Melanie Fritz 3
Trust and Risk in Business Networks:
Towards a Due Diligence for Electronic Commerce
Melanie Fritz
Division of Business Management, Organization and Information Management,
Department of Food and Agricultural Economics, University of Bonn,
Meckenheimer Allee 174, D-53115 Bonn, Germany,
[email protected]
Abstract
This paper develops a due diligence for electronic transactions with new partners in business
networks with complex goods such as food products to enable the use of e-commerce poten-
tials in first time transactions. The e-commerce due diligence is a means to reduce perceived
risks and uncertainties for businesses and create trust and confidence in the electronic transac-
tion with appropriate information. The paper presents a conceptual framework for the due dili-
gence integrating the principles of transaction decision making and the four phases of a
transaction process. The operationalization of the framework assigns trust signals and control
elements to the four process phases to be communicated during the process.
Keywords: Trust, risk, electronic commerce, first time transactions, due diligence, food net-
works
1 Introduction
Business networks are situations where companies in principle act in relatively stable relation-
ships where complex products are exchanged along the production chain and where the prod-
uct quality is difficult to analyze and needs explanations. However, dynamic changes in the
supply or demand situation repeatedly force companies to start new relations to open new sup-
ply sources and to find new markets for their products. E-commerce with its potentials for mar-
ket transparency and transaction efficiency opens a wide range of opportunities to start new
business relations. Transactions with new partners in general involve various uncertainties and
risks, though. This is particularly true for complex products such as, e.g., food products. E-
commerce is often considered as anonymous, which enhances the perception of risks and
uncertainties as opposed to the traditional way of starting new relations where decision makers
often rely on their personal impression of a potential business partner.
To reduce risk and uncertainties in transactions with a new partner, many different kinds of
information need to be communicated between seller and buyer to create trust and confidence
in the transaction process and to lead to decisions for the transaction. This information
includes, a.o., hard information about product characteristics and production methods as well
as soft information such as the impression of a potential partner. In e-commerce environments
being based on information and communication technology, the support and provision of new
potentials of information and communication is inherent. It offers a wide range of opportuni-