Hanmei Fan

Examining the Cultural Effect on

Online Trust at the Individual
Level
Hanmei Fan
PhD Student

Dr. Stylianou
Dr. Lu

Department of Business Information Systems and

Operational Management (BISOM)
Belk Business School
University of North Carolina at Charlotte

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Introduction
Online shopping has become global and, due to cultural differences, it is important to
understand the effect on trust in e-commerce. When exposed to the same information,
consumers from different cultures may perceive it and form trust differently. In consumer
behavior, cultural values have been shown to affect consumer’s motives, attitudes toward
choices, intentions, and behaviors (Henry 1976). Dawar et al. (1996) found that personal
and impersonal sources of information had different impacts on individuals across
cultures. Lee et al. (2001) show that there are differences in perception of trust and
formation of trust among cultures. Keil et al. (2000) suggest that culture dimensions can
affect consumers’ willingness to trust online sellers and to accept uncertainty, which is
crucial to conduct business online.

National culture and trust has been proposed to be closely related (Doney et al. 1998;
Fukuyama 1995; Hofstede 1994) but not verified and thus culture should be included in
the trust study (Gefen 2006). Doney et al. (1998) have called for empirical studies
examining how national culture impacts trust and the trust building process. Gefen et al.
(2008) have also pointed out a future research direction by considering trust and
behavioral outcomes across cultures. Though many studies in IS have already examined
the moderating effect of culture, moderating the relationship between trust and behavior
outcomes in online environment is rarely studied and most of studies are done in the US
(Gefen et al. 2008; Kim et al. 2008). Some studies (David A. Griffith 2000; Gefen et al.
2005; Strong et al. 1998) have examined the cultural effects on trust but not in the context
of e-commerce. Some studies are already done on trust in the context of e-commerce but
due to possible limitations (i.e. convenient samples, culture homogeneity assumption)
there are no strong cultural differences (e.g., Jarvenpaa et al. 1999; Pavlou 2003).

Previous research of the impact of culture on trust in e-commerce uses Hofstede’s

national culture index to examine the moderating effect. Usually, countries are
categorized into two extreme groups and results are compared (i.e.,Gefen 2006;
Jarvenpaa et al. 1999; Kim 2008). However, not all countries can be categorized into
these two groups, limiting the power of generalization. Moreover, this idea is based on an
assumption that everyone in a nation shares the same culture. It may not necessary be the
case especially within a nation where some people shop online and the others do not.
People who shop online may have higher individualism level than average even though
they are in a collectivist nation. Therefore, in this study, we tend to measure culture at the
individual level and examine the moderating effect of each cultural dimension.

Accordingly, the objectives of the study are threefold. First, we extend the previous
framework, draw from marketing literature, and add pre-purchase price fairness
perception as one behavioral outcome of trust. Secondly, we hypothesize and test the
unequal contribution of each trust belief to behavioral outcomes. Thirdly, following
Gefen et al.’s suggested direction (Gefen et al. 2008), we verify the trust-building model

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across culture at the individual level and test the moderating effects of cultural
dimensions on the framework. To our knowledge, this study is the first one on trust in the
e-commerce context to examine the moderating effect of cultural dimensions at the
individual level.

The rest of the paper is addressed as followed. In the next section, we cover previous
research on trust, trust antecedents, trust behavioral outcomes, and culture. Following, a
framework is developed and several hypotheses are provided. After that, we address the
measure of our constructs, followed by the methodology and analysis. Finally, we draw
our conclusion and reemphasize the contribution.

Literature Review
Trust

Online shopping involves higher levels of uncertainty than shopping in a retail store
because the transaction happens in a virtual environment and there is no physical
assessment before purchase. Consumers have to make decisions based on what they
experience (e.g., interface, ease of use), what the seller claims (e.g., product description,
product picture, security), and reviews from other consumers (e.g., reputation score,
feedbacks).

Research in marketing and management demonstrate that trust is a valuable facilitator of

many forms of exchange (i.e., Ball et al. 2004; Griffith et al. 2000; Sorrentino et al. 1995;
Urban et al. 2000). Particularly, in uncertain environments, trust can reduce uncertainty
and perceived risk. Thus, trust becomes critical to the success of online transactions
because of the lack of personal contact and social cues (Gefen 2003; Hoffman et al. 1999;
Ratnasingham 1998). Adapting the definition from Mayer et al. and McKnight et al.
(Mayer et al. 1995; McKnight 2002), we define trust in an e-commerce context as “a
consumer’s willingness to depend on another party and be vulnerable to the actions of the
other party during the online shopping process, with the expectation that the other party
will perform acceptable practices and will be able to deliver the promised products and
services.”

As a complex high-level construct, trust has been viewed by some researchers as

behavioral intentions, beliefs, or a combination of both. To clarify the construct,
McKnight and Chervany (2002) provided, and justified, and later McKnight et al. (2002)
validated the measures of a parsimonious interdisciplinary typology and related trust
constructs to e-commerce consumer actions, defining both conceptual-level and
operational-level trust constructs. Trust is decomposed into a second-order construct,
with first-order construct trusting beliefs. Trusting beliefs, also known as trustworthiness
(Doney et al. 1998; Gefen 2002; Jarvenpaa et al. 1999; Mayer et al. 1995), means that
one believes that the other party has one or more characteristics (i.e., dimensions)
beneficial to oneself: integrity (trustee honesty and promise keeping), benevolence
(trustee caring and motivation to act in the trustor’s interests), ability (capability of the

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trustee to do what the trustor needs), and predictability (trustor believes trustee’s actions
are consistent and predictable). The former two have been widely accepted and
frequently adopted by researchers (e.g., Ba et al. 2002; Gefen 2002; Gefen 2006; Mayer
et al. 1995; Pavlou et al. 2006). Gefen (2002) demonstrated the need to examine trust
from a multi-dimensional perspective. Our study proposes a two-dimensional scale of
trust beliefs dealing with integrity and benevolence in the setting of online shopping, and
showed the importance of examining the effects of each dimension individually because
different beliefs influence different consumer activity intentions.

Antecedents of Trust

McKnight et al. (1998) theorized that initial trust is affected by three factors: individual
disposition to trust, institution-based trust, and cognitive-based trust. Individual
disposition to trust is a personality characteristic that develops during childhood and
keeps evolving along with lifelong experience. Institution-based trust is the security that
one feels about a situation because of guarantees, safety networks, or other regulatory or
legal structures. Cognitive-based trust is developed based on rapid cognitive cues or first
impressions, which can be affected by the interface design of the website.

Under the framework, the antecedents of trust have been identified and tested accordingly.
For institution-based trust, Pavlou (2002) examined how monitoring, legal bonds,
accreditation, feedback and cooperative norms help engender interorganizational trust
and indirectly influence transaction success in B2B marketplaces. Results showed
significant impacts of monitoring, feedback and cooperative norm on credibility and
benevolence. In a later paper, Pavlou and Gefen (2004) studied another set of institution-
based mechanisms – feedback mechanisms, third-party escrow services, and credit card
guarantees – engender buyer trust in the online auction context. Data from Amazon’s
auction site provided evidence that feedback mechanism and escrow services have
significant effect on trust in the community of sellers and trust in the marketplace
intermediary provides the overarching institutional context builds buyer’s trust in the
community of sellers. McKnight et al. (2002) tested one institutional factor – structural
assurance (consumer’s perceptions of the safety of the web environment) – and two trust
building levers – perceived web vendor reputation and perceived web site quality. They
found that all of them influence significantly consumer trust in the web vendor and that
web site quality and reputation are especially powerful levers. The study also
demonstrates that perceived Internet risk affects negatively consumer intentions to
transact with a web-based vendor.

Considering cognitive-based trust, Lim et al. (2006) investigated the effectiveness of

trust-building strategies to influence actual buying behavior in online shopping
environments. They focused on a scenario where first-time visitors build trust to an
Internet store that does not have an established reputation. In their trust-building
framework, they considered the effects of portal affiliation and satisfied customer
endorsements on customers’ trusting beliefs. Jarvenpaa et al. (2000) found perceived size

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and perceived reputation of an Internet store evoking buyers’ trust and influencing their
assessment of perceived risk.

Integrating both TAM and TRA theories, Heijden et al. (2003) investigated online
purchase intention using a technology-oriented perspective and a trust-oriented
perspective. From the technology-oriented perspective, they included perceived-ease-of
use and perceived usefulness; from the trust-oriented perspective, they considered trust in
the online store and perceived risk. Results showed that perceived risk and perceived
ease-of-use directly influenced the attitude towards purchasing online. Gefen et al. (2003)
integrated trust and TAM to explain online shopping intentions. Different from others,
the study focuses on experienced repeat online shoppers, by including a knowledge-based
trust antecedent (familiarity with the e-vendor). Besides institution-based trust and
cognitive-based trust, they also introduced calculative-based trust, according to which
trust can be shaped by rational assessments of the costs and benefits of another party
cheating or cooperating in the relationship.

The Theory of Planned Behavior (TPB) asserts that specific salient beliefs influence
behavioral perceptions and subsequent actual behavior (Ajzen 1985; Ajzen 1988; Ajzen
1991). There are three types of beliefs in the TPB that affect three perceptual constructs:
behavioral beliefs that influence attitudes, normative beliefs that affect subjective norm,
and control beliefs that shape perceived behavioral control. In turn, these three perceptual
constructs determine behavioral intentions and actual behavior. The direct influence of
perceived risk on intention is related to the notion of perceived behavioral control (Ajzen
1985; Ajzen 1991). Perceived behavioral control reflects the degree to which an
individual feels that successfully engaging in the behavior is completely up to them. In
the context of online shopping, the perceived risk associated with shopping may reduce
the consumers’ perception of control and extent to which this occurs might negatively
influence willingness to shop. Jarvenpaa et al.’s (2000) results suggested that one of the
consequences of trust is that it reduces the consumer’s perception of risk associated with
opportunistic behavior by the seller, thus resulting in favorable attitude toward the e-
vendor and enhancing the willingness to buy. The effect of trust on the decrease of
perceived risk has been confirmed by Heijden et al.’s (2003) study. Pavlou and Gefen
(2004) also provided evidence that the institution-based trust factors can only reduce
perceived risk indirectly, through the mediating role of trust.

Trust Formation Process

Doney et al. (1998) proposed a model of the cognitive trust-building processes. The
calculative process involves a turstor calculating the cost and/or rewards of a trustee
cheating or cooperating in a relationship. A trustor assumes that a trustee would not
engage in opportunistic behaviors when the benefits of cheating do not overweigh the
costs of being caught, because trustees are self-interest-seeking individual who make net
present value calculations. The prediction process lays on the logic that a trustee’s past
action provide a reasonable basis for future behavior prediction. This trust-building
process depends on a trustor’s past experience with a trustee, under an assumption that

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human’s action is consistent and predictable. The more prior experience a trustor and a
trustee share, the more predictable a trustee’s behavior is. The transference process refers
to transferring trust from a known entity to an unknown one. A trusted “proof sources”,
from which trust is transferred to another individual or group and which the trustor has
little or no direct experience with, has to be identified and links between known entities
and unknown entities have to be established. The intentionality process forms trust
through a trustor’s perception of the intention of a trustee, by interpreting the trustee’s
words and behavior. The capability process is based on an assessment of a trustee’s
ability to meet his/her obligations as well as the trustor’s expectations.

In the e-commerce context, though the limited online communication and information are
not sufficient for a trustor to assess a trustee’s intention and ability before transactions,
the calculative, prediction and transference processes have been applied and
demonstrated in the trust related studies. Ba and Pavlou (2002) examined the calculative
trust-building process and demonstrated that sellers’ reputation can induce calculative-
based credibility trust without repeated interactions between two transaction parties and
indirectly generate price premium for reputable sellers. Gefen and Heart’s (2006)
findings reveal that familiarity and predictability can impact trust behavior intention
directly and indirectly through trust building. To include both cognitive and non-
cognitive trust building processes, Kim (2008) adopted the cognitive trust-building
processes of the model of national culture (Doney et al. 1998) and synthesized the
transference trust-building process (Doney et al. 1998), institutional-based trust
production (Zucker 1986), weak trust(Barney et al. 1994), and affect-based trust-building
process (Kim et al. 2008), and developed self-perception-based trust through direct
experience with a partner and transference-based trust through a trusted “proof source”.

Familiarity is an understanding, often generating from previous interactions, experiences,

and learning of what, why, where and when others do what they do (Gefen 2000). It deals
with the understanding of the current actions of other people and of objects. In the e-
commerce context, this understanding includes knowledge of how to search products,
how to order, how to interact with the interface, as well as sellers’ behaviors and
intentions. Thus, familiarity can reduce the complexity and uncertainty of the online
purchase processes by understanding and learning from experience. Moreover, familiarity
and trust are related. They complement each other as complexity-reduction methods
(Gefen 2000). Familiarity reduces uncertainty by establishing a structure, while trust
reduces uncertainty by letting people hold relatively reliable expectations (Luhmann
1979). As an important antecedent, familiarity builds the basis of the favorable behavioral
expectations when the experience is positive, inducing trust when a trustee behaves in
accordance with which of a trustor (Luhmann 1979). It gives a trustor ideas of what to
expect based on previous interactions (Gulati 1995).

Trust and Behavioral Outcomes

A number of studies empirically test the effect of trust on behavioral intention. In the
context of e-commerce, one outcome of trust has been widely tested by researchers: the

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willingness to purchase (Gefen 2002; Gefen 2006; e.g., Jarvenpaa et al. 2000; Lim et al.
2006; McKnight et al. 2002; Pavlou et al. 2004) with presumption of the willingness to
provide personal information such as credit card information. It relates a behavior that a
trustor may perceive risky (McKnight et al. 2002). The findings indicate that trust has a
significantly positive effect on the intention to purchase. In this study, we combine the
willingness to purchase and the willingness to provide personal information as the
intention to purchase.

Specifically, in the setting of an online auction, the price premium has been examined as
another outcome. In the examination of the nature and role of Psychological Contract
Violation (PCV), which is defined as a buyer’s perception of having being treated
wrongly regarding the terms of an exchange agreement with an individual seller, Pavlou
and Gefen (2005) found that PCV attenuates the positive impact of trust on transaction
intention and the impact of the perceived effectiveness of institutional structures on trust,
while reinforcing the negative impact of perceived risk on transaction intentions. In
addition, they showed the reinforcing interrelationships between transaction intentions,
price premiums, and actual transaction behavior. In a series of studies involving trust in
the online auction setting, trust has been demonstrated to have a positive impact on the
price premium. Ba and Pavlou (2002) demonstrated that appropriate feedback
mechanisms can induce calculus-based credibility trust in one-time transaction, and
mitigate information asymmetry by reducing perceived risk, eventually generating price
premiums for reputable sellers. Also, they provided support that the relationship between
trust and price premiums is stronger when it involves very expensive products. Utilizing
content analysis, Pavlou and Dimoka (2006) examined how feedback text comments
create price premiums for reputable sellers through the mediator benevolence and
credibility trust. Credibility is a trust dimension similar to integrity. The findings reveal
that text comments and benevolence help explain 50% of variance in price premiums and
surprisingly, benevolence explains a larger variance than credibility.

The price premium in the online auction setting is determined by consumers, while in the
more common way of online shopping, sellers are the ones who set up the price and/or
price premium, while consumers are the ones who decide to accept it based on their
perception of price fairness before purchase. The perception of price fairness is important
because it partially shapes consumer satisfaction and price consciousness (Sinha et al.
1999) and a firm’s profitability is constrained by fear of perceived exploitation (Blinder
1991; Piron et al. 1995). Previous studies in marketing and economics found a direct
positive path between perceived price premiums and pre-purchase price fairness
(Hubbard 1998; Rao et al. 1992; Rao et al. 1996). In economics, price premium is defined
as the difference between a super-high price and the perfectly competitive price for high-
quality output (Rao et al. 1996). Singh (2000) argues that price premium is a mechanism
for consumers to motivate sellers to avoid moral hazard in an information asymmetric
environment, under the assumption that the cumulative value of price premiums is
perceived to be greater than the profits from cheating and opportunistic behavior.
Additionally, based on the reference price literature, pre-purchase price fairness judgment
involves a comparison of the expected price premiums in the specific service encounter
relative to price premiums paid by others/self for the same/similar service or in previous

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encounters (Campbell 1999; Dickson et al. 1994; Singh 2000). Developed from the
principle of dual entitlement, price fairness perception is governed by the belief that firms
are entitled to a reference profit and customers are entitled to a reference price
(Kahneman et al. 1986). It suggests that prevailing competitor prices can serve as
reference transactions, especially when the consumer does not have prior transactions
with the seller. Adopting Xia et al.’s definition (2004), we define pre-purchase price
fairness as a consumer’s assessment and associated emotions of whether the difference
(or lack of difference) between a seller’s price and price of a comparative other party is
reasonable, acceptable, or justifiable before purchase.

Culture and E-Commerce

Hofstede’s cultural framework has been widely cited and tested by researchers in many
fields. Though the four original cultural dimensions were generated from data from one
organization 30 years ago, Hofstede’s results have been empirically supported by many
researches. Hofstede (2001) cited 140 studies that statistically validate his cultural
dimensions. According to him, national culture is the interactive aggregate of common
characteristics that influence a human group’s response to its environment. Culture is
defined as the collective programming of mind that distinguishes one national group or
category of people from another. Hofstede’s national culture framework includes five
dimensions: Individualism/Collectivism, Uncertainty Avoidance, Power Distance,
Masculinity/Femininity, and Long-term orientation.

It is suggested that only those dimensions that are strongly tied to the underlying theory
under study should be investigated when trying to understand a phenomenon (Bruce
Kogut 1988; Hofstede 1980; Hofstede 1983; Hofstede 1985). Previous research
indentified three dimensions of culture that are theoretically linked to the behavioral
perspective of relationships development: individualism, uncertainty avoidance and
power distance (Hofstede 1980; Paula Trubisky 1991; Triandis 1995).

Individualism/Collectivism (IC) reflects the relations between an individual and other

individuals and is defined as the degree to which people in a country act as individuals
rather than as members of cohesive groups (Hofstede 1980). Hofstede (1980) found this
dimension to have the strongest variation across culture. This dimension deals with the
way society prefers to deal with complexity and its related value system of willingness to
rely on strangers. In an individualistic cultural type, examples like the US, Australia and
most of Western Europe, individuals look after the interests of their own or closed tied
small social groups such as their immediate family (Hazel Rose Markus 1991; Hofstede
1980; Shinobu Kitayama 1997). On the opposite, a collectivist cultural type has strong
social ties among members where the members are primarily concerned with the
prevailing interest of the group instead of self. Relationships within a collectivist cultural
type are normally strong and intimate and members tend to share similar opinions and
beliefs, working toward a feeling of harmonious interdependence.

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Uncertainty Avoidance (UA) is the degree to which people in a culture prefer structured
over unstructured situations. It describes how people handle the uncertain future
(Hofstede 1980). It is found among many studies that there is strong correlation between
individualism/collectivism and uncertainty avoidance (Kai H. Lim 2004). On one hand,
people from higher uncertainty avoidance cultures are more intolerant to uncertainty than
those from lower uncertainty avoidance countries, and attempt to formulate ways of
controlling future events in order to reduce uncertainty and risk. On the other hand,
people from lower UA index countries have the tendency to tolerate the uncertainty
among sellers’ behavior and higher levels of risk (Hofstede 1980).

Power Distance (PD) is the degree of inequality among people that the population of a
country considers as normal. It involves the manner in which a cultural type addresses the
fact that all people are not equal in terms of physical and intellectual capabilities. A
higher PD index shows the tendency of subordinates to depend on “bosses”, to respect
the more powerful, to accept norms of wide gaps in income, to show preference for a
paternalistic and autocratic superior, and to regard benevolence as the primary
characteristics of the ideal boss (Hofstede 1984b). The type of large power distance
allows inequalities to grow over time until there is a great separation of power and wealth,
while the type of small power distance attempts to minimize the inequalities by
redistributing power and wealth (Hofstede 1980).

Though many researchers have integrated the culture perspective in IS research, only a
small number of studies focus on the impact of national culture on trust in the context of
e-commerce. The most common way to apply Hofstede’s cultural framework is to test
models on data from multiple countries that differ in several cultural dimensions.
Hofstede’s cultural index serves as a classification scheme to distinct countries or country
groups from each other. Jarvenpaa et al. (1999) used data from Australia, Israel and
Finland, differentiating on the cultural dimension individualism/collectivism, to cross-
culture validate their previous Internet consumer trust model. The trust model was held
across countries but no strong cultural effects were found regarding the antecedents of
trust. Possible reasons are the use of country as a surrogate measure of culture in general,
the assumption of cultural homogeneity (i.e., ignoring cultural differences within a
country), and the use of convenience sample of college students. Lim (2004) used
secondary data to test two national culture dimensions, individualism/collectivism and
uncertainty avoidance, and their interaction that influence Internet shopping rate across
countries. Results showed that, for countries with lower scores in uncertainty avoidance,
individualist cultures show higher Internet shopping rates than do collectivist cultures.
And they also found that trust mediates the relationship between cultural differences and
Internet shopping adoption decisions. Pavlou & Chai (2003) drawn from TPB, added
more variables in the framework, incorporated Hofstede’s cultural dimensions, and tested
the model with data from China and the US. Though the cultural effects are not
consistently significant in both countries, trust is found to be a significant predictor of
attitude and perceived behavior control in both countries, indirectly influencing
transaction intentions. Kim (2008) formed two types of culture based on Hofstede's
cultural constructs: Type I (individualistic, weak uncertainty avoidance, low long-term
orientation, and low context) and Type II (collectivist, strong uncertainty avoidance, high

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long-term orientation, and high context). A survey was conducted among a group of
college students from the USA and South Korea who were asked to visit any B2C
ecommerce web site to shop for an item of their choice. Results suggested that consumers
in Type I culture are more trusting in e-vendor and more willing to use e-commerce than
consumers in Type II. Results also showed that self-perception-based determinants are
more likely related to Type I culture, while transference-based trust determinants are
more likely related to Type II culture. Griffith (2000) examined the manufacturer-
distributor relationships across culture by assigning the US and Canada in Type I culture
with individualistic, small power distance, and weak uncertainty avoidance, while Chile
and Mexico in Type II culture with collectivistic, large power distance, and strong
uncertainty avoidance. Though the difference in the strength of the trust-commitment
relationship between Type I and Type II culture is not significant, the results support
theoretical differences in the consequences of the trust-commitment relationship between
intra-cultural and inter-cultural relationship, and suggest that the ones in Type I culture
are more likely to form a trusting relationship with others in Type I culture than with
others in Type II culture. Gefen and Heart (2006) verified the trust building process
model with three dimensions of trust beliefs across country by applying it to both the US
and Israel datasets. The two countries differ significantly in individualism, uncertainty
avoidance, and power distance. Their findings showed that familiarity has stronger effect
on trusting behavioral intention in Israel, predictability has bigger impact on trust and
trust behavioral intention in the US, and ability trust contributes more to trust behavioral
intention in Israel.

Culture Measured at the Individual Level

Some studies in IS do not find significant effects of culture on online trust models.
Jarvenpaa et al.’s (1999) Internet consumer trust model fails to show cultural effects
among Australia, Israel and Finland. Most of the hypotheses of McCoy et al.’s (2005a)
examination of the TAM on email usage are not significant in both the US and Uruguay.
The possible reason for the insignificant results is not being able to test individual
dimensions of culture with Hofstede’s original instrument (Jarvenpaa et al. 1999; McCoy
et al. 2005a).

In the studies of online trust, culture is usually considered at the nationla level and the
comparisons of effects are based on the index of cultural dimensions of Hofstede
(Hofstede 1980; Hofstede 1984a). Many studies in IS investigated cultural variables
using Hofstede’s scores and without collecting additional or actual data, or attributed
differences among groups to culture post-hoc. Though Hofstede’s culture dimensions and
culture index are still widely used in many disciplines, it is not guaranteed that the
measures still hold after over 30 years (McCoy et al. 2005b). Compared with the old
cultural dimensions score collected by Hofstede (1980), MoCoy’s email usage study
(2005a) showed that more than half of new scores between the US and Uruguay are
different.

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Moreover, since Hofstede’s original instrument addresses issues from the standpoint of
how the respondents believe most people think instead of how the respondents
themselves think , it can only be used to measure national culture, not individual-level
relationships. The national level assumes that it collectively reflects all individuals from
the nation. Apparently, the cultural homogeneity assumption is problematic especially
when integrating the national culture construct into IS models that capture individual
behavior and cognition, such as the TAM. The limitations of applying national level
constructs at the individual level have been noted (Bond 2002; McCoy et al. 2005a;
Spector et al. 2001). Though culture is a collective rather than an individual phenomenon,
within one national culture there can be large variation in individual values and behaviors.
In other words, people within the same country can differ on their orientations toward the
cultural dimensions (McCoy et al. 2005a). For example, people who adopt e-commerce
may have characteristics differing from the nation average. Thus, it is a problem to use
Hofstede’s measures in this study because we cannot distinguish between people in the
sample, and the population we try to generalize to is people who shop online in a culture
not all people in the culture.

Additionally, using Hofstede’s culture index to differentiate countries, as done by the

studies mentioned in the previous section, it is hard to generalize the findings because in
order to include as many as cultural dimensions, countries selected are normally opposite
in most dimensions, making them extreme cases. For example, the USA has low scores in
collectivism, uncertainty avoidance, long-term orientation, and low context at the same
time, contrasting to South Korea’s high scores in collectivism, uncertainty avoidance,
long-term orientation, and context. In fact, only a small number of countries fall into
either group, and those findings are difficult to apply to other countries that fall in
between.

Dorfman and Howell (1988) develop an individual-level instrument based on the original
Hofstede dimensions, following Churchill’s (1979) rigorous instrument development
procedures. Not popular in IS research, Dorfman and Howell’s individual-level
instrument has appeared frequently in recent psychology and management studies (e.g.,
Clugston et al. 2000; Cohen 2007; Farh et al. 2007; Raajpoot 2004; Robertson et al.
2000). In McCoy’s (2002) study of online teaching tools usage, the individual-level
instrument has been used and tested. In the study, the reliabilities of all four constructs
have passed the 0.7 threshold recommended by (Nunnally et al. 1978). The factor
analysis result indicates that the measure is acceptable and exhibit convergent and
discriminant validity. Compared with Hofstede’s score from 1980, scores from the study
are quite different. It is either because the scores collected 30 years ago are out-dated or
the individual approach captures different information. We intend to apply the individual
level measure to a similar model as Gefen and Heart’s (2006) and are interested to
uncover any difference in results.

Development of the Framework and Hypotheses

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Guided by the Theory of Reasoned Action and the Theory of Planned Behavior, the
relationship between trust and trust outcomes has been proposed and verified in a variety
of studies in the context of e-commerce (Table 1).

Table 1 Previous IS Research on Trust and Outcomes

Paper Theory / Outcomes / DV Methodology
Framework
(Ba et al. 2002) Price premiums Experimental survey
(eBay users); eBay
secondary data
(Pavlou et al. Price premiums Survey (eBay users);
2006) eBay secondary data
(content analysis)
(Gefen 2000) Theory of Purchase intention, Experimental survey
trust and inquiry intention (Amazon.com; students)
power
(Gefen 2002) Window-shopping Experimental survey
intention, purchase ( Amazon.com; students)
intention
(Gefen et al. TAM, Intended use Survey (students)
2003) TRA, social
exchange
theory
(Gefen et al. Social Purchase intention Free simulation
2004) presence experiments
theory (Amazon.com &
Travelocity.com;
students)
(Jarvenpaa et TRA, TPB, Willingness to buy Experimental survey (4
al. 2000) exchange online book stores & 4
theory, airline/ticket websites;
balance students)
theory
(Lim et al. TRA Willingness to buy Experimental survey
2006) (iBook.com; students)
(Kim 2008) Willingness to use Survey (visit any B2C
ecommerce web site to
shop for an item of their
choice; students)
(McKnight et TRA, TPB Intention to follow Experimental survey (a
al. 2002) advice, intention to law advice website;
share personal students)
information, intention
to purchase
(Pavlou 2002) TRA, TPB, Satisfaction, continuity Survey (an online
TAM auction-based B2B

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marketplace users)
(Pavlou et al. TRA, TPB Transaction intention Survey (Amazon.com
2004) auction users)

Drawing from previous models of trust beliefs in e-commerce (McKnight 2002) and trust
building processes (Doney et al. 1998), we extend Gefen and Heart’s framework (2006)
and propose the research model (Figure 1) to explore the different trust belief impacts on
behavioral outcomes and the effects of cultural dimensions. Calculative and prediction
trust-building processes induce the trust of consumers and thus affect their behavioral
outcomes. At the same time, familiarity, which builds knowledge bases and helps
consumers know what to expect, directly impacts consumers’ behavioral outcomes as
well as prediction process. Though our model is similar to Gefen and Heart’s, there are
four differences. First, based on previous e-commerce research and marketing studies, we
introduce the pre-purchase price fairness perception in the online trust research. Secondly,
we specifically explore the relationships of two trust beliefs and two behavioral outcomes
by examining which trust belief contributes the most to which behavioral outcomes.
Third, though Gefen and Heart’s framework can apply to both initial and repeated trust
building, it assumes that initial trust should be low because there is no prior experience to
generate familiarity and prediction. However, this assumption contradicts the findings of
McKnight et al. (1998) that initial trust may not necessarily be low because a consumer
may choose to trust a seller until something goes wrong. As suggested by Lewicki and
Bunker (1995) that in the initial stage of buy-seller relationship calculative-based trust is
the major source of trust, we add perceived reputation and perceived size, suggested by
prior research (Jarvenpaa et al. 1999; Kim et al. 2004; e.g., Lewicki et al. 1995).
Therefore, even though consumers have no experience with the technology or the vendor,
their initial trust can be captured by the calculative trust building process. Finally, we
integrate culture dimensions measured at the individual level in the study and compare
the results with Gefen and Heart’s findings.

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Trust Building Process and Trust

The calculative process is deterrence-based and forms trust through the comparison of a
trustee’s cost of being caught and benefits of cheating, perceived by a trustor. When the
trustee’s cost of being caught exceeds the benefits of cheating, the trustor would expect
the rational trustee to behave honestly. Reputation is an indicator of a trustee’s honesty
and past forbearance from opportunism (Smith et al. 1997). The marketing literature
argues that reputation is a valuable asset that requires a long-term investment of resources,
effort, and attention to customer relationships. A trustee would be reluctant to jeopardize
his/her established good reputation and long-term benefits by acting opportunistically. An
unhappy consumer can leave negative feedback regarding products and services offered
by a certain seller and the negative message can be spread quickly to other consumers.
Empirical studies demonstrate that negative feedbacks have larger impacts on price and
willingness to buy and can result in the decline of sales and price, even driven out of
business (Cabral et al. 2004; Lee et al. 2000; Melnik et al. 2003). The perceived size of a
trustee’s online store assists consumers in forming their trust (Jarvenpaa et al. 2000). The
size of a trustee’s online store implies the investment and commitment of the trustee.
Larger stores require more resources to invest in personnel, supplier relationship,
inventory, IT, accounting, and customer service, in order to conduct business smoothly.
Due to high overhead cost, consumers perceive that larger stores intend to stay in the
business for a long time and provide promised services and products to turn their negative
balance into positive. It is unrealistic to cover he big sunk cost makes by opportunistic
actions. For smaller stores, since a seller only needs to invest few resources, consumers
may perceive the trustee less trustworthy and more likely to engage in opportunistic
behaviors. The benefits from cheating are more likely to exceed the cost, even though the
highest cost is to exit the market, which is equal to all prior investments. Therefore, both
size and reputation imply the seller’s motivational investment in being in business
(Jarvenpaa et al. 1999) and the larger the size and better the reputation, the greater loss
the seller incurs if he/she is caught cheating.

Doney et al. (1998) argue that individualists are more likely to develop trust through a
calculative process than collectivists. Hofstede states that in the more individualistic
societies, people will tend to develop higher initial trust because they expect others to
adhere to the accepted basic rules of conduct, based on the assumption that people will
want to do so due to the benefits to the majority (Hofstede 1984a). It means that
individualists are more likely to trust strangers. In the absence of prior experience with a
seller, people in individualist cultures are more likely to carefully evaluate the likelihood
that the seller would not fulfill the terms and conditions promised. If the benefits
overweigh the perceived uncertainty, they are likely to purchase from the seller. Due to
the emphasis on social relatedness and interdependence, collectivists are sensitive to the
ingroup-outgroup boundary (Triandis 1995). They tend not to rely on strangers or trust
them (Fukuyama 1995) and are more likely to base their trust on relationships with first-
hand knowledge or the word-of-mouth recommendation from the members of the in-
group (Doney et al. 1998). As discussed above, we propose:

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H1a: Perceived reputation of an online seller will have a stronger effect on trust for
individualists than collectivists.

H1b: Perceived store size of an online seller will have a stronger effect on trust for
individualists than collectivists.

People from higher power distance level cultures show a tendency to allow inequalities to
grow over time until there is a great separation of power and wealth, while people from
lower power distance attempt to minimize the inequalities by redistributing power and
wealth (Hofstede 1980). A seller in e-commerce is at the more powerful position because
he/she knows the truth about the product and service he/she provides but consumers do
not. In high power distance cultures, a trustee who has power may intend to exercise the
power by behaving opportunistically in order to gain personal gains while people in low
power distance cultures tend to share power and participate in decision making with each
other (Doney et al. 1998). Considering a trustee’s cheating tendency in high power
distance cultures, a consumer would be more rigorous and careful to assess the cost and
benefits of a seller’s behavior and the calculative-based trust building process can be
more useful and effective in high power distance cultures. Thus, we propose:

H1c: Perceived reputation of an online seller will have a stronger effect on trust for
individuals high in power distance than those low in power distance.

H1d: Perceived store size of an online seller will have a stronger effect on trust for
individuals high in power distance than those low in power distance.

Doney et al. (1998) suggest that low uncertainty avoidance is associated to the calculative
trust-building process because opportunistic behaviors are more likely to appear in these
cultures. However, uncertainty avoidance is related to anxiety people feel (Hofstede
1984a). In high uncertainty avoidance cultures, people feel more anxious toward
uncertain situations than those in low uncertainty avoidance cultures. People in high
uncertainty avoidance cultures feel a strong need to protect themselves against possibly
hazardous behavior in their trust relationship (Nooteboom 2002). To them, the limited
information such as reputation and store size is very important to judge the trustee’s
trustworthiness. As such, we propose:

H1e: Perceived reputation of an online seller will have a stronger effect on trust for
individuals high in uncertainty avoidance than those low in uncertainty avoidance.

H1f: Perceived store size of an online seller will have a stronger effect on trust for
individuals high in uncertainty avoidance than those low in uncertainty avoidance.

The prediction process forms trust based on a trustor’s prior experience with a trustee.
The trustee’s past behavior provides a reasonable knowledge base for the trustor to
predict the trustee’s future behavior. Under a predictive trust building process, trust is

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build based on prior experiences, which is used to form the current belief that the
trustee’s behavior is acceptable (Lewicki et al. 1995; Rempel et al. 1986). Trust emerges
when the trustor gains the confidence in his or her ability to predict the trustee’s future
behaviors with accuracy (Doney et al. 1998). Based on the assumption that human
behaviors are consistent and predictable, the more confidence the trustor has in his/her
ability, the more certain the trustor feels about the situation, and the more likely the
trustor will trust the trustee. As a result, the increasing certainty induces the trustor’s
intention to depend on the trustee. Thus, prediction can influence behavioral intention
directly and via the mediating effect of trust.

Individualists are motivated by self-interest and self-goal while collectivists are after the
common interest and goals of members of an in-group. Due to self-driven actions, people
in individualist cultures have a large degree of freedom and have little restriction in the
variance of human behaviors. As a result, it is hard to predict a trustee’s behavior in
individualist cultures and a trustor may have less confidence in the accuracy of the
prediction, leading to a lower level of trust. Conversely, people in collectivist cultures
hold group values and beliefs and seek collective interests (Hofstede 1984a; Singh 1990).
The variance of people’s behavior is limited by the group-oriented concern. As discussed,
we propose:

H2a: The impact of prediction on trust will be stronger for collectivists than
individualists in e-commerce.

H2b: The impact of prediction on intention to purchase will be stronger for

collectivists than individualists in e-commerce.

Power distance addresses people’s response to the power gap in a society. In low power
distance cultures, people are less likely to behave in a conforming way and tend to do
whatever they want to do (Hofstede 1997). In contrast, in high power distance cultures,
due to the prevalence of conformity in norms, people tend to behave more compliantly to
the social norms. The conformity in social norms provides a basis for the predictability of
a trustee’s behavior leading to trust formation. Consumers from high power distance
cultures tend to use their prior experience with and observation of a seller to predict the
trust relationship more than those from low power distance cultures because a trustee’s
behavior is more predictable. Thus, we propose:

H2c: The impact of prediction on trust will be stronger for consumers high in power
distance than those low in power distance in e-commerce.

H2d: The impact of prediction on intention to purchase will be stronger for

consumers high in power distance than those low in power distance in e-commerce.

In low uncertainty avoidance cultures, people tolerate a wide range of behaviors and
opinions (Lundgren et al. 2003), while people in high uncertainty avoidance tend to avoid
uncertainty. Triandis (1990) noted that people from high uncertainty avoidance cultures
like predictability and like to know what others will do. Chimezie et al. (1993) pointed

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out that countries like China with a strong avoidance of uncertainty have a strong desire
to maintain social order with a degree of predictability. It suggests that people in high
uncertainty avoidance cultures prefer to follow clear structures and rules. The preference
signals that consumers from high uncertainty avoidance cultures consider past shopping
experience and exposure to an online store or seller as reliable evidence upon which trust
can be built (Lundgren et al. 2003). Thus, we propose:

H2e: The impact of prediction on trust will be stronger for consumers high in
uncertainty avoidance than those low in uncertainty avoidance in e-commerce.

H2f: The impact of prediction on intention to purchase will be stronger for

consumers high in uncertainty avoidance than those low in uncertainty avoidance in
e-commerce.

Familiarity is knowledge-based and creates an understanding of the current situation,

trustees, relevant procedures and technology in the e-commerce context. The knowledge
of a trustee reduces the uncertainty of the trustee’s future action and gives reasonable
expectations of the trustee to a trustor. The knowledge base of a trustee and the reduced
uncertainty in a trustee’s expected future behaviors make a trustor feel that the trustee’s
action is more predictable. When a trustor is more confident to predict a trustee’s
behavior, the trustor’s trust level may increase. Furthermore, when familiarity reduces the
complexity of technology and interface, consumers may be more willing to use IT
services to inquire and purchase online. Thus, familiarity can induce trust through the
prediction process, as well as influence behavioral outcomes directly.

Comparing with collectivists, individualists are more willing to trust strangers and are not
sensitive to the ingroup and outgroup boundaries. Collectivists, on the other hand,
automatically treat those belonging to outgroups with a higher level of suspicion (Brown
1996). The avoidance of outgroups can be strong in collectivist cultures and it is not
acceptable to do business with strangers before getting to know them (Hofstede 1983). It
suggests that increasing familiarity with an online seller can be more helpful to encourage
consumers’ intention to purchase in collectivists cultures than in individualists cultures.
Therefore, consistent to Doney et al.’s proposition (1998), we propose:

H3a: The impact of familiarity on intention to purchase will be stronger for

collectivists than individualists in e-commerce.

Studies show that people in high uncertainty avoidance cultures are more resistant to
change than people in low uncertainty avoidance (e.g., Kale et al. 1992). The resistance
to change can hinder people from browsing, searching, inquiring and transacting online if
they are not familiar with the seller they are going to deal with, the online interface or the
transaction procedures. An increasing level of familiarity can induce people’s intention to
purchase in high uncertainty avoidance cultures more significantly than in low
uncertainty avoidance cultures. Therefore, we propose:

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H3b: The impact of familiarity on intention to purchase will be stronger for

consumers high in uncertainty avoidance than those low in uncertainty avoidance in
e-commerce.

Most recent research on trust has already treated trust as a complex construct with several
dimensions and measures it by aggregating the measure of each dimension (Bart et al.
2005; Casalo et al. 2007; Jin et al. 2008; Lim et al. 2006; e.g., McKnight et al. 2002;
Pavlou et al. 2004). However, not all dimensions of the composite trust construct are
borne equal and they do influence behavioral outcomes differently (Gefen et al. 2008).
Drawing from previous findings, we intend to focus on and explore the distinguishing
effect of each dimension on the trust outcomes.

Trust Beliefs and Behavioral Outcomes

Urban et al. (2000) asserted that the most crucial element of web trust is fulfillment. To
make sure fulfillment happens, a seller has to be capable of as well as has the intention to
behave honestly. Focusing on the intention to behave honestly and keep promises,
integrity trust has common functional criteria for assessment, including shipping the right
product to the right place at the right time, efficient customer support services, the right
place at the right time, efficient customer support services, error-free billing, and credits
on returned items (Urban et al. 2000). Singh suggested that integrity trust is a function of
meeting or exceeding quality service performance (Singh 2000). When a consumer
perceives that a seller has high integrity trust, it means that the seller is more likely to be
expected to provide products and service in a reliable and promised manner. In addition,
after repeated experiences, the accumulated experiential information about the seller
increases the confidence level the consumer has in the seller. Hence, trust acts as an
informational resource that reduces the perceived risk of information asymmetry and
performance ambiguity. Singh (2000) proposed a similar sub-construct as integrity that
has a significant positive influence on consumer pre-purchase performance expectation.
Previous research on trust in the context of e-commerce has shown a consistent pattern of
the effect of integrity trust on the intention to purchase. In Gefen and Heart’s (2006)
cross-culture study, they found that in a repeated transaction setting, both integrity and
ability affect behavioral trusting intentions; particularly the intention to purchase is
primarily influenced by integrity, while benevolence is not a significant predictor of
intention to purchase and intention of inquiry in both countries. This result replicates
Gefen’s (2002) examination on the relationship between the three dimensions of trust
beliefs and window-shopping intentions (i.e. inquiry) and purchase intention. The
findings are consistent with his result in another study on e-products and e-service in
which only integrity has a significant impact on the intention to purchase (Gefen et al.
2004). Another example is in McKnight et al.’s study (2002) where they use a law advice
site to validate the trust typology. They found that integrity has the highest correlation
with the willingness to share personal information and both integrity and benevolence
have the same correlation scores with the willingness to purchase. In this study, we
include the willingness to share personal information as an item under the construct of
intention to purchase because sharing personal information such as name, address, credit

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card information is part of the action of purchase and when considering purchase,
consumers are already willing to share those information. As such, we propose:

H4a: Integrity trust will have positive effects on consumers’ intention to purchase in
e-commerce.

H4b: Benevolence trust will have positive effects on consumers’ intention to

purchase in e-commerce.

H4c: Integrity trust will have a more significant positive influence on consumers’
intention to purchase than benevolence trust in e-commerce.

Price fairness perception involves a comparison of the expected price premiums in the
specific service encounter relative to price premiums paid by others/self for the
same/similar service or in previous encounters. A major reason for the existence of price
premiums is the need to compensate the seller for reducing transaction risks (Rao et al.
1996). An honest seller will provide products and services as promised, and a benevolent
seller will put an consumer’s welfare as priority and be willing to sacrifice his/her own
interst for the sake of the consumer’s. Hence, a consumer may be willing to accept a
higher price if he/she believes that the seller is more honest and benevolent. Also, a
consumer can choose to reject the higher price and think the price is not reasonable if the
seller cannot convince the consumer to trust him/her and the consumer perceives the
transaction-specific risks are above average because the consumer is reasonable to
believe that the seller is very likely to chase his/her own current benefits at the expense of
the consumer’s. As argued above, we propose:

H5a: Integrity trust will have significant positive influences on consumer pre-
purchase price fairness perception in e-commerce.

H5b: Benevolence trust will have significant positive influences on consumer pre-
purchase price fairness perception in e-commerce.

Moreover, Singh (2000) proposed that benevolent trust can affect customers’ perception
of pre-purchase price fairness directly because perceived price fairness is thought to be a
foundation of benevolence trust. He argued that a benevolent seller is expected to place
the consumer’s welfare and interest over their own short-term profits. With this in mind,
consumers imply that a benevolent seller is fair and have a positive perception on price
fairness. Also, in repeated transactions, benevolence is a critical trust dimension that
leads to loyalty and commitment (Ball et al. 2004; e.g., Lewicki et al. 1995; Selnes et al.
2000). As a valuable asset, sellers are unlikely to jeopardize by exploiting a single buyer
because benevolence provides sellers an incentive to avoid cheating and opportunistic
behavior and to maintain their goodwill behavior in order to protect their reputation
(Pavlou et al. 2006). Taking this into consideration, consumers will have positive belief
to benevolent sellers and positive perception of their price fairness. To support the effect
of benevolence on price fairness perception, Campbell (1999) used a construct similar to

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benevolence in a price change experiment. The results showed that benevolence is a

critical factor in the perception of price fairness. However, once consumers realize that
the seller is not benevolent and only considers his/her own interest (e.g., using dynamic
pricing), they may judge the seller as betraying their good relationship (Sirdeshmukh et al.
2002), leading to a more unfair price perception. In the experiment of dynamic pricing,
Garbarino and Lee (2003) found that as dynamic pricing is generally considered unfair,
the mean of benevolence trust is significantly lower, leading to a marginal decrease in
overall trust, and the weight given to benevolence trust in the formation of overall trust
substantially increases. Again, on the basis of Singh’s (2000) proposition, we propose:

H5c: Benevolence trust will have a more significant positive influence on consumer
pre-purchase price fairness perception than integrity trust in e-commerce.

According to the Theory of Reasoned Action, the general feeling of favorableness or

unfavorableness (i.e., an attitude) toward the allocator of rewards (e.g., a seller who sets
prices) is affected by the perception of fairness (Ajzen 1982). The attitude toward the
seller will be generalized into a global attitude toward conducting an exchange with the
seller (Maxwell 2002). As consumers perceive that the difference between a certain
seller’s price and the price of a comparative other party is reasonable and justifiable (e.g.,
the seller is more trust worthy), consumers can accept the seller’s price and have a
favorable attitude toward the seller. Eventually, the favorable attitude can induce the
intention to purchase. However, once consumer cannot find evidence (e.g., a seller’s self
statement and reputation, other consumers’ feedback) to justify the price premium,
consumers may think that the seller is self-interested and intends to take advantage of
them. Consumers may not be willing to make transaction with the seller due to high
potential risks. Oh (2000) and Bell (1999) examined the effect of price fairness to
intention to purchase directly and indirectly. Bell’s study revealed the significant
correlation between price fairness and intention to purchase and Oh found that price
fairness has significantly positive influence on the intention to purchase. Additionally,
Maxwell’s study demonstrated that not only the price itself but also how that price has
been determined affects consumers’ perception of price fairness and thus willingness to
purchase. As discussed above, we propose:

H6: Pre-purchase price fairness perception is positively associated with intention to

purchase in e-commerce.

We do not hypothesize the relationship between familiarity and prediction and the
relationship between trust and behavioral outcomes specifically because they have
already been proposed and verified across cultures by previous studies (Gefen 2000;
Gefen 2002; Gefen 2006; Jarvenpaa et al. 1999; i.e., Luhmann 1979; McKnight 2002;
McKnight et al. 2002).

Measures

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Most items are adapted from existing measures and modified to fit our context (Appendix
A). To measure the cultural dimensions at the individual level, we adopt Dorfman and
Howell’s (1988) instrument measuring individualism/collectivist, power distance, and
uncertainty avoidance with a 7-point scale (1 = strongly disagree to 7 = strongly agree).
Higher scores represent higher collectivism, higher power distance, higher uncertainty
avoidance, and high masculinity. To measure the perceived reputation and perceived size
of store, we use Jarvenpaa et al.’s (2000) instrument. Pre-purchase perceived price
fairness is measured following Martins’ approach (1995). Finally, the rest of the items are
drawn from Gefen (e.g.,Gefen 2000; Gefen 2002; Gefen 2006). All items are scored with
a 7-point Likert scale.

We derived two new items (Fam5 and Fam6) in familiarity based on Gefen’s items. In
Gefen’s study (Gefen 2000; Gefen 2006), Amazon.com is not only the seller but also the
platform provider, which means that the familiarity of Amazon.com consists of both from
the seller and the technology. The new set of items specifies the two sources of
familiarity. Also, we develop another item Pur3 based on Pur1 because using paypal is
the most common method of payment on eBay and protects both consumers and sellers.
Both payment methods – credit card and paypal – will expose consumers and sellers’
name, address and phone number if possible to the counterpart.

For the scale development, the instrument had been distributed and reviewed by a group
of professors and PhD students in IS who are experienced in online shopping to ensure
the content validity and to identify ambiguous items. After receiving feedbacks from
professors and PhD students, necessary modifications had been made accordingly.

Additionally, we include questions to collect demographic information of subjects, such

as their age, gender, education, country (birth, grow-up), hours per day on the Internet
(web searches, browsing, checking email, chatting, etc.), hours per day on computer
(including time spent on the Internet), self-rating on computer skill (1 = novice/7 =
expert), self-rating on Internet skill (e.g., searching, browsing, finding information, etc.)
(1 = novice/7 = expert), which product they choose to purchase, and the perceived
average price of the particular product on eBay.

Data Collection
A pilot study will be conducted on a USA dataset for exploratory factor analysis,
followed by data collection and data analysis of the main study from May to August. We
intend to finish the study by early October.

In order to have large variance in our data, we will collect data from multiple countries in
Table 2. Compared with the world average, the group of selected countries has a good
variance on each cultural dimension (i.e., Type I countries with high individualist, low
power distance and low uncertainty avoidance, Type II countries with high collectivist,
high power distance and high uncertainty avoidance, and countries in between that cannot
be categorized into neither). The table demonstrates the necessity of measuring cultural

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effect at the individual level because countries (e.g., Germany, India, and Spain) which
are hard to categorize into either extreme types can be included in our study. Also, the
results are more generalizable to each cultural dimension than to each type of countries.

Table 2 Hofstede’s Indices of Countries

Country Individualism/ Power Distance Uncertainty Avoidance
Collectivism
Australia 90 36 51
Brazil 38 69 76
China* 20 80 30, 40
Germany 67 35 65
HK 25 68 29
India 48 77 40
Mexico 30 81 82
Netherland 80 38 53
South Korea 18 60 85
Spain 51 57 86
USA 91 40 46
UK 89 35 35
World Average 43 55 64
* The index is estimated.

A group of student subjects, both undergraduates and graduates in a college from each
country, will be invited to participate in an experimental survey in a computer lab during
class time. The purpose of the survey will be briefly given by the instructor and students
will be asked to visit the eBay website of their own country to shop for an item of their
choice among a group of “low touch” product categories. Most of the leading product
categories selling online are “low touch” product and “no touch” services (i.e., for low or
no touch products, consumers do not rely much on physical experience of products before
commitment, while for high touch products, consumers would rather physically inspect
products before buying), such as computing hardware, software, music, videos, books,
electronic goods, financial services, travel, and tickets (Lynch et al. 2001). Thus, the
choice pool of product categories includes computing hardware, software, CDs, video,
books, electronic goods, games, toys, health & beauty, and tickets. To exclude inter-
culture transaction, the seller for potential transaction should be in and from a subject’s
country. eBay has C2C platforms in these countries, and functions and services are the
same as those on ebay.com in the USA. The layout and website design of eBay platform
are similar across countries, all having choices of buy-it-now and auction and availability
of Paypal. Since we consider the more common phenomenon in e-commerce, subjects are
only allowed to consider or choose buy-it-now option.

The procedure consists of several steps:

Step 1: decide which product he/she is interested in and would like to purchase.

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Step 2: go to eBay website in his/her country and search the product.

Step 3: choose “Buy it Now” in Buying Format and keep the default display format
“View as: List” and “Sort by: Best Match”.
Step 4: go through the list of the product availability from various sellers and have a
general idea of the price variance of the product and shipping.
Step 5: choose one seller and go to the product page of this seller.
Step 6: carefully go through details on the page.
Step 7: check the seller’s reputation and other consumers’ feedback comments.
Step 8: check the seller’s store and other products.
Step 9: complete an online survey and he/she can check any information needed in order
to answer questions.

Data Analyses and Results

Following McCoy’s approach (2002), we will split the dataset into six different sets, a
high and a low category for each cultural dimension to test the moderating effect of
cultural dimensions. We will rank order the dataset according to each construct and slip it
into thirds. The middle third will be removed, only leaving a relative high and low for
each dimension (Nitko 2001). For robustness testing, we will also use the top 10% and
button 10% of scores in each dimension to test our model. We intend to use LISREL to
test the measurement properties and utilize Bollen’s method (1989) for direct cross-
sample comparison of paths to analyze the path differences across the two samples of
each cultural dimension. In order to compare with the cultural effect at the national level,
we will compare the path differences of sub-dataset between the USA and China as well.
The chi-squared difference test will be used to reveal any differences between the
structural parameters across samples.

Conclusion and Discussion

The potential contribution of the paper is addressed as followed. First, we expand the
concept of price premium on online auction context to the more common online shopping
situation. By examining the relationships between trust beliefs and behavioral outcome,
we provide evidence to help online sellers or vendors improve their performance by
emphasizing on showing their integrity and benevolence. Second, we can possibly
identify which cultural dimension can significantly affect the trust building process. It
provides evidence for practitioners to consider their international business strategy.

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Appendix A. Survey Items

Constructs Items* Sources
Familiarity Fam1 I am familiar with searching for the particular item (Gefen
on the Internet. 2000; Gefen
7 = strongly agree Fam2 I am familiar with buying the product on the 2006)
Internet.
1 = strongly disagree Fam3 I am familiar with eBay.
Fam4 I am familiar with the processes of purchase on
eBay.
Fam5 I have prior experience with the seller.
Fam6 I am familiar with the seller.
Prediction process Pre1 The seller is predictable. (Gefen
Pre2 I am quite certain what the seller will do. 2006; Gefen
Pre3 I am quite certain what to expect from the seller. et al. 2004)
Rep1 This seller is well known. (Jarvenpaa
Perceived Reputation
7 = strongly agree Rep2 This seller has a bad reputation in the market. et al. 1999;
1 = strongly disagree Rep3 Jarvenpaa et
This seller has a good reputation al. 2000)
Perceived Size Siz1 This seller is a very big supplier. (Jarvenpaa
Siz2 This seller is the industry's biggest suppliers on et al. 1999;
7 = strongly agree eBay.
1 = strongly disagree
Jarvenpaa et
Siz3 al. 2000)
This seller is a small player on eBay. (reverse)
Ben1 I believe that the seller have good intentions (Gefen
Benevolence toward me. 2006; Gefen
Ben2 I believe that the seller’s intentions are
benevolent (seller does not intent to harm)
et al. 2004)
7 = strongly agree
Ben3 I believe that the seller is well meaning
1 = strongly disagree Ben4 I feel I can count on the seller to consider how
his/her actions will affect me.
Integrity Int1 Promises made by the seller are likely to be (Gefen
reliable. 2006; Gefen
7 = strongly agree Int2 I do not doubt the honesty of the seller.
1 = strongly disagree
et al. 2004)
Int3
I expect that the seller will keep his/her promises.
Pur1 I would use my paypal account or credit card to (Gefen
Intention to purchase purchase from the seller. 2000; Gefen
7 = strongly agree I am very likely to buy the particular item from
2006; Gefen
Pur2 et al. 2004)
1 = strongly disagree the seller.

Pre-purchase price Pri1 How fair/unfair do you think the final selling price (Martins
fairness plus shipping charge offered to you by the seller 1995)
is?
7 = extremely fair / Pri2
acceptable
1 = extremely unfair / How acceptable/unacceptable do you think the
extremely unacceptable final selling price pus shipping charge offered
to you by the seller is?
Individualism/collectivism IC1 Group welfare is more important than individual (Dorfman et
rewards.

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 Hanmei Fan

IC2 Group success is more important than individual al. 1988;

7 = strongly agree success McCoy
(collectivist) IC3 Being accepted by the members of your work
group is very important
2002)
1 = strongly disagree IC4 Employees should only pursue their goals after
(individualistic) considering the welfare of the group
IC5 Managers should encourage group loyalty even if
individual goals suffer
IC6 Individuals may be expected to give up their goals
in order to benefit group success
UA1 It is important to have job requirements and (Dorfman et
instructions spelled out in detail so that employees al. 1988;
Uncertainty Avoidance always know what they are expected to do
Managers expect employees to closely follow
McCoy
UA2
instructions and procedures 2002)
7 = strongly agree (high UA3 Rules and regulations are important because they
UA) inform employees what the organization expects of
them
1 = strongly disagree - UA4 Standard operating procedures are helpful to
low UA employees on the job
UA5 Instructions for operations are important for
employees on the job
PD1 Managers should make most decisions without (Dorfman et
consulting subordinates al. 1988;
PD2 It is frequently necessary for a manager to use
authority and power when dealing with
McCoy
Power distance
subordinates 2002)
PD3 Managers should seldom ask for the opinions of
7 = strongly agree (high employees
PD) PD4 Managers should avoid off-the-job social contacts
with employees
1 = strongly disagree PD5 Employees should not disagree with management
(low PD) decisions
PD6 Managers should not delegate important tasks to
employees
* The bold part is what we modified to suit the context.

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