Where the Cloud Rests: The Economic Geography of Data Centers.

This study analyzes the entry strategies and geographic location determinants of third-party and cloud-based data centers in the United States during 2018–2019, prior to the COVID-19 pandemic. It finds that third-party data centers exhibit a strong urban bias, locating primarily in dense metropolitan areas to be near local demand from information-intensive industries, despite higher costs, while cloud providers concentrate their facilities in a few low-cost, less dense locations and are more sensitive to input costs like electricity and construction wages. The research highlights a strategic divergence: third-party firms prioritize proximity to users to reduce latency and meet specialized service demands, whereas cloud providers leverage the "shippability" of digital services to optimize costs by clustering in select regions. These findings have implications for technology strategy, economic geography, and public policy, particularly regarding infrastructure investment, tax incentives, and the evolving spatial dynamics of digital infrastructure.