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250 Pavlou
taken advantage of from the other firm (Anderson and Weitz, 1989) and improves
favorable impressions for the other firm (Anderson and Narus, 1990). Since signals
and incentives were shown to build trust and reduce fears of moral hazard and
adverse selection, trust should also reduce perceived risks. Consequently, trust in
a firm’s credibility should diminish risk perceptions, predicting a negative relationship
between impersonal trust and perceived risk.
Anticipated Continuity
Anticipated continuity is defined as the perception of a firm’s expectation of
future transactions in a B2B exchange. There is significant evidence to suggest a
strong association between trust and a propensity to continue a relationship
(Morgan and Hunt, 1994). According to Ganesan (1994) trust is a necessary
ingredient for long-term orientation because it shifts the focus to future conditions.
Similarly, Morgan and Hunt found a negative relationship between trust and
propensity to leave, and also Anderson and Weitz (1989) showed that trust is key
to maintaining continuity in buyer-supplier relationships. Therefore, trust should be
associated with a firm’s intention to continue participating in a B2B exchange. Firms
participating in impersonal B2B exchanges usually make decisions based on
objective, calculative evidence (credibility), rather than subjective evaluations
(benevolence) since familiarity trust is rarely present. Nevertheless, anticipated
continuity should be affected by trust in a firm’s credibility, predict a positive
relationship between impersonal trust and anticipated continuity.
Pricing
A major reason for the existence of different prices is the need to compensate
some firms for reducing agency risks and transactions costs (Rao and Monroe,
1996). Therefore, in an efficient or dynamic pricing mechanism, firms need to
reward reputable firms with better prices to assure safe transactions, since
reputable firms are more likely to reduce transaction and agency costs. Similarly,
in B2B exchanges, trustworthy firms are likely to reduce such costs and receive
more favorable pricing. This phenomenon could be explained by the notion of
returns to reputation (Shapiro, 1983), where reputable agents tend to receive more
favorable terms. On the contrary, organizations tend to mandate compensation for
the risk they are exposed to when they transact with less reputable firms.
Consequently, differences in trust may cause different prices given a dynamic
pricing scheme. Pavlou and Ba (2000) empirically showed that differences in trust
perceptions affect price premiums and discounts in eCommerce auctions. Similarly,
in B2B exchanges with dynamic pricing schemes, impersonal trust is viewed as a
risk-reduction mechanism, allowing trustworthy firms to obtain more favorable
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