Abstract
This research was
designed to fill the gap in the existing body of knowledge
Regards attitudes
towards online shopping and differences in electronic services quality
Perception between two
different geographical and cultural countries, in addition this research
extended previous effort in online shopping context by providing evidence that
service quality increase consumer trust perception, which in turn results in
favorable attitude toward online shopping, with risk perception moderating the
impact on consumer’s trust. In many previous researches, focus has been found
in the relationship between consumer trust and its antecedents. Researchers have also established that online
purchase intentions are the product of consumer trust. The objective of this
study is to reexamine some factors affecting consumer trust in
Online shopping in
various parts of country as well as to investigate the effect of risk aversion
as a moderator on the relationship between trusts and purchase intention. This
paper provided
Evidence that trust in
Internet shopping is built on high service quality as well as website quality.
Size of online retailers is found to be negatively related to trust. Notably,
risk aversion moderates negatively on the effect of trust toward consumer
purchase intention. Implications and suggestions for further research are also provided
in the study
Table of contents
1. Introduction……………………………………
2. Literature
review………………………………
3. Research
model and hypotheses………………
4. Methodology…………………………………..
5. Findings
and Analysis…………………………
6. Discussions and Implications……..
7. Limitations and Future Research…
8. Conclusion………………………………..
References………………………………..
Appendix…………………………………..
List of Figures
List of Tables
1.
Introduction
1.1.
Statement
of the problem
The adoption of the
Internet as a way to purchase goods and services has seen an increasing trend
over the past two decades globally. Compared to traditional shopping, the
Internet not only facilitates transactions between buyers and sellers from
anywhere at any time, but also provides a wide range of product choices and a
platform for exchanging ideas for customers with low costs. To achieve the
success of electronic commerce, companies place great emphasis on attracting
customers continuously and building long-term relationship with customers on
the web. However, people still remain reluctant to make purchases on the
Internet due to the lack of trust toward businesses in the new electronic
environment. Past researches have indicated that consumers’ lack of trust
constituted a key barrier to the use of Internet shopping as well as long-term
commitment to the relationship building. According to NEPSOL and Report on
ecommerce Trends in Nepal, (2015) identified lack of consumer trust in
Internet vendors as a major factor inhibiting online purchases. Trust plays an
essential role for facilitating online transactions between consumers and
electronic retailers and realizing the development of e-commerce to consumers
in the Nepal
1.2.
Objectives
of study
Although the Internet
offers enormous advantages which seem to attract massive interest of customers,
recent survey showed that the penetration rate of online purchasing stayed
relatively low, especially in Nepal.
According to the most
recent survey on NEPSOL and Report on ecommerce Trends in Nepal the
popularity of online shopping among all Internet users has just show few
percentage in the Some Major cities in 2015. However, previous studies that only
focus on trust of consumers provide a limited view of the phenomenon and may
hinder a comprehensive understanding of the consumer purchasing behavior in the
e-commerce context in Nepal. In part, this stems from the cultural values that
shape the consumer characteristics and influence the relationship between trust
and consumer purchase intention on the web. Previous Literature and Report
on ecommerce Trends in Nepal, observed that risk aversion as one of the
cultural dimensions affects consumers’ decision-making. As trust indicates the
level of consumers’ perceived risk in the Internet shopping, different degrees
of their risk aversion may have non-ignorable effects on the online buying
behavior
2. Literature Review
2.1.
The concept of trust in Internet
shopping
Before a review of
previous literatures on trust in the context of Internet shopping, we first
need to have a look at general definitions of trust in various disciplines. The
concept “trust” is defined as the willingness of a party to be vulnerable to
the actions of another party based on the expectation that the other will
perform a particular action important to the trust or, irrespective of the
ability to monitor or control that other party (Mayer, Davis and Schoorman,
1995). This definition is widely
Recognized and commonly
cited in other researchers’ work. Later
Doney and Cannon (1997)
defined trust as the perceived credibility and benevolence of a target of
trust. According to another two researchers,
Lewis and Weigert (1985), trust
is further identified as
“the understanding of a risky course of action on the confident expectation
that all persons involved in the action will act competently and dutifully”
(p.971). And precisely,
Bhattacharya, Devinney and Pillutla (1998) and Boon and Holmes (1991) conceived
trust as predictability and reliance upon another person under uncertain and
risky circumstances. In the electronic commerce context, a large number of
researchers have proposed both conceptual and empirical studies of trust. Some researchers viewed trust as a general
belief that another party can be trusted (Gefen 2000; Hosmer 1995; Moorman, Zaltman
& Deshpande 1992). One of the most popular studies on electronic commerce
trust is the one
conducted by Mayer, Davis and Schoorman (1995) who viewed trust as a trustor’ s
intention to take a risk and proposed the trustor ‘s perceptions about a trustee’
s characteristics as the main predictors of trust. Another commonly cited study
is the conceptual model of McKnight, Cummings and Chervany (1998) where the researchers
defined trust as trusting beliefs and trusting intention only in uncertain and risky
situations and the approach was widely tested by later studies. For example, Schlosser,
White and Lloyd (2006) adopted the model and viewed trust as a way to reduce
uncertainty and complexity in website consumers. Among other studies is the one that
identified trust as a buyer’s perception of appropriate conditions being in
place to facilitate transaction success with online sellers (Pavlou and Gefen,
2004). As pointed out by Sonja (2002),
trust plays a crucial role in the development of electronic business and some
relevant factors in the emergence of trust problems in on transactions should
be therefore analyzed. In this paper, the definition of trust in the Internet
shopping context proposed by Rousseau (1998) will be employed. According to the
author, trust is a psychological condition
comprising the intention to accept vulnerability based on positive expectations
of another party’ s intention or behavior, in interdependent and risky environment
(Rousseau, 1998).
2.2.
Factors
impacting trust in Internet shopping
In the electronic
commerce context, there are several factors considered as predictors of trust
in online vendors as proposed by previous researchers. They are reputation,
size, perceived service quality and perceived website quality. Customer s
perceptions of a company s profile include reputation as well as and affect
trust in the process of Internet shopping. Jarvenpaa and Tractinsky (1999)
considered size and reputation to be the predictors of trust. For example, the
authors
Believed that larger
companies were more likely to be around longer and larger and more reputable
ones might be more trusted by customer
(Jarvenpaa & Tractinsky,
1999). Other researchers also viewed
reputation and size as important factors forming consumer trust (Grazioli &
Jarvenpaa, 2000; Pavlou, 2003; Kim, Xu & Koh, 2004; Koufaris &
Hampton-Sosa, 2004).
Customers’ perceptions of a
company’s service quality affect trust in online shopping (Daignault, 2001). It
seems to be the most significant factor of maintaining trust and building
e-retailer – customer relationships, according to Kim and Tadisina (2007). As
Anderson and Fornell (1994) observed in their study, a high level of service
quality is likely to cause a high level of customer satisfaction which will
lead to a customer’ s positive experience and understanding of the company. In this way,customer’s trusting beliefs as
well as trusting attitude are confirmed (Kim & Tadisina, 2007). The
perceived service quality includes warranties (Grazioli & Jarvenpaa, 2000),
guarantees (Pennington, Wilcox & Grover, 2003-2004), and customized
services and delivery performance (Doney & Cannon, 1997), as well as the
general concept of company s service quality (Gefen, 2002; Kim, Xu, & Koh,
2004). Perceived website quality also
plays an important role in determining consumer trust in online shopping
(McKnight, Choudhury, & Kacmar, 2002; Araujo, 2003; Kim, Xu, & Koh,
2004). Websites that are perceived easy
to use and of good quality are more
Like to build a high
level trust in consumers (Wakefield, Stocks, &
Wilder, 2004; Want
& Benbasat, 2005)
2.3.
Risk aversion
The term risk aversion
is defined as “the extent to which people feel threatened by an ambiguous
situation, and have created beliefs and institutions that try to avoid these”
(Hofstede & Bond, 1984, p419).
People with high risk aversion tend to feel threatened by risky and
ambiguous situations (Hofstede, 1991).
Bao, Zhou and Su (2003) Examined the effects of risk aversion, one of
the most important cultural dimensions, on consumer decision-making and
compared two consumer decision-making styles under cultural differences between
United States and
Nepal. In order to maintain the within-group
harmony in China as a typically collectivistic society, people are expected to
behave as a group (Bao, Zhou, & Su, 2003), and risk-taking behavior is often
discouraged (Tse, 1996).
Another similar study
on risk aversion affecting consumers’
decision making is carried out by Shimp and Bearden (1982) who found that
highly risk-averse customers are likely to search for more information regarding
product quality when they make
Purchasing decisions. On the other hand, as suggested by Seenkamp,
Hofstede and Wedel
(1999), people with low risk aversion feel less threatened by ambiguous and novel
circumstances and tend to feel
excited by the purchase
of new and innovative products.
According to the
rationale proposed by Raju (1980), the optimum stimulation level, defined as a
property that characterized a person in terms of his general response to
environmental stimuli, is positively related to both risk-taking behavior and
switching behavior. Based on this rationale, Ranaweera, Bansal and McDougall
(2008) examined the effect of risk aversion as one of consumer characteristics
on the purchase intention on the Internet. However, the research focused on the
effect of risk aversion on the relationship between website satisfaction of
consumers and their purchase intention (Bao, Zhou, & Su, 2003). In this
paper, the emphasis will be on examining the possible impact of risk aversion
on the relationship between consumers’ trust and the behavioral intentions.
2.4. Outcomes of trust in
Internet shopping
Consumers’ purchase intention is one of the common behavioral
dimensions resulting from their trust in Internet shopping (Boulding, Kalra, Staelin,
& Zeithaml, 1993). Previous research on the relationship between consumer
trust and purchase intentionby McKnight and Chervany (2002) found out that when
customers hold high level of
Trust they are more
willing to depend on the Internet vendor and make online purchases
3.
Research
Model and Hypotheses
3.1.
Model
Based
on the literature review, a conceptual model has been designed to study the effects
of perceived company’ s reputation, Online payment method, Delivery on time ,size,
perceived service quality and website quality
on consumer trust in Internet
shopping and also the effect of risk aversion on the relationship
between consumer trust and purchase intention as a moderator .
Figure 1 Conceptual Framework
Abstract
This research was
designed to fill the gap in the existing body of knowledge
Regards attitudes
towards online shopping and differences in electronic services quality
Perception between two
different geographical and cultural countries, in addition this research
extended previous effort in online shopping context by providing evidence that
service quality increase consumer trust perception, which in turn results in
favorable attitude toward online shopping, with risk perception moderating the
impact on consumer’s trust. In many previous researches, focus has been found
in the relationship between consumer trust and its antecedents. Researchers have also established that online
purchase intentions are the product of consumer trust. The objective of this
study is to reexamine some factors affecting consumer trust in
Online shopping in
various parts of country as well as to investigate the effect of risk aversion
as a moderator on the relationship between trusts and purchase intention. This
paper provided
Evidence that trust in
Internet shopping is built on high service quality as well as website quality.
Size of online retailers is found to be negatively related to trust. Notably,
risk aversion moderates negatively on the effect of trust toward consumer
purchase intention. Implications and suggestions for further research are also provided
in the study
Table of contents
1. Introduction……………………………………
2. Literature
review………………………………
3. Research
model and hypotheses………………
4. Methodology…………………………………..
5. Findings
and Analysis…………………………
6. Discussions and Implications……..
7. Limitations and Future Research…
8. Conclusion………………………………..
References………………………………..
Appendix…………………………………..
List of Figures
List of Tables
1.
Introduction
1.1.
Statement
of the problem
The adoption of the
Internet as a way to purchase goods and services has seen an increasing trend
over the past two decades globally. Compared to traditional shopping, the
Internet not only facilitates transactions between buyers and sellers from
anywhere at any time, but also provides a wide range of product choices and a
platform for exchanging ideas for customers with low costs. To achieve the
success of electronic commerce, companies place great emphasis on attracting
customers continuously and building long-term relationship with customers on
the web. However, people still remain reluctant to make purchases on the
Internet due to the lack of trust toward businesses in the new electronic
environment. Past researches have indicated that consumers’ lack of trust
constituted a key barrier to the use of Internet shopping as well as long-term
commitment to the relationship building. According to NEPSOL and Report on
ecommerce Trends in Nepal, (2015) identified lack of consumer trust in
Internet vendors as a major factor inhibiting online purchases. Trust plays an
essential role for facilitating online transactions between consumers and
electronic retailers and realizing the development of e-commerce to consumers
in the Nepal
1.2.
Objectives
of study
Although the Internet
offers enormous advantages which seem to attract massive interest of customers,
recent survey showed that the penetration rate of online purchasing stayed
relatively low, especially in Nepal.
According to the most
recent survey on NEPSOL and Report on ecommerce Trends in Nepal the
popularity of online shopping among all Internet users has just show few
percentage in the Some Major cities in 2015. However, previous studies that only
focus on trust of consumers provide a limited view of the phenomenon and may
hinder a comprehensive understanding of the consumer purchasing behavior in the
e-commerce context in Nepal. In part, this stems from the cultural values that
shape the consumer characteristics and influence the relationship between trust
and consumer purchase intention on the web. Previous Literature and Report
on ecommerce Trends in Nepal, observed that risk aversion as one of the
cultural dimensions affects consumers’ decision-making. As trust indicates the
level of consumers’ perceived risk in the Internet shopping, different degrees
of their risk aversion may have non-ignorable effects on the online buying
behavior
2. Literature Review
2.1.
The concept of trust in Internet
shopping
Before a review of
previous literatures on trust in the context of Internet shopping, we first
need to have a look at general definitions of trust in various disciplines. The
concept “trust” is defined as the willingness of a party to be vulnerable to
the actions of another party based on the expectation that the other will
perform a particular action important to the trust or, irrespective of the
ability to monitor or control that other party (Mayer, Davis and Schoorman,
1995). This definition is widely
Recognized and commonly
cited in other researchers’ work. Later
Doney and Cannon (1997)
defined trust as the perceived credibility and benevolence of a target of
trust. According to another two researchers,
Lewis and Weigert (1985), trust
is further identified as
“the understanding of a risky course of action on the confident expectation
that all persons involved in the action will act competently and dutifully”
(p.971). And precisely,
Bhattacharya, Devinney and Pillutla (1998) and Boon and Holmes (1991) conceived
trust as predictability and reliance upon another person under uncertain and
risky circumstances. In the electronic commerce context, a large number of
researchers have proposed both conceptual and empirical studies of trust. Some researchers viewed trust as a general
belief that another party can be trusted (Gefen 2000; Hosmer 1995; Moorman, Zaltman
& Deshpande 1992). One of the most popular studies on electronic commerce
trust is the one
conducted by Mayer, Davis and Schoorman (1995) who viewed trust as a trustor’ s
intention to take a risk and proposed the trustor ‘s perceptions about a trustee’
s characteristics as the main predictors of trust. Another commonly cited study
is the conceptual model of McKnight, Cummings and Chervany (1998) where the researchers
defined trust as trusting beliefs and trusting intention only in uncertain and risky
situations and the approach was widely tested by later studies. For example, Schlosser,
White and Lloyd (2006) adopted the model and viewed trust as a way to reduce
uncertainty and complexity in website consumers. Among other studies is the one that
identified trust as a buyer’s perception of appropriate conditions being in
place to facilitate transaction success with online sellers (Pavlou and Gefen,
2004). As pointed out by Sonja (2002),
trust plays a crucial role in the development of electronic business and some
relevant factors in the emergence of trust problems in on transactions should
be therefore analyzed. In this paper, the definition of trust in the Internet
shopping context proposed by Rousseau (1998) will be employed. According to the
author, trust is a psychological condition
comprising the intention to accept vulnerability based on positive expectations
of another party’ s intention or behavior, in interdependent and risky environment
(Rousseau, 1998).
2.2.
Factors
impacting trust in Internet shopping
In the electronic
commerce context, there are several factors considered as predictors of trust
in online vendors as proposed by previous researchers. They are reputation,
size, perceived service quality and perceived website quality. Customer s
perceptions of a company s profile include reputation as well as and affect
trust in the process of Internet shopping. Jarvenpaa and Tractinsky (1999)
considered size and reputation to be the predictors of trust. For example, the
authors
Believed that larger
companies were more likely to be around longer and larger and more reputable
ones might be more trusted by customer
(Jarvenpaa & Tractinsky,
1999). Other researchers also viewed
reputation and size as important factors forming consumer trust (Grazioli &
Jarvenpaa, 2000; Pavlou, 2003; Kim, Xu & Koh, 2004; Koufaris &
Hampton-Sosa, 2004).
Customers’ perceptions of a
company’s service quality affect trust in online shopping (Daignault, 2001). It
seems to be the most significant factor of maintaining trust and building
e-retailer – customer relationships, according to Kim and Tadisina (2007). As
Anderson and Fornell (1994) observed in their study, a high level of service
quality is likely to cause a high level of customer satisfaction which will
lead to a customer’ s positive experience and understanding of the company. In this way,customer’s trusting beliefs as
well as trusting attitude are confirmed (Kim & Tadisina, 2007). The
perceived service quality includes warranties (Grazioli & Jarvenpaa, 2000),
guarantees (Pennington, Wilcox & Grover, 2003-2004), and customized
services and delivery performance (Doney & Cannon, 1997), as well as the
general concept of company s service quality (Gefen, 2002; Kim, Xu, & Koh,
2004). Perceived website quality also
plays an important role in determining consumer trust in online shopping
(McKnight, Choudhury, & Kacmar, 2002; Araujo, 2003; Kim, Xu, & Koh,
2004). Websites that are perceived easy
to use and of good quality are more
Like to build a high
level trust in consumers (Wakefield, Stocks, &
Wilder, 2004; Want
& Benbasat, 2005)
2.3.
Risk aversion
The term risk aversion
is defined as “the extent to which people feel threatened by an ambiguous
situation, and have created beliefs and institutions that try to avoid these”
(Hofstede & Bond, 1984, p419).
People with high risk aversion tend to feel threatened by risky and
ambiguous situations (Hofstede, 1991).
Bao, Zhou and Su (2003) Examined the effects of risk aversion, one of
the most important cultural dimensions, on consumer decision-making and
compared two consumer decision-making styles under cultural differences between
United States and
Nepal. In order to maintain the within-group
harmony in China as a typically collectivistic society, people are expected to
behave as a group (Bao, Zhou, & Su, 2003), and risk-taking behavior is often
discouraged (Tse, 1996).
Another similar study
on risk aversion affecting consumers’
decision making is carried out by Shimp and Bearden (1982) who found that
highly risk-averse customers are likely to search for more information regarding
product quality when they make
Purchasing decisions. On the other hand, as suggested by Seenkamp,
Hofstede and Wedel
(1999), people with low risk aversion feel less threatened by ambiguous and novel
circumstances and tend to feel
excited by the purchase
of new and innovative products.
According to the
rationale proposed by Raju (1980), the optimum stimulation level, defined as a
property that characterized a person in terms of his general response to
environmental stimuli, is positively related to both risk-taking behavior and
switching behavior. Based on this rationale, Ranaweera, Bansal and McDougall
(2008) examined the effect of risk aversion as one of consumer characteristics
on the purchase intention on the Internet. However, the research focused on the
effect of risk aversion on the relationship between website satisfaction of
consumers and their purchase intention (Bao, Zhou, & Su, 2003). In this
paper, the emphasis will be on examining the possible impact of risk aversion
on the relationship between consumers’ trust and the behavioral intentions.
2.4. Outcomes of trust in
Internet shopping
Consumers’ purchase intention is one of the common behavioral
dimensions resulting from their trust in Internet shopping (Boulding, Kalra, Staelin,
& Zeithaml, 1993). Previous research on the relationship between consumer
trust and purchase intentionby McKnight and Chervany (2002) found out that when
customers hold high level of
Trust they are more
willing to depend on the Internet vendor and make online purchases
3.
Research
Model and Hypotheses
3.1.
Model
Based
on the literature review, a conceptual model has been designed to study the effects
of perceived company’ s reputation, Online payment method, Delivery on time ,size,
perceived service quality and website quality
on consumer trust in Internet
shopping and also the effect of risk aversion on the relationship
between consumer trust and purchase intention as a moderator .
Figure 1 Conceptual Framework
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