Does Social Software Increase Labour Productivity?

Social software applications are increasingly applied in firms and particularly support communication, cooperation and information sharing between individuals. They comprise applications like wikis, blogs and social networks. These applications are webbased, self-organised and interconnect users and their knowledge making the communication processes more efficient. Social software can be applied for external communication as well as internal knowledge management making it possible for firms to access both external and internal knowledge. Firms benefit from the external usage of social software applications in areas including customer relationship management, marketing and market research. The internal usage of social software has the potential of leading to a more efficient project management and product development by knowledge sharing which might result in productivity gains. Firms can operate faster and have greater flexibility using social software compared to the usage of content management systems. It enables them to improve their time management and to save costs. A further benefit associated with social software is the support of e-commerce which opens up new communication channels with customers.

This study attempts to distinguish whether the usage of social software in a firm leads to an increase in labour productivity. The analysis is based on recent German firm-level data consisting of 907 firms from the manufacturing industry and the service sector. As a theoretical framework, I employ a Cobb-Douglas production function with social software representing an input factor in the production process.

The analysis reveals that the usage of social software has a negative impact on labour productivity. The main driver of this productivity loss is the social software application blog. The result stays robust across different specifications controlling for several sources of firm heterogeneity. In addition, a robustness check containing social software intensity as an alternative measure for social software is applied. It reveals the same negative effect and thereby confirms the result.

Sarbu, Miruna (2013), Does Social Software Increase Labour Productivity?, ZEW Discussion Paper No. 13-041, Mannheim.