A new paper by Mikko Packalen, University of Waterloo, and Jay Bhattacharya, Stanford University, argues that when it comes to innovation, city size may not matter as much today as it did in the past.
The advantage of locating R&D resources in large cities over locating the same resources in smaller cities seems to be much smaller now than it has been in the past.
Throughout most of the 20th century, there was a clear connection between densely populated cities and innovative ones. However, that advantage seems to have declined over time. The likely reason for the shift is digital communication: people have wider access to new ideas, and wider access to the discussion of those ideas.
Further details here.