Institutional Trust Building Tools and Processes

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Theoretical Framework

In this chapter, the three dimensions from Tan and Sutherland’s (2004) model will be elaborated. Taking these dimensions into account and combining them with the stakeholder relationships within the sharing economy, this chapter will result in a multi-dimensional trust model which will guide the analysis.

Trust Dimensions

With Tan and Sutherland (2004) investigating consumer trust in e-commerce, they present dispositional- , institutional- and interpersonal trust as three dimensions of trust which have an impact on the intention to trust. Thus, the following research in the field of trust will be delimited to these three aspects by investigating previous literature about dispositional-, institutional- and interpersonal trust. Dispositional trust affects a person’s stance to institutional and interpersonal trust and is characterized by the individual’s personality. Since the sharing economy is most commonly based on peer-to-peer interactions on a platform, interpersonal trust, with a high relevance in social sciences, is a suitable approach to explain trust in the context of the sharing economy. The third trust perspective will be institutional trust as the platform is an intermediary which facilitates sharing between two individuals by building high level levels of trust in the institution. The research field of institutional trust has been the main focus of business and economic sciences. With the sharing economy encompassing both peer-to-peer interactions and the economic perspective, there is an interplay of trust from a social science perspective as well as from an economic perspective. The final part constitutes a summarized trust model combining interpersonal and institutional trust from Tan and Sutherland’s (2004) framework with the trust relationships in the sharing economy. The framework is adjusted from Tan and Sutherland’s multi-dimensional trust model by excluding online purchase behavior as this paper focuses on the intention of trust and not its outcome per se.

Dispositional Trust

Behnia (2008) identifies dispositional-based trust as a major approach to interpersonal and institutional trust development. He explains how this approach assumes a high connectivity of trust to personality traits and therefore evokes two types of trustors: The high trustors and the low trustors. Behnia (2008) describes high trustors as having almost naive trust with the tendency to accept strangers easily, assume salespersons to be transparent and honest, and approve contracts without reading the content, whereas low trustors tend to show abnormal levels of distrust in similar situations. A person’s willingness to build trust with another peer develops from previous experience (Behnia, 2008). Accordingly, Erikson’s (1963) fundamental theory Stages of Psychosocial Development explains how trust is already developed in infancy and how it forms a child’s attachment type. Growing up in a childhood with a positive environment e.g. caring parents, teachers who kept promises, or other peers who generally were honest and showing good intent evoke an optimistic attitude towards others (Behnia, 2008). The presence of a positive mind-set and optimistic stance “makes one more likely to take risks and to initiate a trusting relationship with others” (Behnia, 2008, p. 1428). On the other hand, Behnia (2008) observes individuals with a rather pessimistic mentality due to negative experiences in the past to be more likely to distrust strangers. As illustrated in figure 1., an individual’s disposition to trust is a variable unlikely to change a person’s attitude towards trusting others. Thus, it is a constant which cannot be influenced by the platforms through tools since the disposition to trust is deeply enrooted in the individual’s personality. Therefore, dispositional trust is not a factor of investigation for further analysis in this paper.

Institutional Trust

In his fundamental work, Zucker (1986) characterizes institution-based trust as security provided by legal or regulatory structures, safety nets and guarantees. The scholar distinguishes between formal indicators which appear in the form of an insurance and informal trust indicators which includes e.g. a membership in a professional association. Specifically, institutionalization is a process in which trust-building acts are transmitted to an external partner (Zucker, 1986). This implies that trust tools and processes provided by an external party can foster peer-to-peer trust. However, Zucker (1986) treats the topic from a broad perspective and describes the production of institutional trust as highly subjective with few general mechanisms.
McKnight and Chervany (2014) break down Zucker’s (1986) institutional trust into two subcategories: structural assurance and situational normality. According to the scholars, structural assurance encompasses protective mechanisms such as contracts, guarantees, regulations and processes amongst other. On the contrary, situational normality refers to the attitude towards a specific situation. If the situation is perceived to be normal, it facilitates trust building. With the newness of the sharing economy, situational normality implies the establishment of tools and processes in the sharing economy to portray itself as a conventional online business to appeal to broad masses. McKnight and Chervany (2014) present five mechanisms which e-vendors can adopt to increase institutional trust online and influence the purchasing decision. First, privacy policies ensure an ethical approach to how data is handled. Besides, customer interaction in an online environment transmits the image of a benevolent, competent and honest vendor. Further, McKnight and Chervany (2014) identify reputation building, links to other credible sites and guarantees or other seals as main interventions which increase institutional trust. To ease the interaction in the sharing economy, institutional trust is considered to be fundamental to build interpersonal trust. This is in line with figure 1. which shows how institutional trust does not only influence the intention to trust, but also interpersonal trust. However,interpersonal trust has no impact on institutional trust. In practice, a platform with high institutional trust affects the trust relationship between two peers positively.

Interpersonal Trust

Interpersonal trust is the trust which is established towards another individual (Tan & Sutherland, 2004). In the process of forming interpersonal trust, Tan and Sutherland (2004) identify competence, predictability, benevolence and integrity as the most essential attributes. In a business context, Behnia (2008) highlights the importance of providing professionals to gain the client’s trust. He argues that the client, as the vulnerable party, has to be willing to share intimate information with a person he/she is not familiar with, whereas the professional needs to be empathetic and appear professionally. Further, Behnia (2008) assumes clients to collect information about a service provider prior to consultation to evaluate his/her trustworthiness. As a result, he determines three parameters a client considers before trusting a professional: i) the self-concept, ii) one’s perceived self, iii) and the professional’s identity. Behnia (2008) elaborates on the behavior of the client who intends to find out whether the professional is competent in his/her field, able to present realistic solutions and perceives the client positively. Therefore, it is crucial from a service providing perspective to build trust through attributes like competency, reliability and empathy (Behnia, 2008).
Interpersonal trust in a social context as described by Messick and Kramer (2001) implies a privileged treatment among members of the same group. According to the scholars, an individual is more likely to trust group members only. Therefore, the group-based trust building tools may explain why people have historically delimited the sharing of goods and services to their social network where trust is the strongest (Schor, 2016). Hence, community building processes could serve as a main method to build trust. Similarly, Freitag and Traunmüller (2009) identify two different forms of interpersonal trust: particularized and generalized trust. According to the scholars, particularized trust focuses on personal experiences, which translates to the people an individual already knows being the only ones who can be trusted. On the contrary, generalized trust supports the idea of anyone being trustworthy (Freitag & Traunmüller, 2009). In the context of the sharing economy, a generalized trust condition facilitates the interaction between two strangers when sharing goods or services.

Summarizing Model

To present an integrated model which illustrates the trust construct in a sharing economy environment, this paper combines Tan and Sutherland’s (2004) framework with the relationships between the two peers and the platform present in the sharing economy (see model 1.). According to Hawlitschek, Teubner and Weinhardt (2016), the platforms are responsible to ensure trust towards peers, the platform and the product which constitute the three P’s and frame a multi-dimensional trust construct. In model 1., these three parties are referred to as Platform (P), Consuming Peer (C) and Supplying Peer (S) and represent its cornerstones. While institutional trust is displayed as arrow 1. and 2. in red, and stems from the level of trust the consuming and supplying peers have in the platform, interpersonal trust is illustrated as arrow 3. and 4. in blue, and is a reciprocal relationship between the consuming and supplying peers. As previously stated, interpersonal trust describes the trust relationship between two individuals, whereas institutional trust defines the trust in an institution. Hence, the trust building mechanisms on arrow 5. and 6.colored in black do not categorize as any of the trust dimensions investigated by Tan and Sutherland (2004) since they move from an institution towards an individual.
All tools and processes, regardless of which relationship they serve, are installed by the platform. For instance, by implementing a reciprocal feedback system, the platform is providing the infrastructure for interpersonal trust building without affecting the trust a supplier or consumer has in the platform. Further, the trust relationship model (model 1.) serves as a basis for the empirical analysis by linking the different trust tools and processes to their corresponding dimension. Finally, the analysis section includes a complimentary section which displays on which trust relationships the companies emphasize on.

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Methodology & Method

This chapter firstly discusses the methodology including the purpose, philosophy and approach of this research. Secondly, the method section contains research design, data collection of literature, sampling, interview design, data analysis and credibility of research. Finally, this section clarifies the ethics of the research.


Research Purpose

Taking previous research into account, this paper extends present knowledge through an exploratory research. As acknowledged, the importance of trust has been investigated by previous scholars. However, there is little research on how trust is established in business practices through tools and processes. Therefore, this paper builds upon existing research and thus, functions as an extension to previous findings. Moreover, a link between literature about trust within the sharing economy and trust in the context of peer-to-peer activities is established through the development of an integrative framework. Literature has debated on why trust is important in the sharing economy rather than investigating how trust is assured towards the consuming and supplying peers. The primary data was collected through semi-structured interviews with companies operating in the field of the sharing economy to explore how trust is established between the three parties.

Research Philosophy

The research philosophy can be divided into an interpretivist and positivist paradigm (Collis & Hussey, 2014). The latter of the two stems from natural sciences and assumes social reality to be objective and singular; hence, reality is not affected by the investigation itself. Having its roots in the realist philosophy, the approach uses an explanatory theory to understand social phenomena. However, this approach has been questioned with critiques pointing on reality and humans being too complex to generalize. Thus, research presented the interpretivist approach to explain the social phenomenon (Bryman, 2012). Instead of assuming objective reality, it emphasizes on subjectivity; thus, research is influenced by social circumstances.
This research paper does not acknowledge single reality or truth, since the study is shaped by individuals or groups. By aiming to broaden the understanding and interpretation of existing theories within the sharing economy, this paper followed an interpretivist paradigm. Further, with diverse products and services provided by the interviewed companies, they all have different perceptions of the sharing economy; making an interpretivist paradigm the most suitable with these subjective evidences. Thus, this paper grasped the complexity of the trust issue and its background in the sharing economy by gaining an interpretive understanding of the underlying tools.

Research Approach

The research approach for scientific work can either be inductive, deductive or abductive (Saunders, Lewis & Thornhill, 2012). The starting point of the deductive approach is present theory, moving on to its specific application. It is characterized by either challenging or confirming a hypothesis by testing it with quantitative data, after collecting information from existing literature. In contrast, inductive reasoning uses a specific observation or the collection of data as a foundation to proceed to a general conclusion by building a theoretical framework based on own findings. Thirdly, the abductive approach combines the deductive and inductive approach. An abductive approach is commonly applied when unforeseen facts are discovered either prior to the study or whilst conducting the research. These facts are then elaborated by plausible theories of how they might have occurred (Saunders et al., 2012).
This paper encompasses features from both deductive and inductive approach. A deductive approach was applied in the data collection process and adopted to structure the theoretical framework. By linking previous research about the sharing economy with research conducted in the field of trust/trust building in the context of sharing economy/e-commerce, this theory sets the basis of research and thus fulfilled the characteristics of deductive reasoning (Bryman, 2012). Inductively, Tan and Sutherland’s (2004) framework was applied to conditions which encompass the three different stakeholders in the sharing economy: i) consuming- ii) supplying peers and iii) the platform. This constitutes a new developed trust relationship model according to an inductive reasoning approach. By exploring different tools and processes which companies implement to build trust towards their peers, this study aims to find out how sharing economy operators manage to build trust in practice rather than why trust is an essential component. Thus, previous research focusing on the importance of why trust is essential constituted the underlying theory to introduce a practical view on the topic.
By linking existing theories within the sharing economy and the research field of trust, this paper applied an exploratory research approach. Given the limited amount of research encompassing both fields, it was essential to acquire new insights by applying an exploratory approach. Through this approach, the research aims to group opinions and categorize patterns as suggested by Collis and Hussey (2014). In contrast to conclusive research, this paper presented several options to establish trust instead of identifying one valid solution and thus laid groundwork for future studies.


Research Design

To display the research design, an overview (see figure 2.) was set up to graphically illustrate how the research was conducted chronologically. Starting with the deductive part of this paper, the literature search and its review served as a basis by providing a general overview of trust research and perspectives within the sharing economy. Tan and Sutherland’s (2004) theory comprises the basis for the framework which was combined with the three stakeholder relationships present in the sharing economy. Together with the qualitative data collection in form of semi-structured interviews, information from the literature review was extracted as inputs in the analysis. Subsequently, the theoretical framework structured and guided the analysis.

Table of Contents
1.1 Background
1.2 Problem Formulation
1.3 Purpose
2Literature Review
2.1 Sharing Economy
3Theoretical Framework
3.1 Trust Dimensions
3.2 Summarizing Model
4Methodology & Method 
4.1 Methodology
5Findings & Analysis 
5.1 Institutional Trust Building Tools and Processes
5.3Importance of Trust Relationship
7.1Further Findings
7.2Limitations, Further Research and Contributions
Trust Building in the Sharing Economy How Companies Build Trust between Peers and towards the Platform

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