Introduction to the Special Issue: Business Value Creation Enabled by Social Technology
Karl R. Lang and Ting Li, Guest Editors
International Journal of Electronic Commerce,
Volume 18, Number 2, Winter 2013-14, pp. 5-10.
Abstract: Viewing social commerce as settings that offer users an electronic commerce platform to specifically support participation and co-creation activities, we present five rigorously conducted empirical research studies that quantitatively measure business value contributions generated from consumer co-creation activities. The studies are based on business data from five different social commerce settings: a social gaming site, an e-book recommendation system, a social news site, a social network fan page, and a social buying platform. The specific co-creation activities examined consist of, respectively, user collaboration in playing online games, user-driven book recommendations, implicit relationship building in social network communities, online discussions in a consumer brand community, and consumer coordination in social shopping.
Key Words and Phrases: business value, co-creation, consumer participation, empirical research, social commerce.
Social commerce has recently emerged as a key area within the larger field of electronic commerce, both in academic research and business practice. Liang and Turban have defined social commerce as electronic commerce arrangements that use a Web 2.0 infrastructure and social media technology applications to support online interactions and user contributions to assist in the acquisition of products and services [1]. Similarly, but more specifically, Zwass views social commerce as electronic commerce settings that offer users an online platform to support participation and co-creation activities [2]. Such social commerce platforms are designed to connect businesses with consumers in new ways that enable businesses to develop interactive relationships with their customers that are community oriented and primarily based on conversation and collaboration. Consumer co-creation activities include open discussion forums, user-generated content creation, product ratings, reviews and recommendations, and various forms of user participation and coordination. Zwass [2] argued that consumer co-creation not only offers direct benefits to consumers but also presents businesses across industries with a significant new source for gaining competitive advantage. Consequently, social commerce innovation and management have become strategically important business concerns.
From a conceptual and theoretical perspective, the emerging literature on social commerce agrees that co-creation has the potential to create business value. Until now, there has been a lack of rigorous empirical work using business data that would show exactly how value is created and also measure in quantitative terms just how much value co-creation delivers to both businesses and consumers. This special issue aims to close this gap by presenting five rigorously conducted empirical studies that advance our understanding of how organizations can use social technologies to create business value.
With the advances of social commerce, new possibilities of social interaction among electronic commerce customers as well as social interaction between consumers and organizations have rapidly emerged. Organizations are exploring these new opportunities in various ways to create business value. The papers we offer in this special issue examine the question of how social technology can create value and how it can be measured. All five papers use theoretically grounded empirical analysis to investigate the impact of social-technology-enabled consumer co-creation processes on different performance metrics. Three studies employ experimental methods, and the other two apply econometrics to analyze user behavior and consumer decisions in different social commerce settings. We also emphasize the multidisciplinary nature of social commerce research by including studies that bring different theoretical backgrounds to their empirical work, including economics, computer science, and marketing.
The papers included here were selected and extensively revised from the presentations at the 14th Annual International Conference of Electronic Commerce held at the Singapore Management University in August 2012. Studying innovative business applications of social technology tools was one focus of the conference that drew a lot of attention and featured a number of strong papers. After a thorough screening of all the papers on social commerce topics, we invited the authors of the five best empirical papers to develop their conference presentations into full journal papers. After the authors submitted their revised and extended papers, each went through an additional three rounds of extensive revisions. We proudly present five works that we believe will make a strong contribution to the social commerce literature.
Our lead paper, “Valuation of Participation in Social Gaming,” by Kim, Yoo, and Kauffman, contributes to the research on hedonic value modeling in economics by analyzing consumer co-creation in terms of collaborative user participation in online games. Based on their analysis of the value of participation, the authors are able to recommend a pricing scheme that demonstrably improves service profitability. It has been widely recognized in social commerce research that user participation in terms of time and effort spent offers the companies supported by social technology a critical source for potential value creation. However, there have been only scant attempts on how to measure the value of user participation. Kim et al. present here an original and very creative approach that uses hedonic valuation to establish a basis for valuing the time a user spends participating in an online gaming activity. They use empirical analysis based on a cross-sectional data set from a massive multiplayer online role-playing game (MMORPG) site as well as analytical modeling to derive optimal pricing policy at the firm. With some knowledge of hedonic value for game-playing time, the authors are able to estimate willingness to pay, and they take this as a basis to propose an initial participant value subsidy; as willingness to pay goes up over time with the user’s involvement with the game, a fee can be charged without subsidy. The paper presents a very innovative example of applied economic research that demonstrates how empirical analysis and analytical modeling can be used to help firms analyze social interactions on their user platform for the purpose of improving the pricing structure they offer to their customers. The paper contributes to our understanding of the economic value users derive from what can be understood as co-creation.
Our second paper, “From Accuracy to Diversity in Product Recommendations: Relationship Between Product Diversity and Customer Retention,” by Park and Han, combines economics and marketing thinking to argue that current consumer-product recommendation systems should be extended to incorporate more predictions oriented toward product diversity. Recommendation systems have emerged as a powerful social technology that has been widely adopted on electronic commerce platforms. Park and Han present a study that explains how product diversity affects long-term bottom-line performance of recommendation systems. They examine the relationship between number of product categories offered on an e-book sales platform and customer churn incidence. They collected a large-panel data set that includes product category, revenues, and customer churn information from a large retailer. They find that as the recommender system increases the number of product categories recommended to the customers, the customer churn rate goes down, after controlling for the number of individual products being recommended. Their results suggest that companies can achieve better outcomes with their recommendation systems by explicitly incorporating the diversity of products being offered to their customers. Based on additional scenario analysis the authors suggest that their proposed diversity-based recommendation strategy can be a significant revenue driver by reducing customer churn.
The third paper in this special issue, “Identifying Implicit and Explicit Relationships Through User Activities in Social Media,” by Yang, Tang, Dai, Yang, and Jiang, offers a different perspective on studying the value of user co-creation processes, which in this case refers to the sharing and rating of news stories among the platform users. Using a data set collected from a leading social news site and by applying computational models and methods from computer science research, the authors show how social network ventures can augment their knowledge about their user base by uncovering important user relationships that are not explicitly represented in the social network structure. They argue that by integrating explicit and implicit user relationships, a social-network-oriented business can more effectively leverage user participation for purposes of business intelligence and marketing. As we know, social network analysis and mining has been a powerful tool for electronic commerce vendors and marketing companies for understanding user behavior and for identifying potential customers. However, the capability of social network analysis and mining diminishes when the social network data are incomplete, especially when there are only limited explicit ties available. While social network representations can be routinely extracted from explicit relationships in social media environments, they are usually quite sparse. For example, many social media users may have no direct interactions with one another, and yet share similar interests or purchase the same products. Such cases suggest an implicit relationship based on like-mindedness and behavioral similarities that are not captured in social network structures. Yang et al. propose a computational approach using techniques from temporal analysis to identify implicit relationships for enriching the understanding of the underlying social network structure. They have also conducted an experiment on Digg.com, a social media site for content discovery and content sharing, that shows that their model outperforms the standard techniques that rely only on explicit relationships. They conclude that richer social network representations provide business value by enhancing business intelligence and consumer knowledge.
The next paper, “Corporate Twitter Channels: The Impact of Engagement and Informedness on Corporate Reputation,” by Li, Berens, and de Maertelaere, looks at microblogging (e.g., Twitter), which has quickly developed as one of the most popular forms of social media and has been widely adopted among both professional users and regular consumers. Many businesses are using microblogging to connect more directly with their customers. However, the question of how to leverage microblogging user interactions and user data to create business value has been difficult to answer. The authors address this question by examining information sharing on Twitter and its effects on corporate reputation and corporate image. They designed an experiment and found that informedness and engagement play an important role in the corporate reputation. The authors find that the depth of the relationship among users, the level of corporate involvement, and the purpose of the channel interactively affect user engagement and informedness. Their results suggest that deeper relationships among users of a corporate Twitter channel increase user engagement when the level of corporate involvement with the channel is high and when the channel has a specific purpose. However, surprisingly, they find that when the channel has a generic purpose, a high corporate involvement decreases user engagement. Their results imply that, under certain circumstances, firms should reduce their involvement in their social media channels. Li et al. proceed to discuss business implications of their findings, valuable to companies that want to make effective use of microblogging technology as well as to the future researchers of microblogging.
Our fifth paper, “Social Buying: The Effects of Group Size and Communication on Buyer Performance,” by Pelaez, Yu, and Lang, concludes this special issue by offering a study of the impact of a new form of consumer coordination based on the adoption of social technology tools. Viewing social communication on group-buying platforms as a new form of IT-enabled coordination mechanisms, the authors examine the impact of group size and communication capacity on buyer performance on a group buying platform design in which consumers coordinate product choice and product price among themselves using social tools. Drawing on theories from economics and information systems, the researchers posit that larger buyer groups should be able to obtain better prices and extract higher surplus from sellers and that more communication capacity should help buyers with coordinating their actions, and go on to more nuanced results. Using an economic experiment, the authors found that introducing a private communication channel for buyers had a negative effect on a group’s surplus. They explain this unexpected finding by the increased task complexity that arises from the additional needs for information processing of the exchanged messages. In general, adding communication capacity slowed down task completion, and this effect was stronger for larger groups than smaller ones. This research methodology is consistent with the principles of design science—designing an IT artifact (e.g., an IT-enabled market mechanism for electronic group buying platforms), implementing it, and then evaluating it (using economic performance measures). This work demonstrates that combining design science with experimental economics offers a useful approach to systematically design and evaluate new social commerce mechanisms and technology features, applicable for a large range of specific questions. Using market experiments in the laboratory presents a powerful method to evaluate new market designs before deploying them in the real economy. Their approach is particularly appropriate in social commerce research that studies the economic value from incorporating social technology features and mechanisms in electronic business platform designs.
We believe that each of the five studies included in this special issue makes a unique contribution to the social commerce literature. As they differ in specific context, theoretical perspective, and choice of analytic and empirical methods, they share a focus on looking at specific consumer co-creation processes and apply empirical analysis to establish a link between co-creation activities on social commerce platforms and business value creation.
Last but not least, we want to acknowledge the outstanding help that we have received in preparing this special issue. First, we would like to give our special thanks to Rob Kauffman, who had the original idea of putting together a special issue of social commerce research. In numerous interactions via e‑mail, phone calls, and personal meetings, he shared his editorial experience, his deep knowledge about e-commerce research, and his views on the research process in general, which all contributed a great deal to the development of all five papers that we present in the final product. We also thank Editor-in-Chief Vladimir Zwass, who responded enthusiastically to our initial proposal to guest edit a special issue on social commerce. His support was incredible. He also offered invaluable input on all the papers. We are grateful to Chris Westland, who helped us as a special adviser on technical issues regarding empirical research methodologies. Finally, we are indebted to the anonymous reviewers who volunteered to do accelerated reviews on short notice. Their insights and suggestions were a key element in developing the five papers to the level the reader finds published in this issue.
References
1. Liang, T.P., and Turban, E. Introduction to the special issue: Social commerce: A research framework for social commerce. International Journal of Electronic Commerce, 16, 2, (winter 2011–12), 5–14.
2. Zwass, V. Co‑creation: Toward a taxonomy and an integrated research perspective. International Journal of Electronic Commerce, 15, 1 (fall 2010), 11–48.
KARL R. LANG (karl.lang@baruch.cuny.edu) is a professor of information systems at the Zicklin School of Business, Baruch College, City College of New York. He holds a Ph.D. in management science from the University of Texas at Austin. His research interests include management of digital businesses, experimental economics, and issues related to the informational society. He held previous positions at the Free University of Berlin and the Hong Kong University of Science and Technology (HKUST). His findings have been published in diverse journals, including Journal of Management Information Systems, Communications of the ACM, Decision Support Systems, Long Range Planning, Computational Economics, and Annals of Operations Research. He is an associate editor of Decision Support Systems, Information & Management, and Electronic Commerce Research and Applications.
TING LI (tli@rsm.nl) is an assistant professor of decision and information systems at the Rotterdam School of Management, Erasmus University, the Netherlands. Her research interests include strategic and economic impacts of IT, Internet commerce and social media, and consumer decision making in the online and mobile channels. Her work has been published in Decision Support Systems, International Journal of Electronic Commerce, European Journal of Information Systems, and in several edited books. Her research is supported by the Dutch National Science Foundation (NWO). She won the second prize for the 2011 Prof. Aard Bosman Dissertation Award and was a runner-up for the 2010 Accenture-PIM Marketing Science Dissertation Award. She obtained her Ph.D. in management science at Erasmus University and her M.Sc. in computational science at the University of Amsterdam. Prior to joining academia, she worked for General Electric and IBM.