A Dynamic Model of the Effect of Online Communications on Firm Sales

  • Sonnier G
  • McAlister L
  • Rutz O
  • 210

    Readers

    Mendeley users who have this article in their library.
  • 0

    Citations

    Citations of this article.

Abstract

Interpersonal communications have long been recognized as an influential source of information for con- sumers. Internet-based media have facilitated information exchange among firms and consumers, as well as observability and measurement of such exchanges. However, much of the research addressing online com- munication focuses on ratings collected from online forums. In this paper, we look beyond ratings to a more comprehensive view of online communications.We consider the sales effect of the volume of positive, negative, and neutral online communications captured byWeb crawler technology and classified by automated sentiment analysis. Our modeling approach captures two key features of our data, dynamics and endogeneity. In terms of dynamics, we model daily measures of online communications about a firm and its products as contributing to a latent demand-generating stock variable. To account for the endogeneity, we extend the latent instrumental variable technique to account for dynamic endogenous regressors. Our results demonstrate a significant effect of positive, negative, and neutral online communications on daily sales performance. Failure to account for endo- geneity results in a severe attenuation of the estimated effects. From a managerial perspective, we demonstrate the importance of accounting for communication valence as well as the impact of shocks to positive, negative, and neutral online communications.

Get free article suggestions today

Mendeley saves you time finding and organizing research

Sign up here
Already have an account ?Sign in

Find this document

Authors

  • Garrett P. Sonnier

  • Leigh McAlister

  • Oliver J. Rutz

Cite this document

Choose a citation style from the tabs below

Save time finding and organizing research with Mendeley

Sign up for free