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The study explores how inter-personal trusts between the Owners of Small Enterprises (OSEs) and their exchange partners affect the mitigation of Transaction Costs (TC) of Small Enterprises (SEs) in Sri Lanka. Data were collected from 373 SEs located in nine Districts representing all Provinces in Sri Lanka, by conducting face to face personal interviews with the respondents. The data were analyzed using Partial Least Squares-Structural Equation Modelling. Results revealed that inter-personal trust between the OSEs and exchange partners has negatively affected firm TC, providing sufficient evidence to conclude that inter-personal trust has a significant impact on mitigating TC of SEs and providing important insights for policy makers to focus their strategies on new direction on focus their strategies conventional approaches to support SEs.

The effect of inter-personal trusts on transaction costs of owner-managed small enterprises in Sri Lanka