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UNRAVELING THE INFLUENCE OF FACTORS ON MICRO SMALL AND
MEDIUM-SIZED ENTERPRISES’ ADOPTION OF SOCIAL MEDIA
MARKETING AND ITS BUSINESS IMPACT
Steven Young
1*
, J. Johny Natu Prihanto
2
, Prio Utomo
3
Faculty of Business, Universitas Multimedia Nusantara, Indonesia
1,2,3
steven.young@student.umn.ac.id
1
2
, prio.utomo@umn.ac.id
3
ABSTRACT
The continuously growing opportunities in the digital economy have prompted the Indonesian
government to encourage Micro, Small, and Medium-sized Enterprises (MSMEs) to undergo digital
transformation. While there are various approaches available, marketing products/services through
social media is believed to be one of the most effective methods. To maximize the benefits of social
media marketing adoption for MSMEs, it is indeed crucial to identify the influential factors related to its
adoption. Therefore, this study aims to quantitatively identify the factors influencing social media
adoption among MSMEs in Indonesia. In this study, attention is directed toward five factors:
performance expectancy, social influence, effort expectancy, facilitating conditions, and operating costs.
The study incorporated 136 actively participating MSMEs that employed social media marketing. We
opted to employ Partial Least Squares Structural Equation Modeling (PLS-SEM) due to its suitability
for our sample size and potential data characteristics. As we were unsure about the normality of our data
and the presence of measurement issues, PLS-SEM provided a robust and flexible approach. It allows
us to analyze complex models and handle potential non-normal data and measurement concerns,
ensuring reliable results even if such issues arise. Data is processed using the SmartPLS 3.0 software.
The research findings indicate that the usage of social media marketing is influenced by performance
expectancy and social influence. However, factors such as effort expectancy, facilitating conditions, and
costs do not have a significant impact on social media adoption among MSMEs. Furthermore, the results
of the study highlight the positive impact of utilizing social media for marketing on the performance of
MSMEs, particularly in terms of increasing sales, enhancing customer relationships, improving
productivity, and fostering creativity. These findings suggest that MSMEs can leverage social media
platforms to achieve tangible benefits and enhance various aspects of their business operations.
Keywords: UTAUT; Micro, Small and Medium-sized Enterprises; Social Media Marketing
INTRODUCTION
The role of Micro, Small, and Medium Enterprises is crucial for the development of the
newly industrialized country’s economy. MSMEs play a central role in Indonesia's economy,
making substantial contributions to both the Gross Domestic Product (GDP) and employment
generation (Remmang et al., 2023; Sarfiah et al., 2019). The state minister for Cooperatives Small
and Medium Enterprises reports that approximately 99.9% of business entities in Indonesia
belong to the MSME category, amounting to around 64.2 million entities as of 2018. MSMEs
employ 117 million workers, comprising 97.0% of the total workforce in Indonesia's business
sector. MSMEs make up approximately 61.1% of the GDP, with the remaining 38.9% attributed
to large enterprises, showcasing their significant contribution to the national economy (Sangsoko,
2020).
The global outbreak of COVID-19 has necessitated swift adaptation to new environmental
conditions and behavioral patterns, commonly referred to as the "new normal." Consequently, the
integration of digital technology has become a fundamental element of everyday life,
encompassing MSMEs that have undergone business transformations (Dzul Fikry et al., 2023).
Amidst the pandemic, digital platforms have risen as the optimal solution, aiding MSMEs in
effectively carrying out their operations (Nelly, 2021). The survey results by McKinsey in March
2022 indicated a clear shift in consumer shopping behavior, transitioning from offline channels
(brick-and-mortar retail stores) to online channels across almost all product categories (Arora et
al., 2022).
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The surge in internet user growth in Indonesia creates a valuable opening for digital
MSMEs to enhance their market presence. Internet users in Indonesia have consistently increased
over the past 5 years. By January 2022, it had reached 204.7 million users. This number accounts
for 73.7% of the total national population, which is approximately 277.7 million people, and
represents a 54.3% increase compared to internet users in 2018 (We Are Social, 2022).
Furthermore, Indonesia possesses significant potential for digital economic growth, positioning it
as a prospective leader within the ASEAN region. In 2020, Indonesia achieved the highest digital
economy transaction value in Southeast Asia, amounting to US$44 billion. Future forecasts
suggest that by 2025, Indonesia's digital economy will soar to an estimated US$124 billion (Bain
& Company et al., 2020).
The growing adoption of social media in newly industrialized countries has emerged as a
pivotal strategy for fostering the development of MSMEs. Social media has become one of the
most popular choices as it facilitates rapid and transparent communication between two parties
(such as businesses and customers), empowering businesses to proactively understand and
effectively address customer needs (Qalati et al., 2021). Social media platforms also offer
substantial potential for product sales. A survey conducted by We Are Social found that the search
for products to purchase ranks 7th among the reasons why individuals use social media,
accounting for 25.3% of respondents (We Are Social, 2023). SMEs can capitalize on this
opportunity, given that the survey highlights how 25% of social media users actively employ
these platforms to explore and make purchases.
However, data from the state minister for Cooperatives Small and Medium Enterprises in
December 2022 indicates a low number of businesses that have undergone digitalization in
Indonesia, with only 20.76 million out of a total of 64 million entities (Dewanto & Suyitno, 2023).
The government is making concerted efforts to enhance digitalization among MSMEs, aiming to
digitally onboard 30 million MSMEs by 2024 (Smesco & Kemenkopukm, 2021). As such, this study
seeks to analyze the determinants that shape MSMEs' digital market share growth, with the aim
of assisting stakeholders in devising policy strategies to expedite the achievement of the digital
MSME target.
RESEARCH METHOD
Hypothesis
There have been several previous studies to gain insight into the factors that shape
businesses' adoption of social media. Some of the theories that are often used, for example, TAM
and UTAUT. Researchers use UTAUT because the theory was coined by (Venkatesh et al., 2012)
as the addition and integration of several existing acceptance technology models. The variables in
UTAUT can also explain the acceptance of technology with R2 reaching 69%, higher than previous
theories (Venkatesh et al., 2012). The researcher also found several studies in other countries which
provide insights into the elements influencing the utilization of social media marketing by MSMEs
using the UTAUT theory.
In research conducted by (Puriwat & Tripopsakul, 2021) in Thailand, individuals believe
that a system can assist in their work to improve performance is the factor that most influences
business people in using social media marketing. There are also several other studies where it
appears that there is a notable and positive correlation between performance expectancy and the
adoption of technology. (Chatterjee & Kumar Kar, 2020; Syaifullah et al., 2021) observed that
business individuals tend to embrace social media for business marketing when they have a higher
level of confidence in the positive impact it can have on their marketing efforts. In the midst of a
pandemic, social media is also the optimal solution to help MSMEs in maintaining their business
performance (Syaifullah et al., 2021).
Users will not hesitate to adopt a technology that can help if the use of the technology is
easy (Kuo & Yen, 2009; Venkatesh et al., 2012). Compared to other online platforms, social media
is a platform with the fewest efforts and applications that are quite familiar among business people,
because people are used to using social media for alternate functions like communicating or
socializing with friends and family (Puriwat & Tripopsakul, 2021).
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SI is defined as the level of interest someone has in social media perceived based on the
beliefs and attitudes of others in using social media platforms (Sullivan & Koh, 2019). Previous
research by (Abdat, 2020; Jabeen et al., 2022; Puriwat & Tripopsakul, 2021), described the
significant role of social influence in the acceptance and utilization of social media applications.
The stronger the influence of the social environment on business stakeholders, the more it will
shape their behavior in utilizing social media for business operations (Abbas et al., 2019; Puriwat
& Tripopsakul, 2021).
Previous studies have shown that the availability of affordable training facilities on social
media marketing techniques for employees, supported by IT facilities such as internet network
connectivity, and the support from all parties to create a conducive environment are motivating
factors for the utilization of social media for marketing purposes (Chatterjee & Kumar Kar, 2020;
Hung & Lai, 2015; Schaar et al., 2014). MSMEs would readily embrace SMM when their
employees have good training facilities and affordable internet facilities. If the facilities do not
support it, then MSMEs will be resistant to the use of social media marketing (Syaifullah et al.,
2021).
Numerous studies emphasize a connection between cost and the adoption of technology
(Chatterjee & Kumar Kar, 2020; Chong & Chan, 2012; Syaifullah et al., 2021). Efforts to achieve
cost efficiency aim to maintain stability and increase business competitiveness, especially because
current business developments continue to grow rapidly, resulting in increasingly fierce
competition (Febryanti et al., 2019). Price savings orientation is not only assessed in terms of
savings, but can also be seen from other aspects, such as not incurring additional costs for
purchasing products or using services (Yeo et al., 2017). The role of cost is significant when it
comes to the adoption of technology (Chong & Chan, 2012). MSME participants would refrain
from utilizing social media marketing (SMM) if the associated costs are elevated. (Syaifullah et
al., 2021). Their motivation to employ social media stems from the minimal entry barriers, cost-
effectiveness, and the absence of a necessity for advanced IT skills (Derham et al., 2011). SMM
also allows businesses to gain cost savings in communicating and identifying consumer needs
(Chatterjee & Kumar Kar, 2020).
In Indonesia, approximately 167 million people are active users of social media, spending
an average of 3 hours and 18 minutes per day on these platforms (Hassan et al., 2022; We Are
Social, 2023). These statistics highlight the substantial market opportunity presented by social
media, as it has emerged as a convenient platform for sharing information online between
companies and consumers, as well as among consumers worldwide, without any time limitations.
The utilization of social media is particularly well-suited for MSMEs considering their limited
resources, such as financial constraints and technical expertise (Fraccastoro et al., 2021; Rana et
al., 2019). Marketing on social media can enhance trust and brand loyalty for a business.
Furthermore, social media marketing facilitates consumers in obtaining information about
products sold by companies with minimal effort (Agnihotri et al., 2016; Chung & Koo, 2015;
Puspaningrum, 2020; Zaglia, 2013). Previous research has also indicated a positive association
between social media marketing and trust, closeness, and customer loyalty (Khoa, 2020; Li et al.,
2020). In addition, other studies found that the use of social media by companies brings about
convenience in brand building and facilitates their business activities (Chatterjee & Kumar Kar,
2020; Jibril et al., 2019; Sullivan & Koh, 2019). The conceptual framework of this study is illustrated
in Figure 2.
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Figure 2.
SEM-PLS Result (Inner Model)
The hypotheses are as follows:
H1. PE has a positive and significant influence on SMEs' adoption of SMM
H2. EE has a positive and significant influence on SMEs' adoption of SMM
H3. SI has a positive and significant influence on SMEs' adoption of SMM
H4. FC has a positive and significant influence on SMEs' adoption of SMM
H5. The cost has a negative and significant influence on MSMEs’ adoption of SMM
H6. The utilization of Social Media Marketing (SMM) has a significant and positive impact on
the performance of MSMEs.
Research Design and Data Collection
The aim of this study was to explore the factors influencing the adoption of social media
marketing among micro, small, and medium enterprises (MSMEs), as well as its repercussions
on business outcomes. The objects of the research carried out are micro, small and medium
entrepreneurs who meet the criteria in (Undang-Undang (UU) Nomor 20 Tahun 2008 Tentang
Usaha Mikro, Kecil, Dan Menengah, 2008) and are active in using social media. The research
employed a quantitative approach, utilizing the partial least squares structural equation modeling
(PLS-SEM) technique to confirm the hypothesized relationships and authenticate the proposed
theoretical framework. The study's participants encompassed various micro, small, and medium
enterprises situated in Indonesia. The process of gathering data involved the distribution of an
online survey through popular social media platforms such as Facebook, Instagram, and
Whatsapp. According to (Hair et al., 2021), the inverse square root approach can be used in
determining the minimum number of samples. Assuming a general level of power of 80% and a
significance level of 5%, the minimum sample size (nmin) can be calculated using the formula:




nmin = numbers of minimum sample
pmin = path coefficient minimum
The minimum sample size can be calculated after the researcher collects data from
distributing questionnaires and performs an inner model analysis to acquire the lowest path
coefficient value among the variables that have a significant effect. In case there is an
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insufficiency of gathered data, the researcher will again increase the number of samples.
Researchers collected data for 3 weeks, and 136 samples were successfully collected. When the
data is processed, the smallest path coefficient value in this study is 0.369. By entering this value
into the formula above, the number 45.38 is obtained, so that the minimum number of samples in
this study has been fulfilled.
Questionnaire Development
Based on the indicators that have been developed, a pretesting process is carried out to
guarantee the non-redundancy, reliability, and suitability of the indicators used. In the final
questionnaire, there are 26 indicators used, which are presented in Table I. The questionnaire
consists of closed-ended questions, utilizing a 5-point Likert scale (ranging from 1 for Strongly
Disagree to 5 for Strongly Agree).
Table 1 Operational Variables
Construct
Items
Indicator
Performance
Expectancy
(PE)
PE1
Social media will be useful in running a business (Puriwat
& Tripopsakul, 2021)
PE2
Social media will increase your business profits (Puriwat &
Tripopsakul, 2021).
PE3
Social media can help you increase customer satisfaction
(Chatterjee & Kumar Kar, 2020).
PE 4
Social media will accelerate you in achieving business goals
(Puriwat & Tripopsakul, 2021).
Effort
Expectancy
(EE)
EE1
Social media will be easy for you to learn in running a
business (Puriwat & Tripopsakul, 2021).
EE2
Becoming skilled in utilizing social media for business
purposes can be achieved effortlessly (Puriwat &
Tripopsakul, 2021).
EE3
You can do sales transactions on social media quickly
(Puriwat & Tripopsakul, 2021).
EE4
You can easily advertise business products and services on
social media (Chatterjee & Kumar Kar, 2020).
Social Influence
(SI)
SI1
Individuals of significance recommend your engagement in
utilizing social media for business motives (Puriwat &
Tripopsakul, 2021).
SI2
Individuals who have an impact on your actions propose the
utilization of social media for business intentions (Puriwat
& Tripopsakul, 2021).
SI3
Individuals whose viewpoints you hold in high regard
propose your involvement in using social media for
business objectives (Puriwat & Tripopsakul, 2021).
SI4
People around you suggest that you use social media for
business purposes (Puriwat & Tripopsakul, 2021).
Facilitating
Condition (FC)
FC1
You possess the required knowledge to effectively employ
online social media for business endeavors (Puriwat &
Tripopsakul, 2021).
FC2
You possess connections who can provide assistance with
any social media challenges you might encounter (Puriwat
& Tripopsakul, 2021).
FC3
You have access to the necessary resources to effectively
utilize social media for business purposes (Puriwat &
Tripopsakul, 2021).
FC4
Social media seamlessly integrates with other platforms you
have employed (Puriwat & Tripopsakul, 2021).
Cost (COS)
COS1
The costs required to interact with customers will decrease
after using social media (Chatterjee & Kumar Kar, 2020).
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COS2
The expense related to discovering new customers will be
diminished by utilizing social media (Chatterjee & Kumar
Kar, 2020).
COS3
Social media will make the costs needed to increase brand
awareness cheaper (Chatterjee & Kumar Kar, 2020).
Social Media
Marketing
(SMM)
SM1
Marketing on social media is useful in advertising your
business products and services (Chatterjee & Kumar Kar,
2020).
SM2
You use social media as a marketing tool because your
competitors use it too (Chatterjee & Kumar Kar, 2020).
SM3
Employing social media marketing techniques contributes
to the enhancement of the business (Chatterjee & Kumar
Kar, 2020).
Impact on
Business (IOB)
IOB1
After engaging with social media, your customers
experience a heightened sense of connection to your
business (Chatterjee & Kumar Kar, 2020).
IOB2
Social media helps businesses in identifying customer needs
(Chatterjee & Kumar Kar, 2020).
IOB3
Your product sales have increased compared to before using
social media in business (Chatterjee & Kumar Kar, 2020).
IOB4
Marketing on social media helps in increasing the creativity
of the employees (Chatterjee & Kumar Kar, 2020).
RESULT AND DISCUSSION
Descriptive Statistics Result
The majority of respondents are MSME actors with the business category being in the type
of micro business and domiciled in Banten, DKI Jakarta, Bengkulu. All respondents have used
social media in marketing their business. A significant portion of participants are females
belonging to the age group of 25 to 42 years (millennial generation) and possess a bachelor's
degree. The demographic characteristics of the survey respondents are detailed in Table 2.
Table 2 Descriptive Statistics
Category
Description
No
Gender
Male
44.0
Female
92.0
Enterprise
Category
Small (Rp 300 M – Rp 2.5 B)
25.0
Medium (Rp 2.5B – Rp 50 B)
22.0
Micro (0 – Rp 300 M)
89.0
Domicile
Banten
50.0
Bengkulu
27.0
DKI Jakarta
33.0
Jawa Barat
13.0
Others
6.0
Sumatera Selatan
7.0
Age
25 - 42 years
95.0
43 - 57 years
23.0
< 25 years
14.0
> 57 years
4.0
Last
Education
Associate Degree
6.0
Bachelor
82.0
S2
15.0
Senior High School
33.0
Before testing the hypothesis, the researcher first measured the model (outer model) using
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SEM-PLS. Construct validity pertained to the degree of accuracy with which a collection of
observed variables authentically portrays the latent variables intended to be theoretically
measured. Criteria introduced by (Hair et al., 2017) were employed to assess convergent validity,
discriminant validity, and reliability. The results substantiated a combined count of 26 items
encompassing PE (four items), EE (four items), SI (four items), FC (four items), Cost (three
items), SMM (three items), and IOB (four items) meet the requirements of the validity and
reliability test. Every indicator displays item loadings exceeding 0.5, and the Average Variance
Extracted (AVE) value for each construct also surpasses the 0.5 threshold as proposed by (Hair
et al., 2017). Cronbach’s alpha coefficient for the instrument varies between 0.847 and 0.921,
while the composite reliability scores for the instrument fall within the range of 0.909 to 0.944.
The measurement model results are presented in both Table 3 and Table 4.
Table 3 Reliability and validity of constructs
Indicator
Convergent Validity
Internal Consistency Reliability
Loadings
AVE
Composite
Reliability
Cronbach's
Alpha
> 0,70
> 0,50
> 0.70
> 0.70
PE1
0,877
0,779
0,934
0,905
PE2
0,919
PE3
0,864
PE4
0,869
EE1
0,889
0,735
0,917
0,880
EE2
0,84
EE3
0,835
EE4
0,864
SI1
0,909
0,808
0,944
0,921
SI2
0,894
SI3
0,934
SI4
0,857
FC1
0,76
0,715
0,909
0,867
FC2
0,828
FC3
0,892
FC4
0,896
COS1
0,864
0,764
0,907
0,847
COS2
0,911
COS3
0,846
SMM1
0,805
0,793
0,919
0,868
SMM2
0,927
SMM3
0,933
IOB1
0,896
0,777
0,933
0,903
IOB2
0,916
IOB3
0,909
IOB4
0,799
The convergence validity indicators are standardized through Factor Loadings and the
Average Variance Extracted. All indicators achieved recommended values by (Hair et al., 2017)
represented convergent validity acceptance. To assess internal consistency reliability,
standardization is achieved through Composite Reliability (CR) and Cronbach's Alpha (Hair et
al., 2017). All constructs achieved recommended values by (Hair et al., 2017). Table 4 presents
the results of the discriminant validity test. Discriminant validity was successfully established as
evidenced by the fact that the value of the HTMT Confident Interval does not have a value of 1
(Hair et al., 2017).
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Table 4 Heterotrait-Monotrait Ratio (HTMT)
COS
EE
FC
IOB
PE
SI
SM
COS
EE
0,765
FC
0,679
0,913
IOB
0,750
0,705
0,732
PE
0,719
0,742
0,684
0,867
SI
0,740
0,738
0,724
0,700
0,724
SM
0,745
0,745
0,723
0,855
0,835
0,849
Structural Model and Hypotheses Testing
After the assessment of the measurement model, the subsequent phase involved the development
of the structural model (inner model). The outcomes of the proposed path model are depicted in
Figure 1, and the detailed results can be seen in Table 5.
Figure 1 SEM-PLS Result (Inner Model)
Table 5 Results of Hypothesis Testing
Effect
Path
Coefficient
p-value
R2
Remarks
Effect on SMM
0,709
by PE
0,376
0,000 (*** p < 0,001)
Supported
by EE
0,048
0,309 (ns p > 0,05)
Not Supported
by SI
0,369
0.000 (*** p < 0,001)
Supported
by FC
0,080
0,191 (ns p > 0,05)
Not Supported
by COS
-0,088
0,125 (ns p > 0,05)
Not Supported
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Effect on IOB
0,589
by SM
0,767
0.000 (*** p < 0,001)
Supported
Seven constructs and twenty-six statement-based questions (items) were discerned.
Drawing upon the literature, a conceptual model was constructed, leading to the formulation of
six hypotheses. The conceptual model's validity was verified using PLS-SEM analysis. Following
the validation process, it became evident that among the six initially formulated hypotheses, three
hypotheses (H2, H4, H5) were not substantiated. This implies that the presumed impact of Effort
Expectancy (EE), Facilitating Conditions (FCO), and Cost (COS) on Social Media Marketing
(SMM) adoption has not been supported. Calculation of determinant coefficients (R2) indicates
that Performance Expectancy (PE), Effort Expectancy (EE), Social Influence (SI), Facilitating
Conditions (FC), and Cost (COS) collectively account for 70.9% of the variability in Social Media
Marketing (SMM), as the corresponding coefficient of determination is 0.709 (R2). Among all
the independent variables (PE, EE, SI, FC, and COS), the impact of PE on SMM (H1) stands out
as the strongest, with a path coefficient of 0.376 and a high level of significance ***(P < 0.001).
On the other hand, the influence of EE on SMM (H2) is relatively modest, indicated by a path
coefficient of 0.048 and non-significant (ns) level of significance (p > 0.05). Furthermore, Social
Media Marketing (SMM) accounts for approximately 58.9% of the explanation of Impact on
Business (IOB) (H6), given the coefficient of determination (R2) of 0.589.
CONCLUSION
The characteristics of the respondents in this research survey are that the majority are
MSME actors with the business category being in the type of micro business and the majority are
domiciled in Banten, DKI Jakarta, Bengkulu, and have used social media to market their business.
The majority of respondents are also female, aged 25-42 years (millennial generation) with an
undergraduate degree. The use of social media as a marketing tool greatly influences the
development of MSME businesses. The results of the study show that the use of Social Media
Marketing in MSMEs will have an impact on business benefits, such as increasing product sales,
better relationships with consumers, ease in identifying customer needs, and increased employee
creativity. Expectations for increased performance have the strongest influence on MSME
behavior in adopting social media as a marketing tool. In addition, the opinions of people in the
social environment of MSME actors are quite influential on the behavior of MSMEs to use social
media as a marketing tool in running their businesses. As for the ease of use of marketing
techniques on social media, the condition of available facilities, and the cost savings factor, it has
not been proven to influence the behavior of MSMEs to adopt marketing on social media in
running their business. MSMEs in Indonesia still find it difficult to adopt social media marketing
in running their business. Some MSMEs cannot yet use social media marketing properly. Apart
from that, the available facilities, such as training and infrastructure, are still inadequate to
encourage MSMEs to adopt social media marketing. Improved facilities and effective training
will be able to help MSME players in adopting social media marketing in the future which will
have an impact on improving business performance.
In the research conducted, data dissemination was carried out using the researcher's social
media account, so that the number of respondents obtained was still not optimal. In addition, the
respondents obtained are also still in a scope that is too spread out. Further research can be done
by limiting certain regions/provinces to get an overview of an area. In addition, it is also possible
to modify the research model and add variables, such as adding variables from TAM theory, as
well as UTAUT2 or UTAUT 3, and the research model can be supplemented with moderating
variables such as age, level of education, gender and type of business category. In future studies,
it is recommended to further clarify and direct the criteria of respondents to the industry as well
as the requirements for activity on social media, for example, limiting the criteria of respondents
to a creative industry, or setting a minimum frequency of using social media, so that the selected
respondents are truly active in using the media social. In subsequent studies, the approach is still
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using a single cross-sectional design, where the number of samples is only taken once.
Subsequent research can use a longitudinal design to get an overview of differences in business
performance, before and after adopting social media marketing.
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