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Journal of Marketing Channels
ISSN: 1046-669X (Print) 1540-7039 (Online) Journal homepage: http://www.tandfonline.com/loi/wjmc20
Ethics in the Sharing Economy: Creating a
Legitimate Marketing Channel
Tracy L. Gonzalez-Padron
To cite this article: Tracy L. Gonzalez-Padron (2017) Ethics in the Sharing Economy:
Creating a Legitimate Marketing Channel, Journal of Marketing Channels, 24:1-2, 84-96, DOI:
10.1080/1046669X.2017.1347005
To link to this article: http://dx.doi.org/10.1080/1046669X.2017.1347005
Published online: 11 Aug 2017.
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Journal of Marketing Channels, 24:84–96, 2017
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Taylor & Francis Group, LLC
ISSN: 1046-669X print/1540-7039 online
DOI: 10.1080/1046669X.2017.1347005
Ethics in the Sharing Economy:
Creating a Legitimate Marketing Channel
Tracy L. Gonzalez-Padron
Department of Marketing, Strategy, and International Business, College of Business,
University of Colorado at Colorado Springs, Colorado Springs, Colorado, USA
The sharing economy is a regulatory-disruptive business model in transportation, accom-
modation, household services, and other service sectors. In this article, we examine the
ethical issues in the sharing-economy business model that depends on trust and reputa-
tion. We draw from the stakeholder, trust, and institutional theory literature to explore
ways to encourage conformity of practices in the relatively infant marketing channel of
the sharing economy.
Keywords: business ethics, institutional theory, regulatory disruption, sharing
economy, stakeholder
Calls for regulating businesses operating in the sharing
economy garner attention by media and consumers.
Newspaper headlines include “A Michigan Shooting
Spree Kindles Fear of the Sharing Economy” (Vick &
Steinmetz, 2016), “Uber and Lyft Face Legal Test to
Sharing Economy” (Mintz, 2015), and “NJ Bill Seeks to
Regulate Airbnb-Type Rentals” (Ensslin, 2016). Sensa-
tionalism of ethical challenges with Airbnb, Lyft, and
Uber are indicative of the novel platform of the sharing
economy that leads to inated news coverage.
A Pew Research Center study reports that almost half
(48%) of adults in the United States (U.S.) have heard
at least something about the debate happening in cities
across the country over how best to regulate ride-sharing
services (A. Smith, 2016). Public perception of the degree
of risk in the sharing economy skews to the high side
because of the urgency of news reports. People tend
to overestimate the frequency of extreme events due to
an availability heuristic bias—the ease with which one
can bring to mind exemplars of an event (Folkes, 1988;
Tversky & Kahneman, 1973).
Address correspondence to Tracy L. Gonzalez-Padron, PhD,
Department of Marketing, Strategy, and International Business, Col-
lege of Business, University of Colorado at Colorado Springs, Dwire
Hall 351, 1420 Austin Bluffs Parkway, Colorado Springs, CO 80918,
USA. E-mail: tgonzale@uccs.edu
EXAMINING ETHICAL CONDUCT IN THE SHARING
ECONOMY
Sharing economy is an encompassing term for market
access to underutilized assets for monetary or nonmon-
etary benets (Belk, 2014). Firms in the sharing economy
facilitate peer-to-peer (P2P) business models connecting
users (i.e., purchasers of products) with providers (i.e.,
sellers of services) via mobile applications (apps) or Inter-
net sites. At startup, many sharing rms use independent
service-providers that own the assets and users pay for
their use at a lower cost than traditional channels.
O. C. Ferrell et al. (2017) discuss the sharing econ-
omy within the context of a marketing channel. As
a marketing channel, the sharing economy combines
aspects of direct-to-consumer selling through indepen-
dent workers, Internet commerce, and online auctions
that offer services and goods across multiple sectors such
as travel, car sharing, nance, stafng, music / video
streaming, and health and beauty services. Revenues of
the ve largest sectors of the sharing economy in 2014
are US$15 billion and expected to reach US$335 billion
by 2025 (PricewaterhouseCoopers LLP, 2015).
Perceptions of risks in the sharing economy derive
from the media attention to actions of a few large
multinational rms. Airbnb and Uber are the leaders
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ETHICS IN THE SHARING ECONOMY 85
in the ride-sharing sector at US$62.5 billion and the
home-sharing sector at US$25 billion, respectively (Telles,
2016). With a greater market presence comes greater
demands by stakeholders for responsible and ethical
conduct.
Media coverage of Uber using surge pricing when
people in downtown Sydney, Australia, were needing to
ee a gunman and of Airbnb hosts discriminating against
African-American guests encourage sharing-economy
companies to respond to multiple stakeholders. The
consequences of not attending to community, user, and
provider responsibilities include legal action, regulation,
and loss of markets (Freeman, 1984).
Regulatory Disruption
As an innovative business model, the sharing economy
is experiencing legal action although regulation is lack-
ing. The sharing economy contests existing regulatory
schemes, termed by Cortez (2014) regulatory disruption.
Circumventing existing regulation or failure to anticipate
ethical issues is damaging to the reputation of the rm
and the service providers (Gonzalez-Padron & Nason,
2009). However, the varied sectors and transitory busi-
ness models make regulation of the sharing economy
challenging. Most state or country government pres-
sure is for regulation to maintain a competitive market,
protect consumers, and collect taxes.
Sharing-economy rms should adopt industry self-
regulation or collaborative approaches to regulation of
the marketing channel to avoid legal action, stake-
holder distrust, and an unattractive business environment
for innovation. Firms respond to regulatory pressures
through minimal compliance, self-regulation through
government and industry programs, or collaborations
with regulatory agencies. Firms adopting a minimalist
approach to regulation reect views that the cost of com-
pliance sties innovation (Miles et al., 2002). The shar-
ing economy relies on lower regulatory costs to compete
and so resists compliance with existing industry regula-
tions (Hartl et al., 2016; Jonas, 2015).
Gonzalez-Padron and Nason (2009) nd that a
strategic-based approach to the regulatory environment
enhances innovation. Strategic approaches include adopt-
ing industry guidelines or collaborating with governing
authorities to develop regulation favorable to innovative
growth. Attention to company stakeholders and a strate-
gic approach to regulation can alleviate the negative effect
of regulatory attention on innovation and reputation of
the sharing economy. Therefore, sharing-economy rms
should follow existing industry models and best practices
to address community, user, and provider responsibili-
ties to avoid cumbersome regulation of their marketing
channel.
Community, User, and Provider Responsibilities
Community responsibilities relate to the infancy of the
marketing channel and the reaction of traditional busi-
ness disrupted by the sharing economy. Disruption
describes “a process whereby a smaller company with
fewer resources is able to successfully challenge estab-
lished incumbent businesses” (Christensen et al., 2015,p.
46).
The sharing economy is threatening rms in the trans-
portation and accommodation sectors with increasing
consumer acceptance of peer-to-peer sharing (Kathan et
al., 2016). Home sharing is in position to take 10% of
the U.S. accommodations market and ride sharing could
reach 5% of the global taxi market by 2025 (Telles, 2016).
Reactions of taxi drivers to Uber competition include
protests in France and Hungary; in the U.S. taxi drivers
are lobbying local legislators for bans on ride sharing or
restrictive regulation in cities nationwide (Castelluccio,
2014; Hill, 2014; Keszthelyi, 2016; Verbergt & Schechner,
2015). But it is not surprising that resistance to challenges
by novel platforms is a prevalent reaction. In describing
business-model innovations in healthcare, Hwang and
Christensen (2008) recognize that “every company and
industry that was eventually disrupted has had support-
ers who at one time lobbied against change and argued
that disruptive enterprises could never offer more than
substandard performance and unacceptable quality”
(p. 1335).
Misconduct by the service providers or the company
erodes the trust of consumers and damages the reputation
of the industry. User responsibilities relate to maintaining
user trust in the sharing economy that would be eroded
by misconduct, bending of rules, and poor experiences:
reliance on independent providers for quality and con-
sistency of service can increase uncertainty and risk for
the sharing-economy rm. Trust represents condence in
a relationship that Ganesan (1994) describes as “expecta-
tion about an exchange partner that results from the part-
ner’s expertise, reliability, and intentionality” (p. 3).
Users are satised with sharing economy when the
service experience matches the promised level of service.
Sharing-economy rms should take user trust seriously
as 72% of users in the U.S. feel that the experience is not
consistent (PricewaterhouseCoopers LLP, 2015). Jonas
(2015) states pointedly that “every aggrieved user com-
plaint has the potential for a lawsuit and every violation
creates an opportunity for penalties” (p. 205).
Provider responsibility refers to fair treatment of the
independent providers contracting with the sharing-
economy rm. The market platform of the sharing
economy relies on a reliable supply of providers with
excess assets. Thorne and Quinn (2017) reference three
regulatory concerns that shape ethical responsibilities of
sharing-economy rms toward providers of assets in the
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86 T. L. GONZALEZ-PADRON
sharing economy including employment classication,
property rights, and data privacy. The sharing-economy
rm must balance providing the exibility that attracts
independent providers with the need to comply with reg-
ulations and meet user demand.
A tension exists among providers between the desire
for work-life balance, exibility, and control over income
with a desire for more benets and training (Steinmetz,
2016). Fair treatment of independent workers includes
the workers receiving adequate compensation for work on
time and protection from cancelled services. Unfair treat-
ment of independent workers fosters a high turnover of
providers. A former Postmates driver indicated that she
started out “optimistic, then grew disillusioned as parking
fees, smartphone costs and her frustrations with company
protocol piled up” (Steinmetz, 2016, p. 47).
Airdnb and Uber are the market leaders and have the
resources to invest in inuencing the regulatory environ-
ment related to competition, user safety, and provider sta-
tus. Regional rms or startups may not have the expertise
or capacity to ght lawsuits or cultivate relationships with
regulatory agencies. Therefore, sharing-economy rms
rely on the leading rms to dene the marketing channel
with regulators, industry sectors, users, and providers.
From the institutional perspective, rms oper-
ate within a social framework of norms, values, and
assumptions about what constitutes acceptable behavior
(DiMaggio & Powell, 1983). Conformity to social con-
straints of rm behavior encourages homogeneity, or
institutional isomorphism. A fundamental consequence
of institutional isomorphism is organizational legiti-
macy, the acceptance of an organization by its external
environment.
Organizations within an industry that conform to the
strategies used by other rms are recognized as being
more legitimate than those that deviate from “normal”
behavior. Both regulatory endorsement of a rm by
governing bodies that formally regulate the industry
and public endorsement of an organization expressed
by the media increase the legitimacy of an organization
(Deephouse, 1996).
Purpose of this Research
This article reviews the ethical issues in the sharing-
economy business model from a perspective of industry,
customers, and workers. The multifaceted nature of the
sharing economy as a marketing channel calls for research
that integrates theoretical perspectives at multiple levels
of analysis.
In a review of the scant research of the sharing econ-
omy, Cheng (2016) uncovers that trust is not included in
studies relating to sharing-business models or the nature
of the sharing economy. Additionally, O. C. Ferrell et al.
(2017) call for managerial attention to the ethical risks
inherent in the sharing economy and suggest the need for
ethical values, culture, and standards.
Therefore, we explore the ethical responsibilities to
company stakeholders to maintain the reputation of the
business model and create trust with consumers. Consid-
ering aspects of the stakeholder, trust, and institutional
theory literature, we seek to explore ways to encourage
conformity of practices in the relatively infant marketing
channel of the sharing economy.
THE SHARING ECONOMY AS
INDUSTRY DISRUPTOR
Imagine needing to get to the airport without the hassle
of driving and parking. A friend or relative could drive
you to the airport and save you the expense of parking.
Scheduling a taxi or limo service may be costly, yet con-
venient. Airport shuttles are less convenient with strict
departures and frequent stops. Ride-sharing services such
as Lyft and Uber provide on-demand transportation that
includes conrming information on driver and arrival
information. According to A. Smith (2016), 86% of
Americans believe ride-sharing services save time and
stress over other transportation options. Ride-sharing
models are a successful sector in the sharing economy
and threaten the global taxi industry.
The market leaders of the sharing economy, Airbnb
and Uber, grew from literally nothing in 2008 to multibil-
lion dollar international rms within seven years. By 2015,
the sharing economy consisted of 10,000 rms offering
services such as the use of boats, doctor visits, dog sitting,
and haircuts from independent providers (Stein, 2015).
Worldwide there are 17 companies in the sharing econ-
omy valued at more than US$1 billion (Telles, 2016).
Fast growth of a novel business model attracts the
attention of stakeholders such as communities, indus-
try incumbents, and regulators. Active engagement with
external stakeholders should incorporate the sharing-
economy societal benets, consider partnerships with
incumbents, and shape regulatory frameworks (Marchi
& Parekh, 2016). A trade association could represent
sharing-economy members’ interests to regulators, legis-
lators, and the public.
Definitional Challenges
Differing denitions create challenges to measuring the
size and inuence of the sharing economy and the impact
it has on the community and existing businesses. Sharing-
economy models rely on technology to connect con-
sumers with on-demand access to excess capacity. Often
referred to as collaborative consumption or
on-demand
economy, the sharing economy is a marketing channel that
offers a business opportunity to owners of underutilized
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ETHICS IN THE SHARING ECONOMY 87
assets (Belk, 2014). The U.S. Department of Commerce,
Economics and Statistics Administration (Telles, 2016)
describes companies in the sharing economy as digital
matching rms that exhibit the following characteristics:
r
They use information technology (IT systems), typ-
ically available via web-based platforms, such as
mobile apps on Internet-enabled devices, to facilitate
peer-to-peer transactions.
r
They rely on user-based rating systems for quality
control, ensuring a level of trust between consumers
and service providers who have not previously met.
r
They offer the workers who provide services via
digital-matching platforms exibility in deciding
their typical working hours.
r
To the extent that tools and assets are necessary to
provide a service, digital-matching rms rely on the
workers using their own.
The term digital-matching rms may not catch on
globally, but critics of the Department of Commerce
report admit that “sharing economy is a misnomer for
companies like Uber and TaskRabbit, which involve the
exchange of money for services, and where no one is
sharing anything” (Roberts, 2016, p. 1). Facilitating mar-
ket exchanges via technology could include online retail-
ing rms such as Amazon, crowdfunding, online auc-
tions such as eBay, or knowledge-sharing platforms such
as Wikipedia (Belk, 2014). A sharing-economy rm is a
digital platform owned and operated separately from the
products / services exchanged.
However dened, as the global sharing-economy
develops more industry sectors have a P2P-market
channel. The largest sectors of the sharing economy
are accommodations offering excess space in a home
(Airbnb) or a vacation rental (HomeAway) and trans-
portation that includes sharing a ride (Lyft, Uber), car
(Turo), bike (Spinlister), boat (Sailo), or parking space
(Parking Panda).
On-demand household services include beauty
(The Glam App), delivery (Postmates), dog sitting
(DogVacay), errands (TaskRabbit), home doctor visits
(Doctor on Demand), and meals (Munchery). Stafng
and professional services include Amazon Mechanical
Turk and GigSalad. Goods sharing via apps include
fashion (Tradesy) and peer-to-peer borrowing (Neigh-
borGoods). Crowdfunding, online ticket resellers, and
music / video-sharing services are considered by some to
be part of a sharing economy (PricewaterhouseCoopers
LLP, 2015; A. Smith, 2016).
Disrupting Traditional Business
The role of the sharing economy in disrupting traditional
business attracts much attention in the business press. In
a Fast Company article during the infancy of the sharing
economy, economists and investors warn that this disrup-
tive business model will change the way of thinking about
ownership and erode margins of incumbent businesses
(Sacks, 2011). The sharing economy is seen as disrupt-
ing the labor market compensation structures for inde-
pendent providers, affecting wages for traditional service
providers (McEvoy, 2015). The sharing economy is also
seen as a disruptor in human resources management by
changing ways of meeting stafng needs and expanding
the independent-worker pool (Horney, 2016; Steinmetz,
2016).
Scholarly attention to the sharing economy as a dis-
ruptor focuses on disruptive technology or regulatory
disruption.
1
The type of innovation can guide success
as a disruptive innovator or for defending against a
disruptive challenger. Disruptive technologies are usually
less complicated, less expensive, and more accessible for
new markets than existing technology, whereas sustaining
innovations involve marketing improved products or
services to an incumbents’ existing customers (Bower &
Christensen, 1995; Christensen et al., 2015). The work
of Christensen et al. (2015) suggest that Uber and other
sharing rms are sustainable innovations that offer better
services than incumbent rms do, thereby attracting
existing taxi or hotel customers.
Cheng (2016) explores the themes in the fragmented
literature on the sharing economy over the years 2010 to
2015 and ascertains that theories of social and disruptive
innovation mainly explains the sustainability benets of
the sharing economy through utility of excess resources
and addressing inequalities in access to goods. Sustain-
ability benets do resonate with users of the sharing
economy.
Surveys nd that 76% of people believe that the shar-
ing economy is better for the environment (Pricewater-
houseCoopers LLP, 2015) and that ride-sharing services
provide access to underserved areas and populations that
may not be able to hail a taxi (A. Smith, 2016). Sharing
companies need to educate communities on the contribu-
tion their business model makes to the environment and
to social issues such as employment (Marchi & Parekh,
2016).
Disrupting Regulatory Frameworks
As noted previously, regulatory disruption refers to busi-
ness models that do not t within existing regulatory
schemes thereby disrupting the regulation framework
(Cortez, 2014). Sharing-economy rms seem to have an
unfair competitive advantage by not following the exist-
ing regulations for incumbent rms.
1
In the business press, disruption describes any “shaking up” of
existing business practices.
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88 T. L. GONZALEZ-PADRON
Taxi drivers in some municipalities must comply with
local laws prohibiting raising rates, pay for taxi medallions
that decrease competition, secure insurance, and undergo
regular drug testing. In the State of California, since ride-
sharing services entered the market, there are 50% fewer
taxis and a 30-year old taxi company closing resulted in
300 jobs lost (Williams, 2016).
To attempt to level the playing eld, municipalities
or states are requiring ride-sharing rms to pay applica-
tion fees, secure insurance, conduct background checks,
and require special licenses for ride-sharing cars (Jonas,
2015; Sharp, 2016). Home-sharing providers fail to collect
and report taxes and violate occupancy laws, prompting
scrutiny from regulators in some municipalities (Ensslin,
2016; Telles, 2016).
Public opinion can inuence the degree of regulation
of the sharing economy. A 2016 survey (Vaughan &
Daverio, 2016) highlights that 15% more Swiss consider
taxation or safety regulations as unnecessary (36%) than
Swiss that support regulation (21%). The U.S. sample
in the study did not have as large a difference between
the positions with 25% supporting regulations and 28%
opposing regulations.
A U.S. survey by A. Smith (2016) delved into the issue
of regulating the sharing economy by sector. For example,
42% of Americans knowing of the sharing economy and
57% of ride-sharing users feel that ride-sharing compa-
nies should not have to follow the same rules as taxi com-
panies regarding pricing, insurance, or disability access.
Similarly, 56% of U.S. adults using home-sharing services
consider it appropriate that owners do not pay local hotel
or lodging taxes required of incumbent hotels.
Incumbent and government reaction to the sharing
economy seems to depend on whether ofcials expect
the business model to be a short-term fad or a long-
term shift in consumption patterns (Kathan et al., 2016).
The cofounder of Airbnb relates how in 2008 no one
was willing to discuss the externalities or regulations that
peer sharing of rooms would entail in their municipal-
ity (Stein, 2015). But, as Airbnb expanded to more cities
and attracted more hosts, contacts from homeowners
complaining about parties, loud noises, and strangers in
their community or building created government scrutiny
of rentals (Lockwood, 2016; Weisberg, 2016). Sharing-
economy companies are encouraged to shape regulations
rather than ignore legal responsibilities until their opera-
tions are questioned.
USER TRUST IN THE SHARING ECONOMY
User trust is an essential determinant in service satis-
faction of the sharing economy that relies on exchanges
between individuals that are most often strangers. Almost
90% of Americans familiar with the sharing economy
believe that trust between service producers and users
is necessary, yet 69% will not trust sharing-economy
companies until they are recommended by someone they
trust (PricewaterhouseCoopers LLP, 2015).
Users are key stakeholders that help establish the rm’s
reputation in the market. A customer is more likely to
install and use a mobile app from rms with high rankings
on trust by peers (Harris et al., 2016). The relationship
between a customer and a rm exists because of mutual
expectations built on trust, good faith, and fair dealing in
their mutual interactions.
Social connections and relationships drive many con-
sumers to engage in the sharing economy. Enthusiastic
participants in the sharing economy are committed to
maintain a relationship with trusted companies (Morgan
& Hunt, 1994). Trust represents a condence in a relation-
ship that Ganesan (1994) describes as an “expectation
about an exchange partner that results from the partner’s
expertise, reliability, and intentionality” (p. 3). This is
especially germane here as users of sharing-economy
services rely on peer evaluations of the reliability and per-
formance of individual providers (D. Smith et al., 2005).
The provider’s intentions and motives also inuence
user trust in a sharing-economy rm. Bucher et al. (2016)
nd that providers are more likely to share for social and
moral motives relating to meeting new people, playing a
new role, and contributing to environmental sustainabil-
ity. The provider’s motives align with user’s sentiments
that the sharing economy is more fun than traditional
companies are and better for the environment (Pricewa-
terhouseCoopers LLP, 2015).
Individual-Level Trust and Organization-Level Trust
Trust in channel relationships consists of individual-level
trust and organization-level trust (Zaheer et al., 1998).
Considering individual-level trust, in app-based peer-to-
peer exchanges users trust that the provider will act hon-
estly and fairly as in providing a safe ride or promised
accommodations. The Pew Research Center nds that
only 16% of ride-sharing users had a bad experience and
only 12% of users had a bad experience with a room-
sharing service (A. Smith, 2016); however, there remains
room for improvement.
Organizational-level trust is the extent of overall trust
placed in the sharing-economy rm to ensure quality
providers of services, condentiality of private informa-
tion, and truth in advertising.
2
Ride-sharing users expect
that the vehicles that customers request are clean and
safe (A. Smith, 2016). Likewise, users expect that compa-
nies deliver on promises for safety. Customers sued Uber
for falsely advertising state-of-the art background checks
of drivers funded by a US$1 fee charged for each ride
(MacMillan, 2016). Sharing-economy rms can instill
2
Organizational-level trust is also referred to as institutional trust.
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ETHICS IN THE SHARING ECONOMY 89
trust by secure and transparent payment services, returns
policies, and dispute resolution (Li et al., 2012).
Trust and Customer Satisfaction
Users of sharing rms state that along with cost savings,
trust in the service providers drives customer satisfaction
of the business model (Möhlmann, 2015). Customer
satisfaction is dened as an overall evaluation based on
the customer’s total purchase and consumption experi-
ence with a good or service over time (Fornell, 1992).
An equity approach to exchange evaluation shows
that perceived fairness from the customer’s view is a
strong predictor of customer satisfaction (Symanski &
Henard, 2001). Unethical marketing that exploits or
harms another party reduces the user’s evaluation of per-
ceived fairness and risks alienating the most committed
customers (Ingram et al., 2005). For example, sharing-
economy rms are under scrutiny for discriminatory prac-
tices in accepting short-term rentals and refusing rides to
users requiring guide dogs (Begley, 2015; Quittner, 2016).
Guest decisions on lodging rely on the attributes of
both the room and the host’s reputation. In addition
to online review scores and personal information, hosts
have begun to provide personal photos that exhibit trust-
worthiness and attractiveness (Ert et al., 2016). However,
research has shown that the personal photos foster greater
discriminatory practices in sharing-economy use from the
guest (Edelman et al., 2016).
Reliance on independent providers in a sharing econ-
omy complicates a rm’s ability to control the quality and
consistency of the service that users experience. Sharing-
economy rms must balance a need to ensure quality
and meet user demand with a need to avoid exerting too
much behavioral control over providers that would indi-
cate an employee, rather than an independent-contractor,
relationship for providers (Dennis-Escofer, 2016). Con-
sequently, the model to use independent providers may
not work for all on-demand services. Sprig, a startup app
to request meals delivered to a residence, found that free-
lance chefs working out of their own kitchens were not
able to meet demand, used expensive ingredients, and
delivered incomplete meals (Kessler, 2016).
Trust and Reputation
Reputation refers to “a perceptual representation of
a company’s past actions and future prospects that
describes the rm’s overall appeal to all of its key con-
stituents when compared with other leading rivals”
(Fombrun, 1996, p. 72). Misconduct by the service
providers or sharing-economy rm erodes the trust of
consumers and damages the reputation of the company
and, depending on the degree of the misconduct, of the
industry (Kathan et al., 2016).
Ride-sharing services have abuses similar to those
of traditional taxi drivers, yet the global presence of
ride-sharing providers Lyft and Uber (and home-sharing
provider Airbnb) generates media attention more so than
do local rms. For example, Time magazine reports
that an Airbnb customer in Argentina was mauled by
the host’s Rottweiler dog, a California Uber driver was
charged by police with driving while intoxicated on the
way to pick up a fare after a “Super Bowl” championship
football game, and a Michigan Uber driver allegedly
killed six people before and after driving passengers to
their requested locations (Vick & Steinmetz, 2016). Uber
may be liable for two sexual assault cases in Boston,
Massachusetts, and Charleston, South Carolina, where at
least one of the drivers had a criminal record (Kendall,
2016a). Inconsistent quality and misconduct in the shar-
ing economy generates distrust among users or potential
users that leads to calls for regulating the sharing econ-
omy (Hartl et al., 2016).
RESPECT FOR PROVIDERS OF ASSETS IN THE
SHARING ECONOMY
The nature of the relationship between the providers
and the app-based sharing-economy rm dictates ethi-
cal responsibilities for respect in the marketing channel.
The majority of the estimated 45 million Americans offer-
ing the use of an asset or providing a service in the shar-
ing economy act as independent contractors with control
over their business interactions (Steinmetz, 2016). As part
of the rm’s downstream supply chain, the owner of the
asset or skill is the primary contact with the customer.
Ethical treatment of the supply chain includes “managing
the optimal ow of high-quality, value-for-money mate-
rials, components or services from a suitable set of inno-
vative suppliers in a fair, consistent, and reasonable man-
ner that meets or exceeds societal norms, even though not
legally required” (Eltantawy et al., 2009, p. 101).
Not all sharing-economy rms rely solely on indepen-
dent contractors. Firms striving to emulate an Airbnb or
Uber discover that independent providers are not able
to deliver reliable and consistent service in other sectors.
Honor started with independent medical-practitioners for
its home health on-demand service before transitioning
to an employee model to respond to provider turnover,
health-care provider desire for a long-term commitment,
and greater trust of trained health-care providers in a
customer’s home (Weise, 2016). Trusted, an on-demand
babysitting service, uses only trained employees to ensure
safe and reliable childcare for customers (Kessler, 2016).
But grocery-delivery rm Instacart has a mixed system,
using employees to fulll customer orders and indepen-
dent contractors to courier the groceries to their homes
(Steinmetz, 2016).
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90 T. L. GONZALEZ-PADRON
Whether an employee or independent contractor, an
individual has few avenues to inuence the pricing
policies, job assignments, or contractual responsibilities
related to an app-based service. Kumar et al. (1995)
explore how smaller and vulnerable resellers in a market-
ing channel perceive fairness in their relationship with a
stronger channel partner. Their ndings can relate to the
relationship quality that providers have with an app-based
sharing-economy rm.
Relationships Among Channel Partners
Relationships among channel partners improve when
policies and processes meet six components of pro-
cedural fairness. These components are (a) bilateral
communication, encouraging two-way dialogue; (b)
impartiality, maintaining consistency of policies across
providers; (c) refutability, allowing providers to challenge
policies; (d) explanation of changes in policies; (e) knowl-
edge of the situations faced by providers; and (f) courtesy
of providers by being polite and respectful (Kumar et al.,
1995).
Ride-sharing drivers express feelings of unfairness and
disrespect in the compensation structure of the business
model as the provider rms respond to market pres-
sures to increase the number of drivers and lower prices
to compete. Sharing-economy rms change fare struc-
tures or reduce commissions at will, forcing providers to
increase workload to make the same amount of income
(Bensinger, 2016;VanGrove,2016a).
In the U.S. State of California, ride-sharing drivers
sued Lyft and Uber for adequate compensation that
would cover costs of gas and mandated car repairs. One
driver stated, “It seems lopsided to me. As a driver, I feel
like I’m a lab rat. Disposable” (Mintz, 2015).
The relationship erodes further as driver expectations
for income earnings and working conditions do not match
with reality. Uber made unsubstantiated claims that an
average driver in New York earned over US$90,000 a year,
intentionally misleading drivers about prospective income
(Rogers, 2016). The lack of communication or respect for
drivers of ride-sharing services creates the perception that
driver freedom and exibility is lost.
There are two approaches to address concerns of the
providers in the sharing economy. One is to allow inde-
pendent contractors to organize and negotiate working
conditions. Providers can organize informally through
creating a trade association such as when high-volume
eBay sellers formed the Professional eBay Sellers Alliance
trade association and used their inuence to negotiate
with eBay about offering more payment options than
PayPal in Australia (Foo, 2009). An advocacy group
for the sharing economy, Peers, offers safeguards for
providers such as insurance, tax advice, and repair or
replacement services for damaged assets (Stein, 2015).
California is considering allowing formal bargain-
ing units of independent contractors. The 1099 Self-
Organizing Act under consideration in the State of
California would allow independent contractors leverage
to bargain with rms regarding pay and benets (Van
Grove, 2016b). In May 2016, Uber drivers in New York
created an Independent Drivers Guild through a workers
union that provides dialogue with the California-based
rm on pay and benets (Scheiber & Isaac, 2016).
Another approach to address concerns of providers is
through legal clarication of the employment status of
the providers in the sharing economy. As the leaders in the
ride-sharing sector, Lyft and Uber defend against lawsuits
from disgruntled drivers seeking the benets and com-
pensation of employees. A State of California newspa-
per reports that after resolving 60 lawsuits in 2015, Uber
is ghting 70 lawsuits in federal courts in 2016 for issues
relating to driver misconduct, driver employment status,
and company misrepresentation (Kendall, 2016b).
In the U.S., nontraditional workers may not t into
the complex compliance structure that classies work-
ers as employees or independent contractors. To help
remedy this discrepancy, some are calling for creating a
“dependent contractor” category of worker that would
allow companies to provide independent workers bene-
ts and training without risking an employee classica-
tion (Weber, 2015).
Digital matching of independent owners of assets or
services to customers is no longer the only business model
of the sharing economy. Firms are recognizing that cus-
tomers may desire continuous service and offer subscrip-
tions or that on-demand does not mean immediately but
at a time in the future (Kessler, 2016). Likewise, providers
of assets or services may be attracted to exibility and
independence whereas others may desire stable employ-
ment. As the sharing economy matures as a business
model, the regulatory and ethical issues become more
complex.
AN INSTITUTIONAL PERSPECTIVE OF THE
SHARING ECONOMY
Sharing-economy rms require legitimacy to maintain
functional, long-term relationships with the various
communities on which they depend (Nasi et al., 1997).
Legitimacy is a measure of the attitude of society toward
an industry and its activities, based on cultural norms for
corporate behavior. The term legitimacy most commonly
refers to the right to exist and perform an activity in a
certain way, referred to in practice as the “license to oper-
ate.” Government regulators and stakeholders pressure
for acceptable behavior of like businesses (Lenox, 2006).
The sharing-economy rms offer an innovative business
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ETHICS IN THE SHARING ECONOMY 91
model that would benet from the creation of governance
practices to establish legitimacy (Palacios et al., 2016).
The Direct-Selling Channel’s Experience as a
Roadmap for the Sharing Economy
The sharing economy can learn from direct selling ways
to address ethical issues that guide regulation and public
opinion. Similar to the sharing economy today, direct sell-
ing was a growing yet relatively new business model that
afforded business opportunities to independent workers
who would offer products and services. Over the years,
direct selling has used door-to-door selling, party plans,
personal sales presentations, and more recently digital
platforms to reach personal networks of customers (L.
Ferrell et al., 2010; L. Ferrell & Ferrell, 2012).
As a marketing channel, direct selling disrupted
traditional retail channels, relied on independent con-
tractors to deliver goods and services, and operated in a
sometimes-ambiguous regulatory environment. A 1954
Harvard Business Review article examines the threat of
door-to-door sales to retail store sales after a year that
cosmetics newcomer Avon had prot of more than three
times that of cosmetic brands at retail counters (Buell,
1954). Buell identied challenges with the then-novel
business model of direct-selling companies that are sim-
ilar to the challenges of the sharing economy today (see
Table 1).
Ethical issues over the years with direct selling include
consumer protection (Jolson, 1972; Tootelian, 1975),
independent-seller misconduct (Cahill, 1999), interna-
tional expansion (Quilter, 2004), and provider compen-
sation plans (Barkacs, 1997; Muncy, 2004; Vander Nat
& Keep, 2002). One response to these ethical issues
was the enactment of consumer-protection regulations to
allow consumers to cancel orders without repercussions
(Tootelian, 1975).
A shift of many direct-selling rms to a compensation
plan allowing independent salespeople to earn commis-
sion on the sales of salespeople they recruit in addition to
their own sales created many ethical issues for the industry
(Crittenden & Albaum, 2015; Koehn, 2001). In response,
direct-selling rms developed and enforced codes of con-
duct for the sales force and company to address these—
and other—ethical issues. As a now-legitimate market-
ing channel, direct-selling sales has grown worldwide to
US$183.7 billion in 2015 (World Federation of Direct
Selling Association, 2016).
Legitimization of the sharing economy requires chang-
ing the institutional environment. The institutional envi-
ronment refers to formal (e.g., laws and contracts) or
informal (e.g., culture, customs, habits) rules that struc-
ture interactions among organizations in a eld (de Leeuw
& Gössling, 2016; DiMaggio & Powell, 1983). Legiti-
macy of the sharing economy entails attaining legality in
TABLE 1
Shared Challenges with Direct Selling
Direct-selling challenges
a
Sharing-economy challenges
Recruiting large numbers of
salespeople due to low volume
per salesperson.
Recruiting providers of assets.
Only a third of on-demand
providers earn 40% of income
through sharing economy.
High turnover rate among sales
personnel.
Disillusioned workers who nd
compensation does not cover
expenses quit or join class
action suits.
High sales costs relating to
commission, training, and
recruiting.
Costs rising to conduct
background checks, conrm
asset acceptability, and
training.
Control of a sales force made up
of “nonemployees” and many
part-time salespeople difcult.
Control of providers as
independent contractors
restricted to avoid employee
status.
Local ordinances preventing or
harassing door-to-door selling.
City, state, and national
regulations banning or
inhibiting sharing-economy
business model.
Need for highly aggressive sales
management and promotion to
motivate sales force.
Need to motivate providers to be
exclusive or engaged with one
sharing-economy rm.
Damage to the company
reputation through
misrepresentation by sales
personnel.
Damage to company reputation
through misconduct or
misrepresentation by providers.
a
See Buell, 1954, p. 116.
addition to shifting the culture of how a customer relates
to existing service providers such as taxis and hotel
chains.
In a process model for institutional change, de Leeuw
and Gössling (2016) examine ve steps to legitimatize the
sharing economy that includes social and functional inno-
vations for prompting change, the de-institutionalization
of incumbent providers, theorization on perceived chal-
lenges and solutions, and diffusion of the market platform
that leads to social acceptance of the sharing economy.
They argue that ride-sharing services can attain legality
through de-institutionalization of incumbent providers
by dismantling regulations that protect conventional taxi
services from competition. For example, taxi fare reg-
ulations reduce the ability to compete in a market. In
Toronto, Canada, a new rule is being considered that per-
mits taxicabs to offer lower rates on rides booked through
an app or on the phone allowing rates to uctuate in
response to demand (Sharp, 2016).
Institutional Isomorphism
Institutional isomorphism is the process whereby like
businesses force rm behavior. DiMaggio and Powell
(1983) identify three types of isomorphic processes that
legitimize like rms. Normative isomorphism requires
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92 T. L. GONZALEZ-PADRON
TABLE 2
Isomorphic Change in the Sharing Economy
Normative Coercive Mimetic
Key concepts Professionalism: formal/legitimate.
Endorsement of particular practices.
Codes of conduct.
Seek organizational efciency.
Compliance with ofcial and unofcial
rules.
Fear of punishment.
Modeling of leading rms.
Widespread adoption of practices.
Industry / rms Create best practices and code of
conduct for use by mobile
applications as a common platform.
Educating regulators on industry and
lobbying.
Developing practices to safeguard
against misconduct.
Look at Airbnb, Lyft, and Uber
practices to address ethical issues.
Users Sense of community generates ethical
conduct and loyalty to application.
Require user agreements.
Provider ratings can reduce access. Provide an avenue to report problems.
Complaint management.
Providers Provider contracts with conduct
guidelines.
Professionalism creates consistent,
reliable service; more likely to
continue.
User ratings can reduce work
assignments or ban from sharing-
economy rms.
Provide insurance to drivers and / or
other benets to providers.
professionalism to dene the conditions and methods of
work and arise from the endorsement of particular prac-
tices by key, respected, or inuential actors in an organi-
zational eld. Coercive isomorphism includes compliance
with ofcial and unofcial rules that arise from expecta-
tions of rewards or fear of punishment for noncompli-
ance. Mimetic isomorphism represents imitation based on
the widespread adoption of practices and can dene the
character of the like rms.
The three isomorphic processes for the sharing econ-
omy can apply to the ethical issues relating to the par-
ticipants in the sharing economy, the rms, users, and
providers. Table 2 proposes considerations for conformity
of ethical practices in a maturing and evolving sharing-
economy business model. Conformity to ethical practices
of sharing-economy rms can have important returns.
Besser and Miller (2011) nd that actions of peers speak
louder than words and deeds.
Normative isomorphic processes focus on formalizing
the roles and expectations of the participants in the
sharing economy that leads to organizational efciency.
Standards of conduct for the sharing economy should
relate to the similarities of the diverse rms, users, and
providers involved in the marketing channel. For exam-
ple, sharing-economy rms use mobile apps as a common
platform. Related ethical practices include privacy poli-
cies to protect user information, secure payment services,
protection from malware, and the ease of installing apps
(Harris et al., 2016).
User agreements to access the services through the app
foster a sense of community and set expectations for the
user and for the rm. User loyalty to the app service
increases when expectations are met (Yan et al., 2013).
Provider contracts provide conduct guidelines such as
expected service quality. Professionalism by providers cre-
ates consistent and reliable service for the customer and it
becomes more likely that a provider will continue with the
app and a customer will continue with the service.
Coercive isomorphism comes from pressures to com-
ply with ofcial and unofcial rules of expected behavior.
Pressures can include rewards for good behavior or fear of
noncompliance. The sharing-economy rms can address
societal demands for ethical conduct through enforce-
ment of ethical standards and through educating regula-
tors about the business model to help shape regulatory
frameworks (Gonzalez-Padron & Nason, 2009).
A trade association can represent sharing-accounting
rms’ interests to regulators, legislators, and the public.
Users and providers rely on user-based rating systems for
quality control. Low ratings can prevent customers from
accessing services or providers from operating within
the sharing economy. Thus, providers are motivated to
improve their ratings and establish a reputation for a reli-
able and likeable option for users (Ert et al., 2016).
Mimetic isomorphism occurs to address uncertainty
in dening expected behavior by modeling leading rms
and adopting best practices. Firms model themselves
on other organizations identied as the best practice by
industry associations and trade press, even though the
efciency of the strategy is unproved. As the leaders of
the sharing economy, Airbnb and Uber receive regula-
tory scrutiny by local and federal jurisdiction on worker
status, discrimination, provider misconduct, and business
approval (Telles, 2016). Some business practices that Lyft
and Uber have already implemented are support systems
for users to report problems and insurance for drivers.
DISCUSSION
The sharing economy is still a rather young busi-
ness model that allows customers to obtain on-demand
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ETHICS IN THE SHARING ECONOMY 93
services from mostly strangers. Regulatory scrutiny inten-
sies as the sharing economy attracts more users and
expands operations globally. This business model disrupts
labor relationships, impacts communities, and challenges
incumbent businesses, calling for sharing-economy rms
to engage with external stakeholders and shape regulatory
frameworks.
However, compliance with existing regulatory schemes
may not relate to an innovative business to match cus-
tomers and independent providers through a mobile app.
Consistent regulation of sharing-economy rms becomes
challenging because rms operate in diverse sectors such
as transportation, lodging, delivery, and personal services
through varied structures.
Sharing-economy rms should adopt industry self-
regulation or collaborative approaches to regulation
of the common feature of the marketing channel—a
digital platform owned and operated separately from
the products / services exchanged. Mobile apps act as
“digital-matching” exchanges connecting customers with
providers possessing excess assets. Although based on
peer exchanges, the app-based rm interacts with cus-
tomers and suppliers only through online technology.
The stakeholders of the sharing economy are not dif-
ferent from traditional business, but the relationships and
ethical issues differ. Users and providers of services enter
into agreements that dictate conduct in the marketing
transaction, but do not have a long-term agreement with
the app-sharing rm. User loyalty and continued patron-
age of an app-sharing rm depends on trust that ser-
vice quality matches expectations for a consistent, safe,
and reliable experience. Providers seek to afliate with
rms that respect concerns regarding income, encourage
two-way communication, maintain consistency of poli-
cies across providers, allow providers to challenge policies,
explain changes in policies, and understand the situations
faced by providers.
The sharing economy has roots in online auctions
that encourage peer-to-peer exchanges. As a marketing
channel, the sharing economy offers entrepreneurial
individuals a business opportunity to serve customers
similar to, yet different from, direct sales. Ethical issues
of the sharing economy deal with consumer protection,
independent-provider misconduct, provider compensa-
tion, local regulatory environment, and international
expansion.
Trade associations are a vehicle to represent members’
needs to regulators, legislators, and the public that are
key to establishing legitimacy (Besser & Miller, 2011).
The adoption and enforcement of industry codes of con-
duct encourages self-regulation of member conduct and
fosters normative isomorphism (Hemphill, 1992;Lenox,
2006).
The Direct Selling Association (DSA) is the trade asso-
ciation for rms that offer entrepreneurial opportunities
to independent sellers to market and sell products and ser-
vices personally to consumers (Direct Selling Association,
2016). The DSA establishes and enforces ethical guide-
lines for rms and independent sellers to assist rms with
regulatory compliance.
The DSA provides guidance on issues relating to
deceptive or unlawful consumer or recruiting practices;
truthful representation of products, services, promotional
materials, and earnings; terms of sale; warranties and
guarantees; provider identication and customer privacy;
inventory loading; and training of providers (Direct Sell-
ing Association, 2016). It appears that this guidance is
effective as a survey showed DSA member rms believe
the DSA Code of Ethics lessens misconduct in their com-
pany and of their independent sales force (Chonko et al.,
2002).
It is encouraging that the leading sharing-economy
rms are implementing ethical practices as issues arise.
However, the industry has yet to create powerful trade
associations such as the DSA to shape regulations
and counteract negative media (Marchi & Parekh,
2016).
CONTRIBUTION AND FUTURE RESEARCH
This article reviews the ethical responsibilities to com-
pany stakeholders of the sharing economy and provides
recommendations to legitimatize this relatively new mar-
ket channel. As a disruptive innovation and regulatory
disruptor, the sharing economy is changing the compet-
itive landscape in communities and prevailing regulatory
frameworks.
The sharing economy relies on lower regulatory
costs to compete and resists compliance with exist-
ing industry regulations. Media, incumbent businesses,
and regulators demand a level playing eld. Therefore,
sharing-economy rms should address community,
user, and provider responsibilities by adopting ethical
approaches to build trust among consumers, providers,
and the community. Drawing from the institutional the-
ory literature and considering direct-selling practices, this
article provides recommendations for creating avenues
to establish ethical standards and culture to address
ethical risks faced by the sharing economy, maintain the
reputation of the business model, and create trust with
consumers.
An institutional perspective provides a structure for
academic research that addresses the multifaceted nature
of the sharing economy as a marketing channel. Legiti-
macy of an industry requires enforcement of formal poli-
cies as in codes of conduct and informal processes relating
to norms and culture. The framework to foster confor-
mity of ethical practices integrates isomorphic processes
(i.e., normative, coercive, and mimetic) with the three
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94 T. L. GONZALEZ-PADRON
primary company stakeholders (i.e., rm, customer, and
provider).
Current direct-selling policies and practices addressing
concerns relating to ethical conduct toward consumers,
providers, and regulators can serve as a model for the
sharing economy to emulate. As a marketing channel, the
sharing economy combines aspects of direct selling, Inter-
net commerce, and online auctions to connect customers
with providers of goods and services through technol-
ogy. Years of experience, particularly within the U.S., have
taught the direct-selling rms valuable lessons on behav-
iors consistent with societal expectations.
The ethical issues identied in this article are not
comprehensive nor could they be given the scope of the
sharing economy and the new issues quickly arising.
Sharing-economy rms cross many product sectors and
present varying structures to serve customers, just as
direct-selling rms do. As a marketing channel, confor-
mity of practices is more likely to occur with common-
alities of the sharing-economy rms. For example, apps
would need to address privacy and security concerns of
users and providers. Fair treatment of service providers is
the right thing to do regardless of service providers being
classied as independent contractors or as employees.
Research in the sharing-economy business model and
evolutions of the app-based marketing channel war-
rants more attention by marketing scholars. As trust is
the basis for peer-to-peer exchanges, additional research
could explore how trust among users, providers, and the
rm develops or erodes.
A stakeholder approach to the sharing economy could
broaden the ethical responsibilities of the rm beyond
the primary stakeholders to include those stakeholders
associated with traditional marketing channel ethical and
social responsibility issues. The tendency of the sharing
economy to ignore legal obligations encourages studies
of the impact of compliance versus rm strategic reg-
ulatory approaches on the reputation of the channel.
Likewise, future research into the degree of conformity
within sharing-economy rms as the model matures could
explore whether mimetic isomorphism encourages imita-
tion of inappropriate strategies.
The sharing economy offers a rich context for mar-
keting research to further understanding of this innova-
tive marketing channel. It is hoped that this article will
encourage that exploration.
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