Establishment of higher education institutions and new firm entry

The presence of universities has generally been associated with technological entrepreneurship. But what is the real impact of new universities on the levels of firm creation in a region? The present paper uses policy evaluation methodologies and longitudinal data on the establishment of higher education institutions in Portuguese municipalities for the period 1992–2002 to examine its effect on entry rates of new firms in different sectors. We find that the establishment of a new university has a positive and significant effect on subsequent levels of knowledge based firm entry in municipalities, and a negative effect on the levels of entry in other sectors, such as low-tech manufacturing.

► Universities are generally associated with technological entrepreneurship.
► The effect of new universities on new firm entry is examined.
► Policy evaluation methodologies and longitudinal data are used.
► New universities increase firm entry in knowledge based sectors in municipalities.