The Effect of University Science on Corporate Innovation

We study how three components of university science—university publications, PhD graduates, and university patents—influence both upstream and downstream innovation in U.S. publicly traded firms that conduct R&D. To measure the relevance of university science to corporate innovation activity, we use machine-learning algorithms and bibliometric data to link university publications, PhD dissertations, and university patents to corporate publications and patents. Identification exploits firm-specific exposure to shifts in federal agency R&D budgets. We find that university science affects corporate innovation primarily through PhD graduates and university patents: PhD graduates raise firm innovation, whereas university patents substitute for corporate patents and lower the need for internal research. In contrast, university publications elicit little direct contemporaneous response on average; however, this pattern varies substantially across sectors and firm capabilities, with stronger complementarities in the life sciences and among firms operating near the technology frontier. Because established firms account for more than three-quarters of all business R&D, understanding how their innovation responds to university publications, PhD graduates, and university patents is central to assessing the broader impact of university science on corporate innovation. This paper was accepted by Anita McGahan, strategy. Funding: This work was supported by Qualcomm Incorporated, the Coller Foundation, the Alfred P. Sloan Foundation [Grant G-2023-21022], the Fuqua School of Business, the Freeman School of Business, and The Henry Crown Institute of Business Research. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2024.05723 .