JOURNAL OF INFORMATION SYSTEMS American Accounting Association

Vol. 28, No. 1 DOI: 10.2308/isys-50674

Spring 2014
pp. 187–207

The Value of Social Media for Small

Businesses
Ludwig Christian Schaupp
West Virginia University
France Bélanger
Virginia Polytechnic Institute and State University

ABSTRACT: Companies are implementing social media for marketing, advertising,

employee recruitment, and overall communications with employees, clients, and
partners. Small businesses are able to gain substantial value from social media but
there are also many challenges. In this research, the Technology-Organization-
Environment framework, the Resource-Based View theory, and interview data are
combined to develop a model of social media usage and value for small businesses.
Survey data from small businesses from a variety of industries and geographical
locations are collected to validate the model. Results indicate that technology
competence, pressure from clients, and characteristics of the mobile environment are
significant antecedents of social media usage. The dimensions of social media value—
perceived impact on internal operations, marketing, customer service, and sales—are
also significant. Implications and avenues for future research are discussed.
Keywords: social media; small business; organizational perspective; value; resource-
based view; technology-organization-environment.

I. INTRODUCTION

R
esearch has shown that by developing social media strategies small businesses are creating
new opportunities to communicate with their customers (Jantsch 2010). A recent survey
found that the greatest advantages of social media marketing are generating more business
exposure, increasing traffic, and improving search engine rankings (Stelzner 2011). All of these
benefits are especially important for small businesses with limited means, since the owners often
wear many hats in the organization and, as a result, have many demands on their time (Mershon
2011). While marketing is often essential to their success, small business owners must also make
sure that operations are run efficiently, finances are well taken care of, and employees are both
productive and satisfied with their employment. Exacerbating the time demands are small business
owners’ limited financial means, which lead to the need to find creative ways to perform many tasks
at limited costs. This is where social media can play an important role. Indeed, 66 percent of small

Editor’s Note: Accepted by William N. Dilla.

Published Online: December 2013

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business owners with two or more employees strongly agree that social media is important for their
businesses (Stelzner 2011).
Engaging in social media efforts can help generate exposure and increase traffic for the small
business at a fraction of the cost of traditional marketing approaches. The main financial cost of
social media marketing is the time it takes to realize the benefits of the effort put forth. However,
overall marketing costs can potentially be reduced or eliminated by using social media. Further,
small businesses can benefit from ‘‘earned media’’ or the favorable publicity gained through
promotion other than advertising. Social media generates this publicity through grassroots actions.
As such, earned media cannot be bought, only gained. This is the value of social media marketing:
it provides a platform that has the potential to expose small businesses to numerous potential
customers and to nurture their existing customer base in an inexpensive and effective manner.
It is essential for small businesses to understand and be able to identify the value that results
from their social media efforts. While there are a number of recent studies exploring social media
use by individuals (e.g., Heinrichs, J. Lim, and K. Lim 2011; Scott and Orlikowski 2012), few
studies empirically explore usage and value of social media from the organizational perspective. To
our knowledge, no one has yet empirically studied social media use by small businesses and the
value they may derive from such use. To address this gap in existing research, the study develops a
model of the antecedents and value of social media for small businesses. The Technology-Orga-
nization-Environment (TOE) framework (Tornatzky and Fleischer 1990) is used to identify a
number of potential antecedents of small business social media usage. The Resource-Based View
(RBV) theory (Wade and Hulland 2004; Zhu and Kraemer 2005) is used as a starting point to
identify determinants of social media value for small businesses.
Therefore, grounded in the TOE and RBV frameworks, the research seeks to answer the
questions: (1) What are the antecedents of social media usage by small businesses? (2) What is the
value of social media usage for small businesses? Results from exploratory interviews (Study 1)
help identify value drivers beyond those already described in the existing literature. A model of
antecedents for, and value of, small business social media use is then developed using these
findings. Small businesses, in a variety of industries and geographical locations that implemented
social media initiatives, were surveyed (Study 2) to test the model.
Social media usage for small businesses is defined in this study as the use of a technology
platform to develop a community of stakeholders to collectively create, know, like, and trust
relevant matters of the business entity. As done in prior research (DeLone 1988; Thong 1999), all of
the businesses that were investigated in this study meet the Small Business Administration (see,
http://www.sba.gov) requirement of having less than 100 employees. The results indicate that three
of the four proposed antecedents of social media usage are significant: technology competence,
customer pressure, and the mobile environment. One antecedent, competitive pressure, was not
found to be significant. The results also support the proposed dimensions of social media value,
with perceived impact on internal operations, marketing, customer service, and sales all significant.
For researchers, this study validates a theoretically based model of social media organizational
usage and value for small businesses. Most prior social media research has focused either solely on
the individual perspective or on large organizations. The study also provides a more in-depth look
at the concepts of interest by using a research approach that combines qualitative and quantitative
methods. In addition, it examines actual usage by real-world organizations, as opposed to intentions
to use social media, as most prior research has done. Importantly, the research provides a more
in-depth understanding of the dimensions of value in the context of social media. The findings
therefore contribute to the research literatures on social media and small business.
For practitioners, the model of social media value and usage gives small business owners and
managers a roadmap to identify additional ways to use social media to their advantage. For
example, while a small business owner might have heard how social media allows mass marketing

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The Value of Social Media for Small Businesses 189

to reach a large population of potential customers, they may not have considered how to use social
media for internal operations. Indeed, the internal operations dimension accounts for the
most-explained variance in the model. In addition, managers and owners can consider the model’s
determinants of social media usage as a guide for where to invest to improve their use of social
media tools. For example, since technology competence is an important determinant, the small
business owner can invest in training and education to provide employees with a better
understanding of mobile technologies.
The remainder of the paper is organized as follows. Section II presents the background of the
study. Section III and Section IV present the theoretical background, methodologies, and results for
Studies 1 and 2, respectively. Section V and Section VI present a discussion of the findings and the
study’s overall conclusion.

II. BACKGROUND
Businesses can use social media for a variety of organizational tasks such as recruitment,
marketing, customer relationship management, and employee communications. Large global
organizations’ recruiting operations use social media to advertise positions (Doherty 2010) and
screen applicants (Slovensky and Ross 2012). Marketing and advertising are the most widely
recognized uses of social media for all organizations, both large and small (Askool and Nakata
2011; Looney and Ryerson 2011). Researchers recently identified the term ‘‘social CRM’’ (SCRM)
to refer to the fact that organizations are no longer managing relationships with clients, but instead
‘‘facilitate collaborative experiences and dialogue that customers value’’ (Baird and Parasnis 2011).
SCRM not only includes social networking sites, but also Wikis and blogs (Askool and Nakata
2011) where customers, partners, and employees are all engaged into conversations. Woodcock,
Green, and Starkey (2011) suggest that SCRM is fundamental to business performance, with
financial benefits accruing throughout the customer life cycle.
Companies using social media continue to report they are receiving measurable business
benefits, with 90 percent reporting at least one such benefit (Bughin and Chui 2010). A sample of
the reported benefits include: increased sales and market size, improved customer satisfaction and
relationships, improved employee relationships, better technical support, reduced marketing
expenses, and improved search engine rankings (e.g., Angel and Sexsmith 2011; Askool and
Nakata 2011; Stelzner 2011). However, there are also potential constraining implications of
organizational use of social media. For example, social media has led to a shift in accountability of
organizations toward consumers (Baird and Parasnis 2011; Scott and Orlikowski 2012) and has
created new threats to the reputation of organizations (Aula 2010; Jones, Temperley, and Lima
2009). Organizations are also warned that implementation of social media requires proper
development of social media policies regarding uses for both employees and customers (Cull 2011;
Harris 2011), support from executives (Cull 2011), security to protect bandwidth and information
(Cunningham 2011), and importantly, tools to measure social media returns (Cull 2011).
Most of the research on social media has focused on large organizations. Indeed, a study of 132
websites of global financial institutions in Europe, the Asia-Pacific region, and the Americas found
that the size of the organization and the region in which it operates were significant factors
determining whether organizations made full usage of Web 2.0 and social media (Bonsón and
Flores 2011). Further, only half of small businesses use social media and, of those, most deploy
only Facebook and email for customer contact (Looney and Ryerson 2011). While small businesses
often ‘‘feel compelled to follow mainstream corporate entities and develop social media for
promotion and customer interactions’’ (Bonsón and Flores 2011, 157), their resources are limited,
with the owner often handling many functions such as marketing, finance, and technology
management. Therefore, while small businesses have the potential to use social media at a strategic

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190 Schaupp and Bélanger

level for marketing efforts (Jantsch 2010), they often do not have the resources or the competencies
necessary to implement social media efforts. A recent survey of small businesses shows that only 37
percent of respondents felt they were competent enough to deal with social media, with others
stating they needed more training (32 percent), had just enough skills (20 percent), or felt totally
lost (11 percent) (Looney and Ryerson 2011). Consequently, it may be difficult for small firms to
have a good perspective on the value proposition of social media.
For many information technology-based initiatives, measuring the value of IT has been a
challenge, even for large organizations. In an analysis aimed at developing a return on
investment measure for social media for a public library, Romero (2011) notes that while the
costs are fairly easy to identify, it is not necessarily true for profits. Therefore, other measures of
social media benefits might include changes in number of users of the site, changes in brand
perception after implementation of social media, and changes in the behavior of users who
follow the organization on social media. There are also important cost savings to consider, such
as the reduced cost of resolving customer complaints, advertising, and surveying clients. Other
less tangible benefits to consider include improvements in products and overall user experience
via social media feedback (Angel and Sexsmith 2011). However, how do these benefits actually
turn into value? More important, are small businesses deriving value from their social media
efforts?

Theories of Social Media Usage

Previous studies of social media, even at the organizational level, are primarily grounded on
theories that analyze adoption at the individual level (Gangadharbatla 2008), such as the Theory of
Planned Behavior (TPB) (e.g., Harrison, Mykytyn, and Riemenschneider 1997) or extended
versions of the Technology Acceptance Model (Riemenschneider, Harrison, and Mykytyn 2003).
However, when studying IT adoption at the organizational level, some researchers argue that such
theories are not appropriate (Picoto, Bélanger, and Palma-dos-Reis 2012). Two theories widely
used at the organizational level of analysis are the Technology-Organization-Environment (TOE)
framework (e.g., Kuang-Wei and Yan 2010; Picoto et al. 2012; Srivastava and Teo 2009) and the
Resource-Based View (RBV) theory (Wade and Hulland 2004; Zhu and Kraemer 2005). The TOE
framework serves as a foundation to identify potential antecedents of social media usage, while the
RBV provides a foundation for the link between social media usage and value.
Potential antecedents of social media usage are well described by the TOE framework, whereas
the value drivers for small business are incompletely described. Therefore, the present research uses
a mixed-method approach, as in prior research on organizational IT adoption (Riemenschneider et
al. 2003), to address this gap. This approach consists of an exploratory qualitative phase and a
confirmatory quantitative phase. First, interviews were conducted with a small sample to more fully
identify the value drivers (Study 1). Then, the complete model of antecedents and value drivers was
tested with a larger sample of survey respondents (Study 2).

III. STUDY 1: VALUE DIMENSIONS

Research Method
Fifteen small businesses from various industries in the United States that had recently
implemented the use of social media were contacted. These businesses were identified through
personal contacts of the authors. Eight individuals responsible for their small business’ social media
implementation agreed to participate in semi-structured interviews (Myers 1997). Data collection
took place in person at the convenience of the respondents.

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The Value of Social Media for Small Businesses 191

Protocol Development and Coding Procedures

The semi-structured interview protocol was developed to offer structure yet flexibility when
conducting the interviews. The focus was on identifying dimensions of social media value for small
businesses and potential metrics to measure this value, and on identifying factors leading to social
media use by small businesses. The final protocol contained 33 open-ended questions, summarized
in Appendix A.
The interviewer took notes during the interviews, which lasted on average 50 minutes. An
initial list of coding categories was developed based on the constructs identified from the literature.
The list was then refined after the interviews to reflect additional knowledge gained from the
interviews (Miles and Huberman 1994). Once the original coding categories were identified, the
two authors coded each interview file and compared their findings, discussing any discrepancies.
The Cohen’s Kappa statistic was above 0.80, suggesting almost perfect agreement (Landis and
Koch 1977). The initial coding categories for antecedents of use included all of the factors
identified in the literature review (technical competence, customer pressure, competitive pressure,
and characteristics of the mobile environment). The following categories of benefits or value
emerged: brand recognition, increased sales, increased traffic, and improved marketing. Based on
the interview results, benefits to internal operations such as improved communication among
employees and customer service were added. During the coding process, it became apparent that the
coded quotes for the categories marketing and brand recognition were similar. The same was true
with the categories increased sales and traffic. Therefore, the categories with significant overlap
were better coded as one. Marketing and brand recognition were merged, as were increased sales
and traffic. The resulting metrics and categories are presented in Table 1.

Study 1 Results
The interviewees were asked about the ‘‘value’’ of social media usage for their business and
why they used social media. The value elements were then grouped into the four dimensions in
Table 1, i.e., perceived impact on (1) internal operations, (2) sales, (3) marketing, and (4) customer
service. Internal operations represent operational benefits of social media usage, such as improved
communications among employees and increased staff motivation and effectiveness. Indeed, in
their discussion of the usefulness of the RBV model, Wade and Hulland (2004) state that managing
internal relationships and providing cost-effective operations are important uses of IS resources.
The interview data differentiate impacts on sales and on marketing. Marketing focuses on the
benefits of pre-selling activities, including improved advertising and marketing efforts and reduced
marketing costs, whereas sales refer to the actual benefits related to the sale of a product or service,
including increased market share, revenues, and product improvements. Finally, the customer
service dimensions include benefits related to service interactions with customers, such as greater
satisfaction, increased convenience, and improved communications. The marketing, sales, and
customer service dimensions are consistent with Wade and Hulland’s (2004) assertion that
managing external relationships and market responsiveness are important uses of IS resources.
These value constructs are summarized in the research model in Figure 1.

IV. STUDY 2: SOCIAL MEDIA VALUE

Antecedents of Social Media Usage

The Technology-Organization-Environment (TOE) framework (Tornatzky and Fleischer
1990) is useful to explore the factors that may influence the use of social media by small businesses,
since previous research shows that it is empirically supported in a variety of contexts (e.g., e-

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Construct
Perceived impacts on internal
operations
Perceived impacts on sales
Perceived impacts on marketing
Perceived impacts on customer
service
Spring 2014
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192
TABLE 1
Value Dimensions from Interview Data and Literature
Metrics
Metrics from Interviews from Literature References
 Better information quality  Better information quality (Picoto et al. 2012)
 Compression of business processes/faster business  Increased staff motivation and
processes satisfaction
 Facilitate communication among employees
 Improved decision making
 Improved employee effectiveness
 Improved employee learning
 Increased staff motivation and satisfaction
 Internal marketing initiatives became more efficient
 Reduce administrative duties by elimination of
manual routine
 Reduction of number of employees required
 Staff productivity increased
 Improved product and service innovation  Sales area widened (Picoto et al. 2012)
 Sales area widened  Sales increased as a result of
 Sales increased as a result of social media use social media use
 Ability to access and update in real time from any  Reduced marketing costs Interviews and (Picoto
location et al. 2012)
 Improved marketing flexibility
 Increased control of direct marketing objectives
 Reduced marketing costs
 Customer satisfaction increased  Customer service improved Interviews
 Customer service improved  Facilitate communication with
 Facilitate communication with customers customers
 Increased convenience/service level to customers
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The Value of Social Media for Small Businesses 193

FIGURE 1
Model of Social Media Value for Small Businesses

business, mobile business, and enterprise resource planning) (Pan and Jang 2008; Picoto et al.
2012; Zhu and Kraemer 2005). The TOE framework includes three elements: (1) technological, (2)
organizational, and (3) environmental contexts.

Technological Context
The technological context focuses on the characteristics of technologies being considered
(Basole 2005), in this case, social media tools. Social media adoption by small businesses is heavily
dependent upon the degree to which they can utilize social media sites and their offerings. Jantsch
(2010) argues that when technology is leveraged to facilitate and enhance social interaction, a great
deal of value can be created. Yet, Looney and Ryerson (2011) find that 65 percent of small business
owners attempt to manage social media without the necessary competence. According to the
Information Systems (IS) literature, technology competence consists of technology infrastructure
and Information Technology (IT) human resources in terms of knowledge and skills required to
implement a specific technology (Soares-Aguiar and Palma-dos-Reis 2008; Zhu and Kraemer
2005). Similarly, Askool and Nakata (2011) specify that the factors needed for social media
adoption include technology infrastructure, applications, and system integration, as well as

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194 Schaupp and Bélanger

employee training. Thus, technology competence represents both the technology infrastructure and
the employees’ knowledge and skills needed to enable social media usage.
H1: Technology competence is positively associated with social media usage by small
businesses.

Organizational Context
The organizational context is typically defined in terms of descriptive features like firm size,
centralization or formalization, communication processes (with clients or employees), and
management structure (Tornatzky and Fleischer 1990). While organization size is an important
organizational factor for technology adoption in general (Tornatzky and Fleischer 1990), and
more specifically for social media (Bonsón and Flores 2011), it is not included in this study
because all firms in the sample are small. Similarly, management structure and centralization are
unlikely to vary across small organizations. The study, therefore, focuses on communication
processes with customers, more specifically on the requests customers make for the firm to
provide social media, which is labeled customer pressure.1 Depending on the level of bargaining
power customers have, they may be able to pressure the organization to implement an innovation
(Teo, Wei, and Benbasat 2003). With respect to social media, Askool and Nakata (2011, 212)
suggest that it is ‘‘easier for the management to make a decision if someone they know has it or is
getting it.’’ Therefore, if customers exert enough power to request that a small business
implement social media, it is more likely that the small business will indeed make greater usage
of social media tools.
H2: Customer pressure is positively associated with social media usage by small businesses.

Environmental Context
The environmental context is ‘‘the arena in which a firm conducts its business—its industry,
competitors, access to resources supplied by others, and dealings with the government’’ (Tornatzky
and Fleischer 1990, 154). In this study, the environment includes competition, government
(regulations), and the mobile environment (resources) in which the small business exists. Since
there are no regulations regarding social media usage in the participants’ geographic area, only
competitive pressure and mobile environment are included in the model.
Competitive pressure, or the degree to which an organization is affected by competition in the
market, has been recognized as an important factor in prior e-business usage research (Zhu and
Kraemer 2005). Askool and Nakata (2011) also recognize this importance in the context of social
media, especially in competitive environments. Porter and Millar (1985) suggest that by using
innovations, businesses may change the rules of competition and leverage new ways to surpass
competitors, changing the competitive landscape. Thus, businesses in a more competitive market
are more motivated to use advanced technologies, such as social media and Web 2.0 technologies.
In view of these findings, it is likely that many small business owners in industries that are facing
increasing growth of social media usage feel the pressure to also do so.
H3: Competitive pressure is positively associated with social media usage by small
businesses.

1
Teo et al. (2003) refer to this dimension as partner pressure. The term customer pressure is adopted to capture the
retail nature of the model.

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The Value of Social Media for Small Businesses 195

The mobile environment in which a small business operates influences the adoption and usage
of mobile Web 2.0 technologies, including social media. Factors such as the availability of client
devices and the price of mobile technologies likely can influence mobile use (Tarasewich,
Nickerson, and Warkentin 2002). For example, more than 250 million active users are currently
accessing Facebook through their mobile devices, and they are considered twice as active as non-
mobile users (Facebook 2012). Businesses operating in advanced mobile environments, therefore,
are likely to make more use of social media.
H4: The mobile environment of the small business (technology and security availability) is
positively associated with social media usage by small businesses.

Social Media Usage and Value

The Resource-Based View theory suggests that to be valuable, IS resources must be (1)
economically valuable, (2) relatively scarce, (3) difficult to imitate, and (4) immobile across
companies (Peteraf 1993). In this study, RBV provides support for the link between usage of social
media and its value for small businesses on various dimensions of value creation. Therefore, the
model posits that managers will identify social media use, as determined by the antecedents
previously discussed, as an opportunity to create value for the organization. More specifically:
H5a: Small business social media usage is positively associated with its perceived value on
the internal operations dimension.
H5b: Small business social media usage is positively associated with its perceived value on
the marketing dimension.
H5c: Small business social media usage is positively associated with its perceived value on
the customer service dimension.
H5d: Small business social media usage is positively associated with its perceived value on
the sales dimension.

Research Method
Ninety-nine small businesses that had recently begun utilizing social media were solicited to
participate in the survey. Businesses were identified through personal contacts of the authors, as
well as via Facebook. The survey was accessible via a link provided by email if completed online or
printed on paper if solicited in person. Of the 99 small businesses contacted, 57 completed the
survey, for a response rate of 58 percent. Upon survey completion, respondents had the opportunity
to enter a drawing for an iPad. Respondents included owners, general managers, marketing
managers, or the primary person in charge of social media efforts at the business. They were from a
variety of industries and geographic locations. All surveys were confidential (except contact
information for the drawing, which was kept separately from survey data). Demographics are
summarized in Table 2.

Survey Instrument
The online survey has two sections. The first captures measures of the latent variables, while
the second section captures respondents’ demographics. The instrument uses measures adapted
from prior research whenever possible, with the wording modified to fit social media contexts. The
following latent variables are measured as reflective based on the literature they were drawn from:
technology competence, customer pressure, competitive pressure, mobile environment, and usage

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TABLE 2
Demographics
Category Values Frequency Percentage
Age 21–24 37 37.4%
25–30 22 22.2%
31–35 18 18.2%
36–40 4 4.0%
41–50 6 6.1%
50þ 12 12.1%
Totals 99 100.0%
Gender Male 55 55.6 %
Female 44 44.4%
Totals 99 100.0%

of social media (Hsu, Kraemer, and Dunkle 2006; Picoto et al. 2012; Tarasewich et al. 2002; Zhu
and Kraemer 2005; Zhu, Kraemer, and Xu 2006). Similarly, three of the dimensions of value are
modeled as formative, as was done in prior research: impact on internal operations, marketing, and
sales (Picoto et al. 2012). Finally, the impact on customer service dimension is modeled as
reflective, since the items that are identified during the interviews are interchangeable measures of
customer service. Each question is measured on a five-point Likert-type scale, ranging from 1
(strongly disagree) to 5 (strongly agree). Fifteen academics and practitioners pre-tested the
instrument. The revised final survey includes 26 items representing nine constructs, in addition to
demographic and self-reported usage items. Constructs and sources are presented in Table 3.

Data Analysis
The model is tested using SmartPLS 2.0 (Ringle, Wende, and Will 2005) since it allows for the
testing of reflective and formative constructs, and is robust to small sample sizes (Chin and Todd
1995). In this study, the sample size of 57 exceeds the minimum threshold (Chin and Newsted
1999; Hair, Ringle, and Sarstedt 2011).2 Because SmartPLS 2.0 has no established global
goodness-of-fit criterion, a two-step process is used to assess first the measurement model, and then
the structural model (Urbach and Ahlemann 2010).
Convergent validity. For reflective constructs, convergent validity is assessed using three ad
hoc tests recommended by Anderson and Gerbing (1988): the standardized loadings, construct
composite reliabilities, and variance-extracted estimates (Tables 5 and 6). All tests support the
convergent validity of the scales with expected loadings above 0.50 (Fornell and Bookstein 1982)
except for TC3, composite reliabilities between 0.77 and 0.90, and average variance-extracted
estimates between 0.55 to 0.82 (Netemeyer, Johnston, and Burton 1990). Cronbach’s alphas for all
reflective constructs are almost at or above 0.70 (Nunnally 1978). While TC3 has a lower loading at
0.393, the item loads much higher on technology competence than any other construct (Table 4). In
the interest of completeness, and given an acceptable composite reliability, all three technology-
competence items are retained for analyses.

2
Hair et al. (2011) suggest that the minimum sample size should be equal to the larger of (1) ten times the largest
number of formative indicators used to measure one construct, or (2) ten times the largest number of structural
paths directed at a particular latent construct in the structural model.

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 TABLE 3
Reflective Measurement Constructs and Validity Analysis

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Standardized Composite Cronbach’s
Construct Items—TYPE (Sources) Loading Reliability AVE Alpha
Technology Competence—REFLECTIVE (Picoto et al. 2012; Zhu and Kraemer 2005) 0.771 0.552 0.690
1. The amount of technology necessary available to facilitate social media usage 0.895
2. The number of IT knowledgeable employees available to facilitate social media usage 0.837
3. The extent of social media applications that are integrated with internal databases and information 0.393

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to facilitate social media initiatives
Customer Pressure—REFLECTIVE (Hsu et al. 2006; Picoto et al. 2012) 0.872 0.750 0.830
1. Customers demand it 0.930
2. To improve communication channels to your customers 0.773
3. Top management requires it 0.887
The Value of Social Media for Small Businesses

Competitive Pressure—REFLECTIVE (Picoto et al. 2012; Zhu and Kraemer 2005) 0.902 0.822 0.789
1. Degree to which social media influences the competition in your industry 0.937
2. Degree to which your competitors influence your business in the local market 0.876
Mobile Environment—REFLECTIVE (Picoto et al. 2012; Tarasewich et al. 2002) 0.872 0.775 0.750
1. Availability of attractive smart phones 0.784
2. Mobile technology price 0.967
Social Media Use—REFLECTIVE (Zhu and Kraemer 2005; Zhu et al. 2006) 0.837 0.633 0.708
1. The extent of marketing objectives conducted via social media 0.731
2. The extent of customer services conducted via social media 0.767
3. The extent of supporting employees to work independently from top management 0.882
Perceived Impact on Customer Service—REFLECTIVE (Interviews) 0.900 0.693 0.853
1. Customer service improved 0.767
2. Customer satisfaction increased 0.826
3. Increased convenience/service level to customers 0.920
4. Facilitate communication with customers 0.811
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TABLE 4
Item Loadings and Cross Loadings for Reflective Indicators
Customer Impact
Technology Pressure Competitive Mobile Customer
Competence (PP) Pressure Environment USE Service
TC1 0.895 0.369 0.123 0.024 0.274 0.269
TC2 0.837 0.180 0.129 0.070 0.229 0.211
TC3 0.393 0.025 0.002 0.333 0.020 0.063
PP1 0.291 0.930 0.350 0.419 0.430 0.495
PP2 0.238 0.774 0.175 0.080 0.371 0.712
PP3 0.324 0.887 0.319 0.528 0.433 0.469
CP1 0.067 0.292 0.937 0.532 0.140 0.234
CP2 0.229 0.313 0.875 0.371 0.101 0.294
ME4 0.135 0.382 0.485 0.784 0.156 0.371
ME5 0.103 0.371 0.458 0.967 0.380 0.230
USE1 0.194 0.361 0.146 0.339 0.731 0.261
USE2 0.180 0.413 0.060 0.166 0.766 0.421
USE3 0.321 0.366 0.120 0.318 0.882 0.453
CS1 0.323 0.532 0.281 0.295 0.289 0.766
CS2 0.124 0.641 0.426 0.420 0.427 0.826
CS3 0.296 0.611 0.230 0.231 0.475 0.920
CS4 0.242 0.320 0.008 0.044 0.381 0.811

Formative construct validity. Formative construct validities are evaluated based on their
weights and Variance Inflation Factors (VIFs) (Table 5). The weights for Sales area widened;
Improved marketing flexibility; Internal marketing initiative more efficient; and Staff productivity
increased are statistically significant, which is an indication of their validity (Chin 2010). The
weights for Sales increased; Increased control; Reduced marketing costs; Increased staff motivation

TABLE 5
Formative Constructs Measurement and Validity Analysis
Standardized
Construct Items—TYPE (Sources) Loading Significance VIF
Perceived Impact on Sales—FORMATIVE (Picoto et al. 2012)
1. Sales increased as a result of social media use 0.216 ns 1.738
2. Sales area widened 0.846 0.001 1.738
Perceived Impact on Marketing—FORMATIVE (interviews; Picoto et al. 2012)
1. Improved marketing flexibility 0.796 0.001 1.594
2. Increased control of direct marketing objectives 0.169 ns 2.398
3. Reduced marketing costs 0.172 ns 1.765
Perceived Impact on Internal Operations—FORMATIVE (Picoto et al. 2012)
1. Internal marketing initiatives more efficient 0. 594 0.001 1.334
2. Staff productivity increased 0.397 0.05 2.568
3. Increased staff motivation and satisfaction 0.109 ns 2.887
4. Improved employee effectiveness 0.129 ns 2.105

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TABLE 6
Discriminate Validity Test
Construct Mean (S.D.) TC CP PP ME USE SI CSI IOI MI
Technology Competence (TC) 3.75 0.743
(0.96)
Competitive Pressure (CP) 3.70 0.148 0.888
(1.05)
Customer Pressure (PP) 3.54 0.330 0.330 0.911
(1.04)
Mobile Environment (ME) 4.04 0.037 0.509 0.409 0.866
(0.86)
Social Media Use (USE) 3.48 0.298 0.135 0.474 0.344 0.841
(1.04)
Perceived Impact on Sales (SI) 4.04 0.354 0.307 0.622 0.317 0.607 NA
(0.84)
Perceived Impact on 4.24 0.287 0.284 0.636 0.296 0.482 0.706 0.924
Customer Service (CSI) (0.72)
Perceived Impact on 3.40 0.194 0.435 0.701 0.522 0.675 0.682 0.655 NA
Internal Operations (IOI) (1.00)
Perceived Impact on 4.16 0.275 0.221 0.603 0.246 0.554 0.532 0.673 0.643 NA
Marketing (MI) (0.81)

Diagonal values shown in bold are the square root of the average variance extracted for each construct.
Off-diagonal elements represent the correlations among constructs.

and satisfaction; and Improved employee effectiveness are not significant. However, they are not
removed from the model, as they represent different dimensions of the construct of interest (Chin
2010). This is consistent with prior research where such items are retained to preserve content
validity (Arnold, Benford, Canada, and Sutton 2011; Bollen and Lennox 1991; Petter, Straub, and
Rai 2007). Multicollinearity is checked using the VIFs and all of the VIFs are below the cutoff
value of 3.3 (Diamantopoulos and Siguaw 2006), indicating that multicollinearity is not an issue.
Discriminant validity. Discriminant validity is assessed with the test recommended by
Anderson and Gerbing (1988). A construct is considered to be distinct from other constructs if the
square root of the AVE for it is greater than its correlations with other latent constructs (Barclay,
Higgins, and Thompson 1995). As shown in Table 6, all constructs in the model pass this test.
Common method bias. To verify whether common method bias is a problem with the data set,
the Harmon one-factor test (Podsakoff and Organ 1986) is conducted where all 26 items are entered
into a factor analysis. The results show that at least eight factors are present, and that the most
variance explained by any one factor does not account for the majority of the variance (i.e., 50
percent), indicating that common method bias is not a likely issue in this study (Podsakoff and
Organ 1986).
Results. Results of the structural model analysis are presented in Figure 2. The PLS testing of
the structural model results in moderate levels of variances explained (R2) in the endogenous
variables.3 30.4 percent of the variance for the usage of social media construct is explained. For the
dimensions of social media value, the percentages of variance explained are 45.6 for perceived

3
Chin (1998) considers values above 0.67 substantial, above 0.33 moderate, and values of 0.19 and lower weak.

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200 Schaupp and Bélanger

FIGURE 2
Results for the Social Media Value for Small Businesses Model

*, ** Indicates p , 0.05, and p , 0.0001, respectively.

impact on internal operations, 30.7 for perceived impact on marketing, 23.2 for perceived impact on
customer service, and 36.8 for perceived impact on sales.
Three of the four proposed hypotheses regarding antecedents of social media usage by small
businesses are supported. Social media use is positively impacted by greater technology
competence (H1), greater customer pressure (H2), and a more developed mobile environment
(H4) with coefficients of 0.223, 0.330, and 0.298, respectively. All of these paths are significant (p
, 0.05) in the model, supporting H1, H2, and H4. Competitor pressure (H3) was not found to be a
significant antecedent of social media use by small businesses in this study. The strongest paths in
the model are between social media usage and dimensions of value, with coefficients of 0.675 for
impact on internal operations, 0.607 for impacts on sales, 0.554 for impacts on marketing, and
0.482 for impacts on customer service. All of these paths are highly significant (p , 0.0001) in the
model, supporting H5a, H5b, H5c, and H5d. Together with the moderate levels of explained
variance, these findings suggest that the RBV is indeed an appropriate framework for studying the
value of IT at the organizational level.

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The Value of Social Media for Small Businesses 201

V. DISCUSSION
Social media creates new and unprecedented opportunities for small businesses to expand their
existing marketing strategies to improve customer relationships, increase their sales, and improve
their reputation. Social media is especially important for small businesses with limited means and
skills. Yet, the value of social media for small businesses has yet to be researched. Therefore, this
study explores the usage and value of social media for small businesses. Elicited from interviews of
small businesses utilizing social media, the TOE framework, the RBV theory, and prior literature,
antecedents of usage of social media by small businesses are identified and three of them are
validated. The four proposed dimensions of social media value for small businesses are also
confirmed.

Summary of Results
The research comprised two studies. First, interviews were conducted with a small sample to
more fully identify social media value drivers (Study 1). Then, a complete model of antecedents and
value drivers was tested with a larger sample of survey respondents (Study 2). PLS testing for the
proposed model of social media usage and value confirms that technology competence (H1),
customer pressure (H2), and the characteristics of the mobile environment (H4) positively impact
social media use by small businesses. Competitive pressure (H3) does not impact social media use
by small businesses in this study. This finding might be explained by the fact that in a small
business context the focus tends to be mostly on the customer, especially repeat customers, and that
oftentimes the small business does not have a direct competitor in close proximity. In fact, in
interviews, respondents mentioned that they typically did not have many, if any, competitors in the
local market. This presents an interesting avenue for future research. Statistical tests also confirm
that the four proposed dimensions of social media value (impact on internal operations, on sales, on
marketing, and on customer service) are all significant, supporting H5a–H5d.
The model developed and tested in this paper provides a foundation for future research on
social media. Most prior social media research has focused either solely on the individual
perspective or on large organizations. By focusing on the organizational perspective with an
organizational-level framework, antecedents such as customer pressure and characteristics of the
mobile environment were identified and found to be significant. This is important for researchers
interested in organizational-level studies, since the research validates the use of the TOE framework
for technology usage in such contexts.
The impact of technology competence on usage suggests that researchers have to consider both
the amount of technology available and the skills available when measuring technology
competence. The small businesses surveyed had minimal amounts of technology at their disposal,
but were still able to make good use of social media. Measuring only technologies available is not
sufficient; researchers must also measure the IT knowledge of employees who utilize the available
technology. For practitioners, this result suggests that small business owners and managers will
likely need to acquire the skills to support social media even more in the future. Since customer
pressure is rarely studied as a determinant of usage, but was found to be significant in this study,
researchers should consider adding customer pressure to IT usage models at the organizational level
of analysis. For small business owners, this result highlights the importance of maintaining a line of
communication between themselves and their customers. Finally, the importance of the mobile
environment as a significant predictor of social media usage provides researchers with initial
evidence regarding this relationship. Researchers interested in social media should include the
characteristics of the mobile environment in future research. For practitioners, the results suggest
that small businesses must develop effective strategies for increasing their mobile technology
adoption.

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202 Schaupp and Bélanger

Overall, the findings regarding the antecedents of social media usage by small businesses
provide an extension to prior research using the Technology-Organization-Environment framework
by validating the framework in the context of small businesses. In addition, the study adds to social
media research by examining actual usage by real-world organizations as opposed to intentions to
use social media. Finally, managers and owners can consider the determinants of social media
usage as a guide for where to invest to improve their use of social media tools.
The research also examines the dimensions of value in the contexts of social media and small
businesses. Interestingly, the strongest explained variance was for the impact on internal operations.
This is an important finding, since most researchers may think of social media as outward looking.
The model provides small business owners and managers a roadmap to identify potential additional
ways to use social media to their advantage. For example, while a small business owner might have
heard how social media allows mass marketing to a large population of potential customers, they
may not have considered how to use social media for internal operations. Other small businesses
might start using social media for sales purposes, but the results suggest they should also consider
expanding their use for marketing, customer service, and internal operations. For small businesses,
social media involves substantial investment, so a better understanding of its possible value is
crucial. A critical success factor for small businesses is their ability to market themselves efficiently
and cost effectively by reducing or eliminating marketing and sales costs, and social media provides
an opportunity to do this.

Limitations
There are limitations to the study. First, the sample size was relatively small; however, the rules
of thumb of PLS analysis (Chin and Todd 1995) suggest that the sample was sufficient for the
analyses performed (40 data points required). Since this research focused on the organizational
perspective, it was necessary to obtain answers from organizations; there could not be several
responses per organization, which would have increased the sample size. Also, surveying a single
individual may or may not adequately reflect the organization’s views.

Opportunities for Future Research

Several possible avenues for future research derive from the findings of this study. One of the
most interesting findings is the non-significant result for H3. Competitive pressure does not
significantly influence social media usage in this study, which suggests that competition is not the
driving force behind the decision to adopt social media, but that instead, customers are. Future
research should investigate the conditions under which competitive pressure might or might not be
a factor in social media use.
The TOE framework could be used to identify other possible antecedents of social media usage
by organizations. For example, future studies might separate technology availability and skills into
different constructs. Finally, it would also be interesting to compare where on the continuum of
small business (micro-business with 1 to 5 employees, very small with 5 to 25 employees, or small
with 25–100 employees) the organizations are. Since in the context of very small businesses the
owner may also be the main user/developer, it is possible that individual-level theories, such as the
Technology Acceptance Model (Davis 1989) and its subsequent versions, might be appropriate to
study such micro-businesses.

VI. CONCLUSION
This study extends prior research on social media to examine organizational use by small
businesses. It uses a mixed method approach that combines interviews and survey data. Unlike prior

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The Value of Social Media for Small Businesses 203

research at the individual level, this study examines social media usage at the organizational level.
Three of the four proposed antecedents of social media usage are significant: technology
competence, customer pressure, and the characteristics of the mobile environment. At the same
time, all four proposed dimensions of social media value for small businesses are significant: impact
on internal operations, sales, marketing, and customer service. The study therefore provides
empirical evidence of the links between antecedents, social media usage, and its value for small
businesses.

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APPENDIX A

Study 1 Interview Protocol

1. How long have you been utilizing Social Media?
2. How many ‘‘friends’’ do you have?
3. Are Social Media tools being utilized?
4. What is the purpose of your Social Media presence?
5. What are your most important goals that your Social Media helps accomplish?
6. How have these goals affected the actual design or functionality of your Social Media?
7. How do you judge whether your Social Media is successful in meeting those goals?
8. What outcome(s) do you hope to see as a result of Social Media?
9. What does Social Media add to the business?
10. Who are the users of your Social Media?
a. Specifically, how well do you ‘‘know’’ your Social Media friends?

11. What is the primary purpose that a potential Social Media ‘‘friend’’ would become a part of
the Social Network?
a. What benefit(s) do users enjoy by participating?

12. Does Social Media improve the organization’s visibility/image?

13. Is communication bi-directional (two-way)?
a. In other words, B2C and C2B.

14. Does the business have a website in addition to Social Media?

a. Are metrics tracked?

b. How many visits do you get per day/week?

15. Is the website able to make transactions of some sort with users?
a. If yes, how many are executed per day/week?

16. What are the main concerns of your senior management regarding Social Media?
17. Who has ultimate responsibility in running your Social Media initiative?
a. Is it autonomous control or shared between several individuals?

18. How often is Social Media updated?

a. How many and how often are message blasts sent out? Daily? Hourly?
b. Do you utilize location service functionality, i.e., mobile advertising?

19. Do you have a Social Media and/or website development/maintenance budget, or is this
activity funded ad-hoc?
20. Who (if anyone in particular) is responsible for the design/content of your site?
21. How do you keep your Social Media current/up to date?
a. Are in-store specials the same as those offered via Social Media?

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22. What (if anything) are you measuring?

23. What do you wish you could measure?
24. Do you have any process for gathering feedback from visitors/customers and incorporating
this into your Social Media?
25. Who are the audiences that you target?
26. How do you design your Social Media in order to target multiple audiences?
27. What have you done to learn about the motivations and goals of your customers?
28. Do you know if your customers are referring other people to your Social Media?
29. What is your social networking growth rate?
a. How many new friends do you add in a month?

30. In your own words, how would you evaluate the success of your Social networking
efforts?
31. Please rate the importance of the following criteria in evaluating the success of your Social
Media efforts (5 ¼ most important, 1 ¼ least important):
a. Increased favorable impression of your organization

b. Increased frequency of return visits to the Social Media page

c. Customers refer the Social Media page to others

d. Customer satisfaction increased

e. Reduction in advertising costs versus other avenues (in-person, phone, mail)

32. What are the major weaknesses of your Social Media efforts?
33. Do you plan on expanding your Social Media efforts? How? When?
a. Willing to commit resources ($$) to the cause?

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