Illustration: Peter Hoey

By Cheryl Winokur Munk

August 22, 2022

For tech startups wondering where to locate their new companies, here’s one suggestion: Set up shop near another tech startup, preferably one that isn’t in the same business.

In a working paper, researchers from Harvard University, the Georgia Institute of Technology and the Massachusetts Institute of Technology measured the exchange of ideas that occurred between tech startups located near each other at one of the largest technology co-working spaces in the U.S.

They found that “knowledge spillovers” were greatest between dissimilar startups that worked within 20 meters (22 yards) of each other. Working in such close range allowed for socialization, which in turn led to idea sharing about the types of technology the startups were using as part of their overall tech infrastructure, the researchers found.

“Environments really matter, and being close to each other is especially important in knowledge-based industries,” says Maria P. Roche, lead researcher and an assistant professor of business administration in the strategy unit at Harvard Business School.

For their study, researchers chose a location where several new ventures worked side by side in the same building. They focused solely on interactions that occurred between startups on the same floor. On average, startups in the sample were working near one another for a year.

Researchers observed that working in close range allows people who otherwise probably wouldn’t interact to meet, talk and see each other regularly, Dr. Roche says. These interactions led to idea sharing about the types of technology the ventures were using to build their applications. This, in turn, resulted in some of this technology being adopted by the other nearby startups.

The benefits of working closely include the ability to quickly implement ideas that are working well for other companies, Dr. Roche says. If one startup has already incorporated a particular technology, such as error tracking, marketing automation or analytics software, other startups can benefit from this knowledge and more quickly adopt it themselves, without having to do all the initial legwork and investigation into the technology’s applicability and function.

This gives them the ability to launch their product more quickly, Dr. Roche says.

Notably, researchers found that startups located more than 20 meters apart on the same floor were indistinguishable from startups on different floors, stressing the importance of close location when it comes to idea sharing.

The study also underscores drawbacks to all-remote work, including the loss of unplanned interactions. The ability to gather immediate feedback from someone in proximity can be really important, especially when doing creative work, Dr. Roche says.