Start-up companies create local jobs, attract investment, and foster regional clusters of expertise. As a result, cities around the world are increasingly competing to attract new start-ups to strengthen their innovation capacity and global competitiveness.

Alongside this trend, the concept of smart cities has emerged as a framework for improving urban efficiency and enhancing resident’s quality of life (QoL). One increasingly prominent approach is the development of Air-front Smart Cities, which emphasise the strategic role of airports and global connectivity in driving economic growth while maintaining high living standards through stronger business environments.

Another important factor influencing the attractiveness of a city for emerging start-ups is its quality of business (QoB). This includes factors such as access to capital, taxation policies, and innovation support systems, which can all provide lucrative environments for entrepreneurs looking to establish themselves.

A recent study published in the Open Access journal Smart Cities explored how the combined effects of QoL and QoB shape the attractiveness of urban start-up ecosystems. The researchers developed an analytical framework and applied it to Aichi Prefecture in Japan, a region currently promoting start-up-oriented urban development around its airport infrastructure. The same framework was then applied to the cities of Singapore and Munich, helping identify the factors that make cities more attractive environments for start-ups.

The study found that corporate tax rates, economic growth, and overall safety were among the strongest predictors of start-up attractiveness, while digitally connected and highly accessible cities tended to perform better overall. These findings could be used to address the stagnation of industries in developed countries and drive economic growth in developing countries.

The evolution of smart cities

The concept of smart cities has evolved through multiple generations. The initial Smart City 1.0 design relies on technology to transform cities into highly efficient havens for innovators. This has progressed from the city-led design of Smart City 2.0, to more citizen-centred and sustainability-focused models in Smart City 3.0 and Smart City 4.0 versions.

More recently, the emergence of Smart City 5.0 adopts a holistic approach of human-centric innovation, social inclusion, and the integration of technologies to improve QoL. One limitation of the existing models is the focus on the immediate area with no consideration of surrounding regions.

The concept of an Air-front Smart City addresses this by underlining the importance of global connectivity, which influences both QoL and QoB, in tackling industrial stagnation and economic growth in developing countries.

The importance of start-ups for driving economic growth

Innovative entrepreneurship has increasingly been acknowledged as one of the vital drivers of economic growth and high-value job creation. Therefore, urban policies have seen a major shift in improving the business environment as a form of sustainable development.

Start-ups contribute to regional development directly, through job creation, and indirectly, through competition and knowledge spillovers. Importantly, start-ups are highly sensitive to their surrounding environment, with their survival and growth dependent on market opportunities and financial access alongside the availability of a skilled workforce, institutional support, and everyday living conditions for both founders and employees.

More evidence exists which identifies airport infrastructure as a source for economic growth in an area by enhancing overall connectivity. As a result, many urban policies have positioned cities with higher transport connectivity as innovation hubs to attract globally oriented start-ups.

Factors that influence start-up location behaviour

Both QoL and QoB indicators are crucial factors to consider for entrepreneurs looking to locate their start-up company.

For financial viability, market size, the concentration of existing businesses, corporate tax rates, and start-up investment potential play a key role in attracting new start-ups.

However, a human aspect also exists. Housing conditions, accessibility to services, environmental quality, and overall safety can attract highly skilled entrepreneurial talent to an area.

Therefore, start-up competitiveness should be assessed by simultaneously factoring both QoB and QoL components. This study develops an evaluation framework that integrates both aspects to assess start-up attraction potential in Air-front Smart Cities. Aichi Prefecture was used as the primary case study to develop the framework which was then applied to the cities of Singapore and Munich to examine its validity.

Why Aichi’s start-up strategy works

The researcher’s collaborated with start-ups in Aichi. Through interviews with 18 start-up companies, they identified 30 urban needs that influence where start-ups choose to locate. These included:

• Taxation
• Economic growth
• Accessibility
• Digital Infrastructure
• Skilled workforce availability
• Safety

These factors were then analysed using a cojoint analysis survey to measure their impact on QoB and QoL for start-ups, business partners, and residents.

The findings revealed that practical business conditions mattered more than prestige alone. Corporate tax rates emerged as the single most influential factor, with lower taxes producing the strongest increase in start-up attractiveness. Economic growth and government start-up support budgets were also highly valued, demonstrating the importance of stable, future-oriented economic conditions.

Accessibility was another major advantage for Aichi. High-speed rail connectivity, international flight access, and efficient transportation systems significantly improved urban attractiveness by strengthening both domestic and international connections. Access to skilled talent also emerged as a key factor, with start-ups favouring cities that provide a young workforce and access to higher education institutions.

The study also found that QoL plays an important role in start-up decision-making. Cleaner air, lower crime rates, safer streets, and better access to everyday services increased attractiveness, while environmental and safety risks reduced it.

Overall, the findings suggest that Aichi’s start-up appeal comes from its ability to combine economic competitiveness, connectivity, policy support, and liveability into a well-integrated start-up ecosystem, as Dr Mustafa Mutahari, lead author of the study notes:

“Startup-related policies in smart cities should not be driven by technology alone. Our findings show that startups respond to a complex system in which institutional and regulatory conditions, accessibility, and QoL are closely interrelated. The most effective cities are those that strategically integrate these elements, balancing economic competitiveness with human well-being, rather than prioritising one over the others.”

How do Aichi, Singapore, and Munich compare as start-up ecosystems?

The study also compared Aichi’s start-up ecosystem with the Air-front Smart Cities of Singapore and Munich, revealing how different policy approaches shape start-up attractiveness and QoL:

• Singapore achieved the highest start-up attractiveness, supported by low corporate tax rates, strong digital infrastructure, and extensive international connectivity. However, QoL for residents was lower, suggesting strong business performance does not always translate into broader urban liveability.
• Munich is a city with strong international connectivity, environmental quality, and talent availability. Yet high taxes and operating costs reduced its competitiveness for start-ups despite high living standards.
• Aichi presented a balanced profile. While its business competitiveness was lower than Singapore’s it achieved the highest QoL for residents among the three cities, supported with safer living conditions and regional accessibility.

This comparison further emphasises that successful start-up ecosystems rely on more than infrastructure. Cities perform best when they combine start-up support regulation, accessibility, and liveability into a connected urban system.

What this means for future start-up policy

The findings suggest that strategies for future smart cities should adopt a holistic approach rather than focusing solely on technology or infrastructure projects. The most effective start-up ecosystems are likely to be ones that combine economic competitiveness with everyday QoL.

For policymakers, this means balancing tax policy, transport connectivity, digital services, safety and environmental quality rather than treating them as separate priorities. Ultimately, the case study of Aichi demonstrates that attracting start-ups is not just about building a good business environment but creating cities where businesses, workers, and residents can thrive together.

More studies on Air-front Smart Cities and factors influencing start-up attractiveness can be found across the Open Access journals Sustainability and Smart Cities. Alternatively, you can access the full MDPI journal list here.