Competition among virtual communities and user valuation

The case of investing-related communities

Bin Gu, Prabhudev Konana, Balaji Rajagopalan, Hsuan Wei Michelle Chen

Research output: Contribution to journalArticle

124 Citations (Scopus)

Abstract

Virtual communities are a significant source of information for consumers and businesses. This research examines how users value virtual communities and how virtual communities differ in their value propositions. In particular, this research examines the nature of trade-offs between information quantity and quality, and explores the sources of positive and negative externalities in virtual communities. The analyses are based on more than 500,000 postings collected from three large virtual investing-related communities (VICs) for 14 different stocks over a period of four years. The findings suggest that the VICs engage in differentiated competition as they face trade-offs between information quantity and quality. This differentiation among VICs, in turn, attracts users with different characteristics. We find both positive and negative externalities at work in virtual communities. We propose and validate that the key factor that determines the direction of network externalities is posting quality. The contributions of the study include the extension of our understanding of the virtual community evaluation by users, the exposition of competition between virtual communities, the role of network externalities in virtual communities, and the development of an algorithmic methodology to evaluate the quality (noise or signal) of textual data. The insights from the study provide useful guidance for design and management of VICs.

Original languageEnglish (US)
Pages (from-to)68-85
Number of pages18
JournalInformation Systems Research
Volume18
Issue number1
DOIs
StatePublished - Mar 2007
Externally publishedYes

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virtual community
community
Industry
Investing
Virtual community
source of information
Values
methodology
evaluation
management

Keywords

  • Computer-mediated communication and collaboration
  • IT diffusion and adoption
  • Network economics
  • Virtual communities

ASJC Scopus subject areas

  • Library and Information Sciences

Cite this

Competition among virtual communities and user valuation : The case of investing-related communities. / Gu, Bin; Konana, Prabhudev; Rajagopalan, Balaji; Chen, Hsuan Wei Michelle.

In: Information Systems Research, Vol. 18, No. 1, 03.2007, p. 68-85.

Research output: Contribution to journalArticle

Gu, Bin ; Konana, Prabhudev ; Rajagopalan, Balaji ; Chen, Hsuan Wei Michelle. / Competition among virtual communities and user valuation : The case of investing-related communities. In: Information Systems Research. 2007 ; Vol. 18, No. 1. pp. 68-85.
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