Exit, Voice, and Response on Digital Platforms: An Empirical Investigation of Online Management Response Strategies

In the past decade, we have witnessed the growing importance of management responses to online reviews on digital platforms. In this study, we examine the impact of online management responses on business performance and their spillover effect on nearby businesses. By adopting multiple causal identification strategies to address the issue of self-selected responses, we find that the responses by a business owner play a significant role in the performance of the focal business as well as in the performance of the nearby businesses. We observe that, in general, the launch of the new management response feature benefits businesses. What is more interesting is that the benefit is not observed in a consistent manner across all businesses. Only the businesses that choose to use the management response feature observe increases in check-ins. On the other hand, the businesses that are unaware of the management response feature launch on digital platforms, or are aware but choose not to use the management response feature, tend to remain at a disadvantage. Interestingly, we also uncover that the spillover effect (externality) of online management responses on the nearby businesses crucially depends on whether the focal business and the nearby businesses are in direct competition. Furthermore, we identify conditions under which business owners are more likely to respond to consumer comments. Our findings have direct implications for both business owners and digital platforms: Digital platforms can help businesses develop the right engagement strategies by taking the online response strategies of the nearby businesses into account.