competitive business environment

Companies rely heavily on large amounts of information to draw in new clients and strengthen relationships with existing ones in the present, fiercely competitive business environment (Appari and Johnson 2010, p. 104). The use of information technology, which makes it possible to access and use information in ways that were previously considered to be economically impossible, is another feature of the previous decades. Technology has enabled many organizations to easily record details of customer transactions, store vast quantities of transaction data and to use these data in executing marketing programs (Bashir et al. 2016). This research paper aims at assessing the impact of information privacy on business organizations.

Research Gap and Justification

Most businesses are motivated to invest in information security in order to safeguard their confidential data and the customers’ private information. Information privacy issues have frequently been reported over the past few years, an aspect which has raised questions about whether business organizations have the capability to safeguard private information (Acquisti, Friedman and Telang 2006). Tsai et al. (2011 p. 1) also denote that most consumers have also expressed concerns regarding a threat to their right to privacy since most businesses collect their personal data. This research aims at filling the research gap with regard to the impact of information privacy in business organizations since not much research has been undertaken in this area.

Problem Statement

Information privacy is a critical issue in the current technological world since the digital world has given rise to the collection of more and more consumer data. Business organizations need to understand that privacy concerns arise as a result of consumers not trusting companies with their personal details (Bashir et al. 2016). This lack of trust has led to privacy concerns which need to be addressed by businesses in order to create stable and ultimately profitable relationships with customers (Brown and Muchira 2004, p. 62). This research paper seeks to assess this problem of information privacy in relation to how business organizations can handle privacy concerns.

Research Question

What is the impact of information privacy on business organizations?

Research Objectives

1. To determine the impact of protecting consumers’ information privacy to business organizations
2. To determine the impact of using consumers’ private information for market profiling
3. To determine whether the display of consumers’ private information causes privacy concerns

2.0 Literature Review

Theory and Framework

Prior research on the area of information privacy defines privacy in different contexts including the expectation of anonymity, fairness, confidentiality as well as control over personal information (Brown and Muchira 2004, p.64). Grama (2016) outlines three distinct information security concepts for maintaining information privacy which includes confidentiality, integrity, and availability. Confidentiality entails the protection of information from unauthorized access at all times while integrity is making sure the data in the information systems are accurate. Availability encompasses ensuring that information is always available when needed and the information systems are reliable. Privacy has also been broadly defined as an event encompassing the misuse of an individual’s personal information (Acquisti, Friedman and Telang 2006). With regard to information privacy and fairness, Appari and Johnson (2010, p. 106) denotes that consumers are likely to consider an information collection procedure as invasive if information is collected within an existing relationship, the information is relevant to the transaction, the information can be used to draw reliable inferences and they believe they have the ability to control the future use of this information. According to Brown and Muchira’s (2004) framework, consumer information privacy concerns can be subdivided into two basic sets of variables which include the contextual issues regarding the type of information and organization collecting the data and the individual differences between consumers. This study will focus on the privacy concerns with regard to the contextual issues.

Construct

The context of this research is on the impact of information privacy in business organizations and in this case the dependent variable is the business organization while the independent variables are; unauthorized access of data, invasion of privacy, and privacy errors.

Business organization

The dependent variable which is being tested and measured in this research paper is the business organization. The business organization is likely to be impacted if changes occur in the independent variables.

Unauthorized access of data

The unauthorized access of data is the first independent variable that affects the dependent variable which in this case is the business organization. The growth in technology has made unauthorized access to data easier since consumers’ data can move easily within the cyberspace which in turn impacts the business.

Invasion of privacy

Invasion of privacy is another independent variable which has an impact on the business. Evidence suggests that the lack of privacy protection has become a major consideration for consumers when undertaking transactions, especially with online businesses. Those consumers who have experienced an invasion of privacy are less likely to purchase products via the internet (Brown and Muchira 2004. P. 65).

Privacy errors

The third independent variable that impacts business organizations are the privacy errors which occur as a result of various business transactions with customers. These errors create a negative relationship between the consumers and the business organizations.

Hypothesis Development

From the literature, information privacy is an important aspect of the business, and its invasion can negatively impact an organization. There are three major hypotheses for this research regarding the impact of information privacy on business organizations (Brown and Muchira 2004).

H1: There exists a significant negative relationship between the attitudes of consumers towards unauthorized access of their personal data and their purchasing habits

H2: There exists a significant negative relationship between the invasion of consumers’ privacy and their purchasing habits

H3: There exists a significant negative relationship between the consumers’ experience of inaccuracy or manipulation of their personal data and their purchasing habits

Conceptual Model

The conceptual model illustrates the relationship between the three independent variables; unauthorized access to information, invasion of privacy and privacy errors and the dependent variable; business organization. It indicates the impact of these privacy violations on the business organization, especially on the customers’ purchasing habits.

Figure 1: Conceptual model

3.0 Methodology

Research Design

The research design applied in this particular study as the overall strategy for integrating different components of the study in a coherent and logical manner is the qualitative study. A qualitative research design was used in this study to ensure that the research adequately addresses the research problem and is sufficient for the collection, measurement, and analysis of data. This qualitative research adopted an experimental design and made use of a tool called privacy finder to answer the research questions (Tsai et al. 2011). The privacy finder is a search engine tool that makes use of search results by graphically representing how well the privacy policy of a website matches the user preferences. This tool also generates privacy reports for that information which is of greatest concern to the users (Tsai et al. 2011, p. 9).

Sampling Design

The sampling design consists of the rules and procedures by which particular elements of the population are incorporated in the sample. In this research study, data collection was done using survey questionnaires that accumulated a convenience sample of about 200 consumers from New York City. The sample selected was relatively homogenous with regard to lifestyles and the demographics thus enhancing the internal validity. However, this sample might have reduced the research’s external validity. This convenience sample is appropriate since this study does not purpose to provide interval estimates of the variables but to test their relationship.

Questionnaires Design

In collecting data, questionnaires were used which combined both multivariate and univariate measurements and other measures of the major demographic factors. The dependent variable, business organizations was assessed using a single item measure which indicated the number of times a consumer had purchased a product and paid through the internet. In measuring unauthorized access to consumer data, a scale was replicated from Brown and Muchira (2004) who developed it to measure factors that affect confidentiality in market research. In this study, the scale was modified to give a reflection of the confidentiality of personal information from the internet. The measurement of privacy invasion was measured on a three-item scale. This scale measured privacy concerns of consumers not related to transactions. These scales were deemed appropriate for this particular research study after analyzing them for face validity. Previous studies have also found the use of these scales as reliable (Brown and Muchira 2004; Economics 2010; Palmer 2010). The operationalization of errors in recorded data, a measurement was undertaken to assess whether consumers had been in a situation where their details were altered via a nominal univariate item.

Data Collection Method Survey

The study developed an online concerns survey with the aim of solving two high-level questions. The first question was to assess the various types of privacy concerns for individuals when shopping online as well as the risk these individuals link with these concerns. This was important in designing an experiment whereby these concerns would be addressed. The second question was to assess the types of products which may lead to privacy responses during a purchasing scenario.

Data analysis method

A preliminary data analysis was done in order to prepare the data for further analysis, describe some of its main features as well as summarize the results. Various approaches were applied including non-response bias analysis while preparing this data for analysis. The research hypothesis was tested using a three-way variance analysis (ANOVA). The survey questionnaires also combined both multivariate and univariate measurements as well as other measures of the major demographic factors.

Research ethics

The research ethics entails a set of ethics governing how scientific and other research studies are undertaken. Whenever we think of research ethics, we are usually inclined to those issues arising as a result of the use of human or animal subjects, which might not necessarily be the case. One of the issues regarding research ethics arising from this research is honesty and integrity (Palmer 2010). This research encompassed an honest reporting in relation to the methods used and data collected. The research was also as objective and unbiased as possible in its design, data analysis, and interpretation. A lot of care was also taken during the research, intellectual property respected and confidentiality maintained.

4.0 Data Analysis and Findings

In the data analysis, a three-way ANOVA analysis of variance was adopted to test the three research hypothesis. The dependent variable was business organizations while the independent variables were unauthorized use of consumer information, privacy invasion, and privacy errors. Out of the 200 questionnaires issued out, there was a response rate of about 88.6% with ninety respondents being male and the rest female. This represented an almost equal gender distribution thereby indicating that there was no gender bias in the research. The scales for the attitudes towards privacy invasion and unauthorized use of consumer information demonstrated an acceptable level 0.6. According to Cronbach’s alpha measures, this is an acceptable level when it comes to social research (Brown and Muchira 2004, p. 67). The first hypothesis was that there is a significant negative relationship between the attitudes of consumers towards unauthorized access to their personal data and their purchasing habits. The summed mean from this hypothesis was analyzed in order to determine whether there was any significance in the relationship. It was found out that there was no significant relationship and therefore the first hypothesis was rejected.

The second hypothesis stipulated that there is a significant negative relationship between the invasion of consumers’ privacy and their purchasing habits. The summed mean from this hypothesis was analyzed in order to determine whether there was any significance in the relationship. It was found out that there is a significant relationship which suggested that consumers are generally highly concerned with being contacted by companies without giving them a prior permission. The results from ANOVA analysis demonstrated the presence of a significant relationship between privacy invasion and the consumers’ purchasing habits. The third hypothesis suggested that there is a significant negative relationship between the consumers’ experience of inaccuracy or manipulation of their personal data and their purchasing habits. The extent to which consumers’ personal data had been altered or manipulated was measured using a single, univariate item. The findings denoted that there is a strong relationship between the alterations of consumers’ personal data and their purchasing ability. The study found no significant interactions between the independent variables.

5.0 Conclusions

Conclusions of Hypothesis and Research Questions

This study was undertaken to fill a research gap since not much research has been undertaken to examine information privacy in relation to its impact on online business organizations, especially with regard to customers’ purchasing habits. A majority of the research that has been undertaken has been on the examination of the unauthorized secondary use of data with regard to direct marketing. According to the literature, confidentiality of consumers’ information is one of the major privacy concerns that is highly regarded by most consumers. For instance, a majority of consumers get very concerned when private and confidential information regarding their personal and financial information records is shared or sold to other individuals or companies. However, one of this study’s hypotheses regarding the unauthorized use of data was found not to have a major impact on the purchasing habit of individuals. The low mean reported from respondents suggested the lack of an overall strong feeling for this particular variable. Many consumers are clearly concerned with this particular aspect although it appears as though the concern is not that great and thereby cannot deter the consumers from making purchases. There might be various possible explanations for this outcome including aspects such as the age of the sample selected. According to Brown and Muchira (2004 p.68), various studies denote that age is a crucial consideration when analyzing privacy concerns since the younger age groups do not have many privacy concerns as compared to the older population. Another possible explanation can be that the consumers have already adapted to this phenomenon to some extent through their experiences in traditional marketing channels such as direct mail. It is common for consumers’ mailing lists to be made available to third parties without prior awareness of the consumers on who exactly gave out their details. This can be viewed as an acceptable though the commonly disagreeable way of undertaking business.

Implications of the Research

Theoretical implications

The theoretical implications of this research are that theory from marketing disciplines, and information systems need to be incorporated into the study of information privacy issues. This research denotes that business organizations should incorporate theory in learning how to guarantee the confidentiality of consumer data and information. However, business organizations should realize that passing consumers’ information may not necessarily negatively impact the purchasing habits. Moreover, businesses may unlock additional revenue streams when such data is sold to interested parties with much impact on the business’ conventional sales. In interpreting these results, caution needs to be applied since some customer segments may be more sensitive to the unauthorized use of consumer information as compared to others. There is a need for further research to find out those consumers and products that are likely to be more sensitive to the resale of consumers’ information.

Managerial implications

There are clear managerial implications for this research study especially for business organizations engaged in online retailing. Whenever business organizations wish to sell their products through online means, it is important for them to carefully select communication channels. It should be noted that spam e-mails are unlikely to be effective marketing strategies unless the contact can be traced back through legitimate means. There are high chances that consumers will disregard any prompt to purchase the business’s products through spam email marketing. Furthermore, the consumers may become hostile to that particular firm thus limiting the possibility of creating mutually beneficial relationships. The current research certainly supports the concept of permission research.

Drawing from the third hypotheses, those consumers with a bad prior experience with regard to erroneous alteration of their data are likely to demonstrate lower levels of purchase. This hypothesis supports previous research which denotes that the consumers are more concerned with what business organizations do with the information collected as well as the accuracy of the data they use (Brown and Muchira 2004, p. 68). This implies that managers should put more efforts on making sure they accurately record and store data regarding their consumers. One good example of an erroneous information privacy mistake that might make consumers offended is sending an email to a consumer with a wrong title on it. The manner in which personal data is handled is, therefore, a critical matter to the management. Contacting consumers without their personal permission and maintaining inaccurate information highly influence the consumer habits and the overall business. It is, therefore, paramount for business organizations to take information privacy issues seriously in order to encourage loyalty and consequently boost sales. Most research suggests that the consumers’ purchasing decisions are affected by many factors including to some extent privacy concerns. Therefore, it should be known that consumers need to be convinced that there are more real benefits before accepting their privacy to be intruded.

Limitations of the Research

This research study is not without limitations, and one of them is that it relies on a sample population from New York City with varied age groups and as a result, it may be difficult to generalize this sample population to the entire population. It can also be denoted that privacy concerns differ across age groups with the younger population having lesser privacy concerns as opposed to the older population. However, drawing from the two supported hypotheses out of the three, the results may be tentatively generalized to the entire population. Moreover, this was an exploratory study which purposes to establish any significant relationship between privacy concerns and the consumers’ purchasing habits. Another important limitation is with regard to the measurement of the consumers’ attitudes towards information privacy in general. The consumers are likely to behave differently when making decisions on whether to purchase products from specific companies or regarding product categories.

Recommendations for Future Research

One recommended area for future study is on the use of a random representative sample which is likely to provide different results from the ones in this particular study. Another area of future research is on the response of consumers to specific companies with respect to privacy concerns.

References

Acquisti, A., Friedman, A. and Telang, R., 2006. Is there a cost to privacy breaches? An event study. ICIS 2006 Proceedings, p.94.

Appari, A. and Johnson, M.E., 2010. Information security and privacy in healthcare: current state of research. International journal of Internet and enterprise management, 6(4), pp.279-314.

Bashir, M., Xu, H., Lambert, A. and Huang, H.Y., 2016. Information Privacy: Current and future research directions. iConference.

Brown, M. and Muchira, R., 2004. Investigating the relationship between Internet privacy concerns and online purchase behavior. Journal of Electronic Commerce Research, 5(1), pp.62-70.

Economics, L., 2010. Study on the economic benefits of privacy enhancing technologies (PETs). Final Report to the European Commission DG Justice, Freedom and Security, London.

Grama, J.L., 2016. Understanding information security and privacy in postsecondary education data systems.

Palmer, D.E. ed., 2010. Ethical Issues in E-Business: Models and Frameworks: Models and Frameworks. IGI Global.

Tsai, J.Y., Egelman, S., Cranor, L. and Acquisti, A., 2011. The effect of online privacy information on purchasing behavior: An experimental study. Information Systems Research, 22(2), pp.254-268.