Introduction

The social media is associated with the Internet of things that impacts the way organizations generate innovation and value in business activities (Santoro et al., 2017). The role of social media in the entrepreneurial process has been acknowledged by promoting a virtual collaborative approach for a start-up business and strategic behavior in market access (Guercini et al., 2014). Positive network externality generates competitive interaction through greater social economic value (Lado et al., 2006). Another study also supports the view that social networks have a significant impact on many aspects of firm performance (Arora et al., 2016). The needs that drive social networks are similar in many ways to the needs to get satisfied by offline relationships (Kozienkova et al., 2017). However, nearly half of the marketing managers believe that they are not prepared to manage the challenges of social media although they allocate resources for the social media (IBM, 2016). Harnessing the power of social networks to achieve organizational performance seems to be complicated because of some reasons. The first reason arises from over-exploitation of such relationship (Duffy et al., 2012). Second reason concerns with the overwhelmed network structures (Terpend and Ashenbaum, 2012) and the overloaded information (Schilke, 2014). Another reason argues that a different group of people has a different orientation from the use of social networking sites (Tian, 2016). In developing economies, social media has evolved frequently (Del Giudice et al., 2013), especially when small businesses represent a major component of the economic systems (Tilmes, 2015). Despite the increased attention to the efforts of SMEs to actively exploit social networking activities, the mainstream literature still partly neglects the topics on social networks and interaction processes with regard to small business (Bocconcelli et al., 2016). It is important to generate a greater understanding of how social capital adversely affects the performance in which the organizations have the intention to exploit social media (Oldroyd and Morris, 2012). There is a research gap in explaining the complex relationship between social network and firm performance, which becomes essential for developing a strategy theory (Afuah, 2013). This calls for a research to understand how the performance outcomes depend on mature relationships with sellers (Kozienkova et al., 2017). To address the research gap, this article begins with a process approach to theory development to explore the role of social network structure in improving selling capability and pricing capability toward firm performance. The empirical test involved a survey on the observed variables that represent attitudes and beliefs held by small and medium enterprises (SME) in the Indonesian context. The result is expected to contribute to the development theory of social capital, which aims at understanding the role of social media in social interaction in the business context.