The effects of university academic research on firm’s propensity to innovate at local level: evidence from Europe

Universities have become key elements in building regional innovation systems. However, even though academic research is important when firms choose universities as collaboration partners, a still open question in the literature is whether only top-tier universities are relevant for firm innovativeness. This paper investigates the effect of the volume of scientific publications on firm’s propensity to develop new product and processes and to what extent academic research has to be excellent in order to enhance local industrial innovation, taking into account that education may act as a channel of local university-based knowledge spillovers. Using data on manufacturing firms in seven European countries covering the period 2007–2009, a multivariate probit model is estimated to relate firm’s propensity to develop innovation to the level of provincial academic research and education. Results show that academic research has a direct impact on the firm’s propensity to develop innovation. Research at the second-tier university impacts product innovation more than that at first-tier one. Furthermore, the research output of the first-tier university exerts a detrimental effect on the development of process innovation whereas the research output of third- and lower-tier universities is beneficial. Research excellence, although very important, is not sufficient to explain university-based knowledge spillovers. It may be the case that academic research may enhance radical innovation of relatively few firms working on cutting edge research, whereas less advanced academic research may be directly useful to incremental innovation of most local firms.