Public funds and local biotechnology firm creation

Christos Kolympiris, Nicholas Kalaitzandonakes and Douglas Miller

Research Policy, 2014, vol. 43, issue 1, 121-137

Abstract: A long stream of academic literature has established that public funding towards research and development matters for economic growth because it relates to increases in innovation, productivity and the like. The impact of public funding on the creation of new firms has received less attention in this literature despite theoretical constructs that support such association. In the present paper we study whether indeed there is a relationship between public research funds and local firm births in the context of the U.S. biotechnology industry. In doing so, we introduce a number of changes that strengthen the robustness of our findings when compared with existing literature. These changes include a direct measure of research expenditures and a considerably lengthier longitudinal dataset which allows us to capture a structural relationship and not a chance event. We empirically demonstrate that increases in the level of research funding from the National Institutes of Health towards biotechnology associate with increases in the number of biotechnology firm births at the Metropolitan Statistical Area level. Further, we reveal that public funds towards established firms associate with local firm births considerably more strongly when compared with funds towards universities and research institutes/hospitals. We conclude the paper with academic and policy implications of the present work that highlight the complexity of factors that underlie the creation of local firms in high technology industries.

Keywords: Biotechnology; Firm birth; Federal funding; NIH; MSA (search for similar items in EconPapers)
JEL-codes: C23 L26 O18 R12 R3 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:respol:v:43:y:2014:i:1:p:121-137

DOI: 10.1016/j.respol.2013.07.012

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