4-1 HIGHER EDUCATION, KNOWLEDGE AND WEALTH CREATION

UK National Competitiveness

4-1 HIGHER EDUCATION, KNOWLEDGE AND WEALTH CREATION

Higher Education as a Knowledge Institution

Universities are defined by their role in the production and the mediation of knowledge.

A brief historical overview of the relationship between the university and the wider society would help in grasping the changing nature and emphasis of the university’s activities in relation to knowledge production and mediation (dissemination and application). First, the primary and oldest role of the university is education. The second role, research, has emerged more recently (since the 19^th century) and only gradually come to be seen as a major university activity, especially with the growth of science and technology. The third category, the ‘third stream’ activities, which involves broad relationships that universities have established with the community and industry both locally, nationally and globally, has increased in significance in more recent years.

Table 4.1 sums up the historical transformation of the main functions of universities. ¹

Table 4.1 Expansion of the Western University Mission

1 This table is constructed from data in Delanty (2001) and Etzkowitz (1994). Also, it is based on notes taken from the seminar held at the Institute of Education in London in February 2003. The presentation given by Prof. Robert Cowen was particularly useful.

Medieval Modern age

Higher education is inescapably bound up with ‘knowledge’, both in advancing our understanding through research and in its acquisition by others through teaching (Clark, 1983 cited in Barnett, 1999:11). Another aspect of ‘knowledge’ that higher education institutions are having to face today is that of wealth creation. Leadbeater argues that universities should become not just centres of teaching and research but hubs for innovation networks in local economies. Universities should be “the open-cast mines” of the knowledge economy (Leadbeater, 1999:114), helping to spin off companies, for example. Consequently, the university laboratory becomes an incubator for knowledge economies whilst scrambling for soft, venture-driven money (Willinski, 2000:49).

The Economist’s 1997 extended survey of contemporary universities, under the title of “The Knowledge Factory”, positioned universities as a “major agent of economic growth” (The Economist, 1997). Here it was suggested that the traditional liberal ideal of university education is epitomised by Newman. In 1852, Cardinal John Henry Newman, the creator of the Catholic University in Dublin, propounded a definition of the function of the ideal university as “the high protecting power of all knowledge and science, of fact and principle, of inquiry and discovery, of experiment and speculation” (cited in The Economist, 1997). ² This definition, that soon became famous, presents a stunning contrast to the today’s university as a ‘major agent of economic growth’ (The Economist, 1997:4). A university is considered to be “an

2 In his influential The Idea of a University, Newman wrote that the university was about making gentlemen, ‘of cultivated intellect, a delicate taste, a candid, equitable, dispassionate mind, a noble and courteous bearing in the conduct of life’ (Newman, 1996 cited in Willinski, 2000:48).

increasingly useful asset” in the knowledge economy. There are good examples of universities contributing to the creation of wealth in knowledge economies. ³

Two Academic Revolutions

Contemporary interactions among universities, industry and government are said to be the outcome of “two academic revolutions” (Etzkowitz, 1994:144). The first occurred in the late nineteenth and early twentieth centuries, with the “introduction of research into the university”. Then the university began to be transformed from an institution for cultural preservation and transmission of knowledge into an institution conducting research as well (Etzkowitz, 1994:144). The second academic revolution is currently under way, making economic development a function of a university in addition to teaching and research, harnessing universities more tightly to the business agenda.

The emergence of academic relations with industry and of technology transfer as an explicit university mission, in the late twentieth century, is an academic revolution as potentially far-reaching as the one that made research an academic goal during the late nineteenth century (Etzkowitz, 1994:140).

However, such a commercially driven revolution is not new. So-called civic universities in the UK were established from the end of the 19^th century towards the early 20^th century in search of establishing links between industry and academia. What is important about the current second academic revolution seems to be the fact that government at various levels is an important force in encouraging the link to enhance

‘science-based’ and ‘knowledge-based’ economic development.

3 There are examples of this in both public and private institutions in the USA. According to the headline of Chronicle of Higher Education, “Universities’ Royalties Income Increased by 33 % in 1997, Reaching

$446 Million” (Chronicle of Higher Education, January 8 1999, A 51 cited by Willinski, 2000:51). The University of California received 57 million dollars through licensing agreements on its intellectual property, whilst registering 122 new patents for the year 1995. Stanford University received 39 million in licensing agreements and 70 patents in the same year (Willinski, 2000:50).

David et al. (1994:14) argue that “the spirit of technonationalism has cast universities as an instrument of national R&D policy, assigning them a central role in generating knowledge and transferring it successfully to the domestic sphere of industrial application” (cited in Lawton Smith, 1997:na). As The Economist argues, a university is “not only the nation’s R&D laboratory but also the mechanisms through which a country augments its ‘human capital’, the better to compete in the global economy”(The Economist, 1997:4). Robertson argues that both improvements in “the supply of high quality labour” and “the exploitation of innovative academic staff” are seen as essential constituents of economic success (Robertson, 1999:18). ⁴

Governments throughout the world are striving to establish reliable connections between wealth and higher education, epitomised by the rapid growth of the sub-regional economies of Silicon Valley with the contribution of Stanford University (see Chapter 1, p. 12). ⁵ Governments in other countries are trying to follow these success stories. In many of the projects, higher education institutions are involved as key players.

Malaysia plans to spend $40 billion to create a latter-day Silicon Valley of its own (The Economist, 1997:5). ⁶

Robertson summarises the changing environment surrounding universities and research institutions, and the new challenges confronting academic and educational institutions faced by government discourses within the so-called knowledge economy:

4 Robertson points out there are two forms of exploitation of the ‘intellectual capital’ of higher educational institutions (HEIs): first, an expansion of the higher education (HE) system leading to improvements in the “quality of labour stocks”; and second, investment in academic capital—that is, the

“liberation of the research and innovation” locked up in a nation’s universities and research centres (Robertson, 1999:18).

5 Others such as ‘Research Triangle Park’ in North Carolina reinforce a growing perception of the role of universities in the science and technology base in economic competitiveness.

6 For example, Singapore has attempted to systematically encourage top talent and corporations in the country to participate in its state-of -the-art multimedia network called “Singapore One”, aiming to be the

‘giga-hub’ for Southeast Asia. Other examples include: South Africa’s “Cyber-townships”; Malaysia’s

“Multimedia Corridor”; the “Redline” project in the Netherlands; “Smart Toronto” in Canada;

“Stockholm Project” in Sweden (Schwartz et al., 1999:87). More recently, the Japanese government

The opening up of the ‘information society’, and the close attention now being paid to knowledge-intensive production is seen to oblige universities, colleges and research centres to generate a suitable return on public investment by producing both greater volumes of high-skilled labour and the innovations needed to refresh the economy (Robertson, 1999:19).

This is a challenge as well as a new opportunity for higher education institutions.

…universities increasingly approach the market as a strategic resource, locked into knowledge production, regional development, a high-skills economy and job creation.

As revenue from public sources has tightened, so universities have offered themselves as partners with corporations in the national innovation system (Robertson, 1999:18).

As companies begin to describe themselves in terms of knowledge creation (Nonaka and Takeuchi, 1995), so universities respond by “positioning themselves as part of the knowledge economy” (Etzkowitz and Leydesdorff, 1997 cited by Robertson, 1999:18).

What has emerged is a set of relationships among universities, industry and government named as the ‘triple helix relationship’ (Etzkowitz, 1994:139). Government policies encourage academic-industry ties in industrialised and industrialising countries, at the national and regional levels. Etzkowitz and Leydesdorff (1997) sum this up as follows:

Universities and industry, up to now relatively separate and distinct institutional spheres, are each assuming tasks that were formerly largely the province of the other. The role of government in relation to these two spheres is changing in apparently contradictory directions. Governments are offering incentives and encouraging academic institutions to go beyond performing the traditional functions of cultural memory, education and research, and to make more direct contribution to ‘wealth creation’ (Etzkowitz and Leydesdorff, 1997:2).

Etzkowitz (2003:116) proposes “an interactive model of innovation” as opposed to a linear model of innovation, emphasising the two-way processes of interactions between industry and academia. ⁷ Science parks and industrial liaison offices, which are either

announced the plan to set up ‘the world’s best scientific university’ in Okinawa island, which will make the area “the highest level intellectual cluster in the Asia Pacific region” (Financial Times, 13 May, 2002).

7 For example, the ‘Cambridge Phenomenon’ is known as the example where the sectoral composition of high technology firms in the area can be traced back to research conducted in the University of

Cambridge and associated institutions (SQW, 1988:15). New industries, such as biotechnology and health

located within the university or separately, function as ‘institutional intermediaries’

between the university and industry. These intermediaries as well as the government policies constitute the triple helix relations of the university, industry, government relations.

Higher education’s purposes and mandates are multiple and are under constant pressure for change as its scale and clients change, and even the very definition of higher education has become uncertain. Each of the missions in higher education such as research, scholarship, teaching, consultancy, and community functions calls for different forms of knowledge and different forms of sponsorship and institutional organisation. Higher education is susceptible to influences and challenges from the outside world, particularly in terms of making its teaching, research and development, and screening activities “relevant to the needs of the society and the economy” (Kogan, 1996:120).

From Elite to Mass Education: Massification of the University

Higher education has expanded in most countries with the result that it no longer caters wholly for an elite but provides either “mass or universal higher education” (The Economist, 1997). There is empirical evidence, notably, of a growing number of mature students and of those studying part-time along with ‘traditional’ full-time students, and of the growth of continuing professional development (CPD) within universities and colleges (Duke, 1992). The transition from elite to mass higher education is a global phenomenon comprising not only the inner dynamics of national higher education systems but also deeply rooted trends in the character of the state, society, the economy, science and culture (Scott, 1995). It has been posited that the more human capital each

care which draw directly on academic research, are seen to become increasingly important in terms of forging new industry-university linkage.

nation has, the better it becomes at competing in the global economy (The Economist, 1997:4).

The growth and diversification of higher education systems have brought new sets of questions. One set of the questions has given new prominence to the issues of

‘access and participation’. The expansion of higher education increases the diversity of users –both of students in terms of age, gender, ethnicity and social and educational backgrounds, and of other ‘stakeholders’ such as employers, and social and community groups (Brennan, 1999:5). Now universities have to ask themselves: What are the needs and demands of these users? ; Which of them will be met by universities and which by other forms of educational institutions? ; And what are the consequences for the university of the access of these ‘new’ kinds of students? (Brennan, 1999:5)

The second set of questions is about the conceptual debate around ‘continuing education’, ‘lifelong learning’ and ‘widening access’. As Coffield (2000a: 1) asks: is lifelong learning the big idea which will deliver economic prosperity and social justice, or will it prove to be yet another transient phenomenon like ‘recurrent education’ which came and went during the 1970s? What are the implications of the expansion of higher education from elite to mass participation associated with the idea of ‘lifelong learning’?

The third set of questions concerns the cost and quality of higher education. The notion of accountability to students under the broad banner of quality has been emerging since the 1990s (Middlehurst, 1995:78-9). In many countries, such as France and Germany, the expansion in the number of students has led to the overloading of the system and to an increase in the number of students who drop out of their course. In contrast, the United States has enjoyed the benefits of the expansion of higher

education.⁸ The issues are who pays for the higher education and how the system is funded.

Scott (1995:35) identifies four types of higher education system emerging within the organisational complexity, admitting the simplicity of such a typology to capture the complexity of higher education systems. The first is a ‘dual system’ in which universities are regarded as entirely separate from other post-secondary education institutions and treated differently. The second model is a more dynamic ‘binary system’ where alternative institutions are deliberately established to complement the universities. The third model is a ‘unified system’ in which all institutions belong to a common system and are not formally differentiated. The fourth model is a ‘stratified system’ where higher education is conceived of as a total system and institutions are allocated specific roles within it.

Table 4.2. The four types of higher education systems

Four Types Examples

A dual system France, Germany, Netherlands

A binary system England before 1992

A unified system Sweden since 1977; England since 1992;

Australia since 1988 A stratified system California’s Master Plan (Based on Scott, 1995:35)

Thus, the expansion of higher education and the need to regularise and enhance vocational education have led to the creation of ‘binary systems’ in some countries.

Britain had a binary system, which was reconstituted in 1992 into a larger ‘unified university system’. Then the distinction between universities and polytechnics was replaced by a new demarcation between higher education institutions (HEIs) and further

8 The United States has moved farther than any other countries towards a system of mass higher education, and many of the research universities achieve higher academic standards than ever before. American universities have been able to pluck the very best students from an ever-deepening pool of eligible applicants, which has raised standards, not lowered them (The Economist, 1997:6).

education colleges. ⁹ Or, as is shown below, a new sub-stratification is emerging within the category of HEIs/universities.

These issues and contrasting evidence surrounding massification of the university present acute questions to the conception and institutional management of the university within the wider higher education system in the twenty-first century. Since the advent of mass higher education, the ideal university depicted by Newman or Humboldt has been unable to accommodate the demands of diversified students’ and society’s needs. The expansion of higher education, combined with the need to regularise and enhance vocational education, lead to more dynamic relationships between universities and other post-secondary institutions, which vary in different national systems, and each of them has evolved over the time in relation to its state policy.

Being Entrepreneurial

With regard to sources of funding, there are three main streams of income for higher education institutions: the relevant government ministry¹⁰; funds from governmental research councils; and all other sources, grouped together as ‘third-stream income’, which is next examined further in relation to the notion of accountability.

Whilst there are many different ways of sub-streaming this third-stream income, Clark (2001) categorises ‘third-stream income’ into three further sub-streams:

• Other governmental sources including departments of other levels of government such as departments of regional and city governments.

9 In some countries which have dual systems, school leavers are encouraged to go for technical and vocational training. A few German regional governments are confining any further expansion of higher education to the Fachhochschulen, which concentrate on technical and vocational subjects. Finland, Switzerland and Austria have also tried to direct more school leavers into such training rather than into traditional universities (The Economist, 1997:9).

10 In the case of the UK, Higher Education Funding Councils (HEFCs) are allocating government money to HEIs. Currently HEFCs are making money available to promote the ‘third stream’ activities of

• Private organised sources including industrial firms, professional and civic associations that promote continuing education, and foundations.

• University-generated income including endowments and investments, income from campus services, tuition fees, alumni funding, and income from Intellectual Property Rights (IPRs).

Income streams are key steering mechanisms in university activities. The various third-stream sources identified above clearly bring “different problems and opportunities and different degrees of expenditure discretion” (Clark, 2001:13) and, hence, different forms and conditions of accountability (see Kitagawa, 2003:102-3).

Industrial firms want something for their money, and something is often quite specific;

university-industry collaborations involve tough bargaining over contracts, and compromises over whose interest has priority. Government departments, in turn, may offer generous, relatively unearmarked grants, or they may insist on segmental budgeting and tight accounting (Clark, 2001:13).

Many of these areas of accountability are recognisable as the “key purposes” of higher education, and there is now strong pressure on universities to clarify and measure their aims, intentions and claims on the economy and society (Middlehurst, 1995:79). For example, involving firms in the definition of curricula and funding may be one of the ways to strengthen the links between higher education and the labour market, requiring certain forms of accountability.

As already mentioned, higher education in many countries has become more diverse, in terms of the institutions, the programmes and the students who enrol.

Therefore, ‘the knowledge’ relevant to running and developing higher education will be

“multiple in content, use and ownership”. A further question arises as to how different kinds of knowledge can or should co-exist, be managed and distributed in the context of

universities, with notable recent funding opportunities promoting universities’ reach-out to businesses.

Arrangements for this vary in different parts of the UK. See below p.117-9.

a shift from Mode 1 (disciplinary, curiosity-driven research priorities) to Mode 2 (problem-solving oriented) knowledge production (Gibbons et al.,1994).

From the viewpoint of institutional management, this may provide a new opportunity for individual institutions to develop entrepreneurial leadership in order to become “a viable, competitive part of the rapidly emerging international world of learning” (Clark, 2001:11). There is increasing evidence of a pro-active approach being taken by academic institutions. This involves adopting an entrepreneurial role in collaborating with industry, for example, through research contracts, consultancy, licensing of patents, creation of spin-off companies and so on (see HEFCE, 2001a: 6-8).

Universities need to develop or retain their institutional autonomy if they are to re-invent themselves as ‘entrepreneurial universities’ (Clark, 1998) within the system of the ‘supervisory state’ (Neave, 1995 a). In other words, individual universities need to develop strategies and instruments appropriate to their own context rather than centrally imposed mechanisms (OECD/IMHE, 1999:28).

Policy-makers, in turn, need to create a policy environment in which institutions are allowed to have a good deal of autonomy if this helps them to be dynamic and strategic and able to move fast enough in international competition. The homogenising, unifying policy instruments that would prevent institutions from experimenting and

In document Universities and Regional Advantage in the Knowledge Economy: Markets, Governance and Networks as Developing in English Regions (Page 113-126)