The Erasmus Centre for Entrepreneurship has published the European ScaleUp Monitor 2021, a ranking of European countries with the most scaleups. In the report, Frank van Oort, Professor of Urban and Regional Economics at Erasmus School of Economics, writes about scaleup clustering, and how this influences the success of scaleups in big cities.
Van Oort writes that the argument that improved ICT-networks defy locational advantages, does not necessarily hold, as we notice increased and selective agglomeration among scaleups: a few cities and regions of Europe form spikes in the economic landscape. The ScaleUp Monitor 2021 shows that the UK, Germany, and France are frontrunner regions for scaleups, and especially their capital cities.
According to van Oort, economists explain this by the identification of agglomeration economies. Firms tend to cluster together for several reasons: First, firms and employees better match labour demand and supply in proximity, which decreases the costs related to talent search. Second, certain industries that need subcontracting partners profit from short distances and large markets in agglomerations. Third, firms profit from knowledge spillovers in cities. Cities that are very diverse and specialized in many industries, are also more resilient to international industry specific shocks.