Julien Jourdan, Paris Dauphine
We explore how the social media attention received by a firm implicated in a large corporate scandal may affect the market value of its competitors. Existing work provides contrasted arguments and evidence regarding the spillover effects of a scandal: while rivals may suffer from contamination, they may also benefit from substitution. Building on and extending prior work, we develop a model to predict how contamination and substitution interact and jointly affect firms’ value in a non-linear way during the course of a scandal diffusing on social media. We test our model using unique data, including 1.2m tweets, on the Dieselgate scandal that affected the global automobile industry in 2015. We find evidence of an inverted-U shape relationship between social media attention and rival firms’ value, suggesting that substitution dominates on average. Yet the pattern is reversed for German and other European firms, primarily affected by contamination. We further explore the moderating effects of firm and social media characteristics.
Cass Business School, 106 Bunhill Row
106 Bunhill Row, London EC1Y 8TZ, UK
Julien Jourdan (email@example.com) is a professor of strategy at Universite Paris-Dauphine (PSL), affiliated with the Dauphine Center for Management Re-search and the French National Center for Scientific Research. He received his PhD in Strategic Management from HEC Paris. His research focuses on the social evaluation of organizations and its strategic implications.