Fragile and Resilient Trust: Risk and Uncertainty in Negotiated and Reciprocal Exchange * LINDA D. MOLM University of Arizona DAVID R. SCHAEFER Arizona State University JESSICA L. COLLETT University of Notre Dame Both experimental and ethnographic studies show that reciprocal exchanges (in which actors unilaterally provide benefits to each other without formal agreements) produce stronger trust than negotiated exchanges secured by binding agreements. We develop the theoretical role of risk and uncertainty as causal mechanisms that potentially explain these results, and then test their effects in two laboratory experiments that vary risk and uncertainty within negotiated and reciprocal forms of exchange. We increase riskin negotiated exchanges by making agreements nonbinding and decrease uncertainty in reciprocal exchanges by having actors communicate their intentions. Our findings support three main theoretical conclusions. (1) Increasing risk in nego- tiated exchange produces levels of trust comparable to those in reciprocal exchange only if the partner’s trustworthiness is near-absolute. (2) Decreasing uncertainty in reciprocal exchange either increases or decreases trust, depending on network struc- ture. (3) Even when reciprocal and negotiated exchanges produce comparable levels of trust, their trust differs in kind, with reciprocal exchange partners developing trust that is more resilient and affect-based. Since Granovetter’s (1985) classic work, scholars have increasingly documented the extent to which even economic exchanges are embedded in networks of social rela- tionships. In the organizational literature, researchers commonly distinguish between “arm’s-length” market exchanges characterized by impersonal deals that focus solely on monetary outcomes and reciprocal exchanges embedded in long-term relation- ships in which interests expand beyond monetary exchanges and business partners become friends (Kranton 1996; Larson 1992; Uzzi 1996). Contracts and formal agreements govern transactions in market exchanges; trust and reciprocity norms govern reciprocal exchanges in socially embedded relationships. Entrepreneurs prefer embedded reciprocal relationships because of both their economic advantages (e.g., securing loans at lower interest rates and obtaining private information about new products or investment opportunities) and their social benefits. ∗ Address correspondence to: Linda D. Molm, Department of Sociology, University of Arizona, Tucson, AZ 85721. Tel.: 520-621-3531; Fax: 520-621-9875; E-mail: molml@u.arizona.edu. This research was sup- ported by a grant from the National Science Foundation (No. SES-0217287) to the first author. We gratefully acknowledge their support and the valuable assistance of Lorien Lake and Jason Rosow with the research. The contributions of the second and third authors are equal. Sociological Theory 27:1 March 2009 C  American Sociological Association. 1430 K Street NW, Washington, DC 20005