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Creative Destruction and the Sharing Economy

Uber as Disruptive Innovation

Henrique Schneider

While creative destruction and disruptive innovation change the entrepreneurial landscape; regulation – especially regulation of sectorial markets and competition regulation – can delay this change or even bring it to a halt. Uber plays an active role between these two forces: first as an agent of creative destruction and then possibly in championing regulation on its own terms. Grounded in a particular understanding of the economic concept of the market as a series of processes, this book explores the implications of creative destruction, competition regulation and the role that businesses play. Instead of discussing these relations in a purely abstract manner, this book uses Uber as a case study.
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Chapter 3: What are creative destruction and disruption innovation?

Henrique Schneider

Extract

What are creative destruction and disruptive innovation? Creative destruction is the overall process of change and adaptation of actual industries to novelties. Many traditional business models are driven out of the market processes by new technology, new forms of production, new marketing and new business models. Disruptive innovation is primarily technology-backed innovation starting at the low end of markets or creating a new market foothold. This innovation changes the whole character of market processes in which it is exchanged. It makes it impossible for the marker processes to exist without it. Both are open-textured processes with non-determinate and no-determinable possible outcomes. If a specific innovation was disruptive and if it creatively destroyed any industry can often only be stated during the process and not at its beginning. Is Uber an agent of creative destruction? Uber’s business model innovates on different levels. It lowers costs, it increases quality, it optimizes idle capacity and it has ‘flashy’ marketing. If that is enough to destroy the whole taxicab industry remains to be seen. Actually, it is unfolding disruptive energy and many taxicab providers have already adapted their value propositions to include many of Uber’s elements (app, rating, surveillance, among others). But because of this disruptive energy, many incumbent taxicab companies are trying to stop Uber by using regulation. It is not the task of regulation to stop innovation, but that it what Uber’s competition expects it to do.

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