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Trust in Sharing Economy

Written by J. Lindström, M. A. Morshed

Paper category

Master Thesis

Subject

Business Administration>General

Year

2020

Abstract

Master Thesis: Sharing economy Sharing economy companies are expanding rapidly on a global scale (Cannon and Summers, 2014). Many researchers define the sharing economy as having basic characteristics, but they did not propose a common definition (Anwar, 2018; Key, 2017; Laurell and Sandström, 2017; Osztovits et al., 2015). According to Laurel and Sandstrom (2017), the sharing economy can be defined as: "A platform supported by information and communication technology that uses non-market logic, such as sharing, lending, gifting and exchange, and market renting and selling Waiting logic" (page 63). The sharing economy is rooted in the old concept of “collaborative consumption” (Felson & Spaeth, 1978), that is, participation in joint activities such as sharing goods with friends, family and other people or strangers (Henten and Windekilde, 2016; Laurell and Sandström, 2017). Although this concept has existed in history, it has changed and is now considered a new idea in the modern business world. Belk (2014) believes that the concept of sharing economy is a “phenomenon born in the Internet era” and a digital footprint facing the post-ownership economy. Digital platforms create interactions between service providers and users, where they can share information and communicate with each other. This digital age has provided impetus to the sharing economy, creating bilateral markets through profit sharing (Laurell and Sandström, 2017). Sharing economy companies need the participation of at least three parties. For example, one party provides resources for sale, lease or joint use, they act as private providers, the other party seeks products or services provided, and finally a digital platform to manage the resources. The relationship between supply and demand promotes bilateral markets (Hawlitschek et al., 2018; Anwar, 2018). The digital platform is owned and operated by a company that acts as an intermediary that matches people who want to buy with others who provide services (Frenken & Schor, 2019). In the case of Airbnb, these platforms act as a way for people to rent out houses to people looking for accommodation (Breidbach & Brodie, 2019). In the sharing economy platform, suppliers share underutilized assets with strangers. They must trust strangers, but they must also assess potential risks. Theft or different types of damage may occur when interacting with strangers. (Bellin, 2017) Many researchers also discussed the issue of mutual trust between customers and suppliers (Bellin, 2017; ter Huurne et al. 2019). 2.2 TrustTrust has been defined by different disciplines in the research field. There is still uncertainty about how to define trust, but researchers can agree on certain parts of the concept. Trust always has a subject (a person who creates trust) and an object (the person who manages and interprets trust), and they are interdependent. (PytlikZilling and Kimbrough, 2016). In the traditional business model, customer trust is regarded as a company's competitive advantage and a key point for the company, because most transactions are based on physical activity (Barney and Hansen, 1994). In the sharing economy, it is almost the same as the traditional business model. In the US market, 72% of customers worry about trust in the sharing economy (PwC, 2015). Here, consumers need to establish trust between the online platform and strangers, so consumers' purchase intentions will be affected by customer trust issues. The question is how to manage trust in the sharing economy. Many researchers say that perceived risks, perceived benefits, and trust in influencers or participants may drive customers' purchase intentions (Kim et al., 2009). Customer loyalty is directly related to trust, company reputation, and customer retention (Delgado-Ballester et al., 2003; Erdem and Swait 2004; Matzler et al., 2008; Willmott 2003). A high degree of trust in online platforms means that consumers have low risk to service providers (Kim et al., 2009). According to Mayer, Davis and Schoorman (1995) trust can be defined as: "One party is willing to be vulnerable to the actions of the other party based on the expectation that the other party will perform specific actions important to the client." (Mayer et al., 1995 Year) this definition of Mayer et al. (1995) is also part of the description of PytlikZilling and Kimbrough (2016). They describe that trust is always based on the risk that the subject relies on the object to perform actions that are beneficial to the subject. Putting trust in a business environment can be interpreted as the consumer's belief that the seller will fulfill the transaction and its obligations to the consumer. (Kim et al., 2009) However, trust may vary from situation to situation and can be developed from different risk assessments. (PytlikZilling & Kimbrough, 2016) 2.2.1 Trust based on personality Trust based on personality can be described as trust based on general assumptions or tendencies of personality psychology (McKnight & Chervany, 2001). Personality-based trust is rooted in the belief system of the human mind and continues to develop throughout life (Lewicki & Wiethoff, 2000). This type of trust is developed from previous social experience (Kim, Ferrin, and Rao, 2008). Personality-based trust is often considered a key factor in relationship development. Read Less