The Role of Universities in Local Entrepreneurial Ecosystems

While universities are often associated with strong entrepreneurial ecosystems, the underlying drivers of this relationship have proved more elusive. We combine comprehensive business registration records with a predictive analytics approach to estimate both the quantity and (growth-oriented) quality of entrepreneurship at the level of individual zip codes over time. Moreover, we link these locations to the presence or absence of research-oriented universities or national laboratories, and we construct comparison groups based on ex ante similarities. Finally, we take advantage of significant changes over time in Federal commitments to both universities and national laboratories, and in particular of the distinction between research-oriented versus more general financial support for university activities. Together, these building blocks allow us to highlight three core findings related to the role of universities in local entrepreneurial ecosystems. First, universities are associated with not only a higher level of entrepreneurship but also a higher level of quality-adjusted entrepreneurship, and this relationship has strengthened over time. Second, relative to the direct impact of universities, demographic and economic factors associated with the presence of a university are even more strongly associated with entrepreneurial ecosystems. Finally, even after controlling for such factors, changes over time in resources enhance entrepreneurship but only increases in research-oriented funding enhance entrepreneurial quality. Together, these findings suggest both that universities as large economic institutions play a critical (and often underappreciated) role in local economic development, but that the norms and governance of universities play a unique role in promoting growth entrepreneurship conducive to long-term economic growth.