It has been known for some time that cities are breeding grounds for new ideas, economic dynamism and start-up entrepreneurs. People from different fields find the perfect opportunity to talk to each other, maintain relationships and exchange ideas. And that exchange of knowledge and creativity automatically creates new business.
Researchers like sociologist Richard Florida have recently advocated for the promotion of specific urban facilities, including cafes and restaurants, to boost the creative sector. They claim that these facilities promote a ‘hip and cool’, diverse and tolerant urban culture. Such urban dynamics are particularly attractive to the creative class and venture capital.
Meeting places outside the home and work
Targeted urban policy requires more insight into the attractiveness of third places, meeting places outside home and work, by start-up entrepreneurs. Li Fang (Florida State University), Femi Adelakun (City78) and Theo Goetemann (Basil Labs) examined the factors that determine the success of these creative urban incubators. To do this, they specifically analyzed the relationship between the presence of startups and coffee shops.
The study focused on Maryland, one of the most entrepreneurial states in the United States. Through Google Reviews, the researchers collected relevant data on the quality of the services (food, beverages and service), the quality of the space and the availability of the place. Based on scores on Google Reviews, they got an idea of customer satisfaction in the various components.
The researchers determined the location of startups and coffee shops on the basis of official company data and, for the coffee shops, points of interest (POIs) on Google Maps. Based on text analysis, they surveyed nearly 80,000 reviews of 940 coffee shops on Google Reviews. The use of terms such as ‘conversation’, ‘talking’, ‘conversation’ and ‘discussion’ suggests a relatively high number of business meetings in companies.
Correlation between coffee shops and startups
Using this data, the researchers wanted to demonstrate a causal link between startups and coffee shops. And it turned out to be: Startups are on average 447 meters closer to the nearest coffee shop than existing businesses and 398 meters closer to the three nearest coffee shops. For every mile that a business is closer to the three nearest coffee shops, there is a 10.1 percent greater chance that it is a startup.
The researchers identified four possible explanations for the connection between startups and coffee shops:
- false relationship: attractive locations are simply interesting for both startups and coffee shops.
- Reverse causal relationship: coffee houses are settling into an entrepreneurial environment.
- Selection: Entrepreneurs are attracted to the lifestyle that comes with a coffee shop.
- True causal link: the coffee bars meet the need for interaction, from which ideas and entrepreneurship arise.
The ‘false connection’ is not relevant to finding a causal connection. According to research, there is little or no evidence of reverse causality. The ‘selection’ factor may indicate a causal relationship, but the researchers found too little supporting evidence for this.
A closer analysis of specific terms that appeared in Google Reviews, such as “work” and “business”, supports their suspicion of a “true” causal relationship, where the coffee shop is an ideal place for ideas and entrepreneurship.
Stimulating third places
Fang, Adelakun and Goetemann argue for a more focused urban policy to promote the development of third places to stimulate. To this end, cities must in any case allow for more flexibility in the design of public space. Strict legislation and rules often hinder a varied layout of the urban area. More flexibility in the design of public spaces and buildings makes the development of third places much more attractive.
The researchers emphasize the importance of the existing public third placessuch as libraries and parks. Renovation of old and dilapidated buildings gives a huge boost to public life and gives creative and entrepreneurial activities a boost†
Social entrepreneurs deserve support and grants when they start up urban third places of high quality, the researchers argue. Many entrepreneurs start their business based on a social motive. Administrators and planners can also play an important role in this, for example by improving walking routes and accessibility of public transport.
Owners of urban third places and their employees benefit from events and programs to further stimulate contact between entrepreneurs. Research by Fang, Adelakun and Goetemann shows that this is an important task for coffee shops, which often feel related to this urban entrepreneurship. Training programs from the municipality are also very welcome here.
Researchers believe planners and urban authorities should continue to look for improvements to the built environment. Attractive third places represent great economic value, ensure closer social ties and contribute to a decrease in crime. In addition, they are an inexhaustible source of knowledge, creativity, innovation and entrepreneurship.