The internationalization of companies with a sharing business model : a multiple case study of car-sharing platforms

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Amsterdam, the 22nd of June 2018 Frenay Alexandra

11765194

The internationalization of companies with a sharing

business model: a multiple case study of car-sharing

platforms

Master Thesis

University of Amsterdam, 2017-2018

Master in Business Administration, International Management Supervisor: Dr. Francesca Ciulli

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Statement of originality

This document is written by Student Frenay Alexandra who declares to take full

responsibility for the contents of this document.

I declare that the text and the work presented in this document are 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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List of Tables

Table 1: Definitions of a business model

Table 2: The three types of cities, based on the classification on Hymer (1972)

Table 3: Key information of the cases with a business-to-consumer sharing business model Table 4: Key information of the cases with a peer-to-peer sharing business model

Table 5: Features for the cities classification Table 6: Overview of data sources Table 7: Themes developed Table 8: Zipcar Table 9: Car2Go Table 10: DriveNow Table 11: Ubeeqo Table 12: Snappcar Table 13: Turo Table 14: GorMore Table 15: Drivy Table 16: Overview of the results Table 17: Overview of propositions and results

13 24 43 43 45 47 48 53 55 57 59 60 61 62 63 65 66

List of Figures

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Abstract

The sharing economy has recently grown at an unprecedented pace and companies with a sharing business model have quickly seized international opportunities. Two sharing business models can be distinguished: business-to-consumer (B2C) and peer-to-peer (P2P). The main difference is the owner of the product to share, which is a company in the case of a B2C sharing business model and an individual in the case of a P2P sharing business model. The characteristics of the sharing economy suggest that a sharing company does not behave in the same way as a traditional one. First, a traditional company sells products, while a sharing company provides products to share, which is more complex. Second, the sharing economy bases its success on the interaction and interdependency of users on a digital platform, which is not the case for a traditional one. Indeed, a company with a sharing business model combines a digital component (the platform) and a tangible one (the product to share). Given the rapid expansion of the sharing companies, their specific aspects and their different business models, the internationalization of these companies represents an interesting topic to investigate since the internationalization process may differ. This study aims to explore how the companies with sharing business models internationalize. In order to analyse this phenomenon, a qualitative multiple case study is conducted. Eight companies in the car-sharing sector are selected; four with a B2C sharing business model and four with a P2P sharing business model. To answer the research question, an analysis of documents made publicly available by the company is performed. The results reveal that the internationalization of companies with a sharing business model can differ from traditional companies. Furthermore, the differences between the two sharing business models lead to dissimilarities in their internationalization behaviours.

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1. Introduction

Uber was launched for the first time in the United States in 2010, and is present today in 83 countries and in 674 cities around the globe (Uber, 2018). AirBnb was created in 2008 and has expanded into almost 200 countries (AirBnb, 2018). These two examples show that the sharing economy has grown at an unprecedented pace worldwide, and will continue this exponential ascent (Deloitte, 2017). Yet, there are some drivers behind this rapid growth. Indeed, the boom of the internet and new technologies leads companies to develop innovative business models (Chesbrough and Rosenbloom, 2002; Parente et al., 2017). During the past few years, consumers have moved incrementally towards a new habit: sharing. Sharing a bike, a car or a book has increasingly become part of the everyday life of many people (Cohen & Kietzmann, 2014). Platforms such as AirBnb, Drivy or GetAround, which facilitate sharing, have invaded the market.

Several scholars have investigated the sharing economy topic, highlighting the presence of different views concerning its definitions and boundaries (Belk, 2014; Botsman & Rogers, 2010; Munoz & Cohen, 2017; Olson & Kemp, 2015). Some scholars adopt narrow definitions, while others suggest broader definitions. The narrow definitions exclude the fact that a business can also make available products to share, and include only private individuals as providers, whilst the broader definitions include different kinds of offline and online sharing, and include the notion of purchasing. Therefore, this study chooses to use the definition of Olson and Kemp (2015), integrated with two key elements: the environmental benefits and the social interactions fostered by the sharing economy. This definition is an intermediate one encompassing the relevant elements for this study:

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7 1. Users are individuals, businesses, or machines;

2. There is excess supply of an asset or skill set and sharing creates economic benefit for both the sharer and the user [as well as environmental benefits] ;

3. The internet provides the means for communication, [social interactions] and coordination of the sharing. “

(Olson and Kemp, 2015, p.4).

From this definition, four important dimensions of the sharing economy can be highlighted. First, there is an economic dimension due to excess supply of goods. Second, there is the digital dimension via a platform. Third, there is the creation of communities through sharing, which is a social aspect to the sharing economy. Fourth, since underutilized assets are used, environmental benefits accrue via a reduction of waste and one can observe an optimization of the use of resources and a decrease in the overproduction.

These four dimensions, derived from the Olson and Kemp (2015) definition of the sharing economy, suggest that the business models of sharing companies are not the same as the business model of ‘traditional’ companies. More precisely, a sharing company bases its success on the interaction and interdependency of users on its platform, which is not the case for a company with a traditional business model (Brouthers et al., 2016). Companies with a traditional business model focus on the sale of products, while companies with a sharing business model focus on the sharing of products. In other words, a company with a traditional business model sells products and the consumer becomes the owner of the product, whereas a company with a sharing business model gives only the access to a product to share.

Furthermore, this definition allows this research to integrate two types of business models: the business-to-consumer (B2C) and the peer-to-peer (P2P) sharing business models. The B2C

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8 sharing business model implies that a company, such as ZipCar, gives the consumer access to a product to share (Parente et al., 2017), while the P2P sharing business model is when an individual is the owner of the product and shares it with other peers, such as GoMore (Puschmann & Alt, 2016). The most striking difference between these two models is related to the owner of the product to share, which is a business for B2C and a private individual for P2P. This major difference leads to variations between these models, such as different cost structures or a different feeling of trust (Puschmann & Alt, 2016).

Considering the specificity of a company with a sharing business model (Amit & Zott, 2010; Brouther et al., 2016; Cusumano, 2015; Parente et al., 2018), the internationalization process may differ from that of a traditional company. Given the importance of the digital component in this type of business model, it would face fewer barriers and the costs of doing business abroad, namely the liabilities of foreignness, would be small due to a low physical presence (Luo et al., 2005; Zaheer, 1995). In contrast with this lower liability of foreignness, a company based on a digital platform would experience a high level of liability of outsidership because of the dependence on the networks of users (Johanson & Vahlne, 2009).

Given the fact that there are different sharing business models, which may lead to different internationalization processes, and the increasing international expansion of companies with a sharing business model, these companies represent an interesting topic to investigate. A growing number of studies investigate the internationalization of digital companies on different dimensions, such as the speed of internationalization (Luo et al., 2005; Yamin & Sinkovics, 2016) or location choice (Chen, 2006; Gabrielsson & Pelkonen, 2008). However, despite the rapid escalation in the level of interest for this field, the literature examining the internationalization of specific types of digital companies, i.e. those adopting a sharing business

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9 model are very scarce. Furthermore, even though the digital dimension is important in the sharing economy, the literature on the internationalization of digital businesses is mainly focused on fully digital organizations, while the sharing economy combines a digital component and the sharing of a physical good. Also, studies on the internationalization of digital firms focus on those which sell a product, whereas sharing companies offer temporary access to a product. Additionally, regarding the two types of sharing business models, namely the B2C and the P2P, no studies addresses this difference of ownership in respect of their internationalization. This difference is extremely relevant since it could lead sharing economy companies to have two different internationalization processes. Therefore, this research addresses these gaps in the literature by answering the following question:

How do companies with a peer-to-peer and a business-to-consumer sharing business model internationalize?

In order to respond to this question, this study adopts a multiple case study research design. The car-sharing sector has been chosen as the setting because it has experienced an unprecedented boom and is at a more advanced stage than the other sectors in the sharing economy (Ernst & Young, 2015). Four car-sharing platforms with a B2C sharing business model have been selected: DriveNow, ZipCar, Car2Go and Ubeeqo. Four car-sharing platforms with a P2P sharing business model have been chosen, namely Snappcar, Turo, GoMore and Drivy. These car-sharing platforms have been selected because they operate in at least two countries besides their home country and because they are well-established, having being founded at least two years ago.

The data collected are secondary and have been gathered via documentation made publicly available by the companies, such as press releases.

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10 This study contributes to the literature in two main ways. Firstly, the research provides contributions to the literature on the sharing economy. It contributes to the understandings of the internationalization of sharing business models. Furthermore, it helps to understand that different sharing business models may have different internationalization processes. Secondly, it contributes to the literature on the internationalization because it helps to raise the level of understanding on the internationalization of sharing companies, which have been under-researched by the literature on the internationalization. Indeed, this study focuses on companies which associate a digital component (the platform) and a tangible part (the sharing of goods). Additionally, the goal of these companies is not to sell products, as do the ones with a traditional business model, but to provide to users products to share.

Moreover, this research has practical implications and relevance for managers. It reveals to managers how sharing business expands internationally and how their behaviour differs from that of a traditional company. Furthermore, it shows that managers need to be aware of the sharing business model adopted and that different types of internationalization decisions may be taken.

This paper is structured as follows. In the first section of this paper, an extensive literature review will be performed to explain and define the following theoretical concepts: the business model, the sharing business model and the internationalization. This part will end with the theoretical framework in which the research question and the propositions will be presented. After that, the methodology of this research will be illustrated. Within the methodology, the research design, the case selection, the data collection and the data analysis will be discussed. Then, an analysis of the results in which, first, a within-case analysis for each company will be presented, followed by a cross-case analysis. Following the analysis, a discussion of the results

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11 will be elaborated in which the significance of the findings will be stated, followed by the limitations and the possible future research opportunities of this study. Finally, this paper will end with a conclusion presenting a brief summary of the research.

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2. Literature Review

In this section, the key concepts are developed and defined. First, the concept of business model, sharing economy and sharing business model are explained. Secondly, this paper examines the internationalization theories of companies with a traditional business model and with a digital one. Finally, the foregoing concepts form the basis for the research question addressed in the theoretical framework.

2.1 Business Model

In 1957, the notion of business model was used for the first time as “a representation of reality, a simulation of the real world through a model” (Bellman et al., 1957, p. 474). After that, the amount of literature on the business model remained low until the end of the century (DaSilva & Tkrman, 2014). In the beginning of the 2000s, organizations realized that the business model concept was useful to understand how a company operates (Zarei et al., 2011). This led to an increase in the literature on business models (Wirtz et al., 2016).

Since then, various definitions of the business model construct have been developed. Scholars define the business model in different ways, such as ‘conceptual tool’ or ‘description’ (Zott et al., 2011). According to Teece (2010), the definition of a business model should take into account the revenue and the cost structure of a business. Zott et al. (2011, p.1024) provide a holistic explanation of the business model and define it as a general depiction of how a company does business: “the content, the structure and governance of transactions designed so as to create value through the exploitation of business opportunities”. More specifically, Onietti et al. (2012, p.360) include the notion of internationalization and location choice with “the focus, the locus and the modus” in order to describe a business model. This study adopts the definition of

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13 Osterwalder and Pigneur (2010), which describes the business model as “the rationale of how an organization creates, delivers and captures value” (p.14). This definition is chosen because it is broad, complete and coherent with other definitions of the business model concept. Furthermore, the definition of Osterwalder and Pigneur (2010) is appropriate because it focuses on the business model by taking into consideration its value creation and capture as fundamental features of a business model. Table 1 shows various definitions of the business model.

Author Definition

Chesbrough and Rosenbloom (2002, p. 529) “Business model is the heuristic logic that connects technical potential with the realization of economic value” Onetti et al. (2012, p. 360) “Business model is a way a company

structures its own activities in determining the focus, locus and modus of its business.” Osterwalder and Pigneur (2010, p.14) “A business model is the rationale of how an

organization creates, delivers and captures value”

Teece (2010, p. 179) “A business model articulates the logic, the data and other evidence that support a value proposition for the customer, and a viable structure of revenues and costs for the enterprise delivering that value”

Zott. et al. (2011, p. 1024) “Business model is the content, structure, and governance of transactions designed so as to create value through the exploitation of business opportunities”

Table 1: Definitions of a business model, (Source: Author)

Overall, scholars outline three main components of the business model: the value proposition, the value creation & delivery and the value capture (Bocken et al. 2014; Boons & Lüdeke-Freund, 2013; Roome & Lalouche 2016). Firstly, the value proposition corresponds to the products and/or the services a company offers. In addition, it includes the customer target group

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14 of the company and the relationship with them (Bocken et al., 2014). It is paramount to identify the specific needs of a given group, for instance, that it represents the market which the company is targeting (Tongur & Engwall, 2014).

Secondly, there is the value creation and delivery (Chesbrough & Rosenbloom, 2002; Lepak et al., 2007; Shafer et al., 2005). This represents the means whereby the company creates and delivers the value to the customers. Three key elements are part of the value creation and delivery (Richardson, 2008). The first one reflects the resources and the capabilities of the firm. It includes the potential sources of competitive advantage of the company (Richardson, 2008). The second element contains the activities of a company in order to create, manufacture and deliver the product to the customers (Richardson, 2008). Scholars demonstrate that the creation of value is a key element of the business model (Chesbrough & Rosenbloom, 2002; Osterwalder & Pigneur, 2010; Teece, 2010; Zott et al. 2011). The third component of the value creation and delivery is the value network. It encompasses the relationships with the suppliers, the partners and the customers (Richardson, 2008).

Thirdly, the focus of the value capture is how an organization can monetize the value it creates by one or more revenue models. It denotes the ways a company makes money and from which customer target group this money comes. Moreover, it allows a business to assess its profitability.

These three main components of a business model demonstrate that the creation of value occurs when an organization seizes new opportunities, expands into new markets and generates new revenues streams (Teece, 2010). Moreover, with the growing competition and the boom of technology, companies have to re-invent themselves and be innovative in order to face their competitors. New trends, such as the internet and the use of social media, have entered the

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15 market in a significant manner. That is why, in recent years, a number of startups and incumbents have engaged in ‘business model innovation’ (Chesbrough & Rosenbloom, 2002). Business model innovation is “a way for general managers and entrepreneurs to create and appropriate value, especially in time of economic change [...] The process of designing a new, or modifying the firm’s existent, activity system.” (Amit & Zott, 2010, p 1,2). One example of a business model innovation, in which an increasing number of existing firms and new entrants have engaged, has been the design of sharing economy business models.

2.2 Sharing economy and sharing economy business models

2.2.1 The sharing economy

Thanks to technology and the increasing attention to ecological and social impacts, several sharing-based systems have been recently developed (Albinsson & Perera, 2012; Belk, 2010; Botsman & Rogers, 2010). Companies such as Uber or Airbnb have grown at an exponential pace and have attracted attention to the topic of the sharing economy. The concept of sharing economy has only recently began to attract interest and is therefore not widely discussed by scholars (Botsman & Rogers, 2010). Consequently no established definition is provided.

A core subject of contention among scholars and practitioners has concerned where the ‘boundaries’ of the sharing economy should be set. In keeping with this debate, the definitions of the sharing economy can be categorised into ‘narrow’ and ‘broad’. For example, Stephen Miller (2016, p. 150) developed a narrow definition of the sharing economy, describing it as “an economic model where people are creating and sharing goods, services, space and money with each other”. This definition is narrow because it argues that the sharing economy includes only the sharing performed by individuals, not that performed by businesses. Munoz and Cohen

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16 (2017, p.1) instead proposed a broad definition: “the sharing economy is a socioeconomic system enabling an intermediated set of exchanges of goods and services between individuals and organizations which aim to increase efficiency and optimization of under-utilized resources in society”. The definition of Munoz and Cohen (2017) is broad because it includes both individuals and businesses as providers of goods to share and it considers sharing not only as the act of giving/having temporary access to an under-utilized good but also that of selling/purchasing it. Also, it does not refer specifically to digital technology, thus including sharing occurring online as well as offline. For this study, an integrated version of Olson and Kemp (2015)’s definition is adopted, which is an ‘intermediate’ definition between the narrow and the broad ones, positing that:

“Sharing economy is a market whereby :

1. Users are individuals, businesses, or machines;

2. There is excess supply of an asset or skill set and sharing creates economic benefit for both the sharer and the user [as well as environmental benefits];

3. The internet provides the means for communication, [social interactions] and coordination of the sharing“ (p.4).

This definition includes elements relevant for this study and omitted in the narrow definition (i.e. the fact that a business can also provide products) and in the broad one (i.e. the core role played by digital technology). Furthermore, this definition is integrated with two relevant elements: the environmental benefits and the social interactions fostered by the sharing economy. In the definition of Olson and Kemp (2015), four main dimensions can be highlighted: namely economic, technological, social and environmental. These four dimensions of the sharing economy will be discussed in dedicated sections hereafter.

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2.2.1.1 Economic dimension

A core feature of the sharing economy is its emphasis on efficiency (Gansky, 2010; Rauch & Schleider, 2015). Indeed, the sharing economy allows a cost reduction benefiting both the users and the providers of shared goods. This can be explained by the availability of technology and the data which limit the transaction costs (Parente et al., 2017; Rauch, & Schleider, 2015). Furthermore, Bocken et al. (2014) introduce the concept of under-utilized assets, the life cycles of which can be extended. This can be illustrated by the following situation; a person already possesses a car, a room or a book, and can lend it to a peer in exchange for money.

Besides the financial costs, other types of costs appeared to be indirectly reduced by the sharing economy. For example, the suppression of a physical intermediary, which is substituted by a digital one, does not only reduce financial costs, but it also enables the people to save time and space (Denning, 2014).

2.2.1.2 Social dimension

The second important aspect of the sharing economy is clearly represented by the social interactions (Munoz & Cohen, 2017: Parente et al., 2017). The sharing economy increases the willingness and the capacity of consumers to be involved (Kortmann & Piller, 2016). According to Habibi et al. (2016), the participants in the sharing economy have a high degree of socialization since the sharing economy creates a social network for the users and the providers. Indeed studies reveal that, thanks to the sharing economy, communities have emerged (Piscicelli et al., 2015), and the creation of these communities encourages the participants to come closer to each other. Another important aspect to note is that these communities take time and effort to be created, but they are required for the sharing economy to function well. More precisely, it will

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18 build a culture and tradition in which the members will find a common purpose and a group identification (Habibi et al., 2016).

Although the promise of the sharing economy is that it increases the sense of community and socialization, there is a debate on whether different types of platforms can deliver that promise. Some platforms focus on the social dimension, while others purely on the economic dimension (Bardhi & Eckhardt, 2015).

2.2.1.3 Technological dimension

Another core dimension of the sharing economy is the technology, which allows the internet-based sharing platforms to connect the users (Belk, 2014; Daunorienė et al., 2015; Munoz & Cohen, 2017; Parente et al., 2017; Sundararajan, 2016). A number of scholars agree that technology is a key component of the sharing economy (Belk, 2007; Botsman & Rogers, 2010). Belk (2007) mentions that the technological aspect is the most important aspect of the sharing economy since it allows the large scale sharing of products or services. Furthermore, Botsman and Rogers (2010) demonstrate that it makes possible for organizations to collect a higher number of data in order to offer the best tailored services to the customers.

The boom of the internet has completely changed the market and has led to the development of virtual marketplaces. The arrival of social networks, such as Facebook, Twitter and many others, has modified societal habits and has led people to incrementally integrate the notion of “sharing”, from sharing photos and entertainment to tangible sharing of daily needs such as transport or accommodation (Botsman & Rogers, 2010). Moreover technological innovations, such as online payments and mobile devices, contribute to the evolution of the sharing economy (Botsman & Rogers, 2010).

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2.2.1.4 Environmental dimension

Scholars have highlighted how the sharing economy provides solutions for sustainability and contributes to environmental protection (Ferrero et al., 2015; Munoz & Cohen, 2017; Puschmann & Alt, 2016), by allowing a reduction in production and the optimization of the existing products. An example of environmental benefits is represented by ride-sharing: people going to the same destination can share the ride instead of taking two separate cars. This reduction of car use reduces CO2 emissions and noise pollution. Another example is a person in need of a household good, such as a drill. Thanks to the sharing economy he/she does not have to buy the drill but can borrow it from a neighbour. This sharing behaviour will make the product life cycle longer, thus generating a decline in product purchase and reducing waste.

2.2.2 The sharing economy business models

The characteristics of the sharing economy suggest that the business model of a traditional firm and the business model of a firm in the sharing economy differ significantly. Regarding the value proposition, a company having a traditional business model creates value by selling goods to a customer; the customer becomes the owner of the product after having bought it. Conversely, a firm adopting a sharing business model generates value by providing temporary access to the good (Parente et al., 2017), which is more complex than just selling a product since sharing relates to a continuous relationship with a network of people. In other words, there is a joint ownership of the product; this means that both the user and the provider are responsible for it (Habibi et al., 2016). Thus, the value is created by the providers and the customers of the sharing economy (Kannisto, 2017; Zott et al., 2011).

The value delivery and creation of a company in the sharing economy is different from that of a traditional company. Regarding resources, the main one in the case of a company with a

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20 sharing business model is the technological property, namely the platform. The technology allows companies with a sharing business model to broaden their business to a larger number of consumers compared with a traditional model (Parente et al., 2017).

The value capture relates to sharing the profit. In other words, the sharing economy enables people who have a product to share among users to make money. On the other hand, a traditional company does not share the profit. An example of revenue for the business in the sharing economy is the fee the members need to pay for the subscription to the platform. However, sharing the profit does not concern all companies with a sharing business model. For instance, a company providing a product to share to users does not share the profit, whereas a private individual sharing a product via a sharing platform earns money for the rent of his product. The above explanations reveal that dissimilarities among the sharing business model exist. Indeed, the previous statement suggests that the provider of a good to share can either be a company or an individual. The following section will explain and define the different sharing business models.

2.2.3 The types of sharing economy business models

Although four main dimensions, namely economic, social, technological and environmental, appear to be essential and present in the sharing economy, differences between types of sharing economy business models have emerged. Various scholars classify these business models into different categories (Botsman & Rogers, 2010; Cohen & Kietzmann, 2014; Olson & Kemp, 2015). The main difference that was highlighted by these scholars concerns the ownership of the product to share. This difference generates two sharing business model categories: the business-to-consumer (B2C) and the peer-to-peer (P2P). A company with a B2C sharing business model is the owner of the goods to share and gives temporary access to them to the users of its platform

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21 (Parente et al., 2017). Instead, in the case of a P2P sharing business model, the owners of the goods to share are private individuals, who give access to their goods to other peers. The company does not own the goods to share, but facilitates the connection between the individual providers of products to share and the users (Hernaes, 2015). The owner of the shared product is a private individual who provides a peer with access to it (Cohen & Kietzmann, 2014). This difference in ownership of the shared goods has two main implications.

First, this difference of ownership generates variations regarding the costs for the sharing company. For example in the context of car-sharing, DriveNow, a company with a B2C sharing business model, provides the cars to share to the consumer as well as the maintenance and the parking in the DriveNow Zone (DriveNow, 2018). This represents significant investments and costs for the company. In others words, the companies with a B2C sharing business model face high fixed costs and are capital intensive, since they own a set of assets and their use has to be optimized (Cohen & Kietzmann, 2014). On the other hand, a company with a P2P model is not the owner of the products since it relies on products owned by individuals; consequently its costs and investments differ. Indeed, the companies with a P2P sharing business model have to create a two-sided network from scratch: they have to convince the providers to share their goods (the supply), so that they can begin to attract the potential renters of those goods (the demand) (Parente et al., 2017). Even though a company with a P2P business model needs to make profits, it is not a capital intensive business (Cohen & Kietzmann, 2014).

The second implication of the ownership difference is trust. There is an issue of trust towards the providers of goods to share. In the context of a company with a B2C sharing business model, the provider is the company, while in the context of a company with a P2P sharing business model, the providers are individuals. Scholars claimed that people are likely to have more trust in

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22 a business (B2C) than in an individual (P2P) (Parente et al., 2017; Puschmann & Alt, 2016; San-Martin et al., 2014). When consumers deal with a business, they face the same provider of the good to share on an ongoing basis: the company. Consequently, it is effortless to create and maintain a sentiment of trust. A firm with a B2C sharing business model has a reputation (Weber, 2014), an image and is most of the time known by people. This would strengthen the feeling of trust towards the provider. In contrast, when consumers deal with individuals, it is not always the same individual who gives access to the good to share. In other words, the trust will be dependent on the peer providing the good to share. Thus, the feeling of trust needs to be built at each sharing in a P2P sharing business model.

In a nutshell, the P2P sharing business model and the B2C sharing business model have been recently the subject of various studies. However, few researchers have focused on a comparison of these two types of business models regarding their behaviour, such as their internationalization process.

2.3 Internationalization

2.3.1 Internationalization theory

Today, companies are increasingly expanding internationally in order to find new opportunities. Doing business abroad has become essential for most companies. The internationalization of a company can have different features. In this paper, two relevant features will be elaborated: the location choice and the speed of internationalization.

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2.3.1.1 The location choice

One of the most important features of internationalization is the location choice. Johnson and Vahlne (1977) propose the traditional Uppsala Model in which internationalization is a slow and incremental process. In other words, a company first gains experience in the domestic market before going abroad (Rugman et al., 2011); it then starts the international expansion in locations close to home. Gradually, the company expands into more distant locations in terms of geographic and psychic distance. The reason for this incremental process is that, when doing business abroad, costs, called liability of foreignness, arise (Lu & Beamish 2004; Mezias, 2002; Zaheer,1995). The liability of foreignness represents “the costs of doing business abroad that result in a competitive disadvantage for an MNE (Multinational Enterprise) subunit” (Zaheer, 1995, p. 342). These costs occur since the company is not operating at home but in a new location abroad. When going international, a company faces high managerial and coordination costs (Shenkar, 2012). Moreover, companies need to adapt to a new environment with its local competitors and its regulations. Goerzen et al. (2013) point out that the costs when going abroad occur because of discrimination, complexity and uncertainty. Hutzschenreuter et al. (2016) demonstrate that the larger the distance is, the higher the liabilities of foreignness are, thus lower the probability of success is. That is why, Porter (1996) states that companies are likely to select a location in which related industries are already operating, in order to reduce the costs and to benefit from synergies. Furthermore, others mention that the presence of competitors could be beneficial for a company willing to internationalize. According to Chetty and Wilson (2003), competitors can present some opportunities: “competitors…, may be the best source of complementary resources or up-to-date information in a rapidly changing business environment” (p. 66).

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24 Given the literature on internationalization and more precisely on location choice, it appears thatthe liability of foreignness is an important factor to take into account. Indeed, the liability of foreignness depends on the country or the city chosen. Some scholars have taken the country as a unit of analysis for the location choice. As mentioned earlier, the Uppsala model (1977) suggests that a company first enters a country close by and then goes to a more distant one, thanks to the experience acquired. However, there have been some shifts concerning the focus of the literature. Today, researchers are more likely to center their attention on the regional level rather than on the national level (Goerzen et al., 2013; Iammarino & McCann, 2013). This can be explained by globalization and by the decrease of national borders’ significance (Iammarino & McCann, 2013). Consequently, studying all the different regions and cities would allow a more comprehensive study than taking into account a country as one entity.

In this respect, studies adopt a focus on cities rather than countries such as the one of Beaverstock et al. (2000) or the one of Goerzen et al., (2013). This research on cities use the original study of Hymer (1972) “The Multinational Corporation and the Law of Uneven Development “ in which he has taken cities as the unit of analysis. Hymer (1972) develops a city classification including three types of cities namely I, II and III. These types of cities are all attractive for several reasons. In Table 2, their main characteristics are summarized.

City Type I City Type II City Type III Characteristics -global city

-skilled labor force

-highly developed market - economical, financial, political centers

-less tangible and intangible flows (ie. knowledge) than city type I

-specific industry and presence of related activities -supplies an entire region -small city -production center -cheap labor force -cheap land -availability of natural resources

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25 Examples Paris, Milan, Amsterdam,

London

Liège, Hamilton, Freiburg, Oxford

Girona, Cala d’Or, Baden-Baden, Offenburg

Table 2: The three types of cities, based on the classification of Hymer (1972), (Source: Author) Type I includes the characteristics of the “global cities”, which is a term developed by Goerzen et al. (2013) in their study. These characteristics are a cosmopolitan environment, international connectedness to local and global markets and advanced producer services (Goerzen et al, 2013). Cosmopolitan environment means a high level of social factors, such as culture or education. International connectedness to local and global markets is measured by the flows of tangible and intangible assets in the cities. The last characteristic means that a global city focuses on the specialization of advanced producer services, such as finance, accounting or law (Sassen, 2012). The labor force is highly skilled, which leads to the presence of top universities and R&D centers, allowing a high knowledge flow. The type I city is connected to a global city network by excellent technological networks (ie. internet) and has extensive transportation facilities, such as an airport and transit system. Consequently, type I attracts the attention of expatriates. The presence of international firms in global cities reinforces the attractiveness for new entrants in these types of cities (Nielsen et al., 2017). The type I city is the center for the political, governmental, economic and financial decisions. Therefore, the stock exchange market, the headquarters offices and the media activity take place in type I. Also, the population is more likely to be large due to the attractiveness of this type of city. Goerzen et al. (2013) and Nielsen et al. (2017) show that MNEs have the natural tendency to choose global cities as location. Type II cities are large and have a high population density. Most of the time, MNEs select this location for middle-management departments (Hymer, 1972). It is not unusual that a type II city is specialized in a specific industry. Many related activities are attracted to, and concentrated in,

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26 this type of city. Consequently, MNEs specialized in a specific industry would be attracted by a city in which its industry is already present. In these cities, the economy is relatively strong. However, the tangible and intangible (ie. knowledge) flows are less relevant. Type II cities can have universities. No stock exchange market is present in type II. Type II cities can be the capital of the country or the region. It is not unusual to have transportation facilities, such as an airport, in type II.

Finally, type III cities are the smaller cities in which the businesses establish their production. The labor costs and the locations are cheaper than in the other types of cities. Type III cities are attractive for the availability of natural resources. Companies achieving economies of scale install their factories in type III cities. No airport, university or stock exchange market are present in these cities. Important roles, such as the capital of a country or of a region, are not attributed to a type III city.

2.3.1.2 The speed of internationalization

The speed of internationalization is an important issue for managers. Their decision regarding the speed of entry should be weighted between the resources available to a company and the international opportunities (Chetty et al., 2014). The importance of this notion attracted the interest of many scholars. Some researchers use the term “speed” (Casillas & Acedo, 2013; Wagner, 2004), while others apply the term “pace” (Lin, 2012; Vermeulen & Barkema, 2002). In this study, these two terms are used interchangeably. Furthermore, two distinct types of speed, have been identified in the literature (Yasmin & Sinkovics, 2006). First, there is the time elapsed between the foundation of the company and the first expansion of the company. Second, there is the time between each internationalization after the first one (Chang & Rhee, 2011; Yamin & Sinkovics, 2006).

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27 After much research on the speed of internationalization, the findings remain contradictory. Certain scholars claim a positive relationship between the speed of internationalization and the performance of the company (Chang & Rhee, 2011; Luo & Tung, 2007; Mathews, 2006). However, others refute this relationship and show that the speed of internationalization is negatively related to the performance of the firm (Barkema & Drogendijk, 2007; Khavul et al., 2010). Since there are diverging opinions regarding the impact of the speed of internationalization, this study adopts the theory of Uppsala, as the findings are the intermediate ones among the scholars’ ones. According to Johanson and Jan-Erik Vahlne (1977), the speed of internationalization should be incremental. As explained earlier for the location choice, a company should first gain experience and then gradually expand abroad.

2.3.2 Internationalization of companies with a digital business model

As mentioned in section 2.2.1.3, the technological dimension of the sharing economy can lead to characterize the companies with a sharing business model as digital businesses. Indeed they rely on digital technology in order to deliver value. Because of this specificity of a digital business, this study assumes that the internationalization of sharing economy companies differs from the internationalization process of traditional companies. Coviello et al. (2017) demonstrate that the digital component of a business has the ability to influence the internationalization process in terms of timing, speed or location choice. A growing number of studies have explored this recently emerged area of research (Brouthers et al., 2016; Coviello et al. ,2017; Wentrup, 2016; Yamin & Sinkovics, 2006). The studies use different terms to illustrate a company with a digital business model, such as ibusiness, e-business companies, e-commerce corporation or also digital business. In this study, the appellation “digital business” is used.

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28 During its internationalization process, a traditional firm has to move the goods to the new locations. This generates costs, namely liabilities of foreignness, such as costs associated with spatial distance, adaptation costs or transaction costs (Lu & Beamish 2004; Zaheer, 1995). Therefore, a traditional company starts in a low psychic distant location, with small investments, in order to gain experience in this new location (Johnson and Vahlne, 1977, 2009). A digital business, instead, provides a platform to connect users. Since the business is digital and the value is created online, it is assumed that the transfers of goods are less important for digital companies than for physical, product-based, companies (Brouther et al., 2014; Parente et al., 2017). Digital platforms allow this type of business to face few physical barriers (Luo et al., 2005). Therefore, the companies using digital technology experience fewer liabilities of foreignness than the traditional companies. To put it differently, due to the reduction of adaptation costs, the geographic distance becomes less relevant for internationalization (Parente el al., 2017). As an illustration, Cairncross (2001) used the expression “death of distance” when talking about a digital business.

On the other hand, administrative problems and legitimacy issues can impair a digital business (Parente et al., 2017). As in the case for a traditional business, a digital company suffers from discrimination and has to deal with the fact that locals can prefer doing business with a domestic digital company (Brouthers et al., 2016). Furthermore, this type of business is dependent on the internet and its quality in each location. Thus, any variances could impair the firm and generate extra costs for the proper functioning of the platform (Brouthers et al., 2016). These are reasons why relations with government and locals are relevant factors for the success of a digital firm. While digital companies face few liabilities of foreignness, they have to deal with high liabilities of outsidership (Brouthers et al., 2016; Johanson & Vahlne, 2009). Liability of

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29 outsidership means that a company is an outsider in the foreign location because it has a small number of relations with locals (Johanson & Vahlne, 2009). Digital companies rely on the creation of a big network; the creation of this network can only be achieved if the company has convinced potential users. Contrary to other types of resources, a network of users is not transferable to other locations; the company needs to create it from scratch in the new location. Hence, digital firms experience a lack of embeddedness with locals in the new market. Since the success of a digital platform depends on the number of users, people can be dubious about joining a platform because of the uncertainties regarding its proper functioning (McIntyre & Subramaniam, 2009). The platform should try to convince users about the future size of the networks (Schilling, 2003). To put it differently, a digital firm needs to learn how to be ingrained within the new location in order to attract a mass of users (Brouthers et al., 2016).

As for the traditional business, the location choice and the speed of internationalization are important decisions for digital businesses. These two factors will be discussed below.

2.3.2.1 The location choice

The location choice has been studied in the case of digital companies. Well-developed internet infrastructures encourage the presence of digital business (Ekeledo & Sivakumar, 2004). Even though the internet’s use is widespread everywhere, the global cities and cities Type I appear to be attractive for digital business for two main reasons. Firstly, there is a pool of potential employees in the digital economy, such as highly skilled and specialized workers, that is more valuable in global cities (Goerzen et al., 2013). Secondly, geographically dense locations, such as cities Type I, are the best locations in order to create a network effect because of the higher probability of potential users (Parente et al., 2017; Radhakrishnan, 2015). Furthermore, Chen (2006) also finds that digital firms are likely to enter locations in which the internet market

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30 grows rapidly, without taking into account the psychic distance. Additionally, for Laanti et al. (2007) and Gabrielsson and Pelkonen (2008), the companies in the internet sector have expanded into distant markets early thanks to the creation of networking and the relationships the internet enables.

However, not all scholars agree with these perspectives on the location choice of digital business. For example, Chen (2006) points out that the internet connections do not have any effect on the globalization of the digital firms and that they do not influence the way in which the company enters a location.

2.3.2.2 The speed of internationalization

Another element of the internationalization of digital businesses which has been widely discussed, is the speed of internationalization (Luo et al., 2005; Yamin & Sinkovics, 2006). Some scholars argue that the speed of internationalization of digital companies is fast (Luo et al., 2005; Parente et al., 2017; Wentrup, 2016). According to Lu et al. (2005), since the decision in respect of speed is built on the basis of coordination and communication costs, a digital business, which faces low coordination and communication costs, has the ability to go abroad quickly. Additionally, other scholars mention the internet as a springboard or as a facilitator for a fast internationalization since it can overcome the temporal and the spatial barriers (Chen, 2006; Sinkovics et al., 2013; Wymbs, 2000).

Furthermore, Manyika et al. (2016) indicate in an article of McKinsey that the use of digital technologies allows companies to internationalize rapidly because these technologies help firms to learn quickly on the new markets. More recently, Neubert (2018) confirms the research of Manyika et al. (2016) and demonstrates that the digital platform allows these companies to rapidly identify the sales opportunities, and thus to speed up the internationalization process.

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31 To sum up, the topic of the internationalization of digital companies has been increasingly discussed due to the boom of the internet. However, some gaps remain unexplored. Studies of companies combining a digital component and a tangible product have not been conducted, although this type of business has already attracted a lot of adopters and concerns many businesses today. Indeed, studies focus either on a fully digital core offering or on no digital core offering, such as the traditional companies. By the same token, the research on digital business encompasses companies which sell, and not share, products. These relevant aspects mentioned above suggest that it is important to study them, since they may lead to different internationalization processes.

2.4 Theoretical framework

The literature has illustrated that the sharing economy has grown at an unprecedented pace and has already attracted a lot of adopters around the globe. The sharing economy offers economic, technological, social and environmental advantages (Olson & Kemp, 2015). Additionally, the literature reveals that different sharing business models exist: the business-to-consumer (B2C) and the peer-to-peer (P2P). In the B2C sharing business model, the owner of the goods to share is a company, which gives users access to goods to share. Conversely, in the P2P sharing business model, it is individuals who provide goods to share to other individuals (Cohen & Kietzmann, 2014). In other words, the company is not the owner of the goods to share, but only facilitates the connections between the users (Hernaes, 2015). These different business models may lead companies to choose different strategies.

Given the specificity of the sharing economy, it suggests that the internationalization of the companies with a sharing business model may differ from that of a traditional company. Indeed,

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32 a key feature of the sharing company is its reliance on a digital platform (Belk, 2014; Daunorienė et al., 2015; Munoz & Cohen, 2017; Parente et al., 2017; Sundararajan, 2016), which is not the case for a company with a traditional business model. More precisely, a company with a sharing business model combines, simultaneously, a digital component (the platform) and a tangible component (the sharing of goods). Furthermore, the goal of a traditional company is to sell products, while the goal of a sharing company is to gives access to products to share, which is more complex than just selling since it relates to continuous relationships with a network of people. These aspects make these companies different from the traditional ones and suggest that there is a need to study these companies since they may behave differently.

Despite the boom of interest in the sharing economy and its rapid growth, the internationalization of the sharing business model has been neglected in the literature. Numerous studies exist on the internationalization of traditional companies, nevertheless they omit the notion of technology and focus either on B2C or business-to-business (B2B) firms. Although the technological aspect of the sharing economy is a key dimension, the existing literature on the digital business mainly focuses on fully digital offerings, while it omits organizations which combine the digital aspect with the sharing of a tangible good. Furthermore, the literature on digital business principally analyses companies which offer a product to sell, and not to share, which may lead to different internationalization processes. Moreover, no research investigates the distinction between a P2P and a B2C sharing business model, and no research explores their internationalization behaviours. The theoretical reasons mentioned above suggest that it is important to address these gaps and to study the internationalization process of companies with a sharing business model since it may differ from that of a traditional companies. To address these gaps, this paper will attempt to respond to the following question:

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33 How do companies with a peer-to-peer and a business-to-consumer sharing business model

internationalize?

This research links the notions of business model, sharing business model and internationalization, which have been extensively discussed in the literature review. In order to answer this question, different propositions were developed. There are two sets of propositions offered in regard to internationalization behaviours: the first (1a, 1b, 2a, 2b) focus on the speed of internationalization and the others (3, 4a, 4b,5,6) concern the location choice. This study assumes that a set of internationalization behaviours will be similar between companies adopting the B2C sharing business model and those adopting the P2P business model, since these two models share the same four keys dimensions of sharing economy. However, as these two types of business models present key differences regarding the ownership of the product to share, this research assumes also that another set of internationalization behaviours will differ between these two types of sharing business model.

Speed of internationalization

Firstly, the literature on the internationalization of digital companies demonstrates that, since these companies rely on digital technology, they face fewer costs, such as transaction, spatial or adaptation costs, when going abroad than traditional companies (Luo et al., 2005; Parente et al., 2017). In other words, the liabilities of foreignness are quite low (Parente et al., 2017). As argued above, it is the existence of a platform which differentiates the traditional firms from the digital ones. This platform is a characteristic of both sharing business models, the P2P and B2C ones. Furthermore, as mentioned by Manyika et al. (2016) and Neubert (2018), the digital component allows the companies to learn quickly on the new markets, and to quickly identify opportunities.

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34 Therefore, given these low costs and these quick learnings, scholars suggest that digital companies are internationalizing early and quickly (Gabrielsson & Pelkonen, 2008; Laanti et al. 2007; Manyika et al.,2016; Neubert, 2018). More precisely, the Yamin and Sinkovics’ two types of speed (2006) are used to classify the speed of internationalization. The first type of speed of internationalization consists of the speed between the foundation of the company and the first internationalization of the company. The second type of speed consists of the speed of internationalization after the first one. Given the reduction of costs and the reduction of liabilities of foreignness, the companies with a sharing business model are more likely to expand internationally soon after the foundation of the company. Moreover, these companies are more likely to continue their international expansion soon after the first one since, in addition to the reductions of costs, the digital component of these companies allows them to learn quickly on the markets. Based on similar previous studies and on the work of Andersson (2011), Vermeulen and Barkema (2002), and Cesinger et al. (2012), the notion of “soon” in this paper means under three years after the foundation and one year after the first internationalization. Consequently the first two propositions are :

Proposition 1a :Companies with a P2P and B2C sharing business model are more likely to expand internationally soon after the foundation (Three years).

Proposition 1b : Companies with a P2P and B2C sharing business model are more likely to expand internationally soon after the first activity abroad (One year).

A company using a B2C sharing business model is the owner of the goods to be shared, and thus owns more tangible assets than a company with a P2P sharing business model (Cohen & Kietzmann, 2014). That is why a company with a B2C sharing business model has “only” to

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35 introduce the product on the market since the company already possesses the goods. Instead, a company with a P2P sharing business model must find not only the users but also the providers of the products to share (Parente et al., 2017). This process is likely to be rather longer than the one of a company with a B2C sharing business model since the company with a P2P business model must build a two-sided network (supply and demand) from scratch and convince the owners and the users to participate at each location the company enters (Parente et al., 2017). Consequently, considering the first type of speed of internationalization identified by Yamin and Sinkovics (2006), the internationalization after the foundation is expected to be faster for companies with a B2C sharing business model than for the ones with a P2P sharing business mode, since the ones with a B2C model already possess the product to share and do not need to create a two-sided network from scratch. In addition, the second type of speed is supposed to be faster for companies with a B2C sharing business model since, in addition to the fact that companies with a B2C possess the assets and do not need to create the two-sided network, the companies with a P2P sharing business model would have to create these two-sided networks at each location they entered. Consequently, it would take a long time at each internationalization, and not only at the first one. This leads to the following working propositions :

Proposition 2a : Companies with a B2C sharing business model are likely to expand faster internationally, after the foundation, than companies with a P2P sharing business model. Proposition 2b : Companies with a B2C sharing business model are likely to expand faster internationally, after the first activity abroad, than companies with a P2P sharing business model.

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Location choice

The city choice is an important decision for a company. In the case of companies with a sharing business model, some cities’ characteristics are required for their success. For example, for this type of company, the cities need to have a good technological network, such as the internet, for facilitating the connection between the users on the digital platforms (Ekeledo & Sivakumar, 2004; Yamin & Sinkovics, 2006). Moreover, a geographically dense location is essential because there is a higher probability of potential users. By the same token, a geographically dense location is the best location to create the network effect, which is mandatory for the success of these companies (Parente et al, 2017; Radhakrishnan, 2015). These points are characteristics of Type I cities (Hymer, 1972). That is why, based on the three types of cities illustrated by Hymer (1972), the type I cities are expected to attract companies with a sharing business model. These arguments lead to the following proposition:

Proposition 3: Companies with a P2P and B2C sharing business model are more likely to enter type I cities.

The liability of outsidership is a relevant and very significant issue for companies with a sharing business model because the networks are not transferable (Brouthers et al., 2016; Johanson & Vahlne, 2009). Since the success of a sharing platform will depend on the networks of providers and/or users, a large network is required (Brouthers et al., 2016; Munoz & Cohen, 2017; Parente et al., 2017). However, the creation of a network is not an easy task and can take a lot of time; the notion of sharing is hard to implement. In regard to the agglomeration theory of Porter (1996), if a network of users in a related industry (sharing) is already present, it signifies that the sharing mentality is present. Consequently, the attraction of users is easier than if there

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37 had been no network and therefore having to create one from scratch. In other words, this means that society can be aware of this type of service (sharing) and can already use it. An example of a related sector for car-sharing companies could be bike-sharing systems. Furthermore, if competitors (ie. another car-sharing company) are already operating in a location (Chetty & Wilson, 2003), this presence of the same sharing sector will be more relevant than the presence of a related sector. Indeed, as mentioned earlier, people would be more used to this specific mode of consumption. The competitors can open the market and thus the companies do not have to build the market themselves. Consequently, if there is an existing competitor in the city a company with a sharing business model aims to enter, the presence of a company from a related sector would become irrelevant, while if there is no competitor, the presence of a firm from a related sector is relevant. Therefore, the following propositions are formulated:

Proposition 4a: Companies with a P2P and B2C sharing business model are more likely to enter cities in which an organization providing a sharing platform in related sector already operates. Proposition 4b: Companies with a P2P and B2C sharing business model are more likely to enter cities in which a competitor in the same sharing sector already operates.

Expanding abroad and operating in many markets can be beneficial for a company with a platform. However going abroad implies costs, such as liabilities of outsidership (Johanson & Vahlne, 2009). In addition, the administrative distance and the adaptation to local regulations could be major negative points in the sharing economy (Parente et al., 2017). Consequently, it would be less costly for a company to adapt to the regulations of one country instead of many countries. As shown above, a company needs to have tangible and intangible resources in order to succeed in other countries (Rugman et al., 2011). Indeed, a company faces competitors,

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38 unknown environments, new regulations etc. Consequently, a company with a B2C sharing business model, which owns more tangible assets than one with a P2P sharing business model, would be more likely to expand into more countries than a company with a P2P sharing business model. Furthermore, since the companies with a B2C sharing business model own the products to share and are the only providers of these products, they have a reputation (Weber, 2014), which is global, and they have a unique image. Conversely, since in the case of companies with a P2P sharing business model, the owners of the goods to share are multiple private individuals, the reputation depends on each of the providers and there is no overall reputation which may be transferable to other locations. The companies with a P2P sharing business model build their reputation around each provider of goods to share and expand locally. Consequently, it would be easier for a company with a B2C sharing business model than for one with a P2P sharing business model to adopt an international strategy and use its reputation, since it is the same provider of the goods to share everywhere. On the contrary, as mentioned above, in the company with a P2P sharing business model, the providers of the goods to share change for each product at each location. That is why, a company with a B2C sharing business model is more likely to expand into more countries than companies with a P2P. This leads to the following proposition: Proposition 5: Companies with a B2C sharing business model are likely to expand into more countries than companies with a P2P sharing business model.

Using the same explanation as the previous proposition (5), a company with a B2C sharing business model possesses more assets and resources than that with a P2P business model. Furthermore, since the companies with a B2C sharing business model possess a set of assets, they have to optimize their use (Cohen & Kitzman, 2014) in order to offset the high fixed costs.

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39 Consequently, it is important for the companies with a B2C sharing business model to focus on the locations in which it is possible to attract a lot of users. In other words, to attract a higher number of users and to be successful, the potential market for a business providing products to share is more likely to be situated in global cities (Parente et al., 2017; Radhakrishnan, 2015). On the other hand, private individuals are present everywhere, even in small towns and not only in the main cities. In other words, the availability of the sharing service will depend on the location of the individuals providing their goods to share, who will propagate it. Consequently, the market for peer-to-peer sharing includes many smaller towns as well. Therefore, the companies with a B2C sharing business model would more likely focus only on the main cities of a country to attract the higher number of users, whereas for the companies with a P2P sharing business model, it would depend on the locations of the individuals providing their products to share, which may be situated in main cities, but also in smaller towns. The reasons mentioned above lead to the sixth proposition:

Proposition 6: Companies with a P2P sharing business are more likely to expand into more cities in the same country, while B2C sharing business model are more likely to expand into the main cities of the country.

The internationalization of companies with a sharing business model : a multiple case study of car-sharing platforms