Let the User Speak: Is Feedback on Facebook a Source of Firms' Innovation?

Social media open up new possibilities for firms to exploit information from various external sources. Does this information help firms to become more innovative? Combining firm-level survey data with information from firms' Facebook pages, we study the role that firms' and users' activities on Facebook play in the innovation process. We find that firms' adoption of a Facebook page as well as feedback from users are positively and significantly related to product innovations. Our results withstand a large set of robustness checks, including estimations that take potential endogeneity of firms' Facebook use into account. Analyzing the content of firm posts and user comments reveals that Facebook adoption is correlated with product innovations only if firms and users actively engage in a discussion.

Bertschek, Irene and Reinhold Kesler (2017), Let the User Speak: Is Feedback on Facebook a Source of Firms' Innovation?, ZEW Discussion Paper No. 17-015, Mannheim.