What do cities want? Understanding the link between subjective well-being and entrepreneurship in cities

– by Dr. Maksim Belitski & Dr. David Audretsch –

Regional economic development and entrepreneurship are driven by the quality of life in modern cities. Understanding what contributes to higher quality of life perception will help policy-makers to attract the most bright and highly-skilled workers and their families, retain existing human capital and young people to live and work in a city. To this end, understanding the link between subjective well-being and entrepreneurship in cities has been a priority for scholars and regional policy makers who aim to understand the drivers of entrepreneurship, innovation and regional prosperity.

Much of the debate on this topic has been over the factors which contribute to life satisfaction (Glaeser et al., 2001; Florida, 2002). Various attempts have been undertaken to develop comprehensive well-being indices such as the Gallup-Healthways index and the Gallup’s World Poll (Deaton, 2008) to monitor the social progress of society over time. From both a theoretical and methodological perspective researchers questioned whether subjective well-being can be summarized into one single index (Botterman et al. 2012).

A team of researchers from Indiana University Bloomington, USA and University of Reading, UK building on the European Perception of quality of life surveys (Eurostat, 2012) created an indicator by applying the comprehensive method to answer: what is the well-being in European cities? How does it vary across cities? How subjective well-being can facilitate economic growth through improving the quality of the city entrepreneurship ecosystem? (Audretsch and Belitski, 2017). Their study contributed to the ongoing debate over happiness, well-being and entrepreneurship in cities (Audretsch and Belitski, 2015).

They employ newly available data from a European quality of life perception Survey (Eurostat, 2014) to develop this pioneering subjective well-being index. Below are six domain with major findings and suggestions to policy-makers.

First domain is satisfaction with infrastructure represented by city amenities and available facilities. Cost of renting and buying a property in a city is used as a proxy for higher levels of amenities and better infrastructure with generally higher quality of life through amenities. Thus, housing costs also being a burden for tenants may illustrate other amenities and be positively associated with happiness. Developed infrastructure, museums, green areas, cinemas, coffee shops, pubs and restaurants all contribute and attract high skilled labour in a city. Transport infrastructure adds to amenities and its high-connectivity is important to commuting. Long commute to work and spending most of working time in transport is the most unpleasant activity of the day, hence affecting the level of satisfaction with transport quality and life.

Second domain is market agglomeration economies, demand for housing and labour. Job offerings and lifestyle are one of the leading factors why people move to leading cities. Job offering alone with financial security are important factors of life satisfaction. Former factors contribute to the Canadian Index of Well-Being, Nova Scotia GPI and the OECD Better Life Initiative Indices (Osberg and Sharpe, 2009). Economic security and market size that offers jobs drive both high and low-qualified labour in large cities.

Third domain is culture and norms that play an important role in subjective well-being. We demonstrate higher levels of happiness associated with a higher level of social capital and trust were in areas with relatively low population density. Trust fosters building a close relationship and developing necessary level of social cohesion that made people feel happier.
A cohesive community allows open discussion and resolution of difficult problems, and gives its members a sense of identity, and even more trust.

Forth domain is efficient administration framework and regulation that represent formal institutions (Audretsch et al. 2018). Size of a local administration shapes and distributes organizational and entrepreneurial resources facilitating or impeding entrepreneurs in their access to finance. Efficient regulation improves the living standards of a population, while efficient accumulation and distribution of economic and social services help improve living conditions among the most impoverished in the country making them feel happier and achieve higher life satisfaction.
Recent research suggests that efficient public resource management is highly appreciated by community when the administration is multi-dimensional.

Fifth domain of index construction follows Maslow’s hierarchy which states that food security, healthcare conditions, security and safety to be basic steps in human needs to be satisfied and hence direct impact life satisfaction and happiness. Security is often related to employment status, education, trust, but most often with a rate of crime, number of accidents in the area, and perceived neighbourhood security. The perception of safety can be altered to account for a possible natural and technological disaster due economic activity or environemental pressures.

Finally, sixth domain emphasises the role of IT infrastructure, information technology and access to digital platforms and high speed internet which has been largely ignored as a factor of life satisfaction earlier (Audretsch and Belitski, 2015). Facilitating IT infrastructure and Internet access as a one-point access to a global information system is crucial while moving from managed to a digital economy . This challenge is coupled with an increasing role of human capital and creativity in wealth creation with ICT as a driver for regional economic development. Higher Internet coverage and penetration at work and at home is positively associated with subjective well-being.

Most interesting we visualize the connection between City Ecosystem Index (CEI) and regional entrepreneurship development index (REDI) developed by Szerb et al. 2013.

ImmagineFigure. The connection between REDI scores and the City Ecosystem Framework Conditions Index (2009-2013). Number of cities 75.
Source: Audretsch and Belitski (2015).

Audretsch, D.B. and Belitski, M. 2015. Is Happiness Conducive to Entrepreneurship? Exploring Subjective Well-Being–Entrepreneurship Relationship across Major European Cities. Henley Business School Discussion Paper.
Audretsch, D. B. and Belitski, M. 2017. Entrepreneurial ecosystems in cities: establishing the framework conditions. The Journal of Technology Transfer, 42(5), 1030-1051.
Audretsch, D. B., Belitski, M. and Desai, S. 2018. National Business Regulations and City Entrepreneurship in Europe: A Multilevel Nested Analysis. Entrepreneurship Theory and Practice, 1042258718774916
Botterman, S., Hooghe, M. & Reeskens, T. (2012). One Size Fits All? An Empirical Study into the Multidimensionality of Social Cohesion Indicators in Belgian Local Communities. Urban Studies, 49(1), 185–202.
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Dr. Maksim Belitski is an Associate Professor in Entrepreneurship and Innovation at the Henley Business School, University of Reading, United Kingdom. He is a Research Fellow at the Institute for Development Strategies, Indiana University Bloomington (US). He has worked for University of Bolzano (Italy), Loughborough University, University College London (UK), University of Leicester, University of Economics Bratislava, Belarusian State University. His research interests lie in the area of Entrepreneurship, innovation and regional economics, with a particular focus on Entrepreneurship as a spillover of knowledge and creativity. He is an Associate Editor of Small Business Economics: An Entrepreneurship Journal.


Dr. David Audretsch is a Distinguished Professor and the Ameritech Chair of Economic Development at Indiana University, where he also serves as Director of the Institute for Development Strategies. He is an Honorary Professor of Industrial Economics and Entrepreneurship at the WHU-Otto Beisheim School of Management in Germany and a Research Fellow of the Centre for Economic Policy Research in London. Audretsch’s research has focused on the links between entrepreneurship, government policy, innovation, economic development, and global competitiveness. He is co-author of The Seven Secrets of Germany, published by Oxford University Press. He was awarded the Global Award for Entrepreneurship Research by the Swedish Entrepreneurship Forum (Entreprenörskapsforum). He has received honorary doctorate degrees from the University of Augsburg in Germany and Jonköping University in Sweden. Audretsch was also awarded the Schumpeter Prize from the University of Wuppertal in Germany.