The Economy of Collaboration

The New Digital Platforms of Production and Consumption

Francesco Ramella, Cecilia Manzo

• Publisher: Routledge
• Year: 2020
• Print ISBN:
  9780367636333
• eBook ISBN:
  9781000261103
• Topic: Economics
• Subtopic: Economic History
• Index: Economics

Over the past few decades, the world economy has undergone radical transformations, in part connected to the expansion of the 'digital economy', in part to the growing interconnection via the internet of the world of objects and physical processes. This 'great transformation' poses the dilemma on the capitalism's ability to reconcile economic and social value, keeping together economic well-being, social cohesion and political freedom.

The Economy of Collaboration can offer a contribution in this direction but requires courageous policies to mediate the various interests at stake, as well as to rethink and make more sustainable its development, by increasing the benefits not only for businesses but also for workers and consumers. In short, to create shared value.

This book refers to a mode of organizing the production, distribution and consumption of goods and services based on cooperative relations. The main reference is to activities linked to the digital economy, since they are the emerging forms of a definitely older phenomenon, but which is expanding on an ever-wider scale thanks to new technologies. These collaborative activities can be regulated differently, along a continuum that ranges from the pole of market exchanges to that of generalized reciprocity, with various intermediate mixed forms.

Part I

Between production and consumption

Chapter 1

The drivers of the economy of collaboration

Francesco Ramella

The technological transition

One of the first aspects that we should consider is the scientific-technological change and the expansion of the digital economy.

On the one hand, we are witnessing a process of increasing ‘scientification’ of technology (Carlsson and Stankiewicz 1991, 112), particularly accentuated in the so-called science-based sectors, that is, in the productive sectors that make greater use of the knowledge coming from the scientific community (biotechnology, pharmaceutical, etc.). This process involves not only an increase in collaboration with universities but also joint ventures with other companies, both to reduce the costs and risks associated with innovation and to pool the specialist knowledge necessary for it (Ramella 2016).

On the other hand, the process of digitizing information must be considered, since it is reaching ever-larger scales. As is known, the digital adjective refers to a system of numerical coding of information, based on a set of discrete values, which are opposed to analogical representation systems and which vary continuously and can assume an infinite number of values. This process can be applied to different types of information ranging from alphanumeric to sound and visual, as well as to operational instruments.

Digitization enhances information since it facilitates:

1. taking advantage of computer data processing;
2. using a single language for significantly different information, integrating codes and media that in the past used different supports;
3. using it interactively both for consumption and for the production of contents and artefacts (Ciotti and Roncaglia 2000, 27–29).

The latter point is particularly relevant to the economy of collaboration, where the producer–consumer networks are characterized precisely by the interactivity and sometimes interchangeability of these roles.

The change in scenario is also linked to the growing interconnection via the internet not only of personal networks, organizations and companies but also of the world of objects and material processes. The growth of connectivity, the convergence of fixed, mobile and television networks, together with the combined use of sensors, machine-to-machine (M2M) communication systems, big data, artificial intelligence, the internet of things and the blockchain,¹ are creating a technological infrastructure that supports the digital transformation of society and the economy on a large scale (OECD 2015b, 2017a).

The new technologies concern both hardware and software and enable the volume and the variety of consumption of digitized goods to be increased, reducing their production costs quite radically. This last element calls into question one of the basic assumptions of neoclassical economic theories, that of scarcity. In fact, digitalized information is ‘non-rival’: the consumption by someone does not deteriorate the characteristics of the goods and therefore does not preclude the use by others. Furthermore, information is expensive to produce but very cheap to reproduce (Shapiro and Varian 1998).² The duplication of these goods thus happens almost at zero cost, generating an economy of abundance in the sector of digital products (Brynjolfsson and McAfee 2014).

Having said this, the term ‘digital economy’ refers to the processes of digitalization of the economy and to their outcome, that is, to activities of production and economic exchange that increasingly exploit new digital technologies. Studies conducted by the OECD in recent years testify to the rapid growth of the digital economy in the sectors of retail (e-commerce), transport (automated vehicles, car-sharing), education (massive open online courses), in health (electronic documentation and personalized medicine), in social interactions and personal relationships (social networks) and in relations between citizens and governments (e-government) (OECD 2013, 2015b). It is a process connected to the advent of the knowledge economy that can be defined as ‘production and services based on knowledge-intensive activities that contribute to an accelerated pace of technological and scientific advance as well as equally rapid obsolescence’ (Powell and Snellman 2004, 201). One key component of this general trend is ‘greater reliance on intellectual capabilities than on physical inputs or natural resources’ (ibid.).

Another aspect is the growing relevance of data. In Chapter 2, we will address this issue regarding manufacturing and the so-called fourth industrial revolution. In general, however, when we talk about data economy, we refer to a process on a global scale, whereby the collection, processing and exchange of data, between public and private, becomes an essential component for the creation of value. The digitalization of information, which favours its circulation and exchange on a global scale, and the growing internet connection of men and things, generates an exponential multiplication of data, important both for economic growth and for social well-being.³ Just to give an idea, it is estimated that in the next few years, the percentage of people with mobile connectivity will go from 66% of the world population (5.1 billion) in 2018 to 71% in 2023, and that of internet users will rise to 5.3 billion. The increase in the number of devices and connections will be even faster, with the share of connected objects and machines (M2M) that will reach half of the total in 2023 (CISCO 2018, 6).

For all these reasons, the control over production and circulation of data takes on strategic value, not only for the socio-economic development but also for geopolitical security. This type of concern explains the recent launch of the ‘European strategy for data’, which is aimed at increasing ‘the use of and demand for data and data-enabled products and services throughout the Single Market’ (EU 2020a, 1). The idea is to create a single European data space, where the use of personal and non-personal data is safe, and the circulation and exchange of them are guaranteed by a trustworthy regulation (ibid., 4–5).

At present, however, the control of most of the world’s data is in the hands of a small number of big technology companies, mainly American and Chinese, and the overall regulatory strategies have a ‘centralizing’ effect on the governance of data spaces. In the United States, its organization is entrusted to the private sector and market mechanisms dominated by big corporations. In China, there is a combination of government surveillance and big tech companies’ control. In both cases, these governance strategies induce a highly oligopolistic concentration. That said, technological trends open new regulatory possibilities. As has been observed:

Today 80% of the processing and analysis of data takes place in data centers and centralized computing facilities, and 20% in smart connected objects, such as cars, home appliances or manufacturing robots, and computing facilities close to the user (‘edge computing’). By 2025 these proportions are likely to be inverted.

(Ibid., 2)

Soon, therefore, a great deal of data will be produced by companies, professionals, public agencies, applications of the internet of things in sectors in which Europe has significant competitive advantages. The creation of a European data space of high quality and reliability, based on a partnership between public and private players, can therefore expand the room for the collaboration economy. That can be done by ensuring a less concentrated and more decentralized governance structure, capable of balancing ‘the flow and wide use of data, while preserving high privacy, security, safety and ethical standards’ (ibid., 3; EU 2020c, 2–3).

We could summarize what we have said so far, stating that in recent decades we have begun to see the effects of a radical technological transformation, which manifest themselves with the classic delays connected to the transitions between different technological regimes (Garrone and Mariotti 2001, 9). This paradigm shift is one of the enabling factors of the collaborative economy since the combination of digitization and interconnection removes many of the physical limits to the sharing of goods, services, information and facilitates the formation of dispersed collaborative networks on the production, innovation and consumption fronts. In other words, the new digital technologies create a technological infrastructure that supports the development of the collaborative economy, creating a network effect both with regard to demand and supply.⁴

On the supply side, they reduce access barriers to markets by new providers of goods and services, even with low added value, while on the demand side, they reduce prices and information asymmetries through specific and innovative mechanisms that serve to evaluate and monitor performances. Ex ante, these mechanisms improve information: (a) on the goods and services offered, through descriptions, photos, etc. (digital-showcase effect) and (b) on who offers them, through profiles, reviews, sharing of social networks, etc. (digital-reputation effect). Ex post, they enable the advertising and stigmatizing of opportunistic performances, influencing the provider’s overall rating (digital-sanction effect).

These ‘reputational monitoring’ mechanisms are essential to facilitate the diffusion of the collaborative economy. Especially for services that require a high degree of a priori confidence, whether it be to lodge strangers at home or to accept a lift in an unknown person’s car for a long journey, to invite strangers to dinner and, conversely, eat food cooked by people never seen before.

However, this explanation, which emphasizes above all the enabling aspects of new technologies, is not enough. Isolating only the ‘scientific-technological’ feature would give a deformed and one-dimensional reading of a process that is instead more complex. Following Weber, to avoid any form of technological determinism, a bidirectional analysis is necessary: exploring in both senses the chain of causal links ranging from technology to economy, society, and politics (Weber 2005, 31). It is a process of co-evolution. Even though it is true that the digitalization of information is changing society in-depth, this process is, in turn, supported by profound changes in the economic and institutional scenario.

A first element to consider is the international economic crisis, which has created a favourable context for the spread of collaborative peer transactions. Both on the supply side, for individuals looking for job opportunities or income supplements, and on the demand side, for consumers looking for lower prices (EU 2016, 13).⁵ On this backdrop, attention should be drawn to the proliferation of new business models, which, in addition to altering traditional competitive dynamics, also fuel demand for regulation. Not coincidentally, the European Commission, in an attempt to define an agenda for the collaborative economy, refers to ‘business models where activities are facilitated by online platforms that create an open marketplace for the temporary use of goods or services often provided by private individuals’ (EU 2016, 3). As is specified, generally, these transactions ‘do not involve a change of ownership and can be carried out for profit or non-profit’ (ibid.). Although this is a comprehensive and inclusive definition, it is clear that the primary intent of the Commission is to focus on the market dimension of the collaborative economy,⁶ underlining the contribution it can make to the growth, as well as the advantages for customers.⁷

Economists tend to consider online platforms as an example of ‘two-sided markets’ (Evans and Schmalensee 2007; Demary 2015; Demary and Engels 2016). These can be defined as ‘markets in which one or several platforms enable interactions between end-users and try to get the two (or multiple) sides ‘on board’ by appropriately charging each side’ (Rochet and Tirole 2003, 2006, 645). In other words, these are transactions in which two groups benefit from interaction through a platform or an intermediary. The platform produces a situation of interdependence so that the choices of adhesion made by the group acting on one side of the platform influence the results achieved by the other group. Typically, through ‘network externalities’.⁸

There are many examples of these markets: credit cards, video-games, search engines, operating systems, digital marketplaces (such as Amazon, eBay, etc.). To give just an idea, the success of a play-station depends on the ability to capture and intermediate the relationship between video-game developers and their players/consumers. Moreover, both groups benefit from a large number of people using that play station. The same reasoning applies to credit cards and electronic markets, which must attract a large number of sellers and buyers on both sides of the market. To extract value from transactions, they must increase the benefits that users get from the platform, and this depends very much on the volume of the participants. The economic literature that has analysed these types of markets has mainly focussed on the actions of intermediaries, in particular on the pricing strategies applied and their effects.⁹

Many of the most industrialized countries have also launched strategies to support the digital economy. A study conducted in 2015 by the OECD noted that as many as 27 of the 34 analysed countries had a national strategy,¹⁰ and that in most countries of the old continent, this reflected the objectives set by the Digital Agenda for Europe.¹¹ The inter-ministerial conference of the OECD countries, which took place in Cancun in 2016, further underlined the strategic character of these policies (OECD 2016a).

These market transformations and the focus on regulatory aspects highlight the socio-institutional changes that accompany and support the development of the collaborative economy. After having recalled the technological one, therefore, we want to mention at least three other factors that have favoured its diffusion and that concern the productive sphere, that of consumption and globalization.

The change in production paradigms

The second factor to mention is the changes occurring in the sphere of production. Following the crisis of Fordism, companies have begun to experiment with different ways of organizing and competing. They have been implementing business strategies more oriented to outsourcing and collaboration with sub-suppliers and external partners, from a perspective of ‘diversified quality production’ that involves both large and small firms (Streeck 1992).

In particular, the studies conducted on the Italian ‘in...

Table of contents

• Cover
• Half Title
• Series Page
• Title Page
• Copyright Page
• Table of Contents
• List of figures
• List of tables
• Introduction: what is the economy of collaboration?
• Part I Between production and consumption
• Part II Sectoral perspectives
• Part III Research perspectives: the infrastructures of collaboration
• Conclusion
• Bibliography
• Index