Entrepreneurial fintech clusters

We study the formation and dynamics of entrepreneurial clusters in the emerging fintech industry. Using detailed data on the almost 1000 fintech startups in France to date, we find that most fintechs are geographically clustered and that the location of new fintech startups is affected, among other things, by the size of clusters and the presence of incubators. Larger clusters attract more new fintech startups, and incubators are shown to be an effective mechanism to attract new fintech startups. We further examine entrepreneurial exits of fintechs and find that being located in a larger cluster reduces the risk of failure but increases the likelihood of being acquired. Increased competition within a given segment of fintech increases failure rates. Moreover, the risk of failure is significantly lower for fintech startups that have been developed in an incubator.