The introduction of Uber: An institutional analysis of UberBlack and UberX services across the globe

Abstract

The worldwide introduction of Uber’s taxi services has spurred heated debates among media and politicians. Such debates mainly revolve around the introduction of the low-cost UberX service, as this service diverges from existing institutional practices. Uber also introduced the luxury UberBlack service which fits within existing institutional practices. By combining Foreign Direct Investment (FDI) location theory and institutional entrepreneurship theory, this study aims at answering the question: How can the market entry timing strategy across cities worldwide of Uber’s services be explained? Uber’s market entry timing strategy worldwide can be explained as follows: Uber’s city choices are driven by favorable institutional contexts. UberX is the main service Uber tries to diffuse, possibly on its own. Meanwhile UberBlack is used either to create legitimacy before introducing UberX or is introduced alongside UberX when enough potential profitability allows to make a profit on both services simultaneously in a city. The conclusions of this study can contribute by making public debate concerning Uber more factual. As theoretical contribution, this study shows that since both favorable institutional contexts and legitimation processes are proven to be important, the combination of FDI by MNCs theory and institutional entrepreneurship theory is functional to research worldwide service innovations. Furthermore, institutional entrepreneurship theory and FDI by MNCs in services both lack an explanation for the possibility of using multiple services, with different levels of divergence, in one strategy.