Company-College Co-location: Do Universities Create Local Innovation Clusters?

Abstract

I show that firms produce more valuable patents when they are located close to a university or land-grant college. Land-grant colleges were established in as-good-as-random locations in the 19th century, allowing me to rule out reverse causality and omitted variables as explanations. To understand the mechanism, I show that firms whose executives are more connected to a land-grant college produce more valuable patents, pointing toward executive networks as an important channel for spillovers. I strengthen these findings by using large donations from alumni as exogenous shocks to university research. The resulting increases in university research mainly benefit connected firms.