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MIT: Encouraging Entrepreneurship and Emphasizing a Mutually Beneficial Relationship between the Institution and Graduates

In a recent presentation delivered at MIT, Professor Edward Roberts and Charles Eesley discussed the findings of a report that they co-authored on the role of universities in the level of success ultimately attained by companies founded by their graduates. Understandably, an emphasis was placed on the economic success achieved by start-up companies created by MIT alumni. He explained that there are currently 25,800 active companies worldwide that have been started by MIT alumni, which employ approximately 3.3 million people and generate annual global sales of $2 trillion. This is essentially equivalent to the eleventh-largest economy in the world.

Prior to the execution of this study, it was subjectively obvious that MIT graduates were highly entrepreneurial in spirit. However, the current report is the first of its kind to actually quantify the entrepreneurial success attained by MIT graduates in various geographic regions across the United States.

Unsurprisingly, the vast majority of start-up companies created by MIT graduates are located in Massachusetts. While less than 10% of incoming freshman at MIT are actually Massachusetts residents, more than 38% of the software, biotech and electronics companies founded by MIT graduates are located within the state. It is estimated that just under one million jobs worldwide can be attributed to the current 6,900 Massachusetts-headquartered companies that were founded by MIT alumni. Approximately 4,100 California-headquartered companies founded by MIT alumni account for 526,000 jobs worldwide.

When the founders of these companies were asked which factors were most instrumental in determining the location of their businesses, the most common responses were (in order): (1) residence of the founder, (2) contact network, (3) quality of life, (4) proximity to major markets, and (5) access to skilled professional workers (i.e. engineers, technicians, managers).

While the number of jobs created in Massachusetts by companies founded by MIT alumni is substantial, their impact on the state’s economy is underestimated until one considers the instrumental role that these firms play in shaping the development of cutting-edge technologies on a global scale. Notable examples are; Raytheon in missile and guidance systems and ThermoElectron in instruments and environmental technology.

The authors stress the importance of MIT to the Massachusetts economy and are of the opinion that without MIT, it is unlikely that the majority of these companies would be located in the Massachusetts area. Apparently a major advantage of locating in Massachusetts is proximity to MIT, as well as other surrounding universities. The vast majority of Massachusetts firms ranked access to MIT as being more important than low business cost. In all other states, low business cost was ranked higher than access to universities. Interestingly, approximately 32% of MIT alumni entrepreneurs report having, or expect to have, a continuing connection with their alma mater. These connections exist to facilitate the recruitment of new employees, conducting joint research, etc.

To further emphasize the economic importance of entrepreneurship, MIT has introduced a relatively new entrepreneurship & innovation track to their MBA program. Approximately 25% of incoming MBA students are entering this highly specialized program of study and are regularly involved in various company-building activities and have won various prestigious business competitions.

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