October 24, 2012
Study shows Stanford alumni create nearly $3 trillion in economic impact each year
A study by two Stanford professors determines that companies founded by the university's alumni generate trillions in annual revenue and have created 5.4 million jobs.
By Jamie Beckett
Students take part in an interactive innovation exercise during Stanford Entrepreneurship Week. (Photo: Courtesy of Stanford Technology Ventures Program)
Stanford University has long been known as one of the world's leading centers for innovation and a breeding ground for the entrepreneurs who created – and continue to shape – Silicon Valley. Now, for the first time, a study puts into perspective the sheer scale of the university's economic impact, not just in Silicon Valley and California but across the globe.
The study, released today, estimates that companies formed by Stanford entrepreneurs generate world revenues of $2.7 trillion annually and have created 5.4 million jobs since the 1930s.
The study, "Stanford University's Economic Impact via Innovation and Entrepreneurship," describes the results of a large-scale, systematic survey of Stanford alumni and faculty conducted in 2011 by Charles Eesley, an assistant professor in the Stanford School of Engineering, and William F. Miller, the Herbert Hoover Professor of Public and Private Management Emeritus in the Stanford Graduate School of Business and a professor emeritus of computer science. [Download an executive summary.]
Based on results of that survey, the professors estimate that Stanford alumni and faculty have created 39,900 companies since the 1930s, which if gathered collectively into an independent nation would constitute the world's 10th largest economy.
"Stanford's history is one of pioneering innovations in research, transferring discoveries to the broader community, and educating tomorrow's leaders and entrepreneurs," said Stanford President John L. Hennessy. "As this study illustrates, our faculty, students and alumni have had – and will continue to have – a tremendous impact on the global economy and on improving people's lives."
Companies founded by Stanford alumni include tech giants like Google, Hewlett-Packard and Cisco Systems, companies that form the backbone of Silicon Valley, as well as a continuing stream of startups that feed the region's innovation pipeline and contribute to its robust economy.
"The people, research and ideas of Stanford Engineering have been a catalyst for some of the world's best-known companies," said James D. Plummer, the Frederick Emmons Terman Dean of the School of Engineering and the John M. Fluke Professor of Electrical Engineering. "While the findings of the Stanford Innovation Survey are a tribute to the successful entrepreneurial legacy of our community, they also provide inspiration for our students, researchers and faculty to fulfill the full promise of science and technology to be the drivers of economic and societal prosperity in the 21st century."
Although Stanford is best known for its contributions to Silicon Valley, the university's influence stretches beyond high technology to include automaker Tesla Motors, financial companies like Charles Schwab and widely recognized consumer brands like Gap, Nike, Netflix and Trader Joe's.
"Stanford has been the wellspring of some of the most enduring companies of our time," said Roelof Botha, a partner at Sequoia Capital, which funded the study. "It's been our privilege to partner with alumni like Larry & Sergey, Jerry & David, Sandy & Len, James, Jen-Hsun, Reid, and Trip, and we will continue to look to Stanford to nurture the next generation of legendary founders."
In addition to quantifying Stanford's economic impact, the report examines Stanford's role in fostering entrepreneurship and describes how the university creates an ecosystem that encourages creativity and entrepreneurship across schools and disciplines.
It also includes a look at the rise of social innovation at the university, estimating that in addition to 39,900 for-profit organizations, graduates and faculty have created more than 30,000 non-profit organizations. Among the best-known of these is Kiva, a microfinance organization, The Special Olympics and Acumen Fund, which supports entrepreneurs in developing economies.
"Multidisciplinary learning, management knowledge and leadership skills are highly relevant to an ever-increasing diversity of organizations that strive to solve systemic global problems like health care delivery, public education, and sustainable development," said Garth Saloner, the Philip H. Knight Professor and Dean of the Graduate School of Business. "Many of these are management challenges at their core."
Other key findings of the survey include:
- 29 percent of respondents reported being entrepreneurs who founded an organization (for-profit or nonprofit)
- 32 percent of alumni described themselves as an investor, early employee or a board member in a startup at some point in their careers
- 25 percent of faculty respondents (some of whom are also alumni) reported founding or incorporating a firm at some point in their careers
- Among survey respondents who became entrepreneurs in the past decade, 55 percent reported choosing to study at Stanford because of its entrepreneurial environment.
The university's reputation as an innovation epicenter draws people from all over the world interested in exploring ideas and who, in many cases, remain in the region. One-quarter of entrepreneurs who graduated after 1990 formed their companies within 20 miles of the university. (Among the engineering graduates whose firms dot Silicon Valley, that number rises to 31 percent.) Thirty-nine percent of all alumni founded firms located within 60 miles of Stanford – roughly a one-hour drive.
Statewide, California is home to an estimated 18,000 firms created by Stanford alumni, generating annual worldwide sales of about $1.27 trillion and employing more than 3 million people.
Jamie Beckett is the director of communications and alumni relations at the School of Engineering.