Does proximity still matter? Digitalization against physical proximity externalities for small cultural and creative businesses of Berlin during and post Coronavirus crisis

The global pandemic of Coronavirus of 2020 has made a tremendous impact on individuals’ health and the economy at large. In terms of economic impact, especially smaller cultural organizations have been affected due to the character of their products and service (EY, 2021). Canceled events, lower demands of cultural products, limited capacities at museums and theatres - all forced entrepreneurs to shut down or seek an alternative business strategy. Digitalization has served many on this path as a possible solution in sustaining their business during the pandemic (IDC, 2020). The case of Berlin creative clusters is especially peculiar, as the entrepreneurial eco-system and physical proximity within the cluster allowed cultural entrepreneurs to emerge, grow and thrive in the past. This research investigates digitalization replacing the physical presence of small businesses in creative clusters, and as such is trying to argue that the COVID-19 pandemic has altered the preconditions for cultural entrepreneurship as remote work and migration away from cities is now seen as a norm and allows many entrepreneurs to grow their businesses through digital marketplaces. However, despite of the advantages and opportunities of digital technology for businesses, social ties are still fundamental when it comes to cultural organizations. By means of 11 semi-structured in-depth interviews with cultural entrepreneurs in Berlin, this research aims to shed light on the complex phenomena of physical proximity and digital presence for businesses during the pandemic and forecast future trends and stimuli of cultural entrepreneurship within and outside creative clusters. The conclusions suggest the dependency of entrepreneurial choice of physical representation over digital presence or vice versa on the factors subject to each business described in the interdependencies’ model of the findings. Additionally, digitalization is believed not to be a temporary solution but rather a trend that is here to stay in the form of a hybrid business model. Due to the increased migration away from cities, Berlin starts to gain a different atmosphere that impacts the creative clusters leaving fewer spillovers of physical proximity for entrepreneurs.