A CULTURAL ANALYSIS OF THE DIFFERENCE BETWEEN INTERPERSONAL TRUST AND INSTITUTIONAL TRUST

The developing world’s electronic commerce potential is huge. However, it has been demonstrated that successful e-business models from developed countries do not seem to transfer well to developing countries. We argue one reason for this is that perceptions of trust differ across developing and developed nations. This, in turn, requires a different design for e-commerce markets. This paper focuses on the impact of trust perception on infrastructure in Chinese e-commerce. A price comparison of Taobao (an institutional trust-based electronic market) and WeChat (an interpersonal trust-based electronic market) for 34 products purchased from outside China demonstrates that sellers in interpersonal trust-based electronic markets can command a higher price than those in institutional trust-based ones. Furthermore, trust labels (a standard form of institutional trust in western emarkets) appear to command no benefit in China. Our research suggests e-commerce companies planning on moving to China should focus on incorporating technologies facilitating interpersonal trust rather than institutional trust