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J. Stanley Metcalfe

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Henrique Schneider

Are innovation and regulation opposites? From a perspective that understands markets as open-ended, undeterminate processes, regulation is detrimental to innovation. Regulation presupposes a certain idea of the results of the markets. Often, this is not made explicit in the regulation itself, but being willing to make rules implies not being willing to accept any behavior or outcome. In this chapter it has also been explained how regulation serves the status quo in using the status quo to measure innovation. By necessity, innovation is different from the actual state of affairs, and, in as far as actual regulation is used to measure it, deviant. Actual regulation, by ‘correcting’ the deviances of innovation diminishes the innovative content or brings the whole process to a halt. So, in answering the leading question of the chapter, yes, innovation and regulation are opposites. Is Uber changing its business model because of regulation? Using the example of Uber it has been shown not only how the company adapts to regulation but in adapting to it, it changes its own business model and diversifies it into less regulated realms. Instead of advancing innovation in the markets it started to ‘disrupt’, Uber opts for complying and diminishes the development of new technology or products that were able to revolutionize these markets. Instead it expands to more generic, that is, less innovative products.
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Henrique Schneider

Is someone destroying Uber, the destroyer? Many would like to. Sectorial and competition regulation could end in destroying the innovation of Uber, of the company. But there is also the danger of self-destruction: The more Uber adapts to regulation or submits to it, the less it innovates. This means that if Uber does not continue to disrupt the taxicab industry by innovating, it will itself become the target of even newer market entrants, even more disruptive innovators. By destroying creative destruction, Uber risks being destroyed itself.
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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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Henrique Schneider

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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Henrique Schneider

The chapter provides the background on the economics of this book, on the ‘sharing economy’ and how Uber can be assessed as an economic agent. This book understands markets as open-ended undetermined series of exchanges between a potentially unlimited number of agents. These agents engage voluntarily in the different market processes without knowing more than the other agents but judging their own beliefs, preferences and costs subjectively. Agents use the market processes in order to learn about other agents’ beliefs, preferences and costs. Market processes are cooperative actions. Whatever might be labelled the sharing economy relies on these market processes and does not in any way fundamentally change them. The sharing economy is not different from the traditional economy; to the contrary, it applies and broadens the application of market processes and individual actions. However, the role that technology plays is important. With the development of online networking, e- and online payment methods as well as individual online mobility, many business models gain scale and scope. Technology often makes it possible to diminish costs of participating in a market process, to learn quickly or gather information in a timely manner as well as to scale up some market processes. Uber, in due entrepreneurial spirit, seized this opportunity and turned it into a successful business model.
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Henrique Schneider

What is Uber’s business model? Uber capitalizes on convenience. In order to do so, it identifies idle capacity, aggregates it and allocates it to consumers willing to pay the price. Uber is an intermediary of idle capacity. This intermediation happens at lower costs, which allows Uber to create value-added to customers. It makes finding a taxicab easier, it provides different service levels, it gives information about the quality and price of the ride and it allows interaction. This value-added is redirected at the company in form of feedback by the customers prompting their trust and loyalty. Characterizing Uber as an intermediary, as a technology platform offering its services as a matchmaker for those willing to sell spare capacity of cars to those willing to pay for this capacity, is therefore correct. Uber could have applied this business model to other different sectors, but it chose transportation. Transportation, however, is not the core of what Uber is. Rather, it is just its application.
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Franz Huber and Rune Dahl Fitjar

The chapter reflects on the limitations of the discourse on networks in innovative clusters in light of the author’s own empirical findings and associated research. The conceptual part of the chapter stresses the importance of distinguishing between personal and formal networks, and between stages of network mechanisms. It also stresses the need for conceptual sensitivity towards individualized networks that may go beyond coherent communities. The authors reflect on weaknesses in previous research, and then elaborate on reasons why networks in clusters can be limited due to lack of perceived need or lack of opportunity to benefit from local networks. Subsequently, they show that spatial proximity tends to be important for the formation of networks, while it tends to be less important for actual knowledge exchanges. In fact, within the context of Norway, the authors illustrate that it is international networks that are related to innovativeness. Finally, they clarify the role of various types of proximities for innovation by finding empirical evidence for the so-called Goldilocks principle: a medium level of proximity delivers the best innovative returns to collaboration, while collaboration with partners that are either too close or too far may not be beneficial for innovation.

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Heidi Wiig Aslesen and Arne Isaksen

The chapter studies the relationship between companies’ knowledge bases and their sources, channels and geography of innovation-relevant knowledge. It questions whether some types of cluster initiative are too oriented towards establishing regional cooperation. Indeed, regional clusters and innovation systems assume that geographical agglomerations and regional cooperation stimulate firms’ innovation activity and value creation. However, companies are becoming increasingly integrated into global value chains and knowledge networks, suggesting that extra-regional resources are also important for innovation. Further, the geography of knowledge sources also varies between the types of knowledge that are central to firms’ innovation activity. The analysis shows that firms have innovation collaboration with many different types of partners, and that firms with different knowledge bases use partners differently. Analytical knowledge firms have more cooperation with universities, technology centres and suppliers than firms with a symbolic knowledge base. The geography of knowledge sources also varies as firms with an analytical knowledge base collaborate internationally, while companies in symbolic industries collaborate more with proximate actors. Informal channels for obtaining innovation-relevant knowledge are frequently used by firms, and the source of informal knowledge also varies between firms with different knowledge bases. Based on this, cluster initiatives should have a national and international perspective, and the design of cluster policy should enter a new ‘radical phase’ that takes more into account the geography of innovation sources and types of innovation channels of relevance to different cluster types.

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Juan-Luis Klein and Diane-Gabrielle Tremblay

The chapter presents a survey of the main theoretical elements, debates and strategic perspectives on the link between cultural creation and the building of social cohesion in the city. The question addressed is: How can a cultural creation-oriented approach contribute to making the city more cohesive while contributing to its overall economic and social development? The chapter is divided into three sections. The first defines the main concepts and presents the main challenges. The second section provides a summary of the main debates on creation and creativity in the city and offers some innovative proposals. The third section sets the groundwork for a city development approach that would allow building a more cohesive city on the basis of cultural creation. The chapter shows that creation can be a collective way of enhancing the quality of life for all citizens and this calls for innovative forms of governance.