Big Tech’s Legitimacy Problem

The New York Times published an insightful piece on how Facebook sought to navigate its recent crisis series (I also recommend to read the supplement analysis of Ben Thompson at Stratechery). Informed by resource dependency theory and theories on power, Facebook’s strategy and tactics are not particularly surprising – lobbying, using personal ties to influence opinions, etc.
What particularly captured my attention, though, is how one political strategist summarized the communication strategy of Facebook (an approach we can also find in other domains, particularly in politics): proactively spreading good news about yourself, while discrediting your direct competitors, challengers (e.g. activists) or other big players in the industry.
Successful implementation of this strategy may lead to short-term gains for an individual player, however, at the long-term, this strategy – if applied by other players as well – has the potential to cause serious legitimacy challenges for the entire industry. If all relevant players in the industry use the same strategy, it means that the overall volume of negative news regarding the tech industry increases. This, in turn, channels out expected gains from positive news about an individual corporation and increases the likelihood that essential stakeholders (e.g., consumers, politicians) increasingly question the appropriateness of all big tech corporations (and not just of individual players). Ironically, big tech’s communication patterns and fights among each other may complement, if not amplify the voices of their critics (e.g., activists calling for regulation).
But why should big tech care? One could argue that these corporations don´t need to care because they have an oligopolistic/monopolistic market position. And due to their lobbying efforts its unlikely that they face serious threats, particularly in the US. Yes, but – and I draw here on Ben Thompson – increasingly questioning their legitimacy and reputation matters for two reasons:
First, the Cambridge Analytica Scandal for Facebook is the equivalent of the First Surgeon Generals Report on the adverse effects of Big Tobacco. The biggest threat for Facebook and Co are not regulations, instead it is the users turning away from the network (after all, the power of their business model is aggregating consumers on the demand side, which makes it desirable for the supply-side (e.g., advertisers, brands) to pay for getting consumer’s attention). Being perceived as the equivalent of big evil tobacco is not particularly helpful for expanding and maintaining a user base (hence it is not surprising that Google and Facebook launch image campaigns – the various ads in Berlin are witness to that). Second, legitimacy and reputation matters for recruiting talent. Big tech is already facing a crisis in this area – consider how it deals with incidents of sexual misconduct and abuse. While money is an important deciding factor for great talent, we must not underestimate that people want to situate themselves in nurturing environments where their intrinsic motivation and self-actualization flourishes. Who wants to work for a corporation perceived as evil, if other meaningful jobs are a click or swipe away?

Digitale Transformation braucht eine digitale Bahn 

Bei der Deutschen Bahn kriselt es. Wer regelmäßig Bahn fährt, spürt es am eigenen Leib. Zahlreiche Verspätungen, Ausfälle und Verzögerungen aufgrund von kaputten Zügen oder Infrastruktur sind an der Tagesordnung. Wer in den Medien Berichterstattung über die Deutsche Bahn verfolgt, hört ebenfalls nicht viel Gutes. Die Bahn möchte ihr Schienennetz digitalisieren um den Ausnützungsgrad der Schienenkapazitäten zu erhöhen und Koordination effizienter zu gestalten. Soweit so gut. Doch es kostet viel und es gibt kein klares Signal der Bundesregierung Geld dafür zur Verfügung zu stellen – bei diesem Budgetkurs droht eher ein Sparprogramm bei der Bahn. Es wird zwar investiert, aber noch mehr Investitionen sind dringend notwendig da die Bahn noch immer mit den langfristigen Auswirkungen des Sparkurses im Zuge der nicht erfolgten Privatisierung kämpft.

Warum ist die Bahn aus Sicht einer digitalen Ökonomie so wichtig? Deutschland ist ein föderaler Staat und hat eine dementsprechende Wirtschaftsstruktur. Um in einer digitalen Ökonomie zu bestehen, braucht es Flexibilität sowie raschen Austausch von Ressourcen und Information zwischen zahlreichen AkteurInnen. Die Bahn ist eine Infrastruktur, die dies, sogar auf ökologische Weise, ermöglicht. Darüber hinaus ist für viele die Reisezeit im Zug Arbeitszeit – quasi ein mobiler (Co-)Working Space. Wer durch einen ICE geht, sieht zahlreiche Menschen an ihren Laptops arbeiten (es leben die Steckdosen an den Sitzen und auch der WiFi Zugang ist besser geworden). Manchmal sieht man wie Teams ihre informelle Nachbesprechungen nach einem Termin im Speisewagen führen. Die Bahn hat das Thema remote work am Schirm, wie eine Kooperation für Pop-Up Arbeitsplätze mit WeWork am Berliner Hauptbahnhof zeigt. Ebenso den Arbeitsplatz im Zug könnte die Bahn noch innovativer machen – wo sind die Abteile, die sich sowohl architektonisch als auch im Service auf mobile ArbeiterInnen spezialisieren?

Wie man es also dreht und wendet – die Bahn braucht Innovationsmut und das notwendige Geld dazu. Bei der Internet-Infrastruktur hat Deutschland den Zug der Zeit verpasst. Bei der Mobilitätsinfrastruktur wie der Bahn stimmt das Fundament. Noch. Aber wenn die Bundesregierung nicht rasch umdenkt, wird auch dieses endgültig erodieren.

Update (22.11.2018)

Die Berichterstattung in den vergangenen Tagen zeigt (siehe hier und hier), dass die Situation der Deutschen Bahn unverändert dramatisch ist. Ich vertrete die Position, dass die Deutsche Bahn die absolute politische Priorität der Bundesregierung einnehmen sollte – sie ein zentraler Baustein für eine vernünftige und nachhhaltige Wirtschafts- und Umweltpolitik.


When the petting zoo spawns into monsters

Sascha Naderer, a former master student at JKU Linz, and I published a paper on crowdfunding in the Journal “Organization: Innovation & Management” titled “When the petting zoo spawns into monsters: open dialogue and a venture’s legitimacy quest in crowdfunding.” (you can access the article also here).

Continue reading “When the petting zoo spawns into monsters”

Digital Transformation: an institutional perspective

Bob Hinings, Royston Greenwood and I published an article titled “Digital innovation and transformation: An institutional perspective” in the journal Organization and Information.

Two observations were critical inspirations for this article. First, Uber experiences how the regulatory contexts of the transportation industry in European cities effectively results in a shutdown of its services in certain jurisdictions. Second, I saw a talk from an Airbnb employee at a conference. He emphasized how crucial the review systems are for the functioning of the market, but he understated the role of existing institutional frameworks. However, through verifying IDs or using insurance services, Airbnb leverages existing institutions too. The lesson from Uber is that context matters – despite the disruptive, forward-looking ‚digital talk‘ championed in Silicon Valley. We can learn from Airbnb that we should think more about the interplay between new and old arrangements.

Consequently, and embracing an institutional perspective, we understand digital transformation as “the combined effects of several digital innovations bringing about novel actors (and actor constellations), structures, practices, values, and beliefs that change, threaten, replace or complement existing rules of the game within organizations and fields“ (Hinings et al., 2018: 3). To become institutionalized, such novel digital arrangements must gain legitimacy (i.e., social acceptance) of critical audiences in a given institutional field.

If you want to learn more, check out our article. You can contact me also via researchgate.


Paola Ometto, Johanna Winter, Royston Greenwood, and I published an article in Business & Society titled: “From Balancing Missions to Mission Drift: The Role of the Institutional Context, Spaces, and Compartmentalization in the Scaling of Social Enterprises“. In this article, we examine how a social enterprise in Brazil (a student organization at a private university) struggles to maintain (and ultimately fails) to maintain its mission as it scales-up. We suggest that in addition to spaces of negotiation (in our case the student organization’s assemblies a decision-making arena), herding spaces matter too (arenas allowing a social enterprise to pull support from its environment). However, we demonstrate how compartmentalization undermines these spaces as the organization scales up.

Against the backdrop of this article, I would like to note that I am increasingly fond of longitudinal studies. A mechanism in play at point X in time to prevent, say, mission drift, may not only not work at point Y, but the mechanism operating at point X may lead to unintended (or being unaware of) consequences cumulating into that mission drift at point Y. This paper is based on an empirical, longitudinal study covering a period of 13 years and leverage this rich data over time for our theorizing. If we had just ignored time or examined a shorter period (e.g., the early years of this organization), our story would be a different one (concluding that the organization can balance its missions). However, even if we assume a research question fit, it is undoubtedly neither always possible nor feasible to examine such long time spans. Nevertheless, we should ask ourselves: if we can expand the temporal horizon of studying our phenomenon of interest, what could we learn?

Fellow Austrian Academy of Sciences and more updates

After finishing my dissertation and doing research on crowdwork (see previous blogpost), the Austrian Academy of Sciences awarded me with a Post-DocTrack-Pilotprogram-fellowship of the Austrian Academy of Sciences (19.000 Euro) for continuing to my work on journal manuscripts focusing on crowdsourcing. I will not be able to complete the entire 6-month program, since I will start an assistant professorship (“Juniorprofessur) in digital transformation at the Leuphana University beginning 1st of April 2018 (more on that in my next posts).

In the winter term, I also taught a master course on digital transformation at Leuphana University and took part in activities of the new Digital Transformation Research Center.

I also gave talks on my research at the BI Business School and the University of Innsbruck. Sascha Naderer and I organized a “Food for thoughts” session at the Axis co-working space in Linz, where we sought to transfer our gained insights on crowdfunding to practitioners. I also participated in a discussion on how society can cope and shape digital transformation at the “Das Progressive Zentrum” in Berlin (look at a report of the discussion, I´ve also written a blog post here).


Conferences in 2017 and research project Hans-Böckler-Stiftung on crowdwork

I attended several conferences this year, the Academy of Management conference in Atlanta (paper presentation and participation in the OMT doctoral consortium), co-host of a sub-theme at this years SASE meeting, the Open and User Innovation workshop in Innsbruck (with two papers), the EGOS Conference (participation in the doctoral consortium) in Kopenhagen and the Early Scholars Workshop at WU Vienna.

Research Project Crowdwork

Together with Max Ellmer and Claudia Scheba, I am conducting research on what participation mechanisms crowdsourcing platforms deploy to inform, seek feedback, engage in a dialogue with the crowd or include the crowd in decision making. I am grateful to the Hans-Böckler-Stiftung to fund this research.

Continue reading “Conferences in 2017 and research project Hans-Böckler-Stiftung on crowdwork”

Crowdsourcing in the public sector: Why people participate in the urban maintenance platform

How can we use technology to improve the interactions and relationship between (local) governments and their citizens? This question guided my research when working for a Toronto-based think-tank led by Don Tapscott in 2010. Coming back from Toronto, I contributed to theorizing an online platform (web- and app-based) for reporting urban maintenance issues in Linz. Following a motion of former vice-mayor of Linz, Christian Forsterleitner, the administration implemented this idea and launched Other cities are now adopting the Schau.auf.Linz platform too, such as the City of Bregenz.

This project also resulted in numerous research activities such as publications and conference submissions (e.g., poster at the MIT Collective Intelligence Conference, HICCS 2017, a book chapter). Most recently, Lisa Schmidthuber, Dennis Hilgers, myself and Stefan Etzelstorfer have a paper forthcoming in Government Information Quarterly with the title: „The emergence of local open government: Determinants of citizen participation in online service reporting.“ This paper examines why people participate in public crowdsourcing platforms (also called citizensourcing), such as Schau.auf.Linz. The dataset for this paper is a survey sent to 2200 registered users (773 completed questionnaires, a response rate of 35.14 %). One finding is that people who already reported urban maintenance issues via traditional channels (e.g., telephone, e-mail) are more active on the platform.

Doctoral studies completed

I completed my doctoral studies at Johannes Kepler University Linz in July. The hard work in the last five years paid off, my cumulative dissertation, titled „Cultural Entrepreneurship: Making Audiences Attend, Understand, and Value“ is a witness to that. My supervisors of the dissertation were Robert Bauer (JKU Linz) and Michael Lounsbury (University of Alberta); Johann Füller (Universität of Innsbruck) served as the third examiner of my defense.
Cultural entrepreneurship has two meanings: first, it is generally associated with entrepreneurship in the creative industries, and second, it refers to a sociologically-grounded concept within management research seeking to shed light on the socio-cultural dynamics of entrepreneurial efforts (see Lounsbury and Glynn, 2001). I situate my dissertation in the latter sense.
The starting point of my dissertation is that a functioning product or service is not sufficient to establish a new venture in the marketplace. Why? New ventures suffer from the liability of newness – crucial external audiences such as media, consumers, and investors face uncertainty whether a new venture deserves their support. To address this challenge, a new venture seeks to manipulate its environment through cultural entrepreneurship efforts such as storytelling, impression management, and symbolic action that serve as identity claims aiming at influencing external audiences’ perceptions. These cultural entrepreneurship efforts support a venture in overcoming the liability of newness because it helps external audiences to understand who the new venture is, what it does and what it seeks to achieve. In response to such efforts, external audiences may perceive the venture as legitimately distinct (i.e. socially accepted and desirable) within a social context.
My cumulative dissertation consists of two major parts. In the first part, I review the intellectual journey that brought me to this point. The cumulative dissertation consists of six manuscripts, three published in well-respected international journals, the other three were submitted to reputable conferences.
Building on the insights of the first part, I develop a dynamic cultural entrepreneurship framework in the second part of my dissertation. The framework takes stock on how a new venture utilizes cultural entrepreneurship efforts with the aim to receive audience endorsements. An endorsement is a social evaluation predicated on three steps: an audience must attend to a venture, understand who the venture is and what it does, and, make some kind of value judgment, such as a pragmatic judgment regarding the value of a venture’s product offerings. I demonstrate that as a new venture evolves (i.e. launch, growth and maturity phase), it ought to address specific subtypes of an audience category (media, consumers, and investors) relevant to the current development stage of a venture (e.g. crowdfunders as investors in the launch phase, angel investors in the growth phase). I also consider the interactive effects among audiences, for instance, media stories positively affect investor decisions. At the start, a new venture can draw on its resources at hand (e.g. a founder’s social capital) to convince external audiences. As the new venture evolves, it can build on the audiences’ endorsements of previous phases in its cultural entrepreneurship efforts. These efforts are further influenced by three field level factors, namely, norms and rules of an industry, industry structure, and industry competition.
With this framework, I enrich conversations on new venture legitimation in general and the culture entrepreneurship literature specifically. I address three current gaps in the literature: first, the role of various audiences at a particular time of a new venture’s development, second, the role of openness or involvement of audiences in co-constructing legitimacy, and third, integrating the attention construct.

If you want to have a read my dissertation, please write me an e-mail to thomas.gegenhuber[a]

What’s Next? Disruptive/Collaborative Economy or Business as Usual?

The next annual meeting of SASE (Society for the Advancement of Socio-Economics) dedicates its attention to the digital economy. The internet and web-based technologies enable forms of organizing that are innovative and beneficial for our society, yet, these forms can also be disruptive, challenging and a potential source for (new) inequalities. Elke Schüßler (JKU Linz), Robert Bauer (JKU Linz), Stefan Kirchner (Universität Hamburg) and I are hosting a mini-conference at the conference, where we want to discuss the role of regulation in the context of digital intermediaries  (Regulating Platform Capitalism: The Emerging Role of Digital Intermediaries). For more information see the SASE Homepage.