International Journal of Information Management 33 (2013) 419–428 Contents lists available at SciVerse ScienceDirect International Journal of Information Management j our nal ho me p age: www.elsevier.com/locate/ijinfomgt Leveraging social grouping for trust building in foreign electronic commerce firms: An exploratory study  Yani Shi a,b,∗ , Choon Ling Sia b , Huaping Chen c a School of Management, University of Science and Technology of China, Jinzhai Road No. 96, Hefei, Anhui, China b Department of Information Systems, City University of Hong Kong, Kowloon, Hong Kong, China c School of Computer Science and Technology, University of Science and Technology of China, Jinzhai Road No. 96, Hefei, Anhui, China a r t i c l e i n f o Article history: Available online 28 February 2013 Keywords: Internet shopping Trust Social grouping Social identity a b s t r a c t Internet development has fueled e-commerce firms’ globalization efforts, but many have met with only limited success. This often stems from the foreign firms’ limited understanding of a focal country’s local culture and idiosyncrasies. Foreign firms are usually viewed as out-group entities, which lowers con- sumers’ trust in them. The extent of such a phenomenon varies. In locations where people are more skeptical of out-groups, a critical question is whether it is possible to transform such foreign out-group firms into in-groups, specifically with the support of popular social networking media. Based on Social Identity Theory and Trust Transference Process, five strategies leveraging social grouping and social ties to build trust for foreign electronic commerce firms were proposed. A survey was conducted to examine their effectiveness. The results suggest that social-grouping strategies are useful for in-grouping foreign out-group entities to build trust, and the effectiveness of strategies is determined by the social similarity and psychological distance between the consumer and the endorser. This has important implications for scholars and practitioners, both local and abroad, to leverage social grouping to boost Internet sales. © 2013 Elsevier Ltd. All rights reserved. 1. Introduction Due to the globalization of the Internet and the rapid devel- opment of electronic commerce (e-commerce), a number of companies are seeking to explore new markets even as they are subject to increasingly intense market competition. For exam- ple, many multinational e-commerce firms are attracted to China because of its fast-growing economy and huge market potential (eBay.com, Yahoo.com, Amazon.com, etc.). Although some have succeeded, many have failed and suffered significant financial losses, such as eBay China. Studying the failure of eBay China (www.ebay.com.cn), researchers found that the eBay (China) web- site simply replicated the international eBay website. Although it featured the respective local language and contents (Ou & Davison, 2009; Ye, Hu, & Li, 2008), there was no significant adaptation to the context of China. Trust issues are a significant challenge for foreign companies as customers most likely will not view them as an indigenous platform. In a 2010 Business Leader Forum,  An earlier, conceptual version of this paper has appeared in the Proceedings of the 2010 Ninth International Conference on Mobile Business, and cited in Theoretical Background and Research Hypotheses Section of this manuscript. ∗ Corresponding author at: Department of Information Systems, City University of Hong Kong, Kowloon, Hong Kong, China. Tel.: +852 3442 9962; fax: +852 34420370. E-mail addresses: amyshi99@gmail.com (Y. Shi), iscl@cityu.edu.hk (C.L. Sia), hpchen@ustc.edu.cn (H. Chen). the speaker, Vice-President of a prominent Chinese online travel agency, attributed such challenges to a lack of “grassroots spirit” amongst these less successful foreign ventures. Foreign companies are less likely to be embraced by a community if they do not under- stand local norms and culture. As a result, it is important for foreign e-commerce firms to indicate their sincerity to do business locally by being integrated into the local culture. When foreign firms set up websites to explore new markets in different countries, initial trust building is fundamental to their success (Choi & Geistfeld, 2004; Jarvenpaa, Tractinsky, & Saarinen, 1999). Replicating the original website by simply using the local language is not enough to build trust in foreign online stores (McKnight, Cummings, & Chervany, 1998; Zucker, Darby, Brewer, & Peng, 1996). Without integrating local in-group features, local consumers would view such foreign firms as out-group entities that lack social similarity (Zourrig, Chebat, Toffoli, & Medina- Borja, 2010). The social categorization of in-group and out-group based on social similarity and psychological distance is rooted in Social Identity Theory (SIT) (Tajfel & Turner, 1979). People usu- ally behave more favorably to in-groups (e.g., local peers, friends) than out-groups (e.g., foreigners, foreign organizations), especially in collectivistic cultures (Doney, Cannon, & Mullen, 1998; Lee & Ward, 1998; Triandis, 1972). While similarity refers to matching attitudes, values, interests, and personality between people, social similarity emphasizes similarity based on social structure and orga- nized social activities, such as relatives, friends, classmates (Turner 0268-4012/$ – see front matter © 2013 Elsevier Ltd. All rights reserved. http://dx.doi.org/10.1016/j.ijinfomgt.2013.02.001