A Conceptual Taxonomy of Trust and Online Trust in Electronic Commerce

Transcription

1 A Conceptual Taxonomy of Trust and Online Trust in Electronic Commerce Qi Li Department of E-commerce College of Economic and Financial Xi an Jiaotong University Xianfeng Zhang Department of E-commerce College of Economic and Financial Xi an Jiaotong University Abstract Trust in electronic commerce is an important and interesting issue to EC research. Although trust is an essential component of all successful transactions, there is a renewed focus on trust when the relationships of seller and buyer are conducted through Internet. This paper reviews different perspectives to trust, mainly focused on transaction relationship and online trust, and develops a general conceptual taxonomy for trust. Trust can roughly be defined in two aspects: static/nominal trust and dynamic trusting behavior. Furthermore, trust is formed with four core elements, risk and uncertainty, fragility and vulnerability, common belief and expectation, and subjective belief. Finally, the differences between online trust and offline trust as well as suggestions for future research are discussed. Keywords: Trust, Online Trust, E-commerce 1. Introduction Online trust, the new form of trust in e-commerce, has been disscussed in many prior researches since Some important issues were investegated, including online cusumer trust, the trustworthiness of vendors, and online initial consumer trust (Ratnasingam, 1998a; Hoffman et al., 1999; Ba, 2001; Shankar et al., 2002). However, the long tradition of disciplinary explanation of trust blurs the steps to grasp the meaning of trust (Young, 1993). The general talk on what is the importance of trust in e-commerce, how dealers trust each other has contributed less in the study of trust in the new era. There are many questions we have to answer before we infuse trust into e-commerce research. What is trust? How many trust types are there? What is online trust and how to differ it from offline trust? What is the importance of trust and how does it express in actual e-commerce activities? Since prior researches of trust in information system have used diverse definitions, it is difficult to compare results across studies. Therefore, this paper contributes by proposing an integrative taxonomy of trust and comparing the online trust with offline trust. The remainder of this paper is organized as follows. In the next section, literature in trust of diversified disciplines is reviewed and summarized. In section three, an integrative taxonomy of trust is advanced, from which readers can comprehend trust in a deeper degree. Accordingly, online trust is discussed in section four from three aspects: what is online trust, how it differs from offline trust and what is the influence towards types of trust. Finally, 2355

2 conclusions and suggestions for future research are discussed. 2. Literature Review Defining trust is not a work of small efforts. Blomqvist (1997) reviewed trust from the perspective of social psychology, philosophy, economics, contract law and market research. Zakaria (1999) studied it from sociological standpoint, cultural manifestation and political forum. Jones (2002) found its identifiable core through advancing and discussing five scenarios. In this paper, trust is reconsidered in two aspects: trust and trusting behavior. The matrix shown in Table 1 summarizes the two aspects of trust. The formal meaning is static and nominal, while the latter represents a dynamic verbal meaning. Table 1. Two Aspects of Trust Aspects Descriptions Static Trust Trust is firstly the expression of personal traits. Trust is the product of social environment. Dynamic Trust is the psychological cognition derived from emotion, passion or Trusting commitments. Behavior Trust is the result of rational balances among various dimensions. Trust is the belief on the other party s predictable activity based on external forces like systems, regulations and so on. 2.1 Static Trust Trust is affected and shaped by one s personal trait (Worchel, 1979). It may be originated from one s early forming of social philosophy and even curved in his characteristics. The traits lying in people s subconsciousness, can be stirred up under certain circumstances and are highly fictile, liable to be concealed by intended controls. The research of Fukuyama (1995) and Wang (2002), in a deeper degree, advanced that trust was the product of social environment. Wang (2002) found in America and Japan, there showed a positive correlation between the evaluation of humanity and trusting behavior. 2.2 Dynamic Trusting Behavior In addition to static perspective, we can view trust from dynamic perspective dynamic trusting behavior. There are three definitions of trust based on dynamic process Trust is the psychological cognition derived from emotion, passion or commitments. Hobbes, a typical psychologist, argued trust is a passion proceeding from the belief of him, from whom we expect or hope for good, so free from doubt that upon the same we pursue no other way to attain the same good (Hobbes, 1988). Sociologist Frost (1978) deemed trust as expectancy held by an individual that the behavior of another individual or group of individuals would be altruistic and personally beneficial to himself. Boon and Holmes (1991) even proposed a three-stage trust building model: romantic adoring stage, evaluation stage and adaptive stage. Trust, in this regard, is usually built on kinship, common interests or high responsibilities. They are rather strong, unreliable to be changed by the small faults of either party. 2356

3 2.2.2 Trust is the result of rational balances among various dimensions. Trust dimension plays as a reference to judge the reliability. Benevolence, credibility, competence, integrity and goodwill are often used dimensions. After rationally balancing on those dimensions, dealing entities may have the the willingness to engage in a transaction in the absence of adequate safeguards (Noorderhaven, 1992), and further tolerate the negative incidents, provided long-term expectations of positive developments exists (Hallen and Sandstrom, 1991) Trust is the belief on the other party s predictable activity based on external forces like systems, regulations and so on. In this notion, trustee has been transferred. That is to say, trust is more likely to be constructed due to certain social systems, regulations or institutions rather than the weak sensible cognition sustained by emotion, commitments or calculus. This is the strongest and most stable trust form, as trust has been condensed into an inner-institution or inter-institution phenomena. In this case, what people trust is not the opposite entity but the systems or regulations. 2.3 Elements of Trust Though the above definitions have constructed a relatively integrated review of trust, we need to explore the core of trust to well understand what trust is. There are four necessary elements of trust as figure 1 shown. First, risk and uncertainty are the premise, as trust is produced under the situation that is the risky one accompanying certain outcomes (Schlenker et al., 1973), the one existing a series of uncertain behavior (Deutsch, 1960) and the unstable one produced by information asymmetry. Then, fragility and vulnerability are the origin. Because when trusting, it is to believe that the other party will not exploit the vulnerability, while distrusting, it is the reverse. Furthermore, common belief and expectation is the core of trust. Whatever the beliefs or expectations are, establishing a relationship, finishing a transaction or implementing some stated activities, they act as the driver of successive actions. Finally, Trust is eventually a subjective belief. Whoever it is on, dealing partners or social systems, risk and uncertainty fragility and vulnerability Trust common belief and expectation subjective belief Figure 1. Core Elements of Trust 2357

4 trust is the subjective and sensible feeling. Based on the four core elements, we can concisely define trust as one kind of subjective belief of one party towards another that the latter will act as commonly predicted and exploit no vulnerability under the situation filled with uncertainties and risks. 3. Taxonomy of Trust Many researchers have studied the classification of trust (Luhmann, 1988; Sako, 1992; Barney and Hansen, 1994; Lewicki and Bunker, 1995). Accordingly, there are diversities as well as overlaps among those literatures. Through comprehensive investigating and inducing, this paper proposes an integrative taxonomy of trust as Table 2 shown. These types of trust are described in detail as following. Table 2. Taxonomy of Trust Discriminator Types Individuals and particularistic trust and universalistic trust (Luhmann, 1988) Environment personal trust and situational trust (Noorderhaven, 1992) impersonal trust (Halinen, 1994) Opportunism weak trust, semi-strong trust and strong trust (Barney and Hansen, 1994) Trust contractual trust, competence trust and goodwill trust (Sako, 1992) Dimension technical trust and moral trust (Bidault and Jarillo, 1995) trust in privacy, competence and finance (Peng, 2000) Growth of Trust institutional-based trust, characteristics-based trust and process-based trust (Zucker, 1986) deterrence-based trust, knowledge-based trust and cognition-based trust (Shapiro et al., 1992) calculus-based trust (Lewicki and Bunker, 1995) 3.1 Based on the Differentiation between Individuals and Environment Luhmann (1988) divided trust into particularistic trust and universalistic trust. Particularistic trust is based on kinship or social relationship, while universalistic trust represents the impersonal one, building on social regulations, institutions or agreements. Universalistic trust is usually the main index of one nation s institutional efficiency. Noorderhaven (1992) proposed a similar notion: personal trust and situational trust, with the former denoting trust based on personal relationship or firing passion and the latter representing rational ones. Halinen (1994) applied specific trust to indicate the impersonal trust. 3.2 Based on Opportunism Barney and Hansen (1994) developed a three level trustworthiness: weak trust, semi-strong trust and strong trust. Weak-form trust exists in competitive commodity market, where there are limited opportunities for opportunism and no real vulnerabilities; semi-strong-form trust appears when parties find it irrational to behave opportunistically, perhaps for the fears of some regulating mechanisms; as for strong-form trust, the dealing parties have internalized values, principles and behavior standards, which will further strongly, counteract opportunism. 2358

5 3.3 Based on Trust Dimension Trust has many dimensions. Sako (1992) separated them into three levels: contractual trust, competence trust and goodwill trust. Bidault and Jarillo proposed in 1995 the definition of technical trust and moral trust, respectively representing the trust on people s technical ability and moral level. Peng (2000) indicated that trust could be in privacy, in competence and in finance. 3.4 Based on the Growth of Trust Through investigating the economic structural evolvement of America during 1840 to 1920, Zucker (1986) developed a three level trust: institutional-based trust, characteristics-based trust and process-based trust. According to her, institutional-based trust is the most important form, as it is produced in an impersonal economic environment in deficiency of similarity and commonness. Process-based trust is established during the gradual communicating and exchanging, while the precondition of characteristics-based trust is factors like the same or similar culture or beliefs. Besides, Shapiro et al. (1992) figured out three trust models through investigating the relationship building in commerce: deterrence-based trust, knowledge-based trust and cognition-based trust. 4. Online Trust in Electronic Commerce Although online trust has been numerously mentioned in literatures since 1998 (Ratnasingam, 1998a; Hoffman et al., 1999; Ba, 2001; Shankar et al., 2002), most researchers did not specifically discuss what is online trust, how it differs from offline trust. Therefore, the significant difference between online trust and offline trust will be discussed in this section. 4.1 What is Online Trust Jarvenpaa et al. (2000) use the terms consumer trust and trustworthiness of the store interchangeably in their paper. McKnight et al (2002) explain initial consumer trust as trust in an unfamiliar web vendor, one with whom tge consumer has no prior experience. Accoding to Shankar et al. (2002), online trust involves the firm s business activitites in the electronic medium, and in particular, its web site, while offline trust concerns offline activities of the firm. Actually, the specific difference between online trust and offline trust notion lies in the medium. They still possess the same core elements as section 2 discussed. Therefore, we can normatively define online trust as one kind of subjective belief of one party towards another that the latter will act as commonly predicted and exploit no vulnerability under the online environment filled with uncertainties and risks. 4.2 The Difference between Online Trust and Offline Trust Although online trust and offline trust possess the same core elements, eveluating indicators (i.e. product quality, firm reputation or personal virtue), and the same building mechanisms, they can not be measured or built on the same way. There are many especial issues existing on online environment, including security, system quality, and transaction uncertainty. Shankar et al. (2002) pointed out that in offline trust, the object of trust was typically a 2359

6 human or an entity, whereas in online trust, technology (mainly the Internet) itself represented a proper object of trust. McKnight et al. (2002) advanced two inter-related components of trust in a e-vendor: trusting beliefs (perceptions of the competence, benevolence, and integrity of the vendor), and trusting intentions willingness to depend (that is, a decision to make onself vulnerable to the vendor). He furhter proposed three factors building online trust in a vendor: structural assurance (consumer perceptions of the safety of the web environment), perceived e-vendor reputation and perceived web site quality. 4.3 Trust in Electronic Commerce According to the characteristics of online trust mention above, trust in electronic commerce is more difficult to achieve than offline trust. There are two key factors influencing online trst, information asymmetry and opportunism. In talking the person who knows completely need not trust; while the person who knows nothing can on no rational grounds afford even confidence, Granovetter (1992) means that trust dose not exist in symmetric information, as information has been perfect; meanwhile, with no single idea, trust also cannot establish. That is to say, trust and distrust behavior exist only in the information asymmetry which is potentially risky and uncertainty. On the side, opportunism may disrupt the trust. Opportunism, as Williamson (1993) describes, is self interest seeking with guile and to make self disbelieved statements. Opportunists are trying to exploit the information asymmetry to their own advantages. Thus, once there is opportunitism, distrust behavior will emerge. As to the Internet environment, whose information asymmetry has been worsened by its impersonal traits, infrastructural openness and transacting virtuality, the potential speculations and fraud inclinations are even grievous. Since the trust plays an important role in e-commerce, we have to build online trust by some mechanisms. Tan and Thoen (2002) even proposed that Electronic commerce could only become a success if the general public trusted the virtual environment. The importance of trust to e-commerce shows in the following aspects: trust benefits dealing entities of e-commerce and trust can be well established through trust building mechanisms. 5. Implications and Conclusions Trust in electronic commerce is an important and interesting issue to EC research. Although trust is an essential component of all successful transactions, there is a renewed focus on trust when the relationships of seller and buyer are conducted through Internet. This paper reviews different perspectives to trust, mainly focused on transaction relationship and online trust, and develops a general conceptual taxonomy for trust. After the long discussion, it can be easily recognized that whatever online trust or offline trust, the essence is the same: one kind of subjective belief of one party towards another that the latter will act as commonly predicted and exploit no vulnerability under the situation filled with uncertainties and risks. The specific feature between online trust and traditional trust notion lies in the medium in the Internet environment or not. However, in the Internet environment, opportunists, more than anytime and anywhere else, have the potential to conduct speculative and fraudulent behaviors. The findings in this paper provide helpful implications for researchers and practicers. For researcher, the taxonomy of trust provides well ground to study trust related issues. Moreover, main research challenges and issues in the field of trust in e-commerce 2360

7 have been discussed. For practicer, trust has been vital for successful e-commerce. Both virtual store and click-and-mortar store should share more information to consumers in order to reduce information asymmetry, and build consumers loyal trust by trust building mechanisms. References Ba, S. Establishing Online Trust through a Community Responsibility System, Decision Support Systems (31), 2001, pp Barney, J.B. and Hansen, M.H. Trustworthiness as a Source of Competitive Advantage, Strategic Management Journal (15), 1994, pp Bidault, F. and Jarillo, C.J. Trust in Economic Transactions, EMOT Workshop, December 1-3, Geneve, Blomqvist, K. The Many Facets of Trust, Scandinavia Journal of Management (13:3), 1997, pp Boon, S.D. and Holmes, J.G. The Dynamics of Interpersonal Trust: Resolving Uncertainty in The Face of Risk, in Cooperation and Prosocial Behavior, Hindi, R.A. and Groebel, J. (Eds), Cambridge University Press, Cambridge, UK, 1991, pp Deutsch, M Trust, Trustworthiness and The F-Scale, Journal of Abnormal and Social Psychology 61, 1960, pp Frost, T., Stimpson, D.V. and Maughan, M.R.C. Some Correlates of Trust, The Journal of Psychology (99), 1978, pp Fukuyama, F. Trust: The Social Virtues and the Creation of Prosperity, The Free Press, New York, Granovetter, M. Problems of Explanation in Economic Society, in Network and Organizations, Nohria, N. and Eccles, R.G. (eds.) Harvard Business Press, Boston, 1992, pp Halinen, A. Exchange Relationship in Professional Services: A Study of Relationship Development in the Advertising Sector, Ph.D. Thesis, Turku School of Economics and Business Administration, 1994 Hallen, L. and Sandstrom, M. Relationship Atmosphere in International Business, New Perspective on International Marketing, 1991, pp Hobbes, T. Human Nature in the Moral and Political Works of Thomas Hobbes of Malmesbury, London quoted in Dunn John, 1988, Trust and Political Agency. In Trust Making and Breaking Relationshops. Gambetta (ed), Basil Blackwell, Oxford, pp Hoffman, D.L., Novak, T.P., and Peralta, M.A. Building Consumer Trust Online, Communications of the ACM (42:4), April, 1999, pp Jarvenpaa, S.L., Tractinsky, J., Vitale, M. Consumer Trust in an Internet Store, Information Technology and Management 1 (1/2), 2000, pp Lewicki R.J. and Bunker, B.B. Trust in Relationships: A Model of Trust Development and Decline, in Conflict, Cooperation and Justice, Bunker, B.B. and Bubin, J.Z. (Eds.), Jossey-Bass, San Francisco, Note: the other references are available from the author, Qi Li. 2361