Up the ante: Electronic word of mouth and its effects on firm reputation and performance

Nisar, Tahir M.; Prabhakar, Guru; Ilavarasan, P.V; Baabdullah, A.M

Abstract

Prior management research on firm reputation has acknowledged the importance of word of mouth (WOM) in influencing key choices made by businesses, as well as by individuals. In recent developments, Internet-based WOM forums aggregate vast amounts of information relevant to firm strategy and operations. For example, online social media communities aggregate information generated by both the firm (i.e. firm-generated content FGC) and users (i.e. user-generated content UGC). We theorize that FGC and UGC generate reputation benefits for a company in the form of two intermediate information mechanisms: information diversity and valence. We first undertake a qualitative content analysis to investigate the extent to which FGC and UGC generate information diversity and valence. We then test the hypothesis that both information diversity and valence increase a firm’s financial performance. Our findings show that electronic WOM as transmitted through social media communities enhances a firm’s reputation and thereby its performance through both these effects (i.e. embedded information and valence). We thus fully delineate the determinants of ‘good reputation’ in these social environments. As part of our robustness checks, we also consider the impact of price and quality, the two specific FGC components, on firm performance. Our findings further confirm these relationships.

• Journal Article Type: Article
• Acceptance Date: Dec 23, 2018
• Online Publication Date: Jan 17, 2019
• Publication Date: Mar 1, 2020
• Deposit Date: Jan 15, 2019
• Publicly Available Date: Jul 18, 2020
• Journal: Journal of Retailing and Consumer Services
• Print ISSN: 0969-6989
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 53
• DOI: https://doi.org/10.1016/j.jretconser.2018.12.010
• Keywords: reputation, electronic word of mouth, social media communities, information diversity, valence, performance
• Public URL: https://uwe-repository.worktribe.com/output/853740
• Publisher URL: https://doi.org/10.1016/j.jretconser.2018.12.010
• Additional Information: Additional Information : This is the author's accepted manuscript. The final published version is available here: https://doi.org/10.1016/j.jretconser.2018.12.010.
• Contract Date: Jan 15, 2019