Digital innovation and urbanisation of entrepreneurial ecosystems

Digital means of creating and transferring knowledge have been thought to reduce the importance of firm location. Still, there is evidence that the urbanisation of entrepreneurship and innovation is accelerating in the digital era. We review the theory that explains how and why entrepreneurial activity moves towards city centers. Schumpeterian dynamics may affect urban entrepreneurial ecosystems more than others, and cities are thus more susceptible to external shocks. We therefore expect urban entrepreneurial activity to exhibit rapid but discontinuous growth. With data from 88 entrepreneurial ecosystems over 15 years, a panel regression analysis not only finds support for the urbanisation of entrepreneurial activity but also for how and when it happens. Urban entrepreneurial ecosystems appear to better support entrepreneurship under the current circumstances. Possible explanations and implications include the rise of digital platforms upon which business-model innovations prosper.