Trust and Loyalty in Electronic Commerce: An Agency Theory Perspective

Karake-Shalhoub uses agency theory to ground her empirical analysis of more than 100 e-commerce firms in this highly readable examination of trust in e-commerce relational exchanges. She identifies several trust-building measures, including privacy statements, the existence of a chief privacy officer, and a trusted third-party seal of approval; companies are then evaluated based on an index of those trust builders. She demonstrates that there is a positive relationship between management ownership and trust, and that managers who fail to protect the interests of their stockholders-as well as their own-will never gain customer loyalty. Any business considering a move into e-commerce, or re-evaluating an earlier investment in online marketing and retailing, will benefit greatly from Karake-Shalhoub's insights.The timeliness of this study-the first of its kind-and its unique agency-theory perspective allow for an analysis of the appropriateness of e-business and e-commerce for certain businesses. What are e-commerce businesses that are developing loyalty and building trust doing differently than their less successful competitors? How are successful companies moving from traditional applications to the new breed of integrated e-commerce architectures? Karake-Shalhoub answers these and other pressing questions for senior and mid-level managers and strategic planners, corporate executives charged with incorporating an e-commerce strategy into their long-range plans, chief privacy officers, regulatory policymakers, and students of e-commerce, customer relationship management, and online marketing.