Mitigating Privacy Tension: The Role of Active Privacy Transparency in Privacy Granting, Trust Decline, and Negative Word-of-Mouth

Transparency—or lack thereof—in privacy practices is a growing privacy concern for users, firms, and policymakers. Despite its importance, privacy transparency suffers from divergent conceptualizations in prior literature and is often passively implemented in practice, making it ineffective and illusory for users. Moreover, although existing research primarily focuses on its immediate effects, findings remain highly inconsistent, and its long-term effects are largely underexplored, further limiting a holistic understanding of its overall influence. In this research, we first propose user-centric active privacy transparency by clarifying three defining features in comparison with dominant passive practices, thereby refining the conceptualization of privacy transparency. Through two-stage experiments, we simultaneously explore the immediate and nonimmediate effects of this transition from passive to active privacy transparency on firms, examining psychological contract violation (PCV) and privacy risk as underlying mechanisms, and users’ privacy knowledge as a moderator. The results show that active privacy transparency effectively prevents nonimmediate negative word-of-mouth and trust decline induced by future third-party news reports, and these impacts are mediated by PCV. Moreover, these positive long-term effects do not come at the immediate expense of heightening privacy risk or reducing permission granting. Furthermore, we find that this immediate outcome can be explained by users’ privacy knowledge, which serves as a boundary condition, providing fresh insights into reconciling previous inconsistencies. Overall, this study contributes to information systems (IS) privacy literature by providing a more overarching understanding of privacy transparency and suggesting a feasible way to balance user privacy considerations with companies’ multiple privacy needs.

History: Ravi Bapna, Senior Editor; David (Jingjun) Xu, Associate Editor.

Funding: This work was supported by the National Natural Science Foundation of China [Grants 72071177, 72571244, and 72394371], the Fundamental Research Funds for the Central Universities of China [Grant ZYGX2025WXJ004], and STI2030 Major Projects [Grant 2021ZD0200409].

Supplemental Material: The online appendix is available at https://doi.org/10.1287/isre.2023.0134.