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Fact of the Week: Opening a Starbucks in Neighborhoods With No Existing Coffee Shop Leads to an Increase in Local Entrepreneurship

Fact of the Week: Opening a Starbucks in Neighborhoods With No Existing Coffee Shop Leads to an Increase in Local Entrepreneurship

November 15, 2024

Source: Jinkyong Choi, et al., “Third Places and Neighborhood Entrepreneurship: Evidence from Starbucks Cafes,” National Bureau of Economic Research (NBER) working paper (Cambridge, Massachusetts: October 2024).

Commentary: “Third places” are local establishments, such as restaurants, bars, and coffee shops that provide a location for individuals to meet, exchange ideas, and build community. A report by Jinkyong Choi, et al. assesses the effects of these third places on local business environments, looking particularly at the impact Starbucks Cafes have on new business registrations. Starbucks, unlike other coffee shops, are modeled after European cafes, which prioritize the coffee shop as a social setting rather than a place to simply buy food and drink. In neighborhoods that do not have any coffee shops, the introduction of Starbucks has a substantial effect on entrepreneurship, leading to an increase of new businesses from 5.5 percent to 13.6 percent. This increase is equivalent to 1.1 to 2.9 new startups annually. Starbucks cafes, like other third places, establish a location for networking, an important component of innovation development. The study also finds a positive impact of restaurants on local entrepreneurship, but no impact from bars.

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