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

Journal of the Academy of Business and Economics, March, 2003 by Ahmed Elmorshidy

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.