Stefanie Pakura/Adalbert Pakura

Effects of Facebook
activities on the
performance of start-ups Stefanie Pakura Adalbert Pakura

An empirical study in the German crafts business sector

Die Auswirkungen der Facebook-Aktivitäten des Existenzgründers
auf den Unternehmenserfolg
Eine empirische Studie im deutschen Handwerk

„ Schlüsselbegriffe „ Keywords
Erfolg; Existenzgründung; Facebook; Kleinst- Facebook; marketing capabilities;
und Kleinunternehmen; Marketing Fähigkeiten; micro and small-sized enterprises; social capital;
soziale Netzwerke; Sozialkapital social networks; start-ups; success

Zusammenfassung Abstract

Die Nutzung von sozialen Netzwerken wie Face-
book ist auf dem Vormarsch. Aber kann Facebook
für Unternehmen ein entscheidendes Marketing-
und Networking-Tool sein, das den Unternehmens-
erfolg stützt? Unsere Auswertungen von 1.971 Fir-
men zeigen, dass die Aktivität auf Facebook durch
den Inhaber eines kleinen oder Kleinstunterneh-
mens im deutschen Handwerk einen positiven Ein-
fluss auf den Unternehmenserfolg hat. Aufbauend
auf bestehenden Ansätzen zu Marketing-Fähigkei-
ten und angepasst an das soziale Netzwerk Face-
book, können wir die Marketing-Fähigkeiten, die
auf Facebook angewendet werden, positiv mit
dem Unternehmenserfolg verknüpfen. Unterneh-
mer, die aktiv ihre Marketing-Fähigkeiten auf Face-
book zum Einsatz bringen, sind erfolgreich.
The usage of social network services such as Face-
book is on the rise. But can firm performance be
linked to the use of Facebook as a marketing and
networking tool? Analyzing data on 1,971 firms, we
show that the activity on Facebook by the owner of
a micro or small enterprise in the German crafts
business sector has a positive impact on firm per-
formance. Applying the approach on marketing
capabilities to the case of Facebook, we can link
marketing capabilities (in the context of Facebook)
directly to firm success. Facebook marketing capa-
bilities turn into a valuable key factor for micro and
small enterprises to outperform their competitors
and provide superior value to customers. Further-
more, we investigate online social capital and so-
cial interaction on Facebook.

Autoren
Stefanie Pakura (corresponding author), Department of Entrepreneurship and Start-up Management, Leuphana University of Luene-
burg, Scharnhorststr. 1, D-21335 Lueneburg, Germany, e-mail: Stefanie.pakura@uni.leuphana.de; Adalbert Pakura, Leuphana Entrepre-
neurship Hub, Leuphana University of Lueneburg, Scharnhorststr. 1, D-21335 Lueneburg, Germany.
Financial support from the EXIST 4 Project (Humboldt plus Schumpeter) is gratefully acknowledged. Moreover, the authors would like
to thank the Centre for Entrepreneurship in Theory & Application (Ceta e. V.), the Leuphana Entrepreneurship Hub and the Landes-
Gewerbeförderungsstelle des nordrhein-westfälischen Handwerks e. V. (LGH), for funding the project which provided data analysed
in this paper. We are thankful for the suggestions of two anonymous reviewers that much improved the final version of this paper.
Many thanks to Dinah Thompson and Magnus Thompson for proofreading.

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 Effects of Facebook activities on the performance of start-ups
1. Introduction
With the emergence of Web 2.0 applications and a
fundamental shift to an interconnected and pro-
suming customer (Kietzmann et al., 2011), busi-
nesses need to adapt to new conditions in the mar-
ket. The more a customer is connected over the
internet and can access instant reviews and evalu-
ations from other customers, the more important it
is to react to these new conditions and to become
more active in the social web. This is especially
important (Storey, 1994) for micro and small enter-
prises (definition according to The European Un-
ion, 2003). Micro and small enterprises face some
particular challenges, such as having limited
resources for marketing and having few major
clients (Jones/Rowley, 2011). Meanwhile, social
networking sites (SNSs) provide entrepreneurs with
new opportunities to interact with customers and
business contacts, as well as their extended net-
work, including family and friends (Stam et al.,
2014). 78 % of internet users in Germany already
use SNSs on a daily basis (BITKOM, 2013) not only
to have fun and to interact with friends, but also to
inform themselves about brands and products
(Correa et al., 2010). The explosion of SNSs into
almost all parts of modern life (Boyd/Ellison, 2007;
Donath/Boyd, 2004; Caers et al., 2013) has oc-
curred at such a high speed that many businesses
hesitate to fully commit to the online world. Those
who do not use SNSs at all and in particular, do
not use Facebook, mostly worry about privacy
concerns, especially in Germany (BITKOM, 2013;
Debatin et al., 2009). Researchers have begun to
study why people use social media and especially
Facebook (Sledgianowski/Kulviwat, 2009; Correa
et al., 2010; Lewis et al., 2008). Caers et al.’s (2013)
meta-analysis offers an overview of the develop-
ments of recent years regarding Facebook usage.1
Kim et al. (2013) warn that small and medium
sized-enterprises (SMEs) have to increase their so-
cial media efforts to remain competitive in years to
come, where it will be a must for SMEs to be en-
gaged in social networks, since customers and
1 Furthermore, in recent studies, Abbas (2013) explores possi-
ble strategies of friendship-development on Facebook, while
Bohn (2014) focuses on how interactions on Facebook can
be translated into social capital. Others (e. g. Wallsten 2013)
examine the time that users spend on Facebook and what
other activities are impacted with these relatively new
behavior patterns.
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friends are already using them (Ferri et al., 2012).
Further, there is a research delta in terms of the
possible effects of Facebook activity by entrepre-
neurs on their firm’s success. Are micro and small
enterprises who use social networks more success-
ful than those who do not? Can entrepreneurs
boost their businesses by primarily using Facebook
to reach customers, clients, family and friends and
to communicate and grow their networks? Do they
need specific marketing capabilities adapted for
Facebook? Despite the lack of research in this
area, there are plenty of guidebooks (Ceyp/Scupin,
2013; Smith/Zook, 2011) which aim to help entre-
preneurs to get started in SNSs and make the best
of the possibilities (Kim et al., 2013) that are al-
ready known. For example, we already know that
users want to see entertaining and interesting con-
tent in regard to the Facebook activity of an enter-
prise (Cvijikj/Michahelles, 2013) to be engaged
and feel connected, but there is still little research
on how businesses actually transfer these initial
insights into practice and how this might affect a
firm’s performance. Facebook can act as a tool to
build networks and, therefore, build social capital
(Valenzuela et al., 2009) in a way that was not
possible before SNSs emerged on the World Wide
Web. This paper contributes to the literature by
investigating the effects of Facebook activities
by entrepreneurs on the success of firms in the
German crafts business sector for a large sample
(N=1,971) of micro and small enterprises. We
focus on full time ventures and conduct a hierar-
chical multiple OLS-regression analysis. The re-
sults can be transferred on other sectors, since the
crafts business sector can be viewed as typical of
entrepreneurial activities in Germany in terms of
size, business model, and legal type, among other
characteristics. The paper consists of five sections.
Section 2 gives a short overview of the relevance
of networking and social capital and discusses the
latest findings in the research on social networks,
and especially Facebook. Section 3 presents our
hypotheses in relation to the main literature while
section 4 focuses on the data and the research
methodology used. Section 5 summarizes the main
findings and section 6 concludes with the study’s
main points, providing a discussion of the results
and offering implications for further research and
practice.
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2. Networking activities
in the Facebook era
Starting a business and ensuring its survival is
closely linked to many problems and opportuni-
ties. While having only limited personal, financial
and intangible resources (Stinchcombe, 1965), an
entrepreneur must learn to acquire essential re-
sources whenever needed. Networking is crucial
(Johannisson, 2000; Sullivan/Marvel, 2011; Wat-
son; 2007) as it provides access to those resources
(Ostgaard/Birley, 1994). Therefore, by fostering
and expanding their networks, entrepreneurs ex-
tend their success. The positive relationship be-
tween networking and a firm’s success is well ex-
plained (Witt, 2004; Watson et al., 2003) and it is
generally assumed that successful networking
consists of two dimensions: a venture having
both a good mix of relational embeddedness and
structural embeddedness in its network (e. g.
Granovetter, 1985, Burt, 1995). Also, it is broadly
accepted that networks positively accumulate so-
cial capital (Birley, 1985; Gronum et al., 2012)
and that it is essential for entrepreneurs, who
want to benefit from social capital, to manage
different types of ties (Granovetter, 1985), struc-
tural holes (Birley, 1985) and preferably to de-
velop strategies for interactions in networks (Mar-
tinez/Aldrich, 2011). Anderson and Jack (2002)
define social capital as a process, and therefore
not a »thing« or a product: it is the exchange of
resources and information in a network. Social
capital as a concept has been extensively studied
in recent years (Foley/O’Connor, 2013; Nahapiet/
Ghoshal, 1998; Stam et al., 2014; Baron/Mark-
man, 2003; Baron/Tang, 2008). Furthermore, the
link between social capital and firm performance
has been well covered (Batjargal, 2003; Geda-
jlovic et al., 2013; Cooke/Wills, 1999). Stam et al.
(2014) conducted a meta-analysis that shows how
social capital has a strong linkage to a firm’s per-
formance, depending on the firm’s age, it’s indus-
try and other factors. Network diversity had the
strongest effect on a firm’s performance.
The face of marketing is changing remarkably
due to the changes being caused by the emerging
Web 2.0 applications (Nakara et al., 2012). Social
Media in general, the multitude of »internet-appli-
cations […] that allow the creation and exchange of
User Generated Content« (Kaplan/Haenlein, 2010)
and SNSs (Boyd/Ellison, 2007) in particular, have
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Stefanie Pakura/Adalbert Pakura
become not only important to their users around
the world but also to businesses and most recently
also to micro and small enterprises, who trust on-
line networks to help them become more successful
(Kahar et al., 2012). The purpose of the social net-
work Facebook (from a user perspective) is to be-
come »friends« with other Facebook users, to com-
municate with them through comments, wall-post-
ings and instant messages, and to stay informed
about their friends’ self-published activities and
interests (Caers et al., 2013). From a business per-
spective, companies can create a Facebook-page to
accumulate »fans«, post status updates and foster
discussions with the users about their products and
services.
Overall, Facebook can be utilized for many
purposes (e. g. Naylor et al., 2012; Ellison et al.,
2007; Ellison et al., 2014), such as human re-
sourcing and recruiting (Brown/Vaughn, 2011;
Chauhan et al., 2013), as a support structure for
not-for-profit activities (Waters et al., 2009), for
prosuming (Kietzmann et al., 2011), procurement
processes for businesses (Backhaus et al., 2013;
Cyganski/Hass, 2011), and for specific marketing
opportunities (Ceyp/Scupin, 2013; Smith/Zook,
2011; Hettler, 2010; Walsh et al., 2011). We focus
here on Facebook due to its many advantages for
users over other SNSs (Kim et al., 2013, Stam et
al., 2014) and its huge user base (Statista GmbH,
2014) in Germany. Cvijkj and Michahelles (2013)
elaborate in detail the opportunities for a busi-
ness arising from engagement on Facebook, such
as advertising (viral marketing), product develop-
ment, and market intelligence. Another impor-
tant aspect of the utilization of Facebook by
micro and small enterprises might be »word of
mouth«. As early as 1968, Arndt (1968) discov-
ered the potential power behind recommenda-
tions. Today, this is one of the key features in the
highly transparent and interconnected online
world (Trusov et al., 2009; Jansen et al., 2009;
Katona, 2013).
So how can Facebook be of further help for mi-
cro and small enterprises? Used correctly, it in-
creases the number of weak ties (Donath/Boyd,
2004) and can be a key factor in generating social
capital (Bohn et al., 2014; Ellison et al., 2007; El-
lison et al., 2014; Valenzuela et al., 2009; Abbas,
2013). Furthermore, Facebook builds social capital
in an »entertaining way« (Shah et al., 2012). None-
theless, Facebook is not without critique from pri-
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 Effects of Facebook activities on the performance of start-ups
vacy groups and policy makers2. But what is the
current state of adoption of social networks in gen-
eral, and Facebook in particular, in micro and
small enterprises? There are initial approaches to
this question (Aharony, 2013; Durkin et al., 2013;
Perrigot et al., 2011), but those mainly focus on
user behavior and not so much on possible out-
comes of Facebook use. Our goal is to fill this gap.
In Germany, the Bitkom e.V. collects data on a
regular basis about the adoption rate of social me-
dia services and can show that a very high percent-
age of German SMEs are active on Facebook (BIT-
KOM, 2013). There is currently no data specifically
on micro and small enterprises, but we assume that
there will be more deep and sophisticated research
on this matter in the coming years due to its rising
importance. The question remains as to why so
many SMEs, and, therefore especially micro and
small enterprises struggle to utilize Facebook as a
helpful tool (Kirtiş/Karahan, 2011). We hope that
our findings can motivate more entrepreneurs to
be active on Facebook and thereby boost their
business performance.
3. Hypotheses
Research findings on the impact of social media
engagement by entrepreneurs on business perfor-
mance are extremely scant. While the research
landscape around this topic is getting more diverse
at an increasingly higher rate (Caers et al., 2013),
there is still very little consensus on the effects of
social media use. Recent (unpublished) research by
Kraus (University of Liechtenstein, 2013), takes a
critical view of the outcomes of social media ac-
tivities for SMEs. In this study, 400 decision mak-
ers in SMEs in Germany, Switzerland, Austria and
Liechtenstein were asked about their social media
activities and no influence on their firm’s perfor-
mance was found. For our purpose, we focus on
micro and small enterprises to see if our results
differ from those of Kraus (2013). Furthermore,
O’Donnell (2004) and Schoonjans et al. (2013)
point out that there is an important distinction be-
tween the networking and marketing efforts of
2 The dangers of (mis-)use of Facebook, like deprivatization
and privacy violation, were covered (Debatin et al. 2009;
Ahlden 2012; Leskovec et al. 2010) in recent years due to
high media attention on these matters.
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small, medium and big enterprises, respectively. In
other words, the founders of micro or small enter-
prises deploy different networking activities to
these of larger companies. Relationships and net-
works can be boosted by Facebook activity and
therefore might have an impact on firm perfor-
mance. The concept of relational capital (Hormiga
et al., 2011), which we believe can be highly effec-
tive (through interactions in social networks),
might be well applicable. Hormiga describes rela-
tional capital as the entrenchment of a firm in its
relational surroundings (Hormiga et al., 2011), re-
ferring to the presence of a business in a commu-
nity, the reputation it gets and grows through in-
teraction with its environment and so on. Any type
of connection the venture can make, be they for-
mal or informal, can have important impact on
channels of communication, obtaining resources
and a wider access to distribution channels (Hor-
miga et al., 2011, p. 625). So if we follow Hormiga´s
lead, we can assume that a company’s mere pres-
ence on Facebook can be associated with reputa-
tion and visibility of the business venture and is,
therefore, an important intangible asset. So, keep-
ing in mind the specific needs and problems of
micro and small enterprises, and the potential that
can be discerned in their engagement in social
media activities, we may conclude:
H1: Being engaged in Facebook as an entrepre-
neur of a micro or small enterprise is positively
associated with his firm’s performance.
Due to their high level of uncertainty stemming
from having little knowledge about market devel-
opment and customer behavior (Schulte/Eggers,
2010), young firms usually need a more flexible
approach to marketing. While marketing activities
in general are usually perceived as a very impor-
tant success factor for enterprises (Krasnikow/Jay-
achandran, 2008; O’Sullivan/Abela, 2007), entre-
preneurial marketing is still a relatively young
concept in the scientific community (Eggers et al.,
2009). Being able to effectively implement market-
ing is highly important in situations where cus-
tomers lack information about new ventures and
vice versa. Entrepreneurs, therefore, need to com-
municate better and engage their specific audience
and thus need different capabilities to ensure a
successful business venture. The research on capa-
bilities and their effects on firm performance has
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been diverse. Capabilities can be seen as accumu-
lated and complex bundles of knowledge and skills
in entrepreneurial contexts (Eisenhardt/Martin,
2000; Helfat/Peteraf, 2003). Some of the most im-
portant capabilities, amongst others, are technologi-
cal capabilities (Song et al., 2005), operational capa-
bilities (Worren et al., 2002) and, as mentioned
above, marketing capabilities (Kotabe et al., 2002).
Regarding our specific research, to find out what
drives entrepreneurial success in terms of Facebook
activity, the impact of marketing capabilities is very
interesting. As stated above, entrepreneurial mar-
keting is crucial in the development of a firm and
the possibilities of the Web 2.0 add a new layer of
opportunities for businesses. The research on mar-
keting capabilities in an entrepreneurial context
with a focus on SNSs seems long overdue and our
research tries to fill this gap by providing informa-
tion about the positive effects of Facebook activity.
Following Morgan et al. (2009), we adapted the
five capabilities »pricing, product, marketing com-
munications, market planning, and marketing im-
plementation« for micro and small businesses to
apply to Facebook-use in the context of the Ger-
man crafts business sector. The capabilities »prod-
uct development« and »selling« could not be com-
bined with social media activities and thus were
excluded3. So what happens if we apply the effects
of marketing capabilities to the specific context of
Facebook? Can Facebook be beneficial to entrepre-
neurs and their ventures? Do marketing capabili-
ties give a strategic advantage to those entrepre-
neurs? Synthesizing the literature, we can antici-
pate that marketing capabilities will have a strong
impact on an entrepreneur’s success depending on
the activity on Facebook. We conclude:
H2: Having strong marketing capabilities
regarding Facebook as an entrepreneur is
positively associated with firm performance.
Social capital theory argues that networks of rela-
tionships constitute a valuable resource for entre-
preneurs (Nahapiet/Ghoshal, 1998). The impor-
tance of weak ties and relational diversity espe-
cially, leads to the assumption regarding Facebook
that it should be important for entrepreneurs to
have a lot of friends on Facebook, preferably from
highly diverse contexts (Abbas, 2013; Bohn et al.,
2014). Having many friends on Facebook might
provide connections and possible opportunities:
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Stefanie Pakura/Adalbert Pakura
for example, a large group of friends would allow
the entrepreneur to attract new customers in a pu-
tatively cheap and uncomplicated way, by word of
mouth (Arndt, 1968; Trusov et al., 2009). Hormiga
et al. (2011) point out that any ties a firm aggre-
gates (or in this case, the entrepreneur), regardless
if they are formal or informal, might help the suc-
cess of a start-up by widening the spectrum of pos-
sible interactions. Such interactions might be with
business contacts and customers as well as family
and friends. Depending on the age of the company,
its sector and other factors, different kinds of ties
can be more or less important.
Stam et al. (2014) supply an extensive meta-
analysis on this matter, finding that high network
diversity has the strongest effect. Effect sizes of
weak ties were smaller than those of structural
holes, but overall we can assume with some cer-
tainty that the number of friends with different
types of interactions can be of high interest. In our
research, we sum up all types of contacts (»friends«
on Facebook) and hypothesize that the presence
and the number of friends have a positive effect on
a firm’s success – for now, without splitting the
friends into different categories. We, therefore, hy-
pothesize specifically:
H3: The number of friends on Facebook is
positively associated with a firm’s performance.
Spending time with stakeholders, friends and fam-
ily adds to an entrepreneur’s social capital. Re-
search shows that the effort an entrepreneur in-
vests into establishing relationships is highly cor-
related with the success of his venture (Hormiga et
al., 2011). Staying in contact with strong and weak
ties in order to get access to opportunities is also
crucial to success (Dubini/Aldrich, 1991). We as-
sume that a tool like Facebook can make it easier
for entrepreneurs to stay in contact with friends,
family and other stakeholders. Therefore, we can
propose:
H4: Spending time interacting with friends
on Facebook as an entrepreneur is positively
associated with firm performance.
3 Since the craft sector is very special, it is extremely difficult
for a roofer or a bricklayer, for example, to invite Facebook
users to get involved in developmental processes, or to
utilize Facebook as a sales channel to customers.
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 Effects of Facebook activities on the performance of start-ups
4. Methodology
4.1. Sample and procedure
This study employed a quantitative approach by
collecting primary data from a questionnaire sent
to entrepreneurs in the German crafts business sec-
tor, specifically to micro and small enterprises. The
participants are already familiar with such surveys,
thus explaining the high response rate. The study is
based on a German panel data set, the start-up
panel North Rhine-Westphalia (Germany’s largest
federal state), which undertakes annual surveys
among micro and small enterprises. Until 2012,
this longitudinal study has accumulated about
20,000 start-ups, with annual response rates from
35 % to 70 % (Lambertz/Schulte, 2013). Its survey
in 2014 was the fifteenth year data had been col-
lected. The panel covers successions as well as ac-
tive participations and contains data only about
full-time entrepreneurship. Therefore, it is not
biased by part-time businesses. Single person en-
terprises, which have become a very important part
of today’s economies (Keßler et al., 2009), are cov-
ered as far as they can be classified as a full-time
job. The panel data set predominantly includes
firms belonging to the crafts business sector. In
Germany, this sector can be viewed as typical of
entrepreneurial activities in terms of size, business
model, and legal type, among other characteristics.
The panel allows controlling for survivorship bias.
Hidden market exits are impossible as a result of
governmental authorities having monitored all the
included start-ups. Furthermore, all exits can be
verified by using a special crafts register, where all
entries and exits have to be recorded. The panel
wave questionnaires cover recurring questions as-
sessing corporate development (e. g. quantity of
staff, sales volume, investment volume, production
activity, achievement of profit goals) as well as
non-recurring questions. These latter topics are
different in each panel wave (including, e. g., start-
up financing, official advising, or entrepreneurial
motivation).
The panel offers an extra enterprise database
with detailed information on the respective busi-
nesses and files on entrepreneurs’ biographies and
business plans, which can be found alongside the
panel wave data. The enterprise database provides
information about the age of the enterprise, the
legal form of the company, its location, and the
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DBW_06_15.indb 418
gender of the entrepreneur, amongst other data.
To test our hypotheses, our data was collected
from the 14th survey of the panel in late 2013.
The questionnaire was sent out to 4,437 entrepre-
neurs in the craft sector in North Rhine-West-
phalia. After excluding responses which had too
much missing data, so they could not clearly be
identified as small enterprises, we retained 1,971
usable surveys. Thus, the final sample consists of
1,971 micro and small enterprises, a response rate
of 44.42 % of the total sample. To assess differ-
ences across respondents and nonrespondents, we
conducted independent-samples t-tests on all
4,437 addressed enterprises along with the de-
tailed information from the extra enterprise data-
base (e. g., the firm’s business sector). We found
no differences between the two groups. Since our
study particularly refers to the organizational size
(focus on micro and small enterprises) we incor-
porated the data from the longitudinal panel da-
tabase in addition to calculate t-tests among
respondents and nonrespondents along with the
organizational size measured in the previous
year’s wave (in 2012) by number of employees
and sales volume. No significant difference was
found (number of employees: t[df:1,962] = .513, p >
0.10) and sales volume: t[df:1,731] = .734, p >
0.10). This suggests that nonresponse bias is not a
problem in our dataset. Finally, we compared our
dataset concerning the responses made on the
number of employees and the sales volume with
secondary data from the German federal statistical
office (Federal Statistical Office, 2014) for the
crafts business sector and found high correlations
between our database and the average numbers for
micro and small enterprises in the crafts business
sector for the whole of Germany. This suggests that
our dataset is likely to be representative for micro
and small enterprises for the whole crafts business
sector in Germany.
Hence, we can say that participants belong
only to micro and small enterprises, and that the
questionnaires were all completed by the com-
pany owner. The average age of the companies in
the final sample was 41.1 months (standard devi-
ation [S. D.] = 23.2). The firms employed five per-
sons on average (S. D. = 4.47) including the firm
owner. The average sales volume was € 350,000
for the previous 12 months. In the crafts business
sector, 35 % of the companies were involved in
personal services (e. g., hairdresser or chimney
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sweep), 30 % in the building installation and
building completion industry (e. g., painter or
electronics technician), 10 % in building and con-
struction (e. g., roofer or bricklayer), 9 % in the
motor vehicle industry (e. g., automotive me-
chatronics technician), and 16 % in other indus-
tries (including health care [7 %], industrial ser-
vices [6 %], and food industry [3 %]). The final
dataset contains 65 % start-ups and 35 % succes-
sions or active participations (with more than
50 % participation). The majority of micro and
small enterprises are founded on the basis of sole
proprietorship (78 %). Of the respondents, 27.5 %
indicate being active on Facebook.
4.2. Measures
4.2.1. Dependent variable
We wanted the dependent variable to be based on
the success of the enterprise and measured by
objective data about the firm’s performance in-
stead of subjective self-perception of success as
reported by the business owner. Since subjective
measures of success are prone to error (Watson et
al., 2003), we chose the number of employees as
the most reliable measure for firm success. In
contrast to financial measures, such as revenue or
profit, employment is a very stable construct that
allows a superior measure of success (e. g., Barba-
Sánchez/Pilar Martínez-Ruiz, 2009; Gilbert et al.,
2006; Headd/Kirchhoff, 2009; Keßler et al., 2009)
and is resistant to fluctuations in economies. Fur-
thermore, it is not biased by the subjective esti-
mates of the entrepreneur or even the entrepre-
neurs’ manipulation of the business’ apparent
profit. Since the German crafts business sector is
typical of entrepreneurial activities in Germany in
terms of size, business model, and legal type, and
contains predominantly ordinary business starters
with neither innovative nor technology-based
business concepts (Lambertz/Schulte, 2013), the
number of employees established by an enterprise
is of particular relevance in this sector and pre-
sents an important success indicator, not only for
the firm itself, but also cumulatively for the na-
tional economy. Firm success is the logarithm of
the total number of employees including the firm
owner.
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Stefanie Pakura/Adalbert Pakura
4.2.2 Independent variables
Facebook activity
To determine if the business owner is an active user
of Facebook, we asked the entrepreneur if he or
she had set up a Facebook page for the business
(1 = yes; 0 = no). Even without having a Facebook
business page, an entrepreneur can have a personal
Facebook profile (private page), utilizing it for
communication with Facebook friends and market-
ing for his venture as well. Therefore, we addition-
ally asked for the number of friends on Facebook
and the time the entrepreneur spent talking with
his friends on Facebook. Facebook activity is
measured as a combination of all three questions
and refers to an overall indicator of being privately
on Facebook at all, having a Facebook business
page, or even having both (1 = yes; 0 = no).
Marketing capabilities
We adopted Morgan et al.’s (2009) marketing capa-
bilities items and adapted them to match marketing
capabilities in the context of Facebook. We de-
ployed a measure of marketing capabilities that
had five items to measure the five distinct market-
related capabilities which we identified to be im-
portant in the context of Facebook: product devel-
opment, pricing, marketing communications, mar-
ket planning, and marketing implementation.
Using all of these items, a composite marketing-
capabilities construct regarding Facebook-use was
generated by averaging the five items for our re-
gression model. Cronbach’s coefficient alpha was
.899, which suggests a high level of reliability for
this construct since the value is greater than the
suggested cut-off level of .700 (Nunnally, 1978).
This measure is a valid proxy for marketing capa-
bilities. Take, for instance, previous research by
Morgan et al. (2009) or Vorhies et al. (2009), which
has shown the high correlation between this meas-
ure and other constructs utilized to capture mar-
keting capabilities.
Friends on Facebook
To identify how many friends the participants had
on Facebook, we asked them to name the number of
a) close friends/family b) acquaintances c) business
contacts d) customers in their private Facebook pro-
file. These measures were summed up into an indi-
cator of »general amount of Facebook friends«.
419
13.11.15 13:26
 Effects of Facebook activities on the performance of start-ups
Interaction with friends on Facebook
To measure and interpret the amount of time spent
on Facebook talking with different kinds of net-
work partners, we asked our participants to quan-
tify their interaction on Facebook with the above-
mentioned network entities (in Facebook terms:
»Friends«) in hours per week. We added these num-
bers up to get an indicator for »Interaction on
Facebook with Friends«.
4.2.3. Control variables
The study utilizes a number of control variables to
control for industry and firm heterogeneity and to
ensure that the results are generally acceptable and
not ascribable to other effects. We included sales
volume and legal form of the organization as indi-
cators of firm size. Firm size approximated by sales
is the logarithm of the total sales volume for the
previous 12 months. Furthermore, we included the
business sector, firm age, and whether the firm is
either a start-up or a succession or active participa-
tion to account for the effects of these variables.
5. Analysis and results
Variable means, standard deviations, and zero-
order correlations are reported in Table 1. All hy-
potheses were tested using hierarchical multiple
OLS-regression analyses. Regression results to
verify the hypothesis H1 are reported in Table 2,
while the results referring to the hypotheses H2 to
H4 appear in Table 3. There were 1,971 observa-
tions for each analysis presented in Table 2 to ver-
ify the hypothesis that any engagement at all in
Facebook as an entrepreneur is positively related
with firm success. Since the hypotheses H2 to H4
focus on the entrepreneurs who have reported be-
ing already engaged in Facebook, the regression
analysis exclusively focuses on the subgroup of ac-
tive Facebook users. After excluding observations
with missing data concerning the independent
variables »number of Friends«, »time spent on
Facebook« and »marketing capabilities«, 364 com-
plete observations remained for the analysis.
We conducted the MCAR (missing completely at
random) test provided by Little (1988) to ensure
that the missing values were scattered randomly
through our data matrix and posed no problem for
420 © Schäffer-Poeschel Verlag für Wirtschaft · Steuern · Recht GmbH
DBW_06_15.indb 420
our analysis. The test reported the missing values
in our dataset to be completely unrelated to the
observed values, so missing data bias is no concern
in this study. After evaluating the assumptions of
the regression, we conducted a logarithmic trans-
formation of the variables »sales volume« and
»number of employees« to reduce skewness of dis-
tribution (Tabachnick/Fidell, 2010, p.89) and im-
prove the normality, linearity, and homoscedastic-
ity of the residuals. The dispersion of the residuals
confirms the lack of heteroscedasticity. For the
predictive variables, the variance inflation factor
(VIF) scores were analyzed. All showed scores
within acceptable ranges (Ryan, 2009). Hence, col-
linearity diagnostics indicated no cause for con-
cern.
To analyze the hypothesis H1, the hierarchical
regression analysis was conducted in two steps: in
model 1 we only included the set of control vari-
ables as predictive variable, finding that belonging
to a given craft business sector would have a sig-
nificant influence on the success of the firm (e. g.,
especially a positive influence on those belonging
to the service and food industry). The squared
multiple correlation R2 is .613 (F = 281.801,
p < .001). The addition of the independent variable
»being engaged in Facebook« results in a signifi-
cant increment in R2. Furthermore, model 2 shows
some very interesting results regarding the effects
of Facebook activity in the German craft business
sector.
The relationship between activity on Facebook
to the success of the business venture (H1) was
positive and significant (t = 4.095, p < .001), mean-
ing that the activity of the entrepreneur on Face-
book (the possibilities to interact with his custom-
ers and be connected with friends, family and busi-
ness contacts as well as the options to build up
reputation and to market his product or service) are
of high value for micro and small enterprises. After
step 2, R2 is .616 (F = 261.784, p < .001). The ad-
justed R2 of .614 for the full model indicates that
61.4 percent of the variability in firm success is
predicted by the variables in model 2. Thus, our
model has sufficient explanatory power and does a
satisfactory job at explaining firm success. Even
so, after including the Facebook involvement vari-
able in the model, the increment in R2 was small,
its significant change and the significance of the
relationship between this predictor variable and
the firm success suggests that the Facebook activ-
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   Variablesa Mean (S. D.) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

DBW_06_15.indb 421
Facebook activity
1 .2750 .4466 1.000                              
(1 = yes; 0 = no)

2 Facebook friends 194.1126 252.9959 – 1.000                            

DBW 75 (2015) 6
Interaction with friends on
3 3.4914 6.6937 – .077 1.000                          
Facebook (hours per week)

4 Marketing capabilities 3.0870 1.6889  – .264** .220** 1.000                        

5 Unlimited private company .0999 .3000 .018 –.066 –.045 –.053 1.000                      

6 Limited liability company .1202 .3253 –.022 .013 –.047 –.079 –.123** 1.000                    

7 Age of company (months) 41.1426 23.2151 –.126** .007 –.063 –.100* .023 .019 1.000                  

Succession / active
8 .3486 .4766 .012 –.134** –.029 .034 .143** .172** .058* 1.000                
participation

9 Building and construction .1015 .3020 –.083** –.008 –.008 –.138** .050* .124** .027 –.070** 1.000              

10 Industrial needs .0558 .2296 –.051* –.072 .004 .001 .044* .087** –.011 .026 –.082** 1.000            

11 Motor vehicles .0928 .2903 –.021 –.003 –.002 .061 .016 .064** .009 .059** –.108** –.078** 1.000          

12 Foodstuff .0279 .1647 .020 –.011 –.066 .014 .067** –.025 .004 .128** –.057* –.041 –.054* 1.000        

13 Health care .0695 .2544 .055* –.089 –.088 .039 .015 .022 .013 .081** –.092** –.066** –.087** –.046* 1.000      

14 Personal services .3511 .4774 092** .144** .122* .198** –.132** –.252** –.066** –.199** –.247** –.179** –.235** –.125** –.201** 1.000    

Sales volume last 12 months

15 350.8391 491.6181 –.031 .023 –.054 .050 .155** .312** .127** .285** .112** .042 .113** .105** –.017 –.325** 1.000  
(in € 1,000)

© Schäffer-Poeschel Verlag für Wirtschaft · Steuern · Recht GmbH

Number of employees
16 4.9574 4.4687 .013 .152** –.070 .080 .187** .282** .151** .348** .099** .040 –.023 .216** –.019 –.259** .734** 1.000
(including the firms owner)

aN=1,971 for all correlations except: Facebook friends, interaction with friends on Facebook, and marketing capabilities.
Sector: building installation and building completion (reference category: 30.1 %), legal form of company: sole proprietorship (reference category).
*p< .05, **p< .01 (two-tailed).
Stefanie Pakura/Adalbert Pakura

421
Tab. 1: Descriptive statistics, standard deviation, and zero-order correlations

13.11.15 13:26
 Effects of Facebook activities on the performance of start-ups

ity is of significant importance concerning the
business’ performance. So the entrepreneur’s ac-
tivities and the success of his venture are deeply
connected. Therefore it is of no surprise that his
presence on Facebook, where most of his custom-
ers are already active, shows positive results. Most
interestingly, while only 27.5 percent of the par-
ticipants are active on Facebook, it shows that the
other 72.5 percent apparently are missing out on a
lot of opportunities and are potentially harming
their own business by ignoring Facebook and stig-
matizing it as an »unnecessary« tool.
In Model 2 we showed that the success of a ven-
ture can be linked to the presence of its founder on
Facebook, we then particularly looked at how those
participants (all of them active on Facebook) can
dissociate themselves by different behaviours re-
garding Facebook usage addressed in the hypoth-
eses H2 to H4. Again we conducted a hierarchical
multiple regression analysis, introducing only the
control variables in the first step and entering the
predictor variables in the second step. The goal of
H2 was to understand if marketing capabilities that
are deployed in Facebook can have a significant

Model 1 Model 2
Number of Employees Number of Employees
Variables
Standardized Standardized
t-value t-value
Coefficients Coefficients

Sector
Building and construction .012 .743 .015 .942
Industrial needs –.029† –1.921 –.026† –1.777
Motor vehicles –.065*** –4.238 –.065*** –4.241
Foodstuff .061*** 4.165 .059*** 4.066
Health care –.028† –1.859 –.032* –2.110
Personal services .114*** 6.201 .109*** 5.969

Legal form of organisation

Unlimited private company .045** 3.020 .042** 2.870
Limited liability company .045** 2.880 .044** 2.797

Age .067*** 4.648 .074*** 5.096

Succession / active
.156*** 10.133 .154*** 10.065
participation

Size .707*** 38.680 .710*** 38.950

Facebook activity (H1) .058*** 4.095

F-value 281.801*** 261.794***

Adjusted R Square .611 .614

R Square .613 .616

R Square Change 0.003***

Standardized coefficients and t-values.

N = 1,971, Sector: building installation and building completion (reference category),
legal form of company: sole proprietorship (reference category).
†< .10, *p< .05, **p< .01, ***p< .001.

Tab. 2: Hierarchical regression results of hypothesized relationship hypothesis H1

422 © Schäffer-Poeschel Verlag für Wirtschaft · Steuern · Recht GmbH DBW 75 (2015) 6

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 Stefanie Pakura/Adalbert Pakura

Model 3 Model 4
Number of Employees Number of Employees
Variables
Standardized Standardized
t-value t-value
Coefficients Coefficients

Sector
Building and construction –.023 –.678 –.019 –.577
Industrial needs –.028 –.835 –.029 –.875
Motor vehicles –.098** –2.802 –.118*** –3.421
Foodstuff .080* 2.336 .069* 2.065
Health care –.109** –3.036 –.121*** –3.419
Personal services .196*** 4.566 .141*** 3.245

Legal form of organisation

Unlimited private company .041 1.235 .060† 1.831
Limited liability company .056 1.595 .062† 1.805

Age .090** 2.643 .102** 3.057

Succession / active
.149*** 4.380 .159*** 4.753
participation

Size .727*** 17.244 .701*** 16.878

Marketing capabilities (H2) .105*** 3.023

Friends on Facebook (H3) .092** 2.776

Interaction with friends on

.004 .112
Facebook (H4)

F-value 57.329*** 49.254***

Adjusted R Square .631 .650

R Square .642 .664

R Square Change 0.022***

Standardized coefficients and t-values.

N=364, Sector: building installation and building completion (reference category),
legal form of company: sole proprietorship (reference category).
†< .10, *p< .05, **p< .01, ***p< .001.

Tab. 3: Hierarchical regression results of hypothesized relationship hypothesis H2–4

influence on the success of a start-up. The con-
struct »marketing capabilities«, which describes the
capabilities of the founder to deploy marketing
campaigns and locate his business as a brand,
among others (see chapter 3 to H2), is also highly
significant and positively related to the business’s’
success (t = 3.023, p < .001). We can therefore as-
sume that the better an entrepreneur knows how to
use Facebook for his marketing purposes, the more
he can gain in terms of firm success. Regarding the
last two hypotheses (H3 and H4), the number of
friends on Facebook emerged as a significant and
positive variable in the analysis (t = 2.776, p < .01),
whereas no support was found for hypothesis H4
concerning the time spent interacting with Face-
book friends on the social network (t = .112, p > .10).

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DBW_06_15.indb 423 13.11.15 13:26

 Effects of Facebook activities on the performance of start-ups
That means that while firm success is affected by
the number of friends a founder has on Facebook,
this cannot be confirmed for the time he invests to
talk to these friends. One explanation could be that
he benefits from the sheer number of Facebook
friends because he has instant access to his net-
work – but that does not mean that he has to talk
with all of his contacts. Maybe this is also an issue
of age or simply of habit, meaning that most of the
relevant communication is still made outside of
Facebook. But the positive and significant effect on
the number of friends leads us to the assumption
that an entrepreneur could benefit from the con-
tact-management possibilities offered by Face-
book. So if he really needs help or information
from strong or weak ties (Granovetter, 1985), Face-
book makes it very easy to get in touch with
friends, family and other stakeholders. Hierarchical
regression results show that the statistically sig-
nificant predictor variables added significant im-
provement to R2 (R2 change = .022, p<.001) and
thus the explanatory power of the model predicting
business success. Our findings strongly indicate the
importance of the predictor variables number of
Facebook friends and being capable of marketing
capabilities in context of the social network Face-
book (H2 and H3) in explaining business success.
The determination coefficient (R2) in model 4 was
.664 (F = 49.254, p < .001), thus indicates that
66.4 % of the variations in business success can be
explained. According to the F-values all models
are highly significant.
Finally, we conducted further analyses to check
the robustness of our main findings. First, we re-
ran our regressions using heteroskedasticity-con-
sistent (HC3) standard error estimators for the
regression (Hayes/Cai, 2007). Hayes and Cai argue
that these estimators should routinely be used
when conducting hypothesis tests using OLS re-
gression giving greater comfort in the validity and
power of those tests. The additional analyses could
well be used to double-check the results from the
use of the OLS estimators against the results given
from the use of a HC estimator, to make sure that
conclusions are not compromised by heteroskedas-
ticity. Since there was no heteroskedasticity-prob-
lem in our models, the findings of our OLS-regres-
sions remain robust after double-checking with
HC3 estimators and thus can be strongly supported.
Second, since the dependent variable is measured
in terms of number of employees, we added a sub-
424 © Schäffer-Poeschel Verlag für Wirtschaft · Steuern · Recht GmbH
DBW_06_15.indb 424
jective performance measure for the explained
variable and re-estimated the models. Using a con-
struct of three subjective success measures (reach-
ing revenue goals, reaching profit goals, the entre-
preneurs’ ability to earn a livelihood; detailed re-
sults available from the authors) and high level of
reliability (Cronbach’s coefficient alpha was .798),
the results remain significant and coefficients keep
their signs. Moreover, re-estimating model 3 and 4
with a single-item success measure (overall perfor-
mance relative to major competitors last year) even
confirmed support for H4 concerning the time
spent interacting with Facebook friends on the so-
cial network.
6. Conclusion and implications
This paper contributes to the research delta regard-
ing the use of SNSs, in particular Facebook, in
terms of success for micro and small enterprises.
Data on 1,971 firms, strongly representative for
›ordinary‹ entrepreneurial activities in Germany,
confirm and underline the importance of activity
in the social network Facebook in the German
crafts business sector. Being active on Facebook
showed a highly significant effect on a firm’s per-
formance. For entrepreneurs, our findings strongly
indicate that a high level of activity on Facebook
can bring high value to the company through the
possibilities bound to a broad and diverse online-
network. Future research will have to address spe-
cific actions that entrepreneurs can undertake to
most effectively make use of Facebook and other
SNSs. For researchers, our study underlines the in-
creasingly important role of Facebook on generat-
ing social capital and future research may there-
fore study the activity of micro and small enter-
prises on Facebook and the tools and activities that
most help the entrepreneur to achieve his goals. In
terms of marketing capabilities we found evidence
that these capabilities regarding Facebook activity
are strongly associated with firm success.
Entrepreneurs who attributed themselves with
high levels of marketing capabilities in the context
of Facebook benefit the most. These conclusions
extend previous research work (e. g. Morgan et al.,
2009; Vorhies et al., 2009) referring to the positive
effects of marketing capabilities on firm perfor-
mance. Previous studies on firm-specific marketing
capabilities have been primarily focused in a con-
DBW 75 (2015) 6
13.11.15 13:26

ventionally marketing context beyond SNSs’. Our
study examined for the first time the effect of mar-
keting capabilities in the particular context of
SNSs, in our case Facebook as valid proxy for
SNSs, and clearly showed that marketing capabili-
ties have a positive relationship with firm success
especially in the context of Facebook by utilizing
the opportunities offered by these sites. Thus, our
findings transfer previous academic work to the
specific context of SNSs. Furthermore, we exam-
ined the relationship between the entrepreneur’s
number of Facebook friends and firm success as
well as the relationship between the actual time the
entrepreneurs spent engaging in conversations
with their Facebook friends. Our results show a
high correlation between the number of friends
and firm success among those entrepreneurs who
actively use Facebook, regardless of having a dedi-
cated Facebook-page for their company or not.
This does not include an itemization into different
kinds or friends and therefore different kinds of
social ties – future research might address whether
strong or weak ties are more important on Face-
book. Finally, while the number of friends showed
a significant effect on firm success, we could not
find this to be true for the time spent engaging in
conversations with Facebook friends. One explana-
tion might be that entrepreneurs use Facebook for
marketing activities and the management of their
network, with a focus on word-of-mouth effects,
but do not take the time to communicate directly
with all their stakeholders over Facebook – instead,
they stick to customary ommunication channels
(e. g., telephone, face-to-face, etc.). This goes along
with Hormiga et al. (2011), who stated that there is
no connection between the sheer amount of time
establishing relations with different stakeholders
and firm success. Future research should also check
for Likes and Comments on Facebook-Posts and
how the Community talks about the company. This
could be a vital addition to research and may be
worthwhile utilizing longitudinal research designs
in future research to empirically study the engage-
ment of the Facebook-community and perfor-
mance outcome over time. This could go along
with a more objective and longitudinal measure of
the variable ›interactions with friends on Face-
book‹, since this explanatory variable is based on
subjective estimation of the entrepreneur.
Concurrently with this, more research is needed
regarding the activity of micro and small enter-
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DBW_06_15.indb 425
Stefanie Pakura/Adalbert Pakura
prises as well as medium sized ventures in other
SNSs like Xing, Twitter or Pinterest. We hope the
positive results invite scholars in the field and
SMEs to intensify their activity in the intersection
of Social Media and Business. Most interestingly,
while there is vast agreement on how positive net-
working activities affect the generation and nur-
turing of social capital and how important social
capital is for entrepreneurs, recent research shows
that people actually do have problems understand-
ing their own network correctly due to the com-
plexity of the social structures in which they are
embedded (Brands, 2013). Future research will
have to address whether tools like Facebook can
help to better understand their role in the network,
especially for entrepreneurs – and therefore help
them to benefit more from high activity on Face-
book. Opposed to that, we could conclude that Fa-
cebook actually makes it harder to comprehend his
or her network structure due to the loose definition
of »friends« and the ever expanding online connec-
tions with friends and strangers. That could make
it actually harder to benefit from one’s network on
Facebook or other SNSs – Bohn et al. (2014) con-
cluded that the amount of Facebook friends be-
yond a certain level does not provide support for
the entrepreneur. From our point of view and
supported by our results, we conclude that online
networking sites will help entrepreneurs to sort
their network rather than make it harder to com-
prehend.
Regarding our own research and its limitations,
we anticipate interesting paths for future research
and recommend longitudinal studies. Facebook en-
gagement and marketing capabilities, as well as
social capital evolve over time; analyzing the full
effect may take some time. The cross-sectional na-
ture of our study prevented the assessment of any
long-term relationship between those aspects and
firm success. Furthermore, a more in-depth analy-
sis on differences between male and female entre-
preneurs, different crafts or the age of the entrepre-
neur in the context of using Facebook as an entre-
preneur or a venture should be on the agenda for
future research projects. Future research endeav-
ours should also take a look beyond the German
craft sector to check for transferable outcomes in
other industries and, moreover, examine other us-
age scenarios of Facebook by entrepreneurs. While
we see little value in using Facebook as a sales
channel or as tool for product development for a
425
13.11.15 13:26
 Effects of Facebook activities on the performance of start-ups
roofer or a bricklayer, for instance, (and therefore
didn’t include those in our study), we imagine that
entrepreneurs in Germany outside the crafts busi-
ness sector might make use of Facebook in this re-
gard and future research should take that into ac-
count. This study assessed firm success in term of
number of employees, which is both an objective
and stable metric, because it is less driven by fluc-
tuation in economies and is not liable to subjective
bias of the entrepreneur, as it used to appear for
financial or subjective success measures. However,
growth dimensions, such as employee growth and
growth in sales, are also relevant. Given the avail-
able data, the study could not address these dimen-
sions. Further research should corroborate the
findings with growth indicators. However, the
study conducted additional robustness checks for
different success measures concerning additionally
subjective success dimensions, which confirmed
the results.
Despite these limitations and further research
needs, our findings offer some important implica-
tions for practice. Many entrepreneurs, particularly
in micro and small-sized enterprises, still struggle
Appendix
Marketing capabilities
Pricing capabilities
Product capabilities
Marketing communication capabilities
Marketing planning capabilities
Marketing implementation capabilities
All of the answers were evaluated on a standard Likert-type seven-point scale ranging from anchors 1 (strongy disagree)
to 7 (strongy agree).
Table A1: Measurement scales marketing capabilities
426 © Schäffer-Poeschel Verlag für Wirtschaft · Steuern · Recht GmbH
DBW_06_15.indb 426
getting involved in SNS activities – many avoid
activities in SNSs such as Facebook due to privacy
concerns (BITKOM, 2013, Debatin et al., 2009). Our
findings provide strong support for the positive re-
lationship between the entrepreneur’s/the firm’s
Facebook engagement and firm success. Entrepre-
neurs in micro and small enterprises should try to
get involved in SNSs and especially Facebook and
gain friends there, as well as to learn how to build
marketing capabilities in particular in the context
of SNSs that will help their business to achieve bet-
ter performance. The findings also offer valuable
implications for policy makers and consultants.
Results suggest that consultants should encourage
entrepreneurs to become more involved in SNSs
and develop special marketing capabilities in the
context of Facebook. Policy makers could reinforce
the positive relationship between social network-
ing activities and firm performance by supporting
adequate training courses which could give entre-
preneurs the opportunity of getting their enterprise
start to participate in SNSs or even extend their
company’s competences in marketing through the
context of social networks.
We, in contrast to our major competitors, …
…do a more effective job of pricing products/services
on Facebook.
…tend to better meet the product/service
requirements and needs communicated by
our customers on Facebook.
…do a better job placing ourselves as a brand on
Facebook.
…develop more creative marketing activities via
Facebook.
…can execute advertising campaigns faster on
Facebook.
DBW 75 (2015) 6
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