Digital entrepreneurship may result in institutional turbulence and new initiatives are frequently blocked by vested interest groups who posit superior financial and relational resources. In this paper, we explore the role of cities in facilitating digital entrepreneurship and overcoming institutional resistance to innovation. Drawing upon two historical case studies of digital entrepreneurship in the city of Stockholm along with an extensive material on the sharing economy in Sweden, our results suggest that cities offer an environment that is critical for digital entrepreneurship. The economic and technological diversity of a city may provide the field conditions required for institutional change to take place and to avoid regulatory capture.

Introduction

Research in the field of entrepreneurship increasingly acknowledges the importance of digital entrepreneurship (Del Giudice and Straub, 2011). Digital entrepreneurship facilitates the exchange, transfer and acquisition of knowledge while also initiating new ways of doing business. As web-based platforms enable peer-to-peer transactions and allow novel and unique combinations of resources that generate new products and service offerings (Amit and Zott, 2001), digital entrepreneurship becomes increasingly prevalent in many sectors of the economy, giving rise to institutional conflicts as new initiatives are frequently incompatible with formal and informal laws and regulations governing established industries. The platform revolution (Parker et al., 2016) and the rise of the sharing economy constitute prominent examples of ways in which unused resources become utilized (Acquier et al., 2017) which create unparalleled scalability. Apart from some notable exceptions (e.g. Florida et al., 2016; Isenberg, 2011), little is known concerning how digital entrepreneurship relates to its nearest geographical proximity. Therefore, much remains in assessing the interplay between ecosystems of digital entrepreneurship and specific spatial settings such as cities, especially concerning the role of institutions and institutional change. Institutional change is usually associated with considerable resistance among vested interest groups who frequently posit superior financial and relational resources, putting them in a position where they can captivate regulatory processes and block changes of a more divergent nature (Epstein, 1980; Mokyr, 2003). How is it possible for digital entrepreneurs to enact institutional change when facing resistance from resourceful interest groups? In this paper, we study how digital start-ups and scale-ups grow in a city, in our case Stockholm and Sweden. Specifically, we explore how and why digital entrepreneurship takes place in cities and how digital entrepreneurs can overcome resistance. We do so by employing a mixed methods approach, drawing upon both archival data concerning historical cases and more contemporary material such as entries in social media. While two of our cases concern the early phases of digitalization (the 1980s) with entrant and incumbent firms in telecommunications and financial exchanges, we combine this material with an analysis of how the sharing economy is currently gaining momentum in Sweden. This is done by drawing upon approximately 5000 user-generated content in social media concerning the Swedish sharing economy.