Essays on network dynamics and informational value of virtual communities

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Chen, Hsuan-wei, 1980-

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Public press and companies have increasingly strong interests in the impact on businesses brought about by virtual communities. In recent years, virtual communities have become significant sources of information for consumers and businesses by offering unprecedented opportunities for information sharing. Scholars recognize that information posted in virtual communities has important implications for the behaviors of community members and subsequent economic decisions and market performance. However, relatively less is explored about how the informational value of virtual communities results from an aggregated or fragmented community of information. In particular, the underlying motives and mechanisms of user interactions in virtual communities are challenging to understand because of the amount of information available and the potential noises. To investigate user dynamics and the resulting informational value in virtual communities, I explore three major issues in my dissertation. First, I empirically examine whether community fragmentation or aggregation prevails in the context of virtual investment communities. Results indicate that instead of the common belief of virtual communities serving as melting pots that comprise opinions, online investors, in particular, show strong homophily behavior in virtual investment communities. Second, using data from virtual investment communities, I investigate the interactions among online investors that drive homophily and community fragmentation. I find that psychological needs for supportive opinions mainly drive the information seeking and interaction behaviors of online investors as compared to economic rationales. Following this line of exploration, I also identify the informational impact of virtual communities on user behaviors in the context of electronic markets. With data from online retailers, I examine the possible shrinkage of consumer product consideration that is reinforced by online recommendations. A resultant change of consumer consideration leads to a landscape shift of product competition for online retailers, suggesting strategic implications to manufacturers. All in all, my dissertation contributes to an understanding of the value of virtual communities as informational media, how virtual communities shape online user opinions, and how online user preferences impact businesses and markets in a networked economy. My research pushes the frontier toward understanding virtual communities and sheds light on the insights into exploring online network dynamics.