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.

ZEINAB KARAKE-SHALHOUB is Associate Dean of the School of Business and Management at American University of Sharjah, United Arab Emirates. She is also Professor of Management Systems. Before joining AUS, she was a professor at Catholic University of America (1989-1998) and at George Washington University (1996-1989), both in Washington, D.C. She is the North American editor of Management Decision Journal and Logistics Information Management Journal. She is the author of Downsizing, Discrimination, and Corporate Social Responsibility (Quorum Books, 1999), Information Technology and Management Control: An Agency Theory Perspective (Praeger Publishers, 1992), and Technology and Developing Economies: The Impact of Eastern European Versus Western Technology Transfer (Praeger Publishers, 1990).