Why Location Still Matters—Even in a Decentralized Business World

In an era of tariff tensions and geopolitical fragmentation, the importance of location has become impossible to ignore. Despite the appealing concept of "anywhere operations" in our digitally connected world, where you plant your business flag still profoundly impacts your potential for success — perhaps more than ever.

Talent: the first and most critical factor

No resource is more fundamental to a company's success than talent, and despite what remote work evangelists might suggest, talent isn't evenly distributed.

For example, a Brookings Institution report on The Rise of Innovation Districts highlights how biotech startups cluster in places like Boston and San Diego, where the concentration of research institutions, specialized talent, and industry connections significantly increases their chances of success. According to recent industry data, biotech companies in these innovation districts are more than twice as likely to reach successful exits. Similarly, tech founders still migrate to Silicon Valley not just for capital — but because ideas, talent, and opportunity exist in a tightly woven ecosystem there.

We've watched startups embedded in talent-rich environments benefit from significantly faster hiring cycles. According to LinkedIn's Economic Graph Research, the average time-to-hire in talent-rich locations is 23 days, versus 42 days in isolated locations. They also demonstrate better culture alignment and generate more patents per employee, particularly in fields driven by cutting-edge innovation.

Even in our Zoom-dominated world, in-person collaboration and creative serendipity still deliver measurable advantages. A 2023 Microsoft study found that teams with regular in-person interaction generated 16% more novel ideas and resolved complex problems 22% faster than fully distributed teams.

The Rise of EORs: flexibility versus local integration
The surge in remote work has given rise to Employers of Record (EORs) — third-party organizations that handle employment responsibilities for distributed teams. According to Remote.com's 2024 Global Employment Report, EOR usage has grown by 57% year-over-year as companies seek to hire talent regardless of location.

EORs like Deel, Remote, and Papaya Global have revolutionized global hiring by managing payroll, benefits, and compliance across jurisdictions. Deel reported that companies using their platform hired talent across an average of 7 different countries in 2023, up from just 2.5 in 2021.

However, there's a significant trade-off that many founders overlook. While EORs solve immediate hiring needs, they create a critical strategic limitation: they don't enable companies to tap into local resources and government incentives — from tax breaks to infrastructure support — as most of these programs require an established legal entity and demonstrated investment in the community.

For instance, when AMD announced their new chip manufacturing facility in New York, they secured $5 million in state tax incentives — obviously, benefits of this magnitude would have been impossible through an EOR arrangement. While the AMD example is striking, it may feel out of reach for smaller firms not building billion-dollar facilities. But accessing public incentives doesn’t require industrial-scale investments. A recent client of Upsite involved a European AI company with just over 100 employees, around 10 of whom are NYC-based. Without purchasing real estate or major equipment, they were still eligible for up to $132,000 annually in financial benefits — including state wage credits, R&D tax offsets, and targeted employment incentives. All they needed was a small local team and the right corporate setup. The lesson is clear: you don’t need a factory to unlock meaningful support, just a foothold in the right location and a plan to deliver on growth and job creation.

Incentives go far beyond simple tax breaks — they represent the essential connective tissue between businesses and their host communities. From grants and R&D credits to infrastructure support and workforce training programs, state and local governments offer powerful tools to accelerate enterprise growth.

Why are companies like Amazon, Tesla, and even AI infrastructure firms like OpenAI so strategic about location? Because governments can be tremendous enablers when interests align. According to Good Jobs First, Amazon alone has received over $11 billion in government incentives across its global locations.

These incentives, however, typically require businesses to engage locally — to understand zoning, environmental regulations, workforce programs, and economic development goals. The relationship must be reciprocal. Communities expect more than jobs — they want businesses to become long-term partners in economic development.

A perfect example is Toyota's $1.3 billion investment in Kentucky, where state support included not only tax incentives, but customized workforce training programs that produced over 700 specifically skilled workers. The company has now been embedded in the community for over 30 years, creating a symbiotic cycle of development.

Agglomeration: why clustering still wins
Despite the rise of digital collaboration tools, agglomeration remains a powerful economic force. Being physically near other innovators, suppliers, researchers, and investors creates network effects that are difficult to replicate virtually.

Research on Israeli startups has demonstrated that those relocating to the U.S., especially Silicon Valley, performed significantly better in terms of capital raised and exit valuations. These companies often see funding advantages and higher acquisition prices despite showing no significant increase in innovation output. This phenomenon, documented in numerous analyses of the "Startup Nation's" global expansion, reinforces a clear conclusion: proximity to capital, infrastructure, and high-value networks unlocks exponential outcomes. This is especially true for startups with high fixed costs and long development cycles. A 2024 McKinsey analysis showed that semiconductor firms located within established clusters achieved 31% lower R&D costs and 24% faster time-to-market.

Demographics and Psychographics: your customer base still has a ZIP code
Event in e-commerce or SaaS businesses, understanding the community where your customers, workers, and partners live influences product-market fit. Social demographics — age, education, lifestyle — shape not only what people buy, but how they engage with brands.

Companies that authentically embed in communities build not just loyalty but cultural relevance. Tim Hortons in Canada doesn't just sell coffee – it's woven into the cultural fabric. Similarly, the Toronto Raptors' multilingual "We The North" campaign resonated because it spoke to Toronto's unique identity as a diverse, northern basketball city.

This is a vital lesson for any brand trying to scale sustainably – community isn't a backdrop, it's an active stakeholder. Research from Edelman's Trust Barometer shows that 71% of consumers expect brands to address local community needs, with 64% making purchasing decisions based on this commitment.

Infrastructure and Cost Dynamics: the Real Estate reality check
Location also determines your burn rate. Operating in New York or San Francisco comes with steep real estate and talent costs, but also with unmatched access to networks. In contrast, places like Austin, Salt Lake City, or Ithaca may offer lower costs and high quality of life, but potentially require longer timelines for growth or hybrid-remote setups.

Location also influences infrastructure, like access to renewable energy for data centers or proximity to ports for logistics companies. AI firms siting GPU farms are laser-focused on low-latency fiber routes and sustainable power grids — not just spreadsheet savings. Google's decision to invest hundreds of millions in its Nevada data center was driven primarily by access to renewable energy and fiber connectivity, not just cost.

Choosing the right location is a strategic advantage
In today's volatile world, location is no longer an afterthought. It's a strategic variable in every decision from workforce strategy to ESG compliance to innovation velocity. Whether you're a startup founder picking your first city or an enterprise expanding into new geographies, the question isn't "can we work remotely?" but "where can we grow intelligently?" At Upsite Systems, we help businesses navigate these complex decisions — not just based on spreadsheets, but with an eye toward long-term embedded success.