Entrepreneurship and Gentrification

Abstract

How do startups influence the neighborhoods in which they locate? Using data from the Greater London area, we find a positive association between growth-oriented entrepreneurship and both demographic and organizational changes in these communities. Older, less educated residents are replaced by younger, more educated ones. Restaurants become more expensive and more diverse. We also demonstrate that growth-oriented entrepreneurship predicts a subsequent rise in residential real estate prices. This price appreciation, however, does not seem to benefit long-term residents, as property values increase primarily in areas with high rates of renting. The gentrification of neighborhoods experiencing startup entry calls for deeper reflection on the role of entrepreneurship in inequality and the sustainability of entrepreneurial ecosystems. Supplemental Material: The online appendix is available at https://doi.org/10.1287/orsc.2024.18920 .

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