Three Essays on the Economic Impact of Online Word-of-Mouth in Online Software Market
Open AccessThe advances in information technologies and the Internet significantly promote the prosperous growth of electronic commerce in recent years. Simply surfing the Internet allows consumers to conveniently explore endless product choices and a flood of related product information. As one of the most important sources of product information, Word-of-Mouth (WOM) helps consumers assess product quality, reduces decision risk without physical trials, and thus facilitates locating their best matches. WOM volume on the Internet has been rising fast while the Internet also unprecedentedly enhances the reach of WOM. As a result, online WOM could significantly influence consumer decision-making. More and more firms are embracing and applying online WOM marketing as a complementary strategy for advertising to increase sales. Even so, not much has been known regarding the mechanism underlying the WOM effect on online consumer behavior. A deeper understanding of the economic impact of online WOM is needed to provide practitioners insightful guidance on information systems design and the allocation of firm resources to more effectively develop online WOM marketing strategies. This dissertation seeks to shed light on online WOM effect from three angles using a three-essay structure. The first essay of this dissertation investigates how a demand side factor (online user-generated WOM) interplays with a supply side factor (product variety) to affect a product's popularity in the online market where product choices are abundant and consumers can easily access product information. Extant research primarily looks into either demand side or supply side justifications for the heterogeneity of consumption pattern. Alternatively, this study highlights that consumers' reliance on online user reviews to choose products is significantly influenced by the quantity of products available. In addition, this dissertation also explores the differential impact of online WOM created by different types of reviewers on online user choices. While consumers are widely exposed to both online user reviews and professional reviews, those two sources of WOM information are generally believed to influence user choices independently. However, an in-depth mediation analysis conducted in the Bayesian framework shows that professional reviews influence online user choices not only directly but also indirectly through the volume of online user reviews. This study also proposes a more robust hierarchical structure to model the interaction effect between online user reviews and product variety, refining the first essay. Following this line of inquiry, this dissertation further studies the impact of the distribution of online WOM across retailing and third-party websites on consumers' purchasing decisions. In parallel with the flocking WOM available on the Internet, nowadays consumers are able to reach almost every piece of online WOM information relevant to their interested products. The distribution of WOM information across the Internet may accordingly influence consumers' search costs for product information and affect their final decisions. This research has found empirical evidence that both the dispersion of WOM volume and variation of WOM valence across the Internet significantly influence online retail sales.
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