How social media expedites the crisis spillover effect: A case study of Tesla's recall event

Abstract

Technologies such as intelligent and fully automatic driving are currently developing rapidly. However, product recalls by electric vehicle manufacturers occur frequently because of immature technology. As a crisis factor, product recalls of the focal company pose a risk of contagion to other players. Through a two-period time series analysis, the current study observes that online public opinion regarding Tesla exerts an indirect spillover over abnormal returns on non-focal companies (i.e., BYD, NIO, LI) from two aspects—social media buzz and public sentiment. Moreover, abnormal returns on Tesla directly spill over into abnormal returns on NIO and LI. The low brand equity proximity plays a role in the direct spillover effect. Besides, the time lag is two days in the direct and indirect spillover process. Under the guidance of Situational Crisis Communication Theory (SCCT), we classify spillover crises as victim clusters of crisis types and put forth implications and suggestions in practice based on our findings.