Birds of a feather flock together... so do entrepreneurs.
Ed Morrison found some interesting research that examines the dense clustering of successful economic neighborhoods/clusters. This research is similar to that of Thomas Allen @ MIT, who studied how engineers and scientists worked, and from that came the Allen Curve, which shows the correlation between distance and frequency of communication in organizations. Both sets of research support what I have observed in social network analysis projects: those close by, form a tie -- and as a result get things done. In the age of the Internet, distance still matters!
From Washington University in St. Louis, News & Information:
"High-tech firms locating close to each other benefit from the proximity," says Barak S. Aharonson, visiting assistant professor of organization and strategy at the Olin Business School at Washington University in St. Louis. "The potential for frequent face-to-face interaction, serendipitous encounters and easy scrutiny are facilitated by being near firms that are working on similar things and are open to sharing information."
Coffee shop encounters could lead to new business ideas. These "knowledge spillovers" happen more frequently the closer firms are to each other, and dissipate as the distance between companies grows. In fact, Aharonson said, the benefits of agglomeration are strongest within 500 meters (about 0.31 miles) and fade quickly over distances.
"Eventually they are all going to meet in the nearby coffee shop. The basis of agglomerations and the benefit for high tech firms is the flow of knowledge," Aharonson said. "At this point high tech knowledge is almost a public commodity. You can protect it, however through interactions with people — especially those outside the company — it disseminates rapidly. Proximity facilitates face to face interaction and increases the likelihood for knowledge spillovers. These knowledge spillovers enhance the potential creativity of the scientists. Increased creativity leads to new ideas, new products and new businesses. Hence, closely located firms are more likely to benefit from such knowledge spillovers than isolated firms."
Here is the full paper on Knowledge Spillovers.