Publications
Publications
- 2020
Social Influence in the COVID-19 Pandemic: Community Establishments’ Closure Decisions Follow Those of Nearby Chain Establishments
By: Abhishek Nagaraj, Mathijs de Vaan, Saqib Mumtaz and Sameer Srivastava
Abstract
As conveners that bring various stakeholders into the same physical space, firms can powerfully influence the course of pandemics such as COVID-19. Even when operating under government orders and health guidelines, firms have considerable discretion to keep their establishments open or closed during a pandemic. We examine the role of social influence in the exercise of this discretion at the establishment level. In particular, We evaluate how the closure decisions of chain establishments, which are associated with national brands, affect those of proximate, same- industry community establishments, which are independently owned or managed. Since social information gleaned from these peer firms may not be influential if community establishments receive direct social information from its customers, we also assess how peer influence varies with community establishments’ relationships with customers. We conduct these analyses using cellphone location tracking data on daily visits to 230,403 U.S.-based community establishments that are co-located with chain establishments affiliated with 319 national brands. We disentangle the effects of social influence from other confounding factors by using an instrumental variables strategy that relies on local variation in community establishment’s exposure to closure decisions made by brands at the national level. Our results suggest that chain establishments exert material social influence on community establishments: a community establishment is 3.5% more likely to be open if the proportion of nearby open chain establishments increases by one standard deviation. Moreover, the magnitude of this effect varies considerably with the extent to which community establishments can rely on social information provided by customers.
Keywords
COVID-19; Peer Influence; Closure Decisions; Health Pandemics; Business Ventures; Decisions; Business and Community Relations
Citation
Nagaraj, Abhishek, Mathijs de Vaan, Saqib Mumtaz, and Sameer Srivastava. "Social Influence in the COVID-19 Pandemic: Community Establishments’ Closure Decisions Follow Those of Nearby Chain Establishments." Working Paper, December 2020.