Trust and Risk in E-Commerce: A Re-examination and Theoretical Integration

Abstract

Feedback system plays an important role in E-commerce as decision support for buyers. In this paper we examine the role of feedback system in building trust towards unknown E-vendors when buyers are making purchase for the first time. We adopted Signaling theory from marketing literature to breakdown the cognitive process of buyers when they face a mixture of true and fake advertisements and guarantees from the E-vendor, and how they perceive the signals to be honest and true. We posit that Social Presence signals from reviewers in the feedback system possess the bonding ability that makes the cost/difficulty in sending fake signals prohibitively high in given feedback system. This perceived credibility in feedback system then positively influence the perceived credibility of trust-building signals, as the cost for sending fake signal without being exposed by the feedback system is extremely high. Finally, the perceived level of trust in the E-vendor positively influence the perceived credibility of risk-reducing signals, because the potential loss of sending out fake signals will jeopardise established consumer trust, which is highly sought after and valuable. By identifying the reinforcing effect between these constructs rather than parallel constructs, we hypothesize that interpersonal signals serve as a "primer" that can trigger this chain reaction, and feedback system has a much broader implication in the formation of online trust than previously recognized. For practitioners of e-commerce, this study provides an alternative source of trust-building tools apart from costly traditional signaling behaviors.