The Boundaries of Trust and Risk: The Quadratic Moderating Role of Institutional Structures.

Author List: Gefen, David; Pavlou, Paul A.;
Information Systems Research, 2012, Volume 23, Issue 3, Page 940-959.
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.
Keywords: institutional structures; online marketplaces; polynomial regression; quadratic moderating effects; response surface methodology; risk; trust
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List of Topics

#202 0.179 online uncertainty reputation sellers buyers seller marketplaces markets marketplace buyer price signaling auctions market premiums ebay transaction reverse literature comments
#172 0.139 trust trusting study online perceived beliefs e-commerce intention trustworthiness relationships benevolence initial importance trust-building examines discussed building future context transactions
#264 0.100 risk risks management associated managing financial appropriate losses expected future literature reduce loss approach alternative mitigate failures failure cause mitigation
#161 0.088 role relationship positively light important understanding related moderating frequency intensity play stronger shed contribution past considered maintenance effort effect specifically
#121 0.083 human awareness conditions point access humans images accountability situational violations result reduce moderation gain people features presence increase uses means
#285 0.080 effects effect research data studies empirical information literature different interaction analysis implications findings results important set large provide using paper
#254 0.078 level levels higher patterns activity results structures lower evolution significant analysis degree data discussed implications stable cluster exist relationships identify
#24 0.070 institutional pressures logic theory normative embedded context incumbent contexts forces inertia institutionalized environment pressure identify mimetic dominant coupling board newly
#18 0.065 adaptive theory structuration appropriation structures technology use theoretical ast capture believe consensus technologies offices context based initial advanced exploring findings
#237 0.056 boundary practices capacity new boundaries use practice absorptive organizational technology work field multiple study objects actors actor theory practical spanning