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

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

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.

Electronic word of mouth, Information diversity, Performance, Reputation, Social media communities, Valence
0969-6989
Ilavarasan, P. Vigneswara
602da488-74aa-4ba1-8ebd-3233dd8dee1c
Prabhakar, Guru
50ab5bb3-e9bb-4a0f-8668-8a8324d1a835
Baabdullah, Abdullah M.
c50b6195-9dbb-409b-b0d5-db0565a3e764
Nisar, Tahir M.
6b1513b5-23d1-4151-8dd2-9f6eaa6ea3a6
Ilavarasan, P. Vigneswara
602da488-74aa-4ba1-8ebd-3233dd8dee1c
Prabhakar, Guru
50ab5bb3-e9bb-4a0f-8668-8a8324d1a835
Baabdullah, Abdullah M.
c50b6195-9dbb-409b-b0d5-db0565a3e764
Nisar, Tahir M.
6b1513b5-23d1-4151-8dd2-9f6eaa6ea3a6

Ilavarasan, P. Vigneswara, Prabhakar, Guru, Baabdullah, Abdullah M. and Nisar, Tahir M. (2019) Up the ante: Electronic word of mouth and its effects on firm reputation and performance. Journal of Retailing and Consumer Services. (doi:10.1016/j.jretconser.2018.12.010).

Record type: Article

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.

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PaperReputation2018_V12 - Accepted Manuscript
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More information

Accepted/In Press date: 23 December 2018
e-pub ahead of print date: 17 January 2019
Keywords: Electronic word of mouth, Information diversity, Performance, Reputation, Social media communities, Valence

Identifiers

Local EPrints ID: 427868
URI: https://eprints.soton.ac.uk/id/eprint/427868
ISSN: 0969-6989
PURE UUID: e902c8b7-4fab-4dfa-a306-3759f1c96f08

Catalogue record

Date deposited: 30 Jan 2019 17:30
Last modified: 13 Mar 2019 17:37

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Contributors

Author: P. Vigneswara Ilavarasan
Author: Guru Prabhakar
Author: Abdullah M. Baabdullah
Author: Tahir M. Nisar

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