We investigate how technology transfers from universities to private firms influence firm innovativeness. Using data on R&D acquisitions from universities of more than 10,000 Spanish firms for the period 2005-2013 and applying propensity score matching techniques, we find that technology transfers from universities strongly increase firm innovativeness. We next explore heterogeneous effects in order to analyse whether these gains are mediated by firm size and the business cycle. Our results suggest that the contribution of universities to firm innovation is particularly important for small firms and during the whole business cycle. The contribution of universities goes beyond its direct effect on innovation: We find that technology transfers from universities generate positive spillovers and enhance firms‘ internal R&D capabilities. Our results suggest that the knowledge generated by universities makes an important contribution to economic growth through technology transfers, which makes firms more innovative. Hence, knowledge creation by universities provides an important public good.

Introduction

Do universities provide benefits to society beyond providing higher education to the young generation? This question has been at the core of the public and political debate about the role of university in society (Veugelers, 2016). One way universities can benefit society beyond education is through the transfer of their scientific research to firms which, in turn, can enhance innovation and thereby long-run economic growth (Mansfield, 1991). A core role of universities is to generate basic knowledge at the frontier of research, which is difficult to obtain through private markets.1 Therefore, companies have incentives to acquire some research from universities (contractual technology transfers) instead of producing it themselves to remain competitive and to increase efficiency. While there is a large amount of literature on the effects of in-house R&D on innovation, and on the productivity of technology transfers from the perspective of universities, 2 few studies analyse the effects of contractual university technology transfers on firm innovation. In this paper, we contribute to filling this gap. We investigate the effect of knowledge transfers from universities to private firms on firm innovativeness. A fundamental feature of universities is that they generate basic and applied research in an interlinked way. As a consequence, a large variety of different firms can benefit from university knowledge. Some small and medium sized firms lack capabilities and skilled personnel to implement incremental product innovations already known in the market.3 Some start-ups hire research university services to create and organize their own laboratories. Large firms often have incentives to develop new products and processes to stay ahead of their competitors and to reduce their costs.