Why downtown universities help fuel the urban startup ecosystem

For years, proponents of increased downtown development and innovation districts have spoken of the important interplay between universities, startups, and local jobs. Cities such as Pittsburgh, which has seen its stock rise as a center for technology and innovation, found that local universities such as Carnegie Mellon served as catalysts for commercial and creative growth.

A new Brookings Institution study, which focuses on the economic and educational output of downtown colleges and universities—defined as those within the top 100 metro areas—underlines just how important these learning hubs are in today’s innovation ecosystem.

Hidden in plain sight: The oversized impact of downtown universities, written by researcher and fellow Scott Andes, shows the oversized impact downtown schools are having compared to their peers situated around tree-lined quads in the country. “Downtown universities are emerging as competitive differentiators,” Andes writes.

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From the perspective of the startup and innovation economy, downtown schools are reaping major rewards. Andes’ research found that they’re producing 80 percent more licensing agreements, 123 percent more inventions, receiving 222 percent more income from licensing agreements, and creating 71 percent more startups than comparable schools in rural, suburban, or small town settings.

In many cases, these advantages are building upon themselves. Downtown schools are also specializing more in STEM topics, receiving more funding from nonprofits, and spending nearly $10,000 more per student per year on research and development. That’s why among U.S. research institutions—defined as those that spend $50 million in R&D expenditures ever year, or about 200 schools across the country—urban ones outperform. Full-time students at these urban schools represent just a quarter of enrollment among all research universities, but are responsible for 37 percent of startups and patents, 43 percent of invention disclosures, and 52 percent of licensing income.

The big benefit for cities

The overall conclusions shouldn’t come as a surprise, since closeness to money, investment, and talent clearly creates an advantage for an university. In the life sciences and healthcare fields especially, proximity to large patient populations and urban health care and hospital networks offer huge advantages to urban institutions.

These advantages explain why, between 2013 and 2015, urban schools established 220 new companies. It’s an impressive statistic, but not quite indicative of how universities improve the overall urban economic picture.

Andes also makes the case for cities supporting, attracting, and retaining universities and university-level talent. Studies show that schools have a direct impact on all levels of the local economy, well beyond just increased spending by new employees and students: doubling the number of universities is associated with a four percent increase in gross domestic product (GDP) per capita, while a one percentage point increase in the supply of college graduates in a city actually raises the wages of local high school dropouts by 1.9 percent. University of California researchers also found that every $1 increase in university spending led to a $0.89 increase in average income within the surrounding city.

Building upon success

Andes concludes that downtown schools need to invest in what’s working—collaborate with industry partners to accelerate commercialization, connect with corporate research centers, incentivize entrepreneurship, and invest in strategic connections to the city—and not assume that proximity will be productive. Even with the advantages of an urban location, schools need to foster growth and innovation.

Local leaders also need to cultivate their relationships with downtown universities. The most important thing is to focus on utilizing campuses as economic engines: tie universities in with local economic development, connect them to regional economic clusters, and make sure they’re part of sustainable, inclusionary plans for growing nearby neighborhoods. The tech ecosystem that leaders in academia and city hall want only happens when both sides communicate and collaborate.

As Andes writes, in a time of “stagnant economic growth and mounting global competition,” successful downtown universities are positioning themselves as engines of growth. He believes that wise local leaders should do all they can to make urban universities true anchor institutions of our cities.