Digital attrition: The negative implications of the sharing economy for the digital options of incumbent firms

Abstract One of the key competitive advantages of sharing economy platforms stems from their superior IT capabilities, which enable operations that are more efficient and/or effective than the incumbent firms. However, given that many of the incumbents tend to be established market leaders or resource‐rich multi‐nationals, their general inability to acquire the appropriate digital options (ie, the IT capabilities that enable the launch of, and response to, competitive actions) to meet the challenge of the sharing economy platforms is puzzling. This study explores this phenomenon by posing the research question: How do the “forces at work” associated with the sharing economy paradigm impact the digital options of incumbent firms? Based on the case of Qiangsheng Taxi and how its IT capabilities have been affected by the emergence of ridesharing platforms, the evidence uncovered suggests that the sharing economy can influence the digital options of incumbent firms through a process of digital attrition, which may be induced by a blend of unfavorable contextual influences (ie, an unbalanced regulatory regime, evolving market preferences and the resourcing advantages of sharing economy platforms). A framework is inductively derived from the data collected that depicts digital attrition as a process of three phases: (a) deinstitutionalization, (b) technological incapacitation, and (c) competitive erosion. In doing so, our study suggests that digital attrition may culminate in IT‐induced competitive disadvantages for incumbent firms, which in turn, could exacerbate the unfavorable contextual influences to complete a vicious cycle that reinforces the negative influence of the sharing economy even further.