Please rotate your device to landscape mode to view the charts.

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

Background and Context

Research Focus

This study examines how the departure of AI professors from universities to industry ("AI brain drain") affects students' ability to create AI startups and raise venture capital funding.

Data Sample

Analysis covers 504 AI entrepreneurs and 432 AI startups founded by graduates from 84 North American universities between 2010-2018, with data on professor departures from 2004-2018.

Methodology

The study tracks AI faculty departures using LinkedIn profiles and measures their impact on student entrepreneurship through regression analysis of startup formation and funding data from Crunchbase.

Rising Trend in AI Faculty Departures from Academia

  • Shows dramatic increase in AI professor departures from just 1 in 2004 to 40 in 2018
  • Represents unprecedented exodus of AI talent from academia to industry
  • Highlights growing competition between universities and companies for AI expertise

Impact of AI Brain Drain on Student Startups

  • One standard deviation increase in AI brain drain leads to 5% fewer AI startups by students
  • Effect is strongest for tenured faculty departures (5.2% decline)
  • Untenured faculty departures have minimal impact (1.5% decline)

Early-Stage Funding Gap Between Professor and Student Startups

  • Professor-founded startups raise 64% more funding than bachelor's degree founders
  • Higher education levels correlate with increased funding success
  • Demonstrates importance of advanced AI knowledge for startup success

Deep Learning vs Non-Deep Learning Professor Impact

  • Deep learning professor departures have 6x greater negative impact on student startups
  • Highlights critical importance of cutting-edge AI expertise
  • Suggests specialized knowledge transfer is key for entrepreneurial success

Contribution and Implications

  • First systematic evidence of widespread AI faculty exodus from academia to industry and its negative impact on innovation through reduced startup formation
  • Demonstrates that advanced academic knowledge in AI is crucial for successful startup formation and fundraising
  • Highlights need for policy interventions to maintain AI expertise in academia for training future innovators

Data Sources

  • Faculty Departures Chart: Based on Figure 1, Panel A data
  • Brain Drain Effect Chart: Based on Table IV regression results
  • Funding Comparison Chart: Based on Table II, Panel B data
  • Deep Learning Impact Chart: Based on Table VI regression coefficients
  • Company Hiring Chart: Based on Figure 2, Panel A data