Examining macro-sources of institution-based trust in social commerce marketplaces: An empirical study

Highlights

• Marketplace-based e-commerce dominates current social commerce economy.

• The institution-based trust is vital for social commerce marketplaces.

• Two macro-level factors of the institution-based trust are uncovered.

• A high order construct – perceived social presence – is introduced.

• It discloses a trust-building mechanism in social commerce marketplaces.

Abstract

Trust has been seen as the foundation of e-commerce. While the interpersonal trust has gain a lot attention in literature, institution-based trust has been studied only infrequently. However, with the significance of the marketplace-based e-commerce, more attention should be paid to institution-based trust, particularly trust at the marketplace level. This study focuses on a specific type institution-based trust associated with marketplaces, termed as trust in marketplace. Based upon the institutional theory and the social presence theory, two categories of marketplace-driven factors, the institutional and social factors, are then proposed as antecedents of trust in marketplace in the new context of social commerce marketplaces. Two formative high-order constructs, perceived effectiveness of institutional structures and perceived social presence, are developed to account for the effects of these two sources on trust in marketplace, which in turn leads to transaction intention in social commerce marketplaces. The research model is examined via the free simulation experimental method where seven real social commerce marketplaces are duplicated. The findings suggest the positive impacts of both constructs in shaping institution-based trust that leads to social commerce marketplace transaction intention. This study then offers insightful understandings to the institutional trust building mechanism in the recent phenomenon of social commerce, as well as introduces the important but neglected social perspective to e-commerce research.

Introduction

A new development of e-commerce is social commerce (Wang and Zhang, 2012, Huang and Benyoucef, 2013), defined as the delivery of e-commerce activities and transactions via the social media environment (Liang and Turban, 2011). Via the embedded social media technologies such as recommendation lists, ratings, comments, reciprocity applications and others (Olbrich and Holsing, 2011), online purchase environment becomes more socially rich than before. One significant trend in social commerce is the emergence of social commerce marketplaces, including those evolving from the traditional online marketplace like Amazon and eBay by deploying social applications and content (Lu et al., 2016). This marketplace-based e-commerce has become the mainstream of current e-commerce market, and thus, it calls special attention to institution-based trust related to the marketplace (i.e. the institution).

Institution-based trust is trust that is based on formal societal structures like guarantees and recommendations from institutions, systems or third parties (Zucker, 1986, Shapiro, 1987). Although institution-based trust is argued the most important mode of trust for unfamiliar business environment like e-commerce, it is still under-explored in literature. Bachmann (2011) argues that in substantial parts of the literature, trust has been seen as essentially a micro-level phenomenon based on frequent contacts between individual actors, where macro-level factors such as institutions do not appear as a constitutive part of a business relationship. In e-commerce studies, while interpersonal trust have been extensively explored (e.g., Bhattacherjee, 2002, Jarvenpaa et al., 2000, Hoffman et al., 1999), institution-based trust has been studied only infrequently (e.g., Pavlou and Gefen, 2004, Qu et al., 2014). However, with the dominance of the marketplace-based e-commerce (Gefen and Pavlou, 2012), we argue that trust in marketplace – one type of institution-based trust at the marketplace level - deserve more attention. When the individual-level trust towards the unknown online sellers is difficult to form, trust in marketplace, thus, becomes indispensable for buyers to engage in the online transactions (Pavlou and Gefen, 2004).

Online marketplaces have heavily invested in trust-building tools (i.e. marketplace-driven institutional mechanisms) to foster buyers’ trust and reduce their risk to enhance transaction activity and market liquidity (Gefen and Pavlou, 2012). More recently, they have reinforced the investment in social technologies (Huang and Benyoucef, 2013) to enhance social context for online transactions. Social commerce marketplaces then have established not only the institutional context, but also the social context where social interactions and cues can be observed by online buyers for their decisions. While the institutional structures have been suggested as the crucial means for trust building at the institutional level (Pavlou and Gefen, 2004), the impact of social context on institution-based trust has rarely been examined in e-commerce literature, although extant research indicates that trust is deeply rooted in social context and is engendered by social interactions (Blau, 1964, Luhmann, 1979, Cialdini, 2001). Thus, there is a knowledge gap in literature on the building mechanisms of institution-based trust when both the institutional and social factors are present in e-commerce marketplaces. The primary of purpose of this study is to address this knowledge gap by focusing on two marketplace related factors (i.e. institutional mechanisms and social factors) that directly engender institution-based trust at the marketplace level in the new context of social commerce marketplace.

Based upon Pavlou and Gefen (2004), we propose a new set of marketplace-driven institutional mechanisms including feedback mechanisms, escrow services, information security, and dispute resolution. A formative second-order construct, termed perceived effectiveness of institutional structures (PEIS) (Pavlou and Gefen, 2005), is then proposed to account for the overall effects coming from institutional context on trust in marketplace. In addition to the institutional factors, two social factors is identified by drawing upon the social presence theory (Gefen and Straub, 2004, Hassanein et al., 2009): perceived social presence of marketplace and perceived social presence of others. Similar to PEIS, another formative second-order construct, termed as perceived social presence (PSP), is proposed to account for the overall impacts from social context of marketplaces.

In doing so, we make a few potential contributions to current literature. First, while prior e-commerce research focused on the particularized trust at the micro-level, this paper concentrates on institution-based trust at the marketplace level (i.e. trust in marketplace). Because of the dominance of marketplace in current e-commerce economy, institution-based trust at the marketplace level becomes particularly important and deserves special attention. Thus, this paper makes a good complement to the trust literature. Second, it discloses how marketplace-based factors (i.e. institutional and social sources) have influences on institution-based trust at the marketplace level, providing us a deeper understanding of both trust and online purchase intention in the context of social commerce marketplace. Third, this study proposes a new set of institutional mechanisms based upon Pavlou and Gefen (2004) by focusing on the marketplace-driven structures, and thus, makes a good complement to their work. Finally, in addition to PEIS rooted in the institutionalism research paradigm (Gefen and Pavlou, 2012, Fang et al., 2014), this study introduces another high order construct – perceived social presence - to account for the impacts of social context. It calls more attention to the impacts of social context and introduces this new perspective of social commerce to the traditional e-commerce landscape.

The remainder of this paper is structured as follows. We first make the theoretical development, including the discussion of two formative second-order constructs: PEIS and PSP. Next, we propose the research model, followed by the hypotheses. The paper then briefly describes research methodology, followed by the discussion of results, findings, limitations, as well as research and practitioner implications. Finally, we indicate possible future research directions and offer the concluding remarks.