1. Introduction
In the contemporary world, disruptive issues such as increased globalization, widespread technology use, community resurgence, cost consciousness, and augmented environmental concerns have made modern organizations and people adopt innovative ways to improve relationships in the complex economy via internet-based platforms — hence, the rise of sharing economy and open innovation (Hira & Reilly, 2017; Rafat, 2022; Zhu & Liu, 2021). This report illustrates the concept of open innovation in the sharing economy by elaborating on why open innovation is significant for modern businesses, the characteristics/attributes of sharing economy, and how open innovation is integrated into the sharing economy.
1.1 Definitions of Open Innovation and Sharing Economy
Open innovation entails innovation and a business paradigm that stresses the cooperation and sharing resources, capabilities, technologies, and ideas between enterprises and external partners/stakeholders to nurture inventiveness and create new solutions, services, or products (Nnamseh et al., 2020). Typically, the key concepts of open innovation include an open ecosystem, intellectual property rights management, external collaboration, and outbound and inbound innovation (Marzi et al., 2022; Nnamseh et al., 2020). Outbound open innovation helps organizations leverage innovation by commercializing internal inventiveness in the outside/external business markets, while inbound open innovation entails exploiting innovation by gathering external knowledge and understanding to address critical internal challenges (Marzi et al., 2022). Through leveraging open innovation, organizations can obtain various benefits, such as increased inventiveness and idea diversity, minimized research and development risks and expenses, availability of external capabilities and knowledge, heightened market awareness and competitive edge, and hastened innovation cycles.
On the other hand, sharing economy encompasses a collaborative economic framework in which enterprises and people directly exchange access to skills, capabilities, services, products, and resources, facilitated by seamless online marketplaces and technology platforms (Curtis & Lehner, 2019; Zhu & Liu, 2021). Sharing economy is typically illustrated through various key concepts, including peer-to-peer interactions, access instead of ownership, diverse sectors, and technology facilitation. Through these concepts, sharing economy allows organizations and people to achieve efficient sharing of underutilized assets, increased environmental sustainability, accelerated resource utilization, enhanced consumer convenience and flexibility, resource/cost-effectiveness, and new revenue generation opportunities for people (Hira & Reilly, 2017; Zhu & Liu, 2021).
2. Why Open Innovation is Important for Modern Enterprise
The open innovation paradigm encourages enterprises to open or permit their boundaries to allow valuable resources, skills, knowledge, capabilities, and talents to stream in from outside environment (Marzi et al., 2022). By allowing external resources to stream in, enterprises can realize various benefits that may directly or indirectly enhance their growth and development.
2.1. Access to Valuable External Proficiency and Knowledge
Modern organizations encounter numerous complex opportunities and difficulties that usually need specialized knowledge and proficiency to exploit and address (Bogers et al., 2019). Incorporating open innovation paradigm enables companies to grasp a broad base of external viewpoints, skills, talents, and knowledge from relevant external sources like research institutions, investors, customers, academia, suppliers, and academia, among other sources (Marzi et al., 2022). Acquiring this external proficiency and knowledge broadens the enterprise’s scope and capability of possible resolutions and hastens problem-solving procedures to guarantee sustained business operations. For example, small-to-medium enterprises often have limited resources to facilitate steady growth, but with the effective application of open innovation, the enterprises can leverage the broad base of external resources by allowing input from relevant external stakeholders, like customers, financiers, government, and research bodies (Bogers et al., 2019). The enterprises combine the externally sourced proficiency and knowledge with their existing internal resources to accelerate their performance capability better to execute anticipated goals, mission, and vision and maintain the forward trajectory of the business.
2.2. Accelerated Innovation Culture and Cycles
Integrating open innovation enables an organization to nurture an organizational culture that acknowledges and values openness, inventiveness, collaboration, and creativity (Lam et al., 2021; Yun et al., 2020). By having a reinforced organizational innovation culture, employees are inspired to think and act beyond expected limits to help the organization create feasible innovation solutions and inventively execute tasks to foster progressive organizational performance (Nnamseh et al., 2020). An innovation culture also motivates employees to gather external inspiration and experiences to creatively develop critical solutions and give the organization insightful opinions to improve the organizational decision-making process and heighten performance (Bogers et al., 2019). Hence, embracing an innovation culture can help modern businesses to entice and retain competent/top talent/staff who are enthused to execute and participate in cutting-edge or innovative programs and projects to promote the company’s innovation capabilities. An innovation culture also allows organizations to leverage prevailing ideas, viewpoints, solutions, feedback, and technologies, minimizing the resources and time required to create new services or goods and speeding up the organization’s innovation cycles (Yun et al., 2020). Collaborating with like-minded external partners also allows organizations to access and leverage innovation projects already corroborated by the partners, quickening their innovation integration and preventing potential innovation from gathering redundant efforts. By quickening innovation cycles, an organization can ensure it better addresses market challenges and demands by timely delivering innovative goods, solutions, and services.
2.3. Heightened Market Responsiveness
With the current ever-changing market dynamics and trends, modern enterprises strive to address the dynamics and trends to stay relevant and gain increased recognition (Surya et al., 2021). Integrating open innovation paradigm gives modern enterprises an open-minded approach that allows them to remain accustomed to the changing market dynamics and customer interests. Allowing input from external stakeholders offers enterprises a suitable opportunity to create productive interactions with stakeholders, improving their understanding of prevailing and emerging market situations. Effective collaboration with stakeholders allows the enterprises to leverage the stakeholders’ market knowledge and understanding, enabling the enterprise to gain more understanding of the various market conditions and accordingly align its service delivery with the market trends and customer needs. Being more responsive to changing market conditions allows modern enterprises to develop services and goods that are exceedingly customer-centric, leading to remarkable customer satisfaction and reinforced stability of the enterprises in dynamic market circumstances (Bogers et al., 2019). Therefore, open innovation helps modern enterprises improve their market responsiveness, heightening their adaptability to diverse market demands/needs and advancing customer satisfaction and experience.
2.4. Access to Feasible New Market Growth Opportunities
Open innovation provides a platform for enterprises to understand the external environment, enabling the organization’s management to identify critical opportunities that align with the enterprise’s growth and development vision and objectives (Marzi et al., 2022). Identifying viable opportunities in the external environment can assist an enterprise in effectively implementing necessary strategies to achieve desired market diversification and expansion targets and gain accelerated market share. The open innovation paradigm enables the enterprise to create firm collaborations with relevant partners and people with expertise and knowledge in various markets and sectors, improving the enterprise’s capability to understand new market segments and customer expectations (Surya et al., 2021). Effective understanding of new market segments and customer expectations allows the enterprise to develop inventive cross-sector solutions, services, and products to cater to the needs of an expanded market segment and thereby grow its market niche. So, open innovation allows enterprises to leverage uncharted market segments and diversify their services, products, and solutions to meet the needs and demands of the new markets, creating an expanded market reach.
2.5. Reduced Research and Development Risks and Expenses
Conventional closed innovation approaches usually require considerable costs to cater to extensive research and development to ensure the company improves its internal capacity to create and implement innovative ideas (Surya et al., 2021). However, the emergence of open innovation provided organizations with a feasible open platform to share innovation-associated expertise, opinions, costs, talents, and risks with external environment partners, to improve innovation process effectiveness and reduce the organization’s burden of solely creating and executing innovations.
2.6. Improved Competitive Advantage
Open innovation allows modern businesses to distinguish their market position and gain a unique competitive advantage (Surya et al., 2021). By accessing and leveraging new market growth opportunities, like-minded partnerships, heightened innovation cycles, and unique knowledge and technologies, businesses can create services, solutions, and goods that are outstanding in the competitive market, enabling them to gain sustainable market performance and competitive advantage (Marzi et al., 2022; Nnamseh et al., 2020; Yun et al., 2020).
3. An elaboration of the characteristics of the sharing economy
The economy distinguishes itself from traditional economic models through its various unique characteristics that provide an economic umbrella for a wide array of disparate organizational models and consumption practices, comprising bartering, sharing, purchasing second-hand, trading, renting, exchanging, borrowing, swapping, gifting, lending, and purchasing new items to foster enhanced sustainable consumption of resources (Curtis & Mont, 2020; Kong et al., 2020). These unique characteristics include access over ownership, idling capacity to facilitate utilization of underutilized services and goods, ICT-mediated platforms, and short-term peer-to-peer transactions.
3.1. Access over Ownership
The concept of sharing economy assumes that there is limited desire and need for product or service ownership, particularly in the millennial generation. Thus, the sharing economy operates by fostering exchanges or transactions that do not culminate in shifting ownership of the exchanged services or goods (Curtis & Lehner, 2019). Through the sharing economy paradigm, owners make their goods or services accessible for hiring, renting, borrowing, sharing, collaborating, or lending by potential users while they remain the actual owners. For example, ride-sharing applications like Uber provide a good example of the illustration sharing economy notion of access over ownership (Curtis & Mont, 2020). The ride-sharing platform provides a multi-faceted marketplace where car owners can connect with people seeking rides. In this case, the car owner only lends out the car to riders or acts as the driver to offer rides to potential users, indicating no ownership change. So, the sharing economy emphasizes that rather than buying or acquiring services or items outright, people and businesses can lease, borrow, rent, or share them to meet their temporary use needs. This shift from focusing on owning assets to accessing them for short-term use fosters enhanced efficient asset utilization, reduced wastage, and alignment with sustainability development principles.
3.2. Idling Capacity
The sharing economy emphasizes leveraging the underutilized, excess, or surplus nature of dormant/idling services and goods (Curtis & Lehner, 2019). The capacity to leverage idling services or goods by making them available for potential users is a key feature in differentiating it from conventional consumption-based sharing economic models (Kong et al., 2020). Most services and goods within the modern sharing economy are considered extremely idle, with most being used sparingly over extended periods, making them underutilized. Underutilization of services and goods jeopardizes the global goal of promoting enhanced and sustainable resource utilization to avoid overexploitation of natural resources and make the world sustainable. The idling capacity of the modern sharing economy focuses on minimizing underutilization by providing a multi-faceted platform where users and providers can conveniently connect and facilitate enhanced utilization of available services and goods (Eckhardt et al., 2019). Leveraging the sharing economy idling capacity allows enterprises and people to extract value from their underused or idle resources, like cars, spare home rooms, or vacant parking places, by lending, renting, sharing, or selling to prospective users. For example, enterprises and people can create monetary value from their sparingly used vehicles by employing the sharing economy concept to offer ride-sharing and increase the utilization of cars. Hence, sharing economy facilitates the exploitation of services or goods idling capacity, leading to augmented utilization and minimization of the requirement to create new services or products, considerably minimizing the general environmental impact linked with uncontrolled production and utilization.
3.3. ICT-enabled Intermediation
Although the concept of sharing economy is not new, its proliferation after the onset of technology transformed its applicability as it seems to overly utilize information communication technology (ICT) to enable efficient exchange or linkage between providers and users (Curtis & Lehner, 2019). The ICT-enabled nature makes sharing economy a multi-sided market transaction platform that considerably minimizes the transaction expenses linked with sharing or exchanging among two or more strangers. Normally, traditional transaction platforms involve considerable costs to facilitate sharing or bartering between resource providers and users. However, the ICT-enabled nature of the modern sharing economy provides a cost-effective sharing platform by facilitating enhanced access to critical transaction information between resource providers and aspiring users (Eckhardt et al., 2019). The sharing economy technology also provides convenient intermediation between users and providers, leading to minimized transaction costs and timely access to resources by users. Typically, technology and digital platforms serve a fundamental function in upholding the distinctiveness of the sharing economy and enhancing its effectiveness. These technologies engraved in the sharing economy digital platform link enterprises or people desiring to share or exchange their resources or assets with prospective users. Thus, the ICT-enabled nature of the sharing economy streamlines and simplifies transactions, fosters effective communication, and applies ratings, feedback, and reputation structures to establish trust and confidence among participating users and providers.
3.4. Peer-to-peer Platform
The sharing economy facilitates transactions by providing a platform where users and providers can interact directly and share skills, assets, resources, or goods. The sharing economy’s participants become providers and users to facilitate peer-to-peer business interaction (Kong et al., 2020). The sharing economy incorporates a peer-to-peer approach to allow diverse sectors and business levels, comprising the accommodation sector (Airbnb), transportation sector (Lyft and Uber), services, and goods to exchange services or assets (Curtis & Mont, 2020; Eckhardt et al., 2019). Incorporating a peer-to-peer transaction approach makes the sharing economy more convenient and flexible, allowing providers or owners to conveniently offer their assets and consumers or users to access the assets on demand through a mutually favorable agreement. The direct peer-to-peer connection between participants can build a more customized experience and heightened trust, nurturing a sense/feeling of social and community cohesion that cannot be realized through other conventional business models (Kong et al., 2020).
4. How Open Innovation Can Be Facilitated In the Sharing Economy
Facilitation of open innovation in the modern sharing economy can effectively be achieved by leveraging and integrating the key characteristics and principles intrinsic to them. Several sharing economy activities effectively incorporate open innovation paradigms to attain desired outcomes, as illustrated below.
4.1. Cooperative Enhancement of Sharing Platforms
Open innovation can be employed in sharing economy to facilitate collaborative enhancements of business-sharing platforms. For instance, a ride-sharing peer-to-peer platform enables car owners to lease their cars to other people instead of keeping them idle (Acquier et al., 2017). The sharing economy in car-sharing platforms like Uber executes an open innovation paradigm by holistically engaging its users/customers in advancing and transforming its unique services. The ride-sharing platform users are motivated to offer feedback and opinions, recommend new features and improvements, and take an active part in testing incorporated updates. These peer-to-peer sharing platform mechanisms for facilitating sharing of information and knowledge between the platform developers and users demonstrate the concept of open innovation in allowing the flow of external information (Ma et al., 2019). By incorporating open innovation to facilitate the gathering of user insights and feedback, the car-sharing platform can heighten user trust and experience, payment procedures, and safety features, promoting incessant enhancements and establishing a loyal customer/user pool.
4.2. Co-Designing of Novel Sharing Features or Services
Incorporating open innovation in sharing platforms like home-sharing systems allows the platform providers to engage their host people/community to develop inventive adventure experiences, generating mutual benefits collaboratively (Ma et al., 2019). For example, a home-sharing platform like Airbnb engages with hosts to develop an exciting experience for travelers or guests (Botsman, 2020). The platform allows hosts to suggest distinctive practices or experiences that enhance guests’ experience, like cooking sessions, cultural workshops, or ushered city excursions. The home-sharing platform further utilizes open innovation narrative to foster advancements and elevate the created distinctive experiences to a wide customer base. Thus, such as sharing economy platform leverages open innovation to motivate hosts to improve their creativity and entrepreneurial skills, while the sharing platform gains from differentiated and expanded offerings that entice more customers or guests seeking temporary accommodation.
4.3. Partnering for Enhanced Service Innovation
Sharing economy platforms like vacation rental sites often embrace open innovation to partner with relevant travel-technology startup enterprises to reinforce their unique offerings and heighten customer/guest experience. Vacation rental sites like Airbnb, Vrbo, FlipKey, and HomeAway are sharing economy platforms that leverage open innovation by collaborating with suitable travel-technology firms to gain more advanced knowledge on how to effectively innovate their vacation rental designs and features to ensure visitors enjoy unforgettable travel experiences (Botsman, 2020). By allowing external partners’ innovation knowledge and expertise, the vacation rental platforms can create exciting innovations, like augmented real-time tour guides, to allow travelers to discover more via the viewfinder functionality of the virtual tour guide camera. Open innovation enables the sharing platforms to establish partnerships that offer external partners access to an expanded user pool while the sharing platform attains access to inventive technologies, elevating its overall value propositions for travelers and hosts.
4.4. Open Resource Sharing for Heightened Sustainable Solutions
Open innovation can be integrated into sharing economy platforms to promote open resource sharing for heightened sustainable solutions. For example, a neighborhood-based sharing platform like NeighborGoods inspires cooperation with local community members to facilitate sharing of stuff with one another and friends (Botsman, 2020). The Neighborhood-based sharing platform also allows community members to share up-cycling ideas, projects, and resources to promote social and environmental sustainability and generate a rich knowledge base to develop innovative solutions for sustainable development. The platform also adopts open innovation to motivate users to share and exchange their projects and opinions to contribute to the development of innovative solutions to enhance overall neighborhood sustainability.
5. Conclusion
Open innovation has been indicated to fundamentally help modern enterprises through various ways, including access to valuable external proficiency and knowledge, accelerated innovation culture and cycles, heightened market responsiveness, access to feasible new market growth opportunities, reduced research and development risks and expenses, and improved competitive advantage. The sharing economy has been described as possessing inherent characteristics, including access over ownership, idling capacity, ICT-enabled intermediation, and peer-to-peer platform, which it effectively achieves by incorporating open innovation. Several approaches have been illustrated to promote the facilitation of open innovation in sharing economy, including cooperative enhancement of sharing platforms, co-designing of novel sharing features or services, partnering for enhanced service innovation, and open resource sharing for heightened sustainable solutions.
6. References
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