Knowledge Work in the Sharing Economy: What Drives Project Success in Online Labor Markets?

Abstract

Online labor markets (OLMs) are an integral part of the sharing economy. While these platforms offer huge matching efficiencies and cost benefits, managing performance in their projects is still a challenge. Taking an agency theory perspective, we study the determinants of project performance in the context of OLMs. We theorize pre-contract OLM-related features that can serve as a credible signal to alleviate problems about hidden information about an agent’s type. Moreover, we investigate how OLM-related factors interact with the (post-contract) problem of hidden action, which eventually influences the performance in OLMs. Using an extensive and novel dataset from Upwork— a leading OLM platform worldwide— we test our theoretical arguments and provide implications for research and practice.

Keywords: sharing economy, online labor markets, project performance, agency, hidden action, hidden information