Papers in Brief (XXVII): Ciulli & Kolk (2019): Incumbents and business model innovation for the sharing economy: Implications for sustainability

[Note: This is the 27th 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 (27) by Francesca Ciulli and Ans Kolk

Ciulli, F., and Kolk, A. (2019), “Incumbents and business model innovation for the sharing economy: Implications for sustainability”, Journal of Cleaner Production, Vol. 214, pp. 995-1010. https://doi.org/10.1016/j.jclepro.2018.12.295 [Open Access]

Background and relevance

In addition to fostering the rise of new players in various sectors, the sharing economy has attracted the attention of established companies, the so-called ‘incumbents’. A growing number of incumbents is joining the sharing economy to both reap its emerging opportunities and tackle newcomers’ competition. The entry of incumbents comes at a time in which the sharing economy, still in its initial stages, is the ‘battlefield’ between actors defending its original sustainability promise, based on the efficient use of resources, social bonding, non-monetized relationships and power of the communities, and those supporting the need to compromise on the principles, to ensure the sharing economy’s expansion (Acquier et al., 2017; Frenken and Schor, 2017; Martin, 2016; Murillo et al., 2017). Given incumbents’ size and power, their entry is likely to significantly affect the shape of the sharing economy. Our study captures the nature of incumbents‘ engagement in the sharing economy, suggesting that they have started to enter the sharing economy by making different kinds of changes to their business model. We first develop a typology of business model innovation for sharing (Table 1), which stems from the literature on sustainable business models in particular, and subsequently present and examine illustrative cases of incumbents’ entry in the sharing economy.

Ciulli-Kolk Table 1

Table 1: A framework for analyzing incumbents’ approaches in the sharing economy

The study subsequently explores the implications for environmental, social and economic value creation of the different ways in which incumbents are changing their existing business models to join the sharing economy. For every type adopted by incumbents, we consider both the potential benefits and drawbacks of incumbents’ entry in the sharing economy.

Research method

As our study aimed to explore whether and how the types of business model innovation for sharing represented in our framework (see Table 1) and drawn from the sustainable business model literature are actually adopted by incumbents, we used a qualitative method. Through an extensive data collection from publicly available sources, we compiled a list of cases of incumbents’ engagement in the sharing economy. We then positioned the identified cases into our framework (see Table 1) and deduced their likely/expected sustainability impacts. We did so by considering the sustainability-related promises and distortions of the sharing economy highlighted by prior studies, in light of the defining features of incumbents (e.g. size, financial resources, complementary assets) identified by existing literature. For each case, we thus reflected on whether the core characteristics of an incumbent would likely help realize the sustainability-related promise that the sharing business model should attain or would rather amplify existing drawbacks or engender new ones.

Results

The data collection yielded more than 100 cases of incumbents’ engaging in the sharing economy, distributed as illustrated in Table 2, which also includes a few illustrative examples (the full list of cases can be found in the article itself). On the vertical axis we distinguish three modes of business model innovation for sharing, i.e. international development, partnership and acquisition. Partnership emerged as the most adopted mode by incumbents to enter the sharing economy. Below the table we will illustrate briefly the content of business model innovation for sharing (horizontal axis).

Ciulli-Kolk Table 2

Table 2: Illustrative examples of the types of business model innovation for sharing adopted by incumbents.

Considered from the horizontal axis and moving from left to right, our study shows that some incumbents have found that specific sharing services could be valuable complements to the products and/or services they already offer to their target customers. They have thus adapted their value proposition to the sharing economy, largely through partnerships and less through acquisitions. Key examples are McDonald’s, which has combined a sharing service with its existing offer through the partnership with UberEats, and Ikea, which has acquired TaskRabbit, a platform connecting independent ‘taskers’ with people in need of their services. Other incumbents instead have identified the users of sharing platforms as a promising new customer segment that they can target. These incumbents thus adjust and adapt their ‘traditional’ products and services to cater to the needs of sharing platforms’ users and of sharing platforms themselves. The most adopted mode in this respect is the partnership with sharing platforms. Multiple partnerships were found in the insurance sector, where incumbents have adjusted their traditional value proposition to respond to the needs of sharing platform users. An example is the partnership between Allianz Worlwide Partners and Car2Go. Other relevant examples of partnerships have been found among car manufacturers that collaborate with car sharing/ride-hailing companies to supply drivers with their vehicles and to test (and supply) innovative products, such as self-driving cars. Incumbents have also started, to a limited extent, to embrace the sharing economy in their business infrastructure. This adaptation of their business models, conducted mainly through partnerships, affects in particular the supply of production equipment and of labour. Some incumbents partner with sharing platforms, e.g. Dozr, to rent equipment for production activities from their peers, rather than buying it. Incumbents (e.g. P&G) have also started to access the skills offered by freelance work platforms such as Upwork. Finally, some incumbents have decided to embrace the sharing economy by adopting an entire ‘new’ sharing business model. The adoption of a sharing business model has been pursued through all three modes and interesting examples were found in particular in the car (e.g. Daimler) and hotel (e.g. Accor) sectors.

Our results indicate heterogeneous effects of incumbents’ entry on the sustainability of the sharing economy, on which we elaborate in detail in the article. For example, if the incumbent adds sharing services to strengthen its existing ‘conventional’ value proposition and thus to increase product sales and consumption, it is unlikely that this business model innovation leads to higher environmental value creation. In addition, the drawbacks of the sharing economy may be amplified and incumbents’ sustainability may deteriorate if they bring in parts of sharing business models whose environmental and/or social impact is controversial, as in the case of gig business models. There may, however, also be positive sustainability implications if incumbents’ business models are reshaped in line with original promises of the sharing economy, for example, the optimal use of underutilized assets, such as production equipment and tools. In addition, thanks to the incumbent’s visibility, legitimacy and size, a proper inclusion of sustainable sharing features in its business model may help institutionalize sustainable sharing practices, paving the way for their diffusion.

References

Acquier, A., Daudigeos, T. and Pinkse, J. (2017), “Promises and paradoxes of the sharing economy: an organizing framework”, Technological Forecasting and Social Change, Vol. 125, pp. 1-10.

Frenken, K. and Schor, J. (2017), “Putting the sharing economy into perspective”, Environmental Innovation and Societal Transitions, Vol. 23, pp. 3-10.

Murillo, D., Buckland, H. and Val, E. (2017), “When the sharing economy becomes neoliberalism on steroids: unravelling the controversies”, Technological Forecasting and Social Change, Vol. 125, pp. 66-76.

Martin, C.J. (2016), “The sharing economy: a pathway to sustainability or a nightmarish form of neoliberal capitalism?”, Ecological Economics, Vol. 121, pp. 149-159.

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