The effect of IT-based security on feedback mechanisms and trust building in online auction settings

ABSTRACT

The purpose of this study is to examine the effects of IT-based security on the feedback mechanisms and trust building in the online auction settings. Evidence of price premiums and buyer confidence will be examined. This study extend the work of previous studies--in trust building in online marketers--by including IT-bossed security measures such as authentication, biometric controls and online audit to examine how they affect feedback mechanisms. This study will also makes use of the well-accepted IS success model of DeLone and McLean (1992) to examine the success of our research model and how the enhanced system quality and information quality of online auctions--through authentication, biometric controls and audit--can affect feedback profiles, trust, and price premiums. Literature review, theoretical framework, research model, hypotheses, research methodology, potential results, and limitations of the study are described in the following sections.

1. INTRODUCTION AND RESEARCH QUESTIONS

The purpose of this study is to examine the effects of IT-based security on the feedback mechanisms and trust building in the online auction settings. Evidence of price premiums and buyer confidence will be examined. This study extend the work of previous studies--in trust building in online marketers--by including IT-bases security measures such as authentication, biometric controls and audit and examining how they affect feedback mechanisms. The following research questions are provided:

1. Can IT-based security measures enhance feedback mechanisms in online auction settings?

2. Can this lead to more buyers trust in sellers, and higher price premiums?

3. Does product type and product price moderate the relationship between trust in seller and price premiums?

2, LITERATURE REVIEW AND THEORITICAL FRAMEWORK

Bandyopadhyay (2002) stated "Most emerging markets are "highcontext" cultures, where creating trust and establishing mutually obligatory relationships are often prerequisites to doing business." She added "An emphasis on building trust and relationships reduces the risk of transacting on the Internet where the parties don't meet face-to-face." Luo (2002) outlined that trust plays a key role in the electronic market that involves high uncertainty and lack of legal protection. Building trust online is proposed as a solution to consumers' privacy concerns.

Online security is a vital issue in all Internet-based transaction. It has a particular importance in online auction sites as they are vulnerable to a high percentage of fraud activities. Building trust in e-commerce requires a clear definition of rigorous standards for security, data protection, transparency of data use, etc. (Grabner-Kraeuter 2002)

Auction sites such as eBay are the early market makers in the business-to-consumer segment. A market maker endeavors to provide value to suppliers and customers through a system of implicit or explicit guarantee of security and trust in the business transaction (Mahadevan 2000).

Applegate et al. (1999) discussed several issues related to Internet security such as authentication--through digital certificates and other technologies--used to authenticate the user identity, or make sure that he is truly the person he or she purports to be. They also discussed log, audit, system management policies and procedures to face fraud or theft. They further discussed sabotage and how can someone access other people information and alter or delete it and how can firewalls or firebreaks can prevent that. Applegate et al. (1999) furthered discussed privacy issues and public/private key encryptions.

Chaudhury (2002) identified authentication as the process of identifying an individual or a message. Authentication ensures that the individual is who he or she claims to be and that access to system objects is based on his or her identity.

Turban et al. (2000) categorized authentication and biometric controls as two main ways to assured buyer and seller protection when conducting transaction on the Internet. They stated "In cyberspace, buyers and sellers do not see each other." "Even when videoconferencing is used, the authenticity of the person you are dealing with must be verified, unless you have dealt with the person before." They further explained that if we can be assured of the identity of the person on the other end of the line, many of new and improved e-commerce application can be established.

On the other hand Turban (2000) described biometric controls as way to provide access procedures that match every valid user with a valid user identifier (UID). Biometric controls include several possible techniques such as voice-print, finger scan, hand geometry, signature and keystroke dynamics such as a match of a person's keyboard pressure and speed against presorted information.

In our study we will focus on authentication, biometric controls and online audit (system management and procedures) as three main IT-based techniques that can affect feedback mechanisms in online auction settings.

Ba and Pavlou (2002) only included positive and negative feedback as part of the feedback profile of online auctions, and they recommended other studies to include the additional comments by buyers and sellers as part of the profile. Our study will extend to include these additional written comments as part of the feedback profile. Our study will also examine more than just one auction setting. It will include 5 online auctions: u.Bid.com, eBay, icollector.com, auctionport.com and Yahoo Auction.

Ba and Pavlou study used product price as the only moderating variable in the relationship between trust and price premiums and recommended that future studies include other possible moderating variables. Our study will extend to use product type besides product price as moderating variables in the relationships between trust and price premiums.

Figure 1 represents the proposed effect of IT-based security measures (authentication, biometric controls, and online audit) on the feedback profile (positive ratings, negative ratings and additional written comments). Further this IT-generated feedback profile should affect buyers' trust in the seller, and thus price premiums.

The IT-based security measures we proposed for online auction settings should also affect the system quality and the information quality of the online auctions. That's why we utilized the well-accepted IS success model of DeLone and McLean (1992) to strengthen our conceptual model.

This model discussed six dimensions for information systems (IS) success: System Quality, Information Quality, Information Use and User Satisfaction, and how they have an Individual Impact as well as an Organizational Impact. In our study we are only concerned with the individual impact which is the trust in seller. This model is depicted in figure 2 below.

3. RESEARCH MODEL

Combining the proposed model of the effect of IT-based security measures on feedback profiles in online auctions (Figure 1) with the IS success model of DeLone and McLean (1992) (Figure 2), we arrived our research model (Figure 3). Our research model propose that IT-based security measures (authentication, biometric controls, and online audit) will have an effect on the system quality and information quality of the online auction settings, which by their turn affect the feedback profiles that online auction settings maintain. The feedback profile will affect the information quality and information user by the buyers and sellers (users) of the online auctions, which will affect the trust in sellers (on an individual basis). Finally, the trust in seller will affect the price premiums of the products sold in these online auctions. Additionally, the relationships between trust and price premiums are going to be moderated by product type and product price. The research model is illustrated in figure 3 below.

4. HYPOTHESES

H1: Authentication will have a positive effect on the system quality of online auction settings.

H2: Authentication will have a positive effect on the information quality of online auction settings.

H3: Biometric contorts will have a positive effect on the system quality of online auction settings.

H4: Biometric contorts will have a positive effect on the information quality of online auction settings.

H5: Online Audit will have a positive effect on the system quality of online auction settings.

H6: Online Audit will have a positive effect on the information quality of online auction settings.

H7: The enhanced system quality of the online auction setting--due to use of IT-based security--will have a positive effect on the feedback profiles of these auction settings in term of keeping track of positive ratings posted by buyers regarding their trust in sellers.

H8: The enhanced system quality of the online auction setting -due to use of IT-based security- will have a positive effect on the feedback profiles of these auction settings in term of keeping track of negative ratings posted by buyers regarding their trust in sellers.

H9: The enhanced system quality of the online auction setting--due to use of IT-based security--will have a positive effect on the feedback profiles of these auction settings in term of keeping track of the additional comments posted by buyers regarding their trust in sellers.

H10: The enhanced information quality of the online auction setting--due to use of IT-based security--will have a positive effect on the feedback profiles of these auction settings in term of keeping track of positive ratings posted by buyers regarding their trust in sellers.

H9: The enhanced system quality of the online auction setting -due to use of iT-based security- will have a positive effect on the feedback profiles of these auction settings in term of keeping track of the additional comments posted by buyers regarding their trust in sellers.

H10: The enhanced information quality of the online auction setting--due to use of IT-based security--will have a positive effect on the feedback profiles of these auction settings in term of keeping track of positive ratings posted by buyers regarding their trust in sellers.

H11: The enhanced information quality of the online auction setting--due to use of IT-based security--will have a positive effect on the feedback profiles of these auction settings in term of keeping track of negative ratings posted by buyers regarding their trust in sellers.

H12: The enhanced information quality of the online auction setting--due to use of IT-based security--will have a positive effect on the feedback profiles of these auction settings in term of keeping track of the additional comments posted by buyers regarding their trust in sellers.

H13: Better tracking and maintaining of positive ratings of sellers in the feedback profile on the online auction settings will provide for better information use of the buyers of these ratings.

H14: Better tracking and maintaining of positive ratings of sellers in the feedback profile on the online auction settings will provide for increased user satisfaction by buyers.

H15: Better tracking and maintaining of negative ratings of sellers in the feedback profile on the online auction settings will provide for better information use of the buyers of these ratings.

H16: Better tracking and maintaining of negative ratings of sellers in the feedback profile on the online auction settings will provide for increased user satisfaction by buyers.

H17: Better tracking and maintaining of the additional comments posted by buyers regarding seller in the feedback profile of online auction settings will provide for better information use of the buyers of these additional comments.

H18: Better tracking and maintaining of the additional comments posted by buyers regarding seller in the feedback profile of online auction settings will provide for increased user satisfaction by buyers.

H19: The enhanced information use by buyers in the online auction settings will have a positive effect on their trust in the seller.

H20: The enhanced user satisfaction (buyers) in the online auction settings will have a positive effect on their trust in sellers.

H21: The relationship between trust and price premiums is stronger by for expensive products than for inexpensive products.

H22: The relationship between trust and price premiums is going to be moderated by product type.

H23: Higher trust in seller will result in higher price premiums for identical products.

5. RESEARCH VARIABLES

According to the research model we proposed in Figure 3, price premiums serve as a dependent variable in the study. System quality and information quality serve as mediating variables between the IT-based security measures on one side (authentication, biometric controls, and online audit) and between the feedback profile components of the online auction settings on the other side (positive ratings, negative ratings, and the additional comments of buyers).

6. RESEARCH METHODOLOGY

6.1 SAMPLE

The targeted population of this study is the online auction settings in the United States. An initial approximate number of 400 users from 5 different online auction setting--u.Bid.com, eBay, icollector.com, auctionport.com and Yahoo Auction--is estimated. The actual sample size will be determined using the technique suggested by (Kerlinger and Lee 2000). The determination of the appropriate sampling size is very important to get the best information at the lowest cost. According Kerlinger and Lee (2000), the appropriate sample size should be determined by multiplying the standard score corresponding to the specified probability of risk by the standard deviation of the population of the users of the online auction settings. Currently, we are investigating both standard score corresponding to the specified probability of risk, and the standard deviation of the population pertaining online auction settings.

6.2 RESEARCH DESIGN AND DATA COLLECTION

The selected sample of users of online auction settings will be asked to respond to a survey questionnaire. The survey questionnaire technique was preferred over a lab or filed experiment techniques because of several reasons. First, the wide scope of the survey research that involves a greater deal of information that can be obtained from a large population of online auction users from different cities in the United States. Second, while the survey will be more expensive than laboratory or filed experiments, for the amount and quality of information it will yield, the survey is more economical. Finally, survey research will possess a much stronger external validly than filed or lab experiments in the scene that their findings and results can be generalized.

6.3 ANALYSIS OF DATA

Means, standard deviation, and correlation for the independent, dependent and controlled variables will be performed during the data analysis phase. To assess the fit of the structural model to data obtained from the suggested sample size, structural equation modeling using the maximum likelihood method will be employed. Path coefficient analysis can also be used to test each hypothesis and to determine the significance of each path, and thus, we can make a decision on accepting or rejecting each hypothesis.

7. POTENTIAL RESULTS AND OUTCOMES

It is expected that the IT-based security measures suggested in this study will seriously enhance the feedback profiles of online auction settings through enhancing the system quality and information quality of these online auctions. It is also expected that the enhanced feedback profiles will also result in better user of information of online auctions' users and increase their satisfaction, which will result by its turn, increasing the trust in sellers which leads to higher price premiums

8. POTENTIAL CONTRIBUTION AND IMPLICATIONS OF THE RESEARCH

It is expected that this study will have significant implications for research and practice. As for research, this study will fill a gap in the current research concerning trust building in electronic markets especially that current research showed conflicting results concerning whether or not feedback mechanisms induce higher trust an lead to higher price premiums. This research also extended previous work by introducing IT-based security measure to enhance the system quality and information quality of online auction settings.

As for practice, this research is going to shed more light on areas related to market uncertainty and risks associated with online transactions especially in the online auctions settings. The study is also expected to introduce some important findings to online auctions about how to enhance their feedback forums, and how to recognize the benefits associated with IT-based security measures. The study will also shed more light on how to use feedback forums as competitive advantages as they keep track of users' positive and negative ratings, and how this information may be applied in other related forms of transactions in other e-commerce settings.

9. RESEARCH LIMITATION AND RECOMMENDATIONS FOR FUTURE RESEARCH

The proposed study will be limited to studying only online auction settings in the United States. It will not extend to examine any other e-commerce settings. Further, mo other international online auction settings will be included in the study. Due to the increased importance of trust building in online markets as almost every industry is moving to the Internet, it is strongly recommended that this study be replicated examining other online transaction settings such as online stock markets and online payment mechanisms. This research study is also constrained by its limited budget. Future studies that have larger budget are encouraged to increase their sample size and scope of their study to examine trust building in other electronic markets (other than online auctions). This should help increasing the external validity of the study and enable its finings to be generalized.

REFERENCES

Applegate, Lynda M., Mc Farlan, F. Warren and McKenney, James L., Corporate Information Systems Management: Text and Cases, 5th Edition. Irwin/McGrw-Hill 1999.

Ba, Sulina and Pavlou, Paul A., Evidence of the Effect of Trust Building Technology in Electronic Markets: Price Premiums and Buyer Behavior. MIS Quarterly. Vol. 26 No. 3, pp. 243-268/September 2002.

Bandyopadhyay, Soumava, Competitive strategies for Internet marketers in emerging markets; Competitiveness Review, Indiana; 2001, Vol. 11, Iss. 2; pg. 16, 9 pgs. 2002.

Chaudhury, A. & Kulliboer, Jean-Pierre, e-Business and e-Commerce Infrastructure: Technologies, Supporting the e-business Initiative, McGraw Hill Higher Education, 2002.

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Kerlinger, F. N., & Lee, H. B., Foundation of Behavioral Research. Fourth Edition, Harcourt College Publisher, 2000.

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Lou, Xueming, Trust production and privacy concerns on the Internet: A framework based on relationship marketing and social exchange theory, Industrial Marketing Management, New York, Vol. 31, Iss. 2; pg. 111, Feb 2002.

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Mahadevan, B, Business models for Internet-based E-commerce: An anatomy, California Management Review, Berkeley;, Vol. 42, Iss. 4; pg. 55, 15 pgs, Summer 2000.

Turban, E., Lee, J., King, D. & Chung, H. M., Electronic Commerce: A Managerial Perspective Prentice-Hall, Inc. New Jersey, 2000.

Ahmed Elmorshidy, Claremont Graduate University, California

AUTHOR PROFILE

Ahmed Elmorshidy is a Ph.D. candidate working on his dissertation in the School of Information Science at Claremont Graduate University, Claremont, California. He earned an MA. in Computer Resources & Information Management (1994) and an M.B.A. (1995) from Webster University, Irvine, California.

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