By Joseph A. Mann Jr.
Uber’s introduction of its revolutionary ride-hailing technology in four U.S. cities indicates that similar platform-based ventures may need to rush into a new market even without regulatory approval, research from FIU Business shows.
While waiting for regulatory approval may be more pragmatic, it could mean missing a fleeting window of opportunity to be among the first to establish themselves in the marketplace.
“You just can’t wait for regulators to give you permission,” said Arun Kumaraswamy, the FIU Business professor of international business who conducted the study. “Companies have to go in and get acceptance from customers; with that, convince regulators that the service is necessary and safe. Many times, we can figure out what the problems will be with a new service only when it operates.”
Published in the March 2022 issue of the Strategic Management Journal, the study noted that key to a platform venture’s survival and success is its ability to adapt its digital platform and business model to continually leverage opportunities and address challenges as they emerge.
Researchers analyzed 1,258 documents surrounding Uber's entry into four U.S. cities – San Francisco; New York City; Portland, Oregon; and Austin, Texas – between 2008 and 2018.
In some, Uber entered without permission from local governments and regulatory bodies, openly challenging the authorities while gaining public acceptance. In others, the company negotiated agreements allowing it to operate alongside existing taxi and car services, while pushing the boundaries of what it was allowed to do.
The content studied by researchers included publicly available regulatory and legal documents; Uber corporate documents; blogs and websites; local and national news articles; videos of publicly available interviews with key company executives and stakeholders; books; and teaching cases.
The researchers’ analysis provides insights for new digital technologies on how to penetrate existing markets. Kumaraswamy noted that the focus should be on liminal movement, a transitory phase where, after jumping into the market, a company’s leaders use market strategies to mobilize users, while employing non-market strategies to gain acceptance from other key stakeholders, regulators and local government officials.
“It’s good, very important, to enter first,” he added. “Then you really have to fight to become legitimate. Even then, success is not guaranteed.”
The study was co-authored by Kumaraswamy and Raghu Garud of Pennsylvania State University, with two Ph.D. students, Le Xu (now at Hofstra University) and Anna Roberts (now at the University of Bath, U.K.).