Unravelling Dynamics: Social Media, Absorptive Capacity, and Organizational Performance

Nowadays, using social media has expanded in societies and organizations. So the question arises: What are the effects of social media on organizations? It seems the varied effects of social media on organizations altogether form a complex, dynamic system. This study examines this issue with system dynamics to model the dynamic complexity. The concept absorptive capacity is used as a mediator to apply the social media effects on the system. Absorptive capacity means the organization’s ability to recognize valuable external information, assimilate, and utilize it in the organization, explaining the difference in the performance of organizations. After modeling, using the data obtained from a company active in the Iranian food industry, the relationships between the model variables are defined. To generalize the model, its variables are normalized so that the results can be applicable for different organizations. To improve the current situation, four policies are proposed and exerted to the model. The results demonstrate that proactively managing social media, compared to increasing the investment share of social media, has a more considerable effect on the organization’s financial performance and market share.