Higher Education, Regional Economic Development, and Federal Policy: Improving the Connections

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Higher Education, Regional Economic Development,
and Federal PolicyImproving the Connections

• University Continuing Education Association
• Workforce Development Forum
• January 9, 2008
• Howard Wial

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Higher Education, Regional Economic Development,
and Federal Policy Improving the Connections
Regional Economic Development Needs Have Changed
I
Higher Education Can Make a Major Contribution to
Regional Economic Development
II
Federal Policy Is Not Designed to Address the
Range of Needs of Regional Industry Clusters
III
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Regional economic development is the process of
changing a regional (metropolitan or
nonmetropolitan) economy to improve the standard
of living of the people who live in the region
(Drabenstott 2006).
I Regional Economic Development Needs Have
Changed

• 1930s-1970s Analysts and policymakers assumed
  that all regions have the same development needs
• Economic base is manufacturing
• Attract firms from outside the region
• Firms are highly vertically integrated, often
  within the same region
• Large firms organize worker training and RD
• Infrastructure is crucial

• 1980s to today Analysts and state and local
  policymakers recognize that different regions,
  and different industries within them, have
  different needs

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1980s to today (continued)

• Greater variety of economic base industries
  tradable services as well as manufacturing.
• Attention to geographic clustering of industries
  (e.g., software in Silicon Valley, autos in
  Detroit).
• An industry cluster is a group of firms, and
  related economic actors and institutions, that
  are located near one another and that draw
  productive advantage from their mutual proximity
  and connections (Cortright 2006).
• Trade with low-wage countries has made innovation
  (new products, new technologies, new ways of
  organizing work and business processes) in the
  United States more important. Regional industry
  clusters promote innovation.
• Retain existing economic base and grow new
  industries indigenously, less emphasis on
  attraction (Isserman 1993).

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1980s to today (continued)

• Entire business processes are now carried out in
  different regions (e.g., corporate headquarters,
  RD, production, back-office services,
  transportation and logistics).
• Large firms spend less on worker training and
  early-stage RD, leaving gaps.
• Economic development needs are multifaceted and
  vary by both industry cluster and region
• workforce skills
• work organization
• business financing
• technology
• business organization
• products and services produced
• infrastructure
• innovative capacity.

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Higher Education, Regional Economic Development,
and Federal Policy Improving the Connections
Regional Economic Development Needs Have Changed
I
Higher Education Can Make a Major Contribution to
Regional Economic Development
II
Federal Policy Is Not Designed to Address the
Range of Needs of Regional Industry Clusters
III
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II Higher Ed Can Make a Major Contribution to
Regional Economic Development
Colleges and universities have various tools
that can contribute to regional economic
development (Reamer 2004, Lester 2005)

• Provide education and training. Increasing the
  percentage of a regions population with
  postsecondary education raises the regions rate
  of economic growth (e.g., Glaeser and Saiz 2004).

• Serve as an export industry for the region,
  bringing in students and skilled workers from
  outside the region.

• Adding to the stock of codified knowledge,
  e.g., through publications and patents. This is
  least specific to the educational institutions
  home region.

• Serve as a public space for sharing of
  business and technological knowledge, e.g.,
  conferences, standard-setting forums, investor
  forums, alumni networking events.

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Add to the regions capacity to solve
technological and business problems.

• Technology-transfer offices
• Business incubators
• Technical assistance
• Upgrading small and mid-sized manufacturers
  (e.g., Center for Integrated Manufacturing
  Studies at Rochester Institute of Technology)
• Technical-expert matching and grants (e.g., New
  Hampshire Innovation Research Center at
  University of New Hampshire)
• Faculty consulting and contract research with
  local industry
• Industry-university cooperative RD centers
• Federally funded (e.g., NSF Engineering Research
  Centers)
• Independent regional organizations (e.g.,
  University City Science Center in Philadelphia)
• Industry consortia (e.g., SEMATECH in Austin)

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How colleges and universities use these tools
depends on the economic development needs of the
regions industry clusters (Lester 2005, Safford
2007)
I Indigenous creation of cutting-edge
science-based industry clusters (e.g.,
biotechnology) Commercialize a university-based
technology through new small firms financed with
angel and venture capital.
II Related diversification Find new applications
for a technology in which the regions firms
already specialize.
III Upgrading existing industry clusters Improve
existing firms technologies, products, or
organizational forms.
IV Project-based Bring together teams of
specialized workers for the duration of a project
(e.g., construction, motion pictures, finance).
V Industry transplantation Meet the needs of an
industry cluster recruited from elsewhere.
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• I Indigenous creation of cutting-edge
  science-based industries (e.g., biotechnology in
  San Diego, New Haven, Boston)

• Educate Ph.D. scientists and engineers, keeping
  practitioners up to date on the latest research.
• Attract scientists and engineers to the region
  from elsewhere, as students, faculty, or
  practitioners who benefit from the universitys
  presence.
• Publish cutting-edge research, patenting
  inventions based on it.
• Hold scientific and technical conferences,
  including standard-setting.
• Support faculty and student efforts to start new
  firms.
• Connect scientists and engineers with angel and
  venture investors.
• Participate in cooperative RD with firms and
  consortia.
• License new technologies to local firms.

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II Related diversification (e.g., polymers in
Akron)

• Educate scientists and engineers, including those
  already working in the regions firms, in new
  applications of existing technologies.
  Continuing education can play important role.
• Publish applied research, patenting inventions
  based on it.
• Hold scientific and technical conferences,
  including standard-setting, esp. involving
  practitioners.
• Participate in cooperative RD with firms and
  consortia, esp. applied research and product
  development.
• Establish on-campus forums to discuss new
  applications of existing technologies in the
  region.

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III Upgrading existing industry clusters
(e.g., precision manufacturing in York, PA)

• Align curricula with specific needs of local
  clusters, esp. in engineering and management.
• Create continuing education and workforce
  development programs to educate managers,
  engineers, technicians, and production workers in
  technological and organizational best practices.
• Support contract research and faculty consulting
  with regional industry clusters.
• Create opportunities for students and faculty to
  work in regional industry clusters (e.g.,
  internships, faculty leaves).
• Convene firms in regional industry clusters to
  discuss upgrading needs, technological and
  organizational best practices, and how to
  implement them or participate in convenings
  sponsored by others (e.g., Workforce Investment
  Boards).
• Coordinate with other technical assistance
  providers in the region (e.g., Manufacturing
  Extension Partnership) to fill technical
  assistance gaps.

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IV Project-based

• Provide specialized curricula, including
  continuing education, to meet industry cluster
  needs.
• Hold forums to bring cluster participants
  together to discuss cluster needs.
• Articulate college and university degree programs
  with apprenticeship and other training programs
  for workers without bachelors degrees (e.g.,
  Plumbers and Pipefitters Union and Mechanical
  Contractors in central Pennsylvania).

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V Industry transplantation (e.g., auto
manufacturing and supplier cluster in
Greenville-Spartanburg, SC)

• Align curricula with specific needs of local
  clusters.
• Provide technical assistance to suppliers.

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College and university promising practices for
working with all types of clusters

• Consult with cluster firms to learn their needs

• Collaborate with other service providers,
  Workforce Investment Boards, economic and
  workforce development organizations

• Be consistent with college or university mission

• Develop flexible educational programs

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Higher Education, Regional Economic Development,
and Federal Policy Improving the Connections
Regional Economic Development Needs Have Changed
I
Higher Education Can Make a Major Contribution to
Regional Economic Development
II
Federal Policy Is Not Designed to Address the
Range of Needs of Regional Industry Clusters
III
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Total Federal Economic Development Spending
(billions) Annual Average for 2000 to 2004
By one estimate, the federal government spends
about 188 billion annually on economic
development, about one-fourth of the federal
budget (Drabenstott 2006).
Total 188.2 billion
Source Drabenstott (2006).
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III Federal Policy

• Spending is fragmented among at least 13 cabinet
  departments and independent agencies.
• Infrastructure accounts for 39 of economic
  development spending.
• Higher education accounts for about 17 of
  spending. An additional 5 goes to research.
• Education spending is not well integrated with
  industry cluster needs.
• Research spending goes largely to top-tier
  research universities for cutting-edge scientific
  research.

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A few federal economic development programs
involving colleges and universities are, or have
the potential to be, connected to the needs of
industries at the regional level.

• Appalachian Regional Commission
• Education and training and research activities
• National Science Foundation
• Engineering Research Centers
• Industry-University Research Centers
• Partnerships for Innovation
• Small Business Administration
• Small Business Development Centers
• Multi-agency
• Small Business Innovation Research
• Small Business Technology Transfer

• Department of Agriculture
• Extension Service
• Department of Commerce
• Economic Development Administration University
  Centers
• National Institute of Standards Technology
  Technology Innovation Program
• National Institute of Standards Technology
  Manufacturing Extension Partnership Program
• Department of Labor
• Employment Training Administration Workforce
  Innovation in Regional Economic Development

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Federal Policy Reform Principles

• Link federal economic development programs more
  closely to regional industry cluster needs.
• Fund the full range of regional economic
  development needs
• Do not assume that applied research and
  development will follow from federal funding of
  basic research.
• Integrate education and training into other
  economic development programs.
• Promote collaboration between higher education
  institutions, firms, government, and other
  cluster members.
• Reduce program fragmentation.
• Give state governments, businesses, and regional
  organizations a greater role in directing the use
  of federal funds, while providing strong federal
  incentives to serve the national interest.

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Federal Policy Reform Some Possible Directions

• National Innovation Foundation

• Cluster Grant Program

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References

• Cortright, Joseph. 2006. Makings Sense of
  Clusters Regional Competitiveness and Economic
  Development. Washington Brookings Institution.
• Drabenstott, Mark. 2006. Rethinking Federal
  Policy for Regional Economic Development,
  Economic Review (Federal Reserve Bank of Kansas
  City), 1st quarter.
• Glaeser, Edward, and Albert Saiz. 2004. The
  Rise of the Skilled City, in Janet Rothenberg
  Pack and William G. Gale, eds., Brookings-Wharton
  Papers on Urban Affairs 2004. Washington
  Brookings Institution.
• Isserman, Andrew. 1993. State Economic
  Development Policy and Practice in the United
  States A Survey Article, International Regional
  Science Review 16 49-100.
• Lester, Richard. 2005. Universities, Innovation,
  and the Competitiveness of Local Economies.
  Cambridge MIT Industrial Performance Center.
• Reamer, Andrew. 2003. Technology Transfer and
  Commercialization Their Role in Economic
  Development. Washington Economic Development
  Administration, U.S. Department of Commerce.
• Safford, Sean. 2007. InnovateNow! Report.
  Manuscript, University of Chicago Graduate School
  of Business.

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v i s i t u s
www.brookings.edu/metro