Remarks on the location theories of startups – new scientific article in Regional Science Policy & Practice

Startups, understood as new forms of innovative and fast-growth ventures, are emerging in traditional industries, creating intense competition and displacing former leaders. Our study focuses on location theory embedded in institutional and resource context and its application to startups in the Visegrad countries. We know a lot about the location choices made by small and medium-sized enterprises (SMEs). However, research on the location preferences of startups is limited, especially within the transition economies of Central and Eastern Europe. We investigated the differences in location decisions between startups and SMEs and those between startups located in metropolitan areas and rural areas. A study on the location decisions of startups was conducted in 2021 using mixed methods. The research showed that local factors strongly influence startups. It may seem obvious that large cities provide startups with access to resources, markets and support through the local innovation ecosystem. However, our analysis identified three significant differences between startups and traditional SMEs regarding location choice.
For startups, the availability of skilled workforce and an R&D center/research university is more difficult. In contrast, local (family) ties and rootedness are more important for rural startups than metropolitan ones.
This study provides new evidence on how spatial externalities affect innovative startups in the Visegrad countries and identifies factors that influence the location of startups in urban and rural areas, with a particular focus on Hungarian startups. For the latter, the study shows that state aid to startups has an ambiguous effect on the shape of the ecosystem, producing contradictory effects on the development of startups in the region. Given the methodological limitations described in our paper, further research is advisable to deepen the study of localization theory in the context of startups in the CEE region, especially in the V4 counties.