The Role of Universities in Economic Development

April 2006

By Katie Bullard, Project Manager

AngelouEconomics

The traditional roles of the American university are often described through the image of a “three-legged stool.” These three roles are defined as instruction, research, and service. Today, however, many university officials recognize that their institutions can and should play a key role in the economic development of the surrounding communities. Unfortunately, universities are often not utilized to their full economic development capacity because critical linkages between the institutions and economic development organizations are not formalized. This article explores higher education’s role in economic development and offers recommendations designed to strengthen this increasingly important partnership.

Richard Rosan of the Urban Land Institute noted, “few institutions have more to offer in propelling economic development on both a national and local basis than our nation’s colleges and universities.” Why is that? In today’s knowledge economy, technology, innovation, and knowledge have replaced capital and energy as the primary production factors. The 2 primary products created by colleges and universities are skilled workers and innovative research – by definition, the drivers in this knowledge-based economy.

The University is…a knowledge workforce generator
Today, businesses demand an educated workforce and human capital is at a premium. Universities educate and produce the labor force that fuels this innovation-based economy. Computer programmers, scientists, doctors, researchers, design professionals, and other skilled workers drive the success of communities to become economic engines of growth.

The University is…a research and development hub
Universities are the primary driver in the advancement of scientific knowledge and applied research. A turning point in the connection between universities’ research activities and economic development occurred with the passage of the Bayh-Doyle Act in 1980. As a result of this law, universities retain ownership to inventions made under federally funded research. In return, universities are expected to file for patent protection and to ensure commercialization upon licensing. This “technology commercialization” has stimulated relationships between universities and industry. Many universities have expanded their commercialization program to include licensing, research consortia, industrial extension (technical assistance) programs, industrial-liaison or affiliates programs, spin-off enterprises, research parks, start-up firm incubators, consultant services, and venture-capital funds.

Although these two economic development functions of a university are critical, they are not complete. In fact, if communities want to maximize the economic benefits provided by universities, they must develop ways to 1) keep the university’s highly mobile, entrepreneurial workforce within the community, 2) use the university to train and re-train existing employers within the community and 3) utilize the “brand” of the university to expand economic development marketing efforts.

The University is…an entrepreneurial climate creator
Universities are key players in the development of entrepreneurs who form start-ups and expand businesses. Some have developed affiliated incubators and many entrepreneurs will stay in the university town, knowing that they can find well-educated employees on a regular basis. Universities also provide “seed money” for advanced research that can lead to the development of innovative products and additional start-ups. Beyond that, however, we have found that a region that embraces creativity fosters an entrepreneurial climate. This would include everything from music to art to theater to design. Communities with colleges and universities can embrace and enhance the creative juices of their resident students.

The University is…a workforce development center
Although community colleges and technical schools often take the primary roles as workforce development centers, popular university extension and continuing education programs can offer an accessible and outstanding way to upgrade skills and acquire industry-specific skills.

The University is…a powerful marketing and branding tool
Smaller communities have an obvious advantage in marketing themselves as attractive places to live, work, and visit by including the university’s advantages in all marketing efforts. Additionally, university events that bring in tourists, including sporting events and national conferences, provide visibility to a community that may otherwise go unnoticed. When you think of Ann Arbor…you think of the University of Michigan. When you think of Lubbock…you think of the Texas Tech. This association is tremendously valuable to economic development efforts.

So, what are some ways that economic development organizations (EDOs) can work with universities to continue to strengthen these connections?

EDOs can…

• Establish a Business and Education Council that brings together university officials and major employers to discuss the needs of local industry, including research, product innovation, and workforce training. Work to develop new programs and curriculum if a need is demonstrated.

• Lobby state legislators to provide additional funding for university programs needed in local industry and establish a bi-partisan caucus to support higher education and economic development efforts.

• Support universities by sponsoring incubator programs in targeted industries.
  Ensure that university entrepreneurs are an integral part of the small business network.

• Partner with major employers to aggressively recruit local university students to stay in town after graduation.

• Provide university artists and musicians places to showcase their art in public venues across town.

• Promote university events through your website.

• Showcase available job opportunities through networking events, community fairs, and other activities for “boomerang” alumni that return to the community for sporting events, reunions, and other university events.

A recent success story out of Little Rock, Arkansas exemplifies the type of positive results that come from the collaboration of EDOs and universities.

In May 2005, spurred by the Metro Little Rock Alliance’s (MLRA) recently completed CEDS plan, Trinity Foundation of Pine Bluff presented a $6 million endowment the University of Arkansas at Little Rock (UALR) for the addition of a bachelor’s degree program in mechanical and electrical engineering at UALR's Donaghey College of Information Science and Systems Engineering. This was the largest endowment that Donaghey College had ever received.

The CEDS plan had been completed by AngelouEconomics, and included a priority recommendation that expanding UALR's five-year-old, ABET- accredited systems engineering curriculum was key to developing the central Arkansas region and its target industries.

By engaging the university and leading citizens throughout the CEDS process, MLRA and the entire Little Rock community are realizing tremendous benefits.

It is clear that the impact that colleges and universities can have on economic development efforts is unparalleled. Economic development professionals and university officials must develop a collaborative system to work together and continue to promote activities that generate economic prosperity for the entire region.