Your Uber is arriving now: An analysis of platform location decisions through an institutional lens

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.