Location choice of academic entrepreneurs: Evidence from the US biotechnology industry

• Academic entrepreneurs maximize utility by allocating efforts between academic and entrepreneurial pursuits.
• Firm location choice follows from utility maximization.
• Both entrepreneur and location characteristics enter this optimal choice.
• Firm location choice of 275 academic bioentrepreneurs is empirically examined.
• Relevance of personal and location-specific factors in firm location choice confirmed
• Entrepreneur-specific factors dominate choice.

Where knowledge-based firms are located is important because entrepreneurship, firm creation and innovation are typically associated with regional economic development, wealth creation and increased employment. In this paper we examine where academic entrepreneurs locate their firms. We begin by developing a theoretical model that examines the location choice of the academic entrepreneur within the standard utility maximization theory. Academic entrepreneurs are assumed to maximize their utility by allocating their efforts between academic and entrepreneurial pursuits which, in turn, determine their future streams of income and end-period wealth. Optimal allocation turns out to be a function of both personal and external factors that condition the relevant payoffs and such factors can be empirically observed. We then use several candidate explanatory variables to examine those factors that may influence the firm location choice for 187 biopharmaceutical firms started by 275 academic entrepreneurs in the US. From our empirical analysis we find that location-specific factors such as proximity to certain knowledge assets and to the funding venture capital firms, affect the firm location choice of academic entrepreneurs. Nevertheless, entrepreneur-specific characteristics, such as their age, seem to dominate the choice of firm location.