A trust model for consumer internet shopping

Ecommerce success, especially in the businesstoconsumer area, is determined in part by whether consumers trust sellers and products they cannot see or touch, and electronic systems with which they have no previous experience. This paper describes a theoretical model for investigating the four main antecedent influences on consumer trust in Internet shopping, a major form of businesstoconsumer ecommerce: trustworthiness of the Internet merchant, trustworthiness of the Internet as a shopping medium, infrastructural (contextual) factors (e.g., security, thirdparty certification), and other factors (e.g., company size, demographic variables). The antecedent variables are moderated by the individual consumer’s degree of trust propensity, which reflects personality traits, culture, and experience. Based on the research model, a comprehensive set of hypotheses is formulated and a methodology for testing them is outlined. Some of the hypotheses are tested empirically to demonstrate the applicability of the theoretical model. The findings indicate that merchant integrity is a major positive determinant of consumer trust in Internet shopping, and that its effect is moderated by the individual consumer’s trust propensity

A Trust Model for Consumer Internet Shopping

Article in International Journal of Electronic Commerce · September 2001

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International Journal of Electronic Commerce /Fall 2001, Vol 6, No 1, pp 75–91.

Copyright © 2001 M.E Sharpe, Inc All rights reserved.

1086-4415/2001 $9.50 + 0.00.

Matthew K O Lee and Efraim Turban

ABSTRACT: E-commerce success, especially in the business-to-consumer area, is deter-mined in part by whether consumers trust sellers and products they cannot see or touch, and electronic systems with which they have no previous experience This paper describes

a theoretical model for investigating the four main antecedent influences on consumer trust in Internet shopping, a major form of business-to-consumer e-commerce: trustworthi-ness of the Internet merchant, trustworthitrustworthi-ness of the Internet as a shopping medium, infrastructural (contextual) factors (e.g., security, third-party certification), and other fac-tors (e.g., company size, demographic variables) The antecedent variables are moder-ated by the individual consumer’s degree of trust propensity, which reflects personality traits, culture, and experience Based on the research model, a comprehensive set of hypotheses is formulated and a methodology for testing them is outlined Some of the hypotheses are tested empirically to demonstrate the applicability of the theoretical model The findings indicate that merchant integrity is a major positive determinant of consumer trust in Internet shopping, and that its effect is moderated by the individual consumer’s trust propensity

KEY WORDS AND PHRASES: E-commerce trust, Internet shopping, trust model, trust pro-pensity, trust theory, trustworthy attributes

The growth of the Internet and its user base in recent years has been truly phenomenal In most developed countries, the number of Internet users is 20–

50 percent of the total population In the United States alone, the number of people with Internet access via home PCs reached 136 million in September

2000,1 and the annual growth rate remains high In Hong Kong, the number of people with Internet access accounts increased from less than 1 million in March 1999 to more than 2.3 million (about one-third of the total population)

in November 2000,2 indicating very robust growth Enormous potential exists for the use of the Internet for the purchase of goods and services The poten-tial for Internet shopping is underexploited, however, because as recent mar-ket surveys have confirmed, many users are reluctant to make purchases on the Internet In Hong Kong, for instance, only 5 percent of active Internet us-ers made purchases through the Internet in 2000.3 Lack of trust is one of the most frequently cited reasons for consumers not purchasing from Internet shops Despite the importance of trust in consumer-based e-commerce, there has been very little theory-guided empirical research on the nature of trust and its antecedents in the specific context of Internet shopping This paper attempts to fill the gap Drawing from the findings of e-commerce research

The work described in this paper was partially supported by grants from the Research Grants Council of the Hong Kong Special Administrative Region, China (Project Nos CityU 1191/98H and CityU 1204/97H).

A preliminary version of this paper was presented at the International Confer-ence on Electronic Commerce 2000 (ICEC2000), held in Seoul, Korea, on August 21–

24, 2000 Jae Kyu Lee served as the guest editor for the paper.

and integrating trust theories from the fields of marketing, psychology, and sociology, it describes the development of a theoretical model for the investi-gation of trust and its antecedents in the context of Internet shopping In addi-tion, it presents details of a potential empirical investigation of some major hypotheses arising from the model Findings from such research could extend trust and e-commerce theories, and be used to guide efforts by the e-com-merce community to increase consumer trust in Internet shopping

Background and Literature Review

This paper describes the development of a research model that can be used to examine consumer trust and its determinants in the context of Internet shop-ping Although the importance of trust is widely recognized, there is wide-spread disagreement about its definition, characteristics, antecedents, and outcomes Mayer, Davis, and Schoorman have identified five issues that sum-marize the root of this disagreement [36]:

• the difficulty of defining trust

• confusing trust with its antecedents and outcomes

• failing to clearly understand the relationship between trust and risk

• confusing the levels of analysis due to lack of specificity of trust referents

• failing to consider both the trusting party and the party to be trusted

In addition, the trust literature concentrates on person-to-person trust (e.g.,

in psychological studies) or organization-to-organization trust (e.g., in the study

of strategic alliances) or people-to-computing systems trust (e.g., in the study

of user interfaces of mission-critical computing systems) Researchers have given little attention to trust between people and organizations, and there are almost no empirical studies on consumer trust in Internet shopping The few available ones (e.g., Jarvenpaa et al [25]) rely on limited models (focused solely

on the Internet merchant) and use ad hoc samples, ignoring some important antecedents (e.g., those related to the Internet marketing channel) To further complicate things, Internet shopping involves trust not simply between the Internet merchant and the consumer, but also between the consumer and the computer system through which transactions are executed Since Internet shop-ping is a relatively new phenomenon with enormous potential, there is a strong need to reexamine the notion of trust and identify its determinants in this context in different markets and cultures

In particular, it is necessary to:

1 develop a notion of consumer trust specific to the Internet shopping context

2 discover the existing level of consumer trust toward Internet shop-ping in different markets or cultures (countries)

3 develop and empirically test a model of consumer trust and its antecedents in the context of Internet shopping

Trust is an especially important factor under conditions of uncertainty and risk As a new form of commercial activity, Internet shopping involves more uncertainty and risk than traditional shopping Internet shops are less well known to consumers Moreover, a consumer cannot physically check the qual-ity of a product before making a purchase, or monitor the safety and securqual-ity of sending sensitive personal and financial information (e.g., credit card numbers) through the Internet to a party whose behaviors and motives may be hard to predict The importance of trust in e-commerce cannot be overestimated Many studies have identified the building of trust as a fundamental and yet unre-solved issue in the development of Internet shopping (e.g., [20, 41])

The notion of trust has been examined in various contexts over the years— for example, as related to bargaining [43], industrial buyer-seller relationships [14], distribution channels [15], partner cooperation in strategic alliances [12], and the use of market research [38] The theoretical perspectives used in these studies may be aggregated into three categories [36]:

• personality theory, conceptualizing trust as a belief, expectancy, or feeling deeply rooted in the personality and originating in the individual’s early psychological development

• sociology and economics, conceptualizing trust mainly as a phe-nomenon within and between institutions, and as the trust indi-viduals put in those institutions

• social psychology, characterizing trust in terms of the expectations and willingness of the trusting party in a transaction, the risks associated with acting on such expectations, and the contextual factors that either enhance or inhibit the development and mainte-nance of that trust

Although the social-psychological perspective appears to be most relevant for understanding consumer trust in Internet shopping because it focuses on transactions, the other perspectives are also important For example, a

con-sideration of consumer trust in Internet shopping that did not examine trust

propensity, a personality trait of the concerned consumers, would be quite

inadequate

The perceived trustworthiness of a participating party is often thought to

be an important antecedent of trust Trustworthiness encompasses certain personal attributes conducive to the building of trust Table 1 summarizes some of the main attributes that have been found to lead to trust in general Three attributes arguably constitute the main elements of trustworthiness:

ability, benevolence, and integrity [36] Ability comprises the skills and

com-petencies enabling a party to have influence within some specific domain As

such, ability is domain-specific In the present context it relates to the

compe-tence of a company in the Internet shopping business Benevolence is the extent

to which the trusting party believes that the trusted party wants to do good

things rather than just maximize profit Integrity is the trusting party’s

per-ception that the trusted party will be honest and adhere to an acceptable set of principles In the literature, the term “reputation” sometimes encompasses competence and integrity Doney and Cannon, for example, define a firm’s reputation as the extent to which customers in the industry believe that the firm is honest and concerned about them [14] Thus, the three trustworthiness attributes include the concept of reputation

As noted by Lewicki and Bunker, trust is situational and context-specific, and should be investigated under specific contextual and situational param-eters [33] In the context of Internet shopping, risk is a relevant situational parameter in that (1) there is uncertainty about the outcome of an Internet shopping transaction, (2) the outcome depends on the behavior of the Internet merchant, which is not within the consumer’s purview and control, and (3) the harm of an undesirable outcome may be greater than the benefits of a suc-cessful outcome A number of context-specific parameters are worth consider-ing in the context of Internet shoppconsider-ing Hoffman, Novak, and Peralta argue that the effectiveness of third-party trust-certification bodies (e.g., TRUSTe or Verisign)4 and the public key encryption infrastructure for ensuring transac-tional security (including privacy protection) are central success factors for build-ing consumer trust in Internet shoppbuild-ing [20, 46] Kini and Choobineh suggest that trust in the Internet merchant is necessary but not sufficient for an Internet shopping transaction to take place The consumer must also trust the transac-tion medium for Web shopping (i.e., a computer connected to servers and to the Internet) [28] Lee and Moray found that whether an operator trusts an auto-mated system influences whether the operator will use that system [32] Trust

in an automatic system is mainly dependent on the system’s perceived techni-cal competence and performance, and the operator’s understanding of the underlying characteristics and processes that govern the system’s behavior The literature on trust crosses a wide variety of disciplines It provides a useful basis for investigating consumer trust and its antecedents in the con-text of Internet shopping, but as pointed out by Mayer, Davis, and Schoorman,

Authors Trustworthiness attributes

Butler [5] Availability, competence, consistency, discreetness,

fairness, integrity, loyalty, openness, promise fulfillment, receptivity Cook and Wall [11] Ability, trustworthy intentions

Deutsch [13] Ability, intention to deliver

Doney and Cannon [14] Reputation, size, willingness to customize

Good [19] Ability, intention, trustee’s promises

Kee and Knox [27] Competence, motives

Lieberman [35] Competence, integrity

Ring and Van de Ven [42] Moral integrity, goodwill

Table 1 Trustworthiness Attributes.

many researchers confuse trust with its antecedents [36] For example, Kini and Choobineh’s definition of trust includes the sources of trust [28] In addition, most of the literature offers no supporting evidence Theory-guided empirical studies of consumer trust in Internet shopping are relatively rare, a severe lack that critically impedes an understanding of consumer trust in Internet shop-ping The authors hope that this paper will improve the situation

The Proposed Model

Based on a review of the literature, the authors have developed a theoretical model for the antecedents of trust in consumer Internet shopping (business-to-consumer [B2C]) The model is shown in Figure 1 The independent vari-ables (on the left) fall into four broad categories: (1) trustworthiness of the Internet merchant, (2) trustworthiness of the Internet shopping medium, (3) Internet shopping contextual factors, and (4) other factors (e.g., control fac-tors, such as size of Internet merchant, demographic variables, prior related experience) The effect of these variables on the dependent variable of con-sumer trust in Internet shopping (CTIS) is moderated by the trust propensity

of the consumer concerned The level of trust propensity is expected to be fairly stable over time and can be measured The model suggests that the level

of trust, which is a personality trait, moderates the relationships between the independent and dependent variables, as will be shown below The definition

of trust from Mayer, Davis, and Schoorman is adopted, with modifications for

use in the Internet shopping context [36] CTIS is defined as the willingness of

a consumer to be vulnerable to the actions of an Internet merchant in an Internet shopping transaction, based on the expectation that the Internet merchant will behave in certain agreeable ways, irrespective of the ability of the consumer

to monitor or control the Internet merchant

The model is not all-embracing in that it does not attempt to capture every possible antecedent of trust It is focused on capturing the most significant set

of trust antecedents, derived from different lines of previous research, and presenting them as an integrated entity that can provide direction for empiri-cal testing Other variables that might affect the model (e.g., experience with the Internet, age, gender) can be controlled in empirical tests

The Model’s Components and Possible Research

Hypotheses

The discussion in this section postulates some hypotheses, derived from pre-vious research and from discussions with e-commerce merchants, that indi-cate directions for future research

Trustworthiness of Internet Merchant

Many researchers have studied the influence of perceived trustworthiness on building trust As indicated earlier, ability, integrity, and benevolence are

con-sistently related to trust in most studies and thus are included in the present research framework These three factors encompass, and represent different

dimensions of, the concept of reputation Some possible hypotheses for this

group of factors are:

H1: The perceived ability of an Internet merchant is positively associated with CTIS.

H2: The perceived integrity of an Internet merchant is positively associ-ated with CTIS.

H3: The perceived benevolence of an Internet merchant is positively associated with CTIS.

Since these antecedents are all fairly broad, one can create several subhypotheses and measures for each of the hypotheses when undertaking a research design Additional variables may be identified and will be employed

to create new hypotheses

Trustworthiness of the Internet Shopping Medium

In the literature on human-computer interface and ergonomics, trust is iden-tified as a factor affecting human choice of the use of computerized systems [39] Internet shopping is an activity that necessarily entails primary interac-tions with computer systems In some senses, the Internet device (e.g., per-sonal computer, WebTV) that the consumer interacts with is analogous to the salesperson in a traditional shop The extent to which consumers trust this computerized medium is likely to affect their overall trust in Internet shop-ping According to Lee and Moray, human trust in an automated or

comput-Figure 1 A Proposed Model for Consumers’ Trust in Internet Shopping

Trustworthiness of Internet

Merchant

- ability

- integrity

- benevolence

Trustworthiness of Internet

Shopping Medium

- technical competence

- reliability

- medium understanding

Contextual Factors

- effectiveness of third party

certification

- effectiveness of security

infrastructure

Consumer Trust in Internet Shopping (CTIS)

Individual Trust Propensity Other Factors

erized system depends on three factors: (1) the perceived technical compe-tence of the system, (2) the perceived performance level of the system, and (3) the human operator’s understanding of the underlying characteristics and processes governing the system’s behavior [32] The technical competence of a system is its ability to perform the tasks it is supposed to perform Performance level includes such parameters as speed, reliability, and availability These three variables together may influence consumer trust in the Internet shopping me-dium (ISM) Some possible hypotheses for this group of factors are:

H4: The perceived technical competence of the ISM is positively associated with CTIS.

H5: The perceived performance level of the ISM is positively associated with CTIS.

H6: The degree to which a consumer understands the workings of the ISM (referred to as “medium understanding”) is positively associated with CTIS.

Again, subhypotheses and a variety of measures are possible, as well as additional hypotheses related to this topic

Contextual Factors

As noted earlier, several contextual factors are important in trust building Most noteworthy are the issues of security and privacy, which can be pro-tected by public key encryption (PKI) systems and the related SSL and SET protocols Also important are third-party certification, escrow, and insurance services Some possible hypotheses for this group of factors are:

H7: The perceived effectiveness of third-party certification bodies (certifi-cation effectiveness) is positively associated with CTIS.

H8: The perceived effectiveness of public key security infrastructure (security effectiveness) is positively associated with CTIS.

Again, subhypotheses and a variety of measures are possible, as well as additional hypotheses related to this topic

Other Factors

This group includes factors that do not fit the preceding categories but may have a bearing on CTIS Examples include the size of an Internet shop [25] and various demographic variables of the buyers, such as sex, age, and Internet usage experience Since the variables in this group are less coherent from a theoretical perspective, they tend to be treated as control variables rather than tested as independent variables in similar studies However, this does not rule out the value and possibility that variables in this group may be tested individually in a research redesign

Trust Propensity

The impact of the trust antecedents just presented can be influenced by the propensity of the individual to trust Hofstede found that this trait is depen-dent on cultural background, personality type, and developmental

experi-ence [21] The propensity to trust is a personality trait that moderates the effect

of trustworthiness attributes on the formation of trust This position is sup-ported by Mayer, Davis, and Schoorman [36] When deciding whether and how much to trust, consumers look for cues (e.g., trustworthiness attributes) Trust propensity magnifies or reduces the signals the cues provide This moderation effect acts positively in the sense that the higher the level of trust propensity, the greater the impact of trust attributes on the formation of trust Some possible hypotheses for this group of factors are:

H9: Trust propensity positively moderates the relationship between the perceived abilities of Internet merchants and CTIS.

H10: Trust propensity positively moderates the relationship between the perceived integrity of Internet merchants and CTIS.

H11: Trust propensity positively moderates the relationship between the perceived benevolence of Internet merchants and CTIS.

H12: Trust propensity positively moderates the relationship between the perceived technical competence of the ISM and CTIS.

H13: Trust propensity positively moderates the relationship between the perceived performance level of the ISM and CTIS.

H14: Trust propensity positively moderates the relationship between medium understanding and CTIS.

H15: Trust propensity positively moderates the relationship between certification effectiveness and CTIS.

H16: Trust propensity positively moderates the relationship between security effectiveness and CTIS.

Again, subhypotheses and a variety of measures are possible, as well as additional hypotheses related to this topic Such hypotheses can be tested empirically, using a sample survey or experiments Guidelines for hypothesis testing using a survey research methodology are provided in the appendix

Applicability of the Model

To illustrate the applicability of the model, Cheung and Lee selected six hy-potheses for initial testing [6] They also investigated some of the key trust constructs in a related trust model, and developed and validated the corre-sponding measurement instrument [7] The six hypotheses they selected were: H1 (ability of the merchant), H2 (integrity of the merchant), H7 (third-party

certification), H9 (ability moderated by trust propensity), H10 (integrity mod-erated by trust propensity), and H15 (third-party certification modmod-erated by trust propensity)

Methodology: Instrument Development and Testing

Cheung and Lee used a survey research approach to measure the following five

of the constructs in the proposed model: (1) perceived integrity of Internet mer-chants (related to H2 and H10), (2) perceived ability of Internet mermer-chants (re-lated to H1 and H9), (3) individual trust propensity (the moderating effect), (4) perceived effectiveness of third-party certification (related to H7 and H15), and (5) consumer trust in Internet shopping (the dependent variable) [6] They employed a three-phase instrument-development process, following the guide-lines of Moore and Benbasat [37] In phase I, 19 measures were identified, mainly

by in-depth interviews with subject experts and potential Internet shoppers These measures are shown in Table 2 In phase II, the initial construct validity of the measures was put to the test using a four-judge panel Each of the judges was asked to sort the measures into conceptual constructs based on similarity

of meaning Almost all the measures were sorted correctly, with a very high degree of agreement among the judges This was suggestive of a high degree of initial convergent and discriminant validity In phase III, the instrument was pilot-tested using a sample of 40 students from a local university Using Cronbach’s alpha test with an acceptance level of 0.7 (see [40]), one of the mea-sures was removed The remaining 18 meamea-sures were then field-tested using a convenient sample of 405 business school undergraduates majoring in manage-ment information systems (MIS) at the City University of Hong Kong This test resulted in the removal of three additional measures The relationship between the five constructs and the 15 remaining statements of the measures is shown in Table 2 The 15 statements were then subjected to an exploratory factor analysis

to assess the construct validity of the instrument EQUAMAX rotation was used

in the exploratory factor analysis The measures loaded correctly on the con-structs, with a total of 68.8 percent of the variance being explained by the data The EQUAMAX approach was used as a compromise between two frequently used methods, QUARTIMAX and VARIMAX, to arrive at the best interpreta-tion In practice, the objective of all methods of rotation is to simplify the rows and columns of the factor matrix to facilitate interpretation Rather than con-centrating either on simplification of the rows or simplification of the columns, the EQUAMAX approach tries to accomplish some of each The factor loadings (shown in Table 2) were good, with most of them exceeding 0.7 Even the lowest factor loading of 0.523, could be regarded as acceptable [10] The details of the factor matrix and other statistics can be found in Cheung and Lee [6, 8]

Testing the Hypotheses

A survey questionnaire containing the 15 statements was administered to a convenient sample of undergraduate business students at a university in Hong