Essays on universities and economic development

Abstract

This dissertation seeks to contribute to a better understanding of the roles that universities currently play in economic development. This topic is particularly relevant in the current situation, in the aftermath of the world financial crisis, when the leading industrial nations are increasing their support for universities and for scientific research in particular (Hughes and Mina, 2012). The main questions that this dissertation will deal with are therefore the following: How do universities affect economic development? To what extent do universities generate impacts on economic development that would otherwise not occur? These are big questions. We can start by answering smaller questions: What happens in a region in terms of firm creation when a university is created? What is the role of the universities in terms of creating of human capital? What are the effects of the universities on industrial innovation?

After the general introduction of the dissertation, the second chapter evaluates the effects of the establishment of new universities by measuring its impact on the formation of new firms. I study this effect making use of the differences-in-differences methodology. I create a quasi-experimental design based on the enacting of the Spain’s 1983 University Reform Act (LRU), which opened the door to the foundation of new universities and faculties.

The results indicate that the establishment of a new university has a positive and significant effect on new firm start-ups. When the analysis is carried out at faculty level, the findings indicate that the foundation of science and social science faculties has had a marked impact on the creation of firms.

The third chapter aims to analyse university characteristics that affect the graduation rate, and to determine whether regional characteristics influence university performance in terms of graduation. The results show that university expenditure has been a key determinant of the graduation rate in Spain over the last decade. Moreover, results obtained through quantile regression analysis show that a policy of increasing university expenditure only makes sense for universities with low graduation rates. However, universities whose graduation rates do not belong to the 20th percentile can improve their ranking by raising financial-aid to students.

The universities’ roles in industrial innovation are tested in chapter fourth. Four different roles of universities are analysed: 1) as source of information, 2) as a partner of cooperation, 3) as an agent helping to enhance absorptive capacity and, 4) as a supplier of R&D services.

The main findings can be summarised as follows. Firstly, the role of universities as a source of information and knowledge is found to be a very important channel in enhancing firms’ innovative performance. Secondly, carrying out formal collaboration with universities in order to perform research is a very effective mechanism for improving firms’ innovation outcomes. Moreover, the effect of collaborating with universities over four years is found to have a strong and positive impact on firm innovative performance. Thirdly, universities as a creator of highly skilled workers are found to be one of the natural and most important mechanisms through which they boost innovation. Finally, universities play another role in the innovation process as suppliers of R&D services. It is confirmed that firms that undertake the development of complex innovations buy R&D services from universities.

In a nutshell, the dissertation’s chapters are concerned with questions of universities and economic development. The first two of them with a regional perspective - firm location and creation of human capital - and the other deals with the links between universities and industry. Overall, this dissertation provides strong evidence for the importance of universities and demonstrates the wide range of mechanisms by which universities influence economic development.