Fact of the Week: New, Knowledge-Intensive Enterprises That Use Innovations From Government-Funded Programs Add Employees and Grow Sales Faster

September 24, 2018

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New, knowledge-intensive enterprises that utilize innovations from government-funded research programs add employees 61 percent faster and grow sales 39 percent faster than other enterprises.

Source: David Audretsch and Albert Link, “Entrepreneurship and Knowledge Spillovers from the Public Sector,” No 18-5, UNCG Economics Working Papers, University of North Carolina at Greensboro, Department of Economics, 2018.

Commentary: Large bodies of research have established that firms can benefit from the spillover effects of innovation by other firms and universities, but significantly less is known about the extent to which firms benefit from R&D conducted by governments outside of academia. This year, the U.S. government launched the Unleashing American Innovation initiative, attempting to maximize private use of public research, which a new paper indicates is badly needed.

In a survey of new, knowledge-intensive enterprises conducted by the European Council, only 14 percent of firms reported public research was an important “source of knowledge for exploring new business opportunities,” demonstrating that many firms are unaware of potentially valuable developments in government programs. New analysis of this survey has shown that the firms which have explored government research have significantly outcompeted those that have not. Controlling for the industry, country, and other potential sources of knowledge spillover, firms that have relied on public knowledge have seen annual growth in employment and sales of 10 percent and 18.2 percent, respectively, compared to 6.2 percent and 13.1 percent for other firms.