Papers in Brief (XV): Dreyer, Lüdeke-Freund, Hamann & Faccer (2017): Upsides and downsides of the sharing economy

[Note: This is the 15th post in our “Papers in Brief” series. This series offers a special service as it explains the core ideas of chosen research papers in a nutshell.]

Papers in Brief (XV) by Betine Dreyer and Florian Lüdeke-Freund

Dreyer, B.; Lüdeke-Freund, F.; Hamann, R. & Faccer, K. (2017): Upsides and downsides of the sharing economy: Collaborative consumption business models’ stakeholder value impacts and their relationship to context, Technological Forecasting and Social Change, online first 02 May 2017, https://doi.org/10.1016/j.techfore.2017.03.036.

Summary

‘Sharing economy’ businesses, and more specifically ‘collaborative consumption’ (CC) business models that rest on ICT platform-facilitated exchanges, are becoming ever more present. Yet the impacts and value trade-offs that these businesses hold for their stakeholders are not well understood. Hence, it is not clear whether they are in fact examples of ‘sustainable business models’ or not. This paper explores these impacts through a comparative multiple-case study approach and shows that …

  • context and embeddedness play an important role in assessing the sustainability of a business model and business model innovations.
  • unintended negative externalities can arise from CC businesses’ ability to make rapid changes to their digital business models.
  • … it is the interaction between local context and the CC company’s responses to this context, which determine how their business model will impact on stakeholders.

Background

The ‘sharing economy’ is a growing phenomenon around the world with different sorts of initiatives and businesses continuously emerging. A particularly prominent and controversial subset of the sharing economy consists of ‘collaborative consumption’ (CC) business models, which emphasize the commercial aspects of (pseudo-)sharing and involve “coordinating the acquisition and distribution of a resource for a fee or other compensation” (Belk, 2014, p. 1597), usually via an ICT platform. Some herald these new CC business models as vital innovations and emancipators of people and resources and as contributors to environmental sustainability. Others see them as a new form of capitalist exploitation and corporate co-option.

Therefore, better understanding the impact that these business models have on society and the environment, when compared to traditional business models, is of importance to inform future sustainable business model stewardship, and would be noteworthy for policy makers and practitioners. It is theorised that if the business hopes to capture value for the firm and its shareholders, it must first of all create value for its customers, employees, business partners, and other members of society (Freeman, Wicks & Parmar, 2004). Whether this is the case for CC business models is explored in this paper. As noted by Mair and Reischauer (2016), “We know little about how the sharing economy matters for social life (impact) and how the sharing economy manifests differently across institutional and geographical contexts (variety).”

Research method

This paper explores the value creation impacts that CC business models have on their various stakeholders in an emerging market context. In this study the term ‘stakeholder value impacts’ is used to refer to the overall value creation and/or value destruction effects resulting from the way the business operates, as experienced by various stakeholders. These value creation impacts can be either tangible or intangible. Four comparative case studies were conducted guided by the ‘business model canvas’ (Osterwalder & Pigneur, 2010) and the ‘value mapping tool’ (Bocken, Short, Rana & Evans, 2013) as research instruments. Two domestic cleaning industry businesses and two metered taxi transportation industry businesses were explored and their stakeholder impacts were compared. In each industry case, one traditional and one CC business model was studied. South Africa provided a suitable research setting for the study because a number of global and local CC businesses have established themselves there. And yet despite being identified as an emerging economy, the country has many characteristics of a developing country.

Results

This paper shows that context and embeddedness play an important role in assessing the stakeholder value impacts of CC business models. It shows how context has direct and indirect effects on the value created for stakeholders of CC business models. A comparative analysis of traditional and CC business models’ stakeholder value creation and destruction helps to unveil the systemic, embedded character of business model innovation and this is captured in a three-way model of the interactions between context, business model innovation, and stakeholder impacts (Figure below).

PiB_xv

The paper shows how local context has a direct effect on sharing economy business models’ social and environmental implications. For instance, high degrees of unemployment mean that the livelihood opportunities created by companies like Uber are particularly important. However, the lack of access to vehicles of the right quality standard to be used on Uber is also of importance, as this means more vehicles need to be financed and brought onto the roads, thus increasing rather than reducing resources used in mobility. Significantly, the local context influences stakeholder value impacts indirectly because of the way it motivates and conditions CC companies’ business model innovations, either in the original design (as in the case of the platform-based cleaning business SweepSouth) or in the adaptation of a model initially developed elsewhere (as in the case of Uber).

The paper shows how unintended negative externalities can arise from CC businesses’ ability to make rapid changes to their digital platform business models. The paper further discusses CC business models as manifestations of two-sided markets which allows us to better understand their positive and negative impacts on their key stakeholders. Our analysis shows that both new and established CC business models must be carefully adapted to local contexts to make best use of their potential to create stakeholder value and to avoid unintended negative impacts on vulnerable social groups.

It is thus the interaction between local context and the CC company’s responses to this context which determine how the business model will impact on stakeholders. This is especially salient with regard to CC business model innovation because far-reaching changes can be implemented relatively easily and swiftly, given the technological platform at the core of the business model.

Conclusion

Assessing the stakeholder value impacts of sharing economy business models (here, forms of collaborative consumption) requires distinguishing the many different stakeholders for whom value is created and destroyed, as well as accounting for the influence of the particular local, socio-economic contexts in which these models are implemented – the ‘upsides and downsides’ of sharing economy business models are leveraged by their contexts.

References:

Belk, R. 2014. You are what you can access: Sharing and collaborative consumption online. Journal of Business Research, 67(8), 1595–1600.

Bocken, N., Short, S., Rana, P., & Evans, S. 2013. A value mapping tool for sustainable business modelling. Corporate Governance, 13(5), 482–497.

Freeman, R. E., Wicks, A. C., & Parmar, B. 2004. Stakeholder theory and the corporate objective revisited. Organization Science, 15 (3), 364–369.

Mair, J., & Reischauer, G. 2016. Impact and variety of the sharing economy: Perspectives for field-level research. Paper presented at the 32nd European Group of Organizational Studies Colloquium (EGOS 2016), sub-theme “Organizing in the Shadow of Sharing” July 7-9, 2016, Naples, Italy.

Osterwalder, A., & Pigneur, Y. 2010. Business model generation. New Jersey: John Wiley & Sons, Inc.

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