Investigating business-university innovation linkages

1. The Impact of Higher Education on Regional Economies Research Initiative Investigating business-university innovation linkages Laura Abramovsky (IFS and UCL) Helen Simpson (IFS and CMPO Bristol) University of Strathclyde, Glasgow October 2007

2. The Impact of Higher Education on Regional Economies Research Initiative This research • Two inter-related research questions • To what extent (foreign) firms locate their R&D labs in the vicinity of (world-class) university research departments in Great Britain? • Is the probability that a firm co-operates with a local university (or sources information from the university sector) related to its proximity to (world-class) university research departments?

3. The Impact of Higher Education on Regional Economies Research Initiative Research background • Evidence suggests research base is an important source of knowledge for business • If knowledge cannot be codified, geographic proximity may be important for technology transfer • Empirical literature on the existence of geographically mediated spillovers and on proximity to research institutions as determinant of innovative activity - most for the US

4. The Impact of Higher Education on Regional Economies Research Initiative Policy background • Commercial exploitation of the research base: topical policy issue • UK: Lambert Review; DTI Innovation Review; Science Framework 2004-2014 • Funding allocation for research: role of Research Assessment Exercise and Higher Education Innovation Fund • UK regional policy

5. The Impact of Higher Education on Regional Economies Research Initiative Empirical methodology I • We relate the location pattern of R&D labs, and the extent to which firms interact with universities, to the presence of nearby relevant (world-class) university research departments • We take into account further firm- and area-level characteristics as well as university characteristics, which might affect firms’ R&D location decisions and the extent to which they interact with universities

6. To capture the role of geographic proximity: we use information on the precise location of firms and universities, (their geographic co-ordinates), to construct continuous distance measures The Impact of Higher Education on Regional Economies Research Initiative Empirical methodology II

7. To capture the role of geographic proximity: we use information on the precise location of firms and universities, (their geographic co-ordinates), to construct continuous distance measures The Impact of Higher Education on Regional Economies Research Initiative Empirical methodology II Distribution R&D labs (2003)

8. To capture the role of geographic proximity: we use information on the precise location of firms and universities, (their geographic co-ordinates), to construct continuous distance measures The Impact of Higher Education on Regional Economies Research Initiative Empirical methodology II Example: Cambridge postcode area (CB) r c Universities (the higher the size, the higher the measured quality of research)

9. To capture the role of geographic proximity: we use information on the precise location of firms and universities, (their geographic co-ordinates), to construct continuous distance measures The Impact of Higher Education on Regional Economies Research Initiative Empirical methodology II Example: Cambridge postcode area (CB) 1 r c 2 Universities (the higher the size, the higher the measured quality of research)

10. To capture the role of geographic proximity: we use information on the precise location of firms and universities, (their geographic co-ordinates), to construct continuous distance measures The Impact of Higher Education on Regional Economies Research Initiative Empirical methodology II Example: firm A collaborates with local universities and firm B does not Chemistry research departments r Firm A r Firm B

11. The Impact of Higher Education on Regional Economies Research Initiative Empirical methodology IIIMicro level data • Rich firm level data • Precise location of R&D labs in GB (BERD: population of R&D labs, by product group) • Innovative firms’ interactions with universities and their location (CIS4: representative sample of (innovative) firms) • University level data • Research Assessment Exercise (2001) (research departments presence and quality) • Complement with HE-BCI survey (2003/04) (university interactions with firms) • Other firm- and area-level characteristics

12. The Impact of Higher Education on Regional Economies Research Initiative Related results: R&D labs location • Discrete geographic units: allocating firms and universities to discrete geographic units • We find evidence of geographic co-location of R&D labs near relevant research departments in some sectors: • Strongest and robust for R&D labs in pharmaceuticals and chemistry departments • Stronger with highly-rated chemistry departments • Stronger for foreign-owned R&D labs (consistent with technology sourcing) • Some evidence of co-location with lower quality research departments in industries such as machinery and communications equipment • See http://www.ifs.org.uk/publications.php?publication_id=3829

13. The Impact of Higher Education on Regional Economies Research Initiative Contact details • Laura Abramovsky • labramovsky@ifs.org.uk • +44 20 7291 4823 • Helen Simpson • helen.simpson@bristol.ac.uk • +44 117 33 10805