Institution-based trust in interorganizational exchange relationships: The role of online B2B marketplaces on trust formation

Abstract

Given the uncertainty of online transactions, the digital economy encourages the creation of institutional structures that assure online interorganizational exchange relationships. This research examines how institution-based trust develops in online B2B marketplaces to facilitate interorganizational trust (buyers' trust in sellers). Building upon the notion of institutional trust [Zucker,1986], this study proposes how specific institution-based structures help engender interorganizational trust and indirectly influence transaction success in B2B marketplaces. Five specific institution-based mechanisms are proposed - perceived monitoring, perceived legal bonds, perceived accreditation, perceived feedback, and perceived cooperative norms. To assess the influence of the proposed two dimensions of interorganizational trust - credibility and benevolence - in buyer-seller relationships, three trust outcomes are examined - satisfaction, perceived risk, and continuity. The proposed model is tested on data from 102 organizational buyers in an online B2B marketplace. The results support the proposed model, delineating the relationship between institution-based trust and interorganizational trust. The study provides evidence on how specific institutional mechanisms build trust in online B2B marketplaces, stressing the ability of institution-based trust to build a trustworthy trading environment in the digital economy. The paper discusses the theoretical and managerial implications of this study and proposes several suggestions for future research. © 2002 Elsevier Science B.V.