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Insights Animation: Why Integrated Cities Produce More Startups

Venture capital investments in more racially integrated cities are more effective, producing more innovation and economic growth. Yale SOM’s Olav Sorenson explains why that might be.

  • Olav Sorenson
    Frederick Frank '54 and Mary C. Tanner Professor of Management

When you’re launching a startup, being in the right city—a place where you can find investors, scientists, and other entrepreneurs—can make a big difference. Research by Yale SOM’s Olav Sorenson and Sampsa Samila of IESE Business School identified another important factor in entrepreneurial success: being in a racially integrated city.

Sorenson and Samila found that in cities that are more integrated, venture capital investments are more effective in producing innovation and economic growth. There are more startups and those startups are more successful.

Read the study: “Community and Capital in Entrepreneurship and Economic Growth”

Why might that be? Sorenson says the “serendipitous interactions” of everyday life—bumping into neighbors at the store or the park—are opportunities to exchange ideas and find potential partners. And in more integrated communities, people with different backgrounds and ideas are more likely to come together.

“New inventions, ideas, and businesses often come from recombining existing elements in new ways,” he says, “This flourishes in more diverse, integrated communities, where people come together who otherwise might never come into contact.”

Department: Research