Geographical Pattern of Online Word-of-Mouth: How Offline Environment Influences Online Sharing

48 Pages Posted: 9 Dec 2019 Last revised: 8 Oct 2021

See all articles by Tianshu Sun

Tianshu Sun

Cheung Kong Graduate School of Business; University of Southern California - Marshall School of Business

Yanhao 'Max' Wei

University of Southern California - Marshall School of Business

Joseph Golden

Collage.com

Date Written: October 7, 2021

Abstract

We study the geographical pattern of online word-of-mouth (WOM). Specifically, we examine whether and how customers' local environment influences the generation and direction of online WOM. Leveraging a unique research design, we measure the online WOM at a U.S. national e-commerce platform by tracking the WOM referral decisions of customers in over 240,000 purchases. In parallel, we measure the local environment of customers by combining a range of proprietary and public data sources (Facebook, Census, ESRI, and SCCBS). This includes the offline social environment (e.g., friend visiting frequency, neighbor interactions, and population mobility), online social environment (e.g., Facebook ties), and local historical sales across geographical areas. We build a stylized theoretical framework based on customer sharing motives and social networks to guide our empirical examination. While digital technologies have enabled customers to share without physical boundaries, we find that location still plays significant roles in the generation and direction of online WOM. First, a customer's offline social environment significantly explains the generation of online referrals (whereas local characteristics known to drive online sales do not positively explain the referral generation). Second, online referrals are largely bounded locally (e.g., 47% within 10 miles), and referrals in areas with more local social interactions are more likely to stay local. Third, even when referrals travel far, they are more likely to point at destinations socially similar to the origins. Our findings have important implications for firms in allocating resources across geographical areas as well as using referral directions as signals to identify high-potential geographical markets.

Keywords: Word-of-Mouth, Online Sharing, Offline Environment, Referral, Internet and Geography, E-commerce, Facebook

Suggested Citation

Sun, Tianshu and Wei, Yanhao and Golden, Joseph, Geographical Pattern of Online Word-of-Mouth: How Offline Environment Influences Online Sharing (October 7, 2021). USC Marshall School of Business Research Paper Sponsored by iORB, No. Forthcoming, Available at SSRN: https://ssrn.com/abstract=3497493 or http://dx.doi.org/10.2139/ssrn.3497493

Tianshu Sun (Contact Author)

Cheung Kong Graduate School of Business ( email )

1017, Oriental Plaza 1
No.1 Dong Chang'an Street
Beijing
China

University of Southern California - Marshall School of Business ( email )

3670 Trousdale Parkway
Bridge Hall 310B
Los Angeles, CA 90089
United States

Yanhao Wei

University of Southern California - Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA California 90089
United States

Joseph Golden

Collage.com ( email )

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