A Trust Model for First Trade Transactions in Electronic Commerce

In this paper we extend the generic trust model that was introduced in Tan and Thoen. The model of Tan and Thoen addresses in a generic way the issues related to how to build trust for conducting a first trade transaction in electronic commerce (i.e. a trade transaction in an electronic environment between two possibly international parties who are new to each other or have not conducted trade transactions between them before). In this paper we add specific electronic commerce elements to the generic trust model, resulting in a trust matrix for first trade transactions in electronic commerce. This matrix can be used as a tool to analyze and develop trust-building services that are offered by trusted third parties to help organizations conduct such first-trade electronic commerce transactions. First Trade Encounters in Electronic Commerce In this paper we focus on the problem of how to build online trust in electronic commerce between trading partners that have never traded with each other before, the so-called first trade situation. Most trust building mechanisms and theories on trust are based or put the emphasis on trust built via a history of exchanges between the partners in a process through time. See for example [Keen, Ballance, Chan & Schrump, 00], [Lewicki & Bunker, 95] and [Nooteboom, Klos & Jorna, 01]. This type of experience is probably the best way to build trust, but it is simply not always available, and there are many unique trade opportunities where people can make very good trades with a company that is totally unknown to them. In particular, in electronic commerce, where there is so much emphasis on globalization and opportunities to meet new international business partners, trust building in a first trade situation becomes a much more prominent problem that needs special investigation. International cross-border trade via Internet, called international e-trade, is more complicated than traditional off-line domestic trade in two respects. First, international e-trade, is more complicated than traditional off-line domestic trade because import and export of goods require a wide variety of trade documents ranging from customs declaration to all kinds of documents related to country of origin declarations and health certificates. In addition, due to its international character there are much less shared norms and business practices. Therefore, people want to have more safeguards. A typical example of such a safeguard used in international trade is the so-called Letter of Credit that is typically used by a seller in international trade as a safe guard to get his payment from the buyer to which he has shipped the goods and with whom he has never traded before. Letters of credit are