The Role of the University, the Business Council of Australia, Steven Schwartz and Arizona State University's W. P. Carey School of Business. (March 16, 2006)

    Recently the Business Council of Australia took our universities to task for graduating students who are ill prepared to enter the workforce.

"Courses, need to be practice-based, relevant and appropriate for business innovation needs."

Now Steven Schwartz, the newly installed vice-chancellor of Macquarie University writing in The Sydney Morning Herald has taken exception to this restricted view that the role of universities should be merely that of institutions of advanced vocational training.

Professor Schwartz continues, "While not denying that graduates must work, many academics believe that their job is to educate students for a lifetime of learning and self-fulfilment. This tension... between the practical and the theoretical, between teaching skills and opening minds, has long divided academics, business people and students themselves."

He decries that "[w]e have put so much emphasis on the utilitarian aspects of our activities that organisations such as the business council have become convinced that universities exist mainly to confer economic benefits. Now, economics is vital. The country needs educated people and graduates need jobs. A sound economy is also essential if we are to achieve our social goals. But first we need to have goals. Otherwise, we are a nation of means without ends."

Schwartz then asks rhetorically, "How should universities respond to critics such as the business council?" and replies rather vaguely, "We should begin by stating clearly what we believe to be the balance between vocational and theoretical teaching, which may differ from university to university and even from course to course. We must also make clear to the public exactly how academic research improves teaching. Most importantly, we must articulate and defend our moral goals. Universities are engines of social mobility. We enrol students from all sections of the community, we prepare them for work and we absorb them into ethical communities. In this way, we achieve our true purpose - advancing the cause of freedom and liberty in Australia."

But the recent paper Universities in the U.S. National Innovation System by Kent Hill, Research Professor, Department of Economics and Center for Business Research Arizona State University's Carey School of Business, is far more precise in addressing the question.

 Dennis Hoffman, professor of economics and associate dean for research at the W. P. Carey School says of Hill's paper, "There has been some controversy about how much the public sector should spend on R&D infrastructure and what role universities should play," and observes that Hill's paper, along with the other work already under way [at the School], responds to that controversy by articulating the value proposition for universities as performers of basic research.

Professor Hoffman summarises the matter saying that in contrast to the other types of R&D (including development, which is directed at production and design; and applied research, aimed at meeting a specific need with particular consideration for commercial application), basic research is directed toward developing big-picture understanding and enhancing general knowledge, and for that reason, basic research is the foundation of all other knowledge -- and the ultimate base of an innovative society (our emphasis).

He contrasts the United States with the rest of the world saying that the strong coupling of basic research with education -- as American universities do -- provides our next generation of researchers with the ability to flow with technological changes by being firmly grounded in the fundamental principles of a subject. That's the kind of understanding gained through basic research.

Professor Hill points out private industry conducts less than 20 percent of the US basic research. He says that if funding for basic research was left to private industry, it would be under-funded because, "Industry perspectives are too narrow, and firms will have a difficult time appropriating commercial value from basic research findings."

For most private firms, appropriating commercial value from activities -- in other words, achieving returns on investment -- is critical. Basic research benefits are long-term in nature, diffuse, and difficult to predict. Professor Hill says simply, "not the kind of benefits commercial firms profit from." And that's why government support for basic research at universities is critical. "Because of spill overs and an inability to appropriate commercial value from research findings, societies will under invest in basic research unless it is supported by the government."

 Furthermore, Hill contends that universities are better suited to basic research than are private firms or other research organizations (such as government laboratories). Universities and colleges perform nearly 60 percent of basic research in the United States, and because the involvement of students in basic research at universities, this allows for easier transfer of research findings to industry as graduate students take their knowledge to work in industry after graduation.

In addition the fact that US universities require students to take a range of classes, university-trained researchers are better able to have a big-picture understanding than are researchers trained without broad curriculum requirements.

While private industry is not well-suited to basic research, it does well in applied research and development. Indeed, private industry in the United States performs over 90 percent of development and about 70 percent of applied research. Unlike universities, private firms are intimately involved in the market for their products and can make good commercial judgments in areas of product or process development.

Effective public policy requires that governments provide financial support for basic research, says Hill. "The best policy for basic research is that it be subsidized by the government, with other users allowed free access to research findings." That way, researchers can cover their costs while the findings can be widely disseminated.

Professor Hill than addresses a point which has also occupied and preoccupied the Australian federal government and bedevilled our universities.

He  notes that universities have responded to perceived threats to government support of research by trying to commercialise their research programs, a move that makes some economists uncomfortable. When government pulls back from research and universities feel forced to look to private industry for funding, Hill suggests there is the worry that the nature of that research will change and the research findings will become proprietary.

He says that the Bayh-Dole Act, passed in 1980, was the first step in the broader effort by universities to profit from their research. The act allowed universities to patent research funded by the federal government. Its logic, Hill writes, is that "intellectual property protection will enable university researchers to realize a commercial return on their investments and this will serve to accelerate commercial innovation."

According to Hill, this logic is very different from that recommended by economic theory. "To optimally invest in and develop new knowledge, research should be publicly funded and the findings should then be liberally disclosed and disseminated."

Among the problems with commercialisation of basic research are difficulty identifying parties for whom the research will have commercial value and bringing them into the licensing process.

"Scholars are concerned that university licensing of research will involve restriction of publication and other avenues of dissemination that will ultimately undermine the value of research by reducing the volume of information flowing to potentially interested parties."

Professor Hill also claims, "In other countries, few universities rank among the best research institutions, and many of the best research scholars in science and engineering do not teach.". And that top U.S. researchers are also teachers presents an efficient way for knowledge to be diffused throughout the country -- from innovative professors through graduate students who, upon graduation, take their knowledge to others.

The U.S. graduate education system according to Hill also requires students to develop a broad range of knowledge. "Students are not simply research students. They are expected to master a broad range of skills which will help prepare them for a long research career."

That requirement -- unique to U.S. graduate schools -- fosters the big-picture understanding that Hoffman says is so critical in an innovative environment.

Finally, Hill is concerned for universities performing basic research including the move to commercialise their research and says that if the U.S. is to remain a leader in innovation, people will need to become more cognizant of the importance of basic research and universities performing government-funded research.

Below is the summary of the main points in Kent Hill's paper