Welcome to REDI-Updates. REDI-Updates is a bi-annual publication which will get behind the data and translate it into understandable terms. WM REDI staff and guest contributors will discuss various topics, with this first publication focusing on how inclusive growth can be a tool to tackle regional imbalances across the UK. In this article, Dr Chloe Billing takes a look at the relationship between Universities and local businesses, and how the research carried out by the former can better help the development of the latter, and thus the growth of local economies.
Universities are no longer thought of as ‘ivory towers’ focussed only on the creation of knowledge and education, since they are increasingly involved with ‘third mission’ or ‘third stream’ activities (teaching and research being first and second mission activities). These activities are labelled as ‘technology transfer’ or the ‘commercialisation of university research’ and defined as the transformation of knowledge into marketable products and services (Narayan et al., 2017). The commercialisation of university research became prominent following the introduction of the 1980 Bayh-Dole Act in the USA, which gave universities the right to own and license the intellectual property from their research. Today, publicly funded research at most UK universities is supplemented by private investment and gains from intellectual property ownership. There are five different technology transfer mechanisms from universities: (i) spin-outs (new firms created to exploit commercial knowledge or tech developed within a university); (ii) licencing; (iii) consultancy; (iv) publications; and (v) cooperative R&D agreements with industry.
It is widely acknowledged, that successful technology transfer has positive impacts on local economic growth. This was proven in recent research by the London School of Economics which found that a 10% increase in the number of universities (which roughly means adding one more university in the average region in our data) increases that region’s income by 0.4% (Valero and Reenen, 2016). Additionally, universities were found to increase output in neighbouring areas within the same country, with stronger effects for geographically closer regions. These findings were based on analysis of the UNESCO’s World Higher Education Database, which details the location of 15,000 universities in 1,500 subnational regions across 78 countries.
The commercialisation of university research impacts on local economic growth in two key ways. First, transformative knowledge created by University research (disseminated by license, consultancy, publications or cooperative R&D agreements) is adopted by local businesses for their R&D activities, supporting new-to-the-market innovations of products and processes. Secondly, universities have the ever-increasing capacity and capability to generate and transfer new technologies in-house. These technologies can be exploited into marketable products and services either via university spin-outs or the licensing of intellectual property.
Universities also provide skilled graduates as an important capacity-building input into the region’s innovation ecosystems with associated impacts on increasing productivity in the firms where they work. Graduates are not only skilled employees but can also become entrepreneurs and firm founders, contributing to job creation and economic growth. There is also the transformative knowledge that both graduates and the University departments offer to the LEPs, local authority, Chambers of Commerce, trade and professional bodies, other public services, as well as businesses.
However, there is an observed long-term systemic problem relating to the UK university-industry gap, whereby there are limits to the adoption and diffusion of new technologies. The Industrial Strategy Green Paper (2017) highlighted that whilst the UK ranks first in many key global measures of research quality; in terms of intellectual property income generated against research resources and the number of successful spin-off companies the UK performs far behind US institutions. In order to address this gap, there is a demand for better partnerships to be built between universities and local businesses. This is important as the knowledge created by Universities does not always match the needs of local firms and thus, is not always adopted (Hewitt-Dundas et al., 2017). Studies have also found that bridging this university-industry gap requires confronting the differences in the culture and priorities between the business and higher education worlds. For example, academics are motivated by a number of incentives and performance indicators (including their teaching and research responsibilities) that can distract from commercialisation activities. At City-REDI, we are looking at ways of addressing this issue by identifying the different forms of commercialisation pathways at Universities and developing a framework to help academics to better understand the process and the potential impact of their technologies.
This research is timely, given Research England’s recent publication of their methodology for creating a new Knowledge Exchange Framework (KEF), to compare how effective universities are at knowledge engagement activities and the commercialisation of research. KEF is expected to sit alongside the existing Research Excellence Framework and the Teaching Excellence and Student Framework, to provide a more holistic view of the contributions made by universities. In the future KEF will have some bearing on how £200m of Higher Education Infrastructure Funds (HEIF) is allocated.
- Breznitz, S. M. (2011). Improving or impairing? Following technology transfer changes at the University of Cambridge. Regional Studies, 45(4), 463-478.
- Clarke , E., and Williams, M. (2014) Delivering change: supporting links between universities and high-growth firms in cities, Centre for Cities.
- Hewitt-Dundas, N., Gkypali, A., & Roper, S. (2017). Accessibility, utility and learning effects in university-business collaboration. ERC Research Paper, (57).
- Narayan, A. K., Northcott, D., & Parker, L. D. (2017). Managing the accountability–autonomy tensions in university research commercialisation. Financial Accountability & Management, 33(4), 335-355.
- Scandura, A. (2016). University–industry collaboration and firms’ R&D effort. Research Policy, 45(9), 1907-1922.
- Valero, A., & Van Reenen, J. (2016). How universities boost economic growth (No. 488). Centre for Economic Performance, LSE.
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The views expressed in this analysis post are those of the authors and not necessarily those of City-REDI / WM REDI, University of Birmingham.