Social embeddedness and online consumer behavior

Abstract

Dear Readers of Electronic Markets, Social embeddedness refers to the extent to which organizations are connected to other actors via linkages of a social network or the extent to which human action of consumers (including their economic behavior) takes place within a web of social attachments such as friendship and kinship (Uzzi and Gillespie 2002). Motivated by the increasing popularity and economic significance of online social networks, the overall objective of this special issue is to advance our understanding on how consumer behavior is influenced by online social embeddedness. The emergence of online social networks has substantially shaped, and continues to reshape, the environment for decision making by market actors. Making decisions is a daily function for organizations as well as for individual consumers. Companies, for example, continuously have to select software solutions to business problems, decide about the relevance of new technologies and decide about sourcing in or out parts of IS/T, to name just a few from the perspective of an IS/T manager. Managers and employees in all fields are usually provided with a variety of resources and tools to help them with making decision. This typically involves some use of information systems, because they can bring about greater efficiency in organizational operations and they can effectively support management processes. The proliferation of the World Wide Web provides individuals for the first time with access to hundreds of pieces of relevant information to help them make more informed consumer choices. For example, while people talked with sales personnel and perhaps asked for advice from friends or family before making a major purchase, today, technology-supported access to information and recommendation systems make the process of comparing different options much easier and more effective. Notions of rationality were frequently applied by social scientists as a basis for describing, understanding and evaluating the actions of individuals and organizations in relation to decisionmaking. In the last decades, however, it has been suggested that the usefulness of rationality in describing and explaining decision making is limited. The work by renowned psychologists, such as Kahneman and Tversky (1979) and Thaler (1994), showed various divergences of actual human decision making from neo-classical economic theory and provided evidence that homo sapiens act quite differently in various situations from the idealized homo oeconomicus. Consequently, the strict assumption of rationality has been gradually softened. A change can be seen from the new institutional economics with fully rational agents alongside dynamic theories with opportunistic agents, towards behavioralism based on agents acting with at most bounded rationality (Simon 1947). Sociologists also challenge the utilitarian neoclassical position and have long recognized that economic decisions and behavior of individuals and organizations are profoundly shaped by the social network in which they are embedded. The concept of social embeddedness expresses the idea that social actors exist within relational, institutional, and T. Hess (*) University of Munich, Ludwigstrase 28 VG, 80539 Munich, Germany e-mail: thess@bwl.lmu.de