The Role of E-Commerce Institutional Mechanisms in the Online Repurchase Context

As online retailing has grown rapidly worldwide and become globally competitive over the past decade, how to retain existing customers to make repeated purchases (hereafter referred to as repurchase) becomes a more important concern for online vendors than ever before [38]. In this context, a large number of studies have been conducted to understand what makes online customers repurchase from an online vendor. Amongst the many influencing factors, trust has been found to be a key predictor for customer retention [e.g., 22, 26, 70], due to its crucial ability to promote risk-taking behavior in the case of uncertainty, interdependence, and fear of opportunism [58, 61].However, the impact of trust on online repurchase is not independent from its context, which has recently led researchers to call for further investigation of an additional area of concern: the moderating effect of the e-commerce institutional context on the impact of trust [27], where the institutional context refers to formal regulative structures initiated to safeguard the transaction environment [85]. Following this call, the first objective of our study is to investigate this moderating effect due to its potential theoretical and practical significance. Theoretically, it presents a research opportunity to investigate how trust operates under various boundary conditions [27]. The findings could help specify regulative conditions under which trust has varying effects on online purchase [29], and explain the somewhat unexpected results in the literature that trust has a much less significant effect on customer e-loyalty [e.g., 71] than in other related studies [e.g., 22, 26, 51, 70]. Practically, a complete understanding of this moderating effect can yield the potential of guiding online firms to fine-tune their online trust (re)production strategies. In today’s hyper-competitive e-commerce environment, customer trust is increasingly becoming a hygiene factor [82]. Thus an online firm’s vast investment in building and maintaining a trustworthy image, whilst expensive, is no longer a distinctive advantage, but more of a business necessity for ongoing operations [7]. In this context, a better understanding of the moderating effect of the e-commerce institutional context is essential to inform online firms on how to more cost-effectively allocate their trust-building resources, and thereby optimize their return from investing in trust production.Our second objective is to examine the moderating effect of the e-commerce institutional context on the evaluation of trust in the online repurchase situation. Whilst prior research suggests that the institutional context directly affects trust in initial transaction relationships, it also implies that the institutional context does not play a role in evaluating trust in the repurchase situation. This is because first-hand experience with the trustee in a repurchase situation is available and can serve as a dominating source for evaluating trust [61]. With this conjecture put forward, very few follow-up studies have further explored the effect of the institutional context on trust evaluation in the online repurchase situation [e.g., 45]. We argue that even though returning customers primarily rely on first-hand experience to evaluate trust, it is questionable to assume that this effect of first-hand experience-based evaluation holds uniformly strong regardless of the effect of the institutional context. In fact, scholars have long suggested that the importance of previous transaction performance to the re-evaluation of trust is still dependent on the context [58]. Yet, prior research has largely ignored the potential effect of the institutional context on trust evaluation in repurchase situations. There is a clear need to address this gap.To meet these two objectives, we propose to address the moderating role of the e-commerce institutional context in the online repurchase situation, by investigating the perceived effectiveness of e-commerce institutional mechanisms (PEEIM) as a manifestation of the institutional context. PEEIM refers to online customer perceptions that third-party safeguarding mechanisms exist to protect them against potential risks in the e-commerce environment. Unlike existing similar concepts, PEEIM is developed to capture customer perceptions of the vendor-independent e-commerce institutional environment, and is framed to highlight its ability to mitigate risks. We address the role of PEEIM in two stages. In stage one, we will take a theory extension approach by building on the sociological [23, 50] and organizational [58] theories of trust to examine the extent to which PEEIM moderates the linear relationship between (1) trust in vendor and online repurchase intention, and (2) between customer satisfaction (the evaluative outcome of first-hand transaction experience) and trust. In stage two, we will take a theory exploration approach by exploring the nonlinear effect of trust on online repurchase intention and the moderating role of PEEIM on this nonlinear effect. We base our exploration on the utility theory [56] in general and prospect theory [39] in particular, both drawn from the economics discipline.