The results of this study provide insight into why some universities generate more new companies to exploit their intellectual property than do others. We compare four different explanations for cross-institutional variation in new firm formation rates from university technology licensing offices (TLOs) over the 1994–1998 period—the availability of venture capital in the university area; the commercial orientation of university research and development; intellectual eminence; and university policies. The results show that intellectual eminence, and the policies of making equity investments in TLO start-ups and maintaining a low inventor’s share of royalties increase new firm formation. The paper discusses the implications of these results for university and public policy.