What is Stochastic Frontier Approach

The definition of smart city and its measurement are not shared. Different characteristics define a city as smart, which is strictly linked to urban efficiency and to entrepreneurship spirit in a multifaceted way as well as to citizens' well-being. On the basis of the comparison between city and entrepreneur behaviour and on the definition of Giffinger et al. (2007) of smart city, this chapter verifies the efficiency of a sample of European cities using a stochastic frontier approach. Departing from this analysis, the chapter develops the relative smartness definition based on the efficient use of its own resources and related to the different context. Moreover, as a city becomes close to the optimal value, the frontier will shift upward because of the more attractiveness and a new adjustment mechanism should be followed to become efficient again (virtuous cycle). Then, the concept of smartness becomes dynamic. This definition, taking into account city's performance, is able to sustain the entrepreneurship milieu of a city.