Online Review Helpfulness and Firms’ Financial Performance: An Empirical Study in a Service Industry

Abstract

This study aims to bridge a significant research gap in the electronic word-of-mouth (eWOM) literature: measuring the effect of the degree of online review helpfulness (ORH) on firms’ financial performance. As studies of the impact of ORH on firm performance in the context of service industries in general and more specifically in the hospitality sector are virtually nonexistent, this work intends to offer insights to eWOM researchers by analyzing if and to what extent ORH affects the financial performance of hospitality firms. Based on a re-visitation of the antecedents of ORH stemming from information adoption models, social influence theory and dual process theory, we analyze the moderating effects of the degree of ORH on the relationships between online review valence/volume and firms’ financial performance. Based on the examination of 395,964 online reviews related to 261 higher-end hotels located in London, the third most visited destination worldwide, we find that the degree of ORH positively moderates the positive effect of the reviews’ valence on financial performance, while it does not moderate significantly the positive effect of the reviews’ volume on financial performance. Theoretical contributions to the nascent research stream taking an outcome-oriented approach to the study of eWOM helpfulness and managerial implications are discussed.