The relationship between new universities and new firms: evidence from a quasi-natural experiment in Spain

• Main Authors: Javier García-Estévez, Néstor Duch-Brown
• Format: Article
• Language: English
• Published: Taylor & Francis Group 2020-01-01
• Series: Regional Studies, Regional Science
• Subjects: regional entrepreneurship; universities; firm creation; knowledge spillovers; regional development
• Online Access: http://dx.doi.org/10.1080/21681376.2020.1784778

We examine whether establishing a new university (or faculty) in a region affects new firm creation within that given region. We identified a quasi-experimental design based on Spain’s 1983 University Reform Act, which opened the door to founding new universities at the regional level. We use a generalized difference-in-difference model to estimate this relationship. The results indicate that establishing a new university has a significant positive effect on new firm creation. We then introduce an analysis by the field of knowledge of the created university/faculty and the creation of firms in different categories of sectors defined according to their research and development intensity. In this case, the results show that creating a new university/faculty has a significant positive effect on firm formation in medium-high- and medium-low-technology manufacturing as well as in knowledge-intensive market and financial services. Moreover, creating a health faculty has a significant positive effect on new firm formation in the high-tech manufacturing sector. Finally, the results indicate ambiguous results from different sources of agglomeration economies.