University and Local Innovation: Evidence from College Mergers in China

This paper investigates whether larger colleges bring greater benefits for local innovation and higher research productivity. Using college mergers in China as a case study with a difference-in-difference model, this paper finds that mergers lead to a significant increase in local patent applications, signifying enhanced innovation within the cities where the merged colleges are located. This rise in innovation coincides with a notable improvement in the merged college's research productivity, achieved without additional faculty or government funding. These findings suggest economies of scale in the college's impact on local innovation and research output. Further analysis reveals that mergers involving solely four-year research colleges have the most significant positive effect. This aligns with the notion that merging similar institutions facilitates more efficient utilization of research resources. Overall, the paper offers valuable insights for policymakers aiming to enhance local innovation and research efficiency. By promoting resource-sharing initiatives or strategic mergers, particularly among four-year research colleges, policies can unlock the full potential of these institutions for both research excellence and regional economic development. JEL Classification: I23, I25, O31