Abstract
Based on detailed information about the regional knowledge base, particularly about universities, we find that regional public research and education have a strong positive impact on new business formation in innovative industries but not in industries classified as non-innovative. Measures for the presence and size of public academic institutions have more of an effect on the formation of innovative new businesses than indicators that reflect the quality of these institutions. We find relatively weak evidence for interregional spillovers of these effects. Our results clearly demonstrate the importance of localized knowledge and, especially, of public research for the emergence of innovative new businesses.
Similar content being viewed by others
Notes
Harhoff’s (1999) analysis is limited to start-ups in electrical machinery and the mechanical engineering industry. Audretsch and Lehmann (2005) and Audretsch et al. (2005) focus on 281 firms that made an initial public offering (IPO) in Germany between March 1997 and March 2002. Since these firms may have been set up considerably in advance of making an IPO, their founding date is only vaguely defined.
This corresponds to the observation that founders are likely to set up their business in the industry in which they previously worked (Fritsch and Falck 2007).
Since many service firms do not have a standardized product program but provide customer-specific services, they are not innovative in the same sense as manufacturing firms. Hence, service industries that may be relevant for innovation are defined as such based on the knowledge intensity of their inputs. These knowledge-intensive service industries include, for example, “computer services,” “research and development in natural sciences and engineering,” and “business consultancy.” For definitions of these groups of industries, see Grupp and Legler (2000) and OECD (2005). For a review of different methods of identifying innovative businesses, see Fritsch (2011).
The reason for these mixed results may be high correlation among the different indicators (see Sect. 4).
A study of the USA by Bania et al. (1993) shows that there may also be considerable differences in the effect of different regional knowledge sources among four-digit industries that are classified as highly innovative.
An indication for different effects of size and quality-related university indicators is provided by Fritsch and Slavtchev (2007), who find that only the volume of external funds has a positive effect on regional innovation activity; no such positive effect can be found for indicators that are related to size, such as the number of professors and academic personnel or the number of students and of graduates.
See Fritsch (2011) for the classification of German industries as “innovative,” “technologically advanced,” or “technology-intensive services.”
We account for all institutes of the four large public research organizations in Germany, i.e., the Fraunhofer, the Helmholtz, the Leibnitz, and the Max Planck Society. Data have been collected from different sources, mainly from publications of these organizations and the Federal Ministry of Education and Research. Since a number of these institutes have several locations, the publicly available information about their budgets and number of personnel cannot be meaningfully assigned to regions.
If a patent has more than one inventor, the count is divided by the number of the inventors involved and each inventor is registered with his or her share of that patent.
This common classification of German regions by the Federal Office for Building and Regional Planning is based on a region’s population density and settlement structure. For details, see Federal Office for Building and Regional Planning (2003).
The highest number of HEIs can be found in Berlin (34 HEIs), followed by Munich (19), Hamburg (17), and Stuttgart (10). The regions with the highest number of non-university institutions for public research are Berlin (26), Munich (20), and Dresden (17).
A plausible assumption for the selection of “true” zero values could be that the emergence of an innovative start-up in a region requires the presence of at least one university or of a non-university public research institute. This assumption, however, is not unproblematic because it already implies the general hypothesis that innovative start-ups emerge from public research. Running a zero-inflated negative binomial model with the variable “presence of a university or non-university public research institute in the region” for the selection of the “true” zero values, we find that a Vuong test suggests that doing so is not a significant improvement over a standard negative binomial model.
A great deal of the financing and legal framework for universities and non-university public research institutes is the responsibility of the Federal States in Germany. Most of the Federal States also operate their own programs for promoting entrepreneurship.
Employment in industry groups and small-firm employment are entered in the regressions as shares in overall regional employment because including these numbers would lead to double counting with the overall number of employees and cause multicollinearity.
We do not distinguish between patents registered by HEIs, non-university public research institutes, or the private sector for several reasons. One reason is that universities and other public research institutes in Germany are to different degrees selective with respect to patenting inventions so the number of patents is not a meaningful indicator of innovative output. A second reason is a change in the legal framework for university patenting that led to considerable change in patenting behavior during the period of analysis (for details, see Proff et al. 2012).
The correlation coefficient between the aggregate indicator for the regional HEIs (the number of non-university public research institutes) and the number of private-sector R&D employees is 0.465 (0.596); see Table 7 in the Appendix. The correlation between the regional number of private-sector R&D employees and the aggregate indicator for HEIs (the number of non-university public research institutes) in adjacent regions is 0.323 (−0.021).
The results are available as online material for this article.
The coefficient of correlation between these two indicators in the overall sample is 0.488 (see Table 7 in the Appendix).
References
Acs, Z. J., Braunerhjelm, P., Audretsch, D. B., & Carlsson, B. (2009). The knowledge spillover theory of entrepreneurship. Small Business Economics, 32, 15–30.
Akaike, H. (1974). A new look at the statistical model identification. IEEE Transactions on Automatic Control, 19, 716–723.
Anselin, L., Varga, A., & Acs, Z. J. (1997). Local geographic spillovers between university research and high technology innovations. Journal of Urban Economics, 42, 422–448.
Asheim, B. T., & Gertler, M. S. (2005). The geography of innovation: Regional innovation systems. In J. Fagerberg, D. C. Mowery, & R. R. Nelson (Eds.), The Oxford handbook of innovation (pp. 291–317). Oxford: Oxford University Press.
Astebro, T., & Bazzazian, N. (2011). Universities, entrepreneurship and local economic development. In M. Fritsch (Ed.), Handbook of research on entrepreneurship and regional development (pp. 252–333). Cheltenham: Elgar.
Audretsch, D. B., Keilbach, M., & Lehmann, E. (2006). Entrepreneurship and economic growth. Oxford: Oxford University Press.
Audretsch, D. B., & Lehmann, E. E. (2005). Does the knowledge spillover theory of entrepreneurship hold for regions? Research Policy, 34, 1191–1202.
Audretsch, D. B., Lehmann, E. E., & Warning, S. (2005). University spillovers and new firm location. Research Policy, 34, 1113–1122.
Bade, F.-J., & Nerlinger, E. A. (2000). The spatial distribution of new technology-based firms: Empirical results for West-Germany. Papers in Regional Science, 79, 155–176.
Bania, N., Eberts, R. W., & Fogerty, M. S. (1993). Universities and the startup of new companies can we generalize from Route 128 and Silicon Valley? Review of Economics and Statistics, 75, 761–766.
Baptista, R., Lima, F., & Mendonça, J. (2011). Establishment of higher education institutions and new firm entry. Research Policy, 40, 751–760.
Baptista, R., & Mendonça, J. (2010). Proximity to knowledge sources and the location of knowledge-based start-ups. Annals of Regional Science, 45, 5–29.
Bonaccorsi, A., et al. (2013). How universities contribute to the creation of knowledge intensive firms: Detailed evidence on the Italian case. In A. Bonaccorsi (Ed.), The European higher education landscape—diversity and performance. Cheltenham: Edward Elgar (forthcoming).
Boschma, R. (2005). Proximity and innovation: A critical assessment. Regional Studies, 39, 61–74.
Bosma, N., et al. (2012). Entrepreneurship and role models. Journal of Economic Psychology, 33, 410–424.
Carree, M. A. (2002). Does unemployment affect the number of establishments? A regional analysis for US states. Regional Studies, 36, 389–398.
Carree, M. A., Della Malva, A. & Santarelli, E. (2012). The contribution of universities to growth: Empirical evidence for Italy. Journal of Technology Transfer. doi:10.1007/s10961-012-9282-7.
Dahl, M. S., & Sorenson, O. (2009). The embedded entrepreneur. European Management Review, 6, 172–181.
Elfenbein, D. W., Hamilton, B. H., & Zenger, T. R. (2010). The small firm effect and the entrepreneurial spawning of scientists and engineers. Management Science, 56, 659–681.
Federal Office for Building and Regional Planning (Bundesamt für Bauwesen und Raumordnung). (2003). Aktuelle Daten zur Entwicklung der Städte, Kreise und Gemeinden (Vol. 17). Bonn: Federal Office for Building and Regional Planning.
Feldman, M. P. (2001). The entrepreneurial event revisited: Firm formation in a regional context. Industrial and Corporate Change, 10, 861–891.
Figueiredo, O., Guimaraes, P., & Woodward, D. (2002). Home-field advantage: Location decisions of Portuguese entrepreneurs. Journal of Urban Economics, 52, 341–361.
Fritsch, M. (2011). Start-ups in innovative industries—causes and effects. In D. B. Audretsch, O. Falck, S. Heblich, & A. Lederer (Eds.), Handbook of innovation and entrepreneurship (pp. 365–381). Cheltenham: Elgar.
Fritsch, M. (2013). New business formation and regional development—a survey and assessment of the evidence. Foundations and Trends in Entrepreneurship, 9, 249–364.
Fritsch, M., & Falck, O. (2007). New business formation by industry over space and time: A multi-dimensional analysis. Regional Studies, 41, 157–172.
Fritsch, M., & Slavtchev, V. (2007). Universities and innovation in space. Industry and Innovation, 14, 201–218.
Gehrke, B., Schasse, U., Rammer, C., Frietsch, R., Neuhäusler, P., & Leidmann, M. (2010). Listen wissens- und technologieintensiver Güter und Wirtschaftszweige. Studien zum deutschen Innovationssystem, 19(2010), Frauenhofer ISI, NIW, ZEW.
Greene, W. (2008). Econometric analysis (6th ed.). Upper Saddle River: Pearson Prentice Hall.
Grupp, H., & Legler, H. (2000). Hochtechnologie 2000: Neudefinition der Hochtechnologie für die Berichterstattung zur technologischen Leistungsfähigkeit Deutschlands. Karlsruhe and Hannover, FhG, ISI, NIW.
Harhoff, D. (1999). Firm formation and regional spillovers—evidence from Germany. Economics of Innovation and New Technology, 8, 27–55.
Hülsbeck, M., & Pickavé, E. N. (2012). Regional knowledge production as determinant of high-technology entrepreneurship: empirical evidence for Germany. International Entrepreneurship Management Journal,. doi:10.1007/s11365-011-0217-9.
Klepper, S. (2009). Spinoffs: A review and synthesis. European Management Review, 6, 159–171.
Lasch, F., Robert, F., & Le Roy, F. (2013). Regional determinants of ICT new firm formation. Small Business Economics, 40, 671–686.
Markusen, A., Glasmeier, A., & Hall, P. (1986). High Tech in America—the what, how, where, and why of the sunrise industries. Boston: Allen & Unwin.
Organization for Economic Co-operation and Development (OECD). (2005). OECD handbook on economic globalization indicators. Paris: OECD.
Parker, S. C. (2009). Why do small firms produce the entrepreneurs? Journal of Socio-Economics, 38, 484–494.
Piva, E., Grilli, L., & Rossi-Lamastra, C. (2011). The creation of high-tech entrepreneurial ventures at the local level: the role of local competences and communication infrastructures. Industry and Innovation, 18, 563–580.
Proff, S. V., Buenstorf, G., & Hummel, M. (2012). University patenting in Germany before and after 2002: What role did the professors’ privilege play? Industry and Innovation, 19, 23–44.
Reynolds, P. D., Storey, D. J., & Westhead, P. (1994). Cross-national comparisons of the variation in new firm formation rates. Regional Studies, 28, 443–456.
Spengler, A. (2008). The establishment history panel. Schmollers Jahrbuch/Journal of Applied Social Science Studies, 128, 501–509.
Sternberg, R. (2009). Regional dimensions of entrepreneurship. Foundations and Trends in Entrepreneurship, 5(4), 211–340.
Storey, D. J., & Tether, B. S. (1998). New technology-based firms in the European Union: An introduction. Research Policy, 26, 933–946.
Sutaria, V., & Hicks, D. A. (2004). New firm formation: Dynamics and determinants. Annals of Regional Science, 38, 241–262.
Statistisches Bundesamt (various volumes). Fachserie 11—Bildung und Kultur. Wiesbaden: Statistisches Bundesamt.
Zentrum für Europäische Wirtschaftsforschung (ZEW). (2011). Die Bereitstellung von Standardauswertungen zum Gründungsgeschehen in Deutschland für externe Datennutzer. Mannheim: ZEW.
Author information
Authors and Affiliations
Corresponding author
Additional information
We have benefited from comments on earlier versions of this paper by participants of several workshops and conferences. Special thanks for suggestions go to Guido Buenstorf, Donato Iacobucci, Haifeng Qian, Colin Wren, Michael Wyrwich, and an anonymous referee.
Rights and permissions
About this article
Cite this article
Fritsch, M., Aamoucke, R. Regional public research, higher education, and innovative start-ups: an empirical investigation. Small Bus Econ 41, 865–885 (2013). https://doi.org/10.1007/s11187-013-9510-z
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11187-013-9510-z