Social Referral and Business Growth across Markets

Posted: 25 Oct 2021

See all articles by Shan Huang

Shan Huang

The University of Hong Kong

Wendao Xue

University of Washington - Department of Economics

Yifan Yu

University of Washington - Michael G. Foster School of Business; Amazon

Date Written: October 20, 2021

Abstract

To show the cross-market evidence on how social referral helps business growth, we analyze a full set of the actively used instant mobile apps (46,929 in total) embedded in one of the world’s largest social networking sites, WeChat. The WeChat platform provides on average over 350 million social referrals of these apps per month. We collect data on the social referrals of the apps and their positions in different markets (i.e., developing and developed, local and non-local markets). By leveraging an exogenous policy change and the coarsened exact matching approach, we find that the apps in the local and developing markets experienced a larger decrease in new user growth rate than those in other markets when the platform sets up barriers to social referrals. Our results show that social referral is an effective way for firms to gain business growth, and its effectiveness is more salient on firms in the local and developing markets.

Keywords: Social Referral, Cross-market, Developing Markets, Local Markets

Suggested Citation

Huang, Shan and Xue, Wendao and Yu, Yifan, Social Referral and Business Growth across Markets (October 20, 2021). Available at SSRN: https://ssrn.com/abstract=3946630

Shan Huang

The University of Hong Kong ( email )

Pokfulam Road
Hong Kong
China

Wendao Xue

University of Washington - Department of Economics ( email )

Box 353330
Seattle, WA 98195-3330
United States

Yifan Yu (Contact Author)

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States

HOME PAGE: http://staff.washington.edu/yifanyu/pro/

Amazon ( email )

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