3-1 GLOBALISATION, KNOWLEDGE, UNIVERSITIES, AND REGIONALISATION

Globalisation - Drivers and Conditions for Universities’ Regional Engagement

It is argued in the literature that higher education is increasingly expected to work as an interface between the needs of the regionalised global economy and the globalising regional economy, by providing firms with labour with appropriate skills, knowledge and learning ability, and by providing appropriate technological supports (Goddard and Chatterton, 1999). In this context, universities are expected to provide a vital locational asset within the global economy (Goddard, 1999; Kanter, 1995).

The drivers for greater university engagement with regional development can be found in two places. First, there are the push factors found in the changing nature of higher education itself. In the past, higher education in most countries has been primarily funded by national governments to meet “national labour market needs for skilled manpower” and to provide “a capacity to meet national research and technological development needs” (Goddard, 1999:36). However, some of the changes mentioned already, such as the emergence of mass systems of higher education, meeting the needs of a larger and more diverse client population, and the pursuit of efficiency in public funding, have amongst others, challenged the predominance of this national model. Thus the privileged relationship between universities and the national system of knowledge production has been questioned. Consequently, there is now a greater concern to harness university education and research to specific economic and social objectives.

Regional needs emerge as one of the important items on the agenda for universities in such a context. These include lifelong learning needs created by changing patterns of skill demands in the labour market, declining public financial support for students leading to more attending their local universities, increased competition from

providers of education on a global scale, new ways of delivering education and training made possible by information and communication technologies (ICTs), and the changing nature of knowledge production and distribution, which is altering the monopolistic position of universities (Goddard and Chatterton, 1999:686).

The pull factors from the wider economy are found in the “emergence of new territorial development dynamics” (Goddard and Chatterton, 1999:686), and this emergence is the main concern of this chapter. The global changes in the nature of economic activities are provoking “a re-examination of cornerstone factors of production, investment and trade” (Acs and de la Mothe, 2000: 240). In the globalising knowledge-based economy, the growth of the knowledge-laden content of foreign direct investment (FDI) in the forms of R&D and international technology flows by multinational enterprises (MNEs) is recognised. There is also a move towards

“endogenous views of growth” in which skills, learning, creativity, entrepreneurship, quality and other knowledge-based intangibles are seen as key (Acs and de la Mothe, 2000: 240).

Paradoxically, the globalisation of economic activities is a major factor explaining the increasing importance of localities in the spatial organisation of economic processes. As Goddard puts it, “fundamental shifts in the organisation of production and the related regulation of the economy reflected in the twin processes of globalisation and localisation” (Goddard, 1999:37) are taking place. Certain academic and policy circles argue for the ‘re-emergence of regional economies’ (Sabel, 1989), the

‘localization of the world economy’ (Krugman, 1991), and the rise of a ‘global mosaic of regional economies’ (Scott, 1998). Some authors think that the re-emergence of ‘the region’ is tied in with the supposed transition from Fordism to post-Fordism, through adopting the system of ‘flexible specialisation’ (Sabel, 1989).

What is Regionalisation?

As the above section mentioned, a common thread in the literature on the geographical dimension of globalisation is that globalisation processes are inherently associated with

‘regionalisation’ in some form (Sugden and Wilson, 2001:15), promoting greater regional economic distinctiveness. But different forms of regionalisation need to be distinguished and investigated further. What forms of regionalisation are observed, and what does they mean for policy makers and institutional players including universities?

First, regionalisation is observed in terms of policy formulation and delivery.

There is a wider consensus than before that economic globalisation and the liberalisation of markets have rendered nation-states a less appropriate level at which to formulate and co-ordinate some economic policies (Webb and Collis, 2000). There seems to be increased competition between regions and cities over resources such as investment, skilled labour, markets and technological infrastructure (OECD, 2001b: 44).

Ohmae (1995) points to the ‘end’ of nation-states, and describes ‘region states’ as powerful engines of development linked to the global economy, and regional economies rather than national economies are seen as the salient foci of wealth creation and world trade (Ohmae, 1995; Krugman, 1991; Storper, 1997). ¹

In many countries a general shift of innovation and labour market policies can be observed from the national to the regional levels of decision-making. It is argued that, in the global economy, modern regions are far less subject to changing national policies, and the major linkage of regions tend to be with the global economy (Ohmae, 1993, 1995). The so-called ‘hollowing-out’ of the state (Jessop, 1990) has allegedly promoted

1 Contrary to the emphasis on the growing importance at sub-national and regional levels, the significant roles are still played by national governments. Nation-states, or groupings of nation-states at international level, are still the principal decision-makers on the regulation of globalisation processes such as trade policies, investment policies and environmental policies (OECD, 2001b: 29).

the emergence of a new kind of regional policy, characterised by regulation and co-ordination based around inter-firm networks and public-private partnerships at the city and regional levels (see Jessop, 1998).

Secondly, regionalisation has to be seen as part of the devolution process moving towards a new territorial governance structure (see OECD 2001b). It is important to note that cities and regions as ‘actors’ have entered the debate on economic and social development and policy-making as a result of the devolution of some national economic power, and the emergence of regional governments and regional development agencies. This process has also been promoted by the emergence of trans-national institutions such as the European Union (EU). Thus the regional level is increasingly seen as the level that offers the “greatest prospect for devising governance structures” (Hassink, 2001:221) to foster learning in the knowledge economy (Lorenzen, 2001). Attention is paid below to the ways in which regionalisation of policies and governance affects institutional processes, in particular, networking as strategic alliances.

Thirdly, regionalisation combined with globalisation affects models of regional development which influence policy thinking. Regional policy has moved away from a top-down approach focusing on physical investment to a more bottom-up approach focused on supply-side measures (Lagendijk and Cornford, 2000:212) whilst a theoretical shift has occurred from the so-called exogenous model to the endogenous model of regional development. ²

2 This refers to the shift in policy thinking towards a new paradigm that can be referred to as the

‘endogenous development paradigm’. The 1980s saw inward investment as the main focus of the regional development agenda, mainly attracting jobs in the form of branch-plants. Inward investment still remains a main focus of many European regions, but the new emphasis is more on innovation and the exploitation of indigenous capacity, upgrading the technological capacity of existing small and medium sized

enterprises (SMEs) and improvements in the regional skills base. Endogenous development, based on resources existing within the local area, contrasts with the ‘exogenous development model’, which is

Now some authors draw attention to the critical role of links to ‘non-local networks’ (Park and Markusen, 1995; Malecki, Oinas and Park, 1999:261). At first glance, the increasing trends to localised networks and international networks seem to be contradictory but, in fact, they can coexist with increasing globalisation. Therefore, regional policy makers have to make the right balance of endogenous and exogenous factors, for example, in designing policies for attracting and embedding foreign investment within local economic development (Potter et al., 2002: 303-5).

Fourthly, in the field of innovation studies, factors that promote innovation ³ are increasingly associated with the trend of regionalisation. A potentially significant theoretical convergence seems to be underway between innovation studies, economic geography and other adjacent academic disciplines.⁴ The perception of innovation as a system is the central idea highlighting the dynamic social processes involved in the interactions of organisations and institutions. Freeman (1988), Lundvall (1995) and OECD (2001c) focus on the distinctive attributes and interactions of national innovation systems. The national innovation system comprises the set of institutional actors that together play the major role in influencing innovative performance (Nelson and Rosenberg, 1993:4).⁵ In the mid 1990s, the question emerged as to whether or not such a thing as regional innovation existed, let alone whether or not it was systematic (Cooke,

dependent on investment by external agents. The latter approach has been criticised for stimulating only weak connections between external investment and local firms and capabilities (OECD, 2001 b: 27).

Endogenous development strategies have stressed primarily the essential nature of local relations and the kinds of conditions that seem favourable for the functioning of local production and innovation networks.

In practice, both models are pursued but external investment is limited for many areas.

3 Innovation is defined as both the creation and diffusion of new ideas.

4 The neo-Schumpeterian evolutionary school in innovation studies has opened up a connection with other cognate fields such as industrial organisation, economic sociology, regional studies and science and technology policy (Morgan, 1997:492-493).

5 At its broadest level, the national innovation systems idea is “a way of describing and analysing the set of institutions that generate and mould economic growth”, whereby national economic growth is explained by technological innovation as the key driving force (Nelson, 2000:11).

1998:3; original emphasis).⁶ Authors such as Braczyk et al. (1998) have examined how

‘innovation systems’ operate at the regional level through networking between different players within the region (see below p.76).

Fifthly, from a somewhat different perspective, an economist takes increasing interest in a regional level as the manifest differences in economic growth and levels of welfare between regions remain. Barro (1998) addresses the paradox of remaining regional disparities. Whilst neo-classical economic theories would suggest that different regions and territories may be expected to converge towards the same level of growth in the long run, what is observed is persistent differences in growth rates. There are marked economic disparities between regions and the convergence is slow and disparities remain at regional level whilst there is a tendency to convergence at national level (OECD, 2001 a: 21; 2001b: 28).

There are empirical grounds for the view that such regional differentials are becoming more significant, despite the wider context of the globalisation of economic activities. Barro explains that differences in growth rates are mainly dependent on the initial capital that territories benefit from, in terms of physical capital, human capital and financial capital and on how this capital is mobilised (OECD, 2001b: 28).

Developing this argument further, it can be argued that the most successful regions may have many aspects of ‘initial capital’, such as an educational system, a technological system, and a communication system with its ‘social’ and ‘institutional’ dimensions underlined by the presence of innovative firms, institutional networks, high mobility of capital and labour and an entrepreneurial culture. In the light of this, the key question is:

to what extent are the regional economic trajectories and remaining economic

6 Cooke et al. (1998: 1581) define regional innovation systems as “systems in which firms and other organisations [such as research institutes, universities, innovation support agencies, chambers of

disparities explicable in terms of the differences in institutional innovation capability and the processes of individual and organisational learning in regions? And, how can policies promote such institutional conditions?

Universities as Knowledge Institutions in the Region

Besides the globalisation of economic activities, the increasing importance of knowledge in advanced production has a particular relevance for understanding the emerging role of sub-national regions in modern economies, and challenges the prevailing notion about the social role of universities (Varga, 2000:139). It is also pointed out that corporate globalisation strategies are meaningful only if local, national and regional differences exist and can be harnessed on a global scale (Braczyk and Heidenreich, 1998). The challenge for the region, in turn, is to find ways in which the global economy can work locally. Such concerns are associated with the need to mobilise a large group of stakeholders, including universities as providers of knowledge.

In the light of this, the universities’ role is to contribute to the regional economy by providing knowledge in the form of both local labour and technological support that enhance the development of the economy of the region, and by finding for the region an appropriate technological niche in the global economy. It is increasingly believed that investment in both scientific research and in higher education has become a key factor in international competitiveness in the knowledge economy, in the shape of both “basic science and commercial patents” and “human capital” in the form of highly skilled workforces (Scott, 1998:111).

Charles (2002:24) provides a useful perspective depicting universities as

“knowledge institutions”. He distinguishes three different types of knowledge:

commerce, banks, government departments] are systematically engaged in interactive learning through an institutional milieu characterised by embeddedness”.

knowledge as a commodity; knowledge as human capital; and knowledge as social capital. Each is relevant to universities.

Some other authors focus on the role of universities in terms of technology transfer (see Mowery and Shane, 2002) and knowledge spillovers (see Adams, 2002;

Varga, 2000). ⁷ Models of local economic development emphasising local production and innovation networks have identified universities as sources of knowledge which could be commodified for use within the local economy either through licensing or the formation of new firms (e.g. Segal Quince and Partners, 1985). Such claims, based on the experiences of a few exemplary regions during the 1970s and early 1980s, led to a flurry of initiatives, such as science parks and technology transfer offices, albeit with significant variations across nations and in success rates (Charles, 2002:22).

An important process for the localisation of knowledge is the development of human capital (Charles, 2003:11). Universities have traditionally produced graduates for a national labour market dominated by large employers with little concern for SMEs or graduate retention in local labour markets. This model has begun to break down in response to changing patterns of employer demands, such as the decentralisation of large corporations into clusters of smaller business units and the greater role of smaller businesses as sub-contractors, suppliers, and franchisees (Charles, 2003:11). Thus the impact of the universities is not restricted to the technological sphere but may spread

7 From a theoretical perspective, in the area of regional development, more research is required in relation to spatial proximity and the different transferability of the various types of knowledge that universities can produce. Not every form of university knowledge transfer requires spatial proximity, and university expertise can be channelled between distant locations. Nevertheless, it is suggested that when academic knowledge is in its “evolving, non-codified stage”, successful knowledge transfers between university and industry requires spatial proximity (Varga, 2000:141). The transferability of knowledge from universities to their local areas seems to be influenced by various other factors such as the national and local university funding system, national policy initiatives, the nature of industrial sectors, nature and the size of local firms, and local mechanisms and incentives for knowledge transfer (Adams, 2002; Cohen et al., 2002). Most of the existing work seems to have focused on individual channels of knowledge transfer (e.g. patenting, licensing, start-ups) and their outcomes (Mowery and Shane, 2002). The full range of these formal mechanisms and the much broader array of channels, including their interactions, that constitute the interface between a university and its region, need to be explored.

into the wider social and economic performance of their localities and region. However, the broader significance of labour-market processes for technological and organisational dynamism including that of higher education, has yet to be examined (Angel, 2000:127-8).⁸

In regional studies and economic geography literature, attention has been drawn to the roles played by formal channels of education and learning such as schools, colleges and universities, and by research institutions such as government research institutes and university laboratories in the creation of regional industrial networks (see Saxenian, 1994; Keeble and Lawson, 1997). In the knowledge economy, knowledge, as the key ingredient of economic growth and learning is said to have become the best way to understand regional economic change (Malecki, 2000: 119). In the literature of the

‘learning economy’(Lundvall, 1995), which emerges from the work on national innovation systems, different kinds of knowledge are identified. These are summarised as

• Know what –facts and information;

• Know why-principles and laws necessary to reduce trial and error;

• Know how-the skills and capability to do something acquired within the workplace;

• Know who-information about who knows how to do what and the social capability to establish relationships to special groups, in order to draw on their expertise.

In the case of know what and why, formal learning in schools and universities is the normal channel. Know how depends on practical experience, through tacit learning but

8 The significance of local labour-market processes goes beyond transactional efficiencies in the matching of labour supply and demand. The movement of workers and students is a central pathway for the transfer

also through network relationships. Know who is learned from social interaction via professional associations, day-to-day dealings with customers and a wide range of other actors and agencies (Charles, 2002:24). Many of the existing models of university-industry interaction emphasising high-technology knowledge transfer and academic entrepreneurship activities seem to underestimate the importance of universities in interactive learning, creating social rather than technological networks and trust (Morgan, 2002).

In this line of thinking, the central concern of this thesis is to investigate the role played by universities as part of ‘innovation systems’ or, in other words, to examine in what ways universities can be seen as parts of the ‘initial capital’ of their region. The role of universities as knowledge institutions in their region has been (re) discovered with the recent ‘regionalisation’ phenomenon accompanying the globalisation of economic activities (see above, p.64). The following section clarifies some models to explain in what ways universities can play a role in regional economic development within the globalising economy.