Concern for Information Privacy and Online Consumer Purchasing

Although electronic commerce experts often cite privacy concerns as barriers to consumer electronic commerce, there is a lack of understanding about how these privacy concerns impact consumers' willingness to conduct transactions online. Therefore, the goal of this study is to extend previous models of e-commerce adoption by specifically assessing the impact that consumers' concerns for information privacy (CFIP) have on their willingness to engage in online transactions. To investigate this, we conducted surveys focusing on consumers’ willingness to transact with a well-known and less well-known Web merchant. Results of the study indicate that concern for information privacy affects risk perceptions, trust, and willingness to transact for a wellknown merchant, but not for a less well-known merchant. In addition, the results indicate that merchant familiarity does not moderate the relationship between CFIP and risk perceptions or CFIP and trust. Implications for researchers and practitioners are discussed. 1 Elena Karahanna was the accepting senior editor. Kathy Stewart Schwaig and David Gefen were the reviewers. This paper was submitted on October 12, 2004, and went through 4 revisions. Information Privacy and Online Consumer Purchasing/Van Slyke et al. Journal of the Association for Information Systems Vol. 7 No. 6, pp. 415-444/June 2006 416 Introduction Although information privacy concerns have long been cited as barriers to consumer adoption of business-to-consumer (B2C) e-commerce (Hoffman et al., 1999, Sullivan, 2005), the results of studies focusing on privacy concerns have been equivocal. Some studies find that mechanisms intended to communicate information about privacy protection such as privacy seals and policies increase intentions to engage in online transactions (Miyazaki and Krishnamurthy, 2002). In contrast, others find that these mechanisms have no effect on consumer willingness to engage in online transactions (Kimery and McCord, 2002). Understanding how consumers’ concerns for information privacy (CFIP), or their concerns about how organizations use and protect personal information (Smith et al., 1996), impact consumers’ willingness to engage in online transactions is important to our knowledge of consumer-oriented e-commerce. For example, if CFIP has a strong direct impact on willingness to engage in online transactions, both researchers and practitioners may want to direct efforts at understanding how to allay some of these concerns. In contrast, if CFIP only impacts willingness to transact through other factors, then efforts may be directed at influencing these factors through both CFIP as well as through their additional antecedents. Prior research on B2C e-commerce examining consumer willingness to transact has focused primarily on the role of trust and trustworthiness either using trust theory or using acceptance, and adoption-based theories as frameworks from which to study trust. The research based on trust theories tends to focus on the structure of trust or on antecedents to trust (Bhattacherjee, 2002; Gefen, 2000; Jarvenpaa et al., 2000; McKnight et al., 2002a). Adoptionand acceptance-based research includes studies using the Technology Acceptance Model (Gefen et al., 2003) and diffusion theory (Van Slyke et al., 2004) to examine the effects of trust within well-established models. To our knowledge, studies of the effects of trust in the context of e-commerce transactions have not included CFIP as an antecedent in their models. The current research addresses this by examining the effect of CFIP on willingness to transact within a nomological network of additional antecedents (i.e., trust and risk) that we expect will be influenced by CFIP. In addition, familiarity with the Web merchant may moderate the relationship between CFIP and both trust and risk perceptions. As an individual becomes more familiar with the Web merchant and how it collects and protects personal information, perceptions may be driven more by knowledge of the merchant than by information concerns. This differential relationship between factors for more familiar (e.g. experienced) and less familiar merchants is similar to findings of previous research on user acceptance for potential and repeat users of technology (Karahanna et al., 1999) and e-commerce customers (Gefen et al., 2003). Thus, this research has two goals. The first goal is to better understand the role that consumers’ concerns for information privacy (CFIP) have on their willingness to engage in online transactions. The second goal is to investigate whether familiarity moderates the effects of CFIP on key constructs in our nomological network. Specifically, the following research questions are investigated: How do consumers’ concerns for information privacy affect their willingness to engage in online transactions? Does consumers' familiarity with a Web merchant moderate the impact of concern for information privacy on risk and on trust? Information Privacy and Online Consumer Purchasing/Van Slyke et al. Journal of the Association for Information Systems Vol. 7 No. 6, pp. 415-444/June 2006 417 This paper is organized as follows. First, we provide background information regarding the existing literature and the constructs of interest. Next, we present our research model and develop the hypotheses arising from the model. We then describe the method by which we investigated the hypotheses. This is followed by a discussion of the results of our analysis. We conclude the paper by discussing the implications and limitations of our work, along with suggestions for future research. Research Model and Hypotheses Figure 1 presents this study's research model. Given that concern for information privacy is the central focus of the study, we embed the construct within a nomological network of willingness to transact in prior research. Specifically, we include risk, familiarity with the merchant, and trust (Bhattacherjee, 2002; Gefen et al., 2003; Jarvenpaa and Tractinsky, 1999; Van Slyke et al., 2004) constructs that CFIP is posited to influence and that have been found to influence. We first discuss CFIP and then present the theoretical rationale that underlies the relationships presented in the research model. We begin our discussion of the research model by providing an overview of CFIP, focusing on this construct in the context of e-commerce.