Pavlou, Paul A.

On the Longitudinal Effects of IT Use on Firm-Level Employment (Information Systems Research, 2016)

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Authors:

Atasoy, Hilal; Banker, Rajiv D.; Pavlou, Paul A.;

Abstract:

The effect of information technology (IT) on employment is a crucial question in today's economy given the increased digitization of work. To analyze the relationship between IT use and firm-level employment, we examine the longitudinal role of IT use in the firm's total number of employees. Our data set comes from the emerging economy of Turkey, and it represents firms of different sizes and industries. The data capture the firm's use of enterprise applications, such as enterprise resource planning and customer relationship management, and the use of Web applications, such as e-banking and e-government. Our empirical specifications exploit both within-firm and between-firm variations to show the positive effect of IT use on firm-level employment, which varies across IT applications over time. Interestingly, we find that the effects of the use of enterprise applications materialize after two years, whereas the effects of the use of Web applications are realized in the current year. We also examine whether the role of IT use in firm-level employment are moderated by firm size, average wage rate, and industry technology intensity. The long-term effects of the use of enterprise applications on firm-level employment are more pronounced in larger firms, with higher average wages, and in high-technology industries. The results are robust to alternative specifications and tests that address causality and endogeneity concerns. Implications for research, practice, and public policy are discussed.

Comparing Open and Sealed Bid Auctions: Evidence from Online Labor Markets (Information Systems Research, 2016)

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Authors:

Hong, Yili; Wang, Chong (Alex); Pavlou, Paul A.;

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Online labor markets are Web-based platforms that enable buyers to identify and contract for information technology (IT) services with service providers using buyer-determined (BD) auctions. BD auctions in online labor markets either follow an open or a sealed bid format. We compare open and sealed bid auctions in online labor markets to identify which format is superior in terms of obtaining more bids and a higher buyer surplus. Our theoretical analysis suggests that the relative advantage of open versus sealed bid auctions hinges on the role of reducing service providers' valuation uncertainty (difficulty in assessing the cost to execute a project) and competition uncertainty (difficulty in assessing the intensity of the competition from other service providers), which largely depend on the relative importance of the common value (versus the private value) component of the auctioned IT services, calling for an empirical investigation to compare open and sealed bid auctions. Based on a unique data set of 71,437 open bid auctions and 7,499 sealed bid auctions posted by 21,799 buyers at a leading online labor market, we find that, on average, although sealed bid auctions attract 18.4% more bids, open bid auctions offer buyers $10.87 higher surplus. Furthermore, open bid auctions are 55.3% more likely to result in a buyer's selection of a certain service provider and 22.1% more likely to reach a contract (conditional on the buyer's making a selection) with a provider, and they generate higher buyer satisfaction. In contrast to conventional wisdom that Òthe more bids the betterÓ and industry practice of treating sealed bid auctions as a premium feature, our results suggest that the buyer surplus gained from the reduction in valuation uncertainty enabled by open bid auctions outweighs the buyer surplus gained from the higher competition uncertainty in sealed bid auctions, which renders open bid auctions a superior auction design in online labor markets.

Does Information and Communication Technology Lead to the Well-Being of Nations? A Country-Level Empirical Investigation (MIS Quarterly, 2016)

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Authors:

Ganju, Kartik K.; Pavlou, Paul A.; Banker, Rajiv D.;

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This paper examines the role of information and communication technology (ICT) in enhancing the well-being of nations. Extending research on the role of ICT in the productivity of nations, we posit that the effects of ICT may not be limited to productivity (e.g., GDP), and we argue that the use of ICT can also improve the well-being of a country by helping citizens to develop their social capital and achieve social equality, enabling access to health-related information and health services, providing education to disadvantaged communities, and facilitating commerce. Using a number of empirical specifications, specifically a fixed-effects model and an instrumental variable approach, our results show that the level of ICT use (number of fixed telephones, Internet, mobile phones) in a country predict a country's well-being (despite accounting for GDP and several other control variables that also predict a country's well-being). Furthermore, by using an exploratory method (biclustering) of identifying both country-specific and ICT-specific variables simultaneously, we identify clusters of countries with similar patterns in terms of their use of ICT, and we show that not all countries increase their level of well-being by using ICT in the same manner. Interestingly, we find that less developed countries increase their level of well-being with mobile phones primarily, while more developed countries increase their level of well-being with any ICT system. Contributions and implications for enhancing the well-being of nations with ICT are discussed.

Product Fit Uncertainty in Online Markets: Nature, Effects, and Antecedents (Information Systems Research, 2014)

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Authors:

Hong, Yili; Pavlou, Paul A.;

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Product <i>fit</i> uncertainty (defined as the degree to which a consumer cannot assess whether a product's attributes match her preference) is proposed to be a major impediment to online markets with costly product returns and lack of consumer satisfaction. We conceptualize the nature of product fit uncertainty as an information problem and theorize its distinct effect on product returns and consumer satisfaction (versus product quality uncertainty), particularly for experience (versus search) goods without product familiarity. To reduce product fit uncertainty, we propose two Internet-enabled systems—<i>website media</i> (visualization systems) and <i>online product forums</i> (collaborative shopping systems)—that are hypothesized to attenuate the effect of product type (experience versus search goods) on product fit uncertainty.

Latent Growth Modeling for Information Systems: Theoretical Extensions and Practical Applications (Information Systems Research, 2014)

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Authors:

Zheng, Zhiqiang (Eric); Pavlou, Paul A.; Gu, Bin;

Abstract:

This paper presents and extends Latent Growth Modeling (LGM) as a complementary method for analyzing longitudinal data, modeling the process of change over time, testing time-centric hypotheses, and building longitudinal theories. We first describe the basic tenets of LGM and offer guidelines for applying LGM to Information Systems (IS) research, specifically how to pose research questions that focus on change over time and how to implement LGM models to test time-centric hypotheses. Second and more important, we theoretically extend LGM by proposing a <i>model validation</i> criterion, namely “<i>d</i>-<i>separation</i>,” to evaluate <i>why</i> and <i>when</i> LGM works and test its fundamental properties and assumptions. Our <i>d</i>-separation criterion does not rely on any distributional assumptions of the data; it is grounded in the fundamental assumption of the theory of conditional independence. Third, we conduct extensive simulations to examine a multitude of factors that affect LGM performance. Finally, as a practical application, we apply LGM to model the relationship between word-of-mouth communication (online product reviews) and book sales over time with longitudinal 26-week data from Amazon. The paper concludes by discussing the implications of LGM for helping IS researchers develop and test longitudinal theories.

Swift Guanxi in Online Marketplaces: The Role of Computer-Mediated Communication Technologies (MIS Quarterly, 2014)

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Authors:

Ou, Carol X. J.; Pavlou, Paul A.; Davison, Robert M.;

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The concept of guanxi (i.e., a close and pervasive interpersonal relationship) has received little attention in the literature on online marketplaces, perhaps due to their impersonal nature. However, we propose that computer-mediated communication (CMC) technologies can mimic traditional interactive face-to-face communications, thus enabling a form of guanxi in online marketplaces. Extending the literature on traditional guanxi, we herein introduce the concept of swift guanxi, conceptualized as the buyer’s perception of a swiftly formed interpersonal relationship with a seller, which consists of mutual understanding, reciprocal favors, and relationship harmony.

VISIONS AND VOICES ON EMERGING CHALLENGES IN DIGITAL BUSINESS STRATEGY. (MIS Quarterly, 2013)

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Authors:

Bharadwaj, Anandhi; Sawy, Omar A. El; Pavlou, Paul A.; Venkatraman, N.;

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An introduction is presented in which the editor discusses various reports within the issue on topics including the implementation of digital business strategies (DBS), the importance of DBS and information transparency in leadership, and the disclosure of information outside the boundaries of business.

DIGITAL BUSINESS STRATEGY: TOWARD A NEXT GENERATION OF INSIGHTS. (MIS Quarterly, 2013)

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Authors:

Bharadwaj, Anandhi; Sawy, Omar A. El; Pavlou, Paul A.; Venkatraman, N.;

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Over the last three decades, the prevailing view of information technology strategy has been that it is a functional-level strategy that must be aligned with the firm's chosen business strategy. Even within this so-called alignment view, business strategy directed IT strategy. During the last decade, the business infrastructure has become digital with increased interconnections among products, processes, and services. Across many firms spanning different industries and sectors, digital technologies (viewed as combinations of information, computing, communication, and connectivity technologies) are fundamentally transforming business strategies, business processes, firm capabilities, products and services, and key interfirm relationships in extended business networks. Accordingly, we argue that the time is right to rethink the role of IT strategy, from that of a functional-level strategy-aligned but essentially always subordinate to business strategy-to one that reflects a fusion between IT strategy and business strategy. This fusion is herein termed digital business strategy. We identify four key themes to guide our thinking on digital business strategy and help provide a framework to define the next generation of insights. The four themes are (1) the scope of digital business strategy, (2) the scale of digital business strategy, (3) the speed of digital business strategy, and (4) the sources of business value creation and capture in digital business strategy. After elaborating on each of these four themes, we discuss the success metrics and potential performance implications from pursuing a digital business strategy. We also show how the papers in the special issue shed light on digital strategies and offer directions to advance insights and shape future research.

The Boundaries of Trust and Risk: The Quadratic Moderating Role of Institutional Structures. (Information Systems Research, 2012)

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Authors:

Gefen, David; Pavlou, Paul A.;

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Aprevalent assumption in the literature is that trust and risk are always relevant in online marketplaces, and that there is always a need to build trust and reduce risk irrespective of context. Challenging this assumption, this study seeks to identify the boundaries of the effects of trust and risk on transaction activity in the context of institutional structures in online marketplaces. The perceived effectiveness of institutional structures (PEIS), defined as the extent buyers believe that appropriate conditions are in place to facilitate transactions with sellers, sets the boundaries of trust and risk by moderating their effects on transaction activity in a quadratic (inverted-U) fashion. Specifically, at the lower boundary condition of PEIS (among buyers who believe institutional structures are ineffective), the high situational uncertainty they perceive should make these buyers unwilling to become vulnerable to sellers, thus rendering trust and risk immaterial to their decision making. Trust and risk should also be immaterial at the higher boundary condition of PEIS (among buyers who believe institutional structures are very effective), because the insufficient situational uncertainty makes trust and risk irrelevant to these buyers' decision making because of a lack of vulnerability. Only between these two boundary conditions (among buyers who perceive moderate levels of PEIS), and thus a moderate degree of situational uncertainty and vulnerability in the marketplace, should trust and risk have a significant effect on transaction activity. Data from 398 buyers on eBay's and Amazon's online marketplaces support the quadratic moderating role of PEIS on the effect of risk on transaction activity, but not on the effect of trust. Theoretical and practical implications on specifying the boundaries of the effects of trust and risk and understanding the direct and moderating role of institutional structures are discussed.

INTERFIRM IT CAPABILITY PROFILES AND COMMUNICATIONS FOR COCREATING RELATIONAL VALUE: EVIDENCE FROM THE LOGISTICS INDUSTRY. (MIS Quarterly, 2012)

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Authors:

Rai, Arun; Pavlou, Paul A.; Im, Ghiyoung; Du, Steve;

Abstract:

This study seeks to identify the means by which information technology helps cocreate relational value in the context of interfirm relationships in the logistics industry--a large and information-intensive industry. We identify a set of IT functionalities-single-location shipping, multilocation shipping, supply chain visibility, and financial settlement--that can be used to manage the flows of physical goods, information, and finances across locations in interfirm logistics processes. Progressively more advanced sets of IT functionalities, when implemented and used in the interfirm relationship to execute logistics processes, are proposed to form four distinct IT capability profiles of increased sophistication. Interfirm IT capability profiles of higher sophistication are proposed to help cocreate greater relational value by facilitating the flows of physical goods, information, and finances across locations in the interfirm logistics process. Besides their direct role in helping cocreate relational value, these interfirm IT capability profiles are proposed to further enhance relational value cocreation when complemented by interfirm communications for business development and IT development. Our empirical study was situated in one of the world's largest logistics suppliers and over 2,000 of its interfirm relationships with buyers across industries. Integrated data from four archival sources on the IT functionalities implemented and used in interfirm logistics relationships, interfirm communications, relational value (share of wallet and loyalty), and multiple control variables were collected. The results show that the proposed interfirm IT capability profiles and interfirm communications have both a direct and an interaction effect on relational value. Implications for cocreating relational value in interfirm relationships with the aid of IT are discussed.

ON PRODUCT UNCERTAINTY IN ONLINE MARKETS: THEORY AND EVIDENCE. (MIS Quarterly, 2012)

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Authors:

Dimoka, Angelika; Hong, Yili; Pavlou, Paul A.;

Abstract:

Online markets pose a difficulty for evaluating products, particularly experience goods, such as used cars, that can not be easily described online. This exacerbates product uncertainty, the buyer's difficulty in evaluating product characteristics, and predicting how a product will perform in the future. However, the IS literature has focused on seller uncertainty and ignored product uncertainty. To address this void, this study conceptualizes product uncertainty and examines its effects and antecedents in online markets for used cars(eBay Motors).Extending the information asymmetry literature from the seller to the product, we first theorize the nature and dimensions (description and performance) of product uncertainty. Second, we propose product uncertainty to be distinct from, yet shaped by, seller uncertainty. Third, we conjecture product uncertainty to negatively affect price premiums in online markets beyond seller uncertainty. Fourth, based on the information signaling literature, we describe how information signals (diagnostic product descriptions and third-party product assurances) reduce product uncertainty.The structural model is validated by a unique dataset comprised of secondary transaction data from used carson eBay Motors matched with primary data from 331 buyers who bid on these used cars. The results distinguish between product and seller uncertainty, show that product uncertainty has a stronger effect on price premiums than seller uncertainty, and identify the most influential information signals that reduce product uncertainty.The study's implications for the emerging role of product uncertainty in online markets are discussed

ON THE USE OF NEUROPHYSIOLOGICAL TOOLS IN IS RESEARCH: DEVELOPING A RESEARCH AGENDA FOR NEUROIS. (MIS Quarterly, 2012)

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Authors:

Dimoka, Angelika; Banker, Rajiv D.; Benbasat, Izak; Davis, Fred D.; Dennis, Alan R.; Gefen, David;

Abstract:

This article discusses the role of commonly used neurophysiological tools such as psychophysiological tools (e.g., EKG, eye tracking) and neuroimaging tools (e.g., fMRI, EEG) in Information Systems research. There is heated interest now in the social sciences in capturing presumably objective data directly from the human body, and this interest in neurophysiological tools has also been gaining momentum in IS research (termed NeuroIS). This article first reviews commonly used neurophysiological tools with regard to their major strengths and weaknesses. It then discusses several promising application areas and research questions where IS researchers can benefit from the use of neurophysiological data. The proposed research topics are presented within three thematic areas: (1) development and use of systems, (2) IS strategy and business outcomes, and (3) group work and decision support. The article concludes with recommendations on how to use neurophysiological tools in IS research along with a set of practical suggestions for developing a research agenda for NeuroIS and establishing NeuroIS as a viable subfield in the IS literature.

NeuroIS: The Potential of Cognitive Neuroscience for Information Systems Research. (Information Systems Research, 2011)

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Authors:

Dimoka, Angelika; Pavlou, Paul A.; Davis, Fred D.;

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This paper introduces the idea of drawing upon the cognitive neuroscience literature to inform IS research (herein termed "NeuroIS"). Recent advances in cognitive neuroscience are uncovering the neural bases of cognitive, emotional, and social processes, and they offer new insights into the complex interplay between IT and information processing, decision making, and behavior among people, organizations, and markets. The paper reviews the emerging cognitive neuroscience literature to propose a set of seven opportunities that IS researchers can use to inform IS phenomena, namely (1) localizing the neural correlates of IS constructs, (2) capturing hidden mental processes, (3) complementing existing sources of IS data with brain data, (4) identifying antecedents of IS constructs, (5) testing consequences of IS constructs, (6) inferring the temporal ordering among IS constructs, and (7) challenging assumptions and enhancing IS theories. The paper proposes a framework for exploring the potential of cognitive neuroscience for IS research and offers examples of potentially fertile intersections of cognitive neuroscience and IS research in the domains of design science and human-computer interaction. This is followed by an example NeuroIS study in the context of e-commerce adoption using fMRI, which spawns interesting new insights. The challenges of using functional neuroimaging tools are also discussed. The paper concludes that there is considerable potential for using cognitive neuroscience theories and functional brain imaging tools in IS research to enhance IS theories.

CIO REPORTING STRUCTURE, STRATEGIC POSITIONING, AND FIRM PERFORMANCE. (MIS Quarterly, 2011)

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Authors:

Banker, Rajiv D.; Hu, Nan; Pavlou, Paul A.; Luftman, Jerry;

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The article presents management research on the executive position of chief information officer (CIO), considering the reporting structure of management in terms of the CIO's access to senior executives and participation in decision making. The informal assumptions that the CIO should report directly either to the chief executive officer (CEO) to promote the role of information technology or to the chief financial officer to control information technology costs are examined. A hypothesis is proposed that a company's strategic positioning should determine the CIO reporting structure, and longitudinal data is presented supporting the hypothesis.

STATE OF THE INFORMATION PRIVACY LITERATURE: WHERE ARE WE NOW AND WHERE SHOULD WE GO? (MIS Quarterly, 2011)

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Authors:

Pavlou, Paul A.;

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While information privacy has been studied in multiple disciplines over the years, the advent of the information age has both elevated the importance of privacy in theory and practice, and increased the relevance of information privacy literature for Information Systems, which has taken a leading role in the theoretical and practical study of information privacy. There is an impressive body of literature on information privacy in IS, and the two Theory and Review articles in this issue of MIS Quarterly review this literature. By integrating these two articles, this paper evaluates the current state of the IS literature on information privacy (where are we now?) and identifies promising research directions for advancing IS research on information privacy (where should we go?). Additional thoughts on further expanding the information privacy research in IS by drawing on related disciplines to enable a multidisciplinary study of information privacy are discussed.

Toward a Causal Interpretation from Observational Data: A New Bayesian Networks Method for Structural Models with Latent Variables. (Information Systems Research, 2010)

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Authors:

Zheng, Zhiqiang (Eric); Pavlou, Paul A.;

Abstract:

Because a fundamental attribute of a good theory is causality, the information systems (IS) literature has strived to infer causality from empirical data, typically seeking causal interpretations from longitudinal, experimental, and panel data that include time precedence. However, such data are not always obtainable and observational (cross-sectional, nonexperimental) data are often the only data available. To infer causality from observational data that are common in empirical IS research, this study develops a new data analysis method that integrates the Bayesian networks (BN) and structural equation modeling (SEM) literatures. Similar to SEM techniques (e.g., LISREL and PLS), the proposed Bayesian networks for latent variables (BN-LV) method tests both the measurement model and the structural model. The method operates in two stages: First, it inductively identifies the most likely LVs from measurement items without prespecifying a measurement model. Second, it compares all the possible structural models among the identified LVs in an exploratory (automated) fashion and it discovers the most likely causal structure. By exploring the causal structural model that is not restricted to linear relationships, BN-LV contributes to the empirical IS literature by overcoming three SEM limitations (Lee, B., A. Barua, A. B. Whinston. 1997. Discovery and representation of causal relationships in MIS research: A methodological framework. MIS Quart. 21(1) 109-136)-lack of causality inference, restrictive model structure, and lack of nonlinearities. Moreover, BN-LV extends the BN literature by (1) overcoming the problem of latent variable identification using observed (raw) measurement items as the only inputs, and (2) enabling the use of ordinal and discrete (Likert-type) data, which are commonly used in empirical IS studies. The BN-LV method is first illustrated and tested with actual empirical data to demonstrate how it can help reconcile competing hypotheses in terms of the direction of causality in a structural model. Second, we conduct a comprehensive simulation study to demonstrate the effectiveness of BN-LV compared to existing techniques in the SEM and BN literatures. The advantages of BN-LV in terms of measurement model construction and structural model discovery are discussed.

The "Third Hand": IT-Enabled Competitive Advantage in Turbulence Through Improvisational Capabilities. (Information Systems Research, 2010)

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Authors:

Pavlou, Paul A.; El Sawy, Omar A.;

Abstract:

Organizations are increasingly engaged in competitive dynamics that are enabled or induced by information technology (IT). A key competitive dynamics question for many organizations is how to build a competitive advantage in turbulence with digital IT systems. The literature has focused mostly on developing and exercising dynamic capabilities for planned reconfiguration of existing operational capabilities in fairly stable environments with patterned "waves," but this may not always be possible, or even appropriate, in highly turbulent environments with unexpected "storms." We introduce improvisational capabilities as an alternative means for managing highly turbulent environments; we define this as the ability to spontaneously reconfigure existing resources to build new operational capabilities to address urgent, unpredictable, and novel environmental situations. In contrast to the planned role of dynamic and operational capabilities and the ambidexterity that they jointly offer, improvisational capabilities are proposed to operate distinctly as a "third hand" that facilitates reconfiguration and change in highly turbulent environments. First, the paper develops the notion of improvisational capabilities and articulates the key differences between the two "reconfiguration"—improvisational and dynamic—capabilities. Second, the paper compares the relative effects of improvisational and dynamic capabilities in the context of new product development in different levels of environmental turbulence. Third, the paper shows how IT-leveraging capability in new product development is decomposed into its three digital IT systems: project and resource management systems, organizational memory systems (OMS), and cooperative work systems—and how each of these IT systems enhances improvisational capabilities, an effect that is accentuated in highly turbulent environments. The results show that although dynamic capabilities are the primary predictor of competitive advantage in moderately turbulent environments, improvisational capabilities fully dominate in highly turbulent environments. Besides discriminant validity, the distinction between improvisational and dynamic capabilities is evidenced by the differential effects of IT-leveraging capability on improvisational and dynamic capabilities. The results show that the more the IT-leveraging capability is catered toward managing resources (through project and resource management systems) and team collaboration (through cooperative work systems) rather than relying on past knowledge and procedures (through organizational memory systems), the more it is positively associated with improvisational capabilities, particularly in more turbulent environments. The paper draws implications for how different IT systems can influence improvisational capabilities and competitive advantage in turbulent environments, thereby enhancing our understanding of the role of IT systems on reconfiguration capabilities. The paper discusses the theoretical and practical implications of building and exercising the "third hand" of improvisational capabilities for IT-enabled competitive dynamics in turbulence.

Seeking the Configurations of Digital Ecodynamics: It Takes Three to Tango. (Information Systems Research, 2010)

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Authors:

El Sawy, Omar A.; Malhotra, Arvind; Park, YoungKi; Pavlou, Paul A.;

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This paper starts from the premise that the simultaneous increase in environmental turbulence, the requisite speed of organizational change, and the intensified ubiquity of digital technologies are spawning a phenomenon that is messy, complex, and chaotic. Accordingly, we need to change the way we examine how information technology (IT) can help organizations build a strategic advantage in turbulent environments. We propose a more systemic and holistic perspective to theory building and testing in the information system (IS) strategy area and correspondingly appropriate methods that capture the complexity of this phenomenon. We term this phenomenon digital ecodynamics, defined as the holistic confluence among environmental turbulence, dynamic capabilities, and IT systems-and their fused dynamic interactions unfolding as an ecosystem. We believe that a more holistic understanding of digital ecodynamics will fuel the next leap in knowledge in the IS strategy area. First, extending the strategic management literature that has mainly focused on two-way interactions between environmental turbulence and dynamic capabilities, we foreground IT systems as a third central element. We use a "threesome tango" analogy with strong mutual interdependence to accentuate our view of digital ecodynamics-while also stressing the emerging role of IT systems in triggering environmental turbulence and shaping dynamic capabilities to build a strategic advantage. Second, we propose a different paradigmatic lens (configuration theories) as an appropriate inquiring system to better understand the complexity of digital ecodynamics. The paper articulates the key aspects of configuration theories as inquiring systems, compares them with the more common variance theories and process theories, and illustrates the power of recent advances in configurational methods. Third, we create a preliminary roadmap for IS researchers to better examine digital ecodynamics using novel structural properties afforded by configuration theories (i.e., mutual causality, discontinuity, punctuated equilibria, nonlinear change). Fourth, we reflect on the broader opportunities that the configurational perspective of digital ecodynamics can create for IS strategy research. The paper ends by highlighting the double-barreled opportunity that digital ecodynamics renders, both as an energizing vision for IS strategy research and also as a reshaper of strategic management research and practice in a turbulent and digitized world.

INTRODUCTION TO THE SPECIAL ISSUE ON NOVEL PERSPECTIVES ON TRUST IN INFORMATION SYSTEMS. (MIS Quarterly, 2010)

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Authors:

Benbasat, Izak; Gefen, David; Pavlou, Paul A.;

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An introduction to the issue is presented in which the editors discuss the topic of novel aspects of trust in under-researched information system contexts, the article "What Does the Brain Tell Us about Trust and Distrust: Evidence from a Functional Neuroimaging Study" by Dimoka, and the article "Are There Neural Gender Differences in Online Trust?," by Riecil, Hubert, and Kenning.

Special Issue: Trust in Online Environments. (Journal of Management Information Systems, 2008)

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Authors:

Benbasat, Izak; Gefen, David; Pavlou, Paul A.;

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This article discusses various published reports within the issue, including one by Dan J. Kim on culture and trust and another by Dianne Cyr on culture and web site design.

A Research Agenda for Trust in Online Environments. (Journal of Management Information Systems, 2008)

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Authors:

Gefen, David; Benbasat, Izak; Pavlou, Paul A.;

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We present an agenda for the future research that has the potential to extend the conceptual foundations of trust in online environments and to improve the practice in the domain. The agenda draws on the previous work on trust, the papers included in this Special Issue, and our perspective on the state of the literature. This agenda is structured into four components--nature and role of trust, moderators of trust, antecedents of trust, and empirical methods for examining trust.

UNDERSTANDING AND MITIGATING UNCERTAINTY IN ONLINE EXCHANGE RELATIONSHIPS: A PRINCIPAL--AGENT PERSPECTIVE. (MIS Quarterly, 2007)

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Authors:

Pavlou, Paul A.; Liang, Huigang; Xue, Yajiong;

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Despite a decade since the inception of B2C e-commerce, the uncertainty of the online environment still makes many consumers reluctant to engage in online exchange relationships. Even if uncertainty has been widely touted as the primary barrier to online transactions, the literature has viewed uncertainty as a "background" mediator with insufficient conceptualization and measurement. To better understand the nature of uncertainty and mitigate its potentially harmful effects on B2C e-commerce adoption (especially for important purchases), this study draws upon and extends the principal-agent perspective to identify and propose a set of four antecedents of perceived uncertainty in online buyer--seller relationships--perceived information asymmetry, fears of seller opportunism, information privacy concerns, and information security concerns--which are drawn from the agency problems of adverse selection (hidden information) and moral hazard (hidden action). To mitigate uncertainty in online exchange relationships, this study builds upon the principal--agent perspective to propose a set of four uncertainty mitigating factors--trust, website informativeness, product diagnosticity, and social presence--that facilitate online exchange relationships by overcoming the agency problems of hidden information and hidden action through the logic of signals and incentives. The proposed structural model is empirically tested with longitudinal data from 521 consumers for two products (prescription drugs and books) that differ on their level of purchase involvement. The results support our model, delineating the process by which buyers engage in online exchange relationships by mitigating uncertainty. Interestingly, the proposed model is validated for two distinct targets, a specific website and a class of websites. Implications for understanding and facilitating online exchange relationships for different types of purchases, mitigating uncertainty perceptions, and extending...

From IT Leveraging Competence to Competitive Advantage in Turbulent Environments: The Case of New Product Development. (Information Systems Research, 2006)

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Authors:

Pavlou, Paul A.; Sawy, Omar A. El;

Abstract:

A burning question for information systems (IS) researchers and practitioners is whether and how IT can build a competitive advantage in turbulent environments. To address this question, this study focuses on the business process level of analysis and introduces the construct of IT leveraging competence-the ability to effectively use IT functionalities. This construct is conceptualized in the context of new product development (NPD). IT leveraging competence is shown to indirectly influence competitive advantage in NPD through two key mediating links: functional competencies (the ability to effectively execute operational NPD processes) and dynamic capabilities (the ability to reconfigure functional competencies to address turbulent environments). Environmental turbulence is also shown to moderate the process by which IT leveraging competence influences competitive advantage in NPD. Empirical data were collected from 180 NPD managers. Through the construct of IT leveraging competence, the study shows that the effective use of IT functionalities, even generic functionalities, by business units can help build a competitive advantage. The study also shows that the strategic effect of IT leveraging competence is more pronounced in higher levels of environmental turbulence. This effect is not direct: It is fully mediated by both dynamic capabilities and functional competencies. Taken together, these findings suggest that IS researchers should look beyond the direct effects of firm-level IT infrastructures and focus their attention on how business units can leverage IT functionalities to better reconfigure and execute business processes. In turbulent environments, focusing on these aspects is even more vital.

The Nature and Role of Feedback Text Comments in Online Marketplaces: Implications for Trust Building, Price Premiums, and Seller Differentiation. (Information Systems Research, 2006)

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Authors:

Pavlou, Paul A.; Dimoka, Angelika;

Abstract:

For online marketplaces to succeed and prevent a market of lemons, their feedback mechanism (reputation system) must differentiate among sellers and create price premiums for trustworthy sellers as returns to their reputation. However, the literature has solely focused on numerical (positive and negative) feedback ratings, alas ignoring the role of feedback text comments. These text comments are proposed to convey useful reputation information about a seller's prior transactions that cannot be fully captured with crude numerical ratings. Building on the economics and trust literatures, this study examines the rich content of feedback text comments and their role in building a buyer's trust in a seller's benevolence and credibility. In turn, benevolence and credibility are proposed to differentiate among sellers by influencing the price premiums that a seller receives from buyers. This paper utilizes content analysis to quantify over 10,000 publicly available feedback text comments of 420 sellers in eBay's online auction marketplace, and to match them with primary data from 420 buyers that recently transacted with these 420 sellers. These dyadic data show that evidence of extraordinary past seller behavior contained in the sellers' feedback text comments creates price premiums for reputable sellers by engendering buyer's trust in the sellers' benevolence and credibility (controlling for the impact of numerical ratings). The addition of text comments and benevolence helps explain a greater variance in price premiums (R² = 50%) compared to the existing literature (R² =20%-30%). By showing the economic value of feedback text comments through trust in a seller's benevolence and credibility, this study helps explain the success of online marketplaces that primarily rely on the text comments (versus crude numerical ratings) to differentiate among sellers and prevent a market of lemon sellers. By integrating the economics and trust literatures, the paper has theoretical and practical implications for better understanding the nature and role of feedback mechanisms, trust building, price premiums, and seller differentiation in online marketplaces.

UNDERSTANDING AND PREDICTION ELECTRONIC COMMERCE ADOPTION: AN EXTENSION OF THE THEORY OF PLANNED BEHAVIOR. (MIS Quarterly, 2006)

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Authors:

Pavlou, Paul A.; Fygenson, Mendel;

Abstract:

This paper extends Ajzen's (1991) theory of planned behavior (TPB) to explain and predict the process of e-commerce adoption by consumers. The process is captured through two online consumer behaviors: (1) getting information and (2) purchasing a product from a Web vendor. First, we simultaneously model the association between these two contingent online behaviors and their respective intentions by appealing to consumer behavior theories and the theory of implementation intentions, respectively. Second, following TPB, we derive for each behavior its intention, attitude, subjective norm, and perceived behavioral control (PBC). Third, we elicit and test a comprehensive set of salient beliefs for each behavior. A longitudinal study with online consumers supports the proposed e-commerce adoption model, validating the predictive power of TPB and the proposed conceptualization of PBC as a higher-order factor formed by self-efficacy and controllability. Our findings stress the importance of trust and technology adoption variables (perceived usefulness and ease of use) as salient beliefs for predicting ecommerce adoption, justifying the integration of trust and technology adoption variables within the TPB framework. In addition, technological characteristics (download delay, Website navigability, and information protection), consumer skills, time and monetary resources, and product characteristics (product diagnosticity and product value) add to the explanatory and predictive power of our model. Implications for Information Systems, e-commerce, TPB, and the study of trust are discussed.

Psychological Contract Violation in Online Marketplaces: Antecedents, Consequences, and Moderating Role. (Information Systems Research, 2005)

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Authors:

Pavlou, Paul A.; Gefen, David;

Abstract:

This study examines the nature and role of Psychological Contract Violation (PCV) in online marketplaces, a critical factor that has been largely overlooked by previous research. Applied to buyer-seller relationships, PCV is defined as a buyer's perception of having being treated wrongly regarding the terms of an exchange agreement with an individual seller. PCV with individual sellers is proposed as a formative first-order construct driven by the occurrence of fraud, product misrepresentation, contract default, delivery delay, and failure to follow product guarantees and payment policies. PCV with an individual seller is proposed to prompt a generalized perception of PCV with the entire community of sellers in a marketplace. PCV with the community of sellers is hypothesized to negatively affect buyer transaction behavior in a marketplace by directly impacting transaction intentions, price premiums, trust, perceived risk, and the perceived effectiveness of institutional structures. PCV is also hypothesized to act as a moderator, transforming the buyers' initial trust-based mindset to one more centered on perceived risk. Finally, PCV is hypothesized to attenuate the positive impact of trust on transaction intentions, while reinforcing the negative impact of perceived risk on transaction intentions. It is also proposed to attenuate the impact of the perceived effectiveness of institutional structures on trust, while strengthening its negative effect on perceived risk. As a means of preventing PCV, the buyers' positive experience and the sellers' favorable past performance are hypothesized to make PCV with the community of sellers less likely. A combination of primary and secondary longitudinal data from 404 buyers in eBay's and Amazon's online auctions support the proposed hypotheses, validating PCV as a central element of buyer-seller relationships in online marketplaces. Interestingly, ex post facto results show that buyers with higher perceptions of PCV with the community of sellers are less likely to experience PCV with an individual seller in the future. Implications for buyer-seller relationships in online marketplaces and the PCV literature are discussed. Also discussed is how the increasing number of buyers who experience PCV in online marketplaces extends the literature that has been largely developed based on buyers who had not experienced PCV.

Building Effective Online Marketplaces with Institution-Based Trust. (Information Systems Research, 2004)

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Authors:

Pavlou, Paul A.; Gefen, David;

Abstract:

Institution-based trust is a buyer's perception that effective third-party institutional mechanisms are in place to facilitate transaction success. This paper integrates sociological and economic theories about institution-based trust to propose that the perceived effectiveness of three IT-enabled institutional mechanisms--specifically feedback mechanisms, third-party escrow services, and credit card guarantees--engender buyer trust in the community of online auction sellers. Trust in the marketplace intermediary that provides the overarching institutional context also builds buyer's trust in the community of sellers. In addition, buyers' trust in the community of sellers (as a group) facilitates online transactions by reducing perceived risk. Data collected from 274 buyers in Amazon's online auction marketplace provide support for the proposed structural model. Longitudinal data collected a year later show that transaction intentions are correlated with actual and self-reported buyer behavior. The study shows that the perceived effectiveness of institutional mechanisms encompasses both "weak" (market-driven)and "strong" (legally binding) mechanisms. These mechanisms engender trust, not only in a few reputable sellers, but also in the entire community of sellers, which contributes to an effective online marketplace. The results thus help explain why, despite the inherent uncertainty that arises when buyers and sellers are separated in time and in space, online marketplaces are proliferating. Implications for theory are discussed, and suggestions for future research on improving IT-enabled trust-building mechanisms are suggested.

EVIDENCE OF THE EFFECT OF TRUST BUILDING TECHNOLOGY IN ELECTRONIC MARKETS: PRICE PREMIUMS AND BUYER BEHAVIOR. (MIS Quarterly, 2002)

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Authors:

Ba, Sulin; Pavlou, Paul A.;

Abstract:

Despite the wide use of reputational mechanisms such as eBay's Feedback Forum to promote trust, empirical studies have shown conflicting results as to whether online feedback mechanisms induce trust and lead to higher auction prices. This study examines the extent to which trust can be induced by proper feedback mechanisms in electronic markets, and how some risk factors play a role in trust formation. Drawing from economic, sociological, and marketing theories and using data from both an online experiment and an online auction market, we demonstrate that appropriate feedback mechanisms can induce calculus-based credibility trust without repeated interactions between two transacting parties. Trust can mitigate information asymmetry by reducing transaction-specific risks, therefore generating price premiums for reputable sellers. In addition, the research also examines the role that trust plays in mitigating the risks inherent in transactions that involve very expensive products.