A research study by Arora et al (2023) was recently covered in The Economist, arguing that universities are hindering productivity growth. However, drawing such a sweeping conclusion from specific context and data is ambitious.

In terms of context, the study primarily focuses on the post-war period, characterised by significant shifts in government policies, economic priorities, and university-industry dynamics, aligning with the technological advancement of the United States during that time. This raises concerns about the applicability of the findings beyond this particular era.

Regarding the data, relying solely on papers and patents to gauge the impact of science may oversimplify the intricate relationships between universities and businesses. Indeed, the limitations are significant enough that even minor adjustments to the methodology can yield contradictory results. Arnaud Dy`ever from LSE has recently attempted to address these limitations, unveiling a strikingly different conclusion: public R&D spillovers have three times the impact on firm productivity compared to private R&D spillovers. International evidence also shows that investment in public R&D has had a clearly positive effect on productivity growth.

Long-term vision: recognising the value of curiosity-driven research

Furthermore, the criticism levelled at universities for focusing on fundamental research overlooks its crucial long-term impact, considering that scientific breakthroughs like the internet, initially born from basic research, can take decades to mature into powerful economic engines.

University commercialisation is only one facet of a multifaceted innovation landscape

Arora et al.’s claim that university commercialisation may stifle corporate R&D is a contentious one.  While a select few universities in the US and UK actively generate patents and spin-outs,  the bigger picture reveals a complementary dynamic. This is evidenced by the UK’s 2021/22 external income breakdown. Universities secured a staggering £5.7 billion, yet only 6% stemmed from licensing and spin-outs. The substantial remainder came from collaborative and contract research alongside professional training. This suggests university commercialisation strengthens, rather than replaces, existing research efforts, fostering a multifaceted knowledge ecosystem.

Beyond economic output: A multifaceted impact

Universities contribute to society and the economy in diverse ways, extending far beyond simply boosting short-term economic growth. Their core mission lies in generating and disseminating fundamental knowledge, teaching and training the future highly skilled workforce, fostering intellectual curiosity, and laying the groundwork for future advancements. This knowledge becomes a public good, benefiting individuals, businesses, and society.

A significant aspect highlighted by Arora et al’s paper is that private businesses benefit most through the mobility of researchers between sectors. This fundamental finding underscores the importance of acknowledging the multifaceted impact of universities.

Additionally, universities:

  • Cultivate critical thinkers and problem solvers: Graduates equipped with analytical and problem-solving skills are invaluable to various sectors.
  • Serve as innovation incubators: Universities foster ideas through research and the intellectual environment they nurture. These ideas often form the foundation for new businesses and contribute to entrepreneurial innovation.
  • Bridge the gap between academia and industry: Universities facilitate collaborative communities, fostering partnerships and knowledge exchange between scholars and industry leaders.
  • Boost local economies: The available evidence underscores the significance of the geographical aspect in university-led innovation. Existing research indicates that the presence of universities exerts positive spillover effects across different places. The evidence also shows that university knowledge spillovers strengthen with geographic proximity, density and local skills. It would be intriguing to investigate whether the findings in Arora’s paper remain consistent when delving into national and regional variations.

A system of collaboration

Rather than seeing universities and corporations as competitors, they should be seen as part of a wider system in which interaction and collaboration is valuable. Universities can tailor their research to real-world applications by incorporating industry input, and companies can tap into university expertise and talent to speed up innovation. Knowledge exchange happens in many ways and directions. This highlights the significance of knowledge co-creation, which involves integrating academic and business knowledge to tackle specific challenges (See De Silva et al., 2023). This collaborative system allows for the generation of  economic value (De Silva et al., 2021; Etzkowitz et al., 2008, Grimaldi and Grandi 2005;  among others) and/or social value (OECD, 2023; Trencher et al., 2017; Trencher et al., 2014; among others).

The enduring value of basic research

It’s important to acknowledge that fundamental research forms the foundation for innovation, even though not every research project will lead to immediate, commercially viable applications. Driven by the insatiable curiosity of world-renowned researchers, basic research has been and will continue to be the driving force behind humanity’s most significant advancements. However, much thinking about the commercialisation of research adopts an inappropriate and misleading ‘linear model of innovation’ where university research directly generates innovations that are then transferred and commercialised.

Summing up

Arora et al study provides valuable insights, but it’s crucial to avoid solely blaming universities for stagnant productivity while ignoring the broader picture. Universities play a multifaceted role in economic growth, and their long-term contributions cannot be solely evaluated through short-term metrics like patents. By recognising their diverse contributions, fostering collaboration, and adapting to evolving economic realities, universities can remain powerful engines for progress and prosperity.