37: Degrees of commerce
Exploiting inventions to fund education
The problem: under-funded universities
Universities complain that they are short of funds and many have become overly reliant on taxpayer support.
The idea: harness your brain-power
One way out is to set up university companies to market the skills and expertise of academic staff. The staff make money and gain valuable practical experience, while the academic institution gains independence.
Examples: science and research parks
Universities in the United States have a long experience in running highly successful commercial activities. Well known universities such as Harvard, Stanford and Chicago earn substantial sums of money from their research and consultancy activities. Stanford University in California earns tens of millions of dollars annually in support from corporations, foundations and individuals, in part through more than 40 industrial affiliate programmes.
American universities also pioneered the concept of research parks. Stanford, for example, created the Stanford Research Park in 1951 in response to the demand from the emerging electronics industry tied closely to the School of Engineering. The park is now home to more than 150 companies in electronics, software, biotechnology and other hi-tech fields.
Stanford's example was copied around the world. In England, Trinity College in Cambridge developed the country's first science park in the 1970s, which has attracted some of the world's leading companies including Microsoft. Collaborative research programmes between the university and business are encouraged, while companies are assured of the right to use any intellectual property arising from the research they sponsor. Science parks now surround many of the major university towns in Britain.
Tighter public purse-strings have forced universities in the United Kingdom to expand their non-governmental sources of income. One-tenth of UK universities' income now derives from the sale of services to business, charities and hospitals. This figure does not include the substantial income earned from government and research councils for project work
Several universities have established scientific and technological subsidiaries. For example, the University of Manchester Institute of Science and Technology has established its own company, Aromascan, to exploit some of its academic research while Nottingham University has negotiated with venture capitalists 3i to float its Law School as a public company. In Scotland, Edinburgh's Heriot Watt University has established its Business School as a separate business.
A number of universities have taken advantage of the rising demand for holiday and conference venues. By renting out student accommodation and meeting rooms during the vacation periods, those in the most desirable locations, like Oxford, Cambridge, or St Andrews in Scotland, can bring in a considerable income. Some have special deals for alumni, who return to their alma mater for holidays or reunions.
Warwick University, in central England, earns half its income from the private sector. Several London colleges earn the majority of their income outside the public sector. The world-famous London School of Economics (LSE) derives only around 40 per cent of its income from the UK government; London Business School a mere 25 per cent.
Some of the old polytechnics, such as South Bank in London, which have now been upgraded to university status, have led the way in pioneering commercial links with business and industry. De Montford University in Coventry is another example: it has done away with Vice Chancellors and Deans, and now has chief executives, executive directors, with governors acting as non-executive directors.
Assessment: colleges facing competition
To survive and prosper, universities must compete against one another as they have never done before. This has already happened in the US and UK, and a similar trend is now likely to occur in continental Europe. Taxpayers are no longer prepared to accept inefficiency; nor for that matter are many students, particularly if they are paying their own fees.
Traditional universities are being threatened by a host of new entrants, whether former polytechnics in the UK or distance learning institutions such as the Open University on the internet. One of the most interesting new initiatives in the UK is that adopted by the aerospace manufacturer, BAe Systems, which set up a 'virtual university', focusing on engineering and manufacturing technology, with plans to invest over £2 billion in this venture over the next ten years.
Universities themselves do not have to be state-finance or state-run. The London School of Economics was one of the last colleges to be established by the private sector in Britain, even though many of its founders were prominent socialists. In the 1980s a private university was established at Buckingham, and it remains entirely independent of the state. However, its pioneering example has not been followed elsewhere in the UK, despite some attempts to do so.
"To compete," argues Sir Douglas Hague, "universities will have to organize and operate in ways more like those of knowledge businesses themselves. Indeed, they will often have to form alliances with these newcomers if they are to go on engaging in activities which they have supposed were their own, as if by right".
For further information:
- Hobson, Dominic (1999)The National Wealth: Harper Collins.
- Hague, Sir Douglas (1991) Beyond Universities: A New Republic of the Intellect: Institute of Economic Affairs.
- Kedourie, Elie (1988) Diamonds into Glass: the Government and the Universities: Centre for Policy Studies.
- Butler, Eamonn (1987) A Degree of Privacy: Adam Smith Institute (London) www.adamsmith.org.
- Malcolm, Philip (1981) Light, Liberty and Learning: Adam Smith Institute (London) www.adamsmith.org.
- Any university of any note has its own extensive website. They are a mine of information. See for example:
Copyright 2002: Adam Smith Institute
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