Institutional Trust and Familiarity in Online Interorganizational Relationships

Institutional trust is necessary for inter-organizational relationships in e-commerce. Two types of institutional trust are herein proposed (a) third-party institution-based trust, which deals with intermediary-driven structures, and (b) bilateral institutionalized trust, which deals with dyadic inter-organizational processes. We examine how these two types of institutional trust develop through their underlying dimensions (i) structural assurances, (ii) facilitating conditions, and (iii) situational normality. We focus on how interorganizational trust and online relationship building can be longitudinally facilitated by institutional trust, which can initially substitute and progressively complement the role of familiarity. More specifically, this study focuses on the time-dependent nature of initial trust formation, and specifically on the role of relationship phase (from exploration to maturity), by describing (a) the role of bilateral relative to third-party institutional trust on interorganizational trust, and (b) the transition of the underlying dimensions of institutional trust. This research has implications for (1) the longitudinal nature and role of institutional trust in online relationship building, (2) the literature on initial trust formation, and (3) the strategic design and use of cost-effective trust-building mechanisms