4.1 Each of the four case study regions has noteworthy examples of good practice in the attempts by HEIs to engage with their surrounding communities. These can be considered by looking at two broad areas: first, the role of HEIs in supporting regional economic development strategies (through the commercialisation of research, inward investment and small firms, community-based linkages, etc); and second, the outputs of HE in terms of labour market and skills initiatives.

HE and regional economic development strategies

4.2 The growing awareness of the role of HEIs in supporting local and regional economic development is partly a result of the importance of universities and colleges as employers in their own right and as purchasers of services. This has prompted numerous studies which have estimated the impacts of HEIs and the multiplier effects engendered by HEI ‘business’(for example, Armstrong, 1993; CVCP, 1994; Robson et al, 1995; Harris, 1997). At a broader level, HEIs also have a role in supporting local and regional economic development. This occurs through a variety of aspects of HEIs’ work. There are innumerable instances of creative attempts by HEIs to contribute to such endeavours: involvement in local and regional partnerships; links with local business and industry through targeted training and research consultancies; the establishment of research incubators, of science parks, of quasi autonomous R&D companies and the commercialisation of HE research via spin-off companies and patents; student placements in local businesses and the tying of student projects to the needs of businesses and local community groups; and through HEIs’ wider role as part of a network of knowledge industries, a feature which itself is used in local and regional promotion to attract overseas inward investment.

4.3 The perception of the growing importance of these aspects means that economic development policy-makers are increasingly attempting to draw universities and colleges into their strategies. This has led to competing arguments about the degree to which, and the ways in which, HEI involvement at regional level might be made more effective. Our survey revealed several noteworthy, if somewhat isolated, instances of good practice with regard to HEIs’ role in supporting regional economic strategies.

Commercialisation of HE services

4.4 Commercialisation of HEI research is one area where collaborative HE activity, sometimes at the regional scale and sometimes within cities, can be seen as contributing directly to wider economic growth, and one where (in the case of Scottish Enterprise) the existence of a strategic ‘regional’ economic agency has helped to facilitate such developments. An important part of the role of HEIs in supporting regional economic development has involved attempts to bolster university research and consultancy activities which are of benefit to local companies. At the national level, there has been endorsement for HE’s role in university/industry partnerships through the White Paper Realising Our Potential (Office of Science and Technology, 1993), and this has been reflected in the 1990s in each of the case study regions. In the North West, one of the responses to the White Paper came with the launch of the industry-funded Faraday North West Network in 1994, the aim of which was to promote ‘a more effective network of industrially-relevant research and technology’ across the region (Innovation North West Secretariat, 1994). Schemes supported through the Faraday initiative have included placements for higher degrees in industry, funds to cultivate HEI-industry networking, and the realisation of the scale economies necessary to enable small businesses to commission and fund research. This is one example of the many such regionally based initiatives which are replicated elsewhere. In London, for instance, the Thames Gateway Technology Centre, supported by four HEIs (London Guildhall, City and East London universities and Queen Mary and Westfield College) is one attempt to bridge HEI research and consultancy services and employer needs; in the East Midlands, the Space Science and Management and Enterprise Development centres supported by local TECs and de Montfort, Leicester and Loughborough Universities are some of the many others.

4.5 In Scotland, experience with regard to these types of initiative is more advanced. The existence of a national economic development and training agency in the form of Scottish Enterprise has enabled some significant progress to be made, for example in the commercialisation of research, developing business acumen amongst HEI staff, and the development of entrepreneurial skills amongst students. One noteworthy example is the establishment by Scottish Enterprise of the Technology Ventures Team, set up to implement the Commercialisation Strategy for Scotland, the aim of which is to increase the rate at which HEI science and technology research is commercialised. This is seen as a key area of weakness, where Scotland (and, indeed, the rest of the UK) has under-performed relative to competitor nations, and in particular to the United States. Scottish Enterprise commissioned research on the experiences of different approaches to commercialisation of research in the US, with instances of best practice disseminated through a series of seminars. This has been important in influencing the decision to establish a commercialisation hub at Edinburgh University (based on the CONNECT model in California) which aims to provide a single focus for researchers from across Scottish HEIs, together with investors and businesses. This adds to other attempts to support the commercialisation of research, for example through the joint SHEFC and Scottish Enterprise project to fund the development of commercial spin-off companies from HE research. But even in the Scottish case, these initiatives are somewhat tentative, low profile, and generally have very limited resources; the hope being that they will provide important demonstration effects which in future will extend across the Scottish HE sector.

4.6 Commercialisation initiatives exist in many English regions, although at a generally more modest scale than in Scotland. The Knowledge House, a collaborative venture to improve small firm competitiveness, financed by the North East universities and the Open University and the European Regional Development Fund, is just one recently launched example (Tighe, 1997, p14). In respect of commercialisation the North East is probably typical of the more proactive clusters of regional HEIs. Collectively or individually, its universities have established a European Process Industry Competitiveness Centre, a Centre for Achievement in Manufacturing and Management, a Centre for Low Volume Engineering, a Northern Informatics Application Agency and the Knowledge House (Goddard et al, 1996, p 44). Yet the impression remains of general under-development of potential commercialisation and of uneven development. The case for systematic mapping of what is already under way, dissemination of good practice and attention to constraints and inhibitions is generally accepted.

4.7 Following Technology Foresight, there is a growing appreciation in England, among the larger firms and the government regional offices, of the potential for modernising regional economies through a greater commercialisation of higher education’s knowledge base. Inward investment agencies are similarly aware of the attractive powers of universities which have a good record of collaborative research and development with inward-investing firms. In English regions this appreciation has often been slow to translate into greater activity except where individual institutions and firms have developed their own collaborations. In many regions, despite technology audits in universities, the basic audit of the extent and nature of such commercialisation has not yet taken place, so it is very difficult for anyone to identify the real scale of current exploitation and the shortcomings. It has been pointed out that, as a result, no one outside particular institutions can say what is working and why, what might be replicated, and whether existing incentives such as employment and remuneration structures for academics or government promotional activities need modification.

Inward investment and small business development

4.8 HEIs have had some involvement with inward investment initiatives but again only at a limited scale. In the North West, five of the nine universities sat on the HEI Working Party of Inward, the region’s inward investment promotional agency. In the East Midlands, regional development was generally considered by interviewees to be at a less advanced stage than in the North West – largely as a result of the lack of top-down incentives to regionalism in the absence of Objective 2 status for European Union Structural Funds – but again HEIs were seen as having a valuable contribution to make to the attraction of overseas inward investment.

4.9 In Scotland, similarly, HEIs were seen by one interviewee as ‘a significant reason why companies [invest]...It is not so much for financial packages...a key sell for us is the skills base’. While our survey was replete with similar warm words about the immense (but unspecified) value of HE, in the Scottish case there were arguments that the Silicon Glen area might already be seen as constituting, in extremely embryonic form, the sort of ‘learning region’ – with tentative linkages between HE teaching and research, and the network of largely overseas electronics companies – about which some policy-makers have made great play. One respondent with close links to Scottish Enterprise HE activities cited the existence of key institutions which facilitated the development of these networks. He argued that the Scottish Electronics Forum (SEF) and the Scottish Opto-Electronics Association (SOEA) helped to facilitate dialogue between firms and HEIs, with the teaching and research agenda of the latter very much influenced by the former, for example through the focus on forward graduate supply and demand of the SEF’s long-term skills group, or through SOEA’s close links to research groupings in HEIs. The existence of these channels of communication, it was argued, meant that Scotland was in a strong position to attract inward investment.

4.10 The attraction of overseas inward investment has generally been seen as one of the core elements of economic development in the UK in the 1980s and 1990s. The other has been nurturing small business development, and here too there have been attempts to harness HEI resources to aid SMEs. However, while attempts to attract inward investors have met with some success in some of the UK’s under-performing regions (amongst whose number might be included Scotland and the East Midlands and North West case study regions), this is less true of SME growth. In the case of Scotland, the low SME start-up rate has been viewed as a major problem, and one to which HEIs have not provided a solution since, in the words of a non-HEI respondent, ‘very little of the education sector suggested there could be worthwhile careers from starting your own business’. The response from Scottish Enterprise has involved establishing seven entrepreneurship centres shared between thirteen HEIs, with undergraduate and postgraduate teaching combating what one interviewee saw as an overall HE antipathy towards entrepreneurial skills. Attempts to foster such skills are also evident in the English case study regions; for example South Derbyshire TECs working with Derby University to provide Youth Credit training in inner-city SMEs. There are also examples of attempts to foster the direct creation of (as distinct from the support of existing) micro-businesses and SMEs. In the North West, for example, the creation of Campus Ventures within Manchester University provides an incubator for micro businesses established largely by graduates and academic staff. Perhaps significantly, its development was made possible through European Regional Development Fund (ERDF) resources.

Cultural and community development

4.11 There is a need to recognise that the contribution of HEIs to local and regional development is not restricted to a narrowly-defined economic or labour-market impact. The ‘softer’ areas represented by their impacts on culture, tourism and community development are important to the quality of life in localities. The range and quality of entertainment and the inclusion of local communities in the communal activities of their areas are significant attributes of the ability of regions to offer high-quality lifestyles and to attract in-migration and inward investment. As such consumer dimensions become ever more important in a ‘post-industrial’ economy, the contributions of staff and students within HEIs to such activities should be recognised and encouraged. While universities have contributed to the arts for many years – through a range of activities from support for campus-based theatres to visiting professorships for artists – the emphasis placed on the arts has grown in recent years as cultural and entertainment industries have come to be seen as critically important to the successful development of ‘post-industrial’ economies. Amongst our survey respondents, HEIs were seen as important to this in a number of respects. In addition to their long-established, but still important, role in providing performance spaces, galleries and supplies of arts graduates, some stakeholders cited the growing alertness to the importance of HEI staff and students in sustaining the market for such activities. In the North West region, for example, buoyant student recruitment has underpinned – and has itself been sustained by – Manchester’s status as leading provincial centre for popular culture. In Glasgow, likewise, there is said to be an awareness on the part of the city’s Local Enterprise Company, the Glasgow Development Agency, of the importance of the HE sector ‘not only as a training and research capability but as a significant industry in its own right’, and one which generates important multiplier impacts for culture and leisure-based industries in the city.

4.12 An interesting example of collaboration with arts boards was cited in London where three types of collaboration have been developed: a commissioning relationship, with the London School of Economics, for a study of London’s cultural industries; a regular contract, involving the Institute of Education, to train artists to work in schools across the whole of London rather than on a borough-by-borough basis; and a developmental partnership based on fields of mutual interest. Interestingly, the nature of funding arrangements has impinged on such collaborations in the field of the arts since the trend for HE to require accredited outcomes from an increasing range of CET does not serve the arts cause well. Many desirable relationships are informal and developmental. Lottery funding, on the other hand, has provided a valuable alternative since it can be used to promote (non-accredited) developmental outcomes, including learning and teaching not associated with formal qualifications.

4.13 Such ‘softer’ aspects of regional development raise the issue of the increasing weight placed by economic development policy-makers on the attraction of students, and – perhaps even more importantly – on the retention of graduates. Not only is this seen as vital in helping to support the development of cultural industries, it also serves in a wider sense as a prop for local and regional economies by contributing towards human resource endowments, and by exercising spending power on local goods and services. This is particularly so in areas like Yorkshire and Humberside and London where, according to a recent HEFCE report on student domiciliary origins, there are disproportionately large student populations (HEFCE, 1997). Conversely, seepage of young people from local and regional economies – either to study at other universities or after graduation – has deleterious impacts for areas like the South West of England or Northern Ireland. In the case of the latter, it is estimated that an additional 12,500 HE places would have to be created to sustain levels of graduates at rates similar to those in Scotland, and even this might fail to address the problem of post-graduation seepage.

The role of HE in labour market and skills initiatives

4.14 Most HE provision continues to be dominated by a ‘producer’ perception of what is best as a learning experience. There is a seemingly perverse support among most HE providers for, on one hand, a free-market choice of subject and course and, on the other, a national allocation system of student numbers to institutions. Amongst many non-HEI respondents there is a widespread perception of unmet regional needs both of individuals and of organisations. This can be interpreted as concern about the workings of the local market – in new graduates, in continuing professional development (CPD) or for R&D services – and its interaction with a fragmented and poorly-functioning local system for identifying local needs and supplementing the market with developmental subsidies.

4.15 There is a business view that the extent of local collaboration between firms and HEIs is determined fundamentally by the competitiveness of institutions relative to the competitiveness of rival suppliers. Any increase in such business depends on the institution being able to offer expertise which is more relevant to local employer needs, or in a form and within a timescale that the employer wants. Any local collaboration ‘problem’ reflects a lack of competitiveness in fields such as CPD or applied research and development, where institutions frequently face effective non-institutional competitors. If institutions wish to meet more of the needs of local organisations they have to make themselves more competitive.

4.16 This case for relying on the market mechanism to meet the local needs of organisations depends on two key assumptions: that the local market is working properly; and that buyers know their business. If either assumption is unsafe, it may be desirable to intervene in the operation of the market.

4.17 With respect to the first assumption, it is widely recognised that some firms – SMEs invariably being cited – are hindered by high information and transaction costs. It is also widely accepted that existing attempts by Business Links and TECs to reduce these costs are not adequate to the scale of the problem. With respect to the second assumption, no respondent revealed doubts about the capacity of firms to identify and to implement an optimal skill strategy to fit their product strategy. However, the continuing slow progress of Investors In People and strong survey evidence regarding the sizeable fraction of firms without any training or HRD plan suggest that firms do not always know their business when it comes to identifying skill needs. Again it follows that it will not always be safe to leave the identification of sub-regional or regional skill needs entirely to the market. For example, the seminar was reminded that all markets are socially constructed, and it could be that the way in which the private demand of individuals for higher education is socially managed requires both some redirection and also greater coherence – to compensate for many years of ad hoc adjustments. This supports the view that there is a need for HEIs to play a central role in determining regional HRD strategies.

4.18 Another important issue is the potential for bolstering HE activities which contribute towards demonstrable labour market needs, and the scope for doing so at the regional scale. The consensus from the telephone survey of non-HEI regional stakeholders was that few HEIs are as sensitised to skills needs as they might be. Although the UK HE sector performs well relative to competitor countries (as borne out by the national skills audit established in the wake of the second Competitiveness White Paper), some of the local stakeholders canvassed felt that HEI resources could be harnessed more effectively in trying to meet needs in key, specialised areas, most of which are in science and technology fields. While there are arguments that any such shortages will eventually be met through the ‘natural’ operation of market forces – and, indeed, that the competitive jostling for students amongst HEIs actually helps in this respect by encouraging new courses in areas of unmet demand – there are some compelling arguments in favour of a more proactive approach to meeting higher-level skills needs.

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