Higher Education Plays Growing Role in Economic Development

The Rockefeller Institute released a report recently showing that colleges and universities are taking an increasingly active role in states' economic development. The study shows that universities are going beyond their traditional research function with efforts as varied as business consulting, job training and housing rehabilitation.

State University of New York at Geneseo

Integrated Science Facility building at SUNY-Geneseo

Nancy L. Zimpher, who is the chancellor of the State University of New York, sees higher education as an important component of economic development. When she took on her position in the summer of 2009, she announced that she wants SUNY to become 'the engine of New York's economic revitalization.' In pursuit of that goal, Zimpher commissioned the Rockefeller Institute of Government to perform an analysis of economic revitalization efforts at colleges and universities.

Rather than focus on existing initiatives in New York state, the project cast a nationwide net for new ideas. After data was gathered from all 50 states, the Institute focused on projects and programs in about a dozen states. By exploring how these programs started, how they've worked so far and where they're going, the study aims to create a dialogue that will allow institutions to learn from each other's experiences. Their analysis found that a 'new paradigm' is emerging in states' economic development efforts. The paradigm puts knowledge ahead of the traditional incentives that have become insufficient for the 21st century.

University Research Center

Transforming Research into Innovation

The report catalogues the study's findings into four main areas: innovation, strengthening employers, community revitalization and educating the populace. Research and development - the building blocks of innovation - are the strengths of the university system, and these pursuits are central to the modern economy. The report points out that recognizing the importance of innovation isn't a novel concept, but it has become exceptionally salient in an era of intense global intellectual competition. Technological development is crucial for America's economy (and therefore workforce) to thrive. In 2003, Bruce Mehlman of the U.S. Commerce Department declared that America must never compete in what he terms a 'battle to pay workers least', going on to say that 'it will take sustained innovation to ensure that we don't have to.'

In order to successfully harness universities as an economic resource, the transition must be made from research to innovation. The connection isn't automatic. Research is necessary to transform knowledge into new ideas, but innovation is necessary to transform new ideas into practice - and the marketplace. In 2006, the U.S. Department of Commerce performed a study on universities that had been successful in 'launching and supporting knowledge economies.' They found that such schools had the following similar characteristics:

  • Research leadership in areas relevant to their specific regional economies.
  • A large group of nationally prominent faculty.
  • Leadership that prioritizes economic growth and links effectively with the business sector to pursue that goal.
  • The physical infrastructure necessary to support research, including labs, equipment, research parks, classroom and conference facilities.
  • Enough flexibility in laws and policies to allow the commercialization of research outcomes.

Universities on the cutting edge of economic development have been able to commercialize the fruits of their research, staying closely involved at every step of the way. The report points to projects such as North Carolina's Research Triangle Park, founded by Duke, NC State and the University of North Carolina at Chapel Hill. The largest research park in the United States, Triangle Park has transformed the region's economy by creating jobs and stimulating development of 'new-line' industries. Another example of successful use of educational resources is the Georgia Research Alliance (GRA), a non-profit corporation run by a board that includes major business leaders and the presidents of six participating Georgia-based research universities. Through the Eminent Scholars program, the GRA brought many renowned entrepreneurial researchers to the state, funding their research (and its commercialization) in what the report calls the 'most comprehensive research-to-implementation strategy in any state.'

Modern Warehouse

Supporting Local Employers

Bringing innovative technologies to the market doesn't do much for the economy if local businesses aren't equipped to adapt them. Another important role that educational institutions have played in stimulating the economy is providing support for local employers as they learn and grow. The Organization for Economic Cooperation and Development identifies these separate processes as knowledge creation and knowledge transfer.

In fact, although activities such as workforce training or management counseling may not seem as sexy as innovation, these 'knowledge transfer' practices may actually be more effective at boosting the local economy. For an ongoing study at the Massachusetts Institute of Technology (MIT), researchers performed over 700 interviews with business and university executives in major metropolitan areas in the U.S., the U.K., Japan, Finland and Norway. They found that 'upgrading existing industries' and 'diversification' (helping businesses expand into new areas) were the most common as well as successful interventions that higher education made in local economies.

The report argues that workforce training is the most important way for higher education to support the growth of local employers. They don't mean students earning degrees, they mean campus-run job training programs that teach people seemingly mundane skills such as controlling an automated forklift or washing floors in a biotech plant. As boring as these new skills may seem, they're necessary for employers to adopt the new processes that will lead to their company's growth and success. These programs thus perform a dual function for the economy: helping a group of people become employable and creating employees with the skills that businesses need.

Community Engagement

Educating the Community

Colleges and universities' investment in the local community goes deeper than stimulating economic growth. They understand that thriving community environments positively impact the marketability of their institutions as places to work, study and invest. The Rockefeller Institute's report identifies four main areas that characterize the 21st century university-community relationship:

  1. Revitalizing the surrounding environment;
  2. Engaging with community stakeholders;
  3. Partnering with public educators to improve the K-20 educational pipeline;
  4. Intentionally targeting institutional activities for broad community impact.

These efforts may include infrastructure development projects, civic service outreach, participating in early education initiatives and creating incentive programs that encourage local spending and investment by the thousands of people that universities employ.


The fourth area that the report identifies in higher education's contributions to the economy is really the 'bedrock' purpose of the field: education. Recent studies have shown that there is a persistent correlation between educational attainment and economic growth on a national level. Individuals with degrees have greater earning power and, perhaps more significantly, income levels overall are higher in populations with higher education levels.

There has been a lot of focus recently on the importance of advanced science and math training in keeping the U.S. globally competitive. But community colleges and the 2-year degree are also playing an increasing role in stimulating the American economy. They provide a shorter path to career-readiness for student seeking practical skills that don't necessarily require a 4-year education. The Bureau of Labor Statistics (BLS) has predicted that about 45% of job openings over the next few years will require more than a high school education, but will not require four-year degrees. The BLS expects that positions requiring a bachelor's degree or higher will account for only 33% of upcoming job openings.

Colleges and universities also play a crucial role in supporting the populace through continuing and adult education. New delivery methods such as online learning are making it easier for people to go back to school to get the degree they never earned, or pursue more education in order to advance in their present careers. These programs have opened up extraordinary economic opportunities for countless individuals.

The Rockefeller Institute's report shows that institutions of higher education are becoming more active in the economy as they become more integrated into the community. From business development to workforce training to their core mission of educating their students, colleges and universities should play a vital role in rejuvenating the American economy.

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