7. Sharing and its conventional market alternatives
7.1. Sharing in the light of traditional solutions
As mentioned in Section 3, institutional entrepreneurs reflect on new technologies, take advantage of the competitive edges, and ride the new technological wave. In case of sharing, especially in its mixed version, Uber and Airbnb, the introduction and penetration of new ICT technologies is a key factor of success. Institutional innovations are made easier to carry out because traditional enterprises often fail to take advantage of these opportunities, they do not notice the appearance of dangerous competitors, and by the time they realize the danger, the new institution has acquired considerable market share, starting to even force them out of the market.
This was typically observable in the case of Uber and Airbnb.
The institution of sharing, especially the variants classifiable as collaborative consumption, are especially decreasing the environmental burden, and foster the spread of a green attitude. In comparison with sharing, its conventional market alternatives prove to be very expensive and wasteful. As we face the threat of global warming and other environmental catastrophes day by day, it is difficult to shrug our shoulders when witnessing the mindless waste of resources and not ponder on how this could be changed. This can also be considered as a comparative advantage of sharing against conventional market solutions. As it mentioned in Section 3, the chances for institutional entrepreneurships to appear are especially big in highly monopolized sectors. This could be observed in the 1970s when conglomerates appeared, but also on the contemporary cab market, where customers encounter rigid market structures. Naturally, incumbents offering traditional services tend to attempt to maintain the status quo, and fight the spread of the new institutions with all means available. They could, however, probably be more successful in retaining their market position by adopting a different behavior. Similarly to English landlords, who became capitalists in the course of the industrial revolution, traditional
service providers could undergo a transformation to adapt to the new environment. However, we can only see a few examples for this behavior.
Competitors offering traditional alternative services often attempt to annul the competitive advantage of these novel institutions by forcing them out through legal regulation rather than by innovating their own services. This can be witnessed in several countries – among them in Hungary, in the case of Uber or Airbnb. Fortunately, there are some good examples too. For example, in connection with Uber, two taxi companies from Budapest – although failing to radically change their services – had an application for smart phones developed, adopting this element from Uber. This way, they managed to somewhat make their customers experience something similar to what Uber offers to the users, at least in this respect. In Table 2, the characteristics of sharing-based services are contrasted with those of conventional market-based services.
A crucial problem of these types of sharing is facilitating trust among service providers and their clients. This problem is especially sharp in rental markets, given the “opportunity” renters have to misuse or destroy the flats or houses. Facilitating trust is not an easily solved problem, but in online markets different trust building mechanisms have been built in earlier, on which participants in sharing transactions can rely
Table 2. Mixed sharing and its conventional market alternatives
Name Current conventional
market solutions Sharing Entrepreneurship Character of institution Market based Combination of community based and market
based elements Technological background Mainly traditional industrial
technologies Application for mobile technologies, smart phones, internet platforms combined with traditional technologies (car, flat, etc.) Power-market position In most cases hard power, dominant
market players, significant market share (Hargadon – Douglas 2001)
Soft power, new entrants, market niche (proximity to the client as a result of its size).
Resources far outnumber those of even the biggest traditional service provider
Transaction + production cost High Low (due to the decreasing information cost,
Fit of preferences, flexibility Gaps, inflexible, additional costs, fixed prices
Corrected fit, flexibility, dynamic pricing13
Growth potential (increase in
well-being) Small, or none at all Big growth potential due to the international networks
Regulation State (overregulation) Reputation based + state regulation Source: compiled by the author
Last, but not least, self-regulation in the sharing economy appears to be inevitable. It is more and more difficult to apply state regulation over a global economy operating within frameworks of increasing complexity. Sluggishness of state bureaucracy is in striking contrast with hectic economic changes. It is only self-regulation that may resolve this contradiction. The sharing economy is based on trust building and self-regulation, which, however, cannot mean that state regulation is altogether unnecessary. The existence of sharing, however, might also be seen as a reaction to overregulation. The strategy of states that do not live with the possibility of overregulation and only intervene to the extent that is necessary in order to cut back “wildings”
might be set as a good example (Estonia is a country that follows this practice in the region).
Conclusions
The paper aimed at answering some of the questions connected to the phenomenon of institutional entrepreneurship that, despite the rapidly growing body of literature focusing on the subject, had so far remained partly unanswered. We also tried to find arguments for the relevance and timely nature of the problem.
13 According to Techopedia (n.d.), “dynamic pricing is a customer or user billing mode in which the price for a product frequently rotates based on market demand, growth and other trends. It enables setting a cost for a software or Web-based product that is highly flexible in nature. Dynamic pricing is also known as real-time pricing.”
Institutional entrepreneurships pivot around modifying existing institutions. As this is conceptualized by the so called agency theory, the role of human activity in the construction of institutions is of key importance.
Attempts were made in the study to illustrate theoretical presumptions on institutional entrepreneurship with examples from the sharing economy. This novel phenomenon spreading like wildfire probably constitutes the most significant institutional entrepreneurship existing at present. We tried to introduce sharing in a meticulous way, from different angles, making a clear distinction between pure sharing on the one hand, void of business interests and profit orientation, and mixed versions on the other, combining community resources with platforms operating on business principles.
We also tried to answer the question whether sharing such as Uber or Airbnb established by institutional entrepreneurs may be regarded as a radically new phenomenon or it should be considered merely as a digitalized market place that technically makes the meeting of supply and demand easier. While this latter opinion does exist, we, however, tried to show how agents establishing sharing economy did not only manage to carry out technical modifications in transactions, but they also had a deep impact on economic relations, on the relationship to ownership, and on the operation of society as a whole.
New socio-economic forms always have an antecedent, they always emerge as a result of the combination of already existing elements. The most important contribution of the present article to the research of this field is that it combines two novel topics, that of institutional entrepreneurship and of sharing economy, and describes the latter in several aspects as the combination of already known factors. Institutional entrepreneurship of mixed sharing mobilizes capacities that did not use to work as capital before, thus it transfers them to “quasi capital”, making social loss deriving from failed transactions avoidable, decreasing environmental and transaction costs, increasing the flexibility and growth potential of the economy.
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