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University and Business Relations: Connecting the Knowledge Economy

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Abstract

It is commonplace to say that the modern economy is knowledge based but a moment’s reflection points to the vacuity of this notion. For all economies are knowledge based and could not be otherwise. The question is rather how is one kind of knowledge based economy to be distinguished from another? This essay proposes that the answer may lie in three directions: (1) in terms of the variety of knowledge that is engaged; (2) in terms of the processes by which the production of knowledge is organised, and its corollary the resources devoted to knowledge production and dissemination; and, (3) in terms of the purposes to which knowledge is put. In respect of each of these dimensions, the rise of the modern university as a custodian of knowledge in Western economy and society has been of central importance; but universities are not alone in this role, a wide range of other agencies, private firms, public research laboratories for instance play an important role in defining a knowledge economy and have done so increasingly since the turn of the nineteenth century—a first indication of the systemic dimensions of a modern knowledge economy.

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Notes

  1. See Martin (2003) for a contemporary account of the changing social contract.

  2. Ashby (1974) puts it thus, “Now universities have become absolutely essential to the economy. Under the patronage of modern governments they are cultivated as intensive crops, heavily manured and expected to give a high yield essential to the nourishment of the state” (quoted from page 7).

  3. See, for example, Agrawal (2001), Perkmann and Walsh (2007), Rothaermel et al. (2007), and Siegel et al. (2007) for surveys of a large and growing literature.

  4. Science is here to be treated broadly, not only knowledge of the natural world but of the human built world to technology and organisational knowledge in particular.

  5. Nic de Liso has drawn my attention to the writing of Charles Babbage in respect of the complementarity of different kinds of knowledge arising from the division of labour. He wrote that “[I]t is impossible not to perceive that the arts and manufactures of the country are intimately connected with the progress of the severer sciences; and that, as we advance in the career of improvement, every step requires, for its success, that this connection should be rendered more intimate…” (Babbage 1835, p. 379).

  6. See in particular, White (1962).

  7. As Young (1928) clearly understood in one of the most important papers on the economic power of the division of labour. Young was building on foundations laid by Marshall (1919, 1920), and, no doubt, both were aware of the profound developments in the division of labour associated with the principle of interchangeable parts and the complementary development of specialised machinery that characterised the then modern industries of sewing machine, bicycle and automobile manufacture.

  8. I have developed this theme more fully in Metcalfe (2006).

  9. Op cit, p. 49.

  10. That Australia, New Zealand, Hong Kong, South Africa followed a British but note not an Oxbridge model, is scarcely surprising. More interesting, perhaps because unexpected, is the influence of the French model on the newly independent Latin American countries in the nineteenth century and the influence of the German model on the USA, the universities of Chicago and Michigan as well as Johns Hopkins being notable examples. In neither case is the colonial link present. On this, see Shils and John (2004). Several of the early university presidents in the USA studied in Germany (C.W. Eliot at Harvard, for example) and the State of Michigan contained a large German speaking population which may have been a factor in that case. As Shils and Roberts point out, this is a matter of German influence, not the copying of a German template.

  11. An article in the Financial Times (29/11/07) by Jonathan Guthrie, “Business and boffins have a volatile chemistry”, captures very well the difference between being an academic inventor and being an innovator, and the consequent need for arrangements to bridge between the two processes.

  12. On this later point, of the different tempo of academic and commercial life, see Cowan et al. 2008.

  13. Universities that were established from the end of the twelfth century onwards (Bologna, Paris, Oxford as exemplars) had strong ecclesiastical links and purposes, a bond that naturally began to weaken with the Renaissance and the rise of science and technology in the seventeenth century. See Ruegg (2004) for further essays on this theme.

  14. The complementary viewpoint espoused by Francis Bacon and others that the pre seventeenth century university was a scientific wilderness is effectively challenged by Porter (1996) in a carefully nuanced account of the interplay between the developments of science within and without the European universities of the time.

  15. This is not to deny that the unworldly pursuit of abstract knowledge has potential practical benefits but it is the critical, scientific understanding of “industry, politics, law or medicine” (p. 342) that marks the contribution the university can make—their purpose is to educate not to train, to lay general purpose foundations not build specific structures. Rosenberg (1961) explores the relation between agricultural research and the growth of the American university system.

  16. See Goldin and Katz (1999) for a broader account of the interplay between rapid industrial diversification and the diversification of university disciplines from the late 1980s onward.

  17. On the USA, see Mowery et al. (2001), on Europe, Murmann (2003); also Nelson (2004). As Murmann indicates, the British synthetic dye industry benefited from an influx of German chemists, while many of the business leaders in the German industry had spent time in the UK to familiarise themselves with the textile and traditional dyestuffs industries (op cit, pp. 71–74).

  18. See Horrocks (2007). Examples of this kind can be produced almost at will: military R&D needs have played a large role in this respect, but so have the links that market focused electrical and chemical companies thought it useful to develop with particular individual academic consultants and university-based research institutes. An excellent study of university industry interaction in the growth of the German optics industry is provided by Buenstorff and Murmann (2005). The medical supply industry provides many further, contemporary examples of the close intertwining of business and academia in the pursuit of innovation. See for example, Mina et al. (2007), and Metcalfe and Pickstone (2006).

  19. Harvey and McMeekin (2007) also discuss the sequencing of the fungus Aspergillus niger which was organised on very different lines, involving a Dutch biotechnology food company as lead partner, seventeen universities in five countries, and other commercial organisations and government funded laboratories. It is a fine example of the organising principle that epistemic collaborations are built around particular problem sequences that require multiple skills and capacities for their solution.

  20. See Observatory of the European University (OEU) 2007, ‘Position Paper’, PRIME Network.

  21. Today we would include in the latter category the metrology laboratories and public or quasi-public “standards institutes” charged with setting and disseminating physical and technical standards, and checking compliance of products with specifications mandated by government regulations. On the general classification and role of innovation intermediaries, see Howells (2006).

  22. A referee usefully suggested that this problem be thought of in terms of a gap between proof of concept and commercial realisation.

  23. Rosenberg (1990) is one classic reference in a large literature on absorptive capacity. A recent review by Agrawal (2001) is a useful starting point for the interested reader. See also Perkmann and Walsh (2007).

  24. Abrue et al. (2008) provide many examples of different modes of connectivity in the UK system, ranging from joint research laboratories set up by a company and different university partners (the Rolls Royce model and the BP institute model), to general cooperative framework agreements between a firm and a university department (Waitrose and Lancaster University), and to firms providing projects to serve as the basis for a Ph.D. (Electronic Arts and UCL). That there is so much diversity in the modes of interaction is exactly what one would expect of a complex adaptive process, in which novel modes of interaction are proposed and tested continually. Many fail, one might imagine, but others become part of a transforming spontaneous order. D’Este and Patel (2007) provide detailed evidence on the different modes of interaction and the factors influencing the propensity of research grant holders to engage with business firms in the UK. Link et al. (2007), provide evidence for US universities on the propensity to engage in informal collaboration. Further examples of the wide range of connection modes may be found in Kitson et al. (2009).

  25. To suggest one example of a potentially significant intermediate linkage, we might consider the role of universities in shaping standards and regulation, which, as Table 1 shows, are a significant direct influence on the innovative activities of firms.

  26. Of a total income of circa £2bn earned by UK universities from the business sector in 2006/7, only 2% was IP related. The balance was accounted for as follows, 57% from contract and collaborative research, 32% from consultancy and continuous professional development and 9% from regeneration activities. Figures quoted from Kitson et al. (2009).

  27. Over the period 2000–2007 the number of UK licensing agreements grew by 350% while licence revenue increased by 220%, signifying a drop in the average income per licence of 25%. Full time staff in technology transfer offices grew in the same period from 1,538 to 7,440. The number of university spin outs seemed to be without trend (source HEFC-Business Community Interaction data).

  28. One harbinger of the growing unease of the business community with these developments may be inferred from the recently announced Open Collaborative Research Program, under which I.B.M., Hewlett-Packard, Intel, and Cisco Systems together with seven US universities have agreed to embark on a series of collaborative software research undertakings in areas such as privacy, security and medical decision making. The intriguing feature of the agreement is the parties’ commitment to make their research results freely and publicly available. Their avowed purpose in this is to able to begin cooperative work, by freeing themselves from the lengthy delays and costly, frustrating negotiations over IP rights that proposals for such collaborative projects typically encounter.

  29. The difficulties in establishing the extent of university involvement in the patenting process are laid bare in Geuna and Nesta (2006).

  30. One might also add that the internal division of labour between academic researchers and technology transfer offices may create its own barriers to connectivity, as a referee pointed out.

  31. David and Metcalfe (2008).

  32. Requiring universities to switch their efforts towards applied R&D would be one example of the argument for not respecting the division of labour. It is not uncommon to find R&D directors of major research intensive firms who are uniformly opposed to such a development, precisely on the grounds of the comparative advantage of universities in basic research and of firms in applied research and development. See also, Kaufmann and Todtling (2001).

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Metcalfe, J.S. University and Business Relations: Connecting the Knowledge Economy. Minerva 48, 5–33 (2010). https://doi.org/10.1007/s11024-010-9140-4

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