When products come alive: Interpersonal communication norms induce positive word of mouth for anthropomorphized products
| Authors | Chen, Sengupta, Zheng |
| Journal | Journal of Consumer Research |
| Year | 2023 |
| Type | Published Paper |
| Abstract | Across five experiments, this research finds that product anthropomorphism enhances consumers' intention to share positive thoughts in their word-of-mouth (WOM) communication about such products, in the hope of creating a favorable interpersonal impression about themselves. Our theorizing suggests that the effect occurs because consumers apply a norm that originates in human-related communication--namely, that speaking positively of other people creates a more likable impression of speakers by making them seem more kind and polite--to their WOM for anthropomorphized products (study 1). As a result, when an impression management motive is salient, consumers display greater overall positivity in their WOM for an anthropomorphized product than for its non-anthropomorphized equivalent (study 2). Support for this prediction is found across various measures of WOM positivity. Furthermore, in line with this conceptualization, anthropomorphism-induced positivity diminishes (a) when consumers are less concerned about impression management, such as when talking to a close friend (study 3), (b) when an opposing accuracy motive overpowers the impression management motive (study 4), or (c) when the underlying belief that positivity will yield favorable impressions is itself challenged (study 5). Our conceptualization and findings inform and extend research on consumer WOM communication, product anthropomorphism, and impression management. |
| Keywords | Consumer word of mouth, interpersonal communication norms, product anthropomorphism, impression management |
| URL | https://academic.oup.com/jcr/article-abstract/49/6/1032/6609178?redirectedFrom=fulltext |
| Tags | Archival Empirical | Consumer Decisions |
Social influence in household equity investment: Evidence from randomized military drafts
| Authors | Chi, Hung, Lin, Tseng |
| Year | 2023 |
| Type | Working Paper |
| Abstract | We provide causal evidence of the peer effect on investment in a large-scale natural experiment. We show that retail investors respond to the investment decisions of their military peers who were randomly assigned in compulsory military drafts: retail investors participate more in the stock market, invest more in stocks that peers hold, and perform better. Our investigation indicates that retail investors learn valuable information from their peers to make profitable investment decisions. These effects are more pronounced among peers who are more sophisticated and among stocks entailing less behavioral bias. Stocks with more peer clientele outperform stocks with less clientele. |
| URL | https://sites.google.com/view/timcchung/research |
| Tags | Archival Empirical | Consumer Decisions | Experimental / Survey-Based Empirical | Financing- and Investment Decisions (Individual) |
I really know you: How influencers can increase audience engagement by referencing their close social ties
| Authors | Chung, Ding, Kalra |
| Journal | Journal of Consumer Research |
| Year | 2023 |
| Type | Published Paper |
| Abstract | Despite firms' continued interest in using influencers to reach their target consumers, academic and practical insights are limited on what levers an influencer can use to enhance audience engagement using their posts. We demonstrate that posting stories with or about people whom they share close ties with--such as family, friends, and romantic partners--can be one effective lever. Content that incorporates close social ties can be effective for several reasons: it may increase perceptions of authenticity, enhance perceived similarity, increase the perception that the influencer possesses more warmth, and could satisfy viewers' interpersonal curiosity. We analyze texts and photographs of 55,631 posts of 763 influencers on Instagram, and after controlling for several variables, we find robust support that consumers "like" posts that reference close social ties. Furthermore, this effect enhances when first-person pronouns are used to describe special moments with these close ties. We supplement the Instagram data with an experimental approach and confirm the relationship between close ties and consumer engagement. Managerially, this is a useful insight as we also show that sponsored posts tend to be perceived negatively compared to non-sponsored posts; yet, embedding social ties on the sponsored posts can mitigate consumers' negative responses. |
| Keywords | Social media, influencers, consumer engagement, social ties |
| URL | https://academic.oup.com/jcr/article-abstract/50/4/683/7077143?redirectedFrom=fulltext |
| Tags | Archival Empirical | Consumer Decisions |
Visibility bias in the transmission of consumption beliefs and undersaving
| Authors | Han, Hirshleifer, Walden |
| Journal | Journal of Finance |
| Year | 2023 |
| Type | Published Paper |
| Abstract | We model visibility bias in the social transmission of consumption behavior. When consumption is more salient than nonconsumption, people perceive that others are consuming heavily, and infer that future prospects are favorable. This increases aggregate consumption in a positive feedback loop. A distinctive implication is thatdisclosure policy interventions can ameliorate undersaving. In contrast with wealth-signaling models, information asymmetry about wealth reduces overconsumption. The model predicts that saving is influenced by social connectedness, observation bi-ases, and demographic structure, and provides new insight into savings rates. These predictions are distinct from other common models of consumption distortions. |
| URL | https://onlinelibrary.wiley.com/doi/10.1111/jofi.13223 |
| Tags | Archival Empirical | Consumer Decisions | Social Transmission Biases |
How social media influencers impact consumer collectives: An embeddedness perspective
| Authors | Mardon, Cocker, Daunt |
| Journal | Journal of Consumer Research |
| Year | 2023 |
| Type | Published Paper |
| Abstract | Research has documented the emergence of embedded entrepreneurs within consumer collectives. This phenomenon is increasingly prevalent as social media enables ordinary consumers to become social media influencers (SMIs), a distinct form of embedded entrepreneur. Whilst research has considered the implications of embeddedness for embedded entrepreneurs themselves, we lack insight into embedded entrepreneurship's impact on consumer collectives. To address this gap, we draw from a longitudinal, qualitative study of the YouTube beauty community, where SMIs are pervasive. Informed by interactionist role theory, we document the Polanyian "double movement" prompted by the emergence of SMIs within the community. We demonstrate that the economy within the community was initially highly embedded, constrained by behavioral norms linked to established social roles. SMIs' attempts to disembed the economy created dysfunctional role dynamics that reduced the benefits of participation for non-entrepreneurial community members. This prompted a countermovement whereby SMIs and their followers attempted to re-embed SMIs' economic activity via role negotiation strategies. Our analysis sheds new light on the negative implications of embedded entrepreneurship for non-entrepreneurial members of consumer collectives, highlights the role of social media platforms in negotiations of embeddedness, and advances wider conversations surrounding the evolution of consumer collectives and the impact of SMIs. |
| Keywords | Embedded entrepreneurship, consumer collectives, social media influencers, embeddedness, double movement, interactionist role theory |
| URL | https://academic.oup.com/jcr/article/50/3/617/6978199 |
| Tags | Archival Empirical | Consumer Decisions | Experimental / Survey-Based Empirical |
Rejections are more contagious than choices: How another's decisions shape our own
| Authors | Nan, Park, Yang |
| Journal | Journal of Consumer Research |
| Year | 2023 |
| Type | Published Paper |
| Abstract | Every day, we learn about others' decisions from various sources. We perceive some of these decisions as choices and others as rejections. Does the mere perception of another's decision as a choice versus as a rejection influence our own behavior? Are we more likely to conform to another's decision if we view it in one way or the other? The current research investigates the social influence of decision frames. Eight studies, including a field study conducted during a livestreaming event hosted by an influencer with over 1.5 million followers, find that people are more likely to conform to another's decision if it is perceived as a rejection than if it is perceived as a choice. This effect happens because consumers are more likely to attribute another's decision to product quality as opposed to personal preference, when consumers perceive another's decision as a rejection than as a choice. The inference about quality versus personal preference in turn increases conformity. This research bridges the existing literatures on decision framing, social influence, and perceptions of quality and personal preference, and it offers important implications for marketers and influencers. |
| Keywords | Framing effect, choice versus rejection, social influence, conformity, attribution, quality versus personal preference |
| URL | https://academic.oup.com/jcr/article/50/2/363/7133747 |
| Tags | Archival Empirical | Consumer Decisions | Experimental / Survey-Based Empirical |
A turn of the tables: Psychological contracts and word of mouth about sharing economy platforms when consumers get reviewed
| Authors | Rifkin, Kirk, Corus |
| Journal | Journal of Consumer Research |
| Year | 2023 |
| Type | Published Paper |
| Abstract | The Peer-to-Peer sector of the sharing economy relies on reputation systems through which consumers and providers review each other. Whereas prior research has examined the effects of reviews by consumers on providers and firms, this research examines, for the first time, a turn of the tables in which consumers are evaluated. Across a pilot and seven studies (five preregistered), using multiple actual behaviors and sharing contexts, results reveal that a negative review of the consumer from the peer provider leads to negative word of mouth (NWOM) about the platform. Drawing from psychological contract theory, the research demonstrates that this effect is mediated by consumers' perceived betrayal by the platform. Two sets of moderators are identified. The first set establishes that a breach of consumers' psychological contract with the platform underlies the effect. In the second set, platform policies that may render a breach more or less consequential can intensify or mitigate consumer reactions. Specifically, making the review private (vs. public) and providing opportunities for justice restoration (response, revenge, and dispute) attenuate the effect of review valence on betrayal and NWOM. Implications for sharing economy platform managers and consumers are discussed. |
| Keywords | Sharing economy, reputation systems, platform intermediation, psychological contract, negative word of mouth, reviews |
| URL | https://academic.oup.com/jcr/article-abstract/50/2/382/6984723?redirectedFrom=fulltext |
| Tags | Archival Empirical | Consumer Decisions |
Social referral programs for freemium platforms
| Authors | Belo, Li |
| Journal | Management Science |
| Year | 2022 |
| Type | Published Paper |
| Abstract | We examine how freemium platforms can design social referral programs to encourage growth and engagement without sacrificing revenue. On the one hand, social referral programs generate new referrals from users who would not have paid for the premium features. On the other hand, they also attract new referrals from users who would have paid but prefer to invite others, resulting in more referrals but fewer paying users. We use data from a large-scale randomized field experiment in an online dating platform to assess the effects of adding referrals programs to freemium platforms and changing the referral requirements on users' behavior, namely, on their decisions to invite, pay, and engage with the platform. We find that introducing referral programs in freemium platforms can significantly contribute to increasing the number of referrals at the expense of revenue. Platforms can avoid the loss in revenue by reserving some premium features exclusively for paying users. We also find that increasing referral requirements in social referral programs can work as a double-edged sword. Increasing the referral threshold results in more referrals and higher total revenue. Yet these benefits appear to come at a cost. Users become less engaged, decreasing the value of the platform for all users. We explore two mechanisms that help to explain the differences in users' social engagement. Finally, and contrary to prior findings, we find that the quality of the referrals is not affected by the referral requirements. We discuss the theoretical and practical implications of our research. |
| Keywords | Field experiment, freemium business models, platform strategy, referral program |
| URL | https://pubsonline.informs.org/doi/full/10.1287/mnsc.2022.4301 |
| Tags | Archival Empirical | Consumer Decisions | Experimental / Survey-Based Empirical | Manager / Firm Behavior |
Expression modalities: How speaking versus writing shapes word of mouth
| Authors | Berger, Rocklage, Packard |
| Journal | Journal of Consumer Research |
| Year | 2022 |
| Type | Published Paper |
| Abstract | Consumers often communicate their attitudes and opinions with others, and such word of mouth has an important impact on what others think, buy, and do. But might the way consumers communicate their attitudes (i.e., through speaking or writing) shape the attitudes they express? And, as a result, the impact of what they share? While a great deal of research has begun to examine drivers of word of mouth, there has been less attention to how communication modality might shape sharing. Six studies, conducted in the laboratory and field, demonstrate that compared to speaking, writing leads consumers to express less emotional attitudes. The effect is driven by deliberation. Writing offers more time to deliberate about what to say, which reduces emotionality. The studies also demonstrate a downstream consequence of this effect: by shaping the attitudes expressed, the modality consumers communicate through can influence the impact of their communication. This work sheds light on word of mouth, effects of communication modality, and the role of language in communication. |
| Keywords | Word of mouth, communication modality, emotion, speaking, writing, automated text analysis |
| URL | https://academic.oup.com/jcr/article-abstract/49/3/389/6483086?redirectedFrom=fulltext |
| Tags | Archival Empirical | Consumer Decisions | Experimental / Survey-Based Empirical | Media and Textual Analysis |
Epidemiological expectations
| Authors | Carroll, Wang |
| Year | 2022 |
| Type | Working Paper | Literature Review Paper |
| Abstract | 'Epidemiological' models of belief formation put social interactions at their core; such models are widely used by scholars who are not economists to study the dynamics of beliefs in populations. We survey the literature in which economists attempting to model the consequences of beliefs about the future -'expectations'- have employed a full-fledged epidemiological approach to explore an economic question. We draw connections to related work on 'contagion,' narrative economics, news/rumor spreading, and the spread of internet memes. A main theme of the paper is that a number of independent developments have recently converged to make epidemiological expectations ('EE') modeling more feasible and appealing than in the past. |
| Keywords | Economic expectations, epidemiological expectations, social interactions, social dynamics, information diffusion, economic narratives |
| URL | https://www.nber.org/papers/w30605?utm_campaign=ntwh&utm_medium=email&utm_source=ntwg4 |
| Tags | Asset Pricing, Trading Volume and Market Efficiency | Consumer Decisions | Financing- and Investment Decisions (Individual) | Investment Decisions (Institutional) | Manager / Firm Behavior | Media and Textual Analysis | Propagation of Noise / Undesirable Outcomes | Social Network Structure | Social Transmission Biases | Theory |
The effects of online review platforms on restaurant revenue, consumer learning, and welfare
| Authors | Fang |
| Journal | Management Science |
| Year | 2022 |
| Type | Published Paper |
| Abstract | This paper quantifies the effects of online review platforms on restaurant revenue and consumer welfare. Using a novel data set containing revenues and information from major online review platforms in Texas, I show that online review platforms help consumers learn about restaurant quality more quickly. The effects on learning show up in restaurant revenues. Specifically, doubling the review activity increases the revenue of a high-quality independent restaurant by 5%-19% and decreases that of a low-quality restaurant by a similar amount. These effects vary widely across restaurants' locations. Restaurants around highway exits are affected twice as much as those in nonhighway areas, implying that reviews are more useful to travelers and tourists than locals. The effects also decline as restaurants age, consistent with the diminishing value of information in learning. In contrast, chain restaurants are affected to a much lesser degree than independent restaurants. Building on this evidence, I develop a structural demand model with aggregate social learning. Counterfactual analyses indicate that online review platforms raise consumer welfare much more for tourists than for locals. By encouraging consumers to eat out more often at high-quality independent restaurants, online review platforms increased the total industry revenue by 3.0% over the period from 2011-2015. |
| URL | https://pubsonline.informs.org/doi/abs/10.1287/mnsc.2021.4279 |
| Tags | Archival Empirical | Consumer Decisions |
Social interactions and households' flood insurance decisions
| Authors | Hu |
| Journal | Journal of Financial Economics |
| Year | 2022 |
| Type | Published Paper |
| Abstract | Flooding is the most costly natural disaster faced by US households, yet policymakers are puzzled by the low take-up rates for flood insurance. Leveraging novel transaction-level data, this paper studies the influence of social interactions on households' insurance decisions. I show that households increase flood insurance purchases by 1-5 percent when their geographically distant friends are exposed to flooding events or to campaigns for flood insurance. These exogenous shocks to far-away friends should not affect local households' own insurance decisions except through peer effects. I provide evidence suggesting that social interactions facilitate learning through information dissemination and attention triggering. |
| Keywords | Flood insurance, social learning, peer effects, social networks |
| URL | https://www.sciencedirect.com/science/article/pii/S0304405X22000563 |
| Tags | Archival Empirical | Consumer Decisions |
The power of profanity: The meaning and impact of swear words in word of mouth
| Authors | Lafreniere, Moore, Fisher |
| Journal | Journal of Marketing Research |
| Year | 2022 |
| Type | Published Paper |
| Abstract | Swearing can violate norms and thereby offend consumers. Yet the prevalence of swear word use suggests that an offensiveness perspective may not fully capture their impact in marketing. This article adopts a linguistic perspective to develop and test a model of how, why, and when swear word use affects consumers in online word of mouth. In two field data sets and four experiments, the authors show that relative to reviews with no swear words, or with non-swear-word synonyms (e.g., super), reviews with swear words (e.g., damn) impact review readers. First, reviews with swear words are rated as more helpful. Second, when a swear word qualifies a desirable [undesirable] product attribute, readers' attitudes toward the product increase [decrease] (e.g., "This dishwasher is damn quiet [loud]!"). Swear words impact readers because they convey meaning about (1) the reviewer and (2) the topic (product) under discussion. These two meanings function as independent, parallel mediators that drive the observed effects. Further, these effects are moderated by swear word number and style: they do not emerge when a review contains many swear words and are stronger for uncensored and euphemistic swear words (e.g., darn) than censored swear words (e.g., d*mn). Overall, swear words in reviews provide value to readers-and review platforms-because they efficiently and effectively convey two meanings. |
| URL | https://journals.sagepub.com/doi/full/10.1177/00222437221078606 |
| Tags | Archival Empirical | Consumer Decisions | Experimental / Survey-Based Empirical |
The effects of consumer preference and peer influence on trial of an experience good
| Authors | Pyo, Lee, Park |
| Journal | Journal of Marketing Research |
| Year | 2022 |
| Type | Published Paper |
| Abstract | This research examines the interaction effect of two dimensions of preference on social contagion: preference similarity between a consumer (i.e., who seeks recommendation) and a peer (i.e., who potentially provides recommendation) and the fit of an experience good with the consumer's preference. For empirical analyses, the authors collected rich information from Last.fm, a music social networking website, including individual users' music play histories, friendship information, social tags (i.e., user-generated keywords associated with artists and songs), and new song profiles. The results show that consumers' trial of a song that fits less with their preference is influenced more by peers with similar preferences. By contrast, consumers' trial of a song that fits more with their preference is influenced more by peers with dissimilar preferences. This research enriches the understanding of the nuanced role of preference in social contagion and offers managerial implications to better leverage social dynamics. |
| URL | https://journals.sagepub.com/doi/abs/10.1177/00222437221093603 |
| Tags | Archival Empirical | Consumer Decisions |
Let me show you what I did versus what I have: Sharing experiential versus material purchases alters authenticity and liking of social media users
| Authors | Valsesia, Diehl |
| Journal | Journal of Consumer Research |
| Year | 2022 |
| Type | Published Paper |
| Abstract | Social media may encourage novel ways of signaling that involve different purchase types (experiential vs. material), signaling frequencies (multiple vs. single signals), and other features unique to social media (e.g., hashtags). This work examines how purchase signals are received on social media and how these signaling variations affect signal receivers' perceptions of the authenticity of social media posts as well as the overall impressions receivers form of the signal sender. Data collected across six experiments show multiple material purchase signals lead to more negative impressions compared to multiple experiential purchase signals. Signal receivers perceive multiple material purchase posts as less authentic, which dampens their impressions of the signal sender. In line with this mechanism, the impression premium of experiential purchase signals disappears when receivers use other cues (monetary mentions, other users' comments, and marketer associations via hashtags) to infer a signal's lack of authenticity. Additional data also document downstream consequences on engagement. This work contributes theoretically to research in both signaling and social media and improves the understanding of substantive situations in which consumers' objectives of curating a positive image and creating engagement with their posts, collide with marketers' objectives of encouraging user-generated content and word of mouth. |
| Keywords | Signaling, social media, impression management, word of mouth, engagement, influencer |
| URL | https://academic.oup.com/jcr/article-abstract/49/3/430/6444995?redirectedFrom=fulltext |
| Tags | Archival Empirical | Consumer Decisions | Experimental / Survey-Based Empirical | Theory |
Down a rabbit hole: How prior media consumption shapes subsequent media consumption
| Authors | Woolley, Sharif |
| Journal | Journal of Marketing Research |
| Year | 2022 |
| Type | Published Paper |
| Abstract | Consumers often become "stuck in a rabbit hole" when consuming media. They may watch several YouTube videos in the same category or view several thematically similar artistic images on Instagram in a row, finding it difficult to stop. What causes individuals to choose to consume additional media on a topic that is similar to (vs. different from) what they just experienced? The authors examine a novel antecedent: the consecutive consumption of multiple similar media. After viewing multiple similar media consecutively, more consumers choose to (1) view additional similar media over dissimilar media or (2) complete a dissimilar activity entirely, even when the prior consumption pattern is externally induced. The rabbit hole effect occurs because of increased accessibility of the shared category: when a category is more accessible, people feel immersed in it and anticipate that future options within that category will be more enjoyable. The authors identify three characteristics of media consumption that contribute to the rabbit hole effect by increasing category accessibility: similarity, repetition, and consecutiveness of prior media consumption. This research contributes to literature on technology, choice, and variety seeking, and it offers implications for increasing (vs. slowing) similar consumption. |
| URL | https://journals.sagepub.com/doi/abs/10.1177/00222437211055403 |
| Tags | Archival Empirical | Consumer Decisions |
Tweets we like aren't alike: Time of day affects engagement with vice and virtue tweets
| Authors | Zor, Kim, Monga |
| Journal | Journal of Consumer Research |
| Year | 2022 |
| Type | Published Paper |
| Abstract | Consumers are increasingly engaging with content on social media platforms, such as by "following" Twitter accounts and "liking" tweets. How does their engagement change through the day for vice content offering immediate gratification versus virtue content offering long-term knowledge benefits? Examining when (morning vs. evening) engagement happens with which content (vice vs. virtue), the current research reveals a time-of-day asymmetry. As morning turns to evening, engagement shifts away from virtue and toward vice content. This asymmetry is documented in three studies using actual Twitter data-millions of data points collected every 30 minutes over long periods of time-and one study using an experimental setting. Consistent with a process of self-control failure, one of the Twitter data studies shows a theory-driven moderation of the asymmetry, and the experiment shows mediation via self-control. However, multiple processes are likely at play, as time does not unfold in isolation during a day, but co-occurs with the unfolding of multiple events. These results provide new insights into social media engagement and guide practitioners on when to post which content. |
| Keywords | Time of day, vice, virtue, content engagement, self-control failure, Twitter |
| URL | https://academic.oup.com/jcr/article-abstract/49/3/473/6463636?redirectedFrom=fulltext |
| Tags | Archival Empirical | Consumer Decisions |
Social finance as cultural evolution, transmission bias, and market dynamics
| Authors | Akcay, Hirshleifer |
| Journal | Proceedings of the National Academy of Sciences |
| Year | 2021 |
| Type | Published Paper | Literature Review Paper |
| Abstract | The thoughts and behaviors of financial market participants depend upon adopted cultural traits, including information signals, beliefs, strategies, and folk economic models. Financial traits compete to survive in the human population and are modified in the process of being transmitted from one agent to another. These cultural evolutionary processes shape market outcomes, which in turn feed back into the success of competing traits. This evolutionary system is studied in an emerging paradigm, social finance. In this paradigm, social transmission biases determine the evolution of financial traits in the investor population. It considers an enriched set of cultural traits, both selection on traits and mutation pressure, and market equilibrium at different frequencies. Other key ingredients of the paradigm include psychological bias, social network structure, information asymmetries, and institutional environment. |
| Keywords | Evolutionary finance, cultural evolution, social interaction, behavioral economics, social finance |
| URL | https://www.pnas.org/doi/10.1073/pnas.2015568118 |
| Tags | Asset Pricing, Trading Volume and Market Efficiency | Consumer Decisions | Evolutionary Finance | Financing- and Investment Decisions (Individual) | Propagation of Noise / Undesirable Outcomes | Social Network Structure | Social Transmission Biases | Theory |
Media persuasion and consumption: Evidence from the Dave Ramsey Show
| Authors | Chopra |
| Year | 2021 |
| Type | Working Paper |
| Abstract | Can entertaining mass media programs influence individual consumption and savings decisions? I study this question by examining the impact of the Dave Ramsey Show, an iconic US radio talk show which encourages people to spend less and save more. To that end, I combine household-level expenditure records from a large scanner panel with fine-grained information about the geographic coverage of the radio show over time. Exploiting the quasi-natural experiment created by the staggered expansion of the radio show from 2004 to 2019, I find that exposure to the radio show decreases monthly household expenditures. This effect is driven by households with initially high expenditures relative to their income. In a mechanism experiment, I document that listening to the radio show has a persistent effect on people's attitudes towards consumption and debt. This suggests that attitudinal changes are a key mechanism driving behavioral change. My findings highlight the potential of entertaining mass media programs for interventions aimed at changing people's financial decisions. |
| Keywords | Consumption, debt, entertainment, edutainment, household finance, mass media, persuasion, radio, savings |
| URL | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3992358 |
| Tags | Archival Empirical | Consumer Decisions | Experimental / Survey-Based Empirical | Financing- and Investment Decisions (Individual) |
The salience of entrepreneurship: evidence from online business
| Authors | Huang, Lin, Liu, Manso |
| Year | 2021 |
| Type | Working Paper |
| Abstract | We study the psychological bias underlying the decision to become an entrepreneur in the online business context. Using entrepreneurs affiliated with Taobao Marketplace, the worldâs largest online shopping platform, as our sample, we find that people who observe the emergence of successful stores in their neighborhood are more likely to become online entrepreneurs. Relying on the Taobao store rating system and detailed geographical information for identification, we find that in rural areas of China, an increase in the online rating (upgrade event) of a store leads to a significant increase in the number of new stores within a 0.5-km radius. This effect increases with the magnitude of the upgrade event, decreases with physical distance from the focal store and is robust to a wide range of rigorous model specifications. However, such decisions to enter the market may be suboptimal, as entrants whose entrepreneurs are motivated by these upgrade events underperform relative to their peers in terms of sales and have a higher probability of market exit. Overall, our results are most consistent with salience theories of choice and cannot be explained by regional development or rational learning. |
| Keywords | entrepreneurship, peer effect, salience theory, availability heuristic |
| URL | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3843524 |
| Tags | Archival Empirical | Consumer Decisions | Manager / Firm Behavior |