We investigate the effects of focal firm knowledge intensity and uncertainty on inter-organizational trust and subsequent performance of small and medium size enterprises (SMEs). We integrate the trust literature with transaction cost literature as both of these offer partial explanations of the dynamics of inter-organizational trust in the context of an SME. We propose that knowledge intensity of the focal firm will have a positive relationship while uncertainty will have a negative relationship with inter-organizational trust in an exchange relationship. Further, we propose a positive relationship between trust and SME performance, which will be contingent on the level of external and internal uncertainty faced by the focal firm. Empirical evidence, based on the survey data of 565 German SMEs, mostly supports our arguments.

Relying on relational capital theory and transaction cost economics (TCE), this study identifies factors that impede or promote alliance formation in small to medium-sized enterprises (SMEs). Environmental uncertainty and knowledge intensity impede firms' R&D alliance formation; the focal firm's overall trust in partners enhances alliance formation. Trust interacts positively with environmental uncertainty and knowledge intensity to affect alliance formation in SMEs. The findings reflect data from a longitudinal sample of 854 German SMEs, captured over eight years from 1999 to 2007.

0We investigate the effect of product diversity and geographic diversity on the performance of sMes, using an integration of the upper echelons literature with the product and geographic diversification literature. 0 We propose an inverted U shaped relationship between product (geographic) diversification (PD/GD) and the performance of SMEs. We also propose that effect of PD and GD is contingent on one another and the TMT experience. 0 We find that both PD and GD have an inverted U shaped relationship with the SME performance. Further, PD and GD interact positively to enhance each other's value in affecting firm performance. TMT experience also enhances the value of PD and GD for firm performance.