Universities ‘failing to boost growth’? That’s ‘overly dramatic’

Companies’ lack of capacity to absorb ideas is big part of picture, says author on paper touted as evidence for economic failure of academic research

March 4, 2024
Source: iStock/f11photo

“Universities are failing to boost economic growth”, ran the Economist headline on its recent article about a journal paper looking at the effect of public science on corporate research and development. But that’s “probably overly dramatic”, according to an author on the paper, who said a key message from it is that when big companies no longer have the capacity to absorb university research, then “university research by itself won’t do much” for innovation – unless it is “embodied in people or inventions”.

Ashish Arora, the Rex D. Adams professor of business administration at Duke University, was lead author on the study, published as a National Bureau of Economic Research working paper.

The study analyses a wealth of US data from Digital Science’s Dimensions database on scientific publications by corporations, universities and public research institutions, and on federal funding for this research; on scientists profiled in the American Men and Women of Science directories, including their links to companies; on PhDs from the ProQuest Dissertations & Theses Global database; and on companies’ financial information from S&P’s Compustat North America.

The paper concludes that “abstract knowledge advances” in the form of journal papers “per se elicit little or no response” in terms of fostering innovation in large companies, and that university inventions “reduce the demand for internal research by corporations”.

“Our findings question the belief that public science represents a nonrival public good that feeds into corporate R&D through knowledge spillovers,” adds the paper, co-authored also by Duke’s Sharon Belenzon, Larisa Cioaca and Hansen Zhang, plus Lia Sheer of Tel Aviv University.

But when asked about the Economist headline for its article about the paper, Professor Arora told Times Higher Education it was “probably overly dramatic”.

“It is clear that we’ve had a fairly large, sustained increase in university research without a concomitant increase in productivity growth…Which way any causal relationship exists is an important question, but one that’s clearly not been settled,” he said.

Professor Arora noted that “private [corporate] investment in R&D – mostly D – has steadily increased in America to the point where [it] accounts for about 70 per cent of American R&D. So, one could just as easily have claimed that private R&D is failing to boost productivity growth.”

The paper also concludes that “human capital trained by universities fosters innovation in firms”.

“Universities produce many things,” said Professor Arora. “The Economist headline was about a null result – which is the abstract research that universities produce in the form of papers. That doesn’t seem to help [companies’ innovation] very much on average. But two other types of things universities produce are clearly effective: in particular, the knowledge that’s embodied in people, in the form of PhDs, is helpful.

“And, also, the knowledge that’s more downstream, in the form of patents that universities produce – that too has an effect on corporate R&D.”

The paper says its findings “confirm that firms, especially those not on the technological frontier, appear to lack the absorptive capacity to use externally supplied ideas unless they are embodied in human capital or inventions”.

The limit on growth is the rate at which firms can convert ideas into innovations, it adds. “In other words, productivity growth may have slowed down because the potential users – private corporations – lack the absorptive capacity to understand and use those ideas.”

“We need companies that are capable of absorbing this research,” said Professor Arora. “Sometimes that’s start-ups. But we also need the established incumbent firms, the big companies that account for the bulk of R&D, to have that capability. When that is missing, university research by itself won’t do much – until such time it is embodied in people or inventions.”

Professor Arora also highlighted the study’s findings of “significant differences across sectors. For example, if you look at life sciences, you would…see that university research, even the abstract kind, does have a positive effect.”


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Reader's comments (1)

You might start by asking is it the job of universities to boost economic growth? I looked at my University's charter https://secretariat.leeds.ac.uk/home/university-charter/ The word "economic" occurs 0 [zero] times as does the word "growth" Instead the words degrees, students, knowledge, scholarship feature heavily. For that matter there was nothing about economic growth in my contract nor in my duties or the criteria on which performance and promotion were assessed Still the charter dates from 1904 and society imight have changed. However of govt and society want universities to do certain things then 1) they need tosay so explicitly 2) unis in turn need to decide how much of staffs time should be spent doing those things and how that is balanced with scholarship, teaching, research etc. 3) how the success of those activities is to be measured 4) how the time spent is costed and paid for Otherwise articles like this are as pointless as complaining that the army is failing to secure an adequate supply of goldfish.