Can higher education foster economic growth?-A conference summary

Chicago Fed Letter, Mar 2007 by Mattoon, Richard H

While higher education is being asked to perform more roles in the local economy, specific pathways for influencing local and regional economic transformation are still being identified. On October 30, 2006, the Federal Reserve Bank of Chicago and the Midwest Higher Education Compact held a conference on higher education and economic growth.

To begin the conference, Michael Moskow, Federal Reserve Bank of Chicago, noted that the Midwest's higher education institutions represent a primary asset to the region's economy, providing highly skilled human capital and research and development potential for new businesses and technology transfers. While other economic actors have an increasingly global perspective and less direct interest in the local economy, higher education is being asked to fill new roles regionally.

Would a direct economic development mission compromise traditional roles of higher education in teaching and research? Moskow noted that interaction between business and higher education has been uneven and that many of the roles higher education is being asked to fill (such as providing business strategy and consulting services) are already offered by private consulting firms. Moskow asked the following three questions. Are there barriers here that limit business-university engagement? For instance, intellectual property lights are often seen as a contentious issue between private firms and universities. Is there an inherent tension between higher education, whose mission is to disseminate knowledge broadly, and industry, with its goal of capturing proprietary knowledge to gain competitive advantage? Finally, will the needs of business firms be better served by consultants than by universities trying to provide consultant-like services?

A framework for higher education's role in economic growth

Richard Lester, Massachusetts Institute of Technology, presented his work on a multi-year study conducted by an international consortium of universities that addressed university involvement in local economic change. Lester found that the "one-size-fits-all" approach to economic development does not always work well in real-world scenarios. The common approach that focuses largely on patenting, licensing, and forming new businesses needs to be replaced with a more comprehensive and differentiated view of higher education engagement. This specifically means aligning the universities' contributions with what is happening in their respective local economies.

Lester's model suggests four dimensions of economic transformation, ranging from creating new industries to retooling existing firms. Each type of economic transformation has a specific strategy for university involvement (see figure 1).

In Lester's view, this strategic approach to local economic development is fully compatible with the university's primary missions of education and research.

Case studies

Michael Luger, University of North Carolina-Chapel Hill, desciibed the university's Center for Competitive Economies, which aims to apply its resources to problems of economic development, mostly within North Carolina; to use the university outputs to improve business decision-making and government policy related to economic development; and to coordinate and publicize ongoing economic development activities on campus and with other campuses, state agencies, and economic development organizations.

The center developed a series of metrics for success that include the abilities to attract external funds, to produce publications and conference speeches, and to demonstrate an effect on policy and visibility leading to respect at the state capital and beyond. The center has taken on several projects, ranging from strategic economic development plans to analysis of specific legislation.

Luger cautioned that the center's clients are often more interested in having the university's name on the report than in the actual content of the report. Clients are often reluctant to pay for academically rigorous work. Similarly, business clients often want the work to be proprietary, which is at odds with the center's mission of disseminating findings. Public sector leaders are unlikely to be enthusiastic about work that is critical of current policies, and this can erode support tor the center. Finally, applied centers tend to have an uneasy relationship with the rest of the university. Luger felt that this could be improved if the center employed full-time tenured faculty rather than adjunct faculty.

Scan Safford, University of Chicago, focused on the role of higher education in transforming mature and declining industrial economies in Akron, Ohio, and Rochester, New York. In Akron, the tire industry was in rapid decline. In Rochester, traditional chemical-based photography was being challenged by digital imaging. In both cases, the local universities were looking to diversify an existing industry into a related new industry.

In Akron, the university invested heavily in the study of advanced polymers, the building blocks of the synthetic rubber used in tire production. In Rochester, the emphasis was oil photo-optics. Safibrd concluded that the latter effort was more successful because it had focused more on deepening the social capital of the region. Indeed, Safford demonstrated that a dense communication node had developed in Rochester, suggesting that university-business-community interaction was richer there than in Akron. He argued that universities are best able to expand their roles when they serve as "forums" for social connection rather than as "fountains" of specialized knowledge.