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Investigating the nonlinear and conditional effects of trust - the new role of institutional contexts in online repurchase

Journal: Information Systems Journal

Date: 2023

Author: Haiyun (Melody) Zou, Israr Qureshi, Yulin Fang, Heshan Sun, Kai H. Lim, Elaine Ramsey, Patrick McCole

Abstract:
Trust is paramount to developing and maintaining long-term relationships in all stages of the customer lifecycle, including the repurchase stage. This research goes beyond the simple finding documented in the extant trust literature that the effect of trust will diminish. It sheds light on the role of institutional contexts and develops a nuanced understanding of the boundary conditions under which trust operates in the repurchase stage, where knowledge-based trust becomes more predominant. Drawing on a different theoretical tenet, prospect theory, we find that customers exhibit distinctively different transaction intentions in the two perceptual conditions of high and low trust in institutional contexts. Specifically, the nonlinear relationship between trust and repeat online transaction intention is inverted U-shaped curvilinear when trust in institutional contexts is high, but is U-shaped when trust in institutional contexts is low. With data collected from both e-commerce and mobile banking contexts using two different measures of institutional contexts, we employed a new and advanced latent moderated structural (LMS) equations approach for analysis and provided robust results. Our findings largely confirm the hypotheses and offer theoretical, methodological, and practical implications.

Link: Google Scholar

Background and Context

E-commerce Evolution

E-commerce has progressed to a mature repurchase stage, making it essential for companies to understand how customers develop online rebuying intentions.

Trust and Institutional Contexts

Trust plays different roles in initial purchase versus repurchase stages, with institutional contexts (guarantees, regulations, safeguards) moderating its effects.

Research Methodology

Two empirical studies were conducted in mobile banking and e-commerce contexts using advanced latent moderated structural equations approach for analysis.

Trust Operates Differently in Initial Purchase vs. Repurchase Stages

Initial Purchase Calculus-based Trust Focus on rewards/costs Institutional contexts build trust in vendor Repurchase Knowledge-based Trust Focus on predictability Institutional contexts moderate trust effect
  • Trust evolves from calculus-based in initial purchase to knowledge-based in repurchase stages.
  • Customer concerns shift from maximizing self-interest to seeking predictability and certainty in repurchased relationships.
  • Institutional contexts change from building trust to moderating how trust influences repurchase decisions.

Different Trust Patterns Emerge Under High vs. Low Institutional Contexts

How Customers Frame Trust Decisions High Institutional Trust Positive Domain Inverted U-shaped Focus on gains Low Institutional Trust Negative Domain U-shaped Focus on avoiding losses Based on Prospect Theory
  • Customers with high trust in institutional contexts view transactions through a positive lens focused on gains.
  • Customers with low trust in institutional contexts focus on avoiding losses, framing decisions in negative terms.
  • This different framing creates opposite trust-intention relationships: inverted U-shaped for high institutional trust versus U-shaped for low.

Nonlinear Effect of Trust on Repeat Online Transaction Intention

  • Trust shows a significant nonlinear (quadratic) effect on customers' repeat online transaction intentions in both studies.
  • The negative β coefficient for Trust² (-0.14 in mobile banking, -0.09 in e-commerce) indicates diminishing returns.
  • This confirms the premise that trust exhibits a nonlinear effect rather than a simple linear relationship.

Trust in Institutional Contexts Significantly Moderates the Trust-Intention Relationship

  • Trust in institutional contexts significantly moderates both linear and nonlinear effects of trust on repurchase intentions.
  • The negative coefficient for SA*Trust² (-0.10) confirms the hypothesized negative moderating effect on the nonlinear relationship.
  • A similar pattern appears in both mobile banking and e-commerce contexts, strengthening the generalizability of findings.

Stronger Moderation Effect in E-commerce Compared to Mobile Banking

  • The moderating effect of institutional contexts is significantly stronger in e-commerce than in mobile banking.
  • In e-commerce, the PEEIM*Trust² coefficient is -0.29 compared to -0.10 for SA*Trust² in mobile banking.
  • This suggests industry context influences how institutional protections affect customer trust and repurchase decisions.

Contribution and Implications

  • This research systematically investigates the boundary conditions of trust, extending understanding to the repurchase stage.
  • The study introduces prospect theory as a new theoretical foundation for understanding trust in online repurchase scenarios.
  • Businesses should adopt different trust-building strategies depending on customers' perception of institutional protections.
  • In high institutional trust environments, vendors should build trust until a tipping point before shifting focus.
  • When institutional trust is low, vendors should emphasize long traditions and extensive support networks to mitigate concerns.

Data Sources

  • Visualization 1 is based on Table 1 from the article, summarizing trust characteristics in initial vs. repurchase stages.
  • Visualization 2 illustrates the theoretical framework based on prospect theory described in the hypotheses development section.
  • Visualization 3 uses data from Tables 5 and F1, showing nonlinear coefficients for Trust² across both studies.
  • Visualization 4 presents interaction coefficients from Table 5 (Model 4) showing how trust in institutional contexts moderates trust effects.
  • Visualization 5 compares coefficients from Table 5 (Study 1) and Table F1 (Study 2) across different contextual settings.