In-depth Study on the Influence of Internet Perceived Risk on the E-WOM

GUO Guoqing, YAO Yanan, YU Lianzhao Business School, Renmin University of China, Beijing, P.R.China, 100872 Abstract: This empirical study explores the relationship between internet perceived risk and E-WOM. In this study, internet perceive risk is divided into four dimensions based on exsited literrature which are internet core-service risk, internet associated risk, internet privacy risk and internet fake risk, and E-WOM is studied from information releasing and opinion seeking perspective as an input variabe of consumer purchasing progress. Finally, the study found that all four internets perceived risks have posive effect on E-WOM. Moreover, the high perceived risk will lead to frequent information releasing, information searching is still the most important measure for consumers to reduce their internet perceived risks and consumers with high perceived risk are more prone to search for E-word-of-mouth information actively. Keywords: Internet, Perceived risk, E-WOM

1 Introduction
With the development of internet, E-WOM (Electronic Word-of-mouth) is becoming a universal message when consumenrs make their purchase decisions. Consumers communicate with each other online before making their decisions can reduce their perceived risk. This study will explore the relationship model between internet perceived risk and E-WOM.

2 Theory Background
2.1Internet Perceived Risk Perceived Risk was firstly originated from psychology research domain, which is defined as any consumer action will lead to unexpected result which may be unpleasant, so consumer behavior is a kind of risk bearing in itself. Forsyth and Boshi 2003 [1]defined perceived risk in the internet environment as the consumer subjective expected lose when they experience online shopping. In this study, we define the internet perceived risk consumer perceived loses before making purchase decision which are led by product/service, internet and online shops during purchase and use process. Information searching is the most effective method to reduce the perceived risk Sheth and Venkatesan, 1968 [2], Boulding and Kirmani 1993 [3]thought that consumers will reduce their perceived risks by searching for formal or informal information related to products, including brand reputation, free use, buying products with high quality image or repeat purchase. As for dimensions of internet perceived risk, Miyazaki 2001 [4]researched into the influence of privacy risk and security risk on consumer behavior online. Forsyth and Boshi (2003) [1] evaluated internet perceived risk in terms of 4 dimensions: Financial risk, performance risk, psychology risk and time risk. This study adopts the dimension of internet perceived risk developed by Chinese scholar Dong Dahai 2005 [5 ]which is composed of internet core-service risk, internet associated risk, internet privacy risk and internet fake risk.

as

2.2 E-WOM Word-of-mouth communication is an oral, person-to-person communication between a receiver and a communicator whom the receiver perceives as non-commercial regarding a brand, a product, or a

296

service (Arndt, 1967). [6] However, with the development of internet, more and more consumers are communicating with each other and sharing their opinions online, and E-WOM Electronic Word of Mouth is emerging accordingly. On the basis of definition of Hennig-Thurau 2004 [7], we define E-wom as the two-way communication related to products, enterprises and newsmakers online. Compared to the information provided by enterprises, E-WOM on web forum has much more significant impact on consumer behavior Bickart, Schindler 2001 [8]. This study takes E-WOM as input variable, which refers to information searching online before making purchase decision including information releasing and opinion seeking.

3 Hypotheses
The more frequent WOM behavior is, the higher perceived risk is Arndt,1967 . Consumers with high perceived risk will search for word-of-mouth information actively. A few scholars [4] [7] [8] also found that reducing perceived risk is the main reason for E-WOM communication. Moreover, consumers will also release word-of-mouth information motivated by altruism and self-enhancement. Consumers will release information and share them with others while searching information. Therefore, internet perceived risk has positive effect on information releasing. We suppose that: H Internet perceived risk has positive effect on E-WOM. In order to explore the effects of 4 internet perceived risk dimensions on information releasing and opinion seeking online, we make further hypotheses as follows: H1: Internet core-service risk has positive effect on information releasing online. H2: Internet core-service risk has positive effect on opinion seeking online H3: Internet associated risk has positive effect on information releasing online. H4: Internet associated risk has positive effect on opinion seeking online. H5: Internet privacy risk has positive effect on information releasing online. H6: Internet privacy risk has positive effect on opinion seeking online H7: Internet fake risk has positive effect on information releasing online. H8: Internet fake risk has positive effect on opinion seeking online

Internet core service risk (CR) H2 Internet associated risk(AR) Internet privacy risk(PR) H4

H1

+
H3

+ H5+

Information releasing online(IR)

Internet fake risk(FR)

+ H7+ H8+
H6
Figure 1. Research Model

Opinion seeking online(OS)

4 Methodologies and Analysis

4.1 Sample

297

Data for this study are collected through online survey from consumers who bought their mobiles online. 318 questionnaires are handed out and 288 valid ones were received. The gender proportion is balanced with 57.99% males and 42.01% females. 90.28% samples are below 35 years old, most of which are students with high education. 4.2 Latent variables and measurement This study employes the scale of perceived risk posed by Chines scholar Da-hai Dong (2005) which is composed of 19 items and measured in terms of Likert which rages from 1 (entirely disagree) to 7 (full agree).
Table1 Latent variables, operational definations and scales Dimensions Definitions Scales The product information online are exaggerated and even false The refund of shopping online may be inconvenient. The guarantee of shopping online may be inconvenient. Maybe I cant receive the delivery. The net shop may be inexistent Maybe there is damage to goods during delivery process. I cant get enough product information due to the lack of face-to-face interaction with salesman. There may be a big gap between the real goods and expected goods. The payment failure online may lead to money lost. Searching for information online may be time-consuming due to the massive information. It may be a long time to receive the goods. The hacker maybe steal the credit card information which lead to money lost Taking the delivery by myself may be time-consuming. My shopping experience and habit may be analyzed by online shop. The net shop maybe connects with me without my permission. My personnel information may be leaked. The return of goods may be time-consuming. The goods ordered online may be fake. There may be metal pressure when shopping online I know mobiles very well; many people believe that I am the opinion leader.

Concepts

Internet core service risk

Consumer perceived risk related to net shops and web sites.

Internet perceived risk(PR) Internet associated risk

Consumer perceived possible risk related shopping online.

Internet privacy risk

Internet fake risk

Consumer perceived risk related to personnel information leakage. Consumer perceived possible risk related to the fake. Consumer sends message or gives 298

E-WOM

Information releasing

online

advice to others online

Opinion seeking online

Consumer searches for opinion or advice from others.

My friends think my opinion is the reliable information source when they decide to buy mobiles online. I talked about mobiles with my friends in last 6 months. Compared to others, many people are more prone to my opinion when they ask for suggestions about mobiles online. I think that my friends rely on my opinion online. I like to talk about mobiles with my friends when I chat online. I want to influence others view on mobiles through internet. Im prone to ask advices from others before buying mobiles Ill search for the latest information about mobiles before buying mobiles. Ill ask for suggestions about mobiles from my friends online. Ill ask for suggestions throng BBS, QQ, MSN and EMAIL before buying mobiles. Ill be at ease if I ask for suggestions online before buying mobile Ill ask others to provide information about mobiles for me. I like to search for negative comment on mobiles before making purchasing decision. I like to search for positive comment on mobiles before making purchasing decision.

Resource: summarized by authors

4.3 Reliability and validity IPR and E-WOM scales have quite high reliabilities. The result of EFA shows that after deleting CR 4 and CR 6, the scale of perceived risk has high convergent validity and the 4 perceived risk factors cumulative contribution of variance account to 87.313%. The resuls of CFA show that the scales of IPR and E-WOM have high model fitting and validity.
Table 2 Reliability and vlidity of the variables Reliability RMSEA CFI =0.785 0.072 0.885 =0.929 0.066 0.879

Variable IPR E-WOM

NFI 0.901 0.901

4.4 The effect of perceived risk online on E-WOM We employ Amos to examine the relationship between internet perceived risk and E-WOM and the result is as follow:

CR IR AR IR

Table 3 SEM result Path coefficient 0.27 0.32 299

Level of sig. 0.012 0.010

PR FR CR AR PR FR

We can see from Table 3 and Table 4 that RMSEA is 0.085>0.08, NFI, RFI, IFI, TLI and CFI are all near to 1, so the fitting of model is well and all hypotheses are supported. Therefore, the perceived risk online which is composed of internert core service risk, intenet associated risk, internet privacy risk and internet fake risk has positive effect on E-WOM which is composed of information releasing online and opinion seeking online.
Table 4 The path coefficient and fitting index of the model 2/df p-level RMSEA NFI RFI IFI 2.187 0.000 0.085 0.892 0.868 0.841

IR IR OS OS OS OS

0.36 0.45 0.36 0.45 0.25 0.39

0.000 0.000 0.000 0.000 0.014 0.000

df 807.161 369

TLI 0.791

CFI 0.818

5 Conclusion
We can see from this study that internet perceived risk has positive effect on E-WOM. As far as opinion leader is concerned, the high perceived risk will lead to frequent information releasing, which is in accord with the study of Hennig-Thurau 2004 . [7] However, the content of information under the high perceived risk is still needed to a further research. Information searching is the primary and important measure for consumers to reduce their perceived risks and consumers with high perceived risk are more inclined to search for E-word-of-mouth information actively.

Acknowledgments: Supported by projects of National Science Foundation of China (Grant No.70772090, 70972133)

References
[1]. Sandra M. Forsythe, Bo Shi. Consumer Patronage and Risk Perceptions in Internet Shopping. Journal of Business Research, 2003(56), 867-875. [2]. Sheth J N, Venkatesan M. Risk-reduction Process in Repetitive Consumer Behavior. Marketing Research, 1968 (5), 307-310 [3]. Boulding, William & Kirmani Amna. A consumer-side examination of signaling theory. Journal of Consumer Research, 1993(20-1), 111-123. [4]. Miyazaki, Anthony D, Fernandez, Ana. Consumer Perceptions of Privacy and Security Risks for Online Shopping. Journal of Consumer Affairs, 2001 (35-1), 27-44. [5]. Dong Dahai, Li Guanghui, Yang Yi. Research of the Perceived Risk Facets by Consumers in Internet Shopping. Chinese Journal of Management, 2005 1 , 55-60. In Chinese [6]. Arndt, J. Role of Product-related Conversations in the Diffusion of a New Product. Journal of Marketing Research, 1967(4), 291-295. [7]. Hennig-Thurau, Thorsten. Kevin P. Gwinner, Gianfranco Walsh, and Dwayne D. Gremler. Electronic Word-Of-Mouth Via Consumer-Opinion Platforms: What Motivates Consumers to Articulate Themselves on the Internet? Journal of Interactive Marketing, 2004(18), 38-52. [8]. Bickart, B., Schindler, R.M. Internet Forums as Influential Sources of Consumer Information. Journal of Interactive Marketing, 2001(15-3), 31-40.

300