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, while 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 to dominant passive practices, thereby refining the conceptualization of privacy transparency. Through two-stage experiments, we simultaneously explore the immediate and non-immediate 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 non-immediate 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 reconcile 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.