To strive for market and technology leadership, innovation is key for niche entrepreneurs. While research underlines that regions benefit economically from a high concentration of niche entrepreneurs, it is unclear which role the geographical area plays for their innovation performance. Using a sample of 1,372 German niche entrepreneurs, this article investigates (1) whether niche entrepreneurs benefit from agglomeration effects and resulting knowledge spillovers for their innovation performance and (2) whether the agglomeration effects are stronger for more industry-wise heterogeneous clusters. Our results show that locating in a cluster increases the patenting rate by a factor of 1.49. The effect is stronger for more heterogeneous clusters.
