Management Responses to Online Reviews: Helpful or Detrimental?

Firms are shifting their social media emphasis from passive listening to active intervening. This paper investigates the performance implications of management responses to online reviews and advocates that responses to online reviews should be provided strategically. Using longitudinal online reviews, management responses and financial performance data of 730 hotels in a specific U.S. market from 2005 to 2011, we examine how managers should respond to online reviews for increased performance outcomes. On one hand, when valence and volume are both high and both low, responding to those reviews may hurt financial performance. On the other hand, when one is high and the other is low, management responses positively impact financial performance. Our results hold for various business contexts using revenue, price, and demand as outcome variables, lending support to the robustness of our findings