Ethical reciprocity in digitalized transactions: An empirical study of pre- and post-contractual behavior

Abstract

Are unethical e-service providers more tolerant of disloyal users? Only a few studies have been done on the attitude of the e-service providers who behave unethically. This research intends to fill this gap in current literature. We identify two different perspectives, behavior consistency and ethical reciprocity, in explaining the attitude of e-service providers towards their users who have breached the service contracts. We further investigate such attitude in respect of the perceived mutual commitment between these providers and their users. We test our propositions by a survey on financial e-service providers and our findings support the perspective of ethical reciprocity.

Introduction

One of the primary concerns in business ethics is whether the market competition brought on by globalization will lead to shadier business conduct in the future (Brass et al., 1998, Chonko and Hunt, 1985, Stead and Gilbert, 2001, Trevino et al., 1999). The Internet, which enables customers and e-service providers to make contacts directly but virtually, will further complicate the issue of unethical business behavior (Babakus, Beinstock, & Van Scotter, 2004a). This complexity is an inevitable result of the dependence of e-commerce on the exchange of spontaneous and hard-to-authenticate information, especially when the customers and the e-service providers are physically separated and possibly in different time zones (Stead and Gilbert, 2001, Zwass, 1996).

E-services are on-line interactive services provided to customers, who are described as e-customers, through the Internet by using advanced telecommunications, information, and multimedia technologies (Boyer et al., 2002, Roth and Menor, 2003, Zemke and Connellan, 2000). Examples of e-service are on-line brokering, banking, and music download, etc. E-services provide easy access to search for relevant information about products and services efficiently, inexpensively and effectively (Sarathy and Robertson, 2002, Zemke and Connellan, 2000).

Current literature has focused primarily on the ethical challenges posed by e-services in the seduction of getting potential customers with some misdirected marketing practices, as well as misusage of transaction information of customers by the e-service providers (Barclay et al., 2003, Maury and Kleiner, 2002). It is not unusual that the digital information presented on the web does not fully present the actual facet of the services/products. In addition, the collected information through e-commerce is not kept or utilized in a proper manner, which will very likely violate the information privacy legislations. Some customers even download and transfer the paid information services, such as MP3-formatted music, to their friends at practically zero cost. It is a clear violation of the copyright laws and will also break the contract between the customers and the e-service providers. Literature, however, tells very little about such exchange relationship, especially about the unethical behavior practiced by both e-services suppliers and their customers.

We start our investigation of e-commerce ethics by focusing on a very important research question – to what extent will the pre-contract unethical behavior of e-service providers be related to their post-contract follow-up actions when their customers are in breach of contracts? In other words, do unethical e-service providers tend to be more (or less) tolerant of disloyal e-customers? From literature, we observe that there are two diverse views about the issue: behavior consistency and ethical reciprocity. On one hand, it is argued that when e-service providers adopt unethical means to solicit customer contracts, they are unlikely to be sympathetic to customers. Because of the consistency in their behavior, these firms will tend to take some harsh actions to prevent the possible breach of contracts by customers, since they have been practicing unethical marketing measures in the first place.

On the other hand, we observe that some e-service providers who have acted unethically to solicit contracts may be very lenient in treating customers who breach the contracts. This leniency is in line with the concept of ethical reciprocity and can be regarded as a form of compensation offered by e-service providers to make up for their previous unethical behavior (Fehr & Gächter, 2003). In the light of these two diverse views, it is a dilemma that an unethical e-service provider will take different attitudes toward a customer who breaches the contract. In addition, our review on the literature (e.g. Carlton, 1986, Holm et al., 1999, Levinthal and Fichman, 1988) further suggests that the impact of the intrinsic beliefs (behavior consistency or ethical reciprocity) of the e-service providers will also be moderated by their views on the importance of mutual commitment. We contribute to the literature by identifying two alternative perspectives of the relationships between pre- and post-contractual behavior. We validate our propositions through a survey of 150 e-service providers in the banking sector in China and our findings support the perspective of ethical reciprocity.

This paper is organized as follows. First, we review the literature on behavior consistency and ethical reciprocity. Based on literature, we propose two alternate hypotheses. We take a further look at the issue by incorporating the moderating effects of perceived mutual commitment of e-suppliers. We then present our research methodology, followed by findings and discussion, and finally we provide some recommendations in the conclusion section.