Who benefits from investment in universities? : institutions, university spillovers, and firm performance

Abstract

This study examines the impact of local institutional arrangements on firm level spillover effects from universities. Specifically, I test the proposition of co-location with universities affecting firm performance, taking advantage of a major policy reform in China, to identify distinct university-influenced regions between 1998 and 2005. Together with a unique dataset from the National Bureau of Statistics of China, I find evidence, which suggests that relative to state-owned enterprises, domestic private firms in these regions experienced performance decline. Collectively, the results suggest that spillover effects from universities on industry are not unidirectional and uniform, and are specific to the unique institutional arrangements of each region and country. This finding raises some substantial welfare implications about the efficiency of public investments in universities when the benefits of such investments are offset by the institutional inefficiency of the state ownership.