The legitimacy of Sharing Economy
characterising its business side
Table of Contents
The research theme/topic 4
The relevance of the study 4
The research problem 4
Research question of my research project 4
The theoretical-conceptual framework 4
The methods used to gather data 7
Study 1 8
Research results 18
Progress to date 20
Research plan for next year 20
Bibliography & References 21
The sharing economy (SE) is growing at an impressive rate across the globe (Cohen & Kietzmann, 2014). It has become increasingly popular mainly for consumer research, however, scientific literature in general still lack a common understanding of SE and its underlying mechanisms (Knote & Blohm, 2016). Moreover, there is a scarcity of research of how SE business models work, which opens up an opportunity for other scholars to shed light on the topic and stimulate the pursue of interesting theoretical and empirical lines of research (Cohen & Kietzmann, 2014). What is, after all, this “Sharing Economy” that everyone seems to talk about and apparently is increasingly becoming part of our lives? This research project elaborates on this gap. It is composed of two distinct studies: (1) How really legitimate it is to refer to SE as a real new category? and (2) What types of business models and its components are used by SE companies? Drawing on multiple secondary data sources (literature review; opinion-making articles; interviews to experts; testimonials from Directors of companies labelled as “SE” ones and specific reports around SE), the first study elaborates on existing frameworks of category emergence, non-emergence and legitimation to investigate how legitimate the SE is as a market category. The second study – to be conducted along the next year –, centred at the organizational level, identifies some representative companies (located both in Portugal and abroad) as case studies in order to characterize their business models. This specific report presents the outcome of Study 1. The end result is the development of a more complete framework and an identification of 5 key determinants – Sameness (or Close Substitution); Distinctiveness; Credibility; Cognitive Legitimation; and Socio-political Legitimation – on the legitimacy of SE as a new market category, which enables a theoretical proposal model on the validation of SE as a true new market category. Results suggest that SE is showing an already relevant pattern path in becoming and consolidating its place as a true (new) market category. Considering Navis et al.’s (2012) foundation that if a core identity frame fails to emerge for the category as a whole, even though there may be significant advances in other areas, a new market category may still fail to emerge, it cannot be concluded that the SE already is a consolidated new market category, because it still lacks in an identity frame: socio-political legitimation. This study could serve as a catalyst for a more unified study of the nascent dimension of SE.
The research theme/topic
The topic and inherent purpose of this research project is to investigate what really defines the Sharing Economy (SE).
The relevance of the study
Since there is a dearth of research of how SE business models work (Cohen & Kietzmann, 2014), this research project represents a contribution in finding answers to such question. It could serve as a catalyst for a more unified study of the understanding of the nascent dimension of SE.
The research problem
In the past few years, SE has become increasingly popular mainly for consumer research (Knote & Blohm, 2016). Today, research mainly focusses on describing the phenomenon itself and its disrupting influences on current economic mechanisms. However, scientific literature in general still lack a common understanding of SE and its underlying mechanisms (Knote & Blohm, 2016). What is, after all, this “Sharing Economy” that everyone seems to talk about and apparently is increasingly becoming part of our lives? This research project elaborates on this gap.
Research question of my research project
The research question is:
What is the SE?
The theoretical-conceptual framework
It is consensual that the phenomenon of Sharing is as old as humankind. Although it’s an old phenomenon in that people have often shared assets with one another, the Sharing Economy (SE) is a relatively new phenomenon by way of technology standards (Zifkin, 2015), born of the Internet age (Belk, 2014), and in which you are not helping a friend for free but rather providing SE services to a stranger for money (Sundararajan, 2016). Sharing and collaborative consumption are growing in popularity today and the current growth of these practices is generating a debate around the implications for businesses still using traditional models of sales and ownership (Belk, 2014). The term SE was first used by Professor Lawrence Lessig at Harvard Law School in 2008. The commercial sharing services or “prototypical actors and practices” (Navis et al., 2012, p. 26) of SE allow people share resources in creative, new ways (Cohen & Kietzmann, 2014). As indicated by Malhotra and Van Alstyne (2014), thanks to SE people can have access to rooms – Airbnb, Roomorama –, cars and bicycles – Relay Rides, Wheelz –, and taxi services – Uber, Lyft. These creative business models have put in the spotlight the SE and its massive growth, by sources ranging from Fortune Magazine to President Barack Obama (Eckhardt & Bardhi, 2015). Further, SE was nominated as one of ’10 ideas that will change the world’ (Teubner, 2014) and its size was estimated at $26 billion value in 2013 (Geron, 2013; Cannon & Summers, 2014). Varsavsky (cited in Silver, 2013) proposes the following definition of SE: “it’s a way of sweating underutilized assets, by building communities around them and turning consumers into providers, and it has the potential to reboot businesses across most economic categories”. In a report issued in June 2016, the Economics and Statistics Administration (ESA) of the U.S. Commerce Department attempted to define and map out the contours of this emerging business sector, labelling its participants as digital matching firms. The report defines this sector through four main characteristics (Penn & Wihbey, 2016): (a) they use information technology (IT systems), typically available via web-based platforms, such as mobile “apps” on Internet- enabled devices, to facilitate peer-to-peer transactions; (b) they rely on user-based rating systems for quality control, ensuring a level of trust between consumers and service providers who have not previously met; (c) they offer the workers who provide services via digital matching platforms flexibility in deciding their typical working hours; (d) to the extent that tools and assets are necessary to provide a service, digital matching firms rely on the workers using their own. Further, a PwC report (2015) on assessing the SE used the label to broadly define the emergent ecosystem that is upending mature business models across the globe. Having spoken with industry specialists, the report has concluded that no single label can neatly encapsulate this movement, as for some the word “sharing” was a misnomer, a savvy-but-disingenuous spin on an industry they felt was more about monetary opportunism than altruism, while for others, more appropriate titles included the Trust Economy, Collaborative Consumption, the On-Demand or Peer-to-Peer Economy.
What such new forms of business models have in common is that they operate in “sharing economies” of collaborative consumption, where people offer and share underutilized resources in creative, new ways (Botsman & Rogers, 2010). Airbnb, for example (Cohen & Kietzmann, 2014, p. 279), lets people rent out part or all of their homes for short stays, and Uber allows for real-time, location-based ridesharing. An increasing number of individuals who may not have considered ridesharing or renting a room in private residence as their vacation domicile a few years ago now prefer such sharing models to mainstream alternatives. Although, some of these sharing models might have resulted from a need for frugal spending after the global economic recession of 2008, their success was also driven by a growing environmental consciousness combined with the ubiquity of Internet and associated information and communication technologies which make sharing possible at scale (Cohen & Kietzmann, 2014, p. 279). Together, these developments have started to challenge traditional thinking about how resources can and should be offered and consumed, supporting arguments that incremental improvements in our existing production and consumption systems are insufficient to transform our global economy toward sustainability (Lovins & Cohen, 2011; Stead & Stead, 2013).
This all discussion is, in turn, making people to rethink and alter the so-called old wisdom that we are what we own into considering forms of possession and uses that do not involve ownership (Belk, 2014). We are entering an age of “post-ownership economy”, where the perception that “you are what you own” is transforming itself into rather “you are what you can access” or even “you are what you share” (Belk, 2014). Getting deeper into the discussion, Belk (1988) argues and theorizes that you are what you own. Nevertheless, the emergence of the Internet had the effect of providing us many ways to express our identity without ownership (Belk, 2013, in press). We have recently been witnessing to a group of related business and consumption practices describable as sharing (Belk, 2010), collaborative consumption (Botsman & Rogers, 2010), the mesh (Gansky, 2010), commercial sharing systems (Lamberton & Rose, 2012), co-production (Humphreys & Grayson, 2008), co-creation (Lanier & Schau, 2007; Prahalad & Ramaswamy, 2004), prosumption (Ritzer & Jurgenson, 2010; Toffler, 1980), product-service systems (Mont, 2002), access-based consumption (Bardhi & Eckhardt, 2012), consumer participation (Fitzsimmons, 1985), and online volunteering (Postigo, 2003).
Researchers and practitioners have been discussing and labelling the above mentioned terms as a result of the rise of numerous for-profit and non-profit businesses that are flourishing thanks to the rise of the so-called sharing economy (e.g., Lessig, 2008; Sacks, 2011). To name a few businesses that fall within these labels are: Airbnb, Zipcar, Wikipedia, YouTube, Flickr, Facebook, Freecycle, and Twitter (Belk, 2014). The Internet becomes a key factor, instigator in the flourishing of these sharing and collaborative consumption practices. As Belk (2014, p. 1595) argues, there are two commonalities in such practices: “1) their use of temporary access non-ownership models of utilizing consumer goods and services and 2) their reliance on the Internet”. Moreover, and even more determinant in enabling those practices to happen, there is a crucial element: the Web 2.0, which refers collectively to websites that allow users to contribute content and connect with each other (Carroll & Roman, 2011). And why is Web 2.0 so decisive? As Belk (2014) explains, in contrast to Web 1.0, which primarily involved one-directional provision of information to consumers, Web 2.0 brought a brake-through: allowed consumers to interact or respond to the web site or to one another.
Despite the pertinence of all accounts presented over the above paragraphs, there seems to still exist some gaps to be fulfilled. The fact that the SE is a fairly new phenomenon born of the Internet age (Belk, 2014), it leads the author of this research to question:
1 – How really legitimate it is to refer to SE as a real new category?
2 – What types of business models and its components are used by SE companies?
The methods used to gather data
In order to find the answers to the questions “How really legitimate it is to refer to SE as a real new category?” and “What types of business models and its components are used by SE companies?”, it becomes clear that this research should undertake two distinct studies. The first would use a concurrent triangulation research design (Creswell, 2003), triangulation of evidence (Yin, 2009). This approach would employ mixed methods: using secondary data sources, it would make a Literature Review on (i) how new market categories emerge and legitimacy is construed and (ii) measuring the legitimacy of SE as a new market category; this would be complemented by other sources of evidence collected from documental data – opinion-making articles, interviews to experts, testimonials from Directors of companies labelled as “SE” ones and specific reports around SE – as a way of identifying on-going processes of creation of SE companies.
The outcome of study 1 would lead to the conduction of a second study, centred at the organizational level, which would identify some representative companies (both located in Portugal and abroad) as case studies in order to characterize their business models. This would probably require the implementation of two phases: a general overview, based on information available in public sources that allow to look at the diversity and similarities (e.g. Uber and Cabify are presumably identical business models); and a much deeper analysis of a limited number of cases. The schematization of these follows below in figure 1.
Figure 1 – Studies for the purposes of this research project
The following pages, then, will present the discussion and findings of the first study.
Research Question: How really legitimate it is to refer to SE as a real new category?
Methodological Strategy: (1) Literature Review on category emergence, non-emergence and legitimation; (2) Collection of documental data (opinion-making articles, interviews to experts, testimonials from Directors of companies labelled as “SE” ones and specific reports around SE).
This study investigates how may be determined the legitimacy of SE as a real new market category. Firstly, it maps the key literature on legitimacy, identity and entrepreneurship in order to find the roots of the definitions, and upon that, it identifies literature on SE participation (what leads people – denominated interested audience – to participate in the SE) and members of the SE collective identity. These combined with the analysis of other secondary data sources – opinion-making articles; interviews to experts; testimonials from Directors of companies labelled as “SE” ones and specific reports around SE – lead to the development of a more complete framework and an identification of 5 key determinants on the legitimacy of SE as a new market category, which enables the proposal of a theoretical model on the validation of SE as a true new market category, taking into account both the organizational actors (“members” of the SE category) and the interested audiences (the general public; target consumers of SE products and services; and governmental officials and regulators).
How new market categories emerge and legitimacy is construed
In recent years, scholars have addressed questions of how new market categories emerge (Kennedy, 2008; Khaire & Wadhwani, 2010; Navis & Glynn, 2010; Santos & Eisenhardt, 2009). Aldrich & Fiol (1994) broach the discussion arguing that market categories bring with them great challenge and uncertainty. Even though entrepreneurs venture in legitimating them (Haveman et al., 2007), there may be certain cases where the establishment of new market categories may flop if they do not gain legitimacy (Navis & Glynn, 2010), cultural recognition (Wry et al., 2011) or understanding from consumers or investors they seek to influence (Dowd, 2003).
Having this framework in mind, what is Legitimacy? According to Suchman (1995, p. 574), it is originated from the perception that a venture is “desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions”. Moreover, it is often achieved through isomorphism, in other words, conformity to institutionalized preferences (Deephouse, 1996), which means that entrepreneurial ventures must face established and sometimes necessary constraints (Rindova et al., 2009). This conformity is, however, very opposite to the true nature of entrepreneurship, “which tends to be more directed to novelty, distinctiveness, and nonconformity” (Navis & Glynn, 2011, p. 479). Entrepreneurship legitimacy must then coexist with its own contradiction (distinctiveness) and implies a “trade-off between the emancipating aspects of entrepreneuring and the accommodation of constraints” needed to acquire resources (Rindova et al., 2009, p. 483). A legitimately distinctive entrepreneurial identity “is paradoxical as it embeds both conformity and deviance, containing identity elements that are contradictory or oppositional” (Navis & Glynn, 2011, p. 480).
The appearance of new markets, in other words, “business environments in an early stage of formation” (Santos & Eisenhardt, 2009, p. 644), brings along new opportunity spaces for entrepreneurial ventures and, despite of their attraction, they also are filled with a heavy weight of uncertainty as technologies, products, or processes are “untested and incompletely understood” (Tushman & Anderson, cited in Navis and Glynn, 2010, p. 439), product definitions are unclear or unknown (Hargadon & Douglas, 2001), and the nascent market category is characteristically ambiguous or ill-structured (Santos & Eisenhardt, 2005). Further, this uncertainty becomes more condensed when the entrepreneurial firms entering in the new market space are also new (Navis & Glynn, 2010). Meaning: new ventures are often incompletely formed, deficient in resources, and lacking clear or coherent identities, and consequently, the achievement of legitimacy can be a particularly critical challenge for new ventures operating in new market categories (Navis & Glynn, 2010).
The legitimation of a new market category results from the interaction of actors internal to the category, i.e., the strategic and symbolic actions of entrepreneurial organizations, and actors external to the category, i.e., the interested audiences who judge its feasibility, credibility and appropriateness (Navis & Glynn, 2010). Moreover, a new market category exists when two or more products or services are perceived to be of the same type or close substitutes for each other in satisfying market demand; the organizations producing or supplying these related products or services are grouped together as members of the same market category (Navis & Glynn, 2010). However, although all members share the collective identity of the category, not all members are equivalent in the category. Such collective and organizational identities lend meaning to a market category but they also pose an identity challenge: member organizations need to navigate between their shared sameness with other category members and their individual distinctiveness from other members (Navis & Glynn, 2010). Resolving the dilemma of sameness and difference in identity becomes critical, because identities are consequential for legitimacy (Glynn & Abzug, 2002; Navis & Glynn, 2011).
The construction of legitimacy may be also viewed from a cognitive and socio-political perspective. Cognitive legitimation relates to the spread of knowledge about a new venture, while Socio-political legitimation relates to the process by which key stakeholders, the general public, key opinion leaders, or governmental officials accept a venture as appropriate and right, given existing norms and laws (Aldrich & Fiol, 1994). The first may be assessed by measuring the level of public knowledge about a new activity – the highest form of cognitive legitimation is achieved when a new product, process, or service is taken for granted –, whereas the second may be measured by assessing the public acceptance of an industry, government subsidies to the industry, or the public prestige of its leaders (Aldrich & Fiol, 1994).
Measuring the legitimacy of SE as a new market category
One compass that may help determine if whether or not SE is a new market category may be found in the already mentioned study of Navis and Glynn (2010), where they define a new market category by (i) the perception of two or more products or services being of the same type or close substitutes for each other in satisfying market demand and (ii) the fact that the organizations producing or supplying these related products or services are grouped together as members of the same market category. Having this in mind, are there any two or more products or services being of the same type or close substitutes for each other within the a supposed “SE category”? The answer to this is yes. Schor’s (2014) research validates this answer. In Schor’s account, there are a number of services that are perceived to be of the same type in satisfying market demand that may be grouped together as members of the same market category. Schor (2014) calls this as “four main types of SE activities”. They are: Recirculation of goods – Proliferation of unwanted items. Example: eBay and Craigslist since 1995; Increased utilization of durable assets – Products or properties that are not used to capacity (e.g., spare rooms and lawn mowers). Examples: Zipcar, which places vehicles in convenient urban locations and offered hourly rentals; Relay Rides (car rental website), Uber (ride service); Boston’s Hubway or Chicago’s Divvy Bikes (bicycle sharing); Airbnb (lodging sector); Exchange of services – Services are traded on the basis of time spent, according to the principle that every member’s time is valued equally. Example: Banco do Tempo; and Sharing of productive assets – This category consists of efforts focused on sharing assets or space in order to enable production, rather than consumption. Examples: hackerspaces, which grew out of informal computer hacking sessions; makerspaces, which provide shared tools; and co-working spaces or communal offices. Example: LX Factory.
However, as Navis and Glynn (2010) emphasize, even though all members share the collective identity of the category, not all members are equivalent in that same category. There is also an identity challenge within the same category, as member organizations need to navigate between their shared sameness with other category members and their individual distinctiveness from other members. Bearing this framework in mind, are all members (those described by Schor above) equivalent within the SE category? The answer to this is no, thus validating SE as a real new market category, according to Navis and Glynn foundation. Schor (2014) describes the distinctiveness of the members of the SE category according to (i) market orientation (for-profit vs. non-profit) and (ii) market structure (peer-to-peer vs. business-to-peer). In Schor’s account, these dimensions shape the activities’ business models, logics of exchange and potential for disrupting conventional businesses. Below follows figure 2, which pinpoints SE activities according to the shared sameness with other category members and the individual distinctiveness from other members.
Figure 2 – Archetypes of sharing economy activities
Type of Provider
Peer to Peer Business to Peer
Platform Orientation Non-Profit Food Swaps
Time Banks Makerspaces
For-Profit Relay Rides
Another compass that may help measure the legitimacy of naming SE as a new market category, may be found also in Navis and Glynn’s (2010) foundation that legitimation of a new market category results not only from the interaction of actors internal to the category (i.e., the strategic and symbolic actions of entrepreneurial organizations) but perhaps more determinately from actors external to the category (i.e., the interested audiences who judge its feasibility, credibility and appropriateness). In this respect, how do people (target consumers) perceive the credibility and appropriateness of the entitled “SE products and services”? What is their perception of the credibility of SE products and services? Furthermore, does their behaviour towards such products and services validates any legitimacy whatsoever to name SE as a true market category? A recent report from PwC (2015) on assessing the SE in the United States of America (USA) market concludes that whether borrowing goods, renting homes, or serving up micro-skills in exchange for access or money, consumers are showing a robust appetite for the sharing-based economy, thus, inherently already giving credibility towards it. Such credibility is reflected in the numbers drawn by the report: (a) 44% of USA consumers are familiar with the SE; (b) 19% of the total USA adult population has engaged in a SE transaction; and (c) of those consumers who have tried the SE, 57% agree “I am intrigued by companies in the sharing economy but have some concerns about them” and 72% agree “I could see myself being a consumer in the sharing economy in the next two years”.
Furthermore, and from Kim et al.’s (2015) study, people (consumers in the marketplace) are demonstrating an already well-articulated behaviour (in judging their adherence to products and services associated to what as been labelled as SE ones), which leads to conclude, from an “actor external to the category” perspective, that there are consumers that are giving credibility to such products and services. Kim et al. were able to map the behaviour of consumers towards such products and services and come with a theoretical model which frames why people give credibility and end up participating in the SE. That is the same to say that they were able to identify the factors that determine the assigning of credibility to SE products and services and, thus, legitimating them as being part of a same market category. Below follows figure 3 illustrating the theoretical model.
Figure 3 – Theoretical model of participation in the sharing economy
(Kim et al., 2015)
Interpreting figure 3 above, there are 3 key factors that mediate the participation in the sharing economy: Trust, Perceived Value and Relative Advantage. By Trust it’s meant the belief that the commercial sharing service platform is honest, reliable and competent. Perceived Risk, on the other hand, refers to the users’ subjective belief of suffering a loss in pursuit of a desired transaction outcome. At the same time, perceived risk of the service is expected to mediate trust and participation intention, since more trust will lessen the perceived risk, and this will eventually result in greater participation intention. Last but not least, Relative Advantage is defined as the degree to which a user perceives that participating in a sharing economy (i.e. Airbnb) will be more beneficial than its precursor (i.e. commercial accommodation, Hotels.com) (Kim et al., 2015).
Regarding the antecedents that lead to both Trust and Relative Advantage, Kim et al. (2015) identify six drivers: Reputation, Social Presence, Benevolence (Trust) and Social Benefit, Economic Benefit, Epistemic Benefit (Relative Advantage). The explanation of each of these follows below:
It refers to that of the property’s owner’s. Prior to the transaction, consumers seek how is the reputation of the property’s owner. Perceived reputation of owners will positively relate to trust.
It is defined as an extent to which a user experiences other users as being psychologically present. Prior studies, namely Teubner et al.’s (2014), have identified that user’s perception of social presence fosters trust building in online platforms. Perceived social presence will positively relate to trust.
It is one of the exclusive attributes of the sharing economy. Meaning: If an individual tends to lend privately owned property to strangers with benevolent purpose and not commercial purpose, this will instinctively result in great trust building. The greater the benevolence, the greater the trust.
It is defined as satisfaction in user’s desire to get social tied and socially connected to others within the sharing economy. Users of commercial sharing systems expect social benefit to satisfy the desire to increase social connections (Schor & Fitzmaurice, 2014). For example, when an individual visits one place via Airbnb, then he or she may make new friends through the service. Contrarily, in case a person reserved a hotel room, he or she may have stayed alone for the rest of the stay. Social benefit will positively relate to relative advantage.
Users of sharing economy perceive sharing to be time saving, money saving, and even no ownership duties, providing autonomy (Seign & Bogenberger, 2012). Thus, this is obviously distinctive competitiveness of sharing economy compared to traditional economy. Economic benefit will positively relate to relative advantage.
It refers to the benefit acquired from a product’s capacity to satisfy curiosity, provide novelty, and/or meet a desire for knowledge of a user (Sweeney & Soutar, 2001). Also, a consumer’s propensity to adopt new products is consistent with epistemic benefit (Sheth et al., 1991). Airbnb, for example, competes on novelty and experience at scales by specializing in unusual places to stay, which satisfies epistemic desire. They provide “exclusive accommodation in a house (…) something less conventional like a tree house and igloo” (Airbnb.Inc, n.d.). Compared to that of traditional service, Airbnb’s hosts selectively offer customized services such as bikes, bottle of wine, cheat sheet of things to do. Guests even get chance of learning local culture by being able to stay and interact with a local. These practical examples significantly indicate relative advantage of sharing economy in comparison with traditional economy. Epistemic benefit will positively relate to relative advantage.
One may also use a fourth compass to measure the legitimacy of naming SE as a new market category: assess the level of both cognitive legitimation and socio-political legitimation of its current members (ventures). As previously explained, one can assess cognitive legitimation (Aldrich & Fiol, 1994) by measuring the level of public knowledge about a new activity (the highest form of cognitive legitimation is achieved when a new product, process, or service is taken for granted), while one can measure socio-political legitimation by assessing the public acceptance of an industry, government subsidies to the industry, or the public prestige of its leaders. In this sense, (i) what is the level of public knowledge about the entitled “SE companies” and (ii) are key stakeholders, the general public, key opinion leaders, or governmental officials accepting current entitled “SE ventures” as appropriate and right? From a cognitive legitimation perspective, Kim et al.’s study – where they frame why people are accepting, giving credibility and ending up participating in the SE – supports that the public in general is increasingly becoming familiarised with products and services associated to what as been labelled as SE ones. So, yes, it may be deduced that there already is public knowledge about SE activities. From a socio-political legitimation perspective, however, this study cannot find a precise answer in validating the legitimacy of naming SE (and its collective members) as a new market category. Today, as we all know from the media and word-of-mouth, there still seems to be some resistance from certain key stakeholders, the general public, or governmental officials in fully accepting the legitimacy of some members (ventures) of this SE market category. An example of this is the current contention between the taxi drivers’ community and Uber (in Portugal, Brazil and France, for example), which on the other hand, delays governmental officials in making an official stand and provide clear legal basement (and legitimacy) to such activities. In this respect, David Plouffe’s (Chief Adviser at Uber) words in an interview made in 2015 to the television news broadcaster CNBC on the benefits of the SE meet the idea that there still is a political legitimation struggle in growing the SE. In his view (Plouffe, CNBC 2015), “the challenge to Uber's growth is the need to convince governments to embrace the ride-hailing app”.
From a socio-political prism, then, signs show that SE activities still are at a critical juncture in affirming and consolidating its legitimation, even though testimonials from Directors of companies labelled as “SE” ones, such as Airbnb’s Canadian Country Manager, Aaron Zifkin, testify an already “positive economic effect” of their activities in the countries they operate, “driving net new tourism with people staying longer and spending more”, which brings expectation “to watch the evolution of the sharing economy and the role technology will play” (Zifkin, 2015). Experts, Cannon and Summers (2014) for example, say that a way of SE companies overcome current obstacles in a heavily regulated market must inevitably be to follow six maxims: 1 – Go on the offensive (rather than defensive) with regulators. “The sharing economy is a new concept and many city regulators are unfamiliar with the business model. As a result, they are often sceptical and assume sharing economy firms are trying to make a profit by skirting the regulations ‘traditional’ industries (i.e., taxis) face. It makes far more sense to be proactive and explain your business to regulators.”; 2 – Be responsive to regulators' legitimate concerns. “Where regulators' concerns are legitimate companies should respond, both because it is the right thing to do and because it will build credibility with the authorities. In making their case, companies should make arguments they would believe if they were regulators.”; 3 – Use state-of-the-art approaches to reaching out to government. “Best practices in approaching government include forming coalitions and industry associations to represent a shared point of view rather than each company approaching regulators independently and only in times of crisis. Further, sharing-economy firms should seek outside validators.”; 4 – Share your data. “Data need not be made public in order to share it with government, and can help your case by reducing regulator concerns.”; 5 – Make a well-researched case for the value provided by your firm. “Rather than relying on maxims about the usefulness of the sharing economy, it helps to have concrete data, especially in the face of sceptical regulators.”; and 6 – Find the best regulations out there and share them with the government. “City governments are often under-resourced and many existing rules are simply outdated and are not relevant given the business model of sharing economy firms. There's no reason firms themselves cannot find the best rules out there and propose them to the mayor's office.”
Literature review and other secondary data sources suggest that, as a whole, there is a certain degree of validation and legitimation in referring to SE as a real new market category. In a first instance, literature review revealed 5 decisive determinants (frames) of legitimacy, identity and entrepreneurship: (1) Sameness (or Close Substitution) – legitimation of a new market category results from the interaction of actors internal to the category, i.e., the strategic and symbolic actions of entrepreneurial organizations, and actors external to the category, i.e., the interested audiences who judge its feasibility, credibility and appropriateness; (2) Distinctiveness – a new market category exists when two or more products or services are perceived to be of the same type or close substitutes for each other in satisfying market demand; the organizations producing or supplying these related products or services are grouped together as members of the same market category; (3) Credibility – although all members share the collective identity of the category, not all members are equivalent in the category: member organizations need to navigate between their shared sameness with other category members and their individual distinctiveness from other members (resolving all these three dilemmas becomes critical, because identities are consequential for legitimacy); (4) Cognitive Legitimation – refers to the spread of knowledge about a new venture; and (5) Socio-political Legitimation – refers to the process by which key stakeholders, the general public, key opinion leaders, or governmental officials accept a venture as appropriate and right, given existing norms and laws.
In a second instance, further literature review showed evidence that there are 4 main determinants (frames) that give legitimacy in naming SE as a true new market category, while 1 does not validate it – socio-political legitimation. The 4 validating determinants are: (1) Sameness (or Close Substitution) – there are a number of services that are perceived to be of the same type in satisfying market demand that may be grouped together as members of that same market category – thus, confirming Navis and Glynn’s foundation that what defines a new market category is (a) the perception of two or more products or services being of the same type or close substitutes for each other in satisfying market demand and (b) the fact that the organizations producing or supplying these related products or services are grouped together as members of the same market category; (2) Distinctiveness – there is a distinctiveness of the members of the SE category – thus, confirming Navis and Glynn’s foundation that not all members are equivalent in that same category; (3) Credibility – there are people, consumers, interested audiences (actors external to the category) that are giving credibility to products and services labelled as SE ones – thus, confirming Navis and Glynn’s foundation that legitimation of a new market category results not only from the interaction of actors internal to the category (i.e., the strategic and symbolic actions of entrepreneurial organizations) but to a certain extent even more determinately from actors external to the category (i.e., the interested audiences who judge its feasibility, credibility and appropriateness); and (4) Cognitive legitimation – based on Kim et al.’s study, the public in general is increasingly becoming familiarised with products and services associated to what as been labelled as SE ones – thus, confirming Aldrich and Fiol’s foundation that legitimation of a new market venture/category results from the level of public knowledge about a new activity.
Other secondary data sources (namely, PwC’s report on assessing the Sharing Economy, as well as, testimonials from experts and Uber’s Chief Adviser), on the other hand, showed empirical evidence that (i) the determinant of Credibility is present – consumers are giving credibility to SE products and services – and (ii) the determinant of socio-political legitimation is currently under construction – SE companies are presently facing milestone challenges in gaining legitimation from governmental officials and regulators.
Having in mind the research question of this Study 1 – How really legitimate it is to refer to SE as a real new category? –, and from a theoretical perspective (taking into consideration the literature review) it must be concluded that the SE it’s on its way in becoming a true (new) market category (it shows a pattern path in consolidating its place in the market place). Even though, yes, 4 out of the 5 identified factors (identity frames) are present, it cannot be concluded that it already is a consolidated new market category, because it still lacks in an identity frame: socio-political legitimation. This meets Navis et al.’s (2012) foundation that if a core identity frame fails to emerge for the category as a whole, even though there may be significant advances in other areas, a new market category may still fail to emerge. From an empirical perspective, the analysis of other secondary data sources leads to the same conclusion obtained from the literature review: the SE still isn’t a consolidated new market category. Even though PwC’s report suggests that actors (consumers) external to the SE category are giving credibility to SE products and services, which confers legitimation to the SE from that identity frame, testimonials from experts and Uber’s Chief Adviser confirms that there still are many challenges for SE companies to gain the identity frame of socio-political legitimation from certain key stakeholders, such as governmental officials and regulators. Overall, the results lead to the construct of a framework describing the factors that determine the legitimation of SE as a true new market category. This follows below in figure 4.
Figure 4 – Theoretical proposal model of the legitimacy of SE as a new market category
Progress to date
Figure 5 – Year 2 (Study 1)
Research plan for next year
Next year, there will be the conduction of Study 2 (figure 6 below).
Figure 6 – Study 2
The research milestones follow in figure 7 below.
Figure 7 – Research Milestones for next year
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