The economic impacts of academic spin-off companies, and their implications for public policy
The importance of academic research ("AR") to economic growth is widely accepted but quantification of incremental impacts, and their attribution to any one country's expenditures, is difficult. Yet quantitative justification of government AR funding is highly desirable. We therefore attempt to quantify one impact which can be directly and causally attributed to one country's funding: spin-off companies. We focus on AR in the non-medical natural sciences and engineering (NSExm) in a whole country, Canada. 'Applied' disciplines are sometimes assumed to be the most commercializable, so we also separately investigate an especially 'basic' science, physics. Using a novel methodology, we estimate the lifetime impacts of companies spun-off directly from AR performed in 1960-1998, and compare the impacts with all government funding, direct and indirect, over the same period. This picks up virtually all funding and most company-formation since WWII, up to 1998. Such long-term studies are rare but essential, since we show that successful spin-offs grow (often exponentially) over several decades. With very conservative assumptions, and allowing for the time value of money, the impacts exceed government funding by a substantial margin. Physics actually fares 30-60% better than the combined NSExm; this reflects more successful companies, rather than greater numbers, and therefore does not seem inconsistent with earlier studies on company numbers. Firm lifetimes are long, with Canadian impacts truncated primarily by some foreign acquisitions. We argue that the spin-off impacts represent incremental contributions to GDP, much larger (even on a time-discounted basis) than the government funding and directly attributable to it; governments will also receive more in additional tax than they spent. The impacts therefore provide a quantitative justification for the public investment, allowing the much more important (but less quantifiable) long-term benefits to be regarded as a 'free' bonus. The very good showing of physics also suggests that reduced emphasis on basic work or on the basic disciplines could actually weaken the commercialization of AR.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jorge Niosi, 2006. "Success Factors in Canadian Academic Spin-Offs," The Journal of Technology Transfer, Springer, vol. 31(4), pages 451-457, 07.
- Lynne G. Zucker & Michael R. Darby & Jeff S. Armstrong, 2001.
"Commercializing Knowledge: University Science, Knowledge Capture, and Firm Performance in Biotechnology,"
NBER Working Papers
8499, National Bureau of Economic Research, Inc.
- Lynne G. Zucker & Michael R. Darby & Jeff S. Armstrong, 2002. "Commercializing Knowledge: University Science, Knowledge Capture, and Firm Performance in Biotechnology," Management Science, INFORMS, vol. 48(1), pages 138-153, January.
- Lynne G. Zucker & Michael R. Darby & Jeff S. Armstrong, 2003. "Commercializing knowledge: university science, knowledge capture and firm performance in biotechnology," Proceedings, Federal Reserve Bank of Dallas, issue Sep, pages 149-170.
- Paula E. Stephan, 1996. "The Economics of Science," Journal of Economic Literature, American Economic Association, vol. 34(3), pages 1199-1235, September.
- Mansfield, Edwin, 1998. "Academic research and industrial innovation: An update of empirical findings1," Research Policy, Elsevier, vol. 26(7-8), pages 773-776, April.
- Narin, Francis & Hamilton, Kimberly S. & Olivastro, Dominic, 1997. "The increasing linkage between U.S. technology and public science," Research Policy, Elsevier, vol. 26(3), pages 317-330, October.
- Salter, Ammon J. & Martin, Ben R., 2001. "The economic benefits of publicly funded basic research: a critical review," Research Policy, Elsevier, vol. 30(3), pages 509-532, March.
- Mansfield, Edwin, 1991. "Academic research and industrial innovation," Research Policy, Elsevier, vol. 20(1), pages 1-12, February.
- Douglas Williams & A Dennis Rank, 1998. "Measuring the economic benefits of research and development: The current state of the art," Research Evaluation, Oxford University Press, vol. 7(1), pages 17-30, April.
- Jaffe, Adam B, 1989. "Real Effects of Academic Research," American Economic Review, American Economic Association, vol. 79(5), pages 957-70, December.
- Teece, David J., 1993.
"Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy,"
Elsevier, vol. 22(2), pages 112-113, April.
- Teece, David J., 1986. "Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy," Research Policy, Elsevier, vol. 15(6), pages 285-305, December.
- Landry, Rejean & Amara, Nabil & Rherrad, Imad, 2006. "Why are some university researchers more likely to create spin-offs than others? Evidence from Canadian universities," Research Policy, Elsevier, vol. 35(10), pages 1599-1615, December.
- Wesley M. Cohen & Richard R. Nelson & John P. Walsh, 2002. "Links and Impacts: The Influence of Public Research on Industrial R&D," Management Science, INFORMS, vol. 48(1), pages 1-23, January.
- Adams, James D, 1990. "Fundamental Stocks of Knowledge and Productivity Growth," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 673-702, August.
- Maine, Elicia & Garnsey, Elizabeth, 2006. "Commercializing generic technology: The case of advanced materials ventures," Research Policy, Elsevier, vol. 35(3), pages 375-393, April.
- Rosenberg, Nathan, 1992. "Scientific instrumentation and university research," Research Policy, Elsevier, vol. 21(4), pages 381-390, August.
When requesting a correction, please mention this item's handle: RePEc:eee:respol:v:39:y:2010:i:6:p:736-747. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.