Social Media and Startup Innovation: A Human Capital Perspective

Xiaoning Gavin Wang, PhD Candidate, and Lynn Wu, Operations, Information and Decisions, The Wharton School

Abstract: Innovation is critical to the growth of advanced economies. Private companies including startups are important contributors of innovation in the United States. Innovation activities often require access to human capital with diversified sources of domain knowledge, especially in information technology (IT) industries where knowledge iterates quickly. However, it can be challenging for early-stage companies whose resources and social capital are usually constrained. Any technology or practice that can accelerate the access to a wider range of knowledge external to the firm can be especially helpful for innovation and entrepreneurship. Recently, an increasing number of startups have adopted social media to broadcast company information and communicate with potential customers, which has been found to be effective in marketing activities, internal operations and venture funding. Despite the importance of social media in startup activities, how social media can benefit innovation processes is underexplored. In this study we plan to fill this research gap by examining whether social media can help startups to access broader knowledge and subsequently facilitate innovation. Our goal is twofold in this research. First, we explore the effect of social media adoption on startup’s knowledge diversity. Second, we analyze whether startups can successfully transfer the diversified knowledge into innovations.