The knowledge spillover theory of entrepreneurship: the developing country context Muhammad Naveed Iftikhar 1 & Maha Ahmad 2 & David B. Audretsch 3 # Springer Science+Business Media, LLC, part of Springer Nature 2020 Abstract This is among the few studies to test the Knowledge Spillover Theory of Entrepre- neurship (KSTE) at the city level in a developing country i.e. Pakistan. KSTE is in its empirical infancy; while the theory has been lauded for its advancement of microeco- nomic foundations in endogenous growth theory, there is scant literature on just how well KSTE holds when tested empirically outside the developed world. This study uses a novel dataset to measure knowledge stock and spillovers in ten major cities across Pakistan to answer the question: What is the role of knowledge spillover in the creation of business firms in cities of a developing country? The study provides valuable insights into the factors that lead to higher levels of firm creation through panel data analysis of ten cities of Pakistan during 2002–2014, and also contributes to captivating the global appeal for KSTE by testing the theory empirically in a developing country. Keywords Entrepreneurship . Knowledge spillovers . Economic growth . Cities . Urbanization 1.Introduction Welter et al. (2019) and Welter et al. (2017) have recently argued that entrepreneurship is context specific. Some theories and empirical findings for entrepreneurship may hold for some national and institutional contexts, but not for others. The Knowledge Spillover Theory of Entrepreneurship (KSTE) explains firm creation and the growth process mostly in the context of developed countries, especially Europe and North America. However, there is a dearth of empirical attention given to KSTE in the context International Entrepreneurship and Management Journal https://doi.org/10.1007/s11365-020-00667-w * Muhammad Naveed Iftikhar cheema@udel.edu 1 University of Delaware, Newark, DE, USA 2 National University of Science and Technology, Islamabad, Pakistan 3 Indiana University, Bloomington, IN, USA