Academic journal article Economics, Management and Financial Markets

Higher Education Systems Are Assuming a Larger Role in the Economic Development Efforts of Their States

Academic journal article Economics, Management and Financial Markets

Higher Education Systems Are Assuming a Larger Role in the Economic Development Efforts of Their States

Article excerpt

1. Introduction

As long ago as the Golden Age of Athens, when Socrates and Sophocles flourished in a city that rose to become the first great commercial power of the Mediterranean world, people knew there was a connection between higher learning and prosperity. "Athens is the school of all Greece," declared Pericles. "The fruits of the whole earth flow in upon us."

At two turning points in its history, the United States has ambitiously applied that insight. In the second half of the 1800s, the Morrill Act spurred the creation of a network of land-grant colleges that educated the people and developed the ideas needed to take the nation to leadership in the early 20th Century. Then, in the second half of the 1900s, the GI Bill sent over a million veterans to college, giving the nation the world's best educated and most productive workforce, and supercharging the growth of research universities that spawned the technologies with which we live today.

Today, with the United States facing global economic competition on an unprecedented scale, a third wave is gathering strength. In states across America, higher education systems, universities, and community colleges are working to help their states and regions advance in the new knowledge economy. From Springfield, Massachusetts, where a technical college has converted an abandoned factory into an urban tech park, to Raleigh-Durham, North Carolina, where research universities helped turn a sleepy backwater into a global powerhouse of innovation and manufacturing, to Sidney, Nebraska, where a community college operates a training academy that helped keep the headquarters of a growing national company in its rural hometown, communities today find that their hopes for the future are tied to institutions of higher education.

Many efforts like these are just beginning, and the ultimate results are not yet known. Many institutions are going through a learning experience, as they test out what seems to work best. However, some of the characteristics shared by the most active institutions in the field can be identified now. They have the leadership to make economic revitalization a priority, the culture to mesh that objective with their academic mission, the legal flexibility to mix and match assets and brainpower with the private sector, and the resources to make it all work.

Their efforts fall into two broad categories.

First, institutions and systems are advancing innovation - new technologies, new processes, new products - in their local and regional economies. This focus on innovation sees university faculty and leaders thinking creatively about how to leverage their strengths in knowledge creation to yield tangible economic benefits.

Second, higher education institutions and systems are pursuing strategies to help employers prosper and grow. They do this by deploying their strengths in knowledge transfer - through worker training, management counseling, help for startups, and other initiatives.

Taken together, these developments suggest that a new paradigm is emerging for the efforts that state governments have traditionally made to attract and keep industry, create jobs, and grow their economies.

In the 20th Century, states' economic development efforts centered on incentives, financial packages, cost comparisons, labor policy, permitting requirements, roads and water systems, and so. The 21st Century paradigm, in contrast, is shifting toward putting knowledge first. For states, increasingly, that means connecting their higher education systems more closely to their economic development strategies.

The thinking that first pointed to this new path came from the academy itself. Since 1990, when Paul Römer published a landmark article, "Endogenous Technological Change," in the Journal of Political Economy, economists at universities across the country have collaborated in developing a new theory of growth that puts knowledge - and not the traditional measurements of land and capital or labor and natural resources - at the center of our understanding of the wellspring of economic change and progress. …

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