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Hiroki Idota, Teruyuki Bunno and Masatsugu Tsuji

Social media such as blogs (a short form of ‘web log’) and SNSs (Social Network Service/Social Network Site) has recently been introduced by many firms as a means of obtaining and sharing information inside the firm, in particular to promote product and process innovation. This paper attempts to examine the relationship between social media inside the firm and product innovation and focuses on the following research questions: (1) whether social capital influences the use of social media; (2) whether social media promotes product innovation; and (3) how the effect of social media on product innovation differs between the manufacturing and service industries. The analysis clarifies that social capital in the firm is indispensable for the effective use of social media. Attitudes toward innovation and social media are requirements for firms in promoting product innovation. If employees understand the target of the firm and collaborate with each other, SNSs can function well. If social capital is well empowered in the firm, the members can send and receive information freely. Top management should thus make an effort to raise the level of social capital and nurture a reciprocal organisational culture for social media use inside the firm. In so doing, the following measures are required: (1) the learning of ICT skills for SNSs; (2) the establishment of ethical rules regarding SNSs; (3) the commitment of top management; and (4) guidelines for SNS use, such as how to use SNSs in the work context. The paper also finds that social media for product innovation is more important in the service industry than in manufacturing. Social media makes it easy to obtain information from customers and share it among related sections and thus social media enables the expansion of channels for making direct contact with the customer in the service industry.