European Regional Science Association
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European Regional Science Association
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The abstract for paper number 40:
Vinod Sutaria, Independent Consultant, Irving, USA, Donald Hicks, University of Texas at Dallas, Richardson, USA
The Impact of R&D Expenditures on New Firm Formation and Regional Economic Growth
Is technology-based economic development driven by investments in research and development assets at the local/regional level? This is a fundamental question for which precise empirical answer is not available today, partly due to unavailability of data. We believe that investments in R&D at the university level tend to further existing ‘basic knowledge’; however, its impact on formation of new firms at the local/regional level is not empirically clear. We wish to extend this inquiry by trying to be (1) theoretically more precise, and (2) analytically more sophisticated.
Private research laboratories, federal research laboratories, and university-based research laboratories are the three primary ‘places’ in the United States where research is done. In this paper, we analyze the impact of only university-based R&D on new firm formations and subsequent economic growth and development. Recent work by Kirchhoff et. al., reported a significant and positive impact of R&D expenditures on new firm formations (his data on new firm formation include all sectors). We wish to look beyond Kirchhoff because we suspect that the relationship may be between university R&D expenditures and ‘high tech’ firm formations (rather than firm formations in all sectors). Moreover, we also suspect that the impact may vary by sectors (high tech, low tech, service etc.) and by time lag. In this context, one of our goals is to rank order sectors of an economy that are impacted by investments in university R&D.
In exploring these questions, we analyze regional factors, including university R&D expenditures, as determinants of NF2 (New Firm Formations) in the United States for the 1990-99 period. All three hundred and ninety four (394) Labor Market Areas (LMAs) of the United States have been used to account for the variation in NF2 over time and space. Realizing the need for developing a more calibrated regression model, we deal at a greater length with the issues of: (1) defining the ‘right’ type of data on dependent and independent variables, (2) measurement and ‘appropriate’ transformation of variables, (3) choosing ‘appropriate’ lag structure for university R&D and other variables, etc.
Multiple-regression modeling techniques have been used to develop a variety of regression models. A cross-sectional time-series analysis is employed to test for the hypotheses proposed.
Initial regression results have shown no impact of university R&D expenditure on new firm formation. Moreover, various lag R&D models also did not show any impact of university R&D expenditure on new firm formation.
Unfortunately full paper has not been submitted.