The role of digital platform adoption and venture capital abundance location in scale entrepreneurship: An entrepreneurial ecosystem perspective

Abstract

This paper investigates the role of digital platform adoption and VC abundance location in scale entrepreneurship from an EE perspective. My results show positive relationships between digital platform adoption and VC valuation, and between VC abundance location and VC overvaluation. These positive relationships are moderated by a venture’s embedded national EE and urban EE, respectively. First, I contribute to the EE literature by highlighting the role of DEE particularly digital platform, EE’s fostering role, and the agency and spatial features of multiscalar EEs with a focus on the interdependence of two ecosystem actors–entrepreneurs and VCs. Second, I contribute to the VC financing literature by finding digital platform adoption as an antecedent of VC valuation, and VC abundance location as a predictor of VC overvaluation that receives little academic attention. Specifically, locating in San Francisco, Silicon Valley, and Boston ecosystems with abundant VC helps ventures avoid the scaleup equity gap. Last, entrepreneurs should consider adopting a digital platform and locating in a VC abundance city embedded in a high-quality urban/national EE. Policy makers should develop tailor-made policies for local, regional, and national EEs to improve EE quality and the resulting VC valuations.