Entry of Providers Onto a Sharing Economy Platform: Macro-Level Factors and Social Interaction

Abstract

Despite the recent proliferation of sharing economy platforms, little is known about what drives providers (individual people who own assets) to enter onto a sharing economy platform. The platform does not own the assets that underlie transactions but depends on individuals to provide them. In the burgeoning market of home rental properties, we investigate the role of macro-level factors to explain geographical differences in the number of entries of providers with diverse motivations onto a sharing economy platform. Using a sample of listings posted by property owners on the Airbnb platform across different cities in Spain between 2010 and 2015, we examine how social and economic motivations of providers interact with macro-level antecedents to affect their entry. We show that macro-level drivers have a different effect on the entry of providers depending on the degree of face-to-face interaction between host and guest. We find that industry growth and the availability of underused assets increase the entry onto the platform of hosts who have little face-to-face interaction with guests, while the strictness of regulation decreases their entry. By contrast, the entry of hosts with high face-to-face interaction with guests is not affected by these factors. We discuss theoretical and research implications of the role of social interaction in provider entry and offer practical advice for those in the sharing economy about the role of social interaction in driving providers onto their platforms.