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Previous Volumes: (Dis)honesty in Management: Manifestations and Consequences EDS. TIIA VISSAK AND MAAJA VADI Commercial Diplomacy and International Business: A Conceptual and Empirical Exploration ED. H. RUE¨L Electronic HRM in Theory and Practice EDS. T. BONDAROUK, H. RUE¨L, AND J.C. LOOISE Relational Practices, Participative Organizing EDS. CHRIS STEYAERT AND BART VAN LOOY Autopoiesis in Organization Theory and Practice EDS. RODRIGO MAGALHAES AND RON SANCHEZ Organizations as Learning Systems ‘‘Living Composition’’ as an Enabling Infrastructure ED. MARJATTA MAULA Complex Systems and Evolutionary Perspectives on Organizations: The Application of Complexity Theory to Organizations ED. EVE MITLETON-KELLY Managing Imaginary Organizations: A New Perspective on Business EDS. BO HEDBERG, PHILIPPE BAUMARD AND A. YAKHLEF Systems Perspectives on Resources, Capabilities and Management Processes EDS. JOHN MORECROFT, RON SANCHEZ AND AIME´ HEENE Tracks and Frames: The Economy of Symbolic Forms in Organizations ED. K. SKOLDBERG



MIGUEL R. OLIVAS-LUJA´N Clarion University of Pennsylvania, Clarion, PA, USA

TANYA BONDAROUK School of Management and Governance, University of Twente, Enschede, The Netherlands

United Kingdom – North America – Japan India – Malaysia – China

Emerald Group Publishing Limited Howard House, Wagon Lane, Bingley BD16 1WA, UK First edition 2013 Copyright r 2013 Emerald Group Publishing Limited Reprints and permission service Contact: [email protected] No part of this book may be reproduced, stored in a retrieval system, transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without either the prior written permission of the publisher or a licence permitting restricted copying issued in the UK by The Copyright Licensing Agency and in the USA by The Copyright Clearance Center. Any opinions expressed in the chapters are those of the authors. Whilst Emerald makes every effort to ensure the quality and accuracy of its content, Emerald makes no representation implied or otherwise, as to the chapters’ suitability and application and disclaims any warranties, express or implied, to their use. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library ISBN: 978-1-78190-898-3 ISSN: 1877-6361 (Series)

ISOQAR certified Management System, awarded to Emerald for adherence to Environmental standard ISO 14001:2004. Certificate Number 1985 ISO 14001

To Huub, Yulia, Lena — TB To Xhonane´, the first practitioner to profit from this volume. Without your support, your sharp perspectives and your intrepidity, we wouldn’t be where we arey yand to Jose M, Xhonanita, Montse and Eddie, who soon will know more about SM than both of their parents together!! — MRO


List of Contributors


Strategic Management and Social Media: The Leading Edge










Digital Behaviors and People Risk: Challenges for Risk Management Andy Phippen and Simon Ashby


Leveraging Social Media Technology for Business Transformation: The Case of Corporate Social Communities Richard L. Gruner, Damien Power and Paul K. Bergey


Strategic Management and Social Media: An Empirical Analysis of Electronic Social Capital and Online Fundraising Raymond Henry and Lisa Bosman


Disentangling the Strategic Use of Social Media in the Insurance Industry: A Value Co-Creation Perspective Manuel Castriotta, Paola Barbara Floreddu, Maria Chiara Di Guardo and Francesca Cabiddu


You Might Be Reputable But Are You ‘‘Liked’’? Orchestrating Corporate Reputation Co-Creation on Facebook Anna K. Zarkada and Christina Polydorou


Social Media as a Strategic Tool: Going Beyond the Obvious Poonam Arora and Carolyn E. Predmore


Increasing Dynamic Capabilities of Health Organizations with Social Media Ricky C. Leung


Social Media Champions — Drivers and Sophistication Process of Social Media Strategic Management Lukasz M. Bochenek and Sam Blili


viii 9.






Innovation Management, Lead-Users, and Social Media — Introduction of a Conceptual Framework for Integrating Social Media Tools in Lead-User Management Markus Ernst, Alexander Brem and Kai-Ingo Voigt


Social Media as Marketing Strategy: An Explorative Study on Adoption and Use by Retailers Carlota Lorenzo-Romero, Efthymios Constantinides and Marı´a-del-Carmen Alarco´n-del-Amo


Global Talent Management in Multinational Corporations and the Role of Social Networks Huub Rue¨l, Tanya Bondarouk and Lena Dresselhaus


Culture and Social Media: Exploration of Differences Between the United States and Japan Satoko Suzuki and Kosuke Takemura


Social Networking Sites (SNS): Talent Management in Emerging Markets — India and Mexico Pramila Rao


List of Contributors Marı´a-del-Carmen Alarco´n-del-Amo

Faculty of Economics and Business, Atonomous University of Barcelona, Barcelona, Spain

Poonam Arora

Management – Marketing Department, School of Business, Manhattan College, Riverdale, NY, USA

Simon Ashby

Plymouth Business School, Plymouth University, Plymouth, UK

Paul K. Bergey

Department of Management and Marketing, University of Melbourne, Melbourne, Victoria, Australia

Sam Blili

Enterprise Institute, University of Neuchatel, Neuchatel, Switzerland

Lukasz M. Bochenek

Enterprise Institute, University of Neuchatel, Neuchatel, Switzerland

Tanya Bondarouk

School of Management and Governance, University of Twente, Enschede, The Netherlands

Lisa Bosman

University of Wisconsin Milwaukee, Milwaukee, WI, USA

Alexander Brem

Friedrich-Alexander-University Erlangen-Nuremberg, Nuremberg, Germany

Francesca Cabiddu

University of Cagliari, Cagliari, Sardinia, Italy

Manuel Castriotta

University of Cagliari, Cagliari, Sardinia, Italy

Efthymios Constantinides

School of Management and Governance, Business Administration/NIKOS, University of Twente, Enschede, The Netherlands

Maria Chiara Di Guardo

University of Cagliari, Cagliari, Sardinia, Italy

Lena Dresselhaus

School of Management and Governance, University of Twente, Enschede, The Netherlands

Markus Ernst

Friedrich-Alexander-University Erlangen-Nuremberg, Nuremberg, Germany


List of Contributors

Paola Barbara Floreddu

University of Cagliari, Cagliari, Sardinia, Italy

Richard L. Gruner

Department of Management and Marketing, University of Melbourne, Melbourne, Victoria, Australia

Raymond Henry

Cleveland State University, Cleveland, OH, USA

Ricky C. Leung

Department of Health Management & Informatics, School of Medicine, University of Missouri, Columbia, MO, USA

Carlota Lorenzo-Romero

Faculty of Economics and Business, Marketing Department, University of Castilla-La Mancha, Albacete, Spain

Miguel R. Olivas-Luja´n

College of Business Administration, Clarion University of Pennsylvania, Clarion, PA, USA

Andy Phippen

Plymouth Business School, Plymouth University, Plymouth, UK

Christina Polydorou

Athens University of Economics and Business, Athens, Greece

Damien Power

Department of Management and Marketing, University of Melbourne, Melbourne, Victoria, Australia; University of Groningen, Groningen, The Netherlands

Carolyn E. Predmore

Management – Marketing Department, School of Business, Manhattan College, Riverdale, NY, USA

Pramila Rao

School of Business, Marymount University, Arlington, VA, USA

Huub Rue¨l

School of Business, Media & Law, Windesheim University of Applied Sciences, Zwolle, The Netherlands

Satoko Suzuki

Graduate School of Management, Kyoto University, Kyoto, Japan

Kosuke Takemura

Graduate School of Management, Kyoto University, Kyoto, Japan

Kai-Ingo Voigt

Friedrich-Alexander-University Erlangen-Nuremberg, Nuremberg, Germany

Anna K. Zarkada

Athens University of Economics and Business, Athens, Greece

Strategic Management and Social Media: The Leading Edge

The idea to build this volume crystallized during an academic workshop in which the editors noticed how creatively, pragmatically, and yet rigorously, scientists around the world have been applying their tools to the way social media are revolutionizing businesses and workplaces. We issued a call for chapters and the response overwhelmed us; colleagues around the world sent samples of their work to better understand, analyze, and illuminate the ways in which organizations of all sizes, categories, and purposes are using this emerging family of technologies. The peerreview process was crucial to identify the most promising contributions and even after partitioning the best contributions in two volumes (Bondarouk & Olivas-Luja´n, 2013), we still had to decline the publication of about 50% of the proposals that we received on time (and we have continued to receive proposals thereafter). We are privileged to offer these scholarly contributions to professionals who are not content with simply following what others have done but seek best-available evidence that will help them do their work — be it management practice, research, teaching, or others — in more effective and smarter ways. In this volume, we collect state-of-the-art research on social media with a strategic management perspective, while the next volume focuses on how social media are used for human resources management purposes (see Bondarouk & Olivas-Luja´n, 2013 for details). At the risk of overselling its importance, we are witnessing and cocreating an unprecedented era in which digital innovations offer a competitive advantage for those firms that are willing to experiment often, fail more than occasionally and stick to what works, fine tuning their use of the emerging information and communication technologies (ICTs) as needed. It is undeniable that ICTs have become faster, more effective and more efficient in making communication between stakeholders close to instantaneous, with all the possible benefits and pitfalls that go together with this fact. The paragraph above could have been written fifteen years ago with respect to the use of Internet-based applications and probably will also apply to a different family of technologies, 10 or 15 years from now. ICTs’ blistering progress seems inescapable. But a major difference in our day is that the organizational sciences, particularly strategy, have also kept on advancing. Both conceptual and empirical tools to identify, measure and test the effects of different strategic choices are now available that were incipient — or simply inexistent — during the 20th century.



To illustrate, the resource-based view of the firm, arguably the most influential strategic management framework, became popular in the late 1990s and first decade of the new millennium. Using the acronym VRIO, which stands for valuable, rare, imitable, and organization, Barney (1991) postulates that organizational resources must be able to advance the firm or provide some advantage (i.e., value) that is not widely available (i.e., rare) or easily replicable by their competitors (i.e., inimitable) and that the company (i.e., organization) should be able to exploit such a resource in the long term. Resources having these four properties are the bases of sustainable competitive advantage. This analytical framework offers powerful insights on how social media may present strategic opportunities to the organizations that have adopted them promptly and are using them wisely. The ‘‘value’’ of nearly instantaneous communication and interaction with multiple stakeholders is almost self-evident — notwithstanding occasional risks that may come as a consequence of the ease and speed with which stakeholders may communicate among themselves and with the company. The fourth component of the framework, ‘‘organization,’’ depends upon whether the firm is willing and able to invest other material resources that may be transformed into meaningful interactions. But the fact that most social media technologies are publicly available makes it difficult, some could argue, to use them in ways that could be described as ‘‘rare’’ or much less ‘‘inimitable.’’ Using social media in ‘‘rare’’ and ‘‘inimitable’’ ways might be difficult, but definitely not impossible. For example, Blankenspoor, Miller, and White (2013) found statistically significant evidence that firms — particularly the smaller, lesser known — that communicate with investors via ‘‘tweets’’ show more liquidity, in addition to narrower bid-ask spreads and greater abnormal depths, results that are associated with ‘‘a reduction in information asymmetry.’’ This example could certainly be offered as evidence of a ‘‘rare’’ use of social media that provides ‘‘value’’ to ‘‘organizations.’’ Now that the effect has been found and documented, it is difficult to argue that this would be ‘‘inimitable,’’ but it is also obvious that adoption, let alone institutionalization of such a diffusion mechanism to share company results will not be immediate or guaranteed. Documenting the effectiveness of a business practice does not guarantee its widespread adoption (cf, Rousseau, 2012).

What Social Media Are We Talking about? This volume is a bridge made up by exemplary contributions linking strategic perspectives with the use of social media — the most recent family of technologies that are evolving rapidly and exciting businesses as well as all sectors of society. Social media, defined by Kaplan and Haenlein (2010, p. 61) as ‘‘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 Content,’’ is a term that describes a wide variety of ICTs whose common denominator is the ability to connect users in ways that enable bridging distance, time, and other traditional barriers. Even



though several ‘‘electronic facilities’’ have captured both general and business attention, it is clear that a high degree of environmental turbulence or high velocity exists, as both software (e.g., social networking sites such as LinkedIn, Xing, facebook, Google+, Orkut, or MySpace; blogging sites such as Wordpress, Blogspot, or Twitter; personal or organizational rich-media facilities like YouTube, Skype, Spotify, etc.) and hardware platforms (e.g., tablets, smartphones, thinbooks, and other emerging innovations) keep evolving at a very rapid pace. Whatever software or hardware context we may take, social media aims to complement or even replace traditional media and communication, and will be the locomotive via which the World Wide Web evolves during the next decade or so (Kaplan & Haenlein, 2010, p. 68). Social media cover a large area of activities and websites that differ in content, purpose, users, and information. In this scholarly book, we have collected systematic, rigorous research that uses best-available scientific methodologies to document and analyze evidence on this phenomenon in business. We fill this knowledge gap to facilitate its acquisition and diffusion, as well as enable the higher levels of understanding that may precede both the exploitation and the exploration of newer and more advanced tools and methodologies.

Contributions in this Volume In the first chapter, Phippen and Ashby (2013) bring a risk management perspective to the nagging issue dealing with privacy among ‘‘Digital Natives.’’ Their data show how rapidly what seems to be high-school student behavior can become a problem in many a company that fails to implement adequate personnel policies and practices. Fortunately, they go beyond describing the problems to offer a set of five recommendations that organizations should consider implementing to avoid those risks. Gruner, Power, and Bergey (2013) next show how some companies are using social media to connect in ways that are reshaping corporate relationships and defining an unusual type of online community — corporate social communities or ‘‘CSCs’’ — formed not by individuals but by corporations. It only makes sense that social media will be profitably used by organizations in business-to-business relationships; in their chapter, readers will find inspiration and an evidence-based source of cautious optimism. Most work in the organizational sciences is dedicated to for-profit organizations. In their chapter, Henry and Bosman (2013) report their findings on how nonprofits may utilize their social capital in ways that help them improve their fundraising activities. Readers will find their operationalization of different forms of social capital quite clever and worth replicating in other contexts. Castriotta, Floreddu, Di Guardo, and Cabiddu (2013) take full advantage of the open access that many social networking sites offer, to examine the role of customer engagement in insurance firms and draw conclusions about how the companies’ social presence is effectively becoming a source of innovative behaviors. We feel confident



that their classification schemes can very profitably be used in future studies to continue the exploration of the ‘‘Virtual Square’’ in which our society now operates. In their chapter, Zarkada and Polydorou (2013) show how even some of the most reputed corporations of the world are in the very early stages of managing their social presence, making both successful and failing interactions with their customers. The Virtual Square will surely continue to challenge organizations and enable possibilities of stakeholder interaction that had never been imagined. Arora and Predmore (2013) next bring their research to show that social media is effectively erasing communication barriers between and within multiple stakeholders and their organizations. Their examples show that converting this information into actionable intelligence is not easy at all, but there are a few firms that have taken a proactive approach. Leung (2013) focused his attention on how the diffusion of social media in health organizations has been occurring. This work — that, like others in this volume — has been receiving a measure of attention in established media, will undoubtedly serve as a blueprint for better understanding social media usage in other industries in the near future. It is almost natural to notice how this particular industry is generating a great deal of scientific attention (cf, Korda & Itani, 2013; Neiger et al., 2012). In a similar — but quite distinct — venue, Bochenek and Blili (2013) use exemplar organizations to describe their management of social media and concomitant sophistication. Their qualitative methodology is very helpful to better comprehend different viewpoints and perspectives driving innovative corporate behavior through social media; we feel certain that this chapter will be very helpful in understanding practice. Ernst, Brem, and Voigt (2013) actualize concepts developed in the knowledge management literature — which mostly focuses inside the organization — by bringing the lead user construct from the innovation diffusion literature. Their overview goes beyond conceptual or descriptive; readers will be able to recognize recommendations, possibly prescriptions based in robust logic and expert knowledge of the content matter. Lorenzo-Romero, Constantinides, and Alarco´n-del-Amo (2013) also bring to discussion concepts from diffusion of innovations theory but from a marketing perspective, focusing on retail firms. It is always quite intriguing to see how empirical tests show differential use of the same technologies as a function of company characteristics; we can foresee many lessons being learned from this chapter. Rue¨l, Bondarouk, and Dresselhaus (2013) shed light on how social media used for global talent management is perceived differently by managers in multinational organizations, researchers and potential employees. Their empirically based findings are of great help in understanding the dynamics of social media usage with the goal of improved talent management for those institutions that might most benefit from their ubiquitous access. Also with an international focus, Suzuki and Takemura (2013) dissect and make sense of the absence of differences in social media usage in two of the societies that exemplify Eastern and Western cultures: Japan and the United States. Their findings clearly indicate the need to bring the cross-cultural management literature into the



realm of social media to better understand what descriptors are more likely to translate in usage differences. Finally, in an exemplary look at emerging economies — India and Mexico — Rao (2013) discusses usage, legal and practical implications of talent acquisition in these countries. Her study, grounded in robust theories and using well-accepted statistics, will surely be of great interest to practitioners and researchers who specialize in these countries and are interested in testing her theoretically derived hypotheses with empirical evidence.

Acknowledgments We are grateful to all our authors and to our developing editorial board for the many valuable resources that have been invested in creating these volumes. We are also thankful for the support — and close supervision! — that Katie Spike, Juliet Harrison, and Kim Eggleton, from Emerald, have offered during this process. Our employers, as well as our families, also deserve credit for their support of our research. We feel incredibly privileged to advance management through this series, one volume, one chapter, one paragraph at the time! Miguel R. Olivas-Luja´n Tanya Bondarouk Editors

References Arora, P., & Predmore, C. E. (2013). Social media as a strategic tool: Going beyond the obvious. In M. R. Olivas-Luja´n & T. Bondarouk (Eds.), Social media in strategic management (pp. 115–127). Bingley, UK: Emerald Group Publishing Ltd. Barney, J. B. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99–120. Blankenspoor, E., Miller, G. S., & White, H. D. (2013). Dissemination, direct-access information technology and information asymmetry. Working Paper No. 135, Rock Center for Corporate Governance at Stanford University. Retrieved from Bochenek, L. M., & Blili, S. (2013). Social media champions — Drivers and sophistication process of social media strategic management. In M. R. Olivas-Luja´n & T. Bondarouk (Eds.), Social media in strategic management (pp. 143–167). Bingley, UK: Emerald Group Publishing Ltd. Bondarouk, T., & Olivas-Luja´n, M. R. (2013). Social media and human resource management: It takes two to tango. In T. Bondarouk & M. R. Olivas-Luja´n (Eds.), Advanced Series in Management (Vol. 12). Bingley, UK: Emerald Group Publishing Ltd. Castriotta, M., Floreddu, P. B., Di Guardo, M. C., & Cabiddu, F. (2013). Disentangling the strategic use of social media in the insurance industry: A value co-creation perspective. In M. R. Olivas-Luja´n & T. Bondarouk (Eds.), Social media in strategic management (pp. 63–86). Bingley, UK: Emerald Group Publishing Ltd.



Ernst, M., Brem, A., & Voigt, K.-I. (2013). Innovation management, lead-users and social media — Introduction of a conceptual framework for integrating social media tools in lead user management. In M. R. Olivas-Luja´n & T. Bondarouk (Eds.), Social media in strategic management (pp. 169–195). Bingley, UK: Emerald Group Publishing Ltd. Gruner, R. L., Power, D., & Bergey, P. K. (2013). Leveraging social media technology for business transformation: The case of corporate social communities. In M. R. Olivas-Luja´n & T. Bondarouk (Eds.), Social media in strategic management (pp. 27–42). Bingley, UK: Emerald Group Publishing Ltd. Henry, R., & Bosman, L. (2013). Strategic management and social media: An empirical analysis of electronic social capital and online fundraising. In M. R. Olivas-Luja´n & T. Bondarouk (Eds.), Social media in strategic management (pp. 43–62). Bingley, UK: Emerald Group Publishing Ltd. Kaplan, A. M., & Haenlein, M. (2010). Users of the world, unite! The challenges and opportunities of social media. Business Horizons, 53(1), 59–68. Korda, H., & Itani, Z. (2013). Harnessing social media for health promotion and behavior change. Health Promotion Practice, 14(1), 15–2310.1177/1524839911405850 Leung, R. C. (2013). Increasing dynamic capabilities of health organizations with social media. In M. R. Olivas-Luja´n & T. Bondarouk (Eds.), Social media in strategic management (pp. 129–142). Bingley, UK: Emerald Group Publishing Ltd. Lorenzo-Romero, C., Constantinides, E., & Alarco´n-del-Amo, M. (2013). Social media as marketing strategy: An explorative study on adoption and use by retailers. In M. R. OlivasLuja´n & T. Bondarouk (Eds.), Social media in strategic management (pp. 197–215). Bingley, UK: Emerald Group Publishing Ltd. Neiger, B. L., Thackeray, R., Van Wagenen, S. A., Hanson, C. L., West, J. H., Barnes, M. D., & Fagen, M. C. (2012). Use of social media in health promotion: Purposes, key performance indicators, and evaluation metrics. Health Promotion Practice, 13(2), 159–16410.1177/ 1524839911433467 Phippen, A., & Ashby, S. (2013). Digital behaviors and people risk: Challenges for risk management. In M. R. Olivas-Luja´n & T. Bondarouk (Eds.), Social media in strategic management (pp. 1–26). Bingley, UK: Emerald Group Publishing Ltd. Rao, P. (2013). Social networking sites (SNS): Talent management in emerging markets – India and Mexico. In M. R. Olivas-Luja´n & T. Bondarouk (Eds.), Social media in strategic management (pp. 259–276). Bingley, UK: Emerald Group Publishing Ltd. Rousseau, D. M. (2012). The Oxford handbook of evidence-based management. Oxford, UK: Oxford University Press. Rue¨l, H., Bondarouk, T., & Dresselhaus, L. (2013). Global talent management in multinational corporations and the role of social networks. In M. R. Olivas-Luja´n & T. Bondarouk (Eds.), Social media in strategic management (pp. 217–243). Bingley, UK: Emerald Group Publishing Ltd. Suzuki, S., & Takemura, K. (2013). Culture and social media: Exploration of differences between the United States and Japan. In M. R. Olivas-Luja´n & T. Bondarouk (Eds.), Social media in strategic management (pp. 245–258). Bingley, UK: Emerald Group Publishing Ltd. Zarkada, A. K., & Polydorou, C. (2013). You might be reputable but are you ‘‘liked’’? Orchestrating corporate reputation co-creation on facebook. In M. R. Olivas-Luja´n & T. Bondarouk (Eds.), Social media in strategic management (pp. 87–113). Bingley, UK: Emerald Group Publishing Ltd.

Chapter 1

Digital Behaviors and People Risk: Challenges for Risk Management Andy Phippen and Simon Ashby

Abstract Purpose — This research explores the implications for risk management of ‘‘People Risk.’’ In particular how online digital behaviors, particularly from young people entering the workplace for the first time, might impact on the work setting and how risk management might mitigate impact on the employee and organization. Design/methodology/approach — A mixed methods approach was used to consider these implications and draws from a number of data sources in the United Kingdom including a database of self-review data around online safety policy and practice from over 2000 schools, a survey of over 1000 14–16 year olds and their attitudes toward sexting, and a survey of over 500 undergraduate students. In addition the work considers existing risk management approaches and the models therein and how they might be applied to people risk. Findings — The dataset analyzed in this exploration show an education system in the United Kingdom that is not adequately preparing young people with an awareness of the implications of digital behavior in their lives and the survey data shows distorted social norms that might have serious consequences in the workplace. Practical implications — This research should raise concerns for managers in the workplace who need to be aware of the changes in ‘‘normal’’ behavior and how these potentially harmful practices may be mitigated in the workplace. Originality/value — The research provides a strong evidence base for a change in ‘‘acceptable’’ social behavior by children and young people alongside an education

Social Media in Strategic Management Advanced Series in Management, 1–26 Copyright r 2013 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1877-6361/doi:10.1108/S1877-6361(2013)0000011005


Andy Phippen and Simon Ashby

system not promoting effective awareness. These two datasets combined highlight potential new risks to the workplace. Keywords: Digital Natives; information security; risk management; people risk; social media

Introduction This chapter considers the risk management challenges which may be associated with the movement of so-called ‘‘Digital Natives’’ into the workplace. While there is much to be gained from digitally aware and engaged new employees, the attitudes and behaviors of Digital Natives also present new management challenges and risks. Based upon considerable empirical data drawn from the school age and young adult population, the chapter will identify changes in behaviors, challenges to social norms, and their implications in the workplace. The chapter starts with a discussion on the significance of people risk for organizations, Digital Natives being an important new group of people entering the workplace. The third and fourth sections develop this further, exploring the particular challenges presented by Digital Natives for information security management. The fifth section presents an empirical analysis of Digital Native behavior. Finally, the sixth and seventh sections build on this empirical analysis to explore the risks that are accompanying Digital Natives into the workplace and provide some potential strategies for the management of these risks.

The Importance and Implications of People Risk From an information security risk management point of view the emergence of Digital Natives (see the third section) into the workplace is a special case of what is commonly termed: ‘‘people risk.’’ The specific routes through which people risk can arise in the context of Digital Natives will be explored later in the chapter. For now the focus will be on the general importance and implications of an organization’s exposure to people risk. The concept of people risk, or perhaps more accurately ‘‘people-related risks,’’ recognizes that people are a core ingredient in the way that organizations both manage and are exposed to risk (see Lambert & Cooper, 2010, p. 25). All organizations require people. It is these people who make decisions on the organization’s behalf (e.g., risk taking and control decisions), it is also these people who are tasked with performing specific activities; be they operational or strategic in nature. Ultimately it is the people within an organization who determine its success or failure, rather than the structure of the organization or the technology that it uses — it is even people who create/implement these structures and technologies. In making decisions and performing their required activities the people within an organization can behave in a wide variety of ways, behavior which can be highly

Digital Behaviors and People Risk: Challenges for Risk Management


unpredictable and occasionally destructive. One of the key reasons why different generations of people are profiled is to help predict their behavior. Though these general profiles will never be foolproof and human nature often produces unexpected outcomes. Things are likely to be especially uncertain when these profiles are relatively new and the full complexity of a generation’s behavioral tendencies is yet to be mapped, as in the case of Digital Natives. Despite the unpredictable nature of people, a consensus is emerging on the effective management of people risk (see, e.g., Blunden & Thirlwell, 2010; Lambert & Cooper, 2010; McConnell, 2008). Notably the following principles have been identified: 


Effective risk management is not simply about the formal process of identifying, assessing, monitoring, and controlling risk. It should also be concerned with managing the perceptions and attitudes of the people that make up an organization. The effective management of ‘‘people risk’’ requires investment into qualitative risk assessment tools such as scenario planning. Much risk assessment uses historical loss data in an attempt to quantify risk. However this is often based on the assumption that history will repeat itself in a relatively consistent and predictable way. Something that is rarely the case when dealing with people, especially when dealing with new generations of people like Digital Natives. Significant investment is required in ‘‘softer’’ risk control tools (such as establishing an appropriate risk culture, or via risk management training and risk awareness initiatives) which try to influence human behavior in a direct manner, rather than trying to control this behavior indirectly via physical measures (e.g., access restrictions) or the establishment of policies and procedures. A carrot and stick approach is required — with incentives for ‘‘good’’ behavior, as well as punishments for ‘‘bad.’’ A balance is required between anticipation and resilience activities. Anticipation activities are concerned with the identification of potential risk events (positive and negative) in order to amplify their upsides or minimize their downsides. While resilience activities are concerned with managing the adverse effects of any risk events that may occur, so as to return quickly to ‘‘business as usual’’ (e.g., via disaster recovery planning).

These observations on the effective management of people risk present some interesting challenges for the discipline of information security risk management; a discipline which has traditionally been conducted in a very technocentric way (e.g., Bunker, 2012; Coles-Kemp, 2009; Kraemer, Carayon, & Clem, 2009) and which may not be prepared for the vagaries of people risk management. It is to this issue that we now turn.

The ‘‘Digital Native’’ The concept of the ‘‘Digital Native’’ defines individuals who have only known a world with the presence of the internet. They were born post-1990 and typically the younger


Andy Phippen and Simon Ashby

siblings of Generation X (Whittaker, 2010a, 2010b) or children of the older Baby Boomers and Veterans (Penna, 2008). The term and classification of this identified population is relatively recent and open for debate. However, what is clear is that we are now recognizing a young workforce who have never experienced a time without Internet access and digital technology. The term was first proposed by Prensky (2001a, 2001b), when he stated that the physiological structure of the brain and cognition patterns of Digital Natives fundamentally differs to that of other generations. Prensky’s theory explored the social, psychological, and neurobiological impacts of those immersed in the digital revolution and explores the ramifications of this in the wider population. Social psychology follows that people with varying experiences, for example, of different backgrounds or cultures, do think alternatively from each other. Their expectations and perceptions of any manner of stimuli differ, from the way they perceive/conceptualize time to fundamental business etiquette (Lewis, 2010). Parry (2009, p. 6) supports this position, stating ‘‘younger generations, particularly employees who entered the workforce after 1990 are more likely than older generations to be familiar with and comfortable with using emerging information and communication technology.’’ There are many other attempts to classify those living and working in the digital age. For example, ‘‘Digital Immigrants’’ are those who have learnt to use IT such as social networks and e-mail, later in life and who have experienced a society without digital technology. However, not all digital immigrants are disconnected from the technological world. These ‘‘digital settlers’’ are of the older generations, but are sophisticated in their knowledge and have done much to shape the technology industry (Palfrey & Gasser, 2008; Prensky, 2001a, 2001b). Prensky has developed this abstraction in further work (2009) introducing the term ‘‘digital wisdom’’: ‘‘wisdom arising from the use of digital technology to access cognitive power beyond our innate capacity and to wisdom in the prudent use of technology to enhance our capabilities.’’ This use of technology will result in the evolution of the ‘‘digitally enhanced person,’’ who will be better able to conduct a multitude of functions. He also reasoned that ‘‘technology alone will not replace intuition, good judgment, problem-solving abilities, and a clear moral compass.’’ However, others are less positive about the introduction of technology into our social worlds. Carr (2008) felt that ‘‘the Internet makes our minds lazier and less able’’ yet he goes on to counter this concern pointing out: ‘‘in Plato’s The Phaedrus, Socrates objects to writing on the basis that it undermines memory.’’ In their critique of the ‘‘Digital Native’’ debate Bennett, Matton, and Kervin (2008) conclude that research on young people’s relationships with technology is much more complex than the digital native characterization suggests, and that young peoples’ technology use and skills are not uniform. In addition, the literature could not show evidence of widespread and universal disaffection or of a distinctly different learning style the like of which has never been seen before. In response to the Digital Native debate a variety of thinking has generated multiple subsidiaries/offshoots of the theory. Marazov’s (2008) Digital Renegades and Digital Captives, varied ways of characterizing and defining this new digitized generation and alternative theories to address some of the issues identified in Prensky’s initial proposal. In 2008 Bennet, Matton, and Kervin cited the work of

Digital Behaviors and People Risk: Challenges for Risk Management


Figure 1: Visitor/Resident Model (White, 2011). social researchers Howe and Strauss (2000, 2003) and their positive perception of this population and characterized them as ‘‘optimistic, team-orientated achievers who are talented with technology.’’ White’s (2011) Visitor-Resident Model affords an alternative paradigm to that of the Digital Native/Digital Immigrant. White expounds that the distinction to be made is by how an individual perceives and uses the Internet and other associated digital technologies, rather than by a generations’ reaction to cultural exposure. A Visitor is a person who effectively ‘‘visits’’ the Internet. They perceive the Internet as a tool and source of information and even communication, yet do not tend to consider spending free time within the online environment for socializing and other non-task-related activities, unlike Residents (Figure 1). To date there is much active debate surrounding how Digital Natives and Immigrants are defined in conjunction with scrutiny of the lacking empirical evidence to support this concept. However, what is clear is many scholars do acknowledge that digital technology, particularly in the social word, does have the potential to change norms in social and workplace behavior. Therefore, it is important for organizations to be aware that the next generation of employees may exhibit behaviors that differ from their existing workforce as a result of technological engagement and the issues that may arise from those who do not differentiate between the online and offline world.

Digital Natives: The Challenges for Information Security Risk Management To investigate how organizations currently manage issues around the digital behavior of their staff, we can consider the field of information security risk


Andy Phippen and Simon Ashby

management. Unlike risk management in general, which has only just benefited from an international standard (ISO31000:2009), the specific field of information security risk management has had standards in place since the 1990s — standards that are used by ‘‘hundreds of thousands’’ of organizations (Humphreys, 2008, p. 247). Thus it would seem that there is a consensus view on the practice of information security and that the principles of an effective information security risk management framework are well established. However, it would be wrong to assume that these standards can be relied upon, especially in a world where people risk is present. Notably these standards have been criticized for being both generic in scope and based on (nonvalidated) common practice (Siponen & Willison, 2009). This second problem being particularly problematic in today’s information security environment, where the technocentric focus of much common practice has not necessarily caught up with the people risk management challenges presented by Digital Natives. This does not mean that existing standards for information security risk management are of no value when dealing with people risk and the Digital Native generation. As Humphreys (2008) points out they can provide a good basis from which to organize the management of ‘‘insider threats’’ (p. 247). Though, whether simplified and highly mechanistic management processes, such as the ISO/IEC 27001 cycle of ‘‘Plan, Do, Check, Act,’’ are sufficient to address the complexities of human behavior, especially new human behaviors, remains to be seen. The key issue with information security management, as it is often practiced today, is its reliance on technical systems and controls. Such technical solutions clearly have an important role to play, but they are not a panacea. As Bunker (2012, p. 20) points out the encryption of a laptop or USB stick might appear to solve the problem of data theft in the event that such devices are lost, but what if the password for a device is taped to it, because the user could not remember all their passwords? Information security professionals might claim that such an error of judgment is not their problem and that they did their job by encrypting the device. However the data has still been lost, so such a defense is rather hollow. It would be better if information security professionals could cross the ‘‘digital divide’’ between themselves and users (Albrechtsen & Hovden 2009, p. 476) to take a holistic approach and address both the technical and the human elements of the problem. Only then can the data in question truly be secure. Existing standards do not all restrict themselves to the technical side of information security risk management. Notably the International Standard Organization’s code of practice for information security management (ISO/IEC 27002) recognizes the importance of people as both a source of information security risk and a mechanism for control. However its approach remains highly technocentric. In particular it does not fully address the fact that human nature can affect the effectiveness of technical controls and vice versa. Coles-Kemp (2009, p. 182) develops this point, arguing that the international code and its accompanying standard (ISO/IEC 27001) are ‘‘output’’ and ‘‘product’’ focused, emphasizing the mechanistic processes of risk management (the identification, assessment, monitoring, and control of risk), along with the implementation

Digital Behaviors and People Risk: Challenges for Risk Management


of formal technical controls. As a result the human and technical aspects of information security management are kept separate, one simply needing to be consistent with the other. A point illustrated by the following critical success factor for information security management, taken from the code: an approach and framework to implementing, maintaining, monitoring, and improving information security that is consistent with organisational culture. (ISO/IEC 27002: 2005, clause 0.7)

A further problem is the restrictive focus of the code on organizational culture. While an organization’s overall culture may be a major influence on the behavior of its people, it is not the only influence. Macrocultures, subcultures, and microcultures all having a role to play in influencing the people that operate within organizations (see Schein, 2010).1 In this context generational factors can be an important subcultural element that may dominate an organization’s overall culture. Especially in relation to new employees, who have just entered the workplace and have not yet been indoctrinated in a wider organizational or professional culture. As a result of the significant influence that people can have on the security of an organization’s information it is necessary to reformulate information security risk management as a socio-technical system rather than simply as a technical discipline (Coles-Kemp, 2009; Kraemer et al., 2009). A socio-technical system being one where there is close interaction between the people and technology that are found within organizations. Here technology does not only mean ‘‘physical’’ technology, such as a computer or its software, but also organizational structures and processes, including policies and procedures. Interestingly this reformulation of theory and practice that is already established in some related risk management disciplines, such as health and safety and organizational crisis management (see Smith & Elliott, 2006). In these disciplines it has long been recognized that purely technical and/or engineering solutions to the problems of crisis prevention and employee safety are unlikely to prove effective. Moreover, this literature has reached very similar conclusions to the principles outlined in the second section on the elements of an effective people risk management framework. Viewing information security risk management as a socio-technical system will require a shift of focus for many information security managers and other related practitioners and academics. In this context the problem of information security is no longer isolated to the achievement of technical excellence through the implementation of formal (mechanistic) risk management frameworks or the implementation of state of the art technical controls (firewalls, encryption, etc.). Instead it becomes one of achieving joint optimization between the social and the technical. In this context technical excellence may no longer be necessary or desirable where it might interact in damaging ways with the people element of the equation (remember the laptop 1

Macrocultures relate to broad factors such as a country’s national culture or the culture of a specific ethnic group. Subcultures relate to the values and assumptions which may be shared by a discrete social sub-group such as the members of a specific profession (lawyers, accountants, engineers) or a generation such as Digital Natives. Finally microcultures typically evolve in small groups of individuals that work closely together, such as the members of specific department or branch.


Andy Phippen and Simon Ashby

encryption example). Equally it may well be that changes to the behaviors and attitudes of the people within an organization may prove a more effective means to control information security risks than technical innovation.

An Evidence-Based Approach to Digital Native Risk In parallel with the evolution of information security risk management into a sociotechnical context, we need to consider how the advent of the digital native into the workplace may introduce next social behaviors which traditional standards do not consider (which, as noted above, focus on technical challenges and countermeasures). In this section we present a portfolio of empirical data which presents a case for failings in the education system in developing young people’s awareness of information literacy and online safety alongside evidence demonstrating changes in behavior and evolutions of what might be considered social and corporate norms. This research was motivated by previous work that identified emerging changes in attitudes toward digital behavior and data privacy alongside holes in the education system. Furnell and Phippen (2007) conducted both qualitative work with young people and also a detailed document analysis of UK schools ICT and Personal, Social and Health Education (PSHE) curricula and identified a number of concerning issues:   

young people having a lax attitude toward fundamental information security principles such as password protection, unauthorized access, and privacy; uncertainty regarding how to report incidents relate to security breaches or risky social behavior facilitated by technology; curricula lacking in structured education around privacy, security awareness, online safety, and social uses of technology.

Online Safety Policy and Practice in UK Schools Research in schools across the United Kingdom more recently demonstrates that this situation has not improved. This is particularly concerning because if awareness of risk associated with digital behavior is not provided during school years, it can come as little surprise if new employees are not aware of the implications of their digital behavior on themselves or their employers. The 360 Degree Safe tool ( is a tool developed by the South West Grid for Learning (SWGfL) — an Internet Service Provider used by virtually every school in the South West of the United Kingdom — to allow schools to self-review their online safety policy and practice. Developed by a group of online safety experts, it defines 28 aspects related to online safety, from policy issues through factors such as staff training to technical measures like filtering. For each aspect the tool provides a numeric rating between 1 (the strongest rating) and 5 (the weakest) with a detailed definition for each to allow schools to determine, for each aspect, how their school performs. These levels are defined in Table 1.

Digital Behaviors and People Risk: Challenges for Risk Management


Table 1: Overall level definitions for the 360 Degree Safe tool. Level Level Level Level Level

5 4 3 2 1

There is little or nothing in place Policy and practice is being developed Basic e-safety policy and practice is in place Policy and practice is coherent and embedded Policy and practice is aspirational and innovative

Schools conduct a review of their establishment against these criteria, for each one deciding at what level they currently perform. Every submission to the tool is recorded into a database to allow the school to review and develop their own performance and also provide a large dataset for analysis of online safety policy and practice across the educational landscape as a whole. While it might be argued that self-review data may be open to bias and inconsistency, self-review is an established method of evaluation within UK schools. MacBeath (1999) has commented at length on the need for self-review as a key factor in school improvement. Other authors have commented on its effectiveness when combined with a strong set of evaluation criteria (Kyriakides & Campbell, 2004) and Schildkampa, Visschera, and Luytena (2009) have highlighted the value in self-review tools for professional development. Therefore, we can be confident that a self-review approach to online safety, particularly with such strongly defined criteria, is an effective way of schools considering and improving their online safety practice. It should also be noted that given the size of the 360 Degree Safe database (at the time of writing 2800 schools have enrolled and participated in self-review), anomalous results are very easy to detect and the institution with such data can be explored in more detail. One final measure of validity is that the tool does have an aspect of external validation — schools may opt for online safety certification when they reach a certain level on the tool. If a school wishes to apply for certification, they are subject to a daylong inspection which qualitatively judges the quality of their online safety provision and policy and allows judgment to be made on their self-review scores. To date this mechanism has not identified any anomalous scores — schools are generally consistent and honest with their ratings. Indeed it might be argued that, given the tool is intended for development and improvement purposes, it is not in the school’s interest to inflate their scores. A lot of the assessment by the tool falls outside the scope of this chapter. However, there are a number of aspects which do help us better understand the capabilities of schools to educate the ‘‘digital native’’ and where digital practice and safety is a fundamental part of the education program: E-safety Education — how pupils within the school learn about safe online practices Information Literacy — how pupils within the school learn about skills and knowledge related to digital life (searching, privacy, digital copyright, etc.)


Andy Phippen and Simon Ashby

Contribution of Young People — how pupils within the school are involved in the development of digital literacy and e-safety education in the institution Staff Training — how the school develops staff awareness of these issues to ensure effective education can take place in the classroom. Table 2 reproduces the levels as defined by the 360 Degree Safe tool for the aspects we are considering. The following discussion draws upon the 360 Degree Safe database to consider these aspects across a large number of schools — the snapshot of the database used for this analysis was taken in September 2011 with 1059 schools having submitted at least one aspect review. Table 3 presents the basic statistics for the self-review data around the three aspects of interest for this chapter. As can be seen from these statistics, the levels at which schools evaluate themselves is not high with average scores sitting between level 4 and 3. Standard deviations also, in general, show a fairly narrow spread of values. In considering ‘‘digital education,’’ we do see some encouragement in that e-safety Education is the highest rated score within our dataset. It would seem that on average, the schools within the sample do something on online safety within the curriculum. However, the score for Information Literacy, the more general education around digital behavior, what we might refer to as ‘‘digital life skills,’’ is lower so fewer schools would consider this in the curriculum. The score for the Contribution of Young People decreases further. There is a growing body of knowledge which highlights the value of the involvement of young people in the development of Information Literacy curriculum (e.g., Atkinson, Furnell, & Phippen, 2009). This can be a very effective approach to education in this field not only because young people are key users of technology and informally develop skills, but also because by engaging with curriculum development and deployment they gain ownership over it rather than feeling this is something being imposed upon them. However, most concerning are the statistics around Staff Training. With a mean of 3.77 and a standard deviation of 0.74, we can show that in over 700 UK schools staff training is often not in place or is weak. This is a real concern when considering the implications of ineffective education on those moving into the workplace. While many schools show they do have e-safety and Information Literacy education in place, if this is being delivered by staff who have not received training or up to date knowledge on the issues therein, can we be confident that this education is effective? We can break the data down further to explore the spread of practice in more detail. Figure 2 shows the percentage of each aspect at each level, and we can see that while the majority of schools are at level 3, more are either at level 4 or 5. Indeed, to reiterate the concerns around Staff Training, many more schools have a level 4 selfassessment, meaning that a formal staff training program is ‘‘under development’’ or not in place at all. What is also highlighted from Figure 2 is that while many schools do consider Information Literacy within their curriculum, almost 30% are either ‘‘in development’’ or have no plans at all in this area.

A planned e-safety education program takes place through PHSE/ICT/other lessons and is regularly revisited. Pupils/ students are aware of e-safety issues and are empowered to stay safe. Appropriate e-safety resources are used. The school is aware of the need to educate and protect vulnerable children who may be put at particular risk from their and others’ actions online.

Pupils/students are taught in some lessons to be critically aware of the materials/content they access online and are guided to validate the accuracy of information. They have an understanding of research skills and the need to avoid plagiarism and uphold copyright regulations.

The school acknowledges, learns from, and uses the high level of skills and knowledge of young people in the use of new technologies. These contribute to the development of e-safety programs.

A planned program of formal e-safety training is made available to staff. E-safety training is an integral part of Child Protection/Safeguarding training and vice versa. An audit of e-safety training needs is carried out. E-safety training is included in the induction program for new staff. Designated staff have attended e-safety conference or update sessions. For example, SWGfL e-safety training, CEOP Thinkuknow training, or similar. An e-safety inset session has been held.

e-safety education

Information literacy

Contribution of young people

Staff training

Level 3

A formal e-safety staff training program is being developed. Child Protection/ Safeguarding training will cover e-safety.

The school is developing opportunities to acknowledge and use the high level of skills and knowledge of young people in the use of new technologies in its e-safety programs.

Opportunities for pupils/students to gain an understanding of information literacy skills are being developed.

A planned program of e-safety education is being developed.

Level 4

Table 2: Level 3 and 4 definitions for aspects of the 360 Degree Safe aspect set considered in this research.

Digital Behaviors and People Risk: Challenges for Risk Management 11


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Table 3: Self-review data for each aspect under exploration.

E-safety education Information literacy The contribution of young people Staff training




3.04 3.25 3.49 3.77

0.99 0.67 1 0.74

788 749 737 722

70.00 60.00 50.00 Level 1


Level 2 30.00

Level 3


Level 4


Level 5

0.00 E-safety education

Information Contribution of Staff training literacy young people

Figure 2: Percentage of schools at each level per aspect investigated.

A final dataset to raise concerns around the quality of online education in schools can be seen when comparing 2010 means with those from the 2011 dataset. Obviously the 2010 dataset contained fewer schools (e-safety Education 344, Information Literacy 327, Contribution of Young People 321, Staff training 316), it does allow us to explore whether mean scores have evolved over time. One would hope, as digital technology becomes more pervasive across the education sector over time, the aspects we are exploring would improve. Table 4 shows this data. The data shows that while there have been some improvements in most aspects, Information Literacy education has virtually no change, and perhaps the most crucial aspect for ensuring effective digital education in schools — Staff Training — is virtually standing still. There is hardly any improvement in the average score for training another year on with the addition of another 406 schools to the database. Access to the 360 Degree Safe database provides a unique opportunity to look accurately at the national state of school practice around digital education. This data shows that the environment from which Digital Natives are emerging are weak in terms of digital education. With an ineffective approach to educating Digital Natives on the risks and challenges associated with the digital world, we need to understand

Digital Behaviors and People Risk: Challenges for Risk Management


Table 4: Comparing 2011 and 2010 averages.

E-safety education Information literacy The contribution of young people Staff training




3.04 3.25 3.49 3.77

3.16 3.26 3.61 3.84

0.12 0.01 0.12 0.07

the implications of this on digital native behaviors. Moreover, we need to think about how such behaviors might impact in the workplace. In the next two sections we explore other datasets which show how the use, and abuse, of technology, can evidence changes in what one might consider to be normal, and acceptable, social behavior.

Sexting and Websex Considering the implications of an education system which does not prepare their pupils for the impact of digital behavior on their lives, this section considers two datasets which explored the phenomenon of sexting — the self-generation and distribution of explicit images via mobile and internet technologies. In considering this, we can draw data from two studies: 

A study commissioned in 2009 to explore the prevalence of sexting in schools by surveying children and young people aged 14–16 across the United Kingdom ( A study commissioned in 2011 which explored the use of technology in explicit relationship among the ‘‘young adult’’ population (16–24 year olds in the United Kingdom) (

Both studies used online surveys to anonymously collect data around sexting practices and the use of technology in relationships. Both surveys received approximately 1000 respondents (the 2009 study 1150, the 2011 study 982). While a lot of the statistics to draw from these studies are beyond the scope of this discussion, there are some things very relevant to issues of corporate risk and their management therein. A top level statistic from the 2009 study was that 38% of the respondent had friends who had ‘‘sexted,’’ that is, taken an explicit photograph of themselves and sent it to someone else (usually a boyfriend or girlfriend). With the age of consent in the United Kingdom set to 16 years old, this shows many people beneath this age engaged with explicit practice using digital technology. The study also asked how frequently incidents of sexting occurred within respondents schools. Table 5 shows that for almost 20% of our respondents this was something that happened frequently.


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Table 5: Frequency of sexting incidents for respondents. None Once or twice A few times Regularly It happens all the time

23.2% 38.7% 18.4% 6.6% 13.2%

Table 6: What do you think an ‘‘inappropriate’’ image might be (please tick all that apply)? A A A A A

picture/video picture/video picture/video picture/video picture/video

of of of of of

young people playing in a public place a young person or people in swimwear at a beach someone in their underwear someone topless someone naked

13.3% 20.7% 55.7% 66.6% 87.9%

Indeed, this was reiterated by a quote from one respondent, a 16-year-old girl who stated: Sexting is so commonplace that I doubt many teenagers would bat an eyelid. If I asked around, I could probably get 10 to 20 photos that have been sent around or put on Facebook in under an hour.

However, perhaps the most concerning, from the perspective of corporate risk and behavior in the workplace, was a further question that asked what our respondents consider to be an ‘‘inappropriate’’ image to share with other people. As well as the options provided in Table 6, respondents were also invited to state other things that might be unacceptable to share. From the 1150 14–16 year olds surveyed in this research, around 35% of respondents see nothing inappropriate about sending a topless image and around 12% see nothing wrong with a naked image. This does certainly suggest a change in what is perceived as normal and acceptable related to distributing images. An even more stark illustration of this is one of the respondents who answered the prompt about what they might think ‘‘inappropriate’’ to be: a naked guy in a banana suit, some sheep in a bath tub, somone eating them selfs, chicks with, two girls one cup, meat spin, lemon party.

While the quote is an amusing, and perhaps somewhat sarcastic, comment from a young person, it does highlight someone who, at a very early age, has been exposed to some extreme pornography and views it as humorous. This does raise questions about what being exposed to highly sexualized content at an early age does to social norms. This can be explored further in the second dataset.

Digital Behaviors and People Risk: Challenges for Risk Management


Respondents were asked whether online behavior had ever impacted their ‘‘offline’’ lives. Thirty-six percent of those who responded said that it had. When exploring the sorts of issues the respondents faced, we can categorized between exposure to content such as pornography and ‘‘unacceptable’’ behavior which was being rationalized by our respondents. For example, the quotes below show a somewhat relaxed attitude toward the digital privacy of others: I have previously been so jealous when my then partner was flirting on facebook that I hacked his email and started checking it twice daily. My previous relationship ended due to me constantly being in contact with other guys online. My other half went through all my online profiles too to find out what I had been up to. BF engaged in explicit webcam chat with males and females using IM service MSN Messenger. I accidentally stumbled across the images (taken using print screen button) of conversations when borrowing his USB stick (the files were hidden so I didn’t see them but my graphic software picked them up later when I was using the program).

All of these quotes show breaches in privacy between partners but in each case there is little reflection on the unacceptability of such. In the final quote, in particular, the respondent seems keen to point out that they ‘‘accidentally’’ saw their partner’s private files, but also seems to have placed a lot of effort into finding them! However, perhaps the most alarming response came from a 20-year-old woman who had recently moved into the workplace: I work on refineries and many men cheat on there and due to me being the only under 40 female on site for 800 guys many flirted with me sending pics of cocks and with tech it’s very easy to get carried away.

Within the small quotation we can see clear evidence of sexual harassment in the workplace facilitated by technology, but what is more alarming is that the victim rationalizes the abuse as ‘‘flirting.’’ She is someone who has clearly been subjected to many incidents of sexual harassment but sees little wrong with it.

Attitudes of Undergraduate Students Certainly the datasets around sexual behavior show a number of specific issues around changes in normalized behaviors which are a cause for concern when introduced into the workplace. A final dataset explores more broadly the issues that could potentially face Digital Natives moving into the workplace through research with undergraduates. It has been suggested (e.g., Donnison, 2007) that the digital native generation will be the change agents to alter educational practices and fully facilitate the use of technology in the work setting. Certainly, for the work of Prensky and others, one can see some of the literature proposing the advent of a new era of technologically enabled work practices that will shift social ICT behaviors into the working environment. Therefore, we undertook a further piece of research to measure the attitudes of undergraduates toward social media, digital copyright, and data protection. This data allows us to strengthen further our position that digital behavior, and a lack of


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awareness of safe online practice, can change normal expectations on what is acceptable in the workplace and raises socio-technical risk issues that have not, perhaps, been considered within traditional risk scenarios. In this research we conducted a survey on management and education undergraduate students at a single UK higher education institution. In total 574 students took park in the survey, which was used as a pre-sessional tool for classes on digital practice. Some of the data collected is explored below and its implications are discussed. It should be noted that there was little difference between responses from management students and those studying education. This was not a subject-specific issue from our sample, more a generational one. Table 7 presents basic data on how many of the cohort used social media sites such as Facebook and Twitter. As we can see, this is clearly a connected generation with virtually all respondents engaging in social networking. We further explored their engagement with the online social world by asking how many friends they had on Facebook (if they used the service). This is illustrated in Figure 3.

Table 7: Do you have a profile on any social networking sites? (n=574).

MySpace Bebo Facebook LinkedIn Twitter Other

Response percentage

Response count

16.4% 17.1% 99.7% 7.3% 29.8% 28%

94 98 572 42 171 28

200 180 160 140 120 100 80 60 40 20 0

Figure 3: The number of friends on Facebook (n=550).

Digital Behaviors and People Risk: Challenges for Risk Management


On average, our respondents had 427 ‘‘friends,’’ the minimum number was 5 and the maximum 2000. As can be seen from the histogram in Figure 2, there is a significant skew toward the lower end (with the ‘‘peak’’ between 200 and 400) there are a large number with many friends. This is an interesting observation, given that the concept of privacy in the online world (particularly in Facebook) centers very much around friends as the most private level of control. We have, within this population, many individuals who are very happy to share their personal details and thoughts with a very large number of people, which suggests individuals who do not have concerns about their own privacy. As well as exploring attitudes toward the protection of their own privacy, we also posed some questions that allowed us to judge what the respondents attitudes were toward the protection of others’ data. This was done by asking about their use of filesharing and copyrighted materials online. The first question posed a direct question about whether they use filesharing technologies to illegally obtain films, music, etc. (Table 8). While the debate around filesharing is a complex one (see, e.g., Coakes, Bryant, Land, & Phippen, 2011) this does provide a crude measure to determine the number of our sample that see no problem with illegally downloading the intellectual property of others. While the number of regular file sharers is low in the population, almost half of respondents have engaged in some practices some of the time. This is an issue that has been further explored in class (as mentioned above, this survey was used as a pre-sessional measurement prior to lectures on aspects of digital practice), and many students observed they did not download music and movies themselves, they got a friend to do it for them. Very few students admitted to purchasing music and movies legally. We also explored attitudes toward copyright around the use of materials in their own work. This allows us to further gauge attitudes toward the value of the data and intellectual property of others. The data is presented in Tables 9 and 10. Looking at the data in Table 9 we can see that the majority of respondents in this sample are not confident that they obtain copyright permission before using a resource from the Internet. Less than a quarter of the respondents said they checked copyright permission even some of the time. Even more concerning was that 10% of respondents said they did not care about checking copyright.

Table 8: Do you ever using file-sharing technologies to download music, films, etc. (n=473). Answer options All of the time Some of the time Occasionally Never

Response percent

Response count

7.6% 17.1% 23.9% 51.4%

36 81 113 243


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Table 9: Are you always confident you have the permission of the copyright owner to download/use web-based materials? (n=435).

Yes, always Yes, sometimes Not sure No Don’t care

Response percent

Response count

16.1% 12.6% 32.2% 28.7% 10.3%

70 55 140 125 45

Table 10: If you do use web resources (e.g., Wikipedia, Google Images, YouTube), do you properly reference these sources? (n=439).

Yes, definitely Yes, I think so Not always Never What do you mean ‘‘properly’’?

Response percent

Response count

28.7% 42.1% 21.0% 5.0% 3.2%

126 185 92 22 14

Finally, we asked more explicitly about the correct referencing of web sources in their work (Table 10). Again, only around a quarter of respondents were confident that they correctly referenced web resources. And while only a small number said that they never referenced properly, the data shows a lot of confusion over whether referencing is done effectively. At the start of this section we were discussing the literature which suggested the advent of the ‘‘digital native’’ into the workplace could create a workforce comfortable with the technology and capable of exploiting its potential. However, which it might be a workforce technically comfortable with the exploitation of technology, this datasets would suggest that as a result of the informal learning and development associated with digital and online social behaviors (e.g., Plowman, McPake, & Stephen, 2008) awareness of potential legal and moral issues are not addressed, or considered. We have a population which is highly engaged with social media, in some instance sharing personal information with large number of ‘‘friends,’’ and seem to have little concern around data sharing and copyright issues. Our work with schools across the United Kingdom has already highlighted that data protection, and the wider ‘‘digital literacy’’ curriculum (see, e.g., Furnell, von Solms, & Phippen, 2011), is inconsistent and severely lacking in national coordination. The 360 dataset explored here shows this continues to be the case and

Digital Behaviors and People Risk: Challenges for Risk Management


what is clear from our study of undergraduates is that this patchwork, inconsistent approach is failing and the next generation of the workforce has little grasp of the implications of data or identity loss and how digital behaviors they use in the social world might have significant implications if applied to the corporate setting.

Digital Natives: Key Risks From the data in the fifth section on the attitudes and behaviors of Digital Natives it is apparent that there are some potentially significant information security risks for organizations. This section explores these risks in more detail. Some of these risks represent changes in exposure to known information security risks. Others, such as the use of social networking to bully and harass the staff within organizations are new, at least to the realm of information security risk management. However in both cases a failure to manage these risks can have severe consequences. As with any area of risk management, it is possible to come up with numerous taxonomies of information security risks, depending on the level of granularity desired, the type of organization that is involved, and the perspective taken on risk (risk event vs. a causal or effects-based categorization approach, for example). For the purposes of this chapter the Parkerian Hexad (Parker, 2002) is used. Parker categorizes information security risks according to six fundamental elements of information security. The advantage of Parker’s approach is that it is explicitly designed to reflect the application of information systems and technologies, or put simply the use (and abuse) of data/information by people:  


Availability: loss of access to information, whether due to technical failure (e.g., disk failure) or a deliberate attack, such as a denial of service attack, for example. Utility: a loss in the usefulness of data, for example, data may be secure, but unusable because of the loss of an encryption password. Alternatively data might be stored in an obsolete format. Integrity: a change to the accuracy and soundness of the data held. This could be an accidental or unauthorized change. This includes data corruption. Authenticity: attempts to modify the origin or authorship of information. The theft of a digital signature is one example. Confidentiality: unauthorized access or use of sensitive information (e.g., customer data). Possession: a loss of possession or control over information, but not necessarily a breach of confidentiality. The loss of an encrypted data device is an example. The device may be encrypted, but this encryption could be overcome at some point in the future — hence action is required to address this possibility.

From this Parker (2002, p. 11) identified what he termed a ‘‘complete list’’ of information loss events; each linked to a pair of the six elements. Based on the


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analysis in the fifth section there may be a significantly increased risk of the following loss events from this list, due to the behaviors of Digital Natives. Attributes Availability and Utility

Loss events


Unauthorized movement or displacement.

Digital natives are more likely to engage in unsafe practices such as password sharing and other breaches of acceptable use policies. Digital natives are more capable of introducing viruses, Trojan horses, etc. into information systems.

Destruction, damage, or contamination.

Denial of access. Integrity and Authenticity

Creation of false data or information.

Digital natives are more likely to engage in unsafe practices such as password sharing and other breaches of acceptable use policies.

Unauthorized modification. Misuse. Confidentiality and Possession

Unauthorized disclosure. Revealing the location of confidential and/or sensitive information. Unauthorized copying and/ or theft of information. Endangerment — by not taking sufficient care to protect information.

Due to their intensive use of the internet and social media in particular Digital Natives are more likely to disclose confidential and/or sensitive information. This may be either deliberate or accidental (e.g., by accidentally uploading a file to Facebook or forwarding a sensitive e-mail to a friend).

In addition, there are three additional loss events that need to be added to those identified by Parker, all of which fall under the broad information attributes of Authenticity, Confidentiality, and Possession: Attributes Authenticity, Confidentiality, and Possession

Loss event


Loss of reputation

Any unexpected loss event, whether information security related or not, can damage the reputation of an organization, where such an event is

Digital Behaviors and People Risk: Challenges for Risk Management Attributes

Loss event


Rationale made public (e.g., BP Deepwater Horizon). Due to the public nature of social media, and the potential for anonymous information sharing, it is now more likely that such events will be made public. For example, via an employee who decides to leak the information. In addition, social media provides a forum for the rapid dissemination of rumors, opinions, complaints, reviews, etc. by both staff and other groups such as customers. Even if untrue these rumors, etc. could still seriously damage the reputation of an organization. Especially where there is more faith in the authenticity of social media than any countervailing statements provided by the organization in question.


Digital natives are more likely to commit breaches of copyright (e.g., storing illegal downloads on work devices such as a phone or laptop). In addition, they may use social media to commit crimes such as ‘‘defamation of character’’ or harassment. All these events create potential legal liabilities for the organizations hiring these individuals, especially where weaknesses in information security management and/ or human resource practices are apparent.

Duty of care

Social media provides a new mechanism for bullying and harassment in the workplace. It may also, via the potential for anonymity further increase its probability. As with any such bullying or harassment this can have a psychological effect on staff and damage their health and well-being.


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These new risks illustrate that Digital Natives are bringing with them some unfamiliar challenges for information security professionals; challenges of a human, legal, and reputational nature. To manage these challenges information security professionals will need to get closer to their HR (Human Resources), Legal, and Public Relations counterparts. In particular it is likely that these functions will need to pool their expertise, to help develop a coordinated and cross-disciplinary response to information security. The days of the information security professional restricting him or herself to technical solutions are over, like any other branch of risk management, they must recognize the importance of people risk and manage their organization’s information security risks accordingly. We explore this further in the next section.

Strategies for Managing Digital Native Risks It is not our intention to provide a comprehensive list of potential controls in this section. Rather a broad set of potential control strategies are identified. The basic premise is that information security professionals must combine their traditional technical IT skills with those of a people risk manager. This requires a better balance between ‘‘hard’’ controls, such as access controls or firewalls, and ‘‘soft’’ controls, such as creating an appropriate security culture and ensuring that Digital Natives are appropriately inducted into this culture.

Culture There is a recent body of research looking at the nature and effectiveness of organizations’ information security cultures (see, e.g., Chia, Maynard, & Ruighaver, 2003; Da Veiga & Eloff, 2010; Ruighaver, Maynard, & Chang, 2007). The premise of this research is that an ‘‘appropriate’’ information security culture should help to reduce the risk of accidental and deliberate information security loss events, by influencing the behaviors of employees. This is achieved via mechanisms which affect the way in which these employees perceive information security risks and make decisions (e.g., control decisions) about both their own, and their organization’s, level of exposure. There are many mechanisms that can be used to create an appropriate information security culture. These include: promoting security awareness through training and education initiatives; management styles and attitudes (the so-called ‘‘tone from the top’’); performance reviews and performance-related pay; disciplinary procedures; and recruitment procedures, among others. The precise mechanisms employed, along with their design, will tend to vary by organization (there is no one size fits all approach to any form of organizational culture), though there are frameworks available to help organizations select an appropriate set of mechanisms (e.g., Da Veiga & Eloff, 2010).

Digital Behaviors and People Risk: Challenges for Risk Management


The management of an organization’s culture can be a powerful risk control tool, especially when dealing with issues like information security management that have a strong socio-technical element. However it remains to be seen whether the current design of such mechanisms remains appropriate in the context of the Digital Native generation. For example, existing awareness training programs may need to be modified to reflect the attitudes and behavioral characteristics of Digital Natives, as well as the implications of modern social media applications (see Furnell, 2008). Communication A further important control strategy in the context of Digital Natives is two-way communication. In terms of communicating to Digital Natives, organizations should ensure that they inform them of the potential security threats that they may encounter and significantly the implications of these threats to organizations. While many Digital Natives might believe that they are well aware of the potential information security threats that they can encounter, especially on familiar social media sites, the data highlighted in the fifth section above suggests that they still have much to learn. The other side of an effective communication strategy is communication from people to the ‘‘organization.’’ Of particular importance here is encouraging staff to be open about their mistakes (e.g., accessing a virus infested website or sharing confidential information). With the timely reporting and monitoring of incidents effective remedial action can be taken to limit any damage. In addition lessons can be learned for the future, enabling new control strategies to be put in place. Human Resource Management Information security managers should develop much closer relationships with their HR function. HR professionals are often experts in people management and have access to a range of ‘‘soft’’ controls. Key controls include recruitment procedures, which may be able to filter out employees that could expose the organization to a high level of information security risk, by looking at an applicant’s public web profile, for example. Also important is the induction process, both to raise awareness of information security issues and to ensure that policies and procedures are understood, as well as the implications for noncompliance. Equally disciplinary procedures should be reviewed to ensure that any information security breaches are investigated and resolved in an appropriate manner. Policy There is a danger of placing too much reliance on policies, especially ‘‘Acceptable Use Policies.’’ This may be either because such policies are incomplete, or that people simply take no notice of them, especially if they are very long.


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The trick is to achieve a careful balance between principles and rules. Specific rules may be required in a small number of contexts, to highlight clearly unacceptable behavior (e.g., password sharing). However for the most part a principle-based approach is best. The benefits of principles are that they can cover a wide range of eventualities, without having to rely on large amounts of text. This is especially valuable in the context of Digital Natives, where new attitudes and practices may throw up unexpected scenarios. In addition principles avoid the potential for restricting potentially useful behaviors. For example, a total ban on the use of USB drives or cloud computing applications like ‘‘Dropbox’’ may reduce organizational efficiency as staff struggle to find other ways to share potentially useful information. Instead a principle of responsible file sharing might be implemented, perhaps accompanied by monitoring software, which could be used to detect pockets of excessive or unexpected use. In addition, organizations need to be aware of their duty of care to ensure that staff should not be subjects to abuse via digital means. Policies such as sexual harassment and bullying should reflect the influence of digital technologies in these areas, and clearly define sanctions when breaches of policy occur.

Technical Although technical controls may no longer be the primary weapon in the arsenal of the 21st century information security professional they remain important. Ensuring that monitoring and filtering tools are effective is one area of priority. It is also important that these activities are conducted in a transparent manner so that Digital Natives understand their value and do not routinely look for ways round these controls. In particular, organizations need to consider the impact of mobile device use and how behaviors can be monitored. Finally, learning from research into the education sector (e.g., Byron, 2008), we would reiterate that simple avoidance strategies, such as a ban on portable devices, are rarely effective and are easily worked around by technology-savvy Digital Natives. It is better to embrace new technology and the benefits it can confer, controlling the potential risks via routes such as cultural change and education than seeking to impose technical restrictions on its use.

Conclusions Digital Natives bring with them many opportunities for the workplace however this is accompanied by a range of potential threats that need to be managed. In this chapter we have explored these threats and outlined some strategies that can be used to control them. Technology and technologically skilled employees cannot be managed via mechanistic, technical solutions alone. As technology becomes an increasing part of

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both our personal and working lives we must embrace the human implications of this. Information security management must, therefore, break away from its technical origins and become a fully fledged risk management discipline, built on the same socio-technical foundations like any other modern field of risk management. Are information security professionals up for this challenge?

References Albrechtsen, E., & Hovden, J. (2009). The information security digital divide between information security managers and users. Computers and Security, 28, 476–490. Atkinson, S., Furnell, S., & Phippen, A. (2009). Securing the next generation: Enhancing e-safety awareness among young people, Computer Fraud and Security, 2009(7), 13–19. Bennett, S., Maton, K., & Kervin, L. (2008). The ‘Digital Natives’ debate: A critical review of the evidence. British Journal of Educational Technology, 39(5), 775–786. Blunden, T., & Thirlwell, J. (2010). Mastering operational risk. Financial Times, Prentice Hall. Bunker, G. (2012). Technology is not enough: Taking a holistic view for information assurance. Information Security Technical Report, 17, 9–25. Byron, T. (2008). Safer children in a digital world. The Byron Review. Retrieved from http:// Accessed on September 31, 2012. Carr, N. (2008). Is Google making us stupid? What the internet is doing to our brains. The Atlantic [online]. Retrieved from is-google-making-us-stupid/6868/. Accessed on September 31, 2012. Chia, P., Maynard, S., & Ruighaver, A. (Eds.) (2003). Understanding organisational security culture. In Information systems: The challenges of theory and practice. Las Vegas, NV: Information Institute. Coakes, E., Bryant, A., Land, F., & Phippen, A. (2011). The dark side of technology: Some sociotechnical reflections. International Journal of Sociotechnology and Knowledge Development (IJSKD), 3(4), 40–51. Coles-Kemp, L. (2009). Information security management: An entangled research challenge. Information Security Technical Report, 14, 181–185. Da Veiga, A., & Eloff, J. (2010). A framework and assessment instrument for information security culture. Computers and Security, 29, 96–207. Donnison, S. (2007). Unpacking the millennials: A cautionary tale for teacher education. Australian Journal of Teacher Education, 32(3), 1. Furnell, S. (2008). End-user security culture: A lesson that will never be learnt? Computer Fraud and Security, April, pp. 6–9. Furnell, S., & Phippen, A. (2007). Raising a generation at risk. Retrieved from http:// Accessed on September 31, 2012. Furnell, S., von Solms, R., & Phippen, A. (2011). Preventative actions for enhancing online protection and privacy. International Journal of Information Technologies and Systems Approach (IJITSA), 4(2), 1–11. Howe, N., & Strauss, W. (2000). Millennials rising: The next great generation. New York, NY: Vintage. Howe, N., & Strauss, W. (2003). Millennials go to college. Washington, DC: American Association of Collegiate Registrars and Admissions Officers.


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Humphreys, E. (2008). Information security management standards: Compliance, governance and risk management. Information Security Technical Report, 13, 247–255. Kraemer, S, Carayon, P., & Clem, J. (2009). Human and organizational factors in computer and information security: Pathways to vulnerabilities. Computers and Security, 28, 509–520. Kyriakides, L., & Campbell, R. J. (2004). School self-evaluation and school improvement: A critique of values and procedures. Studies in Educational Evaluation, 30(1), 23–36. Lambert, J., & Cooper, D. (2010). Managing the people dimension of risk. London: Corporate Research Forum. Lewis, R. (2010). When cultures collide: managing across cultures (3rd ed.). London: Nicholas Brealey Publishing. MacBeath, J. (1999). Schools must speak for themselves: The case for school self-evaluation. London: Routledge. McConnell, P (2008). People risk: Where are the boundaries? Journal of Risk Management in Financial Institutions, 1(4), 370–381. Morozov, E. (2008). Digital renegades, or captives? The New York Times [online], November 11. Retrieved from html. Accessed on September 31, 2012. Palfrey, J., & Gasser, U. (2008). Born digital: Understanding the first generation of Digital Natives. New York, NY: Perseus Books Group. Parker, D. B. (2002). Toward a new framework for information security. In S. Bosworth & M. E. Kabay (Eds.), The computer security handbook (4th ed.). New York, NY: Wiley. Parry, E. (2009). Tapping into talent: The age factor and generation issues. Chartered Institute of Personnel and Development. Penna, & CIPD. (2008) Gen up: How the four generations work. Survey report, CIPD, London. Plowman, L., McPake, J., & Stephen, C. (2008). Just picking it up? Young children learning with technology at home. Cambridge Journal of Education, 38(3), 303–319. Prensky, M. (2001a). Digital natives, digital immigrants. On the Horizon (MCB University Press), 9(5), 1–6. Prensky, M. (2001b). Digital natives, digital immigrants Part II: Do they really think differently? On the Horizon (MCB University Press), 9(6), 1–9. Prensky, M. (2009). H. Sapiens Digital: From digital immigrants and digital natives to digital wisdom [online]. Retrieved from 20Digital.pdf. Accessed on September 31, 2012. Ruighaver, A., Maynard, S., & Chang, S. (2007). Organisational security culture: Extending the end-user perspective. Computers & Security, 26(1), 56–62. Schein, E. H. (2010). Organizational culture and leadership (Vol. 2). Jossey-Bass. Schildkampa, K., Visschera, A., & Luytena, H. (2009). The effects of the use of a school selfevaluation instrument. School Effectiveness and School Improvement, 20(1), 69–88. Siponen, M., & Willison, R. (2009). Information security management standards: Problems and solutions. Information & Management, 46, 267–270. Smith, D., & Elliott, D. (2006). Key readings in crisis management: Systems and structures for prevention and recovery. London: Routledge. White, D. (2011). Visitor Resident Model [presentation online]. Retrieved from http:// Accessed on September 31, 2012. Whittaker, Z. (2010a). Net generation prefers the real world: Not so Web savvy after all? ZDNet [online]. Retrieved from Accessed on September 31, 2012. Whittaker, Z. (2010b). Defining the ‘iGeneration’: Not just a geeky bunch of kids. ZDNet [online]. Retrieved from Accessed on September 31, 2012.

Chapter 2

Leveraging Social Media Technology for Business Transformation: The Case of Corporate Social Communities Richard L. Gruner, Damien Power and Paul K. Bergey

Abstract Purpose — This chapter explores the role that social media can play to support entrepreneurs in managing complex interfirm communities. As companies increasingly operate in highly connected environments, it is important to move beyond corporate networks, and understand and build corporate social communities (CSCs) that underpin organizations. Design/methodology/approach — The authors conducted 14 case studies at member firms of GS1 Australia — a not-for-profit association dedicated to the development, implementation, and promotion of information technology standards to improve supply chain management. Finding — The gathered data illustrate a number of common challenges managers typically encounter in their supply chain operations. In response to these challenges, the authors propose distinct ways in which CSCs can leverage and transform interfirm relationships and support operational goals. Research limitations/implications — The empirical investigations were limited to the supply chain context, and Australian companies. The benefits pertinent to CSCs were only explored conceptually. Further studies should address these limitations. Practical implications — We provide empirical evidence supported by theoretical insights that CSCs are powerful tools that community designers and managers can leverage to transform business-to-business (B2B) relationships. Originality/value — The originality of this study resides in advancing theoretical understanding and providing practical managerial guidance on how to best deploy Social Media in Strategic Management Advanced Series in Management, 27–42 Copyright r 2013 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1877-6361/doi:10.1108/S1877-6361(2013)0000011006


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CSCs in a supply chain context. Additionally, we consider the role CSCs play in different stages of B2B relationships, and the reasons why most managers are hesitant to adopt CSCs. Keywords: Corporate social communities; multiple case studies; interfirm relationships; GS1 Australia It seems [y] archaic compared with how easy it could be using more modern technologies over the internet. It’s like these companies [y] and whoever else have built some sort of a system around them being profitable, rather than necessarily around it being the most effective way of doing something. Quote from GS1 Australia member expressing his frustration with current inter-firm technologies and related supply chain practices

Introduction No firm is an island: Firms depend on networks. This is especially true in our modern economies where flows of communication and information have become at least as important as flows of physical products (Van Dijk, 2012). The arrival of social media technologies plays an important role in this development. Social media platforms have the potential to transform and reshape business processes through various kinds of exchanges between trading partners (Pavlou & Chai, 2002). Social media technologies allow firms to evolve from networks to online communities where knowledge is shared in real time, creating a living body of corporate knowledge (Sena & Sena, 2008). If a firm has difficulties locating potential expertise and finding the right trading partners, it can turn to online communities., for example, is a marketplace where buyers of made-to-order industrial goods and apparel request a quote complete with technical specifications. This request is automatically matched to suppliers around the globe with the right equipment, expertise and capacity creating efficiency, and value for all parties involved. The collaboration, quoting, awarding of the order and tracking through delivery of the product all happens on this particular platform. However, while the literature abounds with examples of social media transforming the interactions between the firm and the end consumer, little empirical work has examined the potential value of online social communities, such as The influence of social media extends beyond the interactions and the formation of networks between firms and end consumers. It is much more than a ‘‘collective participation by consumers in a grassroots format that is relatively open and controlled by consumers themselves’’ (Kozinets, Belz, & McDonagh, 2011, p. 207). Power is not only shifting away from marketers and flowing to consumers (Kozinets, 1999), but increasingly empowering all parties engaged in business-to-business (B2B) transactions. The business connections fostered through social media ‘‘are anchored in affinity and beneficial to individual members through the information they are able to obtain and share, creating knowledge capital that becomes attached to their profile and is

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visible to other network members’’ (Sena & Sena, 2008, p. 228). The ensuing corporate social communities (CSCs) can result in a number of benefits for firms. What do these communities look like though? The term ‘‘online community’’ usually refers to a wide range of internet-based forums, including social networking sites, electronic bulletin boards, and sharedinterest websites (Miller, Fabian, & Lin, 2008). These communities consist of networks that connect actors and the pattern of relationships that ties them together (Iacobucci & Hopkins, 1992). We are interested in networks as modes of organizing economic activities between business partners (Grandori & Soda, 1995). When social media platforms connect firms with one another, CSCs begin to form and develop. We define CSCs as internet applications that enable specialized, nongeographically bound connections, communication, and collaboration between stakeholders. Connections in these communities form the basis of genuine, collaborative business relationships that grow both on and offline. But what are the benefits firms can draw from CSCs and why are they not widely adopted — despite managers’ frustrations with their current, largely outdated interfirm systems (as the opening quote illustrates)? In this chapter we seek to propose answers to these questions. In doing so, we consolidate, broaden, and develop the view that the social media phenomenon has the potential to fundamentally change the way firms collaborate with one another. Thus, our main concern in this chapter is a practical one. We aim to show how firms can benefit from social media technologies, and present a rationale for why it is crucial for managers (particularly in a supply chain context) to understand and build CSCs that underpin extant organizational networks. Fourteen case studies allow us to identify recurrent challenges and tensions that decision makers face in their supply chains. We illustrate how CSCs can help overcome these issues and turn into a tool for dedicated, ongoing, and sustained business collaboration. We also illustrate how CSCs can help firms move through the various stages of an evolving B2B relationship. We shed light on the question of what CSCs look like, and how these consensual, non-hierarchical networks lay the framework for previously unknown levels of cooperation and coordination between firms. We first offer a brief account of the nature and origins of CSCs. This is followed by a theoretical exploration of the potential benefits of these communities in a supply chain context. Next, we report the findings from multiple case studies that helped us identify common challenges in supply chains, and explain how CSCs can address these issues. We then outline the role CSCs play at different stages of a B2B relationship, and the inherent obstacles and limitations pertaining to the development and use of CSCs. The chapter closes with a summary and future research suggestions for social media scholars.

The Nature and Origins of Corporate Social Communities The past decades have seen a constant shift away from traditional monolithic corporate structures. The importance of alliances and multi-organizational corporate


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networks has increased dramatically. These networks are complex constellations of firms with the purpose of organizing economic activities through the cooperation and coordination between firms (Ebers, 1999; Grandori & Soda, 1995). Managers typically use technology to impose this type of coordination and cooperation in advance and then use software to put it in place. McAfee (2009, p. 53) explains: ERP (enterprise resource planning), CRM (customer relationship management), SCM (supply chain management), procurement, and other types of ‘‘enterprise systems’’ enjoyed explosive growth starting in the mid-1990s. These applications differed in many respects, but they shared one fundamental similarity: they were used to define, then deploy, business processes that cut across several organizational groups, thus helping to ensure that the processes would be executed the same way every time in every location.

Flows of information and communication are crucial to these networks, which is also reflected in increased research on collaborative support systems, organizational implications, and the impact of these information systems (Ma¨kipa¨a¨, 2006). Yet, while putting structures in place in order to provide consistent outcomes and standardizing cooperation within and between firms makes sense, it may not always be in firms’ best interest. While the IT toolkit for collaboration and interaction has increased massively over the last decades, researchers often report of technology having no or even a negative impact on firms’ bottom lines (e.g., Sanders, 2008). The arrival of Web 2.0 and social media tools further challenge the notion that more control and IT-supported standardized processes always lead to superior business outcomes. Wikipedia is a case in point; its egalitarianism and lack of imposed structure where everyone can contribute to its articles was one of the first success stories of the social media era. Traditionally, in supply chains, communications used to merely accompany the flows of physical products while in transit and assist in their coordination. Increasingly, however, these exchanges are becoming a social affair involving communities of practice and learning (see Brown & Duguid, 2000). This change was brought about through a mix of increased computing power, cloud, as well as mobile technology that make information accessible, shareable, and consumable. How? Through the evolution from transaction-based B2B networks to adaptive, responsive, and collaborative networks — in other words — CSCs. In these communities, information exchange has the potential for knowledge creation through social interactions and the development of communities of practice in a business context (Brown & Duguid, 2000; Van Dijk, 2012). Actors make agreements and engage freely in interactions. ‘‘They cooperate on the basis of complementary strength and they become interdependent’’ (Van Dijk, 2012, p. 73, sic). The potential power of such informal, self-regulated interaction enables networks to become communities when deep relationships develop and become embedded in network architecture (virtual and/or physical). As we will illustrate, CSCs are more important than ever in an economy where production and trade are parts of an extensive value chain that requires smooth and ongoing cooperation and collaboration.

Leveraging Social Media Technology for Business Transformation


A Theoretical Exploration of the Potential Benefits of Corporate Social Communities in Supply Chains CSCs have many implications for both management practice and theory. They can support entrepreneurs in managing complex interfirm relationships, and transform the way managers communicate and collaborate with one another. Natural systems theorists argue that firms are more than tools designed to achieve specific goals. Instead, organizations are social entities. The ability to motivate and leverage the commitment, intelligence, and initiative of the (social) collective can make or break firms (see Fawcett, Fawcett, Watson, & Magnan, 2012). CSCs facilitate open and interactive communication, the exchange of expertise and resources, and a willingness to share risks and rewards. These are essential elements for successful collaborations (Luca & Atuahene-Gima, 2007; Rai & Bajwa, 2007; Stonebraker & Afifi, 2004). More specifically, CSCs can provide a forum for firms that facilitate knowledge sharing and collaboration, solicit feedback from business partners, and extend a company’s reach. CSCs can engender interaction with customers, foster product and procedure improvements, and inspire innovations. These communities allow firms to tap into the wisdom of the crowd. Further, by engaging affiliates and partners in open dialogue, customer retention and satisfaction are improved, thereby increasing revenue (Sena & Sena, 2008). CSCs make ‘‘people feel more connected to one another because they are more connected, and as a result they also feel a tighter bond with the organization as a whole’’ (McAfee, 2009, p. 197). This creates virtual social capital by enhancing the relationships in firms’ value chains and increasing trust between stakeholders. Social capital arises from the connections among people which lead to norms of reciprocity and trust (Putnam, 2001). Communities are characterized by a level of social capital that is related to the degree of trust among community members (Bowles & Gintis, 2002). The way to build trust and functioning relationships is through aligning parties’ interests so that they have a common goal. CSCs can make this common goal more visible and tangible to their members, which is particularly important in a supply chain context, where collaboration should have displaced firm-to-firm competition as the focus in the global marketplace (McCarter & Northcraft, 2007). In supply chains, ‘‘you need to align the interests of the functional groups and multiple partners so that you will be able to move forward in unison’’ (Beth et al., 2003, p. 67). So far, however, the notion that more collaboration leads to more business performance remains a widely heralded, but merely theoretical concept (Frohlich & Westbrook, 2001). In practice, many studies report an increase in interfirm rivalry, reluctance to share information, skills, and processes (Fawcett et al., 2012; Fawcett, Magnan, & McCarter, 2008). Further, supply chain alliance failures brought on by interfirm rivalry lead to numerous performance ‘‘glitches’’ (Hendricks & Singhal, 2003), and even the introduction of expensive IT infrastructure fails to consistently deliver performance improvements (Autry et al., 2010). Thus, the question arises: What


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exactly do the ‘‘rivalry,’’ ‘‘glitches,’’ ‘‘failures,’’ and so on look like, and can CSCs really solve these issues? In the following sections we seek to answer this question, and present our findings from multiple case studies that identify relevant supply chain issues. Next, we assess whether CSCs can respond to these issues, and if so, how they can respond.

A Case Study Exploration of the Potential Benefits of Corporate Social Communities in Supply Chains We conducted 14 exploratory case studies at member firms of GS1 Australia — a nonprofit association that is part of GS1 Global, a federation of organizations with over 1 million member firms in 102 countries dedicated to the development, implementation, and promotion of technologies to improve supply chain management. We sought to comprehend the dynamics and complexities associated with implementing extant supply chain-enabling technologies (e.g., Barcodes, Electronic Data Interchange (EDI), Radio-frequency Identification (RFID)) that have implications for interaction and integration between trading partners across the traditional boundaries of the firm. Without even prompting managers to talk about social media technologies or the potential of CSCs, most managers recognized its potential in changing business practices. The following quote from a GS1 Australia member firm manager illustrates this phenomenon: Well, all of the EDI that you do with the major stores has to be done over their particular networks rather than just using the internet, which is ridiculous, using mailboxes and various other what I would call old school methods of using technology and I think there’s got to be far better ways but if you’re dealing with these big trading partners, they have been convinced you can only do it this way and so this is what they do. But I am sure if I wanted to set up a system with my office in China as an example, I’m sure we could come up with a better way to do it on the internet without having to pay expensive mailbox and data fees and all this sort of stuff. With Google now you can get 5 gigabytes for nothing.

Yet, despite recognizing CSCs potential to enhance supply chain relationships, across all firms, managers only use business networks to stay in touch with trading partners (e.g., through LinkedIn), or communicate within their own firms (e.g., through Yammer), not to enable supply chain collaboration, knowledge sharing, or any of the other potential benefits previously outlined. The case studies further illustrate a number of common challenges and issues managers encounter in their supply chain operations. These represent impediments to an increased supply chain integration and collaboration, and can, as we will illustrate, be overcome through the effective use of CSCs. (1) ‘‘Whatever Works’’: Quick, Localized, and Fragmented Collaboration in Supply Chains This issue in supply chains refers to managers’ tendency to make short-term, opportunistic decisions that allow for successful business transactions for their

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individual businesses. While this strategy is often necessary for the immediate survival and profitability of individual firms, it is frequently adopted with no regard for the implications for a supply chain as a whole. It represents the triumph of self-interest over community management. The following quote illustrates this: Interviewer: ‘‘Are you interested in taking up EDI with other customers as well, or do you say this is actually too much work, learning to use the program?’’ Manager: ‘‘It’s a funny one. No is probably the short answer. It probably works for us at the moment the way it is, and probably working with the customers there would be probably extra training involved and probably some short-term pain but long-term gain and it’s probably the short-term pain I think that’s got to be a problem.’’

Managers also typically implement supply chain-enabling technologies in a fragmented manner, where the situation determines how, when, and which technology is being used. This strategy is adopted even with so-called standardized technologies, such as EDI. We had to sort of cobble up things to make their systems work. It required someone to push a button, or perform a task for it to happen, and once that happens, to me that’s not true EDI.

Further, firm attempts to establish communities were found to be usually limited to transactions and only work in conjunction with other technology and manual interventions. y they basically set up a web portal, they were going down that track and yes I could see that was going to work better but we still had to log in and upload a file to them, we had to perform a manual process, albeit electronically, but we had to perform a manual process to get our invoice.

As the previous quotes illustrate, managers’ main concern was not creating strategic alliances with other companies, but meeting everyday business demands. The result is a situational, fragmented adoption of technologies, which then determines the way in which firms collaborate, and integrate with one another. From the time of some of the earlier theorizations about interactive communication, it has been widely recognized that communications must be managed as a boundary-spanning activity. Day (1992, p. 324) observed that truly market-driven firms ‘‘do not suffer from organizational chimneys, silos, or smokestacks which restrict information flow to vertical movements within functions.’’ Indeed, firms should identify a broader set of business relationships and emphasize communication with trading partners. Interpersonal and intergroup relations should be more facilitative than defensive, more about long-term collaboration that benefits everyone. Integration in the supply chain should be about the whole supply chain, but in practice it is more about firms doing what they can do easily and for a local shortterm benefit. In other words, a ‘‘whatever works’’ attitude toward the management of CSCs and collaboration emerged from our data. We posit that CSCs can help, or even solve, this issue. CSCs allow for disaggregated, fragmented technologies to be transformed into integrated web services. These services facilitate interactive communication between trading partners that can overcome managers’ drive to adopt quick, localized, and fragmented supply


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chain strategies. CSCs do so by tearing down organizational silos and enhancing supply chain collaborations that are beneficial to all members. If CSCs are implemented successfully, trading partner collaboration does not have to be pursued on a case by case basis. CSCs allow for information needs to be shared horizontally, and individual companies can make more informed choices that transcend an immediate, perceived benefit for their own firm. These types of communities are often associated with more flexible ways of working in organizations. It can mean working with flexible places and times, instead of a fixed desk and nine-to-five schedules (Van Dijk, 2012). However, while constraints of time and place may be mitigated, CSCs can also lead to less flexible work routines and more responsible management practices. In this way, established links to other community members keep entrepreneurs from adopting quick, localized, and fragmented collaboration strategies that only benefit their very own firm. (2) ‘‘Just Comply’’: Power Imbalances and Opportunistic Behavior in Supply Chains This issue in supply chains refers to managers’ perceived lack of power in influencing supply chain policies and practices, and the ensuing opportunistic behavior of some (typically more powerful, bigger) trading partners. It represents the triumph of hierarchies over community management. As the following quote demonstrates, managers often feel that they need to follow, mimic, or copy the actions of other, more powerful organizations. The point I’m trying to make, the businesses of our size, we don’t get to make the rules we just follow the rules [y] we’re told what we have to do and we just do it, and if we want to deal with them, that’s how it is, if that makes sense.

The perceived lack of power with regard to the big players in the supply chain often goes hand in hand with communication problems, that is, a lack of dialogue that obstructs the development of meaningful relationships in the supply chain. Further, this issue is exacerbated by opportunistic behaviors of some powerful players in the supply chain. A different supply chain manager explains: y the only weird thing about it is how the retailers differ in their use of the information as an example, Retailer X still need us to send an invoice with every shipment and email or fax them an invoice to their accounts payable office [y] On top of the fact that we are EDI trading and they would be able to scan a label when they receive the goods which should theoretically tally the fact that the order has been received and they should pay us, which is (how) Retailer Y do it, and they launched it as being a more advanced system than every other retailer but they seem to require so much more work and paperwork so that’s weird. They just say they are not ready, I think it’s because it delays the process and it means they’ve got longer to pay, but that’s me being cynical.

We posit that CSCs can help overcome this problem by enhancing supply chain collaborations that are more genuine and beneficial to all involved members. CSCs can empower all trading partners in a supply chain and thus lead to a fundamentally different

Leveraging Social Media Technology for Business Transformation


supply chain management style, one that emphasizes relational, two-way communication between all interested partners (as opposed to top-down communication). CSCs complement and facilitate business practices, such as total quality management, which requires ‘‘that everyone involved in the process be made a partner in its outcome’’ (Duncan & Moriarty, 1998, p. 8). Thus, they can change the traditional stimulus–response or ‘‘transmission’’ model to a more dynamic one that allows trading partners to enter into a conversation with one another. This novel business approach can overcome the limitations of extant supply chain-enabling technologies (such as EDI) that often require special networks, running specialized protocols, which require specific, complex data structures, formats, and syntax on both ends of the transaction. CSCs lead to many links between firms, which allow for information flows that business partners often trust more fully and find more persuasive than more traditional communication (Herr, Kardes, & Kim, 1991). It enables managers to decide for themselves what is relevant for them and what to do, rather than relying on someone else to instruct them and feeling compelled to ‘‘just comply.’’ Interactions on CSCs can help form informal bonds, which can lead to meaningful relationships. While the bulk of communication on CSC platforms is very short, digitally mediated conversations can be long and dense and build lasting relationships of mutual trust. Once this is the case, common values and goals between trading partners can be identified and firms will likely begin to cooperate on the basis of complementary strength. As Van Dijk (2012, p. 73) explains: The rise of networks fulfils the growing organizational need to achieve common goals in a division of labour that has gone very far. However, this is not realized by the invisible hand of the market and its prices, nor by the visible hand of management and its routines, but by reciprocal gains to be achieved in conscious agreement of interdependent actors and their relationships.

Indeed, knowledge making as a social process is only possible if stakeholders can communicate with one another without being curtailed or restricted by policy, practice, or limited infrastructure.1

The Evolution of Firm Relationships and CSCs CSCs have the potential to address many supply chain problems. They transform interfirm relationships. And every firm depends on relationships — evolving relationships to be precise. This is important because we believe that CSCs play distinct roles during different stages of these relationships.


This may also lead to a necessary rethinking of standard-administering organizations such as GS1. Traditionally, technologies such as barcodes, EDI, etc. were largely imposed — these are technologies with predefined workflows, interdependencies, and other rules that are usually incorporated into IT standards. However, social media allow good ideas to emerge from anywhere and spread organically rather than being developed at the center and imposed from top-down (yielding digital, collaborative environments that are easy to search and navigate).


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The Initial Stage In the initial stage of a new relationship, the behavior of actors is typically transactional, as managers agree to engage with each other under specific terms. During this beginning phase, the participants’ perspectives can be characterized as ‘‘zero sum’’ where the agreements are transactional in nature with the responsibilities and benefits easily described as quantifiable expressions (Hagel, Brown, & Jelinek, 2010). The relationship is essentially arm’s length and there are low expectations of future transactions or perceived value beyond that agreed to in the initial transaction. Importantly, there is little in the way of information flow, other than what is necessary to complete the transaction. The behavior of trading partners is exclusively competitive and it is implicitly understood that defection can occur at any point in time. CSCs provide the opportunity for repeated interactions, for example, through contact databases similar to the well-known ‘‘friends lists or circles’’ of social networking sites such as Google+. But CSCs’ main role, at this stage of an evolving B2B relationship, remains that of supporting transactions such as helping a manufacturer identifying the most appropriate supplier. Indeed, this is the primary function of extant CSCs such as

The Intermediate Stage Following the initial stage, the B2B relationship evolves to a more meaningful understanding of the nature of roles and responsibilities between trading partners. Information sharing becomes more than arm’s length and transactional in nature (Hagel et al., 2010). The need for cooperation becomes evident. Essential to this development is the engendering of perceived value that is expected in the form of a payoff at some future point. During this stage of the relationship, coalitions form and a mix of both competitive and cooperative behaviors emerge, and should be expected, among trading partners. A defection will occur when the perceived value for future benefit (shaped by the intrinsic probability of the future payoff changing — a Bayesian revision2) decreases beyond a threshold point. As firms move beyond the initial stage, CSCs increasingly provide the opportunity for managers to accumulate trust-relevant knowledge through experience with other firms (Holmes, 1991). Structural change in the supply chain optimization process requires information sharing predicated on trust among and between supply chain partners (Suh & Kwon, 2006). This makes, for instance, a defection less likely as the structural change makes the relationship stickier. In short, as trust builds, the value of the network relationship increases, facilitating broader exchanges of information.


A Bayesian Revision is a probability technique whereby prior probabilities are revised to incorporate new information. The prior probabilities are updated in a very specific way to yield posterior probabilities.

Leveraging Social Media Technology for Business Transformation


The Mature Stage The full maturation of a sustainable relationship between trading partners is manifested by cooperation and trust on a level that transcends that of transactional relationships. It is often characterized by the formation of a grand coalition involving more than two trading partners whose survival is dependent on each other’s performance. At this stage, trust is the most important variable in the mix as the future is highly uncertain. The ultimate destination is fuzzy and it is fully recognized that information sharing and cooperation is the best (and perhaps only) path forward. At this point, immediate benefit is subservient to learning. Risk is socialized among trading partners in the grand coalition3 — a family is formed. Trading partners exude behavior that is tolerant of the lack of immediate profit, so long as the probability of survival is acceptable and the end result believed to be achievable. Social suasion and jointly created social capital form the glue that binds the ‘‘sticky’’ relationships. We believe that it is at this stage of a B2B relationship that CSCs show their full potential. Once firms enter into a mature relationship, CSCs are ideal platforms to sustain and further develop members’ trust and affective connections. Since CSCs facilitate the suffusion of trusting commitment associated with trading partners (Ren et al., 2012), they can lead to truly sustainable grand coalitions of firms from all over the world. These coalitions ‘‘enable firms to achieve differential performance as they tap into the resources and routines that reside among diverse members of the supply chain’’ (Fawcett et al., 2012, p. 44). CSCs not only play distinct roles at each of the outlined stages of a B2B relationship, but they are equally important in providing a dynamic ‘‘living’’ environment, an ecosystem, by which trading partners can evolve across the three stages. As firms move across the stages by means of CSCs, firms increasingly move beyond calculative-based trust (e.g., Williamson, 1993), whereby managers make trust choices solely (and perhaps soullessly) based on rationally derived costs and benefits of the immediate transactions. Transcending the immediate in favor of longer-term benefits enlarges the pie, where single-transaction focus contests a fixed pie’s contribution. In sum, the potential benefits of CSCs go beyond those identified through our empirical case studies. As firms move through the different relationship stages, CSCs can turn firms into social entities in which open communication, high levels of managerial interaction, and the exchange of resources and expertise as well as a willingness to share risks and rewards, become the norm (Fawcett et al., 2012). But current applications typically fail to support a B2B relationship beyond the initial stage. They are designed predominantly to facilitate partnerships that are transactional in nature and not yet fully developed to support the CSCs that we envision. The best is yet to come.


Grand Coalition is a game theory term whereby all the players in the game agree to cooperate and are compelled to form a multi-firm partnership.


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Why CSCs Are Not Widely Adopted — Yet CSCs can help overcome the identified challenges in supply chains. CSCs provide the necessary infrastructure that can lead to management practices where established links to other community members keep entrepreneurs from adopting quick, localized, and fragmented collaboration strategies. CSCs constitute living environments that allow trading partners to evolve across the stages of relationships and move beyond calculative notions of trust. CSCs can facilitate two-way communications and transform firms into social entities in which open communication, high levels of managerial interaction, and much more become the norm (Fawcett et al., 2012). CSCs are new, democratizing tools that have the potential to broaden the depth and reach of interfirm networks. Every company we have visited (or known for that matter), could probably improve its operational efficiencies by deploying CSCs. If this sounds too good to be true, that is because in many cases history tells us that it is y too often implementation falls short of potential. The landscape is littered with hundreds of failed attempts to establish CSCs, which shows that success is far from automatic (Kenjale & Phatak, 2002). While millions of people shift easily between the roles of creator, consumer, and community member — this fluidity is, to date, still largely absent in an interfirm context (McAfee, 2009). Why is this the case? Because CSCs do not offer a silver bullet solution to all supply chain problems and nor do we expect them to become a ‘‘game-changer’’ just yet. A number of factors stand in the way of CSCs widespread adoption and diffusion. First, just like (consumer) brand communities, CSCs need to experience a ‘‘consciousness of kind’’ or ‘‘we-ness,’’ where members feel connected to the community, its purpose, and most importantly, one another (Mun˜iz & O’Guinn, 2001). To achieve this, CSCs need to gain critical mass. According to O’Reilly (2006), in order to successfully use the internet as a platform, it is crucial to learn its rules; and chief among those rules is to build applications that harness network effects that get better the more people use them. Reaching critical mass and involving, as we argue, even smaller players in a supply chain may not be easy though, because CSCs can clash with existing organizational hierarchies and, more importantly, mindsets. Some trading partners will be reluctant to adopt new technologies as one of our interviewees reveals: Yes, we see them as two separate issues at the moment, our customer base, as I said, isn’t all necessarily computer savvy, pen and paper men a lot of them. So we would have to have a consensus amongst us that this is actually going to be a benefit if we allow our existing clients to jump on our website, place an order, and do it that way. I don’t think at this particular point in time there would be too many that would actually avail themselves of that.

CSCs are an enabler and a tremendous asset, but only if firms have the right people, and in sufficient numbers. CSCs run somewhat counter to managers’ intuition and belief systems. For instance, traditionally when something becomes scarce, it becomes valuable, but the logic of the community is the opposite. Value is created through abundance. ‘‘The more copies you make of your software, the more

Leveraging Social Media Technology for Business Transformation


people you add to your community, the more powerful it becomes’’ (Gladwell, 2000, p. 272). Second, firms that stick to broadcasting media and one-way communications enjoy more control of both the content of the message and the channel of transmission. Further, CSCs are not all identical, and there are still many unanswered questions that may stand in the way of their swift adoption, such as what do different types of CSCs look like, how do they differ, and which one is the most effective and efficient in communicating with trading partners, and under what circumstances? Third, ‘‘because neither traditional structures nor cultures promote collaboration, people find collaborative behaviors such as open information sharing unfamiliar and risky’’ (Fawcett et al., 2012, p. 60) and therefore the natural response is to avoid it. For this reason we encourage scholars and practitioners alike to venture more into this field to support early success and further development of CSCs. Finally, the biggest obstacle may be that people have trouble estimating dramatic change. We cannot conceive that a piece of paper folded over 50 times could reach the sun (Gladwell, 2000) — how can we believe in a real and sustainable change in the way we do business?

Conclusion In this chapter we have discussed the nature and origins of CSCs, their theoretical benefits, their ability to respond to the very real needs of supply chain managers, and factors that hold up the widespread adoption and implementation of CSCs. As firms recognize that social media is about relationships, they will increasingly consider its tools to improve all their relationships. This does not mean that social media will replace face-to-face interaction or be a panacea for all firm problems, but it may, in time, have a profound impact on the way companies relate to one another. If you want to bring about fundamental changes in people’s beliefs and behavior, and thereby leverage business performance, you need to create a community where those new behaviors can be practiced, nurtured, and expressed (Gladwell, 2000; McKenzie-Mohr & Smith, 1999). Giving organizations the advantage of a social foundation is more important than ever in today’s fast-paced, highly connected environment. Dutton and Eynon (2009, p. 198) explain: ‘‘Institutional actors in government and research need to more explicitly recognize and strategically adapt to the practices and tools taken up by networked individuals, such as by creating e-infrastructures that — like the internet — enable rather than constrain bottom-up innovation.’’ While, to date, not much empirical research has explored social media in a B2B context, many of our conceptual arguments are in line with research from disciplines as diverse as computer science, information systems, operations management, sociology, organizational psychology, and consumer behavior. This research suggests a number of ways in which managers, or rather stakeholders, can benefit from communities. Information systems research, for instance, has studied how buyers and


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suppliers can benefit from improved information visibility in supply chains. Yet, much work remains to be done. This goes for managers too, since a lot of effort is typically necessary to make corporate content valuable, and develop CSCs. Best case scenarios should not detract from the real nature of social media which can present a difficult management challenge. Indeed, a survey by McCann Erickson (2010) revealed that almost half of the participating managers (48%) admit that they feel they have inadequate knowledge of how best to use social media technologies. The confusion among managers is considerable. But, on a more positive note, so are the inherent opportunities of social media applications. Once collaborative behavior begins to take root, it likely will grow into a dynamic collaborative capability via a virtuous learning cycle of creation, implementation, and success (Fawcett et al., 2012).

Acknowledgment This study was funded jointly by the Australian Research Council and GS1 Australia. We would particularly like to thank Peter Chambers, Richard Jones, and Steven Pereira from GS1. We also thank the firms and numerous managers who generously devoted their time to participate in this research.

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Chapter 3

Strategic Management and Social Media: An Empirical Analysis of Electronic Social Capital and Online Fundraising Raymond Henry and Lisa Bosman

Abstract Purpose — This study analyzes the impact of different types of social capital (structural, relational, cognitive) from different sources (internal and external) generated in electronic social networks on organizational performance. Design/methodology/approach — We test our hypotheses using OLS regression analysis of data obtained from nonprofit organization (NPO) fundraising on a popular online social networking website. Findings — The results provide insights into the multifaceted, complex nature of social capital in electronic environments. We find that electronic social capital does indeed impact organizational outcomes, but that these impacts vary depending on the type of social capital, the type of outcomes, and roles within the social network. Originality/value — These results clearly indicate the need to further research exploring social capital, in all its forms, within increasingly popular online and electronic social networks. While specifically applicable to NPOs, the findings also provide important insights for a wide variety of organizations. Keywords: Social capital; social media; strategic management; nonprofit organizations; social networks; Facebook

Social Media in Strategic Management Advanced Series in Management, 43–62 Copyright r 2013 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1877-6361/doi:10.1108/S1877-6361(2013)0000011007


Raymond Henry and Lisa Bosman

Introduction Many organizations have begun to recognize the importance of social networks as a valuable resource. Social networking sites such as Facebook, Twitter, and LinkedIn have increased in popularity over the last several years offering the technical capability to bridge online and offline connections (Ellison, Steinfield, & Lampe, 2007). These online resources offer the possibility for organizations to tap into the existing social networks of their customers or clients to generate positive outcomes ‘‘including providing social support, boosting sales and profits, enhancing knowledge, and generating innovation’’ (Agarwal, Gupta, & Kraut, 2008). While many organizations are trying to take advantage of these resources, understanding how organizations can use these electronic social networks to generate value has received relatively little attention (Ellison et al., 2007). Social capital represents a lens for exploring the use of electronic social networks. Broadly speaking, social capital represents the value that comes from social ties. While several studies have examined the impact of social capital within electronic environments (Kankanhalli, Tan, & Kwok-Kee, 2005; Wasko & Faraj, 2005), there is still much that needs to be understood for organizations to be able to take advantage of these tools. In this research we develop a model and set of hypotheses that investigate the impact of social capital in electronic social networks in generating positive organizational outcomes. We test these hypotheses using a dataset collected from a nonprofit fundraising application on a popular social networking site. Our research makes several contributions to both academics and practitioners. First, we gain a better understanding of social capital using data and information specific to electronic social networks. Second this study highlights the importance of different types of social capital. Third, we gain a better understanding of the implications for organizational performance using data specific to nonprofit organizations (NPOs). Through our investigation, we are able to identify how different aspects of social capital impact the different measures of nonprofit organizational performance. While specifically applicable to NPOs, the findings also provide important insights for a wide variety of organizations. The remainder of the chapter proceeds as follows. In the next section we review the literature on social capital and electronic social networks. We then develop our research model and hypotheses. This is followed by a description of the methodology and data collection. The results of our analysis are then presented. We conclude with a discussion of the implications and limitations of this research as well as presenting directions for future research.

Literature Review Social Capital Social capital is a concept that has seen increased usage in a variety of social science disciplines (Portes, 1998) and has been particularly prevalent in the management

Strategic Management and Social Media


literature (Adler & Kwon, 2002; Inkpen & Tsang, 2005; Nahapiet & Ghoshal, 1998; Tsai & Ghoshal, 1998). It has also seen increased application in the information systems literature (Kankanhalli et al., 2005; Robert, Dennis, & Ahuja, 2008; Schultze & Orlikowski, 2004; Wasko & Faraj, 2005). While the term social capital has been widely applied, there are a number of different views of social capital that appear in the literature (Adler & Kwon, 2002). Social capital cannot be seen as a one-dimensional concept (Putnam, 1995) and various authors across fields have tended to focus on different aspects of the concept (Nahapiet & Ghoshal, 1998). Despite a number of differing definitions, social capital is typically seen as a positive effect stemming from the interaction between individuals in a social network (Helliwell & Putnam, 2004). It has been seen as both a cause and an outcome that has been tied to a number of issues of concern to management scholars (Adler & Kwon, 2002). One of the underlying principles behind most of the views of social capital is that social interactions represent a type of resource that provides value. Coleman (1988) notes that ‘‘like other forms of capital, social capital is productive, making possible the achievement of certain ends that in its absence would not be possible’’ (p. S98). The ties between actors provide social capital either through the structure or the content of the ties (Adler & Kwon, 2002). Tie structure can provide social capital by making use of structural holes that provide access to new and unique resources (Burt, 1992) or by enforcing norms and expectations (Coleman, 1988). Similarly, social capital can be generated by the content of ties such as information and trust (Coleman, 1988). While structure and content are often treated separately, these two aspects often overlap (Adler & Kwon, 2002). Social capital, therefore, comprises both social network ties and the resources that are mobilized through them (Nahapiet & Ghoshal, 1998). Social capital can take many different forms and come from many different sources. Social structures provide for the ability to create social capital by providing the opportunity, motivation, and ability for transactions (Adler & Kwon, 2002). As noted by Adler and Kwon (2002), ‘‘a prospective donor without ties to the recipients, without motivation to contribute, or without the requisite ability would not be a source of social capital’’ (p. 27). Coleman (1988) argues that social capital is generated by creating obligations and trustworthiness, providing information, and enforcing norms. Each of these different aspects of social capital can be tapped into to provide value. While there is some general consensus about how social capital is created, there have also been efforts to identify different aspects or dimensions of the construct. Nahapiet and Ghoshal (1998) identify three dimensions of social capital: structural, relational, and cognitive. The structural dimension of social capital refers to patterns of network ties with specific regard to the presence or absence of network ties. Relational social capital develops through a history of interaction and represents a personal connection to the collective (Wasko & Faraj, 2005). Cognitive dimensions of social capital refer to the resources that provide shared meaning. Thus, cognitive capital refers to both expertise and experience with applying the expertise found in social network ties (Wasko & Faraj, 2005).


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Another distinction that has been identified in the literature is between internal and external sources of social capital (Adler & Kwon, 2002). External relations, or relationships outside of a focal network, create ‘‘bridging’’ forms of social capital. This view of social capital sees value in the direct or indirect links to other social networks. This is often associated with the concept of weak ties (Granovetter, 1973) or structural holes (Burt, 1992). Internal or ‘‘bonding’’ views of social capital focus on the linkages among individuals within a specific social network that provide cohesiveness that facilitates the pursuit of collective goals (Adler & Kwon, 2002). It is clear that social capital is a complex concept that plays an important role in the management and organizational literatures. While the concept has been widely applied there are still many opportunities to further develop our understanding of the construct. It is important to better understand the importance and impact of the various facets identified in the literature, such as structural, relational, and cognitive dimensions as well as internal and external sources of social capital. Additionally, while social capital is commonly seen as providing benefit, these benefits are primarily considered from the perspective of the individual. The social networks associated with organizations can also provide advantages to some organizations over others. This is especially true considering many organizations’ attempts to take advantage of electronic social networks.

Electronic Social Networks Electronic social networks, also referred to as digital social networks and digitally enabled social networks (Agarwal et al., 2008), are technology-enabled communities that provide members the opportunity to connect with others over the internet. Electronic social networks are used for viral marketing (Bampo, Ewing, Mather, Stewart, & Wallace, 2008), consumer-generated product reviews and product information-sharing (Forman, Ghose, & Wiesenfeld, 2008; Hinz & Spann, 2008), social support and relationship building (Agarwal et al., 2008; Montazemi, Siam, & Esfahanipour, 2008), open source software development (Hahn, Doh, & Bunyaratavej, 2009), knowledge integration and management (Kankanhalli et al., 2005; Robert et al., 2008), and common interest groups (Van Alstyne & Brynjolfsson, 2005; Wasko & Faraj, 2005; Wasko, Faraj, & Teigland, 2004; Whelan, 2007). Furthermore, research on electronic social networks has focused on information diffusion (Hinz & Spann, 2008), strength of relationships between participants (Hahn et al., 2009; Kane & Alavi, 2008), communication environment (Robert et al., 2008), social network analysis (Trier, 2008), social structure (Bampo et al., 2008), social identity (Forman et al., 2008), interorganizational systems (Chi, Holsapple, & Srinivasan, 2007; Kumar, Van Dissel, & Bielli, 1998), electronic marketplaces (Montazemi et al., 2008), community boundaries (Van Alstyne & Brynjolfsson, 2005), knowledge contribution (Wasko et al., 2004; Whelan, 2007), and social capital (Kankanhalli et al., 2005; Wasko & Faraj, 2005). While there has been some research looking at social capital in electronic networks, most of this work has looked at how individual social capital is affected by electronic

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ties (Ellison et al., 2007). Organizational social capital in electronic environments has largely been overlooked. Better understanding of the structures and mechanisms in electronic social networks that improve organizational performance will allow organizations to better understand and utilize these networks.

Model and Hypotheses Social capital is a network of association representing a valuable resource which can be understood as a collectively owned capital (Kankanhalli et al., 2005; Nahapiet & Ghoshal, 1998; Robert et al., 2008). We define electronic social capital as the actual and potential resources provided by an electronic network of connections attributed to an individual or group. Our model focuses on social capital at the organizational level. Similar to Nahapiet and Ghoshal (1998), we attempt to further understand electronic social capital from the internal and external dimensions of structural, relational, and cognitive social capital, as shown in our conceptual research model in Figure 1. Internal and External Social Capital Internal social capital has been referred to as the ‘‘bonding’’ or ‘‘communal’’ forms of social capital (Adler & Kwon, 2002; Oh, Kilduff, & Brass, 1999). Internal social

Electronic Social Capital Structural External Internal Relational External Internal Cognitive External Internal

Figure 1: Conceptual research model.

Organizational Performance


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capital centers on the collective’s internal characteristics and increases with more or tighter ties within the group. Internal social capital generates the opportunity to act together (Adler & Kwon, 2002). Portes (1998) suggests that internal social capital can be used as a source of social control, which can lead to rule enforcement between participants in the network. Additionally, Coleman argues that obligations, expectations, and trustworthiness result from the networked structures. As such, internal social capital promotes internal cohesiveness allowing the collective group to pursue shared goals specific to performance objectives (Newell, Tansley, & Huang, 2004). External social capital represents the ‘‘bridging’’ or ‘‘linking’’ forms of social capital (Adler & Kwon, 2002; Oh et al., 1999). External social capital focuses on social capital with connections between a focal participant to other participants outside the direct network. External social capital provides participants the opportunity to leverage the resources of their contacts outside of a focal group (Adler & Kwon, 2002). Furthermore, external social capital acts like a gateway to a secondary set of resources capable of providing different types of support, resulting in an increased value for the organization. Portes (1998) suggests that external social capital can lead to networks beyond the immediate friends and family, which employees often depend on for job employment and promotion. Structural Social Capital The structural dimension of social capital describes the overall structure, pattern, or hierarchy of relationships between participants (Nahapiet & Ghoshal, 1998). With respect to information flows, Kong (2008) suggests that structural capital refers to routine knowledge, including explicit knowledge such as knowledge stored in databases, procedures, publications, and organizational culture which create value for an organization. As such, structural social capital also reflects the potential resources available to an actor or a team (Robert et al., 2008). Networks described by high levels of structural capital are more likely to sustain collective action (Wasko & Faraj, 2005). Furthermore, a high level of structural capital implies an increase in opportunity for actors to share and apply information contributed by other members or actors (Robert et al., 2008). From the perspective of electronic social networks, we hypothesize the following: H1a. External structural capital in an organization’s electronic social networks will be positively related to organizational performance. H1b. Internal structural capital in an organization’s electronic social networks will be positively related to organizational performance. Relational Social Capital The concept of relational social capital focuses on particular connections that influence actions and fulfill social endeavors, such as sociability, approval, and

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prestige (Nahapiet & Ghoshal, 1998). Thus, relational capital refers to the nature of social relations developed through a history of interaction among the team members, which includes identification, trust, obligations, and team norms (Robert et al., 2008). When actors or team members identify with the team, they are more likely to contribute, share, and use information offered by other actors or team members (Robert et al., 2008), which is an important asset that benefits the network and its members (Wasko & Faraj, 2005). From the perspective of electronic social networks, we hypothesize the following: H2a. External relational capital in an organization’s electronic social networks will be positively related to organizational performance. H2b. Internal relational capital in an organization’s electronic social networks will be positively related to organizational performance.

Cognitive Social Capital The cognitive dimension of social capital resembles those assets which provide shared representations and interpretations between actors (Nahapiet & Ghoshal, 1998). Cognitive capital is the extent to which members share a common understanding (shared meaning and expectations) about their teamwork and/or task (Robert et al., 2008). Kong (2008) suggests that cognitive capital includes the tacit knowledge embedded in individuals, such as attitudes, competencies, and experiences. A shared understanding between actors drives the exchange of quality communication required for knowledge creation (Robert et al., 2008). When participants feel their expertise and knowledge is inadequate or lacking, they are less likely to contribute to the overall good of the network (Wasko & Faraj, 2000). On the other hand, the higher the skills and competencies recognized by an actor, the more likely he or she will contribute to the network (Wasko & Faraj, 2005). From the perspective of electronic social networks, we hypothesize the following: H3a. External cognitive capital in an organization’s electronic social networks will be positively related to organizational performance. H3b. Internal cognitive capital in an organization’s electronic social networks will be positively related to organizational performance.

Methods Data Our data originates from Facebook, a leading social networking platform. One of the most highly used applications on Facebook is the Facebook Causes application. This application was launched in May 2007 and had built a following of about


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35 million active users as of December 2009. This represents about 20% of all Facebook users. The Facebook Causes application provides a forum for NPOs to reach out to Facebook users and gain support for its cause(s). The mission of the Facebook Causes application is as follows: ‘‘Causes empowers anyone with a good idea or passion for change to impact the world. Using our platform, individuals mobilize their network of friends to grow lasting social and political movements’’ (, 2009). The Facebook Causes application is open to any U.S. registered 501(c)(3) nonprofit or Canadian registered charity. Upon verification of the NPO status, charities are allowed to collect monetary donations using the registered application. Any Facebook user can download the Facebook Causes application and participate in one of five ways. First, the user can support a specific Cause through becoming a member of that Cause. Second, once membership status is obtained, the user can promote the specific Cause through recruiting members to join the Cause. Third, the user can donate money directly to the specified Cause. Fourth, the user can solicit funding for the specified Cause from other Facebook users, by means of the fundraising mechanism. Fifth, the user can create his own Cause and if desired, connect to an NPO for the purposing of collecting donations. Facebook has a number of categories of Causes including Animals, Arts & Culture, Education, Environment, Health, Human Services, International, Political Campaigns, Public Advocacy, and Religion. Our data was collected over the course of about a two-week time period, from October 10, 2009 through October 26, 2009. We collected publically available data specific to the Facebook Causes application, focusing on the two main groups of (1) Cancer (within the Health category) and (2) Animal Cruelty (within the Animals category). These categories were chosen because they were affiliated with Causes located in the top five Cause list. Thus, we expected to see a relatively large amount of variance within these categories. Within these two categories we collected data for all Causes which had collected at least $1000 in donations. This resulted in a dataset of 232 Causes (101 Causes for the Cancer category and 131 causes for the Animal Cruelty category) representing a total of 180 NPOs (nonprofit 501(c)(3) organizations). We only collected publically available data, specifically, data which was viewable to all users within the Facebook Causes application. Upon downloading the Facebook Causes application, the observational data was collected on information specific to the Cause, as well as aggregated information about the ‘‘leadership group.’’ For the purposes of this study this group represents a proxy for the social capital of each Cause, and consisted of 15 people (top 5 recruiters, top 5 donators, and top 5 fundraisers) for each Cause. No identifying information was recorded about individual users; instead numbers (i.e., R1-R5, D1-D5, and F1-F5) were used to keep track of the different individuals. The focus of the data collection was on aggregating each leadership group (top 5 recruiters, top 5 donators, and top 5 fundraisers) to the Cause level of analysis, which was then aggregated to the NPO level of analysis when multiple Causes were initiated by the same NPO. Our measures of organization social capital are based on data about the leadership group for each Cause. We examine

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each of the different roles (recruiter, donators, and fundraisers) to allow us to more accurately assess different aspects of social capital and their impact on performance.

Measures Our empirical research model with measures, and operational definitions, is shown in Figure 2. These variables and measures are described in greater detail in the remainder of this section. For each Cause, two subsets of data were collected, one set specific to the Cause and another set specific to the Cause leadership group (i.e., top recruiters, donors, and fundraisers). Data obtained from the Cause was collected relative to the dependent variables, specifically, quantity of members, quantity of donations, quantity of donors, and value of donations per donor. The data obtained from the Cause leadership group was collected to operationalize the social capital of the Cause, specifically, structural capital, relationship capital, and cognitive capital.

Dependent Variables The study used four dependent variables to measure the overall success of the Cause, which was then aggregated to the NPO level of analysis; quantity of members, quantity of donations, and quantity of donors. Financial donations, provided by cause donors, provide the NPO with the ability to develop and face the future (Weisingera & Black,

Internal Social Capital Structural Capital – Total quantity of friends linked to NPO NPO Performance Relational Capital – Total quantity of posts to discussion topics specific to NPO Cognitive Capital – Total quantity of skills specific to this NPO: (1) Recruiters, (2) Donators, (3) Fundraisers External Social Capital Structural Capital – Total quantity of NPO Causes supported

Total Dollar Amount of Total Quantity of Donors Total Quantity of Members

Relational Capital – Total quantity of thank notes and props received within NPO Cognitive Capital – Total quantity of skill for all NPOs supported: (1) Recruiters, (2) Donators, (3) Fundraisers

Figure 2: Operational research model.

Control Variables: Age, Category


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2006). Specifically, the quantity of members is the total amount of members currently supporting the NPO’s Cause(s). The quantity of donations is the total amount of monetary donations, in dollars, currently supporting the NPO Cause(s). The quantity of donors is the total amount of individuals who have donated to the NPO’s Cause(s).

Independent Variables Structural capital. Structural capital relates to the ties among actors and reflects the potential resources available to an actor or a team (Robert et al., 2008). A high level of structural capital implies an increase in opportunity for actors to share and apply information contributed by other members or actors (Robert et al., 2008). Structural capital, which focuses on potential resources, is broken down into internal structural capital and external structural capital. Internal structural capital, focuses on the specific NPO’s Cause(s), and is measured as the total quantity of friends linked to each area within the leadership group, including top recruits, top donators, and top fundraisers. The external structural capital, focuses on all Causes supported by the leadership group, and is measured as the total quantity of Causes linked to each area within the leadership group, including top recruiters, top donators, and top fundraisers. Relational capital. Relational capital, often referred to as relational embeddedness, describes the personal relationships among individuals (i.e., friendships). Relational capital refers to the nature of social relations developed through a history of interaction among the team members, which includes identification, trust, obligations, and team norms (Robert et al., 2008). Relational capital, which focuses on connectedness, is broken down into internal relational capital and external relational capital. Internal relational capital, focuses on the specific NPO’s Cause(s), and is measured as the total quantity of comments posted to all discussion topics. External relational capital, focuses on all causes supported by individuals within each area of the leadership group, including top recruits, top donators, and top fundraisers, and is measured as the total quantity of thank you notes received for all causes. When a cause member does a great job, he or she is commonly provided with a ‘‘Thank you note’’ from another member using a specialized area of the Facebook Cause application. These notes allow members to increase feelings of community with other members. Cognitive capital. Cognitive capital represents the resources that provide shared meanings and interpretations possible within a collective (Wasko & Faraj, 2005). Basically, cognitive capital refers to both expertise, having information, and experience with applying the expertise, having knowledge (Wasko & Faraj, 2005). Cognitive capital, which focuses on expertise, is broken down into internal cognitive capital and external cognitive capital. Internal cognitive capital is a measure of the total quantity of skill (i.e., recruits, donations, or fundraising) linked to each area within the leadership group (i.e., top recruits, top donators, and top fundraisers). External

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cognitive capital is a measure of the total quantity of skill applied to all causes (i.e., recruits, donations, or fundraising) linked to each area of the leadership group (i.e., top recruits, top donators, and top fundraisers). For both the internal and external cognitive capital, the leadership roles were purposely not aggregated together to form the leadership team. This is twofold; first of all, the leadership roles are measured different (i.e., quantity of people vs. quantity of dollars), and as such, then need to be kept separate. Second, since cognitive capital focuses on expertise and resources, we wanted to better understand the cognitive capabilities of the individual leadership roles.

Control Variables Age. Age is measured in number of days. It is the difference between the date of the first donation and the date the information was collected in October 2009. The Facebook Causes application was founded in May 2007, therefore, the age of all Causes will be less than about 900 days (about 30 months). For example, if the start date of the Cause was January 1, 2008 and the date of data collection was October 20, 2009, then the age of the Cause would be 658 days. Category. Category is used to describe the type of cause. For example, in this study, we collected data on (1) cancer and (2) animal cruelty. Thus, category is a dichotomous variable to classify the data groupings.

Reliability and Validity of Data Validity and reliability are important issues in any research context. While these issues are important, the ability to assess validity and reliability of data reflecting interactions in electronic social networks or ‘‘digital trace data’’ is only beginning to be explored. Howison, Wiggings, and Crowston (2011) explore a number of issues associated with the validity of this type of data. These researchers note that digital trace data, defined as ‘‘records of activity undertaken through an online information systems’’ have several characteristics that are different from other data collection techniques that are important in understanding validity and reliability. First, these data are a direct result of individual activity rather than being produced by a research instrument. Second the data is based on specific events, and third these events occur over time, giving a longitudinal aspect to the data. In evaluating the use of data collected from electronic social networks, the impacts of these characteristics must be taken into consideration. Reliability. Reliability answers the question: Will our selected methods of measurement consistently produce the same results? Since the network used in this research is based on specific actions taken by individuals many issues related to reliability are largely mitigated. We are only interested in direct participation in the


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electronic social network, which requires that individual sign up for a cause and take some action related to that cause. In that regard the data accurately reflect network participation. There can be some question as to whether similar results would be seen for different networks or different causes. As previously discussed, the research controlled for both age and category. Age was classified according to days and category was classified as one of the two main groups of (1) Cancer (within the Health category) and (2) Animal Cruelty (within the Animals category). Neither classification resulted in statistical significance, providing evidence of reliability.

Validity. Validity answers the question: Is the research measuring what we say we are measuring? One issue that must be dealt with for electronic social networks is the longitudinal nature of the data. The relationships reflected in the data are the result of events that occur over time. In order to deal with this issue we used aggregate results collected within a narrow window of time. As a result the temporal associations between the independent variables and our outcome measures are not confounded. We also control for the different ages of the causes in the analysis. These actions are consistent with recommendation for dealing with temporal threats to validity (Howison et al., 2011). Another issue of validity is to what extent the measures accurately capture the constructs of interest. Careful consideration was taken in operationalizing the dimensions of social capital based on the definitions from the literature to maintain construct validity.

Analysis and Results We used OLS regression to analyze the data. None of the basic assumptions of OLS regression (linearity, independence of errors, homoscedasticity, and normality) appear to be violated in our dataset. Table 1 provides a summary of the descriptive statistics associated with the variables used in the analysis. Table 2 provides a correlation matrix of all variables used in the analysis. Table 3 provides a summary of the regression analysis results recognizing the significant relationships. The results suggest a highly contingent relationship between electronic social capital and organizational performance in this context. Looking at the summary of results shown in Table 3, we can see that there are a number of significant relationships between our measures of social capital and our dependent variables. This would clearly suggest that the social capital in electronic or online social networks does impact organizational outcomes. However, the relationship between social capital and organizational performance appears to vary depending on the type of social capital, the aspect of performance, and the specific roles being considered. Several significant relationships are negative, which suggests an opposite relationship from that hypothesized. In Table 3, the positive relationships supporting our hypotheses are bolded, the negative relationships not supporting our hypotheses are shaded, and the insignificant relationships are designated with an ‘‘x.’’

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Table 1: Descriptive statistics. Descriptive statistics Variable




1 2 3 4 5 6 7

Performance outcomes

15825.9 259.3 270122.1 1.6 494.0 3578.8 540.7

88342.3 624.4 871840.7 0.5 280.0 3670.7 738.3


Relational capital

Quantity of donations Quantity of donors Quantity of members Age Category Internal: quantity of friends (leadership) External: quantity of all NPO causes supported (leadership) Internal: quantity of discussion topics within NPO causes (leadership) External: quantity of thanks and props for all NPO causes (leadership) Internal: quantity of recruits (recruiters) Internal: quantity of donations (donators) Internal: quantity of fundraising (fundraisers) External: quantity of recruits for all causes (recruiters) External: quantity of donations for all causes (donators) External: quantity of fundraising for all causes (fundraisers)





867.2 8437.5

1155.8 84998.7









Control Structural capital

9 10 11 12 13 14 15

Cognitive capital

The results show several negative and significant relationships between structural social capital and performance (H1). For internal structural capital (H1a), the total quantity of friends linked to the leadership group is negatively related to total quantity of donations (b=0.090, po0.01) and total quantity of donors (b=0.443, po0.01). This makes sense after we took a closer look at the data and consider the leadership roles separately. On average per NPO, the recruiters have 30,558 friends, the donators have 2818 friends, and the fundraisers have 9864 friends. In other words, donors need not have friends to make large donations, they just need the financial ability to do so. For external structural capital (H1b), the total quantity of NPO Cause(s) supported was negatively related to the total quantity of donors (b=0.153, po0.05). This also makes sense after digging deeper into the data. On average per NPO, there are 270,122 members and 259 donors, which equates to about 1 donor per every 1000 members. Thus, the more time the leadership team spends supporting other NPO Causes, the greater the opportunity for that rare donor to find another



*po0.05; **po0.01.

1 1 .243** .231** ** 2 .243 1 .870** 3 .231** .870** 1 4 .107 .075 .055 5 .037 .360** .263** ** ** 6 .519 .510 .423** ** 7 .060 .359 .353** 8 .140 .756** .827** ** 9 .142 .550 .549** 10 .190* .746** .654** ** 11 .980 .050 .069 12 .454** .682** .529** 13 .137 .587** .582** ** 14 .967 .042 .060 15 .445** .678** .531**


Table 2: Correlation matrix.

.107 .075 .055 1 .288** .149* .291** .074 .156* .023 .088 .209** .196** .086 .195**





.037 .519** .060 .140 ** .360 .510** .359** .756** .263** .423** .353** .827** ** * ** .288 .149 .291 .074 1 .159* .136 .277** * ** .159 1 .283 .467** ** .136 .283 1 .476** .277** .467** .476** 1 .099 .393** .630** .616** .385** .576** .565** .779** ** .112 .429 .015 .001 .270** .881** .307** .509** .217** .419** .738** .707** ** .123 .427 .016 .003 .296** .905** .336** .549**



.142 .190* ** .550 .746** .549** .654** * .156 .023 .099 .385** ** .393 .576** ** .630 .565** .616** .779** 1 .656** .656** 1 .031 .045 .379** .654** .664** .798** .066 .044 .415** .669**



.980** .454** .050 .682** .069 .529** .088 .209** .112 .270** ** .429 .881** .015 .307** .001 .509** .031 .379** .045 .654** 1 .325** ** .325 1 .027 .471** .989** .317** ** .318 .980**




.137 .967** .445** ** .587 .042 .678** .582** .060 .531** ** .196 .086 .195** .217** .123 .296** ** ** .419 .427 .905** ** .738 .016 .336** .707** .003 .549** .664** .066 .415** .798** .044 .669** ** .027 .989 .318** ** ** .471 .317 .980** 1 .030 .498** .030 1 .311** ** ** .498 .311 1


56 Raymond Henry and Lisa Bosman

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Table 3: Results summary for all outcome variables. Variable






Age Category Internal: quantity of friends External: quantity of all NPO causes supported Internal: quantity of discussion topics External: quantity of thanks and props for all NPO causes Internal: quantity of recruits (recruiters) Internal: quantity of donations (donators) Internal: quantity of fundraising (fundraisers) External: quantity of recruits for all causes (recruiters) External: quantity of donations for all causes (donators) External: quantity of fundraising for all causes (fundraisers)

x x 0.090** x

x x 0.443** 0.153*

x x x x

























R2=0.991 F=1506.7

R2=0.770 F=46.3

R2=0.759 F=43.6

Structural capital Relational capital

Cognitive capital

Note: (1) *po0.05 and **po0.01; (2) x signifies pW0.05; bold cells represent a positive relationship and the shaded areas represent a negative relationship.

NPO Cause to support. This agrees with the current nonprofit literature in that quality of friends (i.e., friends with money) is more important than quantity of friends for organizations looking to tap into structural social capital. Furthermore, from a publicity and marketing perspective, the leadership team should be comprised of ‘‘true believers’’ that only support one single cause. The results show several positive and significant relationships between relational capital and performance (H2). For internal relational capital (H2a), the quantity of discussion topics is positively related to donations (b=0.066, po0.01), donors (b=0.433, po0.01), and members (b=0.826, po0.01). For external relational capital (H2b), the quantity of thanks and props for all NPO Cause(s) is positively related to donations (b=0.060, po0.01), donors (b=0.226, po0.01), and members (b=0.229, po0.01). These are consistent with the literature in that discussions can help create relationships increasing the overall trust in and identification with the group.


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Cognitive capital represents the skills held within the leadership group for each cause. As such, the cognitive capital was considered for the separate leadership roles, including recruiters, donors, and fundraisers. The results suggest mixed relationships between this form of social capital and the performance of the organization (H3). For internal cognitive capital (H3a), positive relationships are found between the quantity of donations contributed by donors and the total quantity of donations (b=1.115, po0.01), total quantity of donors (b=0.525, po0.05), and total quantity of members (b=0.820, po0.01). Similarly, positive relationships are found between quantity of fundraising done by fundraisers and total quantity of donations (b=0.176, po0.01), total quantity of donors (b=0.795, po0.05), and total quantity of members (b=0.878, po0.01). These relationships appear to be consistent with the literature. However, the negative relationship between the quantity of recruits obtained by recruiters and total quantity of members (b=0.214, po0.05) is not consistent. When we take a closer look at the data, on average per NPO, the lead donors and fundraisers contribute $10,451 of the average $15,826 donated to each NPO. As such, this leadership team of donors and fundraisers accounts for 66% of the overall donations. This is similar to the 80-20 rule, in that a large portion of the donations is coming from a small group of people. However, when we look at the lead recruiters, on average per NPO, they recruit 867 people to the total average membership of 270,122. As such, the lead recruits only account for about 0.32% of the total average membership. Thus, when it comes to recruitment, companies should encourage all members to be involved and when it comes to donating and fundraising, companies can be more specific to a certain group of individuals. This concept alone stresses the implications of the top donators over the top recruiters. As for the external cognitive capital (H3b), there are four negative relationships. The quantity of donations for all NPO Cause(s) contributed by top donors is negatively related to total quantity of donations (b=0.149, po0.01), and total quantity of members (b=0.773, po0.01). Also, the quantity of fundraising for all NPO Cause(s) completed by top fundraisers is negatively related to total quantity of members (b=0.623, po0.01). This implies, at least specific to the role of donor or fundraiser, that monetary efforts applied outside the NPO will negatively impact performance outcomes within the firm. Upon looking at the data, on average per NPO, donors and fundraisers give about $10,450 to a single NPO and about $106,141 to all NPO Cause(s). This suggests that about 10%, on average, of all donations remain within an NPO and about 90% goes to other NPOs. Considering donors have a set amount of money they will donate each year, the more that is donated within the NPO, the less donations end up outside the NPO, and vice versa. The negative effects of cognitive social capital may also reflect the possible ramifications of relying on a small group rather than the entire social network.

Discussion and Implications In our research model, we hypothesized a positive relationship between both internal and external for all three types of social capital and organizational performance.

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Although, the hypotheses have mixed support, the findings are quite interesting. This research provides support to the notion that social capital is a multifaceted, complex construct which ‘‘requires a finer-grained analysis of the specific quality and configuration of network ties’’ (Adler & Kwon, 2002). Past literature has examined many of these aspects and this work expands on what has been found. Specifically, our study analyzed the impact of different types of social capital (structural, relational, cognitive) by a leadership team with different roles (recruiters, donors, and fundraisers) from different sources (internal and external). To our knowledge, this is one of the first studies to investigate these aspects of social capital within the same study. Additionally, our empirical investigation suggests that social capital can be studied according to the different functions and roles played by different actors. We demonstrate how a specific role can influence and be influenced by the different components of social capital. The different types of social capital (i.e., structural, relational, and cognitive) are capable of influencing the firm in diverse ways. Thus, firms should encourage development in each of the individual aspects of social capital. This study makes several contributions to research and practice. First, we gained a better understanding of social capital using data and information specific to electronic social networks. Unlike other social networks, electronic social networks can be accessed anytime from anywhere that provides internet access (and in some cases only cellular phone access). Electronic social networks can also provide statistics not easily available in nonelectronic social networks. Thus, we were able to better understand the social capital aspects of a specific electronic social network (i.e., Facebook), which can be further generalized to other electronic social networks (e.g., Twitter, LinkedIn, etc.) and even nonelectronic social networks (e.g., church groups, work settings, neighborhood groups). Second this study highlights the importance of internal and external social capital. Creating group cohesion has largely been seen as primary form of social capital. Most studies have only considered this form of social capital. External social capital that creates ties across groups, and thus a broader community can also have benefits. What does this mean for practice? In addition to encouraging internal cohesiveness and bonding, firms should understand that there is some value in promoting bridging and creating extensions outside the primary network (Adler & Kwon, 2002). Third, we gained a better understanding of organizational performance, using data specific to NPOs. Through our investigation, we were able to identify how different factors of social capital impact the different measures of nonprofit organizational performance and overall firm success. The results are clearly relevant for nonprofit organization seeking to understand how they can utilize online tools to achieve their fundraising goals. Our results suggest that there are times when organizations should use online social networks to try to snare the ‘‘big fish’’ and other times when they should try to cast a wide net to bring in as many fish as possible, depending on what outcomes they are trying to achieve. What we find in this study can be generalized to assist the business practices of other nonprofit organizations (Schneider, 2009) and even for-profit organizations hoping to make the most productive use of emerging electronic social networks by identifying productive strategies for achieving various outcomes.


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Finally, like all research, this study is subject to limitations. First, the electronic social network is limited to Facebook, excluding other popular electronic social networks such as Twitter and LinkedIn. However, the fact that Facebook has surpassed one billion monthly active users worldwide (Facebook, 2013) is encouraging for our study. Second, our investigation focuses on social capital in NPOs. Fortunately, many NPOs are starting to recognize the importance of structuring the organization like a business (Hull & Lio, 2006; Knox & Gruar, 2007; Kong, 2008; Weisingera & Black, 2006; Wu & Hung, 2008). In addition, many NPOs recognize the benefit of social capital (Barros & Nunes, 2008; Knox & Gruar, 2007; Schneider, 2009), perhaps even taking a leadership role in utilizing this resource. Although our study does not focus on for-profit organizations, we believe there are many generalizations which can be applied to the for-profit sector. Finally, a last limitation may be attributed to the methodology, in which we used analysis of secondary data. Secondary data often does not entirely cover the domain of the construct, relying instead on the use of proxies (Dakhli & De Clercq, 2004). However, each of our constructs was measured in several different ways according to the type (i.e., structural, relational, and cognitive), internal and external social capital, and function within the organization. Given our limitations, future research should focus on testing our hypotheses across different electronic social networks, within different types of organizations (both profit and nonprofit), and using multiple methods.

Conclusion The results of this research provide insights into the complex nature of social capital in electronic environments. We find that social capital does indeed impact organizational outcomes, but that these impacts vary depending on the type of social capital, the type of outcomes, and the roles within the social network. While our results have specific implications for nonprofits using the Facebook Causes application, they also suggest strategies for other types of organizations looking to tap into online social networks to improve organizational performance. These results clearly indicate the necessity to further explore social capital, in all its forms, within the increasingly popular online and electronic social networks.

References Adler, P. S., & Kwon, S.-W. (2002). Social capital: Prospects for a new concept. Academy of Management Review, 27(1), 17–40. Agarwal, R., Gupta, A. K., & Kraut, R. (2008). The interplay between digital and social networks. Information Systems Research, 19(3), 243–252. Bampo, M., Ewing, M. T., Mather, D. R., Stewart, D., & Wallace, M. (2008). The effects of the social structure of digital networks on viral marketing performance. Information Systems Research, 19(3), 273–290.

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Barros, C. P., & Nunes, F. (2008). Social capital in non-profit organizations: A multidisciplinary perspective. Journal of Socio-Economics, 37(4), 1554–1569. Burt, R. S. (1992). Structural holes: The social structure of competition. Cambridge, MA. Harvard University Press. Chi, L., Holsapple, C. W., & Srinivasan, C. (2007). Competitive dynamics in electronic networks: A model and the case of interorganizational systems. International Journal of Electronic Commerce, 11(3), 7–49. Coleman, J. S. (1988). Social capital in the creation of human capital. The American Journal of Sociology, 94, S95–S120. Dakhli, M., & De Clercq, D. (2004). Human capital, social capital, and innovation: A multicountry study. Entrepreneurship & Regional Development, 16(2), 107–128. Ellison, N., Steinfield, C., & Lampe, C. (2007). The benefits of Facebook ‘friends’: Exploring the relationship between college students’ use of online social networks and social capital. Journal of Computer-Mediated Communication, 12(4), 1143–1168. Facebook. (2013). Facebook reports first quarter 2013 results. Retrieved from http://investor.¼761090. Accessed on June 6, 2013. Forman, C., Ghose, A., & Wiesenfeld, B. (2008). Examining the relationship between reviews and sales: The role of reviewer identity disclosure in electronic markets. Information Systems Research, 19(3), 291–313. Granovetter, M. S. (1973). The strength of weak ties. The American Journal of Sociology, 78(6), 1360–1380. Hahn, E. D., Doh, J. P., & Bunyaratavej, K. (2009). The evolution of risk in information systems offshoring: The impact of home country risk, firm learning, and competitive dynamics. MIS Quarterly, 33(3), 597–616. Helliwell, J. F., & Putnam, R. D. (2004). The social context of well being. Philosophical Transactions of the Royal Society, 359(1449), 1435–1446. Hinz, O., & Spann, M. (2008). The impact of information diffusion on bidding behavior in secret reserve price auctions. Information Systems Research, 19(3), 351–368. Howison, J., Wiggins, A., & Crowston, K. (2011). Validity issues in the use of social network analysis with digital trace data. Journal of the Association for Information Systems, 12(12), 767–797. Hull, C. E. K., & Lio, B. H. (2006). Innovation in non-profit and for-profit organizations: Visionary, strategic, and financial considerations. Journal of Change Management, 6(1), 53–65. Inkpen, A. C., & Tsang, E. W. K. (2005). Social capital, networks, and knowledge transfer. Academy of Management Review, 30(1), 146–165. Kane, G. C., & Alavi, M. (2008). Casting the net: A multimodal network perspective on usersystem interactions. Information Systems Research, 19(3), 253–272. Kankanhalli, A., Tan, B. C. Y., & Kwok-Kee, W. (2005). Contributing knowledge to electronic knowledge repositories: An empirical investigation. MIS Quarterly, 29(1), 113–143. Knox, S., & Gruar, C. (2007). The application of stakeholder theory to relationship marketing strategy development in a non-profit organization. Journal of Business Ethics, 75(2), 115–135. Kong, E. (2008). The development of strategic management in the non-profit context: Intellectual capital in social service non-profit organizations. International Journal of Management Reviews, 10(3), 281–299. Kumar, K., Van Dissel, H. G., & Bielli, P. (1998). The merchant of prato-revisited: Toward a third rationality of information systems. MIS Quarterly, 22(2), 199–226. Montazemi, A. R., Siam, J. J., & Esfahanipour, A. (2008). Effect of network relations on the adoption of electronic trading systems. Journal of Management Information Systems, 25(1), 233–266.


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Nahapiet, J., & Ghoshal, S. (1998). Social capital, intellectual capital, and the organizational advantage. Academy of Management Review, 23(2), 242–266. Newell, S., Tansley, C., & Huang, J. (2004). Social capital and knowledge integration in an ERP Project Team: The importance of bridging and bonding. British Journal of Management, 15, 43–S57. Oh, H., Kilduff, M., & Brass, D. J. (1999). Communal social capital, linking social capital, and economic outcomes. Paper presented at the annual meeting of the Academy of Management, Chicago, IL. Portes, A. (1998). Social capital: Its origins and applications in modern sociology. Annual Review of Sociology, 24(1), 1. Putnam, R. D. (1995). Tuning in, tuning out: The strange disappearance of social capital in America. PS: Political Science and Politics, 28(4), 664–683. Robert, J. L. P., Dennis, A. R., & Ahuja, M. K. (2008). Social capital and knowledge integration in digitally enabled teams. Information Systems Research, 19(3), 314–334. Schneider, J. A. (2009). Organizational social capital and nonprofits. Nonprofit and Voluntary Sector Quarterly, 38(4), 643–662. Schultze, U., & Orlikowski, W. J. (2004). A practice perspective on technology-mediated network relations: The use of internet-based self-serve technologies. Information Systems Research, 15(1), 87–106. Trier, M. (2008). Towards dynamic visualization for understanding evolution of digital communication networks. Information Systems Research, 19(3), 335–350. Tsai, W., & Ghoshal, S. (1998). Social capital and value creation: The role of intrafirm networks. Academy of Management Journal, 41(4), 464–476. Van Alstyne, M., & Brynjolfsson, E. (2005). Global village or cyber-Balkans? Modeling and measuring the integration of electronic communities. Management Science, 51(6), 851–868. Wasko, M., & Faraj, S. (2000). It is what one does: Why people participate and help others in electronic communities of practice. Journal of Strategic Information Systems, 9(2-3), 155–173. Wasko, M. M., & Faraj, S. (2005). Why should I share? Examining social capital and knowledge contribution in electronic networks of practice. MIS Quarterly, 29(1), 35–57. Wasko, M. M., Faraj, S., & Teigland, R. (2004). Collective action and knowledge contribution in electronic networks of practice. Journal of the Association for Information Systems, 5(11/12), 493–513. Weisingera, J. Y., & Black, J. A. (2006). Strategic resources and social capital. Irish Journal of Management, 27(1), 145–170. Whelan, E. E. W. (2007). Exploring knowledge exchange in electronic networks of practice. Journal of Information Technology, 22(1), 5–12. (Palgrave Macmillan). Wu, S.-I., & Hung, J.-M. (2008). A performance evaluation model of CRM on non-profit organisations. Total Quality Management & Business Excellence, 19(4), 321–342. (2009). Causes exchange — Inspirational resources for changing the world.

Chapter 4

Disentangling the Strategic Use of Social Media in the Insurance Industry: A Value Co-Creation Perspective Manuel Castriotta, Paola Barbara Floreddu, Maria Chiara Di Guardo and Francesca Cabiddu

Abstract Purpose — Despite the fundamental role that digital social media could play in the process of consumer co-creation, academic research on this topic is still in its infancy. The overall aim of the chapter is to consider how digital social media can be used by firms to encourage and sustain co-creation behavior. Design/methodology/approach — We draw a multiple case analyses, focusing on the insurance industry, particularly on the Italian insurance market. Findings — We particularly extend the literature on value co-creation by proposing a composite framework that enables us to grasp the different strategies that firms implement in their different manners of employing digital social media. Practical implications — We set forth a research agenda for managerial scholars that can help understand how social media should be incorporated in the day-to-day operations of insurance companies. Keywords: Co-creation; social media; social media strategies; DART model; insurance sector

Introduction Over the past few years, we have witnessed a dramatic increase in the number of digital media technologies, which firms have started to employ to engage with

Social Media in Strategic Management Advanced Series in Management, 63–86 Copyright r 2013 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1877-6361/doi:10.1108/S1877-6361(2013)0000011008


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stakeholders in new ways under the rubric of Web 2.0. Through digital social media, firms can offer stakeholders new opportunities to take an active role in value creation processes as well as to engage in dialogue with firms during the stages of product design and delivery, including information search, product and service configuration, fulfillment, and consumption (Prahalad & Ramaswamy, 2004a, 2004b; Payne, Storbacka, & Frow, 2008). This process is referred to as co-creation and is considered to be an important manifestation of customer engagement behavior as well as a source of competitive advantage (van Doorn et al., 2010). Consumer value co-creation represents an attractive approach for companies for a variety of reasons. For example, ideas generated through value co-creation will more closely mirror consumer needs, and consumer participation in service consumption can improve quality perception and reduce uncertainty and risk. Despite the fundamental role that digital social media could play in the process of consumer co-creation, academic research on this topic is still in its infancy. More specifically, how firms build and sustain competitive advantages through the use of social media continues to be an unresolved issue, and the strategies related to consumer co-creation through Web 2.0 tools that best suit the needs of firms have not been thoroughly analyzed. The overall aim of the chapter, which employs multiple case analyses, is to consider how digital social media can be used by firms to encourage and sustain cocreation behavior. We particularly attempt to extend the literature on value cocreation by proposing a composite framework that enables us to grasp the different strategies that firms implement in their different manners of employing digital social media. We focus on the insurance industry, particularly on the Italian insurance market. Recent years have brought an unprecedented level of technological innovation to all sectors of the insurance industry. With each wave of technological advancement, insurance industry operators have had to identify, understand, and leverage the opportunities introduced by technological change. Moreover, advances in technology have dramatically changed the way customers interact with insurance firms and, consequently, the way in which these companies plan their routes to market (O’Reilly, 2005). Most insurance operators understand that social media represents a powerful force for change in the industry because it calls established practices into question. Leveraging the emerging theoretical framework provided by the value co-creation concept (Vargo & Lusch, 2004, 2008), we explore how social media can both foster and inhibit customer engagement in the insurance industry. We therefore set forth a research agenda for managerial scholars that can help understand how social media should be incorporated in the day-to-day operations of insurance companies. The chapter is organized as follows. The second section describes the literature on co-creation and social media, and the third section introduces the cases and the employed methods. The fourth section provides the data analysis, and critical reflections are offered in the fifth section.

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Literature Review During the past decade, the concept of value co-creation has been analyzed and developed by many scholars in various research fields (Di Guardo & Valentini, 2007; Grover & Kohli, 2011; Kohli & Grover, 2008; Lusch & Vargo, 2006; Nambisan, 2002; Nambisan & Nambisan, 2008; Prahalad & Ramaswamy, 2004a, 2004b; Vargo & Lusch, 2004, 2008). Co-creation is the process during which customers take an active role in jointly creating value with the firm (Prahalad & Ramaswamy, 2004a). It is not the transfer or outsourcing of activities to customers nor a customization of products and services. When products and services are co-created, firms must treat customers as a ‘‘source of competence’’ and a way to achieve and sustain a competitive advantage (Prahalad & Ramaswamy, 2000). Information and communication technologies (ICTs) and the internet have significantly changed the way the value co-creation process is managed. ICTs are able to considerably increase the quantity and quality of information that can potentially be exploited to generate value (Kohli & Grover, 2008) and also make consumer-to-consumer and consumer-to-firm interactions easier (Sawhney, Verona, & Prandelli, 2005). The intrinsic characteristics of the internet, such as openness, ubiquity, and interactivity, have facilitated interactions among individuals and the sharing of experiences to an extraordinary extent. In relation to value co-creation, the ubiquity of the web and the available information technology (IT) tools serve to harmonize the efforts of individuals in a common action (Zwass, 2010). The emergence of a new generation of IT, collectively referred to as ‘‘social media,’’ has generated profound changes in the processes of sharing, in creating and promoting content, and in products and services (Hanna, Rohm, & Crittenden, 2011; Kaplan & Haenlein, 2010). The connection between social media and value co-creation processes has emerged as a new research stream. Social media platforms and the possibilities they provide can lead to competitive advantages based on more efficient and comprehensive interaction and co-creation processes with customers (Edvardsson, Tronvoll, & Gruber, 2011; Gnyawali, Fan, & Penner, 2010; Potts et al., 2008; Prahalad & Ramaswamy, 2004b). Social media are defined as new websites and information channels that allow an active relationship between firms and customers (Kaplan & Haenlein, 2010). To understand the use of social media in the value co-creation process, it is useful to propose a classification of social media. Distinctions between the different types of social media are based on the following concepts: social presence, media richness, selfpresentation, and self-disclosure (Kaplan & Haenlein, 2010). According to Kaplan and Haenlein (2010), there are six different types of social media: collaborative projects, blogs and microblogs, content communities, social networking sites, virtual game worlds, and virtual communities. By successfully using social media in managing value co-creation, firms can create different sources of competitive advantage, including increased efficiency and effectiveness (Hoyer, Chandy, Dorotic, Krafft, & Singh, 2010). Value co-creation increases productivity and efficiency through cost


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minimization because firms can acquire new ideas from social media interactions (Hoyer et al., 2010; Sawhney et al., 2005). The effectiveness of co-created products depends on firms’ understanding of customer needs, thus reducing commercial risk. Social media promote a deep relationship between firms and stakeholders at each stage of the value co-creation process, including information search, product and service configuration, fulfillment, and consumption (Kane, Fichman, Gallaugher, & Glaser, 2009; Kaplan & Haenlein, 2010; Ramaswamy, 2008). They allow for bidirectional communication between firms and their stakeholders. Furthermore, they improve customer-to-customer interactions (Libai et al., 2010). Social media play an important role in sharing ideas and interactions, allowing customers to create value for firms through word-of-mouth (WOM) (Libai et al., 2010). Moreover, customers especially create value for a firm when they provide feedback on new products or services as well as possible improvements to existing offerings (Kumar et al., 2010). Firms, therefore, take full advantage of social media usage when they create initiatives intended to encourage customer feedback (Kumar et al., 2010). In the case of new product development, firms can use social media to involve customers in the early stages of the product generation process. In the ideation phase, firms can engage customers and web users in a dialogue to share new ideas, seek input, and request feedback based on actual customer experiences (Hoyer et al., 2010; Ramaswamy, 2008). In the design phase, social media and IT-based technologies make it possible for different product configurations to be tested to choose the best solution with the direct collaboration of the end-customers (Sawhney et al., 2005). In the commercialization and post-launch phases, firms can generate consumer awareness by spreading product information through social media. In the post-purchase phase, customers can also benefit from the experiences of other customers who share their experiences on social media platforms (Hoyer et al., 2010; Nambisan & Nambisan, 2008). Firms can actively monitor feedback from customers through social media to understand ways of increasing purchases and improving product or service characteristics (Hoyer et al., 2010). Social media can aggregate the knowledge generated by web users in the online environment (Kane et al., 2009), and they play an important role in spreading information to customers and stakeholders. Firms are able to manage new knowledge generated from customers’ value-creating processes. This knowledge is not based solely on customer satisfaction data but on a deep understanding of customer experiences (Hoyer et al., 2010; Payne et al., 2008).

How to Manage the Co-Creation Process? The value co-creation process poses numerous challenges for firms, especially when it comes to how this process should be undertaken to best exploit its benefits. Various authors have proposed different frameworks designed to foster value co-creation between businesses and consumers (Nambisan & Nambisan, 2008; Payne et al., 2008; Prahalad & Ramaswamy, 2004a, 2004b). In our work, we focus our attention both on the contributions of Prahalad and Ramaswamy (2004a) and Nambisan and Nambisan

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(2008) to analyze our empirical observations. The literature underlines that scholars consider these frameworks to be the most appropriate for the analysis of the cocreation process, the design of the platform, and the type of strategy used by firms. The first framework used to manage and foster value co-creation processes is called the DART model (Prahalad & Ramaswamy, 2004a) and is characterized by the following four interrelated components: Dialogue, Access, Risk assessment, Transparency. Dialogue means having a high level of interactivity, engagement, shared learning, and communication on both the producer and consumer sides. It provides an opportunity for stakeholders to integrate their views into the value-creation process and helps firms understand the behavior of the end user. The meaning of dialogue implies ‘‘interactivity, deep engagement, and the ability and willingness to act on both sides’’ (Prahalad & Ramaswamy, 2004a, p. 9). It requires deep engagement, lively interactivity, empathetic understanding, and a willingness by both parties to interact and co-create value. An active dialogue involves more than simply listening to customers; it implies knowledge-sharing, learning, and communication among peers. In dialogues, firms and customers debate as equals and learn from each other. Previous studies have recognized that dialogue is fostered through real-time conversations among individuals, groups, and organizations that take place in online platforms (Ramaswamy, 2008). Dialogue is difficult if consumers do not have the same access to transparent information at different points of interaction. Giving customers access to resources, information, and assets at various times provide firms with novel and innovative ideas about new products, services, opportunities, and potential markets. In addition, transparency enables a creative dialogue that fosters trust between firms and their customers. For example, to nurture such a complex dialogue, a firm must provide its customers with access to each other and to firm representatives through platforms that allow bidirectional conversation. Moreover, firms can clarify the rules of the cocreation initiatives (Ramaswamy, 2008). Once dialogue, access, and transparency are attained, customers can make a clear assessment of the risks and benefits of a course of action or decision (Prahalad & Ramaswamy, 2004b). As customers become co-creators of value, they become more vulnerable to risk and demand more information about the potential risks associated with the design, manufacture, delivery, and consumption of particular products and services. This means that, rather than depending on the firm, the customer has the tools and the support structure to make his own decisions. For example, Nike enhances the economic value of the online participation of runners by including many conversations about proper training methods to avoid injuries (Ramaswamy, 2008). The second framework focuses on how to create valuable and enjoyable co-creation experiences in online environments for both firms and customers, particularly because encouraging participation and sustaining engagement are critical aspects for web users (Fu¨ller & Matzler, 2007; Kohler, Fueller, Matzler, & Stieger, 2011; Nambisan & Nambisan, 2008). Similarly, how idea and design competition co-creation experiences are designed plays an important role in the achievement of successful co-creation initiatives (Kohler et al., 2011; Nambisan & Nambisan, 2008).


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According to this view, co-creation platforms are designed by firms to support the five different roles of customers in innovation and value co-creation: product conceptualizer, product designer, product tester, product support specialist, and product marketer (Nambisan, 2002; Nambisan & Nambisan, 2008). ‘‘Product conceptualizer’’ means that firms can encourage and involve customers in the generation of new product ideas. One example of this is the Starbucks platform called ‘‘My Starbucks Idea,’’ where web users propose and share their new product ideas and also rate and comment on those of others. In this way, web users who decide to participate have the gratification of playing an active role in product creation and feel like part of a community (Cabiddu, Castriotta, Di Guardo, Floreddu, & Pettinao, 2012). ‘‘Product designer’’ means that customers can propose their ideal version of the product with prototyping tools. Nike implemented a new initiative called ‘‘Nike ID service’’ that provides customers with the possibility of customizing their products. Customers can change the standard product that they are going to buy according to their needs and preferences. The service provides a simple online interface to modify the architectural, material, and aesthetic features of the product (Angioni, Cabiddu, & Di Guardo, 2012). The role of ‘‘product tester’’ emerges when firms decide to engage customers during the product-testing phase. For example, Swarovski implemented an internet-based concept test and design competition (Fu¨ller, 2010). ‘‘Product support specialist’’ means that customers can provide product support for other users because they have acquired considerable expertise on various aspect of product use. IT firms such as Microsoft, Cisco, and HP have implemented applications to sustain this customer role (Nambisan & Nambisan, 2008). The role of ‘‘product marketer’’ emerges when customers are engaged in the diffusion of product information that shapes the perceptions of peers.

Research Setting and Data Analysis To achieve the goal of our study, the insurance sector has been chosen as the research domain for various reasons. The insurance industry was particularly suitable for this study given its information-intensive nature and the significant and continuous changes that have occurred in the competitive environment since the 1990s as the result of deregulation. These transformations have led to the concentration of firms operating in the market and the diversification and specialization of fields of activity (Cabiddu & Di Guardo, 2007). Insurance firms and the broader financial services industry have historically been among the largest investors in IT (Franke, 1987). They have traditionally been leaders in the application of IT to stimulate the creation of new and diverse products (Francalanci & Galal, 1998). Studies on the Italian insurance sector found that firms have increased their productivity through IT, although they have failed to fully exploit the advantages of emerging technologies (Neirotti & Paolucci, 2007). The insurance sector can benefit from the web technologies that help insurers offer new products and services faster, operate more efficiently, and respond to market challenges (Mosley, 2012). Recently, researchers

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have started focusing their attention on the use of social media in the insurance sector (Huber, Landherr, Probst, & Reisser, 2012; Mosley, 2012), placing particular emphasis on understanding if a company’s efforts to stimulate user activity on fan pages are successful (Huber et al., 2012).

Data Sources We collected our data from several sources: (1) archival data, including governmental and business publications; (2) data published and shared on social media, websites, and communities; and (3) secondary sources, such as newspaper articles and public surveys. The data were collected in three phases. In November 2011, we constructed a data set containing information about the main characteristics of the insurance companies operating in the Italian market, such as invoicing information, lines of business (damages or life), sales channels (online, offline), number of clients (online and offline), levels of customer satisfaction, number of policies sold, and implemented types of social media. The data were provided by the updated ISVAP (Supervisory Institute of Private Insurance and Collective Interest) list, published on its official website. A total of 142 insurance companies were identified in the analysis. In the second phase (February 2012), we conducted a web search to verify which insurance companies in our data set utilized social media tools. According to the definition of social media provided by Kaplan and Haenlein (2010), we analyzed blogs, collaborative projects, social networking sites (Facebook, Twitter, Google Plus ‘‘G+,’’ LinkedIn), content communities (YouTube, Flickr, SlideShare), and virtual social and game worlds. We found that 28 firms, most of which are online business model adopters, manage at least one social media platform. We then added this information to our database. In the final stage of analysis (May 2012), we integrated the findings from the preceding stages to explore the co-creation dynamics related to social media adoption, to understand how companies use Web 2.0 tools and to identify the prevalent strategies associated with the insurance setting. In particular, we explored social networking sites such as Facebook, Twitter, LinkedIn, and Google Plus (G+), content communities such as YouTube and institutional blogs, from quantitative (i.e., how often customers reacted and co-created through messages or posts), qualitative (i.e., the ways in which companies stimulated the co-creation environment and dialogue and how customers reacted), and design perspectives (i.e., how many IT features web platforms were organized with or the ways in which social media design affected co-creation potential). From a quantitative perspective, we measured a series of indicators, including number of posts, content, comments, and ‘‘likes’’ (data available upon request), divided according to the analyzed social media type. We used standard cross-case analysis techniques (Eisenhardt, 1989) to look for patterns, often revisiting the data and using charts and tables to facilitate comparisons between cases (Miles & Huberman, 1994).


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Sample Selection From our database of 142 companies, we first selected the 28 companies that possess an account in at least one social media platform, including Blogs, Collaborative projects, Facebook, Twitter, LinkedIn, G+, content communities, such as YouTube, and virtual worlds (Kaplan & Haenlein, 2010). Second, we focused our attention only on those 18 firms that actively managed one of the mentioned web platforms. By ‘‘active’’ we mean that the media page/channel has not just been created but is actually used by the company through the publication of posts or other content. In other words, we excluded platforms created with the sole objective of preventing the misuse of the domain by third parties. Furthermore, the choice of analyzing these types of ‘‘generalist’’ social networks and content communities stems from the fact that they are most popular in the Italian market, including 95% of companies and users, and that there is no empirical evidence about social networks focused solely on the insurance sector.

Empirical Findings As a first step in the analysis of co-creation strategies within the insurance market, we focused our attention on discovering what types of social media were adopted by companies and in which ways. To do this, we identified the number of corporate social media accounts (Kaplan & Haenlein, 2010), the types of adopted social networks and content communities, and the qualitative level of co-creation (see Table 1) and demonstrated qualitative strategic aspects. Table 1 clearly shows that, from the quantitative point of view, social networking sites are currently the most widely used type of social media by insurance companies, followed by content communities, blogs, and collaborative projects. Virtual social worlds and virtual game worlds are absent from the empirical observations. Specifically, 14 out of 18 companies have Facebook and LinkedIn accounts (77%), 9 have Twitter profiles (50%), and 7 are on G+ (38%). YouTube channels are present in 12 of the analyzed cases (66%), while other popular sites such as Flickr and SlideShare are not part of the communication and co-creation strategies of insurance companies. Two companies (Dialogo and Europe Assistance), representing 11% of the sample, use blogs, which are usually connected to the institutional website of the company to facilitate viral dynamics. Only one firm (Direct Line) adopts a collaborative projects tool for the co-creation of value, although it is in an embryonic stage and lacks a dedicated platform. The analysis shows significant quantitative differences among the number and types of social media used by enterprises. In summary, 16% of the sample uses one type of social media (ConTe, Quixa, and Zurich Connect), the same percentage uses two or four tools, and 22% have portfolios of three and five tools. Finally, only one company (5%) chose to implement six types of social media tools (Europ Assistance).

Alleanza Toro Axa Cattolica Previdenza ConTe Dialogo Direct Line Europ Assistance Genertel Genialloyd Linear Pramerica Life Quixa Reale Mutua Sace Sara Tua Assicurazioni Uniqa Zurich Connect Total %


2 11.1




1 5.5


Collaborative projects

14 77.7

x x x x x

x x x x x x

x x x


9 50.0

x x x

x x

x x

x x


7 38.8

x x x x





14 77.7

x x x x x

x x x x x x

x x x


Social networking sites

x 12 66.6

x x


x x x x x x x



0 0.0


0 0.0


Content communities

Table 1: Social media adopted by Italian insurance companies (Kaplan and Haenlein framework).

0 0.0


0 0.0


1 3 5 6 3 5 4 2 1 3 4 5 5 2 1 18 100.0

3 4 2



July 1, 2008 January 21, 2011 May 27, 2009 January 27, 2010 May 3, 2011 December 18, 2009 March 12, 2011 February 17, 2011 0 0 May 5, 2009 December 15, 2008 April 19, 2011 0 0 April 8, 2011 February 28, 2009 April 7, 2010

Signup date



0 0 0 0 0

0 0 10 57

0 0 0 1612 0 0 0 0 0

15 6

50 650 40 35 31 17

They talk about

496 566

13688 13920 11689 3655 1365 426

I Like (by users)


0 0 0 0 0

0 0 June 10, 2012 November 6, 2011

March 25, 2012 November 20, 2011

July 15, 2012 September 18, 2011 January 1, 2012 May 17, 2012 October 2, 2011 May 27, 2012

Popular week


0 0 0 25–44 25–44

None None 25–34 25–34

25–34 25–34

25–34 25–44 25–44 25–34 25–44 25–34



None None None Low Low

None None Medium High

Low Low

High High High Medium None High

Users postsa

High level: 1 post per week at least; medium level: 1 post per month; low: 1 post per three months.


Axa ConTe Dialogo Pramerica Life Reale Mutua

Alleanza Toro Cattolica Previdenza QUIXA Zurich Uniqa Tua Assicurazioni

Europ Assistance Direct Line Genialloyd Genertel Linear Sara


Table 2: Facebook statistics and insights.


None None None Low Medium

None None Medium High

Low Low

High High High High Medium Medium

Company postsa


0 0 0 0 2

0 0 8 8

2 10

10 9 8 7 4 6



0 0 0 0 0

0 0 0 34

17 14

154 101 28 28 26 20



None None None None None

None None 3 3

None None

8 None None 4 1 None


Disentangling the Strategic Use of Social Media


Facebook Data Facebook is the most used social media type in terms of the number of users. The platform provides a large number of data, indicators, and statistics (see Table 2). The analysis shows that the implementation of Facebook in the insurance industry took place 4 years after it was launched (2004). Europe Assistance and Tua Insurance, which enrolled in 2008, are identified as the first movers or early adopters of Facebook in the Italian market. Uniqa, Genialloyd, and Sara followed in 2009 and can be considered the early majority, while Alliance Toro, Cattolica Previenza, Direct Line, Genertel, Linear (2010–2011) can be considered the late majority. Finally, AXA, ConTe, Dialogo, Pramerica Life, Quixa, Reale Mutua, and Zurich are considered laggards (with dormant or no profiles). The ‘‘Fans’’ statistics were then analyzed. This item measures the company’s brand participation and also contributes to increases in the level of consumer engagement. When consumers click the ‘‘Like’’ button, they are informed directly on their Facebook ‘‘walls’’ when companies update their own Facebook pages with news or posts, which increases the probability of users joining company discussions. Direct Line has the highest number of Fans (13,920), followed by Europe Assistance and Genialloyd, which have over 10,000 Fans, The next group, consisting of Sara Assicurazioni, Alliance Toro, Cattolica Previdenza, Linear, Tua, Uniqa, and Genertel, has between 426 (Sara Assicurazioni) and 3655 (Genertel) fans. Finally, the remaining companies, AXA, Quixa, ConTe, and Dialogo, do not have Facebook accounts. The statistical analysis of the ‘‘Are talking about’’ item measures the level of engagement and viral impact of a page. This element makes it possible to evaluate communication success by measuring how many users join, attend, or create a post from a published company post. Direct Line can boast the highest level for this indicator with 600 units, while other companies have results ranging from 6 to 57 units. In short, this means that the Direct Line page has a higher level of member participation (two-way communication), while the others do not manage to engage their users as well (top-down communication). The ‘‘Popular week’’ statistic measures the peak traffic on the page. Assuming a desirable positive growth trend implies that, if the peak is too far back in time, the company is not adopting appropriate engagement strategies. Specifically, Europe Assistance, Uniqa, Sara, and Genertel had peak weeks during the past 3 months, whereas Alliance Toro, Cattolica Previdenza, ConTe Insurance, Direct Line, and Linear had peaked in the past 6–12 months. The most common user ages are constant among the insurance companies and range from 25 to 44 years. The ‘‘Like’’ indicator refers to how often pages have been viewed and the number of potential business partners or those within the value chain. Only Europe Assistance and Genialloyd have significant values of 28 and 18, respectively. Other companies have values ranging from 0 to 3. Europe Assistance, Direct Line, Genialloyd, and Genertel show higher numbers of both vertical posts published by firms and bottom-up posts published by users. Finally, the number of images contained in the Facebook pages varies from 154 and 101 for


Manuel Castriotta et al.

Europe Assistance and Genialloyd, respectively, and from 0 and 28 for the other companies.

Twitter Data The analysis of Twitter highlights that only 50% of companies are using this social media platform (see Table 3). The data shows that Genialloyd, Europe Assistance, and Direct Line consistently use this tool, informing their consumers in real time with a large number of posts (tweets), which range from 317 (Direct Line) to 748 (Genialloyd). Direct Line is followed by Sace Group and Sara, with 207 and 127 tweets, respectively. Finally, the other companies show no activity or significant business operations on this platform. The ‘‘Following’’ indicator highlights the companies’ level of interaction with potential customers, partners, and competitors. Genialloyd (following 1280 Twitter users) and Sace (following 886 Twitter users) make a priority of this, whereas the other companies with Twitter accounts do not follow more than 176 other Twitter users (Europe Assistance). Finally, the number of ‘‘Followers,’’ which mainly expresses the degree of interest in the page and is not necessarily a measure of preference, shows that Genialloyd is managing the tool in a more appropriate way relative to its competitors. The page of the Allianz Group has 1185 Followers, followed by Sace (418), Europe Assistance (322), Sara (231), and Direct Line (198).

Table 3: Twitter statistics and insights. Firm Genialloyd Europ Assistance Direct Line Sace Sara Tua Assicurazioni Linear Alleanza Toro Axa Cattolica Previdenza ConTe Dialogo Genertel Pramerica Life Quixa Reale Mutua Uniqa Zurich Connect




748 438 317 207 127 12 7 4 0 0 0 0 0 0 0 0 0 0

1280 176 85 886 47 104 9 25 0 0 0 0 0 0 0 0 0 0

1185 322 198 418 231 75 59 78 37 0 0 0 0 0 0 0 0 0

Disentangling the Strategic Use of Social Media


Finally, the analysis shows that Sace Group has chosen Twitter as its sole strategic social media tool, neglecting the more widely adopted Facebook social network.

LinkedIn Data The data analysis highlights that LinkedIn is as popular as Facebook in terms of traffic and the participation of insurance companies (see Table 4). Four companies surpass 1000 ‘‘Followers’’: Reale Mutua (1358), Axa (1243), Alleanza Toro (1051), and Sace (1002). Contrary to the Facebook and Twitter results, distribution in LinkedIn is more homogeneous and gradual. There is no significant net division between insurance companies; instead, they fit within a normal statistical curve. The only exceptions are ConTe and Dialogo, which do not utilize this social network. Another indicator, referred to as ‘‘Employers on LinkedIn,’’ highlights the degree of employer engagement but also the use of vertical strategies through top-down decisions and corporate culture. In this case, Alleanza Toro reaches the largest number of employees, followed closely by Uniqa (490), Reale Mutua (462), Axa (434), and Pramerica Life (381). Genialloyd, Cattolica Previdenza, Tua, and Linear have less than 100 employees on LinkedIn, while ConTe, Dialogo, and Zurich Connect do not have LinkedIn accounts. The last analyzed indicator measures and compares this previous figure with the number of actual offline company employees. This indicator normalizes the previous

Table 4: LinkedIn statistics and insights. Company Reale Mutua Axa Alleanza Toro Sace Uniqa Direct Line Pramerica Life Sara Genialloyd Tua Assicurazioni Europ Assistance Linear Genertel Cattolica Previdenza Quixa ConTe Dialogo Zurich Connect


Employees on LinkedIn

1358 1243 1051 1002 885 843 741 496 449 430 393 274 217 158 151 0 0 0

462 434 691 291 490 296 381 261 100 64 117 43 105 82 60 0 0 0


Manuel Castriotta et al.

Table 5: Google Plus (G+) statistics and insights. Company Dialogo Europ Assistance Genialloyd Sace Sara

Within circles

Circles people

‘‘I Like’’

24 0 0 0 0

37 0 112 0 0

57 0 245 0 0

data by assigning an appropriate weight. For example, Genialloyd has only 100 employees on LinkedIn, but they represent a substantial percentage (22%) of the company’s 451 total employees.

G+ Data The analysis of G+ highlights that only five companies have accounts and three of these are considered to be ‘‘dormant’’ or inactive (see Table 5). Dialogo is the only company that uses all the available profile functions, including ‘‘Circles.’’ Finally, Genialloyd usually posts on the page and has 245 preferences (I Like), raising the interest of 112 people.

YouTube Data YouTube is the only Content Community used by insurance companies. Among the dedicated channels created between 2006 (Sara) and 2012 (Dialogo and Reale Mutua) (see Table 6), it is possible to quantitatively analyze three main indicators: ‘‘Uploaded Videos,’’ ‘‘Members,’’ and ‘‘Views.’’ With regards to the first indicator, the data shows that two companies are particularly active in uploading videos. Direct Line (157) and Europe Assistance (43) usually post video applications for their customers. Europe Assistance and Genertel are unique in that they each have two channels with similar content but different statistics. The other companies uploaded less than the 16 videos uploaded by Genialloyd. With regard to ‘‘Views,’’ which represent the success of the video content, Genertel ranks first with 328.084 views, followed by Quixa (158.028) and Genialloyd (83.959). Linear ranks fourth with 63.095 views, and the two channels of Europe Assistance collectively do not reach 19,000. The last three places are occupied by Dialogo (780), Tua Insurance (564), and Reale Mutua (47). Finally, the highest numbers of subscribers among all the insurance channels are 60 for Quixa and 52 for Genialloyd, followed Europe Assistance with 19.

Disentangling the Strategic Use of Social Media


Table 6: YouTube statistics and insights. Company Genertel 2 Quixa Genialloyd Linear Europ Assistance 2 Direct Line Sara AXA ConTe Genertel 1 Europ Assistance 1 Dialogo Tua Assicurazioni Reale Mutua

Signup date

Uploaded videos



April 28, 2011 February 7, 2007 May 31, 2007 March 10, 2010 November 10, 2008 April 1, 2011 July 6, 2006 July 4, 2011 October 1, 2008 July 30, 2007 April 6, 2011 July 13, 2012 May 30, 2011 September 5, 2012

6 12 16 10 43 157 4 9 1 1 47 6 1 1

12 60 52 19 14 17 1 12 3 6 1 4 6 0

328084 158028 83959 63095 17085 15150 9548 6209 5450 3930 1148 780 564 47

Discussion: The DART Model Empirical observation of the data revealed a number of items, indicators, and correlations between the theoretical aspects of the DART Framework (Prahalad & Ramaswamy, 2004a, 2004b) and their application in the Italian insurance market. The case studies have highlighted the key elements of the sector that generate cocreation dynamics (see Table 7).

Dialogue We have identified seven factors, antecedents, or ‘‘drivers’’ (see Table 7) related to ‘‘dialogue’’ that are suitable for assessing the co-creation and communication potentials of company web platforms. Social media macro-design. The ‘‘social media macro-design’’ driver is composed mainly of items that measure the number of social media platforms used by companies. This element undermines the hypothesis that there is a potentially positive correlation between the creation of virtual spaces and dialogue and, consequently, cocreation potential. The case studies show that companies are evenly distributed with respect to the use of social media. Specifically, approximately 27% use at least five web tools, while 47% use at least four (Europ Assistance, Direct Line, Genialloyd, Sara, Tua).


Manuel Castriotta et al.

Table 7: DART model focused on social media dynamics. DART concepts Dialog | | | | | | |



Risk and benefits

Social media | Structural | Rules of | Decision-making macro-design design engagement supports Internal social | Social | Public | What if media design media links customer service strategies Interactivity Deep engagement Ability to manage dialogue Joining problem solving Focus on personalized interactions

Internal social media design. For the ‘‘internal social media design’’ driver, we evaluated the design of each social media platform in terms of the existence of features that allow for two-way communication between the company and customers, customers and other customers, and the company and other companies. In short, we analyzed the companies’ abilities to build web platforms that allow stakeholders to express their opinions and introduce their perspectives. The analysis of the social networks data shows that Facebook primarily allows for different types of ‘‘internal designs’’ and, therefore, different levels of co-creation potential. The pages within this social network may include features such as a bulletin board dedicated to vertical posts by the company, a bulletin board dedicated to user side posts, where customers can freely express their opinions, and a bulletin board ‘‘Like’’ feature in which the company can showcase users’ favorite pages, as well as having several display options related to each of these design ‘‘choices.’’ The absence of a feature dedicated to user posts (i.e., Linear Insurance) implies a top-down communication strategy with lower potential levels of dialogue and co-creation. In particular, some companies, such as Direct Line, Genialloyd, Europ Assistance, and Tua, provide and consistently use bulletin boards dedicated to posts created by users, whereas most of the pages of the other companies do not contain this type of feature. These companies often use this feature for customer service, thus increasing the dialogue potential of the platform. Finally, the other social media types provide more rigid design options, and consequently, the mere presence of an account determines the level of potential co-creation. It is emphasized that Twitter, LinkedIn, and G+ inherently provide spaces for dialogue similar to those of Facebook, whereas Content communities such as YouTube and Blogs, in which communication takes place via the comments box, possess a lower dialogue potential.

Disentangling the Strategic Use of Social Media


Interactivity. The ‘‘interactivity’’ driver measures the amount of two-way communication and ‘‘dialogue’’ that each company can pursue. In essence, the study highlights whether companies allow customers to co-construct their service experiences to suit their preferences (Ramaswamy, 2008). It is measured through the analysis and comparison of quantitative indicators such as user ‘‘Likes,’’ company ‘‘Likes,’’ ‘‘Company Level of Users and Posts,’’ ‘‘Views,’’ ‘‘Following and Followers,’’ and ‘‘Employers on LinkedIn.’’ The data analysis shows that Europ Assistance, Direct Line, and Genialloyd present the highest levels of interactivity on Facebook and Twitter; Alliance Toro, Uniqa, and Reale Mutua have the highest levels of interactivity on LinkedIn; Genialloyd and Dialogo have the highest levels of interactivity on G+; and, finally, Genertel, Quixa, Genialloyd, and Linear have the highest level of interactivity on YouTube. Deep engagement. The ‘‘deep engagement’’ driver is evaluated to understand whether the company is able to create ‘‘an experience environment where consumers can have active dialogue and co-construct personalized experiences’’ (Ramaswamy, 2008). It is measured through the evaluation of quantitative indicators such as ‘‘They talk about,’’ ‘‘Number of Users Posts’’ Followers, ‘‘Circle,’’ and ‘‘Number of Circle Members,’’ and qualitative aspects, such as participation in competitions and initiatives. Through these indicators, it is possible to measure the ‘‘frequency of contact’’ between consumers and businesses using weekly statistics. For example, clicking on ‘‘Like’’ indicates the customer’s preference for a company’s page, but this could represent an isolated behavior, and it is therefore useful to understand if the consumer habitually accesses the page. In contrast, ‘‘They talk about’’ indicates how many people on average respond to a post and how they create news or other posts based on these. The analysis shows that Direct Line is able to create the highest level of ‘‘engagement’’ on Facebook, significantly outperforming the other companies, while Genialloyd and Europe Assistance had the most posts on Twitter. On YouTube, Quixa has 60 subscribers, Genialloyd has 58, and Linear has 19 subscribers. Ability to manage dialogue. The ‘‘ability to manage dialogue’’ driver identifies the company’s ability to adequately and effectively manage conversations and moderate any conflicts within its pages. It is measured by analyzing the types and number of ‘‘company posts’’ and the alignment between the content of the various social media accounts and the number and type of customer responses, which are indicative of user reactions. Companies such as Europ Assistance, Direct Line, Genialloyd, Sara, and Tua Insurance have the highest numbers of Company and Users Posts and are therefore constantly engaged in managing online conversations. In addition, they are part of the 22% of the sample that uses more than five social media tools and uses Facebook for customer service. Specifically, by analyzing customer responses, it is evident that Genialloyd and Europ Assistance receive the highest rating from their customers in terms of competence in managing dialogue and conflict situations, which the data demonstrate are not sporadic occurrences. These two companies stand out for their


Manuel Castriotta et al.

careful management of formalities (grammar) and professional communication style. In contrast, Direct Line has a high level of complaints and communicates in a less accurate manner. In particular, there are frequent grammatical and typographical errors that reduce the perception of quality. Joining problem solving. The ‘‘joining problem solving’’ driver highlights how the company requires the support and contribution of its consumers and stakeholders in the resolution of problems in various stages of the value chain. The analysis showed that only one company (Direct Line) has used social media to create opportunities to resolve specific problems. Specifically, Direct Line requested support from its customers to build what it calls ‘‘the car of 100 ideas,’’ which required the constant contribution of tips and solutions to improve security on Italian roads and reduce the number of car accidents. Insurance companies are constantly searching for new ideas and innovations in risk reduction to make their businesses more efficient. This initiative follows this tradition. The contributions and solutions proposed by customers through interviews were recorded and posted as a video on YouTube that was linked to other social media platforms. This combination offered an innovative experience in a co-creative environment (Ramaswamy, 2008). Focus on personalized interactions. The ‘‘focus on personalized interactions’’ driver summarizes the company’s ability to focus on creating a ‘‘personal’’ dialogue, which is a focal point of the theory and is contrary to the concept of mass customization. In this way, companies can co-construct personalized experiences instead of simply transferring activities from the company to the customer as a self-service process (Ramaswamy, 2008). To assess this indicator, we evaluated both the features that increase one-to-one dialogue and the number and quality of responses given to users. In this sense, Europ Assistance, Direct Line, Genialloyd, Sara, and Tua emerge as leaders. In fact, these companies not only possess suitable places for ‘‘listening’’ but maintain a high rate of responses to questions posted by their customers. In contrast, our results show that Cattolica Previdenza, Linear, and Genertel have a number of inefficiencies, including a lack of space devoted to one-to-one communication and delays in supplying the information requested by users.

Access To evaluate the ‘‘access’’ element of co-creation, we have identified two elements, or ‘‘drivers’’ (see Table 7). Structural design. The ‘‘structural design’’ driver refers to the types of ‘‘grids’’ by which the consumer can ‘‘access’’ the information provided by insurance companies. Therefore, in addition to the number of employed social media tools, the analysis also focuses on the presence of geolocation tools, welcome pages, and internal arrangement and content, especially in relation to the Facebook pages. In this

Disentangling the Strategic Use of Social Media


context, Cattolica Previdenza and Europ Assistance are characterized by a high level of potential areas of ‘‘access.’’ For example, Facebook pages are structured in a complex manner and information can be accessed through a series of buttons. Direct Line offers 10 grids, followed by Tua (9), Genialloyd (8), and Genertel (7). Linear (4) and Alliance Toro (2) have the lowest levels. Social media links. The ‘‘social media links’’ driver highlights the links between social media platforms that increase the potential to access information from different points of contact (e.g., accessing Twitter through Facebook). In this regard, we analyzed both the presence of features such as buttons linking to other social media such that any post could relate the content from one social media platform to another (viral strategies). From this perspective, while the presence of such features in institutional corporate websites (i.e., is constant, the presence of social networks is sporadic. Exceptions were found for Genialloyd, Direct Line, Europ Assistance, and Tua, which strategically posted social media content in accordance with a viral strategy.

Transparency With regard to the aspects of ‘‘transparency,’’ two items were identified to assess the possibility of establishing a relationship of co-creation with customers (see Table 7). Rules of engagement. The ‘‘rules of engagement’’ element is measured by the appearance of written rules that protect consumers by describing appropriate modes of behavior. All companies referred to such regulations, also known as ‘‘netiquette.’’ Public customer care. ‘‘Public customer care’’ highlights transparency in the management of conflicts within social media pages and occurs, for example, if there is a level of censorship or if ‘‘unwelcome’’ posts are deleted. The analysis showed that even in the pages of the companies with the highest rates of complaints, the deletion of posts was not observed. The analyzed companies are committed to providing adequate responses rather than risking the consequences of demonstrating an attitude that could be consistent with censorship.

Risk and Benefits Through ‘‘risk and benefits,’’ it is possible to analyze the potential of co-creating value through the provision of information that facilitates the evaluation of the pros and cons related to certain elements of the offered products or services. From this perspective, two ‘‘key elements’’ have been identified (see Table 7).


Manuel Castriotta et al.

Decision-making support. The ‘‘decision-making support’’ factor identifies the tools that support the purchasing decisions of customers. The availability of quotes and ‘‘quick answers’’ represents the evaluated element of the performance of insurance companies. While it is common to observe such offers on institutional websites, not all companies offer the ability to perform these activities within their social media accounts or possess applications dedicated specifically to these purposes. Tua provides an excellent ‘‘Quick answer’’ service to their consumers directly on their Facebook page. Genialloyd informs its consumers through their customer service, applications, and dedicated quick quote button. What if strategies. The ‘‘what if strategies’’ factor identifies the company’s ability to provide services to customers if they were to suffer an injury or accident, have a claim, or wish to change companies. The analysis showed that companies provide timely top-down information about these issues, but spaces dedicated to consumer support in a bottom-up manner were not observed. Sara, Quixa, and Genialloyd are characterized by the offer of video tutorials that help increase consumer awareness of these issues.

Conclusion The analysis of the data opens up new scenarios about how insurance companies can co-create value with the support of social media platforms through multiple strategies. Empirical observations have revealed a number of complex issues that decision makers need to able to adequately manage them. The results of the research have demonstrated that the social media phenomenon in the Italian insurance sector is relatively recent. The findings indicated that companies began to approach these instruments in around 2009, with a few exceptions (Europ Assistance and Tua Insurance), while the majority (early and late) began to adopt these tools between 2010 and 2011. It is useful to focus on the fact that the industry is facing the beginning of a new technological cycle that is in turmoil; it is not yet clear if the paradigm is going to succeed (Shapiro & Varian, 1999). In this situation, firms implement strategies and test their applications without knowing in advance what the results will be. There is still no clarity about the potential of social media within co-creation strategies and companies tend to proceed, in the short term, through trial and error. Another interesting element that further confirms the hypothesis of the technological turmoil phase refers to the absence of insurance companies in social media platforms such as collaborative projects or virtual environments and the absence of an insurance-focused social media platform (as observed in high-tech settings). These gaps highlight that there is still a high potential for growth, another typical element of the technological turmoil phase. The analysis shows that the level of participation within social media platforms, in terms of ‘‘likes,’’ views, comments, or visualizations, is still quite low compared to the total number of individual

Disentangling the Strategic Use of Social Media


insurance company customers. For example Genialloyd has sold approximately 530,000 policies and receives 6.8 million annual views of its corporate website but has only 13,000 ‘‘likes’’ on its Facebook page. In terms of co-creation strategies, we can make some general comments and specifically focus on the DART model. First, the results have shown that some companies are particularly fond of using more than one instrument, while others focus on a much lower number. Companies such as Europ Assistance, Genialloyd, Direct Line, Tua Insurance, and Sara are characterized by the use of at least four potential instruments of co-creation. Facebook, LinkedIn, and YouTube are the most used; not all companies necessarily adopt Twitter or G+. Within this group, we observed a significant strategic alignment in communication between the various social media types. Among the companies that adopted focused strategies, Quixa did not use the popular Facebook and LinkedIn networks but used the Content Community of YouTube with clear positive results. Reale Mutua is very popular on LinkedIn but is in an early stage of Facebook and G+ use. Finally Dialogo is the only company that actively manages and chooses the Blog as its main instrument of co-creation. The data show that there is not necessarily a positive correlation between the differentiation strategy (adoption of a high number of social media) and cocreation of value efficiency. The observations have shown that different strategies could be used to leverage the elements analyzed in the DART model. First, some companies (Europ Assistance, Direct Line, Genialloyd, Tua) adopt a strategy that we call ‘‘Dialogue design.’’ They are constantly trying to build web platforms with a high potential for dialogue by prominently showcasing two-way communication features: high places and spaces box. From this point of view, firms try to leverage Dialogue potential drivers such as ‘‘social media macro-design’’ and ‘‘design internal social media’’ but also consider aspects of the ‘‘access’’ and ‘‘structural design’’ items. Furthermore, these companies are very committed to leveraging items such interactivity, ability to manage dialogue, and focus on personalized interactions. The analysis has shown that some companies are trying to create spaces in which the consumer can feel deeply involved in activities that are not strictly related to the world of insurance. We call this strategy ‘‘virtual square.’’ In these platforms, which are characterized by heterogeneous content, ample space is allocated to the publication of posts related to leisure, curiosities, and innovations. Genertel is the main adopter of this strategy, which tends to support the elements related to ‘‘deep engagement’’ and ‘‘social media links.’’ Companies such as Direct Line and Genialloyd use social networks mainly to increase the level of transparency through public customer service and also focus on aspects such as ‘‘dialogue in joining problem solving’’ and, indirectly, the ability to ‘‘manage dialogue.’’ We call this strategy ‘‘customer care.’’ Finally, the fourth identified strategy is one defined as ‘‘problem solver,’’ in which the social media platform is used as a potential problem solver. Companies such as Direct Line, Quixa, and Sara focus on factors including ‘‘decision-making support’’ and ‘‘what if strategies,’’ which are linked to the Risk and Benefits factor. Cattolica Previdenza and Sara also focus on collecting information on issues and needs.


Manuel Castriotta et al.

In conclusion, the analysis has shown that the social media strategies adopted by insurance companies in Italy are currently in an embryonic state. Businesses are not yet fully aware of the potential of technology and, in the short term, tend to monitor competitors without straying too far from the norm. Some are waiting (dormant) for greater awareness, while others are experimenting with new, though not particularly innovative, paths. When the potential of the technology becomes clearer, especially with regard to risks and opportunities, companies will adopt very different strategies and differentiation will significantly increase, as will differences in the obtained results. The prospects for future research should include assessing the ability to analyze the contributions of consumers to strategic co-creation through methodologies such as Sentiment Analysis and Opinion Mining to increase the efficiency of strategic behavior in this context.

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Grover, V., & Kohli, R. (2011). Cocreating it value: New capabilities and metrics for multifirm environments. MIS Quarterly, 36(1), 225–232. Hanna, R., Rohm, R., & Crittenden, V. (2011). We’re all connected: The power of the social media ecosystem. Business Horizons, 54(3), 265–273. Hoyer, W. D., Chandy, R., Dorotic, M., Krafft, M., & Singh, S. S. (2010). Consumer co-creation in new product development. Journal of Service Research, 13(3), 283–296. Huber, J., Landherr, A., Probst, F. & Reisser, C. (2012). Stimulating user activity on company fan pages in online social network. ECIS 2012 Proceedings. Barcelona. Kane, G. C., Fichman, R. G., Gallaugher, J., & Glaser, J. (2009). Community relations 2.0. Harvard Business Review, 87, 45–50. Kaplan, A., & Haenlein, M. (2010). Users of the world, unite! The challenges and opportunities of social media. Business Horizons, 53(1), 59–68. Kohler, T., Fueller, J., Matzler, K., & Stieger, D. (2011). Co-creation in virtual worlds: The design of the user experience. MIS Quarterly, 35(3), 773–788. Kohli, R., & Grover, V. (2008). Business value of IT: An essay on expanding research directions to keep up with the times. Journal of the AIS, 9(1), 23–39. Kumar, V., Aksoy, L., Donkers, B., Thorsten, W., Venkatesan, R., & Tillmanns, S. (2010). Undervalued or overvalued customers: Capturing total customer engagement value. Journal of Service Research, 13(3), 297–310. Libai, B., Bolton, R., Bu¨gel, M. S., de Ruyter, K., Gotz, O., Risselada, H., & Stephen, A. T. (2010). Customer-to-customer interactions: Broadening the scope of word of mouth research. Journal of Service Research, 13(3), 267–282. Lusch, R. F., & Vargo, S. L. (2006). The service-dominant logic of marketing: Reactions, reflections, and refinements. Marketing Theory, 6(3), 281–288. Miles, M. B., & Huberman, A. M. (1994). Qualitative data analysis: An expanded sourcebook. Thousand Oaks, CA: Sage. Mosley, R. C. (2012). Social media analytics: Data mining applied to insurance Twitter posts. Casualty Actuarial Society E-Forum, 2, 1–36. Nambisan, S. (2002). Designing virtual customer environments for new product development: Toward a theory. Academy of Management Review, 27(3), 392–413. Nambisan, S., & Nambisan, P. (2008). How to profit from a better ‘virtual customer environment’. MIT Sloan Management Review, 49(3), 53–61. Neirotti, P., & Paolucci, E. (2007). Assessing the strategic value of Information Technology: An analysis on the insurance sector. Information & Management, 44(6), 568–582. O’Reilly, T. (2005). What is Web 2.0? Design patterns and business models for the next generation of software. Retrieved from what-is-web-20.html Payne, A., Storbacka, K., & Frow, P. (2008). Managing the co-creation of value. Journal of the Academy of Marketing Science, 36, 83–96. Potts, J. D., Hartley, J., Banks, J. A., Burgess, J. E., Cobcroft, R.. S., Cunningham, S. D., & Montgomery, L. (2008). Consumer co-creation and situated creativity. Industry and Innovation, 15(5), 459–474. Prahalad, C. K., & Ramaswamy, V. (2000). Co-opting customer competence. Harvard Business Review, 78(1), 79–87. Prahalad, C. K., & Ramaswamy, V. (2004a). Co-creation experiences: The new practice in value creation. Journal of Interactive Marketing, 18(3), 5–14. Prahalad, C. K., & Ramaswamy, V. (2004b). Co-creating unique value with customers. Strategy & Leadership, 32(3), 4–9.


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Ramaswamy, V. (2008). Co-creating value through customers’ experiences: The Nike case. Strategy and Leadership, 36(5), 9–14. Sawhney, M., Verona, G., & Prandelli, E. (2005). Collaborating to create: The internet as a platform for customer engagement in product innovation. Journal of Interactive Marketing, 19(4), 4–17. Shapiro, C., & Varian, H. R. (1999). The art of standards wars. California Management Review, 41(2), 9–32. van Doorn, J., Lemon, K. N., Mittal, V., NaX, S., Pick, D., Pirner, P., & Verhoef, P. C. (2010). Customer engagement behavior: Theoretical foundations and research directions. Journal of Service Research, 13(3), 253–266. Vargo, S. L., & Lusch, R. F. (2004). Evolving to a new dominant logic for marketing. Journal of Marketing., 68(1), 1–17. Vargo, S. L., & Lusch, R. F. (2008). Service-dominant logic: Continuing the evolution. Journal of the Academy of Marketing Science, 36(1), 1–10. Zwass, V. (2010). Co-creation: Toward taxonomy and an Integrated Research Perspective. International Journal of Electronic Commerce, 15(1), 11–48.

Chapter 5

You Might Be Reputable But Are You ‘‘Liked’’? Orchestrating Corporate Reputation Co-Creation on Facebook Anna K. Zarkada and Christina Polydorou

Abstract Purpose — This chapter expands traditional approaches to Corporate Reputation Management by employing postmodernist approaches to value co-creation in order to identify how Facebook Features can be used to facilitate company–consumer Corporate Reputation co-creation. Methodology/approach — Using content analysis of Facebook Fan Pages, the chapter explores how 29 of the world’s most reputable corporations use Facebook Features. Findings — To a surprising degree, the corporations in the sample, despite having virtually limitless access to marketing communications resources, fail to make full use of the opportunities Facebook offers them. It appears that they have not yet fully adapted to this novel medium. Research implications — Facebook together with the locus has also shifted the focus of corporate communications from one-way company-controlled transmission of information to multiparty user-controlled conversations. Thus, Corporate Reputations can no longer be managed. Instead, by offering consumers experiences and emotional triggers, corporations can engage them into willingly marketing the corporation and its products to each other. Originality/value of chapter — This is the first systematic analysis of the practices the world’s most prominent corporations utilize (or fail to employ) on Facebook. It

Social Media in Strategic Management Advanced Series in Management, 87–113 Copyright r 2013 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1877-6361/doi:10.1108/S1877-6361(2013)0000011009


Anna K. Zarkada and Christina Polydorou

illustrates that companies that adapt to the Social Media ecology can successfully orchestrate customer experiences that foster the co-creation of the desired Corporate Reputation. Keywords: Corporate Reputation; marketing; Facebook; content analysis; value co-creation

Corporate Reputation has yet to be defined in a succinct and generally accepted statement (Barnett & Pollock, 2012), but there seems to be some consensus on its being the observers’ collective judgments on the financial, social, and environmental impacts of the corporation over time (Barnett, Jermier, & Lafferty, 2006), and the collective, overall assessment of the attractiveness of an organization by its stakeholders (Van Riel, 2007) relative to a reference group of peers (Fombrum, 2012). Some authors see it as an asset (Fombrun, 2001; Rindova & Martins, 2012) and others as a resource (Goldberg, Cohen, & Fiegenbaum, 2003; Lee, 2012) of the firm but all agree on its ubiquity, importance, and overarching role in marketing strategy. Although it is becoming increasingly more difficult for consumers to distinguish between the corporation, its products, and sub-brands (Van Riel, 2007), it is important to note that the term ‘‘Corporate Reputation’’ refers solely to the reputation of the organization as a unique and inseparable entity. A definition is meant to be the statement of an object’s essential attributes that form its ‘‘essence’’ (Aristotle, 2007), what Deleuze described as a time-dependent difference-creating power (Colebrook, 2006), which guides us to know a thing by its definable form, antecedents, and consequences (Aristotle, 2007). In the case of Corporate Reputation, however, it appears that its ‘‘definitional landscape’’ (reviewed in Barnett et al., 2006), which is shaped by no less than seven conceptual frameworks (Fombrum, 2012) as well as its tangled web woven by its antecedents and consequences (discussed in Balmer & Greyser, 2006), resemble Bertrand Russel’s (2004/ 1946, p. 192) description of essence itself as a ‘‘hopelessly muddle-headed notion.’’ For the purposes of the research presented here we propose that the quest for the elusive ‘‘one vision, one voice’’ (Barnett et al., 2006, p. 31) is sidestepped in favor of acknowledging Corporate Reputation as a distilment of all interactions, depictions, facts (Hasanbegovic´, 2011), and rumors related to the corporation, as in the Greek word for ‘‘Reputation’’ (Woodhouse, 1910): FZ´ mZ (fı´ mi), the root of the English word famous, the French fameux, and the Italian famoso (Famous, 2012), which denotes Rumor, unverified Information, good or bad Opinion about someone or something, Fame, Celebrity, good and bad Name, Glory, Kudos, and Renown (Manthala (Mandala´ ), 1999). Our approach is consistent with Fombrun’s (2012, p. 103) social constructivist repositioning that emphasizes Corporate Reputations’ ‘‘independent ontological status, which stakeholders may or may not share, and that can be experienced, assessed, valued and influenced.’’

You Might Be Reputable But Are You ‘‘Liked’’?


The Building Blocks of Corporate Reputation: Assessors, Media and Attributes Dowling and Gardberg (2012) reviewed 30 measures of Corporate Reputation used in 50 countries, Walker (2010) examined the 54 most cited articles on the topic, Inglis, Morley, and Sammut (2006) performed an econometric analysis through which an elaborate four-dimensional measure (RepuTex) was collapsed into a single-factor measure, and Groenland’s (2002) focus groups ascertained the dominance of the emotional dimension over all other dimensions of the most commonly used measure of Corporate Reputation (the RQ). All seem to concur that Corporate Reputation is qualitatively (Groenland, 2002), statistically (Fombrum, Gardberg, & Server, 2000), and conceptually (Fombrum, 2012) confirmed to be a ‘‘difficult to rationalize and verbalize’’ (Groenland, 2002, p. 309) nonrational, emotional reaction (Groenland, 2002) to the organization as being ‘‘good’’ (Keh & Xie, 2009), appealing (Fombrum, 1996), ‘‘desirable, proper, or appropriate’’ (Suchman, 1995, p. 574). It follows then that Corporate Reputation is not only dependent on the assessed and their reference groups (Fombrum, 2012) but, most importantly, on the assessors — commonly referred to as ‘‘stakeholder groups’’ (Groenland, 2002; Keh & Xie, 2009; Puncheva & Zarkada-Fraser, 2004; Walker, 2010). Moreover, as reputation is experienced before it is assessed (Fombrum, 2012), it follows that it is dependent on the medium through which it is experienced and the context of the assessment. These observations guided us in (1) delineating the study in terms of adopting the perspective of one of the multitude of possible assessors — the customer; (2) selecting the medium of stakeholder–organization interaction — Facebook Pages; and (3) focusing on those of the attributes of Corporate Reputation the stakeholder can experience through the Features of Facebook Pages and which can cause the reputation-forming emotional reaction. The Assessor: King Customer For the exploratory study presented here we adopted the perspective of the Facebook user that could be a potential or existing customer and consumer. Customers are only one of the many stakeholder groups that might be influenced by Corporate Reputation in their decisions to develop a relationship with the company (Puncheva & Zarkada-Fraser, 2003), but they are usually the largest group and the one without which the organization cannot exist. In practical terms, adopting the consumer perspective resulted in three design parameters. First we used the RQr (a consumer-based Corporate Reputation rating representing B2C customers; Harris Interactive, 2012) and the FORTUNE Top 50r (a business executives-based rating of Corporate Reputation representing the B2B customers; CNN Money, 2012) as surrogate measures of the ‘‘you are reputable’’ part of the issue at hand and as a sampling frame.


Anna K. Zarkada and Christina Polydorou

Second, all the data used in the study are easily accessible to the general public at no cost. Moreover, they are available in a format that can be understood by people that do not have any marketing, corporate communications, or business research skills. Finally, we followed simple data collection procedures that reflect the way anyone with an elementary understanding of the internet and basic search skills can navigate the maze of information and participate in the mediated experiences of Web2.0.

The Medium: Facebook Land of Negotiated Identities Almost half (Facebook, 2012) of all internet users in the world (The Internet Big Picture, 2012) are interconnected on Facebook, a single platform to which they dedicate 23% of their on-line lives; ‘‘a staggering 53.5 million minutes per month’’ (Edwards, 2012) or over one hour everyday (Mavidis, 2010; Patterson, 2012). Facebook was chosen as the ‘‘country’’ of this study not only in terms of its staggering size, but also because of its born global nature. Search engines direct customers to social media sites (Xiang & Gretzel, 2010) and consumers see, follow up, and invite their Friends to see a variety of marketing communications, thus actively participating in ‘‘the negotiation of increasingly complex corporate environments’’ (Hearn, 2008, p. 197). Finally, technology has been acknowledged as a change agent of Corporate Reputation, both in respect to its measurement and in its conceptualization (Dowling & Gardberg, 2012). The research project presented here seeks to explore if and how the world’s most reputable corporations respond to the demands of this new and exciting medium. In their study of the ecology of social media Kietzmann, Hermkens, McCarthy, and Silvestre (2011) identified Facebook as the platform with the highest number (five out of the possible seven) of corporation– consumer relationship forming functionalities and the one that best cultivates those most pertinent to the development of emotional bonds between the corporation and the consumer, namely, presence, conversations, identity, relationships (which is the strongest of all the elements of the ‘‘honeycomb’’ of functionalities for Facebook and also the one for which Facebook stands out among other platforms), conversations, and reputation itself.

The Attributes: Morsels of Information, Triggers of Emotion Traditionally, Corporate Reputation has been measured as a collation of numerical ratings based on knowledge, observations, or rumors (Hay Group, 2012) regarding the corporation’s performance on vision and leadership, financial performance, workplace environment, products and services, and social responsibility (Harris Interactive, 2012) but also allowing for assessments of emotional appeal (Harris Interactive, 2012; Hay Group, 2012). We hereby propose that the function of Corporate Reputation resembles the psychological process of admiration which is defined (Immordino-Yang, McColl, Damasio, & Damasio, 2009) as a social emotion

You Might Be Reputable But Are You ‘‘Liked’’?


evoked by witnessing virtuous behavior or displays of virtuosic skill which motivates us to reward the object of our admiration. In the time of television-mediated strictly parasocial interactions between passive audiences and media figures which, through repetition, acquired meanings of relationship (Giles, 2002), virtuous behavior of the corporations (such as charitable donations) and their agents (e.g., the employees’ volunteering) was communicated through PR messages. Virtuosic skill (the superiority of products, for example) was communicated through advertising. In both cases, messages were transmitted in the format the corporations chose to adopt, through loud streams of monologue on as many mass media as possible. Viewers, subsequently, made judgments about the corporations and responded as if some of them had been somehow incorporated into their social networks (Giles, 2002) but they could only form relationships with the few firms that they had some personal interactions with (as clients, employees, or neighbors sharing externalities). In the brick and mortar world, the sharing of the experiences derived from such relationships (e.g., a service encounter) remained limited by space, time, and the breadth and depth of the consumers’ social network. Thus, the ability of any one consumer to share and influence Corporate Reputation was negligible. The function of Web2.0, and Facebook in particular, as a potential instrument of Corporate Reputation is largely unexplored. Even though more than 4,000,000 businesses have utilized the Facebook Page feature ‘‘to engage with their customers directly and authentically’’ (Facebook Inc., 2012, p. 80), their marketing communications management practices are still terra incognita. ‘‘[A]necdotal evidence demonstrates that social media have greatly impacted the culture and economy of [advertising, communication, marketing, and public relations] and inspired paradigm shifts’’ (Khang, Ki, & Ye, 2012, p. 281). Their review of 10 years of research which focused mostly on users (primarily student samples) of the broadest possible range of web-based technologies failed to prove that Social Media were actually integrated into, let alone alter the nature of the corporate communications mix (Khang et al., 2012). All we know, so far, is that by the end of 2009 only 21.3 percent out of the 408 franchise systems operating in France were present on Facebook (Perrigot, Basset, & Cliquet, 2011; Perrigot, Kacker, Basset, & Cliquet, 2012) and in 2010 only 79% of the Fortune 500 companies had some form of Social Media presence (Dekay, 2012). Corporate communication practices on Facebook have not been examined in the context of Corporate Reputation but studies of marketing appeals in the Chinese and US Social Media Sites (Tsai & Men, 2012), franchisee attraction (Perrigot et al., 2011; Perrigot et al. 2012), and dialogic strategies of not-for-profit organizations (Bortree & Seltzer, 2009) as well as dealing with negative comments (Dekay, 2012) tell a story of lost opportunities. The full scope of consumer engagement is nowhere near achieved as a result of the corporations persisting in their old ways despite their treading new realms. This exploratory work aims to expand on the work of mapping marketing communications practices from the perspective of the Corporate Reputation formation processes (e.g., Bennett & Kottasz, 2000; Hutton, Goodman, Alexander, & Genest, 2001). It is here proposed that on Facebook these processes differ significantly from


Anna K. Zarkada and Christina Polydorou

those on traditional media as they are structured by the medium and its functionalities. Company presentation rests with each and every one of the Page Features and is delineated by its technical specifications that dictate how information and stimuli are organized. At the same time, verbal and visual messages related to personnel, vision, philanthropy, products, and even financial performance are simultaneously present in an archival format alongside expressions of the emotional response they have generated in the form of Likes, Shares, Comments, and user-generated content that expresses admiration as much as resentment in an interplay of images, sounds, words y in endless layers upon layers of meanings and personalized yet widely distributed context-creating content. ‘‘Your Page is the central place to grow your business, build your brand, and develop relationships with your customers’’ says Facebook (2012) in the introduction to the tools it provides for corporate users. These tools, listed here, and their Corporate Reputation formation potential are the subject matter of our empirical research. 1. Category and a Page name that represents the business, 2. Cover Photo that represents the firm and showcases its offerings, 3. Profile Picture where they can upload either their logo or another image that they wish people to associate with the business, 4. About section, meant to make people understand what the company does, 5. Photos and Videos, 6. Wall posts where most of the company–consumer interaction takes place, 7. Milestones of the company history, and 8. Extra Tabs where companies can have applications, more information, promotional material, and longer pieces of text.

From Communication to Co-Creation of Significations In the postmodern ‘‘pastiche and collage’’ (Kvale, 1995, p. 23) world of Facebook, 721 million active Facebook users (i.e., over 10% of the global population) were found to be engaged in a total of 69 billion friendships with a median value of 100 and an average of 190 friendships (Backstrom, 2011). Since then Facebook has grown to a billion users who log into Facebook at least once a month (Sengupta & Bilton, 2012) while an estimated 150 million people update their Status at least once a day, 209 million Comment on other’s posts, and 247 million Like another user’s content. Each one of these Posts can reach on average 156,569 friends-of-friends (Goo, 2012). The impact of these statistics on Corporate Reputation is an unprecedented magnification of the breadth and width of shared experiences and opinions. The scale of potential propagation of rumors is simply unpredictable. In the mass media framework of passive viewing that characterized modernity it clearly made sense for corporations to ‘‘talk to’’ customers and prospects in the belief that if you project a consistent message often and loud enough it will, eventually,

You Might Be Reputable But Are You ‘‘Liked’’?


become the truth, thus shaping the desired Corporate Reputation. In the monologue of the commercial image and story line-producing industries, corporations were the sources of crafted significations that were transmitted through selected media to targeted individuals who, at the moment of message transmission, happened to be acting as receivers. In the post-information postmodern world of Facebook, receivers also become sources of noise as well as transmitters of the message and the messages they choose to add on it. They Like, and entice other consumers to Like; they Share, thus adding their approval or they Share but add a derisive Comment which flashes on their friends’ Walls and turns what is designed to be promotional to defamatory material; they Comment, and Comment again; they multitask and media-mesh and thus triggering an unintended interplay of new and traditional media in a constant search for information, alternative perspectives, and even emotional fulfillment (Luck & Mathews, 2010). What they actually do is that they add infinite numbers of bits and bytes as well as divert the message to unintended receivers who add their own verbal, musical, or visual decoding. Thus, the poles in the general communication system (Shannon & Weaver, 1949) become interchangeable and a neat linear sequence is transformed into a whirlwind of hyperreal ‘‘rampant, disjointed significations’’ (Sternberg, 1995, p. 85) spinning in space and time while staying frozen forever on a timeline or at the depths of a What’s on Your Mind or Recommendations or Recent Posts by Others Feature. Corporate Communication on Facebook is like an endless party where people invite themselves and the host mingles with some new, old, good, and often some not so good Friends. Thus Corporate Reputations are not built by strategically chosen actions and communications but co-created. It is here argued that the co-creation of Corporate Reputation on Facebook cannot really be managed; it can only be orchestrated by a corporation that fulfills Darwin’s criterion for the survival of a species: the one most adaptable to change (quoted in a Facebook Status Update by the American Marketing Association, which, incidentally, was Shared by 181, Liked by 350, and Commented on by 11 people in seven hours).

A Note on Methods and Procedures The primary concern for the development of the sampling frame was that data was freely and easily accessible to the general public. Thus, we combined the B2C Reputation (the 32 companies that were rated as at least ‘‘Good’’ with a score of over 74, in the 2012 RQs; Harris Interactive, 2012; see columns ‘‘Rank B2C’’ and ‘‘RQ Score’’ in Table 1) with that of B2B evaluations (the top 50 of the World’s Most Admired Companies; CNN Money, 2012; see columns ‘‘Rank B2B’’ and ‘‘Fortune Score’’ in Table 1). As 31 companies featured in both lists, a total of 59 companies were defined as the research population. The most common way to find a company Page on Facebook (based on a preliminary observational study we conducted) is to type the company name and Facebook in a browser so this is exactly what we did. We copied the name of the


Anna K. Zarkada and Christina Polydorou

Table 1: Compilation and comparison of Reputation metrics and Likes for the companies included in the study. Company name

Walmart Stores Intel Best Buy eBay Southwest Airlines Hewlett-Packard Microsoft Lowe’s Deere Kraft Foods General Electric Costco Wholesale UPS Cisco Systems Wells Fargo Singapore Airlines IBM Accenture Procter & Gamble BMWa Sonya Samsung Electronicsa a

Rank B2C

Rank B2B

RQ score

Fortune score

Likes 24/8/2012

% change likes in a week

40 6 8 27

11 32 7 36 45 4

69.35 81.94 81.14 75.92

6.93 7.15 7.95 6.25 6.77 6.17 6.71 6.66 6.36 7.32 6.34 6.43 6.68 7.42 7.07 6.25 6.30 7.64 7.40 7.43 6.88 5.85 6.16

19,798,202 12,259,784 9,807,810 6,259,580 3,575,399 3,165,828 2,085,733 1,936,973 1,375,003 1,329,636 908,214 864,220 647,070 384,765 325,820 201,428 178,019 148,457 129,610 89,997 75,675 19,243 11,000

0.95 1.05 2.77 0.58 0.99 0.26 0.24 0.43 2.00 0.44 0.25 1.34 0.51 0.50 0.37 0.65 0.63 1.16 0.77 0.77 0.44 0.25 0.40

23 25 16

7 30 20 13 45 26 11 14

9 49 39 13 29 30 28 41 18 12 49 5 19 46 38

76.88 76.43 80.16

81.67 74.22 78.03 80.51 66.15 76.27 80.98 80.44

The Facebook Page that came up first on the search was the Greek Page.

Company from the source and pasted it into the Google Chrome Search Bar/URL line followed by ‘‘Facebook.’’ The first page that came up on the Results Page was clicked on and opened. One company (GoldmanSachs) had no Facebook presence and for six companies (Berkshire Hathaway, Apple, SC Johnson, Honda, Toyota, and Exxon Mobil) the first Page that came up did not belong to the company and in most cases it was actually against the company. These companies and another 29 companies that did not have the term ‘‘official’’ or the term and logo for copyright (r) in the texts they provided on their Pages were excluded from the study so as not to violate the criterion of document authenticity (Bryman & Bell, 2007). The 23 companies that were included in the content analysis (Berelson, 1952; K. Krippendorff, 1981; K. Krippendorff, 2004; Weber, 1990) phase of the research are listed in Table 1.

You Might Be Reputable But Are You ‘‘Liked’’?


The Facebook presence of nine of the companies in the sample (Amazon, P&G, Microsoft, Costco, IBM, Best Buy, Walmart, Wells Fargo, and Lowe’s) had been previously examined in relation to their handling negative comments on Facebook (Dekay, 2012) and one of the companies in the sample (Walmart Stores) was the number one Social Media Star according to CNN Money (Konrad, 2012). Facebook Pages comply with the requirements for being treated as documents as they can be ‘‘read,’’ have not been produced specifically for the purposes of the research but are relevant to the study of reputation, and are preserved (Bryman & Bell, 2007). Facebook Pages are by nature dynamic and in a state of constant flux so what we are really studying is only snapshots taken in a narrow space of time (August–September 2012). Data was collected from each one of the Facebook categories presented above and manually coded according to the nature of the messages they contained. Visual messages were defined as any type of picture, image, or symbols (except punctuation marks) while verbal messages were defined as any combination of letters, words, and sentences. We also coded and analyzed material for its co-creation potential and utilization of the opportunities for Corporate Reputation enhancement. The scope for co-creation exists in Features that allow Fans to interact with the Page by Liking, Commenting, or Sharing company-generated content or to Post their own verbal, visual, or audiovisual content on the company’s Page (activities that are visible to the users’ personal network on News Feed and on their Friend’s Walls). In manipulating the data we stayed strictly with what the Facebook user sees and experiences, purposefully ignoring the corporate perspective, the Facebook-provided metrics (insights), and making no use of data mining and business analytics technologies.

Research Findings Overview of Practices In some of the Features of Facebook Pages, it is technically impossible for users to interact with the company. For example, Category and Page Name, the About Section, the Info, and some company-created Extra Tabs are spaces designed for Corporate monologue. How these are utilized by the companies in the sample is shown in Table 2 where the numbers represent the number of companies that made use of the feature in t0 (24/8/2012) and t1 (a week later) categorized by the nature of the messages transmitted (verbal or visual). Cells marked as N/A indicate that the type of message is not technically possible to be transmitted in the particular Feature. The rest of the analysis focuses on the Features marked in bold letters in Table 2, because Videos, Wall Posts, and Milestones require different analytical tools to be approached and are defined as beyond the delineation of this first exploratory study.


Anna K. Zarkada and Christina Polydorou

Table 2: Summary of how the 23 companies in the sample use the Attributes of Corporate Reputation on Facebook. Nature of messages Facebook feature Category & Page Name Cover Photo Profile Picture About Info Tab Photo Albums Videos Wall Posts Milestones Extra Tabs

Visual representation t0

t1 N/A 23


Verbal communication t0 15 23

19 22

16 22

19 21 21 22

t1 N/A 23 23 N/A N/A 23

17 19 23 23 23


21 22


23 23 1 7

16 23


Scope for co-creation


19 23 21 18

Facebook Features as Attributes of Corporate Reputation We hereby examine each Feature separately and illustrate its most successful uses as well as blunders that show how long the way to adaptation to the new realities still is, even for corporations that are highly visible, innovative, and in possession of considerable resources. Representing the business: the Category and Page Name. When creating a Page, Facebook forces users to choose if they are ‘‘Local Businesses or place,’’ a ‘‘Company organization or institution,’’ or a ‘‘Brand or product’’ and then to select their Category from a set list of industries. The Category is crucial for Corporate Reputation as it positions the firm within the reference group (Fombrum, 2012) it believes it should be judged against. So, for example, Southwest Airlines selected Airline and Singapore Airlines chose the Travel/Leisure Category so they will be not judged against each other. Of all the companies studied, almost half used generic terms as their Category such as ‘‘Company’’ (four companies in total, i.e., 17% of the sample) or ‘‘Product/ Service’’ (six companies, 26%) and the rest selected either the industry they operate in (e.g., Best Buy chose ‘‘Retail and Consumer Merchandise’’) or their most prominent product (BMW, for example, described itself as ‘‘Cars’’). The issue of naming a page is anything but trivial or a routine matter. Variations in approaches can be to just use the brand name (12 companies in the sample) or an abbreviation (e.g., GE for General Electric and HP for Hewlett-Packard). Finally, a multibrand firm with numerous product Pages, Kraft Foods, highlights the function of the Corporate Page in relation to its other Pages by giving its Page Name as Kraft

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Foods — Corporate. The Category and Page Name Features do not allow for interactions with Fans and they are not designed to function as a place for visual communication or meaning co-creation. Showcasing the firm and its offerings: the Cover Photo. This Feature showcases key corporate brand elements through visual and verbal messages. Companies show their products or new offerings or pick a picture that is iconic of their brand. All 23 firms in the sample have a visual representation of their company on their Cover Photo. In the top half of Exhibit 1, for example, Singapore Airlines puts forward one of the strongest and most consistent brand elements ever. The Singapore girls, slim Asian women dressed in the distinctive Sarong Kebaya SIA uniform, an icon of service since 1972 (Lindberg, 2000), bridge with their smiles China and France (notice the two sides of the river banks). Most of the corporations (17, i.e., 74% of the sample) have also included a verbal component. For example, Costco Wholesale (in the bottom half of

Exhibit 1: Examples of visual and combined verbal/visual representations in the ‘‘Cover Photo’’ section.


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Exhibit 1) show a service (the Executive Club Card) held high up, pointing towards the Brand values of value, quality, savings, and wow! (sic). The Cover Photo is public, the first thing that visitors see, and, thus, extremely important to identity construction and image promotion. Usually, Cover Photos are changed regularly to reflect strategic repositioning, new products or even the time of the year, and major events. This is prime attention-getting and meaning co-creation territory, as the Cover Photo often attracts more Comments, Likes, and Shares than any other Feature. Intel’s Cover Photo, for example, had on 11/09/2012 5245 Likes, 297 shares, and 279 comments while the Profile Picture had only 220 Likes, 102 Shares, and 56 Comments. It is not surprising that the Profile Picture has generated business for graphic designers and photographers. A search on Google using ‘‘Facebook profile picture’’ as the search term returned 73,000,000 Videos and 6100 results in the Shopping search, 2010 of which were priced over $40. Associating the business with a single image: the Profile Picture. In our sample, 15 companies (65%) use their logo as a ‘‘Profile Picture’’ (eBay, for example, as in the middle picture of Exhibit 2) and eight companies (35%) use their logo enriched with visual or/and verbal messages enhancing their brand (as in the UPS logo on the left of Exhibit 2 which is enriched by words and the universal love symbol) and only three use an image that depicts their business (see, for example, Southwest Airlines on the right-hand side of Exhibit 2). Companies’ Profile Pictures are visible on the News Feed, the running stream of updates on the activity of Friends, and the Fan Pages that users have Liked. It is the par excellence Feature that promotes uniqueness, enhances brand awareness, and aims to create recognition in a flash. As the Profile Picture allows user interaction, it is inevitable that Fans will voice their feelings right next to the logo. The neat and bright Wells Fargo Profile Picture is decorated with 14 extensive and rather bitter complaints by customers with one feeble ‘‘Nice BANK y’’ lost in the disdain. One wonders what Comments accompanied the logo’s 16 Shares.

Exhibit 2: Different treatments of the ‘‘Profile Picture’’ section.

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Explaining what the company does: the About and Info Tab. Facebook provides a discreetly marked (just the word ‘‘About’’) but prominent space (at top left, right under the company logo) for the creation of a one-click profile of the business. The first Sentence of the About section appears in a plain box designed to take 40 words. First the text Posted by the companies in the sample was checked for textual integrity. If a company has used more than 40 words then only a fraction of a sentence accompanies the Profile Picture. The majority of companies (16, which is 70% of the sample) are aware of this, so they just write a catchy sentence. Notably six companies (26% of the sample) appeared to have failed to check their selfpresentation for sloppiness (Exhibit 3). The whole text of the About section was coded in terms of content as shown in Table 3. In the Microsoft text which reads ‘‘Welcome to the official Microsoft Facebook page, your source for news and conversation about Microsoft’s consumer products and services,’’ for example, the italicized words were respectively coded as WELCOME+DESIGNATION+PROMPT TO ACTION. The summary results and some characteristic examples are presented in Table 3. In the column marked ‘‘Pages’’ the subcolumn marked ‘‘#’’ indicates the number of companies that had the specific content in their texts and the column marked ‘‘%’’ shows the respective percentage of the sample. Just like the About section, the Info section is a pure monologue with no means of establishing if anyone is paying attention to the primarily verbal messages. The only visual messages used are symbols such as s, @, r, or a bingr map with no place for co-creation. Of the 23 companies we studied, only P&G had utilized the interactive map feature, thus providing spatial inferences: a building entrenched in the urban fabric, close to a river and a highway.

Company We love science, technology, innovation and hearing from you! So, say hello.


Transport/Freight Welcome to the offical UPS Facebook page–the place to talk about logistics. See how the power of logistics can revolutionize the way you do business and the way you About

Exhibit 3: Examples of textual integrity. The top picture is GE’s About where space is used wisely and the bottom one is the UPS About which was coded as not having textual integrity.


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Table 3: The content of the first 40 words of the About section. Content code

Pages #






12 9

52 39





1 2

4 9






Example text

A world leader in agricultural, construction, forestry and turf care equipment with an age-old commitment to those linked to the land. Welcome aboard the official Singapore Airlines Facebook page! We hope you enjoy your journey with us. ‘‘If we work together, we’ll lower the cost of living for everyoneywe’ll give the world an opportunity to see what it’s like to save and have a better life.’’ — Sam Walton This page is managed by George Faulkner and Kevin Winterfield, and follows the IBM Social Computing Guidelines. We love science, technology, innovation, and hearing from you! So, say hello.

Example company Deere

Singapore Airlines

Walmart Stores


General Electric

Companies can choose which of the Facebook set sections of the Info they fill in. The sections in order of popularity were: Basic Info and Contact Info (filled in by all of the companies in the sample), History (21, i.e., 91% of the sample), Company Overview (18, i.e., 78%), Mission (15, i.e., 65%), and Description and General Information (6 and 5 each, i.e., 26% and 22%, respectively). Almost half of the companies have posted engagement rules detailing what users can and cannot post on the Page, measures that will be taken against offenders, such as banning them form the Page, and copyright terms in the Info Tab. Nine companies (40%), however, have created an Extra Tab for Terms and Conditions and one (Hewlett-Packard) has added visual messages (a woman wearing a headset in front of a computer screen) to the communication guidelines. Making the virtual real: Photos. Photos organized in Albums have been extensively utilized by all companies in the sample for providing the physical evidence needed for consumers to make inferences about all aspects of Corporate Reputation. Most

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importantly, images and their captions position the corporation in physical and social space as well as in time, build expectations and supply evidence of delivering the covenanted service. This is a section of lively dialogue, overflowing sentiment, and users’ being really personal in sharing not only their reactions to the company Posts and content but also submitting and discussing their own life stories with other Fans. In this section, we only analyzed the Album’s titles and not their contents as this is a project in itself requiring an in-depth netnographic and visual anthropology approach. People feature strategically in the Photos section in at least 10 (43%) company Pages (see Exhibit 4). Albums are used extensively for product launches (as in Exhibit 5) and they generally seem to create a strong consumer reaction unlikely to be achieved by a traditional PR event for the same purpose. Intel has here created an open to anyone, space and time constraint-free, ongoing, virtual event out of a product launch. Almost 12,000 people have Liked and 1626 have Shared this collection of photographs showing the product itself (a processor), the products the product goes into (personal computers) and people using them, the company representative presenting the new family of products, a snapshot of the presenter’s visual aids, and the attentive audience. The Intel logo appears in most of the photographs. The 10 latest of the 435 comments on the Album are also shown in Exhibit 5. People not only admire the product and the company but also call for the elimination of Intel (in Spanish), explain production processes to other consumers, Like the previous users’ Comments, ask about prices and Share the photos. They also share their experiences with the product and an Indian/English girl of school age shares a hyperlink to a drawing of palm trees in the dessert. The interactions are limited to mutual Likes and Intel has not answered or commented on any of the latest 150 posts. Photo Albums, however, can go a lot further than just presenting products. They can add context to the corporate offerings and provide inferences about the covenanted service performance in a way that no print or televised advertisement could ever hope to achieve. Albums are there; people go looking for them and invite

Exhibit 4: People as Corporate Reputation Ambassadors, from left to right Walmart shareholders, Kraft employees, and Accenture leadership.


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Exhibit 5: Facebook Photo Album specifically created for a product launch. their friends to peek as well. They hold all the excitement of opening your host’s bathroom cabinet, or the sadness and sweetness of going through your shoebox of High School memorabilia. Hewlett-Packard, for example, has made full use of triggers to emotionally connect their history to their Fans’ past. They have uploaded a

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Photo Album of the first workshop of the company titled ‘‘Birthplace of Silicon Valley — 367 Addison Avenue,’’ comprising 12 pictures (one of which is shown in Exhibit 6). The photos look as if they were just private snapshots of private spaces and the effect is highlighted by the forgotten coffee mug on the work bench in the photo shown in Exhibit 6. This HP Album has received 2663 Likes and 43 Comments and has been Shared 604 times. A young man from Singapore has Commented that ‘‘Big things have small beginnings,’’ a middle aged woman from California has added a touch of her personal story under the Album ‘‘That’s just a couple of streets over from where I grew up. I am a Paly girl all the way!’’ as did an elderly man who wrote ‘‘Worked for HP 141/2 years y had a chance to meet and talk to both of them y The best bosses of their day y’’ but a former employee of HP who now lives in Ireland admonished them to ‘‘get back to your focus on innovation y like apple (sic).’’ Scrolling through the Shares history we counted 10 people from as far away from Palo Alto as Italy and

Exhibit 6: Sample of HP Album of its origins.


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Japan who had shared the Album with an introduction along the lines of ‘‘this is where it all began’’ in their own language. UPS, on the other hand, attempt to position themselves as a state-of-the-art and innovative organization by showcasing the means they use for their intermodal transportation. Their Album of planes, trucks, cargo ships, and loading cranes also includes a gondola with the caption ‘‘a Venice Delivery Boat: That’s Logistics! Packages are delivered by boat in Venice on the Grand Canal.’’ These photos (shown in original size in Exhibit 7), however, do not seem to have captured the consumers’ attention as the album has elicited only 28 Likes, 74 Shares, and one Comment from a female former employee of UPS in Paraguay who is complaining about the quality of the pictures in Spanish, thus illustrating our point that new media are novel ecosystems that require adaptation of the introduced species for survival. Dekay (2012) have demonstrated that positive responses are more likely to be elicited by marketing messages that are not of the ‘‘hard sell’’ type. At least 10 of the companies in the sample (44%) have utilized the Photo Albums for integrating themselves into the social fabric of Facebook. Informal socializing through photos that are irrelevant to the business or at least loosely related, with the logical link left to the semantic framework of the viewer, seems to generate positive responses. Amazon’s ‘‘Holiday 2011’’ Album shows their customers demonstrating Christmas spirit, eBay celebrates Mother’s Day by collecting photos of their customers with their moms, and Kraft Foods share romantic Valentine’s Day photos. The fact that these are three of the most commercialized days globally, we suppose it is unlikely to be coincidental. Regardless of our skepticism, however, the fact remains that Fans Share, Like, and lavish admiration on the company that remembers their mums, treasures their pets in Santa hats, and lends romance to their online flirt. Even eBay’s National Dog Week Photo of a pooch wrapped in a fluffy pink towel has elicited 9612 Likes, 1803 Shares, and 139 laudatory Comments such as ‘‘ssssooo fffuuunnnnnnyyyyy!!!!111!!!’’ alongside personal revelations (‘‘My dachshund, Gidget, is like my second child. I think my daughter Laurel would agree that I spoil the dog more than her sometimes! Lol’’).

Exhibit 7: UPS Photo Album of means of Transport (original photo sizes and quality).

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Engaging consumers into play and learn: Extra Tabs. Facebook is transforming social learning into an ‘‘anytime, anywhere’’ experience as it is the par excellence harbor for self-disclosure, the repository of recorded experience, and a medium for the co-creation of knowledge (Harris, 2012). Providing a flexible company-controlled social learning space is the primary function of Extra Tabs that are used for presenting aspects of the business, for rewarding Fans for Liking the Page and for interacting informally. After counting and classifying Tabs we opened each one of them, coded the content, and tested if the applications actually worked. The coding was performed between 11 and 13 September 2012. One company (IBM) had no Extra Tabs, five (Intel, eBay, UPS, IBM, and Walmart) had 10, and the rest between two and nine. Out of a total of 129 Extra Tabs the companies provided nine (7%) that did not work, thus creating an impression of not upholding even the simplest and voluntarily undertaken promises. There were 119 Tabs with visual and 131 with verbal content, but only 61 (47%) were interactive and allowed Shares, Likes, and Comments. It is these 61 Tabs that are of a particular interest as they show the companies’ understanding of the particularities of the medium and the modus operandi of the playful, easily distracted connected consumer. They also signal a commitment of resources to providing free entertainment and educational value to the Facebook crowd that have fun or take a break from their boredom by hopping on and off Pages. Facebook gives companies the freedom to choose which two or three of their Extra Tabs will be shown on the Front Page and for which visitors will have to click and scroll. These choices are of paramount importance to the orchestration of Reputation forming experiences as they signal marketing objectives and set the tone and scope of interaction. Eight companies (35%), for instance, present ‘‘Deals’’ or/and ‘‘Contests’’ among their three first Tabs (always after ‘‘Photos’’) to engage Fans and prompt them to immediate action. Thus they answer the fundamental relationship question: what’s in it for me? The monologue attitude is adopted by 19 companies (i.e., 83% of the sample) who use this prime real estate (Top Tabs) to provide mostly textual information about their business. Many are didactic in tone and static (such as rules of engagement). Reputation co-creation through play and learn is utilized to varying degrees by 14 companies (60%) who have customized applications that range from pictures with text to games and viral promos. The co-creation potential is dependent on the technology behind the applications and reflects both communication objectives and the corporations’ degree of adaptation to an environment that is characterized by attention-grabbing devices aimed at a low attention span audience. Microsoft, for instance, promotes a new product in a Tab, by allowing users to Like and Comment on its text, video, and photos, but, most importantly, by strongly encouraging Fans to Share the content, not only with other Fans but with anyone they might think is worried about their phone’s speed (notice the Share button on the top right of Exhibit 8). This Microsoft Extra Tab has managed to generate 169 comments, one of which has received 150 Likes, by using red – the colour signifying speed and passion in the


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Exhibit 8: Microsoft’s Extra Tab, promoting a product and enticing Fans to provide feedback to the marketing and, to play, their friends.

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West and good fortune in the East – in the lettering and banners, by providing a two minute long video promoting a challenge and some photos of people using the product as well as by asking ‘‘What do you think?’’ and thus encouraging engagement. It is notable that because the video is not posted in the Videos Feature but has been uploaded as an application it shows the professional affiliation of the person that is Posting a Comment, thus adding an extra layer of credibility (see the IT affiliations in the three out of the four Comments). In the fourth Comment, for example, Conor Raypholtz expands on the first Comment by Phill Bell, turning the eagerness of a simple phrase ‘‘windows phone isn’t smart, it (sic) genius’’ into an enthusiastic quip ‘‘apples and robots may be smart but a windows is a genius’’ that not only enhances the original comment (which has already been Liked by 150 people, so it must be true, right?) but also bashes the main competitors (something that Microsoft would never be able to even insinuate). The sober portrait of the person that Posted the Comment (a young man, with a university affiliation, so he must know a thing or two about SmartPhones, right?) leaving the sunset of conventional phones behind him adds spark to authority. The company showcases evidence of Performative legitimation and educates consumers on product usage; the Fans endorse it, add personal significations, and provide humorous comparisons with competitor in a Corporate Reputation co-creation interplay.

A Note on Limitations and Future Directions The exploratory work presented here is like a Polaroid snapshot of a Formula 1 race: by the time it fully develops nothing looks like it did when the shutter closed on the action. Facebook technologies come and go, Pages change by the second (that is why we stress the dates of data collection) so replication is impossible. Nevertheless, we hope the snapshot has provided some insights into how the most reputable companies in the world, vast organizations with access to unparalleled marketing and communications resources, have exploited (and mostly missed) the opportunities that Facebook Fan Pages Features present them with. Their actions (and oversights) have been discussed from the perspective of their ability to provide an exciting and fulfilling experience for the other members of the Facebook community in order to orchestrate the co-creation of meanings that foster admiration and help build and sustain their desired Corporate Reputations. For this first systematic look we purposefully used the simplest possible methods and analytical tools as the objective was to reflect on the perspective of the Facebook user. Our next steps in the understanding of the evolution and implications of this novel reality will focus on the Features we eschewed in this analysis. We believe that social media are not a hybrid element of the promotion mix (Mangold & Faulds, 2009), not anymore. They are a unique marketing tool and as such we propose they should be studied. So, the next phase of our research involves an analysis of Photo Albums and Milestones using the tools of visual anthropology in order to explain their effect on consumer-held conceptualizations of the brand


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and their function as an element of the Promotion & Education strategy of the marketing mix. Furthermore, value co-creation needs to be analyzed on the level of consumer engagement and the motivation behind it. Issues in need of in-depth study are whether people Like in order to gain access to promotions, to express loyalty, because they are intrigued by marketing communications or as part of their social identity construction through conspicuous membership of aspirational brand communities.

Final Thoughts The Facebook Fan Page has changed marketing communications beyond recognition. It is not the nature and function of the medium that created a novel reality. SMS advertising, for example, is a new technology-driven medium but the logic of the communication between business and consumer is strictly within the ‘‘old paradigm’’ in which ‘‘the traditional elements of the promotion mix (y) were the tools through which control was asserted’’ (Mangold & Faulds, 2009, p. 364). In the world of Facebook, our data analysis has demonstrated, marketing communications are not about controlling the content and transmission of messages but about engaging in meaningful (and, why not, the occasional silly) conversation. ‘‘The new Web conversations are remarkably sensitive to the empty pomposity that has served marketing so well’’ (Searls & Weinberger, 2001). It is consumers that control the time and place of their interactions with corporations or with each other. They also control the conversation flow to their personal networks and networks of networks, ad infinitum, thus making it impossible — or for companies that are willing to invest in sophisticated analytics, expensive — to follow, let alone manage those reputation building (or demolishing) streams of information interspersed with emotion. Gone are also the days of containing consumer outrage through service recovery, suing for libel, and getting activists hanging from factory chimneys arrested. There is no way, so far, for companies to completely eliminate negative Comments that are harmful to their reputation. Once Posted a Comment is seen by all the Friends of the person that wrote it so it can ‘‘spread like wildfire’’ as did the legendary teenage party invitation which ended in thousands of revelers descending on a quiet Dutch town (Facebook party invite sparks riot in Haren, Netherlands, 2012). By the time the corporation’s Facebook team delete it the damage is done. Having said that, Social Media-based collective identities that ‘‘seek to transform the ideology and culture of consumerism’’ (Kozinets & Handelman, 2004, p. 691) are also a brilliant opportunity to get to know your Friends and foes intimately. Alongside their Likes, Shares, and Comments users leave their digital life stories, an invaluable database of socio-demographics, opinions, needs, desires, values, grievances, and hates. Through Facebook, corporations enter the consumer’s social milieu and take steps towards reaching the holy grails of branding: a human substance which helps the

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company ‘‘insinuate itself into the lives of consumers in profound ways’’ (Hearn, 2008, p. 214). Instead of launching attacks on passive audiences, corporations now chat and play with active community members. Instead of yelling to be heard over the advertising clatter they now need to listen carefully in order to subtly orchestrate consumer experiences people feel are worth sharing. With sensitivity, respect, and painstaking attention to minute details they can break through consumer boredom. ‘‘Corporate messaging is pathetic. It’s not funny. It’s not interesting. It does not know who we are or care’’ (Hanna, Rohm, & Crittenden, 2011, p. 267). People on Facebook need proof that corporations know who they are and care to know more. They allow companies into their private space if they prove to be interesting, fun, and amazing enough to attract their Likes and to Share, that is, to market the companies’ offerings to one another. Our findings show that companies can control five out of the six points of Balmer’s and Greyser’s (2006) star of Corporate Marketing using the Features of their Page: they can present the Facebook community with the words and images they think best portray their character (corporate identity), express what they say they are (corporate communication), show off not only how many Likes they attract but also the pictures of those they seek to serve (marketing and stakeholder management), build and give evidence of upholding the covenant (corporate brand management), and share the traditional sanitized or — if they have really understood the medium — their honest feeling of who they are and what the corporate culture is (organizational identity). What they cannot control is their conceptualizations (corporate reputation). The ‘‘what we are seen to be’’ (Balmer & Greyser, 2006) will always depend on how they are seen to behave as members of the community. Being a member of a community means occupying a space in other members’ hearts. A monologue, no matter how inspired, cannot open people’s hearts. It is conversations that build relationships, confirm evaluations of social and performative legitimation, and make people want to share the achievements of a company they have as a Friend with their friends through Walls, tweets, emails, over a cup of coffee or during a shopping spree.

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Luck, E. M., & Mathews, S. W. (2010). What advertisers need to know about the iYGeneration: An Australian perspective. Journal of Promotion Management, 16(1–2), 134–147. doi:10.1080/ 10496490903574559 Mangold, W. G., & Faulds, D. J. (2009). Social media: The new hybrid element of the promotion mix. Business Horizons, 52(4), 357–365. doi:10.1016/j.bushor.2009.03.002 Manthala (Mandala´ ), M. M. (Ed.). (Mandala´ ). Major Greek Dictionary (Meı´zon ellZniko´ lexiko´: Oryografiko´, ermZneutiko´, etumologiko´, sunonu´mon, antiye´ ton, arktikole´ xon, kurı´on onoma´ ton). Athens, Greece: Tegopoulos - Fytrakis (Tego´pouloB - Futra´ kZB). Mavidis, A. (2010, 12/5/2010). Facebook in the life of young people (To facebook stZ zoZ´ ton ne´ on), Democrat (DZmokra´ tZB). Retrieved from php?id=13961&view_option=subject&year=10 Patterson, A. (2012). Social-networkers of the world, unite and take over: A meta-introspective perspective on the Facebook brand. Journal of Business Research, 65(4), 527–534. doi:10.1016/j.jbusres.2011.02.032 Perrigot, R., Basset, G., & Cliquet, G. (2011). Multi-channel communication: The case of Subway attracting new franchisees in France. International Journal of Retail and Distribution Management, 39(6), 434–455. doi:10.1108/09590551111137985 Perrigot, R., Kacker, M., Basset, G., & Cliquet, G. (2012). Antecedents of early adoption and use of social media networks for stakeholder communications: Evidence from franchising. Journal of Small Business Management, 50(4), 539–565. doi:10.1111/j.1540-627X.2012. 00366.x Puncheva, P. Y., & Zarkada-Fraser, A. (2003, May 21–25). The role of corporate reputation in the stakeholder decision-making process for establishing long-term relationship with a company. Paper presented at the 7th International Conference on Corporate Reputation, Identity and Competitiveness, Manchester, UK. Puncheva, P. Y., & Zarkada-Fraser, A. (2004). The effect of corporate reputation dimensions on the decision to become a stakeholder in a firm. Paper presented at the 18th Australia New Zealand Academy of Management Conference, Dunedin, New Zealand. Rindova, V. P., & Martins, L. L. (2012). Show me the money: A multidimensional perspective on reputation as an intangible asset. In M. L. Barnett & T. G. Pollock (Eds.), The Oxford handbook of corporate reputation (pp. 16–33). Oxford: Oxford University Press. Russell, B. (2004/1946). History of Western philosophy. London: Routledge. Searls, D., & Weinberger, D. (2001). Markets are conversations. In C. Levine, R. Locke, D. Searls & D. Weinberger (Eds.), The cluetrain manifesto: The end of business as usual. New York, NY: Basic Books. Sengupta, S., & Bilton, N. (2012). A billion users raise stakes at Facebook for revenue. The New York Times, October 4. Retrieved from Shannon, C. E., & Weaver, W. (1949). The mathematical theory of communication. Urbana, IL: University of Illinois Press. Sternberg, E. (1995). The Economy of Icons. In W. T. Anderson (Ed.), The Truth about the truth: De-confusing and re-constructing the postmodern world (pp. 82–85). New York, NY: Jeremy Tarcher/Putnam. Suchman, M. C. (1995). Managing legitimacy: Strategic and institutional approaches. Academy of Management Review, 20(July), 571–610. doi: Tsai, W. H., & Men, L. R. (2012). Cultural values reflected in corporate pages on popular social network sites in China and the United States. Journal of Research in Interactive Marketing, 6(1), 42–58. doi:10.1108/17505931211241369 Van Riel, C. (2007). Essentials of corporate communication. Taylor & Francis.

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Walker, K. (2010). A systematic review of the corporate reputation literature: Definition, measurement, and theory. Corporate Reputation Review, 12(4), 357–387. doi:http://dx.doi. org/10.1057/crr.2009.26 Weber, R. P. (1990). Basic content analysis (2nd ed.). Newbury Park, CA: Sage Publications. Woodhouse, S. C. (1910). English-Greek dictionary: A vocabulary of the attic language. Retrieved from reputation&pagenumber=&sortorder=Keyword Xiang, Z., & Gretzel, U. (2010). Role of social media in online travel information search. Tourism Management, 31(2), 179–188. doi:10.1016/j.tourman.2009.02.016

Chapter 6

Social Media as a Strategic Tool: Going Beyond the Obvious Poonam Arora and Carolyn E. Predmore

Abstract Purpose — This chapter demonstrates the strategic use of social media by firms interacting with stakeholders, not just customers. Corporations have seen how consumers can share their experiences with products and services. Smart companies find ways to leverage these conversations to engage current and potential customers and other stakeholders. Design/methodological approach — Our approach is theoretical, based on an examination of how the communication channel of social media can be used as a strategic tool throughout the organization, going well beyond marketing. Findings — This chapter looks at four advantages of social media. Social media provides a mechanism for firms to not just find customers, but also allow customers to find firms. Social media can engage customers, industry influencers, and thought pundits in cost-effective ways that benefit both the firm and stakeholders. The largest contribution of social media is the information from big data on customer needs and wants as well as on the processes underlying consumer decisions. The greatest opportunity lies in how a firm converts data into actionable intelligence in real time. Practical applications — We discuss how the words, social and media, need to be de-coupled: The concept of social can be practically applied very effectively to areas of strategy and internal learning, and product development. Taking advantage of the opportunities presented by social media requires a social enterprise to be effective.

Social Media in Strategic Management Advanced Series in Management, 115–127 Copyright r 2013 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1877-6361/doi:10.1108/S1877-6361(2013)0000011010


Poonam Arora and Carolyn E. Predmore

Originality — This chapter presents an original theoretical framework of social media that can be used by a company to examine the social aspects and implications of every element in the value chain. Keywords: Social media; strategic planning; big data

Introduction A conversation about using social media for a business often starts with questions about where to open accounts, how to gather more followers, should a company move directly to mobile, and how can a company do better on measures like the number of likes, hits, or re-tweets, or on what would be the equivalent of the holy grail — going viral. Not only are the questions overwhelming and endless, but just as soon as an organization answers them, new tools come online changing the playing field and requiring that they be answered anew. In this chapter we argue that the real issue is not answering this barrage of questions correctly or even well. Rather, it is finding the correct starting point for having the conversation about how to best use social media. The questions above are about tactics, which should serve strategy. The starting point of this conversation should be the company’s strategy: How can social media strengthen or enhance an organization’s competitive advantage. Tactical considerations should flow out of a strategic vision, thus addressing both what a company should do and from what it should walk away. That is not to say that an organization should not experiment with various forms of social media, but experimentation should not replace strategy. Social media may appear to be free, but for an organization, it can be costly in terms of time, effort, holding the potential for mistakes to go viral long before the positives do. Just ask any political candidate who has had a gaffe re-tweeted a myriad of times but is hard-pressed to find people who can speak to the campaign’s central message. We assume that an organization has clarity regarding its strategy and core competencies, and has a product or service that customers need, want, or desire. The goal of this chapter is to illustrate how social media can enhance a core competency by allowing for more effective and efficient creation and delivery of value from an organization to its customers or clients. The topics discussed here apply to all organizations ranging from corporations to governmental agencies and non-profits and as such we use terms like company, firm, and organization interchangeably throughout the chapter. Social media provides certain distinct advantages that have typically been associated with marketing, but other functions can also benefit from a foray into the social domain. The conversation about social media needs to move from whether or not a company uses it to whether or not a company can (or should) be thought of as a ‘‘social’’ enterprise (Merchant, 2012). Social media can increase the conversations a company has — such as with customers about products, with industry influencers

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about future trends, with suppliers about logistics, with employees about strategic directions and new innovations — and simultaneously decrease the costs associated with having these conversations. More specifically, social media brings four distinct advantages to a firm, each of which is explored in a separate section in this chapter. First, social media can convert the otherwise time-consuming and costly process of finding customers to a more efficient and effective two-way street where customers can find the firm as well. Second, having found customers, social media can allow the firm to engage them in ways that both encourage loyalty and manage expectations. Smart firms don’t limit themselves to engaging only their customers; rather they find ways to also engage those who exert influence in the firms’ industries. Two-way conversations engage current and potential customers while creating an exciting and innovative node that attracts talent and future employees who want to be a part of the evolution of an animated firm. Third, engagement with customers and industry experts converts the two-way conversations into actionable intelligence, effectively changing what is now seeing through a frosted glass — guessing about the future — into data that describes sentiment and emotion about present problems and future desires. Last, but certainly not least, social media creates strategic value when it is used throughout the organization in systematic ways. This occurs when a company uses the social sector as a way to generate solutions for current issues as well as to strategically develop the next generation of ideas, essentially moving from being a company that uses social media to becoming one that is a ‘‘social’’ enterprise. For example, does the product management team use social media for crowdsourcing, thus arriving at more effective solutions? Are employees at all levels involved in providing input into vital questions pertaining to new products and future strategic directions? And in keeping with that, are C-level executives willing to use the fact that social media can level the playing field to empower all employees to express their viewpoints on which activities, processes, and projects get support within the firm?

Customers: Here, There, and Everywhere Social media users are everywhere. Joanna Brenner of the Pew Research Trust (2012) found that 86% of 18 to 29 year olds, 72% of 30 to 49 year olds, 50% of adults aged 50 to 64, and 34% of American adults over the age of 65 use some form of social media. Use of social media is mostly gender neutral with 61% of men and 71% of women engaging in social media (Brenner, 2012). Social media is no longer the purview of those who can afford a computer as it is often accessed via mobile devices, such that 71% of the households with an annual income of $30,000 or less, 69% of the households earning between $30,000 and $49,999, 60% of those earning between $50,000 and $74,999, and 69% of those earning more than $75,000 use social media (Brenner, 2012). Indeed, social media use covers a wide variety of web sites and smartphone apps, ranging from Facebook to Google+ to Pinterest to Dig to Reddit and LinkedIn. With over 845 million users, Facebook is perhaps the most popular


Poonam Arora and Carolyn E. Predmore

and equally so among both men and women (MBAonline as cited by Skelton, 2012). That is not the case with Pinterest, where 82% of the users are women, while men make up 71% of Google+ users. Within the United States there are no geographic differences in access to social media. Internationally, social media penetration in China exceeds that of the United States; in fact, the number of online users in China is roughly equivalent to the combined population of France, Germany, Italy, Spain, and the United Kingdom. This is due to easy access to cheap cell phones, which is China’s primary device used for social media activity (Chiu, Ip, & Silverman, 2012). Social networks have traditionally been thought of as a place to hang out with friends and to be social but their power may come from the influence ‘‘social’’ conversations exert on opinions, views, and outcomes. As the variety of conversation topics ranges between the distinctly personal to business and professional, these networks become ideal conduits for companies to informally connect to their stakeholders and prospective customers. A typical starting point for an organization considering a foray into social media is to ask where it is most likely to reach the largest group of people. Perhaps a better version of the question might be to ask where a firm’s customers turn to when trying to meet the need fulfilled by the firm’s products and services. Are they more likely to conduct a broad internet-based search, look at online discussions by independent professionals, or turn to their personal networks? The answer can be the difference between focusing on LinkedIn versus a big ad-buy on Google or Facebook. There are several programs and websites that provide information on the average user of social media on any of the social media sites that are continually growing in number. Companies like Google analytics,,,, Adobe Social Analytics, as well as others exist to inform users what the traffic is on a website, and deliver demographic information on the site users. In addition, numerous dashboard programs can help a firm’s communication department to monitor what is being said on numerous web forums, blogs, tweets, Facebook pages, as well as news outlets. A firm’s strategic social media marketing plan should start with identification of the social media websites that coordinate with the persona of the brand and the personality of the consuming market. For example, an effort to professionally reach out to C-level executives should take into account that over 25% of CEOs have LinkedIn profiles, but less than 10% of them use Facebook (Williams & Scott, 2012; Castro, 2012). If you have an active loyal consumer base, the transition to online social media may be as simple as asking them where they spend time. Previous purchasers of your products are the ones most likely to explore your social media platform. And for those conducting broad searches using various search engines, company websites, Facebook pages, and Twitter feeds are all possible discovery links and entryways for potential customers. This, however, will not take a company’s efforts to the next level where it becomes easier for potential customers to find it, rather than the firm always having to seek out customers. Moving to the next level has two requirements: in-depth understanding of the ways in which the firm’s products and services create value for consumers, and thus a clarity of exactly what makes it unique; how to present its unique

Social Media as a Strategic Tool


characteristics in ways that make it possible for current customers to engage in a conversation with others about the true benefits of the firm. For this next step it is the nature of the conversation that is more crucial than the social network or medium used, particularly since it is difficult to identify one best network, and new ones are continually emerging. Once an organization has the knowledge of where its customers reside online, and how to market its unique features to current and potential consumers, it is now ready to address the issue of engagement. Red Bull appears to have successfully captured the imagination of its consumers by encouraging their consumers to submit pictures of themselves doing day-to-day activities while using their product as a way to showcase their brand identity. The firm also sponsors a large number of athletic events that seem larger than life, such as the extreme diving competitions where divers leap off of tall structures into city harbors, such as the sponsorship of Felix Baumgartner’s 128,000 foot skydive from space ( There are videos, blogs, links, and areas that invite participation by hiding content until the consumer chooses to respond (Mershon, 2011). Engaging customers, particularly a younger demographic, can require creativity and a certain degree of ‘‘coolness,’’ but social media cannot be used constantly to repeat the message of ‘‘Look how cool I am! You need to pay attention to all the messages you are sending out.’’ While the conversation can be started by a company, customers need to be intrigued enough to want to respond and quickly!

Engagement: Building a Two-Way Highway of Trust and Loyalty Social media works when information sent out to the public is claimed by a group of people who not only understand it, but also want to be a part of its dissemination. Information sent out by firms, even when it is limited to their products and services, influences their image and people’s perception of their values. Talking about being ‘‘customer-centric’’ doesn’t go far in social forums when individuals can respond with data about the firm’s actions that are contrary — just ask Toyota, who continues to feel the woes of having waited three days after the announced recall to own up to the problem. Since then other car manufacturers have seen the possibility of beating Toyota in at least one or more categories by becoming more responsive to consumers. Ford Motor Company has created ‘‘Ford Social,’’ which is a place designed for people who love their Fords and want to share their ideas in order to improve their Ford. Ford is starting to involve consumers into the strategic discussion by providing links to news articles and internal documents, while encouraging customers to send in stories, share ideas through email, blogs, or Twitter feeds in one central location. Ford has been reaching out to the public to change the perception that their cars are of lower quality, particularly compared with imports. They seem to want to listen and have incorporated the ability to use the Internet and social media into the Ford Sync system for the Ford Focus, which as of August 2012, was poised to become the number one car for 2012, beating the Toyota Corolla.


Poonam Arora and Carolyn E. Predmore

Smart firms put out meaningful and strategic information that lets individuals unconnected to them have a positive conversation about them, and their values and offerings in a social media forum. Not only does such a conversation carry more weight in the marketplace, it also yields the kind of credibility and brand recognition that cannot be bought with advertising dollars. Social media is not just another marketing channel – it is a strategic tool that is capable of delivering substantial advantages in the form of loyalty, ideas, and involvement at a considerably lower cost. It bears pointing out that an organization does not have to put out information using a social media tool in order for it to capitalize on this advantage: consider Apple, Inc., a company that chooses not to have a Facebook page or a Twitter feed and yet successfully and strategically leverages the ability of social media to create a buzz capable of exciting and delivering customers. Firms have always known the value of ‘‘traditional word-of-mouth’’ for established brands, as well as the value of early adopters for new ideas and innovations. In the age of social media, both established and new, products and services are subject to the ‘‘online-word-of-mouth,’’ which can be a double-edged sword in that it has substantially greater reach and can be executed with relative ease (as simple as a quick comment in a social forum, or pressing the like button on a website). When the ‘‘online-word-of-mouth’’ is positive for the organization, it is a boon, but strong negatives from those who carry influence can be far more damaging when it is online — as the old saying goes: once something is on the Internet, it never really goes away. Thus a firm has to be strategic in not only what it puts out, but also in its response to true criticisms — customers appreciate effort and are willing to forgive mistakes when they become learning steps in a firm’s evolution. In fact, responsiveness lends itself to loyalty and this process is both more visible and much faster in the age of social media. Indeed, McDonalds learned the power of the Internet in its ability to be both negative and positive when a picture portraying African-Americans being charged more was tweeted over a weekend at great speeds. The fact that the picture was a hoax did not stop it from making the rounds on social media. McDonalds, Inc., did not hesitate but took to the Internet a few hours later after the picture was making the rounds. The company tweeted, posted, and discussed its policies and dedication to diversity, as well as how the picture was a hoax. McDonald’s effective handling of the situation resulted in its stock rising 5% at the start of trading that Monday (Mattern et al., 2012). Social media can work in multiple time frames to forge interaction, commitment, and relationships between the firm and current as well as potential customers, employees, community neighbors, shareholders, and stakeholders — broadly defined as any person who could potentially affect the business or be affected by the firm. In the immediate, it is possible to instantly implement tactical shifts through the use of the company’s Facebook page, newsfeed, and Twitter chatter. The McDonalds incident above exemplifies the power of social media in the immediate. Social media can also be used equally effectively in the medium and long term. The Barclays Center opened in September 2012 amid excitement about a new entertainment arena in Brooklyn, New York City, as well as conflict over the potential negative changes to the neighborhood. Community leaders were interested

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in keeping the familiar atmosphere of the community while wanting the economic benefits such as increased employment (Kleinfield, 2012). The first event showcased Jay-Z, a local hometown success story. The City monitored the public’s reactions as well as the intense scrutiny by the media, partly by keeping tabs on online posts and chatter regarding the event. In fact, there were additional security personnel ready to intervene if any of the monitored feeds indicated a problem developing (Kleinfield, 2012). Social media allowed for the issues to be managed in real time and with the same tools that the customers (crowds) were using. When a change or event happens on the street or in a neighborhood, smart phone cameras are directed to the acts as they occur and are posted to the Internet as fast as fingers can push buttons (Ruiz, 2012). News about anything can flash across the globe instantly, in color and with video. Any firm can monitor the reactions of consumers to a product introduction or a change in direction and make a course correction to remove the problem that the public has perceived before negative comments create a more long-term impression. In fact, traditional news outlets are starting to pay attention to these real-time sources rather than just looking to formal news releases from companies. Social media can also help the company incorporate fun into the discussion. While news flashes are often sent via Twitter with broader coverage to follow, a social media conversation can also incorporate flash coupons or the creation of a flash mob to inspire excitement and a unique experience with current and potential customers. Social buzz can be used as a measure to inform the company how well the event has worked by tracking the public response. The Philadelphia Opera Company has used social media to promote opera through ‘‘random acts of music.’’ The opera company films the actions of the actors and the reactions of the crowds as singers launch into operatic song and action in common community spaces to show the general public that opera can be fun, entertaining, and not stuffy. The cast of La Traviata used the local Italian Reading Market to showcase parts of the opera and entertain shoppers and tourists alike (Operaphila, April 24, 2010). Social media can be used to create excitement, provide information, and engage consumers, but we have also seen social media act as a cry for help, such as in the Middle East, where it can help light a nation’s desire for political freedom with dynamic results. The key is the open access for posting opinions, pictures, emotions, and the possible instant reaction and retort from anyone with access to the network. Ideas and feelings that resonate with portions of the population will be picked up and re-tweeted or shared, spreading the information further and faster than previous forms of word-of-mouth. A company needs to be a part of the conversation in order to remain relevant in an ever-expanding dynamic marketplace. In the end, social media should allow a company to understand their consumer’s life and needs in any situation and frame of mind. It is so easy to look at a customer as she walks into the store, in person or online, and misjudge what she wants from assumptions based on demographics. Several studies have shown chronological age does not necessarily match psychological age. Senior citizens aged 85 and older represent 13% of the population today, and even though they are only 4% of all Internet users, their percentage is growing rapidly (Eastman & Iyer, 2006).


Poonam Arora and Carolyn E. Predmore

These seniors who see the Internet as strengthening their social connections and reference groups cannot be thought of as a block or even as being the same age – what matters more to them are their mental or cognitive ages (how they see themselves) and their physical abilities (which vary considerably). Wary and Hodges (2008) found that baby boomers tend to think of themselves as being 10 to 15 years younger than their chronological age — this difference is a material one for companies focused on this market. Social media and the big data it generates can help companies identify their potential markets based on needs and actions rather than on assumptions inherent in traditional demographic segmentation. Such careful analysis requires both detailed understanding of the data as well as thoughtful human interpretation, which are discussed in the next section of this chapter.

Through the Looking Glass: Finding Actionable Intelligence Conversations on social media can provide a firm with a golden opportunity to listen and respond to the consumer to create customization possibilities for products in terms of color choices, size choices, as well as features and benefits offered based on the outcomes from the engaged conversations of the previous section. Some of these tweaks to the product line can be instant, taking advantage of short-term trend in the marketplace, such as a color that supports a current cause. Others may require greater investments and changes, and thus an in-depth analysis of the tremendous amount of data generated by social media. As discussed earlier, a company like Ford, with its tremendous access to consumers’ opinions, preferences, experiences, and stories, can introduce changes in superficial variables like color, door handles, etc., within a season, or even in-between models. But the conversations also provide it with other insights that might require a complete re-design capable of pushing it to the forefront in a specific subcategory of cars or trucks. The problem is not finding actionable intelligence; it is reorganizing the firm’s understanding of what can be done with enormous amounts of data. An exabyte of data is a billion gigabytes and there are about 2.5 exabyte of data collected each day from social media, email, customer service, sales information (Wal-Mart collects about 2 petabytes, where 1 petabyte=1 million gigabytes, of data every hour from consumer sales), and other firm collected data (McAfee & Brynjolfsson, 2012). The well-done collection and storage of that incredible amount of data creates both an incredible opportunity for seeing trends before competitors, as well as the problem of too much data and not knowing to what to pay attention (McAfee & Brynjolfsson, 2012). There are two main issues a firm must deal with when handling the massive amounts of data generated by social media. First, current analytical tools are still in their infancy in terms of their ability to handle both the volume and speed of data. Second, the availability of such detailed data in real time requires that management and IT change how they think about the data: when to trust it as is, and when to interject subjective human interpretation into the analysis, perhaps even questioning the data.

Social Media as a Strategic Tool


There are three software programs that can be used to quickly sift through the data to glean a synopsis of what is happening and create a base for decision making; Hadoop, which is open source software, GPFS (Global Data File System owned by Sony Ericsson and Lustre) which is a parallel distributive file system. IT departments have to remain flexible to use the statistical and analytical tools that are most appropriate for the data stream and not remain wedded to the techniques of even 2 years ago. Not only is information available to be collected in greater volume and velocity than ever before, it will continue to grow exponentially as global use of social media increases and the number of types of social media continues to develop. A related issue is whether or not storage and data transfer technologies can keep up with the volume and velocity of data generated. There is a need for information to be able to flow into a cloud storage system at an ever-increasing speed (Ferguson, 2012). What is needed are analytics capable of mining the data for trends that can then be combined with knowledge about competitive dynamics in the industry, and broader socioeconomic factors to form the basis for future predictions, and this method has been shown to be more effective than simply asking industry experts and top executives (McAfee & Brynjolfsson, 2012). However, this does not mean that human expertise can be ignored. Rather, knowing when it is best to bring in the human element is the critical issue, especially since memory can cloud human experience and data doesn’t suffer from emotional attachments to past acts, so there is a tendency to trust data more (Starr, 2012). Evidence shows that once data is analyzed, experience and expert views can not only aid the decision process, but also craft a better strategic plan (Kiron, 2012), as long as one controls for heuristics and biases such as discounting contrary evidence, having too much confidence in one’s predictions, and being anchored to past experience (see Bazerman & Moore, 2012; Kahneman, 2011; Kahneman, Slovic, & Tversky, 1982 for a complete review of decision heuristics and biases). Experiencedbased knowledge is a vital ingredient because it allows for an understanding of not only what worked, but also what had to occur (or not occur) in order for the success to happen. The last important step is understanding the timescales involved — not every new nuance in a market is a new trend, it may just be a fad that can and should be ignored given strategic priorities. But when aggregated, many new fads moving in a particular direction can point to a trend, which may be worth some attention in the strategic planning process. One advantage of social media for strategic planning is the access to sincere opinions and expressions of personal experiences that are important to the various stakeholders of a company. Knowing what to keep, what to pay attention to, what did not happen, and what to ignore for the moment are a set of critical skills firms will need to develop in part from experience (Hopkins, 2012). In this process, the collection of information from social media that can generate a holistic picture of what is being talked about is a critically important resource for making economy market time-constrained decisions that are the best for the company (Hopkins, 2012). A caveat here would be to note that decision makers and companies function in a social context, and are thus likely to be influenced by the groups they value or those whose respect they want to earn, even at the cost of other groups that might be


Poonam Arora and Carolyn E. Predmore

impacted by their decisions (Arora Peterson, Krantz, Hardisty & Reddy, 2012; Brewer, 1979; March, 2009). What this means is that, from the point of view of a company, it is critical to have clarity on the motivations underlying the goals it is trying to achieve. A company gaining greater understanding into why and how its products are purchased, being motivated by adding value for the customer while not wanting to cause harm to various stakeholders, including the local community or employees, is very different than being motivated by wanting to attain a larger market share than its competitors at all costs. The tradeoffs made in these decisions will be very different based on the motivations and with which group one is most concerned (competitors, shareholders, or employees). Clearly a complete discussion of the ethical implications of having access to such large amounts of data is beyond the scope of this chapter, but the topic warrants consideration.

Social Media as a Strategic Tool: It’s Not Just for Marketing Anymore The words social, media, and marketing have become completely intertwined such that there is an expectation that the only way for a company to take advantage of social media is in relation to its customers. Social, however, need not be about media or marketing — it can and should be about the entire value chain. Aspects of the value chain, such as procurement, logistics, and delivery, can gain in effectiveness or efficiency by being considered as a social and open activity, rather than a closed set of actions internal to the firm. Social media may be about marketing, but being an organization in the social age is about empowering employees, working within an extended community where processes are transparent and collaboration is the norm rather than the exception. There is much debate about the role of traditional strategy with some arguing that it is dead (Merchant, 2012) in today’s world of co-creation and crowdsourcing, but for a company to know what it does well and its sources of advantage is never a bad idea. In fact, it’s a vital starting point. Being a social business requires not accepting the advantage as static, instead using active engagement as a tool with both buyers and suppliers to continue to innovate and maintain a competitive lead. Strategic decisions have always been seen as the purview of the top executives, but ideas, particularly innovative ones, can come from anywhere in the Organization, and smart firms create mechanisms to take advantage of that. In a nonsocial media world, this typically involves individuals across functions and hierarchical levels coming together in special ‘‘strategy’’ meetings and off-sites. That was the main motivation behind Jack Welch’s creation of the GE Leadership Center in Crotonville (Mark & Thornhill, 2011; according to the GE company website, it spends over $1 billion on leadership and training), and goal of the ‘‘huddle’’ at Dulco Paints. Social media allows this to happen in ways that overcome the otherwise prohibitive cost and other constraints that accompany an attempt to bring together people physically for such an empowering meeting.

Social Media as a Strategic Tool


Companies like Red Hat and 3M are moving to open (open can mean available to all employees only, or a step beyond — open to the public) forums where anyone throughout the organization can provide input on issues ranging from possible future directions to specific products. The more sophisticated firms are moving to internal market places where employees, who often are more likely to have their finger on the pulse of customer requirements, are able to invest in or vote for ideas and innovations. These innovations can be about products, but more importantly they can be and are about process issues — vital steps in the company’s value chain that can lower costs, allow companies to differentiate themselves better, increase sustainability, or result in some combination of all of these. A distinct advantage of involving all levels of an organization in the strategic process is that those who are responsible for the day-to-day execution of the strategy are now deeply involved in development. Participation in the process increases commitment and the motivation to execute the strategy efficiently. It also results in a better understanding of the nuances of the strategy, thus making it more likely that small issues will be dealt with at lower levels and not allowed to become larger firmwide issues. Therefore, greater involvement creates mechanisms for greater alignment of strategic priorities throughout the firm, which in turn enhances the firm’s advantage. On the operational side, internal social enterprise networks and virtual learning networks allow for functions that are typically closed boxes to become social while remaining limited as internal to the firm. These networks reduce communicationbased inefficiencies that result from pertinent information not being available to all who need it as and when needed, or process knowledge being limited to experienced individuals. Thus, these networks ensure decision makers at every level have access to not only all the requisite information but also to experts who have faced similar challenges before. In addition, they create a knowledge trail and preserve the learning within the network such that it is not lost when another person replaces the decision maker, reducing re-training costs as well as those incurred due to naı¨ ve errors. Social networks internal to a company and its consultants, advisers, and other closely related parties including vendors can also be used to manage a form of crowdsourcing where the crowd is limited to those that are related to the company but not necessarily employees within it. This increases the talent pool available for resolving problems. Various issues can be posted to such a network and all participants can contribute based on their specific expertise, allowing the company to ‘‘crowd-source’’ the best solution while keeping sensitive issues and details internal. In fact, if there are multiple solutions, all can be posted such that people can choose to work collaboratively on them such that the one that shows the most progress within a certain period is then supported on a company-wide basis. This allows for competition and collaboration to coexist, increasing efficiency and effectiveness throughout the company (Chui et al., 2012). Social media and networks do not just level a playing field, they also break down barriers of distance, both psychological and physical. The connection to physical distance is more obvious where using social technologies allows for one to source talent from around the world. Psychological distance is vital in that one central


Poonam Arora and Carolyn E. Predmore

premise of this section is that employees at every level of an organization are willing to speak their mind and share their insights. This implies that they feel empowered to do so, even as they are secure in the fact that speaking up in ways that may seem to be in opposition to the choices or goals of top management will not evoke an unpalatable response. Employees of a mutual insurance company were recently asked their opinion about a new product favored by the Management. Most employees chose not to speak up though privately they were quite concerned that the product was problematic. Not surprisingly, the new product was tabled within months of its launch. Such an incident could have been avoided if employees did not feel psychologically uncomfortable stating viewpoints opposing those of management. Social media and internal social networks are great equalizers when used in conjunction with techniques that allow for anonymity or are accompanied by empowerment throughout the organization, such as being able to vote or ‘‘like’’ something anonymously. When the psychological issues are ignored, internal networks are simply new tech-toys on which a company and its employees can waste useful resources like time and money. Social media thus creates tremendous opportunities as well as challenges. Smart firms grow with them and as a result build capabilities that are conducive to the new way of doing business, while traditional firms continue to try to out-compete the social side, hoping it will go away. But in the age of social technologies and the social economy, social media is here to stay.

References Arora, P., Peterson, N. D., Krantz, D. H., Hardisty, D., & Reddy, K. (2012). To cooperate or not to cooperate: Using new methodologies and frameworks to understand how affiliation influences cooperation in the present and future. Journal of Economic Psychology, 33(4), 842–853. Bazerman, M. H., & Moore, D. A. (2012). Judgement in managerial decision making (8th ed.). Hoboken: Wiley. Brenner, J. (2012). Pew internet: Social networking (full detail). Retrieved from http://pewin Brewer, M. B. (1979). In-group bias in the minimal intergroup situation: A cognitivemotivational analysis. Psychological Bulletin, 86, 393–400. Castro. N. (2012). Friday five: Note to c-suite — It’s time to embrace social media. Retrieved from Chiu, C., Ip, C., & Silverman, A. (2012). Understanding social media in China. McKinsey Quarterly. Retrieved from in_china_2961. Accessed on October 16, 2012. Chui, M., Manyika, J., Bughin, J., Dobbs, R., Roxburgh, C., Sarrazin, H., et al. (2012). The social economy: Unlocking value and productivity through social technologies. McKinsey Global Institute. Retrieved from Insights%20and%20pubs/MGI/Research/Technology%20and%20Innovation/The%20social %20economy/MGI_The_social_economy_Executive_Summary.ashx

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Eastman, J. K., & Iyer, R. (2006). The impact of cognitive age on Internet use of the elderly. International Journal of Consumer Studies, 29(2), 125–136. Ferguson, R. B. (2012). The storage and transfer challenges of big data. MIT Sloan Management Review, 53.4: 1–4. ProQuest Central. Web. October 8, 2012. Hopkins, M. S. (2012). Why companies have to trade perfect data for fast info. MIT Sloan Management Review, 52.3(2011): 51–55. ProQuest Central. Web. October 8. Kahneman, D. (2011). Thinking, fast and slow. New York, NY: Farrar, Straus and Giroux. Kahneman, D., Slovic, P., & Tversky, A. (1982). Judgement under uncertainty: Heuristics and biases. Cambridge, MA: Cambridge University Press. Kiron, D. (2012). Why detailed data is as important as big data. MIT Sloan Management Review, 53.4(2012): 1–3. ProQuest Central. Web. October 8, 2012. Kleinfield, N. R. (2012). For Brooklyn’s new arena, day 1 brings hip-hop fans and protests. The New York Times. Retrieved from March, J. G. (2009). Primer on decision making: How decisions happen. New York, NY: Free Press. Mark, K., & Thornhill, S. (2011). General electric: From Jack Welsch to Jeffrey Immelt. Cases in Leadership (2nd edn., pp. 211–221). Thousand Oaks, CA: Sage Publications. Mattern, F., Huhn, W., Perrey, J., Do¨rner, K., Lorenz, J., & Spillecke, D. (2012). Turning buzz into gold: How Pioneers create value from social media. McKinsey & Company, Inc. McAfee, A., & Brynjolfsson (2012). Big data: The management revolution. Harvard Business Review, October, 59–68. Mershon, P. (2011). 9 Facebook marketing success stories you should model. Retrieved from Merchant, N. (2012). 11 rules for creating value in the social Era. Cambridge, MA: Harvard Business Review Press. Operaphila, (2010). Opera Company of Philadelphia ‘‘Flash Brindisi’’ at Reading Terminal Market’’ video file. Retrieved from Ruiz, J. (2012). What is So (social) Mo (mobile) Lo (Local) and why is it important to Marketers? Retrieved from Skelton, A. (2012). Social demographics: Who’s using today’s biggest networks, Mashable, citing infographic from OnlineMBA. Retrieved from Starr, D. (2012). False witness. Discover, November, 38–42, 64. Williams, D. K., & Scott, M. M. (2012). New research on why CEOs should use social media. HBR Blog Network. Harvard Business Review, July 27. Retrieved from cs/2012/07/new_research_on_why_ceos_shoul.html Wary, A. Z., & Hodges, N. N. (2008). Response to activewear apparel advertisements by US baby boomers: An examination of cognitive versus chronological age factors. Journal of Fashion Marketing and Management, 12(1), 8–23.

Chapter 7

Increasing Dynamic Capabilities of Health Organizations with Social Media Ricky C. Leung

Abstract Purpose — This research examines how social media helps increase the dynamic capabilities of health organizations. Using the concepts of ‘‘technical fitness’’ and ‘‘evolutionary fitness,’’ the research focuses on changes in: (1) the number of ‘‘likes’’; (2) the amount of discussions in these pages; and (3) enabling factors for (1) and (2) over time. Methodology — Missouri Hospital Association (MHA) provides a sample of 164 hospitals. The Facebook pages of these hospitals are analyzed. Specifically, the number of ‘‘likes’’ and the amount of discussions are readily available for analysis. Data collection was conducted at two time points. Findings — At time 1, 39% of the hospitals had an official Facebook page, increased to 47% at time 2. On average, there was a 22.2% increase in likes and a 4.0% increase in pages of discussions. Whether measured by staffs or patients’ capacity, size is a significant factor that contributes to the increase in likes and discussions. Yet, the location of a hospital — measured by urbanity — is statistically insignificant. Qualitative analyses suggest that certain patient groups particularly welcomed social media. Beside, pictures, videos, and ‘‘happy news’’ tended to increase usage of social media for hospital stakeholders. Implications — Social media can help health organizations fulfill the social needs of their patients. This research applies several useful concepts. In further study, researchers may examine how hospitals optimize staffs’ and patients’ inputs. Besides,

Social Media in Strategic Management Advanced Series in Management, 129–142 Copyright r 2013 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1877-6361/doi:10.1108/S1877-6361(2013)0000011011


Ricky C. Leung

comparing how hospitals’ social media platforms operate differently in other states or countries may yield findings with practical implications. Keywords: Dynamic capabilities; technical fitness; evolutionary fitness; health organizations

Introduction The theory of dynamic capabilities has caught wide attention in strategic management in recent years (Eisenhardt & Martin, 2000; Teece, 2007). Winter (2003) defined dynamic capabilities as [organizational] capabilities that operate to extend, modify, or create ordinary capabilities. Teece (2007) further elaborated the concept as consisting of the organizational capacity (1) to sense and shape opportunities and threats, (2) to seize opportunities, and (3) to maintain competitiveness through enhancing, combining, protecting, and when necessary, reconfiguring the business enterprise’s intangible and tangible assets. In line with the above conceptualization, social media may be a specific mechanism through which organizations can maintain — even increase — dynamic capabilities. The term ‘‘social media’’ refers to Internet-based applications that enable people to communicate and share resources and information. Examples of social media include blogs, discussion forums, chat rooms, wikis, YouTube, LinkedIn, Facebook, and Twitter (Dufty, 2012). The use of social media has become increasingly common among health organizations in the United States and other countries (Hawn, 2009). Social media appears to have changed the nature of interactions between and within organizations (Yates, Orlikowski, & Okamura, 1999). Nonetheless, it is unclear how social media actually helps increase an organization’s dynamic capabilities. Consider the use of social media by hospitals. Patients nowadays do not end their service experience at the hospital. Instead, they continue to reflect on their experience in one or more social media platforms even after having left the hospital. Accordingly, hospital administrators are likely interested in knowing what affects the use of social media among patients, physicians, staffs, and other stakeholders. This knowledge can help administrators utilize social media to extend, modify, and/or create dynamic capabilities for the organization. Two possibilities are particularly worth considering: First, a hospital administrator may utilize social media to enhance the hospital’s ‘‘reach’’ to potential patient customers (Brown & Leung, 2012). This use of social media essentially increases the organization’s marketing capacity. Second, a social media platform is able to increase communication between hospital staffs and patients, and among patients themselves. In this sense, social media is a mechanism to strengthen the hospital’s bond with existing patients and other stakeholders. To what extent have hospitals actually utilized social media for these purposes nowadays? What factors may affect hospital’s use of social media?

Increasing Dynamic Capabilities of Health Organizations


To answer these questions, this research has three major parts: First, I propose specific measures to analyze two concepts in the dynamic capabilities theory — technical fitness and evolutionary fitness. Applied in health care, technical fitness and evolutionary fitness represent how a hospital is able to increase reach to new patients and enhance bond with existing patients. Additionally, I examine how two size variables — staffs and patients’ capacity — influence the technical fitness and evolutionary fitness of a hospital’s social media. Finally, I analyze qualitative data to suggest how hospitals can increase the utility of social media. Hopefully, the findings of this research have useful implications for social media management for health organizations.

Technical Fitness and Evolutionary Fitness According to Helfat et al. (2007), technical fitness refers to how effectively a certain capability performs its intended function(s) [for the organization]; whereas evolutionary fitness is concerned with the organization’s external selection environment. Under this definition, evolutionary fitness is externally oriented, and can be measured by how well an organization is able to renew and extend its resource base to match market changes (Agarwal & Helfat, 2009). Although evolutionary fitness is externally oriented, the attainment of which depends partially on how well the organization produces its products or services ‘‘technically.’’ In plain language, the organization needs to first attract enough customers — by producing high-quality goods or services — before it can attempt to ‘‘keep them.’’ To maintain customers’ loyalty to the product, the organization has to evolve continuously in products and/or services to match with environmental demands (Menachemi, Shin, Ford, & Yu, 2011; Zajac, Kraatz, & Bresser, 2000). ‘‘Technical fitness’’ is therefore a necessary — but not sufficient — condition for an organization to achieve evolutionary fitness. In terms of technical fitness and evolutionary fitness, a health organization may utilize social media for two purposes: First, social media enables a hospital to attract potential customers; second, social media enables the hospital’s stakeholders — including patients, physicians, and other health professionals — to increase communication. In recent years, hospitals have utilized one or more social media platforms for these purposes (Leung & Pasupathy, 2011). Typically, these platforms include nice pictures of the hospital’s facilities, stories about patients, and discussions among the hospital’s various stakeholders. New patients may be attracted to these platforms, and use the hospital’s service(s) as a result. On the other hand, after patients have signed up to these social media platforms, they may or may not participate in them actively. Even if the hospital administrator attempts to encourage communications among patient subscribers, the number of subscribers does not imply intensive usage. The two variables are practically — as well as analytically — distinct (Leung & Pasupathy, 2011).


Ricky C. Leung

To analyze these two variables, one may utilize some of the built-in features in these social media applications. In Facebook, the number of ‘‘likes’’ to a hospitalsponsored page (Leung & Pasupathy, 2011) indicates how extensive the social media platform has attracted customers, and may be used to represent the technical fitness of the hospital’s social media. As these subscribers continue to utilize the social media platform for discussions and information sharing, the amount and quality of posts may be evaluated. The amount of posts — measurable by how pages of wall-post discussions in these hospital-sponsored Facebook pages — is a useful indicator of the evolutionary fitness of a hospital’s social media. To conduct empirical studies, a useful first step is to explore the quantitative relationships between the variables of interest. For these purposes, I hypothesize the following: Hypothesis 1a. The percentage change in technical fitness is faster than the percentage change in evolutionary fitness for a hospital’s social media platform. Hypothesis 1b. There is a moderately strong — but less than perfect — relationship between technical fitness and evolutionary fitness of a hospital’s social media platform. Hypothesis 1a above posits that a hospital is generally more able to attract patients through social media than encourage continuous usage among patients that have subscribed to a social media application. Hypothesis 1b posits that the two types of fitness are sufficiently distinct, so that they are influenced by organizational factors and environmental forces differently.

Organizational Size After separating technical fitness and evolutionary fitness, it is useful to identify organizational and environmental factors that influence them. Based on the literature, organizational size is a variable worthy of investigation. First, size has been widely shown to affect the production process (Camiso´n-Zornoza, Lapiedra-Alcami, Segarra-Cipres, & Boronat-Navarro, 2004). Often, organizations that operate on a large scale have more flexibility in allocating input factors in the production process to develop optimal organizational designs (Bigley & Roberts, 2001). Second, large organizations are more able to specialize than small counterparts, and specialization generally improves efficiency and productivity (Carter & Keon, 1989). Third, larger organizations are often more capable negotiators. For instance, a large organization that regularly orders large amounts of production inputs can expect suppliers to offer big discounts and better payment options. Collectively, these advantages are often called economies of scale (Cowing, Holtmann, & Powers, 1983). Depending on the nature of goods and services being produced, diseconomies can occur after an organization has grown to a certain size. For example, a factory in the manufacturing industry has a ‘‘fixed’’ size in the short run. It is not convenient to vary the size of operation in response to production needs, which may result in inefficiency.

Increasing Dynamic Capabilities of Health Organizations


Besides, smaller organizations are better able to avoid unnecessary bureaucratic structures, which are frequent sources of interpersonal conflicts and communication problems (Kimberly, 1976). In short, there seems to be a limit of scale economies for organizations. After a certain point, size may be a disadvantage for organizations (McKinley, Sanchez, & Schick, 1995). In the literature, there was evidence that size affects the development of an organization’s dynamic capabilities (Nohria & Gulati, 1996). Yet, with respect to social media, the effects of size are still unclear. Leung and Pasupathy (2011) suggested that smaller hospitals might use social media more effectively than larger ones. They reasoned that the staffs of smaller hospitals know their patients better, and are therefore more capable of building social media platforms to fit with the taste of their patients. Another possible reason is that smaller hospitals are more ‘‘committed’’ to building effective social media platforms once they have chosen to use it. In comparison, larger hospitals have more resources and channels for marketing and information dissemination. They may not spend as much time to utilize social media as smaller hospitals in relative terms. Two hypotheses are tested: Hypothesis 2a. Larger hospitals measured by staffs perform better than smaller ones in terms of increasing the technical fitness of their social media platforms over time. Hypothesis 2b. Smaller hospitals measured by staffs perform better than larger ones in terms of increasing the evolutionary fitness of their social media platforms over time. Collectively, the two hypotheses above test whether or not the size of staffs exerts positive effects on the technical fitness of a hospital’s social media but negative effects on the evolutionary fitness of a hospital’s social media. An alternative measurement of size is a hospital’s patients’ capacity. For social media, measuring size in terms of staffs emphasizes the level of managerial activities devoted to building and maintaining one or more social media platforms. Measuring size in terms of patients’ capacity emphasizes participation among patient users of social media. The participation of patients is a critical factor in the development of social media for health organizations (Chou, Hunt, Beckjord, Moser, & Hesse, 2009). Two hypotheses are tested: Hypothesis 3a. Larger hospitals measured by patients’ capacity perform better than smaller ones in terms of increasing the technical fitness of their social media platforms over time. Hypothesis 3b. Smaller hospitals measured by patients’ capacity perform better than larger ones in terms of increasing the evolutionary fitness of their social media platforms over time. Finally, the effects of size may be moderated by the hospital’s location. In this respect, the location’s level of urbanity may be a significant factor (Thomas, Ellis,


Ricky C. Leung

Konrad, Holzer, & Morrissey, 2009). On the one hand, residents of more rural areas generally have more limited access to health care resources (Higgs, 1999), so they may rely more on social media platforms for obtaining information about hospitals and communicating with others. On the other hand, Internet access is also less available in rural than more urban locations (Strover, 2003). Thus, social media may not be a feasible communication platform even if rural residents are interested in them. Without any clear evidence, I test the following hypothesis: Hypothesis 4. The location of a hospital in terms of urbanity does not exert any significant effects on a hospital’s social media in either technical fitness or evolutionary fitness. It is noteworthy that urbanity may affect a hospital’s social media in different ways. For example, even without exerting independent effects, urbanity may still reinforce or undermine the size effects. Yet, I have no justification for stating more specific hypotheses.

Method The target population of this empirical research was all hospitals serving Missouri and its adjacent areas. To demarcate a sampling frame, I used data from the Missouri Hospital Association (MHA). MHA had 206 member hospitals across the state of Missouri (including several hospitals on the borders of Missouri and other states). They were all listed in MHA’s official website as of September 2011. Additionally, MHA provided publicly available data that contained information about the size of staffs (i.e., the number of full-time employees) and patients’ capacity (i.e., the number of licensed beds) for all member hospitals. To supplement these MHA data, the Area Resource File (ARF) — a data set provided by the U.S. Department of Health and Human Services for a fee — provided the variable of urbanity. ARF documents the level of urbanity of all counties in the United States, using a scale between 1 and 9 (1 is the most urban and 9 is the most rural). These data were merged with MHA data to determine the level of urbanity of a hospital’s location in the sample. The initial sample, after removing incomplete data and missing values, contained 164 hospitals. At first, the research team examined whether each of these hospitals had built an official Facebook page. The first data collection time occurred in February 2011, and the second data collection was completed in September 2011. At both data collection times, the research team also collected data regarding the number of ‘‘likes’’ and amount of discussions in all official Facebook pages built by the sample hospitals. With these data, I performed statistical analysis using Microsoft Excel primarily. The regression equation may be stated in the following manner: y ¼ f ðxi Þ

Increasing Dynamic Capabilities of Health Organizations


whereas y denotes the response variable(s) — technical fitness or evolutionary fitness — and xi denotes one or more explanatory variables — such as size of staffs, patients’ capacity and level of urbanity. After the statistical analysis, the research team also organized meetings for visual inspection analysis of selected Facebook pages built by the sample hospitals. Some of these meetings included actual ‘‘Facebook administrator(s)’’ — who was employed in one of the sample hospitals and was responsible for managing the hospital’s official Facebook page. These administrators shared with the research team regarding the experiences of building and managing Facebook pages for their hospital. These sharing sessions had facilitated the research team to make qualitative interpretation of the data.

Findings Of the 164 hospitals in our initial sample, 64 (39%) had built an official Facebook page as of February 2011. After 7 months, 77 (47%) built an official Facebook page, representing an 8% increase, as of September 2011 Figure 1. The research team then examined (1) the number of ‘‘likes’’ (essentially Facebook users who elected to be informed of new feedings from a specific page or ‘‘subscribers’’ to the page) and (2) the number of wall posts in these Facebook pages at the two different time points as mentioned above. The changes in these two variables are the response variables in this analysis, and also represent the technical fitness and evolutionary fitness of the hospital’s social media. Hospitals’ size measured by staffs and patients’ capacity are the explanatory variables in this analysis. Given a relatively limited justification, the variable urbanity is essentially a control variable. Descriptive Statistics Descriptive statistical analysis shows that the percentage change in likes and pages of discussions differed across two time points. On average across all hospitals, there was


Februray 2011

September 2011


47% Adopted


Not adopted

Not adopted


Figure 1: Facebook adoption increase in 7 months.


Ricky C. Leung

a 22.2% increase in likes within the hospitals’ Facebook pages; with respect to pages of discussions, there was only a 4.0% increase on average. Hypothesis 1a is supported Table 1. To provide more detailed analysis, the sample hospitals are categorized by (1) the number of full-time staffs, (2) the number of licensed beds, and (3) the level of urbanity. Descriptive statistics was obtained by cross-tabulating these three variables with time increase in likes and pages of discussions. The results are summarized in Table 2. For example, for hospitals with 200 or less full-time staffs, the average increase in the number of likes was 45.9 between two time points, and the average increase in number of pages of discussions was 17.1. For hospitals with 1501–3000 full-time staffs, the average increase in the number of likes was 383.3, and the average increase in the number of pages of discussions was 49.1. Table 1: Percentage change in likes and discussions.

February 2011 September 2011 Average percentage change

Average number of likes

Average pages of discussions

393.3 835.3 22.2%

25.1 62.6 4.0%

Table 2: Change in likes by staffs, patients’ capacity, and urbanity. Average number of likes

Average pages of discussions

45.9 80.3 113.9 206.9 383.3 1146.5

17.1 23.1 32.8 47.5 49.1 31.5

Patients’ capacity (in licensed beds) 500 53.6 51–100 84.2 101–200 207.5 201–400 1734.6 401 or more 149.5

20.4 21.1 33.3 80.0 27.2

Urbanity 1 2–5 6–9

40.6 38.9 19.3

Size of staffs 200 201–500 501–1000 1001–1500 1501–3000 3001 or more

830.0 250.9 93.8

Increasing Dynamic Capabilities of Health Organizations


Divided by different categories of patients’ capacity, the largest average increase in likes (1734.6) between two time points was found in the group of 201–400 licensed beds. The largest average increase in pages of discussions (80.0) between the two time points was also found in this group. With respect to level of urbanity, hospitals are divided into three groups: Hospitals scoring ‘‘1’’ constitute the most urban group, with an average increase of 830.0 in likes and an average increase of 40.6 in pages of discussions between two times points. Hospitals scoring 2–5 are the second urban group, with an average increase of 250.9 in likes and an average increase of 38.9 in pages of discussions between two data collection times. Hospitals scoring 6–9 are the rural group, with an average increase of 93.8 likes and an average increase of 19.3 in pages of discussions between two data collection times. Correlation and Regression Analysis Further, correlation analysis shows that the relationship between the two response variables was moderately strong, with a correlation coefficient of 0.58. This correlation is strong but less than perfect, indicating that technical fitness and evolutionary fitness are sufficiently distinct to be influenced by organizational and environmental factors in different degrees. The findings provide support in favor of Hypotheses 1b. While the correlation between number of staffs and increase in likes was also moderately strong (0.44), the correlation between number of staffs and increase in pages of discussions was very weak (0.02). Number of licensed beds was weakly correlated with both increase in likes (0.13) and pages of discussions (0.13), albeit in different directions Table 3. Subsequently, regression analysis was performed to examine whether size is a deterministic variable on the technical fitness and evolutionary fitness of a hospital’s social media. Results of several regression models are shown in Tables 4 and 5. As far as increase in likes is concerned, the independent effects of staffs are statistically significant (Model 1) but those of patients’ capacity are not (Model 2). Interestingly, when both staffs and patients’ capacity are included in the regression, both variables were statistically significant. In this model (Model 3), while staffs had a positive effect on increase in likes (1.64), each unit of patients’ capacity increase led to

Table 3: Correlations between likes, discussions, patients’ capacity, and staffs.

Increase in likes Increase in discussions Patients’ capacity Staffs

Increase in likes

Increase in discussions

Patients’ capacity

1.00 0.58 0.13 0.44

1.00 0.13 0.02

1.00 0.89




Ricky C. Leung

Table 4: Regression models on likes. Model 1 Intercept Staffs Patients’ capacity Urbanity F R2

334.56 0.64** – – 18.13** 0.24

Model 2 Model 3 Model 4 263.33 – 1.00 – 0.60 0.01

Model 5 Model 6

159.89 448.82 746.13 583.29 1.64** 0.66** – 1.64** ** 9.23 – 0.31 9.79** – 26.24 102.99 90.24 31.12** 8.97** 0.80 21.51** 0.53 0.24 0.03 0.54

*po.05; **po.01.

Table 5: Regression models on discussions.

Intercept Staffs Patients’ Capacity Urbanity F R2

Model 1

Model 2

Model 3

Model 4

Model 5

Model 6

17.93** 0.02** – – 23.44** 0.29

24.66** – 0.07** – 6.32** 0.10

22.96** 0.03** -0.09* – 14.63** 0.34

21.79* 0.02** – 0.89 11.65** 0.29

35.77** – 0.06 2.37 3.67* 0.12

33.11** 0.03** 0.11** 2.16 10.17** 0.36

*po.05; **po.01.

a 9.23 reduction of likes over time. This means that: (1) larger hospitals in terms of staffs had a relative advantage in improving the technical fitness of their social media over time; and (2) smaller hospitals in terms of patients’ capacity performed better in terms of improving the evolutionary fitness of their social media over time. Hypothesis 2a is supported by this evidence but Hypothesis 3a is rejected. Urbanity is not a statistically significant variable in all models in Table 4. Judging from the F statistics (31.12) and R square (0.53), Model 3 (Increase in Likes as a function of Staffs and Patients’ Capacity) is retained as the preferred model. Table 5 provides evidence to support Hypothesis 3b but reject Hypothesis 2b. Based on Table 5, the independent effects of both staffs and patients’ capacity are statistically significant (Models 1 and 2). When both variables are included in the regression, they reinforce the strength of each other slightly. In Model 3, the coefficients of staffs and patients’ capacity were 0.03 and 0.09, respectively. These mean that each unit of additional staff led to an increase of 0.03 pages of discussions and each unit of additional patients’ capacity reduced 0.09 pages of discussions over two time points. Urbanity is not a statistically significant variable in all models in Table 5. Judging from the F statistics (14.63) and R square (0.34), Model 3 (Increase in Pages of Discussions as a function of Staffs and Patients’ Capacity) is retained as the preferred model.

Increasing Dynamic Capabilities of Health Organizations


Based on all models, level of urbanity does not exert any significant effects on both increases in likes and pages of discussions over time. Hypothesis 4 is supported. Qualitative Analysis According to visual inspection and interview data, women’s and children’s hospitals had attracted a particularly large number of likes. One possible reason was that many ‘‘healthy patients’’ in these hospitals — such as parents of newborns — were eager to announce ‘‘happy news’’ in the hospital’s Facebook page, and they also had attractive contents such as pictures and videos to share. At the same time, older users had emerged as a rising ‘‘Facebook population.’’ For example, retirees might enjoy connecting with children, grandchildren, other family members and friends in Facebook or other social media platforms. They also enjoyed seeing birth announcements in Facebook. Yet, hospitals serving other patients seemed less able to increase likes and discussions over time. For example, patients of chronic diseases might not be very active in social media, and their participation might be limited by less favorable physical and psychological conditions. Despite these constraints, hospital administrators might still continue to utilize social media for useful purposes. For example, they might utilize social media to provide information to patients, and encourage patients to form social support groups. This type of support is quite important for fulfilling patients’ social needs, even if they could not participate in social media actively.

Conclusions and Implications This research applies the concepts of technical fitness and evolutionary fitness to examine how social media may help health care organizations increase dynamic capabilities. The application of these concepts provides a feasible approach to evaluating the utility of social media for health organizations in strategic management. Further studies can combine this approach with other frameworks to identify other organizational factors and environmental forces that influence the adoption (Menachemi, Burke, & Brooks, 2004) and utility (DeLone & McLean, 2003) of social media in the health sector. In particular, this research identifies size — measured by both staffs and patients’ capacity — as a significant organizational factor to influence how health organizations can increase technical fitness and evolutionary fitness of their social media platforms (Singh, Mathiassen, Stachura, & Astapova, 2011). These two size indicators are worthy of further investigation because they point to specific resources that organizations can utilize to improve their social media platforms. Given that staffs and patients’ capacity are both statistically significant variables in the analysis of this research, hospital administrators may focus on these two factors in their social media strategy.


Ricky C. Leung

Also, this research has shown that the use of social media is particularly suitable for certain patient groups. Patients of women’s and children’s hospitals — especially those who have happy news such as birth announcements to share in social media platforms — are one of the strongest user groups of this new communication platform. Previous research showed that different media technologies lead users to memorize, understand and appreciate online contents differently (Paivio, 1986). But it remains unclear whether different patient groups need different media technologies to absorb online contents (Dexter, Perkins, Maharry, Jones, & McDonald, 2004). In further research, it is useful to find out what social media contents map with what patient groups the best. At the same time, other patient groups that do not have as much happy news to report as new parents tended to be more reserved in social media. Administrators of hospitals serving ‘‘sad patients’’ — such as those having chronic diseases — may utilize their social media platforms to provide more encouragement, as well as fostering the development of social support groups. This type of help can go a long way, enabling patients to fulfill their social needs at critical times. With increased level of perceived social support, patients might engage in positive behavioral change more easily (Cohen & Hoberman, 1983; Wantland, Portillo, Holzemer, Slaughter, & McGhee, 2004). Interestingly, the adoption of social media did not seem to be affected much by whether the organization is located in a rural area. This is different from previous studies on health information technology in rural America (Bahensky, Jaana, & Ward, 2008). Finally, two specific research directions may build on this research: The first is to find out the optimal resource allocation for social media management. While this research has shown that staffs generally contribute to both technical fitness and evolutionary fitness of a hospital’s social media platforms, it has yet to reveal what level of staff and other organizational input factors are optimal for building and maintaining social media. Since hospital administrators typically work within budget constraints (McGuire, 1985), this research direction carries practical implications. With respect to environmental forces, this research focuses on hospitals in a specific state (i.e., Missouri). A follow-up research may analyze hospitals in a similar or relatively different state, and compare how the social media of hospitals in the other state and Missouri operate differently. If circumstances allow, this research direction may extend to other national settings as well.

Acknowledgments This research has benefitted from a number of researchers and students at various stages. I especially thank Kalyan Pasupathy, Amit Prasad, and Jing Li for suggestions on an earlier draft. The audience in the Medicine 2.0 conference at Harvard Medical School in September 2012 also provided useful comments. The Mizzou Advantage Office at the University of Missouri (MU) provided support for undergraduate research assistance in the initial stage of this research. The Health Management and Informatics department at MU has provided salaried time for this research.

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McGuire, T. G. (1985). Prospective, cost-based and mixed reimbursement systems: An economic evaluation. In DiBlasi, Kline, & Strickney (Eds.), Pursuing excellence in a time of declining resources: The role of automated information systems. Nathan Kline Institute. McKinley, W., Sanchez, C. M., & Schick, A. G. (1995). Organizational downsizing: Constraining, cloning, learning. The Academy of Management Executive, 9(3), 32–42. Menachemi, N., Burke, D., & Brooks, R. G. (2004). Adoption factors associated with patient safety-related information technology. Journal for Healthcare Quality, 26(6), 39–44. Menachemi, N., Shin, D. Y., Ford, E. W., & Yu, F. (2011). Environmental factors and health information technology management strategy. Health Care Management Review, 36(3), 275–285. doi:210.1097/HMR.1090b1013e3182048e3182047e Nohria, N., & Gulati, R. (1996). Is slack good or bad for innovation? Academy of Management Journal, 39(5), 1245–1264. Paivio, A. (1986). Mental representations: A dual coding approach. Oxford, England: Oxford University Press. Singh, R., Mathiassen, L., Stachura, M. E., & Astapova, E. V. (2011). Dynamic capabilities in home health: IT-enabled transformation of post-acute care. Journal of the Association for Information Systems, 12(Special Issue), 163–188. Strover, S. (2003). The prospects for broadband deployment in rural America. Government Information Quarterly, 20(2), 95–106. Teece, D. J. (2007). Explicating dynamic capabilities: The nature and microfoundations of (sustainable) enterprise performance. Strategic Management Journal, 28(13), 1319–1350. Thomas, K. C., Ellis, A. R., Konrad, T. R., Holzer, C. E., & Morrissey, J. P. (2009). Countylevel estimates of mental health professional shortage in the United States. Psychiatric services (Washington, D.C.), 60(10), 1323–1328. Wantland, D. J., Portillo, C. J., Holzemer, W. L., Slaughter, R., & McGhee, E. M. (2004). The effectiveness of Web-based vs. non-Web-based interventions: A meta-analysis of behavioral change outcomes. Journal of Medical Internet Research, 6(4), e40. Winter, S. G. (2003). Understanding dynamic capabilities. Strategic Management Journal, 24(10), 991–995. Yates, J., Orlikowski, W. J., & Okamura, K. (1999). Explicit and implicit structuring of genres in electronic communication: Reinforcement and change of social interaction. Organization Science, 10(1), 83–103. Zajac, E. J., Kraatz, M. S., & Bresser, R. K. F. (2000). Modeling the dynamics of strategic fit: A Normative approach to strategic change. Strategic Management Journal, 21(4), 429–453.

Chapter 8

Social Media Champions — Drivers and Sophistication Process of Social Media Strategic Management Lukasz M. Bochenek and Sam Blili

Abstract Purpose — This chapter presents results of a qualitative study among European champions in social media management. It aims to describe a strategic process and its implications for social media strategic management. Methodology/approach — The chapter is based on four in-depth case studies involving both primary and secondary data analysis and interviews. Findings — Social media management is governed by similar principles as corporate communication management. However, there is an important role of personal preferences of senior executives for an effectiveness of the strategic process. Practical implications — The model allows describing the social media management in the multinational companies. Organizational learning process drawn in this chapter can be directly applied in the multinational companies from various industries. Social implications — Social media create an environment in which established actors need to learn how to communicate socially. Sophistication of the tools requires sophistication of the strategies and processes. Originality/value of chapter — This chapter analyzes companies from various industries which are considered successful in social media strategic management. It creates a model which is applicable in various industries. It provides also insights into social media strategies from the research among social media global leaders. Keywords: Social media; sophistication; organizational learning; corporate communication Social Media in Strategic Management Advanced Series in Management, 143–167 Copyright r 2013 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1877-6361/doi:10.1108/S1877-6361(2013)0000011012


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Introduction ‘‘Social Network’’ — the movie, ‘‘You’’ as a person of the year of TIME magazine — social media are clearly present in the current media discourse. They are an element of everyday life and part of pop culture. They enter into the collective imagination as a ‘‘revolution’’ in the way people communicate and in the way organizations communicate and act. That illusion leads to the creation of the single ecosystems in business and research. But are the social media really a new world, a paradise of interaction which can be analyzed as a system per se? Is it not about strategies which integrate multiple stakeholders? Is the question of social media impact on business complicated, simple, or just complex? Surely, social media create a new environment in which companies can interact directly with their stakeholders and customers. These interactions can contribute to building of the intangible assets of companies (corporate reputation). Reputation helps to create networks of supporters (advocacy) which transfers to third party endorsement. However, this is a process clearly similar to corporate communication (CC) management. Social media are not an asset as defined by research (Gibb & Blili, 2012). Social media are a tool which is used in construction of (social) reputation and this reputation is an intangible asset (IA) of the corporation. This chapter presents a preliminary scan of literature about social media management and highlights some of the research tendencies. It combines the state of art of social media research with the model of CC strategic management to create a conceptual model of a strategic management process in social media management. The model is then applied in the analysis of four case studies — European companies leading on social media. The companies analyzed are from different sectors: banking, air transportation, luxury, and infrastructure. The theoretical sampling allowed the showcasing of different strategies applied by companies in their management of social media activities.

State of Art — Social Media Management Social media has been studied as a new means of communication for the businesses. These studies included the analyses of the use of social media and the interaction with customers/consumers (Heller Barid & Parasnis, 2010). There were few studies analyzing the strategic implications of the use of these new tools for overall CC management. The participatory potential of social media was assessed from the point of view of the end user (Cammaerts, 2008). Engagement with the brand and the cause were parts of the same participatory ecosystem (Heinonen, 2011). Studies on NGOs’ communications focused on the creation of networks and advocates (Harvey, Steward, & Ewing, 2011). The question of social media as word of mouth (WOM) draws a new area for marketing studies (Jansen, Zhang, Sobel, & Chowdury, 2009). International businesses use social media for marketing, HR, and communications (Liang & Scammon, 2011; Mills, 2012). Focus on the interaction with end users gave insights into the interactions which occur between institutional actors and consumers

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(Meek, 2011). This allows to draw the patterns in the engagement models between the actors (i.e., in case of use of YouTube by the social movements) (Meek, 2011). The managerial implications of this phenomenon draw potential for more direct communication in the corporate context (Heinonen, 2011). This relation is also managed inside the organizations. Social media are a part of internal communications toolkit and can transform employee communication as shown on an early example of Sun Microsystem (Barker, 2008). The management of CC becomes crucially affected by social and technological changes (Terblanche, 2011). Studies have focused on the presence of political actors in the social media. This tendency in research was in line with the media discourse which analyzed the impact of social media on the election choices of voters. The 2008 US campaign and victory of Barack Obama encouraged other politicians to be present on social media. The study ‘‘Twitter use by US congress’’ which analyzed the communications patterns of Congressmen on Twitter is one of the examples (Golbeck, Grimes, & Rogers, 2010). It studied the types of Tweets on a sample of 6000 messages. It concluded that Twitter does not improve either transparency or knowledge on political action. It is rather used as a self-promotion tool with the majority of Tweets belonging to the information category (53%) followed by location/activity (27%). Also, 44% of Tweets contained links to other websites, congressmen’s personal websites, and news media outlets. The research led to the conclusion that Twitter was more used to inform and promote political programs and not to increase transparency of decision-making processes. Nevertheless, it improved the direct dialogue with voters (Golbeck et al., 2010). Twitter is not used by politicians and organizations to create a new quality of communication. Rather, it offers an additional tool to social actors to communicate and create networks. Online groups constitute an interesting field for marketing research as they offer a large amount of data which is relatively easily accessible. The information on composition and behavior can be easily retrieved through data mining techniques (Barbier, Tang, & Liu, 2011; Ripberger, 2011). The research looked for a proxy to predict the offline behavior of group members in the ‘‘real world.’’ Internet may be also used to measure public attentiveness to events and overall social trends (Ripberger, 2011). Trend measurement is another level on which CC can build momentum for messaging (i.e., by using priming techniques). One hundred and forty signs to send a corporate message seem to be little, but the potential for externalization and directing traffic to a corporate website and content cannot be underestimated. Moreover, studies show that the messages with negative sentiment spread faster on social media and Twitter in particular. In consequence, monitoring and corporate reputation management of these channels remains top priority (Thelwall, Buckley, & Paltoglou, 2011). The engagement of the public is streamed in CC activities — especially in corporate messaging. The messages developed frequently take the form of stories via ‘‘storytelling’’ techniques (Salmon, 2007). This connection built with key stakeholders and public contributes to building trust and construction of network groups (Angel & Sexsmith, 2011). The marketers use other Twitter-like tools at a different level depending on their target groups and scope of operations (Kwon & Sung, 2011). At the same time even blogs


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which are not always considered as social media are alternative CC channels (Kenix, 2009). These online communities need to be managed at the strategic level as they are a source of current trends (Miller, Fabian, & Lin, 2009). Therefore, the social media can be used by organizations as the listening tools to discover the trends in their constituencies and among their stakeholders (Miller et al., 2009). These facts were first understood by politicians who were early adopters of social media communications techniques (Terblanche, 2011). Indeed, the social media provide an opportunity to develop bespoke communications strategies to the groups which are otherwise difficult to address through traditional channels. Liang and Scammon provided an overview of a potential usage of the social media in tailored health communication (2011). Indeed, social media provide an opportunity to use WOM marketing as the spread of viral messages is instant (Jansen et al., 2009). However, there is a need to take into consideration the drivers of the spread of information. They are behavioral and depend on the users’ backgrounds and message contents (Harvey et al., 2011). Moreover, initial engagement doesn’t mean loyalty and continuous engagement. Therefore, the question of community management becomes crucial (Porter & Kramer, 2006). The communications crisis related to the oil spill in the Gulf of Mexico is one of the excellent examples of how social media creates a new level of activism and engagement (Bennett, Wells, & Freelon, 2011). The potential impacts of crisis on corporate performance (Fearn-Banks, 2011) demand a more holistic approach in which reputation-building is managed on all organizational levels. The need for 24-hour responsiveness moves CC to the strategic level. In fact, web and social media can be very useful tools for crisis communications. They can be also a real threat if mismanaged (Gonzalez-Herrero & Smith, 2008).The management of social media needs to be executed at a high level which elevates the strategic role of CC to the board-level function (Maon, Lindgreen, & Swaen, 2010). Creativity is frequently associated with the notion of User Generated Content. It is considered as a constitutive sign of a new model of social engagement. The instant sharing of information via posting and hyperlinks increases the level of soft engagement (Porter, Donthu, MacElroy, & Wydra, 2011). Social media play therefore a core role in crisis communications management. The channels are incorporated to the overall crisis communications strategies (Veil, Buehner, & Pakenchar, 2011). That subscribes to the many-to-many logics which are driven by the constant search for selection of information (Breakenridge, 2008). The amount of the knowledge available underlines the role of the tools and techniques used in the selection of the content. Selection of this content is driven by the personality of the users (among other socioeconomic factors). Therefore, the amount of information and the content touching the company does not necessarily mean the same high amount of awareness of the existence of this content (Pagani, Hofacker, & Goldsmith, 2011). CC is the organizational unit which manages corporate reputation. Social media are one of the tools used by CC. Therefore, the organizational learning of CC management and its governance system has a strong impact on social media strategic management. As social media are part of CC and marketing management, they are

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subject of the same corporate rules on spending and reporting. The question of Return on Investment (ROI) in social media has been studied in both scientific and professional publications (Fisher, 2009). However, most of the articles try to assess social media ROI in the closed ecosystem, not taking into consideration external factors which influence the numbers (Nair, 2011). Social media allow organizations to interact with their stakeholders directly. However, a scale of this interaction has been discussed as well as the drivers of engagement (Cammaerts, 2008). It is important to stress the role of external factors, for example, brand sustainability, which impact the engagement levels (Briggs, 2010). Moreover, the relationships established on social media need to be managed both online and offline (Ang, 2011). One of the drivers of engagement is sustainability and there is a need for CSR integration into social media strategic management (Waddock & Mcintosh, 2011). This management is crucial in the understanding of customers and gives communicational and business insights (Paasovaara, Luomala, Pohjanheimo, & Sandell, 2012).

Toward a Conceptual Model of Social Media Sophistication The literature overview led to the conceptual model of social media sophistication. The drivers of the social media management include: - Importance of the brand for the operations — the companies which are strongly dependent on the brands in their operations (i.e., FMCG) are more likely to invest in advance CC campaigns and social media (Briggs, 2010). - Risks of crises in the industry — the high risk of crisis would likely impact corporate listening behaviors. Social media trends can be used as early warning systems (Efron, 2011; Gonzalez-Herrero & Smith, 2008). - Customer type — B2c companies are likely to reach out to their customers through social media. B2b companies would more likely target their key stakeholders (Plangger, 2012; Robertson, McQuilken, & Kandampully, 2012; Sharma et al., 2011). - Organizational culture and CSR program — companies which are more open to disclosure have more developed communication cultures. They are more likely to use new communicational tools. CSR programs are one of the information programs which provide content for social communication and marketing (Sweetser, 2010; Waddock & Mcintosh, 2011). - Internationalization of the operations — global companies would use social media to address customers and stakeholders in various countries using social media as an effective communication tool. The drivers of social media management influence the sophistication process. The sophistication criteria are influenced by proposals of CC management (Argenti, 2006) (Table 1).


Lukasz M. Bochenek and Sam Blili

The sophistication process leads to social media results where the output measures include interaction level (i.e., number of likes, discussions, replies on social media channels) and the externalization of communication (i.e., number of shares, number of people Tweeting about the company, or talking about the company). The drivers of social media management are similar to those identified for CC management. Therefore, they impact the sophistication process of channel management and outcomes which are related to reputational measures. The outcomes here include brand reputation (which can be measured by sentiment value on social media)

Table 1: Sophistication factors and process in social media strategic management. Variable Operational level

Social media awareness Social media sophistication Social media staff

Social media integration across the channels

Maturity of the usage of social media

Strategic level

Strategy of social media management Social media gravity center

Network level

Social media networks

Description Presence and integration of the social media in the corporate communication operations. Level of the usage of the platforms. Cross-platform integration of the corporate communication messages. Responsiveness on the channels. Presence of the social media staff on the channels. Level of the personalization of the social media messages on the channels. Cross-referencing of the channels. Integration of the social media channels across the corporate communication platforms. Integration of the corporate messaging on the social media platforms. Level of presence on the platforms. The establishment of the practices. Time of the uninterrupted presence on the respective social media platforms. Level of strategic consideration of the social media management. Internal rollout of the social media programs. Importance of the social media tools for the cross organizational communications programs. The valuation of the community for marketing and strategy. Networks of stakeholders in which company participates.

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and third party endorsement, in other words advocacy (i.e., number of positive posts, blogs, Tweets related to the brand).

Hypothesis — Propositions The theory review leads to three propositions which will be assessed in the case studies: Proposition 1. Drivers of social media strategic management directly impact the sophistication process. The sophistication process (actual behaviors of companies) depends directly on the business context in which they operate. The general trend in marketing which requires companies to embrace social media is the first driver of social media efforts (Angel & Sexsmith, 2011). Companies establish their social media strategies because ‘‘everyone does it,’’ or because they don’t want to risk not being there (Heinonen, 2011). The role of the brand for operations and its impact on competitiveness is the second driver impacting the sophistication process (ibid.). It defines how the company is present on social media. For example, multinationals from the FMCG sector manage multiple accounts branded at the product level while banks focus on their corporate channels (Greffe & Sonnac, 2008). The risk of crisis in the industry is another driver impacting the sophistication process of social media management (Veil et al., 2011). Companies from industries more exposed to a crisis have a more advanced presence on the social media channels. Also, consumer type (b2b vs. b2c) defines the level of social media presence and its strategic valuation (Plangger, 2011). At the micro level, the organizational culture (i.e., internal openness) defines the framework for the social media sophistication process (Heinonen, 2011). The CSR strategy also defines the sophistication process of social media strategic management. Proposition 2. The sophistication process of social media strategic management impacts the performance. Sophistication of the social media practices impacts social media performance. The operational sophistication impacts the output results. More advanced usage of applications and social media tools leads to an increased size of the community (Angel & Sexsmith, 2011; Plangger, 2011). The strategic valuation of social media and use of the network contribute to the outcome results of the social media strategic management (Heller Barid & Parasnis, 2010). The strategic approach helps to achieve direct ROI from the social media activities (ibid.). Proposition 3. The context in which company operates (drivers) directly impacts social media performance.


Lukasz M. Bochenek and Sam Blili

Social media are part of overall communicational efforts of companies (Greffe & Sonnac, 2008). Trends and online trends can make some companies more ‘‘attractive’’ for users (Barbier et al., 2011). The drivers impact also a social media performance. The size of the community of the company depends on the industry in which the company operates (Plangger, 2011). It is actually based on the need of that community to receive information from and about the company (ibid.). The customer type b2b versus b2c impacts the output results. B2b companies tend to have smaller social media communities. The brand also drives the performance results of social media activities. The companies with stronger brands have bigger communities (Greffe & Sonnac, 2008). Corporate culture defines the interaction between the company and its stakeholders and in consequence its social media performance (ibid.) (Figure 1).

Drivers of social media strategic management Macro-level



General trends on the social media

Role of the brand for competitiveness Crisis risks in the industry Customer type (b2b, b2c)

Organizational culture CSR strategy Internationalization of operations

P: 1

P: 3

Sophistication process

P: 2

Measurement of the performance Output measures

Outcome measures

Number of fans, likes Interaction level Size of the community

Externalization of the brand Sales leads

Figure 1: Social media strategic management process.

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Methods The Research Study The design of the methodology of the research is inspired by the methodological proposals of Hamilton and her study on entrepreneurial learning (Hamilton, 2011). It draws also from Bezenc- on and Blili’s proposals for case study analyses of the fair trade behaviors of Swiss companies (Bezencon & Blili, 2009). The study involved social media channels analysis of 60 Swiss-based companies. To identify practices and learning networks we also analyzed the channels of 100 NGOs and 50 IGOs. This initial overview allowed the identification of learning profiles and matching corporate behaviors. Four European companies have been identified to showcase the learning patterns in the case studies. It is important to stress that the analysis and observations presented in this chapter are but one interpretation of the empirical material with no intention to generalize the findings (Hamilton, 2010). Rather the empirical data offers some tentative support for the theoretical propositions of the situated learning patterns and profiles (Hamilton, 2010).

The Sample The sampling of this study is theoretical rather than random to clearly illustrate corporate behavioral patterns (Yin, 2003). A purposive sample is determined by the experience of the processes being studied that any particular individual or group may be able to draw upon (Hamilton, 2010). The companies are therefore selected based on their ability to illustrate the practices and ‘‘lead’’ the category. The companies are in that approach playing the role of ‘‘experiential experts’’ (Morse, 1995). This approach allows the identification of advanced practices and strategies. It also allows comparing the internal strategies which are behind observed operations. The selection process, although based on theoretical sampling, also included elements of ‘‘maximum variety sampling’’ in selecting a heterogeneous sample (Hamilton, 2010; Morse, 1995). The choice of companies from different sectors was purposive and aimed to allow the drawing of some strategic propositions based on different industry experiences.

Case Studies The analysis is based on the case studies which showcase the ‘‘leading’’ European companies in social media management. The operations of the companies on the channels (corporate website, LinkedIn, Facebook, Twitter, LinkedIn, Pinterest, Flickr) have been analyzed. In the next step, in-depth personal interviews have been


Lukasz M. Bochenek and Sam Blili

conducted with representatives of the companies. The interviewees were responsible for the social media operations within their respective companies. The final case studies have been sent for validation to avoid any potential misinterpretation.

Analysis Swiss International Airlines — Community Driver The company is a wholly owned subsidiary of Lufthansa AG. The company is the biggest airline in Switzerland. SWISS is present on the most common social media channels and was one of the early adopters in Switzerland. The company has a fan base of over 125,000 fans on Facebook, 32,000 followers on global Twitter (US account with 1900 and CH account with 4700 followers). Snapshot of strategy. SWISS uses social media for CCs, marketing, recruitment, CRM. The last part dedicated to CRM is now rapidly growing and playing more important role. The social media manager is situated in the marketing department. However, the company represents a structural model of a ‘‘department of one’’ which coordinates the activities across the company and geographies. The guiding principles of the company are interaction with the community and transparency. The latter is valued to the point that the company has a policy of not deleting negative and even harsh comments posted by its fans on social media channels. The company ‘‘tries’’ different channels and has a policy of internal learning which also means learning from its errors. Social media is a learning process. We learn from failures as well. Luckily, our senior management is open to social media and allows us to try different platforms. Thanks to that we know where to put the effort. Christian Lu¨di — Community Manager Swiss Int. Airlines

The turning point for SWISS’ social media efforts can be defined as the moment of eruption of the volcano in Iceland in 2010. The company acknowledged the role of social media in crisis situation and used social media channels to update its customers and stakeholders about the developments of the situation. Awareness of social media. The social media are used by the company throughout the organization. Twitter is mainly used for CRM. Facebook and YouTube are considered more in terms of a marketing channel to push corporate advertising and build brand awareness. The company also uses social media to support HR activities, that is, talent acquisition. It also communicates via social media with its employees which makes social media a channel for internal communication. Social media sophistication. The company uses the applications and other available tools to manage its social media channels. SWISS creates dedicated content for social media. Actually, the social media activities started when SWISS created an advertising spot and was willing to push it through additional channels to the

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customers. Therefore, the company decided to enter into the social media sphere. The company follows the trends on social media in order to build dialogue with its stakeholders and customers. Nevertheless, the trend search is based more on manual activities of the channel manager as the company does not use monitoring tools. Social media staff. SWISS’ social media efforts are led by one coordinator working in the marketing department. He coordinates the activities of the company in the corporate channels in terms of content and responsiveness. The current social media manager is the person who started social media efforts for the company. He actually progressed from a short-term trainee to a social media manager. It can be claimed that the sophistication and maturity of the tools ran parallel to the learning process of the community manager. Different social media channels become tools for various organizational departments. Twitter is managed by the CRM team which handles requests. FlyerTalk (the portal for frequent travelers) is managed by the person working on the Customer Care Team within the organization. In the company, there are around 10 people ‘‘working on’’ social media, but only one person who is 100% dedicated to social media activities. Social media maturity. SWISS has been present on social media from 2009. It actually started in the early stages when benchmarking on the local market was not possible. The company embraces new tools and channels using the principle of ‘‘try and test.’’ Accounts on the platforms are established by the social media manager. After some time, they are handed over to the department which deals directly with the issues related to the platforms. For example, the activities of the company on FlyerTalk were started by the social media manager and then handed over to the CRM of the Customer Care Team. The step of ‘‘handing over’’ requires training for the individuals who start talking on behalf of the company on the social media channel. Social media integration. Social media are integrated into the overall marketing and communications strategies of the company. They are also integrated into the crisis procedures as additional communications channels. CRM is also present in social media on the principle of 24/7 responsiveness which really makes them an additional channel for communication with stakeholders. Social media are also integrated in the communication activities of the HR and other departments. They play a crucial role around business milestones of the company, such as launching new routes. At these moments, senior executives including the CEO are involved. Social media strategic level. Social media are a part of SWISS’ marketing and business strategy. The resources allocated to the social media per se are limited, but these activities benefit from the interest of senior management. Social media activities and results are reported to the executive board on a biannual basis. Internally, there is a social media guideline which shows employees the benefits and threats related to social media. Nevertheless, social media training is limited to those who actually play


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an active role on social media. The CRM department is trained on the usage of Twitter; the CRM Customer Care specialist is trained on usage of FlyerTalk, etc. Social media gravity center. Social media are a part of all the marketing efforts of the company. All the campaigns managed by the company have a social media content. The composition of the fan base with the majority of fans based in the home market allows the targeting of campaigns. Some of them are geo-targeted on Facebook. Social media network. SWISS considers customers as the most important stakeholders on social media channels. The principle of network is egalitarian and fans are considered as equal irrespective of business volume brought to SWISS: It doesn’t matter whether someone is a HON circle member, or one time flier. The posts of both need to be addressed in the same way. Btw I don’t have access to frequent flyer programme data. Christian Lu¨di — Community Manager Swiss Int. Airlines

On the other hand, the company has more reservations about the idea of partnerships on social media for content. Once we posted Lufthansa picture on our wall and got criticized. The argument was that you wouldn’t post pictures of your mother on Facebook which is somehow true and well describing the principle. Christian Lu¨di — Community Manager Swiss Int. Airlines

Internal valuation of social media. Social media activities are regularly reported to the executive board. High appreciation of social media is confirmed in crisis situations. These channels allow direct response to customers and the addressing of potential issues or concerns. Social media activities kicked off during the ash cloud crisis, when in spring 2010 air traffic in Europe was limited. They allowed a direct dialogue with passengers and instant information about new developments. From that moment onwards social media has become a key element of crisis communications plans and trainings. Two elements have been identified as key factors for the internal valuation of social media: - Crisis mitigation and crisis communication - Brand awareness building Measurement of social media activities. SWISS uses a community as a key measurement unit for its social media activities. The principal elements are: - Network composition - Interaction level - Sentiment in the posts Nevertheless, the company doesn’t use advanced ROI frameworks for social media measurement. It considers the tools more in terms of community and brand awareness building than in terms of a direct sales channel which would be measured by sales leads.

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Key successes. The company considers the level of interaction within its community as a key success of social media strategy. It is not driven by the number of people ‘‘liking,’’ or ‘‘following the company.’’ It is rather the regularity and level of interactions which are considered as successes. On the other hand, the launch of social media activities in 2009 with the movie directed by Marc Forster was an early success of the strategy. Later, all the information directly addressed to the passengers in crisis situations is considered as a success. Observation 1: Creativity and community are the drivers of the social media strategic management. The organizational structures and procedures need to ‘‘catch up’’ with the developments of the tools. Warsaw Chopin Airport The airport belongs to the state-owned company PPL which manages different airports in Poland. The company has been actively present on social media since 2010 and uses them both for institutional and customer-oriented communication. It has over 15,000 fans on Facebook and is present on all the main social media channels. Snapshot of strategy. The company uses social media for brand awareness, crisis communication, and mitigation, as well as marketing activities. Crisis communication is based on CRM, but not limited to it. Chopin Airport embraces social media at the operational, strategic, and network levels. The network level is executed for example through joint promotion actions undertaken with the shops situated on its premises. Every day we start with a weather forecast and a picture taken at the airport. That brings us close to the customers from the early moment. In the choice of a picture we try to have in mind the plane spotters and from time to time surprise them. Sylwester Puczen — Public Relations & Social Media Specialist

Awareness of social media. Social media are used by the company throughout the organization. The company uses social media as tools for external communication. The use for internal communication and internal team-building is rather limited. Warsaw Chopin Airport praises itself for having an uninterrupted presence on all the channels. We didn’t have to pull off from any channel. That is something we are really happy about. ˙ uk — Public Relations Bureau Director Rados"aw Z

Social media sophistication. The company uses the tools (and external providers) for brand monitoring on the social media. It uses the channels to monitor the trends and brand sentiment. It develops channel-specific applications, for example, a game for Facebook. Communication on the social media is adapted to the channels in terms of both content and language. The company replies to all posts and criticisms on the social media. It has a policy of never deleting the content as it could be considered as censorship.


Lukasz M. Bochenek and Sam Blili We never delete anything with exception of advertisement of third parties on our channels. We also reply and comment on fans’ remarks as long as the person is accepting the rational arguments. Rados"aw Z˙ uk — Public Relations Bureau Director

Social media staff. The social media team is led by a Community Manager who works 100% on social media. The Community Manager is situated in the PR department and reports to the Director of PR, who in turn reports to the General Director of the enterprise. There is no social media team per se. However, there is an internal ‘‘community of champions’’ — people who spontaneously contribute to the social media activities of the company. They provide the content as well as expertise to enhance the company’s activities. Social media maturity. The company has been using social media since 2010 and uses all the channels. It includes also the thematic discussion forums where the Community Manager and Spokesperson lurk actively and reply to all the comments. The social media is present in marketing activities as well as in crisis procedures and communication. Social media integration. Social media are integrated into the marketing and PR activities of the company. All the marketing initiatives have a social media angle. They are also integrated into the media relations and community communications strategies. Social media strategic level. Social media are considered as strategic for the communications strategy of the company. The social media team is led by a Community Manager and composed by ad hoc experts from other business units. However, the process is not yet formalized. The reporting line to the senior management of the company also shows a high strategic consideration of social media within the company. Social media gravity center. The social media are at the center of all marketing and communication activities of the company. All the promotional activities need to have a social approach which guarantees an appropriate amount of content as well as relevance for social media channels. However, the company does not really use social media for its cross-departmental activities, that is, recruitment. Social media network. Chopin Airport uses social media (more and more) for marketing and communication activities in the travel network. It runs the campaigns together with the airlines and shops present at the airport. It also maintains the dialogue with experts and journalists using social media channels. The organizational learning is therefore externalized and based on the network knowledge aggregation. Internal valuation of the social media. Social media activities are valued by the senior management of the company. Activities and results are reported to the executive team. Management shares its reflections about social media and has a generally

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positive attitude toward these activities. This positive attitude is reinforced by industry awards gathered by company for its social media efforts. The main areas of activities for social media are: - Crisis mitigation and crisis communication - Brand awareness building Measurement of social media activities. The company measures its social media activities. Nevertheless, it is much more focused on outcome results than output ones. The following elements are considered as the most important for social media activities: - Network composition (balance between customers and fans) - Interaction level - Sentiment in the posts Nevertheless, the company does not use advanced ROI frameworks for social media measurement. It considers the tools more in terms of community and brand awareness building than as a direct sales channel which would be measured by sales leads. Key successes. The company considers its overall social media results as a success. It also sees the impact of social media on passengers’ communication. During any irregularities due to the weather, etc., the social media are the source of information for passengers. Overall, the company is constantly present on all the channels on which it started its activities. Observation 2: Social media can be effectively used to support business operations events in the case of smaller players. The strategy and network composition drive the success of these activities. Credit Suisse — Toward Framework of a Business Strategy Credit Suisse is present on the social media channels. However, it seems that its social media strategy is focused more on the retail consumer than other business units. Therefore, its Facebook operations are more sophisticated than on the other platforms. The company uses some application and interactive features. However, the main focus of social media operations is on promotion of its marketing communications and campaign support. Snapshot of strategy. Credit Suisse has a strategic approach to the social media. The company actually sees the concrete business benefits from its social media activities which are beyond reputation management. Benchmarking with other banks shows that relationship management via social media can bring direct business benefits. Having this proof and tangible results to present to management about


Lukasz M. Bochenek and Sam Blili how social media can impact your business goals enables you to enter a discussion on the topic at a different level. Simon Vo¨gtli — Community Manager, Credit Suisse

At the same time, senior management of Credit Suisse supports the communicational policy of ‘‘being where our customers are.’’ That means social media as well. The company includes successively more communicational materials to the social media. CSR content is the one which is supposed to play more important role in the future. Awareness of social media. Social media community is perceived as an asset of the company. It actually started with the principle that we want to be where our customers are. Since our customers are also on social media, we decided to evaluate what kind of added value we could generate for our stakeholders on the social web. Simon Vo¨gtli — Community Manager, Credit Suisse

Social media is still managed within the company by a ‘‘community of champions’’ which exchanges the information and content. It is still considered as a channel for ‘‘push’’ communication where the dialogue with fans is limited (also due to the legal restrictions). We then started to evaluate how we could strategically leverage social media externally and internally. Based on this evaluation we formalized our approach and decided to focus on a few key priorities. Simon Vo¨gtli — Community Manager, Credit Suisse

The company doesn’t have a social media policy per se yet. It has a policy related to electronic communication which restricts the usage of the brand and social media at a workplace. Social media sophistication. Credit Suisse uses the applications and other interactive features of the social media. It creates dedicated content for social media especially around its sponsorship campaigns with Roger Federer. Moreover, the company uses social media monitoring tools to see the trends in its community and especially subjects of conversations between the stakeholders as well as to benchmark with the competitors. Social media are also used for the industry trend analysis. The actual management of the social media is also executed by a dedicated tool which allows controlling and scheduling the postings. The company uses one tool for monitoring and trend analysis and another for account management, handling of approval processes, and for the posting of content. Social media staff. The company will establish a dedicated social media team in fall 2012. Till now, social media has been managed by one coordinator who spent 30% of the work time on the issues related to social media. However, the content is fed by different departments in which there are ‘‘subject matter experts.’’ Their role is to provide information and content for the social media and function as point of contacts in case of any questions or comments.

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Social media integration. Social media are integrated in the communications activities across the brand and across business units. They currently play an important role in the HR communications and recruitment. There is a dedicated career account on Facebook which is co-managed by HR and CCs. The company continues to evaluate opportunities internally and externally and implements them on a case by case basis. One of these cases was the creation of a twitter channel dedicated to the Asia Pacific region. The initiatives are assessed at a centralized level, the internal Social Media Competence Center, which consists of members from all strategically important business and support areas. Social media maturity. The company started using social media end of 2009. First, the approach was to secure the presence of the company in the social sphere, create a so-called social media footprint. Then, social media became a part of the marketing strategies. Furthermore the company defined three areas where it sees potential and opportunities: communications/brand awareness, recruitment, and sales. The integration of the sales in the social media processes builds strategic level of social media management. Focus is more directed toward ROI and business returns from these activities. Growing maturity required also formalization of the processes and construction of a separate team. This team will be dedicated solely to social media management. Social media strategic level. Social media are currently managed by CC department; however, the strategic buildup and the evaluation is coordinated with different units all across the bank: CCs, IT, Legal and Compliance, Business Units such as Private Banking, Investment Banking, Asset Management The separate unit for social media management is created. The bank considers social media as a place ‘‘where customers are.’’ Therefore, the bank’s obligation is to be present there and communicate with them. This strategic consideration leads to formalization of the internal processes and increased role of ROI in the reporting of social media activities. The formalization of the processes as well as creation of the dedicated team elevates social media into the strategic level within the organization. Social media gravity center. Social media play an important role in the marketing and CC strategies of the bank. They are also used as a tool for HR communications. The consideration of the usage of social media in the sales processes leads to increase in the gravity. Coordination will be managed by a centralized ‘‘Social Media Competence Center,’’ a team that will consist of members of different business areas such as IT, Legal and Compliance, and Communications. The management of the actual activities will be done directly within the business units. There is still limited consideration of the usage of social media in the product offerings, but the company already implemented a specific Facebook presence for its offering targeted to students and youth called Viva (only in Switzerland). All the activities depend also on the legal framework which, considering there are a lot of


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questions to be answered, remains a large part of the process. Actually, the current legal framework limits the rollout of social media. Social media network. Credit Suisse uses the network of partners and stakeholders in its social media communication especially at the level of CSR activities and sponsorship. Nonetheless, the network usage is limited to the posting of common messages. Respective social media channels are ‘‘umbrellas of content’’ for all the stakeholders. However, there is certain level of targeting to the defined groups of stakeholders. Therefore, Facebook is directed to the bank’s customers; Twitter to journalists and analysts; dedicated accounts target potential employees and recent graduates. Internal valuation of the social media. Social media are valued within the company. The process of valuation is rather bottom-up since it’s often the business that sees and evaluates the opportunities and then makes the business case to the senior management. It is also a reverse process where the employees join the community on social media and provide the suggestions and additional content. The following aspects are key areas in which Credit Suisse sees the potential for social media activities: - Brand awareness - Recruitment - Sales Measurement of the social media activities. The measurement of social media moved from the output measures (number of likes, etc.) toward more outcome results (brand perception, ROI framework). Sophistication of the tools and sophistication of the business units required advanced KPI framework. It is based on the principle of reporting of the outcomes from investments made. Key successes. The company considers the level of engagement in its community as a key success. Credit Suisse was also featured by Facebook as a best practice case study for one of its campaigns. Observation 3: Social media to be strategic needs to be measured in terms of ROI. The successful strategies look at the business usage of these tools which is beyond brand awareness building. This secures strategic consideration and support from the top management. Hublot — Socially Compatible Social media and especially Twitter are the future. In a busy environment, there is a need to be concise and straight to the point and Twitter with its 140 characters is all about it. It responds to an existing social need to which we need to adapt. This is why Twitter is so powerful. JeanClaude Biver — Chairman of Hublot

Hublot is not a typical company in the luxury industry. Its internal organization is based on flat structures which have clear reporting lines, but create a culture of consensus. It also has a strongly enforced policy of ‘‘open doors’’ which reflects its

Social Media Champions


openness and the internal valuation of each employee. These elements of corporate culture are reflected in all the company’s operations and strategies, and notably in social media. We are not managed as a typical luxury goods company. We don’t create too many structures. We are very open. Jean-Claude Biver — Chairman of Hublot

The company’s philosophy is reflected in the overall marketing approach and marketing strategies. The Chairman of the company is personally involved in communication with the customers: ‘‘if you send in any place of the world an e-mail to info@hulot it comes to my mailbox’’ (Jean-Claude Biver). And he is involved at the same level in the development and management of the company’s social media strategy. Snapshot of strategy. The company’s strategy for marketing, communication, and social media is content driven. Hublot started to use social features and usergenerated content even before the social media became a focus in marketing. We needed content for our website. If there is nothing new on the website, you will not return. So, we created an on-line video portal which presented our activities. We were the first early in 2005. Jean-Claude Biver — Chairman of Hublot

This platform, as well as the site ‘‘Hublot Nation,’’ are the social platforms owned by the company. The company uses also regular social media channels (i.e., Facebook, Twitter) at the global and regional levels. It has the content adapted linguistically and culturally to the users in different geographic locations. Awareness of social media. Hublot is fully aware of the importance of social media for marketing and operations in general. The company perceives social media benefits beyond brand awareness and community management. It sees the impact of them on marketing, CRM, external/internal communication, and HR. Corporate awareness is built through openness and lack of internal regulations related to social media. There are no policies that formalize the process for individuals (though there is a policy for corporate use of the channels). If you have too many policies, you kill social media internally. Social media is not about policies, is about being individual, transparent and open. Jean-Claude Biver — Chairman of Hublot

Social media sophistication. The company uses all social media channels. The messages are targeted to the respective stakeholder groups. It uses applications and all available features which are embedded in the platforms. Moreover, the company has created its own channels which provide the content for overall social media activities. It provides fans with a whole customer journey which even includes offline interaction and direct contact to the top management of the company. Social media staff. Hublot has a community manager who is placed in the company’s marketing team. Also, other employees are encouraged to be active on social media and act as Hublot’s ambassadors. Nevertheless, the key person in the


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social media efforts is Hublot’s Chairman. He has been active on social media from its early stages and drives a big portion of company’s social media efforts. I’m not active enough though. I need to be more active. Now, I’m 3 to 5 hours per day on-line, I should be available 20 hours. If you compare me with someone who is sleeping, I’m active, but I’m active enough. Jean-Claude Biver — Chairman of Hublot

Social media integration. Hublot integrates social media into other channels of communication (i.e., website). It also integrates them throughout the organization. Different business areas use social media to support their communication. Indeed, social media is a tool which is fully integrated throughout the company. Social media maturity. The company started using social media, or rather social features even before the big ‘‘social media platforms’’ were launched. The company has a clear content strategy for social media which forces internal innovation and constant reinvention of the channels. However, the company considers the current stage of social media development as a ‘‘stone age’’ of social media. It perceives a need for constant innovation of the channels as they are constantly evolving. Social media strategic level. Social media activities are driven personally by the Chairman of the company. The Chairman not only drives a strategic vision of the social media activities, but also personally posts and interacts with fans/followers. This level of engagement places social media as a key managerial concern within the company. However, the management of social media is not based on the top-down structure; it is rather embedded in the company’s flat managerial structures. Social media gravity center. Social media are in the center of Hublot’s marketing strategy. All the activities of the company are communicated through social media channels. However, the internal gravity center of social media is the employees and not the communication structure. The employees are supposed to be active on social media networks and get involved both internally and externally. Moreover, social media are used as a tool for marketing, as well as for other business functions including HR and internal communication. Social media network On social media the company can’t talk and communicate only about itself. Also, Hublot is not only about watches. It is about a certain ‘‘art de vie’’ which we share with our customers. This is why we communicate about our partners and common initiatives regularly. That also provides the content. Jean-Claude Biver — Chairman of Hublot

Hublot considers social media as a constant interaction with fans/followers. Therefore, it provides content on a daily basis on each channel. It also provides the content of its partners. Partners are considered part of Hublot’s identity; therefore, the network plays a crucial role in the brand’s social media strategy.

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Internal valuation of the social media. Hublot appreciates social media as a key tool in the enterprise’s strategy. The tool is not designed only for promotion and marketing. Actually, the aspect of interaction and community opinion plays the most important role in the internal valuation of social media. Measurement of social media activities. The company uses external tools to see the dynamic of interactions and growth within its community and reviews them on a regular, monthly basis. The framework is focused on growth and community rather than on precise measures of conversion, sales lead, etc. Measurement is focused on growth which builds brand awareness and brand appreciation. There are no set KPIs for social media activities. Key successes. Hublot considers as a success the constant growth of its community and a growing number of visits. The measurement of performance is based on the interaction level within the community and with the brand. Hublot’s biggest success is the fact that there has never been a decrease of social media results. The second quoted success is the fact that both the social media channels and the operations of the company constantly reflect its identity. Observation 4: Top management’s involvement and personal agenda influence the corporate adaptation of social media. Internal organization and corporate culture can be the drivers for an internal rollout of a social media strategy.

Discussion Analyzed companies differ in size and scope of activities. However, all of them have successful strategies in social media management. Identified drivers of social media management have been confirmed in all of the companies. They lead to a sophistication process which places them among the leaders in their respective industries. The management of social media is thus a strategic concern which moves beyond operations (Plangger, 2011). The organizational learning process leads to the formalization of processes and the integration of social media into the enterprise’s strategic framework (ibid.). It leads to the establishment of social media policies and training procedures. These steps mitigate the risks of crises coming from the social media (Veil et al., 2011). It is important to add that the study suggests an additional driver which can be even more crucial for social media strategies. It is the attitude of the senior management toward social media. All of the analyzed companies benefit from the positive attitude of senior management toward the learning of social media and their management. The strategic approach is shaped by the senior management’s vision of the enterprise. This defines the measurement framework. And the measurement framework also defines the sophistication process. Therefore, the additional observation has to be added: the measurement framework defined by the senior


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management directly influences the sophistication process of social media strategic management as it is in the case of external and internal communications.

Conclusions Social media create a framework in which big companies as well as smaller ones need to learn. This social learning allows them to build relationships with their key stakeholders but also to obtain direct business benefits. The case studies show four companies. Each of them is successful in business operations and gains recognition for its social media efforts. They present four different corporate behaviors. SWISS International Airlines learns at the operational level. It uses a portfolio of available applications and successfully engages with stakeholders. The stakeholders are here defined mainly as customers. The company considers social media as a marketing tool and addresses the community with the corresponding messaging. Warsaw Chopin Airport is a state-owned company which manages the biggest airport hub in Poland. It uses social media at the strategic level (despite its relatively small size and local scope of operations). Its representatives are on each relevant channel and interact with fans and stakeholders. It also uses its own activities to promote its partners (especially the airlines flying from the port and shops present on its premises). Credit Suisse creates a strategic framework which will allow the company to be active on social media. It is important especially in the context of highly regulated environment in which company operates. Social media are embedded in the greater marketing strategy and reported in terms of business benefits. Hublot has a ‘‘totally social’’ marketing strategy. The company uses social media to build its community, maintain dialogue with customers and stakeholders, and drive sales. Hublot was in many aspects the pioneer: in UGC usage in marketing, in social media usage, and in community engagement at the top management level. The company refers to its network to build content spread corporate messages. Four companies: different sizes, different scopes of operation, different industries — they all learn socially and use social media to strengthen the organization and build business benefits. Their learning patterns are different; however, their strategies gain recognition in the industry and bring tangible benefits for the organizations.

Further Research This chapter proposed case studies of four companies to illustrate the learning process and learning aggregation in social media. It shows that social media are beyond being a tool. They actually allow companies to bring CC to a strategic level. They also allow the measurement and monitoring of the value of corporate reputation. It would be interesting to study a larger sample of companies in order to see the learning patterns and profiles of social media strategic management at the statistically important level.

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Such study would generate knowledge of the social learning processes across industries and across different geographic regions.

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Chapter 9

Innovation Management, Lead-Users, and Social Media — Introduction of a Conceptual Framework for Integrating Social Media Tools in Lead-User Management Markus Ernst, Alexander Brem and Kai-Ingo Voigt

Abstract Purpose — With the rise of social media, the practice of innovation management is changing rapidly as well. While the opening up of corporate innovation processes can be observed in literature as well as in practice (commonly known as ‘‘Open Innovation’’), we draw the reader’s attention to the strategic potential of social media in innovation management. For this, a conceptual framework will be introduced. Design/methodology/approach — In this chapter, we compare established concepts of knowledge management to potentials of social media in this field, which offer more efficient and promising ways to integrate external knowledge into innovation processes. This approach is discussed by considering the integration of customers and especially Lead-Users into corporate product development. Based on the concept of Open Innovation, we reflect the role of Lead-Users in the innovation process critically. Mounting on our reflections, we show the potentials of social media for integrating Lead-Users and develop a conceptual framework for the integration of Lead-Users using different social media applications. Findings — In this paper, a conceptual framework for integrating Lead-Users by using different social media applications is developed and introduced. Originality/value — The unique conceptual framework derived in this chapter is enriched with a discussion of the challenges resulting from the implementation of Lead-User integration along with social media in corporate innovation management.

Social Media in Strategic Management Advanced Series in Management, 169–195 Copyright r 2013 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1877-6361/doi:10.1108/S1877-6361(2013)0000011013


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The chapter can help companies as well as researchers to implement a process for the integration of Lead-Users by using the potentials of social media applications. Keywords: Lead-user; social media; innovation management; knowledge management

Introduction In recent years, companies increasingly started to integrate knowledge from outside the firm for their own purposes. This way to open up the innovation process is commonly known as ‘‘Open Innovation.’’ In practice as well as in scientific discussion, several modifications of this concept have appeared since (Chesbrough, 2003; Lichtenthaler, 2011). The development of the Internet has not only influenced a company’s Internal processes but also the interaction with its environment due to the fact that the Internet offers a large potential to collaborate and cocreate with customers as well (Sawhney, Verona, & Prandelli, 2005). With the emergence of social media in the Web 2.0, even more possibilities for companies have appeared (O’Reilly, 2005). Due to social media applications, users can express themselves, interact and exchange information among themselves. Online communities, for example, have become a powerful instrument for information filtering and campaigning (Tietz & Herstatt, 2005). The development in Open Source software shows impressively that users can connect and develop successful products in a sphere outside companies (Brem & Voigt, 2009; von Hippel, 2005b). Companies should be aware of these trends and be prepared to adapt their strategies to these changes caused by Open Innovation on the one hand and the dominance of the Internet on the other hand. The integration of users is one of the most considered concepts among Open Innovation in literature as well as in pratice. One particular manifestation of customer integration is the Lead-User method (von Hippel, 1978; von Hippel, 1986). Combining this concept with the potentials provided by social media, companies have several possibilities of reaching their customers more quickly and less expensively (Dahan & Hauser, 2002). Companies meanwhile make strategically use of this by integrating users in their innovation processes. Hereby, companies target to minimize market risks and to gain competitive advantage by integrating external knowledge (Brem & Voigt, 2007; Bowonder, Dambal, Kumar, & Shirodkar, 2010; Enkel, PerezFreije, & Gassmann, 2005). ‘‘A company’s collective knowledge base represents its most precious asset’’ (Fetterhoff, Nila, & McNamee, 2001, p. 53). As traditional concepts of knowledge management are oriented toward an internal use, new concepts are needed. In this chapter, we want to work out the potentials of applications from the Web 2.0 for knowledge management as well as for integrating customers. Focusing on the concept of Lead-User integration, we highlight the benefits of the use of social media and give critical reflections of opening up a company’s borders by integrating Lead-Users and by using social media for this purpose.

Innovation Management, Lead-Users, and Social Media


Implications of Knowledge Management for Innovation Management The term ‘‘innovation’’ has been defined several times in scientific literature and therefore regarded from different perspectives. Some definitions are of a rather broad sense like ‘‘any idea, practice or material artifact perceived to be new by the relevant unit of adoption’’ (Zaltman, Duncan, & Holbek, 1973). Others are classifying very specific categories like new products or processes, new markets or suppliers or new organizations (Casson, 1982; Schumpeter, 1926). At least all these definitions have in common that innovation in general is something new and it has somehow to be adopted (van der Meer, 1996; West & Farr, 1990). This separates an innovation clearly from an invention, which has to be new but not adopted (Adair, 2007). Taking everything into consideration, innovation is a very complex phenomenon which does not allow an ad hoc definition. Knowledge Management is of high priority for the strategic intelligence of a firm (Liebowitz, 2012) and therefore for innovation management. As knowledge and exchange of knowledge being a potential source of competitive advantage, the continual availability of knowledge becomes essential for technology and innovation management. If companies manage to make more validated knowledge available, their innovation potential can be increased. While developing new products, it is fundamental to have well-structured product- as well as process-related knowledge at hand (Krause, Franke & Gausemeier, 2007). Moreover, companies should be able to fall back on this knowledge easily in future projects. So companies can focus their development capacities on new products or services and don’t waste time searching for knowledge that is already available. Information is the basis of knowledge. Information emerges by combining data with semantics. Data are the combination of figures through a clearly defined syntax (Bodendorf, 2006). Only if information is connected among each other as a result of cognitive processes, knowledge can emerge. Following this, knowledge can be distinguished from information being a result of particular attitudes, perspectives or means and is in general purposeful and context-sensitive. To sum it up, knowledge is occurring dynamically through social interaction (Nonaka & Takeuchi, 1995). Furthermore, knowledge can be classified into explicit and tacit knowledge. While explicit knowledge can be described distinctively, tacit knowledge depends on personal experiences, attitudes and daily routines (Nonaka & Takeuchi, 1995). About 80% of corporate knowledge is assumed to be classified as tacit knowledge (Lehner, 2008). If companies succeed in making this knowledge transparent and accessible, they can realize a huge (competitive) potential. In the following, we will have in mind both categories. But knowledge cannot be reduced to itself; the roots of knowledge are located within the individual. That means that all aspects of corporate knowledge management should always take the employees into consideration. A second aspect is that knowledge is not static, but is continuously in transformation (Kunz & Linder, 2005). That means in the context of our chapter that management of knowledge has also to consider this fact and has to provide solutions in order to handle this dynamic.


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Weaknesses of Traditional Knowledge Management Corporate knowledge management systems are often supported by the use of several IT-systems. They all have the same goal: To identify the knowledge of the firm, to archive it and to make it accessible to the whole company. In such conventional systems, there are clearly defined rules for responsibility and processes. Several companies use such systems to enable their employees to capture, to archive and to exchange their knowledge (Komus & Wauch, 2008). But they show some weaknesses in everyday work. That will be dealt with in the following section. At first, conventional knowledge management systems can be characterized by several items. The generation of content is done by previously defined authors who have clearly defined rights in the system. So-called ‘‘knowledge managers’’ are responsible for exploiting and evaluating the knowledge provided by the employees. Amount, structure, and modifications of the content are due to conceptional standards. For example, in some systems, the list of contents, the way of documenting the content and the subsumption under particular keywords is fixed and centrally administered. By doing so, companies try to avoid failure from the beginning. Further on, the use of the knowledge and its presentation are often realized by systemdependent and mostly expensive software (Komus & Wauch, 2008). Figure 1 shows these main aspects of conventional knowledge management systems. Concerning the emergence of corporate knowledge, companies should support creative groups and processes by creating an atmosphere, in which new and

Conventional Knowledge Management Systems


• Defined role models • Defined rights-management • Default list of contents


• Default terminology due to centrally administered key-words and links • Strict formal standards




• Changes only when ordered • Default amount and data format • Central responsibility for collecting content (knowledge) • Review and evaluation by mandated knowledge-managers Depending on the system

Figure 1: Characteristics of conventional knowledge management systems.

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interdisciplinary knowledge can emerge. Such a creation of knowledge does not stick to hierarchical borders but rather is based on increasing collaboration (Nonaka & Takeuchi, 1995). By focusing on knowledge creation through company-wide collaboration, which is not limited to hierarchical or organizational borders, companies aim to realize an exchange of external as well as internal knowledge. Unfortunately, this is only partly possible with conventional solutions for corporate knowledge management. Existing systems for the internal exchange and management of corporate knowledge can be systemized into two groups: channels and platforms. Channels enable creation and distribution of information, but are limited to a particular and precisely defined group of addresses. For example, information which is send via e-mail is spread via channel. In contrast to that, information distributed on platforms is available for a larger amount of addresses but is created and selected by a small amount of editors, for example, the intranet of a company (McAfee, 2006). In the following section, we show some problems that are connected to such conventional knowledge management systems and that they do not adequately contribute to the goal of storing and developing further the corporate knowledge base. Initially, the information overflow is one of the main problems for employees. Every five years, the amount of available information is doubled, while the performance of information systems is only improved linearly (Sandkuhl, 2005). Additionally, the number of information sources is increasing continually (Bauer & Mandl, 2007). As we already highlighted, knowledge is created by combining information with experiences and by classifying information semantically. The result is an increasing amount of data. A lot of existing knowledge management systems cannot cope with this challenge (Prusak, 2006). Furthermore, due to their rather static structures, these systems are not adequately helpful for employees to deal with the information overflow. Further on, existing knowledge management systems lack a clear orientation to particular goals; more than ever they are not suitable to be connected with the corporate strategy. Generally, the distribution of knowledge is processed undifferentiated without any concept (Probst & Raub, 1998). Besides the problem of the information quantity (information overflow), there is also a problem concerning quality. Employees are exposed to a huge amount of irrelevant information facing the danger of missing relevant information. A study of Berlecon Research in 2007 found out that 50% of the respondents complain about the information overflow by e-mail (2007). Systems for managing knowledge should have the goal to support employees adequately. In practice, the difference between information and knowledge is mostly neglected. Although companies are investing in the extension of knowledge management systems, the latter only provide an infrastructure for information and realize the transport of information and not knowledge (Prusak, 2006). During the 1990s, a lot of centrally administered projects for knowledge management have been forced by the underlying technology. Though these projects neglected cultural aspects like the unwillingness of employees to share their knowledge (Kuhlmann & Sauter, 2008). In practice, some projects in knowledge management failed because of employees not being able to integrate the applications into their daily business efficiently. Moreover, data administration was time consuming and caused additional workload without any recognizable benefits for the employees.


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Some reasons for that might be a system specific handling and a lack of process integration, so that the motivation of the employees decreased continuously (Hideo & Shinichi, 2007). Existing conventional knowledge management systems are mostly too complex for use in daily business (Berlecon Research, 2007). Another critical aspect of conventional knowledge management systems is the orientation toward centrally administered organizations, which are mainly focused on collecting content (Back, 2008). That means, that content is added, administered and made accessible within rigor structures. That neglects the fact that content as well as knowledge workers have to be connected among each other. Such systems are often reduced to the introduction of knowledge data bases and do not regard the fact that companies are characterized by hierarchies as well as informal networks. Consequently a lot of systems are tailored to specific use cases and are not used by the whole company (von Bechtolsheim, 2008). This is also fostered by the use of different access rights depending on the hierarchical position of the user (Bergmann, 2007). Because of that the inherent potential of such systems cannot be used and they degenerate to data silos without any connection to daily business or even innovation processes. Considering cost aspects, another shortcoming of established and mostly commercial knowledge management systems becomes visible: The right to use the system is connected to license costs, which occur per workstation/employee. That means, the more employees use the system, the higher the costs are. Additionally, maintenance and customizing the software to company specific needs by the software provider is time and cost consuming (Back, Gronau, & Tochtermann, 2008). Figure 2 summarizes the shortcomings of established knowledge management systems. As innovation processes are no longer taking place within single organizations, they have to be opened up to all stakeholders of the company. In recent literature, this aspect is discussed with terms like Open Innovation, user innovation, communities, social production, cocreation, and many other (Bogers & West, 2012). In these cases, innovating means the ability to combine knowledge of different sources (von Hippel, 2005a). Following the ‘‘personalization’’ school of thought in knowledge

Shortcomings of Conventional Knowledge Management Systems

• Information overflow • Lack of concrete goals • Lack of integration in daily business • Lack of options for co-working on content • Lack of cost efficiency

Figure 2: Shortcomings of conventional knowledge management systems.

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management, the connection of people is an essential part of knowledge management (Liebowitz, 2012). So the management of the exchange and development of knowledge becomes an essential part of innovation management. Therefore, knowledge management is linked to strategic aspects as well and not surprisingly, knowledge management becomes part of strategic management (Liebowitz, 2012). With the diffusion of the Internet and the emergence of new technologies, a new generation of the Web has emerged: the so called ‘‘Web 2.0.’’ This phenomenon is highly promising to eliminate the shortcomings of conventional knowledge management systems as we will show in the following section.

Characterization of Social Media The term ‘‘Web 2.0’’ has not yet been clearly classified in scientific literature, but refers to more than a software version number (McAfee, 2006; O’Reilly & Batelle, 2009). Applications coming from the Web 2.0 have changed the way of creating, organizing, searching and distributing information and content (Hirsch et al., 2009). They are often summed up by the term ‘‘social media.’’ All suggestions of classifying these applications have in common that they refer on the one hand to a change in the way of interacting and communicating amongst users (Cook, 2008) and on the other hand to web-based applications, which are not administered centrally and which are characterized in particular through the interaction and participation of users (McAfee, 2009; Tapscott & Williams, 2006). The corporate use of Web 2.0 applications is called ‘‘Enterprise 2.0.’’ Therefore, this term refers to different concepts of a new kind of collaboration, fostered by the networking of employees and converted by technological components of Web 2.0 (McAfee, 2006, 2009). Recent studies have examined internal and/or external corporate use of social media (e.g., Berlecon Research, 2007; Bughin, Byers, & Chui, 2011; Bughin, Chui, & Miller, 2009; Bughin, Manyika, & Miller, 2008). Most of the studies do not clearly distinguish between internal or external use and likewise between active or passive use. All of them refer to the immense potential of corporate use of such applications and to their increasing acceptance in corporate use (Voigt & Ernst, 2011). Although most of the existing studies are not explicitly focused on innovation, authors agree that social media has a more or less strong impact on the innovation activity of companies and can even contribute to breakthrough innovations (Jams, 2011), especially those concerning the creation of novel knowledge created by Lead-Users (Mahr & Lievens, 2012). We will come back to this particular aspect later in this chapter. At this point, it is already looming that meanwhile the use of social media is of strategic importance for companies. The emergence of social media — in private as well as in corporate use — implies that in a corporate context, the use of social media has to be part of strategic management. Social media can be used as a strategic instrument for communication for example. Whereas managers are still facing a high uncertainty about how to use these applications, the changes evoked by social media have already affected


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corporate communication. As it can be observed in public relations, former different disciplines are merging and companies are communicating efficiently with their customers. In the field of communication, studies on the communication of college students have shown that they are familiar with the use of social media. Therefore, they have become important assets for companies (Lewis, 2010). To sum up, we can state that an unsystematic way of using social media is only time- and cost-consuming. Companies should face the strategic importance of social media and should strive for an efficient and target-oriented use to realize the inherent potentials.

Potentials of Social Media for Knowledge Management The traditional role models of knowledge management which separate authors (who are responsible for content) from users (who are addressed for using the content) is overridden by the use of social media (Komus & Wauch, 2008). In an ideal situation, social media can enable a transfer of knowledge by every user being able to provide and consume content at the same time (Go¨lz, 2007). Thereby, social media applications tend to move the traditional borders of corporate processes from purely consuming content to a mixture of providing, editing and working with information and knowledge (Harper, 2008). That becomes plainest visible considering authors, structures, dynamic, responsibilities, and presentation of content between a conventional knowledge management system and a wiki-based knowledge management system: in a conventional system there are clearly defined role models for editing, reading, publishing, and reviewing content. Within a wiki-based system, there is no distinction to be made between authors and readers anymore, because both user groups have (theoretically) the same rights concerning creating, editing and reading content. In a conventional system, content undergoes a specific life-cycle, which can be divided into different phases like acquisition, structuring and saving, administration, use and improvement, and distribution and dumping (Bodendorf, 2006). In a wiki-based system, content is regarded as an evolutional entity, changing and developing continuously (Hester, 2010; Komus & Wauch, 2008). This is enabled by abandoning fixed structures of the content (e.g., a table of contents or tree structures) together with Meta information. The structure of content is realized through linking different wiki-pages by hyperlinks. Meta information is added by tags assigned by the users. By linking and tagging content, the structure of the content is continuously adjusting. Some other differences are presented in Figure 3. So users are providing their knowledge voluntarily in the system. The content can be scored using group-based mechanisms like Social Tagging, for example, which can be an indicator for relevance and quality of the contributions. The presentation of the content, which is necessary for transfer and recall of the knowledge, is displayed — in contrast to conventional systems — in popular formats which can be shown by system-independent software like browsers (Komus & Wauch, 2008).

Innovation Management, Lead-Users, and Social Media


Conventional Knowledge Management Systems

Potentials of Social Media

• Defined role models • Defined rights-management

Every reader is a potential author


• Default list of contents Structure

• Default terminology due to centrally administered key-words and links

• Structuring and key-words due to social processes • Almost no fixed formal standards

• Strict formal standards




• Changes only when ordered • Default amount and data format of the content • Central responsibility for collecting content (knowledge) • Review and evaluation by mandated knowledge-managers Depending on the system

• Changes due to the needs of the users • Amount of the content depending on interest and initiative of the users

• Providing of knowledge voluntarily • Social tagging as an instrument for evaluation of relevance/quality Platform-independent software

Figure 3: Potentials of social media in comparison.

Applications from the Web 2.0 can be considered alternatively to conventional knowledge management systems. The shortcomings of the conventional knowledge management systems can be overcome by the potentials of social media. One of the most serious shortcomings of conventional knowledge management is the information overflow of the employees combined with a lack in concrete goals. This can be overcome by so-called knowledge portals. A portal is a network-based application which integrates content, functions and services and allows accessing different data and applications (Sandkuhl, 2005). But knowledge portals on their own are not sufficient to overcome all shortcomings of conventional knowledge management systems. Therefore, several adoptions are necessary, for example, in organizing workflows or concerning the attitude of sharing knowledge (McDermott, 1999). These changes have the collaboration of the employees in mind and therefore affect the company’s culture in particular. Besides that, some standards have to be implemented, for example, consistent terms, content-life-cycle management and possibilities for individualization of the applications to the employee’s needs. Such efforts can be supported or even forced by social media applications. Another shortcoming of conventional systems is that they are merely focused on the collection of content. By using social media applications, content can be developed further so that it is never finished but always up to date (Kunz & Linder, 2005). Furthermore, the use of social media is lean compared to conventional systems. Using a wiki, for example, there is no need for time-consuming publishing or .


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release steps, because the content can go live directly and is immediately available for the users. Systems which should overcome the shortcomings of conventional systems have to fulfill numerous requirements. Time and location independence, easiness to learn and support of group work can be counted among these requirements. During corporate day-to-day business, content has to be published and updated with a short amount of time and it has to be retrieved easily by semantic means. Social media applications do fulfill these requirements because their structures are built up evolutionarily: They are easy to learn, they are open to everyone and the history of the content is transparent and replicable. So these kinds of applications are better suited for knowledge management than conventional systems (Mu¨ller & Dibbern, 2006). This aspect becomes more important considering the fact that corporate knowledge from inside the firm is mostly preferred to knowledge coming from outside. In turn, this aspect becomes even strategically important, thinking of integrating knowledge from outside in the context of Open Innovation (outside-in). Using social media applications for knowledge management, cross-linking of employees and content is made possible. While in conventional systems, the number of participants is limited due to the complexity and the capacity of the system, in social media applications network effects occur with the increasing number of participants. Social media applications simplify the building of networks. Due to the employees’ profiles in social networks, for example, their competences can be seen and others, who are seeking for a particular solution, can contact pretended experts. So employees can converge, who had never known each other before and who work in different parts of the world (Smolnik & Riempp, 2006). Using additional functions of social networks, employees can contact each other and exchange their knowledge in an easy way. Furthermore, the management of personal networks is supported by such applications. Content originated from different sources can be linked-up and can be further developed (Schiller Garcı´ a, 2007). This becomes more important, considering the fact that corporate competences are the core of competitive advantages. So if the building up of competences in a company can be supported, it is supposed to gain competitive advantage. But therefore people have to interact in networks overcoming hierarchical and functional borders, which again is supported/ forced by social media. As social media applications can be used in established browsers, licensing costs can be reduced (Smolnik & Riempp, 2006). Companies can achieve almost no licensing costs by using Open Source software. Indeed, this is possible for conventional systems as well, but the cost- and time-consuming versioning (and customizing) still remains. That does not really generate costs for the software, but labor costs for the inherent administrative tasks. Due to the platform independence and the availability of the software of social media applications, these costs can be reduced significantly (Back et al., 2008). Figure 4 summarizes the shortcomings of conventional systems and the potentials of social media. As an interim conclusion, we can state that social media offers high potential to enhance corporate knowledge management strategically. Especially considering aspects of innovation management, social media can help to create new knowledge

Innovation Management, Lead-Users, and Social Media Shortcomings of Conventional Knowledge Management Systems

Potentials of Social Media

• Information overflow

• Individual flows of information

• Lack of concrete goals

• Integration of corporate strategy

• Lack of integration in daily business

• Integration in daily business

• Lack of options for co -working on content

• Linking-up of employees and content

• Lack of cost efficiency

• Cost efficient


Figure 4: Overcoming of the shortcomings of conventional knowledge management systems by social media.

and therefore contribute to research and development efforts of companies. Knowledge management continually strives for externalizing and further developing the corporate knowledge base. This process can be supported by the directed use of social media. Today, companies are not merely supposed to count on their own knowledge, but have to consider knowledge from outside their corporate borders. This effect is sufficiently described in literature under the term ‘‘Open Innovation.’’ But Open Innovation contains more than simply opening up the borders and looking beyond the own horizon of the company. The main challenge persists in integrating knowledge from the outside and transforming it to the needs of the company. This can hardly be perceived by using conventional (closed) knowledge management systems. In a recent study, Mahr and Lievens (2012) draw the reader’s attention to the importance of the knowledge created by Lead-Users. Knowledge which is created in virtual Lead-User communities has a high strategic impact on the innovativeness of a company. The firm’s capability is to develop solutions, but without the help of Lead-Users — all the more if they provide solutions instead of simply pointing at problems — the company won’t be able to develop as innovative and successful products (Mahr & Lievens, 2012). That emphasizes once again on the importance of a corporate knowledge management with the help of social media. Synthesizing on this study, we will focus on the integration of Lead-Users into the innovation process with social media. Thereto, we will have a closer look at the early phase of product development, where the integration of Lead-Users is typically suggestive. We will work out a theoretical concept which can help to enhance the integration and identification of Lead-Users by using social media.

Current State of the Art in Lead-User Theory According to Baldwin, Hienerth, and von Hippel (2006), user innovation is a process of information exchange when users coalesce together and start to collaborate in developing new products or even innovation projects. As several contributions in literature have shown, ‘‘some of the most important products and processes have been


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developed by users — both user firms and individual end users’’ (Baldwin et al., 2006, p. 1292). To remain competitive in the future, companies strive to improve the understanding of customers, in order to develop products, which are in-line with the market (Bowonder et al., 2010). Therefore, concomitant with Open Innovation, the concept of customer integration has been developed, which describes collaborating directly with customers. One particular method within this concept is the integration of Lead-Users (von Hippel, 1988). Authors have conducted research with different emphases including the process of Lead-User integration. In literature, the realization of the integration of Lead-Users is often presented as a four step process (Urban & von Hippel, 1988; Herstatt, Lu¨thje, & Lettl, 2002). The first step is the starting phase, in which the project, objectives and teams are defined. In the next step, future needs and important trends are identified. Because of their specific characteristics, Lead-Users are very well suited for identifying new market- or technology-trends (von Hippel, 1988). In this phase, it is recommended to scan many sources and to apply different methods, for example, expert interviews, literature reviews, or trendscouting (Lu¨thje & Herstatt, 2004). In the third phase, Lead-Users and their ideas or concepts are identified. Based on the identified trends of step 2, Lead-Users are selected among existing customers by defining unique characteristics like trend leading or dissatisfaction with existing products. Companies mainly use either the networking approach or the screening (pyramiding) approach (Lu¨thje & Herstatt, 2004) to select users who fit the search profile best. The integration itself is part of the last step, in which future concepts are discussed in workshops and ideas are documented and further developed (Springer, Beucker, Lang, & Bierter, 2004). But not only workshops can be used for interacting with LeadUsers. In recent years there is an increasing number of industrial as well as consumer market oriented firms which use toolkits (Franke & Piller, 2004). This phase is the core of Lead-User integration as in this phase the company and the Lead-Users work together. The main goal of Lead-User workshops is the collaborative creation of ideas and their transformation into future product concepts, sketches, or prototypes (Herstatt et al., 2002). The results of the workshops have to be stored to be available inside the company. This is only one interface to knowledge management. Lead-User projects have three main characteristics which distinguish them from standard market research projects: They are all focused on the needs of leading-edge users, they are targeting not necessarily analogue but nonobvious markets and they require interdisciplinary teams to bring in different perspectives to solve the innovation task (Eisenberg, 2011). Figure 5 shows a standardized process of LeadUser integration. By evaluating the outcome of a Lead-User project, it has to be considered that ‘‘the needs of today’s Lead-User are typically not precisely the same needs as the users who will make up a major share of tomorrow’s predicted market’’ (von Hippel, 1986, p. 802). That means that companies should additionally evaluate the acquired concepts for market relevance and acceptance (Herstatt, 1991; Springer et al., 2004). After a positive evaluation, the project can be transferred to the corporate R&D process (Herstatt et al., 2002).

Innovation Management, Lead-Users, and Social Media STEP 1 Start of the LeadUser Project • Interdisciplinary teams • Identification of target markets • Definition of project goals

STEP 2 Identification of Needs and Trends • Expert interviews • Scanning of literature, data bases etc. • Selection of trends

STEP 3 Identification of Lead-Users • Searching users in target market • Searching users in analogue markets • Creation and evaluation of first ideas


STEP 4 Development of Problem Solving Concepts • Lead-User workshops • (further) development of ideas and concepts • Documentation and evaluation of concepts

Figure 5: Process model of Lead-User integration (according to Herstatt et al., 2002).

Critical Reflection of Lead-User Integration in Practice The problem for companies integrating Lead-Users is the use of the results of LeadUser projects in the ongoing product development. The Lead-User method mainly supports early phases of corporate innovation processes and helps to structure them (Lu¨thje, 2004). Empirical studies (e.g., Herstatt et al., 2002; Lilien, Morrison, Searls, Sonnack, & von Hippel, 2002) prove that innovation projects with Lead-Users have a better performance compared to other projects, considering variables like innovation level, feasibility, strategic importance, turnover or market share. The case of Hilti can prove that the use of the Lead-User concept helped to reduce development time and costs. Furthermore, communication between corporate departments — like marketing and R&D for example — has been improved and thus processes have become much more efficient (Herstatt & von Hippel, 1992). Nevertheless, the concept of integrating Lead-Users is not free of limitations. In contrast to the case study of Hilti, Lilien et al. (2002) are able to show that — in the case of 3M — a project in which Lead-Users are integrated, is more expensive (on average 80,000 USD) compared to ‘‘traditional’’ idea generation projects. However, the authors do not substantiate which ‘‘traditional’’ projects they are talking about. Although Hilti and 3M are examples of the capital goods industry, the effect is likely to be the same in other industries. Another aspect is the increasing complexity of projects by integrating Lead-Users. Herstatt et al. (2002) even state that about 50% of the working hours of employees involved is dedicated to the integration of Lead-Users. The main challenge is the identification of suitable users, because the Lead-User selection is one of the most crucial determinants for success. von Hippel (1986) is aware of this dependence and suggests a widening of the search field going beyond the targeted product field to bordering markets. Furthermore, the suitability of selected users should be checked continuously during the project. This is due to the fact that Lead-Users are experts concerning certain product attributes, functions, or fields, and are not able to develop


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an entire product on their own. This should not be seen as a deficit but as a chance to enrich the development process. Aside from that, the following phases of the R&D process, like concept or prototype tests, for example, are not to be disregarded (Herstatt et al., 2002). Moreover, the so-called not-invented-here (NIH) syndrome might be another problem of integrating Lead-Users. The NIH describes the phenomenon that employees reject the use of ideas coming from outside the firm. This attitude prevents companies from adopting useful or even crucial information and knowledge about technologies or markets just because they are originated outside the firm (Chen & Wang, 2008). This fact is already discussed in literature (e.g., Katz & Allen, 1982; Lichtenthaler & Ernst, 2006) and can be observed in the context of Open Innovation in general. Especially in the context of integrating Lead-Users, barriers between employees and customers can occur (Springer et al., 2004). For this reason, it is of essential importance for the performance of Lead-User projects to overcome these barriers and to manage successfully the integration of Lead-Users into corporate innovation processes. At this point, further research has to be conducted on the determining success factors of the use of the Lead-User concept in practice (Lu¨thje & Herstatt, 2004). In the following section, we are going to discuss the potentials provided by applications coming from the Web 2.0, which might contribute to overcome these problems of Lead-User integration in practice.

Potentials of Social Media in Lead-User Integration There is a broad range of web-based applications which can be considered for the use in innovation management and for supporting Lead-User integration. In the following, we will focus on such applications which are most popular in corporate use. Nevertheless, we aim at general characteristics of the respective classes of applications to derive universal statements. Thereby, companies can choose distinctive classes of applications not being limited to certain providers of applications like ‘‘Facebook’’ or ‘‘Wikipedia.’’ Hence, we will analyze the following applications: Blogs, wikis, social networks, microblogs, and online platforms which are designed for different content (like videos or photos). We do not consider instant messaging and comparable applications as they are focused on bilateral communication. According to previous studies, different applications are suitable for different purposes. Blogs consist of chronological posts and are mostly edited by at least one author or a certain group of people. Wikis are designed to create, edit and store content by a group of people interested in the same topic. So wikis are suitable for tasks of knowledge management in particular, especially when knowledge is ad hoc and dynamic (Hester, 2010). Whereas social networks provide the functionality to create and update a personal profile, some of those applications are enriched with additional functions to enhance networking (search profiles, messaging, mailing, etc.). Microblogs are similar to blogs, but limited to 140 characters. Online portals like ‘‘YouTube’’ (videos), ‘‘Flickr’’ (photos), or

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‘‘Slideshare’’ (presentations) are characterized by the opportunity to provide different self-made content to users, whereas each platform is focused on particular data and functions (Voigt & Ernst, 2011). Table 1 shows the differences in suitability of the treated applications. Thereby it is distinguished between ‘‘well suited,’’ ‘‘average suited,’’ and ‘‘not suited.’’ This rating is grounded on a literature-based analysis conducted by the authors and taking into consideration the specific functionalities of each application. Similar to the potentials which can be realized for knowledge management, social media can contribute to an improvement of Lead-User integration. By using social media, all aspects considering knowledge management while integrating Lead-Users can be realized in this case as well. Additionally, the collaboration with Lead-Users can be improved for several reasons: First, social media applications are available outside the company as well and so can be used by Lead-Users directly without installing specific software. If not done yet, internally used applications can be opened up easily by companies to make them available for the Lead-Users outside the company. So this approach is very lean and cost efficient. Second, due to the establishment of social media in private use, Lead-Users will have no difficulties in handling the applications and so they can generate content easily. Furthermore, Lead-Users can network among themselves as well as together with employees of the company. So a community consisting of Lead-Users and concerned employees can occur. They can interact through social networks and can work together in wikis or blogs and exchange content on platforms. So the corporate knowledge base can be further developed. Finally, social media can also be used to identify Lead-Users. But this approach is not yet been researched sufficiently in literature.

How Social Media Can Enhance Lead-User Management: Introduction of a Conceptual Framework Open Source Software is one popular aspect in literature concerning the linkage between Lead-User integration and the Internet (von Hippel, 2005a). For example, Table 1: Suitability of social media applications (modified, based on Voigt & Ernst, 2011).

Blogs Wikis Social Netwroks Platforms Microblogs

Editing of content

Retrieval of content

Linking-up of content

Linking-up of users

O X O O –




X ¼ well suited; O ¼ average suited; – ¼ not suited


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the development of the Apache Web Server Software in the 1990s has started with a small group of developers and has become the most popular web server software in the Internet. It is used by approx. 62% of the web sites worldwide (von Hippel, 2005b). In literature, some studies already exist which highlight the enhancement of user integration by using web-based applications. Some of those studies outline possibilities to enrich Lead-User management focusing on the operational support for Lead-User integration or giving hints to the identification of Lead-Users. Kratzer and Lettl (2009) investigated whether there is a similar positioning of Lead-Users and opinion leaders in social networks. In contrast to studies which have focused on the market-impact of Lead-User innovation, the authors focused on the social context of Lead-Users. In their study among school children, they found out that there was a positive correlation between Lead-Userness and opinion leadership, so that LeadUsers can be regarded as opinion leaders the same time. Lead-Users can act as a connection between different groups or clusters within social networks. The authors suggest their approach in addition to other instruments for Lead-User identification like screening or pyramiding. Although a lot of research about the integration of Lead-Users and the corporate use of social media has already been conducted and the linkage between the innovation process and Lead-User integration is meanwhile understood, there has not yet been any clear connection between the process of Lead-User integration on the one hand and social media on the other hand. Some useful thoughts about supporting the innovation process by social networks have been contributed by Shih (2009). In this conceptual framework, the innovation process is subdivided into four main characteristic stages which are continually followed more or less when developing innovations. Shih argues that every stage is a social process among the people involved in the development. Therefore, innovation processes are ‘‘ideally suited for social networking’’ (Shih, 2009, p. 107). In every stage, different principles originated in the Web 2.0 are suggested for implementation (see Figure 6). By using this framework, companies are supposed to gain a reliable partnership with people outside the company. Thereby, they improve their understanding of customers and exploit new markets. Transferring these thoughts to Lead-Userintegration — although this aspect is not explicitly mentioned in the framework — that means that companies can integrate Lead-Users by using social media in different stages of the innovation process. Cook (2008) systemizes the actions in Web 2.0 applications in his ‘‘4Cs approach.’’ Every application can be assigned to one of the four categories ‘‘communication,’’ ‘‘cooperation,’’ ‘‘collaboration,’’ and ‘‘connection.’’ Applications for communication allow people to converse with others. Cooperation refers to exchanging content with others in structured or unstructured ways, whereas collaboration is focused on working together on particular problems and connection refers to linking up both — content and other people. Considering the suitability of applications for several tasks, it can be stated that each of the functions of the 4Cs is of high importance in the stages of the Lead-User integration process model. Figure 7 shows the potentials of social media and connects them to the process of Lead-User integration and

Innovation Management, Lead-Users, and Social Media

Generating Concepts Social Interaction: Spreading of Memos, Crowdsourcing Ideas, Identifying Expertise

Iterating Continually Social Interaction: Feedback from the Community, Targeted Polling, Testing Ideas


Generating Prototypes Social Interaction: Feedback from the Community, Collaboration

Implementing Social Interaction: Persuading Internal Gate-Keepers, Persuading Customers to Adopt an Unproven Innovation

Figure 6: The cycle of innovation and containing social processes (according to Shih, 2009). innovation management. Each of the four steps of a Lead-User project from Herstatt et al. (2002) is confronted with the four main tasks concerning knowledge management during innovation activities (editing, retrieving, and linking-up of content and linking-up of users) which in turn are correlated with Cook’s ‘‘4Cs.’’ These activities are all together essential for Lead-User integration and part of the corporate knowledge management. As these activities of the process are all part of innovation management as well, they are connected with the cycle of innovation from Shih (2009), which contains social processes in each phase. As shown above, social media offers a huge potential to support the integration of Lead-Users in corporate product development. The Lead-User process is aimed at bringing innovations to market and therefore results in the cycle of innovations which describes roughly the phases of innovation management. According to Shih (2009), the innovation process consists of social processes. Following that idea, social media is nothing less than the essential tool to support innovation management. The characteristics of applications coming from the Web 2.0 — either they are systemized to the 4Cs concept or distinguished according to their functionality — can enhance conventional Lead-User management in every process phase and provide a suitable interface to develop further the findings from Lead-User integration in corporate product development. By processing Lead-User integration, companies get more and more connected to their environment. In later phases, Lead-Users are connected closer to the company


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Editing of Content



Retrieval of Content



Linking-up of Content


STEP 4 Generating Concepts

Generating Prototypes

Iterating Continually


Linking-up of Users


Figure 7: Potential of social media in Lead-User management.

and its processes while the company becomes more open. So the collaboration within the process of Lead-User integration changes from an internal to a more and more external collaboration. Web 2.0 applications provide possibilities for both types of collaboration and help to use results and content generated in previous phases in later ones. Processing this way, content can be continually developed further and can be available for all concerned parties. This is in line with the goals of corporate knowledge management. In the following section, we will show exemplarily, how the integration of Lead-Users can be supported by the use of different social media applications. Starting a Lead-User project, project members define target markets and goals. These discussions can be processed using a wiki in which even final milestones can be documented. Ad hoc communication in the team can be supported by using microblogs. The second phase of Lead-User management is dedicated to the identification of trends and needs. On the one hand, the existing wiki from step 1 can be used to update the content and document results. Microblogging again can support ad hoc communication in the team. On the other hand, blogs in the Internet can be screened to identify trends and particular users. By analyzing content of blogs and platforms (like articles, movies, or discussions) companies can gain hints for upcoming trends. The third phase focuses on the identification of Lead-Users themselves. Web 2.0-applications again can support this step as an object of analysis. But this time, the user of platforms and blogs who provided the content is of higher importance than the content itself. By identifying certain content in blogs, microblogs and platforms dealing with particular user experience or unfulfilled needs, companies can identify users who fit to the Lead-User criteria (for an analysis of Lead-User criteria, see Bilgram, Brem, & Voigt, 2008). Furthermore, social networks can be used to identify users who have certain experience or who are connected to people in a particular field of interest. This aspect is already discussed in literature, using the socalled netnography as a particular method of Lead-User identification (Belz & Baumbach, 2010). In the fourth step, which is characterized by the interaction with Lead-Users, a wiki can provide suitable support. In this setting, employees of a

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company and Lead-Users can work together on the same content and results of workshops can be documented directly in the wiki. These results provide the basis which can be developed further in the corporate development process. Figure 8 sums up these reflections. Social media applications, which have been discussed above, are assigned to each of the four phases of Lead-User integration (Herstatt et al., 2002). Going through these four phases, an opening up of the company is corresponding as well. Finally, as Lead-Users can be integrated in every phase of the corporate innovation process, the applications are appropriate for each phase of Shih’s cycle of innovation (2009) as well with different purposes. As shown in Figure 5, blogs, wikis, and microblogs are suited best to interact with Lead-Users. Besides these two, social networks and platforms also offer some potential. Taking all aspects into consideration, the suitability of an application for supporting Lead-User integration strongly depends on the goal of the project. It might not be expedient to take a certain blog with an author who has some outstanding posts and regard him automatically as a Lead-User. The appropriateness of an author being a Lead-User has to be proven carefully in practice by comparing and evaluating Lead-User criteria. It has to be considered that such posts are mostly subjective and difficult to verify for external readers. That means that our concept is not supposed to replace existing instruments neither of Lead-User selection (such as




Editing of Content

Retrieval of Content

Linking-up of Content






Linking-up of Concepts Users


Iterating Continually

Generating Prototypes


external cooperation

internal cooperation





social networks

social networks





Figure 8: Conceptual framework for social media applications to support Lead-User management.


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pyramiding or screening) nor of product development. Rather it is targeted to complement existing corporate processes. This concept may enable companies to manage time- and cost-reduction in product development. Due to information and knowledge generated during the process of Lead-User integration being available in following phases, it can be used further without any interruption or transformation. In addition to that, our concept provides an easy way to get in contact and to collaborate with Lead-Users. The applications are available on the Internet and do not require costly installation or support. As they offer a high usability and are commonly used in private, they can be used intuitively by customers as well as employees. Our concept can be implemented by companies which are already integrating Lead-Users as well as by companies which are planning to do so. The contribution is of strategic importance, as companies strive for the development of products, which are in-line with the market, and for the reduction of development time. In some cases, companies even follow a pioneer strategy which requires them to be on the market first (Gerhard & Voigt, 2009).

Critical Reflection of the Concept The suggested concept of integrating Lead-Users by using social media is not free of challenges. There are — as shown in the description above — a lot of potentials that can be realized by using social media for identifying Lead-Users. But nevertheless, there are some risks which have to be considered before implementing such a concept for corporate use. Currently, a lot of companies are using social media for some kind of customer integration and merely for internal collaboration or interacting with business partners (McKinsey, 2012). This might also influence the companies’ perception of the applications and their inherent limitations. In general, the use of social media, which is opened to external sources, means a ‘‘whole new level of risk’’ for the company. Additionally, these risks are difficult to calculate due to the fast and interactive development of the applications (Short, 2008). Especially companies which are not aware of the corresponding risks of social media are threatened. For example, risks concerning the uncontrollable processing of content and the control of the spread of the content (Borowiak & Herrmann, 2011). In this context, the main challenge is security (Borowiak & Herrmann, 2011; Weiss, 2011): Because of the interactive and collaborative character of social media, there is an increasing hazard regarding the transfer of sensitive company-, project- or employee-related information (Short, 2008). Companies tend to neglect privacy aspects in favor of business benefits (Ramge, 2010). Another aspect while opening up companies to external social media applications is reputation management. A study of Deloitte in 2009 found out that 74% of employees in the United States think that they can harm the reputation of their company by abusing social media tools like Facebook, Twitter, or YouTube. Only 17% of executives address these risks and 15% of the respondents have developed concepts to monitor and reduce reputation risks (Deloitte LLP, 2009).

Innovation Management, Lead-Users, and Social Media


The converging of private and working life of the employee is another risk for companies. While 52% of employees are reluctant to use social networking at their workplace, 21% of them are using such tools for private (5%), vocational (6%), or both (10%) purpose (Deloitte LLP, 2009). On the one hand, this can be regarded as a great chance from a company’s perspective because employees may use their private network for daily business. In context of Lead-User integration and identification that could probably mean that employees can integrate individuals they are connected with in social networks and that this will lead to new ideas in terms of ‘‘thinking out of the box.’’ On the other hand, the blurring border between vocational and private use generates risks of abuse (O’Rourke, 2011). A study in 2011 showed, that around one third of 120 surveyed companies have taken disciplinary measures due to abuse of Social Networks during working hours. Thus, companies fear misconduct of employees using Social Networks, approximately 45% of the companies do not have any social media policy or guidelines (O’Rourke, 2011). Furthermore, concerning private use of social media during working hours, employees might be diverted and so the productivity of the company may decrease (Ramge, 2010). Dean and Webb note that it was scientifically proved that multitasking has a negative influence on human productivity (2011). Wilson (2009) even states that the total IT-risks outweigh the initial productivity risks. If companies use external social media sites, the risks of hacker attacks increase. Besides that, RSS-Feeds can be used to bypass corporate security systems (Short, 2008). This is underpinned by the study of Deloitte according to which 27% of the employees were not sensible of the consequences of their online activities, like publishing of photos, videos or blog-posts. More than a third merely considered impacts on customers, colleagues or superiors or isn’t aware of them at all (Deloitte LLP, 2009). Another challenge, which occurs inside an organization, which is using social media, is the adoption of the generated knowledge for daily business. While knowledge created by other departments is commonly used — given that it is actually retrieved — knowledge from outside the firm is not always accepted as appropriate. As already discussed above in the context of Lead-User integration, the NIH prevents adopting critical or even useful information and knowledge for the corporate innovation activities from outside the firm. The reason for NIH is rooted in trust among the employees of the company. Employees need a certain amount of trust to encourage knowledge exchange with external partners (Chen & Wang, 2008). This trust, in terms of a pro-active corporate culture is needed for knowledge sharing within communities (Bechina & Hustad, 2011) and therefore for a successful implementation of social media on the one hand and a successful integration of LeadUsers on the other hand. A last potential risk in the context of corporate use of social media is rooted in the protection of IP. The use of social media gives some ‘‘implications for the strength of IP protection — most typically patents but also copyright in the case of software and user-generated content. Outbound open innovation emphasizes strong IP protection [y], while inbound open innovation that comes from external firms depends on those firms being able to profit from their innovation, usually via formal appropriability mechanisms’’ (Bogers & West, 2012, p. 70). As already mentioned, employees often


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are not aware of the consequences when using social media. Together with the blurring borders between business and private use, there is an increasing danger that employees deal too carelessly with corporate information, especially in research and development. So there are two-sided risks for companies: On one side, the information from the company has to be protected. Social media guidelines and measures to enhance the awareness of employees for IP issues may help to prevent this risk. The other side concerns the knowledge, which is adopted by the firm. During the integration of Lead-Users, the company has to make sure that there are clearly defined rules concerning the exploitation of the input of the Lead-Users. Secondly, the company also has to ensure, that no IP rights of third parties are violated. To sum up, the corporate use of social media and the integration of Lead-Users offer a lot of potentials but are not free of challenges/risks. Companies have to be aware of them, to be able to realize the potentials of social media and to overcome the shortcomings of conventional knowledge management systems. First of all, companies have to create the awareness among their employees of the potentials and the challenges as well by using social media and integrating Lead-Users.

Conclusion and Further Research In this chapter, we highlighted the potential of social media for knowledge management and showed exemplarily how to integrate customers, especially LeadUsers, into corporate product development processes. We could show the strategic importance of social media for corporate knowledge management and that every application has its own strengths, which can be measured against the characteristics of each phase of the process of Lead-User integration. Further on, we showed critical aspects and risks of using social media. Nevertheless, further research has to be conducted. First, deeper research is necessary to prove the applicability of the concept in practice and to investigate empirically the success factors and risks of applying the integration of Lead-Users. The investigation of social media applications in comparison to conventional knowledge management systems also has to be a major subject in further research. Especially empirical research can help to ensure the relevance of our concept and to stress further improvements. Additionally, a concrete process model for Lead-User identification supported by social media has to be developed and has to be integrated in existing process maps. Another aspect, which has not yet been researched sufficiently, is the question of the quality of the applications themselves, or, to be precise, of the content within the applications. Yet, there have not been any indications depending on which factors content can be evaluated and quality can be ensured — quality of the content and quality of the whole process of Lead-User integration. Lead-User research and the implementation of theoretical concepts are still in an early stage of diffusion. The economic pressure for corporate innovation management is still high enough to foster integration of Lead-Users in development

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processes. As shown above, applications of the Web 2.0 offer a high potential to contribute to the goals of being faster and developing more customer-conform products by supporting the integration of Lead-Users into corporate R&D. Companies have to enrich their daily work strategically with knowledge from the outside and open up their corporate silos to external leverages (Enkel, Gassmann, & Chesbrough, 2009).

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Chapter 10

Social Media as Marketing Strategy: An Explorative Study on Adoption and Use by Retailers$ Carlota Lorenzo-Romero, Efthymios Constantinides and Marı´ a-del-Carmen Alarco´n-del-Amo

Abstract Purpose — This study examines a cross section of the Spanish retailing branch on the adoption and use of Social Media tools, identifying users and nonusers and their impact on management experiences. The use of 2.0 technologies has also been analyzed based on company size. Methodology — An online survey among 90 Spanish retailers provides a number of interesting insights in the adoption rates, the facilitating and disruptive factors in the adoption process, the types of applications used by retailers, and their experiences from them. Prior to filling in the online questionnaires, the recipients were contacted by phone and were informed about the study. A Chi-square analysis has been carried out to contrast the suggested research questions. Findings — Retailers using Social Media as part of their marketing strategy use most social applications for customer-related purposes and see clear benefits in improving customer relations, market communication, improving their after-sales services, and obtaining customer feedback and customer information. Although many differences do not exist between large, medium, and small companies, it is remarkable that large companies use social web tools as branding and small companies as customer service.


This study is framed within Research Project with reference number ECO2009-08708 (Ministerio de Ciencia e Innovacio´n, Gobierno de Espan˜a, 2009–2013).

Social Media in Strategic Management Advanced Series in Management, 197–215 Copyright r 2013 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1877-6361/doi:10.1108/S1877-6361(2013)0000011014


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Research limitations — The main problem of this study has been the low recruitment of answers by retailers. Practical and social implications — Customers are using such technologies in overwhelming numbers and a substantial part of the customer generated content in Social Media is about brands, businesses, and products. Having a good idea about the customer dialog online can provide businesses with very valuable information and help them understand market trends but also identify potential areas of danger and problems. Originality/value of chapter — The adoption of Social Media tools is a topic much studied from demand perspective. Nevertheless, the application to business and, specifically, retailing sector is less analyzed. With this study we pretend to improve this research line from offer perspective. Keywords: Social media tools; retailing sector; online marketing strategy; users and nonusers; company size; comparative analysis

Introduction The Social Media is a collection of online applications typifying the current interactive stage of the Internet (Constantinides, Lorenzo, & Go´mez, 2008). These applications are by now a familiar phenomenon to consumers and businesses. Highly popular Social Media applications like Facebook, Twitter, YouTube, and LinkedIn attract hundreds of millions of users worldwide who spend a substantial part of their time on these media daily. For many consumers the Social Media have by now become a standard element of their social life; the networking opportunities have opened a whole new domain of peer interaction of social and commercial nature. Large volumes of user-generated content are produced daily in the form of product reviews in customer forums or web logs, shopping advices, or recommendations in social networks, customer forums, bulletin boards, or online communities, or personal brand advocacy web pages (Chevalier & Mayzlin, 2006; Mathwick, Wiertz, & De Ruyter, 2008; Zhu & Zhang, 2010). This fast growing in volume of word of mouth has provided consumers with new sources of product information and empowerment: people trust more their peers’ opinions than marketers advertising their products or even product experts. In the theoretical field research is mainly focused on the impact of the Social Media on corporate processes (Craig, 2007; Yakel, 2006), the importance of online communities for corporations (Du & Wagner, 2006; Kolbitsch & Maurer, 2006; Swaine, 2007), the effects of these new technologies on business (Biever, 2006; Boll, 2007; Deshpande & Jadad, 2006; Karger & Quan, 2005), and the role of Social Media applications as business and marketing tools (Constantinides et al., 2008). Nonacademic research provides plenty of information as to how corporations integrate the Web 2.0 applications into their operations (DeFelice, 2006; McKinsey, 2007).

Social Media Adoption by Spanish Retailers as Marketing Strategy


An increasing number of studies suggest that corporate interest in the Social Media domain keeps growing and more and more firms are introducing different forms of Social Media into their daily business routines as well as into their marketing strategies (Cymfony, 2006).

Issues, Controversies, Problems Businesses and retailers in particular have become increasingly aware and wary about the threats posed by empowered customers (Constantinides & Fountain, 2008; Grewal, Iyer, & Levy, 2004; Kwun, Nickels, Alijani, & Omar, 2010). The widespread adoption of the Social Media by the public has changed the way people express their needs, communicate, interact, search for information, and share ideas and opinions. Traditional marketing strategies and proven past approaches of marketing communication are rapidly losing terrain to peer-to-peer generated content. Such changes pose a major threat for businesses not only because marketers are rapidly losing control and initiative in the marketplace but also due to the direct threat to business reputation caused by customer-generated online content. Characteristic symptom of these trends is that, in several countries with high Internet adoption rates, the web and Social Media have become one of the primary sources of information used by consumers when making product choices (Cocktail Analysis, 2012; FleishmanHillard, 2012). Also more often than not simple Twitter posts have proved to be able to damage brands and business reputations in very short periods of time; a new type of approach to damage control and management is necessary. The overwhelming effects of the Social Media on customer behavior have been forcing many businesses to engage in a race of adoption of Social Media as part of their marketing toolbox and in general business strategy. According to a recent survey by the Social Media Observatory, in Spain 65% users follow some brand in Facebook, 32% through Tuenti (Spanish Social Networking Site), and 33% in Twitter. Moreover, 40% Spanish people know the retail shop on Facebook. The rapid pace of adoption is not followed by every business in the same way. There are still substantial differences in the way businesses adopt Social Media as part of their marketing strategies within countries and sectors. The adoption pace, the objectives of firms engaging Social Media as part of their marketing strategy, and the degree of success are some of the issues increasingly attracting the attention of field marketers and researchers. As mentioned earlier the emergence and the mushrooming growth of the Social Media applications brought about a landslide in the marketing practice (Armstrong & Kotler, 2011; Kotler, Kertajaya, & Setiawan, 2010; Li & Bernoff, 2008). For retailers these trends are looking quite threatening; next to the customer empowerment based on better and more relevant information in the Social Media space some new trends have emerged among customers: collaborative merchandising and the (mobile) comparison shopping are some indicative developments in this field. These challenges and threats can be transformed into opportunities by retailers; the same technologies


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that have empowered the customers can give a new impulse to online retailing and in some cases alleviate some of the negative dimensions of the Social Media revolution. These potential effects of Social Media in retailing can be classified into three dimensions (Jain & Ganesh, 2007): 1. Content parameters: Unique user experiences; dynamic user help like peer-to-peer (P2P)1; data feeds like real simple syndication (RSS2), ATOM, XML, or JS; Podcasts or Vodcasts; search tools; aggregation mechanisms or mash-ups.3 2. Collaboration parameters: Customer P2P network or collective intelligence like blogs, wikis, discussion forums, user reviews, tagging, etc.; collaborative product customizations. 3. Commerce parameters: End-user product customizations; contextual shopping help or live agent chat; voice-based shopping help or VoIP; comparison shopping across brands, end-user recommendations, etc. The above classification highlights the fact that there are multiple factors and effects from implementing Web 2.0 applications (Social Media) in retailing. In fact, a key interest of marketers is how to minimize the negative effects of customer empowerment and utilize the Social Media to their advantage so that they can extract the maximum possible value from Social Media-based marketing approaches (Regus Report, 2010). In this sense, an explosion in the number of Social Media tools adopted by businesses and particularly by retailers has been observed in the past years. Literature about this research line (e.g., Constantinides & Fountain, 2008) indicates the retailers have to use real-time feedback to inform about the existence of new products or promotions, build consumers’ communities around their goods, services, or brand, and leverage customer self-service. Moreover, it helps retailers to develop the cocreation, that is, have consumers collaborating on developing future product strategies (Parise & Guinan, 2008). Li and Bernoff (2008) indicate that companies can deploy social applications in different departments: research and development department (e.g., brand monitoring, research and innovation communities); marketing department (e.g., blogs, communities, video on user-generated sites); sales department (e.g., social networking sites, brand ambassador programs, communities, widgets); customer support department (e.g., support forums, wikis); and operations department (e.g., internal social network, wikis).

1 A P2P distributed network architecture is composed of participants that make a portion of their resources (such as processing power, disk storage, or network bandwidth) directly available to other network participants, without the need for central coordination instances. Peers are both suppliers and consumers of resources (e.g., peer communication systems using technology similar to Skype, BiTorrent, and eMule). 2 RSS is a family of web feed formats used to publish frequently updated works (such as blog entries, news headlines, audio, and video) in standardized format. 3 A mash-up is a web application that combines multiple sources of data into a single tool (e.g., use of a georeference through Google maps).

Social Media Adoption by Spanish Retailers as Marketing Strategy


Based on mentioned current Social Media environment, this study attempts to provide a better understanding of the effects, experiences, and potential of retailers by engaging Social Media as part of their marketing strategy. Next to these objectives the study also provides a picture of the businesses using these technologies by segmenting the market according to the intensity of use of Social Media strategies. In summary, the chapter will provide an answer to the following research questions:      

What is the degree of penetration (use of Social Media) as marketing tool among Spanish retailers? How is the retail sector segmented in Spain based on the degree of engagement of Social Media marketing tools? What are the characteristics of the retailer segments involved in Social Media marketing? What are the preferences and priorities of retailer segments in adopting Social Media as marketing tools? What internal, external, and technological factors influence the adoption of Social Media marketing by various retailer segments? Is the size of the business affecting the degree of the adoption process?

Methodology Sample and Procedure The adoption and usage patterns of Social Media tools by retailers were measured by means of an online questionnaire; prior to filling in the questionnaires the recipients were contacted by phone and were informed about the study. The study population consisted of retailers from various retailing industries but grouped into three categories: large (more than 250 employees, more than 50 million euros of sales), medium (between 50 and 250 employees, between 10 and 50 million euros of sales), and small (less than 50 employees, less than 10 million euros of sales). All companies participating in the survey were based in Spain (NACE2, 47). To select the businesses we made use of the AMADEUS database edited by Bureau Van Dijk, which contains financial information of more than 10 million public and private companies in 41 countries. Finally, we obtained a representative sample of 90 companies. The questionnaire was based on a combination of closed-ended, dichotomous, and multi-chotomous questions, with single and multiple responses. The main objectives of the survey were to identify users and nonusers of Social Media marketing strategies and obtain information about the management experiences by the users. The specific types of Social Media applications considered in our study as suitable marketing tools were derived from the classification provided by Constantinides et al. (2008): web logs, online communities, social networking sites, forums/bulletin boards, and content aggregators.


Carlota Lorenzo-Romero et al.

Data Analysis From the Chi-square analysis, the differences between users and nonusers have been compared with respect to the adoption of Social Web tools as marketing strategy. Among the users, the analysis was focused on the identification of the types of applications companies already in usage and their objectives and experiences from using them but also on the identification of the applications they were planning to use in the future. We also analyzed the reasons for not using Social Media for marketing purposes by nonusers and their intentions to use them in the future. Finally, we analyzed the actual use of Social Media a marketing tool by users, the reasons to use them, and the main benefits they obtained; an analysis was also done in order to identify differences related to the company size.

Results The findings of the survey were analyzed in order to identify the degree of penetration of Social Media marketing, that is, identifying users and nonusers; the characteristics and technological context of these two categories were also compared.

Social Media: Differences between User and Nonuser Retailers As mentioned earlier one of the study objectives was to identify differences between users and nonusers explaining the different attitudes in adoption of Social Media tools as marketing strategy. All factors have content validity because all data have been previously tested by academic literature. A profile analysis was performed focused on the association between the different characteristics of companies and using Social Media (Table 1). Table 1 shows the features of the retailers who use and do not use Social Media based on descriptive criteria. Tests associated with statistic w2 to analyze the goodness data conclude the existence of significant differences between the retailers in several factors (p-valueo0.05; confidence levelW95%). Specifically, data have concept validity due to the existence of correlation between using and not using Social Media and factors such as size of company (small, medium, or large), number of information and communication technology (ICT) professionals working in a company, the presence or absence of formal policy guidelines on the use of Social Media, the possession of an intranet site, the use of adequate software and hardware tools for Social Media activities, the number of employees who can send e-mails internally, and how familiar is with the Social Media notion. Nevertheless, there is no correlation (p-valueW0.05) between using or not using Social Media and factors like the number of company employees, the possession of broadband connection and intranet site, the number of employees who can send e-mails externally and visit Internet sites without restrictions.

Less than 25 Between 25 and 50 Between 51 and 100 Between 101 and 250 Between 251 and 500 Between 501 and 1000 Between 1001 and 5000 More than 5000 Small (o50 employees) Medium (50–250 employees) Large (W250 employees) No one Between 1 and 2 Between 3 and 5 Between 6 and 10 Between 11 and 20 More than 20 Yes No Yes No No Internet connection


Number of ICT professionals working in the company

Formal policy guidelines on the use of Social Media Broadband connection


Number of employees

Descriptive criteria

5.2 94.8 93.2 5.1 1.7

49.2 27.1 8.5 10.2 5.1 0.0

51.7 27.6 20.7

37.9 17.2 12.1 12.1 6.9 10.3 1.7 1.7

Nonuser retailers (%)

54.8 45.2 100.0 0.0 0.0

19.4 25.8 16.1 12.9 16.1 9.7

29.0 25.8 45.2

12.9 19.4 12.9 9.7 19.4 9.7 6.5 9.7

User retailers (%)

Table 1: Profile of retail companies differentiating between users and nonusers of Social Media.

22.5 77.5 95.6 3.3 1.1

49.2 27.1 8.5 10.2 5.1 0.0

43.8 27.0 29.2

29.2 18.0 12.4 11.2 11.2 10.1 3.4 4.5

Total (%)

0.000 0.333











Social Media Adoption by Spanish Retailers as Marketing Strategy 203

No one A few The majority Everyone No one A few The majority Everyone Extremely non familiar Quite familiar Neither Quite familiar Extremely familiar

Number of employees who can visit Internet sites without restrictions

How familiar is with the Social Media notion

22.0 13.6 18.6 20.3 25.4

6.8 37.3 30.5 25.4

8.5 27.1 35.6 28.8

8.5 27.1 32.2 32.2

No one A few The majority Everyone

Number of employees who can send external e-mails

53.4 46.6

Yes No

Adequate software/hardware for Social Media-related activities Number of employees who can send internal e-mails

49.2 50.8

Nonuser retailers (%)

Yes No


Intranet site

Descriptive criteria

6.5 6.5 0.0 16.1 71.0

0.0 16.1 45.2 38.7

0.0 19.4 35.5 45.2

0.0 9.7 32.3 58.1

93.5 6.5

90 10

User retailers (%)

16.7 11.1 12.2 18.9 41.1

4.4 30.0 35.6 30.0

5.6 24.4 35.6 34.4

5.6 21.1 32.2 41.1

67.4 32.6

62.9 37.1

Total (%)















204 Carlota Lorenzo-Romero et al.

Social Media Adoption by Spanish Retailers as Marketing Strategy


With regard to the number of employees, the largest percentage of retailers who do not use Social Media have fewer than 25 employees (37.9%) while the categories of retailers who use Social Media the most are those having between 25 and 50 employees and between 251 and 500 (19.4% in both cases). It is worth noting the high percentage of companies that use Social Media, compared with the non-users in the categories of more than 1000 employees. Moreover, if we group small (fewer than 50 employees), medium (between 50 and 250 employees), and large (more than 250 employees) companies, we note that the majority of companies that not use Social Media are small; larger companies are therefore more likely to make use of Social Media as marketing tools than small ones. There seems to be also a relation between the presence of ICT professionals in the company and the degree of adoption of social media marketing: The highest percentage of companies that do not use Social Media do not have any ICT professionals working for them (49.2%). On the other hand the highest proportion of companies that use Social Media has between 1 and 2 ICT professionals (25.8%). In addition, the percentage of companies applying social media marketing with more than two ICT professionals is also high. These findings indicate that for many businesses the social media marketing is seen as an issue requiring technical support rather than marketing experience. If we assume that the use of Social Media tools is important for the company’s competitive position businesses must pay attention to the ethical and legal issues arising from the use of these applications by their own personnel and marketers. It is therefore very important to establish formal policy guidelines on the use of Social Media by the company. As we can see in Table 1 such policy guidelines have been adopted by a small majority of companies applying Social Media marketing. The adoption of Social Media as marketing tools (like the adoption of any technology) seems to be related to the technological context and technological sophistication of the company personnel. The findings indicate that a higher percentage of companies that use Social Media also use broadband connectivity, intranet, hardware/software needed for Social Media-related activities; they also have a large number of employees who can send e-mails internally and externally, can visit the Internet without restrictions, and are more familiar with the Social Media concepts. Table 2 presents various Social Media applications and their usage levels by retailers using or not using Social Media as marketing tools. Companies that do not use any tools were asked whether or not they plan to use these in the future. The companies using such tools were asked the main purpose of use. Such purposes can be internal (e.g., communicate, share information among employees), customer-related (communication with the customers), or related to working with external partners or suppliers. The option ‘‘do not know’’ was also provided due to the lack of knowledge or understanding by some respondents about the exact nature of the use of the social media by the organization. Firstly, test associated with statistic w2 analyzes the goodness data concluding the existence of significant differences between both types of retailers in all analyzed factors (p-valueo0.05; confidence levelW95%). In consequence, data have concept

79.7 20.3 0.0 0.0 0.0 0.0

Do not plan to use Plan to use Used for internal purposes Used for customer-related purposes Used for working with suppliers Do not know

Do not plan to use Plan to use Used for internal purposes Used for customer-related purposes Used for working with suppliers Do not know

Do not plan to use Plan to use Used for internal purposes Used for customer-related purposes Used for working with suppliers Do not know

Do not plan to use Plan to use Used for internal purposes Used for customer-related purposes Used for working with suppliers Do not know

Social networking Sites

Customer reviews


Youtube or other videos

86.4 8.5 0.0 0.0 0.0 5.1

79.7 15.3 0.0 0.0 0.0 5.1

76.3 16.9 1.7 0.0 0.0 5.1

Nonuser retailers (%)


Social media tools

22.6 12.9 19.4 16.1 9.7 19.4

29.0 22.6 9.7 25.8 9.7 3.2

6.5 22.6 16.1 29.0 9.7 16.1

19.4 16.1 12.9 29.0 12.9 9.7

User retailers (%)

64.4 10.0 6.7 5.6 3.3 10.0

62.2 17.8 3.3 8.9 3.3 4.4

52.2 18.9 6.7 10.0 3.3 8.9

58.9 18.9 4.4 10.0 4.4 3.3

Total (%)






Table 2: Social Media applications that companies do not use, which plan to use, and which use and what for.






206 Carlota Lorenzo-Romero et al.

72.9 18.6 0.0 0.0 1.7 6.8

Do not plan to use Plan to use Used for internal purposes Used for customer-related purposes Used for working with suppliers Do not know

Do not plan to use Plan to use Used for internal purposes Used for customer-related purposes Used for working with suppliers Do not know

Do not plan to use Plan to use Used for internal purposes Used for customer-related purposes

‘‘Listening’’ to the voice of the customer in the social space

Questions and answers

Community forums

Note: Bold means the relevant impact of the analyzed items respect to the two groups.

81.4 13.6 0.0 0.0

71.2 20.3 0.0 0.0 1.7 6.8

79.7 5.1 0.0 0.0 0.0 15.3

Do not plan to use Plan to use Used for internal purposes Used for customer-related purposes Used for working with suppliers Do not know

Social bookmarking sites/tagging

9.7 25.8 16.1 22.6

6.5 12.9 16.1 41.9 9.7 12.9

12.9 16.1 19.4 29.0 6.5 16.1

29.0 12.9 6.5 6.5 3.2 41.9

56.7 17.8 5.6 7.8

48.9 17.8 5.6 14.4 4.4 8.9

52.2 17.8 6.7 10.0 3.3 10.0

62.2 7.8 2.2 2.2 1.1 24.4









Social Media Adoption by Spanish Retailers as Marketing Strategy 207


Carlota Lorenzo-Romero et al.

validity due to the existence of correlation between using or not using Social Media tools and the different uses and plans to use the tools in the future. One interesting finding is the low willingness to engage Social Media as marketing tools by nonusers. Those of the nonusers planning to engage social Media in the future prefer to use them primarily as product suggestion box (28.8%), for social networking sites (20.3%), for question and answers section (20.3%), for ‘‘listening’’ to the voice of the customer in the social space (18.6%), and for customer reviews (16.9%), blogs (15.3%), mash-ups (15.3%), and forums (13.6%). With regard to the companies that use Social Media, the highest proportion of retailers use a section on its website for questions and answers (41.9%), provide a product suggestion box (35.5%), employ social networking sites (29.0%), provide the option for consumer reviews (29.0%), ‘‘listen’’ the voice of the customer in the social space (29.0%), mash-ups (29.0%), and RSS, all of these tools are used for customerrelated purposes. Moreover, the highest proportion of them plans to expand the use in creating applications allowing product reviews and product ratings4 (32.3%) and forums (25.5). It is worth noting that blogs are mostly used for customer-related purposes (25.8%), forums for customer-related purposes (22.6%), product suggestion boxes for internal purposes (22.6%), Youtube or other videos for internal purposes (19.4%), product reviews and product ratings for customer-related purposes (19.4%), and offer the possibility of customization of products for customer-related products (16.1%). It is indeed odd that videos that are quite popular by the online public receive too little attention as marketing instruments by businesses. Social Media applications that are less popular among Spanish retailers and also score low in future usage intentions are tagging applications, social bookmarking sites (e.g.,, Digg, StumbleUpon), wikis (e.g., Wikipedia), podcasts, P2P networking, micro blogging (e.g., Twitter, Plurk, Jaiku), and real-time feed aggregators (e.g., Friendfeed5). Moreover, it is important to point out the low proportion of companies along the board that use Social Media tools for internal purposes or for improving cooperation with external partners or suppliers.

Reasons for not Using Social Media as Marketing Strategy The reasons that retailers mention for not using Social Media as part of the marketing effort are listed in Figure 1. Respondents could mention more than one reason at the time. It is quite interesting that the most common reason for not using Social Media as marketing tools is lack of knowledge as to what social media exactly is. The


A rating is the evaluation or assessment of something (products, services, people, etc.), sometimes a classification according to order or grade. 5 FriendFeed is a real-time feed aggregator that consolidates the updates from social media and social networking websites, social bookmarking websites, blogs, and micro-blogging updates, as well as any other type of RSS/Atom feed. It is useful to create groups and share social networking services.

Social Media Adoption by Spanish Retailers as Marketing Strategy Don’t know enough about it No need for it No perceived benefits Insufficient organizational capabilities Costs Concerns about employee productivity Concerns about security Brand risk / Reputation “Uncontrolled” nature of Social Media


41.7% 33.3% 26.7% 20.0% 13.3% 10.0% 10.0% 8.3% 8.3%

Figure 1: Nonuse of Social Media tools: main reasons for retailers. perception that they are not needed and the lack of visible benefits follow as common reasons of resistance to Social Media marketing. Lack of knowledge and negative sentiment/perceptions about these tools are therefore important barriers to adoption. Better knowledge and information about uses and benefits could change attitudes in this issue. With respect to the consideration to use Social Media tools in the future, most of the nonusers state that they will not use them in the future (52.5%). Therefore, the rest of retailers will use them in the future: a small percentage will use them during the next 6 months (1.7%), a higher percentage during the next 12 months (23.7%), followed by those planning to use them in the next 24 months (6.8%), and the rest after 24 months (15.3%).

Retailers that use Social Media: Uses and Benefits Table 3 shows the composition of retailers who use Social Media by size (small, medium, and large) based on descriptive criteria. Tests associated with statistic w2 indicate that there is no relation between the size of the company using Social Media and the frequency of use of these tools, the level of use, the time the company started to use them, the presence of staff responsible for Social Media activities, different reasons to use Social Media, and the future level of usage. Although there is no significant association between company size and the different studied variables, we can state that there are minor differences between small, medium, and large forms. With regard to the frequency of use of Social Media, the percentage of medium and large companies that use these tools with more frequency and more intensely is higher than the percentage of small firms. With regard the main reasons to use Social Media, most of the small companies find them useful for customer service (77.8%) and networking (55.6%); the mediumsize companies see customer service (87.5%) and brand-building (62.5%) as the main reasons. Large companies are more interested in brand-building (78.6%), networking (65.3%), and customer service (64.3%). Finally, the highest percentage of retailers employ part-time staff responsible for Social Media activities and most of companies think that their level of usage will increase in the future.





0.0 0.0 37.5 37.5 12.5 12.5


The company has staff responsible for Social Media activities

22.2 0.0 11.1 44.4 11.1 11.1

12.5 0.0 25.0 25.0 0.0 37.5

12.5 75.0 0.0 12.5

Less than 3 months ago Less than 6 months ago Less than 1 year ago 1–2 years ago 2–3 years ago More than 3 years ago

When the company started using Social Media

22.2 11.1 11.1 33.3 0.0 22.2

12.5 0.0 12.5 25.0 50.0

Medium (50–250) (%)

11.1 44.4 22.2 22.2

Almost never Less than once a month A few times a month A few times a week About once a day Several times a day

Level of use of Social Media

0.0 22.2 33.3 22.2 22.2

Small (o50) (%)

Yes: Full-time Yes: Part-time No No: External support (consultant) No: PR/Advertising agency

Extremely infrequently Quite infrequently Neither Quite frequently Extremely frequently

Frequency of use of Social Media


Table 3: Use of Social Media by size.



35.7 35.7 14.3 0.0

7.1 7.1 21.4 42.9 14.3 7.1

0.0 7.1 21.4 0.0 21.4 50.0

0.0 28.6 7.1 28.6 35.7

Large (W250) (%)



22.6 48.4 12.9 9.7

9.7 3.2% 22.6 41.9 12.9 9.7

9.7 6.5 19.4 16.1 9.7 38.7

3.2 19.4 16.1 25.8 35.5

Total (%)













210 Carlota Lorenzo-Romero et al.

Stay the same Decrease Increase

How the level of usage will be in the future

12.5 12.5 25.0

44.4 0.0 33.3 12.5 0.0% 87.5

0.0 0.0 25.0

33.3 22.2 44.4

22.2 0.0 77.8

12.5 87.5 0.0

55.6 77.8 33.3

Note: Bold means the relevant impact of the analyzed items respect to the three groups.

Networking Customer service Sharing work-related project information Competitive monitoring Sales prospecting Collecting market information Customizing products Product development/ innovation Market research

Reasons to use Social Media

0.0 0.0 100.0


21.4 21.4

28.6 21.4 42.9

64.3 64.3 21.4

10.0% 0.0 77.8


25.8 12.9

22.6 16.1 38.7

48.4 74.2 19.4



2.513 2.240

3.216 2.076 0.860

5.728 1.518 3.085



0.285 0.326

0.200 0.354 0.650

0.057 0.468 0.214 Social Media Adoption by Spanish Retailers as Marketing Strategy 211


Carlota Lorenzo-Romero et al.

Improving relationships with customers Facilitating direct customer communications Facilitating openness of communication Improving after-sales customer service and support Obtaining customers information at low cost Increasing effectiveness of marketing actions Building customers relationships (customer loyalty) Building brand awareness Improving knowledge sharing Improving our ability to reach new customers Reducing communication and marketing costs Allowing us to obtain quickly customer information Speeding up feedback about market results Increasing ability to compete Helping us to enter new businesses or markets Increasing satisfaction of our stakeholders Improving coordination with customers and suppliers Improving distribution channels and services Realizing time savings (e.g. in information search) Expanding our existing markets Improving trading partner relationships Reducing operational costs

83.9% 82.7% 80.0% 76.7% 73.3% 70.0% 70.0% 67.7% 62.1% 61.3% 56.7% 53.3% 51.7% 50.0% 50.0% 46.7% 40.0% 40.0% 40.0% 34.4% 22.6% 17.2%

Figure 2: Profits obtained by retailers using Social Media. Companies that use Social Media have a positive opinion as to different benefits obtained and it is logical that most of them will increase their usage in the future. Figure 2 presents the main benefits obtained by retailers using Social Media for business purposes. Most of retailers state that the main benefits they obtain from Social Media are the improvement of customer relationships (83.9%), facilitation of direct customer communications (one-to-one, many-to-many) (82.8%), openness of communication (80%), improvement of after-sales customer service and support (76.7%), obtain customer information (about current or potential customers) at low cost (80%), increase effectiveness of marketing actions (70%), build customers relationships (customer loyalty) (70%), build brand awareness (67.7%), improve knowledge sharing (32.1%), improve their ability to reach new customers in their existing markets (61.3%), reduce communication and marketing costs (56.7%), allow them to obtain quickly customer information (about current or potential customers) (53.3%), speed up feedback about market results (51.7%). The middle of retailers affirms increase ability to compete with the use of Web 2.0 tools, as well as, to be helped to enter new markets and businesses.

Conclusions and Discussion The fast adoption of social media applications by the public has forced companies to take notice of this phenomenon and try to understand what is the importance and impact of the social media on their business. This study was conducted among Spanish retailers in order to establish the state of affairs as to the adoption of Social

Social Media Adoption by Spanish Retailers as Marketing Strategy


Media as marketing tools by this category of businesses. The findings indicate that companies retailers with 25–50 personnel and between 250 and 500 personnel are the pioneers in Social Media adoption while the category with less than 25 employees is the least enthusiastic about Social Media marketing. Spanish retailers do not using Social Media tools have for their largest part no intention to use them in the near future. Most important reason for this is the lack of knowledge about them, their use and possibilities, and a negative attitude as to potential benefits from them. Most of these companies are characterized by low use of online communication tools and lack of information and communication technologies expertise. The most popular type of social media application used by Spanish retailers is the Questions and Answers option. Other applications used for mainly customer-related purposes are: social networking sites, customer reviews, blogs, community forums, product suggestions boxes, product reviews, and ratings. Some social media applications are used by only a few retailers and the intention to use them is very limited. In this category we find the wikis, podcasts, P2P networking, real time feeds, and product customization. Videos and micro blogging are used primarily for internal purposes. In general we can state that the Spanish retailing sector is now beginning to discover the social media applications as potential marketing instruments. Looking to the findings of this study we can establish that the large retailers (more than 250 employees) and the small retailers (less than 50 employees) are the most likely to engage in social media marketing. Digital literacy seems to be an important factor for the adoption of Social Media as marketing tools. The higher the affinity with information and communication technologies and the more the internal expertise the higher the appreciation of the benefits offered by these tools and therefore the higher the perception of usefulness and level of use. Retailers should place attention to this point by expanding their information and communication technologies staff and encouraging their personnel to learn using social media as a first step in understanding their uses and advantages and this way encourage them to think about potential benefits for their customers from social media interaction. It is encouraging that retail companies that use already social media tools have the intention to increase their use as they perceive a lot of benefits. This is particularly important since the largest barrier in adoption of social media strategies seems to be ignorance and lack of understanding of the need and benefits for the organization. This attitude is wrong and potentially damaging for retailers: their colleagues who have adopted them see benefits in overwhelming numbers namely improving customer relations, improving customer communication, openness, and building relationships. Next to educating their own personnel retailers must pay also attention to their technical infrastructure and the freedom of employees to make use of online tools. Retailers using Social Media have higher proportion of broadband, intranet, adequate software/hardware for Social Media-related activities, and employees who can send internal and external e-mails andvisit Internet without restrictions. It would be interesting for the future research to analyze if company technological context directly influences the adoption of Social Media.


Carlota Lorenzo-Romero et al.

Finally, although many differences do not exist between large, medium, and small companies, it is remarkable that large companies use Social Web tools as branding and small companies as customer service. As main limitation of this study we could point out the difficulty to recruit the answers by retailers. Finally, the number of responses obtained with respect to the number of surveys carried out has been only a 20%. Concluding, as practical implications, we can mention that next to clear benefits experienced already by retailers using social media tools there is another argument for the nonusers to accelerate the adoption of social media as part of their marketing arsenal; customers are using such technologies in overwhelming numbers and a substantial part of the customer generated content in social media is about brands, businesses, and products. Having a good idea about the customer dialog online can provide businesses with very valuable information and help them understand market trends but also identify potential areas of danger and problems. Such information is available quickly and for free: efficient collection of customer voice in the social media can save substantial amounts of marketing research money and help them continuously refine their value proposition while at the same time can help them to quickly identify problems and issues with the potential to become publicity disasters.

References Armstrong, G., & Kotler, P. (2011). Marketing: An introduction, global edition, 10E: Prentice Hall. Biever, C. (2006). Web 2.0 is all about the feel-good factor. The New Scientist, 192, 30–31. Boll, S. (2007). MultiTube—Where Web 2.0 and Multimedia Could Meet. IEEE Multimedia, 14, 9–13. Chevalier, J., & Mayzlin, D. (2006). The effect of word of mouth on sales: Online book reviews. Journal of Marketing Research, 43, 345–354. Cocktail Analysis. (2012). Observatorio de redes sociales [Observatory of Social Networking Sites]. Retrieved from Constantinides, E., & Fountain, S. (2008). Web 2.0: Conceptual foundations and marketing issues. Journal of Direct, Data and Digital Marketing Practice, 9, 231–244. Constantinides, E., Lorenzo, C., & Go´mez, M. A. (2008). Social media: A new frontier for retailers? European Retail Research, 22, 1–27. Craig, E. (2007). Changing paradigms: Managed learning environments and Web 2.0. Campuswide Information Systems, 24, 151–161. Cymfony. (2006). Making the case for a social media strategy. Retrieved from http:// DeFelice, A. (2006). A new marketing medium. CRM Magazine, 10, 32–35. Deshpande, A., & Jadad, A. (2006). Web 2.0: Could it help move the health system into the 21st century? The Journal of Men’s Health & Gender, 3, 332–336. Du, H., & Wagner, C. (2006). Weblog success: Exploring the role of Technology. International Journal Human – Computer studies, 64, 789–798.

Social Media Adoption by Spanish Retailers as Marketing Strategy


Fleishman – Hillard. (2012). Digital influence index annual global study. Retrieved from http:// Grewal, D., Iyer, G. R., & Levy., M. (2004). Internet retailing: Enablers, limiters and market consequences. Journal of Business Research, 57, 703–713. Jain, A., & Ganesh, J. (2007). Harnessing the power of Web 2.0 in online retail. Part II: An implementation roadmap for retailers. White Paper. Retrieved from Karger, D., & Quan, D. (2005). What would it mean to blog on the semantic web? Web Semantics: Science, Services and Agents on the World Wide Web, 3, 147–157. Kolbitsch, J., & Maurer, H. (2006). The transformation of the Web: How emerging communities shape the information we consume. Journal of Universal Computer Science, 2, 187–213. Kotler, P., Kertajaya, H., & Setiawan, I. (2010). Marketing 3.0, from producers to customers to human spirit. Hoboken, NJ: Wiley. Kwun, O., Nickels, D., Alijani, G. S., & Omar, A. (2010). The perceived strategic value of e-commerce in the face of natural disaster: e-Commerce adoption by small businesses in post-Katrina New Orleans. International Journal of Entrepreneurship, 14, 71–84. Li, C., & Bernoff, J. (2008). Groundswell: Winning in a world transformed by social technologies. Boston, MA: Harvard Business Press. Mathwick, C., Wiertz, C., & De Ruyter, K. (2008). Social capital production in a virtual p3 community. Journal of Consumer Research, 34, 832–849. McKinsey. (2007). How companies are marketing online. The McKinsey Quarterly, September. Retrieved from Parise, S., & Guinan, P. J. (2008). Marketing using Web 2.0. Proceedings of the 41st Annual Hawaii International Conference on system sciences, p 281. Regus Report. (2010). A global survey of business social networking. Retrieved from https:// Swaine, M. (2007). Web 2.0 and the engineering of trust. Dr. Dobb’s Journal, 32, 16–18. Yakel, E. (2006). Inviting the user into the virtual archives. OCLC Systems and Services, 22, 159–163. Zhu, F., & Zhang, X. (2010). Impact of online consumer reviews on sales: The moderating role of product and consumer characteristics. Journal of Marketing, 74, 133–148.

Chapter 11

Global Talent Management in Multinational Corporations and the Role of Social Networks Huub Rue¨l, Tanya Bondarouk and Lena Dresselhaus

Abstract Purpose — Current global business challenges and circumstances are responsible for the need for global talent management (GTM) within multinational corporations (MNCs). Social media and networks are becoming key channels for global communication and collaboration. For GTM in MNCs, an effective usage of social media can potentially result in a competitive edge and create value. The purpose of this study is to answer the question of how. Design/methodology/approach — By means of the Delphi method, three groups of experts were interviewed with questionnaires in two rounds: HR managers, HR researchers, and students following a Master of Science program in Business Administration. Findings — The findings show that all groups assessed the necessity of GTM in MNCs. The HR managers and HR researchers agreed on the areas of focus and instruments that are essential for a successful GTM system. But concerning the application of social networks, the groups have different views. The graduate students are especially open-minded about social networks, and therefore they advocate the use of this tool. The HR managers, however, are skeptical toward this new media and even now have not integrated social networks into GTM to a great extent. Originality/value — This study presents a GTM model for MNCs based on the combined findings from the literature review and the Delphi study. To our knowledge, this is a new approach. The model helps researchers and practitioners to align GTM in MNCs with the support of social media. Keywords: Global talent management; social networks; social media; multinational corporations Social Media in Strategic Management Advanced Series in Management, 217–243 Copyright r 2013 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1877-6361/doi:10.1108/S1877-6361(2013)0000011015


Huub Rue¨l et al.

Introduction In the late 1990s, the ‘‘war for talent’’ kicked off a debate on the necessity of talent management (TM) for multinational corporations (MNCs). Despite the fact that global economic growth slowed down during the period 2007–2012, organizations are struggling to attract and retain talented people. As a consequence of this, TM is important today, and companies have to work seriously on it. MNCs can achieve a global competitive advantage by making use of global talent management (GTM) (Schuler & Jackson, 2009). It is important to have the right people with the right competencies and motivation at the right time and in the right location. Therefore, companies need to identify the main drivers and HR actions that help them succeed. But GTM needs to be appropriate for the 21st century (Cappelli, 2008). In these times in particular, characterized by a financial crisis, the strategic issue of attracting, developing, motivating, and retaining talent constitutes one opportunity for surviving this crisis and assists companies in their eventual recovery (Beechler & Woodward, 2009). In this case, social networks could play a decisive part because more and more people are making use of networking communities and using them to find jobs and establish contacts (Murchu, Bresling, & Decker, 2004). The study presented in this chapter aims to expand our knowledge about GTM and the role of social networks. It will explain today’s challenges for GTM as well as the characteristics like areas of focus and instruments of a GTM system including their core objectives. The results of a literature review are combined and extended with the results of a Delphi study that included the views of three groups of experts: HR managers, HR researchers, and graduate students of M.Sc. programs in business administration. In this way we construct a GTM model for MNCs in the social media era. This model displays the structure of a GTM system and the possibility of social media usage facilitating the focus areas and instruments of this system. The leading question of the study is: How can social networks support MNCs in their global talent management?

Global Talent Management and Social Networks: A Literature Review This section defines the core concepts of the study, GTM and social media. The concepts are positioned in the context of the MNC, which is defined as a company that operates in more than one country. These companies can make use of predominantly centralized organizational structures as well as decentralized ones, and consequently, control, authority, power, and operations can reside either mainly at the headquarters or at the local foreign operations. Global Talent Management Definition of talent. According to the literature, it is difficult to identify a precise meaning of ‘‘talent’’ and the term ‘‘GTM’’ itself (Lewis & Heckman, 2006). The historical starting point of TM was the year 1998 when McKinsey & Company,

Global Talent Management and the Role of Social Networks


America’s largest and most renowned management consulting company, published their eminent report declaring that ‘‘better talent is worth fighting for.’’ They made use of research that was based on a year-long survey of 77 large U.S. companies in a variety of industries and 6000 executives, complemented by case studies of 20 companies widely regarded as being rich in talent (Chambers, Foulon, HandfieldJones, Hankin, & Michaels, 1998). According to McKinsey, talent is ‘‘the sum of a person’s abilities y his or her intrinsic gifts, skills, knowledge, experience, intelligence, judgement, attitude, character and drive. It also includes his or her ability to learn and grow’’ (Michaels, Hanfield-Jones, & Axelrod, 2001). Another definition of talent was developed by Ma¨kela¨, Bjo¨rkman, and Ehrnrooth (2010) who argue that most major MNCs define talent as ‘‘those employees who are high performing and continuously improving within their current position y are mobile and have the potential and the willingness for further growth in other key positions.’’ According to this, talented employees have to demonstrate two qualities: current high performance and future potential. David Ulrich uses a holistic approach to talent. In his view, talent equals competence, commitment, and contribution. Ulrich (2006) determines these three as follows: Competence means that employees have the ability to do today’s and tomorrow’s tasks. Commitment means that employees are willing to give their discretionary energy to the firm’s success. Contribution means that employees are making a real contribution through their work. Furthermore, Ulrich (2006) states that ‘‘organizations are the universal setting in today’s environment where individuals find abundance in their lives through their work.’’ They intend to make their investment of time something meaningful. Ulrich’s talent equation presents a multiplicative one instead of an additive. If one of the three terms is missing, the other two will not replace it. Correspondingly, ‘‘talented employees must have skills, wills and purposes; they must be capable, committed and contributing’’ (Ulrich, 2006). In conclusion, there is no clear definition of the term ‘‘talent’’ (Wellins, Smith, Paese, & Erker, 2006). Talent consists of different components: knowledge, skills, personal attributes, and career experience. Many companies only have one definition of talent for every hierarchy, but to these authors it is necessary to distinguish the hierarchical levels and target positions. The different elements of talent can be seen in the following illustration. Knowledge comprises factors like educational achievement and advanced training. Skills involve special talents or selling skills of the person. Personal attributes are factors like motivation, risk affinity, and features. Career experiences contain aspects like the field of action, projects, or former employer. Consequently, it is quite difficult to determine one definition of talent (Figure 1). Definition of global talent management. Another key challenge is to define GTM (Scullion, Collings, & Caligiuri, 2010). These three authors propose the following definition for GTM: ‘‘GTM includes all organizational activities for the purpose of attracting, selecting, developing, and retaining the best employees in the most strategic roles (those roles necessary to achieve organizational strategic priorities) on a global scale. GTM takes into account the differences in both, organizations’ global


Huub Rue¨l et al.

Skills - special talents - selling skills

Career experience - field of action - projects - former employer Personal attributes - motivation - risk affinity - features

Knowledge - educational achievement - training

Figure 1: Elements of talent (Winkler, 2009). strategic priorities and the differences across national contexts for how talent should be managed in the countries where they operate.’’ Michael Armstrong describes GTM in a similar way. In his opinion, TM illustrates a company’s use of an integrated set of activities to guarantee that the organization attracts, retains, motivates, and develops the talented people it needs now and in the future. The purpose is to protect the flow of talent, bearing in mind that talent is a major corporate resource (Armstrong, 2009). David Creelman, however, defines TM in a more abstract way. TM is best seen as a perspective or a mindset instead of a set of topics (Creelman, 2004). This perspective assumes talented employees play a central role in the success of the firm. As a consequence, all the corporate issues have to be seen from the perspective of ‘‘How will this affect our critical talent?’’ and ‘‘What role does talent play in this issue?’’ Creelman (2004) challenges managers to wear TM as a hat, or as a pair of glasses through which they should see the world. His point of view is that TM in practice implies a set of tools and technologies that help organizations make good decisions about talent. Ashton and Morton (2005) see TM as a strategic and holistic approach to both HR and business planning or a new route to organizational effectiveness. Talent, to their mind, should be a strategic balance between performance and potential. Performance concerns both the past and the present, whereas potential embodies the future. They describe TM as the integration of different initiatives or constructs in order to build a

Global Talent Management and the Role of Social Networks


Direct human resource function

TM processes

Indirect human resource function

coherent framework of activity. The crucial components of this framework are: ethos, including values and behavior, to support the view that every employee has the potential to develop further within the company; focus, detecting the jobs that make a difference and filling these jobs with the right people at the right time; positioning, TM should be a management task, thus making use of a top-down approach; structure, applying different tools, processes, and techniques with defined accountability in order to get the jobs done; system, facilitating a long-term and holistic policy to generate change (Ashton & Morton, 2005). Chambers et al. (1998) reinforce the view that managers must elevate TM to an acute corporate priority. Nowadays, there is already a war for talent, and this will intensify in the coming years. Ja¨ger’s (2009) opinion is that TM is a new, overarching key process of HRM. He differentiates direct and indirect personnel functions. The direct personnel function is TM, which can be seen as an HR function and direct executive function of the line managers. The indirect function consists of strategic HRM, organization of HRM as well as HR planning, HR marketing, and HR monitoring. Both have an influence on the processes of TM. With reference to Ja¨ger (2009), there are five different TM processes, namely attraction, recruiting, appraisal, development, and retention. As a result, it is important to understand that TM cannot be isolated from the company’s business strategy (Guthridge, Komm, & Lawson, 2006). TM is a part of the HRM strategy and therefore also a part of the business strategy. The TM strategy must align with the business strategy of a company (Figure 2). In order to understand TM, it is necessary to explain these five steps of a TM process. The first step of the TM process is attraction. The overall strategy of a company should be becoming an employer of choice. In this case, a company should

Strategic human resource management Organisation of human resource management Human resource planning, human resource marketing, human resource monitoring






Talent management as HR function and direct executive function of line manager

Figure 2: Talent management as an overarching key process of HRM (Ja¨ger, 2009).


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aim at establishing a brand image and continuously strive to become a popular employer. The second part, namely recruiting, involves three aspects: 1. defining requirements in the form of job descriptions and specifications, deciding terms and conditions of employment, 2. attracting candidates through reviewing and evaluating alternative applicants, inside and outside the company, advertising, using agencies and consultants, and 3. selecting candidates by sifting through applications, conducting interviews, evaluating candidates, assessment centres, and preparing contracts of employment. The third step of the TM process is appraisal. Appraisals are closely connected with performance management. This can be described as a planned process including elements like agreement, measurement, feedback, positive reinforcement, and dialog between the employer and the employees. It is a kind of systematic process to improve organizational performance by evaluating the performances of individuals and teams as a basis for improvement. This leads to the fourth element, development. Developing talent means ensuring that people obtain and upgrade the skills and competences they need. The final aspect of the TM process is retention. Organizations need to keep their talented employees. Different factors influence retention and have to be considered in detail by both employer and employees: company image, recruitment, selection and deployment, leadership, learning opportunities, and performance recognition and rewards (Armstrong, 2009). An alternative view on the different elements of GTM is presented by Dahm (2007). He identifies five basic elements of TM: profile creation, discovery and address, choice and positioning, personnel development, and loyalty and motivation. Armstrong (2009) sees TM as a kind of a ‘‘bundle’’ that includes many interrelated processes, as shown in Figure 3. Armstrong stresses the fact that the process of TM starts with the business strategy of an organization. Ultimately, the aim is to develop and maintain a pool of talented people. To achieve this, different steps have to be taken by the company. Decisive aspects in this process are the resourcing strategy, attraction and retention policies, role development, learning and development as well as career management. The resourcing strategy defines human capital requirements and leads to attraction and retention policies. These programs ensure that the company both gets and keeps the talents it needs. In terms of role development, it is necessary to determine the responsibility, challenge, and autonomy required for the jobs. The step of learning and development focuses on the process of nurturing talent. This means that the organization has to ensure that employees acquire and enhance the competencies they need to do their job. Career management deals with the processes of career planning and management succession (Armstrong, 2009). Companies like to encourage the idea that their employees are their biggest source of competitive advantage. Guthridge, Komm, and Lawson (2008) base their report on two McKinsey quarterly global surveys. The first survey, from 2006, revealed that finding talented employees will be the single most important managerial activity in the

Global Talent Management and the Role of Social Networks


Attraction and retention policies

Business strategy

Resourcing strategy

External resourcing

Internal resourcing

Continuing talent audit

Career management


Talent relationship management

Performance management

Management development

Management succession

The talent pool

Learning and development

Figure 3: The elements of talent management (Armstrong, 2009). next few years. In 2007, the second survey argued that half of the respondents anticipate increasing competition for talent and an increasingly global nature of that competition. To the respondents, this will be the most significant global trend in the next few years. However, the authors stress that most of the companies are unprepared for this challenge of finding, motivating, and retaining capable employees (Guthridge et al., 2008). According to Scullion et al. (2010) as well as McDonnell, Lamare, Gunnigle and Lavelle (2010), GTM has gathered mainstream acceptance in the professional community as a key management activity. In their opinion, this key strategic issue in this relatively new field of investigation is particularly critical for MNCs for several reasons. First of all, more attention is being paid to globally competent managerial talent as this reflects a critical success factor of MNCs. This is due to stronger global competition and the greater requirement for international learning and innovation in these companies. Next, a shift from the country level to the regional and global levels concerning talent searching is identifiable. Thus, MNCs need to manage talents globally. They have to understand that talents can be located outside their home country. Another argument is that MNCs state that shortages of managerial and professional talent came up as the key HR challenge for MNCs. Thus, these organizations should see GTM as a business priority, and management should invest enough time in creating strategies to attract, motivate, and retain talents (Guthridge et al., 2008).


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McDonnell et al. (2010) investigated the extent to which MNCs already engage in GTM. They discovered that less than half of the 260 MNCs they used for their research have both global succession planning and formal management development programs for their talented employees. The size of an MNC also has an important influence on the results of this research. The larger the company, the more MNCs use GTM. Furthermore, McDonnell et al. (2010) found out that MNCs that operate in low-tech/ low-cost sectors pay more attention to a GTM system. Iles, Chuai, and Preece (2010) focused their research on TM in China on seven MNCs in Beijing. The purpose was to investigate TM perspectives and practices among Chinese MNCs. Especially in China, there is an imbalance between business opportunities and the supply of qualified managers. Consequently, a major challenge to MNCs is the growing need for talented managers. Another key challenge is the development and retention of existing employees. The Chinese organizations studied do not have a consistent definition of TM, but they do all combine it with HRM and identify functional areas like recruitment, selection, training and development, and appraisal and reward management. In addition, they all stressed the importance of this current challenge for MNCs in China. Another investigation was performed by Tymon, Stumpf, and Doh (2010), who focused on GTM in the emerging economy of India as it and countries like it are playing an increasingly important role in the world economy. Attracting, managing, and retaining talent form a continuing challenge for India. They examined a model that predicted relationships between intrinsic rewards and three different outcomes of managerial practices, namely retention, career success, and satisfaction with the organization. Further, the authors developed four antecedents of intrinsic rewards: socially responsible employer, pride in the organization, manager support, and performance management practices. They found out that intrinsic rewards are of great importance and a kind of mediating variable. They advise MNCs to implement nonpecuniary mechanisms to promote retention and employee satisfaction. Hartmann, Feisel, and Schober (2010) concentrated on MNCs in China as this is a country that has extensively promoted FDI. Finding talented employees in China is one of the greatest challenges for these organizations. It is evident that Western MNCs transfer their TM practices to China without decisive changes. These companies stress the development of talented people and the conception of an organizational culture. But according to Hartmann et al. (2010), MNCs must pay more attention to the implementation of an integrated and strategic TM strategy in China. They feel that this new HR topic of ‘‘Talent Management’’ is still at an early stage and has to be developed more in the future. In conclusion, some authors like Dahm (2007) describe GTM as a simple system, others like Ja¨ger (2009) consider it a very complex system with many different interactions, and still others like Armstrong (2009) use more abstract definitions or a holistic approach of this term. However, all the authors see TM as a strategic priority of HRM for the coming decades. MNCs in particular have to focus on this special area. The authors identify different activities that are part of GTM. Furthermore, TM must align with the overall business strategy of the organization.

Global Talent Management and the Role of Social Networks


Target groups and persons responsible for GTM. According to Dahm (2007), there are four different target groups in TM: job starters, professionally experienced employees, returners to employment, and professionals. All these target groups have different requirements and interests. Job starters seek to create identification with the brand and the company; they need educational objectives. They are also seeking success and to carve out a career. Professionally experienced employees focus on promotion, a higher salary, and the wish for responsibility and specialization. Returners can be characterized as flexible workers who need a new challenge. Furthermore, they want a position within the company that offers them financial protection. Professionals seek to undertake a great responsibility. They aim to reach a leading position in order to gain self-realization and involvement at the company. Dahm (2007) also identifies the people who should be involved and responsible for the TM system in an organization. It is important that coordination takes place between the management, and the personnel department and HR. The author emphasizes the significance of communication and integration of the employees, especially in the planning phase. In the first phase of implementation, it is possible to consult an external service provider who helps and supports the management to coordinate the internal TM. Definition of GTM for this research. For this research, the following definition of GTM will be applied. GTM reflects a part of HRM and will be a key strategic issue today and in the future. MNCs have to adapt their TM strategy to their overall business strategy. GTM consists of different elements, namely attraction, recruiting, appraisal, learning and development as well as retention. Consequently, GTM is not only used for recruiting new talented employees, but also to retain experienced employees, returners, and professionals. This definition combines the elements of different definitions and clearly classifies the position within a MNC.

Social Networks Introduction. As early as 2004, Mark Huselid (2004) stressed the importance of IT as people are always confronted with new technologies. The field of HRM in particular has to deal with these rapidly changing issues as well as the consequences of e-HRM. A few years later, Theresa Welbourne (2008) advanced this topic by explaining the role of IT in social networks of HR practitioners and academics. In order to handle the steady rise in the number of HRM papers, Welbourne proposes participation in a social network. The rapid development of the Internet in the last decade has enhanced the role of social networks in daily life (Strohmeier, 2009). More and more people use social networking sites around the world, as shown in Table 1. ComScore, Inc., is a leader in measuring the digital world and did a study of the state of the Internet, including a focus on social networks (2008). Social networks are of great importance not only to private users, but also to MNCs. The latest research by CedarCrestone concerning HR technologies,


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Table 1: Social networking site users in selected countries (comScore, Inc., 2008). Country Canada Brazil UK Mexico Spain US Australia Germany Italy Netherlands Russian Federation India France South Korea Japan China Taiwan

September 2007 (%)

September 2008 (%)

83.9 76.0 78.7 67.3 63.9 65.8 56.5 45.9 53.0 55.7 36.3 50.9 51.4 52.3 56.4 44.7 48.1

86.5 85.3 78.4 73.0 70.7 70.2 67.5 65.5 62.2 61.3 60.7 60.3 59.1 58.3 55.7 50.3 42.9

deployment approaches, value, and metrics in 2009 emphasizes the importance and development of social networks. Their survey is based on more than 1000 respondents who are typically HR managers or directors. Half of them work for global companies. One of the survey’s topics was the social network adoption, which more than doubled from 2008 to 2009. Figure 4 accentuates the meaning of social networks and that the use of these platforms is still increasing in MNCs (CedarCrestone, 2009). As a result, MNCs are increasingly using social networks as a tool within their organizations and applying it in their daily routines. Definition of social networks. A simple definition of a social network is given by the Business Dictionary. Social networks are ‘‘family, and friends and their families, that together create an interconnected system through which alliances are formed, help is obtained, information is transmitted, and strings are pulled. In an organizational setting, it usually constitutes the group of one’s peers, seniors, and subordinates who provide privileged information on how to get things done, how the power structure operates, and who holds the strings at present’’ (Business Dictionary, 2010). The historical background and the basis of social networks come from a study by psychologist Stanley Milgram in the mid-1960s who discovered the ‘‘small world phenomenon’’ or the ‘‘6-degrees-of-separation.’’ This finding claims that every human being is connected with everyone else via a short chain of acquaintance relationships, at most six corners are needed (Koch, Richter, & Schlosser, 2007). A general, theoretical view of a social network can be explained by Figure 5.

Global Talent Management and the Role of Social Networks


No plans to support

Evaluating/not implemented

Use secure instant messaging 2009

Use internal blogs

2008 Use social networking tools such as Facebook for recruiting/branding Use wikis, social networking, etc. for collaboration/knowledge sharing 0








Figure 4: Organizational support for social networks (CedarCrestone, 2009).


Central knot = Hub

Bridge between clusters

Figure 5: Elements of social networks (Koch et al. 2007). Therefore, a social network consists of a set of nodes in the form of actors or groups of actors. It also includes a set of edges, which can be described as social interactions and relationships (e.g., communication relationship or acquaintance) among actors. Thus, a social network can show who communicates with whom, who knows whom, or who trusts whom. It is also possible to distinguish strong and weak ties among actors. In the illustration, clusters of groups of persons who are closely


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related are visible as well as hubs that describe persons who have many contacts with other persons (Koch et al., 2007). Potts, Cunningham, Hartley, and Ormerod (2008) define social networks as a ‘‘connected group of individual agents who make production and consumption decisions based on the actions (signals) of other agents on the social network; a definition that gives primacy to communicative actions rather than to connectivity alone.’’ They also consider separately the two terms ‘‘social’’ and ‘‘network.’’ To their mind, social in this sense means the capability of one person to connect to and to interpret information that is generated by other persons, and to communicate. Network in this sense means that these are specific connections (often technological). It does not have to do with an abstract group of a nation, people, or suchlike (Potts et al., 2008). There are now several social networks available. Facebook (about 1 billion active users), MySpace (more than 260 million users), Twitter (more than 175 million users), Flixster (more than 30 million unique visitors per month), LinkedIn (more than 80 million users), and Xing (more than 10 million users) belong to the most important ones in the world. More and more people make use of these social networks, and mostly, they are not members of just one social network but of different networks (Webtrends, 2010). Functions of social networks. Social networks can have different functions for the users. The most decisive functions are: identity management, expert search, context awareness, contact management, and common interchange (Richter & Koch, 2008). Identity management means a self-presentation of the user. Social networks offer different kinds of self-presentations. Attention should be paid to the differences between cultures. The German network XING, for example, differs from the American network LinkedIn. As it is common in America to apply for a job without a passport photo, users do not upload a photo on LinkedIn. In Germany, however, the passport photo is very important for XING. Another function is the expert search. This means that users seek experts for a special topic in order to gain knowledge or solutions for complex problems. By doing so, they can save time and money. In a third aspect, it is necessary in organizations to have a cooperation based on trust as confidence is the foundation of human relationships. In order to establish this confidence (context awareness), network users see the personal network of other users. Contact management includes the care of the personal network, for example, the administration of the contact information. The last possible main function for users of social networks is the common interchange. Social networks offer the possibility of communicating via forums (Richter & Koch, 2008). Advantages and disadvantages of social networks. Social networks have both advantages and disadvantages. They offer a fundamental space for actors to convene and operate in. The users can also socialize and exchange information about specific topics. Furthermore, social networks facilitate coordination and communication and encourage mutual trust. In total, this establishes and reinforces relationships between different actors (Beck, 2008).

Global Talent Management and the Role of Social Networks


A disadvantage, on the other hand, could be the risk of dependence as the actors need to use these networks every day. Also, social networks can create differences between members and nonmembers. The danger exists that nonmembers will not understand the behavior of social network members. Moreover, a risk of corruption exists when actors change their behavior due to imitation and absorption of manners (Beck, 2008). Definition of social networks for this research. The following definition will be used in order to represent the consensus-based understanding of social networks. A social network is a system of social interactions between different actors who can be individuals as well as companies. It includes different types of relationships, which can involve strong or weak ties. Concerning GTM, social networks represent a technological tool in order to support recruitment, selection, training and development as well as appraisal and reward management.

Research Model Based on this literature review we propose an initial model, which will be improved and extended in the course of study. Ultimately, elements, motivations, as well as goals, can be determined after using the method. Social networks will be seen as a tool that encourages the process of GTM in different functions. Finally, this supporting tool of the new HR task GTM will lead to a successful MNC in the form of accomplishing organizational goals as well as employee loyalty (Figure 6). This model is too general, however. It has to be extended by including more explicit aspects of its different elements. First of all, it is quite important to add the HR challenges, which are significant for establishing a GTM system within an

Tool: Social Networks

Global Talent Management

Support of recruitment, selection, training and appraisal

elements motivations goals

Figure 6: General research model.

Successful MNC Accomplishing organizational goals Employee loyalty


Huub Rue¨l et al.

HR Challenges

tool for

lead to

need of

Social Networks - attraction - recruitment - selection - training - appraisal - representation

Global Talent Management elements instruments motivations goals

leads to Successful MNC - performance improvement - employee loyalty - employer brand

Figure 7: Advanced research model. organization. It is essential to determine the most decisive HR challenges in order to ascertain the centrality of GTM in MNCs. Furthermore, instruments can be decisive in GTM, and therefore, they have to be analyzed in detail (Figure 7).

Methodology Introduction The selected research technique is the Delphi method. It makes use of ‘‘a group of people who are either involved or interested in the research topic to generate and select a more specific research idea’’ (Saunders, Saunders, Lewis & Thornhill, 2011). The Delphi technique is a flexible research method and has been successfully implemented for exploring new concepts. It is particularly suitable as a research methodology when there is partial knowledge about a problem or phenomenon (Skulmolski, Hartman, & Krahn, 2007). Consequently, it will be useful for this research about GTM and the role of social networks as it describes a new field of research in HRM. The Delphi approach comprises an iterative process in order to collect the judgments of experts using a series of questionnaires with feedback for them. Each subsequent questionnaire is developed on the basis of the results of the previous one. The process ceases when the research question is answered (Skulmolski et al., 2007). Thus, the Delphi model can be qualified as a method for structuring a group communication process so that the procedure is effective in engaging a

Global Talent Management and the Role of Social Networks


group of individuals, as a whole, to deal with a sophisticated problem (Okoli & Pawlowski, 2004). The Delphi method has its origin in the RAND Corporation in the 1950s when Norman Dalkey developed it for a U.S.-sponsored military project in order to acquire expert opinion on the selection (Skulmolski et al., 2007). Rowe and Wright (1999) identified four principal characteristics for the Delphi method: anonymity of Delphi participants, iteration, controlled feedback, and statistical aggregation of the group response. The participants can freely express their opinions on the topic. They can refine their views from round to round. They are given access to the other participants’ opinions, and this gives them the chance to clarify or change their own views. Furthermore, a quantitative analysis and interpretation of data are possible. This methodology has various advantages. First, the respondents are always anonymous to each other, but not to the researcher, who thus has more opportunities to follow up explanations. Second, nonresponse is very low with the Delphi method as the researcher makes personal contact and seeks confirmation of participation before distributing the questionnaire. As there are several rounds of questionnaires and feedback sessions, the Delphi method contains richer data. The participants are also willing to conduct a follow-up interview (Okoli & Pawlowski, 2004). In this case, the Delphi method is a very useful tool for collecting opinions from different experts who are involved in this research area of the role of social networks in GTM. The aim is to build a model for MNCs in order to ensure the successful integration of social networks in GTM. The procedure of a two-round Delphi procedure will be presented in Figure 8. A three-round process is also possible. If the results after two rounds do not produce the answer to the research question, it will be necessary to create a third round to come to a conclusion.

Experience Research Question

Research Design

Research Sample

Delphi R1 Design

Delphi R1 Survey and Analysis

Delphi R2 Design

Delphi R2 Survey and Analysis

Literature Review

Research Documentation and Generalization

Figure 8: Two-round Delphi process (Skulmolski et al. 2007).


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Questionnaire Because of the use of the Delphi method in this study, different questionnaires were needed for different expert groups (available upon request). The graduate students received a survey with questions in three different sections: general questions, talent management, and social networks and employer brand. The HR researchers received questions of the same sections as well as an additional one, namely HR challenges. The HR managers received the most extensive questionnaire, consisting of the same four different sections: general questions, HR challenges, TM, as well as social networks, and employer brand. But the managers were asked to answer more questions in the different sections. The students received fewer questions because it was assumed that they have no or only limited access to working life and executive functions. The HR researchers investigate GTM and social networks, but they have fewer managerial functions and exercise less responsibility in a company. The HR managers were asked to fill out the most exhaustive questionnaire as they were assumed to be able to provide the most information about this research topic. After preparing the questionnaires with the responsible advisor as well as feedback from two HR researchers and two graduate students, the final questionnaires were sent to the three different expert groups. In total, 15 students from different universities, 28 HR researchers, and 44 HR managers from different countries were asked to complete the questionnaire. After getting the documents back, the answers were analyzed. The participants received the consolidated results along with further questions and a request for comments to go more into detail. Furthermore, they had the chance to rank different aspects of TM and social networks again if they changed their opinions after being confronted with the opinions of the other participating experts.

Sample The research sample consisted of experts of three different groups, namely HR managers, HR researchers, and graduate students of M.Sc. programs in business administration. They were chosen for this study because members of all these groups have the ability to evaluate this research area. They all acquire knowledge of this topic. Some HR managers had already implemented a GTM system in their company, or planned to do so in the foreseeable future. Thus, they should all be interested in this domain. HR researchers deal with current topics in HRM. Many of them had already investigated special aspects of this field of study. As the graduate students represent the group of future employees and potential talents within an organization, it makes sense to integrate them in this process. As the Delphi method only focuses on experts, data was collected by asking approximately 10 people of each of the three groups. By means of the Forbes Global 500 list as well as personal contacts, the addresses of HR managers were filtered out. The group of students consisted mainly of M.Sc.

Global Talent Management and the Role of Social Networks


students of the University of Twente as they represent the next generation who will belong to the recruitment group of talented people. All of the potential respondents were asked via e-mail whether they were willing to participate in this study.

Findings Introduction In total, 28 of the 87 invited experts agreed to take part in the survey. This is a total response rate of 32.19%. Ten forms were completed by students, corresponding to a response rate of 66.7% in this group. Nine forms were completed by HR researchers, which represents a response rate of 32.14%, and finally nine forms were completed by HR managers, a response rate of 20.45%. In the second round of the Delphi method, the 28 participants were again asked to answer and improve further questions. This time, only two researchers, three managers and five students answered within the set time limit. This is a response rate of 35.7%. Therefore, the results can be seen as subordinated facts, but particular occurrences will be included in the discussion. In a first step, the results are presented by expert group. Thus, there will be one section for the results of the master students, one section for the HR researchers, and one section for the HR managers. After that, the focus will be on comparing and summarizing the results of these expert groups in a separate section.

Comparisons of Finding First, we looked at the expert groups’ assessment of the challenges facing HR. It is noticeable that HR researchers and HR managers have totally different opinions on this topic. In general, the HR managers gave lower scores for the specified HR challenges. For them, MNCs mainly have to deal with new HR techniques as well as the lack of professionals and managers. The researchers, however, think that MNCs should focus on recruitment and replacement of leading positions. It is also remarkable that the researchers mentioned many additional HR challenges. They obviously have to be concerned more with future challenges than HR managers. But the HR managers appreciate that employer branding and TM are the most decisive HR concepts in the future (Table 2). In order to produce a definition of TM, the researchers and managers were asked to evaluate elements and instruments of TM. In this case, the two expert groups had similar opinions. Identification, attraction, and development are clear elements of TM. Instruments like cooperation with universities, on-the-job training, talentoriented career models as well as off-the-job training are indispensable instruments of TM (Table 3 and 4). In the next step, the expert groups determined the goals of TM. For all participants, performance improvement is one of the most decisive goals. It is


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Table 2: Findings for HR challenges. HR researchers 1. Replacement of leading position (3.89) 2. Strategic realignment (3.67) 3. Difficulty in recruiting employees (3.67) 4. Lack of professionals (3.44)

HR managers 1. Implementation of HR techniques (3.78) 2. Lack of professionals (3.56) 3. Lack of managers (3.44) 4. Strategic realignment (3.00)

Table 3: Findings for TM elements. HR researchers

HR managers

Identification Attraction Selection Development Retention

Motivation Identification Development Attraction Retention

Table 4: Findings for TM instruments. HR researchers Cooperation with universities (3.78) On-the-job training (3.44) Talent-oriented career model (3.38) Off-the-job training (3.22)

HR managers On-the-job training (4.33) Cooperation with universities (3.75) Talent-oriented career model (3.25) Off-the-job training (3.25)

conspicuous that the HR managers think TM also puts emphasis on employee satisfaction and the succession planning of managers (Table 5). Furthermore, the three groups have quite different opinions concerning social media usage on company time. Most of the students like to use all social media without restrictions, while HR managers prefer to block some services (Figure 9). Likewise, they had to estimate the different suitable factors of social media. It is evident that master students and researchers see social media as a tool to enhance

Global Talent Management and the Role of Social Networks


Table 5: Findings for TM goals HR researchers  

HR managers

Performance improvement Employer branding


Master students

Succession planning of managers Employee satisfaction Performance improvement

Performance improvement

GTM Model


Goals Primary goal:





DevelopRetention ment


Performance improvement

Secondary goals:


1. 2. 3. 4.

Employer branding

On the job training Cooperation with universities Off the job training Talent-oriented career model

Employee satisfaction

Tool: Social networks

Figure 9: Findings for future social media usage. Table 6: Findings for suitability of social networks. HR researchers 


Enhance employer branding Recruitment instrument Use employees as ambassadors

HR managers  

Review applicants Use employees as ambassadors Enhance employer branding

Master students 

Enhance employer branding Recruitment instrument Review applicants

employer branding and as a recruitment instrument. The managers, however, are of the opinion that social media are useful in order to use employees as ambassadors and to review applicants, but they do not classify them as a recruitment instrument (Table 6).


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Table 7: Findings for reasons for social networks. HR researchers   

HR managers

Identity management Contact management Common interchange


Master students

Common interchange Contact management Context awareness


Contact management Identity management Job search


HR researchers

use unrestrictedly restricted temporally blocked for some services blocked for every service I cannot answer

use unrestrictedly restricted temporally blocked for some services blocked for every service I cannot answer





10% 10%

22% 0%



Master students

use unrestrictedly restricted temporally blocked for some services blocked for every service I cannot answer

0% 40% 50%


Figure 10: Findings for future role of social media.

Global Talent Management and the Role of Social Networks


In addition, the participants were asked to elaborate on the social networks they use (have their own profile). Almost every student has at least one online profile, preferably on Facebook or LinkedIn. Of the researchers 78% have online profiles, most of them also on LinkedIn or Facebook. Of the HR managers, however, 56% do not have any online profile. Only a few of them also have a profile on Facebook or LinkedIn. In total, all the expert groups prefer the two mentioned social networks, Facebook and LinkedIn. The main reasons for social networks are quite similar for the three expert groups. They all agree that contact management and common interchange are very important in this sense. Researchers and students specify identity management, whereas only the students intend to use social networks for job seeking (Table 7). The evaluation of the future role of social media is attractive to researchers. All of the researchers and all of the students state that social media will play an increased role in HRM in future. The opinion of the HR managers, nevertheless, can be split into different aspects: 67% agree that it will play an increased role, but 11% say that it is only a temporary fashion and will decrease in future, and 22% cannot make an estimate of it. Consequently, social media play a quite different role for HR managers (Figure 10). In the last part of the questionnaire, the participants had to focus on employer brand. The requirements of future employees are key in this case. According to all experts, there are three main requirements, namely a good working climate, the opportunity for development, and challenging tasks. HR managers also state that a good salary is crucial for new employees. Master students, who represent this group of new employees, intend to focus more on the balance between private and working life, however. It is also salient that the students require an international field of action, whereas HR managers and researchers give a low score for this aspect (Table 8). Finally, all parties concerned were asked to designate aspects that represent a competitive advantage in the ‘‘war for talent.’’ According to master students and HR researchers, it is evident that there are three main factors: activities, industry, and wage salary structure in order to remain competitive. The HR managers agree with

Table 8: Findings for requirements of future employees. HR researchers 1. Challenging tasks 2. Opportunity of development 3. Good working climate 4. Sustainability 5. Good salary

HR managers 1. Good working climate 2. Challenging tasks 3. Opportunity of development 4. Good salary 5. Multifaceted opportunities

Master students 1. 2. 3. 4.

Good working climate Opportunity of development Challenging tasks Balance between private and working life 5. International field of action


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the aspects of activities and wage salary structure, but they also mentioned attractive products as significant.

Conclusions and Recommendations Conclusions The key objective of the research is to expand our knowledge about GTM and social networks. The main research question is: How can social networks support multinational corporations in their global talent management? This study shows that social networks play a decisive role in the daily life of many people, including HR managers, HR researchers, and master students. The students especially have grown up with social networks, know how to use them, and do use them to a great extent for various activities, even for their job searches. This has to be considered from two viewpoints. On the one hand, the use of internal social networks within an organization can be viewed as an important support for MNCs because the participants designated the reasons ‘‘contact management’’ and ‘‘common interchange’’ as the most important aspects for using social networks. Thus, if an MNC has an internal social network for its employees, these reasons can be fulfilled, and the employees can benefit from contact with their colleagues as well as a common interchange, especially about issues concerning their job and the organization. This internal communication can be a significant element of the company. Thanks to this element, employees might feel satisfied and accepted in the MNC and able to identify with their employer. As a consequence, elements of GTM like motivation, development, or retention can be achieved to a certain degree. On the other hand, this research focuses on external social networks. More and more people are creating online profiles on a variety of social networks. This is sometimes seen as a risk, but simultaneously offers a pivotal opportunity. Social networks can reflect an extensive potential for MNCs to accomplish their GTM goals. Different goals can be attained by using social networks for GTM. Since HR managers state that they intend to use social networks in order to use employees as ambassadors of their organization, it is remarkable that they do not put much emphasis on recruiting future employees with the help of social networks. Thus, on the one hand, these social networks are a tool to represent their MNC worldwide, but on the other hand, they have not used it thus far to find potential employees. This aspect could be developed for MNCs. In order to sum up the conclusions of this thesis, a GTM model including social networks was developed for MNCs. The combination of the literature review with the findings of this thesis led to a suitable GTM model. Guthridge et al. (2006) already mentioned that TM is a part of the HRM strategy, and consequently, the researchers and managers had to evaluate HR challenges. To the researchers’ minds, the replacement of leading positions, strategic realignment,

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and the difficulty of recruiting employees are crucial. The HR managers stressed the implementation of HR techniques, lack of professionals, and lack of managers. Therefore, it is evident that creating a TM system within an organization is often the key to success. If a company creates a distinct GTM system, it can be easier to accept these challenges. Especially the lack of managers, professionals, and leading positions can be solved in the long run. But companies have to start now to focus on this special HR issue. As a consequence, it is plausible that the current and future HR challenges will lead to the need for GTM within MNCs. According to Guthridge et al. (2006), the organizations are still unprepared for finding, motivating, and retaining capable employees, but they realized the importance of doing so and should now invest more time in this HR issue. The GTM elements and instruments can be summarized in Figure 11. There are six different main elements, which are equally important for the company. In order to implement these aspects, organizations make use of the four most decisive GTM instruments. If a company combines these different elements with the instruments, they will make successful use of a TM system within their organization and can achieve performance improvement as well as employer branding and employee satisfaction. This GTM model can be seen as a combination of different models presented in the literature review and the outcomes of this research. Previous research has shown that there are many different models, which try to define GTM. Consequently, we produced our own GTM model that can be compared with the conclusion of Scullion et al. (2010), who also determined selection, attraction, development, and retention as elements of TM. Armstrong’s (2009) extensive model seems to be equivalent to a

HR researchers

HR managers

Master students

22% 100%

11% 67%


Social media will play an increased role in future Social media will play an increased role in future

Social media is only a temporary fashion and will decrease I cannot say

Figure 11: Global talent management model.

Social media will play an increased role in future


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certain degree as he stresses the importance of attraction, retention, motivation, and development. Furthermore, Creelman (2004) mentioned that GTM is a set of tools and techniques that helps organizations to make good decisions about talents. This can be reflected in the choice of instruments in the GTM model. Social networks represent a tool that should encourage use of these instruments. On-the-job training generally involves a trainer who accompanies the employees along the way. Thus, networks can be used for feedback and act as a communication platform between trainer and employee. Considering the cooperation with universities, social networks like LinkedIn or Facebook could be useful in order to promote possible future employees. A talent-oriented career model intends to advance social, functional, and methodological competencies in order to achieve the employees’ personal developmental targets. In this case, social networks could support different functions. A social network in the form of a communication platform for all of the employees could uphold their social competencies. Online training courses with the help of internal social networks could further their functional competencies. Altogether, these tools or instruments should help the company to make the right decision and to achieve its organizational goals.

Limitations As this study made use of the Delphi method, only a specific number of participants were involved. In total, 28 respondents were selected for the evaluation. Thus, this field research can be used to suggest trends. Due to the small number of participants, it is difficult to consider the results of the questionnaire representative. But in consideration of the given timeframe and its limited size, a master thesis cannot be seen as quintessentially completed research about one topic. It was difficult to find participants willing to guarantee their response; thus, I was satisfied with 8–10 persons in each group for the empirical part. In any case, the Delphi method does not require more respondents. As the HR managers and the HR researchers represent a diversified group of experts, the students might be a homogenous group. They are from different universities, but all of them are doing a M.Sc. in business administration. This might represent a restricted view because this group could be too homogenous. Aspects of the questionnaire could be assessed in a different way if the participants were students of another course of study, for example, psychology. Another limitation is the poor response in the second round of the Delphi method. Only 26% completed the second questionnaire. As agreed before the second round with the supervisor, a response rate of at least 50% of each expert group would be meaningful. Thus, these results have not been considered to a great extent. As a consequence, it is important to make it clear to the participants that they do have to complete at least two rounds to achieve results. HR managers are especially difficult to recruit for this research as they receive many invitations to take part in research and cannot afford the time to participate in every survey. We would like to confirm that the Delphi method was used exclusively in this research. It is an interesting, meaningful method, but its implementation presents various obstacles.

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In addition, it is important to discuss the reliability and validity of any research. This reliability cannot be assured as only three expert groups of 8–10 people were invited, and it is possible that other experts would evaluate the different GTM issues in a different way. But especially in terms of the HR researchers and the HR managers, the experts were chosen very carefully. The HR researchers are specialists in GTM and social networks as they have already researched this field. The HR managers work for quite different companies in different industries, and thus it was a diversified group of experts. Only the students, who represent the less crucial expert group as they have not been directly confronted with this research topic, are all M.Sc. students of business administration and therefore form a homogenous group. Questions about GTM and social networks within an organization cannot be described as unequivocally reliable, but personal questions of the assessment of different elements and goals can be assumed to be reliable as the experts were selected in a diversified way. In the context of this study, the external validity is especially important. In this case, the results can be considered valid because the participating HR managers, the most decisive expert group, as well as the HR researchers belong to a heterogeneous group. The graduate students, however, cannot be assumed to be valid because they are all doing the same course of study and probably have similar sentiments and opinions.

Future Research As GTM is a relatively new HR topic, research into it is still at an early stage. Thus, it is difficult to compare these new results with already published data. In the foreseeable future, more and more studies about GTM and social networks will be conducted, and simultaneously, it will be possible to compare new findings with older ones. This should be done in order to go into more detail in this research field. In this study, new and more profound topics have emerged that should be investigated. In the literature review, the studies focused mainly on Asian countries, like India or China. This should be modified by looking also at European and American countries. How is GTM already implemented in European MNCs or American MNCs, and how do they intend to deal with it in future? It would also be advisable to look at the different elements of GTM. How can they be measured and implemented successfully in an MNC? In addition, employees should be integrated more in the GTM process and the role of social networks. One line of investigation could involve how to convince HR managers to make more use of social networks for different GTM elements. Concerning the methodology, the Delphi method seems to be appropriate in general as GTM is a new research theme, but it would be advisable to have a larger group of expert subjects, especially the HR managers as they play the most decisive role here. Given the novelty of this research field, it is useful to employ different expert groups of managers, researchers, and students, but in the future it would be expedient to integrate HR managers to a greater extent as they represent the main


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target group which intends to implement a TM system within their organizations. For further research, employees should be the target group as they have to be integrated more in the process of GTM and social networks. Another important recommendation for future research is to test the results in practice. Case study research would be a good solution. It is essential to discover whether the current outcomes are implementable in MNCs. Especially the instruments of the GTM model, like cooperation with universities or on-the-job training, should be monitored in practice to estimate their effectiveness. New perceptions could be gained and the current GTM model improved.

References Armstrong, M. (2009). Armstrong’s handbook of human resource management practice (11th ed.). London: Kogan Page. Ashton, C., & Morton, L. (2005). Managing talent for competitive advantage. Strategic HR Review, 4, 28–31. Beck, C. (2008). CeBIT Forum HR ‘Rekrutieren in sozialen Netzwerken – Zwischen Illusion und Wirklichkeit. Retrieved from Beechler, S., & Woodward, I. C. (2009). The global ‘‘war for talent’’. Journal of International Management, 15, 273–285. Business Dictionary. (2010). Business dictionary. Retrieved from Accessed on April 13, 2010. Cappelli, P. (2008). Talent management for the 21st century. Harvard Business Review, (March), 1–9. CedarCrestone. (2009). CedarCrestone 2009–2010 HR systems survey: HR technologies, deployment approaches, value, and metrics (12th Annual ed.), Alpharetta, GA: CedarCrestone. Chambers, E. G., Foulon, M., Handfield-Jones, H., Hankin, S. M., & Michaels, E. G. (1998). The war for talent. The McKinsey Quarterly, 3, 1–8. comScore, Inc. (2008). Retrieved from Accessed on April 20, 2010. Creelman, D. (2004). Return on investment in talent management: Measures you can put to work right now. Washington, DC: A Human Capital Institute Position Paper. Dahm, J. (2007). Talent management – ein Praxishandbuch. Norderstedt: Books on Demand. Guthridge, M., Komm, A. B., & Lawson, E. (2006). The people problem in talent management. The McKinsey Quarterly, 2, 6–8. Guthridge, M., Komm, A. B., & Lawson, E. (2008). Making talent a strategic priority. The McKinsey Quarterly, 1, 49–59. Hartmann, E., Feisel, E., & Schober, H. (2010). Talent management of western MNCs in China: Balancing global integration and local responsiveness. Journal of World Business, 45, 169–178. Huselid, M. A. (2004). Editor’s note: Special Issue on e-HR: The Intersection of information technology and human resource management, Human Resource Management, 43, 2/3, 119. Iles, P., Chuai, X., & Preece, D. (2010). Talent management and HRM in multinational companies in Beijing: Definitions, differences and drivers. Journal of World Business, 45, 179–189.

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Ja¨ger, W. (2009). Talent management is personal management. In W. Ja¨ger & A. Lukasczyk (Eds.), Talent management – Strategien, Umsetzung, Perspektiven (pp. 15–24). Ko¨ln: Luchterhand. Koch, M., Richter, A., & Schlosser, A. (2007). Produkte zum IT-gestu¨tzten Social Networking in Unternehmen. Wirtschaftsinformatik, 49(6), 448–455. Lewis, R. E., & Heckman, R. J. (2006). Talent management: A critical review. Human Resource Management Review, 16, 139–154. McDonnell, A., Lamare, R., Gunnigle, P., & Lavelle, J. (2010). Developing tomorrow’s leaders – Evidence of global talent management in multinational enterprises. Journal of World Business, 45(2), 150–160. Michaels, E., Hanfield-Jones, H., & Axelrod, B. (2001). War for talent. Boston, MA: Harvard Business School Press. Ma¨kela¨, K., Bjo¨rkman, I., & Ehrnrooth, M. (2010). How do MNCs establish their talent pools? Influences on individuals’ likelihood of being labelled as talent’. Journal of World Business, 45, 134–142. Okoli, C., & Pawlowski, S. D. (2004). The Delphi method as a research tool: An example, design considerations and applications. Information and Management, 42, 15–29. O’Murchu, I., Bresling, J. G., & Decker, S. (2004). Online social and business networking communities. In proceedings of ECAI 2004 workshop on application of Semantic Web Technologies to web communities. Potts, J., Cunningham, S., Hartley, J., & Ormerod, P. (2008). Social network markets: A new definition of the creative industries. Journal of Cultural Economics, 32(3), 167–185. Richter, A., & Koch, M. (2008, May). Functions of social networking services. In Proceeding of international conference on the design of cooperative systems (pp. 87–98). Springer. Rowe, G., & Wright, G. (1999). The Delphi technique as a forecasting tool: Issues and analysis. International Journal of Forecasting, 15(4), 353–375. Saunders, M. N., Saunders, M., Lewis, P., & Thornhill, A. (2011). Research methods for business students (5th ed.). Pearson Education India. Schuler, R. S., & Jackson, S. E. (2009). The global talent management challenges: Drivers and HR actions for attaining and sustaining global competitive advantage. Zurich: Rutgers University. Scullion, H., Collings, D. G., & Caligiuri, P. (2010). Gobal talent management. Journal of World Business, 45, 105–108. Skulmolski, G. J., Hartman, F. T., & Krahn, J. (2007). The Delphi method for graduate research. Journal of Information Technology Education, 6, 1–21. Strohmeier, S. (2009). Concepts of e-HRM consequences: A categorisation, review and suggestion. The International Journal of Human Resource Management, 20(3), 528–543. Tymon, W. G., Stumpf, S. A., & Doh, J. P. (2010). Exploring talent management in India: The neglected role of intrinsic rewards. Journal of World Business, 45, 109–121. Ulrich, D. (2008). The talent trifecta. Development and Learning in Organizations, 22(2). Webtrends. (2010). Retrieved from Accessed on April 20, 2010. Welbourne (2008). Editor’s-in-Chief note: Technology, HRM, and ‘‘Me’’, Human Resource Management, 47, 3, 421. Wellins, R. S., Smith, A. S., Paese, M. J., & Erker, S. (2006). Nine best practices for effective talent management. Bridgeville, PA: DDI (Development Dimensions International). Retrieved from Winkler, J. (2009). ‘Talent Management – einem Fu¨hrungskra¨ftemangel mit zielgerichtetem Personalmanagement vorbeugen – Konzepte – Gestaltungsempfehlungen – Praxisbeispiele. Hamburg: Diplomica Verlag.

Chapter 12

Culture and Social Media: Exploration of Differences Between the United States and Japan Satoko Suzuki and Kosuke Takemura

Abstract Purpose — To explore and examine cultural differences in the consumer attitudes toward social media. Methodology/approach — Internet survey. Findings — The influence of culture toward the consumer attitudes in social media may be less salient compared with other consumer behaviors. Research limitations/implications — This study is exploratory in nature. Practical implications — To encourage managers to revisit the issue of globalization versus localization, particularly in the domain of social media. Originality/value of paper — This study is one of the first attempts in exploring cultural differences in the consumer behavior of social media. Keywords: Social media; cultural differences; West and East

The Internet and social media are increasing their importance for many companies around the world. They are changing the advertising scenes by cutting into the traditional media. According to ZenithOptimedia, a unit of advertising agency Publicis, the Internet would overtake newspapers to become the second most popular advertising medium behind television in 2013 (Abboud, 2012). Furthermore, social

Social Media in Strategic Management Advanced Series in Management, 245–258 Copyright r 2013 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1877-6361/doi:10.1108/S1877-6361(2013)0000011016


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media allows companies to connect with customers on a global level. For example, through Facebook, companies are able to connect with customers no matter where they are in the world. Hence, the Internet and social media are considered as effective media for global advertising, the use of standardized advertising in multiple national markets (Keegan & Green, 2000; Ko, Roberts, & Cho, 2006). Despite the growing importance of social media in global communications, very few studies investigate cultural differences in social media. From the cross-cultural marketing perspective where companies try to keep the balance between standardized and localized approaches, the investigation of cultural differences is indeed important. Consumers from different cultures may vary in their attitudes toward social media. In this chapter, we explore cultural differences in social media through a replication of a study that examined the role of individual-level factors among the U.S. consumers’ attitudes toward social media (Gangadharbatla, 2008) in Japan. The U.S. and Japan are often compared in the cross-cultural studies as they represent West and East, respectively. West and East have been identified as having differences in norms and values (e.g., individualism/collectivism; Triandis, 1995), self-views (e.g., independent/interdependent self-construal; Markus & Kitayama, 1991), and cognition (e.g., analytic/holistic thinking; Nisbett, Peng, Choi, & Norenzayan, 2001). We find that the influence of culture toward consumer attitudes in social media may not be as significant as in other consumer behaviors.

Literature Review Cultural Differences in the Internet Use Very few studies investigate the cultural differences in consumers’ attitudes toward social media. In a related area, the cross-cultural studies for consumers’ uses and attitudes toward the Internet have been carried out (e.g., Chau, Cole, Massey, Montoya-Weiss, & O’Keefe, 2002; Ko et al., 2006; Park & Jun, 2003). For example, Chau et al. (2002) explored whether consumers in different countries with different ethnic origins use the Internet for different purposes. They found that while the patterns of online consumer purchasing are gradually becoming standardized, the U.S. and Hong Kong online consumers use the Internet for different purposes. In particular, the U.S. sample reported significantly more use of the Internet for information search and e-commerce, whereas the Hong Kong sample reported significantly more use of the Internet for social communications and hobby activities. Ko et al. (2006) examined cultural differences in motivations in using the Internet. They found that the U.S. sample had a higher degree of information and convenience motivations, while the Korean sample had a higher degree of social interaction motivation in using the Internet. No statistically significant difference was identified for entertainment motivation. Park and Jun (2003) also examined cultural differences between the U.S. and Korea, focusing on the Internet usage, perceived risks of

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Internet buying, and Internet buying behaviors. They found that there were significant differences in the Internet usage and perceived risks of Internet shopping, but no significant differences in the Internet buying intentions or online buying experience. The period of Internet usage in the U.S. sample was longer than that in the Korean sample, but the hours of Internet use per week in the Korean sample was longer than that in the U.S. sample. The Korean online consumers were more innovative than the U.S. online consumers; however, they showed higher perceived risk on privacy and security as well as on product than the U.S. online consumers. To summarize, the cross-cultural studies in consumers’ uses and attitudes toward the Internet show differences between West (e.g., the U.S.) and East (e.g., Hong Kong and Korea), although the standardization is advancing in the Internet. In the next section, we will discuss about psychological differences between West and East, which may be the underlying factor responsible for cultural differences in consumers’ attitudes toward the Internet.

Psychological Differences Between West and East People are deeply influenced by culture. Researchers in cultural psychology have explored and identified how cultures shape the human cognition, emotion, and motivation in different ways. In particular, numerous works have shown that people think and behave differently in West and East (e.g., Hofstede, 1980). Researchers have examined cultural differences accompanied by the distinct value systems (individualism/collectivism; Triandis, 1995), conceptions of selfhood (independent/ interdependent self-construal; Markus & Kitayama, 1991), and basic cognition (analytic/holistic thinking; Nisbett et al., 2001). Each of these perspectives will be reviewed next. Cultures possess different values (e.g., Hofstede, 1980; Smith & Bond, 1999). For example, Hofstede (1980) has identified four value dimensions that explain cultural differences: power distance, individualism versus collectivism, masculinity versus femininity, and uncertainty avoidance. Hofstede’s approach has been pursued by a number of other researchers (e.g., Schwartz, 1991); however, the most widespread research program in the value tradition has focused on the individualism-collectivism dimension (e.g., Triandis, 1995). Individualism refers to a cultural system of norms and values that emphasizes individual freedom, autonomy, personal fulfillment, and free choice. In contrast, collectivism emphasizes community, duty, and the maintenance of group harmony. Researchers have operationalized this dimension at both the country level and at the individual level. Most often, North Americans and Europeans (i.e., West) are viewed as individualist while East Asians (i.e., East) are seen as more collectivist (Peng, Ames, & Knowles, 2001; see also Oyserman, Coon, & Kemmelmeier, 2002). Self also plays an important role in exhibiting cultural differences. The self is experienced differently in various cultures. Markus and Kitayama (1991) have suggested that the psychology of self varies across cultures. They have described two culturally driven ways of being a self: independent and interdependent.


Satoko Suzuki and Kosuke Takemura

An independent construal of self, prevalent in West, is characterized by a sense of autonomy, of being relatively distinct from others; the self is separate from others and bounded by the individual person. In contrast, the interdependent construal of self, prevalent in East, is characterized by an emphasis on the interrelatedness of the individual to others; the self is represented in relation to others. Numerous researchers such as Heine and Lehman (e.g., Heine & Lehman, 1995, 1997; Heine, Takemoto, Moskalenko, Lasaleta, & Henrich, 2008) and Singelis (e.g., Singelis, 1994), to name a few, have followed Markus and Kitayama (1991) and explored this cultural dimension of selfhood (for a recent review, see Markus & Kitayama, 2010). The value and self traditions have been dominant in the cultural researches over the last 20 years; however, recently, another tradition has emerged which describes cultural differences in terms of basic cognition (i.e., thinking styles). Social structural differences between cultures are viewed as promoting certain cognitive processes more than others. East Asians, embedded in more interdependent social systems, will have beliefs about focusing on the field and paying attention to relationships between objects (i.e., holistic thinking). In contrast, North Americans and Europeans, who are embedded in more independent social systems, will have beliefs that the world is discrete and discontinuous and that an object’s behavior can be predicted using rules and properties (i.e., analytic thinking) (U¨sku¨l, Kitayama, & Nisbett, 2008). Holistic thinking is defined as ‘‘involving an orientation to the context or field as a whole, including attention to relationships between a focal object and the field, and a preference for explaining and predicting events on the basis of such relationships’’ and analytic thinking ‘‘involves a detachment of the object from its context, a tendency to focus on attributes of the object to assign it to categories, and a preference for using rules about the categories to explain and predict the object’s behavior’’ (Nisbett et al., 2001, p. 293). This emerging tradition has been followed by numerous researchers including Peng and Spencer-Rodgers (e.g., Peng & Nisbett, 1999; Spencer-Rodgers, Williams, & Peng, 2010), Masuda (e.g., Masuda & Nisbett, 2001; Masuda et al., 2008), and Suzuki, Akutsu, and Takemura (e.g., Suzuki, Akutsu, Takemura, & Hamamura, 2012) (for a recent review, see Ishii, 2013). The three traditions in cultural psychology reviewed here offer the view that human psychology is culture-specific and that culture influences thought and action. How do these perspectives prepare us to think about cultural differences in consumer attitudes toward social media? For example, the value approach (individualism/collectivism) and self approach (independent/interdependent) draw our attention to consumers’ motivations and interactivity in using social media that are concerned about groups and about how individuals relate to groups. If cultural differences occur in their members’ attitudes about groups and group relations, we would expect to find considerable accompanying cultural variance in motivations. In particular, individualists may show a higher degree of information and self-expression motivations, while collectivists show a higher degree of social connectedness motivation in using social media. The thinking style (analytic-holistic) approach also suggests possible cultural differences in consumer attitudes toward social media. Wang, Masuda, Ito, and Rashid (2012) have found that East Asians are predisposed to produce more

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information-rich products than North Americans. They have argued that East Asians, as more holistic thinkers, are accustomed to taking peripheral and detailed parts of information into account. In contrast, North Americans, as more analytic thinkers, de-emphasize pieces of information that they considered too peripheral and too detailed. Accordingly, they would produce relatively simple designs. These findings suggest that East Asians may prefer social media services that appear complex and information-rich, whereas North Americans prefer social media services that are simple in designs. To explore cultural differences between West and East, we conducted the replication study that examined the role of individual-level factors among the U.S. consumers’ attitudes toward social media (Gangadharbatla, 2008) in Japan. Gangadharbatla (2008) found that Internet self-efficacy, need to belong, and collective self-esteem have positive effects on American college students’ attitudes toward social networking site (SNS).

Methodology Procedure and Sample We obtained data through the online survey administered to the panel members of Lifemedia, Inc., a Japanese research agency. First, the screening questionnaire to identify SNS users was distributed among 42,000 members during March 8–13, 2012. 4,545 members responded (10.8% response rate). Of the respondents, 57.2% was men and 42.8% women. Each age group (from twenties to sixties) comprised about 20% of the sample: 11.9% in twenties, 22.2% in thirties, 21.8% in forties, 22.1% in fifties, and 21.9% in sixties. Each respondent who answered screening questionnaire received 5 ‘‘L-points (LPs),’’ the Lifemedia’s points which can be exchanged to cash (1 LP worth about 1 Japanese yen, which is about 1 cent). Then, the survey questionnaire was distributed among 1,000 members (men and women, aged twenties to sixties, nationwide) who were randomly selected from the respondents. The survey took place on March 13 and 14, 2012. Each respondent who answered the survey questionnaire received 100 LPs. Data for 205 respondents were obtained. These 205 respondents were all SNS users. Thirty-eight percent of respondents belonged to Mixi, a Japanese SNS (the ‘‘Facebook of Japan’’), 34% belonged to Facebook, and 28% belonged to both Mixi and Facebook. Of the respondents, 57.6% were men and 42.4% women. Each age group (from twenties to sixties) comprised about 20% of the sample: 20.5% in twenties, 21.5% in thirties, 20.5% in forties, 19.5% in fifties, and 18.0% in sixties. Measures Following Gangadharbatla (2008), the survey questionnaire consisted of five major sections that assess (1) attitude toward SNS, (2) Internet self-efficacy, (3) need for


Satoko Suzuki and Kosuke Takemura

cognition, (4) need to belong, and (5) collective self-esteem. It also asked about the user activities of Facebook and Mixi. The questionnaire was in Japanese, the participants’ native language. Attitude toward SNS. We assessed the respondents’ attitude toward SNS using an established six-item, seven-point semantic differential scale (bad/good, foolish/clever, unpleasant/pleasant, useful/useless, boring/interesting, and negative/positive) (Bruner, James, & Hensel, 2001) which was used in Gangadharbatla’s (2008) study. The items were translated into Japanese by the first author and checked by the second author. The understanding was pretested on the Lifemedia’s employees. Respondents indicated their general feelings toward SNS. Internet self-efficacy. The respondents’ Internet self-efficacy was assessed using Eastin and LaRose’s (2000) eight-item Internet Self-Efficacy Scale tested on a sevenpoint Likert scale (1=Strongly disagree to 7=Strongly agree). Again, the items were translated into Japanese by the first author, checked by the second author, and pretested on the Lifemedia’s employees. Respondents indicated their confidence toward using Internet. Need for cognition. A Japanese version of the Need for Cognition Scale (NCS; Kouyama & Fujihara, 1991) was used to assess the respondents’ need for cognition. It consisted of 15 items which were tested on a seven-point Likert scale (1=Strongly disagree to 7=Strongly agree). The Japanese NCS was developed based on Cacioppo and Petty’s (1982) NCS, which was used in Gangadharbatla’s (2008) study. Need to belong. A Japanese version of the Need to Belong Scale (NBS; Kobayashi, Taniguchi, Kimura, & Leary, 2006) was used to assess the respondents’ need to belong. It consisted of 10 items which were tested on a five-point Likert scale (1=Disagree to 5=Strongly agree). The Japanese NBS was developed by translating Leary, Kelly, Cottrell, & Schreindorfer’s (2001) 10-item NBS, which was used by Gangadharbatla (2008). Collective self-esteem. Again, a Japanese version of the Collective Self-Esteem Scale (CSES; Watanabe, 1994) was used to assess the respondents’ collective self-esteem. It consisted of 16 items which were selected from the Luhtanen and Crocker’s (1992) original scale. The same 16 items were used by Gangadharbatla (2008) as well. CSES was tested on a seven-point Likert scale (1=Strongly disagree to 7=Strongly agree). All scales were tested for reliability. The survey questionnaire also asked for user activities on the two SNSs. The survey also collected demographic information regarding the respondent’s gender, occupation, marital status, age group, and living prefecture. In addition, in the screening questionnaire, information about the number of hours respondents spent surfing the Web, SNS to which they belonged, frequency that they

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signed on to their SNS account, and the number of hours per week they spent on such sites were collected. Respondents took approximately 20 minutes to complete the survey questionnaire. To maintain anonymity, the questionnaires did not collect the respondents’ names.

Results Japanese Consumers’ General Usage Attitudes Toward SNS Data of 4,540 respondents for the screening questionnaire provide an overview of the general usage attitudes toward SNS in Japan. Data for five respondents were removed for the lack of accuracy (in question asking number of hours per week they spend surfing the Web, these respondents answered more than 168 hours). Forty-three percent of respondents did not use any social media. Mixi, Twitter, and Facebook were the top three popular social media among the respondents, with 29.9% belonging to Mixi, 29.4% to Twitter, and 28.1% to Facebook. About 10% of respondents belonged to the Japanese social game sites: 12.5% belonged to Mobage and 12.0% to GREE. The mean number of hours respondents spent surfing the Web was 13.82 (SD=15.19). Table 1 summarizes the number of non-users and users, with information on the frequency that users signed on to their account for Mixi, Twitter, and Facebook. For

Table 1: Number of non-users and users for Mixi, Twitter, and Facebook. Non-users/users and frequency of signing in

Mixi n


Twitter n


Facebook n


1 Do not belong, and is not interested in 2,803 61.7 2,643 58.2 2,601 57.3 belonging 2 Do not belong, but is thinking to belong 200 4.4 503 11.1 614 13.5 in future 3 Belong, but rarely sign in 518 11.4 436 9.6 348 7.7 4 Belong, and sign in once or twice a month 168 3.7 152 3.3 172 3.8 5 Belong, and sign in once a week 124 2.7 145 3.2 172 3.8 6 Belong, and sign in twice to thrice a week 115 2.5 123 2.7 144 3.2 7 Belong, and sign in once a day 187 4.1 172 3.8 182 4.0 8 Belong, and sign in two to four times a 145 3.2 120 2.6 146 3.2 day 9 Belong, and sign in 5 to 10 times a day 68 1.5 101 2.2 67 1.5 10 Belong, and sign in more than 11 times a 32 0.7 88 1.9 43 0.9 day 11 Did belong, but quit 180 4.0 57 1.3 51 1.1


Satoko Suzuki and Kosuke Takemura

all three social media, about 70% of respondents were non-users (i.e., do not belong or have quitted). Although Mixi had the highest usage rate, data have suggested an increasing popularity of Twitter and Facebook. The number of passive users (i.e., rarely sign in) was highest for Mixi: 11.4% Mixi, 9.6% Twitter, and 7.7% Facebook, as well as the number of exit users (i.e., quitted): 4.0% Mixi, 1.3% Twitter, and 1.1% Facebook. Furthermore, the number of potential users (i.e., thinking to belong in future) was high for Facebook and Twitter, but low for Mixi: Facebook 13.5%, Twitter 11.1%, and Mixi 4.4%. This increasing popularity of Facebook and Twitter is aligned with the trend reported by the major research agencies such as The Nielsen Company. The number of active users (i.e., sign in at least once a month or more) was similar for all three social media: 20.4% Facebook, 19.8% Twitter, and 18.5% Mixi. We also asked for the number of hours per week they spent on such sites. The average was about two hours for all three social media: M=2.45 for Twitter, M=2.11 for Facebook, and M=2.06 for Mixi. Comparison of User Activities Between Facebook and Mixi Of the 205 respondents for our main survey, 128 respondents belonged to Facebook and 135 respondents belonged to Mixi. Among them, 58 respondents belonged to both. Table 2 shows means and variances of reported frequencies of each user activity on Facebook and Mixi measured on a seven-point Likert scale (1=Never to 7=Very frequently). As 58 respondents belonged to both SNSs, it became possible to compare the user activities between Facebook and Mixi not only by the between-participant design (n=70 and 77 for Facebook and Mixi, respectively) but also by the within-participant design (n=58). Analyses revealed that the two SNSs did not differ in the frequencies of any activities except for ‘‘Playing games.’’ Only within-participant comparison on

Table 2: Mean and variance of user activities on Facebook and Mixi. Activity

Updating status Uploading pictures Tagging pictures Commenting on others’ activities Sharing links Sharing others’ posts Playing games

Facebook (n=128)

Mixi (n=135)





3.74 3.27 2.78 3.95 4.43 3.28 2.02

3.23 3.38 2.35 2.84 2.72 2.57 1.99

3.62 3.08 NA 3.67 NA NA 2.59

3.55 3.51 NA 3.42 NA NA 3.26

Note: Fifty-eight respondents belonged to both SNSs. They were thus included into calculations of both SNSs. NA, not applicable.

Culture and Social Media


‘‘Playing games’’ reached the level of statistical significance (F(1, 57)=18.21, po.001, Zp2=.24), indicating that respondents who belonged to both SNSs played games on Mixi (M=2.84, SD=1.81) more than on Facebook (M=2.00, SD=1.50). The other comparisons did not yield significant differences (Fso2.06, psW.156). Comparison Between Japanese and American SNS Users Based on our data for 205 SNS users in Japan, we compared the attitudes toward SNS between Japanese and American users. Table 3 summarizes the mean scores, variances, and reliability indices (Cronbach’s alpha) for each scale in our data. Table 4 shows zero-order correlations between the scales. As seen in Table 3, alpha coefficients for each scale were satisfactory (Cronbach’s alpha W.80). To examine if the finding of Gangadharbatla (2008) is replicated in Japan, a multiple regression analysis was performed in which attitude toward SNS was the dependent variable. The predictor variables were Internet self-efficacy, need for cognition, need to belong, and collective self-esteem. Table 5 provides the R2 value, coefficient estimates, and 90% confidence intervals1 for the regression. The regression analysis revealed that the same pattern from Gangadharbatla’s (2008) analysis was observed in Japan. All the variables except need for cognition had positive effects on the user’s attitude toward SNS, which was exactly the same in the U.S. The effect of Internet self-efficacy was relatively weak and only marginally significant. Each standardized value represents the amount of change in attitude toward SNS, given a standard deviation unit change in X (where X is Internet selfefficacy, need to belong, or collective self-esteem). For example, attitude toward SNS changed by .240 with a standard deviation unit change in need to belong and by .125 and .227 for each standard deviation unit change in Internet self-efficacy and collective self-esteem, respectively. The interpretation of the parameters also can use unstandardized coefficient estimates. In this case, each unstandardized value represents the amount of change in attitude toward SNS, given a single raw score

Table 3: Mean, variance, and Cronbach’s alpha coefficients. Scale Attitude toward SNS (6 items) Internet self-efficacy (8 items) Need for cognition (15 items) Need to belong (10 items) Collective self-esteem (16 items)




Cronbach’s alpha

4.44 3.88 4.29 3.00 4.39

0.78 1.69 0.56 0.35 0.43

0.84 0.95 0.85 0.80 0.84

Confidence intervals for Gangadharbatla’s (2008) study were calculated by the authors based on the values reported in the original paper.


Satoko Suzuki and Kosuke Takemura

Table 4: Pearson’s correlation coefficients. Attitude toward SNS

Internet self-efficacy

Need for cognition

Need to belong

.11 .03 .29*** .28***

.23*** .09 .09

.02 .33***


Internet self-efficacy Need for cognition Need to belong Collective self-esteem ***


Table 5: Regression analysis. Unstandardized Standard estimates (b) error

Intercept Internet self-efficacy Need for cognition Need to belong Collective selfesteem Adjusted R2 *





2.043 .085* .083 .360*** .306**

.516 .046 .085 .103 .098

Standardized estimates b


.125 .070 .240 .227

3.956 1.849 .983 3.485 3.128

90% Confidence interval P

Lower Upper limit limit

.000 .066 .009 .327 .223 .001 .189 .002 .144

.161 .057 .530 .468



unit change in X (where X again is Internet self-efficacy, need to belong, or collective self-esteem). In other words, attitude toward SNS increased by .360, .085, and .306 for a unit increase in the value of need to belong, Internet self-efficacy, and collective selfesteem, respectively (scale of 1 to 7). This sample therefore implies that, as Gangadharbatla (2008) found with the U.S. sample, users’ attitude toward SNS is related to their level of Internet self-efficacy, their need to belong, and their collective self-esteem.

Discussion and Conclusion This study finds that the influence of culture may be less salient in the consumer attitudes toward social media. Consumers from Western culture (the U.S.) and Eastern culture (Japan) are both influenced by their levels of Internet self-efficacy,

Culture and Social Media


their need to belong, and their collective self-esteem, but not by their need for cognition, in their attitude toward SNS. How can we explain this lesser salience of cultural differences in the world of social media? The online behaviors of consumers are said to be subtly different in nature from traditional consumer behavior due to the influence of technology (Chau et al., 2002). Similarly, the attitude and behavior toward social media may be different from traditional behavior. For example, the patterns of consumer attitude toward social media may be more standardized than traditional consumer behavior since the social media’s interface and service are more globalized (versus localized), as in Facebook and Twitter. There is also a possibility that cultural differences in the world of social media (i.e., virtual) are smaller than those in the real world. For example, Yamagishi and his colleagues (e.g., Yamagishi, 2011; Yamagishi, Jin, & Miller, 1998) argue that collectivistic mindset is afforded by the social structures where it is difficult or not beneficial to try building new relationships. Social media, however, is generally welldesigned to help people expand their social networks. Hence, it may be possible that the effects of collectivistic values are less salient in the world of social media (Yamagishi & Yoshikai, 2009; Yuki, 2005). In fact, culture-specific psychological processes are flexible and can vary from situation to situation (Hong, Morris, Chiu, & Benet-Martı´ nez, 2000; Kitayama, Markus, Matsumoto, & Norasakkunkit, 1997). The managerial implication of our study is to encourage managers to revisit the issue of globalization versus localization, particularly in the domain of social media. Since Levitt’s (1983) claim that differences in national or regional preference will disappear due to the appearance of new technologies and advanced communications, both scholars and business managers have become interested in the possibility of undifferentiated, uniform marketing across the world. Levitt has argued that advances in communications technology were increasingly inspiring consumers around the world to want the same things. Therefore, he has declared that companies should become global by standardizing the production, distribution, and marketing of their products across all countries. The majority of opinion is that Levitt’s perspective is over-simplistic (Douglas & Wind, 1987; Emmons, 2003). Cultures have different values and thinking styles which influence consumers’ decision-making processes. Although companies prefer standardized global marketing strategy for the global brand image and cost efficiency, in reality, they face the necessity to respond to persistent cultural differences. However, this study suggests that the world of social media may be relatively more close to Levitt’s (1983) prediction. Business cases in the world of social media also suggest the effectiveness of standardized global strategy. First and foremost, Facebook did not change the use of real name to adapt to the Japanese market. In Japan, the use of pseudonyms has been more common (e.g., Mixi). It has been widely said that Japanese consumers have a high concern toward privacy and thus are reluctant to make their personal information open (Barker & Ota, 2011; Schug, Yuki, & Maddux, 2010). However, Facebook has persisted in the use of real name. Other social media platform providers including Twitter and YouTube also develop business in Japan without much localization.


Satoko Suzuki and Kosuke Takemura

Successful standardization cases of companies using social media as their marketing communications tool are also emerging. One of such examples is Satisfaction Guaranteed (SG), the Japanese apparel brand that markets mainly through Facebook. SG’s product is one-off, fashionable and high-quality male casual clothing made 100% in Japan. SG has opened its official Facebook page on March 2010, and in nine months, the page has attracted 160,000 fans. The target is not only Japan: SG considers that Facebook is useful because it can target the global market. Ninety-seven percent of its fans are from Asia, such as from Indonesia and India (Suzuki, 2012). This study is exploratory in nature, and thus has limitations. First, it has only looked at cultural differences for the antecedents of attitude toward social media. Further research is needed to explore cultural differences in the consequences of social media use such as satisfaction. Second, since this study’s primary objective was to replicate Gangadharbatla’s (2008) study, only limited antecedents of attitudes toward social media have been tested. Additional studies should examine other variables, such as the relationships with other members and privacy issues, and collect crosscultural data including the United States and Japan. Third, to further explore if the influence of culture toward consumer attitudes in social media is less salient, future research should include other countries that have different cultural beliefs. In selecting countries, Hofstede’s cultural dimensions and the survey result that shows differences among more than 76 countries (Hofstede, Hofstede, & Minkov, 2010) may be useful. Despite the limited scope of the current study, it marks a step in addressing cultural differences in the consumer behavior of social media.

Acknowledgments The research was supported by JST-RISTEX. We also thank Yoshikazu Maegawa for his help in data collection.

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Eastin, M. S., & LaRose, R. L. (2000). Internet self-efficacy and the psychology of the digital divide. Journal of Computer-Mediated Communication, 6. Retreived from http://www.ascusc. org/jcmc/vol6/ Emmons, G. (2003). Globalization revisited. Retreived from bulletin/2003/september/globalization.html Gangadharbatla, H. (2008). Facebook me: Collective self-esteem, need to belong, and internet self-efficacy as predictors of the iGeneration’s attitudes toward social networking sites. Journal of Interactive Advertising, 8(2), 5–15. Heine, S., & Lehman, D. R. (1995). Cultural variation in unrealistic optimism: Does the West feel more invulnerable than the East? Journal of Personality and Social Psychology, 68, 595–607. Heine, S., & Lehman, D. R. (1997). Culture, dissonance, and self-affirmation. Personality and Social Psychology Bulletin, 23, 389–400. Heine, S. J., Takemoto, T., Moskalenko, S., Lasaleta, J., & Henrich, J. (2008). Mirrors in the head: Cultural variation in objective self-awareness. Personality and Social Psychology Bulletin, 34, 879–887. Hofstede, G. (1980). Culture’s consequences: International differences in work-related values. Beverly Hills, CA: Sage. Hofstede, G., Hofstede, G. J., & Minkov, M. (2010). Cultures and organizations: Software of the mind (3rd ed.). New York, NY: McGraw-Hill. Hong, Y., Morris, M. W., Chiu, C., & Benet-Martı´ nez, V. (2000). Multicultural minds: A dynamic constructivist approach to culture and cognition. American Psychologist, 55(7), 709–720. Ishii, K. (2013). Culture and the mode of thought: A review. Asian Journal of Social Psychology, 16, 123–132. Keegan, W. J., & Green, M. C. (2000). Global marketing (2nd ed.). Upper Saddle River, NJ: Prentice Hall. Kitayama, S., Markus, H. R., Matsumoto, H., & Norasakkunkit, V. (1997). Individual and collective processes in the construction of the self: Self-enhancement in the United States and self-criticism in Japan. Journal of Personality and Social Psychology, 72, 1245–1267. Ko, H., Roberts, M. S., & Cho, C. (2006). Cross-cultural differences in motivations and perceived interactivity: A comparative study of American and Korean internet users. Journal of Current Issues and Research in Advertising, 28(2), 93–104. Kobayashi, T., Taniguchi, J., Kimura, M., & Leary, M. R. (2006). An attempt to construct the Japanese Need to Belong Scale. Poster session presented at the 70th Annual meeting of the Japanese Psychological Association, Fukuoka, Japan. Kouyama, T., & Fujihara, T. (1991). A basic study of the need for cognition scale. The Japanese Society of Social Psychology, 6(3), 184–192. Leary, M. R., Kelly, K. M., Cottrell, C. A., & Schreindorfer, L. S. (2001). Individual differences in the need to belong. Unpublished manuscript, Wake Forest University, Winston-Salem, NC. Levitt, T. (1983). The globalization of markets. Harvard Business Review (May/June), 92–102. Luhtanen, R., & Crocker, J. (1992). A collective self-esteem scale: Self-evaluation of one’s social identity. Personality and Social Psychology Bulletin, 18, 302–318. Markus, H. R., & Kitayama, S. (1991). Culture and the self: Implications for cognition, emotion, and motivation. Psychological Review, 98(2), 224–253. Markus, H. R., & Kitayama, S. (2010). Cultures and selves: A cycle of mutual constitution. Perspectives on Psychological Science, 5, 420–430. Masuda, T., Ellsworth, P. C., Mesquita, B., Leu, J., Tanida, S., & van de Veerdonk, E. (2008). Placing the face in context: Cultural differences in the perception of facial emotion. Journal of Personality and Social Psychology, 94, 365–381.


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Masuda, T., & Nisbett, R. E. (2001). Attending holistically versus analytically: Comparing the context sensitivity of Japanese and Americans. Journal of Personality and Social Psychology, 81, 922–934. Nisbett, R. E., Peng, K., Choi, I., & Norenzayan, A. (2001). Culture and systems of thought: Holistic versus analytic cognition. Psychological Review, 108, 291–310. Oyserman, D., Coon, H. M., & Kemmelmeier, M. (2002). Rethinking individualism and collectivism: Evaluation of theoretical assumptions and meta-analyses. Psychological Bulletin, 128, 3–72. Park, C., & Jun, J. (2003). A cross-cultural comparison of internet buying behavior: Effects of internet usage, perceived risks, and innovativeness. International Marketing Review, 20(5), 534–553. Peng, K., Ames, D. R., & Knowles, E. D. (2001). Culture and human inference: Perspectives from three traditions. In D. Matsumoto (Ed.), The handbook of culture and psychology (pp. 245–264). New York, NY: Oxford University Press. Peng, K., & Nisbett, R. E. (1999). Culture, dialectics, and reasoning about contradiction. American Psychologist, 54(9), 741–754. Schug, J., Yuki, M., & Maddux, W. W. (2010). Relational mobility explains between- and within-culture differences in self-disclosure toward close friends. Psychological Science, 21, 1471–1478. Schwartz, S. H. (1991). The universal content and structure of values: Theoretical advances and empirical tests in 20 countries. Advances in Experimental Social Psychology, 25, 1–65. Singelis, T. M. (1994). The measurement of independent and interdependent self-construals. Personality and Social Psychology Bulletin, 20, 580–591. Smith, P. B., & Bond, M. H. (1999). Social psychology across cultures. Needham Heights, MA: Allyn & Bacon. Spencer-Rodgers, J., Williams, M. J., & Peng, K. (2010). Cultural differences in expectations of change and tolerance for contradiction: A decade of empirical research. Personality and Social Psychology Review, 14(3), 296–312. Suzuki, S. (2012). YUMOTOKAN on Facebook: Online marketing in ryokan [Japanese-style hotel] business. Kyoto University, Graduate School of Management case. Kyoto: Kyoto University. Suzuki, S., Akutsu, S., Takemura, K., & Hamamura, T. (2012). Development of the Japanese dialectical self scale. Paper presented at the 53rd Annual Meeting of Japanese Society of Social Psychology. Tsukuba, Japan. Triandis, H. C. (1995). Individualism and collectivism. Boulder, CO: Westview Press. U¨sku¨l, A. K., Kitayama, S., & Nisbett, R. E. (2008). Ecocultural basis of cognition: Farmers and fishermen are more holistic than herders. Proceedings of the National Academy of Sciences of the United States of America, 105, 8552–8556. Wang, H., Masuda, T., Ito, K., & Rashid, M. (2012). How much information? East Asian and North American cultural products and information search performance. Personality and Social Psychology Bulletin, 38(12), 1539–1551. Watanabe, S. (1994). An attempt to construct the Japanese collective self-esteem scale. The Japanese Society of Social Psychology, 10(2), 104–113. Yamagishi, T. (2011). Trust: The evolutionary game of mind and society. New York, NY: Springer. Yamagishi, T., Jin, N., & Miller, A. S. (1998). In-group bias and culture of collectivism. Asian Journal of Social Psychology, 1, 315–328. Yamagishi, T., & Yoshikai, N. (2009). Reputation in the internet society. Tokyo: NTT Publishing Co. (in Japanese). Yuki, M. (2005). Culture and groups. In S. Kaneko & M. Yuki (Eds.), Social psychological approach to cultural behaviors (pp. 40–50). Kyoto: Kitaohji-Shobo. (in Japanese).

Chapter 13

Social Networking Sites (SNS): Talent Management in Emerging Markets — India and Mexico Pramila Rao

Abstract Purpose — The main goal of this research is to describe the talent management process via social networking sites (SNS) in emerging economies of India and Mexico. Design/methodology/approach — The chapter uses a conceptual approach to detail the subject matter and adopts two theoretical frameworks to enhance understanding of the topic. Findings — India and Mexico have welcomed various forms of SNS as strategic organizational tools for talent management. In India, Orkut is adopted to attract technical employees, Facebook is used to source overseas applicants, and Linkedin is sourced for management professionals. In Mexico, Facebook, Twitter, and YouTube predominantly provide applicants for young talent, while LinkedIn provides applicants for upper-level talent. This research also identifies the role of national cultures and data privacy laws in both these countries. Research limitations/implications — This research is a conceptual paper and any future research will benefit from having either empirical or qualitative research to substantiate the results. Practical implications — Practitioners might also benefit from this chapter as it distinguishes how different cultures use SNS for recruitment practices. Some cultures prefer to use SNS predominantly for its social aspect while others favor its practicality value. Global managers may be interested to identify where social networks are easily accepted for work-related practices.

Social Media in Strategic Management Advanced Series in Management, 259–276 Copyright r 2013 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1877-6361/doi:10.1108/S1877-6361(2013)0000011017


Pramila Rao

Originality/value — There seems to be a paucity of research on SNS in emerging economies. This chapter provides pioneer work in two emerging economies by identifying relevant statistics, developing a model, and listing current SNS. Thus this research helps fill the gap in the extant cross-cultural literature on SNS. Keywords: Talent management; social networking sites; social media; SNS in India; SNS in Mexico

Introduction This chapter will detail the use of social networking sites (SNS) for recruitment in emerging economies of India and Mexico. SNS are becoming a significant organizational tool as it demonstrates several positive outcomes. It creates brand awareness, augments recruiting, enhances learning, broadens communication, reduces traditional costs, and also simulates work environments. Organizations that do not adopt social media strategies may find they are falling behind strategically (Banerjee, 2012; Datta, 2010; Freer, 2012; Iyer, Parise, Rajagopal, & Davenport, 2011; Kavitha & Pillai, 2011; Madia, 2011; Pollitt, 2008). SNS help create a broad recruiting net and hire applicants from nontraditional sources. Kavitha and Pillai (2011) demonstrated in a study on SNS in India that almost 85% of the applicants are passive or not looking for a job actively. Traditional methods might not have been able to identify these applicants. SNS allow recruiters to source into these untapped labor markets. A case in point: the Chief Finance Officer (CFO) of Oracle was recruited through LinkedIn (Datta, 2010; Kavitha, & Pillai, 2011) suggesting that qualified individuals might require different methods to source. SNS allow organizations to develop collaborative learning platforms as employers, employees, and customers interact extensively. It helps to develop vibrant electronic communities, very relevant in industries, such as information technology (IT), where such learning is valued (Iyer et al., 2011). Organizations create realistic job previews for applicants using SNS as employees can really understand the intricacies of their jobs. For instance, Marriot group launched, My Marriott Hotel, a social media game that allowed applicants to understand their tasks, duties, and responsibilities right from housekeeping services to culinary preparation. This allowed the organization to get qualified interviewees as they got a true picture of their work eexpecations (Freer, 2012). Multinationals have enhanced their presence in emerging economies putting a tremendous pressure on recruitment and selection. Traditional recruiting may not be enough to source the required talent making organizations supplement with other methods (Ferna´ndez-Ara´oz, 2007). The Indian economy is experiencing a robust economic growth since 1990s with an average of 8–10% increase in gross domestic product (GDP) annually suggesting a very optimistic business environment (Cappelli, Singh, Singh, & Useem, 2011). Mexico is becoming a leader in the Latin America

Social Networking Sites (SNS)


region and ranked 53 in the ease of doing business in a study of 183 nations (The World Bank and the International Finance Corporation, 2011). The main research question of this chapter is to identify and detail SNS and its related concepts in India and Mexico. It will identify the following themes also: (1) theoretical framework, (2) national culture, (3) SNS in India and Mexico, (4) data privacy acts, (5) digital divide, and (6) concluding remarks.

Theoretical Framework & SNS This section will identify two theories that have been frequently used to understand the adoption of new practices in technology. The theory of planned behavior (TPB) suggests that individuals adopt innovative practices based on their attitudes, values, and beliefs. Usually individuals/organizations that have positive attitudes toward any activities/practices will encourage the adoption of these actions and vice versa. It could also be the ‘‘planned’’ actions may be based on societal pressure to adopt progressive practices. TPB theory has been used to explain the use of several online practices such as purchases, banking, mobile services, and recruitment (Parry & Wilson, 2009; Ravi, Carr, & Sagar, 2007). Parry and Wilson (2009) demonstrated in an empirical study of 14 organizations that TPB played a strong role in adopting e-recruitment practices. Organizations that had positive attitudes toward such practices adopted corporate web sites and commercial online employment web sites. Industries, such as the IT were more conducive toward e-practices and encouraged their adoption. Ravi et al. (2007) in a study of 165 respondents to understand perceptions toward Internet banking in India identified the importance of TPB. Internet banking has not been adopted by the general public very easily as traditionally customers prefer personalized services. This research identified that if bank customers received positive feedback from close friends and family members it helped shape optimistic attitudes and values toward online banking. In this study, characteristics of TPB were ranked third among seven variables in influencing the adoption of online banking. Organizations use marketing blogs to promote shared experiences among their customers illustrating the principle of TPB. For instance, Toyota uses, Open Road Blog, a powerful communication blog among their customers, competitors, and fans to share both positive and negative experiences about their products. This allows potential customers to make the better informed decisions and economic choices promoting a very optimistic attitude toward the company and its products. Nokia uses a shoutbox where customers can send any of their concerns to Nokia’s professionals. This is a very effective communication strategy as these ‘‘planned actions’’ has created excellent attitudes toward the organization among the customers (Mangold & Faulds, 2009). The Technology Acceptance Model (TAM) is another theoretical framework that might help get a better understanding of technology adoption in different cultures. The TAM model indicates that individuals will adopt new technology based on its


Pramila Rao

functionality and simplicity (Barron & Schneckenberg, 2012). Shin (2010) demonstrated in a study on SNS in United States and Korea that US respondents indicated ‘‘perceived usefulness’’ was a very important predictor for the adoption of any online social networks. Ribiere, Hadad, and Wiele (2010) concluded from their research on SNS from the United States, Thailand, and Bahrain that functionality or usefulness of the SNS was a very important predictor for its usage in all three cultures. Respondents indicated one of the reasons for networking was to get relevant information on school projects and academic related work — a functional perspective.

National Culture and SNS Scholars (Ribiere et al., 2010) suggest that national cultural dimensions impact the adoption of SNS. Their study also distinguished between expressive and instrumental usages of social media. The expressive usage focuses on members connecting with each other to satisfy their social interests. The instrumental usage emphasizes purposeful interactions among members that could be nonsocial in nature. This crosscultural study included 376 respondents from Bahrain, Thailand, and the United States, identified that uncertainty avoidance and long-term orientation impact the use of SNS. Cultures high in uncertainty avoidance do not like ambiguity or uncertainty in any process. Respondents from the United States used less of the expressive aspect of social media (United States had the highest uncertainty-avoidance scores) as they may have feared that recruiters would pry on their personal web sites. Hence, they used it less in comparison to their counterparts from Bahrain and Thailand. Cultures high in long-term orientation have a focus on developing skills or thinking strategically ahead. Respondents with the highest long-term orientation adopted more of SNS (Thailand had the highest long-term orientation scores). Cultures high in long-term orientation value any opportunity that may create or provide long-term benefits. Social networking is perceived as valuable as the networking might provide positive outcomes in the future. Shin (2010) compared the usage of SNS in United States and Korea with 351 respondents. CyWorld, a very popular Korean SNS, operated in the United States only for a year before it was closed down. Similarly MySpace has not been accepted very well internationally. Why do some cultures accept certain SNS and reject others? Extrinsic and intrinsic factors were observed to be related to the adoption of SNS. Extrinsic factors (perceived usefulness and perceived connectedness) were more apparent among US respondents who may view SNS as functional tools. It is common for members in the United States to ‘‘friend’’ individuals they might know only as casual acquaintances as individualistic cultures do not make clear distinctions between in and out group members. On the other hand, respondents in Korea considered intrinsic factors (perceived involvement and perceived enjoyment) as very important factors in adopting any SNS. Members of CyWorld can customize their SNS making members very involved in the ‘‘social decoration’’ aspect of their

Social Networking Sites (SNS)


homepages. The web pages can be decorated as individuals would adorn their houses with appropriate home furnishings, ‘‘human beings,’’ and pets. SNS members in Korea only invite close family and friends to share their network sites as the collectivist culture endorses creating distinctions between in and out-group members. Korean respondents also indicated their other reason for choosing CyWorld was simply because members perceived it to be a hedonistic activity. In a cross-national study of 11 cultures and 1763 respondents (Cardon et al., 2009) observed that respondents from collectivist cultures (Turkey, India, China, Macao, and Thailand) had higher averages for the number of online friends they had than individualistic cultures (United States and France). Turkey and India had the highest averages for the number of online friends its members had (3.46 and 2.85, respectively). The social process of creating friendships that allows them to form their own in-groups is very meaningful for collectivist communities. SNS also help members express themselves in a way they may not be able to do in face-to-face interactions. Barron and Schneckenberg (2012) identified a conceptual model using the Hofstede and House models to understand what cultural dimensions may impact SNS usage in seven countries. National cultural dimensions of power distance, uncertainty avoidance and individualism/collectivism had the maximum roles in the adoption of SNS by different cultures. Cultures high in power distance may not like open information sharing as it minimizes their use of authority and power. A case in point: Google Inc. had to suspend its operations in China (a high power-distance culture) as the government did not like way locals freely shared information about the policies and practices of the government on Google’s search engines (Chao & Efrati, 2010). High uncertainty-avoidance cultures may be hesitant to use technology that is considered ambiguous. For instance, France that has high uncertainty-avoidance and power-distance cultures has a lower acceptance of SNS. Highly individualized cultures are less likely to adopt SNS as extensively as their collectivist counterparts. Based on the above studies, this chapter proposes a model (Please refer to Figure 1) to identify the role of national cultures on the adoption of SNS. The national cultural dimensions of uncertainty avoidance, individualism collectivism, long-term orientation, indulgent versus restraint, and power distance will impact how cultures use SNS. Potential researchers may use the variables provided to test and develop any further hypotheses (Please refer to Figure 2). This model advances the body of knowledge as it includes a new dimension (indulgent versus restraint) not addressed by earlier crosscultural studies on SNS (Hofstede, Hofstede, & Minkov, 2010). It also distinguishes between members’ adoption of SNS based on expressive and instrumental needs (Ribiere et al., 2010) providing a difference to the model. Scholars (Ribiere et al., 2010; Shin, 2010) suggest that there is paucity in understanding the influence of national cultures on the convention of SNS. A cultural model might be a first step to augment this understanding. The latest ranks and scores of (Hofstede et al., 2010) study have been used to understand how these economies may adopt SNS (Please refer to Table 1). The Mexican culture has a higher rank (Mexico: 26–27; India: 64) in uncertainty avoidance suggesting that its culture may feel more threatened than the Indian culture


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Expressive(+) Instrumental(+)

Long Term




Indulgent versus Restraint

Expressive(+) Instrumental(–)

Power Distance ReRestraint

Expressive(–) Instrumental(–)

Figure 1: Model for national cultures and SNS adoption. The negative sign indicates the higher scores of a cultural dimension (uncertainty distance) would reflect in the less use of the practices (expressive/instrumental). The positive signs indicate higher scores of a cultural dimension (collectivism) would reflect in more usage of the practices (expressive/instrumental).

in adopting SNS. Both the cultures have similar ranks on individualism/collectivism (Mexico: 48–50; India: 48) indicating that members from both countries experience a collectivist need to socialize with their in-group members (school, church, work, alumnus, etc.) through social media. India has a higher rank in long-term orientation (India: 40–41; Mexico: 74–76) implying that Indian users may adopt SNS more as it may be associated with potential benefits. Mexico ranked second (Mexico: 2;

Social Networking Sites (SNS)


H1: Cultures with high scores in uncertainty-avoidance will adopt less of expressive and instrumental usage of SNS than cultures with low in uncertainty-avoidance. H2: Cultures with high scores in collectivism will adopt more of expressive and instrumental usage of SNS than cultures with low in collectivism. H3: Cultures with high scores in long-term orientation will adopt more of expressive and instrumental usage of SNS than cultures with low in long-term orientation. H4a: Cultures with high scores in indulgent-restraint will adopt more of expressive usage of SNS than cultures with low in indulgent-restraint. H4b: Cultures with high scores in indulgent-restraint will adopt less of instrumental usage of SNS than cultures with low in indulgent-restraint. H5: Cultures with high scores in power-distance will adopt less of expressive and instrumental usage of SNS than cultures with low in power-distance.

Figure 2: Hypotheses development for national cultures & SNS.

Table 1: Scores and ranks for Mexico and India: National cultural dimensions. No.

1. 2. 3. 4. 5.

National cultural dimensions

Uncertainty avoidance Individualism/Collectivism Long-term orientation Indulgent versus restraint Power distance







82 30 24 97 81

26–27 48–50 74–76 2 10–11

40 34 51 26 77

64 48 40–41 73 17–18

Source: Hofstede et al. (2010).

India: 73) among 76 nations for the indulgent versus restraint dimension suggesting that Mexicans may predominantly adopt SNS mainly for the pleasure it provides. Mexico’s rank for power distance is (10–11), while India’s rank is (17–18) suggesting their cultures are very power-driven and may have concerns expressing themselves freely via SNS (Hofstede et al., 2010). Scholars suggest adopting a holistic view to understand how national cultures dimensions impact SNS adoption. For instance, high power distance scores may not always result in low usage of SNS. Understanding the dynamics between/among cultural dimensions may provide a more thorough perspective on how it predicts different outcomes. Examining the role of ‘‘bundles’’ of dimensions (such as collectivist and high power distance) rather than in ‘‘silos’’ may help understand the role of culture better. It is also important to understand these dimensions in context of


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other moderating factors (Internet penetration, use of technology, etc.) that may also be essential predictors in the adoption of SNS (Barron & Schneckenberg, 2012; Ribiere et al., 2010).

Talent Management and SNS in India Nilekani (2009) suggests that the Indian IT industry has not only been successful but also instrumental in changing traditional practices in other industries. Indian organizations have easily adopted e-HRM practices as their IT industry has been a role model in introducing progressive practices. HCL Technologies, a leading IT company, indicated that approximately 30% of their senior talent is recruited from LinkedIn. Mphasis, another IT company, innovatively used Facebook to attract as many as 7000 applicants for mid-level positions. Wipro, a high-profile Indian IT company, has decided to enhance their traditional college recruiting with online communities via Orkut. Orkut has become a favorite sourcing tool for technical firms in India (Kavitha & Pillai, 2011). A global survey indicates that Orkut is widely used both in Brazil (54%) and India (17%). Facebook is predominantly used by local recruiters to source qualified overseas Indians (Sachitanand & Bhattacharya, 2008). Meredith (2008) refers to overseas native talent as ‘‘sea turtles’’ — animals that finally return their birthing places. Multinationals opt to recruit ‘‘sea turtle’’ talent as they bring in a rare combination of local sensitivity and overseas skills. An international report on 39 economies identified that Indian organizations ranked fourth among 39 economies for adopting SNS for work-related purposes. India was ahead other BRIC economies of Brazil and China suggesting that Indian organizations have been early adopters of social media. In this study, 64% of Indian organizations used social media in comparison with 44% of Brazil and 48% of China. An approximate 7% of the Indian businesses used SNS for recruitment and hiring (Anonymous, 2011). In a study of 60 respondents (job seekers and employers), social media was adopted by individuals of different ages and professional levels. Orkut and Facebook are primarily used for entry level and LinkedIn is used for senior positions. About 37% of the respondents stated that recruiters can check their online information to make hiring decisions. (Kavitha & Pillai, 2011). In another study of 264 respondents (recruiters and job seekers), social media was used mainly for upper and mid-level management positions. Recruiters in this study suggested that entry level applicants can be easily recruited through traditional sources (such as college campus, newspapers, etc.) but middle-level talent requires considerable effort to source. Fifty-two percent in this research used LinkedIn and 25% used Facebook to identify additional applicant information as it allows recruiters to get a comprehensive picture of the applicants’ employment and nonemployment profiles. Recruiters suggest that social media allows to understand personality characteristics of applicants which might be relevant skills in team-based organizations. Job seekers also source SNS

Social Networking Sites (SNS)


when looking for jobs and spend approximately 30 hours/week on social media sites (Banerjee, 2012). LinkedIn is considered a very good source of recruitment for upper talent. It is predominantly used by members in the age and income ranges of 35–44 years and 2–10 lakhs (Indian currency)/month (Kaushik, 2011; Sachitanand & Bhattacharya, 2008). India has approximately 13.3 million LinkedIn members and is ranked second for the largest number of users after the United States (please refer to Table 2 for global statistics). Members frequently use special features of this professional social media to create communities of knowledge workers. Members share specific knowledge, discuss industry-related opportunities, and create specialized networks (Mitra et al., 2009). LinkedIn has been effective with Indian recruiters as it uniquely combines the characteristics of both bio-data and employee referrals — members usually provide abundant employment information and also post recommendations they have received (Kavitha & Pillai, 2011; Pande, 2012). Twitter is also being adopted innovatively by recruiters to source applicants. Twitter allows recruiters to send messages of 140 characters or ‘‘tweets’’ of recruiting events or job openings (Bretz, 2010; Madia, 2011). Twitters has helped create ‘‘talent communities’’ (Pande, 2012) for organizations as they look for applicants with specific knowledge, skills, and abilities (KSAs) (Tyagi, 2012). Table 3 provides the names of the top 5 Twitters used in India. The advantages of SNS that recruiters in India have observed are it is very helpful in locating senior and specialized talent (Kavitha & Pillai, 2011; Banerjee, 2012). It saves the traditional recruiting costs associated with headhunters or newspapers (Tyagi, 2012). Recruitment via social media takes less time (almost 2 weeks less) than conventional sources (Kavitha & Pillai, 2011). SNS helps source skills they may not be able to identify through usual staffing methods. For instance, an Indian mining company hired geologists from Australia realizing that a geocentric staffing approach or hiring the most qualified overseas talent is the best fit for their organization

Table 2: LinkedIn global statistics of memberships and ranks. No.


Number of users (million)

Global rank

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

United States India United Kingdom Brazil Canada France Netherlands Italy Australia Spain

58.5 13.3 8.4 6.8 5.1 3.2 3.1 2.8 2.8 2.6

1 2 3 4 5 6 7 8 9 10



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Table 3: Prominent Twitter names in India. No. 1. 2. 3. 4. 5.




@Kavi @VineetNayar @GautamGhosh @tnvora @Joyand Life

Mumbai India Bangalore Ahmedabad Mumbai

1 2 3 4 5

Source: Pande (2012).

(Sachitanand & Bhattacharya, 2008). SNS allow recruiters discern applicants’ soft skills and personality traits without having to interview applicants. SNS have been especially useful in sourcing passive and overseas qualified applicants. The growing practice of adopting SNS could also be a demonstration of TPB as organizations adopt practices based on positive attitudes of others in the industry. Further, the TAM suggests that the value and convenience of any innovative practice using technology encourages its usage further among the consumers (Barron & Schneckenberg, 2012; Parry & Wilson, 2009).

Talent Management and SNS in Mexico Facebook, Twitter, and YouTube are the most popular social media sites adopted by Mexicans. Mexico has approximately 37 million Facebook consumers and 9 out of 10 Internet users have Facebook accounts (McNaughton, 2012). Mexico is rated among the top five nations globally for having the most number of Facebook customers (Facebook Statistics by Country, 2012; McNaughton, 2012). Please refer to Table 4 for global statistics of Facebook users. A study of 327 companies concluded that Facebook (92%), Twitter (86%), Youtube (68%), Google (42%), and LinkedIn (37%) are predominantly used. Organizations mainly used social media to promote marketing, manage employee profiles, and sponsor advertising. A study of 3104 Internet users also found that the most popular social media sites were Facebook (90%), YouTube (60%), and Twitter (56%) (Asociacio´n Mexicana de Internet, 2012). Linkedin is the best source for organizations to hire upper-level or managerial talent. LinkedIn is mainly used for sales, academics, and operational positions and the majority of its users are males in the age group of 35–54. Facebook is an ideal site for recruiting young applicants as 84% of this generation has a profile on Facebook (Sa´nchez, 2012). Sa´nchez (2012) suggests that organizations are turning toward SNS as they realize the advantages it offers. AXA Seguros, an insurance company, realized the benefits of SNS when it had to hire a large number of applicants quickly. The company hired 400 executives in a much quicker time frame and with less cost than they would have if

Social Networking Sites (SNS)


Table 4: Top 10 global users of Facebook. No.


Number of users

Global rank

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

United States Brazil India Indonesia Mexico United Kingdom Turkey Philippines France Germany

163,220,540 56,725,420 53,624,320 44,107,700 37,542,740 31,719,720 31,108,760 29,297,840 24,631,900 24,300,340

1 2 3 4 5 6 7 8 9 10

Source: Facebook Statistics by Country (2012).

they had used traditional recruitment methods. These applicants also came in with the right skills as they had realistic expectations of their jobs. The company established ‘‘virtual communities’’ on SNS allowing applicants and employers to develop recruiting dialogues about expected and best practices. This feature of having informal prerecruitment conversations allow organizations to hire applicants with the best person-job and person-organization fit (Bretz, 2010). Industries such as the IT, oil and gas, aerospace, and pharmaceuticals are considered early users of SNS and also progressive (Herna´ndez, 2012). Multinationals also are introducing SNS and acting as change agents for local companies. For instance, Chrysler Mexico recently introduced Facebook, LinkedIn, and Twitter to attract a broader base of applicants. The management indicated this recruiting strategy allows them to get to know their applicants’ personalities and non-work interests better giving hiring managers a good understanding of their profiles (CNN Expansion, 2012). This is very relevant in Mexico where the process of recruitment and selection is considered a social exchange to glean as much personal and professional information from applicants. The Mexican work culture believes knowing more about applicants in staffing can only help make better hiring decisions (Davila & Elvira, 2005). Mexican companies also use SNS as a prescreening tool to gather as much information about their applicants. The Mexican laws also allow organizations to use publicly available information of applicants for employment-related purposes (Blackmer, 2010; Krudewagen & Stam, 2012). A case in point: a senior federal employee on Social Development made negative comments about rural women on his SNS. He was asked to step down from his position as his social media image did not reflect his public position (Sa´nchez, 2012). Recruiters in Mexico caution applicants to always have separate professional and personal SNS. The images applicants portray are very important to hiring managers. Applicants should pay equal attention to their SNS as they would do for their paper resumes. The applicants’ SNS can be considered


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an online extension of their curriculum vitae — the only caveat is that the online information becomes instantly public and almost indelible (Herna´ndez, 2012). Nabel (2010) suggests that social networks, such as Twitter, have become unfortunately associated with the drug criminals. They have managed to create a lot of fear among Mexican consumers by ‘‘twittering’’ about their latest crimes and violence. This might make potential users of SNS turn away from adopting these networks for either recreational or employment purposes as it has established a negative association. The TPB model applies well in such a context as members share negative experiences with new users creating pessimistic attitudes and therefore reduced usage. Mexican organizations realize that SNS help the recruitment process move faster and also proves cost effective. It helps glean both personal and professional information about applicants, which is a very valued trait in their hiring process. Domestic firms realize they have to adopt progressive practices to keep up with the standards of multinationals and other firms in their industries (CNN Expansion, 2012; Sa´nchez, 2012).

Data Privacy Laws and SNS Several countries follow data privacy acts to monitor and protect online data. For instance, the Fair Credit Reporting Act (FCRA) in the United States requires that consumers are informed if their personal online data information is being used for any purposes. This act also requires organizations that adopt background checks in hiring follow certain procedures. Employers are required to notify applicants if they are planning to conduct any checks (before hiring) and also have the applicants’ permission. Sourcing (identifying applicants) through social media sites could be considered potentially a preliminary screening tool as it allows recruiters to seek unwanted information about applicants that may not be job related (Zeidner, 2007). Many of the SNS explicitly state that the information on their web site cannot be use by noncustomers and for any other purposes other than those intended by web sites (Frauenheim, 2006). However, Mexico and India do not follow such stringent data privacy practices for using of information from their SNS. Mexico introduced a Data Privacy Act (Ley federal de proteccion de datos personales en posesion de los particulars) in 2010 to protect citizens’ rights of their online data. However, the act does not consider any public information that is available as sensitive or requiring consent. The act does not clearly stipulate that organizations cannot screen employees’ profiles that are publicly obtainable. The law suggests if individuals have posted any information openly it allows anyone to access it freely. Hence, applicants in Mexico do not have any legal protection if organizations use their public profiles discriminatorily (Blackmer, 2010; Krudewagen & Stam, 2012). India established the Information Technology Act in 2000 and its subsequent amendments in 2008 that allows authorized federal employees to seek any online

Social Networking Sites (SNS)


information that may be required. The act does not specifically protect online information that individuals may post publicly. Organizations are not hindered by any legal precedents in seeking applicant information from any SNS (Bandyopadhyay, 2011). Studies on social media usage and privacy concerns in India have been mixed. Bandyopadhyay (2011) demonstrated in an empirical study of 201 respondents that participants were concerned about online privacy issues. Respondents were cautious to post authentic personal information or conduct e-commerce if they realized their information is not going to be private. However, respondents who were confident of their Internet skills (how to set controls, such as firewalls, etc.) experienced less concerns about privacy issues. On the other hand, Gupta, Iyer, and Weisskirch (2010) in a cross-cultural study of 809 respondents (267 in the United States and 542 in India) observed that Indian respondents were more willing than US respondents to share personal information such as age, marital status, family, etc. in any online data base. Indian respondents did not view organizations seeking such public information from social network sites negatively. However, US respondents indicated that organizations seeking personal information are considered invasive if not properly authorized. Indian respondents also were not as concerned as the US respondents in creating any protective measures for their personal information.

‘‘Digital Divide’’ and SNS The adoption of SNS in any economy may also be affected by the phenomenon of ‘‘digital divide.’’ This refers to how the wealthy and affluent in the society have access to technology while the poor and underprivileged do not. This trend occurs because of inadequate telecommunications infrastructures, distinct economic classes, and exorbitant service costs (Curry & Kenney, 2006; Lath, 2006; OlivasLujan, Ramirez, & Zapatu-Cantu, 2007). India’s population of one billion has only 10.2% Internet penetration with approximately 121 million Internet users. In Asia, the nations that have the highest Internet penetration are South Korea (82.7%), Japan (80%), and Singapore (77.2%) ( (please refer to Table 5 for comparison of Internet penetration between India and Mexico). Inferior infrastructures and

Table 5: 2011 statistics of Internet users and penetration: India and Mexico. Country

Internet users (as of December 2011)

Country population

Percentage of population penetration

India Mexico

121,000,000 42,000,000

1,189,172,906 113,724,226

10.2 36.9

Source: Internet World Stats: Usage and Population Statistics.


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undependable outages are the norm for most small towns in India. While the big metropolitan cities are very well connected, Internet adoption and usage in rural towns are not comparable to global standards (Lath, 2006). Mexico’s population of 113 million has 36.9 % Internet penetration with approximately 42 million Internet users. In the Latin American region, the nations that have the highest penetration are Argentina (67%), Chile (59.2%), and Uruguay (56.1%) ( In Mexico, the northern states and the city of Mexico have better access to communication and technology (Curry & Kenney, 2006). Interesting statistics provide for a better understanding of the cyber disparity in Mexico; only 5% of the population has access to Internet from their homes (Curry & Kenney, 2006); only 28.6% firms in the corporate world have Internet access (Olivas-Lujan, Ramirez, & Zapatu-Cantu, 2007). The implications of ‘‘digital divides’’ for SNS is that multinationals may need to be cognizant that rural towns and small and medium organizations in both these countries may not have access to technology. Hence, in these emerging economies the metropolitan cities are the hubs of Internet activities. Global practitioners may be advised to approach domestic leaders to get a better understanding of Internet penetration in local economies (Curry & Kenney, 2006; Lath, 2006).

Concluding Remarks The 2007 McKinsey study identified SNS trends from countries in Asia, Europe, North America, and Latin America by surveying 2847 executives. The research suggested that 80% of the Indian respondents indicated a positive interest in investing in Web 2.0 technologies. About 29% of the respondents in India and 28% of the respondents in Latin America indicated that they are currently adopting Web 2.0 technologies for employment purposes. This suggests that in both these economies there is an optimistic attitude toward using SNS for work-related practices (McKinsey Global Survey, 2007). India and Mexico have welcomed SNS as strategic organizational tools for talent management by adopting popular sites such as LinkedIn, Facebook, Orkut, and Twitter among others. In India, Orkut is adopted to attract technical employees, Facebook is used to source overseas applicants, and Linkedin is sourced for management professionals. In Mexico, Facebook, Twitter, and YouTube predominantly provide applicants for young talent, while LinkedIn provides applicants for upper-level talent. The data privacy acts in both economies allow organizations to use any publicly available information for employment practices. Therefore applicants in both these economies are more accepting of organizations using SNS as a preliminary screening tool (Bandyopadhyay, 2011; Blackmer, 2010). This chapter provides the human resource management and cross-cultural literature three contributions. First, it identifies a cultural model (Figure 1) to get a better understanding of the role of national cultures on SNS. This model has included a dimension not addressed in the social media literature before therefore advancing

Social Networking Sites (SNS)


the body of knowledge. It also provides hypotheses (Figure 2) that can be tested by researchers to enhance their knowledge on the topic. Practitioners might also benefit from such a cultural analysis as it distinguishes how cultures use SNS for its functionality and hedonistic activities. Some cultures prefer to use SNS predominantly for its social aspect while others favor its practicality value. Other cultures may be anxious to use any form of social networks as technology adoption for employment practices might be still be a concern. Global managers may be interested to identify where social networks are easily accepted for work-related practices. For instance, the Mexican work culture has not embraced online recruitment as readily as many other cultures as it associates a collective exchange of information to any recruitment process. Elaborate interviews and comprehensive bio-data are considered hallmarks of their staffing process. E-HRM practices were considered ‘‘isolating’’ and ‘‘alienating’’ for Mexican managers (Davila & Elvira, 2005; Olivas-Lujan, Ramirez, & Zapatu-Cantu, 2007). Second, this chapter provides relevant information on two economies that are positioning strongly as economic powers in their own regions. India and China have been identified as ‘‘superhighways’’ as they reflect strong economic development over the last decade (Nilekani, 2009). The Indian economy is experiencing a robust growth since the 1990s as it opened its doors to foreign investment (Cappelli et al., 2011). A 2012 World Bank study on 183 economies provides important business indicators (such as ease of doing business, starting a business, etc.) indicates that Mexico is slowly inching its way to becoming a Latin American leader as it has the following scores: ease of doing business (Mexico 53), starting a business (Mexico: 75), enforcing contracts (Mexico 81), protecting investors (Mexico: 46), and trading across borders (Mexico: 59) (please refer to Table 6). Finally, there seems to be a paucity of research on social media in emerging economies. Scholars (Barron & Schneckenberg, 2012; Ribiere et al., 2010) have commented having information on cultural preferences might help multinationals understand how management practices can be enhanced through social networks. This chapter provides pioneer work in two emerging economies by identifying

Table 6: 2012 World Bank Study: Mexico and India. No. 1. 2. 3. 4. 5.

Business indicators Ease of doing business Starting a business Enforcing contracts Protecting investors Trading across borders (export and import)

Mexico (rank)

India (rank)

Countries ranking number 1 (one) in 2012

53 75 81 46 59

132 166 182 46 109

Singapore New Zealand Luxembourg New Zealand Singapore

Source: The World Bank and the International Finance Corporation (2012).


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relevant statistics, developing a model, and listing current SNS. Thus this research helps fill the gap in the extant cross-cultural literature on SNS. Kluemper and Rosen (2009) suggest that SNS might be able to accurately predict important hiring criteria such as personality, cognitive, and performance dimensions. In a study using 63 raters evaluating 6 SMS, it was identified that there is considerable reliability among raters regarding important hiring criteria. Raters were able to correctly identify individuals high or low on the hiring criteria such as personality, cognitive, and performance providing important information to recruiters. Talent management of the future may soon become an online concept only. Global companies (such as IBM) already use Second Life, a three dimensional virtual environment that allows applicants to discuss their job prospects with ‘‘recruitment avatars.’’ If SNS provide reliable and valid recruitment data as scholars suggest they do, we might soon have social media become the predominant recruiting strategy for organizations (de Burgh, 2008; Kluemper & Rosen, 2009).

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