Startups in a Remote Region: Policy Implications from the Israeli Experience

Abstract

Startups are typically concentrated in major urban centers, while their presence in peripheral regions remains limited, raising important questions about the spatial distribution of innovation and entrepreneurship. This study investigates how different types of startups respond to disparities in regional ecosystem factors, with a focus on the role of support mechanisms in shaping location decisions. We conducted a survey of 202 startups, including 157 located in the Tel Aviv metropolitan area and 45 in the peripheral city of Be’er-Sheva. The survey assessed startup typologies such as innovation strategy, international orientation, and R&D intensity, alongside perceptions of the importance and availability of key ecosystem resources. Logistic regression analysis indicated that startups in peripheral regions rely more heavily on government financial support, pointing to a structural market failure that requires targeted policy intervention. In contrast, startups in central regions benefit from stronger proximity-based advantages, particularly collaboration with suppliers and consumers. Startups engaged in open innovation or with international links were especially dependent on external ecosystem resources. These findings highlight the need for differentiated, evidence-based policies to support entrepreneurial activity in peripheral regions, strengthen local innovation ecosystems, and promote more balanced patterns of regional economic development.