Virtual Embeddedness and Social Media as a Basis for the Relational Capital Management of new Ventures

Abstract

New forms of data storage and transfer as well as new methods to communicate, collaborate and exchange knowledge at diminishing transaction costs over the world‑wide‑web have revolutionised networking, knowledge creation and innovation processes in the knowledge era. Virtual embeddedness signifies the possibility to draw upon pay‑per‑use computing resources and a variety of customised web services and applications. The facilitated utilisation of Software‑as‑a‑Service and in particular social media (SM) applications enables effective networking on platforms and in virtual communities in social as well as in business terms. Such networking processes lead to the accumulation of social, relational and intellectual capital, as they facilitate information and knowledge exchange, integration and creation. Since information and knowledge sharing, collaboration and socialising take virtual dimensions, opportunities and threats arise for enterprises regarding relational capital management (RCM) as well as knowledge and value creation. Most new ventures are keen on utilising SM for internal and external communication and collaboration purposes. In this context, the question of how new ventures can improve their RCM through the utilisation of innovative information and communication technologies (ICT) and SM arises. To answer this question, ventures have to grasp the potential of web technologies and SM and to assess their appropriability to achieve relationship‑specific goals. They need to be aware of SM risks in order to exploit chances and avert threats which arise through SM use. In this paper, the question of how to exploit the benefits of virtual embeddedness and Web 2.0 in order to optimise the RCM of new ventures is discussed. To provide a basis for this discussion, the qualities of social and relational capital and the different forms of physical and virtual embeddedness are analysed. The utilisation of SM for RCM purposes and the implementation of a SM strategy are exemplified in the case study of a German eCommerce venture that took advantage of web technologies to build up and manage its relational capital in virtual and physical dimensions. Finally, a conceptual model describing the contribution of virtual embeddedness and SM to knowledge, value and reputation creation is proposed and illustrated by means of the case study.