MIT: The Impact of Innovation

A Special Report of the BankBoston Economics Department

Return to Table of Contents

Proceed to Next Section

In the first national study of the economic impact of a research university, the Bank-Boston Economics Department reports that graduates of the Massachusetts Institute of Technology have founded 4,000 firms which, in 1994 alone, employed at least 1.1 million people and generated $232 billion of world sales.

The report "represents a case study of the significant effect that research universities have on the economies of the nation and its 50 states."

Wayne M. Ayers, chief economist of Bank-Boston, said,"MIT is not the only university that has had a national impact of this kind, but because of its historical and continuing importance, it illustrates the contribution of research universities to the evolving national economy."

MIT President Charles M. Vest, commenting on the report, said, "About 90 percent of these companies have been founded in the past 50 years, in the period of the great research partnership between the federal government and the research universities. The development of these business enterprises is one of the many beneficial spinoffs of federally funded research, which has brought great advances in such fields as health care, computing and communications."

The companies employed a total of 733,000 people in 1994 at more than 8,500 U.S. plants and offices in the 50 states--equal to one out of every 170 jobs in America.

• Eighty percent of the jobs in the MIT-related firms are in manufacturing (compared to 16 percent nationally), and a high percentage of products are exported.
• The MIT-related companies, if they formed a nation, would rank as the 24th largest world economy in 1994 because the $232 billion in world sales "is roughly equal to a gross domestic product of $116 billion, which was a little less than the GDP of South Africa and more than the GDP of Thailand."
• The five states benefiting most from MIT-related jobs are California (162,000), Massachusetts (125,000), Texas (84,000), New Jersey (34,000) and Pennsylvania (21,000). Thirteen other states have more than 10,000 MIT-related jobs--from west to east, Washington, Oregon, Colorado, Kansas, Iowa, Wisconsin, Illinois, Ohio, Virginia, Georgia, Florida, New York and Connecticut. Another 25 states have 9,000 to 1,000 jobs from MIT-related companies. Only seven low-population states and the District of Columbia had less than 1,000 jobs from MIT-related companies.
• The study also looked at employment around the nation and the world from MIT-related companies. Massachusetts firms related to MIT had 353,000 world-wide jobs; California firms had 348,000 world jobs.
• Other major world employers included firms in Texas, 70,000; Missouri, 63,000; New Jersey, 48,000; Pennsylvania, 41,000; and New Hampshire, 35,000.
• In determining the location of a new business, the 1,300 entrepreneurs surveyed said the quality of life in their community, proximity to key markets and access to skilled professionals were the most important factors, followed by access to skilled labor, low business cost and access to MIT and other universities.
• More than 2,400 companies have headquarters outside the Northeast. The report noted, "MIT-related companies have a major presence in the San Francisco Bay area (Silicon Valley), southern California, the Washington-Baltimore-Philadelphia belt, the Pacific Northwest, the Chicago area, southern Florida, Dallas and Houston, and the industrial cities of Ohio, Michigan and Pennsylvania."
• The MIT-related companies "are not typical of the economy as a whole; they tend to be knowledge-based companies in software, manufacturing (electronics, biotech, instruments, machinery) or consulting (architects, business consultants, engineers). These companies have a disproportionate importance to their local economies because they usually sell to out-of-state and world markets, and because they so often represent advanced technologies." Other industries represented include manufacturing firms in chemicals, drugs, materials, aerospace; energy, publishing and finance.
• MIT graduates and faculty have been forming an average of 150 new firms a year since 1990.
• MIT graduates, in interviews, cited several factors at MIT which spurred them to take the risk of starting their own companies--faculty mentors, cutting-edge technologies, entrepreneurial spirit and ideas.
• In Massachusetts, the 1,065 MIT-related companies represent five percent of total state employment and ten percent of the state's economic base (sales in other states and the world). MIT-related firms account for about 25 percent of sales of all manufacturing firms and 33 percent of all software sales in the state.
• The companies include 220 companies based outside the United States, employing 28,000 people world-wide.
• Some of the earliest known MIT-related companies still active are Arthur D. Little, Inc. (1886), Stone and Webster (1889), Campbell Soup (1900) and Gillette (1901).

The report notes that many of the MIT-related founders also have degrees from other universities, and these entrepreneurs maintain close ties with MIT or other research universities and colleges. The report is the result of an MIT survey of 1,300 founders and two years of fact-gathering by MIT and BankBoston.

Companies Founded by MIT Graduates/Faculty are in All 50 States More than $1 Billion in Annual Sales in Each of 26 States More than 5,000 Jobs in Each of 31 States

State	Jobs, MIT-Related	Sales, MIT-Related Plants & Offices (in millions)*		State	Jobs, MIT-Related	Sales, MIT-Related Plants & Offices (in millions)*
Alabama	9,300	$1,091		Missouri	9,200	$1,143
Alaska	360	$56		Montana	60	$18
Arizona	7,600	$1,163		North Carolina	8,100	$1,680
Arkansas	2,500	$493		North Dakota	110	$64
California	162,000	$19,216		Nebraska	1,900	$1,048
Colorado	15,600	$3,164		Nevada	1,300	$36
Connecticut	10,300	$890		New Hampshire	8,800	$1,574
District of Columbia	770	$88		New Jersey	33,700	$1,834
Delaware	2,100	$306		New Mexico	5,300	$1,035
Florida	15,500	$2,521		New York	15,100	$3,092
Georgia	14,800	$2,852		Ohio	18,300	$3,327
Hawaii	400	$79		Oklahoma	4,800	$843
Idaho	5,300	$1,133		Oregon	10,200	$2,891
Illinois	12,100	$1,899		Pennsylvania	21,000	$2,360
Indiana	4,700	$489		Rhode Island	3,900	$308
Iowa	13,300	$960		South Carolina	9,200	$1,101
Kansas	13,900	$526		South Dakota	380	$56
Kentucky	5,600	$772		Tennessee	6,600	$890
Louisiana	2,100	$562		Texas	84,200	$13,001
Maine	2,100	$410		Utah	4,200	$524
Maryland	6,800	$958		Vermont	650	$47
Massachusetts	125,000	$16,669		Virginia	15,300	$1,626
Michigan	7,600	$1,073		West Virginia	1,260	$128
Minnesota	5,500	$2,445		Washington	10,300	$1,327
Mississippi	1,030	$158		Wisconsin	12,000	$1,373
				Wyoming	130	$19

*Does not include headquarters-related sales of most multi-state companies

Return to Table of Contents

Proceed to Next Section