Company-College Co-Location: Do Universities Create Local Innovation Clusters?
69 Pages Posted: 26 Dec 2019
Date Written: November 18, 2019
I show that firms headquartered geographically close to a top-university engage in more research and development and produce more valuable patents. To address the endogeneity of university and firm location, I use 19th century as-good-as-random allocation of land-grant colleges. I find that firms located close to these colleges are more innovative. Moving from the first to the fifth quintile of the distance distribution is associated with a 0.75 percentage point reduction in research and development expenditure and a 1.72 percentage point reduction in the value of patents, representing 15% and 21% of the mean, respectively. My findings suggest that universities help firms innovate by supplying local labor markets with high human capital and by generating ideas for local knowledge spillovers.
Keywords: Innovation, R&D, Education, Local labor markets, Knowledge spillovers
JEL Classification: R3, I2, G3
Suggested Citation: Suggested Citation