A Multi-Level Examination of the Impact of Social Identities on Economic Transactions in Electronic Markets

Three of the most important uses of the Internet today are as an economic marketplace, as a forum for social interaction, and as a source of information. In this paper, we explore how these three activities come together, in the form of emergent social communities built around information exchanges within IT-enabled electronic marketplaces. Drawing on social identity theory, we suggest that the relationship between online consumer reviews and internet product sales is partially explained by social identity processes. Using a unique dataset based on both chronologically compiled ratings as well as reviewer characteristics for a given set of products and geographical location-based purchasing behavior from Amazon, we provide evidence at the community level linking the prevalence of identity claiming behavior in an online community with subsequent product sales. In addition, we show that when reviewers claim to be from a particular geographic location, subsequent product sales are higher in that region. At the review level of analysis, we show that subsequent reviews conform to identity-claiming norms set in previous reviews, and that identity claiming that conforms to community norms elicits identity granting. Furthermore, our results suggest that the prevalence of identity granting has implications for economic exchange in the form of product sales. Implications for research on word-of-mouth and electronic communities are discussed.