Signalling and External Financing of Academic Spinoffs: The Effect of University Regulations and Spinoff Characteristics

The academic entrepreneurship literature provides substantial evidence on the role of institutional factors and university regulations in shaping academic entrepreneurship and the creation of university spinoffs (ASOs). However, less attention has been devoted to understanding how these institutional rules affect the subsequent development of spinoffs, particularly their ability to attract external financing, which is a crucial condition for their survival and growth. In this paper, we investigate how university regulations governing the creation of spinoffs interact with spinoff-level characteristics, such as founder human capital and innovative potential, to influence the ability of academic spinoffs to raise external funds. Using a unique panel dataset of 1,048 Italian ASOs over the period 2000–2023, we analyse how university-level factors including regulatory frameworks, scientific output, and faculty quality and venture-level characteristics such as founder expertise and patenting activity act as signals of spinoff potential and shape both the likelihood and the scale of external investment. Our findings show that university-level signals primarily affect the probability of obtaining funding by mitigating information asymmetries, whereas spinoff-level signals are more strongly associated with the amount of capital raised. These signalling mechanisms appear particularly important in early-stage and high-uncertainty sectors, highlighting their role in overcoming market failures in the financing of academic spinoffs.