Trade Associations and Trust in Weak Institutional Contexts: Exploring SME Relationships in Nigeria

Abstract

This article examines the institutional logics of entrepreneurial behaviour. It investigates how institutional contexts affect entrepreneurial behaviour, especially in challenging environments. By drawing on a rich qualitative study of 14 small and medium-sized enterprises (SMEs) in Nigeria, the paper uncovers how indigenous institutional forms such as trade associations have evolved to replace dysfunctional formal institutions. The institutional logics perspective was useful in understanding the effects of culture on trade associations. Our interview data reveal how entrepreneurs take advantage of institutional-based trust to enforce trade agreements in the absence of formal institutional trust. The major findings show that trade associations were necessary for enforcing trade agreements, in conditions where actors cannot rely on formal institutional arrangements. The results facilitate a better understanding of how trade associations reduce the room for opportunism and serve to promote trust across members. This study contributes to the field of entrepreneurship concerning SMEs and trade associations, by examining issues in relation to economic-institutional contexts that have been largely neglected.