The impact of firms’ social media initiatives on operational efficiency and innovativeness
| Author | Hugo K.S. Lam,Andy C.L. Yeung,T.C. Edwin Cheng |
| Published date | 01 November 2016 |
| DOI | http://doi.org/10.1016/j.jom.2016.06.001 |
| Date | 01 November 2016 |
The impact of firms’social media initiatives on operational efficiency
and innovativeness
Hugo K.S. Lam
a
, Andy C.L. Yeung
b
,
*
, T.C. Edwin Cheng
b
a
Management School, University of Liverpool, UK
b
Department of Logistics and Maritime Studies, The Hong Kong Polytechnic University, Hong Kong
article info
Article history:
Received 12 November 2015
Received in revised form
24 May 2016
Accepted 1 June 2016
Available online 15 July 2016
Accepted by: Daniel R Guide
Keywords:
Social media
Operational efficiency
Innovativeness
abstract
Social media have been increasingly adopted for orga nizational purposes but their operational impli-
cations are not well understood. Firms’social media initiatives might facilitate information flow and
knowledge sharing within and across organizations, strengthening firm-customer interaction, and
improving internal and external collaboration. In this research we empirically examine the impact of
social media initiatives on firms’operational efficiency and innovativeness. Taking the resource-based
view of firms’information capability, we consider firms’social media initiatives as strategic resources
for operational improvement. We posit that firms’social media initiatives enhance dynamic knowledge-
sharing routines through an information-rich social network, leading to both operational efficiency and
innovativeness. Collecting secondary data in a longitudinal setting from multiple sources, we construct
dynamic panel data (DPD) models. Based on system generalized method of moments (GMM) estimation,
we show that firms’social media initiatives improve operational efficiency and innovativeness. We
identify the importance of an information-rich social network to the creation of knowledge-based
advantage through firms’social media initiatives, and discuss the theoretical and managerial implica-
tions from the perspective of operations management.
©2016 Elsevier B.V. All rights reserved.
1. Introduction
Marching beyond personal or individual usage, social media
have been increasingly adopted for organizational purposes such as
operations and innovation management (Kiron et al., 2012). For
instance, Starbucks has launched a social media platform called My
Starbucks Idea to enable customers to participate in developing
new drinks and flavors (Gallaugher and Ransbotham, 2010), and
Caterpillar has adopted the Spredfast social media platform to
facilitate coordination and collaboration across its internal de-
partments and extended dealer network (PR Newswire, 2012).
Recently, Kane et al. (2014) reported that 87% of maturing com-
panies used social media to spur innovation while 60% integrated
social media into their operations.
In fact, making strategic use of social media is at the top of many
firms’agenda. Firms are now considering social media as an
approach to amplify the word of mouth of their products, a channel
to keep customers in contact, and a chance for direct sales and
marketing (Gamboa and Gonçalves, 2014).While the importance of
listening to customers has been well recognized, especially under
the quality management principle, the rapid-developing social
media technologies empower customers, strengthen firm-
customer connection, and provide opportunities for operational
improvement. Forexample, it was reported that large banks such as
the Bank of America actively turned “online rants into compli-
ments”and used social media to “reach out to clients or employees
to head off problems”(Epstein, 2011, p. P9). Tapping text analytic
methods to search for customer feedback, social media technolo-
gies enabled Wendy’sto“report on customer experiences down to
the store level within minutes”(Henschen, 2010). Social media
have also changed the way in which individuals contact and learn
about firms’offerings (Rishika et al., 2013). A firm’s capability in
facilitating information flow quickly through customer feedback
and interaction is increasingly critical for business success.
Social media provide a platform for experience sharing,
knowledge accumulation, and organizational learning (Nguyen
et al., 2015). Corporate discussion forums (CDS) of organizations
enable firms to gather a particular group of customers and other
*Corresponding author.
E-mail addresses: hugolam@liverpool.ac.uk (H.K.S. Lam), andy.yeung@polyu.
edu.hk (A.C.L. Yeung), edwin.cheng@polyu.edu.hk (T.C.E. Cheng).
Contents lists available at ScienceDirect
Journal of Operations Management
journal homepage: www.elsevier.com/locate/jom
http://dx.doi.org/10.1016/j.jom.2016.06.001
0272-6963/©2016 Elsevier B.V. All rights reserved.
Journal of Operations Management 47-48 (2016) 28e43
stakeholders with diverse backgrounds to discuss organization-
specific issues, work collaboratively, and create new ideas. The
term “open innovation”refers to a system whereby innovation is
not primarily undertaken by a specific research unit, but rather is
developed publicly (Martini et al., 2014). By allowing ideas to
generate dynamically through social networks and clusters, firms
enjoy collective inventions characterized by fast knowledge accu-
mulation and rapid product development rates.
Social media also enhance knowledge sharing within organiza-
tions through social networking of internal staff members (Cao
et al., 2015). Internal social media platforms enhance effective
organizational communication by providing employees across
geographical locations with a forum for posting job updates, asking
questions, and sharing best practices. Intra-organizational
communication facilitates information exchange and knowledge
assimilation, improving cross-functional coordination and man-
agement. For example, GE relied on Colab, its internal social media
platform, to connect its 60,000 knowledge workers worldwide,
enabling them to get “together to solve problems and share best
practices”(Goulart, 2012,p. 14). Facilitating information flow across
organizations, social media also allows business partners to have
unprecedented access to vast volumes of external knowledge
sources, improving business intelligence across organizations and
supply chain networks.
Although anecdotal evidence suggests that firms can benefit
from their social media efforts in terms of operational efficiency
and innovativeness improvement (Cecere, 2010; Kane et al., 2014),
some practitioners worry about the potential drawbacks of
adopting social media in organizations. For instance, too much
social interaction on social media may disrupt work and distract
employees from work-related communication, resulting in lower
productivity (Leonardi et al., 2013); outflow of firms’information
and knowledge to external social networks via social media may
lead to leakage of confidential information and trade secrets,
hurting firms’intellectual property and innovativeness (Molok
et al., 2010). On the other hand, while the emerging social media
phenomenon has attracted much research attention in recent years
(Aral et al., 2013; Fader and Winer, 2012), little empirical evidence
is documented in the literature about the impact of firms’social
media initiatives on operational efficiency and innovativeness. Our
research fills this research gap.
We argue that social media facilitate firms’information flowand
knowledge sharing across internal and external social networks,
which enhance internal and external collaboration, and allow firms
to be more customer-oriented, contributing to operational effi-
ciency and innovativeness improvement. By strategically
enhancing information flow and knowledge acquisition, firms are
likely to improve their capability in new product/service develop-
ment and idea generation, leading to enhancement in both effi-
ciency and creativity (Li et al., 2014). To test our hypotheses, we
collected longitudinal performance data from 2006 to 2012 and
examined firms’social media initiatives in 281 organizations be-
tween 2006 and 2011(Section 3provides the details). Using system
generalized method of moments (GMM) estimation to analyze the
data, we show that social media initiatives improve firms’opera-
tional efficiency and innovativeness.
2. Theoretical background and hypothesis development
2.1. Social media initiatives
Social media are “a group of Internet-based applications that
build on the ideological and technological foundations of Web 2.0,
and that allow the creation and exchange of User Generated Con-
tent”(Kaplan and Haenlein, 2010,p. 61). With a view to capitalizing
on the content generated by their stakeholders (particularly exist-
ing and potential customers), firms increasingly adopt social media
for various organizational purposes such as marketing, operations,
and innovation management (Kiron et al., 2012), which we referto
as social media initiatives in this research. With reference to prior
studies (e.g., Kiron et al., 2013; Kane et al., 2014), we classify firms’
social media initiatives into six categories based on their different
business objectives as follows: 1) Employee collaboration and in-
ternal communication, 2) Inter-firm cooperation and supply chain
management, 3) New product development and idea generation, 4)
Public relations and corporate social responsibility, 5) Customer
service and customer relationship management, and 6) Sales and
marketing. Table 1 lists some examples in each category extracted
from our sample.
Although researchers have been paying increasing attention to
the emerging social media phenomenon in recent years, the
existing research focuses on studying the effects of social media
users’actions (Aral et al., 2013), rather than the outcomes of firms’
strategic use of social media (i.e., social media initiatives). For
instance, Forman et al. (2008) investigated the impact of consumer-
generated product reviews in an online community on firms’
product sale. Luo et al. (2013) studied the ability of consumers’
online ratings and blog posts to predict firms’equity value. Even
though some researchers have begun to examine firms’social
media initiatives directly (Gu and Ye,2014; Rishika et al., 2013; Wu,
2013), they focus on the consequences of firms’social media ini-
tiatives at the individual user level, rather than their impacts at the
firm level. For instance, Wu (2013) analyzed how a firm’s adoption
of social networking tool affects the work performance and job
security of individual employees. Gu and Ye(2014) examined how a
firm’s responses to customer comments on social media affect the
satisfaction of individual customers. Our research is an initial
attempt to investigate the impact of social media initiatives at the
firm level.
2.2. Social media initiatives, information capability and competitive
advantage
In a rapid-changing and fast-moving business environment, the
traditional static approach of knowledge-warehouse deployment
has undergone a paradigm shift towards a dynamic capability in
capturing knowledge through high-velocity, high-volume infor-
mation flow (Kankanhalli et al., 2005). Organizations that are able
to make use of external and internal information movements and
big data are likely to have knowledge-based advantage over their
competitors. Social media, which empower multi-way communi-
cation between organizations and their stakeholders in an efficient
and cost-effective manner (Chua and Banerjee, 2013),is considered
as a strategic approach to foster knowledge exchange among in-
dividuals and organizations, advancing organizational learning and
knowledge management, thus yielding a competitive edge
(Thomas and Akdere, 2013).
More generally, the impact of social media initiatives on firm
performance can be understood through the resource-based view
(RBV) of a firm’s information capability. RBV suggeststhat firms are
able to create competitive advantage through a complex, bundled
set of resources that are rare, valuable, inimitable, and non-
substitutable (Barney, 1991; Hitt et al., 2016b). Hitt et al. (2016b)
argued that RBV has become more important for OM research as
OM researchers are increasingly focused on a collective of organi-
zational routines within and across firms that reinforce each other
to create competitive advantage. Although information technology
by itself rarely contributes directly to a firm’s sustained competitive
advantage, it forms part of the firm’s operationally complex rou-
tines and capabilities (Wade and Hulland, 2004). Barney’s(1991)
H.K.S. Lam et al. / Journal of Operations Management 47-48 (2016) 28e43 29
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