The Impact of Sharing Economy on Profitability, Environment and Innovation

The sharing economy has recently received much attention to determine whether it is economically viable and environmentally friendly. We study the effect of sharing economy on the economy, environment, and innovation.

First, we study the impact of the peer-to-peer sharing economy on the environment and manufacturer’s profitability. There is an open debate on whether sharing economy or collaborative product consumption is environmentally friendly. The main arguments are as follows. First, the number of products produced may decrease under sharing economy, which has a positive impact on the environment. Second, access to the product may increase under sharing economy, which has a negative impact on the environment. Motivated by these arguments, we study the impact of peer-to-peer sharing economy business models on the economy and the environment. We investigate when the sharing economy business model results in a win-win strategy, where it can simultaneously increase a manufacturer’s profits and decrease the environmental impact, as compared to other traditional consumption models such as pure sales and servicizing models. Our analytical results show that the sharing economy can lead to a win-win outcome with respect to both the manufacturer’s profits and the environmental impact.

Second, we study the impact of ride-hailing on manufacturers’ innovation in the car manufacturing industry. To measure innovation, we use the number of patents granted to each manufacturer in the period that goes from 2000 to 2020. The emergence of ride-hailing and its growth are measured based on the revenues of the two main companies operating in this area, Uber and Lyft. Paradoxically, we find a strong positive impact of the ride-hailing growth on the number of manufacturers’ patents, both as a direct effect and as mediated by the manufacturers’ revenues. The rationale is that ride-hailing leads to a price increase in the car models that are adopted by drivers for ride-hailing. Therefore, manufacturers benefit from sharing economy and attain higher revenues as ride-hailing grows. The revenues increase, in turn, leads manufacturers to invest higher financial resources in research and development. Our results suggest that car manufacturing companies should support the practice of ride-hailing.