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Universities, Entrepreneurship and Local Economic Development

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  • Navid Bazzazian
  • Thomas Astebro

Abstract

There has been an increased trend in the number of spin-offs generated by universities in the past thirty years. Past research reveals that the majority of these start-ups are located in the same region as the university from which they originated. In this paper, we investigate critically what universities do to encourage entrepreneurship to increase regional economic development. We will also discuss whether maximizing local entrepreneurship necessarily maximizes total welfare. Unfortunately, the scientific evidence reviewed in this paper indicates that policy changes at universities typically have very little impact on commercialization of research and the benefits to the universities are marginal. For example, current evidence indicates that creating incubators and science parks on university grounds have no discernable effects on local start-up rates. Further, from a theoretical perspective we have reviewed articles showing that introducing Technology Licensing Offices (TLOs), the most popular method to stimulate research commercialization, may likely introduce economic inefficiencies, hold-ups and decision biases that deviate from what is optimal. The median university among the top U.S. research-based institutions creates less than two academic spin-offs per year and so the relative effects on local economic conditions through TLO efforts and policies are bound to be marginal. Nevertheless the evidence also shows that the scientific stature of the faculty, the commercialization culture at the university, and the sheer number of science and engineering students graduated do have important positive effects on local start-up rates. Increasing expenditures on university staff and students causes increases in regional productivity growth and innovation and the marginal effects are much bigger in structurally weak regions. Evidence confirms that university spin-offs disproportionally favor local development. Maybe as much as 80 percent of all university spin-offs are and remain locally situated. However, universities that maximize local effects will not maximize their societal impact. Instead, it appears more efficient if universities simply try to maximize licensing revenues and not worry about the number of spin-offs and their locations.

Suggested Citation

  • Navid Bazzazian & Thomas Astebro, 2011. "Universities, Entrepreneurship and Local Economic Development," ERSA conference papers ersa10p822, European Regional Science Association.
  • Handle: RePEc:wiw:wiwrsa:ersa10p822
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    Cited by:

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    2. Shiri M. Breznitz & Qiantao Zhang, 2020. "Determinants of graduates’ entrepreneurial activity," Small Business Economics, Springer, vol. 55(4), pages 1039-1056, December.
    3. Jürgen Janger & Tim Slickers, 2023. "Wissensproduktion und Wissensverwertung in Österreich im internationalen Vergleich," WIFO Monatsberichte (monthly reports), WIFO, vol. 96(10), pages 699-714, October.
    4. Stephan Heblich & Viktor Slavtchev, 2014. "Parent universities and the location of academic startups," Small Business Economics, Springer, vol. 42(1), pages 1-15, January.
    5. Fritsch, Michael, 2013. "New Business Formation and Regional Development: A Survey and Assessment of the Evidence," Foundations and Trends(R) in Entrepreneurship, now publishers, vol. 9(3), pages 249-364, February.
    6. Jürgen Janger & Matthias Firgo & Kathrin Hofmann & Agnes Kügler & Anna Strauss-Kollin & Gerhard Streicher & Hans Pechar, 2017. "Wirtschaftliche und gesellschaftliche Effekte von Universitäten," WIFO Studies, WIFO, number 60794, April.
    7. Muscio, Alessandro & Ramaciotti, Laura, 2019. "How does academia influence Ph.D. entrepreneurship? New insights on the entrepreneurial university," Technovation, Elsevier, vol. 82, pages 16-24.
    8. Åstebro, Thomas & Bazzazian, Navid & Braguinsky, Serguey, 2012. "Startups by recent university graduates and their faculty: Implications for university entrepreneurship policy," Research Policy, Elsevier, vol. 41(4), pages 663-677.
    9. Alexander Chepurenko & Maria Kristalova & Michael Wyrwich, 2019. "Historical and Institutional Determinants of Universities’ Role in Fostering Entrepreneurship," Foresight and STI Governance (Foresight-Russia till No. 3/2015), National Research University Higher School of Economics, vol. 13(4), pages 48-59.
    10. Jacobsson, Staffan & Lindholm-Dahlstrand, Åsa & Elg, Lennart, 2013. "Is the commercialization of European academic R&D weak?—A critical assessment of a dominant belief and associated policy responses," Research Policy, Elsevier, vol. 42(4), pages 874-885.
    11. Michael Fritsch, 2011. "The effect of new business formation on regional development - Empirical evidence, interpretation, and avenues for further research," Jena Economics Research Papers 2011-006, Friedrich-Schiller-University Jena.
    12. Maximilian Goethner & Michael Wyrwich, 2020. "Cross-faculty proximity and academic entrepreneurship: the role of business schools," The Journal of Technology Transfer, Springer, vol. 45(4), pages 1016-1062, August.
    13. Michael Fritsch & Ronney Aamoucke, 2013. "Regional public research, higher education, and innovative start-ups: an empirical investigation," Small Business Economics, Springer, vol. 41(4), pages 865-885, December.
    14. Viktor Slavtchev & Stavroula Laspita & Holger Patzelt, 2012. "Effects of entrepreneurship education at universities," Jena Economics Research Papers 2012-025, Friedrich-Schiller-University Jena.
    15. Matthias Piontek & Michael Wyrwich, 2017. "The emergence of entrepreneurial ideas at universities in times of demographic change: evidence from Germany [Die Entstehung von Gründungsideen und neuen Unternehmen in Zeiten demografischen Wandel," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 37(1), pages 1-37, February.
    16. Shiri M. Breznitz & Qiantao Zhang, 0. "Determinants of graduates’ entrepreneurial activity," Small Business Economics, Springer, vol. 0, pages 1-18.
    17. Oscarina Conceição & Ana Paula Faria & Margarida Fontes, 2014. "Location of research-based spin-offs: how relevant are regional effects?," NIPE Working Papers 20/2014, NIPE - Universidade do Minho.
    18. Tania Babina & Alex Xi He & Sabrina T. Howell & Elisabeth Ruth Perlman & Joseph Staudt, 2020. "The Color of Money: Federal vs. Industry Funding of University Research," NBER Working Papers 28160, National Bureau of Economic Research, Inc.
    19. Olga A. Myzrova & Tatyana V. Goryacheva & Olga V. Sysoeva & Victor V. Sysoev, 2023. "The Effect of the Entrepreneurial Ecosystem of Universities on the Innovative Activity in Russian Regions," Economies, MDPI, vol. 11(7), pages 1-19, July.
    20. Wifo, 2020. "WIFO-Monatsberichte, Heft 10/2020," WIFO Monatsberichte (monthly reports), WIFO, vol. 93(10), October.
    21. Reinhilde Veugelers, 2014. "The Contribution of Academic Research to Innovation and Growth. WWWforEurope Working Paper No. 71," WIFO Studies, WIFO, number 50856, April.
    22. Wifo, 2021. "WIFO-Monatsberichte, Heft 10/2021," WIFO Monatsberichte (monthly reports), WIFO, vol. 94(10), October.

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