Legitimizing the sharing economy : an ongoing debate : the challenges affecting sharing economy ventures and the legitimation tactics implemented in response

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Legitimizing the sharing economy: an

ongoing debate

The challenges affecting sharing economy ventures and the legitimation

tactics implemented in response

MSc. in Business Administration: International Management

K.L. van de Geest – 10715711

Name: Kim van de Geest

Supervisor: Dr. Francesca Ciuli

Second reader: Dr. Johan Lindeque

Date: 23rd_{June 2017}

Word Count: 27,979 words (excluding tables, figures & references) 34,717 words (including tables, figures & references)

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2 | T h e s i s K . L . v a n d e G e e s t

Statement of Originality

This document was written by student, Kim van de Geest, 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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Statement of Originality ... 2

Table of Contents ... 3

List of Tables ... 5

List of Figures ... 6

Abstract ... 7

Key Words ... 7

List of Abbreviations ... 8

1. Introduction ... 10

2. Literature Review ... 16

2.1 Legitimacy Theory ... 16 2.1.1 Sources of Legitimacy ... 17

2.2 The Sharing Economy ... 19

2.2.1 The Sharing Economy Business Model ... 22

2.2.2 Challenges to the Sharing Economy Business Model ... 26

2.2.3 Actors Challenging the Sharing Economy Business Model ... 33

2.3 Legitimation Strategies ... 34

2.4 The Institutional Environment in Developed and Emerging Markets ... 40

2.4.1 Developed Markets ... 42 2.4.2 Emerging Markets ... 43

3. Theoretical Framework ... 45

3.1 Proposition Development ... 46

4. Methodology ... 53

4.1 Research Design ... 53

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4.2 Case Selection ... 55

4.3 Data Collection ... 56

4.4 Data Analysis ... 60

5. Results... 63

5.1 Within Case Results ... 63

5.1.1 Challenges to Uber’s Legitimacy ... 63

5.1.1.1 Denmark ... 63 5.1.1.2 The Netherlands ... 66 5.1.1.3 Kenya ... 69 5.1.1.4 South Africa ... 72 5.1.2 Legitimation Strategies ... 76 5.1.2.1 Denmark ... 76 5.1.2.2 The Netherlands ... 78 5.1.2.3 Kenya ... 81 5.1.2.4 South Africa ... 84

5.2 Cross Case Results ... 86

5.2.1 Challenges to Uber’s Legitimacy ... 86

5.2.2 Legitimation Strategies ... 89

6. Discussion ... 92

6.1 Findings ... 92

6.2 Academic Relevance and Managerial Implications ... 99

6.3 Limitations and Future Research ... 101

7. Conclusion ... 103

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List of Tables

Table 1 – Definitions of the Sharing Economy ... 21

Table 2 – The Economic Debate ... 29

Table 3 – The Societal Debate ... 31

Table 4 – The Environmental Debate ... 32

Table 5 – Case Selection... 55

Table 6 – Case Details ... 56

Table 7 – Archival Data Details ... 59

Table 8 – Thematic Codes ... 62

Table 9 – Actors in Sharing Economy Debate Denmark ... 65

Table 10 – Actors in Sharing Economy Debate the Netherlands... 68

Table 11 – Actors in Sharing Economy Debate Kenya... 72

Table 12 – Actors in Sharing Economy Debate South Africa ... 75

Table 13 – Legitimation Strategies in Denmark ... 76

Table 14 – Legitimation Strategies in the Netherlands ... 79

Table 15 – Legitimation Strategies in Kenya ... 82

Table 16 – Legitimation Strategies in South Africa ... 84

Table 17 – Uber’s Legitimacy Challenges Across Cases ... 87

Table 18 – Actors in the Sharing Economy Debate Across Cases ... 89

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List of Figures

Figure 1 – Press Timeline for Denmark ... 63

Figure 2 – Orientation of Actors in Sharing Economy Debate Denmark ... 66

Figure 3 – Press Timeline for the Netherlands ... 66

Figure 4 – Orientation of Actors in Sharing Economy Debate the Netherlands ... 69

Figure 5 – Press Timeline for Kenya ... 69

Figure 6 – Orientation of Actors in Sharing Economy Debate Kenya ... 72

Figure 7 – Press Timeline for South Africa ... 73

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Abstract

Since the arrival of the sharing economy, it has been disrupting traditional economy. The positive and negative consequences of the sharing economy are being tested by academics and practitioners. Not surprisingly, this disruption is being challenged worldwide due to economic, societal, and environmental reasons. These challenges have an effect on sharing ventures’ regulative, normative, and cognitive legitimacy. Sharing ventures have to deal with these challenges to their organizational legitimacy by implementing legitimation strategies. By implementing different strategies, sharing ventures’ acquire, uphold, or restore their organizational legitimacy. Implementing a suitable strategy is dependent on context. Therefore, organizations have to make sense of what is expected of them to acquire regulative, normative, and cognitive legitimacy. This depends on the institutional environment that an organization is embedded in. As sharing ventures are often active is one home country and at least one host country, they have to deal with different institutional environments simultaneously. This implies that the challenges to their legitimacy, as well as, the legitimation strategies can differ from one environment to another.

Adopting a comparative, longitudinal multiple-case study, this thesis proves that major differences in institutional environment can be distilled by paralleling developing markets and emerging markets. The economical, societal, and environmental aspects of the debate on the sharing economy have different consequences in developing markets and in emerging markets. Therefore, sharing ventures’ organizational legitimacy is also affected differently. Furthermore, due to data analysis is becomes clear that certain legitimation tactics are used more in developed markets than in emerging markets, and vice versa.

Key Words

Sharing economy, sharing ventures, business models, business model innovation, legitimacy, legitimation strategies, institutional environment, emerging marketing, developed markets

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List of Abbreviations

Abbreviation Full phrase

CG Corporate Governance

DM Developed Market

EM Emerging Market

EU European Union

GNI Gross National Income

HQ Headquarters

IB International Business

KRA Kenyan Revenue Authority

LOF Liability of Foreignness

LON Liability of Newness

MNE Multinational Enterprise

SEC Securities and Exchange Commission

UK United Kingdom

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“We’re totally legal, like totally legal, and the

government is telling us to shut down. And you

can either do what they say or you can fight for

what you believe.”

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1. Introduction

Over the past years, a new phenomenon has come into existence that has disrupted the traditional economy: the sharing economy. This new form of capitalism is founded on notions of collaborative consumption, which is the sharing and exchange of assets between peers (Botsman & Rogers, 2010). The sharing economy is based on the premise of sharing goods and services between consumers, empowered by facilitating companies. These peer-to-peer markets have been appearing at a more frequent rate. Such peer-to-peer markets, for example, started with the sharing of Christmas trees in New York City (Gansky, 2010). Since then many different ventures have come into existence. Well-known, modern-day examples are Uber and Lyft, which make real-time ridesharing possible, Airbnb, that enables homeowners to rent out their accommodation to renters, or TaskRabbit, that allows individuals to outsource their chores, tasks, and labor online. Moreover, these ventures have established themselves as reliable alternatives for traditional suppliers of goods and services (Zervas, Proserpio & Byers, 2014). Sharing economy business models are becoming visible in conventional, as well as, in new industries and have already drastically changed mobility, hospitality, and labor sectors (Cannon & Summers, 2014; Cockayne, 2016).

The opinions about incorporating the principle of sharing into the capitalistic economy are divided. Myriad academics have established themselves as advocates for the sharing economy, suggesting it can offer several benefits (Schor, 2016). Users of sharing economy platforms can enjoy economic benefits such as lower costs, as well as, higher levels of convenience. Lower expenses are especially influential as consumers nowadays are actively reconsidering their spending routines and reassessing their values (Bardhi & Eckhardt, 2012). Botsman and Rogers (2010) support this notion and propose the sharing economy can shift the hyper-consumption climate that characterized the 20th century, into a climate of collaborative consumption. People are sharing, lending, and renting through their peers, at a scale that would be inconceivable without the sharing economy. The realization that access instead of ownership can be beneficial has led many people to participate in

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the sharing economy, providing users with both economic and societal advantages (Botsman & Rogers, 2010). According to Parigi, State, Dakhlallah, Corten, and Cook (2013), participation in sharing economy ventures offers social utility as it can enable the establishment of new friendships. In a sharing context, consumers expect a certain level of socialization, which in turn drives their social behavior (Habibi, Kim & Laroche, 2016). Other profitable outcomes of the sharing economy are environmental. The sharing economy and in particular the ride-sharing sector can actively help to reduce carbon dioxide emissions (Cannon & Summers, 2014).

Simultaneously, there are also numerous contenders against the sharing economy claiming there are societal, economic, and environmental hitches. Cockayne (2016) argues that the sharing economy is, in fact, an economic discourse. The companies active in the sharing economy are making money through the creation of low-paid jobs. By exploiting their workers to some level, these companies can report high revenues and profits (Bergvall-Kåreborn & Howcroft, 2014; Scholz, 2012; Slee, 2016). Additionally, there has also been criticism on the societal outcomes of the sharing economy, as it is possible that there is essentially less socialization involved than in traditional economy. User interaction is codified into a system, which can lead to less face-to-face interface (Frenken & Schor, 2017). Also, Edelman, Luca, and Svirsky (2016) have shown that sharing economy ventures can bring about tough societal detriments such as peer-to-peer discrimination. Even the environmental benefits of the sharing economy are questioned. Many users are making extra money by using sharing economy platforms. The initial interaction can cause positive environmental results, by maximizing asset utilization. However, these earnings are spent freely which can inflict negative environmental consequences. The authors call this the rebound effect (Frenken & Schor, 2017).

The sharing economy has sparked debates around the world, in practice and literature, leading to ambiguity on the issue. Therefore, sharing economy ventures are subject to legitimacy struggles (Cannon & Summers, 2014). According to Suchman (1995): “Legitimacy is a generalized

perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions” (p. 574). In other words,

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being legitimate means your actions and behavior are lawful and in congruence with norms and values set by society. Legitimacy is critical for the survival and the success of any organization (Suchman, 1995). Legitimacy is, for instance, closely related to the acquisition of capital or the inflow of resources (Lounsbury & Glynn, 2001). The process of legitimation can be especially hard for new ventures, such as sharing economy ventures. According to Zimmerman and Zeitz (2002), this process is paradoxical. On the one hand, new ventures seek legitimacy to access resources and to develop the organization further. This legitimacy is acquired by conforming to existing laws, norms, and values. On the other hand, new ventures often characterize themselves by offering an entirely new idea, product, or service, which may challenge existing expectations, norms, and values (Zimmerman & Zeitz, 2002). Therefore, new ventures are often prone to threats to their organizational legitimacy. These threats can, for instance, be economic or social in nature (Dowling & Pfeffer, 1975). As their offering is revolutionary, new ventures have trouble conforming to the existing legitimizing structure. The challenges that face the sharing economy are amplified because such ventures are often active internationally. In the modern-day international business (IB) environment, companies are more likely to embrace internationalization in the early stages as leveraging existing products and services across borders into new markets can be very profitable to a company (Buckley & Casson, 2009; Knight & Cavusgil, 2004). Internationalization increases complexity, as sharing economy ventures’ legitimacy can be challenged in one country, while their legitimacy remains unblemished in another. Likewise, legitimacy can be challenged along different dimensions and to different extents. Dealing with multiple institutional environments can toughen the process of legitimation (Sundaram & Black, 1992). The challenges to the sharing economy ventures’ legitimacy are the first focal point of this thesis.

Besides, due to challenges to their legitimacy, sharing economy ventures have reacted to the legitimacy challenges by implementing justification tactics (Cannon & Summers, 2014). They have resisted a lot of pressures and have retaliated. Using their popularity as a weapon they are guarding their place within the market, actively trying to acquire and maintain legitimacy (Rauch & Schleicher,

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2015). The fact that many sharing economy ventures are active in more than one country sets them up with an additional challenge as they have to acquire and maintain their legitimacy in a home country and at least one host country (Kostova & Zaheer, 1999). Firms have developed many different strategies to build their legitimacy. In the case of sharing economy ventures, firms often have to undertake these strategies in diverse environments (Ahlstrom, Bruton & Yeh, 2008). Many studies have analyzed a number of legitimation strategies companies can implement (Lamin & Zaheer, 2012; Suchman, 1995; Zimmerman & Zeitz, 2002). Companies can, for instance, comply with the set of rules, standards, and regulations that are active, and thereby adopt a conformance strategy. Another example is a manipulation strategy; a company will attempt to manipulate the current norms and values. The legitimation tactics implemented by sharing economy ventures are the second focal point of this thesis.

As mentioned, there are two parts to this research: firstly, the research will investigate how the legitimacy of sharing economy ventures is challenged, and secondly, this thesis will analyze how sharing economy ventures seek to acquire legitimacy. To analyze this, the research applies a contrasting structure whereby the phenomena will be studied within two different environments. In his article, Isenberg (2009) describes the challenges that corporations are threatened with when going abroad; one of these challenges is pointed out as context. This context is formed by a state’s political, regulatory, judicial, tax, environmental, and labor systems. The challenge arises due to varying conditions from state to state (Isenberg, 2009). Global companies are confronted with the complexity of dealing with these diverse contexts, and this level of complexity rises when corporations are active in more than one host country. Differences in context become evident when contrasting developed economies with emerging economies (Hitt, Dacin, Levitas, Arregle & Borza, 2000). In general, the institutional environment in developed economies is organized and well-structured. This leads to more stability in a market, which in turn, decreases the levels of uncertainty and risk (Hitt et al., 2000). According to Buchanan and Keohane (2006), the clear structures result in, among others, strong legal frameworks and advanced intellectual property protection. This makes

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the overall process of gaining legitimacy in a developed country easier (Ahlstrom et al., 2008; Buchanan & Keohane, 2006; North, 1990). To the contrary, emerging economies are characterized by less structured institutional environments. Due to weaker institutions, the rules, regulations, property rights, and ownership protection are less advanced (e.g. Marquis, Zhang & Zhou, 2011; North, 1990). The legal framework in developing economies is still emergent (Hitt et al., 2000; Marquis et al., 2011). According to Peng, Wang, and Jiang (2008) institutions in emerging economies often interfere with the organization. When the institutional environment intrudes, the organization can be obstructed in their operations (Peng et al., 2008; Zimmerman & Zeitz, 2002). This can also hinder the acquisition of legitimacy (Ahlstrom et al., 2008).

Different studies have pointed out research gaps considering legitimacy. Scherer, Palazzo, and Seidl (2013), for instance, state that further research should be done on heterogeneity in institutional environments and the demands for legitimacy. When managing challenges to an organization’s legitimacy, heterogeneity plays a part. Kostova and Zaheer (1999) stress that legitimacy is influenced by different institutional environments to different extents. Companies that operate in two or more countries, are labelled as multinational enterprises (MNEs) (Buckley & Casson, 2009). MNEs should constantly observe their institutional environments to comprehend the different requirements by which to gain legitimacy. Adding to that, organizations should implement strategies to meet these legitimacy requirements (Kostova & Zaheer, 1999). However, further research should be conducted on how new ventures deal with challenges to their legitimacy and how they acquire legitimacy (Zimmerman & Zeitz, 2002). In this case, the phenomena will be studied by comparing developed economies to emerging economies, as they differ greatly with regard to their institutional environments. Collectively, this leads to the following research question:

How is the legitimacy of sharing economy ventures’ business models challenged in developed vs. emerging markets and how does the venture respond to these challenges?

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To answer this research question, a longitudinal comparative multiple-case study research design will be used. Different units of analysis, within one single case, will be analyzed. By adopting this research design, legitimacy challenges and the legitimation strategies of sharing ventures can be compared and analyzed over time. The selected case is a large sharing venture, Uber. Uber is active in different countries and can, therefore, be classified as an MNE. The different units of analysis are Denmark and the Netherlands from developed markets, and Kenya and South Africa from emerging markets. Data will be collected on all different units of analysis through secondary data. As a result, this thesis provides a holistic and contemporary overview of the sharing economy, the challenges to sharing economy ventures’ legitimacy and the legitimation strategies adopted by these ventures.

This research results in various contributions to the existing literature. First of all, the thesis will give an overview of the challenges, being economical, societal, or environmental, facing sharing economy ventures. Secondly, the different responses to these challenges will be recorded. By choosing a key player within the sharing economy and comparing the different legitimacy struggles and the responses undertaken in different environments, this thesis attempts to clarify the way an international sharing economy venture understands and deals with different environments within developed and emerging markets.

This thesis will be structured as followed. The first chapter will contain the literature review regarding important concepts that form the theoretical foundation of this study. Concepts such as the sharing economy, legitimacy theory, and legitimation strategies will be explained in depth. Furthermore, developed and emerging economies will be compared. Chapter three will formulate propositions for the research. The methodology chapter will define the research methods and the data collection. The choice of the observational unit will also be clarified. The succeeding chapter connects to the former chapter, as this chapter will disclose the findings gained from the research. The findings will be discussed further in chapter six. This chapter will consequently acknowledge the theoretical and managerial contributions resulting from this research, as well as, the limitations faced. The final chapter, chapter seven, comprises the concluding part of this thesis.

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2. Literature Review

This chapter will review the current literature on the core topics of this thesis. Firstly, legitimation theory will be discussed, as this is the theme covering this research. Legitimation can be derived from different sources; these sources will be explained. This thesis will then go into the two parts of the research question. The first part concentrates on the challenges that affect sharing economy ventures’ legitimacy (i.e. the debates involving the sharing economy). The second part concentrates on the responses implemented by sharing economy ventures as a reaction to the attacks on their legitimacy. Therefore, this chapter will subsequently reflect on the different legitimation tactics that can be implemented to acquire, as well as, uphold organizational legitimacy. As sharing economy ventures are active in different countries, they have to deal with different contexts. Thus, this chapter will conclude by discussing these different contexts by distinguishing emerging economies from developed economies, evaluating the characteristics, similarities, and differences.

2.1 Legitimacy Theory

A number of studies have analyzed legitimacy in many different contexts. Legitimacy is the external recognition that an organization’s activities are acceptable and ethical (Suchman, 1995). Legitimacy is based on external perceptions and assumptions, which means that legitimacy is created subjectively, through others. According to Suchman (1995), three types of legitimacy can be distinguished: pragmatic legitimacy, moral legitimacy, or cognitive legitimacy. Pragmatic legitimacy is based on the self-interest of an organization, in relation to their audience. It is about organizational behavior towards this audience and the interaction between the parties (Suchman, 1995). A company can achieve this legitimacy by offering the audience what they need (Cashore, 2002). Moral legitimacy refers to the external evaluation of an organization’s behavior as an organization's actions should be viewed as moral by the audience (Suchman, 1995). By speaking to the ethical standards, a company can achieve a moral legitimacy (Cashore, 2002). Cognitive legitimacy goes one

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step further. It refers to the external evaluation of an organization’s goals as these should be seen as correct by the society (Suchman, 1995). A company can acquire cognitive legitimacy by aligning a company’s activities to what is externally viewed as accepted (Cashore, 2002).

2.1.1 Sources of Legitimacy

Organizational legitimacy derives from different sources. Scott (1995) points out three categories: regulative, normative, and cognitive legitimacy. Regulative legitimacy has to do with the regulatory sphere of the institutional environment (Scott, 1995). It has to do with legal systems in place such as policies and rules (Palthe, 2014). Companies have to adhere to the legal systems to acquire regulative legitimacy. Normative legitimacy refers to legitimacy deriving from norms and values of society. A company gains normative legitimacy by meeting these norms and values (Scott, 1995). Cognitive legitimacy has to do with all ethical systems that are incorporated in roles, habits, norms, and values (Scott, 1995). The cognitive sphere is made up of the cultural foundations within the institutional environment such as beliefs and assumptions (Palthe, 2014). According to Hybels (1995), regulative, normative, and cognitive legitimacy are formed by three main factors: the institutional environment, the features of an organization, and the legitimation process. Kostova and Zaheer (1999) state that the higher the complexity of these factors is, the harder it is for organizations to create and uphold their legitimacy.

The first factor that influences the formation of legitimacy is the institutional environment. It is inevitable that companies interact with the institutional environment in their home country and other host country institutional environments (Hybels, 1995). The complexity of the institutional environment arises due to two main factors (Kostova & Zaheer, 1999). The first factor is the fact that institutions are often fragmented into different spheres: regulatory, cognitive, and normative. These three spheres are related to different types of institutions, which reflect the different types of legitimacy outlined by Scott (1995). The second factor has to do with the large variety of institutional environments in the international economy (Kostova & Zaheer, 1999). Globally, countries and their

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institutional environments vary greatly. Companies, nowadays, are more likely than not to be active in more than one country. Imminently, they have to deal with multiple institutional environments. This can temper with the process of legitimation, as legitimacy is partly formed in the institutional environment (Sundaram & Black, 1992). The fact that institutions differ between countries implies there is institutional distance between them. Differences in economic, financial, political, administrative, cultural, demography, knowledge, global connectedness, and geographic factors intertwine to create institutional distance (Berry, Guillén & Zhou, 2010). This means that, for instance, differences such as the openness of the economy, the origins of legal systems, the demography of the population, or the metric distance between two countries can make the acquisition of legitimacy more difficult.

The second factor influencing the acquisition of legitimacy is the features of an organization. Complexity herein is formed by the company itself. The main complexity driver is the fragmentation of the organization. Organizations split their business to specify different tasks and functions, and to coordinate in different locations. The features of an organization help gain organizational legitimacy (Hybels, 1995). However, this concerns internal legitimacy, which is not a focal point of this study.

The third factor influencing the attainment of legitimacy is the process with which it is achieved. This process is ongoing, interactive, and reciprocal between an organization and its institutional environment (Hybels, 1995). There are two sides to this process. On the one hand, there is what Weick (1995) has branded as “organizational sensemaking” (p. 170). This entails that companies try to comprehend what is expected of them to meet the standards set by the institutional environment (Weick, 1995). On the other hand, the institutional environment is trying to understand the organization and the degree to which its practices are accepted (Kostova & Zaheer, 1999). The complexity of the process of legitimation amplifies when an organization is active in more than one country and therefore, in more than one institutional environment. According to Kostova and Zaheer (1999), there are two explanations for this. The first, liability of foreignness (LOF), is the liability of not knowing or not being familiar enough with the host country (Hymer,

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1960; Zaheer, 1995). LOF affects legitimacy due to different causes. A host country is often unfamiliar with the organization and, therefore, may not grant legitimacy immediately or at all. Also, larger firms may also attract a lot of attention from different interest groups, which may challenge the organization when entering a foreign country (Kostova & Zaheer, 1999). The second explanation is legitimacy spillovers. Legitimacy spillovers originate due to the institutional environment basing their legitimacy judgments on other units of the same organization or other organizations active in that particular environment (Kostova & Zaheer, 1999).

Legitimacy is paramount to the existence of any organization. It also relates closely to the success of a firm (Ahlstrom et al., 2008; Suchman, 1995; Zimmerman & Zeitz, 2002). Legitimacy is necessary for an organization as it can, for example, secure the inflow of capital. It can also help an organization compete for economic resources (Dowling & Pfeffer, 1975; Lounsbury & Glynn, 2001). Gaining legitimacy is a tough process, especially for new firms such as sharing economy ventures. According to Zimmerman and Zeitz (2002), this is because of the reciprocal relationship between legitimacy and the standards in place. Ventures need legitimacy to succeed in their operations. Simultaneously, new ventures often offer revolutionary products and services, causing misalignment with the rooted standards for organizational legitimacy. Many sharing economy ventures are subject to challenges to their organizational legitimacy. These challenges will be discussed in the following chapter.

2.2 The Sharing Economy

Different terms have been used to indicate the sharing of resources between peers (e.g. collaborative consumption, peer-to-peer sharing, the collaborative economy, the sharing economy). The common linker is the fact that all these concepts are based on the idea of sharing. However, these terms are used interchangeably, even though there are slight nuances and differences in the exact meaning. Therefore, this chapter will start off by outlining the definition of the sharing economy.

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Bardhi and Eckhardt (2012), for example, label the process as access-based consumption, with the following definition: “transactions that can be market mediated but where no transfer of

ownership takes place” (p. 881). Botsman and Rogers (2010) discuss collaborative consumption and

define this as the sharing and exchange of assets. According to Hamari, Sjöklint, and Ukkonen (2015), the sharing economy is “the peer-to-peer-based activity of obtaining, giving, or sharing the

access to goods and services, coordinated through community-based online services” (p. 2047).

Frenken and Schor (2017) put more emphasis on consumers sharing physical assets. They state that the sharing economy is based on consumers providing other consumers with provisionary access to tangible assets. While the definitions differ from one another, there are many parallels. Sharing is the allocation of assets between consumers, without transferring ownership, through a mediator. The mediator is the sharing platform, which enables the sharing process and extends this even to people with no connection to each other (Frenken & Schor, 2017). The exact definition is debated heavily. For an overview of the different definitions, see Table 1.

Moreover, experts also debate the money issue surrounding the sharing of assets. Frenken and Schor (2017) for example add a monetary aspect to their definition of the sharing economy, stating that consumers can connect the exchange of assets to the exchange of money. The monetary aspect connects to Botsman and Rogers’ (2010) collaborative consumption. In their study, it was found that people join in collaborative consumption for monetary or non-monetary reasons. Habibi et al. (2016) have developed a roadmap to distinguish these different types of sharing. There are two extremes to sharing: the exchange context and the sharing context. Most practices would fall somewhere between the two extremes of the continuum. In an exchange context, consumers have explicit utilitarian incentives, meaning they expect usefulness above all. In a sharing context, consumers expect and long for the socialization processes (Habibi et al., 2016).

Virtually anything (e.g. cars, spaces, skills, belongings) can be shared and, therefore, the sharing economy is a disruptive force (Botsman & Rogers, 2010). Three drivers can be identified to explain this development. The first is the shift in consumer behavior away from ownership and asset

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Table 1 – Definitions of the Sharing Economy

Author(s), Publication Year Terminology Definition

Bardhi and Eckhardt (2012) Access-based Consumption “Transactions that can be market mediated but where no transfer of ownership takes place” (p.881) Botsman and Rogers (2010) Collaborative Consumption “The reinvention of traditional market behaviors—renting, lending, swapping, sharing, bartering,

gifting—through technology, taking place in ways and on a scale not possible before the internet” (p.

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Cannon and Summers (2014) Sharing Economy “A business model where peers can offer and purchase goods and services from each other through

an online platform” (p. 2)

Fraiberger and Sundararajan (2015) Sharing Economy “Focuses on facilitating recurring short-term rental or service provision rather than occasional resale

under which asset ownership is transferred” (p. 3)

Frenken and Schor (2017) Sharing Economy “Consumers granting each other temporary access to under-utilized physical assets (idle capacity),

possibly for money” (p. 4)

Habibi, Kim, and Laroche (2016) Sharing Economy “An economic system in which assets or services are shared between private individuals, either for

free or for a fee, typically by means of the internet” (p. 277)

Hamari, Sjöklint, and Ukkonen (2015) Collaborative Consumption “The peer-to-peer-based activity of obtaining, giving, or sharing the access to goods and services,

coordinated through community-based online services” (p. 3)

Rauch and Schleicher (2015) Sharing Economy “Allows users to buy, sell, or donate eversmaller units of goods, services, or experiences” (p. 912) Zervas, Proserpio, and Byers (2014) Sharing Economy “Broad segments of the population can collaboratively make use of under-utilized inventory via

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sharing (Matzler, Veider & Kathan, 2015). According to Bardhi and Eckhardt (2015), the reasons for this shift are threefold: convenience, lower prices, and ecological sustainability. Consumers are seeking convenient cheaper alternatives to traditional asset ownership, explaining consumer participation in the sharing economy. Additionally, asset sharing offers an ecological benefit in comparison to asset ownership. In short, the sharing economy is attractive for consumers due to its accessibility to lower prices, as well as, ecological benefits (MacMillan, Burrows & Ante, 2009). The second driver towards the sharing economy is social media technologies (Matzler et al., 2015). Social networks and an online community are prevalent in today’s society. The importance of a community has returned to modern-day society (Botsman & Rogers, 2010). Social Media link people together online and, therefore, create the network effect; meaning that the value of a network increases with every additional user (Shapiro & Varian, 2013). Social networks have produced the opportunity to connect electronically. Due to social networks and electronic connectivity, the sharing economy has truly arisen (Puschmann & Alt, 2016). These networks link peers so that they can share, which they eagerly do. The function of sharing is now open to anything from products and assets to resources and services (Botsman & Rogers, 2010). The third driver is the enabler of the sharing economy: the companies that play the role of intermediary. The speed of growth within the sharing economy is a direct result of the internet and the companies who have used this resource to make sharing easier by using mobile devices and electronic services (Matzler et al., 2015). These mobile devices and electronic services are utilized by sharing economy ventures to set up their operations. Without the presence of a platform, the sharing economy would fail to exist, and digital devices are the way to generate a platform and make it ubiquitously accessible (MacMillan et al., 2009). This explains the existence of platform intermediaries, as well as, the producers active on them.

2.2.1 The Sharing Economy Business Model

Although the definitions of business models differ and many researchers have debated the definition, meaning, and goal of business models widely, an understanding of what a business model

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entails is crucial. According to Teece (2010), a business model “delivers value to customers and

defines how the enterprise creates and delivers value to customers, and then converts payments received to profits” (p. 173). Organizations can devise a business model to clarify how they create

and secure the value proposition and all parts that are included in this process. The firm can act upon the business model with its organizational structures, processes, and systems (Osterwalder & Pigneur, 2010). A business model is made up of different factors. Bohnsack, Pinkse, and Kolk (2014) have conceptualized this and designated the three main components: the value proposition, the value network, and the revenue or cost model.

The value proposition incorporates the content of the service or product offered by an organization and the target segment. The service content or product content specifies what a company is offering and covers what the company does to serve its customers (Osterwalder & Pigneur, 2010). Through their offering, a company attempts to gain leverage over competitors by differentiating a product or service (Rasmussen, 2007). In our time, the offering is more than merely a product or service; it is also about the customer experience that accompanies it (Bocken, Short, Rana & Evans, 2014). The target segment identifies the different audiences the product or service is intended for (Bohnsack et al., 2014). An organization serves different customers and customer segments. These groups are formed by shared needs, wishes, and behavior. Different customer segments are treated differently and can be served distinctively (Osterwalder & Pigneur, 2010).

The value network describes every operation that is aimed at producing the value. On the one hand, there is development and production. This part indicates how the service or product is designed and built. The product or service can, for example, be produced in-house or by outsourcing (Bohnsack et al., 2014). On the other hand, the value network is also described by the sales process and the after-sales operations. It mentions the different channels a company can use when selling their product or service. It also includes the after-sale services, so that companies can keep their customers satisfied on the long term. This part also covers what resources a company has at its disposal, as well as, the partnerships it has built (Osterwalder & Pigneur, 2010).

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The revenue, or, cost model explicates how the value that is offered translates into revenues for the firm (Bohnsack et al., 2014). A company needs to clarify their revenue streams and the costs they are subject to (Osterwalder & Pigneur, 2010). This component mentions the pricing structure they have implemented; it should clarify the different revenue streams a company owns. The revenue model should also explain the prospective governmental support an organization can receive (i.e. incentives). Lastly, this component should list all additional income streams a company owns (Bohnsack et al., 2014).

In the case of the sharing economy, certain parts of the business model are substantially different to traditional business models. This is the result of business model innovation. The object of business model innovation is to create a long-lasting competitive advantage in accord with a changing environmental situation. Business model innovation operates on a deeper level than just the adaptation of operations, services, products or markets. The business model is designed by companies and should be the source of competitive advantage (Osterwalder & Pigneur, 2010). To keep the competitive advantages over a longer period, a firm should continuously update their business model, especially during economic changes. For companies to get and to stay ahead, business model innovation is key (Amit & Zott, 2010). A similar product, idea, or service can be executed through different business models to create different outcomes (Chesbrough, 2010). In the latest decades, the issues that pressure companies to revise and update their business models commonly originate from the environment and global warming, as well as, human development. These problems have pressured international policy changes, as well as, business model innovation (Dovers, 1996).

In the case of sharing economies, they are truly establishing themselves in the contemporary economy and only a handful of industries are insusceptible to this change (Belk, 2013; Zervas et al., 2014). Due to the execution of a new business model, sharing economy ventures are successful. The sharing of resources is not entirely new. However, the incorporation of the idea into business models is new; these business models run on the idea of collaborative consumption (Botsman &

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Rogers, 2010). It is a competitive business model that poses a threat to traditional business, as sharing economy ventures can offer similar services to conventional ventures (Möhlmann, 2015). Sharing economy ventures have altered certain aspects of the business model; in the value proposition, the value network, and the revenue model.

The first part of the value proposition is the description of the content of the service or product offered by an organization. Sharing economy business models are different to traditional business models as they allow their customers access to assets, but not ownership over assets (e.g. services, time, property, belongings) (Puschmann & Alt, 2016). It gives people the advantages of ownership without having to carry the costs of it (Botsman & Rogers, 2010). This leads to lower prices and higher convenience. Consumers are assisted in their search to find a product, severely lowering the search costs (Frenken & Schor, 2017). According to Habibi et al. (2016), search costs and other cost factors set back participation. So, when sharing economy platforms effectively assist their users in their search, the participation is expected to go up. The second part of the value proposition is the target segment. In the case of the sharing economy, their business model is different as it deals with two sides, or rather transactions between two sides. For example, renters and hosts or riders and drivers are brought together (Ladd, 2016). These parties need different value propositions, which makes the business model in the sharing economy unique.

Through the mediation between these transactions, the venture can capture and secure their value (Habibi et al., 2016). This is, essentially, part of the value network section of the business model. By connecting renters and hosts or riders and drivers, the venture facilitates the transactions, which derive value. This connection is made virtually on online platforms. Sharing economy ventures rely heavily on the internet to function (Belk, 2013). This facilitates the sharing of assets on a scale that would be unimaginable without modern technology (Botsman & Rogers, 2010). Matches between products and services, on the one hand, and consumers, on the other hand, are simplified. The usage of online payments is common, simplifying the service even further (Frenken & Schor, 2017). The fact that the platform is online also means that an organization can collect data on a large

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number of people, each with a lot of information. This enables companies to perfect their service towards their users, providing after-sales service. Also, this ensures a certain trustworthiness in their service (Frenken & Schor, 2017).

The third part of a business model concerns the revenue or cost model implemented. The transactions are two-sided between two parties, coordinated by a mediator: the sharing economy venture. This venture is an intermediary that offers a platform to consumers and suppliers (Cannon & Summers, 2014). Therefore, the pricing model in a sharing context is often based on a certain percentage that goes towards the mediator.

The sharing economy has a competitive business model, which jeopardizes the position of conventional ventures offering the same product (Möhlmann, 2015). Simultaneously, sharing ventures are attracting lawsuits and governmental inquisitions (Cannon & Summers, 2014; Orsi, 2013). As a result, sharing ventures have been struggling with challenges to their legitimacy and have not succeeded in cooperating with governments productively (Cannon & Summers, 2014). These challenges will be discussed below.

2.2.2 Challenges to the Sharing Economy Business Model

New ventures are often challenged, as their offering is completely revolutionary, and this imposes a threat to their organizational legitimacy (Zimmerman & Zeitz, 2002). Accordingly, many ventures within the sharing economy are highly contested. This imposes a threat to their organizational legitimacy. Legitimacy can be contested due to economic, societal, or environmental reasons (Dowling & Pfeffer, 1975). In the case of the sharing economy, the debate stretches over all three topics.

The first key topic in the debate is the economic disruption due to the sharing economy (Botsman & Rogers, 2010). An essential advantage of the sharing economy is the decrease in transaction costs. This offers consumers lower prices (Bardhi & Eckhardt, 2012; Frenken & Schor, 2017; Zervas et al., 2014). Lower prices result in a number of advantages. For instance, due to lower

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prices, consumers can expect a rise in their disposable income (Frenken & Schor, 2017). Also, consumers nowadays are increasingly concerned with their spending habits and are, therefore, prompted to make use of sharing economy initiatives (Bardhi & Eckhardt, 2012). Additionally, consumers are reassessing the value of their spending. As sharing economy ventures can provide superior value and more convenience, this can also prompt consumers to make use of their services. Higher convenience is provided by offering services that are, for example, geographically proximate (Bardhi & Eckhardt, 2012). Cannon and Summers (2014) describe an increase in employment as another benefit arising from the emergence of the sharing economy. By providing lower prices, more people can make use of the sharing economy. Low-income individuals now have access to certain goods and services as well, meaning the absolute demand for these goods and services increases. This can result in a rise in employment (Rauch & Schleicher, 2015). There are many work opportunities for people in the sharing economy. For example, Uber facilitates opportunities for drivers and Airbnb facilitates hosting-prospects (Cannon & Summers, 2014; Rauch & Schleicher, 2015). Sharing also has another economic outcome: by sharing rather than owning assets, asset utilization and market efficiency go up (Botsman & Rogers, 2010; Slee, 2016).

On the other hand, the disruptive economic dynamics of the sharing economy can also be labeled as damaging. As sharing economy ventures are becoming more popular, they are increasing at the expense of traditional ventures (Zervas et al., 2014). While the surge in their popularity is providing sharing economy ventures with high revenues and profits, this also presents two dangers. Firstly, sharing economy ventures can benefit from the network effect, which is an effect that causes the value of a network to grow exponentially with every additional user (Shapiro & Varian, 2013). This means that large networks will always be superior to small networks as the latter cannot offer size of the network and, therefore, have no competitive value. Shapiro and Varian (2013) state: “Positive feedback makes the strong grow stronger… and the weak grow weaker” (p. 174). Sharing economy ventures that succeed in using the network effect to their advantage can gain a monopoly position. Therefore, it is feared that these ventures can start to charge high margins (Frenken &

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Schor, 2017). Secondly, the sharing economy ventures can earn high revenues and profits because they deposit the risk onto others (Malhotra & Van Alstyne, 2014). The creation of low-paid labor results in smaller expenditures and high profits for the organization, albeit, these profits come at the expense of the workers (Bergvall-Kåreborn & Howcroft, 2014; Scholz, 2012; Slee, 2016). The low-paid labor also becomes riskier as the sharing economy ventures partially remove protections and assurances for these employees (Slee, 2016). According to Scholz (2012), these workers are often not offered a minimum wage, health insurances, or union protection. There is also another secondary effect of the sharing economy, and that is the accelerated depreciation of assets. As peers are sharing their assets, the utilization rates go up, meaning that the depreciation rate also goes up (Fraiberger & Sundararajan, 2015). An overview of the economic debate can be found in Table 2.

Within the societal debate, a key benefit is the inclusion factor. Rauch and Schleicher (2015) state that due to lower prices, the demand for the products and services in the sharing economy rises. This has an economic benefit, the rise in employment, but also a societal counterpart. Lower-income consumers who do not have the means to own cars were excluded from partaking, without the sharing economy. These same consumers are now able to participate, providing them with social inclusion (Fraiberger & Sundararajan, 2015). The sharing economy goes further than social inclusion and actually offers social utility to its users. Ventures within the sharing economy can facilitate the foundation of new relationships, and even friendships (Parigi et al., 2013). If an organization is based on true sharing principles, meaning the pooling, aggregating, and sharing of resources, consumers assume a level of socialization (Belk, 2010; Habibi et al., 2016). On the sharing side of the continuum, users expect things such as social connections, love, and inclusion. They reciprocate this behavior within the network (Habibi et al., 2016).

There are, however, many arguments stating that the sharing economy has negative societal outcomes. In the study by Habibi et al. (2016), it is declared that many sharing economy ventures fall more to the exchange side of the continuum, signifying a more reciprocal, impersonal, and monetary transaction. The exchange context entails mainly utilitarian benefits for consumers. Consequently,

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Table 2 – The Economic Debate

Author(s), Publication Year Economic arguments in favor Economic arguments against

Bardhi and Eckhardt (2012) Consumers are re-examining spending habits and rethinking their values. The sharing economy offers consumers lower prices, as well as, higher convenience.

Bergvall-Kåreborn and Howcroft (2014)

Digital labor exploits workers. Botsman and Rogers (2010) Due to sharing, asset utilization rates go up.

Cannon and Summers (2014) The sharing economy can cause an increase in employment. Fraiberger and Sundararajan

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Due to additional renting, assets are utilized more causing more rapid depreciation.

Frenken and Schor (2017) Due to lower transaction costs, consumers can expect a rise in income. Sharing economy websites benefit from network effects, often leaving room for natural monopolies. This allows the ventures to charge high margins.

Malhotra and Van Alstyne (2014)

Sharing economy business models enjoy large profits, but deposit the risk to others.

Rauch and Schleicher (2015) The sharing economy provides low-income citizens access to cheap goods, as well as, work opportunities.

Scholz (2012) Digital labor often does not offer a minimum wage, health insurance, or union protection.

Slee (2016) Market efficiency increases due to the maximization of asset utilization. Companies are earning a lot of money. This is partially due to the removal of protections and assurances from low-paid work. This low-paid work also carries more risk.

Zervas, Proserpio, and Byers (2014)

Consumers can benefit due to lower (transaction) costs. The retributions in the sharing economy increase at the expense of traditional industries.

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these users do not connect value to the socialization processes (Bardhi & Eckhardt, 2012; Habibi et al., 2016). Many transactions within the sharing economy have ratings, or another value assessment, connected to them. The acquisition of high ratings is important. As these ratings are codified, the socialization process becomes subordinate; there is less room for face-to-face interaction (Frenken & Schor, 2017). Furthermore, the ventures in the sharing economy have been shown to facilitate peer-to-peer discrimination. For example, managers of hotels in traditional industries are not able to see names of their guests and are not able to refuse service to them on the basis of race or socioeconomic position. This is, however, possible with services such as Airbnb (Edelman et al., 2016). Furthermore, the sharing economy can indicate more risk for its users. Consumer protection varies per country, meaning that the level of protection can differ substantially. Particularly in countries with low levels of governance, consumers are often exposed to more risk. For instance, in the case of car sharing, this is because it is not mandatory for drivers to have a special taxi drivers license. Also, it is not uncommon for drivers to forfeit commercial insurance (Malhotra & Van Alstyne, 2014). Furthermore, consumers’ privacy is also something that is unsure in the sharing economy. Granting, users expect, accept, and even want some form of monitoring, the sharing economy venture takes on the monitoring and regulating role to ensure the sharing arrangement works (Bardhi & Eckhardt, 2012). Nonetheless, there can be a loss of privacy for consumers, due to the monitoring of their ratings, and even their whereabouts in the case of ride sharing or accommodation exchange (Scholz, 2012). For an overview of the societal aspects, see Table 3.

Within the environmental debate, the arguments are mostly positive. The sharing economy has been shown to reduce the amount of carbon dioxide emissions (Cannon & Summers, 2014; Nijland, Meerkerk & Hoen, 2015). According to Cannon and Summers (2014), this is especially visible in the case of car sharing. Another effect of car sharing is the fact that it has brought down the number of cars (Nijland et al., 2015). As mentioned earlier, the sharing economy is a tool to battle the mass consumption period nowadays. The sharing economy is less resource intensive, which could reduce this need for mass consumption. Maximizing the utilization rate of assets can help to

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Table 3 – The Societal Debate

Author(s), Publication Year Societal arguments in favor Societal arguments against

Bardhi and Eckhardt (2012) Lack of identification – users do not care for the assets.

Varying significance of use and sign value – users are focused on utilitarian benefits.

Negative reciprocity – The sharing economy venture is responsible. Deterrence of brand community.

Edelman, Luca, and Svirsky (2016)

Online marketplaces can enable peer-to-peer discrimination. Fraiberger and Sundararajan

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Inclusion - lower-income consumers who could not afford to own a car and were thus excluded from participation now consume through the peer-to-peer rental marketplace.

Frenken and Schor (2017) The sharing economy revolves around the acquisition of ratings. These are codified. This leaves less room for face-to-face interactions.

Habibi, Kim, and Laroche (2016)

Users of sharing economy ventures, often seek utilitarian benefits. This means that they do not seek socialization.

Malhotra and Van Alstyne (2014)

Consumer protection differs per country. Especially in countries with weak governance, there is poor consumer protection.

In the case of ride-sharing, drivers often have not taken licensing exams and do not have commercial insurance.

Parigi, State, Dakhlallah, Corten, and Cook (2013)

The sharing economy can facilitate the foundation of new friendships.

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Table 4 – The Environmental Debate

Author(s), Publication Year Environmental arguments in favor Environmental arguments against

Bardhi and Eckhardt (2012) The sharing economy shifts consumer behavior away from ownership and towards asset sharing, for ecological sustainability.

Botsman and Rogers (2010) Due to maximizing the asset utilization rate there is less hyper-consumption.

Cannon and Summers (2014) Sharing economy firms cause a reduction in carbon dioxide emissions (especially in the case of car sharing services).

Frenken and Schor (2017) Even though the sharing economy can yield primary environmental benefits, the secondary effects may be negative (rebound effect). Heinrichs (2013) The sharing economy stimulates sustainability.

Nijland, Meerkerk, and Hoen (2015) Car sharing has brought down CO2 emissions as a result of driving. Also, car sharing has brought down the number of cars.

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combat the hyper-consumption climate of the 21st century. This can help the shift towards an economy based on consumers sharing, lending, and renting to their peers (Botsman & Rogers, 2010). That, in turn, can be beneficial to the environment (Schor & Wengronowitz, 2017). Heinrichs (2013) goes one step further and states that the sharing economy actually promotes sustainability. On the downside, the environmental outcomes of the sharing economy have also been proven more unreliable and unfavorable than thought. Frenken and Schor (2017) expand on rebound effects. Even though the sharing economy can yield primary environmental benefits, the secondary effects are not taken into account, and these could be less positive, environmentally speaking. People are earning money due to the sharing economy, either by direct employment or by using the cheaper alternatives offered. The way this money is spent could have a negative effect on the environment; it could cause a rebound effect (Frenken & Schor, 2017). For an overview of the environmental debate, see Table 4.

2.2.3 Actors Challenging the Sharing Economy Business Model

Legitimacy is the external perception that an organization is operating ethically and appropriately, and, therefore, it is created subjectively (Suchman, 1995). Legitimacy is challenged when an organizations’ activities are not viewed as proper. Sharing economy ventures are subject to challenges to their legitimacy due to the public debate around their practices (Cannon & Summers, 2014; Dowling & Pfeffer, 1975). There are a number of actors that are inflicting the challenges affecting sharing ventures’ legitimacy.

At the moment sharing economy ventures are gaining popularity. However, they are growing at the expense of traditional ventures and disrupting traditional industries. As a result, in many industries, incumbent firms have started an offense against sharing ventures (Rauch & Schleicher, 2015). Traditional industries are negatively affected by the sharing economy as they are often losing market share (Zervas et al., 2014). As sharing ventures can often offer lower prices, as well as, increased convenience, more and more consumers are choosing this option (Bardhi &

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Eckhardt, 2012). For example, within the transportation sector, Uber has significantly established its name. Their business is taking off, but at the expense of other firms in the sector. These firms are not idly standing by, but they are actively fighting Uber. The same thing is happening in other industries (Cannon & Summers, 2014; Zervas et al., 2014). Incumbents have, therefore, urged governments to take actions to suppress or even ban new entrants into the sharing economy. The governments and their regulation have thus become a major opponent, hindering new sharing ventures and future growth for existing sharing ventures. Laws are in formation, meaning that the regulatory framework sharing ventures have to adhere to is intensifying (Cannon & Summers, 2014; Orsi, 2013; Rauch & Schleicher, 2015). These regulatory hurdles are making it hard for sharing ventures to continue their day-to-day operations (Cannon & Summers, 2014). The sharing economy is criticized for enjoying large profits while placing the risk on others. By not offering things such as minimum wage, health insurance, or union protection to their workers the sharing economy is subject to allegations of exploitation. The economic debate has sparked the issuance of regulation, from governments (Cannon & Summers, 2014). Besides the government, different laws, public utilities, commissions, unions, and other actors also play a part in the debate around the sharing economy (Orsi, 2013; Rauch & Schleicher, 2015). Even employees working in the sharing economy are sometimes involved in employment-related lawsuits (Orsi, 2013). It is clear that there are many different actors that play a part in the debate around the sharing economy. The actors contest sharing ventures for different reasons. As a result, sharing ventures are justifying their own actions by using different legitimation strategies. These will be discussed in the next subchapter.

2.3 Legitimation Strategies

The debate revolving around the sharing economy causes a challenge to the individual ventures’ legitimacy. Many contesters of the sharing economy are claiming its adverse outcomes, being economical, societal, and environmental. This threatens their legitimacy (Dowling & Pfeffer, 1975). The regulatory issues surrounding sharing economy ventures have been the center of

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attention in public debates about social, labor, environmental, and political issues. Laws are being put into place (Orsi, 2013). According to Cannon and Summers (2014), since the emergence of the sharing economy, many governments have resisted such firms by means of subpoenas and cease-and-desist orders. As a result, regulation has toughened their existence and their chance of future growth. Incumbents in the different industries are threatened by the emergence of sharing ventures, and this has started to result in regulation across the globe (Cannon & Summers, 2014; Rauch & Schleicher, 2015). This threatens the existence of these types of business models (Cohen & Kietzmann, 2014). Furthermore, it has a disparaging impact on their legitimacy, which causes problems as this is critical to the survival and success of an organization (Ahlstrom et al., 2008; Suchman, 1995; Zimmerman & Zeitz, 2002). Consequently, sharing economy ventures are trying to acquire and uphold legitimacy by resisting pressures and implementing retaliation tactics (Rauch & Schleicher, 2015).

Legitimacy changes over time; it can mutate, increase, diminish, or even fade away. Therefore, organizations can use legitimation tactics. According to Maurer (1971) legitimation is “the

process whereby an organization justifies to a peer or superordinate system its right to exist, that is, to continue to import, transform, and export energy, material, or information” (p. 193). Legitimation

is the process by which an organization aligns the norms and values of others with those of its own (Pfeffer & Salancik, 1978). Mainly new organizations need to prove that their activities can be recognized as legitimate. A thorough legitimation strategy is critical as this can help to make their operations comprehensible, congruent, justifiable, and ethical (Aldrich & Fiol, 1994; Zimmerman & Zeitz, 2002). Legitimation strategies are particularly crucial for new companies as they have to deal with the liability of newness (LON). This is basically the liability of being a new company with new ideas, products, or services (Demil & Bensédrine, 2005; Freeman, Carroll & Hannan, 1983; Singh, Tucker & House, 1986). A company can seek to acquire legitimacy in different ways. Many studies have analyzed the different legitimation strategies that companies can use to achieve different forms of legitimacy. Suchman (1995) acknowledged three main legitimation strategies –

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conformance, selection, and manipulation. Zimmerman and Zeitz (2002) identify the same strategies

but add creation to the list. In a study by Lamin and Zaheer (2012) five different strategies are identified – denial, defiance, decoupling, accommodation, and no response. The different strategies by which to gain legitimacy will be discussed below.

The first strategy is conformance, which involves companies only complying with the set of rules, standards, and regulations (Suchman, 1995; Zimmerman & Zeitz, 2002). The organization does not doubt, alter, or disobey the current structures in place (DiMaggio & Powell, 1983; Suchman, 1995; Zimmerman & Zeitz, 2002). An organization will show conformance throughout its actions; it will try to justify its operations (Demil & Bensédrine, 2005). Organizational legitimacy can come from different sources: regulative, normative, and cognitive (Scott, 1995). The conformance legitimation strategy takes on different forms for these different forms of legitimacy. Regulative legitimacy involves different legal systems and their policies and rules (Palthe, 2014). Gaining regulative legitimacy is handled by complying with all rules, laws, and regulations set out by governmental institutions (Scott, 1995; Zimmerman & Zeitz, 2002). Normative legitimacy is connected to the existing norms and values in society (Scott, 1995). Acquiring normative legitimacy is achieved by conforming to these norms and values. Norms are set by society for companies to follow. An example is making your company and its operations profitable. Society also imposes certain values such as professionality and the respectful treatment of an organizations’ employees (Zimmerman & Zeitz, 2002). Companies can also apply the conformance strategy to gain cognitive legitimacy. Achieving cognitive legitimacy is done by submission to all ideas, practices, and beliefs assumed to be correct within a culture. These cultural foundations are rooted within, for example, the ideas, practices, roles, and habits of a company (Palthe, 2014; Scott, 1995; Zimmerman & Zeitz, 2002). Conformance means the company will only change itself or alter small details within the organization. This can impose changes in the business model. This option is the least strategic legitimation strategy. This strategy is often implemented by new ventures as it is easy to be

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executed and not very resource-intensive (Zimmerman & Zeitz, 2002). The conformance strategy is in line with the accommodation strategy (Lamin & Zaheer, 2012).

The second legitimation strategy is selection. This is a company’s search for an environment that is advantageous (Suchman, 1995; Zimmerman & Zeitz, 2002). Therefore, a company can choose strategically (Scott, 1995; Suchman, 1995; Zimmerman & Zeitz, 2002). When internationalizing companies can select the location that best fits their needs (Zimmerman & Zeitz, 2002). As this research focuses on the legitimation tactics that are activated by companies already positioned in a certain location, this strategy is not relevant to this study.

The third legitimation strategy is manipulation. Manipulation entails organizations to shape the environment to meet their own desires (Suchman, 1995; Zimmerman & Zeitz, 2002). This means an organization will push to innovate, change, or even shift away from the current regulatory and societal structures. This strategy means the company will try to influence its direct environment and the other actors in that environment (Suchman, 1995). So instead of adapting the business model of an organization to its environment, the company attempts to change the environment to align with its business model (Zimmerman & Zeitz, 2002). Regulative legitimacy is about official rules, policies, and regulations (Palthe, 2014; Scott, 1995; Zimmerman & Zeitz, 2002). In this case, the manipulation strategy means attempting to change the prevailing rules to lead to alignment with the company. An example is lobbying. By seeking to manipulate the norms and values of society, a company can seek normative legitimacy (Zimmerman & Zeitz, 2002). Society sets certain norms and values that companies should adhere to. Organizations can try to change these norms and values so that their business is congruent. For example, the norm that a company’s operations should be profitable can be manipulated when that business is focused on scientific breakthroughs or other charitable goals (Zimmerman & Zeitz, 2002). Cognitive legitimacy is generated by altering present ideas and operations so that your company matches these ideas. The manipulation strategy can be applied to gain cognitive legitimacy. This has been the case in the music industry, with companies such as Napster slightly manipulating the status quo (Zimmerman & Zeitz, 2002). This option is a more