More than an Ivory Tower: The Impact of Research Institutions on the Quantity and Quality of Entrepreneurship

This paper provides systematic empirical evidence for the distinctive role of universities on local entrepreneurial ecosystems. Assessing the impact of research institutions on entrepreneurship is challenging, given that these institutions are often located in economic and innovation environments conducive to growth-oriented entrepreneurial activity, are themselves a source of local demand, and produce knowledge, which might serve as the foundation for new ventures. To overcome this inference challenge, we first combine comprehensive business registration records with a predictive analytics approach to measure both the quantity and quality-adjusted quantity of entrepreneurship at the zip-code level on an annual basis. We then link each location to the presence or absence of research-oriented universities or national laboratories. Finally, we exploit significant changes over time in Federal commitments to both universities and national laboratories. Our key finding is that changes in Federal research commitments to universities are uniquely linked to positively correlated changes in the quality-adjusted quantity of entrepreneurship. In contrast, increases in non-research funding to universities and funding to national laboratories is associated with either a neutral or negative impact on the quality-adjusted quantity of entrepreneurship. Research funding to universities seems to play a unique role in promoting the acceleration of local entrepreneurial ecosystems.