Higher Education Institutions as Economic Growth Engines

1
Higher Education Institutions as Economic Growth
Engines

• Martin Shields
• Stephan J. Goetz
• Penn States Center for Economic and Community
  Development
• Northeast Regional Center for Rural Development

2
The Weightless Economy

• Most of what we currently perceive as value and
  wealth is intellectual and impalpable.
• Alan Greenspan

3
Todays Outline

• The role of the university in regional economic
  growth
• What the research shows
• Lessons learned
• How to increase higher education institutions
  effectiveness in regional economic development
  efforts

4
The University and the Economy

• People often associate university research with
  high-tech development
• According to the U.S. Department of Commerce
  statistics, employee pay in high-tech industries
  is 67 percent higher than in other industries.

5
Counties with Research 1 Universities have Lower
Average Unemployment Rates
Source Authors calculations using BLS data
6
And Higher Average Per Capita Incomes
Source Authors calculations using BEA data
7
The Roles of the University in Regional Economic
Prosperity

• The university strengthens the local economic
  base
• Direct economic impacts
• Spending by faculty, students and operations
• The university as an entertainment and cultural
  hub
• Spending by visitors
• For example, a recent study on Penn States
  economic impact shows the university generates
  more than
• 6 billion in economic activity
• 60,000 jobs

8
But Higher Educations Most Important Impacts may
Happen through other Channels
9
How Higher Education Drives Economic Growth

• Building a balanced, creative and competitive
  economy
• Growing existing knowledge-based businesses
• Technology transfer
• Idea transfer
• Incubating new business ventures
• Developing human capital
• Fostering a growth climate for entrepreneurs
• Enhancing the quality of life and appeal of
  communities

10
An Educated Workforce Strengthens the Local
Economy

• There is an increasing gap in earnings between
  those with a college degree and those without

11
Earnings by Degree
12
University Innovations Enhance Regional
Competitive Standing

• Research universities play a critical role in the
  high-tech economy
• Twenty-nine of the top 30 high-tech metropolitan
  areas in the United States are home to or within
  close proximity of a major research university
• Milken Institute

13
Universities Have a Number of Tech Transfer
Mechanisms

• Research consortia
• Licensing
• Industrial extension (eg PennTAP)
• Incubators (look out the window)
• Consultant services
• Venture capital
• Source Universities and the Development of
  Industry Clusters. US EDA and CMU

14
Additionally, Universities Spur High-tech
Spin-offs

• Faculty sometimes start new businesses
• Faculty often consult with existing local
  businesses
• North Carolinas Research Triangle
  Parkestablished in 1959--is home to more than
  100 RD facilities employing more than 37,000
  people with a combined income of 1.2 billion.

15
Universities are a Hotbed of Entrepreneurs

• Attracting
• Richard Florida and the creative class
• Creating
• Hewlett-Packard may be the most famous
• In State College
• Accu-weather
• Mini-tab
• Retaining
• The job search begins closest to home

16
But not all Universities are Realizing Their
Potential

• What makes an innovative university does not
  automatically make a high impact university
• EDA and CMU

17
Universities are not the Silver Bullet

• More than 20 years after opening, the Clemson
  Research Park houses four private companies
  employing 121 people, according to the South
  Carolina Research Authority.

18
Lessons Learned The Keys to Success

• Beyond human capital development
• Beyond technology transfer
• Beyond spin-offs
• Beyond town and gown

19
Beyond Human Capital Creating Creators

• Todays higher education institutions need to
  enhance the critical thinking and creative
  capacity of their students
• Increase entrepreneurship offerings to students
• Create a Heisman Trophy to reward top innovations

20
Beyond Technology Transfer Engaging businesses

• Higher education institutions need to establish a
  reciprocal relationship with regional businesses
• Focus on existing regional strengths, rather than
  trying to create new ones
• Emphasis should be on young, emerging industries
• Innovation needs to flow both ways

21
Beyond Spin-offs Translating Discovery

• Higher education institutions need to have a
  strong research base
• Must be part of the academic mission
• Role models for innovation

22
Beyond Town and Gown Leveraging Reputation

• Universities and colleges hold a unique place in
  the community development landscape
• Higher education institutions have the regional
  standing to foster regional dialogue and networks
• Institutions need to develop more opportunities
  for local access to leading edge research and
  provocative thought
• Innovation open houses
• Service learning opportunities in the classroom

23
Beyond Town and Gown

• But communities must be receptive as well
• Realistic expectationsit is a partnership
• Professors tend to be a little different and
  patience is a virtue

24
Universities Must Change their Business Model

• Institutions need to
• Move beyond compartmentalization
• Broad and complementary approaches
• Teach faculty how to communicate and work with
  businesses
• Alter the reward structure for faculty

25
Further Reading

• Universities and the Development of Industry
  Clusters. US Economic Development Administration
  and Carnegie Mellon (http//www.eda.gov/PDF/uclust
  er2004.pdf)
• James R. Pappas (1997). The Universitys Role in
  Economic Development From Research to Outreach
  (Jossey-Bass)

26
This Presentation will be Online at

• Penn State Center for Economic and Community
  Development
• http//cecd.aers.psu.edu