https://orcid.org/0000-0002-5869-4469
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ABSTRACT
We discuss the economic and institutional factors that contribute to regions retaining university spinouts (USOs) founded within their borders as well as attracting USOs from other regions. Using UK data, we find that those regions with high USO retention rates have lower urbanization and localization economies. This suggests that locally founded USOs take advantage of cheaper inputs in addition to benefits that come from proximity to their home university. However, regions with high USO attraction rates have higher localization economies and innovation resources, suggesting that USOs move there to benefit from dynamic innovation systems. This study offers some general implications for regional and national industrial policy, including the ‘levelling up’ regional policy agenda.
ACKNOWLEDGEMENTS
The authors are grateful to John Slater for his kind support on writing and proofreading the paper, and Dr Frederick Guy, including colleagues at Birkbeck’s Department of Management (during a seminar held in November 2019) for their comments on an earlier version of this paper. We are also thankful to the guest editors of the special issue and the two anonymous reviewers for their excellent guidance throughout the review process.
DISCLOSURE STATEMENT
No potential conflict of interest was reported by the authors.
Notes
1. We adopt the definition provided by the now defunct Higher Education Funding Council for England (HEFCE) for the Higher Education Business-Interaction (HEBCI) survey, in considering USOs established by academic or university staff, in any sector, irrespective of whether the IP is owned by the academic entrepreneur or by the university, and if the latter has invested equity in the USO or not (see https://www.hesa.ac.uk/data-and-analysis/business-community/ip-and-startups; last accessed July 2018). Another type of start-up company linked to a university are graduate start-ups founded by current or former students. While extending the population to graduate start-ups would have broadened the number of companies available for the analysis, these companies are elusive and hard to trace, and information about them is not available from the public websites of most UK universities. Additionally, USOs and graduate start-ups differ in several aspects, including their ability to rely on university resources (human capital, facilities, equity investment), which is usually greater for the former. Hence, graduate start-ups need a separate analysis.
2. See http://www.universitiesuk.ac.uk; last accessed July 2018.
3. See www.spinoutsuk.co.uk; last accessed July 2018.
4. According to HEBCI 2010/11 (see https://www.hesa.ac.uk/data-and-analysis/publications/hebci-2010-11; last accessed July 2018), the number of three-year-old or older spinout companies was approximately 1000. Therefore, we were able to retrieve a larger number of USOs than those reported by universities to the HEFCE.
5. See https://www.hesa.ac.uk/data-and-analysis/publications/hebci-2010-11; last accessed July 2018.
6. See https://www.ons.gov.uk/economy/grossvalueaddedgva/bulletins/regionalgrossvalueaddedincomeapproach/2014-07-07; last accessed September 2019.
7. See https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/housepriceindex/jan2017#house-price-index-by-english-region; last accessed September 2019.
8. See https://ec.europa.eu/eurostat/web/regions/data/database; last accessed September 2019.
9. In particular, we followed the concept of a firm’s life stage coined by Taylor (Citation1975) and Holl (Citation2004). As a new firm is first established, entrepreneurs usually have limited information about alternative locations; in the case of USOs, they are usually based at or close to their home university due to the link with the academic founders. When they start to grow, between five and seven years (Mohr & Garnsey, Citation2011), they obtain better knowledge about business prospects in alternative locations and start making explicit locational decisions.
10. We focus on firms that have the potential to make an economic contribution to the region in which they base themselves, which need to have demonstrated a degree of commercial viability. This is unlikely to be the case for USOs that were already dormant, non-trading, in administration or in liquidation within seven years of their foundation (Jelfs, Citation2016).
11. These were computed as the number of universities in the more research-intensive KEF Clusters V and X (Research England, Citation2020).
12. Including the double clustering of standard errors for both NUTS-2 region (30 clusters) and university of origin (70 clusters) produces very similar results.
13. The indicators thus constructed display acceptable Cronbach’s Alpha values (all > 0.5).
14. Since the literature suggests that older firms are less likely to move than younger ones, we might have expected the latter share to be higher than the former. However, since our full dataset includes companies founded a long time ago (with the oldest firm founded in 1946), it is possible that the older firms moved when they were young. Because we can only measure whether migration occurred at some points between the foundation date and 2012, this further reinforces the importance of focusing on a group of USOs founded within a relatively short period.
15. In the period considered we have not found any USOs originating from the following 10 NUTS-2 regions: Cumbria (UKD1), Cheshire (UKD6), Lincolnshire (UKF3), Herefordshire, Worcestershire and Warwickshire (UKG1), Bedfordshire and Hertfordshire (UKH2), Essex (UKH3), Outer London – East and North East (UKI5), Outer London – South (UKI6), Cornwall and Isles of Scilly (UKK3), and Highlands and Islands (UKM6). As we cannot compute a retention rate for those regions, they are not included in .