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Artificial Intelligence, Education, and Entrepreneurship

Journal: Journal of Finance

Date: 20240201

Author: Gofman, Michael; Jin, Zhao

Abstract:
We document an unprecedented brain drain of Artificial Intelligence (AI) professors from universities from 2004 to 2018. We find that students from the affected universities establish fewer AI startups and raise less funding. The brain-drain effect is significant for tenured professors, professors from top universities, and deep-learning professors. Additional evidence suggests that unobserved city- and university-level shocks are unlikely to drive our results. We consider several economic channels for the findings. The most consistent explanation is that professors' departures reduce startup founders' AI knowledge, which we find is an important factor for successful startup formation and fundraising.

Link: Google Scholar

Key Findings

AI Faculty Brain Drain

211 AI professors left academia between 2004-2018, with 149 taking industry jobs and 62 establishing startups. Departures accelerated over time, reaching 40 professors in 2017-2018.

Impact on Student Startups

Universities experiencing AI faculty departures saw a 5% decline in AI startups founded by their graduates and 20% less early-stage funding raised.

Education Level Matters

AI startups founded by entrepreneurs with advanced degrees raised significantly more funding - PhD founders raised $16.11M in Series A compared to $9.25M for bachelor's degree holders.

AI Faculty Departures Over Time

  • Only 1 AI professor left academia in 2004
  • Dramatic increase to 40 departures in 2017-2018
  • 62 professors left to start companies while 149 joined existing companies

Early-Stage Funding by Founder Education

  • Professor-founded startups raised $19.78M in Series A funding
  • PhD-founded startups raised $16.11M
  • Master's degree founders raised $12.36M
  • Bachelor's degree founders raised $9.25M

Top Universities Affected by AI Brain Drain

  • Carnegie Mellon University lost 16 faculty members
  • University of Washington lost 12 faculty members
  • UC Berkeley lost 11 faculty members

Contribution and Implications

  • First systematic documentation of unprecedented AI faculty exodus from academia to industry
  • Demonstrates that specialized academic knowledge significantly impacts startup success
  • Highlights potential long-term consequences for AI innovation and education
  • Suggests need for universities to develop retention strategies for AI faculty

Data Sources

  • Faculty departures chart based on Figure 1 Panel A data showing AI faculty departures from 2004-2018
  • Funding comparison chart constructed using data from Table II Panel B showing Series A funding amounts by founder education level
  • University impact chart created using data from Figure 1 Panel B showing faculty departures by institution