Essays on the Determinants of Public Funding for Universities and the Impact on Innovation and Entrepreneurship
This dissertation is comprised of three studies that investigate the implications and determinants of public funding for universities.
The first chapter lays down the foundation for the other two studies. I discuss how state-level policies, as determined by legislators, represent a pivotal component of firms' non-market strategies that have direct implications for the viability of their innovative and entrepreneurial activities. I expand this discussion to identify gaps in extant studies surrounding state-level policies and state legislators.
The second study focuses on the state funding for 420 public universities to estimate the precise return on state investments in higher education as measured by two economic outcomes -- the generation of university patents and formation of business establishments in a given university's local economy from 2002 through 2014. Using an instrumental variable estimation strategy, I predict and find a positive, causal association between state funding and the number of patents granted to public universities. I also observe a similar causal relationship between state funding and the entry of new business establishments near a given campus. This becomes pronounced for small firms in the manufacturing, retail, and service sectors, and even more for small firms in high-technology industries that are known to rely heavily on universities as a source of external inventions - pharmaceutical, medical equipment, and semiconductor.
The third study explores a new determinant of state funding for 420 public universities by leveraging novel, hand-collected data on the educational experiences of state legislators - specifically if and where they received postsecondary education. I predict and find a statistically significant, positive association between the share of legislators who attended their states' public institutions and state funding for their entire public higher-education system. A similar positive relationship is also observed between the share of state legislators who attended particular campuses of the state's public university system and funding for those campuses. This relationship is more pronounced among publicly educated legislators who represent legislative districts close to their alma mater's district, and becomes most consequential when the legislator's district contains his or her alma mater.
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