How Local Industry R&D Shapes Academic Research: Evidence from the Agricultural Biotechnology Revolution

Abstract

This paper investigates how industry research and development (R&D) may shape the rate and direction of research at geographically proximate universities and explores the mechanisms leading to such geographical localization of industry influence. Endogeneity concerns related to the selection of industry location were addressed by using the unique setting of the agricultural biotechnology revolution of the 1980s. The emergence of plant biotechnology spurred the entry of nonbiotechnology agribusiness incumbents into genetic engineering, creating a quasi-natural experiment for universities located near the company R&D headquarters. Relative to the control universities identified by coarsened exact matching, the universities within a 50-mile radius of the incumbent R&D headquarters show an approximate 28.5% increase in industry-relevant research output after the company’s entry into agricultural biotechnology R&D. The effect of industry R&D is stronger for research on major cash crops. Additional analysis suggests that local university-industry coauthorships, which proxy for local industry funding, may be a leading mechanism behind the effect. Overall, the results highlight the roles of R&D-intensive anchor tenants in the geography of academic knowledge production. The findings are relevant for regional policymakers and managers considering strategic placements of corporate R&D locations.