(The) impact of open innovation strategy on social network value

Abstract

Social Network Service(SNS) is Growing Rapidly. Understanding the interaction of SNS is beneficial for firms to communicate with their target customers. For scholars, SNS is new species of 3rd generation Network which distinguished from previous theories on network effect. Our study examined FaceBook and Myspace to show how the Open Platform strategy affects to the value of SNS and what factors affect to the adoption of API applications. For this research, Chow test and logistic regression model was used. As the result of the investigation, we found that the open innovation strategy facilitated the growth of Facebook. API applications enabled users interact more broadly and freely and constructed more sub groups in Facebook. Consequently, increased interaction influenced by expanded sub group increase the value of network. Recently, Google and Myspace also open their application source code. It can be an evidence to show Open Platform strategy is beneficial to firms. In addition, factors which affect the adoption of Open Platform application also examined. We can confirm the interaction and group activity are critical factor of application adoption in SNS. The importance of interaction in SNS can give various business implications and opportunity. We suggested some implication for business people.