Different types of ethical habits are conducive to alternative forms of economic organization and lead to large variations in economic structure. High levels of trust facilitate economic interaction and lower transaction costs, thus encouraging development of large-scale corporations. Low trust entails higher transaction costs, as suspicious people protect themselves with negotiations, detailed contracts, and lawyers. Development lags accordingly. Societies with plentiful trust and social capital more easily create the large firms which help them compete in the global economy.
Most businesses start as family-owned, but successful ones often become too big for a family to run.
The family must then either retain control, which usually entails limiting the firm's size, or bring in non-kin to control it, allowing it to evolve into a corporation. Where people are more trusting of non-kin, indicated by numerous voluntary organizations, corporations are more easily formed. The bulk of Trust applies this to scrutinize individual countries' economic development as shaped by culture. The largest German and American firms are far larger than the largest French and Italian firms, and Japan and Korea have far larger firms and more highly-concentrated industries than do Taiwan and Hong Kong. Contrary to myth, America has had strong communitarian as well as individualist tendencies.