Interorganizational Trust in Business to Business E-Commerce Defended on Thursday, 22 November 2001

This thesis aims to empirically examine the role of inter-organizational trust (trading partner trust) in e-commerce participation. By doing so, trust behaviors in business relationships were identified. The findings from ten organizations that formed four bi-directional dyads and two uni-directional dyads contributed to a model of inter-organizational trust within bi-directional dyads. The model identified the development of inter-organizational trust in three stages and identified trust behaviors and characteristics involved in the gradual development of trust from one stage to the next stage, thus providing an awareness of trust behaviors that trading partners need to develop. For example competence trust emphasized on an individual or team's ability and skills to operate e-commerce system and applications (i.e. is at a technical level). Predictability trust examined the reflections and interpersonal experiences of the trading partners based on past experiences, and a consistency of trading partner behaviors. Goodwill trust examined the institutional (i.e. the organization's image, reputation that determines the strategic benefits). Overall, the findings indicated that trust in inter-organizational relationships clearly matter.

Most previous research in the Information Systems discipline focused on information systems and technology, e-commerce applications such as Inter-Organizational Systems (IOSs), competitive advantages, and security issues. The emphasis on IOSs' gave rise to concerns about Inter-Organizational Relationships (IORs), as trading partners became aware of the social-political factors that affected their relationships. IOSs involve the sharing of e-commerce applications in different locations. When this study was initiated in 1997, universal standards were not fully developed. This posed a security concern for Small-Medium-Enterprises, particularly in Australia and New Zealand. This study examines the importance of inter-organizational trust (trading partner trust) in ecommerce participation. The objective of this study is to empirically examine the importance of interorganizational- trust in e-commerce participation. Despite the acknowledged importance of trust, only limited research has examined the role of trust among trading partners in business-to-business e-commerce, when this study was initiated in 1997. As the participation in e-commerce increased, the need for trust among trading partners became more pertinent in business-to-business e-commerce. Exploratory research was carried out via three case studies in the automotive industry. The automotive industry was selected as a critical and typical case for Electronic Data Interchange (EDI) via Value-Added-Networks, and the findings emphasized on the importance of interorganizational trust in e-commerce participation. The exploratory study, together with a literature review, provided the theoretical foundations for the development of the conceptual model. Theories from multiple disciplines including the marketing, management, sociology, information systems and e-commerce were applied in the conceptual model. The research question developed for this study is: How does inter-organizational trust (trading partner trust) influence the perception of ecommerce benefits and risks of e-commerce, thus influencing the extent of participation in ecommerce? The conceptual model was then tested using a multiple-case-study research strategy that aimed to solicit qualitative and in-depth understanding of inter-organizational trust in the context of business-tobusiness e-commerce. Ten organizations from a cross-industry selection that formed four bi-directional dyads and two uni-directional dyads participated in the study. They included a public sector organization involved in customs clearance; their Internet service provider; a customs agent (broker); an importer; two organizations in the computer and data communications industry; two organizations in the telecommunications industry; and two organizations in the automotive industry. The primary unit of analysis in this study is the uni-directional dyad. The case study participants included e-commerce coordinators, IT managers, and senior executives involved in e-commerce. In addition, e-commerce applications, existing documents, and standards contributed to secondary data sources. For example, trading partner agreements, organizational charts, web sites, and internal security policies gave evidence of the organizations' best business practices and background information on the organization and their products. The findings of the four bi-directional dyads (eight organizations) and the two uni-directional dyads indicated that trust was important for participation in e-commerce. The findings differed by the type of e-commerce application used and the industry. For example, organizations that developed extranet applications had only one trading party (the supplier) undertaking the implementation process. Suppliers were involved in the installation of their websites that provided product information. In addition, suppliers had to train their buyers to use extranet applications. The products consisted of many different parts, (such as data communications, computers and telecommunications) which made the task of placing an order complex. These inter-organizational dyads (Cisco-Compaq NZ, and Siemens-Telecom NZ) experienced relational risks arising from the need to establish trust among their trading partners. On the other hand, Avery Ford NZ and Toyota NZ applied intranet applications and Internet-based EDI for routine orders between the manufacturers and suppliers. Smaller organizations such as the customs broker and the importer experienced a smooth e-commerce adoption due to their application "Trade Manager" which was not connected to the Internet. The study contributes to theory, practice and research in the following ways: First, rather than inferring characteristics of e-commerce adoption from a technical and economic background, this study examined behavioral characteristics of trading partners in business-to-business ecommerce from theories in multi-disciplines. The primary emphasis of prior research was on transaction economics, its competitive advantages and/or external pressure (socio-political). This study focused on the importance of inter-organizational trust in e-commerce participation. The findings of the study led to the development of a model of inter-organizational trust within bi-directional dyads in e-commerce participation. Second, the study contributed to practice as it increased the awareness of e-commerce practitioners, who will check the trust behaviors of themselves and that of their trading partners. Trading partners will be better able to select and evaluate trust and security-based mechanisms in e-commerce, thus protecting themselves against opportunistic behaviors of their trading partners. Third, the study contributed to research as it paved the way for longitudinal studies. This study only took a micro-perspective of inter-organizational trust within dyadic relationships as it was intended to be an exploratory study. Further research should extensively test the model using a field survey with business-to-business e-commerce organizations.

Keywords

trust, trading partners, business-to-business, e-commerce, risks, manager, technology, transactions, competition, customs, security-based mechanisms, Internet, security, communications, dyads, EDI, findings, e-commerce participation, participation, mechanisms