532 TRUST IN E-COMMERCE VENDORS: A TWO-STAGE MODEL D. Harrison McKnight College of Business Florida State University U.S.A. Vivek Choudhury College of Business Administration University of Cincinnati U.S.A. Charles Kacmar College of Business Florida State University U.S.A. Abstract This study investigates the development of trust in a Web-based vendor during two stages of a consumer’s Web experience: exploration and commitment. Through an experimental design, the study tests the effects of third party endorsements, reputation, and individual differences on trust in the vendor during these two stages. 1. INTRODUCTION An important barrier to the widespread diffusion of electronic commerce among consumers is “the fundamental lack of faith between most businesses and consumers on the web today. In essence, consumers simply do not trust most Web providers enough to engage in ‘relationship exchanges’ involving money and personal information with them” (Hoffman et al. 1999). Almost 95% of consumers have declined to provide personal information to web sites at one time or another: 63% of these users indicated this is because they do not trust those collecting the data (Hoffman et al. 1999). The fact that many web-based businesses, and even the electronic medium itself, are not familiar to many consumers, makes them particularly hesitant to reveal personal information or to trust in the ability of the vendors to deliver on their commitments. Web site providers have taken many steps to overcome trust barriers. These include providing unconditional guarantees of safety with an offer to cover any losses due to credit card fraud (e.g., Amazon); providing detailed explanations of their privacy policies on their web sites (e.g., Travelocity); trying to capitalize on existing brand reputations in the case of established businesses (e.g., Microsoft Expedia, Barnes and Noble); building brand recognition for their web-only businesses (e.g., Travelocity, Amazon); and trying to build transference-based trust (Stewart 1999) by associating themselves with already-trusted businesses, for instance, by placing links on their web sites to well-established businesses. Transference is based on balance theory (Heider 1958). This study focuses on the vendor strategy of trying to increase consumer trust by placing icons on their web sites from “trusted” third parties, such as the CPA society, Consumer Reports, or Trust-e (which certifies that the vendor has a privacy policy). While this is becoming an increasingly common strategy, there is little empirical evidence that these icons do, in fact, increase consumer trust. One objective of this research is to evaluate experimentally the effectiveness of these icons in promoting consumer trust in web-based businesses.