Identifying Knowledge Spillovers from Universities: Quasi-experimental Evidence from Urban China

This paper studies the impact of universities on local innovation activity by exploiting a unique university expansion policy in China as a quasi-experiment. We take a geographic approach that is empowered by geocoded data on patents and new products at the address level to identify knowledge spillovers as an important channel. We obtain three main findings. First, university expansion significantly increases universities’ own innovation capacity, which results in a dramatic boom of local patents not related to universities. Second, the impact of university expansion on local innovation activities attenuates sharply within 2 kilometers of the universities. Third, university expansion boosts nearby firms’ new products and the number of nearby industrial patents that cite university patents but not those industrial patents that cite patents far away from universities.