Institution-Based Trust in Interorganizational Exchange Relationships: The Role of Online B2B Marketplaces on Trust Formation

Given the uncertainty of online transactions, the digital economy encourages the creation of institutional structures that assure online interorganizational exchange relationships. This research examines how institution-based trust develops in online B2B marketplaces to facilitate interorganizational trust (buyers’ trust in sellers). Building upon the notion of institutional trust [Zucker,1986], this study proposes how specific institution-based structures help engender interorganizational trust and indirectly influence transaction success in B2B marketplaces. Five specific institution-based mechanisms are proposed — perceived monitoring, perceived legal bonds, perceived accreditation, perceived feedback, and perceived cooperative norms. To assess the influence of the proposed two dimensions of interorganizational trust — credibility and benevolence — in buyer–seller relationships, three trust outcomes are examined — satisfaction, perceived risk, and continuity. The proposed model is tested on data from 102 organizational buyers in an online B2B marketplace. The results support the proposed model, delineating the relationship between institution based trust and interorganizational trust. The study provides evidence on how specific institutional mechanisms build trust in online B2B marketplaces, stressing the ability of institution-based trust to build a trustworthy trading environment in the digital economy. The paper discusses the theoretical and managerial implications of this study and proposes several suggestions for future research.

[1]  Wynne W. Chin,et al.  Adoption intention in GSS: relative importance of beliefs , 1995, DATB.

[2]  Sirkka L. Jarvenpaa,et al.  Consumer Trust in an Internet Store: A Cross-Cultural Validation , 2006, J. Comput. Mediat. Commun..

[3]  J. H. Davis,et al.  An Integrative Model Of Organizational Trust , 1995 .

[4]  J. Steenkamp,et al.  Generalizations about trust in marketing channel relationships using meta-analysis , 1998 .

[5]  L. Zucker.  Production of trust: Institutional sources of economic structure, 1840–1920. , 1986 .

[6]  James A. Narus,et al.  A Model of Distributor Firm and Manufacturer Firm Working Partnerships , 1990 .

[7]  Mark S. Granovetter.  Economic Action and Social Structure: The Problem of Embeddedness , 1985, American Journal of Sociology.

[8]  P. Pavlou.  WHAT DRIVES ELECTRONIC COMMERCE? A THEORY OF PLANNED BEHAVIOR PERSPECTIVE. , 2002 .

[9]  Fred D. Davis.  Perceived Usefulness, Perceived Ease of Use, and User Acceptance of Information Technology , 1989, MIS Q..

[10]  B. Williams.  The new social contract , 1967 .

[11]  J. Barney,et al.  Trustworthiness as a Source of Competitive Advantage , 1994 .

[12]  D. A. Kenny,et al.  The moderator-mediator variable distinction in social psychological research: conceptual, strategic, and statistical considerations. , 1986, Journal of personality and social psychology.

[13]  F. Dwyer,et al.  A Transaction Cost Perspective on Vertical Contractual Structure and Interchannel Competitive Strategies , 1988 .

[14]  Yao-Hua Tan,et al.  Toward a Generic Model of Trust for Electronic Commerce , 2000, Int. J. Electron. Commer..

[15]  Ying Ki Kwong,et al.  B2B e-Commerce in emerging economies: i-metal.com's non-ferrous metals exchange in China , 2001, J. Strateg. Inf. Syst..

[16]  Stanton G. Cort,et al.  Information Asymmetry and Levels of Agency Relationships , 1998 .

[17]  S. Helper,et al.  Determinants of trust in supplier relations: Evidence from the automotive industry in Japan and the United States , 1998 .

[18]  R. Lewicki.  Research on Negotiation in Organizations , 1990 .

[19]  Norman L. Chervany,et al.  What Trust Means in E-Commerce Customer Relationships: An Interdisciplinary Conceptual Typology , 2001, Int. J. Electron. Commer..

[20]  Saeed Samiee,et al.  The Influence of Global Marketing Standardization on Performance , 1992 .

[21]  D. Collard,et al.  Trust : making and breaking cooperative relations , 1989 .

[22]  S. Hunt,et al.  The Commitment-Trust Theory of Relationship Marketing , 1994 .

[23]  Yao-Hua Tan,et al.  Trust and Deception in Virtual Societies , 2001, Springer Netherlands.

[24]  Jan B. Heide,et al.  ALLIANCES IN INDUSTRIAL PURCHASING - THE DETERMINANTS OF JOINT ACTION IN BUYER-SUPPLIER RELATIONSHIPS , 1990 .

[25]  Paul A. Pavlou,et al.  Evidence of the Effect of Trust Building Technology in Electronic Markets: Price Premiums and Buyer Behavior , 2002, MIS Q..

[26]  R. Bagozzi,et al.  Representing and testing organizational theories: A holistic construal. , 1982 .

[27]  J. Bakos.  Reducing buyer search costs: implications for electronic marketplaces , 1997 .

[28]  Joseph P. Cannon,et al.  Understanding the Influence of National Culture on the Development of Trust , 1998 .

[29]  R. Gulati.  Does Familiarity Breed Trust? The Implications of Repeated Ties for Contractual Choice in Alliances , 1995 .

[30]  A. Parasuraman,et al.  Marketing Services: Competing Through Quality , 1991 .

[31]  Paul A. Pavlou,et al.  Consumer Acceptance of Electronic Commerce: Integrating Trust and Risk with the Technology Acceptance Model , 2003, Int. J. Electron. Commer..

[32]  Joseph P. Cannon,et al.  Buyer–Seller Relationships in Business Markets , 1999 .

[33]  J. H. Davis,et al.  An integrative model of organizational trust, Academy of Management Review, : . , 1995 .

[34]  Paul A. Pavlou,et al.  Does Online Reputation Matter? An Empirical Investigation of Reputation and Trust in Online Auction Markets , 2000 .

[35]  Brian S. Butler,et al.  Intermediaries and Cybermediaries: A Continuing Role for Mediating Players in the Electronic Marketplace , 1995, J. Comput. Mediat. Commun..

[36]  Joseph P. Cannon,et al.  An Examination of the Nature of Trust in Buyer–Seller Relationships: , 1997 .

[37]  S. Sitkin,et al.  Explaining the Limited Effectiveness of Legalistic “Remedies” for Trust/Distrust , 1993 .

[38]  Jeffrey L. Bradach,et al.  Price, Authority, and Trust: From Ideal Types to Plural Forms , 1989 .

[39]  Ben Shneiderman,et al.  Designing trust into online experiences , 2000, CACM.

[40]  A. Zaheer,et al.  Bridging ties: a source of firm heterogeneity in competitive capabilities , 1999 .

[41]  Barton A. Weitz,et al.  Determinants of Continuity in Conventional Industrial Channel Dyads , 1989 .

[42]  A. Zaheer,et al.  Does Trust Matter? Exploring the Effectsof Interorganizational and Interpersonaltrust on Performance , 1998 .

[43]  L. Stern,et al.  Conducting Interorganizational Research Using Key Informants , 1993 .

[44]  F. Leverick,et al.  Partnerships in the motor industry: Opportunities and risks for suppliers , 1998 .

[45]  B. Borys,et al.  Hybrid Arrangements as Strategic Alliances: Theoretical Issues in Organizational Combinations , 1989 .

[46]  J. Bryant,et al.  Media effects : advances in theory and research , 2002 .

[47]  Samer Faraj,et al.  The Role of Intermediaries in the Development of Trust on the WWW: The Use and Prominence of Trusted Third Parties and Privacy Statements , 2006, J. Comput. Mediat. Commun..

[48]  J. Scott Armstrong,et al.  Estimating nonresponse bias in mail surveys. , 1977 .

[49]  S. Shapiro.  The Social Control of Impersonal Trust , 1987, American Journal of Sociology.

[50]  D. Gefen,et al.  E-commerce: the role of familiarity and trust , 2000 .

[51]  J. H. Dyer.  Effective interim collaboration: how firms minimize transaction costs and maximise transaction value , 1997 .

[52]  Leonard L. Berry,et al.  Discovering the Soul of Service: The Nine Drivers of Sustainable Business Success , 1999 .

[53]  K. Andrews.  The Concept of Corporate Strategy , 1971 .

[54]  N. Ireland,et al.  The co-operative game theory of the firm , 1984 .

[55]  Wynne W. Chin.  Issues and Opinion on Structural Equation Modeling by , 2009 .

[56]  I. Ajzen,et al.  Belief, Attitude, Intention, and Behavior: An Introduction to Theory and Research , 1977 .

[57]  Batya Friedman,et al.  Human values and the design of computer technology , 1997 .

[58]  F. Dwyer,et al.  Developing Buyer-Seller Relationships: , 1987 .

[59]  N. Luhmann.  Trust and Power , 1979 .

[60]  Lee Sproull,et al.  When the Interface Is a Face , 1996, Hum. Comput. Interact..

[61]  P. Pavlou.  TRUSTWORTHINESS AS A SOURCE OF COMPETITIVE ADVANTAGE IN ONLINE AUCTION MARKETS. , 2002 .

[62]  W. Hamilton,et al.  The Evolution of Cooperation , 1984 .

[63]  N. L. Chervany,et al.  Initial Trust Formation in New Organizational Relationships , 1998 .

[64]  Jan B. Heide,et al.  Do Norms Matter in Marketing Relationships? , 1992 .

[65]  Shankar Ganesan.  Determinants of Long-Term Orientation in Buyer-Seller Relationships , 1994 .

[66]  Warren G. Bennis,et al.  Douglas McGregor, Revisited: Managing the Human Side of the Enterprise , 2000 .

[67]  P. Ring,et al.  Structuring cooperative relationships between organizations , 1992 .

[68]  W. Dugger.  The Economic Institutions of Capitalism , 1987 .

[69]  Jeffrey H. Dyer.  Collaborative Advantage: Winning through Extended Enterprise Supplier Networks , 2000 .

[70]  S. Ghoshal,et al.  Social Capital, Intellectual Capital, and the Organizational Advantage , 1998 .

[71]  Yannis Bakos,et al.  The emerging role of electronic marketplaces on the Internet , 1998, CACM.