Abstract
Abstract: Despite widespread acknowledgement that trust reduces transaction costs, we lack a coherent explanation for how the internalization of religious belief systems by individuals can function as trust-generating mechanisms in firms. This paper develops such an explanation by integrating TCE, a framework well known to management academics, with Big Gods Theory, a novel theory from rational-actor anthropology. We argue that belief in morally concerned, omniscient deities serves as an internal governance mechanism that reduces the need for external monitoring of the actions of individuals thus substituting for formal contractual enforcement in institutionally thin contexts. We argue that when the individuals within a firm share a strong belief in a Big God religion, this belief can reduce transactions costs and thus increase the competitive advantage of the firm. This effect would likely be strongest when firms are operating in the types of institutional voids in which secular institutions for reducing transaction costs are absent.