Implications of Online Social Activities for E-Tailers’ Business Performance

Abstract

The popularity of social networking websites has spurred wide applications of socializing functions in online marketplaces, making them social commerce platforms. In the effort of promoting business and building brand, a large number of small-sized online retailers (e-tailers) increasingly rely on online socializing initiatives to stay in touch with peers, exchange social information with past and potential buyers, and seek and contribute knowledge in online communities. However, whether and how online socializing efforts enhance e-tailers’ business performances have yet to be systematically examined. Grounded in social capital and social network theories, a typology of e-tailers’ online social activities is proposed. The typology takes into consideration two distinguishing features of e-tailers’ online social activities: the decoupling of friend-making activities and knowledge exchanging activities in online marketplaces and the traceability of the directionality of the activities.

Using data collected from a large electronic commerce platform in China, we show that: (1) e-tailers’ friend-making activities improve their business performance, regardless of the directional attribute of the activities; (2) sharing knowledge increases e-tailers’ business performance; seeking knowledge without properly sharing decreases e-tailers’ business performance. Theoretical and practical implications of e-tailers’ online social activities are discussed.

Keywords: E-tailer, online retailer, social network, social commerce, friendship tie, advice tie, social capital

JEL Classification: M31, M37, L15, L86