Paper Number
ICIS2025-1955
Paper Type
Complete
Abstract
The growth of cloud-based information technology (IT) has fueled the rapid expansion of data center construction, raising questions about the determinants of digital infrastructure location. This study examines the importance of demand-side factors, supply-side factors, and local government tax policies in influencing data center entries across U.S. counties. Using a novel panel dataset from 2000 to 2023 and a staggered difference-in-differences design, we find that state-level tax incentives significantly increase data center entries, particularly for public cloud and large colocation facilities. Additionally, data center entries continue to be shaped by supply and demand factors, including land prices, broadband penetration, human capital and IT-intensive industries. However, temporal heterogeneity analyses indicate that declining latency constraints have weakened demand-side considerations, while the influence of tax incentives has increased over time. Our findings suggest a growing decoupling between data center location and digital demand, reflecting broader shifts driven by technological change and policy interventions.
Recommended Citation
Tian, Chen; Chellappa, Ramnath K.; and Gomez Martinez, Jonathan, "Supply, Demand or Policy Driven? An Empirical Examination of Data Center Location Strategies in the United States" (2025). ICIS 2025 Proceedings. 10.
https://aisel.aisnet.org/icis2025/public_is/public_is/10
Supply, Demand or Policy Driven? An Empirical Examination of Data Center Location Strategies in the United States
The growth of cloud-based information technology (IT) has fueled the rapid expansion of data center construction, raising questions about the determinants of digital infrastructure location. This study examines the importance of demand-side factors, supply-side factors, and local government tax policies in influencing data center entries across U.S. counties. Using a novel panel dataset from 2000 to 2023 and a staggered difference-in-differences design, we find that state-level tax incentives significantly increase data center entries, particularly for public cloud and large colocation facilities. Additionally, data center entries continue to be shaped by supply and demand factors, including land prices, broadband penetration, human capital and IT-intensive industries. However, temporal heterogeneity analyses indicate that declining latency constraints have weakened demand-side considerations, while the influence of tax incentives has increased over time. Our findings suggest a growing decoupling between data center location and digital demand, reflecting broader shifts driven by technological change and policy interventions.
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