Review of Literature and Theoretical Background

This chapter reviews prior research on the concept of trust across various disciplines. First, the importance of trust for human affairs and communications is emphasized. This is followed by a discussion of the disciplines’ different approaches to conceptualizing, defining and operationalizing trust. Subsequently, this chapter provides a classification framework of trust components which integrates interdisciplinary knowledge and on which further investigation of the trust concept in the domain-specific context of eWOM is based. A discussion of the conditions of trust that arise as well as trust-related concepts follows. In the next chapter, a conceptualization of trust in eWOM is presented based on this chapter’s conclusions.

The Role of Trust

The notion of trust has existed as long as the history of mankind and human social interactions. While the term itself dates back to the 13th century (e.g., Mollering, Bachmann & Lee, 2004) - having its roots in expressions symbolizing faithfulness and loyalty - the concept of trust is most likely to be “as old as the earliest forms of human association” (Watson, 2005). It is now widely agreed that almost every aspect of human life seems to be based on some form of trust. Certainly, trust is positive and essential to human beings, since it is part of the essential ingredients of life such as love and friendship, and different kinds of meaningful relationships seem to depend on this notion (Wang & Emurian, 2005). Trust is regarded as a central necessity for the effective functioning of diverse levels of human relations: it determines relationships between nations, organizations, groups, and dyads but can also be found to be a critical variable for relationships between individuals (Butler, 1986). Trust is an important element of human life (e.g., Gambetta, 1988; Luhmann, 1979), as it can be best described as a governance mechanism in social, business and communication exchange relationships (e.g., Golembiewski & McConkie, 1975; Morgan & Hunt, 1994), which are characterized by risk, uncertainty, vulnerability, and dependence (e.g., Bradach & Eccles, 1989; Mayer et al., 1995; Mishra, 1996).

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W. Weitzl, Measuring Electronic Word-of-Mouth Effectiveness,

DOI 10.1007/978-3-658-15889-7_2

The critical role of trust can be underlined by saying that when there is social uncertainty concerning how others will behave - which certainly is the case in most social interactions - trust is a pivotal factor that determines what people expect from the situation or context. It makes one outcome more likely than another. Trust as a mental mechanism determines what individuals ultimately decide to do, both in social interactions (Blau 1964) as well as in business relationships (Fukuyama 1995; Gefen et al. 2003a) and diverse aspects of life.

Over several decades, the concept has been extensively investigated by scholars from multiple disciplines, such as psychologists, anthropologists, sociologists, economists, organizational researchers and marketing researchers (e.g., Doney & Cannon, 1997; Larzerele & Huston, 1989; Mayer & Davis, 1999; Mayer et al., 1995). Practitioners as well as academics from almost every discipline have commonly acknowledged the role and value of trust. The key message that trust is critical remains the same, but the concept’s importance is explained differently across those disciplines. For instance, Rotter (1967), an often-cited representative of the psychological school, emphasizes the importance of trust by making the claim that the truster’s (i.e., the trusting party) expectancy that the trustee (i.e., the trusted party) is reliable is a key element in the formation of social relationships. Without trust, communication and interaction among individuals become pointless. Likewise, the theorists Lewis and Weigert (1985a, p. 968) also make an adequate recognition of the concept in the same school of thought by concluding that trust is simply “indispensable in social relationships”. A critical consideration for individuals in typical exchange relationships is choosing the other parties with whom an individual is willing to interact (or communicate). Trust plays a key role in such decisions (Fisher & Chu, 2009; McKnight, Cummings & Chervany, 1998; Stewart, 2003). Truly, the obvious frequency with which decisions are typically made makes us assume that trust is regularly produced and can be regarded as being fundamental to human exchanges in social systems. In reference to this, Zucker (1986, p. 56) notes that trust is “vital for the maintenance of cooperation in society and necessary as grounds for even the most routine, everyday interactions”. Gundlach and Murphy (1993, p. 41) conclude that “the variable most universally accepted as a basis of any human interaction or exchange is trust”. Hence, the concept is critical from complex, one-of-a-kind to very simplistic, everyday decisions.

The key role of trust for business and social exchange is evidenced in a number of ways and the positive effects are omnipresent. Trust enables people to live in risky and uncertain situations (e.g., Deutsch 1958; Deutsch 1962; Mayer et al. 1995); it provides the means to decrease social complexity in an overwhelming, complex world by reducing the set of options a person has to consider in a given situation (e.g., Barber 1983; Lewis and Weigert 1985a; Luhmann 1979); it allows us freedom from rational prediction (Aikgen & Bousch, 2006) and provides us with confidence in social interactions (Lewis and Weigert 1985a). Further, trust is a necessity to positive relational exchange in various settings (e.g., Lewis and Weigert 1985a) as the degree of trust is critical to how one interacts with others in a given environment (e.g.,

Golembiewski and McConkie 1975); trust reduces harmful conflict; and promotes effective responses to crises. Trust can also be described as a kind of social capital that enables cooperative behaviour and coordination between people (Deutsch, 1973; Gambetta, 1988; Misztal, 1996). In this vein, trust is important in various commercial activities and relationships, such as those between a supervisor and his/her subordinate or in buyer-seller relationships. Accordingly, trust has been shown to have a substantial effect on business relationships in general (Dasgupta, 1988; Fukuyama, 1995; Gambetta, 1988; Gulati, 1995); trust is an alternative solution to control, besides price and authority (Creed & Miles, 1996); it reduces the need for extensive negotiations, enforced regulation, as well as tight and costly organizational control (Fukuyama, 1995); trust is a cricital ingredient of effective working relationships (Gabarro, 1978). In addition, trust cultivates long-term orientation (Fukuyama, 1995; Ganesan, 1994; Morgan & Hunt, 1994); is key to successful transactions and long-term relationships Koehn, 1996); trust creates commitment (Moorman et al., 1992; Morgan & Hunt, 1994); and increases a person’s acceptance of interdependence (Schurr & Ozanne, 1985; Zand, 1972). Trust becomes a critical success variable especially during periods of uncertainty because of an organizational crisis (Mishra, 1996). The presence of trust is also able to reduce perceived risk (Fukuyama, 1995) as well as transaction costs (Fukuyama, 1995; Williamson, 1985), and is to some degree important to almost any contractual agreement due to the possible opportunistic behaviour of the other party (Williamson, 1985). Trust can reduce uncertainty created by other people or artefacts and is therefore generally essential in commerce (Blau, 1964). Analogously, trust also heightens the willingness of the truster to interact with the trusted party in situations where the trusting party may be vulnerable to the other’s actions (Blau, 1964; Luhmann, 1979). It is a significant element leading to actual and anticipated purchases (Doney & Cannon, 1997). Research has shown that trust affects consumers’ fears of unreliability and risks of being cheated (Jones & Leonard, 2008). Without such a mental mechanism, any interaction would be paralyzed as the risks of failure would be perceived as overwhelming. In essence, all these academic contributions demonstrate that trust is shown to play a major and indispensable role in determining individuals’ diverse forms of intentions and behaviours. Practitioners’ acknowledgement of the value of trust is as pronounced as it is among scholars (Bartlett & Ghoshal, 1995; Peters, 1992). For example, in their book on partnering in organization Rackman et al. (1996, p. 75) have quoted a business executive on the importance of trust, citing: “[...] there are a lot of issues in partnering, [...] but trust is truly the key. Everything else has to be based on it. Without trust, there is no basis for partnering. It’s the bottom line [...]”.

One idea to explain the prominence of trust in exchange relationships is social exchange theory (SET) (e.g., Homans, 1961; Kelley & Thibaut, 1978). This theory is based on the fundamental assumption that people typically form their exchange relationships on the basis of trust. In its essence, SET views social interactions in a similar manner to economic exchange theory. That is, they are composed of costs paid and rewards received. Similarly to economic theory, people are assumed to only take part in interactions in situations where their outcomes are expected to


be satisfactory. This essentially means that the subjectively perceived rewards have to exceed the subjective costs of the interaction (Blau, 1964; Homans, 1950) - or at least satisfy their expectations and exceed their alternative investments (Thibaut & Kelley, 1959). Here, however, SET contrasts social exchange with its economic counterpart by arguing that the former typically deals with situations that are characterized by the absence of explicit or detailed contracts which bind the involved parties. Hence, because rewards cannot be guaranteed in social exchange, trust is essential and determines people’s expectations of the personal reward from the relationship (Blau, 1964; Lewis & Weigert, 1985a; Luhmann, 1979). However, the same has been found to be true for economic relationships, as various researchers emphasize that trust, in general, enables the parties to form appropriate favourable expectations about the party they are doing business with (Gefen, 2002a; Luhmann, 1979; Williamson, 1985). Various scholars argue that even in the presence of a contractual framework, the parties have to “trust the trust” of the other in a proper business order. Contracts typically do not completely safeguard interaction outcomes and parties sometimes have to make a serious effort to enforce the contractually ensured outcomes with penalties, if they are successful at all. So even when there are contracts, some kind of interaction risk is still unavoidable. Hence, in both economic and social relationship situations, trust increases the perceived certainty concerning other people’s expected behaviour (Luhmann, 1979; Zand, 1972) and reduces the fear of being exploited (Zand, 1972).

Luhmann (1979) advances a similar theory and strives to enlighten our understanding of the importance and functionality of trust in human affairs. In essence, he refers to everyone’s need to control and anticipate - or at least to better understand - the social environment with which individual interacts as a central necessity of human behaviour. Specifically, all people have a general desire to “know” before a social interaction takes place (i) how their behaviour will influence the behaviour of others, and (ii) how the behaviour of others will consequently affect themselves (Gefen & Straub, 2004). The sociologist states that in social relations, interaction partners are best described as free agents whose behaviour can neither be entirely controlled nor predicted. This leads to an inherent uncertainty of relationships. Consequently, the social environment is so overwhelmingly complex that without a mechanism striving to minimize this social complexity, only short-term interactions would be possible at the most. Hence, people are forced to develop certain mechanisms or heuristics to effectively reduce this complexity. According to Luhmann (1979), one of these mechanisms is trust and people regularly use this mental shortcut in order to predict the behaviour of other individuals and organizations. People may also apply other mechanisms, such as pre-determined rules and regulations resulting from laws, contracts or societal standards, which likewise strive to enable complex and long-term transactions. However, when, as is usually the case, laws, rules and regulations are not enough (because they do not automatically safeguard interaction partners from harm), individuals often reduce (unwanted) social complexity by “assuming away undesirable, yet possible, behaviours of others” (Gefen, 2002b). The most critical factor that prohibits social interaction is the 22

participant’s fear of potential negative outcomes. With trust, the probability of those negative outcomes is reduced to a level the person can handle. Trust offers people multiple beneficial consequences as - in additional to social complexity - it also reduces general feelings of uncertainty as well as risk. According to Luhmann (1979), the favourable presumption about the acceptable future actions of others is the essence of trust (Gefen, 2002b).

Luhmann’s theory had been stressed by various scholars, amongst them online consumer researchers, as they regularly recognize that the sociologist’s work provides a valuable framework for explaining why people often refrain from online shopping. According to these authors, the online shopping environment is a less verifiable and less controllable business environment compared to traditional retailing (Gefen, 2000; Gefen & Straub, 2004; Reichheld & Schefter, 2000). This generally leads to an increased transaction complexity and a heightened uncertainty of conditions (Lee & Turban, 2001; McKnight & Chervany, 2001). Furthermore, online interactions are not only characterized by uncertainty, but in addition by anonymity of the interaction partner, and potential opportunism. This makes risk and trust crucial elements in online shopping and interactions. Trust - be it in the Internet as a shopping institution or in the seller itself - is regarded as being one of the most efficient mechanisms to reduce inherent online risks and elicit positive expectations of the outcome of the online transaction (Gefen, Karahanna & Straub, 2003; Jarvenpaa & Tractinsky, 1999; Kaplan & Nieschwietz, 2003; McKnight & Chervany, 2002; Mishra, 1996; Pavlou, 2003). Trust is a facilitator of online interactions.

In a nutshell, trust is a critical concept that determines the type and nature of the social and business order (Blau, 1964; Fukuyama, 1995; Lewis & Weigert, 1985a). People have to produce trust in order to participate in many activities with others and would refrain from social interactions (e.g., communication) with other people whom they do not trust (Blau, 1964; Luhmann, 1979). Zand (1972, p. 229) adds to the concept’s role by stating that trust “is the salient factor in determining the effectiveness of many relations”. Konovosky and Pugh (1994) as well as Schurr and Ozanne (1985) more forcefully note that trust is nothing more than the prime motivator of behaviour in general. These opinions support the claim that individuals should in general develop more trust. However, this should only take place under conditions which give them adequate reasons to do so.

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