Why do firms collaborate with local universities?

This paper examines why firms sometimes collaborate locally rather than with higher-quality universities at a distance. Existing research has mostly relied on the localised knowledge spillover, or LKS, model to explain this. This model holds that knowledge transfer across distance is costly, and collaborating locally reduces the risk of information loss when the knowledge is transferred. However, there are various other reasons that could also explain the pattern. If the local university can make a useful contribution, firms might choose to look no further. Firms may also see collaboration as a long-term investment, helping to build up research quality at the local university with the hope of benefiting in the future. Finally, firms may want to contribute to the local community. We extend the LKS model with these additional motivations and explore their validity using data from 23 semi-structured interviews of firms that collaborate intensively with lower-tier local universities.