Trust, interlinking transactions and credit in the industrial district

An essential feature of the 'industrial district' is trust among individuals and firms within it. This paper focuses mainly on trust based on investments in building up a good reputation that is a 'personal capital' that can even substitute for collateral in obtaining credit. Informal credit, often linked to other transactions and especially subcontracting, is therefore an important way of financing economic development in the industrial district. Moreover, the importance of trust as personal capital gives rise to a double financial intermediation. In the industrial district, this double intermediation constitutes a device to reduce information problems that are usually responsible for credit rationing. (c) 1994 Academic Press, Inc. Copyright 1994 by Oxford University Press.

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