New research examines the impact of the establishment of universities of applied sciences (UASs) – bachelor’s degree-granting three-year colleges that teach and conduct applied research – in Switzerland in the 1990s. Comparing firm development in regions where such institutions where established to regions not directly affected by the policy reform, the authors show that average profits per firm – their measure for regional firm development – increased by 23% more in regions with a newly established UAS.

Policy reforms often affect economies beyond their principal purpose. To reveal and investigate these potential side effects is one important goal of policy evaluation. In accordance with this principle, this study analyses whether a tertiary education expansion has the potential to influence regional firm development positively. 

In an attempt to cope with the technological progress and to revalue the Swiss vocational education and training system, the Swiss government in1994 launched an educational policy reform at the tertiary educational level. The core of the policy reform was the establishment of UASs, institutions that, first, focus on teaching and conducting applied research and, second, had a legal obligation to cooperate with the local economy.

These UASs thus constitute a new kind of tertiary education institutionin addition to traditional universities that conduct basic researchwhose impact on the regional economy has not been investigated yet. While earlier research projects have shown that tertiary education institutions directly increase innovation (Pfister et al, 2018) and the number of start-ups, this study investigates whether such positive impacts also translate into broader, regional economic development.

The authors – Tobias Schlegel, Curdin Pfister and Uschi Backes-Gellner – exploit the fact that the 22 UAS campuses, established between 1997-2003, were quasi-randomly distributed across the country with some regions getting a UAS and others not. This setting makes it possible to compare the regional firm development, as measured by average profits per firm, in regions with and without a UAS, respectively.

The study focuses on campuses in the fields of engineering, IT, and life sciences, since the above mentioned positive effects on innovation and start-ups are mostly linked to tertiary education institutions in these fields.

The main analysis reveals three important findings: 

First, the establishment of UASs indeed has a positive impact on regional firm development. The average profits per firm in a region with a UAS increase by 23% more as compared to a region without a UAS. 

Second, analysing this effect over time shows that the average profits per firm begin to increase some three years after the UAS establishment and thus coincide with the arrival of the first UAS graduates on the local labour market.

Third, the positive impact effects persist in the long run, as average firm profits still increase more, some ten years after the establishment of a UAS. Furthermore, by analysing firm relocations, these increases in average firm profits are not mere artefacts of firms moving closer to the newly established UASs.

Generally speaking, these positive effects on regional firm development show that, overall, the direct effects of tertiary education institutions – that is, increases in innovation or in the number of start-ups – eventually translate into regional economic development and reflect thus not only quantitative but qualitative increases. This means that innovations pay off and start-ups are above-average profitable. 

Furthermore, the analysis shows that these positive impacts are not at the expense of regions without newly established tertiary education institutions but reflect an additional stimulus for regional firm development. Educational policies thus also have the potential to affect economic development positively as a side effect. 



Tobias Schlegel, Curdin Pfister, Uschi Backes-Gellne

Department of Business Administration, University of Zurich, Plattenstrasse 14, 8032 Zürich

An earlier research project finds that the UASs increased innovation (Pfister, Rinawi, Harhoff & Backes-Gellner, 2018).

Contact Details

Corresponding author: Tobias Schlegel


Phone: +41 44 634 42 53.

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