The causal relationship between risk and trust in the online marketplace: A bidirectional perspective

Trust and perceived risk have been identified as the two primary factors affecting engagement in online transactions. However, earlier studies have conceptualized the directionality of the causal link between these two factors differently. Some researchers have conceptualized trust as an antecedent to risk, while others see it as a consequence. To resolve this issue, we develop a bidirectional model in which trust and perceived risk mutually influence each other. We then test the ability of the bidirectional model to provide a more realistic explanation of buyers' decision-making than previously offered unidirectional models. In a sample of 747 experienced buyers in the online marketplace, we find a reciprocal and nearly equal effect of trust and perceived risk. The results of the study reveal that the direct effect of trust on transaction intention is highly significant, whereas that of perceived risk is insignificant. Based on these empirical findings, we discuss the implications of our research, including the appropriateness of our research question and several paradoxes identified in prior studies. (C) 2015 Elsevier Ltd. All rights reserved.