Markets versus spillovers in outflows of university research

A substantial body of research has examined the contributions of university research to regional economic development and technological innovation. This literature suggests that the channels through which university-based research affects regional economic or innovative activity may be divided into two broad categories-knowledge “spillovers” (i.e., positive externalities from university research) and “market-mediated” channels such as technology licensing or various types of employment relationships between academic scientists and firms. Yet little research has compared the geographic incidence of these market and nonmarket channels of interaction. This paper compares the localization of knowledge flows from university inventions through market contracts (licenses) and nonmarket “spillovers” exemplified by patent citations. We find knowledge flows through market transactions to be more geographically localized than those operating through nonmarket spillovers. Moreover, the differential effects of distance on licenses and citations are most pronounced for exclusively licensed university patents. We interpret these findings as reflecting the incomplete nature of licensing contracts and the need for licensees to maintain access to inventor knowhow for many university inventions. Such access appears to be less important for inventions that are nonexclusively licensed.