We have been in the digital economy for almost two decades now, but most of our businesses have yet to to grasp what digitization (i.e., a technical process) and digitalization (i.e., a socio-technological process of applying digitization techniques to broader social and institutional contexts that render digital technologies infrastructure) means, let alone converting from existing to new business models that address the gig economy, the sharing economy, and understanding how to co-create value with their customers. This lack of understanding the digital economy in everyday business creates an excellent opportunity for researchers to conduct research on just about any topics surrounding digital economy!
Let’s start with the Sharing Economy. Where does the idea of ‘sharing’ come from? Digitization resulted in the abundance, not from a scarcity, of information. Before digitization, information was limited (e.g., for a product, information is provided by the manufacturer, the distributors, prior customers’ word-of-mouth, and some limited third-party consumer reports). After digitization, information about any product is now abundant on many websites (e.g., vendor, non-vendor, third-party non-vendor evaluative websites such as CNET, consumer-to-consumer evaluative websites such as Yelp, recommendation systems in Amazon). In other words, before digitization, the asymmetry of information happened because the seller had more information about their product than the buyer. After digitization, buyers have more information about the seller’s product and their competitors’ products than the vendor. This is the reversal of the asymmetry of information. In the digital economy, power is now tilted to the side of buyers. The abundance of information and information sharing is the prelude to the sharing economy.
Abundant information sharing is not accidental in the digital economy. Let’s examine the architecture of the Internet and its technologies. The digital infrastructure is designed in such a way that it is decentralized, user-driven, open-sourced, and not subject to a single stakeholder’s control (think Blockchain technologies). The governance of digital infrastructure is open and allows ALL participants to contribute as long as standard interfaces are followed. Users are encouraged to proactively participate, create, and innovate. Digital infrastructure and its ecosystem is built on communities of practice.
Sharing becomes the norm in this digital ecosystem. As an open-sourced based architecture, the Internet was designed to allow users’ participation, and the socio-technological consequence of digitalization allowing everyone to participate through the Web resulted in a culture of volunteering. This prosocial behaviour is unique in that users are providing free labour in time and effort (e.g., writing codes, writing a movie review, rating a restaurant) for their fellow users and organizations. Many of these users turned consumers participate in co-creating new products (e.g., LEGO) with organizations and companies, again collecting no wages, resulting in a class of prosumers who are motivated by a combination of cognitive and affective reasons for either utilitarian or hedonic purposes, which adds value to firms that become part of firms’ intellectual capital.
Volunteerism is the foundation of sharing economy. As users extend from volunteering coding (e.g., in open-sourced coding) to spending time voluntarily co-creating with other consumers or vendors, their view of ownership changes. Similar to volunteering their time to share governance on digital infrastructure, they view sharing traditional assets (e.g., house, car) as equally acceptable. Examples are plenty: AirBnB, BlaBlaCar, DogVacay, Fon, Getaround, Lending Club, among others.
Addressing the needs of the sharing economy, many unicorns (i.e., companies valued more than US 1 Billion prior to IPO) have emerged. Their business models are:
- They disrupt the pricings of the existing market (e.g., Lyft, AirBnB)
- They offer services that were not available before (e.g., BlaBlaCar)
- They use untapped users’ hidden asset (e.g., AirBnB, Getaround, Lending Club)
- They offer services EVERYWHERE (e.g., Ofo bike that allows dropoff at anyplace)
Their business models are based on platforms. Think Instagram, one of the great example of the sharing economy. Instagram does not invent products, it does not have manufacturing buildings, warehouses or labs (note: Kodak used to employ 100,000 people and Instagram has less than 100).
In spite of the emergence of sharing-economy-based unicorns, little research has been reported about the sharing economy. Here are a few research areas that need more in-depth investigation:
- Do sharing economies result in a shrinking economy at the aggregate level? What is the impact of a sharing economy on economic growth? Does this impact vary from developed to developing economies?
- What are some of the regulatory issues surrounding the sharing economy? How do these vary across regions or countries?
- What are the category of products that are viewed as sharable: utilitarian versus hedonic products?
- What are the differences in attitude/behaviour toward sharing across demographic characteristics? For example, do generational cohorts differ in their attitude toward car sharing, house sharing, and others? Do ethnic groups differ in their attitude/behaviour toward peer lending?
Sussan, F. (2012). Consumer Interaction as Intellectual Capital. Journal of Intellectual Capital, 13 (1), 81-105
Sussan, F. and Z. Acs (2017) Digital Entrepreneurial Ecosystem. Small Business Economics, 49(1).