here may deliver additional food for thought for economic sociology

as well as economics, as they remind us that a one-sided view on trust may substantially

distort results13 . It is neither rational expectations nor moral maps alone that structure agents’

expectations and foster trust. Both aspects have to be considered. This may prove to be

particularly fruitful for growth and development research, since until now the cooperative

ethos has attracted only little attention and researchers still use the highly debatable trust

variable of the World Values Survey as an indicator.

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Appendix A

Table 4: Descriptive Statistics

Table 5: Correlations of the independent variables in all samples

Appendix B The construction of moral

orientations — Liberal individualism and

amoral egoism

Trust in the willingness of others to cooperate increases the more accepted and widespread

norms of reciprocity are (Putnam 1993; Coleman [1990] 2000), the more tolerance governs

social interactions (Leicht 2000; Bornschier 2000) and the more widespread individualistic

normative orientations are (Durkheim [1893] 1996; Weber [1904] 1993; Simmel [1908]

1992b, Seligman 1998). These different normative patterns have been termed liberal

individualism and amoral egoism (Bornschier/Volken 2002). The two dimensions are the

results of a principal component analysis (see table 6). All variables are taken from the World

Values Survey. Respondents are asked to judge on a scale from one (never justified) to ten

(always justified) whether they considered a specific morally-debatable action as justifiable or

not. The first factor (liberal individualism) reflects different attitudes with regard to one’s own

body and privacy. Individuals with an affirmative attitude to those morally debatable actions

demonstrate more tolerance and favor individual freedom and responsibility. Since they

justify actions like abortion, suicide, and euthanasia, the individual gains primacy over society

because the potential negative effects which these debatable actions may have on society are

of minor concern.

Table 6: Dimensions of aggregated moral orientations and attitudes

At the same time, this primacy of the individual – his autonomy, his right of decision, privacy

and intimacy – points to a broad belief and trust in the individual. The second factor (amoral

egoism) consists of variables which can be interpreted as symptoms of an anti-civic moral

(Halpern 2001; Bornschier/Volken 2002) or a free rider society. Individuals or societies which

score high on this dimension are highly opportunistic in their moral orientations. For that

reason – and in following Edward Banfield (1958) – this dimension has been termed amoral

egoism, since agents are motivated to maximize their own short-term self-interest.

Social contexts that have cultivated amoral egoism excessively will – if one supposes an

anthropological nature of the norm of reciprocity and the possibility of rationally inspecting

the motive structure of generalized others – exhibit a substantially lower propensity for

cooperation and innovation. Together, liberal individualism and amoral egoism are considered

parts of agents’ expectations, which focus on the integrity and benevolence of generalized

others. In Durkheimian terms one may say that these expectations are formed by the

conscious collective.

Appendix C List of indicators for principal

component analysis — Generalized trust

and trust in systems

Absence of corruption: as an indicator for the absence of corruption, Transparency

International’s Corruption Perception Index (CPI) 1999 is used. The index is based on

subjective ratings of businessmen, investment analysts and the general public. At least three

different, independent sources are combined in order to built the index per country. The index

varies from 0 (highly corrupt) to 10 (no corruption).

Freedom of the press: The indicator is based on the respective index of Freedom House14 for

the year 2000. It is a composit index, which covers several aspects of print and brodcast

media, including laws restricting the publication of certain contents, political repression and

control, economic influence on content and repressive actions like violence towards and

murder of journalists. The index has been been transformed as following:

(100 – freedom of press index), thus 0 represents an unfree press, 100 a fully free press.

Political rights: The index is based on the Gastil, Freedomhouse Index for political rights for

the year 2000. It has been transformed as following:

(7 – index of political rights), thus 0 means no political rights, 7 full political rights.

Civil rights: The indicator is based on the civil rights index of Freedomhouse for the year

2000.15 It has been transformed as following:

(7 – civil rights index), thus 0 stands for no civil rights, 7 means full civil rights.

Economic freedom: This indicator corresponds to the Index of Economic Freedom 1999,

which is provided by the Heritage Foundation and is compiled form a series of 10 different

factors including the rule of law, black market activity, regulatory restrictions for banking, red

tape, beaurocratic efficiency, and regulations of the labor market.16 . The original index has

been transformed as following:

(5 – index of economic freedom), 0 representing a low and 5 a high degree of economic

freedom.

Autocracy (1900/1945): The indicator measures the average autocracy rule between 1900 and

1945. The autocracy index varies between 0 (low degree of autocracy) and 10 (high degree of

autocracy) and stems from the Polity III Data of Keith Jaggers and Robert Gurr.17 .

Democracy (1900/1945): The indicator measures the average democracy during the period of

1900 to 1945. The index varies between 0 (low degree of democracy) to 10 (high degree of

democracy) and comes form the Polity III data (Jaggers/Gurr).

Trust (World Values Survey): The indicator is constructed using the following question of the

World Values Survey konstruiert18 : “Generally speaking, would you say that most people can

be trusted, or that you can’t be too careful in dealing with people?” The percentage of

individuals answering “Can be trusted” (without considering those answering “don’t know”)

are aggregated for the year 1995 per country. Missing values for 1995 have been estimated

based on the data of 1990 for the following countries: Rumania, Czech Republic, Slovak

Repulic, Portugal, Ireland, Ireland, Italy, Netherlands, Canada, Australia, France, Denmark

and Belgium.19

Moral determinism: This indicator is constructed using variable V178 of the World Values

Survey. Individuals who agree with the statement “There are absolutely clear guidelines

about what is good and evil. These always apply to everyone, whatever the circumstances.”

are considered as morally determined. Moral determinism thus is the percentage of

individuals per country who agree with the statement in question.

Liberal individualism: The values for this indicator result from a principal component analysis

of individual moral orientations and attitudes in the period of 1981 to 1995 (see Table 6

above; also Bornschier/Volken 2002). The items used in the analysis include the variables

V192 to V202 of the World Values Survey and are aggregated for each country under study.

Amoral egoismus: The values for this indicator result from a principal component analysis of

individual moral orientations and attitudes in the period of 1981 to 1995 (see Table 6 above;

also Bornschier/Volken 2002). The items used in the analysis include the variables V192 to

V202 of the World Values Survey and are aggregated for each country under study.

Appendix D List of Indicators used in

Linear Regression Models

Diffusion of Internet hosts: Data for the dependent variable – the number of Internet hosts per

country20 – have been obtained from the Internet Software Consortium (http://www.isc.org).

The following transformation has been applied:

log (Internet hosts per 10’000 inhabitants)

Trust in systems: Values for this indicator come from the first factor of the principal

component analysis documented above (see appendix C and table 2). Trust in systems reflects

a general syndrome of “objective” institutional factors, which are relevant to extend empirical

trust. These are: freedom of the press, absence of corruption, political and civil right, rule of

law, economic freedom and the historical experience of democracy and the absence of

autocratic rule. Factor scores have been transformed as following:

log (10 + trust in systems)

Generalized trust:

Values for generalized trust come from the second factor of the principal component analysis

documented above (see appendix C and table 2). Generalized trust refers to a general and

average subjective perception of other’s ethos of cooperation, tolerance and freedom. The

factor scores have been transformed as following:

log (10 + generalized trust)

Proliferation of tertiary education: Data for tertiary education comes from the 1999 Statistical

Yearbook of the UNESCO. It is the percentage of 20-24 year old individuals who are enrolled

in a tertiary educational institution in 1980. In following Bornschier (2001a) the early

proliferation of tertiary education has been chosen purposely, since these people build a

considerable demand potential during for the process of Internet diffusion. Data has been

transformed as following:

log (proliferation of tertiary education)

Technical competence: Data come from the World Development Indicator 1999 and 2001 of

the World Bank. The indicator reflects the average number of scientists and engineers in R&D

per million inhabitants in the period between 1985-199521 . The data has been transformed as

following:

log (technical competence)

Average Wealth: PPP per capita in US$, 1997. Data come from the World Development

Indicators 1999 and 2001 of the World Bank. The data has been transformed as following:

log (Average Wealth)

Internet access costs: Monthly relative Internet access costs are measured by using the costs

of a 20 hour local phone call22 and dividing it by the GNP per capita (ppp) per month (in

US$). Data come from the World Development Indicators 1999 and 2000. The following

transformation has been applied:

log (Internet access costs)

Endnotes

1. I would like to thank Volker Bornschier, Mark Herkenrath and the two anonymous

reviewers for their helpful comments on this paper. My special thanks goes to Marianne

Schindler who helped translating the paper into English. An earlier version of this paper has

been presented at the World Congress of Sociology, Brisbane (Australia), July 2002, Research

Committee 14, Session 4: Information and Knowledge Society.

2. While inventions fundamentally extend the stock of knowledge, innovations refer to the

“doing of new things” (Schumpeter) in the sense that elements from the knowledge stock are

(re-) combined by entrepreneurs and are introduced to markets. Sometimes even new markets

are created. The concept of innovation therefore clearly aims at the productive exploitation of

the “new thing”.

3. For example GT* is the level of aggregated generalized trust in the sample of

transformation society.

4. Descriptive statistics can be found in Appendix A.

5. The advanced democracies are: Spain, Portugal, Italy, France, Ireland, United Kingdom,

United States of America, Australia, Canada, Austria, Belgium, Switzerland, Denmark,

Norway, Sweden, Finland, Germany, Netherlands, Japan and South Korea.

6. The transformation countries are: Bulgaria, Rumania, Lithuania, Latvia, Estonia, Czech

Republic, Slovak Republic, Slovenia, Poland, Hungary, Ukraine, Georgia, Russia, Moldova,

Croatia, Macedonia, Belarus and Azerbaijan.

7. That is, computers which only access Internet resources without providing services (this

would typically be task of the Internet hosts (servers)).

8. All data has been aggregated to the national level.

9. A description of attitudes captured by liberal individualism and amoral egoism can be

found in Appendix B.

10. “Generally speaking, would you say that most people can be trusted, or that you can’t be

too careful in dealing with people?”

11. As an example the diagnosis of the NTIA (2000:15) may be used: “(...) our most recent

data show that divides still exist between those with different levels of income and education

(...)”

12. See appendix C for details of operationalization.

13. This is particularly problematic in the context of transformation societies since, as has

been demonstrated here, a different weight is put on each of the trust resources in these

countries. Thus, a failure to acknowledge a multi-dimensional concept of trust will lead

researchers to conclude that trust is either absent in these fragile contexts or that the level of

trust has no effect on the productive capacity (Haerpfer, Wallace, and Raiser 2001).

14. Freedom House (2000a): Censor Dot Gov. The Internet and Press Freedom 2000.

http://www.freedomhouse.org.

15. dito

16. Johnson, Bryan T.; Holmes, Kim R.; Kirkpatrick, Melanie (1999): 1999 Index of

Economic Freedom. Washington: The Heritage Foundation.

17. Jaggers, Keith; Gurr, Robert (1996): Polity III: Regime Type and Political Authority,

1800-1994. Michigan: Inter-university Consortium for Political and Social Research.

18. Variable V27 (wave 3).

19. The estimate uses the following formula: trust95 = -1.493 + 0.86 * trust90. The

parameters for the estimates come form a regression, which has been performed on an

extended sample of 71 countries. R2-adjusted is 0.842.

20. Because only a minority of Internet hosts in the United States is registered under the

domain “us”, the number of hosts for the United States is estimated by adding the domains us,

edu, com, org and net. This however will somewhat overestimate the diffusion.

21. Estimates have been made for the following four countries: Switzerland = average

(Sweden, Norway, Netherlands); Latvia = average (Estonia, Lithuania); Columbia = average

(Ecuador, Venezuela); Georgia = average (Armenia, Azerbaidjan).

22. Since data on real access costs is only available for a limited number of countries, it is

assumed that individuals are using dial-up connections and use it 20 hours per month. This

however does not take into consideration the costs charged by Internet Service Providers

(ISP) or fixed connection costs charged by the telephone companies.

© Electronic Journal of Sociology