Social media, open innovation & HRM: Implications for performance

Firms are increasingly leveraging social media tools to access knowledge from external actors, particularly customers and other users, to facilitate the innovation process and firm performance. Yet empirical research investigating the impact of external knowledge sourced via social media tools is scant; empirical studies that do exist are mixed, leading to calls for research into the conditions under which knowledge flows via social media from external actors contribute to innovation and firm performance. Using a large-scale survey of firms in Tasmania, Australia, this study examines how external knowledge flows from market-based actors sourced by social media influence innovation and business performance, and the extent to which modern human resource management (HRM) practices moderate this relationship. We find that while knowledge flows from market-based actors are positively related to innovativeness, the relationship between external knowledge flows via social media and innovativeness depends on the importance a firm places on modern HRM practices: a significant positive relationship exists between knowledge sourced via social media and innovativeness when firms attach high importance to modern HRM practices. In contrast, there is no significant relationship in firms in which modern HRM practices are of low importance. The study also shows that social media serves as a mediator for the effect of external knowledge flows on firm innovativeness when firms attach high importance to modern HRM practices. Furthermore, while the results demonstrate that innovativeness and firm performance are positively related, innovativeness does not translate into improved firm performance in firms that attach low importance to modern HRM practices. Taken together, the findings underscore the importance of modern HRM practices to enable knowledge inflows via social media to influence innovativeness, and innovativeness to translate into productivity benefits. •Explore effects of knowledge via social media from market actors on innovation and productivity.•Knowledge flows via social media from market-based actors are positively related to innovation.•Knowledge sourced via social media affects innovation when modern HRM practices are emphasised.•Innovation does not impact productivity when modern HRM practices are of low importance.•Highlights importance of modern HRM practices when sourcing knowledge via social media.