In terms of innovation, it’s well known that proximity plays a big role in whether we create or innovate with others. It’s a concept described by the Allen Curve, and has been shown to exist even in a world that is far more comfortable with remote working than in the past.
Recent research from Harvard shows that proximity also matters in terms of entrepreneurship. The study found that when startups share office space in a coworking facility, they are far more likely to share knowledge and support one another through their growth. What’s more, this was especially so the more different the startups actually were from one another.
Proximity matters
Just as the Allen Curve put the sweetspot for communication at around 10 meters, the Harvard team found that the sweetspot for knowledge sharing among entrepreneurs was around 20 meters. Beyond this, the likelihood of having meaningful interactions fell significantly.
The benefits from such proximity are numerous and extend beyond mere knowledge sharing. For instance, the study found that neighbors are far more likely to adopt one another’s technology, with this especially likely when the companies operate in different markets (and are therefore complimentary rather than competitive).
“The reality today is, we are unlikely to speak to people who are very different from us unless there is some sort of mechanism that brings us together,” the researchers explain. “Our study shows that geography can be super powerful because you don’t necessarily pick who you’re going to run into, as it’s more provided by the physical environment.”
Location matters
The researchers analyzed how entrepreneurs behaved at a coworking space spread across five floors and over 200 rooms. The facility hosted a range of startups covering fintech, martech, and software development, with each startup assigned their space in the facility at random.
The researchers profiled each of the startups, including the nature of their business and also their location in the facility. They also documented the walking distance between each business and whether they influenced the technology stack of their neighbors.
They found that during their research period, startups tended to try out about 7 new web technologies on average, with over half of them adding at least one new tool to their kit.
Company interactions
The study looked at 251 companies that shared office space between August 2014 and January 2017. This big sample helped them understand how nearly 11,000 pairs of companies interacted.
Sharing knowledge worked best when companies were different from each other, especially in what they were selling and who they were selling it to. When startups were in diverse environments, the chances of them picking up each other’s tech jumped by about 3.7 percent. That’s probably because they had less of the same knowledge to begin with.
And when startups hung out together in common areas like kitchens, they ended up sharing more knowledge, even with companies farther away.
The study found that in moderately diverse environments—within 20 meters—startups that shared what they knew and mingled at social events tended to do better. They were more likely to attract at least $1 million in startup funding.
