Know Your Firm: Managing Social Media Engagement to Improve Firm Sales Performance

Abstract

We examine the impact of firm social media engagement on sales performance, answering “whether,” “what,” and “how” questions. The study uses a quasi-experimental design in a social e-commerce setting, for which propensity score matching and difference-in-differences methods quantify a mean 20.67% sales increase after firm social media adoption. We also find that firms that sell low-involvement products benefit more from social media adoption, compared to those that sell high-involvement products. Further, in terms of how to manage social media engagement, we find that informative content, in general, is effective for sales of high-involvement products, whereas promotional content, a new type of content discovered in this study, is more beneficial for sales of low-involvement products. Meanwhile, more social media followers generate better firm sales performance. We used instrumental variables and the control function method to address endogeneity issues and conducted robustness checks to support our conclusions. This study sheds light on the value of firm social media, particularly regarding industry differences and firm know-how.