Trust-literature considers goodwill trust and competence trust as two distinct types of trust. Many well-known scholars have mentioned the two bases of trust as being different. However, the veracity of this distinction does not seem to have been addressed by researchers. This paper suggests an experiment to test whether the two types of trust are indeed distinct, and the results throw up a surprising finding that they are very highly and positively related, and hence, not distinct. Principal's perception of agent's trustworthiness does not seem distinctly clear-cut as competence-based or goodwill-based, despite scholars' mentioning them as different. The paper offers a plausible explanation through the concept of `halo effect'. The contribution of this paper to management practice lies in bringing out the presence of halo effect in trust that may well indicate the possible wastage of resources in superfluous controls and/or the failure to implement appropriate controls required.

Principal-agent relationship has attracted the attentions of scholars from different fields for over three decades. The area continues to be the interest of research-scholars such that the EBSCO database lists 64 articles in refereed journals between 2006 and 2008. This field focuses on economics, socio-psychology and management largely. Such interest initially leads to the birth of two streams of thoughts: Agency Theory and Transaction Cost Analysis (TCA). Both these streams essentially deal with the control methods that the principal can use over the agent. Agency Theory approaches the issue through incentivization (Eisenhardt, 1989) and TCA deals with it focusing on the relationship-structure and contract for better control. Whichever approach one adopts, there is a limit to the principal's ability in documentation and monitoring of preferred behavior by the agent. Somewhere down the line, the principal has to let go of the control and start reducing monitoring efforts owing to either infeasibility or exorbitant cost of such efforts. The final choice of the degree of control and monitoring efforts depends greatly on the degree of comfort the principal feels vis-a-vis the agent or simply, the `trust'. A principal may trust an agent either due to the latter's ability to carry out the task as desired (competence trust) or due to the perception that the latter will not act in a manner detrimental to the relationship or the former (goodwill trust). Scholars consider these two types of trust separately—as though they were different—without explicitly stating anything about their relationship (Morgan and Hunt, 1994; Hosmer, 1995; Nooteboom, 1996; Johnson, 1999; Das and Teng, 2001; McKnight and Chervany, 2001). This paper examines the relationship, if any, between two such seemingly independent types of trust: `competence trust' and `goodwill trust'.

This paper starts with a scanning of research literature on trust for its definition, attributes and bases. It traces the typologies of trust used by various scholars and arrives at the oft-cited dichotomy of goodwill trust and competence trust, examining their respective components. Thus, it derives the hypotheses about their independence and explains the methodology used for testing the hypotheses. The findings are explained and the possible reasons are examined. The paper concludes with the implications to management-practice and possible future research-directions.

Management Research Journal, Halo Effect, Principal-agent Relationship, EBSCO Database, Transaction Cost Analysis, Goodwill Trust, Organizational Loyalty, Inter-organizational Relationships, English Dictionaries, Cooperative Enterprises, Social Interactions, Social Psychology, Agency Theory Framework, Decision Making Process.