Information Sharing in Social Networks: PhD Thesis Thomas Langenberg

Information Exchange in User Communities: A Study of Individual Level Determinants and Firm Level Effects in the U.S. Snowsports Industry Private Dissertation Defense by Thomas Langenberg June 14, 2007

Research Objective & Research Questions

Information Processing in Social Networks

A Conceptual Analysis of Absorptive Capacity and Social Integration Mechanisms

An Empirical Analysis of Information Exchange in User Communities

Summary & Conclusions

Agenda

Among scholars, a structural perspective on social networks has become a popular perspective to understand information processing within & outside firms RESEARCH OBJECTIVE & RESEARCH QUESTIONS Information Processing between Firms and Clients

User communities and innovation toolkits

help firms to get in closer contact with product technology users helps to increase a firm’s product innovation effectiveness (von Hippel 1988, Franke & Piller 2004)

External ties and absorptive capacity

Increase a firm’s ability to acquire novel information outside firms and turn it into commercially attractive opportunities (Lane & Lubatkin 1998, Zahra & George 2002)

Close interaction and brand building

User close interaction with customers and celebrity endorsements to increase brand awareness and customer loyalty (Agrawal 1995, Muniz 2001)

Tie strength, information sharing and knowledge networks

Knowledge networks facilitate the information search and transfer process within firms (Hansen 1999, 2002)

Network structure and individual behavior

The tertius jungens orientation describes the strategic orientation of an individual to connect formerly disconnected individuals in order to facilitate innovative activity and increase innovative performance (Obstfeld 2005)

Network cohesion and knowledge sharing

Firms can effectively utilize their intellectual capital by developing a “common glue”, a shared vocabulary, and common norms among its members (Tsai & Ghoshal 1998)

Information Processing in Intrafirm Social Networks My Research Objective Understand the relationship between a social network’s structural set-up and information exchange that takes place among its members

In my first research paper, I examine the determinants of firm level absorptive capacity and try to understand what social integration mechanisms are RESEARCH OBJECTIVE & RESEARCH QUESTIONS Despite extensive conceptual and empirical work on this construct little is known about the nature of social integration mechanism Research Gap Research Question: What exactly are social integration mechanisms? Absorptive capacity describes a firm’s ability to turn external information into commercially attractive outcomes

Cohen, W. M. & Levinthal, D. A. 1990. Absorptive Capacity: A New Perspective on Learning and Innovation . Administrative Science Quarterly, 35 (Special Issue: Technology, Organizations, and Innovation): 128-152

Lane, P. J. & Lubatkin, M. 1998. Relative Absorptive Capacity and Interorganizational Learning . Strategic Management Journal, 19(5): 461-477

Van den Bosch, F. A., Volberda, H. W., & Boer, M. d. 1999. Coevolution of firm absorptive capacity and knowledge environment: Organizational forms and combinative capabilities . Organization Science, 10(5): 551

Zahra & George (2002) have introduced the notion of social integration mechanisms to account for a firm’s ability to assimilate and transform novel knowledge source: Zahra, S. A. & George, G. 2002. Absorptive Capacity: A Review, Reconceptualization, and Extension. The Academy of Management Review, 27(2): 185-203

The second research paper takes the notion of social networks on a more applied level and studies information exchange in user communities RESEARCH OBJECTIVE & RESEARCH QUESTIONS Product technology users or creative individuals gather in user communities to share information and create knowledge or novel products

Lakhani, K. R. & von Hippel, E. 2002. How open source software works: “free” user-to-user assistance . Research Policy, 1451: 1–21

Füller, J., Bartl, M., Ernst, H., & Mühlbacher, H 2006. Community based innovation: How to integrate members of virtual communities into new product development . Electronic Commerce Research, 6(1)

Shah, S. K. 2006. Motivation, Governance and the Viability of Hybrid Forms in Open Source Software Development . Management Science, 52(7): 1000-1014

Lüthje, C., Herstatt, C., & Von Hippel, E. 2005. User-innovators and "local" information: The case of mountain biking . Research Policy, 34: 951-965

Among other things, scholars found that such communities often dependon the contributions of a few selected individuals Less work has been done to develop characteristics that can be applied to identify the individuals that are indispensable for information exchange in user communities Research Gap Research Question: Why are some individuals indispensable for information exchange while others are not?

The third research paper attempts to understand how information exchange in user communities influences a community member’s perception of firm activities Little work has been done to understand how exposure to different information sources inside and outside such user communities influences a community member’s perception of a firm’s activities Research Gap RESEARCH OBJECTIVE & RESEARCH QUESTIONS Among others, online communities help individuals to find information about products and services which eventually influences personal opinions and purchase decisions

McWilliam, G. 2000. Building Stronger Brands through Online Communities . Sloan Management Review, 41(3): 43-55

Muniz, A. M., Jr. & O'Guinn, T. C. 2001. Brand Community. Journal of Consumer Research, 27(4): 412-433

Modeling Participation in an Online Travel Community , Wang, Y. & Fesenmaier, D. R. in Journal of Travel Research, 42(3): 261-270, 2004

Rindova, V. P., Pollock, T. G., & Hayward, M. L. A. 2006. Celebrity firms: The social construction of market popularity. Academy of Management Review, 31(1): 50-71

Scholars argue that customers can influence a firm’s ability to access rent generating opportunities (for instance by gathering in communities of product technology or service users can influence a firm’s ability to establish popular products or brands) Research Question: How does exposure to information influence an individual’s perception of a firm’s activities?

Agenda

Research Design

Findings

Agenda

A firm’s ability to build absorptive capacity is - in parts - determined by its social integration mechanisms, but it is not yet known what they are A CONCEPTUAL ANALYSIS OF ABSORPTIVE CAPACITY AND SOCIAL INTEGRATION MECHANISMS: RESEARCH DESIGN source: Zahra, S. A. & George, G. 2002. Absorptive Capacity: A Review, Reconceptualization, and Extension. The Academy of Management Review, 27(2): 185-203 Firms differ in their ability to acquire, assimilate, transform, and exploit novel information because they have different degrees of absorptive capacity (Cohen & Levinthal 1990) Despite extensive conceptual and empirical work on this construct little is known about the nature of social integration mechanism: what are they ? how or by what are they determined ?

I reviewed 23 articles from the past five years that addressed Zahra & George’s (2002) model in their work ISI Web of Knowledge and Google Scholar

I reviewed all the journal articles that cited Zahra & George’s (2002) on absorptive capacity

I did not include unpublished articles or conference proceedings

I screened each of the articles with respect to the following two questions

How does this article help us to understand what social integration mechanisms are?

What are the limitations of the article with respect to our understanding of social integration mechanisms

Results

23 empirical and conceptual studies on the nature of social integration mechanisms

Period of five years

A CONCEPTUAL ANALYSIS OF ABSORPTIVE CAPACITY AND SOCIAL INTEGRATION MECHANISMS: RESEARCH DESIGN

Research Design

Findings

Agenda

First, from a social network structure point of view, an intrafirm social network’s cohesiveness is an important determinant of a firm’s ability to assimilate information Cohesive social networks foster information diffusion

The more cohesive a social network is the better information can diffuse through it

Hence, the more cohesive intrafirm social networks are the more informed a firm’s members are (e.g., Reagens & McEvily 2003)

Hence, a firm’s ability to assimilate novel information depends on the intrafirm social network’s degree of cohesiveness firm level knowledge assimilation capability cohesiveness of intrafirm social networks +

Literature

Lane, P. J., Salk, J. E., & Lyles, M. A. 2001. Absorptive capacity, learning, and performance in international joint ventures Strategic Management Journal, 22(12): 1139-1162.

Liao, J., Welsch, H., & Stoica, M. 2003. Organizational absorptive capacity and responsiveness: An empirical investigation of growth-oriented SMEs . Entrepreneurship Theory and Practice, 28 (1): 63

Jansen, J. J. P., Van den Bosch, F. A., & Volberda, H. W. 2005. Managing Potential and Realized Absorptive Capacity: How do Organizational Antecedents Matter? Academy of Management Journal, 48(6): 999-1015

A CONCEPTUAL ANALYSIS OF ABSORPTIVE CAPACITY AND SOCIAL INTEGRATION MECHANISMS: FINDINGS

Second, again from a social network structure point of view, central positions within intrafirm social networks provide individuals with control over information flows Central positions within social networks foster information brokering

Under network configurations where information flows are more likely to be controlled, information brokering is also more likely to occur

Hence, individuals with decision making power are more likely to drive knowledge transformation the more central they are in intrafirm social networks

Hence, a firm’s ability to transform existing information into novel knowledge can also be determined by organizational decisions makers’ control over information flows firm level knowledge transformation capability Centrality of Management (  intraorganizational decision makers ) +

Literature

Lenox, M. & King, A. 2004. Prospects for developing absorptive capacity through internal information provision . Strategic Management Journal, 25(4): 331-345

Burt, R. S. 1997. The Contingent Value of Social Capital . Administrative Science Quarterly, 42(2): 339-365.

Brass, D. J. 1984. Being in the Right Place: A Structural Analysis of Individual Influence in Organization. Administrative Science Quarterly, 29(4): 518-539.

A CONCEPTUAL ANALYSIS OF ABSORPTIVE CAPACITY AND SOCIAL INTEGRATION MECHANISMS: FINDINGS

Hence, different configurations of intrafirm social networks support different types of knowledge integration Firm Knowledge Assimilation Capabilities Firm Knowledge Transformation Capabilities A CONCEPTUAL ANALYSIS OF ABSORPTIVE CAPACITY AND SOCIAL INTEGRATION MECHANISMS: FINDINGS

Mechanism: Fragmentation

Knowledge is becoming dispersed

Firm-level absorptive capacity is relatively low

Mechanism: Recombination

Knowledge is being recombined by managers

Firm-level realized absorptive capacity is relatively high

Mechanism: Convergence

Knowledge is converging toward a common base

Firm-level potential absorptive capacity is relatively high

Mechanism: Generation

Knowledge is frequently exchanged and generated

Firm-level absorptive capacity is relatively high

Appendix

Agenda

Research Design

The Industry Context: U.S. Alpine Skiing

The Research Methodology

Empirical Findings

Appendix

Agenda

Alpine skiing is a particularly interesting subfield of U.S. Snowsports because of decreasing sales & participation but increasing firm creation activities Participation & Equipment Sales are Decreasing source: leisuretrends.com source: SIA Report 2005 Entrepreneurial wave in U.S. alpine skiing 30% of the currently competing ski firms in U.S. alpine skiing have been founded during the last 6 years. THE INDUSTRY CONTEXT: U.S. ALPINE SKIING

Skiing technology is relatively low-tech and thus makes it difficult for firms to differentiate themselves from competitors Differentiation along core design & construction principles source: www.skibuilders.com Differentiation along ski geometry/design parameters source: www.fischer-ski.com THE INDUSTRY CONTEXT: U.S. ALPINE SKIING Ski length Running length Camber Tip and tail width Waist width

Research Design

The Industry Context

The Research Methodology

Empirical Findings

Appendix

Agenda

I collected data through qualitative and semi-structured interviews to arrive at a better (exploratory) understanding of how the industry works

Qualitative Data: (In)Formal Interviews, Archival Records & Trade Magazines

THE RESEARCH METHODOLOGY

I conducted 20+ interviews with industry representatives (CEO, product managers, resort managers, industry analysts etc.) during the annual industry trade show

Average length of the interview 30minutes

Interviews were voice recorded

I conducted 20+ in depth interviews with managers, founders, veterans, and analysts of the local Colorado/Utah ski industry

Average length of the interview was 60+ minutes

Interviews were voice recorded

Results from Interviewing: New start-up firms are gaining ground “ These up-start companies are sick. They support the skiing sports and push the industry forward. ” Newschoolers.com community member about the freestyle skiing movement “ Our products are going back to the roots of skiing. We want to change the industry from the inside. We are not big and corporate, but our company is rider owned and rider operated. ” CEO of a freestyle ski start-up company “ These small start-up firms that are popping up all over Colorado, California, and the East Coast now are exactly what we need. They attract a new generation of skiers that might support the sport for a long period of time .” Product Manager Incumbent Ski Firm

During my interviews, I learned that newschoolers.com is a highly referred to and influential online community of freestyle ski enthusiasts in U.S. alpine skiing Demographics of the User Community Information Processing in Social Networks: the Newschoolers.com Case

The community is the largest community of freestyle skiers in U.S. alpine skiing

Newschoolers.com is said to be the most influential community when it comes to setting trends, creating opinions, or initiating collective action in U.S. freestyle skiing

THE RESEARCH METHODOLOGY

For hypothesis testing, I administered an online survey instrument in the newschoolers.com community Quantitative Data: Results**

Two survey periods of one week each in April and May 2006

Total Population of 85’369 registered members at the time of the survey

Four building blocks with 7-point Likert Scale type questions

Quantitative Data: Sampling Rules

To be eligible for my survey, respondents had to be registered members of the community

I counted only members who had been online during the survey period ( unique visitors during survey period )

I counted only respondents who had been online for at least 21.2 minutes per day. 21.2 is the time each members spends on the site on average per day ( overall sample size ).

*** I tested for survey non-response, item non-response and common method bias, but did not find any evidence for bias THE RESEARCH METHODOLOGY

Research Design

Empirical Findings

Individual-Level Determinants of User Community Information Exchange (Paper 2)

User Community Information Exchange and Firm-Level Effects (Paper 3)

Agenda

Being more active in a user community makes individuals more indispensable for information exchange in the user community EMPIRICAL FINDINGS: INDIVIDUAL LEVEL DETERMINANTS OF USER COMMUNITY INFORMATION EXCHANGE Hypothesis 1: Participation in information exchange has a positive effect on the extent to which an individual is perceived as relevant to the user community by other community members It is the “vibrant” information exchange which makes user communities an interesting place for both members and non-members

Hence,

members who carry most of the activity load might also be more important to the user community than others, and

members who are most active are also more visible to other user community members

Lakhani, K. R. & von Hippel, E. 2002. How open source software works: “free” user-to-user assistance . Research Policy, 1451: 1–21

Franke, N. & Shah, S. 2003. How communities support innovative activities: an exploration of assistance and sharing among end-users . Research Policy, 32: 157-178

Shah, S. K. 2006. Motivation, Governance and the Viability of Hybrid Forms in Open Source Software Development . Management Science, 52(7): 1000-1014

Supporting Literature ** adopted from Lakhani, K. R. & von Hippel, E. 2002. How open source software works: “free” user-to-user assistance . Research Policy, 1451: 1–21, p.9 The nature of information exchange in user communities

Typically, voluntary communities of interest are promoted and developed by a few individuals that are actively interested in shaping the community’s collective norms and shared beliefs EMPIRICAL FINDINGS: INDIVIDUAL LEVEL DETERMINANTS OF USER COMMUNITY INFORMATION EXCHANGE Hypothesis 2: Emotional commitment has a positive effect on the extent to which an individual is perceived as relevant to a user community by other community members In each user community, there are individuals that are actively shaping the norms and beliefs inside the community and without such individuals communities would loose some of their characteristics

Jimmy Wales on Wikipedia

With a vision for a free online encyclopedia, Wales assembled legions of volunteer contributors, gave them tools for collaborating, and created the self-organizing, self-correcting, ever-expanding, multilingual encyclopedia of the future [source:http://www.ted.com/index.php/speakers/view/id/37]

“ We stand for the freedom for information, and for us to compromise I think would send very much the wrong signal: that there's no one left on the planet who's willing to say "You know what? [source:http://observer.guardian.co.uk/world/story/0,,1869074,00.html]”

Eric Raymond on Open Source Software (Cite from The Cathedral and the Bazaar , page 23)

I think the future of open-source software will increasingly belong to people who know how to play Linus’s game […]

I think that the cutting edge of open-source software will belong to people who start from individual vision and brilliance, then amplify it through the effective construction of voluntary communities of interest

Finding: Emotional Commitment and Participation have a Positive Effect on an Individual’s Perceived Relevance to Information Exchange Descriptive Statistics & Pairwise Correlation Regression Results EMPIRICAL FINDINGS: INDIVIDUAL LEVEL DETERMINANTS OF USER COMMUNITY INFORMATION EXCHANGE

Implications: the attractiveness of a user community depends on the participation and emotional commitment of a few selected individuals that are “most central” to the user community’s information exchange The conceptual model is supported by my empirical results Emotional Commitment Perceived Relevance to User Community Information Exchange + Participation in Information Exchange

Other Implications

“ Vibrant” user communities draw on a “common glue” (shared norms and beliefs) which keeps information exchange alive and the user community together

User communities can be “accessed” and understood by observing/getting in touch with the most “central” members

+ EMPIRICAL FINDINGS: INDIVIDUAL LEVEL DETERMINANTS OF USER COMMUNITY INFORMATION EXCHANGE

Research Design

Empirical Findings

Individual-Level Determinants of User Community Information Exchange (Paper 2)

User Community Information Exchange and Firm-Level Effects (Paper 3)

Agenda

Firms that receive more large scale public attention and more positive emotional responses have a higher celebrity status than other firms (Rindova, Pollock & Hayward 2006) EMPIRICAL FINDINGS: USER COMMUNITY INFORMATION EXCHANGE & FIRM LEVEL EFFECTS

Moscovici, S. & Zavalloni, M. 1969. The Group as a Polarizer of Attitudes. Journal of Personality and Social Psychology, 12(2): 125-135.

Rindova, V. P., Pollock, T. G., & Hayward, M. L. A. 2006. Celebrity firms: The social construction of market popularity . Academy of Management Review, 31(1): 50-71.

Katz, E. 1957. The Two-Step Flow of Communication: An Up-To-Date Report on an Hypothesis . The Public Opinion Quarterly, 21(1): 61-78.

My Hypothesis: Besides the media, exposure to information exchange in user communities can also alter an individual’s emotional response toward a selected firm Literature: exposure to information can influence an individual’s opinions about firms ** adopted from Rindova, V. P., Pollock, T. G., & Hayward, M. L. A. 2006. Celebrity firms: The social construction of market popularity. Academy of Management Review, 31(1): 50-71, p65

Argument:

Journalist select protagonists to associate them with important changes within an industry

The media then creates dramatic narratives about firms which eventually creates firm celebrity status

Results: There is a statistically significant interaction effect between exposure to industry information and exposure to user community information exchange EMPIRICAL FINDINGS: USER COMMUNITY INFORMATION EXCHANGE & FIRM LEVEL EFFECTS

Increasing exposure to information exchange in a user community significantly alters an individual’s perception of a firm’s credibility in freestyle skiing

Implications

The so called “social” media has gained importance for firms when it comes to marketing products or services to customers groups, because interaction among users can influence a customer’s purchase decision making process

User communities provide access to current thoughts , perceptions , and opinions with respect to industry developments, firm activities, or products

Interpretation of findings (for incumbent ski firm product users) EMPIRICAL FINDINGS: USER COMMUNITY INFORMATION EXCHANGE & FIRM LEVEL EFFECTS Exposure to Industry Information Perceived Credibility Low Exposure to User Community High Exposure to User Community

Given only limited access to industry information, increasing exposure to the newschoolers.com community has a negative effect on an individual’s perception of his ski firm’s credibility in U.S. freestyle skiing

In contrast, given a good access to industry information, increasing exposure to the newschoolers.com community has a positive effect on an individual’s perception of his ski firm’s credibility in U.S. freestyle skiing

Problem Statement & Research Question

Agenda

In summary, my dissertation addresses my research objective with three findings about the relationship between a social network’s structural set-up and the information exchange that takes place among its members SUMMARY & CONCLUSIONS

Research Question:

Why are some individuals indispensable for information exchange while others are not?

My Empirical Contribution

Emotional commitment increases relevance to information exchange

Participation increases relevance to information exchange

Units of Analysis

Individual: Information sharing behavior in user communities

Understanding Information Exchange in User Communities

Research Question:

How do structural characteristics of intrafirm social networks affect firm-level absorptive capacity?

My Theoretical Contribution

Network cohesion fosters information assimilation

Managerial control fosters information transformation

Units of Analysis

Individual: Managerial control

Network: Intrafirm network cohesion

Firm: Firm-level absorptive capacity

Firm Level Absorptive Capacity

Research Question:

How does exposure to information influence an individual’s perception of a firm’s activities?

My Empirical Contribution

Exposure to information exchange in user communities can alter an individual’s opinion about firm activities and eventually firm celebrity status

Units of Analysis

Individual: Exposure to information

Firm: Perceived credibility

Understanding the Sources of Firm Celebrity Status

My results have important implications for managerial practice and further research. The following table outlines a few avenues. Information Exchange in User Communities Social Integration Mechanisms Firm Celebrity Status SUMMARY & CONCLUSIONS Managerial Practice Further Research

Social Network Management

By strategically analyzing and managing intrafirm networks, firms will be able to identify where novel ideas can be created & where existing knowledge is being lost

Implementation: social networking software can help to visualize information and communication flows inside firms

Empirical Analysis

Further research could compare the social networks of different firms or divisions inside firms with firm level performance indicators

In so doing, one would be able to get a better understanding of how novel knowledge is being integrated inside firms

User Community Integration

By actively monitoring and contributing to information exchange in user communities, firms might be able to alter an individual’s perception of the firm’s products or a specific brand

Hence, ultimately this moderation might enable firms to increase sales or product feedback

Effect on Firm Performance

So far, research has shown where firm celebrity status might be coming from (e.g. the media or information exchange)

Further research should empirically investigate whether firm celebrity status is also associated with rent generating opportunities for firms

User Community Management

Managers or individuals that intent to establish an active user community need to make sure that the community is run by individuals that are both extremely active and dedicated to the community’s goals

Otherwise, a community will not become “vibrant”

User Community Integration

More research needs to be conducted on a longitudinal basis, because this helps us to understand whether participation and commitment change over time