Monday, 31 May 2010

The role of institution-based trust in initial trust formation between E-commerce buyers and sellers in the Nigerian E-commerce environment

The following is a summary of my masters degree dissertation which is a study of Nigerian attitudes with respect to E-commerce in Nigeria, It is mainly focused on trust. The full text can be read here or in the scribd window right at the end of the writeup, enjoy...

E-commerce has been largely very successful and participation requires one to engage with whom they have little or no prior interaction, this requires trust.
The role of trust in E-commerce has been researched and written about extensively, however, most of the literature has focused mainly on developed economies and as such data and survey samples have been taken mostly from these economies. This study intends to contribute to filling that gap by researching key institutional safeguards that encourage initial trust formation between online consumers and vendors and testing them within the Nigerian online environment.
Drawing from Institution based trust literature an integrated model of institutional trust was developed. Nine institutional mechanisms influencing customer trust in e-commerce relationships were identified. They are perceived feedback, perceptions of credit card guarantees, perceptions of security, perceptions of monitoring, perceptions of legal bonds, perceptions of insurance, perceptions of accreditation, perceptions of escrow services and perceptions of third party payment services.
Nine Hypotheses were drawn based on the institutional mechanisms identified and their validity in the Nigerian online environment and an empirical study was carried out to test them. Two Nigerian banks were selected as case study debit Card issuers and data for the study was collected in Nigeria by means of survey questionnaires and semi-structured interviews of the a senior banking officers in each of the case study Debit card issuers (Nigerian Banks).
All hypotheses were confirmed. It was found that all the institutional mechanisms identified by the study influence Nigerian online users' decisions to trust in an e-commerce relationship.

Summary of results
As can be seen in Table 2.0 below, based on the results of the survey conducted in the study, all the hypotheses stated in the abstract were confirmed within the Nigerian context but to varying degrees.

The results of this study suggest that Nigerian internet users are influenced to trust web vendors based on their perceptions of protections even if in reality such protection does not exist. This has strong implications for e-commerce in Nigeria, it means e-commerce web third parties have to work extra hard to make customers aware of their presence and how they protect the online customer, for e-commerce business management it implies that they need to sensitize customers and make them aware of the measures in place to assure their safety, for the Nigerian Government it implies a need for laws that are more protective of customers in cyber space and massive sensitization of these to encourage e-commerce growth.

Research Limitations 
Although the data generally supports the model that has been proposed by this study it is necessary to highlight the limitations of this study.
The two main limitations are that the sample size is smaller than has been recommended for the size of the population that is being studied and the statistical methods used were very simple. However, it is important to note that this study is primarily aimed at offering a snapshot of institutional mechanisms within the Nigerian context and as a first study is meant to open up the area for further research and with regards to that it succeeds.

Suggestions for future research
This study draws from existing literature on trust and seeks to prove that trust mechanisms exist within the Nigerian context and influence Nigerian online users to transact online. The aim of this study is to open up the study of trust in e-commerce within the context of Nigeria specifically and developing economies generally. Therefore there is need for better and more accurate research with a larger sample size, more variables and better statistical analysis.

This study was able to answer the research questions posited at the first chapter in this study as it has been able to prove that theories on the role of institution-based trust in initial trust formation between buyers and sellers hold true for Nigeria. The study was also able to identify key institutional mechanisms that influence customers to transact online with Nigerian web vendors.
It was able to raise some interesting points with regards to how the perceptions of protection are stronger than the reality of the protection actually offered by institutional mechanism within the Nigerian context.
The study has made recommendations that are very useful for common web users, e-commerce management and government agencies.

Full text of Writeup below....
The Role of Institution-based Trust in Initial Trust Formation Between E-commerce Buyers and Sellers in the...

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