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Electronic Commerce and Data Privacy 215 interchange (EDI). More often, though, e-commerce is simply thought of as the buying and selling of goods and services through the Internet, particularly the World Wide Web (WWW). The two most common forms of e-commerce are labeled business-to-consumer (B2C) and business-to-business (B2B) e-commerce. B2C e-commerce may be thought of as the basic type of e-commerce because it was first exploited by retail “e-businesses” such as Amazon.com, eTrade, and eBay that were created as Internet-only versions of traditional bookstores, brokerage firms, and auction houses. These e-businesses could deliver almost unlimited content on request and could react and make changes in close to real time because of the freedom from the geographic confines and costs of running actual stores (Buckley, 1999). These factors soon caused traditional “brick and mortar” stores to launch their own online stores (e.g., Barnes and Noble, Merrill Lynch, Southebys). B2B e-commerce has many of the same advantages that hold for B2C ecommerce organizations such as the ability to increase the services they can offer their business customers. Internet technology has helped create new relationships and to streamline and augment supply-chain processes. The roles of logistic and financial intermediaries (e.g., FedEx, UPS, American Express) are expanding as these changes are occurring (Buckley, 1999). E-commerce is not without risks or barriers. Market conditions constantly change as new competitors can easily enter the market with new business models. Customer loyalty is fleeting, as competitors are only a mouse click away. Competitive advantage is short-lived, as traditional barriers are rendered irrelevant by technological advances (Oracle, 1999). One risk that has received a lot of attention recently concerns the privacy and security of personally identifiable information (PII) transmitted over the Internet and stored by the organization collecting the data (Hoffman, Novak, & Chatterjee, 1993). PRIVACY According to Westin (1967), privacy is “the claim of individuals, groups or institutions to determine for themselves when, how, and to what extent information about them is communicated to others.” Information privacy can be thought of as “the ability of the individual to personally control information about one’s self” (Stone, Gardner, Gueutal, & McClure, 1983). Personal information privacy has become one of the most important ethical issues of the information age (Culnan, 1993; Mason, 1986; Smith, 1994). Data privacy is a major issue facing nearly every business in every country in the world. Over the past several years, many surveys have found consistently high levels of concern about privacy (Cranor, Reagle, & Ackerman, 1999; Culnan, 1993; GVU, 1998; Harris Louis and Associates & Westin, 1991, 1994, 1996; Louis Harris & Associates, Inc., 1999; Milberg, Burke, Smith, & Kallman, 1995; Smith, Milberg, & Burke, 1996). This attention to the data privacy issue has been brought about, in Copyright © 2003, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.
216 Henderson, Snyder and Byrd part, by the increasing impact of information technologies (IT) such as the Internet on daily life and by recent media attention (Smith, 1993). The European Union’s (EU) Data Protection Directive also has contributed to the concern over the protection of an individual’s data privacy. The directive was enacted to protect European citizens from privacy invasions. One of the major provisions of the directive prevents the transfer of personal data to countries whose privacy laws or policies do not measure up to those of the EU. The United States is especially concerned about the implications the directive will have on trade with Europe (Santosus, 1998). The 2-year negotiations between the US Department of Commerce and the European Commission’s (EC) Internal Market Directorate resulted in the EC finally accepting the US “safe harbor” principles, which are supposed to meet the test of the European directive in protecting personal data (LaRussa, 2000; Mogg, 2000). Even with the satisfactory outcome of the EU and US negotiations, consumers and the Federal Trade Commission (FTC) have pushed and will continue to focus on the issue of data protection in the US as rumors surface that the FTC is ready to recommend new regulations to protect online privacy (Schwartz, 2000). This is a complete turnaround from their prior position that self-regulation is the method of choice. Online Privacy There have been several recent studies that addressed the issue of online privacy. The FTC conducted three studies between 1998 and 2000. These studies found that most Web sites collected personal information from consumers and most had not implemented the fair information practice principles originally outlined by the 1998 study (FTC, 1998, 1999, 2000). Culnan (1999a, 1999b) conducted two studies that revealed that once again most Web sites collected personal information while only a limited percentage implemented all of the fair information practice principles. What these studies do not show, however, is how consumers view efforts to protect their personal data on their behalf. This study examines the variables that affect consumer views of privacy, the importance of privacy policies, and whether governmental or self-regulation is more desirable. RESEARCH MODEL AND HYPOTHESES The research model proposed for this study is shown in Figure 1. The model considers the interrelationships among several factors based on the literature. The following sections describe each component of the proposed model and develop associated hypotheses. Copyright © 2003, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.
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The Economic and Social Impacts of
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