From social network to firm performance

Abstract

Purpose The purpose of this study is to develop a structural equation model to explain the complex relationship between social network and firm performance by introducing the mediating role of trust, selling capability and pricing capability. Design/methodology/approach The research model with hypothesis development was derived based on the literature. To provide empirical evidence, this study carried out a survey in which the data were equated with a list of questionnaires with a random survey of 380 small and medium enterprises (SMEs) in the Indonesian context. Findings This study indicates that the use of social media in management process will not affect the increasing firm performance, unless the firms build trust upon social networks. The social network with trust allows the firms to gain a pricing capability and a selling capability, which brings a positive impact on firm performance. The results also show that the selling and the pricing capabilities become essential following the utilizing the social media, which concerns on trust building. Research limitations/implications This study focused on the small-to-medium context, which has conventionally provided an exemplary site for the development of social capital theory but raises issues of generalizability across different contexts. Practical implications To the managers, it is advisable to encourage their employees to consciously exploit the selling capability by enhancing the business networks via social media to achieve the firm performance. Originality/value This paper contributes to the social capital theory by explaining the mediating role of trust in the complex relationship between social network and firm performance. This study provides evidence that trust plays a pivotal role in social networks, which enable the observed firms to achieve the performance.