The Influence of University R&D Expenditures on New Business Formations and Employment Growth

17 Pages Posted: 15 Jul 2007

See all articles by Bruce A. Kirchhoff

Bruce A. Kirchhoff

New Jersey Institute of Technology

Scott L. Newbert

Zicklin School of Business, Baruch College - The City University of New York

Iftekhar Hasan

Fordham University - Gabelli School of Business; Bank of Finland

Catherine Armington

Independent

Abstract

Since new firms generally lack the resources necessary to compete with their larger, older counterparts in the knowledge development process, we argue that they often rely on spillovers to fuel their own innovative efforts. Thus, we hypothesize that new firms will tend to form in areas characterized by high levels of university research and development (R&D) expenditures and that these births will in turn stimulate the local economy by generating increases in employment level and growth. We test our hypotheses at the U.S. labor market area level using secondary data from various government sources for the years 1990 through 1999. Our results demonstrate that university R&D expenditures are positively related to new firm formations, and that these new firm formations are positively related to employment level and change. These findings suggest that university R&D expenditures are an important indirect contributor to overall economic growth by encouraging primary and secondary firm births.

Suggested Citation

Kirchhoff, Bruce A. and Newbert, Scott L. and Hasan, Iftekhar and Armington, Catherine, The Influence of University R&D Expenditures on New Business Formations and Employment Growth. Entrepreneurship Theory and Practice, Vol. 31, No. 4, pp. 543-559, July 2007. Available at SSRN: https://ssrn.com/abstract=999461 or http://dx.doi.org/10.1111/j.1540-6520.2007.00187.x

Bruce A. Kirchhoff (Contact Author)

New Jersey Institute of Technology ( email )

323 Martin Luther King Blvd.
Newark, NJ 07102
United States
973-596-5658 (Phone)
973-596-3074 (Fax)

Scott L. Newbert

Zicklin School of Business, Baruch College - The City University of New York ( email )

NY
United States

Iftekhar Hasan

Fordham University - Gabelli School of Business ( email )

Rose Hill Campus Bronx
New York, NY 10458
United States

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

Catherine Armington

Independent

No Address Available

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