Business value of social media technologies: Evidence from online user innovation communities

•Challenge the common belief that OUICs are valuable by enabling firms to collect large amount of user-generated ideas.•Propose that simply collecting ideas from OUICs is not valuable, whereas how firms deal with the ideas from OUICs matters for value creation.•Adopt a longitudinal design and collect a large-scale panel data set to empirically test the theory.•Provide threefold contribution to IS research on IT capabilities, the business value of IT, as well as IT and innovation.

Social media technologies allow user-generated content and provide new opportunities and challenges for firms to transform their business. In particular, more and more firms have started strategically using the online user innovation communities (OUICs) for open innovation initiatives. The extent to which firms are able to derive business value from OUICs, however, has not been systematically examined. Drawing on a multi-theoretical foundation from the framework of dynamic capabilities and the view of innovation value chain, we conceptualize two OUIC-enabled capabilities, which are, ideation capability related to collecting user-generated ideas about potential innovation from OUIC, and implementation capability related to selecting user-generated ideas for innovation development and introducing developed innovation via OUIC. Using a large-scale panel data set consisting of 1676 firm-day observations from Dell and Starbucks, we examine the impacts of OUIC-enabled capabilities on firm value. We find robust evidence that OUIC-enabled ideation capability actually does not influence firm value, whereas OUIC-enabled implementation capability increases firm value. Novel theoretical and managerial implications are discussed.