The literature on the economics of science and technology shows that academic universities—institutions focusing on basic research—positively affect innovation activities in regional economies. Less is known about the innovation effects of universities of applied sciences (UASs)—bachelor-granting three-year colleges teaching and conducting applied research. Furthermore, the evidence for positive innovation effects is predominantly based on average effects, while heterogeneity in innovation effects due to the economic environment is far less considered. By exploiting a public policy development in Switzerland that led to the quasi-random establishment of UASs, we investigate the regional heterogeneity in innovation effects of these UASs. We rely on patent and business census data and analyze the influence and importance of three economic preconditions—labor market size, labor market density and high tech intensity—on innovation effects of UASs. Our results show that only regions with a large or a dense enough labor market or with an above average high tech intensity experience significant innovation effects of UASs. Comparing the relative importance of the three economic preconditions, we find that labor market size is the most important factor that drives heterogeneity in innovation effects of UASs.
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Also published as: Economics of Education Working Paper Series 0161 under the Title: Heterogeneous Regional Innovation Spillovers of Universities of Applied Sciences