Start Date

11-8-2016

Description

Firms are shifting their social media emphasis from passive listening to active intervening. This paper investigates the performance implications of managerial response to online word of mouth (WOM). Using the longitudinal data of online reviews, managerial responses and financial performance for 730 hotels in a specific U.S. market from 2005 to 2011, we lay out an empirical strategy to examine the performance effects of managerial responses given different conditions of online WOM, while dealing with potential estimation challenges of endogenous managerial response and online WOM, serially correlated financial performance, and unobserved heterogeneity in hotels. Our findings suggest that managerial intervention should be strategic – whether and how to respond depends on the different levels of online WOM metrics.

Share

COinS
 
Aug 11th, 12:00 AM

Management Response to Online WOM: Helpful or Detrimental?

Firms are shifting their social media emphasis from passive listening to active intervening. This paper investigates the performance implications of managerial response to online word of mouth (WOM). Using the longitudinal data of online reviews, managerial responses and financial performance for 730 hotels in a specific U.S. market from 2005 to 2011, we lay out an empirical strategy to examine the performance effects of managerial responses given different conditions of online WOM, while dealing with potential estimation challenges of endogenous managerial response and online WOM, serially correlated financial performance, and unobserved heterogeneity in hotels. Our findings suggest that managerial intervention should be strategic – whether and how to respond depends on the different levels of online WOM metrics.