Car sharing : as a transportation mode for the next generation

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Car Sharing

As a transportation mode for the next generation

Master Thesis

Track: MSc. in Business Studies, Strategy Name: Arthur Tebbe,

Student number: 10475664

Supervisor: Monika Kackovic Date: October 20, 2015

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Statement of Originality

This document is written by Student Arthur Tebbe 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.

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Abstract

This paper attempts to identify the impact of internet usage perceptions on car sharing perceptions as moderated by additional factors such as urban living area and age. The study follows a deductive approach and the research problem was explored by testing three hypotheses. Specifically, positive impact of positive perceptions of internet usage on car sharing perceptions and the positive and moderating effect of urban living on the relationship between internet usage perceptions and car sharing perceptions were formulated as hypotheses. Moreover, the positive and moderated effect of age on the relationship between internet usage perceptions and car sharing perceptions was proposed as an additional hypothesis.

An online questionnaire has been used as a primary data collection method for this study and the sample group comprised 291 respondents living in the Randstad area. A data analysis was conducted using the ordered logistic regression method and composite independent and dependent variables were constructed for internet usage perceptions and car sharing perceptions. Although the level of significance for dependent and independent variables exceeded 0.05, signaling the absence of non-zero regression coefficient in the model, literature review findings confirm age and place of living as significant factors affecting the impact of internet usage perceptions on attitudes towards car sharing.

This research has identified a scope for future studies in the research area to asses the impact of social media on the formation of attitudes towards car-sharing practices, evaluation of effects of important social dynamics such as declining numbers of marriages and marriages without children, or car usage patterns and car sharing attitudes in particular. Moreover, this paper has identified a need to study the same research problem from the viewpoint of car sharing agencies.

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Chapter 1: Introduction

1.1 Motivation and discussion

The increasing impact of the internet on a wide range of professional and personal aspects of our lives has transformed the ways we do things, to a significant extent. It is interesting to note that while an assessment of these implications of the internet on professional and personal aspects of life has attracted massive scholarly attention during the past decade, certain specific implications remain unaddressed from an academic point of view. This paper attempts to evaluate the effects of the internet on consumer perceptions towards car sharing in general and by focusing on consumer age and urban living. Generally, in the automotive industry car ownership is still the dominant business model of car usage, but this could change in the future. The internet opens the door to new ways of ownership, like car sharing, which according to Truffer (2003) can challenge the dominant mode of car ownership.

Car sharing has been defined as a concept that “divorces the notion of automobile use from ownership by providing individuals with convenient access to a shared fleet of vehicles, rather than a single privately owned one” (Katzev, 2003, p.68). Specifically, car sharing is “the practice of sharing a car for regular travelling, especially for commuting” (Oxford Dictionaries, 2015). Car sharing can be seen as a flexible substitute, which lessens the dependency on car ownership (Shaheen & Cohen, 2013). Cars have gone from being an object of purchase, possession, status and personal identity towards a different role as a service item that is collectively shared as part of a network. It shifts the idea of each single person owning one or more cars towards a single car shared by groups of people and towards a different role of cars in our society to another way we perceive mobility as part of our culture (Mehlman, 2009; Simpson, 2009).

In this thesis we try to shed a new light on car sharing as a future transportation mode. Car sharing by itself has existed for over more than forty years and is not a new phenomenon, however the use of the internet in combination with car sharing is. The kind of economic activity where people share goods or services is referred to as the sharing economy and is defined by Botsman (2013) as “An economic model based on sharing underutilized assets from spaces to skills to stuff for monetary or non-monetary

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benefits” (§ 16). In this sharing economy people make use of collaborative consumption which is defined by Botsman and Rodgers (2010b) as: “traditional sharing, bartering, lending, trading, renting, gifting and swapping” (p.xv) and it is shifting the focus from what we are consuming to how we consume. According to Botsman and Rogers (2010a) “Collaborative consumption gives people the benefits of ownership with reduced personal burden and cost and also lower environmental impact—and its proving to be a compelling alternative to traditional forms of buying and ownership” (p.30). Botsman and Rogers (2010a) make a distinction in three systems of collaborative consumption namely: product service systems, redistribution markets and collaborative lifestyles. Car sharing relates to each of these three systems in varying extends as discussed in subsequent chapters in more details.

Consumers today can now use the internet for geo-location, make bookings and even payments with their mobile devices (Shaheen & Cohen, 2013). These technological developments make new sharing ventures more attractive. One of these sharing ventures involves car sharing. In the last decade we have seen a steady rise in car sharing ventures in the countries in which it was introduced. These car sharing ventures could facilitate a transformation from car ownership towards car sharing because of the different technology and business models that appeal to users (Truffer, 2003). We wonder if there is a positive relationship about how people perceive their internet usage and car sharing. In contrast to older generations who had or do experience the internet as a new innovation, younger generations have grown up with the internet as part of their lives (Riegner, 2007). Therefore, we wonder if there is a difference in age groups with regards to this relationship. Since younger generations are more familiar with using the internet, we expect them to have more positive perceptions towards car sharing than older generations. Because younger generations will continue to enter the market while older consumers will fade out, these more positive attitudes might indicate that car sharing will disrupt the automotive industry and become the dominant transportation mode for the next generations.

It has to be specified that this study focuses on car sharing with company-owned cars, which fits into the category ‘neighborhood residential’ and is the most common type of car sharing (Shaheen & Cohen, 2013). Car sharing with company owned cars has a business model in which people become member of these companies like Greenwheels, Car2go and Connectcar. Users subsequently pay for the service of

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getting access to the booking system and they pay for private usage of the cars (Shaheen & Cohen, 2013). The cars can be easily recognized because they all have the company colors and brand names clearly visible. The CarSharing Association (2014) defines car sharing as:

A membership based service available to all qualified drivers in a community. No separate written agreement is required each time a member reserves and uses a vehicle. All CSOs offer members access to a dispersed network of shared vehicles 24-hours, 7 days a week at unattended self-service locations. (§1)

However car sharing with company owned cars must not be confused with other car sharing ventures based on peer-to-peer networks that do drive sharing with individually-owned cars that cannot be recognized as ‘shared cars, ’like SnappCar or Uber (Bardhi and Eckhardt, 2012). Due to its distinctive presence in the Randstad and to be able to set clear boundaries, we will focus in this study on the type of car sharing with company-owned cars.

Before the existence of the internet, several initiatives in Europe and the US were taken towards establishing a normalization of car sharing ventures, such as Witkar, Sefage, Procotip and Star, but they all failed. This failure was mostly due to a number of disadvantages, such as a low scale of availability, unreliable cars and difficult access to booking systems (Shaheen, Sperling & Wagner, 1998). Internet technology reduced the former shortcoming difficulties in accessing booking systems. The internet made automated virtual and remote booking easy accessible for consumers and is thus used by almost all car sharing companies like Greenwheels, Zipcar, Connectcar and Car2go (Shaheen & Cohen, 2013). As the founder of Zipcar, Robin Chase says "this was exactly what the internet was made for, an instant platform sharing access capacity among many people" (Botsman & Rogers 2010b, p. 84). People can now use the internet and locate cars using their mobile devices or computers, book cars 24/7 remotely, pay electronically and unlock cars with smart cards. This makes this combination of internet technology and car sharing an intertwined groundbreaking networking technology that can facilitate a post-private car society (Dowling & Simpson, 2013). The central role of the internet today enhances the transformation in

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ownership of consumer goods and services. This can affect the established dominant industries like, for example, the automotive industry.

The process of disrupting the incumbent dominating firms by new and different technological innovations is defined as ‘disruptive technology’ by Bower and Christensen (1995). The study of disruptive technology is still fueled by extensive debate; especially in relation to the failure of firms operating in consumer markets in forecasting the impact of technological innovations and how to counteract such disruptive technologies (Bower & Christensen 1995, Adner, 2002; Danneels, 2004; Hüsig, Hipp, & Dowling, 2005; Sood & Tellis, 2011). The way consumers perceive car sharing and how fast they will accept it, might be potential barriers for the transformation from the dominant consumption mode of car ownership to car sharing (Truffer, 2003). Therefore, to be able to judge if consumer acceptance of a new technology is a threat or an opportunity to existing firms is of vital importance from a managerial perspective. In each case a firm has to decide if it wants to adopt the new technology, or stick with its current core business. Monitoring closely the strategies of new competitors and being open to new approaches is important for management. Especially a thorough analysis of what new entrants in the market do differently and what kind of skills and resources they posses are relevant (Cooper & Smith, 1992). Also the level of awareness of consumers or its ‘cognitive legitimacy’, helps to realize the full potential of new ventures (Aldrich & Fiol, 1994). Thus, for firms it is important to be able to forecast market susceptibility for an innovation, and to predict the market potential of a disruptive innovation (Klenner, Hüsig & Dowling, 2013). The perceptions which potential buyers have towards new technologies influences their decision to adopt them, and are often strong predictors for the disruptive nature of these new technologies (Obal, 2013). The assessment about how a disruptive innovation is perceived by its potential customers is essential in determining the disruptive potential and gives a broader view (Gilbert, 2003; Danneels, 2004; Schmidt, 2004; Slater & Mohr 2006).

While older generations grew up in times of economic prosperity, today’s young people are faced with a severe economical crisis, which started in 2008 and has made consumers more price sensitive due to lower incomes; this, in turn, has made car sharing a good alternative to car ownership (Belk, 2014; Le Vine and Jones 2012). These younger generations prefer to live more in downtown city areas where

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parking space is scarce and expensive (Belk, 2014; Rosenthal, 2013). Another remarkable difference is that these youngsters grew up with the existence of the internet being omnipresent in their lives, and are more heavy users of the internet than other consumers of a higher age (Riegner, 2007; Spangenberg & Lampert, 2013; Cisco, 2011). Because the internet is spanning all connected devices, it is creating the possibility of sharing user generated content, and opens up new opportunities for products and services as a new and powerful technology source of services (O'Reilly, 2007). Although car ownership is traditionally the superior mode of consumption, market-mediated-access using the internet has enabled a potential transformation in consumption patterns during the last decade. The term mediation in general can be defined as “any moderated conflict resolution discourse, regardless of procedures, methods or tools applied” (Gordon and Marker, 2002, p.737). Market mediated access is defined by Bardhi and Eckhardt (2012) as “the ‘sharing’ of property can occur from the company that owns the object of consumption rather than through sharing of personal property among consumers” (p.882). Today, car sharing as a form of market-mediated-access has grown in importance by firms being able to make it profitable. We wonder if car sharing will continue to grow and whether it might be able to largely replace car ownership as the dominant future mode of transportation.

1.2 Research question

The research questions investigate and attempt to test if the positive consumer perceptions of internet usage lead to a more positive perception of car sharing, and if this relationship is moderated by urban living or age. Specifically, the research question in this study can be formulated in the following manner: How does internet usage perceptions impact perceptions towards car sharing as moderated by urban living or age? We would like to research if there are differences in perceptions based on living area or age groups because people of younger ages might have different perceptions of car sharing due to their internet usage and residential preferences, and they will be the consumers of the future (Lyons, 2014). Therefore, this study wants to shed a light on how potential consumers perceive car sharing, internet usage and its interrelatedness, and we would like to know if we can find differences in age groups or

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residential areas. In order to test our research question, we will conduct a quantitative research that will test for perceptions of internet usage and car sharing. The empirical setting for this study is the urban region of the Randstad in the Netherlands. The Randstad is a densely populated area in the Netherlands, and the residents of this urban region should be familiar with environmental issues, parking problems, and several kinds of car sharing that have been introduced, such as Greenwheels, Car2go, MyWheels, CallaCar, DriveCarSharing and Connectcar. We surveyed 291 persons with an age range of 18 to 81 in the Randstad, for their use of transport modes and their perceptions towards internet usage and car sharing. The research was conducted in a five day period in 2015 from January 23rd until 27th. A detailed explanation of the methodology used for this study is provided in chapter 3.

1.3 Importance of the research

The importance of this study is significant on both levels – academic and practical. The academic importance of the work is associated with the elimination of an important gap in the research area. Although various aspects of the research area have already been studied, such as the role of users in the introduction and expansion of car sharing (Truffer, 2003), the nature of access compared to sharing and ownership in the case of car sharing (Bardhi and Eckhardt, 2012) and implications of car sharing towards future transportation (Shaheen and Cohen, 2013). The most noteworthy studies in the research area also includes the work of Lyons (2014) who attempted to analyze the impact of the world wide web on how people access goods and services in a different way and how this subsequently influences different car usage patterns. John (2012), on the other hand, analyses the relation of sharing and the internet and he explains sharing in the context of Web 2.0.

Nevertheless, amid the abundance of the literature on the research area in general, no scientific attempt has been made up to date in order to assess the effects of the internet on user’s perceptions towards car sharing practices. From this point of view, this study fills a gap in the literature by examining to what extent consumer perceptions towards internet usage and car sharing indicate that car sharing might be an innovation that has the potential to largely replace car ownership as the dominant consumption mode in

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the future. Moreover, the importance of this study is significant due to the current lack of scientific works concerning motivations, feelings, and barriers of potential users of car sharing (Bardhi & Eckhardt, 2012). In general, further research is needed to determine the predictive values of customer perceptions towards disruptive technologies (Danneels, 2004). As an economic concept, sharing is strongly intertwined with the development of the internet and is, therefore, an object of study that needs further research (John, 2012).

This proposed research aims to contribute to the existing knowledge in multiple ways. It will give a deeper insight and broaden the field of knowledge on the influence of consumer perceptions towards internet usage, car sharing, and how they are correlated. Moreover, this study might give new insights into the perceptions of different age groups with regards to car sharing as a transformative disruptive mode of consumption. On a practical level, on the other hand, findings of this study can be used by entrepreneurs and e-commerce organizations to realize new business opportunities, and contribute to the evolution of convenient modes of transportation for people on the global scale. An increasing popularity of car sharing, as studied in this paper, can reduce transportation costs in general, thus making an indirect contribution to increasing the standard of life due to savings on transportation costs. Moreover, the practical implications of this study may relate to environmental benefits, as well. Specifically, the promotion of car sharing practices is associated with a reduced level of car emissions that have detrimental environmental effects and that can lead to the enhancing popularity of car sharing practices.

1.4 Structure of the thesis

The thesis is structured in the following manner: Chapter One, the present chapter, is introductory. It sets the scene for the research by introducing the research question and highlighting the importance of the study in both academic and practical levels. Chapter Two is a literature review. This chapter discusses the most noteworthy works that have been done so far in this research area by other authors. Accordingly, the literature review contains a critical analysis of theoretical frameworks, models, and contradictions that relate to the field of study. Chapter Three gives a detailed explanation of the research approach and research. This methodology chapter also comprises rationale for the selection of the survey method for

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primary data collection, and it explains the sampling process that has been applied in this research. Chapter Four comprises the presentation of questionnaire results. Statistical data constitutes a significant part of this chapter due to the choice of quantitative method of primary data collection, and both data analysis and primary data are presented in tables and charts whenever relevant to the topic and this study. Chapter Five contains a critical analysis and discussions regarding the survey findings presented in the previous chapter. Specifically, primary data is analyzed by taking into account the findings of the literature review. The discussions and analyses in this chapter address the research question in a direct manner. Chapter Six concludes the work and it offers answers to the research question. The study ends with a discussion of the limitations and suggestions for further research.

Chapter 2: Literature review

2.1 Introduction

This chapter comprises a critical review of major models, theoretical frameworks, and views in the research area. The chapter starts with the definition of main terms. This is followed by an introduction of the concept of car sharing, and includes a discussion of its growing importance in contemporary times. Moreover, the literature review covers an assessment of the implications of car sharing from economic and social points of view, and also evaluates the role of internet in facilitating car sharing. Discussions of the theory of disruptive innovations, industry life cycles, product discontinuity, and explanations on the relevance of these concepts to this research are also included in the literature review. This chapter also addresses the issues of assessment on the role of consumer perceptions as a switching indicator and is completed by an analysis of the impact of demographic factors towards internet usage and car sharing.

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2.2 Definitions of main terms

The concept of sharing was defined by Belk (2007) as “the act and process of distributing what is ours to others for their use and/or the act and process of receiving or taking something from others for our use” (p. 127). Belk (2014) defines collaborative consumption as “people coordinating the acquisition and distribution of a resource for a fee or other compensation” (p.1597). Commercial sharing programs, on the other hand, can be defined as “marketer-managed systems that provide customers with the opportunity to enjoy product benefits without ownership” (Lamberton and Rose, 2012, p.109). A definition of e-commerce can be described as commerce and business activities that are performed over electronic networks (both fixed and mobile networks), including upstream and downstream supply chain activities, and consumer purchases that are initiated through electronic means (Lee and Kong, 2003, p.150). Alternatively, e-commerce is a system of conducting business activities using the Internet and other information technologies (Zhou, 2004, p.56).

2.3 The concept of sharing and its growing importance

Three forms of collaborative consumption namely: product service systems, redistribution markets and collaborative lifestyles as specified by Botsman and Rogers (2010a), have also been discussed by Albinsson and Yasanthi Perera (2012). The first form of collaborative consumption relates to payment-based collaborative consumption, where consumers have to pay a specific amount of money in order to be able to initiate and sustain their consumption. Singapore-based Rent-A-Toy is a good example for this specific form of collaborative consumption mentioned by Albinsson and Yasanthi Perera (2012). Secondly, collaborative consumption can be facilitated via redistribution markets. Online portals such as Marktplaats, Craiglist and Peerby each play an instrumental role in the facilitation of this form of collaborative consumption. Thirdly, collaborative consumption can also be perceived as a collaborative lifestyle in which groups of consumers are formed on the basis of their common interests. The sharing

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of gardens, workspaces, and parking lots can all be referred to as examples of collaborative consumption as a collaborative lifestyle. According to the classification offered by Botsman and Rogers (2010a), car sharing relates to all three categories of collaborative consumption. Specifically, membership in car sharing schemes is associated with payments of varying regularity and consumer enjoying the benefits of a car without owning it, there are many websites that serve as a distribution platform for facilitating car sharing, and car sharing groups can be organized on the basis of common interests such as car sharing with private owned cars.

Four underlying principles of initiating collaborative consumption are identified by Botsman and Rogers (2010b) as follows: critical mass, idling capacity, belief in the common, and trust between strangers. Critical mass relates to the necessity for the presence of a required number of individuals with common needs who might be satisfied via collaborative consumption. Idle capacity, on the other hand, is associated with a core assumption of presence of product and service offers in large amounts that can be redistributed. Keymolen (2013) stresses that online platforms and other internet-based technologies can effectively assume the role of distributor in dealing with the idle capacity. This has been the case with car sharing, as discussed further below in more details. The principle of belief in the common, as proposed by Botsman and Rogers (2010b), is associated with the facilitation of collaborative consumption while at the same time providing social value to the community. Online environments such as Wikipedia or Open Street Map can be mentioned as clear illustrations of belief in the common as being in practice. Lastly, the principle of trust between strangers has been specified as a critical success factor for collaborative consumption. Keymolen (2013) argues that rating systems play an instrumental role in terms of regulating the element of trust between members.

According to the levels of exclusivity and rivalry, Lamberton and Rose (2012) divide sharing into four broad categories. Specifically, the typology of sharing systems as proposed by Lamberton and Rose (2012), in Table 1, perceives rivalry as “the degree to which the use of the product by one customer subtracts from the availability of the product to other consumers” (p.110), whereas exclusivity refers to the “degree to which access to the product can be controlled or restricted to a group of consumers according to some criteria” (p.110). According to the typology of Lamberton and Rose (2012), car

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sharing systems belong to quadrant 3 on the basis of their classification, and such a system is marked with openness to anyone willing to participate. However, Lamberton and Rose (2012) rightly note that participation in a sharing program in quadrant 3 does not guarantee availability at any point in time. In other words, members of car sharing schemes can access cars only if cars are available at that point in time.

Table 1

Typology of sharing systems

Note. Typology of sharing systems by rivalry and exclusivity. Adapted from “When is ours better than mine? A framework for understanding and altering participation in commercial sharing systems.” by C. P. Lamberton and R.L. Rose, 2012, Journal of Marketing, 76(4), 109-125. Copyright 2001 by the American Marketing Association. Adapted with permission.

Quadrant 1: Public goods sharing

• Public parks • Public roads • Public schools Quadrant 2: Acces/Club goods sharing

• Country- and private clubs/restaurants • Church recreation facilities

• Book clubs

Quadrant 3:

Open commercial goods sharing • Machinery rings • Tool libraries • Food banks

Quadrant 4

Closed commercial goods sharing • Health maintenance organizations • Surrogacy banks

• Cell phone sharing plans Lower rivalry Lower exclusivity Higher exclusivity Higher rivalry

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Although the absence of ownership by one person can be specified as a fundamental aspect of sharing, the current range of literature devoted to the research area indicates to the presence of a link between sharing and ownership. According to Peck and Shu (2009), merely touching a product can create the perception of ownership. Moreover, Peck and Shu (2009) make a distinction between psychological and legal forms of ownership, and they convincingly argue that while the act of touching has no impact on legal ownership, its effects on ownership at a psychological level may prove to be significant.

2.4 Car sharing and its implications

Present-day car sharing has been intertwined with the internet, and this forms a major difference from car sharing in the past. But before we explain this role of the internet, we will first explain the concept of car sharing versus ownership, and which kind of car sharing we want to research. One of the most concise definitions mentioned by Millard-Ball (2005) defines the term car sharing as “a membership program intended to offer an alternative to car ownership under which persons and entities that become members are permitted to use vehicles from a fleet on an hourly basis” (p.2-2). Ownership, on the other hand, can be defined as “the act, state, or right of possessing something” (Oxford Dictionaries, 2015) and within the scope of this paper ownership refers to the act, state or right of possessing a car by a single individual or household. The sole owner is fully responsible and has complete property rights to fully determine if and to whom he wishes to share the object. The ownership also gives the rights to change the object, to use it, and to commercialize it (Snare, 1972). On the basis of discussions above, it is evident that car sharing is an alternative to ownership and this study is primarily focused on car sharing as a means to save costs with little or no compromise to the convenience of travelling.

The idea of car sharing is quite easy because users get access to a private car without the hassle of ownership responsibilities and costs. Car sharing has its roots in Europe over 65 years ago, and has become quite popular since the last decade, and it even is becoming a worldwide phenomenon that had over one million customers worldwide in 2010 (Shaheen & Cohen, 2013). However, car sharing in 2010 with 31.660 cars was only 0.00003 % of the total worldwide vehicle population in 2010 of 1,015 billion

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vehicles in use (Shaheen & Cohen, 2013; Wards auto, 2011). With an average of 40 members per shared car in 2010, this percentage is still a very small part of the total vehicle population (Shaheen & Cohen, 2013). There are a number of explanations for the growing popularity of car sharing. According to Katzev (2003), people do engage in car sharing due to their occasional need for a vehicle and financial savings.

. Table 2

Benefits of car sharing

Note. Benefits of car sharing in three levels. Adapted from “Car-Sharing: Where and how it succeeds (p. ES-4), by A. Millard-Ball, 2005, Transportation Research Board. Copyright 2005 by the Transportation Research Board. Adapted with permission.

Level _Benefits

Individual/business • Cost savings • Greater mobility • Convenience

Transportation system • Lower parking demand • More-fuel efficient vehicles

• Less vehicle travel • More transit ridership Environment/community • Lower emissions

• Cost savings for development • Less congestion • Better urban design

• More compact development

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Similarly, Botsman and Rogers (2010a) associate advantages of sharing and collaborative consumption with reduced personal burden in terms of cost and environmental impact. Moreover, Katzev (2003) convincingly argues that the distance to the nearest vehicle station and length of membership of a car sharing program represent two major factors impacting usage of car sharing

Millard-Ball (2005) argues that car sharing practices can produce substantial benefits in individual, business, environmental and community levels, along with its benefits to the transportation infrastructure. Table 2 illustrates the full range of benefits associated with car sharing as proposed by Millard-Ball (2005). Globally, there are a variety of car sharing business models, as categorized by Shaheen and Cohen (2013) such as “neighborhood residential, business, government and institutional fleets, transit-based, college and university-transit-based, and personal vehicle sharing (use of privately-owned autos employed in shared-use vehicle services)” (p.6), whereas personal vehicle sharing include peer to peer car sharing. The type of car sharing analyzed in this paper in particular relates to a membership of a car sharing company. Accordingly, it is important to specify that findings of the research presented and discussed in consequent chapters relate to this specific form of car sharing.

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2.5 Potential role of the internet in facilitating car sharing

The literature review sheds some light onto factors that impact collaborative consumption as aided by the internet. For Keymolen (2013), trust plays a paramount role in the emergence and extent of collaborative consumption in the online environment. Keymolen (2013) acknowledges online rating systems as an important tool that is used to establish trust from an interpersonal level, and also stresses the importance of further developing online rating systems. Generally, car sharing as just described above depends largely on using the internet. Digital technologies have enabled organization of car sharing via access-based booking systems that are usable on all kinds of media on a daily basis. Therefore, we will explain the relationship of car sharing with the internet. The internet was defined by Belk (2014) as: “in a broad sense, the internet itself is a giant pool of shared content that can be accessed by anyone with an internet connection, a browser, and a government that allows access to most or all web content” (p. 1595). It has

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been noted that "e-commerce today offers so much luxury that growth of sales through physical stores has declined compared to that of online marketplace" (Mohapatra, 2012, p.13). The relevance of e-commercialization has proved to be significant to almost all industries on a global scale, and transportation and automobile industries are no exception.

The internet was founded in the 1960’s by DARPA, which is the Defense Department of Advanced Research Projects Agency of the US government. They first called it ARPA-net (Internet Society, 2014). It was a system that enabled a connection to a network of computers that could transmit small packages of digital data from and to each connected computer. In 1969 there were only four computers connected to this ARPA-net, and they were only used by universities in the US. With the invention, mass production and worldwide distribution of the personal computer this ARPA-net was able to connect thousands of more computers, and so this university network was opened to the rest of the world and is now commonly known as the internet. In the last decade, the widespread use of smartphones, laptops, and tablets has helped to make internet usage more flexible and mobile. The packages of data that were transmitted through the original Web 1.0 version of the internet were a wide variation of data packages for a range of applications like e-mail, photos, video files, audio files and web pages. These kind of transmissions were a sort of one way traffic in which users could only access data, but could not interact with the website nor were able to react to another; this is also the main difference from what is now known as the internet Web 2.0 (Belk, 2014).

The first to coin the term ‘Web 2.0’ was Dinucci (1999), who described it as fragmentation of the internet into countless permutations. Web 2.0 does not change the underlying technology of the internet, but it does change the use of it, the hardware, software and how it looks on the front end. Thereby, the internet as Web 2.0 is more flexible in its access through the use of different media like TV, cell phones, laptops, hand held game machines, and many other devices to be invented in the future. Another author, who more specifically defined Web 2.0, was O’Reilly (2005), who stated that "Web 2.0 is the network as platform, spanning all connected devices” (p. 17) and “creating network effects through an ‘architecture of participation’ and going beyond the page metaphor of Web 1.0 to deliver rich user experiences” (p.17). DiNucci (1999) and O’Reilly (2005) emphasize the interactivity of Web 2.0 and the usage of multiple

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connected devices compared to Web 1.0. Consumers are now able to interact with organizations and others, to add, share and to use their content, as well as that of others. Some examples of Web 2.0 are: wikis, blogs, video and music sharing sites, web applications, hosted services, and networking sites. With the evolution of the internet to Web 2.0, it can be used as an internet facilitator for sharing and using economic services and goods by granting access.

The vast expansion of internet usage in combination with the widespread use of mobile devices has created fertile ground for the rapid growth of car sharing in the last decade. As a result, internet technology business models that are based on market-mediated-access, such as car sharing, are able to gain popularity (Belk, 2014; Bardhi and Eckhardt, 2012). Networks are increasingly becoming the new markets, and these networks facilitate other new ways of property and consumption like an increasing popularity of sharing through market mediated access (Rifkin, 2000).

2.6 Internet-aided car sharing as an industry changing innovation

2.6.1 The theory of disruptive innovation

The continuous process of industrial renewal was first explained by Schumpeter (1942) with his theory of creative destruction. According to this theory, dominant industries transform and become obsolete as a result of the invention and application of innovations by other firms. Schumpeter’s theory of creative destruction was later more detailed by Abernathy and Utterback (1978). They claimed that when a new technology emerges, firms will introduce a number of different designs pertaining to the technological device in a so-called pre-dominant design phase, but after a while one of these designs will become the industry standard. Once the standard design becomes broadly accepted, the dominant design is set. Thereafter, competition will focus more on process innovations and efficiencies resulting in cost reductions and economies of scale. This all helps to get a broader market acceptance of the dominant design to such extent that other designs become obsolete (Abernathy & Utterback, 1978). Process

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innovations are defined by the Statistical Office of the European Communities (2005) as: “If the innovation involves new or significantly improved methods, equipment and/or skills used to perform the service, it is a process innovation” (p. 53).

Bower and Christensen (1995) were the first to define a more specific explanation of new technologies as a source of industry renewal and coined the term ‘disruptive technology’ which they define as “disruptive technologies introduce a very different package of attributes from the one mainstream customers historically value, and they often perform far worse along one or two dimensions that are particularly important to those customers” (p. 45). These customers therefore do not want to use the new technologies and the incumbent firms therefore see the disruptive technology as not attractive enough to offer to the market. As a consequence the new technology will only be used in niche segments consisting of new users who have non-standard requirements. Therefore this will give new firms the possibility to enter the market and fulfill the needs of customers in these niche segments (Bower & Christensen, 1995). The unattractiveness of the market niches leads the dominant companies to disregard disruptive innovations as offering competitive strength, although they are more easy to use and cheaper (Bower & Christensen, 1995). The disruptive technologies can continue to improve over time up to the point that they are able to attract mainstream consumers. They do this by becoming better over time through improvements to their product attributes and, therefore, become able to establish themselves in the mainstream markets. Due to the disruptive technologies becoming more attractive, the mainstream customers start switching to the new technology that, from this point on, replaces the mainstream technology as the new dominant player in the market (Bower & Christensen, 1995; Hüsig et al., 2005; Adner, 2002). As Christensen and Raynor (2003) have emphasized in their improvement of the original theory of disruptive technology of Bower and Christensen (1995), disruptiveness is more about disruptive innovations in contrast to mere technology and they even replaced the term ‘disruptive technology ’by the term ‘disruptive innovation’. They did this because the term ‘disruptive innovation’ broadens the practical use of the theory, and so the emergence of new services and new business models could also be used as input for describing the process of disruptive technologies. The effect of disruptive innovations on firms and industries as initiated by Bower and Christensen (1995) is also analyzed by Danneels (2004). One of

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the five key issues Danneels (2004) describes is the importance for firms in general to being customer oriented in order to be able to adjust their services and products to the changing market needs like for example car manufacturers in the case of car sharing. For the process of firm renewal it is important for firms to be able to develop competences that link technologies and customers and thus further research should focus on the advantages of being customer oriented in relation to disruptive innovations (Danneels, 2002). The way that users perceive new technological innovations has an important influence in shaping the technological innovation in its further improvement and broader acceptance by the market (Truffer, 2003). Markides (2006) warns that not all innovations can be specified as disruptive innovation. Moreover, Markides (2006) divides innovations into two categories: business model innovations and radical product innovations. According to Markides (2006) there are differences between the two in terms of business challenge as well as implications for managers, although both business model and radical product innovations can be disruptive. On the basis of the above categorization proposed by Markides (2006), the emergence of car sharing practices aided by the internet can be categorized as a business model innovation. This is because the promotion of car sharing, as assisted by the internet, is not a radical product innovation; rather, it can be interpreted simply as the promotion of existing products via a different platform, namely the internet.

2.6.2 Industry change and product discontinuity

The increasing popularity of car sharing can also be analyzed from the viewpoint of industry evolution. McGahan (2004) introduces four different scenarios for industry change, which are illustrated in Table 3, as trajectories of industry change. As illustrated in Table 3 each development trajectory is associated with certain implications to core assets and core activities. On the basis of the Trajectories of Industry Change, it can be argued that changes in the transportation industry marked with the increasing popularity of car sharing are associated with no threats to assets, and core activities of businesses that are operating in the transportation industry. The increasing popularity of car sharing practices as aided by the internet can be classified as progressive change in the transportation industry. This is because car sharing is not a radical

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change since it already exist over more than forty years and the integration of internet-related technologies to the facilitation of car sharing involves incremental testing, thus justifying its position as a progressive change. It is important to clarify that while progressive change appears as the most likely scenario for changes in the transportation industry as impacted by internet-aided car sharing, questionnaire findings presented in chapter 4 and discussed in chapter 5 of this research are set to play an instrumental role in terms of generating conclusive findings regarding the classification of car sharing within the Trajectories of Industry Change.

According to McGahan (2004), the concept of industry evolution is only relevant for industries that are on their progressive and creative paths from the Trajectories of Industry Change, as illustrated in Table 3. Generally, the process of industry evolution can be divided into the following three stages as proposed by McGahan (2004): The first stage involves the point between fragmentation and shakeout. McGahan (2004) considers a low volume of sales as a natural pattern during the initial fragmentation phase where firms focus on a variety of market and product approaches. However, the event of shakeout increases the volume to a considerable extent. The second stage involves the point between shakeout and maturity where firms focus more on process innovations. This stage is reached when the growth rate of aggregate volume in the industry stops increasing. The third stage covers the point between maturity and decline. In the decline phase firms will focus on incremental efficiency improvements and try to retain profitability.

While explaining the industry life cycle, McGahan (2004) warns companies that face radical or intermediate changes you may end up trying to renew your position in an industry that will no longer generate significant returns. (p. 93). At the same time, it is important to acknowledge that the exact nature of these changes is difficult to forecast due to the relevance and impact of a wide range of additional factors. These factors include but not limited to macroeconomic environment, political stability, shifts in customers wants, needs and various types of social changes with implications on consumer behavior. Determining in which stage of the process of industry evolution car sharing should be classified, is thus a difficult process but important for the companies concerned.

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Table 3

Trajectories of industry change

Note. Trajectories of industry change by core and core activities. Adapted from “How industries change.” by A. M. McGahan, 2004, Harvard business review, 82(10), 86-94. Copyright 2004 by the Harvard Business School Press. Adapted with permission.

Product discontinuity emerges as another business concept that relates to the increasing popularity of car sharing practices. Technological discontinuities are specified by Anderson and Tushman (1990) as “innovations that dramatically advance an industry’s price vs. performance frontier” (p.604). Technological discontinuities are perceived to trigger a time period of upheaval that comes to end with the emergence of a dominant design (Anderson & Tushman, 1990). Moreover, a cyclical model of

Radical change

Everything is up in the air

• landline phone manufacturers • travel agencies

• overnight letter delivery services

Creative change

The industry is constantly developing assets and resources.

• the motion picture industry, • ownership of sports teams, • investment banking

Intermediating change Relationships are fragile.

!

• automobile dealerships • investment brokerages • auction horses

Progressive change

Companies implement incremental testing and adapt to feedback. ! • online auctions • commercial airlines • long-haul trucking T hr ea te ne d Threatened Not threatened N ot thr ea te ne d Core Activities C or e As se ts

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technological change, proposed by Anderson and Tushman (1990), explores the timing and patterns of emergence of dominant designs from technological discontinuities. According to Anderson and Tushman (1990), industry-specific innovations that they refer to as ‘technological discontinuities’ emerge at rare and irregular intervals that result in significant advantages to businesses in terms of cost or quality. These technological discontinuities are different from continuous incremental innovation in terms of scale of advantages gained. Product discontinuities caused by massive industry specific innovations change competition realities for businesses operating within the industry with direct impact on business strategies of the business. Chapter 5 contains discussions about the nature and extent of relevance product discontinuity concept towards the research problem on the basis of the primary data.

2.6.3 Consumer perceptions and car sharing

An important factor for the market acceptance of innovations and their further development is the way in which consumers perceive them (Truffer, 2003). Consumer preferences can be used to determine consumers criteria for preferring a new technology instead of the old one (Adner & Snow, 2010; Obal, 2013; Tripsas, 2008).

Firnkorn and Müller (2012) mention an important shift in the role of cars in their study in the perception of people in general and the young segment in particular in Germany. Specifically, according to Firnkorn and Müller (2012) as taken from Bratzel and Lehmann (2010) the role of the car as a ‘symbol of status’ is declining in the age group of 18 to 25 years and cars are increasingly being perceived on the basis of their primary technical function namely as a means of transport to get from one place to the other. It can be argued that such a tendency in consumer perception may have a positive impact on consumer attitude towards car sharing, because the ‘symbol of status and achievement’ associated with car ownership appears to be become less important for young people (Delbosc & Currie, 2013). The same issue is also addressed by Kuhnimhof, Armoogum, Buehler, Dargay, Denstadli & Yamamoto, (2012) by investigating trends in the travel behavior of young adults in Germany, Great Britain, Japan, Norway and the USA using secondary data from more than twenty National Travel Surveys. The study has confirmed

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the tendency for decreasing car ownership among young people in general and young males in particular and Kuhnimhof et. al. (2012) link this tendency to the increasing popularity of information and communication technology. Specifically, Kuhnimhof et. al. (2012) argue that inability to use information and communication technology devices when driving might have caused the decline of driving among young people and these devices also may have replaced cars as ‘symbol of status’ among young people.

According to earlier research by Porter and Donthu (2006), internet usage patterns among people are heavily impacted by a range of factors such as age, education, income level, and race. Moreover, the findings of Porter and Donthu (2006) indicate that, although the effects of access barriers can prove to be significant, user perceptions about ease of use and the usefulness of the internet can also have substantial effects on usage patterns. Within the context of this study, in particular, the findings of Porter and Donthu (2006) may indicate that the perception of ease and the usefulness of the internet, in terms of its assistance with car sharing, may have positive implications on the level of the popularity of car sharing practices via online tools. Critical review of a relevant set of literature has found certain linkage between online activities of individuals and their car usage patterns. For example, collecting primary data from households in Wales and using multivariate regression model for data analysis, Le Vine, Latinopoulos and Polak (2014) have found that generally, internet usage was associated with higher level of car usage. In other words, internet users were found to drive more compared to individuals who do not use internet. However, findings of the same research indicate that among internet users, individuals who spent excessive time online tend to drive less compared to individuals who use internet moderately. Le Vine et. al. (2014) stress the need for further research in this area and this paper addresses this need to a certain extent.

A recent study to car sharing as facilitated by the internet is the research topic of a study by Bardhi and Eckhardt (2012) in which the nature of access involved with car sharing in contrast to car ownership is analyzed. In their explorative study they find four dimensions that matter in the case of car sharing and they suggest that more research is needed to the perceptions of potential users of car sharing. John (2012) argues that the definition of sharing has changed due to the internet and he concentrates on three main features of sharing in the context of the world wide web namely: objects of sharing, usage of the word

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‘share’ without any object and sharing as a function of social networking sites. He also recommends to further study the economic concept of the relationship between sharing and the internet.

John (2012) even states that the historic trend of increasing car use is slowing down due to the financial crises and because of the existence of the internet. In his research he examines how car usage patterns change because of the existence of the internet changes the way that people can access goods and services. He suggests that further research has to be done to study the way people use and perceive internet technology and how this influences their transportation modes.

The integration of the internet as well as information and communication technologies to facilitate car sharing practices might be claimed as a new technology as the internet alters business models for renting cars, to a considerable extent. It can be argued that the role of internet as a factor that can contribute to the emergence of car sharing depends on the nature of the attitude of people towards the internet. In other words, it is important to assess the link between the nature of perception of internet by individuals and evaluate the impact of this perception on car sharing. It must be mentioned that several authors have researched different dimensions of the topic of if this study before. Several of these studies are discussed above and these form only a small part of the total literature that was studied in the research process. However a set of important aspects of the research problem are addressed such as: An important shift in the perception of cars (Firnkorn & Müller, 2012), the linkage between increasing internet popularity and decreasing car ownership (Kuhnimhof et. al., 2012), the relation between the level of internet usage and car usage (Le Vine et al., 2014), the relation between user perceptions and usage patterns of the internet (Porter & Donthu, 2006), the nature of access involved with car sharing (Bardhi & Eckhardt, 2012) and changing car usage patterns in relation to the internet (John, 2012).

Although the findings of the literature review conducted highlight several aspects of the subject of this study there remains still an essential gap in the research area unexplored. Particularly the degree and kind of relationship between perceived internet usage and car sharing perceptions has not yet been researched. Elimination of this gap in the literature could result in developing useful strategies for further supporting car sharing. Therefore, this study would like fill this important gap in the research field and wants to

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examine and test how customers perceive internet usage and car sharing. This results in the following

hypothesis:

Hypothesis 1: A positive perception of internet usage has a positive effect on the perceptions of car sharing.

2.7 Impact of demographic factors on internet usage and car sharing

2.7.1 Urban living, internet usage and car sharing

When an innovation has the potential to attract potential consumers, then it is able to enlarge market share substantially (Govindarajan & Kopalle 2006; Markides, 2006). If we look at car sharing, several social and economical developments have a strong influence on substantially attracting potential consumers. Car ownership has had its peak in many urban regions throughout the world (Newman & Kenworthy, 2011). Young people are particularly less interested in car ownership, due to changes in their economic conditions and social life and they see car ownership as less important for signaling their identity (Belk, 2014; Kuhnimhof, et. al., 2012). People and especially young adults show a strong preference to for living in urban areas close to their jobs (The World Bank, 2010). In order to meet up with the requirements of this vast growing group of consumers for transportation, temporary access-based car sharing does make sense because it leaves out all the hassle of car ownership, like parking problems, high costs, and maintenance (Belk, 2014). Higher education levels, decreasing workforce participation and postponing having children and higher shares of urban population are all socio-economic factors that make young people in lesser need of owning a car (Kuhnimhof, et. al., 2012). According to Belk (2014), for young people the role of car ownership as a means for self-definition is experiencing a rapid decline. One factor that contributes to this decline is that young people prefer to live in the city instead of the suburbs. Besides a range of other factors partially causing the decline relate to expenses associated with the purchase, maintenance and parking. Therefore, short-term car rentals are emerging as an attractive

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alternative for young people in terms of meeting their transportation needs. Higher access to and popularity of internet in urban areas compared to rural areas and the main reasons behind such a difference were found to be related to greater access to education, income and other resources in urban areas (Chen & Wellman, 2004; DiMaggio & Hargittai, 2001). Crang, Crosbie and Graham (2006) confirm this viewpoint by referring to relevant statistical data using the case study of the UK. Specifically, Crang et. al. (2006) illustrate that in North East of England the levels of internet usage amounted to 43 per cent and home access to internet was 41 per cent, whereas similar indicators in London amounted to 64 per cent and 56 per cent respectively. Nevertheless, according to the findings of Forman, Goldfarb and Greenstein (2005), engagement in internet-related activities is more likely in rural areas compared to those in urban areas, given all other factors are controlled. Methodology used by Forman et. al. (2005) involved statistical observations of Harte Hanks Market Intelligence CI Technology database and analysis of internet adoption patterns for 86,879 organizations having more than 100 employees. This study has also confirmed less variation in internet adoption patterns in large urban areas compared to other areas.

It is important to note that various individual aspects of the research problem have already been explored previously by different authors and discussions provided above represent only a fraction of the full range of literature reviewed during the research process. Literature review findings indicate although a set of important aspects of the research problem such as the relationship between residing area and car ownership (Newman & Kenworthy, 2011), the relationship between the age of individuals and their residing area preferences (The World Bank, 2010), the analysis of changes of travel behavior among young adults (Kuhnimhof, et. al., 2012), location-related factors impacting access to the internet and analysis of implications of income, education and others on access to internet (Chen & Wellman, 2004). However, findings of the extensive literature review completed as a part of this study confirm that there is an important gap in the research area that has to be addressed. Namely, no attempt has been made up to date to study the nature and the extent of the relationship between urban living, internet usage perceptions and car sharing perceptions. Importance of elimination of this gap in the literature can be associated with the formulation of effective strategies to promote car sharing with positive implications in multiple levels,

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as discussed above. In simple terms, in-depth knowledge about the linkage between urban living, internet usage perceptions and car sharing perceptions can assist in increasing the level of popularity of car sharing in urban areas taking into account location-specific factors. Accordingly, in order to eliminate this important gap in the research area this study tests the following hypothesis:

Hypothesis 2: Urban living has a positive and moderating effect on of the relationship of perceived internet usage on the perceptions of car sharing.

2.7.2 Effects of age on internet usage patterns and their relationship to car sharing

A factor that seems to influence the views of younger generations and their perceptions of car sharing and car ownership is the influence of the internet. Young people have grown up with the internet in existence, and are nicknamed ‘Generation Y.’ According to Spangenberg and Lampert (2013), they seem to be constantly ‘on line’ using a variety of devices like smartphones, laptops, and iPads. When using the internet, younger people are usually the heaviest users, whether it be as creators or users of content, or in a range of sharing activities like blogging, messaging, chatting, picture sharing and gaming (Riegner, 2007). More than 70% of young people between the ages of 13 and 24 use the internet extensively, and this group will expand enormously in the near future (Riegner, 2007). Using the internet is fully incorporated in the daily lives of young people, and they use it for numerous daily activities like shopping, information seeking, or entertainment. These young people do this individually, but also collaboratively and they do this for divergent sets of goals, such as entertainment or practical use. This digitized interaction makes business models using the internet easier, cheaper, and more effective in being accepted into their lives (Madden & Fox, 2006; Zajicek, 2007). In its yearly technology report, Cisco (2011) found that two-thirds of college students prefer internet access to car ownership, as is also referred to by Business Week (2012) “Though the car is still a gateway to independence, Generation Y has more ways to connect with the outside world than young buyers of past generations” (§3). All of these socio-economical and internet usage factors strongly indicate that car sharing might be able to especially attract

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young people. Instead of choosing car ownership, they might prefer car sharing due to its better services. Because these young people are the new generation of car users, this can have major implications for car sharing as a transportation mode and to car ownership. For a young generation that has grown up with IT technology in a period of economic crisis, the use of car sharing is very appealing (Kuhnimhof et al., 2012). They might have another perception of car ownership and might find ownership too expensive or too much effort with all the maintenance (costs) and parking problems in urban areas (Firnkorn & Müller 2011; Belk, 2014).

A noteworthy study that explores the relationships between age and internet usage patterns was authored by Trocchia and Janda (2000). Focusing on the online behavior of aged individuals, this particular study found old consumers to be growing yet under-represented as a segment of internet users that possesses more discretionary time and financial resources compared to internet-users of other age categories. From this point of view, the facilitation of car sharing as assisted by internet portals might be attractive to the aged segment of the population due to the advantages associated with car sharing coupled with discretionary time and income possessed by older people. According to Kuhnimhof et. al. (2012), the travel behavior patterns of young adults have great implications on the future of the travel industry because such patterns of behavior are likely to persist for a certain duration of time. Furthermore, a follow-up study conducted by Kuhnimhof, Zumkeller and Chlond (2013) confirmed that population aging in general played a significant role in the shift of car usage patterns in Europe and they conclude that this effect is most significant amongst younger age groups. Moreover, attempts have been made to assess the impact of demographic factors on internet usage patterns within the boundaries of workplace settings. In particular, a study conducted by Akman and Mishra (2010) used a survey method of primary data collection to evaluate the effects of age, along with other demographic factors on internet usage patterns at work in Turkey. Their study found that age had a significant effect on the amount spend online and information consumption but surprisingly in their study the older age group were the more heavy users compared to the younger age group. However, it has to be clarified that an interpretation of the implications of the findings of this specific study reflects the level of internet penetration in Turkey, which may be substantially different from the level of internet penetration in highly developed countries.

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To summarize this part, while certain aspects of relationships between age and internet usage have been previously explored, such as popular online activities among young people (Riegner, 2007), unique aspects of the online behavior of aged individuals (Trocchia and Janda, 2000), the role of age in using internet at workplace settings (Akman and Mishra, 2010) and others, there is a gap in the literature that needs to be addressed. Specifically, no previous study has been conducted to evaluate moderating the role of age in impacting the relationship between perceived internet usage and perceived car sharing. On the basis of the discussions above, we wonder if any differences in age groups might influence the perceptions of internet usage on car sharing, or that younger people have more positive perceptions of internet usage and car sharing. Age might function as a moderator in this relationship and, therefore, we in this study would generally expect:

Hypothesis 3: Younger aged groups have a positive moderating effect on the relationship of perceived internet usage on perceptions of car sharing.

Chapter 3: Methods

3.1 Introduction

This chapter explains how the research was conducted and discusses the data, the variables, the analytical technique and research design. The chapter starts with a description of the data and the research approach is explained, followed by a description of the empirical setting and the selection of participants and how the data was gathered. In the second part of this chapter we will explain the variables and the research model that was used to test the hypotheses, followed by a description of the independent variables, dependent variables, moderating variables and control variables. This chapter ends with a discussion of the analytical technique that was used and its research design appropriateness.