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Trust Building in the Sharing Economy

How Companies Build Trust between Peers and towards the Platform

Written by A. Fellenius, P. Swegmark & D. Worpa

Paper category

Bachelor Thesis

Subject

Business Administration>Management

Year

2018

Abstract

Thesis: Definition of Sharing Economy Although the sharing economy is a recent phenomenon, there has been a large amount of literature on sharing and collaborative operation methods for decades. With the development of new technologies, the term has evolved over time, and so far, no consensus has been reached on a single definition. Although many scholars emphasize the importance of monetary compensation (Belk, 2014), others only regard peer-to-peer interaction as a sharing economy activity (Felson & Speath, 1978). The early research of Felson and Speath (1978) confirmed the academic awareness by defining collaborative consumption as the interaction between multiple people, in which the use of goods and services helps to participate in joint activities with other peers. The frequently cited research by Botsman and Rogers (2010) provides a more specific definition, including monetary and non-monetary transactions conducted by strangers in most cases. In the field of research, there are also controversies about how to provide products or services. Piscicelli, Cooper, and Fisher (2014) define a sharing economy company as a company that provides resource access or use, and a business between peers that own private assets. For this article, the definition of Piscicelli et al. (2014) and the combination of Botsman and Rogers (2010) have been selected. Therefore, it covers a wide range of companies and peers that provide services or products. In addition, non-profit organizations are also included and will serve the purpose of this research. Sharing Economy Perspective Reviewing the previous literature, scholars are concerned about the economic, sustainability, social and legal perspectives of the sharing economy. By introducing these contents, a broad overview of the sharing economy will be given, which will serve as the background knowledge throughout this article. In the sharing economy literature, economic factors have always been the main topic of interest to scholars. Since sharing economy companies provide consumers with cheaper alternatives and provide suppliers with a way to earn additional income, their economic impact is of particular interest (Narasimhan, Papatla, and Ravula, 2016). Regarding the lower prices of sharing economy services, Cohen, Hahn, Hall, Levitt, and Metcalfe (2016) conducted a quantitative study in major cities in the United States to investigate consumer surplus. In 2015, Uber generated a surplus of US$2.9 billion in four cities, reaching US$6.8 billion nationwide (Cohen et al., 2016). Ranchordas (2015) not only assumes that customers have larger surpluses, but also assumes that the company is likely to increase profits, thereby extending this view. 2.2 Trust 2.2.1 Trust Background The study of trust is a broad topic discussed in various scientific fields such as sociology, psychology, business or economics (Mayer, Davis & Schoorman, 1995). Although the topic usually focuses on building social relationships, all fields cover the topic from different perspectives. Although trust is a fundamental aspect of the sharing economy, it has not been studied in depth. Therefore, there is no existing model for trust in the sharing economy. However, as Möhlmann (2015) and Slee (2013) study the significance of online transactions and technology to the sharing economy, this section will first introduce trust in e-commerce, then peer trust in online interaction, and finally trust research In the sharing economy. These views are the basis for supporting the theoretical framework. In the early studies, scholars unanimously defined trust as a social construction, which forms the willingness to rely on one party without predicting the outcome (Mayer et al., 1995; Moorman, Deshpandé, and Zaltman, 1993; Morgan & Hunt, 1994). Although Moorman et al. (1993) emphasized the importance of the trustee's trust in the trustee. Morgan and Hunt (1994) believe that the trustee's view of trustee reliability is more relevant. The degree of one party’s trust in the other party also depends on the following assessments: i) damage from threats, ii) the degree of goodwill of the other party to someone, and iii) whether the possibility of damage exists between both parties in the relationship or may be caused by external factors (Friedman, Khan and Howe, 2000). In their frequently cited work, Mayer et al. (1995) defines trust as “a party’s willingness to be susceptible to the other party’s behavior based on the expectation that the other party will perform a specific behavior important to the principal, regardless of how the other party’s ability to monitor or control the party will” (p. 712) . In addition, Mayer et al. (1995) Links the vulnerability component to the willingness to lose what is important to the trustee. Therefore, trust is preparation to expose yourself to risk. For the purpose of this research, the definition of Mayer et al. (1995) was chosen because it includes risk factors that are essential for online transactions when individuals are at risk. Trust in e-commerce The conditions in an e-commerce environment are different from traditional businesses. In particular, the existing literature has identified three major obstacles to building trust. First, the physical evaluation of the product will affect whether consumers decide to buy (Hsiao, 2009). The impossibility of physical product evaluation magnifies trust issues in online interactions. Read Less