Assessing the Influence of Urban Innovation Hubs on Local Entrepreneurial Ecosystems and Startup Survival Rates

Abstract

Innovation hubs in urban areas have become effective mechanisms of promoting entrepreneurship, innovation, and economic development in regions. Even though the role of innovation hubs in the creation of startups is well known, there is little information regarding the impact of the physical association of startups with innovation hubs on their survival and ecosystem development. The current study investigates the impact of physical proximity to innovation hubs on startup survival and ecosystem development. An empirical longitudinal research design and a matched-pair comparative approach are applied in this study. The data have been collected from 320 startups selected from particular metropolitan areas over a five-year period, including 160 startups associated with innovation hubs and 160 startups without innovation hub associations. Data have been collected from business registers in municipalities, portfolios of innovation hubs, venture capital databases, and regional economic reports. The survival of startups has been estimated using the survival analysis and Cox Proportional Hazards models, while the ecosystem development has been assessed by means of employment, financing, mentoring, and collaboration with universities. The results indicate that 74.4% of firms connected to hubs have survived for five years compared to 58.1% of non-hub firms. According to the Cox regression model, new firms located within innovation hubs had a 32% lower probability of failure (HR= 0.68, p<0.05). Firms associated with the innovation hubs exhibited higher levels of mentorship engagement (78.8%), greater access to additional capital (68.1%) and university-industry collaborations (61.9%). In addition, the firms located in the innovation hub created more jobs and registered high growth rates in revenues. However, the increase in the cost of doing business and difficulty of securing skilled workers is another issue in the innovation district. There are numerous benefits of innovation hubs in urban areas for entrepreneurs, other than the creation of start-ups, because of the firm sustainability and availability of resources.