Abstract
The disruptive impact of platform businesses on local economies has received much attention, but virtually none has been paid to the factors that impact platforms’ decisions about where to locate their activities. The novel, disruptive nature of platforms limits the relevance of traditional theories about location decisions. We argue that local institutional conditions and global legitimacy spillovers affect the choices of platform businesses about where to operate. We analyze the controversial case of ride-hailing platform Uber, an app-based service that matches uncertified chauffeurs with passengers. We find that Uber showed a preference for cities that promote competition and innovation. A spillover analysis shows how Uber leveraged its global pool of customers by choosing cities whose visitors were already familiar with Uber’s service. Our study illuminates the key role played by the brand’s mobile customer base as global carriers of legitimacy for Uber’s controversial innovation.
Highlights
Economists and management scholars have extensively studied the location choices of multinational enterprises (MNEs)
As platform companies generally meet institutional resistance in the host locations they enter (Mair and Reischauer, 2017; Thelen, 2018; Uzunca et al, 2018), we studied institutional factors and global legitimacy spillovers that affect the location choices of Uber
The main novel finding we present holds that Uber follows their globally mobile customer base, which functions as a ‘trusted community’ in the locations they visit
Summary
Economists and management scholars have extensively studied the location choices of multinational enterprises (MNEs). Location choices are explained by economic drivers such as market size, resource availability or low labor costs (for a review, see: Kim and Aguilera, 2016). This framework, was developed in the pre-digital era, when multinationals grew organically and expanded in new markets and production locations selectively. In today’s Internet age, many new multinationals are online digital platforms offering services via apps. 65) with Amazon, Facebook, YouTube, eBay, Uber and Airbnb as prominent examples. These platforms provide a support structure for their users, who themselves offer the content, goods and services to be exchanged. The economic structure of platform organizations differs markedly from traditional business; platforms require greater upfront investment in software development, but only marginal spending to scale operations worldwide, as their services are distributed to users via an app
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