Technological agglomerations and the emergence of artificial intelligence start-up ecosystems in Europe

Abstract

The emergence of new industries is shaped by intricate geographical dynamics influenced by multiple factors. Yet, the rationales underpinning the locational choices of AI-based startups remain insufficiently understood. Traditional explanations have largely emphasized agglomeration economies, but their applicability to the AI industry requires further examination. This study investigates the growth of the AI industry across seven major European regions, uncovering two distinct locational patterns associated with different stages of industry evolution. In the nascent phase, the industry benefits primarily from intra-industry co-location effects and knowledge spillovers, which help mitigate technological risks. As the industry advances, however, cross-industry linkages become increasingly important, playing a pivotal role in addressing commercial risks and sustaining development. Overall, the findings highlight the dynamic interplay between technological and commercial risks, offering new insights into the shifting rationales and spatial dynamics that shape the emergence of the AI industry.