Smart Cities Leading the Green Transition: Linking Open Innovation and Entrepreneurial Dynamics

ABSTRACT Smart cities today are vibrant spaces where technology, collaboration, and sustainability come together to shape a better future. The green transition in cities is not just about building greener infrastructure or cutting emissions. It also changes how people, institutions, and businesses think and act. Drawing on institutional and signaling theory, this study conceptualizes urban green transition as a signal capable of attracting and fostering the growth and localization of green entrepreneurship. Open innovation is incorporated as a key moderating condition amplifying this relationship. Cities that foster collaboration across institutional and organizational boundaries through open data platforms, academic spin‐offs, and civic engagement strengthen their capacity to amplify these signals and support the adoption and diffusion of certified environmental management practices among firms as a proxy for green entrepreneurial engagement. Despite increasing policy attention, empirical research on the urban drivers of green entrepreneurship remains limited and often fails to explore the interplay between environmental policy, innovation ecosystems, and entrepreneurial dynamics. To address this gap, this study constructs a panel dataset of 38 Italian cities involved in smart city initiatives over the period 2010–2023, combining multiple institutional and statistical sources. Using a spatial autoregressive model, the analysis captures both direct effects and spatial spillovers, offering new empirical insights into how urban sustainability strategies diffuse across space and shape entrepreneurial clustering. Our findings indicate that urban green transition strategies significantly foster the adoption and diffusion of certified environmental management practices among firms, and that this effect is strongly amplified in cities characterized by higher levels of open innovation. These results contribute to institutional and signaling theory, extend the empirical literature on sustainable urban transitions, and inform policy design at the intersection of green development, open innovation governance, and entrepreneurial ecosystem development.