A country's ability to innovate doesn't depend on how much money is in the bank, but on how much the people actually trust each other.
March 25, 2026
Original Paper
Trust, Finance, and Intangibles
SSRN · 6328461
The Takeaway
The paper finds that 'intangible' industries (like tech) require cash-flow-based lending rather than asset-based lending (collateral). Because cash-flow lending requires high levels of social trust, low-trust economies remain trapped in 'tangible' production (like manufacturing) even if they have plenty of money in their banking systems.
From the abstract
What matters for intangible-intensive production is not credit volume but compositionthe mix of cash-flow-based versus asset-based lending. Using data from 27 countries and over 160,000 firm-year observations, we show that cash-flow-based lending drives intangible investment while overall credit depth does not, and that social trust is its deep institutional determinant. A firm-level trust measure from LLM analysis of 700,000 earnings call transcripts confirms that more transparent firms obtain