ABSTRACT
The principal objective of this research paper is to gain an in-depth understating on what is the critical driver of trust in the market, whether it is social capital or institutions. Works by several authors such as Robert Putnam, Ostrom, Francis Fukuyama, Douglass North, among others were used as primary sources for the research. It is, however, essential to note that there are no proven theories on what is the primary driver of trust in the market, but it is imperative to study a market to know whether institutions or social capital are the primary driver of trust in that particular market. The merits, demerits, and the composition of trust in social capital and institutions are identified in this paper. Generalized trust, values, and norms of reciprocity and cooperation are viewed as the key pillars of social capital and have an undeniable influence on confidence in markets. Trust in institutions, on the other hand, is influenced by the type of institution and institutional change. Organizations are viewed more formally by players in a market and are conceived to be credible; hence one cannot ignore their influence on trust in the market. According to this paper, trust in markets is driven by both social capital and institutions. One cannot solely rely on one and ignore the other. The interdependent relationship existing between institutions and social capital has a significant impact on economic, financial and financing decisions of the players in a market. Developing an even-handed, balanced employment of trust in social capital and trust in institutions could positively influence the socio-economic conditions of any market. In other words, to achieve their primary objective, which is profit maximization, the participants in a market have to learn how to strike a balance in the levels of trust they place on either social capital or institutions.