The moderate-reputation trap: Evidence from a Chinese cross-border business-to-business e-commerce portal

How does review-based online reputation (for brevity, online reputation) influence online firm survival? Drawing insights from the resource-based view and signaling theory, we examine a nonlinear (U-shaped) relationship between online reputation and firm survival on a cross-border business-to-business (B2B) platform and the resulting moderate-reputation trap. We further examine how online firms employ product strategies to moderate the effect of online reputation on firm survival and thus mitigate the moderate-reputation trap. Using data from 17,920 monthly observations (3145 sellers) from July 2016 to December 2017 on DHgate.com in China, we find strong evidence supporting our hypothesized relationships. More specifically, we demonstrate the existence of the moderate-reputation trap and that this trap can be mitigated by a high product price or low product diversity. Our research provides important insights for managers of online firms, B2B platform providers, and governments.