Innovation in the Collaborative Economy

Report for the Ministry of Economic Affairs on Innovation in the Collaborative Economy

Summary

This report summarizes research on barriers to investment in innovation and whether opportunities are currently feasible or not in the collaborative economy, and in the area of green growth. For this purpose, multiple roundtable meetings have been organised and interviews have been held with entrepreneurs, academics, legal experts, representatives of companies and government, who are active in the field of the collaborative economy. This summary sets outs the priority aspects of the collaborative economy which require action.he collaborative economy contributes to green growth, but its potential can be utilized better. This can be achieved by looking at the opportunities and barriers, which now exist because the difference between producers and consumers has become more blurred, as well as changing trends of consumers renting or sharing products rather than owning products. As a result new risks and questions arise concerning liability, taxation, and competition. This report suggests a role for the government in four areas: (1) ensuring that current legislation is clear in how it applies to the collaborative economy; (2) providing regulatory flexibility for experiments; (3) monitoring relevant developments and safeguard the public interest; and (4) addressing the barriers that have been identified in this research.  

Defining the collaborative economy

The term ‘collaborative economy’ is often used to denote a wide range of “economic systems of decentralized networks and marketplaces that unlock the value of underused assets by matching needs and haves, in ways that bypass traditional institutions”.

This research focuses specifically on goods, energy, and transportation markets – including the sharing of parking spaces – in the context of green growth.

Priority areas for action

The traditional roles of, and relationships between, the government, businesses, and the consumer are changing. The government has to deal with new types of businesses, which also operate as digital platforms. These platforms allow a consumer to become a producer with a click of the mouse. This ‘producing consumer’ is a direct competitor to existing businesses. This leads to innovation as the incumbent businesses develop new products and services, but there is also a risk of an uneven playing field between the ‘private supply’ being created by the producing consumers and the supply provided by the incumbent business. This development can in the long term lead to shift of norms in society from sole ownership to shared ownership and shared access to products. The purpose of this report is to set out what action the government should take in response to these trends.

The opportunities, barriers, and priority areas for action outlined in this report are focused around the triangle formed by the government, consumers, and the business community. Four categories that are of interest to the government are described below, followed by developments in the market where government intervention is not necessary:

1. Green growth and the collaborative economy

The collaborative economy results in a more efficient use of existing goods. As a result, the collaborative economy in general has a positive impact on the environment. Therefore, further growth of the collaborative economy is desirable. The government can contribute in two ways to the growth of the collaborative economy. The first is to raise awareness of the opportunities that the collaborative economy offers, by providing information on and participating actively in the collaborative economy. To achieve this, the government should record its spare capacity and unlock this internally as well as externally on sharing platforms. The second is that sharing platforms could be considered as part of the public procurement procedures as well as for individual purchases.

2. Consumer interests

Issues such as liability, taxation, and competition are governed by laws and regulations which differentiate between consumer and producer as well as private individual and entrepreneur. The development of collaborative economy initiatives results in the blurring of the line between these traditional roles. As a result new questions have arisen on these themes which need to be carefully considered, paying particular attention to issues of public interest such as security, quality, and reliability. For this, it is important to have clarity on the nature and scale of the collaborative economy initiatives. It is then important to clarify and to communicate to the citizens active in the collaborative economy, as currently they are often ignorant of their own risks and responsibilities. For example, there is confusion as to whether to pay VAT.

3. Business interests

Enterprises from the collaborative economy, such as Airbnb and Snappcar, can often be characterized as a “digital platform”. This requires a different approach from the government. Traditionally businesses were regulated, as businesses were the owners of the means of production and personnel used to create the “supply” of a good or service; however, now enterprises are arising that possess no means of production but simply bring together through digital means existing unmet supply and demand. This raises all kinds of questions which are relevant to the government, for example, in the field of liability if a transaction goes awry.

It is difficult to estimate what fiscal and judicial regimes are applicable to existing initiatives in the collaborative economy, and what the consequences will be.

A way to determine whether a different approach is needed is to facilitate experimental “zones” which test different forms of regulation and policy.

Market actors can apply these to determine whether they achieve the objectives of existing regulation while operation in new, more appropriate, ways. A ‘classic’ example is the taximeter, which may become redundant as a result of app and GPS technology. Another example is the use of sharing platforms when executing public sector policies: taxes can also be raised via these platforms. To provide clarity, the government could open an information service for entrepreneurs on the legal and fiscal frameworks which apply to these new forms of trade and business models. This will aid the important task of connecting the terms that are being used in the collaborative economy with the legal terms.

4. The market

In the different markets in which there are collaborative economy activities, an uneven playing field can arise between the existing business-to-consumer supply and the new consumer-to-consumer supply facilitated by digital platforms. A real possibility of unfair competition exists in various markets between these platforms and existing businesses, for example, hotels and Airbnb. The government can guarantee a level playing field with standardisation: by declaring explicitly that existing legislation is applicable to new platforms. An alternative for standardisation is innovation: the government can develop new standards in cooperation with market actors (i.e. new digital platforms as well as existing businesses). These standards can be enforced through, for example, permits.

Developments in the market

There is a need for cooperation within the market, for example, in the fields of insurance, marketing,  representation, and integration of services, such as platforms.

ShareNL, which as of 2013 functions as an independent knowledge and network platform advises and provides guidance to businesses, start-ups, governments and knowledge institutes. Several further initiatives and partnerships will shortly be launched:

• An association of Dutch sharing platforms seeking to promote the interests of its members.
• A country-wide ‘Sharing City’ platform where data from test projects in the field of the collaborative economy and on behalf of different cities can be made available. For participating departments, the Sharing City platform is a testing ground for cases that can be used for shaping or amending legislation.
• The Green Deal Autodelen, which aims for 100,000 shared cars in the Netherlands by 2018.

The cooperation gap will to a large extent be addressed by existing initiatives. The government can also potentially accelerate the development of the collaborative economy by amending existing initiatives aimed at cooperation.

The complete research report can be found here (in Dutch).

Do you have any questions? Reach out to info@shareNL.nl.