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An investigation into trust-building mechanisms in B2B e-Marketplaces : a content analysis approach Tu, LingLing. 2004

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AN INVESTIGATION INTO TRUST-BUILDING MECHANISMS IN B 2 B E-MARKETPLACES: A CONTENT ANALYSIS APPROACH By L I N G L I N G T U B.Sc , the South China Normal University, 1996 A THESIS SUBMITTED IN PARTIAL F U L F I L M E N T OF THE REQUIREMENTS FOR THE D E G R E E OF M A S T E R OF SCIENCE IN BUSINESS ADMINISTRATION In THE F A C U L T Y OF G R A D U A T E STUDIES (Sauder School of Business; MIS Division) We accept this thesis as conforming to the required standard THE UNIVERSITY OF BRITISH C O L U M B I A February 2004 © Lingling Tu, 2004 Library Authorization In presenting this thesis in partial fulfillment of the requirements for an advanced degree at the University of British Columbia, I agree that the Library shall make it freely available for reference and study. I further agree that permission for extensive copying of this thesis for scholarly purposes may be granted by the head of my department or by his or her representatives. It is understood that copying or publication of this thesis for financial gain shall not be allowed without my written permission. Name of Author (please print) Date (dd/mm/yyyy) Degree: Year: Department of SftudU^  ScUwjr B>uA.nfcfr<> The University of British Columbia Vancouver, BC Canada Abstract B 2 B e-Marketplaces are applications of an electronic business platform introduced on the Internet. They establish a set of rules for online business, they serve buyers and sellers with acquiring products and information more effectively and efficiently, and they change stages of business processes. Trust is instrumental for establishing business relationships in B 2 B e-Marketplaces. Following Zucker's trust production theory, this study posits that the use of institution-based trust and process-based trust can induce two dimensions of inter-organizational trust in B 2 B e-commerce: trading partner trust (Marketplace participant trust) and Marketplace trust. To investigate the status quo for trust-building in B 2 B e-Marketplaces, one hundred B 2 B e-Marketplaces were selected randomly from the comprehensive list produced by eMarket Services (www. Emarketservices.com) and examined using content analysis methodology. The results reveal that seven trust-building mechanisms are commonly used for increasing trading partner trust (marketplace participant trust), and thirteen trust-building mechanisms are used for increasing marketplace trust. The findings provide guidelines for B 2 B e-Marketplaces for a trustworthy trading environment establishment. TABLE OF CONTENTS Abstract Table of Contents iii List of Tables vi List of Figures vii Acknowledgements viii 1 Introduction 1 1.1 Area of Research Focus 2 1.2 Research Objectives 3 1.3 Organization of This Thesis 4 2 Background: Online Trust in B2B e-Marketplaces 5 2.1 B2B e-Marketplaces 5 2.1.1 What Is a B2B e-Marketplace? 5 2.1.2 Classification of B2B e-Marketplaces 6 2.2 Trust in B2B e-Marketplaces 7 2.2.1 Cognitive Perspective of Initial Trust Formation 7 2.2.2 Inter-Organizational Trust 8 2.2.3 Trust Development 9 3 Identification of Trust Areas in B2B e-Marketplaces 14 3.1 Three Fundamental Dimensions of Inter-Organizational Trust In B2B e-Commerce 14 3.1.1 Trading Partner Trust 15 3.1.2 Marketplace Trust 15 - iii -3.1.3 Technology Trust 16 3.2 Dimensions of Marketplace Participant Trust 17 3.3 Dimensions of Marketplace Trust 18 4 Identification of Trust-Building Mechanisms 19 4.1 Trust-Building Mechanisms for Marketplace Participant Trustworthiness 19 4.1.1 Institution-Based Trust from Structural Assurance 19 4.1.2 Process-Based Trust from Reputation Effects 24 4.2 Trust-Building Mechanisms for e-Marketplace Trustworthiness 25 4.2.1 Institution-Based Trust from Structural Assurance 25 4.2.2 Institutional Trust from Situational Normality 26 4.2.3 Process-Based Trust from Reputation Effects 28 5 Method 30 5.1 Sample 30 5.2 Content Analysis Technique 31 5.3 Pretest 31 5.4 Coding Sheet Development 32 5.5 Coding 33 5.6 Inter-Coder Reliability 33 6 Results 35 6.1 Mechanisms that Build Participant Trustworthiness 35 6.1.1 Institution-Based Trust from Structural Assurance 35 6.1.2 Process-Based Trust from Reputation Effects... 41 6.2 Mechanisms that Build e-Marketplace Trustworthiness 42 6.2.1 Institution-Based Trust from Structural Assurance 42 6.2.2 Institutional Trust from Situational Normality 43 - iv -6.2.3 Process-Based Trust from Reputation Effects 45 7 Conclusions 46 7.1 Discussions 46 7.2 Limitations 50 7.3 Future Research 51 References 71 Appendix 1 Directorate General Enterprise (2002), Open Consultation on "Trust Barriers for B2B E-Marketplaces" 83 Appendix 2 Names and URLs of 100 e-Marketplaces 85 Appendix 3 Coding Sheet 88 Appendix 4 Sample L/C Application 95 Appendix 5 Arbitration Organization Introduction 96 Appendix 6 Instances of Dispute Resolution, Codes of Conduct, and Expected Transaction Patterns 97 - V -List of Tables Table 1: Trust-Building Mechanism, Source, Conceptualization, and Major Trust Issues 56 Table 2: Trust-Building Mechanisms and the Number of B2B e-Marketplaces Using Them 61 Table 3: B2B e-Marketplaces Which Apply Trust-Building Mechanisms in Creating Participant Trustworthiness 63 Table 4: B2B e-Marketplaces Which Apply Trust-Building Mechanisms in Creating e-Marketplace Provider Trustworthiness 65 Table 5: B2B e-Marketplaces Which Use the Five Forms of Perceived Monitoring of Products/Services Traded 67 Table 6: Three Types of Insurance Employed by B2B e-Marketplaces 67 Table 7: Two Types of Reputation Rating Systems Employed by B2B e-Marketplaces 67 Table 8: Types of Approval Seals Employed by B2B e-Marketplaces 68 Table 9: Distributions of 100 B2B e-Marketplaces in 24 Industries 70 - vi -List of Figures Figure 1: Dimensions of Online Trust 53 Figure 2: Three Fundamental Dimensions of Inter-Organizational Trust in B2B e-Commerce 54 Figure 3: A Conceptual Framework of Building Trust in B2B e-Commerce 55 Figure 4: Trust-Building Mechanisms on B2B e-Marketplaces 60 Figure 5: Trust-Building Mechanisms and the Quantity of B2B e-Marketplaces Using Them 62 Figure 6: Steps in Building Participant Trustworthiness in B2B e-Marketplaces 69 - vii -Acknowledgements I would like to express my gratitude to several people for supporting this study. In particular, I would like to thank Dr. Jai-Yeol Son, my supervisor, for giving me the opportunity to work on this challenging topic and his continuous guidance throughout the course of my research work. I also appreciate the help of Professor Izak Benbasat, for his advice and feedback on the draft versions of this thesis: Further, I must thank Yali Zhang, Rong Tang, and Yin Pan for their collaboration on the content analysis of 100 B2B e-Marketplaces in a tight time frame. Finally, to my family, special thanks to their endless love and encouragement. Without their understanding this study would not have been possible. LTNGLING TU The University of British Columbia February 2004 1. INTRODUCTION As the Internet becomes more pervasive in our everyday life, it is changing people's activities in many fields (Raisch, 2001). Companies have seen a wealth of opportunities presented by this medium, and they are extending their operations from brick-and-mortar storefronts to virtual market space. Business-to-Business (B2B) electronic marketplaces (e-Marketplaces), which were initially developed to match buyers and sellers and to facilitate transaction processes (Bakos, 1998), have evolved to provide more value-added services, and they are gradually becoming the leading providers of information and knowledge to B2B participants. According to a report from IDC, B2B transactions are expected to grow to an estimated $5 trillion by 2006. However, the accuracy of these predictions is suspect due to the disappointing past performance of e-Marketplaces (Renard, 2000), and lack of trust seems to be the most significant barrier preventing traders from taking part in e-Marketplaces (Violino, 2002). Therefore, it is beneficial to assess how B2B e-Marketplaces can make use of trust-building mechanisms to increase participation and engender trust among trading partners. 1.1 Area of Research Focus Traditional B2B organizations use physical interactions to reduce perceived risk; for example handwritten signatures, exchanging product and company information, and face-to-face meetings can induce confidence when trading with unfamiliar partners. Electronic Data Interchange (EDI) has added another element to B2B relationships since it emerged two decades ago as an electronic means of conducting transactions. Trust concerns are well addressed by the very nature of EDI: it is a private network, so businesses participate in it through dedicated connections, controlled by a managing organization. B2B e-Marketplaces are relatively open networks that go far beyond EDI, promising a new collaborative environment where online transactions take place between unfamiliar organizations, and across diverse geographical locations ("eMarketplace-Promoting Collaborative", 2001). However, in this open business environment organizations are vulnerable due to their inability to control transaction uncertainties, including potential privacy invasions caused by the use of cookies in tracking visitors' identities and behaviors, the possibility that online information will be tampered with, and doubts regarding the credibility of trading partners. The increasing number of participants influences on the complexity of trust in B2B e-commerce contexts, particularly between the buyers, sellers, and marketplace providers who contribute to e-Marketplaces. Kollmann (2001) addresses the chicken and egg problem caused by the mutual interactive relationships between buyers and sellers, and observed a dilemma inherent in e-Marketplace acceptance: "if there are not enough suppliers, no buyers will use the marketplace. If the acceptance of the buyers is too low, suppliers will not use the marketplace". Furthermore, Kollmann posits that a tri-lateral relationship among buyers, sellers and marketplaces must also be taken into account. He argues that a marketplace works as a channel, mediating between buyers and sellers. Derivative services also affect the complexity of trust in B2B e-commerce contexts. B2B primarily concerns deals between businesses other than delivering goods to end users. It is a lot more than just simply selling products. It handles businesses from supply chain management, product development, joint problem solving, to collaboration. For example, Varon (2001) argues transactions in B2B environment involve negotiation and integration processes. Trading participants can bargain regarding product prices, specify product inspection procedures, ask for escrow services, and sign for trading agreement. Meanwhile, a B2B e-Marketplace might possibly require that its participants install specific software integrated with their internal IT and back-office systems. The present study will understand complex B2B e-Marketplace trust issues by addressing inter-organizational trust from two dimensions: marketplace trust and trading partner trust (marketplace participant trust). It will identify B2B trust-building strategies and evaluate them with data collected via a descriptive content analysis of 100 B2B e-Marketplaces. When completed, this study will not only provide e-Marketplace providers with tools to acknowledge and address trust issues, but it will also provide clear guidelines for potential e-Marketplace participants to assess the performance of an e-Marketplace in terms of originating trust. 1.2 Research Objectives This study will concentrate on the critical trust areas involved in B2B e-Marketplaces, and the use of trust-building mechanisms in e-Marketplaces to handle participants' concerns regarding trust. Specifically, our objectives in this proposed research include: 1) Examining categories of trust and trust-building mechanisms that are critical in B2B e-Marketplaces. To do so, an extensive literature review will be carried out, addressing e-Marketplace characteristics, inter-organizational trust, and trust building processes. Subsequently, a conceptual framework will be developed for understanding inter-organizational trust in B2B e-commerce, demonstrating that process-based trust and institutional trust act as two antecedents of marketplace trust and trading partner trust. 2) Based on the critical trust categories and effective trust-building strategies identified, we will investigate current trust-building efforts in B2B e-Marketplaces by analyzing the content of the web pages of 100 B2B e-Marketplaces. We will assess how e-Marketplaces apply trust strategies when designing and creating website content, and when they seek to develop specific trusting beliefs. 1.3 Organization of this Thesis Section 2 provides a background about B2B e-Marketplace trust from a review of previous research, including specific definitions and classifications of e-Marketplaces, meanings of inter-organizational trust, the role of marketplace trust, and sources of B2B e-Marketplace trust. Section 3 introduces the three fundamental dimensions of inter-organizational trust in B2B e-commerce, and posits two dimensions for this study, namely trading partner trust (marketplace participant trust) and marketplace trust. Section 4 provides a detailed list of trust building mechanisms. A descriptive content analysis technique employed to examine mechanisms of trust is presented in Section 5. Section 6 reports the results of content analysis. Finally, conclusions and a discussion of relevant issues are presented in Section 7. 2. BACKGROUND: ONLINE TRUST IN B2B E-MARKETPLACES 2.1 B2B e-Marketplaces 2.1.1 What Is a B2B e-Marketplace ? An electronic marketplace is defined as "an inter-organizational information system (10S) through which participating buyers and sellers can exchange information about prices and product offerings" (Bakos, 1991, p.296). EDI, as one type of IOS, was used to facilitate communication among trading partners before the Internet was commercialized (Dai and Kauffman, 2001). Mahadevan (2002) states that EDI assisted organizations to improve their supply chain management, eliminating duplication of resources and trimming inventory. However, because the costs to join and to use EDI were expensive, only large companies could offer the high capital outlays necessary to connect with their major trading partners. Malone et al. (1987) predicts that electronic hierarchies (a buyer working with a single predetermined supplier, e.g. through EDI) would shift to electronic markets due to the benefits of electronic interconnections. The introduction of the Internet realized this prediction by eliminating barriers to entry into electronic markets. Many small and mid-sized firms can reach broad audiences of potential trading partners, while paying relatively small listing or transaction fees. Based on the effects of electronic interconnection predicted by Malone et al. (1987), Soh and Markus (2002) identify the benefits of e-Marketplaces as: "(1) reduction of search costs, when buyers and sellers are brought together with price and product information; (2) more accurate matching, through increased price transparency; and (3) saving transaction and collaboration costs by establishing integration systems". 2.1.2 Classification ofB2B e-Marketplaces Following the classification methods used in previous studies (Kaplan and Sawhney, 2000; Skinner, 2000; Hartmann, 2002), we intend to analyze B2B e-Marketplace based on a three-dimensional classification scheme: 1) what is an e-Marketplace's orientation (vertical or horizontal), and 2) who owns the e-Marketplace (biased or neutral). Vertical marketplaces are industry-specific and focus on supply chain efficiency. Kaplan and Sawhney (2000) claim that manufacturing inputs are usually purchased from vertical marketplaces, because raw materials differ from industry to industry. Furthermore, Hartmann (2002) states that vertical marketplaces can offer valuable resources for fragmented markets where buyers and sellers have difficulty finding each other, and the marketplaces can provide in-depth knowledge for a single industry. Horizontal marketplaces, on the other hand, "serve multiple industries, for example, logistics services, printing services, employee and human resources services" ("The e-Business Marketplace: The Future of Competition," 2002, p.6). However, sometimes the distinction between vertical and horizontal marketplaces is ambiguous (Skinner, 2000). E-Marketplaces are generally operated by an intermediary, which can be a market participant or an independent third party (Bakos, 1991). Buyer-owned markets, also known as e-procurement, are operated by individual buyers with many suppliers; while seller-owned markets, also known as demand aggregation, are operated by individual sellers and include many buyers (Hartmann, 2002). Both buyer-owned and seller-owned markets are also named as biased e-Marketplaces. There are fewer trust concerns in biased e-Marketplaces because owners are usually familiar with their trading partners and can restrict membership. In contrast, neutral markets are owned by independent intermediaries, and cannot "be governed by any or all of the members of exchange" (Gordon, 2000). Therefore, neutral markets must act fairly to satisfy both the demand side and the supply side of B2B transactions. In sum, we will focus on neutral (independent of buyers and sellers) and vertical (industry specific) B2B e-Marketplaces in this study, because they offer more opportunities for maximizing transaction efficiency and promoting trust in business relationships than horizontal e-Marketplaces. 2.2 Trust in B2B e-Marketplaces 2.2.1 Cognitive Perspective of Initial Trust Formation Trust formation processes can be divided into an initial phase and a familiar phase. Xiao and Benbasat (2003) actually classify three levels of trust: before-interaction trust, initial interaction trust, and repeated-interaction trust. The first two levels correspond to the initial phase of trust, whereas and the third level corresponds to the familiar phase. McKnight et al. (2002) argues that initial trust is more salient when consumers interact with unfamiliar vendors. Therefore, the current study focuses on initial trust, including conditions before an interaction is completed and in the early stages of completing interactions before familiarity has been firmly established between buyers and sellers. In B2B contexts, prospective participants are not familiar with their trading partners (Sultan and Mooraj, 2001), and buyers do not know whether sellers can deliver what they promise, while sellers, on the other hand, cannot be certain that the buyers are able to pay on time (Hicks, 2001). Thus, the development of trust between the two parties during these initial stages is instrumental in determining whether or not the buyers and sellers will decide to proceed with their interactions with potential new partners. Pavlou (2002) posits that cognitive trust is the primary form of trust involved in the initial phases of buyer-seller interactions, and therefore it plays an important role in business transactions. Cognitive trust is based in rational considerations, in contrast to affective trust, which focuses on emotional issues that "develop as relationships deepen over time" (Chopra and Wallance 2003, p. 9). Because this study focuses on participants without prior experience with the online partners with whom they do business, we do not take affective aspects of trust into consideration. 2.2.2 Inter-Organizational Trust Inter-organizational trust has received a significant amount of attention recently from practitioners and scholars. It has been identified as a critical factor enabling relationships between buyers and sellers (Doney and Cannon, 1997), between manufacturers and suppliers (Sako and Helper, 1998), and between selling partners (Smith and Barclay, 1997), and it has been found to have a positive effect on loyalty, performance, conflict reduction, and cooperation (Chow and Holden, 1997; Aulakh et al., 1996; Zaheer et al., 1998; Doney and Cannon, 1997; Blomqvist et al., 2002). In order to build inter-organizational trust in B2B e-Marketplace contexts, we must analyze the definition of inter-organizational trust and the methods of creating appropriate conditions, including the processes and regulations that manage and sustain trust in inter-organizational relations (Blomqvist and Stahle, 2000). Previous inter-organizational trust studies have shown that inter-personal trust and inter-organizational trust are closely related (Blomqvist and Stahle, 2000; Blomqvist et al., 2002). Zaheer et al. (1998) investigate the role of trust in inter-firm exchanges at two levels: the level of interpersonal trust developed between representatives of each organization, and inter-organizational trust, the extent to which members of one organization have a collectively-held attitude toward a partner firm. According to this model, trust is based on individuals, and the origin of inter-organizational trust is a belief held collectively by all individuals within a firm (Pavlou, 2002). Although various definitions of inter-organizational trust vary according to their relevant contexts, the risks attendant to trust and the expected beneficial outcomes are two essential elements of all definitions (Fichman, 1997). According to Pavlou and Gefen (2002), inter-organizational trust promotes cooperation in relationships: one party act according to the expectations of others, and it will not take advantage of their vulnerability. Our study adopts the definition of inter-organizational trust given by Pavlou and Ratnasingam (2003, p. 7): "the subjective belief with which organizational members collectively assess that a population of organizations will perform a particular transaction according to their confident expectations". 2.2.3 Trust Development Several trust-building processes have been identified in prior studies (Doney and Canon, 1997; Gefen et al., 2003, Zucker, 1986; Janowicz and Noorderhaven, 2002; Pavlou et al., 2003). In our view, the trust building processes that are distinguished most meaningfully at the initial stage of trust establish connections between these trust processes and trust outcomes, giving a conceptual framework of B2B e-Marketplace trust-building. Zucker (1986) proposes three modes of trust production: characteristic-based trust, process-based trust, and institutional-based trust. Institution-based trust and process-based trust are included in the current study because they are involved in the early determinations of new relationships between buyers and sellers, while characteristic-based trust is excluded from our study because it varies in different relationships due to the diversity between individuals working for different firms and the qualities inherent in the organizations themselves. For the sake of completeness, we will briefly assess sources of characteristic-based trust, while providing a more extensive discussion of the other two modes of producing trust. a. Characteristic-Based Trust Production (Similarity) According to Zucker, characteristic-based trust, also known as similarity-based trust, originally refers to the trust produced by personal characteristics that are similar between two parties, such as ethnicity, sex, or age (Zucker, 1986). Parkhe (1998b) extends this concept into inter-firm contexts, and points out organizational background characteristics are important in trust production. A multilevel typology of inter-firm diversity is developed by Parkhe (1991), delineating the differences of firm-specific characteristics in societal culture, national context, corporate culture, strategic direction, and management practices. Further, Parkhe (1998b, p. 423) notes that the trust production might "be harder when cultures are highly dissimilar, since homogeneous expectations and shared assumptions may not exist as readily". B2B e-Marketplaces bring together worldwide organizations. These organizations may exhibit wide diversity, such as through the languages they use, their geographic locations, the way they percept problems, the patterns they communicate, and the values and policy they hold (Parkhe, 1991; Janowicz and Noorderhaven, 2002). Meanwhile, at the stage of initial interactions, it is difficult for participants to understand and interpret the differences of their partners since they can not refer to the knowledge generated from prior relationships. Therefore, characteristic-based trust does not apply to this study because it needs invest sufficient time and effort in overcoming differences and establishing similarities. b. Process-Based Trust Production Process-based trust is generated by two mechanisms: past exchanges and secondhand information (Zucker, 1986). It has also been referred to as knowledge-based trust, according to Gefen et al. (2003), and it has been called prediction-process by Doney and Canon (1997) and Einwiller (2001). Drawing upon Zucker's view of process-based trust, Parkhe (1998b) addresses process-based trust both in the context of ongoing interactions and in the context of reputation effects, when international alliances are being developed. a) Process-Based Trust from Ongoing Interactions According to Pavlou, a B2B e-Marketplace can be viewed as a networked community of market participants that are organized by a market provider (Pavlou, 2002). In such a community, market participants have little knowledge not only about potential partners, but also about the capabilities of the marketplace. Doney and Canon (1997) posited that trust in inter-organizational relationships can be produced and affirmed through interactions that enable trustors to interpret prior outcomes better and to feel more confidence in the trustworthiness of trustees. Furthermore, in ongoing interactions, the installation of formal and informal communication channels between trustors and trustees is able to improve behavior transparency, and thereby engendering mutual comfort (Parkhe, 1998b). However, since the current study focuses on market participants who have not had prior first-hand experience with potential trading partners and marketplaces, the process-based trust from ongoing interactions will not be part of the current research model because it is related to trust formation through repeated exchanges. b) Process-Based Trust from Reputation Effects According to Zucker (1986, p. 62), reputation is "a symbolic representation of past exchange history". Because trustors have little direct prior experience with potential trustees in B2B e-Marketplaces, they turn to external information, constituting the reputation of the trustees. As indicated by Lang et al. (2003), the foundation of reputation lies on the judgment of others. Trustors can collect opinions from colleges, friends, and rating agencies, to predict the future behavior of a prospective partner (Einwiller 2001; Parkhe 1998b). Parkhe (1998b) also states that a trustee's strong reputation implies its continuing trustworthiness in the future. Reputation has been considered as a powerful means to engender trust, and organizations are willing to spend significant amounts of time and effort into building this social capital. c. Institution-Based Trust Production Institution-based trust is tied to formal social structures, such as professional and industry associations and intermediary mechanisms (Zucker, 1986). Several studies (Pavlou and Ratnasingam, 2003; Pavlou, 2002; Pavlou et al., 2003; McKnight et al., 1998) demonstrated the prominent role of institutional trust in initial inter-organizational trust formation, with two general dimensions of institutional trust : situational normality, defined as "the belief that success is likely because situation is normal" (Pavlou and Ratnasingam, 2003, p.6) and structural assurance, defined as "the belief that success is likely because such contextual conditions as promises, contracts, regulations, and guarantees are in place" (Pavlou and Ratnasingam, 2003, p.6). cl. Situational Normality Organizations generally prefer to partner with institutions that have an appropriate business environment and that are favorable for conducting online exchanges. Gefen et al. (2003) state that situational normality is relative to the extent to which an e-vendor's Web site is normal compared to similar sites, rather than to the extent to which users are familiar with - 12-actual e-vendors. McKnight et al. (2002) also state that shared opinions about structures and properly ordered settings facilitate trust formation among trading partners, increasing the probability of success in online transactions. Therefore, it is necessary for any i e-Marketplaces to establish a positive first impression with prospective members, by providing the appearance of a respectable and real business institution, by satisfying the expectations members have for virtual businesses, and by persuading new entrants to participate. Meanwhile, Pavlou and Ratnasingam apply situational normality to the understanding of technology trust, "the subjective belief by which an organization assesses that the underlying technology infrastructure and support mechanisms are capable of facilitating inter-organizational communications, transactions, and collaborations" (Pavlou and Ratnasingam, 2003, p. 1). They posit that technology trust provides "technical standards, security procedures, and protection mechanisms" for the institutional structure of e-Marketplaces (Pavlou and Ratnasingam, 2003, p. 7), and they argue technology trust is one key component of inter-organizational trust. c2. Structural Assurance For most new entrants, the perceived risks of conducting e-business through online intermediaries (e.g. online marketplaces) are high due to the possibility of opportunistic behavior by other parties. Structural assurance is an assessment of success created by "guarantees, regulations, promises, legal recourse, and other procedures" (McKnight et al., 2002, p. 339); the structural assurances built into a Web site can positively affect trust in an intermediary. Disclosure of approval seals issued by trusted third party agencies, for example, is one type of structural assurance used by online intermediaries. Pavlou (2002), and Pavlou et al. (2003) explain the role of structural assurance on facilitating online relationships, demonstrating that online B2B marketplaces can offer institutional provisions for engendering inter-organizational trust and continuous relationships, by compelling trustees to behave in a trustworthiness manner. Pavlou (2002) states that structural assurance is able to augment the trustworthiness of sellers by providing impressions that sellers are subject to monitoring, feedback, and cooperative norms. 3. IDENTIFICATION OF TRUST AREAS IN B2B E-MARKETPLACES 3.1 Three Fundamental Dimensions of Inter-Organizational Trust A significant body of knowledge from practitioner comments already sheds light on the understanding inter-organizational trust in B2B e-commerce. The Directorate General Enterprise ("Trust barriers for B2B e-Marketplaces", 2002) launched an open consultation on barriers to trust for B2B e-Marketplaces, the results of which are listed under four categories: e-Marketplace operator, online selling purposes, online purchasing purposes, and B2B codes of conduct (see Appendix-1). Bridges (2001, p. 4) argues: "Trust in B2B is when there is a belief that an acceptable level of honesty, reliability and competence exists on the part of the intermediaries, the technologies and the other parties involved in the business process, such that trade can take place". This definition is consistent with three trust dimensions proposed by Mahadevan and Venkatesh (2000), who suggested that building trust for B2B e-Commerce should be addressed on the basis of market participant, marketplace, and technology(see Figure 1). Insert Figure 1 about Here - 1 4 -Previous researches also delineate the critical dimensions of inter-organizational trust in B2B e-commerce, although the dimensions are not integrated into a unified framework of analysis. Three major areas that need to be covered in building inter-organizational trust are discussed (Pavlou 2002, Pavlou and Gefen 2002, Pavlou, et al. 2003, and Pavlou and Ratnasingam 2003), namely trading partner trust, technology trust, and marketplace trust. 3.1.1 Trading Partner Trust Ratinasingam (2001) describes inter-organizational relationship in B2B e-commerce is established between trading partners, which can be considered as buyers, sellers, manufactures, retailers, or suppliers. Pavlou (2002) applies this argument to describe the trading partner relations in industrial exchange (i.e. buyer-seller). Trading partner trust is defined by Pavlou and Ratnasingam (2003, p. 11) as "the subjective belief with which an organization assesses that its trading partner will perform the behavioral aspect of particular transaction according to its confident expectations". In this study, the trading partner can be considered as an organization participating in marketplace to do exchange with one another; hence, the terms trading partner trust and marketplace participant trust are used interchangeably hereafter. 3.1.2 Marketplace Trust In B2B contexts, marketplaces work as online intermediaries for matching trading partners and providing satisfactory institutions. Following Pavlou (2002), we define marketplace trust as "a subjective belief with which marketplace participants assess that a marketplace will act according to their confident expectations". Pavlou (2002, p.235) proposed that research into marketplace trust can be beneficial to understanding trading partner trust - 15 -formation, inasmuch as "the trust in the marketplace positively influence the perceived effectiveness of the marketplace's structure mechanism, which in turn builds trust in sellers". Tan and Thoen (2001) similarly posited that, in international electronic trade, trust is connected to control mechanisms, and the trustworthiness of a control mechanism depends on the trustworthiness of the institution providing the mechanism. In this study, we agree with the above arguments that trustworthy marketplaces decrease trading participants' worries about "relying on an intermediary in engaging in online transactions with potential trading partners" (Pavlou and Gefen, 2002, p.25), and they contribute to participants' trust in trading partners by providing a stable institutional structure. 3.1.3 Technology Trust Technology trust is argued as an antecedent to trading partner trust, and includes seven categories: confidentiality, integrity, authentication, non-repudiation, access control, availability, and best business practices, based on Pavlou and Ratnasingam (2003). Technology trust, however, is beyond the scope of this study, because it is related more closely to technical standards and security procedures (e.g. issues related to encryption, authorization, transaction speed, and integration norms), and most procedures in B2B e-Marketplaces are visible only to qualified users, and they can only be examined through repeated interactions. In an examination of trust-building mechanisms in e-Marketplace web pages, we cannot conduct actual transactions to test the specific security mechanisms that e-Marketplaces are using. For instance, it will be very difficult for us to confirm the accuracy of data stored in e-Marketplaces' databases, or to verify the integrity of the transaction information. Based on above discussion and the literature review in section 2, conceptual frameworks for - 16-building inter-organizational trust in B2B e-commerce are proposed, as shown in Figure 2 and Figure 3. Figure 2 describes that trading partner trust, marketplace trust, and technology trust are three essential constructs which form inter-organizational trust; trust problems in either of these areas can discourage organizations from participation in B2B e-Marketplaces. Figure 3 illustrates the processes of trust production in those three constructs. Insert Figure 2 about Here Insert Figure 3 about Here 3.2 Dimensions of Marketplace Participant Trust The trust that arises in the marketplace participant area (as opposed to the administrative and operational aspects of the marketplace) is composed of buyers' trustworthiness (sellers' trust in buyers) and sellers' trustworthiness (buyers' trust in sellers). Competence, integrity, and benevolence are three dimensions of buyer/seller trustworthiness. According to Ba and Pavolou (2002), the first two dimensions of trust are based on economic rationale, and expectations that trustees will behave effectively and honor commitments. The third dimension of trust, benevolence, is a higher level of trust, based on impressions of the goodwill that trustees will not take advantage of trustors. In the current study, we apply the definitions of trusting beliefs provided by McKnight and Chervany (2001, p. 6): - 17-1) Competence means one party believes the other party has the ability or power to do for one what one needs done; 2) Integrity means one party believes the other party makes good faith agreements, tells the truth, and fulfills promises; and 3) Benevolence means that one party believes the other party cares about the other and is motivated to act in the other's interest. In the present study, the trust that is analyzed in the context of the marketplace participant area is based on: • Trustworthiness of sellers, which includes trust in each seller's competence, integrity, and benevolence • • Trustworthiness of buyers, which includes trust in each buyer's competence, integrity, and benevolence 3.3 Dimensions of Marketplace Trust The identity and characteristics of individual marketplaces determine the perceived effectiveness of structural assurance mechanisms. Pavlou claims that structural mechanisms are designed based on the beliefs that favorable outcomes are likely when online B2B structures provide protection for participants (Pavlou, 2002). Market participants will not place their trust in online B2B structures unless they believe those structures are endorsed by trustworthy marketplaces. The present study focuses on the following issues of trust in marketplace areas: • Trustworthiness of marketplaces, which includes trust in the competence, integrity, and benevolence of a marketplace 4. IDENTIFICATION OF TRUST-BUILDING MECHANISMS 4.1 Trust-Building Mechanisms for Marketplace Participants' Trustworthiness 4.1.1 Institution-Based Trust from Structural Assurance In B2B e-Marketplaces, participants involved in business transactions may not know each other but may each trust a common institution. Structural assurance mechanisms, including escrow services, monitoring of product trading, insurance, cooperation norms, member screening, and law enforcement are used for the building of mutual trust between market participants and their trading partners. a. Escrow Zucker (1986) discusses escrow as a notable dimension of institutional trust, which reassures trading participants by responding to doubts about procedures in online environments. Escrow can protect online traders from Internet fraud, and it guarantees the expected outcome of a transaction (Hu et al., 2001, Pavlou et al., 2003). Buyers benefit through the function of a third party that holds payment until the buyer is satisfied with the quality of the' goods received; simultaneously sellers benefit from protection against fraudulent credit cards. Pavlou and Gefen (2002) demonstrate that escrow can induce trust in sellers, thereby augmenting the intentions of buyers to complete transactions. Since the trusting belief generated by escrow service is based on rational calculation, for example, sellers will lose payment if they deliver unsatisfactory products, escrow service can sustain trust in integrity among buyers and sellers. b. Perceived Monitoring of Products/Services Traded Pavlou (2002, p. 221) argues that monitoring in e-Marketplaces refers to "an institutional mechanism undertaken by the marketplace's management to supervise all transactions by - 1 9 -scrutinizing economic activity and conveying sanctions to wrongdoing". The present study focuses on the monitoring of products or services traded. Product quality is a necessary condition for companies to remain in business. There are several monitoring mechanisms for products traded in e-Marketplaces, such as product appraisal, product inspection, product guarantees and warrantees, and product reviews and ratings, used in e-Marketplaces to maintain participant satisfaction with prospective partners. Product appraisal mechanisms allow sellers to classify products into different groups according to the measurement of specified characteristics (Dolan and Humphrey, 2001). Product inspection "can cover the complete production process from initial evaluation and raw materials inspection to final inspection and testing and loading supervision, or any one stage in the manufacturing process" (TradeCard, 2000). Product reviews provide prospective buyers with product characteristics, and give them hints of product quality. Product warranties and guarantees are subsequently complementary type of monitoring mechanism, enhancing buyer confidence in both product quality and seller integrity. In sum, by examining product monitoring mechanisms announced on the web sites where e-Marketplaces do business, potential business partners postulate that sellers who offer high quality products have correspondingly high competence. Furthermore, assurances of product quality can induce buyers' trust in sellers' integrity. c. Insurance It is sometimes difficult for buyers and sellers to successfully trust each other in the context of online transactions, due to the variety of uncertainties involved in their transactions. In response to this issue, according to Bridges (2001), risks can be quantified and minimized -20-by insurance services. As indicated by Zucker (1986, p. 64), insurance serves as an intermediary mechanism, created because of the concern that "the transaction may be completed, or may fail to produce expected return, through no fault of either party involved in the exchange". Zucker also posits that the use of insurance signals that an organization provides reasonable resources to protect another party from loss, and it induces trust. Therefore, the provision of insurance services is good for maintaining trust in benevolence among trading participants. d. Perceived Cooperative Norms Following Pavlou (2002, p. 223), perceived cooperative norms can be defined "as organizations' expectations of the values, standards, and principles to which their trading partners adhere". There are three specific forms of perceived cooperative norms that can be investigated at B2B e-Marketplaces' Web sites: dispute resolution, ethical codes of conduct, and expected transaction patterns. In electronic environments, it seems inevitable that disputes will arise due to uncertain risks and the ambiguous liability of participants. Dispute resolution impacts the adoption of e-Marketplaces as well as the harmony between trading partners (Kaneshige 2001). Litigation is not very helpful to resolve the disputes, because plaintiffs must spend large amounts of money and time for questionable returns (Odams-de-Zylva, 2001). Bridges (2001) cites two examples for dispute resolution in e-Marketplaces: one is the installation of software solutions, and the other is the use of arbitration services. In this study, we will investigate dispute resolution services identified at e-Marketplace web sites. We anticipate finding that dispute resolution is helpful for increasing trust in the benevolence of trading participants, because it establishes acceptable stable behavior to maintain relationships -21 -between buyers and sellers when conflicts emerge. Codes of conduct promote fair transactions between buyers and sellers by specifying ethical requirements for participants, such as accuracy in information disclosure, prohibition of unlawful items, maintenance of information practices and security, and confidentiality of user accounts and passwords. It regulates trading practices and promotes goodwill among participants. Expected transaction patterns, however, are more specific transaction standards, revealing to prospective participants how transactions are made on e-Marketplaces. An e-Marketplace may specify acceptable methods of payment, for example bank transfers or letters of credit. It may also state how shipping is arranged and whether taxes will be charged. In particular, if an e-Marketplace has an exchange or auction function, the content of rules may contain price offers, bidding times, requirements for winning a bid, or bid closing processes. In sum, perceived cooperative norms augment confident attitudes regarding the expected behavior of other parties in transactions. As indicated by Pavlou (2002, p. 224), perceived cooperation norms can promote feelings between buyers and sellers of shared understanding and "similar values, beliefs, and principles", and they can positively influence the competence, integrity and benevolence among trading partners. e. Member Screening Member screening processes are used by marketplaces to control qualifications for membership and to generate trust among unfamiliar trading partners. Pare (2001) describes different registration criteria used by various marketplaces; for example, some - 2 2 -e-Marketplaces request telephone contact while some require letters of reference from existing or current trading partners. Credit checking is another criterion used to screen qualified participants; it has served traditional B2B marketplaces for many years, and recently it has been extended to online environments, to build the credibility of trading partners. It protects buyers by checking the history of sellers' service quality, and it protects sellers by examining buyers' payment habits for products and services (Violino, 2002). Member screening mechanisms provide a sound structural assurance which influences the views of e-Marketplace participants regarding each other; it encourages participants to be confident that prospective partners are competent, honest, and altruistic. Because member screening is based on economic rationale and responds to concerns about opportunism, it is only related to the trust development in participants' competence and integrity. f. Law Enforcement Regulation, legislation and law are important mechanisms for producing institutional-based trust, as noted by Zucker (1986). These systems regulate, formalize, and standardize interaction patterns among trading firms. Following the definition given by Pavlou (2002), law enforcement refers to a legal terms which govern transactions between participants on an e-Marketplace. We agree with Pavlou that the use of law enforcement can engender participants' trust in the integrity of their trading partners, through calculation: the benefits of cheating are less than the costs of illegal behavior. Furthermore, although the survey result of Pavlou (2002) does not support above hypothesis, we think this is due to the limitation of the survey samples he has selected. Pavlou focuses on repeat participants who have already adopted B2B e-Marketplaces, rather than on new firms without any experiences in Online B2B transactions. In actuality, prospective participants generally perceive uncertainties and high risks involving online trading, and law enforcement can be considered as an effective deterrence to opportunism. Therefore, our present study adopts the hypothesis that the effects of governing laws ease the risk concern of prospective participants, while promoting trust in integrity. 4.1.2 Process-Based Trust from Reputation Effects a. Reputation Rating Systems Reputation rating systems have been successfully adopted by Consumer-to-Consumer (C2C) marketplaces for a long time, and are used to eliminate the impact of unfamiliarity among trading partners. E-bay, for example, attributes the success of its well known feedback forum to existing consumers. Ba and Pavlou (2002) examine the role of E-bay's trust building technology on price premiums and buyer behavior. They found that feedback mechanisms are able to induce trust and sellers with more positive ratings charge high bidding prices and gain price premiums for expensive products. Similarly, prospective participants in B2B e-Marketplaces also value recommendations and opinions from existing participants or independent third-parties. They consider that peers' ratings and the comments of third-parties are reliable and reflect participating firms' experiences, and that these ratings can reduce their suspicion of prospective trading partners' competence and integrity caused by the absence of transaction histories. As posited by Pavlou (2002), reputation rating systems utilize "word-of-mouth" communication to disseminate participants' comments about past trading experiences. On - 2 4 -the one hand, based on rational assessments, trust in the competence and integrity of sellers will be strengthened inasmuch as sellers might lose high ticket prices for products, and their reputation might be damaged, if they do not fulfill their own commitments (Pavou, 2002); on the other hand, reputation rating systems help to share trading partners' values and beliefs with other participants. Therefore, a reputation rating system not only engenders trust in participants' competence and integrity but also builds goodwill trust. 4.2 Trust Building Mechanisms for Marketplaces' Trustworthiness 4.2.1 Institution-Based Trust from Structural Assurance a. Approval Seals Approval seals provided by trusted third parties have an important effect on purchasing behavior. McKnight and Chervany (2001) indicate that third-party privacy seals increase the likelihood that consumers will share personal information, and likewise the use of reliability seals (e.g. BBB) can promote trust in the integrity of a vendor. Four approval seals are currently common in online business: TRUSTe provides clear identification of the processes involved in the collection and use of information; Verisign and WebTrust ensure participants that transaction systems are secure and perform as expected; and BBBonline verifies that firms have been in business for more than one year and that they are committed to high levels of ethical business practices and customer satisfaction. According to McKnight et al. (2002), the effects of different third-party seals are varied. For example, BBB and TRUSTe influence trust in the integrity, whereas Versign and WebTrust affect trust in competence and integrity of e-marketplace providers. b. Privacy/Security Statement According to Todd (2001), privacy infrastructure is a critical prerequisite for an -25-e-Marketplace to become an accepted benevolent node, insofar as it protects participants' rights to determine what kind of information about them can be collected and used. Culnan and Armstrong (1999) posit that when customers are explicitly told that fair information practices are employed, their privacy concerns are generally addressed adequately. Fogg et al. (2002) likewise find that sites proclaiming their security policies are more credible than other sites, when statements describe the practices used to protect electronic data transmission. Explicit security and privacy statements thus provide not only rational assessments regarding marketplaces, but also the benevolent intentions applied within the marketplace. 4.2.2 Institutional Trust from Situational Normality a. Advertising the Site Longevity of an e-Marketplace Katos (2002, p. 3) discusses the history of a site as a characteristic that induces trust in an organization; he argues that "the older the site the higher the trust". When a new e-Marketplace emerges without an established brand name or popular recognition, it is hard for prospective participants to confirm its reputation with trusted third parties. Information elements presented at the web site of an e-Marketplace are the major clues for market participants to judge the trustworthiness of an e-Marketplace, before they decide to make any online exchanges. Prospective participants may overcome their uncertainties and their perceptions of risks in the e-Marketplace by examining its history records, or by investigating how long the e-Marketplace has been in operation. By disclosing its business history on the web site, an e-Marketplace provides direct evidence for prospective users to fulfill their expectations about the capability of the e-Marketplace. b. Management Team Profded on the Site of an e-Marketplace -26-Domain expertise has been noted as a critical determinant in promoting trust (Mahadevan and Venkatesh, 2000; Chambers, 2000). It can be perceived as a window that reveals the performance of an e-Marketplace. A management team profile can indicate that an e-Marketplace is very knowledgeable, particularly if its members not only have work experience in a specific industry, but also if they have backgrounds in solving varjous problems encountered within the industry. Chambers (2000) posits that the needs of customers can be satisfied by the knowledge shared by a management team, and that knowledge is therefore important in "operating a successful marketplace". Therefore, profiles of management team members can be helpful for building trust in an e-Marketplace's competence. c. Advertising the Size of an e-Marketplaces The size of an e-Marketplace contributes to customer trust, through a calculated view of the potential costs and rewards of acting untrustworthy (Song and Zahedi, 2002; Jarvenpaa et al., 1999; Doney and Canon, 1997). As pointed out by Jarvenpaa et al. (1999), the large size of an e-Marketplace implies that it has significant resources invested in its business, and the costs of acting inappropriately would subsequently be relatively high. Furthermore, the larger an e-Marketplace is, the stronger indication it gives of its own good performance, and the more likely it will be trusted. Hence, e-Marketplaces with large size tend to display statistics such as the number of users they have accommodated and the volume of trade they have generated, as indicators of their capabilities. d. Values, Goals and Vision of an e-Marketplace Trust can also be supported by a shared common base of knowledge, which can be established by the communication of organizational values (Zucker 1986, Blomqvist 2000). -27 -By announcing values, goals and vision on its website, an e-Marketplace can demonstrate its goodwill to facilitate online transactions between participants, and its commitments to align its behavior with its values. This trust-building mechanism promotes trust in an e-Marketplace's benevolence. e. Contact Information Designing e-Marketplaces to emulate the front store of a brick-and-mortar business may further decrease participants' uncertainties about online transactions. Fogg et al. (2002, p. 11) argue that "sites with clear connections to the real world", for example, disclosure of physical addresses, contact phone numbers and email addresses, earn credibility for their web sites, which in turn increases consumer trust in their operations. Therefore contact information is not only a cue for participants to validate the identity of e-Marketplaces, but a sign of the e-Marketplaces' capabilities related to customer orientation. 4.2.3 Process-Based Trust from Reputation Effects To promote new business alliances with an unknown e-Marketplace, connection to the reputation of a respected organization or website can be helpful, and it can augment about the competence of a relatively new operation. Doney and Canon (1997) state that trust can develop through a transference process, which has been defined as a "process by which consumers' trust in an unknown target is influenced by trust in associated targets" (Stewart, 1999, p. 459). A survey conducted by Fogg et al. (2002) provides evidence that a B2B e-Marketplace can utilize a variety of mechanisms to increase participants' trust in its competence, as follows. a. Affiliation with Respected Organizations - 2 8 -A new e-Marketplace may transfer the reputation from the partners with whom it is affiliated. The survey conducted by Fogg et al. (2002) provides empirical evidence that web credibility can be positively affected by affiliation with respected companies. An e-Marketplace is able to enter a partnership with respected organizations, or to register as qualified members of an association, industry or organization. b. Testimonials from Current Participants Not surprisingly, organizations tend to trust e-Marketplaces that have good records of past performance. In the initial stages of participant-marketplace relationships, however, participants have no experience with e-Marketplaces in which they are planning to do business, and therefore they may desire indirect information channels to trace the history of those e-Marketplaces. Fogg et al. (2002) note that user opinions or reviews on a website can increase its credibility. Therefore, testimonials that publish comments or success stories of participants can share the experience of a previous transaction with prospective participants, and act as a source of trust in the evaluation of e-Marketplace competence. c. Advertising Awards an e-Marketplace has won Fogg et al. (2002, p. 9) posit that a website can increase its credibility if it "displays an award it has won". Winning an award from an industry association, an organization, or a media outlet can be perceived as praise for the outstanding performance of an e-Marketplace. d. Providing excerpts from a news media outlet Public evidence about the performance of an unknown e-Marketplace, such as that published or transmitted by established media outlets, also helps prospective participants to obtain knowledge about the e-Marketplace. In the present study, news media outlets are taken to -29-include authoritative web sites, in addition to magazines, newspapers, and newsletters (Fogg et al., 2002). For example, an e-Marketplace might reproduce articles verifying its revenue growth, strategic affiliations, or acquisitions of investment capital. All these excerpts from the news can exhibit an e-Marketplace's competence to its potential participants. e. Advertising the Weil-Known Customers of an e-Marketplace Listing well-known corporate customer on the site of an e-Marketplace is another factor influencing perceptions of its trustworthiness, as posited by Fogg et al. (2002). Similar to the strategy of entering partnership with respected organizations, advertising connections with well-known customers can transfer prospective participants' trust in those respected customers to an unknown e-Marketplace. 5. METHOD 5.7 Sample A list from the website of eMarket Services (http://www.emarketservices.com) is used as a sample frame for the analysis to be conducted with the present study, because of its up-to-date links to 991 e-Marketplaces around the world, and because of its strong search functions for locations and industries. In particular, the present study focuses on North American B2B e-Marketplaces. From 323 North American B2B e-Marketplaces in 24 industries, 100 e-Marketplaces have been randomly selected, using online resources (http://www.radoin.org) to generate random integers (see Appendix 2 for the list of 100 e-Marketplaces). Some e-Marketplaces which focus on back-office integration or horizontal industries, or which have a common parent company with another e-Marketplace already chosen for examination, were replaced. The sampling was conducted between October, 2003 and December 2003, during which there were no new e-Marketplaces added into the eMarket Services list with respect to our sample sites. 5.2 Content Analysis Technique According to Neuendorf's description (2001), content analysis is a research technique used for examining the availability of certain concepts within a message. Traditional content analysis has been used in several studies related to mass communication (television, radio, print, and film), advertising, and education (textbooks, and software). With the introduction of internet as a new message/ channel, many studies have applied this technique in web content analysis also. For example, using content analysis, Bucy et al. (1999) examines the relationship between web page complexity and site traffic, and Ghose and Dou (1998) assess the impacts of interactive functions on the appeal of internet sites. To conduct a content analysis, a researcher needs to identify "what content will be examined and why" (Neuendorf, 2001, p.50). After getting support from past theory and practitioner recommendations, this study collects a batch of trust-building mechanisms used in B2B e-Marketplaces and adopts predictions that trust-building mechanisms in B2B e-Marketplaces induce trust in trading partners and in e-Marketplace providers. We think that the application of descriptive content analysis techniques (a coder recodes his objective observations about the frequencies of certain variables) to the websites of 100 B2B e-Marketplaces will present a clear picture to us for the status quo of trust creation by answering the question: what are types and frequencies of trust-building mechanisms used in B2B e-Marketplaces. 5.3 Pretest Following Schultz's (1999) suggestion regarding the methodology of content analysis, the present study has included both quantitative and qualitative observations. A preliminary coding scheme was developed and conducted, based on prior research and a pilot test with 20 randomly selected samples. The pilot test has revealed several more trust-building mechanisms employed by B2B e-Marketplaces, including two sub-constructs in the category of perceived monitoring of products/services traded (product guarantees/warranties, and product reviews/ratings), two sub-constructs related to perceived cooperation norms (codes of conduct and expected transaction patterns), values, goals and vision stated on the site of an e-Marketplace, testimonials from current participants, advertising awards an e-Marketplace has won, excepts from a news media outlet, and advertising well-known corporate customers. To make the current study more internally coherent, we have supplemented the academic backgrounds and descriptions of these newly identified mechanisms in section 4, with a more detailed conceptual framework (see Table 1 and Figure 4). Insert Table 1 about Here Insert Figure 4 about Here 5.4 Coding Sheet Development A professor and a graduate student from a business school were invited to check the clarity of trust-building mechanism descriptions, instructions and response formats, and the graduate student was also asked to re-examine five of the e-Marketplaces from our 20 pre-tested samples. We received feedback regarding the inconvenience within the response format and ambiguous descriptions of some trust-building mechanisms; while the overall agreement between the two coders seemed acceptable. A new coding sheet was consequently created to avoid the ambiguity. It included two sections: Section A was a guideline with detailed explanations of terms, and Section B was a questionnaire to examine the availability of each trust-building mechanism (See Appendix 3). Moreover, based on the comments about coding scheme design given by Schultz (1999), most of the questions in the new coding sheet can be objectively judged by coders, which in turn, increases the reliability of present study and is helpful for solving the disagreement about how closely websites should be examined. 5.5 Coding Neuendorf (2001) points out that a content analysis should be conducted by at least two coders, with a 10 percent overlap. To ensure inter-coder reliability and examination of all trust-building mechanisms in B2B e-Marketplaces, each of the B2B e-Marketplaces included in the present study has been coded by two assessors. Three graduate students majoring in Management Information System from a business school were hired as second coders (one was responsible for coding 25 e-Marketplaces, one for 60, and another for 15). A training session was given to second coders before they conducted their formal coding. They were permitted to ask questions about the meanings of certain trust-building mechanisms, and typical locations of such mechanisms. After they were trained, each coder independently examined several B2B e-Marketplaces using uniform coding sheets. Generally, it took approximately two to three hours to assess each e-Marketplace. 5.6 Inter-Coder Reliability 100 B2B e-Marketplaces were coded in this study. Nineteen trust-building mechanisms were examined, and one new mechanism about the dispute resolution between participants and e-Marketplaces was identified (please see Table 2 and Figure 5 for the coding results). Inter-coder reliability was calculated on a total of 34 nominal (yes/no) variables. Agreement was found in 3105 out of 3400 mechanisms, and the average agreement level across all variables coded between the first coder and the second coder was 91.3%, a sufficient agreement for the present study. Further, Cohen's Kappa statistic (k) was used to examine the agreement beyond chance between two coders on individual variable. 15 variables had almost perfect agreement scores beyond chance, exceeding .81 and 9 variables had substantial agreement between .61 and .80. 10 variables had moderate agreement between 0.41 and 0.60. Although the values of Kappa for all variables are acceptable, the reasons for some variables which had agreement beyond chance between 0.41 and 0.60 should be noticed. One reason might be the difficulty in locating corresponding information in sites. For example, coders might need to read many newslettlers issued by an e-marketplace to find out which well-known organizations become its customers. It is possible that coder inattention or coder fatigue (Neuendorf, 2001) happens in this process. A second reason might be that the difficulty in distinguishing minor differences between variables, such as product appraisal and product review. Insert Table 2 about Here Insert Figure 5 about Here Table 3 and Table 4 list the index number of B2B e-Marketplaces that apply specific trust-building mechanisms (see Index 2 where e-Marketplace names are listed). Insert Table 3 about Here Insert Table 4 about Here 6. R E S U L T S 6.1 Mechanisms that Build Participant Trustworthiness 6.1.1 Institution-Based Trust from Structural Assurance a. Escrow Service The content analysis conducted for the present study has indicated that 26 percent of e-Marketplaces use escrow services to resolve participants' financial concerns. Escrow terms are usually specified in a "Payment" section or a "Terms and Conditions" section, or within the content of any value-added services an e-Marketplace might provide. If escrow service is arranged by an e-Marketplace, the e-Marketplace reserves all participants' money in client accounts, and it takes responsibility for debiting the account from a buyer and crediting the account of a seller as soon as any payment is due, under mutually-accepted accounting policies. Furthermore, traditional escrow services, like letters of credit (LC), are still used in some operational B2B e-Marketplaces. An escrow agent (an accredited bank or financial institution trust) can be designated by an e-Marketplace or arranged by buyers (see Appendix 4 for a sample of the Applicants of Letters of Credit). The potential benefits of using escrow services are apparent in the e-Marketplaces -35-reviewed for this study. Commonly perceived benefits include the time it gives to buyers to inspect a service or product on which they bid, for accuracy. Escrow services can also reduce the "risk of paying artificially inflated prices", in the process of bidding for products, inasmuch as all bidders are "bona fide"; moreover, participants can establish connections with more unfamiliar trading partners by securing their money in trust (Bid4asset's Products and Services, 2003). b. Perceived Monitoring of Products / Services Traded The results of this study have revealed that the monitoring of traded products and services is an important mechanism used to induce buyer trust in a seller during their initial interactions. A total of 54 out of 100 e-Marketplaces applied five different forms of product monitoring mechanisms, namely product appraisals, product guarantees and warranties, product inspection, product reviews and ratings, and product quality assurances. Product quality assurances have been adopted by e-Marketplaces that claim they maintain full quality control on all products, either during production or at the time of shipment, by associating with an ISO 9001 or ISO 9002 test centre. Product inspection is mostly used by e-Marketplaces engaged in equipment, raw material or physical product transactions. Inspection processes are conducted by buyers sometimes to make sure that products are shipped in good condition or are the same as sellers claim online. Some e-Marketplaces appoint independent specialists, such as the SGS Group (a verification and testing service), to conduct product inspection before products are posted online or shipped to buyers. The examination of product appraisals in this study particularly emphasizes the assessing of product price or value. Product appraisals are used, for example, to determine the quantity of a given product that should be ordered, where the product characteristics are complex and not amenable to standard pricing methods, including sales of artwork, used equipment, or property. Furthermore, for a company that wants to liquid its inventory, product appraisals can assist in determining the market value of various products. Product reviews and ratings, on the other hand, focus on the evaluation of the performance and quality of products. For instance, the content of a movie may be assessed as "Good", or a product performance may be rated at a particular level. In the case of product warranties and guarantees, the warranties are provided by sellers for situations in which buyers find the products they receive are not substantially in the condition represented in postings, while product guarantees are offered by e-Marketplaces to guarantee satisfaction to buyers. Although the differences between the above five mechanisms to monitor product quality and performance are minor or blurred in some cases, these five mechanisms complement to each other, and they are contribute to a significant deterrence against defaults in industrial exchange. In general, product appraisals, product ratings, product warranties and product inspection are more popular, while product quality assurances and product guarantees are seldom used (please see Table 5). Insert Table 5 about Here c. Insurance This study has revealed that sixteen percent of B 2 B e-Marketplaces apply insurance in trust-building processes. Three types of insurance have been identified: cargo insurance, fraud protection insurance, and transaction-based risk management (see Table 6). Insert Table 6 about Here Cargoes insurance can be arranged for products in transit, by a strategic partner of e-Marketplaces or by buyers themselves. For example, when it is requested by buyers, a consignee might subscribe to a marine freight insurance policy. If the goods are lost or damaged in transit, buyers will claim for compensation. Fraud protection insurance, in contrast, is often used to protect sellers when buyers don't pay the full amount for products, when they provide false credit card information, or when they go bankrupt. In some situations, deposits are also used as fraud protection, for instance, a landlord charges deposits for tenants in the real estate industry. Risk management in transactions, another form of insurance associated with products and services traded, can be a premium paid by buyers to protect themselves from unexpected factors, such as unstable political policies or currency exchange rates, and it can be a protective measure offered by e-Marketplaces to give buyers warnings of risks inherent in a particular transaction; for example, navigation issues that may arise during the execution of a transaction. d. Perceived Cooperative Norms i. Dispute Resolution Based on our study results, only seventeen percent of B2B e-Marketplaces employ dispute resolution mechanisms to maintain goodwill among participants. Most e-Marketplaces declare their liability with terms and conditions specifying that they are not responsible for disputes arising from transactions between buyers and sellers. Only five of the e-Marketplaces reviewed claim to make final determinations for assessing and commenting on disputes between participants. However, ten other e-Marketplaces apply three different resolution methods to rectify problems: mediation, arbitration, and litigation. Mediation is conducted before arbitration is initiated. Buyers and sellers choose a neutral mediator who is familiar with the participants' industry to resolve disputes. However, the mediator has no power to impose a settlement. Mediation is used for disputing parties that want to keep their disputes confidential and save legal expenses and time. Arbitration differs from mediation in that it may follow particular legal rules or procedures. Several arbitration rules have been identified in our study, including the Rules of the National Arbitration Forum, the commercial arbitration rules of the American Arbitration Association, the commercial arbitration rules of JAMS/ENDISPUTE, and Rules of Arbitration of the International Chamber of Commerce (see Appendix 5 for an introduction to these organizations). Arbitration procedures usually include the appointment of arbitrators, the determination of the number of arbitrators, the time and location for hearings, and provisions for inspections. An arbitration award sometimes can be enforced by applicable laws that participants agree upon. The final method, litigation, differs from arbitration "in that it uses the public court system" (Siegfried and Khlyavich, 2003, p. 123). In this case, one party brings a suit against the other party, in a particular court usually specified in the Terms and Conditions of an e-Marketplace. ii. Codes of Conduct Based on our study results, 81 out of 100 B2B e-Marketplaces clearly list codes of conduct for participants to follow. Although these e-Marketplaces name their codes of conduct as "Codes of Business Practices", "Ethical Conduct", or "Buyers / Sellers Conduct", the contents of those ethics are consistent with descriptions in our coding sheet (please see Appendix 6 about the Codes of Conduct explanation), containing general statements about information confidentiality, system integrity, prohibition of unlawful and dishonest behaviors and detailed regulations prohibiting the manipulation of product information. iii. Expected Transaction Patterns In their "Terms and Conditions" pages, "FAQ" pages, or "Help" pages, 63 B2B e-Marketplaces provide potential participants information about how exchanges should be executed on their sites. These e-Marketplaces respond to almost every problem participants may expect, from pre-transaction preparation including membership registration, bidding, RFQ or RFP procedures, to financial and logistic settlement, such as payment methods, tax calculations and shipping and delivery requirements. Furthermore, they may also specify policies for returns, inspection, or warranties, for after-sale services. Of the 38 e-Marketplaces that do not list information about expected transaction patterns, eleven exclude the information because potential participants are not permitted to see details of the buyer and seller terms and conditions until their applicants are approved by the e-Marketplaces. For detailed information about how B2B e-Marketplaces describe terms about dispute resolution, codes of conduct, and expected transaction patterns, please see Appendix 6, which cites instances of perceived cooperative norms. -40-e. Member Screening Member screening mechanisms are used by 79 of the content analysis's B2B e-Marketplaces, to enforce membership qualifications, and about half of the sites state that applicants cannot conduct transactions until their applications are reviewed and verified. Credit checking is used in some e-Marketplaces. For instance, buyers must get approval of certain credit limits to purchase products; their resources must be verified by bank letters before they can enter into bidding. An established reputation within an industry, status as an OEM producer, or possession of equipment previously examined according to the e-Marketplace criteria may also be used as membership qualifications. f. Law Enforcement 79 of the B2B e-Marketplaces claim that their "Terms and Conditions" are governed and interpreted in accordance with the local laws applicable to agreements made. For example, if an e-Marketplace is operated from its office in Texas, then the laws of the State of Texas are applied to its agreements. For users who reside in a different area, the B2B e-Marketplace states that the users are responsible for compliance with the rules and laws of the jurisdiction. Few B2B e-Marketplaces use international laws to govern transactions, because the nature of transactions over the Internet makes it difficult to obtain government intervention. 6.1.2 Process-Based Trust from Reputation Effects a. Reputation Rating Systems Reputation rating systems are applied by B2B e-Marketplaces to identify popular sellers in auctions, to warn participants of the transaction risks associated with certain partners, -41 -and to exclude members who have been caught committing fraud. A reputation rating system can be conducted by participants themselves, by e-Marketplaces, or by impartial third-parties (see table 7). 22 of the B2B e-Marketplaces in the present study use reputation rating systems. Insert Table 7 about Here 6.2 Mechanisms that Build e-Marketplace Trustworthiness 6.2.1 Institution-Based Trust from Structural Assurance a. Approval Seals In the present study, 27 of the B2B e-Marketplaces use trusted third party seals to promote trust, and 13 of them have a Verisign seal built into their websites. Various seals have been adopted by the other 14 of these e-Marketplaces, such as BBB Online, TRUSTe, WebTrust, GeoTrust, THAWTE, and UCCNET (see Table 8). Different approval seals build trust in different dimensions. For example, the Verisign seal is used for protecting company identification and for securing transaction data; TRUSTe is used to indicate the good faith of an e-Marketplace in compliance with a particular privacy policy; and an SAS 70 audit report from AICPA (American Institute of Certified Public Accountants) verifies that the security of a financial e-Marketplace meets industry standards. Insert Table 8 about Here b. Privacy and Security Policy - 4 2 -Our study has demonstrated that 90 B2B e-Marketplaces include explicit privacy statements, and 69 include security statements. Privacy policy content usually contains details regarding an e-Marketplace's methods for collecting users' information, the kind of information that is collected, whether the e-Marketplace shares users' information with third-parties, and the reasons for collecting user information. Concerning security policy, on the other hand, some e-Marketplaces have a simple policy, with a security explanation section built into a privacy policy and claiming that the e-Marketplace will make its best effort to secure online transactions by using SSL (Secure Sockets Layer), while others have a comprehensive policy, dealing with network architecture, intrusion detection, access control, and encryption. c. Dispute Resolution In our pilot study, we identified dispute resolution as a mechanism for building trustworthiness between participants. After completing an analysis of the 100 e-Marketplaces, our study has revealed that dispute resolution is actually used more frequently for promoting marketplace trust. 40 of the e-Marketplaces state that participants can pursue mediation, arbitration or litigation to resolve disputes arising between participants and e-Marketplaces. Therefore, dispute resolution, as a structural safeguard to eliminate participants' concerns about the impartiality of e-Marketplaces, has been included in our trust-building framework. 6.2.2 Institution-Based Trust from Situational Normality a. Advertising the Site Longevity of an e-Marketplace 70 of the B2B e-Marketplaces introduce their business history, for instance, how long a company has been established and when it launched an online e-Marketplace. The level -43 -of experience of the e-Marketplace within its specific industry is also often emphasized. b. Management Team Profiled on the Site of an e-Marketplace 69 of the B2B e-Marketplaces list the profiles of their management teams on their websites. These profiles usually present team members' positions in a company, their education background, work experience, and special contributions to an e-Marketplace or an industry. The presentation of management team profiles shortens the distance between potential participants and a marketplace on Cyberspace, and it also helps participants to evaluate the domain experience of the marketplace. c. Advertising the Size of an e-Marketplace 67 of the B2B e-Marketplaces advertise their size, including the size of their membership rosters, the quantity of their products, the number of visitors visiting their site, and the total transaction volume they have generated. All of this data demonstrates the competence of a B2B e-Marketplace. d. Values, Goals and Vision of an e-Marketplace 57 of the B2B e-Marketplaces state their values, goals, missions or visions on their websites. Several of them state that their goals include helping participants make strategic decisions, or to establish themselves as the best sources for obtaining services or products within a specific industry. Some of the e-Marketplaces also demonstrate their goodwill in generating new business relationships and opportunities, reducing search costs, and increasing profitability and effectiveness among participants. e. Contact Information -44-All B2B e-Marketplaces in this study disclose methods by which they can be contacted. With the exception of two e-Marketplaces that can be contacted only by e-mail or online enquiry forms, the other 98 of the e-Marketplaces disclose their phone numbers or physical addresses. 6.2.3 Process-Based Trust from Reputation Effects a. Affiliation with Respected Organizations Our study has revealed that 64 of the B2B e-Marketplaces are strategically affiliated with respected organizations, thereby combining the best elements of two companies to win a market. There are two forms of affiliation: one involves establishing partnerships with well-known companies, and the other involves becoming a qualified member of an industry association. b. Testimonials from Current Participants 41 of the B2B e-Marketplaces publish testimonials by their current participants. These testimonials operate as references or endorsements which state the benefits or values of using these e-Marketplaces. c. Advertising Awards an e-Marketplace has Won 41 of the B2B e-Marketplaces claim that they have won awards. These awards may be established by governments, industry associations, or authentic commercial organizations, such as "The Best B2B Website Award" given by Forbes, or "the most popular B2B website" rated by Yahoo. d. Excerpts from a News Media Outlet - 4 5 -72 of the B2B e-Marketplaces publish media coverage about themselves. These press articles give participants an objective report about an e-Marketplace. These articles may cover the business outlook of an e-Marketplace from its strategic alliances, revenue status, technological innovation, or its participation in an international conference. e. Advertising the Well-Known Customers of an e-Marketplace 57 of the B2B e-Marketplaces advertise the names of their well-known customers. By doing so, these e-Marketplaces provide an image of greater competence, by transferring potential participants' trust in their well-known customers and by reducing worries about risks with unfamiliar partners. 7. CONCLUSIONS 7.1 Discussions (1) Participant Trustworthiness Membership screening is the first trust-building mechanism confronted by potential participants. It provides assurances regarding the qualifications of members, and it evaluates members' competence and integrity by checking their credit. After registration, participants are legally bound by their agreement to comply with ethical business practices, expected transaction patterns, and specific laws. For sellers, our study has found that e-Marketplaces use mechanisms to monitor products and services, to warrant sellers' competence. Most buyers, on the other hand, often must submit reference letters from banks or other financial institutions to prove their credibility. When a potential transaction is identified by particular participants, payment details, transportation methods, and after^ sales services are generally specified. In this manner, participants may be persuaded that their business partners will maintain a certain level of competence, and that - 4 6 -they will share particular values. When disputes arise with other users, participants may be able to seek arbitration or mediation to address the problems. Moreover, participants may use a feedback forum to monitor the service quality of partners. The steps that may be involved in building participant trust in e-Marketplaces, based on the above summary, are illustrated in Figure 6. Insert Figure 6 about Here Our study indicates that extensive efforts are made to improve the perception about the competence of market participants. Member screening, product monitoring, and expected transaction patterns are used by half of our samples to minimize the uncertainties of trading partners. Further, although similarity trust is out of our research scope, we find that some mechanisms adopted in B2B e-Marketplaces are devoted to establish the mutual understanding of regulations, goals and values. Codes of conducts and expected transaction patterns are frequently used to increase the trusting belief in trading partners' benevolence. This study demonstrates that few e-Marketplaces employ insurance mechanisms; however, as identified in our data analysis section, insurance can address a wide range of issues, including cargo shipment, fraud credit card payment protection, and warnings about other risks when trading products or services. This corresponds to research conducted by Tang et al. (2003) about the use of insurance as a proxy to online trust. They have proposed that B2B e-Marketplaces can create trust in markets by providing security and participant identity insurance, they can provide buyers with payment insurance, and they can provide -47-sellers with insurance for delivered goods. Therefore, the insurance mechanisms in B2B e-Marketplaces are worthy of additional research in future, particularly regarding their effects. (2) e-Marketplace's Trustworthiness Providers of B2B e-Marketplaces have expended significant efforts to increase their trustworthiness, as our study reveals. They offer participants an increased sense of security in an online environment in a number of ways, including: 1) offering institutional assurance (i.e., explicitly stating privacy or security policies, building approval seals into websites, and listing alternatives dispute resolutions methods for participants); 2) imitating conventional business institutions (i.e. advertising the business history and size of the e-Marketplace, and displaying profiles of management teams and their willingness to facilitate transactions among participants); and 3) by establishing respectable online brands (i.e. affiliating with respected organizations, publishing testimonials and press excerpts, advertising awards and well-known customers they have served). The findings outlined above can provide future B2B e-Marketplaces ideas about how to create trust connections with their participants. Based on our findings (see Figure 5), the competence of e-Marketplace providers are considered to be among the most crucial trust areas in B2B e-Marketplaces. Almost all mechanisms related to building the trusting beliefs in marketplace competence are widely adopted in many e-marketplaces. For example, the number of e-Marketplaces which adopted mechanisms, such as the size, history, professional experience, contact information, media coverage, and ability of privacy/security assurance, exceeds 50 percent of our sample. -48-(3) The Role of Online B2B e-Marketplaces Pavlou (2002) argued that an e-Marketplace, as an institutional provider, reduces perceptions of risk in transactions, and it can protect potential participants against the irresponsibility of potential partners. The present study validates Pavlou's theories about the role of online B2B e-Marketplaces in trust formation. Further, the present research also justifies the assertion that most B2B e-Marketplaces focus on behaving as an agent for participants. This finding is supported by Kollmann (2001), who has observed that the "real transaction" is conducted between buyers and sellers, and marketplace providers only provide venues for the relationships. Although a B2B e-Marketplace can make a contribution as an online institution with a proper structure and conduct practices, it still cannot represent specific buyers or sellers, or make commitments about the performance of the other parties. Moreover, inasmuch as an e-Marketplace is not involved in actual transactions between participants, it is not likely to resolve disputes arising between them. This may be an appropriate explanation why dispute resolution between buyers and sellers is not significant in our study. Furthermore, even though 63 percent of the e-Marketplaces state expected transaction patterns for participants, these patterns are not binding contracts between buyers and sellers, but only regulations that require voluntary compliance by e-Marketplace participants. In addition, 41 of the B2B e-Marketplaces declare on their Websites that they are fair and independent. They tend to resolve disputes with participants based on reasonable routes, they will not establish any relations with any users that would lead to conflicts of interest, and attempt to remain neutral. -49-(4) Implications for C2C (Consumer-to-Consumef) e-Marketplaces Similar to B2B e-Marketplaces, the trust issues in the C2C context can be analyzed through three dimensions: trading partner (interpersonal-based), marketplace, and technology. Some mechanisms identified in our study may be applicable for improving the design of trustworthy C2C e-Marketplaces. For example, most C2C e-Marketplaces generally do not impose pre-qualification procedure or charge membership fee for buyers and sellers in order to attract more participants to their websites. Therefore, the barriers to enter C2C e-Marketplaces are very low, and the thus perceived risks involved in transactions are high. However, it is suggested that C2C marketplaces consider certain trust-building mechanisms used in B2B e-Marketplaces (e.g., escrow service and monitoring of products traded) such that they can offer more effective structural assurance for guarding opportunistic behaviors and sustain inter-personal relationships. 7.2 Limitations This study involves some limitations. First, this study examines B2B e-Marketplaces in 24 industries (see Table 9). The differences among the industries have influenced our coding results. For example, product assurance with ISO certificates, as a sub-construct of product monitoring, is mostly used in the electronics industry; while risk assessment for transactions, as a sub-construct of insurance, is used mostly by the financial industry. Second, the content analysis of 100 B2B e-Marketplaces was conducted from October to December, 2003. Although the time period lasted only two months, we identified three e-Marketplaces that had changed some features when a second coder assessed their Websites. Therefore, our study results might face a reliability challenge in the sense that they could not be generalized to other times. Third, this study has taken a list from eMarket Service to generate content analysis samples. It will be possible that some -50-significant e-Marketplaces are not included in this list, and this study is in danger of ignoring certain trust-building elements in such e-Marketplaces. Finally, according to Neuendorf (2001), each nominal variable should be measured with categories or levels that are mutually exclusive. Some variables in present study, such as product appraisal and product review, may easily be coded as having the similar feature to the one others having. Therefore, a more appropriate measurement should be created to improve the validity and reliability of the results. Insert Table 9 about Here 7.3 Future Research A total of 20 trust-building mechanisms have been identified in this study. This study proposes that each trust-building mechanism affects particular trusting beliefs (for example, perceived monitoring of products and services traded contributes to opinions about seller competence). If follow-up research can carry out an empirical test to examine the effects of mechanisms on specific trusting beliefs, organizations may choose to apply specific trust mechanisms to achieve particular trust-related goals. The difficulty of implementation of legal governance for the economic activities on cyberspace requires self-regulation and benevolence suggested by many codes of conduct. Meanwhile, Davison (2000) argues that a culture gap has been a significant barrier to prompt particular sets of ethical values, which may be suitable for one culture but unacceptable for another culture. Therefore, if future study can investigate how to enact effective codes of conduct in B2B e-Marketplaces, it will be valuable for building common values among participants, and the willingness to further invest in trading partner relationship is more likely. This study suggests that inter-organizational trust in B2B e-commerce can be viewed as a multi-dimensional construct, which is composed of trading partner trust, marketplace trust, and technology trust. Further, it proposes that technology and marketplace trust are complement and as antecedents to trading partner trust. However, past research also argues a reciprocal relationship possibly exists between technology and trading partner trust, and between marketplace and trading partner trust (Pavlou and Ratnasingam 2003, Pavlou 2000). Therefore, future research should systematically examine the relationships between those three dimensions to better understand inter-organizational trust. - 5 2 -Figure 1: Dimensions of Online Trust (Mahadevan and Venkatesh, 2000) Note: The technology dimension is beyond the scope of the present study -53-Figure 2: Three Fundamental Dimensions of Inter-Organizational Trust in B2B e-Commerce Inter-Organizational Trust Marketplace Trust Trading Partner Trust (Market Participant Trust) Technology Trust W - 5 4 -ii a •_ 01 a E o U • m M B 3 u H 6£ 3 PQ O o 01 S es u tL. 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Reputation rating system 22 8. Approval seals 27 9-1. Privacy policy 90 9-2. Security policy 69 10. Dispute resolution between e-Marketplace and participants 40 11. Advertising the site longevity of an e-Marketplace 70 12. Management Team Profiled on the Site of an e-Marketplace 69 13. Advertising the size of an e-Marketplace 67 14. Values, Goals and Vision of an e-Marketplace 57 15. Contact information 100 16. Affiliation with respected organizations 64 17. Testimonials from previous participants 41 18. Advertising awards an e-Marketplace has won 41 19. Providing excerpts from a news media outlet 72 20. Advertising the Well-Known Customers of an e-Marketplace 57 Figure 5: Trust-Building Mechanisms and the Number of B2B e-Marketplaces Using Them Trust-building Mechanisms Index Trust-building Mechanism Index Trust-building Mechanism 1 Escrow service 9-2 Security policy 2 Perceived monitoring of products traded 10 Dispute resolution between e-Marketplace and participants 3 Insurance 11 Advertising the site longevity of an e-Marketplace 4 Perceived cooperative norms 12 Management team profiled on the site of an e-Marketplace 4-1 Dispute resolution 13 Advertising the size of an e-Marketplace 4-2 Codes of conduct 14 Values, Goals and Vision of an e-Marketplace 4-3 Expected transaction patterns 15 Contact information 5 Member screening 16 Affiliation with respected organizations 6 Law enforcement 17 Testimonials from previous participants 7 Reputation rating system 18 Advertising awards an e-Marketplace has won 8 Approval seals 19 Providing excerpts from a news media outlet 9-1 Privacy policy 20 Advertising the Well-Known Customers of an e-Marketplace - 6 2 -Table 3 (Part 1 of 2): B2B e-Marketplaces that Apply Trust-Building Mechanisms to Generate Participant Trustworthiness Trust-Building Mechanism The Index Number of B2B e-Marketplaces 1. Institution-Based Trust from Structural Assurance a. Escrow service 1,4, 10, 16, 17, 18, 21, 25, 27, 28, 30, 33, 34, 54, 59, 61, 63, 68, 72, 73, 75, 77, 78, 87, 90, 98 b. Perceived monitoring of products / services traded 1, 3, 4, 6, 7, 10, 12, 13, 14, 16, 18, 20, 21, 22, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 38, 42, 43, 46, 47, 48, 54, 59, 61, 63, 68, 72, 73, 75, 76, 77, 78, 79, 85, 87, 88, 89, 90, 92, 96, 98, 99, 100 Product appraisal 6, 7, 16, 24, 42, 43, 47, 54, 75, 78, 90, 99 Product guarantees/warranties 3, 7, 16, 21, 22, 27, 28, 29, 31, 38, 46, 63, 75, 76, 85, 87, 89, Product inspection 1,3,4, 7, 10, 12, 14, 16, 18,21,25,26, 27, 28, 29,30,31, 32, 33, 34, 38, 48, 61, 63, 68, 72, 73, 76, 78, 85, 87, 88, 90, 92, 96, 98, 99, 100 Product reviews/ ratings 1, 6, 13, 16, 20, 21, 35, 59, 63, 68, 76, 77, 79, 85, 90, 92 Quality assurance 20,29,31,35,38,77,100 c. Insurance 4, 16, 24, 29, 30, 45, 48, 50, 51, 56, 59, 63, 82, 88, 90, 99 Cargo insurance 4, 16, 24, 29, 30, 99 Fault protection insurance 45, 82, 88, 90 Risk management in transaction 48, 50, 51, 56, 59, 63 d. Perceived cooperation norms 1,3,4, 5,6, 7, 8, 9, 10, 11, 13, 15, 16, 17, 18, 19, 20,21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 32, 33, 34, 35, 36, 38, 39, 40, 41, 42, 43, 44, 45, 46, 48, 50, 51, 52, 53, 54, 55, 56, 57, 58, 59, 60, 63, 65, 66, 68, 69, 71, 72, 73, 74, 75, 76, 77, 78, 79, 80, 82, 83, 84, 85, 86, 87, 88, 89, 90, 91, 93, 94, 95, 96, 98, 99, 100 Dispute resolution among participants 1, 3, 5, 8, 21, 25, 29, 35, 38, 41, 69, 71, 78, 80, 85, 87, 90 Codes of conduct 1,3,4,5,6, 8, 9, 10, 11, 13, 15, 17, 18, 19,20,21,22, 23, 24, 25, 26, 27, 28, 29, 30, 32, 33, 34, 35, 36, 38, 39, 40, 41, 42, 43, 44, 45, 46, 48, 50, 51, 52, 53, 54, 55, 56, 57, 59, 60, 63, 65, 66, 68, 69, 71, 73, 74, 75, 76, 77, 78, 79, 80, 82, 83, 84, 85, 86, 87, 88, 89, 90, 91, 93, 94, 95, 96, 98, 99, 100 Expected transaction patterns 1, 3, 4, 6, 7, 10, 11, 16, 17, 18, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 32, 34, 35, 38, 41, 42, 43, 44, 45, 50, 51, 53, 54, 56, 58, 59, 63, 65, 66, 68, 71, 72, 73, 74, 75, 76, 77, 78, 82, 83, 84, 85, 86, 87, 88, 89, 90, 91, 93, 96, 98, 99, 100 Table 3 (Part 2 of 2): B2B e-Marketplaces that Apply Trust-Building Mechanisms to Generate Participant Trustworthiness Trust-Building Mechanism The Index Number of B2B e-Marketplaces 1. Institution-Based Trust from Structural Assurance e. Member screening 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 20, 21, 22, 24, 25, 26, 28, 29, 30, 31, 32, 34, 35, 36, 37, 38, 40, 41, 42, 43, 45, 46, 47, 48, 49, 50, 51, 52, 53, 54, 55, 56, 57, 58, 59, 60, 62, 63, 64, 65, 66, 67, 68, 69, 70, 75, 77, 79, 80, 81, 82, 83, 84, 85, 86, 87, 89, 90, 92, 94, 95, 96, 98, 99 f. Law enforcement 1,3, 4, 5, 6, 8, 9, 10, 11, 13, 15, 16, 17, 18, 19, 20,21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 32, 33, 34, 35, 38, 39, 41, 42, 43, 44, 45, 46, 48, 50, 51, 52, 53, 54, 56, 57, 59, 60, 63, 65, 66, 68, 69, 71, 72, 73, 74, 76, 77, 78, 79, 80, 81, 82, 83, 84, 85, 86, 87, 88, 89, 90, 92, 93, 94, 95, 96, 98, 99 2. Process-Based Trust from Reputation Effects a. Reputation rating system 1,17, 20, 26, 27, 29, 30, 33, 36, 41, 49, 65, 73, 75, 77, 80, 83, 85, 89, 90, 99, 100 Peer ratings 1, 17, 20, 36, 41, 49, 73, 75, 77, 80, 89, 90, 99 The e-marketplace rates the performance of buyers and sellers 26, 27, 29, 30, 33, 36, 65, 77, 83, 85, 89, 100 -64-Table 4 (Part 1 of 2): B2B e-Marketplaces that Apply Trust-Building Mechanisms to Generate e-Marketplace Provider Trustworthiness Trust-Building Mechanism The Index Number of B2B e-Marketplaces 1. Institution-Based Trust from Structural Assurance a. Approval seals 1, 3, 4, 9, 13, 20, 28, 33, 35, 38, 40, 54, 55, 63, 65, 66, 67, 68, 69, 71, 73, 75, 76, 78, 87, 88, 96 bl . Privacy policy 1,2,3,4,5,6, 7, 8, 9, 10, 11, 13, 15, 17, 18, 19, 20,21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 37, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 50, 51, 52, 53, 54, 55, 56, 57, 58, 60, 61, 63, 64, 65, 66, 67, 68, 69, 70, 71, 73, 74, 75, 76, 77, 78, 79, 80, 81, 82, 83, 84, 85, 86, 87, 88, 89, 90, 91, 92, 93, 94, 95, 96, 98, 99, 100 b2. Security policy 1,5,6, 7, 8, 9, 11, 13, 15, 17, 18, 19, 20, 23,24, 25,27, 28, 29, 30, 31, 32, 33, 34, 35, 37, 40, 41, 42, 44, 50, 51, 52, 53, 54, 55, 56, 57, 58, 60, 61, 63, 64, 65, 66, 67, 68, 69, 70, 73, 74, 75, 76, 78, 79, 80, 82, 83, 84, 85, 86, 87, 89, 90, 91, 92, 95, 96, 99 c. Dispute resolution between e-Marketplace and participants 8, 9, 11,15, 17, 19, 22, 25, 26, 28, 32, 33, 39, 41, 42, 43, 45, 46, 52, 53, 54, 60, 63, 65, 71, 72, 74, 75, 77, 78, 81, 82, 83, 85, 87, 90, 91, 92, 93, 95 2. Institution-Based Trust from Situational Normality a. Advertising the site longevity of an e-marketplace 1,2,4, 6, 7, 8, 9, 10, 11, 13, 14, 15, 17, 19,21,22, 24, 25, 28, 29, 30, 31, 33, 34, 35, 36, 37, 39, 40, 42, 43, 44, 45, 46, 47, 49, 50, 51, 52, 53, 55, 57, 58, 59, 60, 64, 67, 69, 70, 71, 74, 75, 76, 77, 79, 81, 83, 84, 85, 86, 88, 89, 90,91,92, 93, 95, 98, 100 b. Management Team Profiled on the Site of an e-Marketplace 1,2,5, 6, 7, 9, 11, 12, 13, 16, 19, 20, 21, 23, 24, 25, 26, 28, 29, 30, 31, 32, 34, 35, 38, 39, 40, 42, 43, 44, 45, 46, 47, 49, 50, 51, 52, 53, 55, 56, 58, 60, 63, 64, 66, 67, 69, 70, 72, 74, 75, 77, 78, 79, 81, 82, 83, 85, 86, 88, 89, 90, 92, 93, 94, 97, 99, 100 c. Advertising the size of an e-marketplace 1,2,3,4, 6, 7, 8, 9, 10, 11, 13, 14, 15, 16, 19, 20,21, 23, 24, 25, 26, 27, 29, 31, 33, 34, 35, 37, 38, 39, 40, 42, 43, 44, 45, 46, 47, 49, 50, 53, 54, 55, 56, 57, 58, 59, 60, 61, 64, 71, 72, 74, 76, 78, 79, 80, 81, 82, 83, 85, 87, 88, 91,92, 93, 95, 100 -65-Table 4 (Part 2 of 2): B2B e-Marketplaces that Apply Trust-Building Mechanisms to Generate e-Marketplace Provider Trustworthiness Trust-Building Mechanism The Index Number of B2B e-Marketplaces 2. Institution-Based Trust from Situational Normality d. Values, Goals and Vision of an e-Marketplace 4, 5, 8, 9, 10, 11, 15, 18, 19, 20, 21, 22, 24, 26, 27, 28, 29, 31, 32, 34, 35, 36, 39, 41, 42, 44, 46, 47, 49, 51, 53, 55, 57, 58, 62, 64, 65, 67, 69, 70, 72, 73, 74, 77, 79, 80, 82, 83, 84, 85, 86, 89, 91, 93, 95, 97, 98 e. Contact information 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51, 52, 53, 54, 55, 56, 57, 58, 59, 60, 61, 62, 63, 64, 65, 66, 67, 68, 69, 70, 71, 72, 73, 74, 75, 76, 77, 78, 79, 80, 81, 82, 83, 84, 85, 86, 87, 88, 89, 90, 91, 92, 93, 94, 95, 96, 97, 98, 99, 100 3. Process-Based Trust from Reputation Effects a. Affiliation with respected organizations 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 13, 15, 16, 18, 19, 20, 21, 22, 23, 24, 25, 27, 28, 30, 35, 38, 39, 40, 41, 44, 46, 48, 50, 51, 52, 53, 54, 55, 56, 58, 60, 62, 63, 65, 66, 67, 68, 69, 70, 74, 76, 77, 78, 82, 84, 85, 89, 90, 92, 94, 97, 99, 100 b. Testimonials from previous participants 2, 5, 7, 9, 13, 15, 16, 18, 19, 20, 21, 24, 29, 35, 39, 41, 43, 44, 46, 47, 50, 53, 55, 58, 60, 64, 66, 68, 72, 74, 77, 78, 79, 80, 81, 85, 86, 88, 89, 92, 96 c. Advertising Awards an e-Marketplace has won 1, 5, 7, 9, 11, 13, 14, 15, 17, 31, 34, 35, 39, 40, 41, 43, 44, 47, 48, 49, 50, 51, 53, 55, 56, 57, 58, 59, 62, 66, 72, 76, 79, 85, 86, 88, 89, 90, 91, 92, 93 d. Providing excerpts from a news media outlet 1,4,5,7, 9, 11, 13, 14, 16, 17, 18, 19, 20,21,23,24, 25, 26, 28, 29, 30, 31, 34, 35, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51, 52, 53, 55, 56, 57, 58, 60, 63, 65, 66, 69, 70, 71, 74, 75, 76, 77, 78, 79, 81, 82, 83, 84, 85, 86, 88, 89, 90, 91, 92, 93, 94, 96, 97 e. Advertising the Well-Known Customers of an e-Marketplace 4, 9, 11, 14, 15, 16, 19, 20, 21, 23, 24, 25, 26, 27, 29, 30, 31, 33, 35, 36, 39, 40, 41, 42, 46, 49, 53, 54, 55, 57, 58, 59, 60, 62, 64, 66, 68, 69, 70, 74, 76, 77, 78, 79, 81, 82, 83, 84, 85, 86, 89, 90, 93, 96, 98, 99, 100 - 6 6 -Table 5: B2B e-Marketplaces that Use the Five Forms of Perceived Monitoring of Products/Services Traded Sub-Constructs of Perceived Monitoring of Products/Services Index of B2B e-Marketplace Product appraisals 6, 7, 16, 24, 42, 43, 47, 54, 75, 78, 90, 99 Product guarantees/warranties 3, 7, 16, 21, 22, 27, 28, 29, 31, 38, 46, 63, 75, 76, 85, 87, 89, Product inspection 1, 3, 4, 7, 10, 12, 14, 16, 18, 21, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 38, 48, 61, 63, 68, 72, 73, 76, 78, 85, 87, 88, 90, 92, 96, 98, 99, 100 Product reviews/ratings 1, 6, 13, 16, 20, 21, 35, 59, 63, 68, 76, 77, 79, 85, 90, 92 Product quality assurances 20, 29, 31, 35, 38, 77, 100 Table 6: Three Types of Insurance Employed by B2B e-Marketplaces Sub-Constructs of Insurance Index of B2B e-Marketplace Cargo insurance 4, 16, 24, 29, 30, 99 Fault protection insurance 45, 82, 88, 90 Risk management in transactions 48, 50, 51, 56, 59, 63 Table 7: Two Types of Reputation Rating Systems Employed by B2B e-Marketplaces Sub-Constructs of Reputation Rating System Index of B2B e-Marketplace Peer ratings 1,17, 20, 36, 41, 49, 73, 75, 77, 80, 89, 90, 99 The e-Marketplace rates the performance of buyers and sellers 26, 27, 29, 30, 33, 36, 65, 77, 83, 85, 89, 100 -67-Table 8: Types of Approval Seals Employed by B2B e-Marketplaces Types of Approval Seals Index of B2B e-Marketplace BBBOnline 75 CyberProcess Certification 40 THAWTE Authentic Site 13,96 TRUSTe seal 1, 69 UCCNET certificate 66 Verisign seal 3, 4, 20, 28, 33, 38, 63, 67, 68, 71, 76, 87, 88, Ernst & Young Trust services certification 9, 35 Arthur Andersen LLP Trust services certification 54 AICPA certification (SAS 70) 55 WebTrust 65 Cybercash 71 Public Eye 71 GeoTrust 73, 78 2 es — C cs o> "§ S .5 "5 o CL *j w oo Q o c c -( 3 ^- ^ c « £ 2 c i tL. a. 5 <u .2 " " c a p — p co 2 S P cu CU eS CU « PP ex i£ 1 § c o c o so a . -5 « ra m o 'Si 3 s es PH •S cs — c t>D 0> .S E •_ 01 CJ 1J — U < - o o U £2 o -a -• S o IS o "a a> o o. _ x u ra ra L U o L U t - CL J 0) p c LU PP SO a. 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Vol. 8, No. 1, pp. 53-111 -82-Appendix 1 (Part 1 of 2): Directorate General Enterprise (2002), Open Consultation on "Trust Barriers for B2B E-Marketplaces" Trust Area The Most Important Trust Barriers Online Purchasing Purposes 1. Uncertainties related to the protection of confidentiality of sensitive data 2. Uncertainties related to the security of information and communication systems 3. Lack of clear information on the terms and conditions of the contract (e.g. applicable laws; jurisdiction) 4. Uncertainties related to the settlement of disputes 5. Uncertainties related to on-line payments 6. Lack of sufficient information on the different steps for the conclusion of the contract 7. Lack of sufficient information on the identity of the companies (name, address, telephone number, VAT number, etc.) 8. Lack of sufficient information on the right of withdrawal from the contract 9. Lack of sufficient information on product return and recovery of amounts paid 10. Lack of sufficient information on the characteristics of the goods/services 11. Lack of sufficient information on availability of products and delivery time 12. Lack of sufficient information on payment methods 13. Lack of sufficient information on certification of products/services 14. Lack of sufficient information on the prices of goods/services including additional charges (e.g. taxes) 15. Lack of sufficient information on insurance of goods/services Online Selling Purposes 1. Uncertainties related to the protection of confidentiality of sensitive data 2. Uncertainties related to the settlement of disputes 3. Uncertainties related to the security of information and communication 4. Uncertainties related to on-line payments 5. High entry costs to take part in the business E-Marketplace Providers 1. Information on the available mechanisms to ensure the security and the confidentiality of sensitive data 2. Information on the criteria for the selection and admission of participants to the e-Marketplace 3. Information on the dates for on-line auctions 4. Information on the applicable rules for online auctions 5. Information on the criteria for participation in on-line auctions Codes of Conduct 1. Information on the available mechanisms to ensure the security and confidentiality of sensitive data 2. Information on the terms and conditions of the contract 3. Information on the transaction procedure (delivery, payment, return, etc) 4. Information on goods/services offered (characteristics, prices including charges) Appendix 1 (Part 2 of 2): Directorate General Enterprise (2002). Open Consultation on "Trust Barriers for B 2 B E-Marketplaces" Trust Area The Most Important Trust Barriers Codes of Conduct 5. Information on the criteria for the selection and admission of participants to the e-Marketplace 6. Information on the identity of participating companies 7. Information on the settlement of disputes 8. Information on on-line auctions and applicable rules 9. Availability of alternative dispute resolution mechanisms *Note: In this table, Codes of Conduct refers to standards of business behavior that should be followed by e-Marketplace providers and participants. In our study, the definition of Codes of Conduct is narrowed down as "transaction regulations for participants from an ethical perspective". Please see section 4. -84-Appendix 2: Names and URLs of 100 e-Marketplaces Index Name Industry URL 1 Buyindies.com Advertising & Media www.buyindies.com 2 Agdeal.com Agriculture www.agdeal.com 3 Buyag.com Agriculture www.buyag.com 4 Fishround Agriculture www.fishround.com 5 Plantfind.com Agriculture www.PlantFind.com 6 TEAM-The Electronic Auction Market Agriculture www.teamauctionsales.com 7 NextMonet Arts & Entertainment www.nextmonet.com 8 Auto central Automotive www.autocentral.com 9 COVIS1NT Automotive www.covisint.com 10 TruckPartsLocator Automotive www.truckpartslocator.com 11 Aero Exchange Aviation www.aeroxchange.com 12 AirCraftMarketplace Aviation www.acmp.com 13 AviationZone Aviation www.aviationzone.net 14 ILSmart Aviation www.ilsmart.com 15 Partsbase Aviation www.partsbase.com 16 AssetLine.com Building and Construction www.assetline.com 17 bLiquid.com Building and Construction www.bliquid.com 18 Concretebrokers.com Building and Construction www.concretebrokers.com 19 Dirtmarket Building and Construction www.dirtmarket.com 20 ENI-Net.com Building and Construction www.eni-net.com 21 IronPlanet Building and Construction www. ironplanet.com 22 Trueflooring Building and Construction www.trueflooring.com 23 BioExchange.com Chemicals www.bioexchange.com 24 ChemConnect Chemicals www.chemconnect.com 25 ChemCross Chemicals www.chemcross.com 26 eChinachem Chemicals www.echinachem.com 27 WTOPharma Chemicals www.wtopharma.com 28 Chemdeals.com Chemicals www.chemdeals.com 29 Usbid.com Defence www.usbid.com 30 United Raw Material Solutions Electronics & Electrical products www.urms.com 31 Converge Electronics & Electrical products www.converge.com 32 eeParts.com Electronics & Electrical products www.eeparts.com 33 Netcom ponents Electronics & Electrical products www.netcomponents.com 34 Virtual Chip Exchange Electronics & Electrical products www.virtualchip.com - 8 5 -35 Partminer Freetradezone Electronics & Electrical products www.freetradezone.com 36 TraderFirst Electronics & Electrical products www.traderfirst.com 37 Vendorbase Electronics & Electrical products www.vendorbase.com 38 Bid Vantage Electronics & Electrical products www.bidvantage.com 39 GlobalSpec Electronics & Electrical products www.globalspec.com 40, Intercontinental Exchange Energy & Fuels www.intcx.com 41 Houstonstreet Energy & Fuels www.houstonstreet.com 42 Petroleum Place Energy & Fuels www.ogclearinghouse.com 43 Network International Energy & Fuels www.networkintl.com 44 Pantellos Energy & Fuels www.pantellos.com 45 Watt Exchange Limited Energy & Fuels www.watt-ex.com 46 World Energy Solutions Energy & Fuels www.wexch.com 47 Cantor Environmental Brokerage Environmental www.emissionstrading.com 48 C02e.com Environmental www.co2e.com 49 401 Kexchange.com Finance & Insurance www.401 kexchange.com 50 Cambridge Mercantile Corp Finance & Insurance www.cambridgefx.com 51 Creditex Finance & Insurance www.creidtex.com 52 Credit Trade Finance & Insurance www.credittrade.com 53 Currenex Finance & insurance www.currenex.com 54 e-Debt Finance & Insurance www.e-debt.com 55 Fxall Finance & Insurance www.fxall.com 56 Puremarkets Finance & Insurance www.puremarkets.com 57 TradeWeb Finance & Insurance www.Tradeweb.com 58 Marketaxess Finance & Insurance www.marketaxess.com 59 Grand Street Group Finance & Insurance www.grandstreet.com 60 ecMarkets Food & Beverage www.ecmarkets.com 61 eVine Food & Beverage www.evine.com 62 seafood Food & Beverage www.seafood.com 63 Uvine Food & Beverage www.uvine.com 64 dairy.com Food & Beverage www.dairy.com 65 Global wine & spirits Food & Beverage www.globalwinespirits.com 66 Forestexpress LLC Forest www.forestexpress.com 67 World Wide Wood Network Forest www.wwwood.net -86-68 Auctionmart.com Healthcare & Pharmaceutical www.auctionmart.com 69 Global Healthcare Exchange Healthcare & Pharmaceutical www.ghx.com 70 Medbuy Corporation Healthcare & Pharmaceutical www.medbuy.com 71 MedPlanet Healthcare & Pharmaceutical www.medplanet.com 72 SoluMed.com Healthcare & Pharmaceutical www.solumed.com 73 Optical Auctions Healthcare & Pharmaceutical www.opticalauctions.com 74 StarCite Hospitality & Leisure www.starCite.com 75 AFTERnic.com IT products www. Afternic.com 76 Componentsource IT products www.componentsource.co m 77 NeoIT IT products www.neoit.com 78 ITParade.com IT products www.itparade.com 79 Telezoo IT products www.telezoo.com 80 Tradeloop IT products www.tradeloop.com 81 Tribon Solution AB Maritime product and service www.tribon.com 82 Ocean Connect Maritime product and service www.oceanconnect.com 83 Metal suppliers online Metal & Mining www.suppliersonline.com 84 Metalsite Metal & Mining www.metalsite.com 85 Omnexus Plastics & rubber www.omnexus.com 86 Polymersite Plastics & rubber www.polymersite.com 87 The PlasticsExchange.com Plastics & rubber www.theplasticsexchange. com 88 TenantWise Real Estate www.tenantwise.com 89 sitestuff Real Estate www.sitestuff.com 90 bid4assets Real Estate www.bid4assets.com 91 barry-wehm i 1 ler.com Packaging www. barry-wehm i 1 ler.com 92 Band-X Telecommunication & Bandwidth www.band-x.com 93 Bandwidth Market Telecommunication & www.bandwidthmarket.co Bandwidth m 94 GsatX Telecommunication & Bandwidth www.gsatx.com 95 TelecomFinders Telecommunication & Bandwidth www.telecomfinders.com 96 Apparelbids Textiles & Leather www.apparelbids.com 97 Fabria Textiles & Leather www.fabria.com 98 Fiberbuys Textiles & Leather www.fiberbuys.com 99 ItalianModa Textiles & Leather www.Italianmoda.com 100 Wotol Textiles & Leather www.wotol.com -87-Appendix 3 - Coding Sheet (General Introduction) Your Name: Date: General Introduction Please visit the following B2B Electronic Marketplace (e-Marketplace), to carefully examine a variety of trust-building mechanisms. N A M E U R L INDUSTRY PRODUCTS T R A D E D BUYERS & SELLERS CRITERIA FOR M E M B E R S H I P TRANSACTION It will take approximately two hours to complete this coding sheet. Start your examination at the homepage of the e-Marketplace. You can use "Site Map" and "Help" sections to get a quick overview. Some trust-building mechanisms can be easily identified at the following pages: "Home", "Privacy policy", "About us", "Contact us", "Partnership", and "Testimonials"; while other mechanisms, such as escrow services, perceived cooperative norms, and reputation rating systems, may require more time and effort to discover. You should closely look at "Terms and Conditions", "Registration Guidelines", or other pages related to user agreements. 19 major types of trust-building mechanisms that can be used in e-Marketplaces have been identified. Please read Section A for the overview of the trust-building mechanisms, and answer the questions in Section B by carefully examining whether each of the trust-building mechanisms is currently used in the above B2B e-Marketplace. Appendix 3 - Coding Sheet (Section A) SECTION A: Overview of Trust-Building Mechanisms 1. Escrow Services Escrow services let buyers send payments to a third party to be held until goods are delivered or they are satisfied with the goods; it simultaneously benefits sellers by providing protection against fraudulent credit cards. Escrow can be held by the e-Marketplace or by a third-party. 2. Monitoring of Products / Services a. Product appraisal -Product price or value are assessed by experts according to the measurement of specified characteristics b. Product guarantees and warranties - A guarantee given to the purchaser by sellers or the e-Marketplaces stating that a product is reliable and free from known defects and that the seller/e-Marketplace will, without charge, repair or replace defective parts within a given time limit and under certain conditions. c. Product inspection - Products are inspected by a trusted third-party or by the purchaser at particular points, from initial evaluations and inspection of raw materials to final inspections of delivered goods. d. Product reviews - Product performance or quality is reviewed by a trusted third-party in order to provide valuable information to prospective buyers. 3. Insurance Insurance is offered for an uncompleted transaction or an unexpected return when there is no fault by either party involved in the exchange. 4. Cooperative Norms Perceived cooperative norms can be defined as organizations' expectations of the values, standards, and principles to which their trading partners adhere. a. Dispute resolution - Facilitators and mediators are enlisted to resolve disputes arising from online transactions. Note that the disputes addressed by this mechanism are the conflicts between buyers and sellers using an e-Marketplace to do business. The resolution process rectifies problems involving three participants in a transaction: buyers, sellers, and e-Marketplaces. The resolution of bilateral arguments, between only buyers and an e-Marketplace or between only sellers and an e-Marketplace, should not be considered. b. Codes of conduct -Codes of conduct describe general transaction regulations for participants from an ethical perspective. For example, participants should provide accurate information for user identification and product description, keep their accounts and passwords confidential, obey applicable laws (e.g. national export/import laws), and avoid disallowed acts, such as interfering with network security and transmission or trading illegal items. .Moreover, some e-Marketplaces will list detailed codes of conduct for buyers and sellers respectively. -89-Please note that codes of conducts are often described in a page titled "Codes of Conduct", or incorporated into a "Terms and Conditions" page. c. Expected transaction patterns - Expected transaction patterns are identified when an e-Marketplace provides detailed information to prospective participants about how transactions are made on an e-Marketplace. For example, on the page of "Terms and Conditions", an e-Marketplace may specify acceptable methods of payment: for example bank transfers or letters of credit. It may also state how shipping is arranged and whether taxes will be charged. In particular, if an e-Marketplace has an exchange or auction function, the content of rules may contain price offers, bidding times, requirements for winning a bid, or bid closing processes. 5. Member Screening Member screening is a membership qualification assessment both for first-time visitors and for members who hope to maintain their qualifications. Screening methods include credit checking, letters of reference from existing or current trading partners, telephone verification of member information, and participant performance reviews. Note that completing a registration form which only contains simple contact information for an applicant should not be consider as a screening method. 6. Law Enforcement An e-Marketplace may provide information about law enforcement such as the jurisdiction (e.g., state, or country) that governs "terms of conditions" or "agreement" in the e-Marketplace. For instance, an e-Marketplace (www.buvindies.com) provides information about law enforcement as follows: "the Terms of Service Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, excluding its conflict of law provisions. ... You irrevocably consent to the exclusive jurisdiction of the courts of the Commonwealth of Massachusetts and the federal courts situated in the Commonwealth of Massachusetts in connection with any action related to the Terms of Service Agreement". Please note that the laws which only concern the rights or benefits of an e-Marketplace (its copyright, risk, or limitation of liability) should not be considered. 7. Reputation Rating System A reputation rating system publishes ratings of the performance of particular participants based on opinions stated by their trading partners or the e-Marketplace. 8. Approval Seals Approval seals are types of certificates offered by trusted-third parties. Usually, they are issued for solving participants' concerns about privacy and the reliability of the sites they are using to do business. The most commonly-used approval seals include TRUSTe, WebTrust, Verisign, and BBBonline. Please note that the seals issued by the sponsors or owners of an e-Marketplace should not be considered. 9. Privacy/Security Policy An e-Marketplace states a privacy policy or a security policy on its web site. Some e-Marketplaces state their privacy and security policies in specific pages (e.g. "Privacy Policy", "Security Policy"), while some may incorporate these policies into general "Terms and - 9 0 -Conditions" pages. 10. Advertising the Site Longevity of an e-Marketplace Site longevity refers to the statements about the business history of an e-marketplace. 11. Management Team Profiled on the Site of an e-Marketplace An e-marketplace's management team may be introduced, often with contact information listed. 12. Advertising the Size of an e-Marketplace An e-Marketplace publishes the size of its membership, its revenue, or the volume of trade generated. 13. Values, Goals, and Vision of an e-Marketplace An e-Marketplace demonstrates its goodwill to facilitate online transactions by listing its values, goals, mission, or vision. 14. Contact Information An e-Marketplace discloses methods by which it can be contacted, including its physical address, contact phone number, fax number, comment forms that can be submitted online and email addresses. 15. Affiliation with Respected Organizations To establish affiliation with respected organizations, an e-Marketplace may enter partnerships with respected organizations or become qualified members of an industry association, or organization. 16. Testimonials from Current Participants An e-Marketplace publishes comments or success stories from its participants. 17. Advertising Awards an e-Marketplace has Won An e-Marketplace advertises that it has won an award from an industry association, organization, or a news media outlet, such as a magazine, newspaper, authoritative website, or email newsletters. 18. Excerpts from a News Media Outlet An e-Marketplace excerpts articles or reports from a news media outlet. The content of reports usually includes: revenue growth, strategic affiliations, or an acquisition of investment. 19. Advertising the Well-known Customers of an e-Marketplace An e-Marketplace lists its well-known customers. For example, an e-Marketplace in Finance industry may list its customers which are industry leaders, such as Morgan Stanley, Merrill Lynch, and Citigroup. *Note: some term explanations of trust-building mechanisms can be referred to the source shown in Table 4. -91 -Appendix 3 - Coding Sheet (Section B) SECTION B: * Examination of Trust-Building Mechanisms Mark " V " in the appropriate blank, "Yes" or "No", if you have found a specific trust-building mechanism in the e-Marketplace. If a new specific trust-building mechanism has been found, but is not listed in this coding sheet, please describe that mechanism in the applicable "Notes" section. Please note that "products" in the coding sheet refers to the products traded in an e-Marketplace. 1. Escrow Service a. Does the e-Marketplace provide escrow services? Y E S ( ) N O ( ) 2. Monitoring of Products / Services a. Does the e-Marketplace provide product appraisals? Y E S ( ) N O ( ) b. Does the e-Marketplace provide guarantees/warranties for products? Y E S ( ) N O ( ) c. Does the e-Marketplace allow inspection for initial evaluations of products or for final rejections of delivered goods? Y E S ( ) N O ( ) d. Does the e-Marketplace provide reviews for products? Y E S ( ) N O ( ) Note: 3. Insurance a. Does the e-Marketplace provide insurance? Y E S ( ) N O ( ) 4. Cooperation Norms 4-1. Dispute Resolution between buyers and sellers a. Is arbitration binding in accordance with the rules of the National Arbitration Forum? Y E S ( ) N O ( ) b. Is arbitration binding in accordance with the commercial arbitration rules of the American Arbitration Association? Y E S ( ) N O ( ) Note: 4-2. Codes of Conduct a. Does the e-Marketplace provide codes of conduct that describes general transaction regulations for participants from an ethical perspective? Y E S ( ) N O ( ) 4-3. Expected Transaction Patterns a. Does the e-Marketplace provide detailed information for prospective participants to know how online transactions are performed? Y E S ( ) N O ( ) 5. Member Screening a. Does the e-Marketplace assess membership qualification? Y E S ( ) N O ( ) 6. Law Enforcement a. Does the e-Marketplace provide information about law enforcement - 9 2 -such as the jurisdiction (e.g., state, or country) that governs "terms of conditions" or "agreement" in the e-Marketplace? YES () NO () 7. Reputation Rating System a. Does the e-Marketplace provide peer ratings? YES () NO () b. Does the e-Marketplace evaluate the performance of its participants? YES() NO() Note: 8. Approval Seal a. Does the e-Marketplace use a seal issued by BBBOnline? YES() NO() b. Does the e-Marketplace use a certification issued by CyberProcess? YES() NO() c. Does the e-Marketplace use a seal issued by THAWTE? YES () NO () d. Does the e-Marketplace use a seal issued by TRUSTe? YES() NO() e. Does the e-Marketplace use a certificate issued by UCCNET? YESQ NO() f. Does the e-Marketplace use a seal issued by Verisign? YES() NO() Note: 9. Privacy/Security Statements a. Does the e-Marketplace state its privacy policy? YES () NO () b. Does the e-Marketplace state its security policy? YES() NO() 10. Advertising the Site Longevity of an e-Marketplace a. Does the e-Marketplace provide its business history? YES () NO () 11. Management Team Profiled on the Site of an e-Marketplace a. Does the e-Marketplace provide a management team profile? YESQ NO() 12. Advertising the Size of an e-Marketplace a. Does the e-Marketplace publish its size, e.g. the number of members, the number of products, and revenue? YES() NO() 13. Values, Goals and Mission of an e-Marketplace a. Does the e-Marketplace provide its goals, values, missions, or vision? YES() NO() 14. Contact Information a. Does the e-Marketplace allow participants to reach it via e-mail or enquiry form? YES() NO() b. Does the e-Marketplace give at least one of following contact methods: phone number, fax or physical address? YES() NO() 15. Affiliation with Respected Organizations a. Has the e-Marketplace established partnerships with respected organizations? YES() NO() b. Has the e-Marketplace registered as a qualified member of an industry association, or organization? YES() NO() 16. Testimonials From Current Participants a. Does the e-Marketplace publish its participants' testimonials? YES() NO() 17. Advertising Awards an e-Marketplace has Won a. Does the e-Marketplace advertise that it has won an award from an industry association, an organization, or a news media outlet such as magazine, a newspaper, or an authoritative website? YES() NO() 18. Excerpts from a News Media Outlet a. Does the e-Marketplace provide excerpts from a news media outlet? YES () NO () 19. Advertising the well-known customers of an e-Marketplace a. Does the e-Marketplace list its well-known customers? YES() NO() - 9 4 -Appendix 4- Sample L/C Application (www.assetline.com) SAMPLE L/C APPLICATION Transferable Irrevocable Letter of Credit Date of Application: 1. Applicant 2. Issuing Bank ("B" Rated or Better) Prime Bank Details 3. Advising Bank : 4. Expiry Date : Fleet National Bank 33/F Jardine House 1 Connaught Place Central, Hong Kong 6. Amount in figures : 5. Beneficiary : Assetline Holdings Limited c/o Assetline Asia Limited No. 22 Ubi Road 4, #04-00 Intra-Motors Building, Singapore 408617 7. In words:United States Dollars : 8. Signed Commercial Invoice: Original Copies 9. Packing List: 1 Original Copies 10. Assetline or Buyer's approved third party Certificate of Inspection. 11. Forwarder's Cargo Receipt issued and signed by designated party stating they have received the merchandise referred to in the Certificate of Inspection consigned to the Issuing Bank AND/OR Title Document endorsed to the Issuing Bank. AND/OR Bill of Sale issued by the Seller endorsed to the Issuing Bank. 12. Certificate of Origin. 13. Exact Description of Goods 14. Partial Shipment 15. Transshipment Allowed Allowed X X Not Allowed Not Allowed 16. Shipment To: 17. Shipment From: 18. Incoterm 2000 Bill of Exchange sight draft at Hong Kong for 100% of invoice value, drawn by Buyer in favour of Fleet National Bank, Hong Kong, through reimbusing Bank appointed by Issueing Bank. Documents to be presented within 21 days after the issuance of the transport document but within the validity period of the credit. Fleet National Bank, 33/F Jardine House, 1 Connaught Place, Central, Hong Kong must be nominated as Transferring Bank. Forwarder's Bill of Lading allowed. All Seller's and Third Party documents shall be valid and acceptable, available through Fleet National Bank, 33/F Jardine House, 1 Connaught Place, Central, Hong Kong. Transfer charges are for account of beneficiary. All other LC Handling Charges for A/C of Opener. 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