Knowledge spillover and entrepreneurship: Evidence from BITNET

Abstract

In this study, we investigate how knowledge spillovers create entrepreneurial opportunities using the adoption of BITNET, an early predecessor of the Internet, across universities in the U.S. as an exogenous shock to the knowledge base in the county where the university is located. Using County Business Patterns data, we find a positive relationship between entrepreneurship, measured by the increase in the number of establishments in a county, and the adoption of BITNET at a university in that county. Further, this relationship is stronger for establishments in high-tech industries and for smaller establishments. We also find that the number of patents and citations in a county increase after the adoption of BITNET in a county. These results indicate that knowledge spillovers from local universities can have a strong impact on entrepreneurial opportunities in a location, consistent with the knowledge spillover theory of entrepreneurship.