Urban economists argue that agglomeration economies are particularly advantageous to startups by facilitating local access to product and factor markets (Gordon and McCann, 2005). Agglomeration economies net benefits accrue from urban scale (urbanization economies) and those that accrue from same-industry spatial concentration (localization economies). However, geographical concentration of firms often intensifies inter-firm competition and inflates the cost of needed inputs, which in turn, may be detrimental to survival by amplifying the “liability of newness.” As a response to these concerns, organizational sponsors have emerged in an attempt to attenuate the environmental adversity facing the early stages of a startup.

Organizational sponsorship refers to deliberate attempts to grow economic activity by increasing the founding and quality of start-ups through support that aims to lower a start-up’s risk of failure and improve its performance (Flynn, 1993). Interest in organizational sponsorship has become prevalent across most national and local governments due to the relevance of entrepreneurship and innovation in responding to the competitive challenges of globalization.