Effect of Social Capital and Absorptive Capability on Innovation in Internet Marketing

By Tsai, Yi-Ching | International Journal of Management, March 2006 | Go to article overview

Effect of Social Capital and Absorptive Capability on Innovation in Internet Marketing


Tsai, Yi-Ching, International Journal of Management


This study explores how website structure and customer relationships affect customer knowledge flow and innovation in Internet marketing in Taiwan. This investigation assumes that the website is a center of information flow and that visiting customers are network members. These two elements thus form the Internet marketing network. This study also uses the concept of 'social capital' frequently used in network study and discusses the effect of structure and relationship on innovation performance. Meanwhile, each website is assumed to differ in 'absorptive capability' of customer knowledge owing to differences in its design. The analytical results show that a website with abundant social capital will have higher 'absorptive capability' and 'innovation performance' than a website that lacks social capital. Furthermore, if a website structure has higher centrality, equivalence and density, it will successfully transfer more customer knowledge. Such a website can provide more creative information and service, meet customer needs and satisfy customers.

Introduction

The Internet has become a key marketing channel in Taiwan, just as in other developed economies. As estimated by the Institute for Information Industry (III) in 2002, the size of the Taiwanese e-business market will grow to approximately USD 12.3 billion in 2004, compared to USD 1.1 billion in 2000. Internet marketing can rapidly create large market economies at high speed, and Internet marketing is clearly crucial to the development of modern economies. However, according to some e-business research, the critical factor in obtaining business opportunities and encouraging consumption in the present era of rapid change is to appreciate customer needs (Hoffman et al., 1999). When customers trust a website, they are likely to buy products or seek product information through that website.

Previous studies often stress that customer interaction is helpful for absorbing customer knowledge. However, compared to traditional 'one-to-many' marketing media, internet is a media with 'many-to-many' characteristic. Thus, if we use traditional measurement of interaction to study the internet, the explanation is not strong enough. Internet characteristics formed in many-to-many environment should also be considered.

Therefore, this work applies the 'social capital' theory of networks, and uses network structure characteristics to represent the structural factors of social capital. Those characteristics include centrality, structural equivalence, and network density. Additionally, the constructs of website-customer relationship and customer-customer relationship were used to represent network member relationship quality. Finally, this study uses absorptive capability to measure the effect of customer knowledge flow and adopts the concepts of 'social capital' and 'absorptive capability' to discuss the influences of the concepts of 'social capital' and 'absorptive capability' on website innovation performance.

Literature Review

Previously, most researchers considered economic behavior to be constrained by continuing social connections. From the perspective of social structure, Burt (1992), Nahapiet and Ghoshal (1988) think all people should participate in a society in which there are shared norms and established social structures, relational and institutional embeddedness. Under such conditions, they can create common social wealth and values. Individuals intending to break or exit the connections would affect the productivity of others to create value. Furthermore, those objects that are embedded in social structure, institution and relationships are termed 'social capital'.

Nahapiet and Ghoshal defined the structural dimension of social capital as the 'holistic connection pattern among members'. In this dimension, important constructs used in previous researches including network connections among members, network structure and morphology.

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Effect of Social Capital and Absorptive Capability on Innovation in Internet Marketing
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