Looking to economise on scientific research? Bad idea.

"Innovation policy doesn’t always place sufficient emphasis on scientific research,” according to Professor Bart Leten. “It’s often assumed that education is the main way that knowledge institutions can affect the innovative performance of local businesses.” But is that really the case? Together with two colleagues, he has shown that scientific research does indeed support industrial innovation activities.

Education and scientific research

Knowledge institutions, such as universities, colleges of higher education and business schools, play an important part in local innovation systems in two different ways: through education and through scientific research.

“First of all, they educate and train students and by doing so supply skilled labour,” explains Bart. “The knowledge, skills and techniques acquired enable graduates to secure jobs where they can make a significant contribution to innovation and economic growth. And because young people tend to stick around in the city or region where they studied, businesses in the immediate vicinity can reap the benefits of their education, by having first pick of the graduates.

“Secondly, knowledge institutions conduct scientific research, which helps them generate and develop knowledge – knowledge that companies can build on. There are various ways of doing that. For instance, businesses can link up with local scientific networks and platforms associated with knowledge institutions, collaborate with academics and research groups, or involve PhD students in their own corporate R&D. Here, too, the impact will tend to be localised, since knowledge spillover is facilitated by geographical proximity.”

Impact examined

“Previous research focused only on either education or research,” he adds. “That may allow you to gauge some kind of effect of knowledge institutions, but you can’t draw any conclusions about the relative importance of both factors, which may well be relevant in terms of policy.

“So our study jointly analysed the impact of the two core activities of knowledge institutions – education and research – on the innovative performance of firms located nearby. Since the effects of education and scientific research are not necessarily identical for all sectors, we studied companies in four different manufacturing industries: chemicals, electrical engineering, pharmaceuticals and mechanical engineering, spread across more than a hundred provinces in Italy.”

Intuition confirmed

What were the findings? Bart: “Firms benefit from both the education and the scientific research delivered by local knowledge institutions. The impact of scientific research was most significant in the most R&D-intensive industries where the scientific knowledge base is still changing rapidly, i.e. electrical engineering and pharmaceuticals. Just think of anything to do with nano-electronics and embedded systems and the developments in biotechnology, for instance in the fields of nanobodies and gene silencing.”

How do you account for that? “So much is changing so fast in those two sectors, which makes it all the more important for companies to have a front-row seat and maintain close relationships with research groups and spin-offs of knowledge institutions,” Bart explains, and adds with a smile: “These findings may not come as a surprise, but it’s always nice to have your intuition corroborated by empirical research.”

What conclusions and recommendations can be drawn?

  • Firms should ideally have one or more business locations near knowledge institutions. Their localisation policy should take into account the presence of these educational and research centres.
  • Knowledge institutions would be well-advised to invest – or continue to invest – in scientific research, since knowledge creation through research is an important asset.
  • Governments are subsidising scientific research through a variety of channels. “Yet this is one area where people are trying to economise these days, and the EU is no exception,” comments Bart. “Our study shows that this is not expedient. It’s important to ensure that policy designed to support innovation systems continues to devote sufficient attention to scientific research.”
Italian dataset

The data analysed in this study relates to companies and knowledge institutions in 101 Italian provinces and covers the period from 1992 to 1998. Education was measured based on the number of graduates, while scientific research was approximated by the number of articles published in peer-reviewed journals. The innovative performance of firms was determined by means of patent data.

Source: The paper “Science or graduates: How do firms benefit from the proximity of universities?” was published in Research Policy, 43 (2014), pp. 1398-1412.

About the authors
Bart Leten is Associate Professor of Innovation Management at Vlerick Business School and KU Leuven and Programme Director of the Masters in General Management at Vlerick Business School. Paolo Landoni is Assistant Professor of Innovation at the Polytechnic University of Milan (Politecnico di Milano). Bart Van Looy is Full Professor of Innovation Management at KU Leuven and Flanders Business School.

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