hierarchy and trust: The knowledge economy and the future of capitalism

Recent conceptualizations of trends in the structure of U.S. in-dustry have focused on the relative importance of markets, hi-erarchies, and hybrid intermediate forms. This paper advances the discussion by distinguishing three ideal–typical forms of organization and their corresponding coordination mechanisms: market/price, hierarchy/authority, and community/trust. Differ-ent institutions combine the three forms/mechanisms in differ-ent proportions. Economic and organizational theory have shown that, compared to trust, price and authority are relatively ineffective means of dealing with knowledge-based assets. Therefore, as knowledge becomes increasingly important in our economy, we should expect high-trust institutional forms to proliferate. A review of trends in employment relations, interdivisional relations, and interfirm relations finds evidence suggesting that the effect of growing knowledge-intensity may indeed be a trend toward greater reliance on trust. There is also reason to believe that the form of trust most effective in this context is a distinctively modern kind—‘‘reflective trust’’—as opposed to traditionalistic, ‘‘blind’ ’ trust. Such a trend to reflective trust appears to threaten the privileges of currently dominant social actors, and these actors ’ resistance, in combination with the complex interdependencies between price, authority, and trust mechanisms, imparts a halting character to the trend. But the momentum of this trend nevertheless appears to be self-reinforcing, which suggests that it may ultimately challenge the foundations of our capitalist form of society while simulta-neously creating the foundations of a new, postcapitalist form