SHARING ECONOMIES ADAPTATION IN DIFFERENT
INSTITUTIONS ACROSS THE WORLD: THE UBER CASE
Matteo Pisani
Student Number: 11180811
MSc. Business Administration – International Management Faculty of Economic and Business
University of Amsterdam Supervisor: Dr. M. P. Paukku
Statement of originality
This document is written by Matteo Pisani, who declares to take full responsibility for the contents of this document. I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it. The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
TABLE OF CONTENTS
Abstract………4
Introduction………..5
Literature Review Sharing economy………..………8
Sharing economy background………11
Business Model theory……….………..12
Institution-based view………...………..16
The six dimensions of the national culture by Hosftede………....19
Working Propositions……….……23
Research Design……….25
Data collection and Methods………...………...………27
Findings………..29
Uber San Francisco Business model Uber San Francisco………..30
Institutional context………35
The six dimensions of the national culture by Hosftede: U.S. analysis…..……...…36
Uber Amsterdam Business model Uber Amsterdam………..……38
Uber Institutional context………...…40
The six dimensions of the national culture by Hosftede: Netherlands analysis….…41 Interaction between Uber businee model and Amsterdam……….42
Uber New Delhi Uber Business Model New Delhi………...………44
Uber Institutional context ………..………46
Interaction between Uber businee model and New Delhi.……….48
The six dimensions of the national culture by Hosftede: India analysis………49
Uber Honk Hong Business Model Uber Honk Hong………..………50
Uber Institutional Context………..……51
The six dimensions of the national culture by Hosftede: China analysis…..………54
Interaction between Uber businee model and Honk Hong……….55
Results………56
Discussion………..…………58
Conclusion………..…60
Abstract
The sharing economy is a recent phenomenon has caused disruptive changes in various industries. Businesses in the sharing economy exploit something different than a traditional product or service produced by the firm. The purpose of this research is to gain a better understanding in how these new business models evolve in different institutional contexts. Sharing economy theory, business model theory and the institutional theory form the theoretical background for this explorative case study on Uber. Findings showed that most interactions between the institutions and the sharing economy businesses had to do with regulatory constraints that concerned either the drivers in Uber’s case. However the findings on business model adaptions also showed that Uber has been trying to hold on to their generic business model as much as possible.
INTRODUCTION
The sharing economy is a recent phenomenon, which caused disruptive changes in various industries. Businesses in the sharing economy exploit something different than a traditional product or service produced by the firm. Sharing firms such as AirBnB, Uber, Lyft, Zipcar, BlaBlacar, TaskRabbit, and Car2go have been at the centre of attention in press coverage and have received large investments (Rauch et al., 2015). All these firms operate in the sharing economies of collaborative consumption. Inside them, people can offer and share underutilized resources in creative and new ways. These businesses are rooted in the technologies of social networks (Botsman and Rogers, 2010). With the use of web-based mobile networks, sharing businesses can define and deliver highly targeted, personal goods and services at the right time and in the right location. Consumers can, for example, use their mobile phones to find quick access to goods and services they need in that precise moment.
Improved data storage and analytics make the cost of matching buyers and sellers lower than ever. And with the mass spread of smartphones, people can access web-based sharing services anywhere, at any time. Likewise, widespread GPS tracking allows for both better customer service (Uber knows where to meet you) and more careful monitoring (Citi Bike, New York’s bike-share service, prevents theft by tracking bikes). And as scholars like Lior Strahelivitz have found with respect to eBay auctions, digital reputation “ratings” can form a functional substitute for personal trust, making more, and more credible, transactions possible - if a Lyft driver has 800 “five star” reviews, a rider may be willing board her car even if she lacks classic indicia of trustworthiness, like a business license.
Taken together, these changes gave rise to the constellation of activity known as the “sharing economy.” And rise it has. Today, the sharing sector has an estimated value of over $100 billion. Uber’s valuation equals that of car rental titan Hertz. Meanwhile, sharing start-ups have arisen in industries from boats to house moving to, apparently, marijuana delivery. In the process, “sharing”
has spawned popular books, prominent newspaper commentary, and innumerable blog posts (Rauch et al., 2015).
Today, Uber is the most valuable and prominent sharing firm. As noted, Uber allows riders to “e-hail” a variety of taxi options: limousines (UberBlack), standard cabs (UberTaxi), SUVs (UberXL or UberSUV), rides with car seats for children (UberFamily) and amateur drivers (UberX or UberPop). Nor is it alone in the “sharing taxi” space: competitors Lyft and SideCar are both widely available, and BlaBlaCar, a long-distance ride sharing outfit, now has more European riders than the Eurostar train (Rauch et al., 2015).
Despite and because of its popularity, Uber faces stiff pushback from incumbent taxi firms and regulators in almost every market it enters. To date, the anti-incumbent “playbook” has overcome many such attacks. In California, for example, Uber convinced state regulators to classify it as “transportation-network company” allowed to operate in exchange for requiring driver background checks and increasing insurance coverage (Ha, 2013). Likewise, Washington D.C., Houston and a number of other cities have passed ordinances explicitly permitting Uber to operate, imposing only limited rules about pricing, insurance and taxes. In some cities, particularly New York, regulators have forced Uber to change business models by requiring even (amateur) UberX drivers to be city-licensed drivers (Bonanos, 2014). More drastically, cities like Las Vegas and Miami have made services like Uber effectively or actually illegal. Beyond the United States, Uber has faced substantial limitations, with UberPop (amateur) drivers being banned from Belgium, France, Germany, the Netherlands, and Spain. Uber’s CEO was even indicted in South Korea (Scott, 2014). In December 2014, in Chongqing, a city in west China, police raided a training session organised by Uber, which was attended by more than 20 drivers. In April 2015, Chinese authorities raided the offices of Uber in Guangzhou, Guangdong (South China Morning Post, May 2015). Moreover, in Italy on May 25, 2015, Italian judge dott. Claudio Marangoni banned the Uber app for unfair competition practices.
On another front, Uber has been sued by drivers which claimed to have been misclassified as independent contractors and are thus entitled to reimbursement. Users and cities have also complained about Uber’s inappropriate gathering or use of rider data (Rubinstein, 2014).
On the whole, however, Uber has been a resounding success. It has also branched out into a host of different services, from delivery to direct sales of consumer goods. Most notably, the firm and its main competitor Lyft, recently started bringing more actual sharing to the sharing economy by allowing riders to share taxis trips in a service some predict could eventually compete with jitneys or public buses.
However, the sharing economy has caused several controversies. Much local regulation, from parking minimums to zoning law, is based on traditional assumptions on how civic resources should be used. Some homeowners constantly have guests over; most do not. Some cars are driven twelve hours a day; most are not. The sharing economy flips many of these assumptions on their heads, leading to more intensive resource uses than originally expected. Cab companies and rental car companies could have comprehensively tracked their customers, but it would have been practically infeasible to do so. Not so with sharing firms. ZipCar and Car2Go automatically track where and when their customers drive, while the most controversial data-collector, Uber, has vast amounts of information about users’ travel habit and, by extension, their private lives, information that has at least once been used to threaten journalists critical of the company.
Conflict stems also from the massive rise of non-professional and non-regulated - service and goods providers - that the sharing economy has enabled. This trend creates particular tension when professionalized and regulated incumbents complain of unfair competition. In the taxi industry, for example, traditional drivers must pay for cab medallions and pass numerous city tests and requirements; Uber drivers, by contrast, need only to download an app. So far, this conflict over unfair competition has been resolved in several ways. Some cities strike deals with sharing firms, such as requiring tax payment in return for allowing operations. Others try to level the regulatory playing field, as when Colorado and Washington D.C. required Uber conduct more extensive driver
background checks and buy more extensive insurance, or as New Orleans might do through a standardized limousine tax on both Uber and non-Uber cars. The purpose of this thesis is to investigate on how Uber's expansion into different countries was driven by different degrees of institutions and regulations as well as different strengths and weaknesses and how Uber's strategy gained success in the countries taken into account.
LITERATURE REVIEW 1. Sharing economy
Botsman and Rogers (2010) are the first who describe the sharing economy movement as an emerging socioeconomic groundswell, which they call collaborative consumption. They argued that the old associations with “sharing” seemed to be collectives, cooperatives and communes. These associations have been refreshed and reinvented to become valuable forms of collaboration and community.
According to Rauch et al. (2015), the reduction of transaction costs is a common thread that, most of the times, is visible in the sharing economy. They note that businesses, described as “part of the sharing economy”, depend on an evident reduction in transaction costs. Despite technology has reduced transaction costs, which makes sharing assets cheap and easy, the most important change still remains the availability of more data about people and things, which allows physical assets to be “disaggregated” and consumed as services.
Now, the draft situation is that owners and renters can be matched up more easily. In the sharing economy users can share, buy or sell smaller units of goods or services, than they used to do before. A rental company for example is able to rent out a car for only fifteen minutes, at a time due to improved technology and data. Rauch et al. note that this is the change that defines the sharing economy (Rauch et al., 2015).
There are different definitions of the sharing economy: Sacks (2011), for example, defines the sharing economy as a global trend that makes sharing something economically significant.
He adds that the basic characteristic of these you-name-it sharing marketplaces is that they gain value out of the stuff we already have.
Despite for all the attention businesses in the sharing economy obtain, a central question remains unanswered: What, defines the sharing economy? Botsman and Rogers (2010) are pioneering authors at the helm of the sharing economy movement. They describe an emerging socioeconomic groundswell, which is called collaborative consumption. They state that the old associations with “sharing” used to be cooperatives, collectives, and communes; these associations are being refreshed and reinvented into appealing and valuable forms of collaboration and community. This groundswell, that they call collaborative consumption is also known as the sharing economy or the collaborative economy. Sharing and exchange of assets – from spaces to skills to cars – is happening in ways and with frequency that has never been possible before. This creates a culture and economy of “what’s mine is yours” (Botsman and Rogers, 2010). The new socioeconomic systems enable assets that were previously unavailable or not conveniently available, to become widely accessible.
When you start to look for sharing economy firms, you can find them everywhere. According to Gansky (2010) a new era of sharing-based businesses is starting. Big businesses such as Netflix or Zipcar, AirBnB or Uber, as well as small ones such as an individuals who rent Christmas trees or offer seats in the car for a long trip, have figured out there is a demand for convenient access to shared goods (Gansky, 2010). These businesses are rooted in the technologies of social networks (Botsman and Rogers, 2010). With the use of web-based mobile networks, sharing businesses can define and deliver highly targeted, personal goods and services at the right time and in the right location. Consumers can, for example, use their mobile phones to find quick access to goods and services they need in that precise moment. The Craigslist app for example uses the location of consumers to find nearby services they need such as the service of a mechanic (Gansky, 2010). The network has the power to connect consumers to the things they need at the time they need it. People can increasingly gain convenient access to goods, which reduces the need to own them.
There is, for example, no need to store and maintain a lawn mower, a buzz saw, or a car when they are easily and less expensively available to use when the consumer wants to or needs to (Gansky, 2010). Sharing economy platforms have the ability to accelerate connections, transactions, and payments between buyers and sellers. The unifying theme that these sharing economy businesses have is the focus on access, instead of ownership and an improved use of assets. The focus of sharing economy firms is on efficiency and practicality (Nadler, 2014).
According to Rauch et al. (2015) the reduction of transaction costs is a common thread that is visible in the sharing economy. They note that businesses, described as part of the sharing economy, depend on an evident reduction in transaction costs. Technology reduced transaction costs, which makes sharing assets cheap and easy. The change can be seen with the availability of more data about people and things, which allows physical assets to be “disaggregated” and consumed as services.
An interesting fact of the sharing economy evidenced by Rinne (2013), is that it empower people to become both sellers and buyers. In the case of Uber, a private citizen can be an entrepreneur and employee when delivering transportation services.
As introduced above, there are different definitions of the sharing economy. Table 1 is an overview of them and their conceptualization made by different authors.
Study Definition Conceptualization
Botsman and Rogers (2010)
Collaborative consumption/ sharing economy as a new socioeconomic system.
Product-service systems that facilitate the sharing or renting of a product (i.e., car sharing); second,
redistribution markets, which enable the re-ownership of a product (i.e., Craigslist); and third,
collaborative lifestyles in which assets and skills can be shared (i.e., coworking spaces). Gansky
(2010)
The Mesh: the storm of mobile, location-based capabilities, web and social network
growth, changing consumer attitudes, and market benefits of sharing platforms.
Mesh businesses share four characteristics: sharing, advanced use of Web and mobile information networks, a focus on physical goods and materials,
and engagement with customers through social networks.
Nadler (2014)
Unifying theme the platforms have is the improved use of assets and the focus on access instead of ownership, emphasizing
efficiency and practicality. Rauch et al.
(2015)
Everything that is described as part of the sharing economy relies on an evident reduction in transaction costs. Users can
buy sell or donate ever-smaller units of goods,
services or experiences.
Reduction in transaction costs is a common thread, visible in the sharing economy.
Rinne (2013) Empower people to become both sellers and buyers. Peer-to-peer commerce.
Peer-to-peer technology platforms unlock and redistribute untapped social, economic and environmental value of underutilized assets.
Belk (2013)
There are two commonalities in sharing and collaborative consumption practices: the first is their use of contemporary access non-ownership models of utilizing consumer goods and services.
The second is their reliance on the Internet, and especially Web 2.0 to bring this about.
Sacks (2011) something economically significant. A global trend that makes sharing
The basic characteristic of these you-name-it sharing marketplaces is that they extract value out
of the stuff we already have.
Frenken et al. (2015)
Consumers that allow each other contemporary access to underutilized
assets.
There are four different sorts of economies that all are forms of collaborative consumption as Botsman
describes it.
- Secondhand economy - On-demand economy - Product-service economy
- Sharing economy
Table 1: Sharing Economy Definitions and Concepts
2. Sharing economy background
As described above, the sharing economy can be seen as a social and economic shift. This shift takes back to the invention of the Internet. Botsman and Rogers (2010) state that the sharing economy started online, by sharing files, photos, videos, code and knowledge. This has led to physical goods, consumed now in different collaborative ways (Botsman and Rogers, 2010). Sharing economy forerunners are, for example, eBay and Craigslist. They appeared over fifteen years ago, and empowered people to become both buyers and sellers through the adoption of
peer-to-peer commerce (Rinne, 2013). Zervas et al. (2015) note that the decentralized peer-peer-to-peer markets are what define the sharing economy. Indeed the peer-to-peer technology platforms enable the effectively unlocking and redistributing of what Rinne (2013) calls: “the untapped social, economic and environmental value of underutilized assets” (Rinne, 2013).
Digital technologies make it possible for people to connect directly with each other, with fewer intermediaries (Rinne, 2013), and at a cost that is lower than ever (Rauch et al., 2015).
Technology is the most tangible external factor that has influenced the creation and acceleration of the sharing economy. Other factors that contribute to the sharing economy are that many natural resources are no longer plentiful, and population and urbanization continue to rise. More people are aging while younger cohorts are also booming. In this setting, companies and governments are seeking to do more, with less resources (Rinne, 2013). In a McKinsey & Company report (2015) these factors are described as global forces that change the world economy’s operating system. The forces are urbanization, technological change, the aging world, and greater global connections (McKinsey & Company, 2015). In addition Rauch et al. (2015) describe demand-side trends from which the sharing economy stems. The great recession is one of the trends they describe that contributes to the rise of the sharing economy (Rauch et al., 2015). This is the only trend that was not mentioned in the McKinsey & Company rapport (2015) and in the description of external factors by Rinne (2013).
3. Business model theory
According to Teece (2010) a business model is about the design or architecture of the value creation, delivery, and capture-mechanisms of a business (Teece, 2010). There have been conducted several literature reviews of the business model concept. Wirtz (2011) made an overview of business model literature. He identified three theoretical approaches for the business model context. These three approaches are technology oriented, organization theory oriented, and strategy oriented. Literature started with the technology-oriented approach from 1975. This first stream
focuses on technology. According to Boons and Lüdeke-Freund (2012) this shows that business models became popular during the Internet boom. It was then that firms came to realize that existing ways of earning a profit were not suitable for capitalizing on new technologies: web-based products and services (Boons and Lüdeke-Freund, 2012). Therefore there is a large body of literature that focuses on the consequences of particular technologies on how firms organize to earn profits.
In 1995 the organization theory oriented approach started (Wirtz, 2011). This approach deals with the business model as a strategic management tool to improve a company’s value chain. In this approach a business model serves as a development tool for business systems and architectures for planning, representing and structuring business with an emphasis on organizational efficiency (Boons and Lüdeke-Freund, 2012). Since 2000 the strategy-oriented approach exists (Wirtz, 2011). This approach adds the element of market competition to the efficiency focus of the organization theory oriented approach. Creating and delivering customer value is the core of any business model. Hereby the business model itself can become a source of competitive advantage (Boons and Lüdeke-Freund, 2012).
Zott, Amit and Massa (2011) also made a literature review on business models. They found that there are four emerging common themes among scholars of business models. The first theme is about the business model that is emerging as a new unit of analysis. This unit of analysis spans traditional units of analysis, such as the firm independently of the network, which is the other traditional unit of analysis. The second theme they found is that business models emphasize a system-level, holistic approach to explaining “how” firms do business. This is the opposite from a particularistic and functional perspective that focuses only on “what” businesses do, such as what products they produce to serve needs in the market. The system-level approach focuses on how businesses do this, for example how they combine factor and product markets in serving customer’s needs. It focuses on both the content and the process of doing business.
The third emerging theme is that activities play an important role in the various conceptualizations of business models that have been proposed. These activities could be activities from a focal firm, or its suppliers, customers, or partners. A business model is described as a system that consists of components with linkages between each other, and in which dynamics play a role. The business model is represented many times as systems of activities (Zott, Amit and Massa, 2011). The last theme that Zott, Amit and Massa found is that business models seek to explain how value is created, not just how it is captured. The focus lies on the creation of value, but the capturing of value is included as well. There has been a shift in focus in the literature from value capture to value creation. However both aspects are included in the business model literature (Zott, Amit and Massa, 2011).
The emerging themes that Zott, Amit and Massa (2011) describe can also be found in the concept that Boons and Lüdeke-Freund (2012) have developed. Boons and Lüdeke-Freund reviewed the current literature on business models in the context of technological, organizational and social innovation. The following elements of a general concept of business models were distinguished: the value proposition, organization of supply chain and customer interface, and financial model. The value proposition incorporates the question: what value is embedded in the product/ service offered by the firm? The second element is about the supply chain and how upstream relationships with suppliers are structured and managed. Next to that, the customer interface is important. How are downstream relationships with customers structured and managed? And the last element is the financial model, thus the costs and benefits from the first three elements and their distribution across business model stakeholders (Boons and Lüdeke-Freund, 2012).
These building blocks are also visible in the Business Model Canvas by Osterwalder and Pigneur (2010). In their research in 2005 Osterwalder et al. first described four pillars: value proposition, customer interface, infrastructure management, and financial aspects. Together these four pillars exist of nine business model building blocks. Customer interface consists of: target customer, distribution channel, and relationship. Infrastructure management consists of: value configuration,
core competency, and partner network. Financial expects exist of: cost structure and revenue model (Osterwalder et al., 2005). Later, these nine “business model” building blocks were transformed into the Business Model Canvas as is known today (Osterwalder and Pigneur, 2010). These nine business model building blocks will be addressed in this thesis as a way to describe existing business models. The various, and specific, building blocks enable a thorough and efficient analysis of companies and their business models. Besides that the nine building blocks can be traced back to the four pillars they are part of: value proposition, customer interface, infrastructure management, and financial aspects. By using the more detailed nine building blocks the overall value proposition, customer interface, infrastructure management, and financial aspects will be described more thoroughly. Table 2 shows the building blocks by Osterwalder and Pigneur (2010) that are chosen on the basis of the previously discussed business model concepts.
Business Model Building Block Description
Value Propositions Answer to the question: What does the company deliver to the customer?
Infrastructure Management
Key Partners Answer to the question: Who are the key partners and suppliers of the company?
Key Activities Answer to the question: What key activities do our Value Propositions require?
Key Resources Answer to the question: What key resources do the value propositions require?
Customer Interface
Customer Segments Answer to the question: For whom is the company creating value?
Customer Relationships
Answer to the question: What type of relationship does each of the firm’s customer segments expect it to establish and maintain with
them?
Channels Answer to the question: Through which channels do the firm’s customer segments want to be reached?
Financial Aspects
Cost Structure Answer to the question: What are the most important costs inherent in the business model of the firm?
Revenue Streams Answer to the question: For what value are the customers of the firm really willing to pay?
Table 2: Business Model Building Blocks
4. Institution-based view
The most spontaneous question that comes out from the concept of business strategy is: Why do strategies of firms from different countries and regions differ? Researchers focus primarily on industry conditions (Porter, 1980) and firm resources (Barney, 1991), as drivers of firm differences, leading to competition- and resource-based perspectives, respectively (Peng, 2002).
Peng (2002) argues that, in addiction of these existing theories, a new institution-based view has emerged to understand the differences in business strategy. Sources of influence, such as the state or the society, must be taken into account when we talk about institutional framework (North, 1990). In order to understand the concept, several authors try to define institutions: according to North (1990), institutions are “the rules of the game in a society or, more formally, are the humanly devised constraints that shape human interaction.” Scott (1995) also gives a definition of institutions, as “cognitive, normative, and regulative structures and activities that provide stability and meaning to social behaviour.” Institutional frameworks interact with organizations by guiding towards choices, which are acceptable and supportable. As a result, institutions help reduce uncertainty for organizations. Institutional frameworks are made up of both formal and informal constraints (North, 1990). Formal constraints include political rules, judicial decisions, and economic contracts. In- formal constraints, on the other hand, include socially sanctioned norms of behaviour, which are embedded in culture and ideology (Scott, 1995). North (1990) suggests that, in situations where formal constraints fail, informal constraints will come into play to reduce uncertainty and provide constancy to organizations.
Treating institutions as independent variables, an institution-based view on business strategy, therefore, focuses on the dynamic interaction between institutions and organizations, and considers strategic choices as the outcome of such an interaction. Specifically, strategic choices are a reflection of the formal and informal constraints of a particular institutional framework that decision makers confront (Scott, 1995).
Of particular concern to strategy researchers is the keiretsu network, the webs of inter-firm relations that envelop many Japanese firms, and now increasingly involve other Asian firms. Specifically, within such a network, independent suppliers seem to be willing to sit their factories close to major manufacturers such as Toyota and Honda, in the absence of a long-term contract. Such a high degree of asset specificity creates economic value by reducing delivery time and costs and increasing the efficiency of more just-in-time delivers (Dyer, 1997).
Difference in national cultures plays a role (US firm with such asset specificity would only act in this manner with a long-term contract). Instead, Japanese firms tend to place a greater emphasis on informal constraints, such as consensus- and trust-building, instead of formal contracts.
A strong test of the institutional perspective needs to demonstrate that institutions matter independent of national cultures. Two competing hypotheses are generated :first, if the national institutional effect predominates, then Chinese American and Caucasian American entrepreneurs would show relatively similar patterns of response compared with those of mainland Chinese entrepreneurs. Conversely, if the cultural effect predominates, then mainland Chinese and Chinese American entrepreneurs would show relatively similar patterns of response when compared with those of their Caucasian American counterparts. The empirical results lend strong support for the institutional perspective. These results, therefore, provide some preliminary evidence suggesting that it is institutional frameworks, rather than national cultures, that drive entrepreneurship.
Since the 1970s, research in the West suggests that, on average, firms with a higher level of diversification are less profitable than firms with a lower level of diversification (Hoskisson and
Hitt, 1994). What seems to hurt performance the most is a strategy of conglomerate (or unrelated) diversification.
In contrast, highly diversified conglomerates, often called business groups, have often been found extensively in Asian countries (Peng, 1997). The answer seems to lie in the institutional perspective with a focus on the underlying formal and informal institutional frameworks permeating these countries. While emerging economies in Asia are hardly uniform, their formal institutions tend to fall short to varying degrees in providing support for low transaction-cost business operations in three critical areas:
- A credible legal framework - A stable political structure
- Functioning strategy factor markets
Throughout Asia, because of the weaknesses of formal institutions, informal constraints rise to play a large role in regulating economic exchanges in these countries during the transition. The main informal constraints come from three sources: first, the interpersonal relations among executives serve as a focal point for valuable managerial networking. Second, external connections linking these executives and key stakeholders, especially government officials, are also a crucial part of the informal institutional constraints. Finally, the reputation of conglomerates serves as an informal but strong signalling device to reduce uncertainty for customers and investors (Child, 1994).
Existing research on the growth of the firm suggests that there are typically three strategies for growth, namely, generic expansion, mergers and acquisitions, and/or networks and alliances. Work on firm growth in transition economies highlights the institutional prerequisites that support each of these three growth strategies. Specifically, generic expansion calls for staff of capable managers, while mergers and acquisitions require functioning strategic factor markets. Developing networks and alliances needs to build trust and mutual understanding.
While the institutional frameworks supporting the first two growth strategies are primarily formal ones, those for the last strategy are of an informal nature based on interpersonal relationships. In
other words, the failure of formal institutional frameworks has led to the reliance on informal constraints, which results in a network-based strategy.
Furthermore, the problems of such a strategy calls for strengthening formal institutions, and therefore, the dynamic interaction between institutions and organizations comes full circle. Specifically, it evolves precisely in a manner described by North in which the institutional framework influences strategic choices, made by organizations, and, in turn, they influence how the institutional framework evolves.
Peng (2002) focus on two significant results: research on Asian organizations has addressed head-on the very first fundamental questihead-on in strategic management head-on why firm strategies differ identified by Rumelt and colleagues, through developing and extending an institution-based view of business strategy. The institution-based view supplements and enriches mainstream strategy research by drawing attention to the often-overlooked importance of institutions, both formal and informal, which is broader than the traditional notion of national cultural differences.
Second, institution-based research on business strategies in Asian economies also contributes to institutional theory by demonstrating the benefits of integrating with efficiency-oriented research. The importance of institutional influences on business strategies will be increasingly appreciated in the new millennium, thus necessitating more attention from researchers, practitioners, as well as policy makers, not only in Asia but also around the world.
5. The six dimensions of the national culture by Hosftede
Hofstede defines culture as “collective programming of the mind” that makes one group unique from another. Patterns of thinking, feeling and potential activity all go into this programming. Culture is a collective phenomenon, consisting of unwritten rules of social interaction. It indicates what reactions are likely to occur in any given situation. Culture exists in between human nature, which is shared by all people regardless of their ethnic or national origin and individual personality. Culture is learned throughout life. First, it is taught by parents in the form of examples and
corrections, then by teachers and interactions with peers. The young in any one culture will vary in their “programming” from the old in the same culture. But the young in culture X will vary as much from the young in culture Y as will the old from culture X to culture Y. So the differences between cultures will manifest themselves beyond age differences and similarities. Culture can be subdivided into layers, with values at the core followed by rituals, then heroes and at the very outer layer symbols. The layers of ritual, heroes and symbols are expressed through daily practices. Values are at the deepest layer of culture, the most difficult to change and therefore most persistent. Values are the stable elements of culture. Symbols, which exist at the outermost level, are more easily changeable and also most obviously observable. Likewise the layers acquired later in life are quicker and easier to change then those acquired early in life. Values are the elements of culture that Hofstede’s theory attempts to measure and classify with his Value Survey Module (VSM) questionnaire. Hofstede readily acknowledges that cultures change and that today’s multi-ethnic, modern national cultures are not as stable and homogenous as the cultures of the isolated, non-literate societies of the past. Of the levels of culture (national, regional / ethnic / religious, gender, generation, social class and organizational / corporate) those at the national level are the easiest, most expedient to study. Although nations may not be completely homogenous, they are the source of much of the collective “programming” of the people who live in them. And, while the scores of nations on Hofstede’s cultural dimensions may vary, the relative position of one culture as compared to another will be fairly stable. Hofstede’s cultural dimensions are based on a large sample of employees from the large, multinational IBM, whom he studied over many years from the 1960’s, 70’s and 80’s. Other sources were added to the large set of IBM data over the years and confirmed the dimensions originally formulated with the IBM studies. These dimensions are: Power-distance, Collectivism vs. Individualism, Femininity vs. Masculinity, Uncertainty Avoidance, and Long vs. term Time Orientation. His fifth dimension, Long-term vs. Short-term time orientation is especially notable because Hofstede had not originally included it in his model. This dimension was added later with the help of Michael Bond who had lived and worked in
Asia. It is a dimension particularly important to cultures influenced by Confucian religion.
Obviously his model has found an extensive and wide-ranging audience, including HCI researchers. Part of this popularity may be due to the simplicity of the five dimensional model that Hofstede uses. Also, his model is based on a short and easily administered questionnaire, which provides the scores for each of the dimensions.
Power Distance
The fact that everybody is unique implies that we are all unequal. One of the most salient aspects of inequality is the degree of power each person exerts or can exert over other persons; power being defined as the degree to which a person is able to influence other people’s ideas and behaviour. Power Distance is defined as the extent to which the less powerful members of institutions and organisations within a country expect and accept that power is distributed unequally.
This dimension expresses the degree to which the less powerful members of a society accept and expect that power is distributed unequally. The fundamental issue here is how a society handles inequalities among people. People in societies exhibiting a large degree of Power Distance accept a hierarchical order in which everybody has a place and which needs no further justification. In societies with low Power Distance, people strive to equalise the distribution of power and demand justification for inequalities of power.
Individualism
The fundamental issue addressed by this dimension is the degree of interdependence a society maintains among its members. It has to do with whether people´s self-image is defined in terms of “I” or “We”. The high side of this dimension can be defined as a preference for a loosely-knit social framework in which individuals are expected to take care of only themselves and their immediate families. Its opposite, collectivism, represents a preference for a tightly-knit framework in society in which individuals can expect their relatives or members of a particular in-group to look after them in exchange for unquestioning loyalty. A society's position on this dimension is reflected in whether people’s self-image is defined in terms of “I” or “we.”
Masculinity
The fundamental issue here is what motivates people, wanting to be the best (Masculine) or liking what you do (Feminine). The Masculinity side of this dimension represents a preference in society for achievement, heroism, assertiveness and material rewards for success. Society at large is more competitive. Its opposite, femininity, stands for a preference for cooperation, modesty, caring for the weak and quality of life. Society at large is more consensus-oriented. In the business context Masculinity versus Femininity is sometimes also related to as "tough versus tender" cultures.
Uncertainty Avoidance
The extent to which the members of a culture feel threatened by ambiguous or unknown situations and have created beliefs and institutions that try to avoid these is reflected in the score on Uncertainty Avoidance. The Uncertainty Avoidance dimension expresses the degree to which the members of a society feel uncomfortable with uncertainty and ambiguity. The fundamental issue here is how a society deals with the fact that the future can never be known: should we try to control the future or just let it happen? Countries exhibiting strong UAI maintain rigid codes of belief and behaviour and are intolerant of unorthodox behaviour and ideas. Weak UAI societies maintain a more relaxed attitude in which practice counts more than principles.
Long Term Orientation
This dimension describes how every society has to maintain some links with its own past while dealing with the challenges of the present and future, and societies prioritise these two existential goals differently. Normative societies, which score low on this dimension, for example, prefer to maintain time-honoured traditions and norms while viewing societal change with suspicion. Those with a culture, which scores high, on the other hand, take a more pragmatic approach: they encourage thrift and efforts in modern education as a way to prepare for the future.
Every society has to maintain some links with its own past while dealing with the challenges of the present and the future. Societies prioritize these two existential goals differently. In the business context this dimension is related to as "(short term) normative versus (long term) pragmatic"
(PRA). In the academic environment the terminology Monumentalism versus Flexhumility is sometimes also used.
WORKING PROPOSITIONS
A firm is expected to evolve differently in different institutions. This study aims to prove that it is important for businesses to adapt aspects of their business model to the institutional context in which they operate. It is still not clear which parts of the sharing economy business models will adapt to different institutions.
The popularity among consumers and the social value of the firm play a role for regulators to make use of regulatory constraints or incentives (Rauch et al., 2015). Therefore it can be expected that sharing economy firms will adapt their value propositions to different institutional contexts to make its service more attractive to consumers and regulators. The first working proposition is:
Working proposition 1: Sharing economy businesses are expected to adapt their value proposition to institutional differences
Institutions will adopt certain policies concerning sharing economy firms: one of these policies was the contracting with sharing firms to provide traditional government services (Rauch et al., 2015). If a sharing economy firm contracts with an institution, this would influence the infrastructure management of the firm. Therefore the second working proposition is:
Working proposition 2: Sharing economy businesses are expected to adapt their infrastructure management to institutional differences
Concerning the customer interface of a business model, there is no evidence that changing the business model might be necessary in different institutional contexts. The context within which a firm solves customers' problems is an important factor of the business model; user needs can require different or new value networks (Christensen and Rosenbloom, 1995). Since these value
networks lie outside of the customer interface, there is no reason to expect the customer interface will change in different institutions. The third working proposition is:
Working proposition 3: Institutional differences have no direct influence on the customer interface of sharing economy businesses
When technological restrictions arise for a business, financial aspects of the business model mostly change. If a classical business model faces technological restrictions, a shift in the revenue model is inevitable (Kley, Lerch, and Dallinger, 2011). Sharing economy firms are not likely to face technological restrictions in different institutions. Therefore the fourth working proposition is: Working proposition 4: Institutional differences have no direct influences on the financial aspects of sharing economy businesses
As noted above, according to Husted (2005), national cultures can influence the acceptance and determine the success of companies doing business and facing institutions. Lee and Peterson (2001) found that Hofstede’s (1994) dimensions influence how conductive an institution is to innovativeness: a culture that is low on power distance, weak in uncertainty avoidance, individualistic and masculine in nature is most conductive to innovativeness (Lee and Peterson, 2001). Since sharing economy firms concern a new way of doing business, the fifth working propositions is:
Working proposition 5: Sharing economy businesses will face less resistance from institutions that contain most of the following cultural dimensions: low power distance, weak uncertainty avoidance, individualistic and masculine.
RESEARCH DESIGN
The purpose of the research is to investigate sharing economy business models and institutional influences on business models. In order to answer the research question, this thesis has a qualitative research approach and makes use of the case study method. Three different country cases of sharing economy business models are selected. According to Miles and Huberman (1984) with qualitative data, one can preserve chronological flow, assess local causality, and derive fruitful explanations (Miles and Huberman, 1984). Theory building from case studies is one of the best of the bridges from rich qualitative evidence to mainstream deductive research. Case studies emphasize developing constructs, measures, and testable theoretical propositions.
Inductive theory builds from cases and produces new theory from data, whereas deductive theory tests and completes the cycle by using data to test theory (Eisenhardt and Graebner, 2007).
The research question of this thesis is: How do sharing economy firms adapt their business model in different institutional contexts? According to Yin (2003) this type of explanatory question is likely to lead to the use of case studies. The case study strategy has a distinct advantage when a “how” or “why” question is being asked about a contemporary set of events, over which the investigator has little or no control (Yin, 2003). Therefore case studies are used as a strategy to answer the research question of this thesis. Next to that, case studies can be considered as an appropriate tool for this thesis, because of the exploratory nature of the research topic. The topic of this thesis clearly has an exploratory nature, as the topic is not well understood yet. Sharing economy businesses are only recently being investigated. In the last five years sharing economy firms like Uber have generated huge market valuations and fierce regulatory contests in cities (Rauch et al., 2015). It is not sure how sharing economy firms will evolve in these institutional backgrounds as the sharing economy firms have a disruptive impact on the industries they operate in and the industries have long been subject to extensive policymaking. For these reasons the research will be developed following a longitudinal design, from 2009 to 2017.
The goal of doing a case study will be to expand and generalize theories (Yin, 2003). Qualitative research aims for analytical generalization (generalize theories) instead of statistical generalization (enumerate frequencies) (Yin, 2003). Therefore as various authors state, a random selection that leads to a generalizable sample is not necessary and not possible in qualitative research (Miles and Huberman, 1984; Eisenhardt and Graebner, 2007). For this research four cases are analysed: the focus is on Uber’s strategy in San Francisco, Amsterdam, New Delhi and Honk Hong. These cities have been chosen because of their geographic position across the world, as well as their different institutions and regulations. India and China, as Asian countries, see their most important goal as serving a social mission, not maximizing shareholder value, as is the case of U.S. or Netherlands. This four models of Corporate governance differ substantially from each other also in the ownership structure of firms, with many firms operating up or under the umbrella of business groups and different number of infrastructure firms owned by the government (Chakrabarti, Megginson, & Yadav, 2008).
In particular, San Francisco has been chosen because the idea of Uber was born and grows up there. Moreover, California has different types of reasons for launching a business: there are access to talents and access to ecosystems, in the Valley there are tons of lawyers, PR, marketers, and others that understand tech companies and are able to help them faster. There is also access to capital, entrepreneurs have better choice and get better terms. Last but not least, there is the access to PR: the world's tech press lives in San Francisco, or, at least, has offices here. So, getting PR means just taking a drive vs. getting on a plane. Plus, a lot of PR is sort of accidental. Being at the right party and getting introduced to the right person means getting a story. That's hard to make happy from outside the area.
The second city that has been chosen is Amsterdam. The culture in Amsterdam is described as open-minded, ready to speak English and has a can-do approach. The government is creating policies to let the tech sector grow (Davies, 2015). The Netherlands contains the following cultural
dimensions: a low level of power distance, a high level of individualism, a low level of masculinity, and a low level of uncertainty avoidance (Itim International, 2015).
India reached the record of biggest market for Uber after the U.S. during October 2014, and has been chosen mainly for this reason. Moreover, Uber invested 400 millions of dollars in India to grow during the following month and started a big growth positioned as premium option, but also offering options like UberGo, almost as cheap as rickshaws.
Honk Hong had several issues with Uber, and so all China. This country offers interesting business opportunities within the taxi market, and specifically for new ventures as the app based companies like Uber. Chinese taxi & limousine industry still have several pains that are not completely solved by local companies, such as: expensive rates in large cities, distressing experiences during busy hours (traffic jams), cab drivers refuse to transport a passenger if the distance between the two points of the ride is short, the car conditions and quality service are inconsistent, etc. The number of taxis was growing every year in this country alongside with a rapid growth in online-to-offline commerce, which offered a perfect scenario to develop mobile application-based initiatives.
DATA COLLECTION AND METHODS
All documents that could be found in the database about Uber’s service in San Francisco, Amsterdam, New Delhi and Honk Hong will be gathered from local, national and global newspapers, interviews, written reports, surveys or business publications. The specific institutional aspects of the cities can be compared to the business model of the case. For each city, an analysis of Uber business model is drafted.
The keywords that were used to search in the database were: "Uber” AND "business model San Francisco" OR "business model Amsterdam" OR "business model New Delhi" OR "business model Honk Hong”. Then the keywords have been changed to "Uber” AND "institutional context San Francisco" OR "institutional context Amsterdam" OR "institutional context New Delhi" OR "institutional context Honk Hong”. This resulted in 236 articles, from 2009 to 2017. Opinion
articles, blogs and editorial letters were excluded. The 142 selected documents on the four cases were imported in the qualitative data-analysis software NVIVO 10.2. For each city, an analysis of Uber’s business model was drafted, using the building blocks by Osterwalder and Pigneur (2010) that were derived from business model theory and institutional theory as codes.
First Uber business model in San Francisco was coded. Next Uber business model in Amsterdam was coded, Uber business model in New Delhi was codes and thereafter Uber business model in Honk Hong was coded.
The same analysis strategy was employed for the institutional contexts of the business models: San Francisco (U.S.), Amsterdam (Netherlands), New Delhi (India), and Honk Hong (China). The same data was analysed again and coded on the basis of the building blocks derived from institutional theory.
Here is a scheme that shows the codification scheme and process.
San Francisco
o Uber Business Model San Francisco Customer Interface
Financial Aspects
Infrastructure Management o Institutional Context San Francisco
o The six dimensions of the national culture by Hosftede: U.S. analysis
Amsterdam
o Uber Business Model Amsterdam Customer Interface
Financial Aspects
Infrastructure Management o Institutional Context Amsterdam
o The six dimensions of the national culture by Hosftede: Netherlands analysis o Interaction between Uber business model and Amsterdam
New Delhi
o Uber Business Model New Delhi Customer Interface Financial Aspects
Infrastructure Management o Institutional Context New Delhi
o The six dimensions of the national culture by Hosftede: India analysis o Interaction between Uber business model and New Delhi
Honk Hong
o Uber Business Model Honk Hong Customer Interface
Financial Aspects
Infrastructure Management o Institutional Context Honk Hong
o The six dimensions of the national culture by Hosftede: China analysis o Interaction between Uber business model and Honk Hong
FINDINGS
Uber Technologies Inc.
Uber is an American worldwide online transportation network company, with headquarter located in San Francisco, California. Garret Camp, founder of StumpleUpon, and Travis Kalanick, founded the company as UberCab in 2009. Thinking about ways to solve this global issue of finding cars at the right place and on the right time, they came with a platform available on every smartphone. The platform is able to track a user’s GPS coordinates, even if the user does not know where she is, and within minutes, an Uber driver will arrive. The user is able to track the arrival of her ride, and receives a text message confirming when the Uber driver is arriving. From the driver’s end, the driver is able to hit a button on his own app that says “Arriving Now” which sends the text message. The driver is never given the user’s phone number directly, but is able to contact the user if he is unable to find the user.
launch during the summer of 2010. In July 2012 UberX is launched, a service option which allows local driver to respond to notifications on the Uber app by driving customers in their own low cost hybrid cars. In August 2014, Uber launched UberPOOL, a carpooling service, in San Francisco and UberFRESH, a lunch delivery service, in Santa Monica. Now Uber is available in over 66 countries and 507 cities worldwide.
Moreover, in March 2015 the company announced that they set up an Advanced Technologies Center (ATC) in Pittsburgh. Its mission was to make self-driving Ubers a reality. In September 2016 Uber announced that the world’s first Self-Driving Ubers were on the road in the Steel City.
UBER SAN FRANCISCO
Business model Uber San Francisco
Value Proposition
Uber maintains his value proposition in every city and country it goes, from San Francisco to Honk Hong. His value proposition is delivered both to customers and drivers:
Customers:
There is no need to wait for a taxi for a long time: Uber provides fast on-demand rides.
Uber offers free rides on certain occasions and discounts from time to time.
The price is less than the normal taxi fares.
Customers have their personal driver; Uber wants them to travel in style.
Uber has fixed prices for common places like Airport etc. Drivers:
Uber become an additional source of income.
they like.
The payment procedure is easy and cashless
Those who love to drive can earn money while pursuing their hobby.
Uber pays drivers to be online, even if they don’t get any request.
Uber’s value proposition is thus like a market but if it were that simple it would not have the same disruptive effect. What enables it to deliver on the promise above is that it is able to match supply to demand. By using real time metrics it is able to see what demand is like and then as demand starts to exceed available capacity to reduce demand by introducing surge pricing (but taxi fares are somewhat price inelastic so this is a lesser effect) which increases prices where demand is highest. At the same time the increased fares encourage more drivers to work and thus increases supply. Uber is able to do this because the drivers are owner operators. it doesn’t own the assets and thus it can flex capacity within minutes, whereas a traditional taxi company takes months or years to achieve the same results.
Customer Interface
With its multiple services, Uber can aim at every kind of costumer segments: from the UberX price sensitive segment, through the UberBlack users and to the drivers themselves. UberX’s customer service is automated through the mobile app. Via the mobile app customers can find a driver in the neighborhood, pay for the ride, and give the driver a rating on its service. Uber’s channels are: Mobile App, Social Media marketing, and PR. Moreover, Uber for Kids is a special service from Uber dedicated for parents who want their kids to reach home from school in an Uber cab. On the other side, Uber for Senior Citizens is another special service from Uber where it targets senior citizens. As per the statistics, Senior citizens make for upto 30% to 40% of total rides in many cities. This made Uber have some special features for seniors and hence attract more senior citizens on the platform.
Financial Aspects
Uber determines his cost structure on the basis of a perfect technological infrastructure, of salaries to permanent employees and of the marketing aspect (launch events and other marketing expenditure). Uber collect typically 20% commission per ride for the service (De La Merced, 2014). The main sources of revenue are the commissions. Besides, the price for ride and revenue that Uber drivers receive are set by Uber and the drivers cannot change them. Uber changes these rates on the basis of its strategy. The rates increase automatically as soon as the taxi demand is higher that drivers around that precise zone. This strategy is called Uber Surge Pricing: prices are surging to ensure reliability and availability for anyone who agrees to pay a bit more. The app will notify the client when the Uber Surge Pricing goes down again. Aside from the surge pricing, Uber charges the car rides on per KM/Mile basis, which is the opposite strategy that taxi drivers use. Uber's pricing algorithm automatically detects situations of high demand and low supply and hikes the price in increments, depending on the scale of the shortage. Those higher prices are supposed to make drivers more likely to bite, putting more Uber cars on the road when they're most needed. Uber’s human staffers, who have on rare occasions used their discretion to lower prices, have also monitored demand surges (Time, 2014). After the great Uber Fare Hike of New Year's Eve in 2012, for instance, Kalanick described the scene at Uber Mission Control. "To our dismay," he wrote, "the pricing multiplier kept going up." "At some point the east coast cities started breaking 6x multipliers—we accepted defeat at that point—the unbending demand breaking our will. We would bring cities down to 3x, only to see conversion go up, supply go down, cars get saturated, and “zeroes” popping everywhere." Zeroes are Uber's term for riders who open the app and see no available cars in their area (Time, 2014).
The basic principles of economics would dictate it does — as would Uber's experience. According to an Uber board member Bill Gurley, the program has been a success since its inception in early 2012. Uber's Boston team first tinkered with a price hike on weekend nights around 1 a.m., when
drivers tended to clock out just as the city's public transit system approached closing time, a situation that created lots of demand for Uber cars. Economists call this responsiveness to price "elasticity." Uber's service does appear to be unusually elastic, given that its fleet of drivers expands and contracts in real time (Time, 2014).
Uber recently announced an algorithm change that sets maximum surge pricing levels during states of emergency in the U.S. When disaster strikes, Uber caps fares at a price that matches the area's fourth highest price over the preceding two months. Uber has also vowed to donate its 20% commission on rides during emergencies to the American Red Cross. In non-emergency situations, surge pricing of six to eight times the regular fare have cropped up in moments of extreme shortages. The highest multiple ever recorded was 50 times the regular fare, or $57 per minute, due to an apparent glitch in Uber's fares in Stockholm, Sweden, Business Insider reports (Time, 2014).
As the hostage crisis in Syndey revealed, in extreme times of need, price hikes, rational as they may be, can also unleash a publicity nightmare. Still, it seems no matter how hard Uber tries to explain its price system, riders' final fare can still raise hackles. It's practically become a meme on social media to post an image of a receipt for a three-figure ride, plus an expletive-laced tirade against surge pricing — despite the fact that the Uber app is very clear about surge pricing before users agree to a ride. Uber board member Bill Gurley pointed out that the company would hazard a far worse form of publicity if it cancelled surge pricing: Chronic shortages of drivers. Better to weather the odd storm, he reasons, than risk a stream of complaints from "tons and tons of unsatisfied customers."Uber's hostage crisis pricing flap may prompt a review of Uber's pricing policy under extreme circumstances. But for the rest of the time, expect Uber's surge pricing to stick around (Time, 2014).
Infrastructure Management
of Uber drivers and their customers, Uber uses two-way rating in which drivers and customers can rate each other. However local authorities challenge this model due to insufficient backup checks of drivers and insufficient insurance (Bradshaw, 2014).
Uber does not own any cars. It provides its technology and a smartphone to drivers who own a car. They are not employees, but they can be seen as contractors. This model allows Uber to keep costs down (Kazmin and Mishkin, 2014). It is important for Uber to have enough drivers. Having enough Uber drivers in San Francisco creates a better customer experience and attracts more customers as it causes a faster on-demand service (Lex Team, 2015).
In San Francisco anyone can drive with Uber, but there are some minimum requirements: drivers must be at least 21 years old and must have driven at least one year (or three years, if the driver is under 23 years old) in the United States. Moreover, drivers must possess a valid U.S. driver license and they must drive a suitable 4-doors vehicle with the legal documentation.
After witnessing huge success in the transportation business, Uber started the delivery business and is expanding it now. In the delivery business, Uber offers UberRUSH and UberEATS. UberRUSH is a door-to-door delivery service that allows businesses to fulfill their local deliveries. When a business requests a delivery, Uber connects it with a Uber delivery partner. The delivery partner drives or rides to the business location, picks up the item, and delivers it to the customer. Businesses can track the location of their deliveries in real-time with UberRUSH. With UberRUSH API (Application Programming Interface), businesses can build on-demand delivery right into their existing IT applications and infrastructure. UberEATS is a food delivery service powered by the Uber app. It delivers meals to the customers from their favorite local restaurants. To place an order, the customers can use the same Uber app that they use to get the ride. UberEATS option is visible on the Uber mobile app only if the service is available at the customer’s location. UberEATS promises a delivery time of 10 minutes or less. UberEATS achieves it as follows. UberEATS teams up with restaurants in different cities to offer a range of cuisines. The signature dishes of the
participating restaurants change daily. Also, UberEATS features a rotating menu on its mobile app curated with the dishes from the top restaurants. The daily rotating menu offers few standard options. The meals are not customizable. Moreover, UberEATS delivery partners visit the restaurants and pick up several bags of those meal options. When a customer orders the meal through the Uber app, the delivery partners are able to quickly deliver the item because they already have it with them.
Uber Institutional context
One of the strongest indications that the Uber platform provides a better economic opportunity for for-hire drivers in San Francisco comes from a second 2013 report prepared on behalf of the SFMTA, which noted that taxi companies in San Francisco have had difficulty finding drivers for their shifts. Local drivers choose to partner with Uber over other opportunities, like driving with taxi companies, because the platform provides more opportunities to earn income in a flexible working environment, among other reasons. Beyond improving transportation availability and affordability for individual riders and providing a desirable platform for driver-partners, Uber has improved and will continue to improve the quality of life in the city of San Francisco as a whole. Some of these second order benefits of Uber to the city of San Francisco include: a reduction in the incidence of drunk driving, improved access to small and independent businesses, reduced congestion and greenhouse gas emissions, and reduced need for the city to allocate valuable real estate to parking under-used private cars (SFMTA, 2013).
Uber also provides riders a way to get to otherwise hard-to-reach local businesses. Independent businesses are often outcompeted by large chains for prime real estate near high foot traffic areas and public transit, but Uber offers an easy way to get to places near or far from the beaten path. Roughly 31% of trips on the Uber platform in San Francisco begin or end at an independent business, and those trips are scattered across the city, often in places that are not easily accessible by other means (SFMTA, 2013).
