Abstract

The paper reviews Georgia’s digital trust formation process and underlines the most important challenges for the online business sector. This research can be generalized for most developing countries where the digital transition process is on the agenda, especially for countries that have recently emerged from economic-political transition. Georgia has completed the transition from a centrally planned economic system (the heritage of being part of the Soviet Union) to a free market economy. Although trust in institutions is improving gradually, mistrust in business processes is still a great challenge for local business sectors. A wide-reaching lockdown caused by the 2020-2021 COVID-19 pandemic pushed both firms and individuals further towards online activity worldwide. In this regard, trust has become the key determinant in facilitating electronic transactions. Technological advances are providing dozens of tools to improve customer satisfaction and trust, which should lead to customer loyalty. On the other hand, lack of digital skills and digital security problems raises digital untrust concerns. Therefore, trust research in the digital economy is becoming more actual for academic or business studies. Digital trust is a multidimensional factor that is under the influence of digital and physical operations. In Georgia, businesses have to overcome obstacles built-in people’s minds as a heritage of the Soviet Union. Georgia was a part of the Soviet Union for 70 years, which critically degraded the trust of both formal and informal institutions. Therefore, building digital trust in business is getting more complex as it includes traditional trust problems and digital challenges too. The main research purpose in this paper is to present the digital trust forming process in Georgia to reveal the major problems. This study involved the trust stack model in analysing three different stages of trust formation in the Georgian digital economy (trust in the idea, trust in the platform, trust in the individual). The research identified challenges and steps which should be carried out soon. Research academic findings and methodological approaches can be used to analyze other developing countries whose economies are influenced by the digital transformation process.

Keywords: digital economy, digital trust, digital business, informal institutions, trust distribution.

JEL Classification: D02, O30, O17.

Cite as: Zhghenti, T., & Chkareuli, V. (2021). Enhancing online business sector: digital trust formation process. Marketing and Management of Innovations, 2, 87-93. https://doi.org/10.21272/mmi.2021.2-07

This work is licensed under a Creative Commons Attribution 4.0 International License

References

1. Arrow, K. J., & Hurwicz, L. (1972). An optimality criterion for decision-making under ignorance. Uncertainty and expectations in economics, 1. [Google Scholar]
2. Bhattacharya, R., Devinney, T. M., & Pillutla, M. M. (1998). A formal model of trust based on outcomes. Academy of management review, 23(3), 459-472. [Google Scholar] [CrossRef]
3. Botsman, R. (2017). Who can you trust?: How technology brought us together and why it might drive us apart. Hachette UK. [Google Scholar]
4. Botsman, R., & Rogers, R. (2010). What’s mine is yours. The rise of collaborative consumption. [Google Scholar]
5. Chakravorti, B., Chaturvedi, R. S., Filipovic, C., & Brewer, G. (2020). Digital in the time of COVID. Digital Planet, The Fletcher School at Tufts University. Retrieved from [Link]
6. Costabile, M., Raimondo, M. A., & Miceli, G. (2000). A dynamic model of customer loyalty. In IMP Conference, Bath, UK. [Google Scholar]
7. EU4Digital. (2021). Georgia. Retrieved from [Link]
8. Furlong, D. (1996). The Conceptualization of ‘Trust’ in Economic Thought. [Google Scholar]
9. Geostat. (n.d.). Information and Communication Technologies Usage in enterprises. Retrieved from [Link]
10. Geostat. (n.d.). Information and Communication Technologies Usage in Households. Retrieved from [Link]
11. Groenewegen, J. P. M. (2010). Institutional Economics, an introduction. Palgrave Macmillan. [Google Scholar]
12. Inglehart, R., Haerpfer, C., Moreno, A., Welzel, C., Kizilova, R., Diez-Medrano, J., Lagos, M., Norris, P., Ponarin, E., & Puranen, B. (2014). World Values Survey: Round Six – Country-Pooled Datafile Version. Retrieved from [Link]
13. Kasper, W., Streit, M. E., & Boettke, P. J. (2012). Institutional economics: Property, competition, policies. Edward Elgar Publishing. [Google Scholar]
14. Lee, J., & Moray, N. (1992). Trust, control strategies and allocation of function in human-machine systems. Ergonomics, 35(10), 1243-1270. [Google Scholar] [CrossRef]
15. Lee, M. K., & Turban, E. (2001). A trust model for consumer internet shopping. International Journal of electronic commerce, 6(1), 75-91. [Google Scholar]
16. Luhmann, N. (1988). Familiarity, confidence, trust: problems and alternatives in Gambetta D ed Trust: making and breaking co-operative relations Blackwell. [Google Scholar]
17. Mazzella, F., Sundararajan, A., d’Espous, V. B., & Möhlmann, M. (2016). How digital trust powers the sharing economy. IESE Business Review, 26(5), 24-31. [Google Scholar]
18. McKnight, D. H., Choudhury, V., & Kacmar, C. (2002). The impact of initial consumer trust on intentions to transact with a web site: a trust building model. The journal of strategic information systems, 11(3-4), 297-323. [Google Scholar] [CrossRef]
19. Möhlmann, M. (2016). Digital trust and peer-to-peer collaborative consumption platforms: A mediation analysis. Available at SSRN 2813367. [Google Scholar] [CrossRef]
20. North, D. C. (1999). Institutions, Institutional Change and Economic Performance, Washington University, St Louis, ch 1, 4, 5, pp. 3-11, 36-54. [Google Scholar]
21. Parker, G. G., Van Alstyne, M. W., & Choudary, S. P. (2016). Platform revolution: How networked markets are transforming the economy and how to make them work for you. WW Norton & Company. [Google Scholar]
22. Pavlou, P. A., Tan, Y. H., & Gefen, D. (2003). Institutional trust and familiarity in online interorganizational relationships. In Proceedings of the European Conference on Information Systems (ICIS) Naples, Italy. [Google Scholar]
23. Ratnasingam, P., Pavlou, P. A., & Tan, Y. H. (2002). The importance of technology trust for B2B electronic commerce. In 15th Bled Electronic Commerce Conference eReality: Constructing the eEconomy, Bled, Slovenia. [Google Scholar]
24. United Nations. (2020). E-Government Survey 2020 – Digital Government in the Decade of Action for Sustainable Development. Retrieved from [Link]
25. Urban, G. L., Sultan, F., & Qualls, W. (1999). Design and evaluation of a trust based advisor on the Internet. Interface. [Google Scholar]
26. Zhghenti, T. (2018). Trust in The Informal Institutions (The Case of Georgia). Proceedings of International Conference on Applied Research In Management, Economics and Accounting. Retrieved from [Link]
27. Zhghenti, T. (2019). The Importance of Trust in Informal Institutional Development Process (Case of Georgia). Proceedings of International Conference Management, Accounting, Banking, Economics and Business Research (ICMABEBR-19). Retrieved from [Link]