Research, knowledge transfer and innovation: the effect of Italian universities’ efficiency on local economic development 2006−2012

We test whether there is a link between the performance of universities, measured through a concept of efficiency, and the economic development of the regions in which they operate. Indicators of teaching, research and third mission are considered as outputs. To handle endogeneity problems between the efficiency of universities and economic development, a system generalized method of moments and then an instrumental variable approach are used. Our findings reveal that the presence of efficient universities fosters local economic development. Knowledge spillovers occur to areas that are in close geographical proximity to efficient universities. Results are robust to different estimation strategies.