Development of the Conceptual Model

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The conceptual model developed for this study was derived from theories in a multi-disciplinary literature, including marketing, management, sociology, information systems and e-commerce. Five theoretical perspectives contributed to the constructs in the conceptual model. A brief description of trust in business relationships, inter-organizational-relationships theory (IORs), transaction-cost-economics theory (TCEs), resource-dependency theory and trust and security-based mechanisms in e-commerce is given below.

Inter-Organizational-Relationships Theory (IORs)

It is only recently that IS literature has recognized the complementary, and at the same time, competing roles of technology and trust in inter-organizational business relationships. For example, while some scholars (Malone et al., 1987; Clemons et al., 1993) have focused primarily on information technology as a means of reducing inter-organizational transaction costs, Kumar et al.'s (1998) findings suggest the substitutability of trust and technology in reducing transaction costs in inter-organizational-systems (IOSs). Inter-organizational-relationships arise from inter-organizational-systems (IOSs), and occur when two or more organizations exchange resources (e.g., money, physical facilities and materials, information, customer or client referrals, and technical staff services) between each other (Bensaou & Venkatraman, 1996; Clemons et al., 1993; Malone, 1987). Inter-organizational-relationships focus on situational, procedural and structural factors. Situational factors drive the need for reasons and conditions that form relationships and inter-organizational-relationship theory provides insights into interactions and, environmental and contingent factors, thus capitalizing on the formation and structure of cooperative IORs (Ring & Van de Ven, 1994). For example, trading partners often negotiate written procedures and contracts on how to undertake their e-commerce operations, thereby leading to procedural factors. Procedural factors emphasize on trading partners' roles and responsibilities outlined in their service level agreements and trading partner agreements, thus ensuring quality of services. Structural factors include governance mechanisms in the form of institutional arrangements that prescribe an overall pattern of interactions in inter-organizational-relationships. Governance mechanisms include: procedures, policies, standards, and trading partner agreements that enable structured routines to take place. Furthermore, structural factors include standardized routines that capitalize on complete and correct e-commerce operations, thereby contributing to economic benefits from savings in time and cost. Hence, by properly managing these situational, procedural and structural factors in e-commerce, outcomes from inter-organizational-relationships may be monitored to achieve high standards and quality.

Transaction-Cost-Economics Theory (TCEs)

Transaction-cost-economics (TCEs) focus on economic efficiencies that provide insights into economic exchanges. They deal with optimum governance mechanisms (markets or hierarchies), thus minimizing production and transaction costs (Williamson, 1975). Economics researchers focus on trading partners' transactions and theorize that trading partners make trust choices based on rationality derived costs and benefits (Williamson, 1993). In other words, trading partners' decide to partake in a trusting relationship based on whether their perceptions of the potential costs they would incur by engaging in the trusting behavior outweighs the expected benefits of engaging in the trusting behavior. For example, trading partners usually negotiate and monitor trading partner agreements as legal contracts before engaging in e-commerce in order to protect themselves against opportunistic behaviors. Hence, transaction-cost-economics contribute to perceived benefits and perceived risks of e-commerce.

Resource-Dependency Theory

Resource-dependency theory provides a holistic approach with explicit recognition of economic and socio-political dimensions of trading partner relationships (Pfeffer & Salanick, 1978). Specifically, resource-dependency theory focuses on three aspects. First, external forces in an e-commerce environment within which the dyad operates, thus contributing to perceived risks via computer viruses, and open standards. Second, internal organizational dimensions that structure and shape written policies and procedures, thus contributing to perceived benefits, and finally, trading partner interactions (as in behavioral dimensions) in their daily e-commerce exchanges, thus contributing to trading partner trust (Pfeffer & Salancik, 1978; Reekers & Smithson, 1996).

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