Agglomeration of startups

Abstract

Entrepreneurship’s role in society and economy has been growing more prominent since the turn of the century. It has become a major source of economic growth and development in recent times. Several billion dollars are invested in startup funding in India over the recent years by different kinds of players such as incubators, angel investors and venture capital firms. The government of India had also announced several initiatives such as ‘Startup India’ aimed at easing the process of founding, getting investments and forging partnerships for startups.i The phenomenon of clustering or agglomeration of organizations has been well studied over time in multiple scenarios. Policy makers have tried to grow their region by creating industry clusters, such as SEZs that provide favourable policies and financial incentives to attract companies. Such agglomeration is believed to increase the productivity of companies by providing easy access to several resources in proximity. An attempt is made to verify if there is an agglomeration of related startups in India and applicability of one of the factors affecting agglomeration in the context of startups is explored. The financial performance of the firms is compared to see if location affects the success of firms. From the findings, it appears that knowledge spill over does play an important role in location of startups, while the relation between location and financial success is not conclusive enough. The clustering of similar types of firms can be clearly seen based on the number of startups founded over time in the cities.