The narrow power decay-length (lambda(q)), recently found in the scrape-off layer (SOL) of inner-wall limited (IWL) discharges in tokamaks, is studied using 3D, flux-driven, global two-fluid turbulence simulations. The formation of the steep plasma profiles is found to arise due to radially sheared E x B poloidal flows. A complex interaction between sheared flows and parallel plasma currents outflowing into the sheath regulates the turbulent saturation, determining the transport levels. We quantify the effects of sheared flows, obtaining theoretical estimates in agreement with our non-linear simulations. Analytical calculations suggest that the IWL lambda(q) is roughly equal to the turbulent correlation length.