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You would have thought that companies like Google, Yahoo, and FAST would establish their Norwegian research and development (R&D) base in that country’s capital city, Oslo. Not so. They all chose Trondheim, a city 500 kilometers from the Arctic Circle. Why?
But the solution to this puzzle was simple. These companies had done the same thing as any other high-technology company does: locate key parts of their operations in a place with a high concentration of knowledge, skills, and infrastructure for innovation.
Over the years and almost unnoticed, the Norwegian University of Technology (NTNU) had transformed the city into Norway’s technological capital. The university had also played a key role in the development of the city through its students—in fact, every sixth inhabitant in Trondheim is a student. In the knowledge economy, and especially in high-tech and creative industries, people no longer follow jobs—jobs follow people. Understanding this has led to the emergence of new and stronger links between the city and its university and helped build a regional innovation system that connects the university, public authorities, and business and industry.
Close but often random and unconstructed links between higher education and local and regional competitiveness are not that unusual, as the Organisation for Economic Co-operation and Development’s (OECD) study of higher education’s role in local and regional economies shows. Regions can, with the help of their colleges and universities, play a key role not only in the development of national but also local and regional innovation systems. But much more needs to be done to take full advantage of higher education in regional and city development. It is becoming clear, for instance, that imitation and adaptation are no longer sufficient strategies in this kind of work. Unique advantages have to be constructed, and they have to be built on innovation. Universities and colleges can and should play a proactive role in providing the ideas and strategies to fuel that innovation.
The OECD study does not provide any one-size-fits-all solutions. On the contrary, it stresses the importance of the regional context. But it also points to important general issues that universities, local and regional stakeholders, and governments at different levels should consider if they are to mobilise the full potential of higher education for economic development. Equally important, the study reveals barriers that prevent colleges and universities from becoming more regionally engaged.
Why Cities and Regions Continue to Matter
Globalization and the technological revolution have far-reaching implications for cities and regions. It is becoming clear that despite the “death of distance,” innovation continues to cluster around specific regions and urban centers that have skilled people, vibrant communities, and the infrastructure for innovation. The competitive advantage of regions that create the best conditions for growth and development is increasing, and the gaps between regions are growing.
Indeed, OECD data (2008) reveal that variation in economic performance is much wider across regions than across countries. For example, between 2001 and 2006 about half of the overall growth in employment in the 30 OECD countries occurred in only 5 percent of the regions. In addition, the difference in annual growth between the fastest and the slowest growing country was 4.3 percentage points, but the difference between the fastest and the slowest growing region was 18 percentage points – a range over four times greater!
As higher education leaders have long argued, the contribution of higher education to national economies is considerable. Take the United Kingdom. Universities contribute close to £45 billion (over $71 billion) annually to the nation’s economy and employ over 600,000 people.
They can play that same role in local and regional contexts. For example, in the northeast of England, five universities contribute 2.3 percent of the regional GDP, with a total of 14,000 employees and 90,000 students. Universities help build communities in other ways as well; sixty-two percent of that same region’s college graduates live and work there, contributing to its civic vibrancy as well as its economic prosperity.
OECD Reviews of Higher Education’s Role in Regional Development
Reviews of higher education’s contributions to regional and city development are the OECD’s main vehicle to mobilise higher education for its role in regional development. Those reviews of policy and practice in selected regions were launched in 2004 to help build capacity at the national, regional, and institutional levels and to make colleges and universities more active in and responsive to their cities and regions.
The first set of regions included, in addition to the Norwegian region of Trøndelag, Atlantic Canada, Busan Metropolitan City in Korea, Canary Islands in Spain, Jutland-Funen in Denmark, the Jyväskylä region in Finland, the northeast of England, the state of Nuevo León in Mexico, the Sunshine-Fraser coast region in Australia, Twente in the Netherlands, the region of Valencia in Spain, and Värmland in Sweden. In addition, the cross-border region of Öresund between Denmark and Sweden and Northern Paraná in Brazil, the only region outside the OECD area, were reviewed between 2005 and 2007.
These fourteen regions represented different regional and national contexts, ranging from institutionally thin rural and peripheral regions to fragmented metropolitan ones. Some were declining, some dynamic. And the institutions in these regions included not only research-intensive universities but also vocational and professionally oriented colleges and institutes. While some regions had a strongly developed private higher education sector, most relied solely on public higher education. At the national level, the review included highly centralised as well as devolved governance systems.
The reviews followed the OECD methodology. First, each region conducted a self-evaluation process following OECD guidelines. An important step was to establish a regional steering committee of representatives from the colleges and universities and public and private sectors to oversee the review process and “take ownership” of the self-evaluation report. Then, international experts visited each region and assembled their findings and recommendations in review reports that were published on the OECD website for shared international learning (see the reports at www.oecd.org/edu/higher/regionaldevelopment). Finally, knowledge-sharing meetings were an important mechanism for bringing together the regions participating in the reviews, as well as others who were interested.
However the geographical bias of the first round of reviews and gaps in important areas were evident: nine out of the fourteen reviews took place in Europe, five of them in the Nordic countries. This experience led the OECD to widen the evidence base with a new set of reviews in 2009-2010 that will reach out to the G8 countries and rapidly developing economies. Notably, two regions in the United States—Southern Arizona and the Paso del Norte area, a cross-border region with Mexico—have already signed up for the reviews. There are also regions in Australia, Chile, Brazil, Mexico, Malaysia, and Israel that will participate, as well as European regions and cities, including Andalusia, Amsterdam, Catalonia, Berlin, Lombardy, and Rotterdam.
Regional Engagement and University Rankings
While university rankings have been part of the U.S. higher education landscape for a long time, over the past decade they have become increasingly prevalent in countries around the world. The frenzy provoked by the Shanghai Jiaotong academic ranking of world universities and the Times QS world university rankings outside of the United States signals the importance that higher education leaders, policymakers, and the media attach to them. The success of a university in these ranking systems is based on research performance—as indicated by, among other criteria, faculty publication in a limited number of international journals. Although the importance of universities in their economies is clear, regional engagement may be seen by academics as a distraction from the kind of research that will gain them a high ranking.
And in fact, case studies from the regions in the OECD study suggest that there is considerable resistance among the academic community to local and regional engagement. Yet the findings of the OECD Programme on Institutional Management in Higher Education (IMHE), working in collaboration with other international organizations, show that building and sustaining a world-class university is roughly a 1.5 billion-dollar business annually. Few national economies, not to speak of individual universities, can bear that type of cost. On the other hand, colleges and universities can afford to help cities and regions become globally competitive. And insofar as they help make their regions become and remain dynamic, they help themselves as well by making their location attractive to top-flight academics.
It is obvious that all regions and their universities cannot compete successfully on the global stage. For some of the most wealthy research universities, regional engagement may seem irrelevant. But for those in the second tier, local support for their global aspirations is becoming essential.
Local Context Matters
When mobilizing higher education for regional or city development, context remains the key issue to be taken into consideration. What works in one region does not necessarily work in another, and the way that the colleges and universities operate must be adjusted to suit local conditions.
Large metropolitan regions enjoy many benefits of agglomeration economies: they have diverse industries and well-developed business services, R&D centers, and large firms. They also tend to have many colleges and universities, as well as research organisations. But at the same time, they are often fragmented and have weak industry-university links. On the other hand, institutionally thin peripheral regions face different challenges: they generally have limited R&D activity and fewer universities and R&D institutions, and they are consequently apt to be less innovative.
One popular strategy for regional development is to create completely new industries where there is no technological antecedent in the local economy. But the “Silicon Valley” approach is risky: it requires a critical mass of researchers, the presence of knowledge-based industries, venture capital, and solid investments in the commercialisation of research results. It is becoming all the more challenging insofar as countries and regions throughout the world are focusing on the same few fields.
A seemingly less ambitious, but often (in the long run) more profitable approach is to transform the economy by building on existing strengths—a strategy that allows for incremental change and growth. Most regions have an industrial and economic base with small and medium-sized enterprises as major employers. Their predominance suggests that economic growth will depend not only on fostering the growth in new knowledge-intensive sectors but also on upgrading and reinforcing the technical capabilities of the manufacturing and service sectors, the latter of which currently accounts for 70 percent of the OECD workforce. The OECD economies with rapidly aging populations especially depend on the innovative capacity of the service sector.
Opening the “Black Box” of Universities: Working With Small Companies
If the greatest gains, at least in non-metropolitan regions, can be made from improving the competitiveness of existing businesses, there is still a hurdle to jump. The small and medium-sized enterprises (SMEs) that dominate most regional economies have great difficulties working with universities. They find it hard to access their knowledge base and to benefit from knowledge transfer. The trick seems to be to take small steps. First, the university can help with a solution to a business or technology problem, and then it can move the enterprise into more innovative product/process/service development.
To help SMEs open the “black box” of higher education, different types of entry points have been created in the regions. One of the oldest is Knowledge House. Established in 1995, Knowledge House is a joint effort of the five universities in northeast England, along with the Open University in the north. It helps companies access university skills, expertise, and specialist resources. It offers expert help in developing ideas and solving problems through collaboration, consultancy, training, and research. Knowledge House offers a soup-to-nuts service, stretching from the receipt and circulation of enquiries through project management and delivery to post-completion evaluation. It receives over 1000 enquiries from client companies and delivers around 200 client contracts every year. Business growth averages 25 percent, and the cumulative economic impact is more than GBP 35 million (a six-fold return on the investment).
Most local industry links with institutions, particularly with research-based universities, are in high-technology sectors, but successful relationships can also be built with other sectors. For example, in the province of Castellón in the Spanish autonomous region of Valencia, the ceramics research institute of the University Jaume I has contributed to the restructuring of the traditional ceramic-tile production cluster, which comprises 500 SMEs employing 36,000 people.
To do this the university had to build close links with small local enterprises, supporting the growth of the ceramic cluster with technology transfer, quality certification tests, spin-outs, student interns, and an overall upgrading of existing technologies. The partnership has enabled the region to become a global leader in the tile and ceramics industry. In addition, the overall absorptive capacity of the SME-based industry has improved. The Castellón example also shows how sustained, long-term collaboration between regional stakeholders and colleges and universities needs to be supported by permanent structures and funding.
No More Ivory Tower
Most OECD countries have invested and continue to invest in making higher education an engine for innovation. The day of the university as an ivory tower pursuing knowledge for its own sake is drawing to a close, and the dawn of one in which it becomes a driver of regional and city economies beckons. But there are clouds on the horizon.
Despite plenty of action and good models, this work is often based on short-term project funding and lacks systematic processes and sustained collaboration. In many regions co-operation is limited not only between institutions and the enterprises they support but also among the institutions themselves, which are more used to competing than collaborating. Local and regional engagement remains a marginal activity for which there is limited funding. There is also little clarity about how to evaluate the impact of such engagement.
The OECD member countries have asked the OECD to develop a strategy that will help policymakers adapt to the changing world by maximizing the contribution of innovative activities to economic growth and social welfare. The results will be delivered at the OECD Ministerial Meeting in 2010. Human capital development will be one of the key elements of the strategy, which will emphasize that the skills needed for innovation go beyond the traditional ones in science and engineering and encompass vocational, entrepreneurial, and social abilities.
While innovation policies have traditionally focused on private-sector activity, the OECD strategy will also look at the public sector, including education. Higher education is not seen only as an engine for social and economic innovation but as a sector that should innovate to improve learning outcomes, research outcomes, equity, cost efficiency, and student satisfaction. This is even more true in the current economic downturn. While the full impact on higher education of the present financial and economic crisis is unclear, there is every likelihood that it will underline the need for countries and regions to mobilize higher education for development and to ask that it operate more efficiently and effectively.
We have been talking here about higher education’s contribution to regional development though research and consulting. But in many countries, regions, and institutions, too little attention is paid to the contribution that educating students, especially in the forms of lifelong learning and upskilling, can make to local economies—despite the fact that one-third of the working age population in the OECD area have low skills. Nor is much attention paid to the contribution of colleges and universities to social, cultural, and environmental development. In short, much more needs to be done if the potential of these institutions in regional and city development is to be realized.
Barriers and How to Remove Them
Of course there are barriers to this work, but these can be surmounted. In a number of countries, the system of higher education limits institutional autonomy and flexibility and leaves little room for responsive action. Colleges and universities in highly regulated countries and states may have little or no scope to decide on their programs and their use of human, financial, and physical resources. Strengthening institutional autonomy is a necessary, although by no means a sufficient, condition for greater institutional engagement in their regions. It needs to be supported by appropriate incentives and means of monitoring outcomes and progress.
Barriers at the local and regional level reflect fragmentation in their governments and competition within and between the regions. Often higher education is not part of the design and implementation of local and regional strategies. Permanent partnership structures that bring together institutions and their public- and private-sector stakeholders can facilitate continuous dialogue and mobilize the resources of both parties for regional development.
But finally, the scope and extent of the regional engagement of a college or university depends on the role that the institution chooses for itself. The regional agenda is a particularly tough challenge for research-intensive universities, which often have a stronger focus on national and international excellence than on local utility. At the end of the day, though, a thriving regional economy benefits colleges and universities in innumerable ways. Even so, it may require a journey of internal reform for a university to take some responsibility for generating that prosperity.
Resources
OECD (2007). Higher education and regions: Globally competitive, locally engaged. Paris: OECD.
Goddard J. and Puukka J. (2008). The engagement of higher education institutions in regional development: An overview of the opportunities and challenges. Higher Education Management and Policy, (journal of the Programme on Institutional Management in Higher Education), Volume 20, Issue 2 (Special Issue: Higher Education and Regional Development). Paris: OECD.
OECD (2008) OECD Higher Education Institutions and Regions Website. At www.oecd.org/edu/higher/regionaldevelopment.
OECD (2008) OECD Programme on Institutional Management in Higher Education Website. At www.oecd.org/edu/imhe.
Barbara Ischinger has been the director of education at the Organisation for Economic Co-operation and Development (OECD) since 2006. Before joining the OECD, she was executive vice-president for international affairs and public relations at Berlin Humboldt Universität; a director at UNESCO, heading the Division of International Cultural Co-operation, Presentation and Enrichment of Cultural Identities; and executive director of the Fulbright Commission for Educational Exchange between the United States and Germany. Jaana Puukka is an analyst in the OECD Programme on Institutional Management in Higher Education. She leads the OECD work on and reviews of higher education and regional development and was the editor and co-author of the OECD publication, Higher Education and Regions: Globally Competitive, Locally Engaged.