What determines the level of a small family-owned business’s virtual communication with customers? Hong Kong’s experience during the Covid-19 pandemic

Abstract

A firm’s virtual communication with customers (VCC) simulates face-to-face communication through the Internet. This study is motivated by the low level of small family-owned businesses’ VCC in Hong Kong during the Covid-19 pandemic when face-to-face communication is restricted by social distancing measures. A firm’s VCC is decomposed into four subsets based on four major functions it performs: product promotion (pp), product customization (pc), customer service (cs), and customer ordering (od). It is hypothesized that information and cost sharing between different VCC subsets reduce the uncertainties and costs of VCC, which implies a mutually reinforcing relationship between the different subsets. Based on cross-sectional data collected from small family-owned businesses in Hong Kong during the 2020 Covid-19 pandemic, this study empirically identifies VCC determinants from the sample firms’ decision-maker characteristics, organizational characteristics, innovation characteristics, and environmental characteristics. Using the identified VCC determinants as exogenous variables, a simultaneous equations analysis is then conducted to endogenize different VCC subsets and show that pp, pc, and cs are mutually reinforcing. This implies that information and cost sharing between different VCC subsets are needed to stimulate the overall VCC by reducing the uncertainties and costs associated with it during the pandemic.