This is a theory I've been mulling over for a while (note: I'm not a historian).
Essentially, it stems from the fact that three of the most artistically significant periods in Western history - Classical Greece, Renaissance Italy and Early Modern Germany - took place in regions where city states (or, at least, very small countries) were the order of the day, and competition between these states, and their courts, was especially common.
Essentially, I'd like to know if there are any other periods/regions where this has been borne out (no need to provide counter examples, I'm aware that those exist!), and I'd be especially interested to know if this is something that has been researched at all by a professional historian?
Thanks in advance.
There certainly is one: perhaps less city-states, but cities themselves (or towns, there's no sure distinction).
Cities have always been associated with intellectual concentration, specialisation and creativity, which is why the University of Little Boggington and the associated Lower Boggington Arts School never quite made it to the citation lists.
In economics it's dubbed an "aggregation economy" or "network effect": the more collected consumers and producers of a specialised good (in this case education or creative experimentation), the greater the opportunity to provide it profitably (and to consume at least cost).
And best of all, the growing concentration of people and interactions - including external transactions - multiplies the initial geographical advantage of clustering larger numbers in a smaller space.
The Tunisian scholar Ibn Khaldun noted the urban phenomenon even in the 14th century: "When those cities fell into ruins, sedentary culture, which God has devised for the attainment of sciences and crafts, disappeared from them."
In history there seems to be, as you note, an additional competition effect between polities: it's been cited as a reason for Europe taking a lead in the latter half of the last millennium.
It's almost a universal given, from the emergence of the first urban concentrations drawing on their regional agrarian surplus to sustain specialised city communities.
What would be really interesting is to draw together the trends with periods of economic growth or contraction: to what extent are whole cultures predicated on mere urbanity?