Geographical Pattern of Online Word of Mouth: How Offline Environment Influences Online Sharing

A key feature of e-commerce is the access to a wide range of geographical areas; e-commerce platforms spend much effort customizing their strategies across geographical areas. Meanwhile, online word of mouth (WOM) is becoming an increasingly important driver for product sales on e-commerce platforms. This study investigates the geographical pattern of online WOM. Specifically, we examine whether and how customers’ local environment influences the generation and direction of online WOM. Leveraging a unique research design, we measure the online WOM at a U.S. national e-commerce platform by tracking the WOM referral decisions of customers. Whereas digital technologies have enabled customers to share without physical boundaries, we find that location still plays significant roles in the generation and direction of online WOM. First, a customer’s offline social environment (e.g., friend visiting frequency, neighbor interactions) significantly explains the generation of online referrals. Second, online referrals are largely bounded locally, and referrals in areas with more local social interactions are more likely to stay local. Third, even when referrals travel far, they are more likely to point to destinations socially similar to the origins. We derive important implications for firms in allocating resources across geographical areas and in using referrals to identify high-potential geographical markets.