1

ACADEMIC CAPITALISM;

POLITICS, POLICIES AND THE ENTREPRENEURIAL UNIVERSITY

Baltimore, MD: Johns Hopkins University Press, 1997

Sheila Slaughter
Institute of Higher Education
212 Meigs Hall
University of Georgia
Athens, GA 30602

Larry L. Leslie
Institute of Higher Education
106 Meigs Hall
University of Georgia
Athens, GA 30602
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TABLE OF CONTENTS

Chapter One: Academic capitalism

The scope of change

Macro changes that shape higher education

Faculty and institutional response to political economic change and resource

dependency: Australian cases

Chapter Two: Academic science and technology in the global marketplace

Industrial and post-industrial economies

Winners and losers: theories of globalization

Globalization and higher education

National higher education policies

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Convergence of higher education policies

Chapter Three: Organizational turbulence and resource dependency

The connections among higher education revenues, expenditures and academic

labor

Resource dependency theory

Separating cause from effect, and data problems

Financing higher education: The United States

Financing higher education: the United Kingdom, Australia and Canada

Conclusion

Chapter Four: Academic capitalism: advantages and disadvantages

Entrepreneurial academic units

Costs and benefits

The benefits-costs taxonomy

Institutional finance policies influencing academic capitalism

Conclusion

Chapter Five: Technology transfer strategies as a response to resource dependency

Central administrators

Center heads and professors

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Other faculty, post-doctoral fellows and graduate students

Conclusion

Chapter Six: Entrepreneurial knowledge

Basic and applied research

Recognizing the market potential of science

Negotiations with industry and government over intellectual property

Vagaries of the marketplace

Consultancies

Entrepreneurial knowledge

Chapter Seven: Reprise: Academic capitalism

Global political economic change and national higher education and R&D

policies

Resource dependency and changing patterns of national higher education

finance

Incidence of academic capitalism in universities

Institutional leaders and center and department heads academic capitalism

strategies

Faculty as market actors

Academic capitalism and distribution of power within research universities

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Academic capitalism and undergraduate education in U.S. public research

universities

Last words
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CHAPTER 1: INTRODUCTION

This book examines ongoing changes in the nature of academic labor in the

period 1970-1995, with an emphasis on the 1980s and 1990s. We argue that the

changes currently taking place are as great as the changes in academic labor that

occurred during the last quarter of the nineteenth century. As the industrial revolution

at the end of the nineteenth century created the wealth that provided the base for

postsecondary education and attendant professionalization, so the globalization of the

political economy at the end of the twentieth century is destabilizing patterns of

university professional work developed over the past hundred years. Globalization is

creating new structures, incentives and rewards for some aspects of academic careers

and is simultaneously instituting constraints and disincentives for other aspects of

careers.

THE SCOPE OF CHANGE

We are not the only ones to argue that higher education as an institution and

faculty as its labor force face change unprecedented in this century. David Brenneman

(1993) deploys financial data persuasively, making the case that state and federal

funds are diminishing as part of the higher education resource mix. He does not see

these financial changes as an aberration in historical funding patterns, but as a new

reality to which higher education will have to accommodate. James Fairweather (1988)

studies how colleges and universities try to compensate for diminished government

revenues through liaison with business and industry, through partnerships focused on
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innovative product development, and through the marketing of educational and

business services. Patricia Gumport and Brian Pusser (1995) examine the power

accrued by state system administrative offices to shape programs and curricula and to

standardize and routinize faculty work, while costs are transferred to students. William

Massy and Robert Zemsky (1994, 1995) speak to changing patterns of academic work,

driven by an academic ratcheting process that encourages ever more research and is

accompanied by a complex "administrative lattice" to manage research, especially the

growth of research on the perimeter of the university, where entrepreneurial centers

and institutes bring in increasing amounts of external funds. Gary Rhoades

(forthcoming) writes about the legal and economic changes that promote increased

management prerogatives to shape academic work and the concomitant loss of power

on the part of unionized faculty. His analysis of union contracts reveals the erosion of

faculty ability to set work loads, to establish staffing parameters, and to set broad

curricular directions. Henry Etzkowitz, in a forthcoming book, takes the position that all

these changes add up to The Second Academic Revolution.

Scholars of other countries address similar changes in higher education. Burton

Clark (1995) writes about innovative European universities that are characterized by

increased entrepreneurship, conflicting faculty and administrative values, especially

around governance issues, and greater diversification of institutional funding. He points

to a shift of cutting edge institutional action from the liberal arts core to an

entrepreneurial periphery. In the United Kingdom, Gareth Williams (1992, 1995)

describes broad patterns of financial change that reduced government funding for
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universities and encouraged faculty to bring in increased external funding, were their

units to survive. Michael Gibbons (1994) studies how changes in funding work to bring

the university and its faculty in line with the economic production, and the managerial

revolution taking place as a global economy develops. Although he emphasizes the

changes in science, engineering and professional schools, which he now sees as the

center of the university, he too notes that segments of all fields, including the social

sciences and the humanities, are aligning themselves with the market. In Australia,

John Smyth's edited volume on Academic Work chronicles changes that, in broad

outline, parallel those that have occurred in the United Kingdom. Simon Marginson

(1993, 1995) elaborates on the "marketization" or increased market and market-like

behavior in which Australian institutions and faculty engage. In Canada, Howard

Buchbinder and Janet Newson (1990), Buchbinder and Rajagopal (1993, 1995), and

Newson (1994), too, describe diminished government funding and the beginning of

"marketization."

Our book draws heavily on the work of these scholars, using it to paint a broad

picture of the changes faced by faculty and institutions of higher education, in

particular, public research universities. Our work differs from that of the scholars we

draw on in that we bring together topics that are usually treated separately, notably

undergraduate and graduate education, teaching and research, student aid policies and

federal research policies. Rather than looking at undergraduate education and the

issues related to it (student aid policy, tuition costs, faculty productivity), as separate

from graduate education, and at the issues that surround graduate education (national
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science and technology policy, including government research priorities, federal

research funding, business and industry research funding), we bring these together so

we can better grasp the degree of change taking place and begin to understand the

forces of change. We try to analyze change using a variety of theories and data sets,

depending on our level of analysis: macro political economic theory and national higher

education policies to understand the global reach of change and how it plays out in

higher education and research policies; resource dependency theory and data on

national higher education financial trends to help us grasp the degree of postsecondary

education change that has occurred at the level of the nation state; process theories of

professionalization and case studies of institutions where faculty and administrators

engage in entrepreneurial activities that are the spearhead of change; sociology of

knowledge and case studies of faculty engaged in technology transfer that allow us to

glimpse how faculty create new epistemologies in a changing world.

Our book is divided into two parts. Part I, Chapters 1-3, provides an introduction

and overview (Chapter 1) and, as well, an analyses of the macro level changes

affecting higher education and faculty work (Chapters 2 and 3). Chapter 2 examines

global political economic change, and then looks at how the four countries mentioned

above--Australia, Canada, the United Kingdom and the United States--developed

national higher education and research policies that responded to the emergence of

global markets. Chapter 3 presents data on higher education finance patterns for the

four countries over a twenty year period. These data show how the countries'

postsecondary systems were shaped by the emergence of a global economy and

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resultant national higher education and research policy changes.

Part II, Chapters 4-6, presents case studies of various institutions. The case

studies concentrate on faculty and administrators engaged in the sorts of

entrepreneurial activity so characteristic of academe's response to the macro level

changes presented in Part I. Chapter 4 deals with how successful academic

entrepreneurs assess the advantages and disadvantages of their work. All faculty who

generated external revenues above a certain cut-off point were included; the units they

represented ranged from engineering centers to physical education. Chapter 5

presents case studies of faculty who were involved with a particular form of

entrepreneurial activity, technology transfer, which is the movement of products and

processes from the university to the market. In Chapter 6, we focus again on faculty

who transferred technology to the market, looking closely at how their work shapes

their epistemology. We explore changing values, norms and beliefs. In the conclusion,

Chapter 7, we sum up our findings and spell out the consequences for faculty and

administrators in terms of academic life at the unit level (center and department), at the

college level, and with regard to central administration. We also suggest likely impacts

that increased faculty and institutional interaction with the market might have on

different segments of the university, analyzing them in terms of closeness to or distance

from the market.

During the industrial revolution, faculty in various nation states were able to

position themselves between capital and labor, protecting themselves from the harsh

discipline of the market (Abbott 1988, Perkin 1989). Professionals negotiated a tacit
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social contract with the community-at-large in which they received monopolies of

practice in return for disinterestedly serving the public good (Furner 1975, Bledstein

1977, Haskell 1977). The very concept of a professional turned on the practitioner

eschewing market rewards in return for a monopoly of practice. Professionals made

the case that they were guided by ideals of service and altruism. They did not seek to

maximize profits; they claimed to put the interests of client and community first.

Although numerous scholars have questioned the degree to which professionals

realized ideals of service and altruism, for the most part professionals in the first half of

the twentieth century did not participate directly in the market (Larson 1977, Starr

1982). Their interaction with the market was mediated by professional associations

and by the law. Professionals did not advertise; they served clients, not customers;

they often charged standardized fees that would have been considered price-fixing on

the open market. Persons not professionally certified were legally prevented from

offering a wide variety of professional services (Brint 1994).

Faculty are a subset of professionals, although in some ways they are the

paramount professionals since they have monopolies on advanced degrees and train

and credential all other professionals. In this, their professional status is almost unique.

In many ways, faculty historically have been more insulated from the market than other

professionals. Because they have worked for institutions that were non-profit and often

state funded, they have not become fee-for-service practitioners, whether solo or in

group practice. Moreover, colleges and universities have had a tradition of autonomy

from the market and the state (American Association of University Professors 1915,
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Berdahl 1978).

During the second half of the twentieth century, professors, like other

professionals, gradually became more involved in the market (Slaughter and Rhoades

1990, Brint 1994). In the 1980s, globalization accelerated the movement of faculty and

universities toward the market, in ways we will describe below. We think the 1980s

were a turning point, when faculty and universities were incorporated into the market to

the point where professional work began to be patterned differently, in kind, rather than

in degree. Participation in the market began to undercut the tacit contract between

professors and society because the market put as much emphasis on the Abottom

line@ as on client welfare. The raison d'etre for special treatment for universities, the

training ground of professionals, as well as for professional privilege was undermined,

increasing the likelihood that universities, in the future, will be treated more like other

organizations and professionals more like other workers.

The changes surrounding faculty and universities as they move into the market

are complex, and are most clearly seen at the increasingly permeable boundaries

between the research university, its work force, and the world outside the academy.

Although these changes have far reaching consequences for all of postsecondary

education, we concentrate on public research universities because the changes in the

nature of faculty patterns of work are most dramatic at these sites. Because these

changes are impelled as much by organizations, institutions, and social forces outside

higher education as inside, we use theories and concepts that are not an integral part

of the higher education literature to explain them. To deal with the complexity of the
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change we use different theories, data sets, and methods. At the international level, we

use political economic theories, data on global economic change, and data on various

higher education and research policies. At the national level, we use higher education

finance data from Australia, Canada, the United Kingdom and the United State; and we

connect these data to resource dependency theory. At the institutional level, we use

process theories of professionalization and sociology of science to help us interpret

data from our case studies. In the course of this book, we try to explain terms, to define

what may be unfamiliar concepts, to provide an understanding of the several theories,

and to clarify the way the theories articulate with each other at the several levels. We

ask our readers to have patience and bear with us as we put forward our lines of

argument, which at times are complex; we hope the material we present will repay

attention.

The political economic changes we examine are global and structural: they are

not likely to disappear, allowing us to return to business as usual. In the 1970s and

1980s, markets became global, in considerable part due to increased economic

competition from Pacific Rim countries. Multinational conglomerates (large

corporations manufacturing unrelated products) began to dominate the world economy.

Established industrialized countries, such as the United Kingdom and the United

States, lost shares of world markets to the Pacific Rim countries. Multinational

corporations in established industrialized countries responded to the loss of market

share by investing in new technologies so they would remain competitive in global

markets. These corporations turned increasingly to research universities for science-

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based products and processes to market in a global economy.

The biological sciences exemplify the growing involvement of science and

technology (or perhaps science as technology [Foreman 1995]) in the market place.

Prior to the 1980s, biology was a basic science whose faculty were concerned primarily

with performing research for the National Science Foundation and authoring papers for

scholarly conferences and journals. As corporations became more aggressive in their

search for products for highly competitive global markets, they began to invest in

molecular biology, the key to biotechnology. By the mid-1980s, most full professors of

molecular biology held equity positions (they were given stock in return for their

expertise) in spin-off companies (small corporations based on products developed in

university or government laboratories) that sold products to large corporations and were

on the national advisory boards of corporations with biotechnology products (Krimsky

1982, Kenny 1986). Corporations supplied 45% of the funding for academic

biotechnology (U.S. Congress, Office of Technology Assessment 1991). When Biology

Departments were restructured to feature molecular biology, many faculty became

entrepreneurs.

Biology was not the only basic science that became entrepreneurial and whose

faculty lost their relative insulation from the market. In the 1980s, a variety of

interdisciplinary centers and departments developed--materials science, optical

science, cognitive science--that became increasingly involved in market activity. The

shift occurred because the corporate quest for new products converged with faculty and

institutional searches for increased funding.

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As the economy globalized, the business or corporate sector in industrialized

countries pushed the state to devote more resources to the enhancement and

management of innovation, so that corporations and the nations in which they were

headquartered could compete more successfully in world markets (Jessop 1993).

Business leaders wanted government to sponsor commercial research and

development in research universities and in government laboratories. In the United

States, the NSF, once regarded as the bastion of basic research, developed

Industry/University Cooperative Research Centers in the 1980s and, under President

Clinton, a national science and technology policy exemplified by the Advanced

Technology Programs housed in the Department of Commerce (Slaughter and

Rhoades 1996). In the United Kingdom, Interdisciplinary Research Centers involving

academic-industry-government funding emerged in the 1980s. Australia modeled its

Cooperative Research Centers, founded in the 1990s, on the models provided by the

United Kingdom and the United States (Hill 1993). Under Prime Minister Mulroney,

Canada attempted to develop university-industry-government partnerships by tying

increases in university research funding to corporate contributions for university

research or for national research councils (Julien 1989). In all four countries, corporate

CEOs worked with university leaders and government officials to develop partnerships

aimed at bringing new products and processes to market (Slaughter 1990, Slaughter

and Rhoades 1996). Faculty and research universities were willing to consider

partnerships with business and government, based on commercial innovation because

government spending on higher education was slowing down.

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The flow of public money to higher education was receding, in part because of

increasing claims on government funds. In the 1970s, the emergence of global financial

markets made possible the financing of ever larger debts in western industrialized

countries. These monies were used primarily for entitlement programs (federally

funded programs to which every citizen has a claim, for example, primary and

secondary education, health care and social security), for debt service, and in the

United States, for military expansion. As borrowing increased, federal shares of

funding for postsecondary education programs, particularly research and development,

decreased (Slaughter and Rhoades 1996).

In the United States, the federal government is the primary funding agent for

student aid and for research grants and contracts, but the several states generally pay

for faculty salaries and institutional operations. As the share of Federal funds for higher

education decreased, the states picked up some of the burden, but not all, because the

states, too, were spending the bulk of their monies on entitlement or mandated

programs, such as health care and prisons. Beginning with the economic downturn in

1983, states periodically experienced fiscal crisis (state income failed to match state

expenditures). These crises precipitated restructuring in higher education. In 1993-

1994, the several states, for the first time, experienced an absolute decline in the

amount of money expended on higher education, rather than a decline in the share of

resources provided or in inflation-adjusted, per student, expenditures. Again, the

several states began to restructure higher education to contain costs. Restructuring

often put increased resources at the disposal of units and departments close to the
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market, that is those relatively able to generate external grants and contracts. At the

state and federal level, then, conditions of financial uncertainty encouraged faculty and

institutions to direct their efforts toward programs and research that intersected with the

market.

To maintain or expand resources, faculty increasingly had to compete for

external dollars that were tied to market-related research, which was referred to

variously as applied, commercial, strategic and targeted research, whether these

monies were in the form of research grants and contracts, service contracts,

partnerships with industry and government, technology transfer, or the recruitment of

more and higher fees-paying students. We call institutional and professorial market or

market-like efforts to secure external monies academic capitalism.

We had numerous and lengthy discussions with our colleagues about the term

academic capitalism. Although some thought the term appropriate, others thought that

it too strongly connoted a Faustian bargain with the "business class" (heads of large

corporations who have regular face-to-face meetings on a series of boards and forums

and are concerned with national policy formation [Useem 1984]). Especially in

Australia, our somewhat social democratic colleagues saw academic capitalism as

conjuring up stronger images of exploitation of the academic labor force than was

warranted by current practices in colleges and universities. Others in Australia thought

the term slighted the state, especially given that the state in most cases provided the

great bulk of external monies for universities and colleges, whether these were for

basic or applied research, or for university-industry partnerships, or for for-profit

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ventures handled through arms-length foundations. i Generally these (sometimes

heated) discussions revealed the inadequacy of extant language to address changes

that blur the customary boundaries between private and public sectors. The same

kinds of language limitations make problematic descriptions of the increasing numbers

of hybrid organizations emerging in a period of privatization and deregulation. In the

end, because no one was able to formulate a more precise term, we decided to employ

academic capitalism, in part because alternatives--academic entrepreneurism or

entrepreneurial activity--seemed to be euphemisms for academic capitalism,

euphemisms that failed to capture fully the encroachment of the profit motive into the

academy.

Of course, the word capitalism connotes private ownership of the factors of

production--land, labor, and capital--and considering employees of public research

universities to be capitalists at first glance seems a blatant contradiction. However,

capitalism also is defined as an economic system in which allocation decisions are

driven by market forces. Our play on words is purposeful. By using academic

capitalism as our central concept, we define the reality of the nascent environment of

public research universities, an environment full of contradictions, in which faculty and

professional staff expend their human capital stocks increasingly in competitive

situations. In these situations, university employees are simultaneously employed by

the public sector and are increasingly autonomous from it. They are academics who

act as capitalists from within the public sector: they are state-subsidized entrepreneurs. ii
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Although faculty and administrators at research intensive universities may be

state subsidized entrepreneurs, their position in many ways is analogous to that of

industrial researchers and entrepreneurs in primary sector industries (large,

oligopolistic industries that produce critical goods and services and employ large

numbers of persons, many of whom are unionized and receive a social benefits

package as part of their wages and salaries [O'Connor 1973, Braverman 1975]). Many

of these industries--for example, aerospace, computers, electronics and nuclear

industries, as well as pharmaceutical, chemical and agriculture industries--are

cushioned from the market by state support from a variety of federal agencies--for

example, the Department of Defense, Department of Energy, the National Aeronautics

and Space Agency, the Department of Agriculture and the National Institutes of Health.

These industries are supported by the federal government because they are perceived

to be critical to a number of national missions--primarily defense, food supply, health.

So important are these missions that the industries contributing to them are partially

subsidized by the state rather than left to the vagaries of the market. Many of the

science based products and processes produced by these industries rely on the same

technologies for which academic capitalists receive public and private support. In other

words, academic capitalists are subsidized primarily from the same sources and for

many of the same reasons as industrial capitalists. The market, the state and the

academy (public universities are, of course, technically arms of the several states) are

related in complex and sometimes contradictory ways. (For a fuller account of the

relation between state subsidized primary sector industry, universities engaged in basic
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research and the emergence of market-oriented research, see Slaughter and Rhoades.

1996).

Another way to approach the idea of academic capitalism is through the widely

accepted notion of human capital. What we mean by this is as follows: Almost

everyone, today, is aware that the knowledge and skills possessed by workers

contribute to economic growth. Conceptually, these worker capabilities make their

contribution by adding to the quality of labor, which of course is one of the three factors

of production, land and capital being the other two. Empirical demonstration of the

importance of labor quality traces back at least tot he work of Edward Denison (1962),

who built National growth accounting models. (Leslie and Brinkman [1988] update and

synthesize the results of this long line of research up through the mid-1980s.) For

production work the quality of labor is built largely through formal education and on the

job training. This brings us to the role of university academics in contributing to

economic growth. Universities are the repositories of much of the most scarce and

valuable human capital that nations possess, capital that is valuable because it is

essential to the development of the high technology and technoscience necessary for

competing successfully in the global economy. The human capital possessed by

universities, of course, is vested in their academic staffs. Thus the specific commodity

is academic capital, which is no more than the particular human capital possessed by

academics. This final step in the logic is to say that when faculty implement their

academic capital through engagement in production, they are engaging in academic

capitalism. Their scarce and specialized knowledge and skills are being applied to
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productive work that yields a benefit to the individual academic, to the public university

they serve, to the corporations they work with, and to the larger society. It is indeed

academic capitalism that is involved, both technically and practically.

Academic capitalism deals with market and market-like behaviors on the part of

universities and faculty. Market-like behaviors refer to institutional and faculty

competition for monies, whether these are from external grants and contracts,

endowment funds, university-industry partnerships, or institutional investment in

professors' spin-off companies, or student tuition and fees. What makes these

activities market-like is that they involve competition for funds from external resource

providers. If institutions and faculty are not successful, there is no bureaucratic

recourse; they do without. Market behaviors refer to for-profit activity on the part of

institutions, activity such as patenting, and subsequent royalty and licensing

agreements, spin-off companies, arms-length-corporations (corporations that are

related to universities in terms of personnel and goals, but are chartered legally as

separate entities) and university-industry partnerships, when these have a profit

component. Market activity also covers more mundane endeavors, such as the sale of

products and services from educational endeavors (for example, logos and sports

paraphernalia), profit-sharing with food services and book-stores and the like. When

we talk about restructuring of higher education, we mean substantive organizational

change and associated changes in internal resource allocations (reduction or closure of

departments, expansion or creation of other departments, establishment of

interdisciplinary units); substantive change in the division of academic labor with regard
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to research and teaching; the establishment of new organizational forms (such as

arms-length companies and research parks); and the organization of new

administrative structures or the stream-lining or re-design of old ones.

In this book, we explore the emergence of academic capitalism by tracing the

growth of global markets, the development of national policies that target faculty

applied research, the decline of the block-grant as a vehicle for state support for higher

education, and the concomitant increase in faculty engagement with the market. We

argue from our data that a quiet revolution has already taken place. Analysis of

financial data show a shift from state block-grants (undesignated funds that accrue to

universities, often according to formulas) to grants and contracts that are targeted on

commercial endeavor. Within public research universities, fewer and few funds are

devoted to instruction and more and more to research and other endeavors that

increase institutional ability to win external funds. Faculty face a Catch-22 situation.

Even when they are asked to focus on undergraduate teaching, most rewards are

attached to bringing in external funds, funds that require them to perform research that

may keep them from the classroom.

We concentrate our examination of changes in professional labor on four large

English-speaking countries: Australia, Canada, the United Kingdom, and the United

States, emphasizing Australia and the United States. We chose the major English-

speaking countries because our research design and methods called for examination of

documents and financial data, and in-depth interviews and observations of faculty; and

we are both essentially monolingual. Although we confined our study to English-

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speaking countries, we noted from various Organization for Economic Cooperation and

Development (OECD) publications that the public universities of most Western

industrialized countries were moving toward academic capitalism, pushed and pulled by

the same global forces at work in the English-speaking countries.

A few words should be said here about the omission of private institutions from

our focus. First, private colleges and universities are of very minor importance in three

of our four nations. In the United States, where (all) private institutions serve

approximately 20 per cent of all students, the research enterprises of private

universities are very substantial. Although limitations on our resources, alone, might

have caused us to eliminate them from our study, there was an additional reason for

our decision: Private universities in the United States receive little in the way of

government block grants; therefore the major factor theorized to drive university

destabilization does not pertain to them. Indeed, U.S. private universities have been

operating in a highly competitive, relatively "unprotected" (by government), environment

for many years, and as we shall see, they do exhibit some of the more important,

projected features. As a matter of fact, private universities in the United States might

well be viewed as prototypes of where public universities are headed, and we reflect on

this reality below.

Movement toward academic capitalism is far from uniform; indeed, it is

characterized by unevenness. Even within the English-speaking countries, there exists

a continuum on this dimension, with Canadian academics probably least involved with

the market and U.S. academics perhaps most involved. U.S. higher education
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institutions have always participated to some degree in commercial activity although we

think the intensification in the last fifteen years has greatly exceeded past involvement,

and, as we said earlier, represents a difference, in kind, rather than in degree. In

contrast, higher education in the United Kingdom and Australia have moved rapidly

toward the market, the United Kingdom in the mid-1980s, Australia in the late-1980s.

We emphasized two of these countries, the United States because of our

familiarity with it, and Australia because in 1991 we received Fulbright research grants

to investigate the changing nature of academic labor there and the costs and benefits

of commercial science and technology. Although the decision to emphasize the United

States and Australia was to some extent happenstance, the two countries captured the

political economic variation we sought to examine: incremental change and abrupt

change, the United States under a Republican President, Australia under a Labor Prime

Minister. Despite the great political differences between the United States and

Australia, in the relative power of the state, in the power of private capital and rates of

change in postsecondary education, both systems of higher education were moving

toward what we called academic capitalism, providing an ideal situation for looking at

the underlying forces moving the systems in the same direction.

We turn now to the plan of the book, providing a brief overview of the research

questions that drive the several sections and separate chapters, a description of the

data we use, and the theories that guide our interpretations of the data. The theories,

the data and the methods vary by level of analysis (global, national, institutional,

individual), so in this section we concentrate on explaining the linkages among these.

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A more complete account of theory, data, and methods, as well as more detailed

citations, are presented later in the book.

INTERNATIONAL CHANGES THAT SHAPE HIGHER EDUCATION

In Part I, Chapter 2, we examine the growth of a global political economy, the

development of Australian, Canadian, British, and American national higher education

policies that seek to enhance national competitiveness by linking postsecondary

education to business innovation. This linking is an effort to create national wealth by

increasing global market shares through the discovery of new products and processes

in order to increase the number of high- paying, high-technology jobs.

Two research questions inform Chapter 2. What forces are driving the

restructuring of higher education? How are these forces manifested in national policy in

the four countries? The data for the chapter are national policy documents, white

papers, and legislation from the four countries that pertain to higher education. The

method is comparative analysis of documents.

To answer the first question--what forces are driving the restructuring of higher

education--we look at political economic explanations of the emergence of global

markets and explore the implications of global markets for research universities. Given

that the changes occur across the four countries, we look to theories that deal with

social forces shaping global change. We review three political economic interpretations

of globalization: neo-liberal political economics, as manifested in the Chicago school

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(Friedman 1981, 1991, Friedman and Leub 1987); liberal or post-Keynsian

interpretations (Kuttner 1991, Reich 1991, Thurow 1985); and radical or post-marxist

ones (Barnet and Cavanagh 1994, Chomsky 1994, Jessop 1993). Although these

theorists disagree markedly with regard to agency--be it market, capital mobility, or

business class--all see the emergence, in traditional industrialized nations in the 1980s,

of a global market creating conditions that mean less money for social welfare and

education functions and more money for building corporate competitiveness. This

trend has powerful implications for postsecondary education. National policy makers in

advanced industrialized countries are moving discretionary research and training

monies into programs focused on the production aspects of higher education, programs

that complement areas of innovation in multinational corporations, such as high

technology manufacturing, development of intellectual property, and producer services

(non-life insurance and reinsurance, accountancy, advertising, legal services, tax

consultancies, information services, international commodity exchanges, international

monetary exchanges and international securities dealing [Thrift 1987, Sassen 1991])

and are reducing monies that are targeted on programs for education and social

welfare functions of the state. With regard to postsecondary education, some

departments, colleges, and curricular areas gain revenue shares (for example, some

areas of the physical and biological sciences and engineering, business, and law),

while areas such as the humanities, some physical sciences (for example, physics),

and most social sciences lose shares, as do fields such as education, social work,

home economics or family studies. In other words, policy-makers at the level of the
 27

nation state, whether responding to pressures from the market, international capital

mobility, or the business-class, are concentrating state monies on higher education

units that aid in managing or enhancing economic innovation, and thereby,

competitiveness..

If changes in the global economy were causing national policy makers to shift

resources to technology innovation, intellectual property, and producer services fields,

we should have seen changes in national legislation and in administrative directives to

that effect in Australia, Canada, the United States and the United Kingdom. Very

generally, we found that all four countries developed national policies that promoted a

shift from basic, or curiosity-driven research to targeted, commercial or strategic

research. We were particularly concerned with the ways in which national policies dealt

with access to higher education, curricula, research, and autonomy for the post-

secondary sector. In all four countries, policies that affected higher education were

instituted, using a rhetoric about maintaining global market shares, creating national

wealth, increasing the number of high-paying jobs, and building prosperity. With regard

to access, higher education policies encouraged greater student participation, but at a

lower national cost. Most countries increased tuition, and most systems switched the

balance from student grants to loans. In terms of curricula, national policies exhibited a

strong preference for departments and colleges close to the market. The several

countries, with the possible exception of Canada, were moving away from basic

research toward entrepreneurial research. All the countries, with one exception, started

integrating higher education into broad government planning processes, processes that
 28

focused primarily on economic development. In short, national policies in three of the

four countries moved decisively toward academic capitalism. At the same time, a

variety of national policies pushed for greater higher education economy and efficiency,

which turned universities toward restructuring and other adjustments.

In Part I, Chapter 3, we look at the financing of postsecondary education in the

four countries to see whether changes in national policy that foster market and market-

like behaviors have had an impact on colleges and universities. Specifically, we ask

whether the changes in national policy described in Chapter 2 have had concrete,

measurable effects on spending patterns in the four countries. At the national level, we

found resource dependency theory (Pfeffer and Salancik 1978) more useful than global

political economic theory. At this level of analysis, we were no longer concerned with

what caused changes in policy and how the new policies took shape. Instead, we

wanted to analyze national patterns of higher education revenue changes that these

policies produced. Resource dependency theory suggested that public universities and

colleges would focus on maintaining and expanding revenues, especially those most

critical to the organization. We expected public research universities to respond to

national policy directives and move toward market-like behaviors because these

organizations were heavily dependent on the state for funding, especially for research

monies.

Although there was some variation by country and postsecondary sector

(research universities, polytechnics, community colleges), in general the results were in

the expected direction. The percentage of GNP devoted to postsecondary education

 29

did not always decline absolutely, but the rate of growth did decline. Further, revenue

shifts were away from block grant funding sources to those that reflected a

"competition" or "market" base. Overall, general public funds for higher education were

down, particularly when considered in constant dollars per enrolled students. However,

revenue shares from other sources, such as sales and services increased, as did

shares from tuition. Private gifts, grants and contracts, and sales and services also

were up. Expenditure patterns reflected the changes in the revenue environment. With

regard to institutional expenditures, measured in shares of all expenditures,

instructional funds declined, while research, public service and administration

expenditures increased. Relatively discretionary funding categories, such as

operations and maintenance of plant and libraries experienced large decreases, while

student aid increased sharply. Very generally then, universities and colleges in all four

countries seemed to be changing their revenue generating patterns, moving from

funding by general public means toward higher tuition and competitive grants and

contracts, private gifts, and other competitive sources of monies.

Our analysis of financial patterns in the four countries demonstrated that all

postsecondary institutions were receiving increasing revenues from market and market-

like activities, suggesting that academic capitalism may go far beyond research

universities. Our case studies at public research universities indicate that academic

capitalism is not confined to science and engineering, that faculty across a wide array

of units engage in academic capitalism. Faculty seem to take for granted resources

automatically provided by the state or several states--salary, space, some equipment--

 30

and actively seek those resources that go beyond standard institutional issue. In other

words, money at the margins alters faculty behavior. If this pattern prevails throughout

postsecondary education, academic capitalism will become the watchword of academic

behavior.

FACULTY AND INSTITUTIONAL RESPONSE TO POLITICAL ECONOMIC

CHANGE AND RESOURCE DEPENDENCY: AUSTRALIAN CASES

In Part II, we look at the ways in which changes described in Part I play out in

the daily lives of administrators, department heads, and faculty, using our data from

Australian research universities as our base. We pose two research questions: How do

administrators and faculty describe the advantages and disadvantages of academic

capitalism? How do individual academics respond to the rise of academic capitalism?

We used qualitative analysis to deal with interview data from the several cases,

although some interview data were quantified and used in cost-benefit taxonomies. In

other instances, institutional statistics were used to compare patterns of external

income generation by departments at various institutions.

Resource dependency theory guides Chapter 4. Oversimplified, resource

dependency theory suggests that organizations deprived of critical revenues will seek

new resources. In the late 1980s, Australian national higher education policies

changed higher education financing so that faculty had to compete for government

research funds rather than receive them as a prerogative of holding a university

 31

position. (A detailed account of these policy changes is presented in Chapter 2.) These

government research funds were increasingly targeted on national priorities that were

often concerned with Australian economic development. The federal government

began to monitor institutions through a Quality Assurance scheme, rewarding

universities that met agreed upon goals and objectives. At the same time, government

share of funds for higher education decreased and professors and institutions were

encouraged to raise money from outside the government. Faculty and institutions

began to recruit full-fees paying oversees students, develop partnerships with industry

for research and training, and create products and processes suitable for the market.

In other words, universities and faculty had to compete--engage in market and

market-like behavior--for critical resources. Research money is a critical resource for

universities not only because most research money is raised competitively, but because

universities are prestige-maximizers. Since most faculty teach, and many faculty

perform public service, but fewer win competitive research funds from government or

industry, research is the activity that differentiates among and within universities.

Resource dependency theory suggests that faculty will turn to academic capitalism to

maintain research (and other) resources and to maximize prestige. Put another way, if

faculty were offered more resources to teach more students, it is not clear that they

would compete for these monies with the same zeal with which they compete for

external research dollars. Further, faculty are selective in their pursuit of external

research money. They go after basic or fundamental research funds with the same

vigor as always, but increasingly look for commercial research funding for frontier
 32

science and engineering projects that are tied to national policy initiatives and are

partnered by prestigious firms, usually those that are national or multinational in scope.

Chapter 4 uses two data sets. First, it examines the financial records of two

Australian research universities. These were used to identify internal units that self-

generated more than a few thousand dollars annually, regardless of the source of

external funds. The associated entrepreneurial activities encompassed a broad array

of projects, ranging from applied social science research contracts to monies secured

by engineering departments for the development of intellectual property. Second, we

interviewed representative project managers and staff from the units that had

entrepreneurial agreements as well as unit members who were not a party to these

agreements or related work. The first part of each interview was a subjective

discussion of the advantages and disadvantages of academic capitalism for the unit

and for the university. The second part employed a technique used in economics

research to impute quantitative values to qualitative variables, permitting a rough

means of assigning dollar values to the qualitative criteria and for the calculation of a

benefits/costs ratio.

Based on the data presented in this chapter, we suggest that faculty are willing

to put a great deal of professional energy into winning financial awards, so long as the

resources secured allow them to maintain or even enhance their place in the status and

prestige system and permit some degree of discretionary spending. Faculty are quite

willing to compete for commercial monies if these resources do not conflict directly with

traditional status and prestige hierarchies and compensate with symbolic rewards, such
 33

as media association of science and technology with national economic

competitiveness. In other words, faculty behavior may not be as difficult to change as

scholars of higher education have thought. If resources do not undermine faculty

status and prestige systems, a relatively small amount of money at the margins can

substantially alter faculty activity. In resource dependency theory, this is known as

AThe Rule of 10%.@

The research questions that guided Chapter 5 asked how university managers,

center heads and individual faculty responded to changing markets and changing

resource mixes. How did faculty perceive the impacts of academic capitalism on their

unit, their universities and their careers? Were they developing new strategies to deal

with political economic change and national higher education policy change? If new

strategies were emerging, did they result in organizational change?

Chapters 5 uses resource dependency theory and process theories of

professionalization (Perkin 1989, Larson 1977, Abbott 1988, Starr 1982, Brint 1994).

Resource dependency theory sets the stage by establishing the limited funding faced

by faculty and the likely direction they will take to deal with austerity. But resource

dependency theory, like the political economic theories we dealt with earlier, is a theory

of constraint that deals with social and political economic structures and perhaps does

not concentrate as much on individual and collective human agency.

Professionalization theory, more strongly grounded in the daily practise of highly

educated experts, helps us look at faculty as social actors in the drama of

organizational change.
 34

Process theories of professionalization view professionalization as a process for

which knowledge, theory, expertise and altruism are not enough; organizational,

political and economic skills are equally, if not more important. Process theories of

professionalization look at professionals' active agency, particularly at their intervention

in the political economy, to gain a greater degree of control over their work lives and

income streams, through, for example, state licensure laws. Because process theories

of professionalization emphasize the ways that professionals act in moments of great

change in the political economy--for example, the rise of industrialization (Bledstein

1977, Haskell 1977), and the formation of the welfare state (Finegold and Skocpol

1995)--they should help us understand how professors position themselves at the

advent of global economy. Process theories of professionalization intersect political

economic (Chapter 2) and resource dependency theories (Chapters 3 and 4) in that the

rise of a global economy is exacerbating faculty and institutional resource dependence

with regard to critical resources, especially those for research; faculty respond to these

changes by attempting to develop new strategies to protect and enhance professional

privileges at the level of the institution and the discipline.

The data for this chapter were interviews with forty-seven persons in eight units

in three universities. The units selected were those most deeply involved in technology

transfer, which is is the movement of products and processes from the university to

the market. We selected faculty involved in technology transfer for close scrutiny

because technology transfer is perhaps the most direct form of academic engagement

with the market. Technology transfer often results in intellectual property, defined as
 35

patents and processes, trademarks or copyrights, and organized consultancies (an

Australian term, which refers to faculty consulting activities that are channeled through

the university, and from which faculty receive one-third of the profits, their college one-

third, and the university one-third) aimed at the commercial market.

Generally, we found that faculty and institutional leaders were extremely

sensitive to changes in the resource mix at the level of the institution and the field. In

Australia, vice-chancellors encouraged faculty to act as entrepreneurs. Their hope was

to develop products and services that would generate resources through for-profit

activity such as licensing and royalties, direct sales, or shares of faculty consulting.

The approaches administrators used to promote academic capitalism were various.

Some administrators let faculty take the initiative. These administrators provided broad

policy guidelines and offered incentives to encourage faculty to discover and develop

products and processes for the market, but did not otherwise participate. Other

administrators targeted particular products and processes, and closely regulated their

development. Yet other administrators worked with the business community and

government leaders to create a large resource pool to support the development of

complex technologies. In the later case, faculty were encouraged to band together in

interdisciplinary arrangements to act as partners in relatively stable, on-going

enterprises.

Heads of departments or heads of centers very often aggressively developed

procedures for generating revenues from faculty activity, including income from

technology transfer activities that provided intellectual property and from faculty
 36

consulting. They used new organizational structures to create interdisciplinary

knowledge that tapped fresh revenue flows. Their tactics looked more like business

plans than professionalization strategies. Very often, the new units called for the

addition of large numbers of professional officers and non-academic staff, who were

fiercely loyal to center or institute heads, did not engage much with faculty, and were

not very interested in teaching. They were much more a part of commercial culture

than academic culture, and tended to bring commercial values to their work,

concentrating on making their centers operate more like small firms, expanding

commercial activity, and generating increased amounts of profit.

Faculty were more varied in their response than central administrators and

center heads. All of the full professors, most of the associate professors, but fewer

junior faculty, regarded entrepreneurial activity and the development of intellectual

property positively. Faculty especially valued the improved relations with external

bodies, heightened prestige of their units, closer linkage to the economy (consulting

opportunities, student employment opportunities) and added monetary benefits. Given

that the faculty were primarily applied scientists or were from professional schools, they

saw their entrepreneurial work as an extension of the research in which they were

traditionally engaged, or, in the case of intellectual property, as a justifiable extension of

that work. Junior faculty, post doctoral fellows and graduate students were less

favorable in their views of academic capitalism. They felt that performance

expectations had doubled, because they were now supposed to demonstrate

excellence in two research venues, fundamental and commercial.

 37

For Chapter 6, we asked whether academic conceptions of the nature of

knowledge were changing. Did the faculty still value fundamental or basic theoretical

knowledge above all else, or were market pressures and resource dependency

changing academic epistemology? How did professors deal with the professional norm

of altruism when they pursued the discovery and development of profit-making products

and processes? If change was occurring, was it across all fields or was it confined, in

research universities, to fields that were close to the market? The complexity of the

environment faculty faced pushed us to cross disciplinary boundaries, drawing on a

variety of theories, drawing on a variety of theories as we tried to understand the

emerging epistemology of academic capitalism. As in Chapter 5, resource dependency

theory set the stage for behavioral change on the part of faculty. Again, as in Chapter

5, we drew on professionalization theory to understand changes in faculty norms,

values and beliefs and the way these changes were manifested by faculty as

organizational actors. We pay particular attention to professionalization theory that

examines faculty interactions with markets (Brint 1994). Because the majority of faculty

we studied were scientists or engineers, we used sociology of science as well as

science innovation theories to look at the intersection of science and markets (Gummett

1991, Etzkowitz 1994, Gibbons 1994). We expected that faculty engaged in academic

capitalism would begin to reconceptualize knowledge so that entrepreneurial research

would be valued highly, especially entrepreneurial research on the frontiers of science

and technology, research that involved discovery of innovative products and processes

for global markets.

 38

The data were from interviews with a sub-group of the sample in Chapter 5, the

thirty tenure-track faculty located in units engaged heavily in academic capitalism. At

the unit level--the interdisciplinary center or department--and in some fields or

subfields, conceptions of knowledge were changing markedly. With regard to altruism,

professors engaged in academic capitalism were ambivalent. Although they still hoped

their research would benefit humankind, they began to speak about research paying its

own way. If they were able to support their research with funds aimed at commercial

targets, they saw no reason why other researchers could not. The same pattern held

true in terms of basic versus applied research. They still saw basic research as the

bedrock of science, but saw entrepreneurial research as folded into that stratum,

forming a new composite. Merit was no longer defined as being acquired primarily

through publication: instead, merit was defined at least in part by success with market

and market-like activities. Faculty were changing their conceptions of knowledge more

rapidly than administrators. For faculty in high-technology fields close to the market,

knowledge was valued as much for its commercial potential and resource-generating

capability as for the power of discovery.

In our concluding chapter, we explore the implications for the restructuring of

postsecondary education, for patterns of professional work, and for emerging

epistomologies of science. While we draw on the data presented in our cases, we also

speak broadly to postsecondary education changes currently taking place in the United

States. Finally, we present some alternatives for faculty and institutional leaders to

consider as they respond to political economic and policy changes.

 39

We conclude that a better understanding of academic capitalism will help faculty

and staff make better sense of their daily lives; that successful academic capitalists will

gain personal power within universities, both individually and collectively; that personal

stress will increase for all organizational actors; that central administrators, too, will gain

in the redistribution of power whereas middle-managers may become less important to

organizational life; and that the concept of university shared governance may suffer. In

this, we see a loss to the concept of the university as a community, where the individual

members are oriented primarily toward the greater good of the organization. A major

vehicle for redistributing power to the operating units of the university will be budget

devolution, the granting of both responsibility for raising revenues and the authority for

spending it to the individual units. We see governments that provide block-grant

funding and students whose tuitions cover only a relatively small share of instructional

costs as possessing only limited power in effecting university response to their desires;

this is in contrast with university responsiveness to those who provide money for

specific purposes and mandate the accomplishment of those ends.

Perhaps our most keenly-felt desire in writing this book was that the state and

the electorate would become aware that the decline in undergraduate education

perceived to exist in public research universities is a natural, almost unavoidable

outcome of the decline in the share of revenues provided by government in block-grant

form. Reversing this trend will require either greater state support, some way of

inducing greater university responsiveness to the desires of the state, or some

combination of the two. Although we believe that ultimately, in a competitive-market

 40

environment, proportional shares of state block-grant support and tuition revenues must

follow students to the units that enroll them, we are not sanguine about this eventuality

in the short or intermediate term. We hold that governments must create incentives for

universities to allocate their resources along the general lines for which the state

intends that they be spent.

 39

CHAPTER 2: ACADEMIC SCIENCE AND TECHNOLOGY

IN THE GLOBAL MARKETPLACEiii

To provide a theoretical grounding for our examination of higher education

policies in Australia, Canada, the United Kingdom and the United States, we begin this

chapter by examining the differences between industrial and post-industrial political

economies. Specifically, we look at which countries are winners and losers in the

global marketplace, paying special attention to the four countries with which we are

concerned, and especially to the United States, given its previous dominance of global

markets. Next, we review briefly theories of globalization that purport to explain why

particular nations are successful in the global economy. Then we link changes in the

global economy to higher education by outlining the ways in which globalization theory

explains the increased centrality of higher education systems to national strategies for

securing shares of global markets. Finally, we examine changes in national higher

education policies in the 1980s and 1990s in the four countries under consideration. iv

We are particularly concerned with the ways in which national policies deal with access

to higher education, curricula, research, and autonomy for the post-secondary sector.

To recap, this chapter is informed by two research questions. What forces were

driving the restructuring of higher education and research in the 1980s and 1990s?

iii. We would like to thank Philip Altbach, Robert Berdahl, Jan Curry, Ross Harrold,

John Levin, Gary Rhoades, and Michael Skolnik for their careful reading and helpful

comments on this chapter.

 40

How were these forces manifested in national policy in the several countries? The first

question is important because it lets us gauge whether the changes we see are likely to

be long lasting or short-term. Are they the product of world-wide structural adjustments

and therefore changes to which higher education must somehow accommodate or are

these changes (relatively) short-term shifts with which we can cope by waiting for a

return to business-as-usual? We argue that the changes stemming from globalization

are of such magnitude that higher education systems will be strongly affected. The

answer to the second question--how were these global forces of change manifested in

national higher education policy--suggests the direction that change may take.

Generally, we see three of the four countries moving toward academic capitalism,

emphasizing the utility of higher education to national economic activity, and displaying

a preference for market and market-like activity on the part of faculty and institutions.

With regard to access, higher education policies encourage greater student

participation, but at a lower national cost. Rather than financing student participation,

all countries are raising tuition and most systems are switching from grants to loans. In

terms of curricula, national policies exhibit a strong preference for departments and

colleges close to the market. The several countries, with the partial exception of

Canada, are moving away from basic research toward academic capitalism. All the

countries, with one exception, have started integrating higher education into broad

government planning processes, processes that focus primarily on economic

development. In short, national policies in three of the four countries moved decisively

toward academic capitalism.

 41

Although we make the case that national higher education policies are

converging in some very important areas, we do not see Australia, Canada, the United

Kingdom and the United States as necessarily responding to globalization in the same

ways. As we point out in our treatment of the higher education policies in each of the

several countries, the nations take very divergent paths to policies that support and

strengthen academic capitalism. For example, higher education policies that promoted

academic capitalism were initiated under conservative governments in the United

Kingdom and the United States, but under a Labor (liberal) government in Australia. In

the United States and Canada, the several states and provinces often pioneered

partnerships that involved universities in academic capitalism, while in the United

Kingdom and Australia, centralized higher education ministries guided these processes.

In contrast, in the United States, at the national level, Congress rather than the

executive branch actively developed legislation that fostered academic capitalism. In

other words, globalization is a system-wide force to which countries, the several states

and provinces develop unique responses, but the system effects are so powerful that

higher education polices in some areas--access, curricula, research, autonomy for

faculty and institutions--converge.

We identified these changes in national policy by looking at white papers,

legislation, and policy directives from administrative agencies concerned with higher

education. We also read numerous secondary sources on policy changes in the four

countries. The method we used was comparative analysis of policy documents.

 42

INDUSTRIAL AND POST-INDUSTRIAL ECONOMIES

In this section, we outline the scope of economic change that characterizes the

last quarter of the twentieth century. We make the case that we have moved from an

industrial to a post-industrial society. Higher education is more important to post-

industrial than industrial societies. Post-industrial societies depend on higher education

for training and research and development to a greater degree than industrial societies.

Paradoxically, post-industrial economies may require fewer workers, regardless of level

education, than industrial societies and post-industrial society may not need these

workers' skills for a life-time, rendering traditional concepts of career obsolete.

Many political economists see modern society in the throes of change as great

as that which characterized the industrial revolution. They believe that current changes

in the organization of work and the displacement of workers will be of the same or

greater magnitude as the shift from agricultural society to urban factory production. (For

classic treatments of the dimension of the shift from agricultural to industrial society see

Marx 1975, Durkheim 1951, Weber 1958.) Because we are enmeshed in the early

processes of change, the outline of the future is not clear, and scholars are engaged in

re-theorizing macro-political economics and re-thinking empirical indicators of change,

fueling heated debates that offer widely different explanations for the causes of change

and very different visions of the future. Although political economics is rife with

controversy, a descriptive model of the differences between past and future is

emerging.
 43

Scholars address these differences through a variety of competing dichotomies:

industrial v. post-industrial (Bell 1973); Fordist v. post-Fordist (Jessop 1993), mass

production v. flexible production (Cohen 1993), manufacturing v. service industries

(Sassen 1991, Thrift 1987), low technology v. high technology (Reich 1992, Tyson

1992), industrial v. informational economies (Castells 1993). Within each of these

dichotomies there is intense controversy (i.e. Bonefeld 1993 v. Jessop 1993, Reich

1992 v. Tyson 1992, World Bank 1993 v. Sakakibara 1993). We will refer to the

differences between past and possible future as differences between industrial and

post-industrial political economies, not because we think that conventional industrial

economies necessarily are disappearing or because we think industry and

manufacturing are unimportant, but because the word post seems to characterize the

nature of scholarly work on a number of fronts at this time--as in post-modernism, post-

structuralism, post-marxism--and captures our inability to name the present, let alone

the future.

The industrial revolution was made possible by new sources of energy (steam,

electricity, oil) that triggered mechanical invention in transportation (railroads,

automobiles, airplanes), in agriculture (reapers, harvesters, processors), and in factory

production (textiles, housing, food storage and processing), all of which served to move

centers of population from rural to urban areas. The technological revolution that is

sweeping the world today is powered less by harnessing new sources of energy and

mechanical invention and more by advances in applied science and engineering,

particularly in areas that deal with or make possible information generation, processing
 44

and storage (Castells 1993). Among these new technologies are

advanced materials, advanced semi-conductor devices and processes,

digital imaging technology, high-density data storage and

optoelectronics....artificial intelligence, biotechnology, flexible computer-

integrated manufacturing, medical...diagnostics and sensor technology

(Cohen 1993, p. 135).

As important as the products derived from these processes are producer services--

telecommunications packages, financial instruments and legal tools that are as much

product as service in that they can be sold and traded rather than immediately

consumed--that make possible global trade and marketing of high technology goods

and services (Thrift 1987, Sassen 1991). v

As many inventions of the industrial revolution were made by non-schooled

amateurs and inventors as by trained scientists (Noble 1976, Ben-David 1965); most of

the discoveries of the current technological revolution were made by persons with

advanced degrees. The post-industrial technological revolution depends on

universities.vi Universities provide the training necessary for the increasing numbers of

professionals employed by corporations to invent, maintain and innovate with regard to

sophisticated technologies and products. In an increasing number of cases,

universities are the site where new technologies and products are developed, often in

partnerships with business, through funding supplied in part by the state.

 45

The industrial revolution organized production through the assembly line, a

mode of production often referred to as "Fordism" by non-American academics. As the

term "Fordism" suggests, mass production was characterized by highly standardized

production, typified by the assembly line, and Taylorism (scientific management,

exemplified by supervisory control over the workers' most minute movement on the

assembly line), and usually occurred in vertically integrated, large-scale organizations.

The system was fairly inflexible; products were not easily altered. It depended on

massive accumulations of capital, top-down planning and very long production runs.

Tasks were closely supervised and repetitious. In contrast, organization of production

in the dawning post-industrial era, exemplified by the organization of Japanese

industry, is "flexible-volume production" that uses fewer workers, less space, and takes

half the investment in tools and machinery, half the engineering hours to

develop a new product, and half the time to develop a new product. It

also requires less than half the needed inventory on site, turns out

products with far fewer defects, and yields a greater and growing variety

of products (Cohen 1993, p. 106. See also Womack 1990).

Flexible volume production is a complex organizational strategy and is not a

technological solution that could be easily imposed on manufacturing problems. While

the strategy can be learned, it is alien to Fordist organization of production and is

correspondingly difficult for Fordist corporations to assimilate. Although a number of

 46

Fordist corporations have attempted Japanese style management aimed at

incorporating production workers into organizational decision making with regard to

manufacturing, these efforts, often labeled total quality management, vii are not notably

successful, in large part because Fordist management and workers seem unable to

abandon their historic adversarial relationships.

Globally successful systems of flexible production are usually embedded in

multinational corporations. As the trust was to the national economies of the twentieth

century, so the multinational conglomerate is to the emerging global economy of the

twenty-first century (Fligstein 1990). Multinational corporations are at the cutting edge

of the market in most industrialized countries. From 1975 to 1990, U.S. multinationals'

annual sales grew substantially faster than the U.S. economy as a whole: "the sales of

the fifty largest industrial multinationals were 28% of U.S. GNP in 1975 and 39% of U.S.

GNP in 1989" (Carnoy, p. 49). Multinational services, particularly financial services,

grew rapidly. The world's fifty largest banks more than doubled their assets between

1980 and 1990 (Carnoy 1993, Figure 3.2, p. 51; see also Sassen 1991 and Cohen

1993).

The significance of multinational corporations to the world economy was

enhanced in the 1980s when computers, harnessed to new telecommunications

infrastructures, created a global market. For industrial corporations this meant

managers were able to supervise far flung business empires electronically, "so that the

national economy now works as a unit at the world level in real time. In this sense, we

are not only seeing a process of the internationalization of the economy, but a process
 47

of globalization--that is, the interpenetration of economic activities and national

economies at a global level" (Castells, p. 19). With regard to financial services,

advances in telecommunications in the 1980s made possible for the first time global

trade in equities, bonds and currency as well as more speculative financial instruments

(Sassen 1991). Multinationals, then, were key organizational vehicles of globalization. viii

The infrastructure of the global economy--computers, telecommunications, producer

services--depend on university trained personnel for continued innovation and for

maintenance.

In the industrial era, labor was divided into craft and unskilled workers, with

highly skilled craft unions gradually disappearing as increased emphasis was placed on

mass production, a process that called for less skill on the part of labor (Braverman

1975). Mass production relied on large numbers of interchangeable blue-collar workers

in oligopolistic sector industries, such as steel, auto and food processing, that were

heavily unionized. The work was often boring, physically demanding, and dirty. These

workers were full time, relatively highly paid, had many fringe benefits--health, pension,

vacation, time-and-a-half for over-time (O'Connor 1973). Assembly-line production was

usually marked by hierarchy, with dramatic social and cultural distance between

workers and managers, differences perhaps best captured by variations in education.

Generally, assembly-line production required workers to have little education, often not

asking for more than rudimentary reading and writing skills: not even completion of high

school was necessary. In contrast, managers usually had some college (Jencks and

Reisman 1968).
 48

Under the post-industrial organization of production, labor looks very different,

especially in Japan and the newly industrializing countries. Flexible volume production

does away with the assembly-line, instead taking a team approach. The distance

between supervisor and worker is somewhat ambiguous, given that all employees are

team members. Moreover, the team approach requires all workers to have a

substantial grasp of design, engineering and production processes. Sometimes

production workers are even encouraged to participate in discussions about the

organization of work and to introduce product and process changes. Workers who

engage in the new organization of production--particularly in Japan, Sweden and

Germany--are well paid and receive a substantial array of benefits.

However, much of the work in established industrial countries has not shifted to

flexible volume production, or has adopted some features of the new organization of

production and not others. Generally, re-design of work in traditional industries in

established industrial countries means that labor costs are reduced by forcing down

wages while at the same time reducing expenditures on working conditions and social

benefits, so that, all else equal, profit ratios increase proportionately (Castells and

Henderson 1987). Productivity and profitability are also increased by elimination of

redundancies, reductions of work time, technical innovations and speed-up (Castells

and Henderson 1987, Harrison and Bluestone 1990). In their home countries,

multinationals in traditional industries employed declining numbers of workers who

labored longer hours for less pay and substantially reduced benefits.

As part of the process of making production "lean," automation increased and

 49

jobs were relocated to less costly production sites, the use of part-labor grew, and

unemployment increased. In Europe, unemployment has been about 12% since the

late 1980s. In the United States,

if part-time employment was calculated as partial unemployment, if the

military was excluded from the employed (as it had been until the Reagan

Bureau of Labor Statistics revised the basis for computing the number of

job holders), and if discouraged workers--those who had stopped looking

for work--were factored into the jobless figure...(Aronowitz and DeFazio

1994, p.2)

the percentage of U.S. unemployed would about the same for Europe--12%.

In sum, industrial political economies were fueled by new sources of energy and

invention that moved production from agricultural to urban areas. Post-industrial

political economies are fueled by new advances in science-based knowledge and

powered by computers and telecommunications. Industrial political economies were

organized along Fordist or assembly-line models of production while post-industrial

political economies use flexible-volume or just-in-time production. The central

organizational unit of the industrial economy was the trust or oligopolistic corporation,

operating at the level of the nation state. The central organization unit of the post-

industrial economy is the multinational corporation, which retains strong oligopolistic

tendencies, operating globally. Under industrial economies, workers were not

educated, their jobs were often dull and repetitive. In post-industrial political
 50

economies, the jobs of workers organized for flexible volume production are often

varied and interesting, and call for substantial knowledge and decision-making.

However, the numbers of flexible volume production jobs are not great. Product

innovation almost always depends on university educated personnel, often persons

with advanced degrees. Managerial positions too are almost always filled with college

educated persons, many of whom now have advanced degrees.

Although we posit a set of neat dichotomies to mark the differences between

industrial and post-industrial political economies, reality is less tidy. Neither

corporations nor countries adopt technologies and strategies for organization of

production in a uniform manner. This unevenness is perhaps clearest with regard to

the labor force. In established industrial countries, some workers who are involved in

flexible-volume production have interesting and responsible, well-paid jobs with high

benefits. But other workers, particularly in manufacturing jobs that still rely on many

aspects of traditional industrial work organization, have had their jobs re-designed so

that they work longer hours for less pay at repetitious jobs that have fewer and fewer

benefits (Phillips 1993, Harrison and Bluestone 1990). And more and more workers

are employed only part-time or unemployed for significant segments of their careers.

Although the inventions that power post-industrial economies are likely to be

made by scientists and engineers, MBAs and attorneys, computer and information

scientists, the productivity gains embodies by these discoveries may reduce the

demand for highly skilled professionals. A college degree no longer guarantees a good

job. The percentage of net job growth for employees with some college or more in the
 51

low income stratum (less than $11,104 [in constant 1986 dollars] increased by 12%

from 1963-1973 to 1979-1986; the percentage of net job growth for employees in the

middle income stratum ($11,104-44,412) decreased by 9.2% in the same period; the

percentage of net job growth for the high income stratum ($44,413+) decreased by

7.8% (Harrison and Bluestone 1988, Table A.2) Post-industrial economies depend on

personnel trained in colleges and universities, but do not absorb all the graduates these

institutions produce, posing problems for higher education's claims to provide social

mobility and adequate returns on students' investment in learning.

WINNERS AND LOSERS: THEORIES OF GLOBALIZATION

In this section, we present the major theories of globalization, theories that

purport to explain why some countries do better than others as political economies

become more global. At first glance, globalization theories do not seem to speak

directly to higher education. However, they do outline the magnitude of the political

economic changes occurring across the four countries. These changes are putting

pressure on national higher education policy makers to change the way tertiary

education does business. In the section immediately following this one, we explain the

consequences of globalization for higher education.

As the world make the transition to post-industrial political economies, some

countries do better than others. Overall, the rise of Japan and of a number of

industrializing countries in Asia, often referred to as the Tiger Republics--Singapore,

 52

Malaysia, South Korea--as well as China, and now Vietnam, have destabalized the bi-

polar trade relations that dominated world trade for most of this century. Twentieth-

century trade was dominated first by Great Britain, and, after World II, by the United

States. Trade relations were bi-polar in that most world trade flowed between the

United States and Europe. In the 1970s, as established industrialized countries lost

some of the advantages conferred by early industrialization, empire and neo-colonial

trade relationships, world trade became multi-polar (Carnoy 1993, Cohen 1993).

Indeed, some argue that the center of growth of the global economy has moved to the

Pacific Rim (Castells 1993).

If we look at national shares of world output, we see that Japan increased its

share from 5.8% in 1967 to 7.7% in 1986 and the developing Asian countries increased

from 10.8% to 17.4%. Japan and China raised output more rapidly than any other

country in the world, and the developing Asian countries far outdistanced any others.

The United States and the United Kingdom lost shares, Australia and New Zealand

held steady, and Canada made a very slight gain. The United States declined from

25.8% in 1967 to 21.4% in 1986; the United Kingdom declined from 4.8% to 3.5%.

Australia and New Zealand held steady a 1.2% share while Canada grew from 2.1% to

2.2% (Castells 1993, Table 2.1, p.25). If we look only at gains and losses in

manufacturing exports, the sector of national economies usually seen as most

important to global competition, the shift with regard to winners and losers is even more

dramatic. Again, Japan and the newly industrializing countries of Asia made the

greatest gains while the United States and the United Kingdom suffered the greatest
 53

losses. Calculated in 1/1000 parts of world trade, Japan increased its performance in

manufacturing exports in the period 1967-1973 by 15.6, in 1973-1980 by 9.0, in 1980-

1986 by 10.4. For the same periods, the increase for the newly industrializing countries

of Asia were 14.7, 17.0 and 9.4, respectively. In contrast, in 1967-1973 the United

States change was -22.9, in 1973-1980 1.5, and in 1980-1986 -21.1. For the same

periods, the figures for the United Kingdom were -17.8, 2.0, -13.1; for Canada, -5.4, -

4.3 and -3.4; for Australia-New Zealand, 3.8, -4.2, -2.2 (Castells 1993, Table 2.2, p. 26).

If we look at productivity in the period between 1960 to 1990, the story is essentially the

same. In this period, the United States increased productivity by 2.9%, Canada by

2.9%, and the United Kingdom by 3.7% while Japan increased by 6.9%. Established

industrial countries increased their productivity by about 1% per decade; Japan

increased productivity at a much greater rate (Cohen 1993, p.11.)

As world output was redistributed, several of these countries increased their

national debt. The United States net government debt as a percent of GNP/GDP

increased from 19.2% in 1979 to 25.3% in 1984, to 31.2% in 1990. Canada increased

from 12.0% in 1979 to 26.1% in 1984 to 40.3% in 1990. The United Kingdom's debt

decreased from 47.9% in 1979 to 47.4% in 1984 to 28.9% in 1990. Although the United

Kingdom decreased its debt substantially, it still remained quite high, comparable to

that of the United States, although not as high as Canada. Only Australia brought its

debt level close to that of Japan. Australia's debt was 27.7% in 1979, 25.1% in 1984

and 13.2% in 1990. Japan's net government debt was 14.9% in 1979, 27.0% in 1984,

and 10.9% in 1990 (Oxley and Martin 1991, Table 1, p. 148).

 54

At the same time, Australia, the United Kingdom and the United States increased

inequality of income between the late 1970s and mid 1980s. "There was virtually no

change in Canada....Changes of around 1 percentage point in the Gini coefficient are

observed in...Australia....in the United Kingdom and the United States there was a more

than 3 percentage point increase" (Atkinson, Rainwater and Smeeding 1995, p. 49,

Table 4.8).

Given that the United States dominated global markets from World War II

through the 1970s, let us consider the U.S. case in somewhat greater detail. "Up to

1979, the United States had been the leading exporter of such [direct foreign]

investments. By 1981, it had become the leading recipient, and had fallen to second

place as an exporter of capital, behind the United Kingdom..." (Sassen 1991, p. 37). In

terms of balance of trade, the United States was unable to uphold a "positive

merchandise trade balance," falling from an indexed -2.3 in 1971 to -141.6 in 1985

(Cohen and Zysman 1987, Table 5.1, p. 62). United States share of world exports fell

"in value terms from 26 percent of world markets in 1960 to 18 percent in 1980--before

the dollar aggravated matters" (Cohen and Zysman 1987, Figure 5.1, p. 64). Even the

United States high technology position was weak, with the majority of high technology

exports concentrated in military goods (Business-Higher Education Forum 1986, Cohen

and Zysman 1987).

What loss of share in world output, loss in manufacturing output, declines in

productivity and standards of living and increases in national debt suggest is that the

Fordist era of high wage, mass production and mass consumption that characterized
 55

the established industrial countries from 1940-1970 is over. The rise of Japan and the

other Asian countries destabalized the bi-polar world trading patterns that had built

prosperity within the established industrial countries. Political economists, together with

politicians and business leaders, began to try to explain and correct the disturbing

decline among the established industrial countries.

For the most part, the various political economic theories that explain patterns

of winners and losers among countries are partial and incomplete, with visible lacunae,

a situation not unexpected in a transitional period. The debates surrounding these

theories are intense because the theories are at once explanations and proscriptions,

the voice of research and attempts to influence the policies of nations. We present

these theories in broad outline, hopefully not over-simplifying to the point of caricature,

even though we gloss over the controversy among and within the various theoretical

camps. In very rough terms, these theories can be characterized as neo-liberal, liberal

or post-Keynesian and radical or post-marxist.

The neo-liberal or Chicago school perspective de-emphasizes the polity, instead

stressing the role of the market in national economic success. The neo-liberal school

sees market forces as impersonal, disembodied and inexorable, as supplanting

national economies with a global market. To compete successfully in the new global

market, nations have to cut back, reducing social welfare and entitlement programs,

freeing capital and corporations from taxation and regulation, allowing them to operate

unfettered (Friedman 1981, 1991, Friedman and Leub 1987). In the neo-liberal model,

the only acceptable role of the state is as global policeman and judge, patrolling the
 56

edges of the playing-field to make sure it remains level, adjucating trading infractions

and transgressions. In this model, the private sector is privileged as the engine of

competition, and the state no more than a drag on economic growth. A major problem

for this explanation of losers and winners in global competition is that the most

successful countries in the past twenty years are Japan and the newly industrializing

Asian countries, all of which have well developed industrial policies, relying heavily on

the state to coordinate their multinationals' global strategies. (For a dramatic instance of

conflict over the Chicago model, see the Japanese objection to the World Bank (1993)

report; for further elaboration, see Sakakibara [1993]). Indeed, the Asian countries

seem not to employ the same rigid distinctions as do Western, English-speaking

countries with regard to private and public, or, to speak somewhat more broadly,

between civil society and the state, and instead see public and private as permeable

and complementary.

Keynesian political economics were built at the level of the nation state. Federal

control of money supply was used to stimulate or slow national economies, thereby

avoiding depression. As global markets emerged and national controls on international

flows of capital were eased to take advantage of expanded opportunities, capital

mobility increased. Greater international capital mobility made more difficult

manipulation of the economy at the national level. At the same time, the warfare-

welfare approach to the political economy characteristic of the United States and the

United Kingdom became more difficult to sustain. The end of the Cold War, together

with the growing critique of defense R&D as a tool for technology innovation, made
 57

stimulation of the economy through military expenditures problematic. Simultaneously,

increased global competition made political and economic justification of the social

wage or social safety net more difficult (Thurow 1980, Melman 1982). In other words,

the growth of a global economy, the increase in capital mobility, the end of the Cold

War, and the erosion of the social wage, made Keynesianism inadequate in the post-

industrial era.

Liberals or post-Keynesians have tried to devise industrial policies that enable

established industrial nation states to compete more successfully in traditional

"smokestack" industries and to stimulate new high-technology industries, largely

through increasing research and development (R&D) and productivity (Porter

1990, Reich 1992, Tyson 1992). In this view, the nation state plays a role in stimulating

high-technology innovation, in building human capital to exploit high technology in

multinational corporations, and in creating a climate favorable to investment at home

(Carnoy et. al. 1993).

Although post-Keynesian political economists emphasize the stimulating and

supportive role the state plays with regard to the economy, they simultaneously

embrace free trade. For the most part, they eschew direct mechanisms for planning,

relying instead on a bottom-up approach, in which industry, by taking advantage of

government-subsidized opportunities for R&D stimulation--for example, the Advanced

Technology Program in the United States--targets areas for state support in developing

products for the global market (Etkowitz 1994). A major problem for proponents of this

type of post-Keynesian approach to the political economy is that the United States and
 58

United Kingdom had substantial increases in productivity in the late 1980s and early

1990s, but these did not translate into increases in wages and standards of living.

According to the most recent Organisation for Economic Co-operation and

Developtment study, income distribution in Australia, the United Kingdom and the

United States showed a rise in inequality between the late 1970s and middle 1980s,

particularly in the United Kingdom and the United States (Atkinson, Rainwater and

Smeeding 1995).

Post-marxists continue to develop an important critique of global capitalism,

even as they recognize that highly centralized state socialism is no longer a viable

political economic alternative (Bowles 1993). Post-marxists see the private sector

working through the state apparatuses of the several nation states and various

international trade organizations and tribunals to level the playing field so that stateless

multinational corporations can dominate the global economy, establishing a new

international division of labor. In this new international division of labor, multinational

conglomerates move production facilities to those parts of the world that provide the

most profitable combination of capital and labor, disproportionately to the lowest wage

states that offer the greatest incentives to multinationals (Frobel et. al. 1980, Chomsky

1994). Multinational CEOs are able to manage far-flung global production through the

information superhighway and telecommunications. In this model, owners and

managers of stateless multinationals, as well as owners and managers of the many

ancillary businesses that serve them, are winners, and workers, whether high-tech or

low, and the unemployed, rooted or trapped in nation states, are losers.
 59

The major problem for this explanation, as other post-marxists as well as post-

Keynesians have noted, is that there is little relationship between labor costs and

international competitiveness. Much more important than labor costs in predicting an

economy's productivity is the technological level of the industrial sector (Castells 1993,

Castells and Tyson 1988). In other words, when multinationals relocate plants they

choose industrializing countries with relatively high levels of technological development,

avoiding the lowest cost, least developed countries, especially in Africa and in parts of

South America, which political economic geographers now refer to as the Fourth World

(Castells 1993).

Political economists who are neither post-Keynesians nor post-marxists, but

perhaps fall somewhere in between the two camps, argue for established industrial

countries modeling themselves more closely on the Japanese and newly industrializing

Asian countries, and developing state planning capacities as well as mechanisms for

capturing and redistributing more equitably the profits from multinational enterprises.

They argue that national policies strongly influence competitiveness, especially national

policies on labor availability and technological infrastructure, on R&D, on high

technology and management training, and on protection from foreign competition and

concessions from foreign multinationals (Carnoy et. al. 1993, Barnet and Cavanagh

1994, Harrison and Bluestone 1990). However, they do not speak to the political

strategies and governmental mechanisms that would make such policies viable,

particularly in countries, such as the United States and the United Kingdom, that have

traditionally tried to minimize the role of the government in economic planning.

 60

GLOBALIZATION AND HIGHER EDUCATION

Globalization has at least four far-reaching implications for higher education.

First is the constriction of monies available for discretionary activities, such as

postsecondary education. Second is the growing centrality of technoscience and fields

closely involved with markets, particularly international markets. Third is the tightening

relationships between multinational corporations and state agencies concerned with

product development and innovation. Fourth is the increased focus of multinationals

and established industrial countries on global intellectual property strategies.

Despite the lack of a coherent conceptual understanding of why some countries

are winners and others losers, the four established industrial nations, with the exception

of Canada, that we studied responded to increased global competition with

conservative political economic policies. The policies are conservative in that they are

aimed at regaining the nation's past positions, in the case of the United States and the

United Kingdom, positions of global preeminence, in the case of Australia and Canada,

positions that retain prosperity rooted in material abundance based on agricultural and

extractive industries. In the 1980s and 1990s, the four nations, with the exception of

Canada, regardless of political party in power, pursued supply-side economic policies,

shifting public resources from social welfare programs to economic development

efforts, primarily through tax-cuts for the business sector, but also through programs

that stimulated technology innovation, whether through military or civilian R&D (Jessop
 61

1993, Mowery 1994). (Although Canada was not able to institute such policies at the

national level, a number of provincial governments did [Bell and Sadlak 1992, Michael

and Holdaway 1992]). At the same time, all four countries attempted to reduce

government expenditures to their national debt. As supply-side economic and debt

reduction policies were instituted, entitlement programs, particularly social security,

medicare and primary and secondary education, expanded enormously, largely in

response to demographic changes.

This combination of policies--supply-side economics, debt reduction and

increased entitlements--had powerful consequences for postsecondary education.

Although postsecondary participation rates vary greatly among the four countries, none

of the nations treat higher education as an entitlement program. Given the fiscal

constraints imposed by conservative supply-side economic and debt reduction policies,

together with the growth of entitlement programs, less public money was available for

postsecondary education, and what new money was available was concentrated in

technoscience and market-related fields in what amounted to a higher education

version of supply-side economics. In the words of a recent British White Paper,

postsecondary education in all four countries was directed toward national "wealth

creation," and away from its traditional concern with the liberal education of

undergraduates (White Paper 1993).

Whether scholars write about "high technology," (Reich 1992), the "information

economy," (Castells 1993), or "technoscience" (Aronozwitz and DiFazio 1994), they

see as central to global competition national strength in computers,

 62

telecommunications, electronics, advanced materials, artificial intelligence, and

biotechnology, whether as the basis for whole new industries or as a means for

streamlining old industries. Technoscience makes impossible the separation of science

and technology, basic and applied research, discovery and innovation (Lyotard 1984,

Touraine 1974, Aronowitz and de Fazio 1994). Technoscience is at once science and

product. It collapses the distinction between knowledge and commodity: knowledge

becomes commodity. Telecommunications and biotechnology exemplify technoscience

(Sassen 1991, Kevles and Hood 1992).

Although discussion of technoscience is usually confined to the physical and

biological sciences that are directly related to manufacturing, the distinction between

manufacturing and services is increasingly difficult to maintain (see note 1), and the

social sciences and professional schools are developing services with technoscience

components that are marketed as products. Examples are legal tools and financial

instruments as well as software packages that depend on sophisticated mathematical

and statistical capabilities. In some ways, technoscience is congealed intellectual

labor, embodied in infrastructure, product and software, authoritative, almost irrefutable,

because its functions and formulas are inaccessable, distanced from ready

manipulation and intuitive understanding (see Latour and Woolgar 1979 on the ability of

technology to resist intellectual challenge). Universities, whether through R&D or

education and training, are the font of technoscience for post-industrial economies.

As movement from bi-polar to multi-polar world trade patterns heightens global

competition, corporations and state agencies often work together to stimulate

 63

technoscience. Business leaders want increased civilian R&D to develop

technoscience products competitive in global markets (Mowery 1994, Etzkowitz 1994,

Slaughter and Rhoades 1996). Political leaders seek to stimulate technoscience as a

way out of the impasse created by the failure of the Keynesian nation state. Leaders of

nations, corporations and universities hope that subsidy of technoscience innovation

will re-create the prosperity of the post World War II period (1945-1970). Specifically,

they see technoscience as generating numerous, high-paying jobs that will replace the

well-paid blue-collar manufacturing jobs characteristic of Fordism. In the four countries,

leaders of state and business leaders have come together around programs to

stimulate innovation, usually through building industry-government-academic

partnerships led by industry, held together by government, and serviced by universities

on the technoscience side (Business Higher Education Forum 1983, Council for

Industry and Higher Education 1987, Buchbinder and Newson 1990).

Because multinationals and nation states are pursuing technoscience as the way

to increase shares of world markets, they are simultaneously pursuing intellectual

property protection strategies. To reduce multi-polar competition, especially from

states with low labor costs and rising educational attainment, established industrial

countries have assiduously worked to establish protection of the intellectual property

embodied in technoscience. The European Community (EC), General Agreement of

Tariffs and Trade (GATT) and North American Free Trade Agreement (NAFTA) all

recognize copyright and patents and attendant royalty and licensing agreements, and

have strong sanctions for violation.ix Universities are a source that corporations and
 64

governments look to for discovery that will yield intellectual property. (To some degree,

universities, at least in the United States, also compete with corporations, given that

many universities have established technology licensing programs to increase

institutional revenues [Slaughter and Rhoades 1993]). Leaders of corporations,

government and tertiary institutions increasingly see faculty work as possible

intellectual property, more valuable in global markets as product or commodity than as

unremunerated contribution to an international community of scholars.

Globalization theories underline the importance of higher education to

technoscience, to industrial policy and to intellectual property strategies. Universities

are the central producers of technoscience, the primary product of post-industrial

economies. At the R&D level, faculty and graduate students participate in innovation,

increasingly working with industry on government-sponsored technoscience initiatives.

Advances in R&D create new fields of knowledge--materials science, optical science,

electronic communications, biotechnology--that reshape undergraduate education.

Universities provide the high level of training, at the undergraduate and graduate level,

essential to technoscience. Increasingly, the service component of universities is being

reinterpreted as contributing to national "wealth creation" (White Paper 1993). As Guy

Neave puts it, "...education is less part of social policy but is increasingly viewed as a

subsector of economic policy" (1988, p.274.) x

NATIONAL HIGHER EDUCATION POLICIES

 65

To understand more concretely the impact that globalization has had on higher

education policy, we review policy development in the four countries from 1980 forward.

We look at both science and technology policy (research and graduate level education)

and access, curricula and financial aid policies (undergraduate level education). We

think that graduate and undergraduate policies cannot be understood separately, given

the degree to which graduate education drives undergraduate, particularly at research

universities. We also look closely at way changes in higher education policy at the

national level shape institutional and faculty autonomy. In particular, we examine the

degree to which national policies promote academic capitalism.

The United Kingdom. The United Kingdom dramatically demonstrates the

pattern of change that has taken place in tertiary education in the four countries in

response to global competition. With regard to access, in a twenty year period, the

system moved from an elitist binary system, with the greatest numbers of students in

the lower tier, to a unitary system that was expanded at the expense of the higher tier.

In terms of career training and curricula, national policies privileged science and

technology, both in terms of numbers of student places and research. National

research policies moved away from basic or curiosity-driven research to research more

tightly tied to state initiatives aimed at increasing industrial competitiveness. Overall,

the system lost autonomy due to major changes in governance structures, and

professors lost many of their prerogatives with regard to control over their work.

Like many others, the British higher education system expanded greatly in the

post World War II period, nearly quadrupling in size between 1945 and 1970, doubling
 66

from 7% in 1964 to 13% in 1971 (Kogan and Kogan 1983, McFarland 1993). The high

point of expansion was probably reached with the Robbins Committee (1963), which

articulated the principle that all those who qualified for entry and wanted a place should

be able to attend college or university. Universities were characterized by a powerful

professional culture that explicitly rejected entrepreneurial initiatives and business goals

(Robins and Webster 1985). Universities enjoyed a great deal of autonomy (Berdahl

1959). The University Grants Committee (UGC) acted as a buffer between the state

and the institutions, and had the authority to make decisions on institutional resource

requests for research, drawing funds directly from the Treasury department after

making decisions about research funding on the basis of national needs for research in

particular areas and on academic criteria for excellence in research (Shattock and

Berdahl 1984).

Although tertiary education was not favored in terms of resources in the 1970s,

higher education policy did not change dramatically in the United Kingdom until the

1980s. Thatcherism was the driving force behind the change (Gamble 1989).

According to Michael Shattock (1989),

Within three days of Mrs. Thatcher's taking office in 1979, 100 million

pounds were cut overnight from the universities' budgets, and, between

1980 and 1984, 17 percent was removed from the grants made by

government to the UGC (University Grants Council, which, at that point

provided about 90% of the operating costs of British universities)....Four

thousand academic posts were lost, mostly through government-funded

 67

early retirement. And, from 1985 onwards, the universities have lost a

further 2 percent per annum from their budgets (p.34).

In the mid-1980s, British business leaders worked with the Thatcher government

to build an enterprise culture in tertiary education. The push was articulated forcefully

by the Jarrett Committee (1985), chaired by a leading industrialist, that called for higher

education to adopt more efficient managerial styles and structures. Business leaders

organized the Council for Industry and Higher Education, an independent body

supported by corporations. The Council was composed of thirty-two heads of large

companies and twelve heads of tertiary institutions. "Its aim was to encourage industry

and higher education to work together and its policy paper Towards Partnership (1987)

argued for greater access to and more variety in higher education, as well as a shift

toward science and technology provision" (Pratt 1992, p.38). This group successfully

sought to increase places in science and technology, particularly in the less costly

polytechnic sector, and to increase civilian R&D, integrating it with economic

development.

The work of politicians, industrialists and higher education managers bore fruit in

a 1987 White paper and the 1988 Education Act. The White Paper called for "major

changes...to improve the effectiveness and purposes of higher education." In

particular, "higher education should serve the economy more effectively..." and "have

closer links with industry and commerce, and promote enterprise," expand access "to

take account of the country's need for highly qualified manpower," including studying
 68

the needs of the economy so as to achieve "the right number and balance of

graduates..." Research should be targeted "to prospects for commercial

exploitation"(Secretary of State 1987).

The 1988 Education Act began to make these intentions law. It diminished

differences between universities and polytechnics, abolishing the University Grants

Committee along with the polytechnic board, replacing them with smaller boards,

dominated numerically by business leaders (Fulton 1991). This was a powerful attack

on the autonomy of academics, symbolic of the end of an era of independent academic

culture (Shattock 1994). Along with the demise of the University Grants Committee, the

government directed that "state expenditures on higher education should be regarded

as payments for services provided rather than as block grants to institutions" (Johns

1992, p. 173). Universities and polytechnics were forced to develop competitive

"bidding schemes" for students to increase institutional cost effectiveness.

In 1992, the binary system was abolished by the Department of Education and

Science (DES). Teaching and research, once considered a single function in university

funding, were differentiated and each allocated to institutions on a separate bidding

system. Teaching monies depended on numbers of undergraduate students and

quality assessments, which looked at quantifiable outcomes and which were performed

by agencies outside the institutions (Peters 1992). The research allocations previously

incorporated in large institutional grants given automatically to universities were taken

away, and competition for research was opened up to the system as a whole (Scott

1993).
 69

According to Martin Trow, Sir Peter Swinnerton-Dyer, head of the Universities

Funding Council, which oversees the new unitary system, takes the following position,

(i) Enrolments in higher education in the U.K. are going to grow over the

next decades.

(ii) Public money for the system may grow also, but not at current cost

levels and not as fast as enrolments.

(iii) Therefore the unit of resource must and will continue to decline,

although the Government is not prepared to say when the unit will hit

bottom nor is it prepared to discuss capital costs at this time.

(iv) On the whole, capital growth will be a problem for the universities and

not of the central government.

(v) public policy for higher education in this country has as its main goals

to get more teaching and research for less public money, at less per unit

of teaching and research. On the whole this is to be seen as an

improvement in the efficiency of your institutions (Trow 1992, p.214).

In other words, abolishing the binary divide was a way of reducing the very high costs

of universities by allowing less prestigious polytechnics and colleges to compete openly

with them. By competing among themselves, institutions in the post-secondary sector

would provide the finances for expansion of the system to meet rising enrolment

demands by leveling down, not up, undercutting the rich resource base of the

universities yet not providing the polytechnics with the same resources as universities.
 70

The demise of the binary system and the institution of competition for research

funds formalized the steady erosion of the research component of general university

funds (GUF) throughout the 1980s. Between 1980 and 1987, GUF funding in Great

Britain grew by 10%, while separately budgeted funding increased by 32% (Martin and

Irvine 1990). Rather than automatically receiving institutional funds for research,

professors increasingly had to compete for funds targeted to strategic goals in

technoscience areas. Following evolutionary theorists of science and technology, the

government moved away from "the assumption of neo-classical economics that

scientific and technological information moved freely between organizations..." and

instead viewed innovative technologies "as developing largely independently of

science," or, when technology was related to science, as developing "in a more

complex way than linear models suggest" (Gummett 1991, see also Gibbons 1994).

Government science and technology policy began to focus on "university-industry

relations and upon the development of `strategic' research to underpin new fields of

technology, often across the boundaries of established disciplines," with special

attention to "`exploitable areas of science,'" and at the same time greatly increased

assessment and evaluation of R&D programs (Gummett 1991, p.35. See also

Leydesdorff 1994). These policies led to concentration of research resources in

Interdisciplinary Research Centres won through competitive bidding and to

development of patent exploitation and technology licensing programs (Williams 1992,

Gering and Schmied 1993). This direction was re-affirmed by a 1993 White Paper that

addressed the research function of postsecondary education and pressed universities

 71

and colleges to make a more direct contribution to "wealth creation" through research

(White Paper 1993).

The United States. Although Mrs. Thatcher and Mr. Reagan had similar political

philosophies and were heads of state at approximately the same time, their specific

policies for higher education were quite different. The differences were due at least in

part to the different state structures, political economies and academic cultures. In

contrast to the United Kingdom, where change was systemic, initiated by the

government through DES, and encompassed undergraduate education as well as

graduate education and research, in the United States change at the federal level in the

1980s was piecemeal, emanating as much from the Congress as from the executive

branch, and concentrated on the research function. Corporate leaders worked with

political leaders and heads of universities to shift research away from basic and military

research to civilian technoscience research that met post-industrial needs (Etkowitz

1995, Slaughter and Rhoades 1996).

With regard to student access, change started even earlier. In the early 1970s,

the Nixon administration, working with national policy groups, such as the Committee

for Economic Development, foundations, such as the Carnegie Foundation for the

Advancement of Teaching, and private and public higher education institutions

introduced the idea of market forces in higher education. Together they developed a

high tuition-high aid policy through which government gave aid to students rather than

institutions, thus making students "consumers" in the tertiary education marketplace.

(For an extended discussion of these policy changes and their consequences for
 72

research universities, see Chapter 3, pp. 105-109.) In the 1980s and 1990s, despite

marked differences in the political institutions of the United Kingdom and the United

States, leaders of large corporations, heads of universities and political leaders in both

countries used their unique institutions to develop competitiveness policies with regard

to research and development. The vehicles for policy development were organizations

such as the Business-Higher Education Forum (1983, 1986) and the Government-

University-Industry Research Roundtable (1992), but these organizations were only two

of many (see for example Committee on Science, Engineering and Public Policy 1992,

1993, President's Council of Advisors on Science and Technology 1992). Moreover,

organizations that brought together leaders of industry, academia and government

developed in the several states in the 1980s and 1990s (Johnson 1984, U.S. Congress

1984, Lambright and Rahm 1991).

At the same time, a strong competitiveness coalition emerged in Congress, and

was ready to translate competitiveness policies into law (Slaughter and Rhoades 1996).

(A selection of the many laws passed promoting technoscience research in universities

and industry is presented in Table 2.1.) Generally, these laws allowed universities to

participate in profit-taking, permitted corporations exclusive access to government-

funded research performed in universities and federal laboratories, and promoted joint

ventures between universities and corporations, breaking down the relatively rigid

organizational boundaries that had previously guarded universities' autonomy.

TABLE 2.1
 73

SELECTED U.S. LEGISLATION ENABLING A COMPETITIVENESS R&D POLICY

1980: PL 96-480. Stevenson-Wydler Technology Innovation Act, as amended in 1986

and 1990

1980: PL 65-517. Bayh-Dole Act, and Reagan's 1983 Memo on Government Patent
Policy

1982: PL 97-219. The Small Business Innovation Development Act

1983: PL 97-414. Orphan Drug Act, as amended 1984, 1985, and 1990

1984: PL 98-462. The National Cooperative Research Act

1986: PL 99-660. The Drug Export Amendments Act of 1986.

1987: Presidential Executive Order 12591

1988: PL 100-418. The Omnibus Trade and Competitiveness Act

1993: PL 103-182. North American Free Trade Agreement

1993: PL 230-24. Defense Appropriations Act, Technology Reinvestment Program

The Bayh-Dole Act of 1980 signaled the inclusion of universities in profit-making.

It permitted universities and small businesses to retain title to inventions developed with

federal research and development monies. In the words of the Congress, "It is the

policy and objective of the Congress ... to promote collaboration between commercial

concerns and nonprofit organizations, including universities" ([emphasis ours] Bayh-

Dole Act 1980). Prior to the Bayh-Dole Act, universities were able to secure patents on

federally-funded research only when the federal government, through a long and

cumbersome application process, granted special approval. In a very real sense, the
 74

Bayh-Dole Act encouraged academic capitalism.

The several technology transfer acts, beginning with the Stevenson-Wydler Act

of 1980, pioneered the legal and administrative mechanisms for transfers between

public and private entities. These acts were aimed primarily at the Federal laboratories,

but also touched on universities. For example, in the Federal Technology Transfer Act

of 1986, the Federal laboratories were able to enter into cooperative research and

development agreements with "other federal agencies, state or local governments,

industrial organizations, public and private foundations, and non-profit organizations,

including universities" ([emphasis ours] Federal Technology Transfer Act of 1986).

The place of universities in the competitiveness agenda was underscored by the

Small Business Innovation Development Act (1982). This act mandated that federal

agencies with annual expenditures over $100 million devote 1.25% of their budgets to

research performed by small businesses, which were deemed the engines of economic

recovery. It passed despite the opposition of major research universities. The

research universities wanted to retain the monies for fundamental research, but the

needs of business were paramount, outweighing claims for basic science (Slaughter

1990).

The Orphan Drug Act (1983) provided incentives for developing drugs to treat

rare diseases. This act encouraged biotechnology firms, which drew heavily from

academically-based, federally funded R&D, whether through university spin-off

companies or through licensing, to pursue niche-markets for vaccines and diagnostics

for diseases, such as Huntington's chorea, that struck relatively small groups of victims
 75

through tax incentives and market monopolies. Such companies received a 50 percent

tax credit for the cost of conducting clinical trials, often performed by universities, as

well as a seven year right to exclusivity in marketing the products (US Congress 1991).

University spin-off companies profited from the Orphan Drug Act, for example,

Genentech, which was started by faculty at University of California-San Francisco,

where the recombinant human growth hormone was first produced and then patented

(Goggin 1986).

The 1984 National Cooperative Research Act afforded special anti-trust status to

R&D joint ventures and consortia. This act was crucial to university-industry

collaborations. Previously, the courts had ruled that collaborations at the enterprise

level were inappropriate, barring joint R&D efforts by firms in the same industries on

grounds of restraint of trade. The National Cooperative Research Act made an

exception for R&D, enabling broad government-industry-university funding of R&D,

such as occurred with Microelectronics and Computer Technology Corporation. xi

Currently, there are over 100 such ventures (NSF 1989). The National Cooperative

Research Act was also a counter in business leaders' strategy to overhaul national anti-

trust policy, promoting cooperation at home and competition abroad (Dickson 1984,

Fligstein 1990).

A series of acts--the Drug Export Amendments Act of 1986, the Omnibus Trade

and Competitiveness Act of 1988, the North American Free Trade Agreement of 1993,

the General Agreement on Tariffs and Trade of 1994--embodied the competitiveness

coalition's global intellectual property strategy. By and large, these acts decreased
 76

regulation, specifically in the biotechnology area, and increased protection of

intellectual property and enforcement of intellectual property rights. By emphasizing

knowledge as commodity, they reinforced the importance of academic capitalism in

universities. (For a more detailed discussion of the provisions of these acts, see
xii
Slaughter and Rhoades 1996).

Neither President Reagan nor President Bush was enamored of a

competitiveness policy if it in any way suggested that the United States was adopting

an industrial policy. However, during the last two years of the Bush administration, his

science and technology staff worked closely with the Council on Competitiveness in

developing a bottom-up industrial policy that relied heavily on R&D (Slaughter and

Rhoades 1996). In his campaign, President Clinton borrowed heavily from these policy

initiatives. He said, "We must go beyond support for basic research and a reliance on

`spin-offs' from defense R&D" (Clinton/Gore 1992, 2). As his position paper points out,

At present, 60% of the federal R&D budget is devoted to defense

programs and 40% to non-defense programs.

. . . At the very least, in the next three years the federal government

should shift the balance between defense and non-defense programs

back to a 50-50 balance, which would free-up over $7 billion for non-

defense R&D. (13-14)

 77

In terms of university curricula and training, there was little formal policy

discussion at the national level in the 1980s and 1990s, in large part because higher

education was the province of the several states and curricula were set by faculty at the

institutional level. However, federal grant and contract monies for technoscience

increased somewhat while monies for the humanities and social sciences decreased

dramatically (Rhoades and Slaughter 1996). Given that the number of places for

graduate students was strongly, albeit, indirectly influenced by grant and contract

monies, the research and development function of universities concentrated

increasingly on the sciences and engineering. In the period 1983-1993, federal R&D in

the science and engineering fields became more applied. Universities share of basic

research remained the same, but applied research increased by 6% and development

by 4% (NSF 1993, see also Rhoades and Slaughter, forthcoming).

With regard to access, the numbers of students overall increased somewhat, but

varied greatly by sector. The greatest growth in the tertiary sector was in the lowest

tier--the community college sector (National Center for Educational Statistics 1995).

Community colleges absorbed the majority of "first-generation" students and "students

of color"-- euphemisms for working and underclass college students (Cooperative

Institutional Research Program and American Council for Education 1994). In part,

these students concentrated in the lowest tier because costs were lower. High tuition-

high aid policies did not cover the full costs of most students as the price of higher

education rose dramatically and the proportion of the costs born by students increased

concomitantly. (For figures of higher education tuition increases and students share of
 78

them, see Chapter 3).

Overall, in the 1980s and 1990s, the United States policy at the federal level

shifted so that colleges and universities were able to engage in academic capitalism.

Like the United Kingdom, the United States federal science and technology policy

promoted science and engineering that encouraged academic capitalism, and

rewarded universities that pursued these initiatives. Professors were discouraged from

pursuing curiosity-driven research and encouraged to engage in more commercial

research (Etkowitz 1994, Etkowitz and Leydesdorff 1996). Given the power of the

several states with regard to education, the United States government did not institute

anything like quality assessments at the national level; however, a number of states

began instituting the equivalent of quality assessments--rising junior exams, junior

writing exams, value-added assessments, more standardized teaching evaluations, and

performance-based budgeting--that more closely regulated faculty's instructional work

(Guthrie and Pierce 1990). Although occurring in piecemeal fashion, policy changes in

the United States were not dissimilar to those that took place in the United Kingdom.

Australia. During the 1980s and 1990s, like the United Kingdom and the United

States, Australia moved toward developing a closer relationship among industry,

academe and government in an effort to strengthen the national ability of private

corporations to compete in a global economy. In many respects, the Australian

process was similar to that of Great Britain, although in some instances--for example,

abolishing the binary divide--Australian policy developments preceded those in the

United Kingdom. (Miller 1995, Williams 1992). Like the United Kingdom, Australia,
 79

which also had a relatively low tertiary participation rate, saw breaking down its binary

divide as a means of forcing institutions to compete with each other for students,

thereby increasing the total skill output and expanding the overall number of places

relatively cheaply, and to compete with each other for research monies, ensuring more,

if not cheaper, research. Unlike in the United Kingdom, the Australian creation of a

unified national system called for colleges of advanced education (CAEs), formerly in

the lower tier of the binary system, to merge with universities, formerly in the higher tier.

Prior to unification, Australia had eighty-five CAEs and thirteen universities. In 1987,

after the organization of the unified national system, there were thirty-five universities.

Because CAEs, historically concerned with vocational and technical education, were

incorporated into the management and programming of universities, they tilted the

system as a whole in the direction of technoscience.

Like the United Kingdom and the United States, Australia promoted science and

technology at the graduate level, targeting specific areas and building university-

industry-government centers and partnerships. Like the United Kingdom, the

organization that buffered universities from the state was disbanded, and like the

United Kingdom and United States changes in organizational practice involved

universities in academic capitalism. Unlike in the United Kingdom and United States,

these changes were instituted by a Labor government.

In 1988, the Hawke government instituted major organizational changes in

higher education as part of an attempt to respond to the globalization of capital and

labor (Pusey 1991). The Australian Labor government saw the rising productivity of
 80

nearby Asian countries as making Australian labor less competitive in southeast Asian

markets. Australians were highly paid, with a minimum wage of A$11.85 (U.S.$10.00)

per hour, and relatively poorly educated, with only about 10% of 18-21 year old

students going on to higher education. The Labor government saw reorganization of

higher education as stimulating preparation of students in high technology fields, and

contributing to economic growth.

The society we want cannot be achieved without a strong economic base.

In Australia, this now requires a greatly increased export income, a far

more favorable balance of trade and a considerable reduction in our

external debt. Our industry is increasingly faced with rapidly changing

international markets in which success depends on, among other things,

the conceptual, creative and technical skills of the labour force and the

ability to innovate and be entrepreneurial (Dawkins 1988, p.6).

To attain that end, the Labor government reorganized its education portfolio in

1987, replacing the Commonwealth Tertiary Education Commission (CTEC), an

organization that, like the University Grants Commission in the United Kingdom, served

to buffer higher education from other government bodies, with the National Board of

Employment, Education and Training, which had among its councils a Higher Education

Council that provided advice but had no executive role. Generally, tertiary education

was overseen by the Department of Employment, Education and Training (DEET),

 81

foregrounding the economic component of education. The head of the new ministry,

John Dawkins, made a number of organizational changes in higher education. Given

that the federal government paid most of the bill for the tertiary sector, he had a

relatively free hand. The three most significant changes for academic labor were (1)

amalgamating universities and CAEs; (2) developing policies that established targeted

commercial research funding priorities; (3) developing policies for establishing and

monitoring institutional profiles (Dawkins 1988).

Creating a unified national system of higher education was probably the greatest

of the three changes. Before Dawkins' organizational reforms, Australian higher

education was organized into two sectors, universities and colleges of advanced

education. The universities had a long history, often pre-dating World War II, while the

CAEs were relatively recent. The universities were geared toward research as well as

teaching, and focused particularly on preparation for entry into the established

professions. The CAEs were focused on teaching and education for entry level jobs in

the more applied professions. The Dawkins' reforms were an effort to eliminate these

distinctions. Formerly, university professors were expected to do research one day in

five and they received a proportionately greater salary to cover this cost. Dawkins'

reforms "clawed back" salaries from university professors, and used the monies

retrieved for research for which professors throughout the unified system had to bid

competitively. Similarly, professors in all universities had to compete for high status

programs (Marginson 1995). The Labor government thought amalgamation would

create more university places for students and stimulate more research. As in the
 82

United Kingdom, government resource flow did not match the increased number of

university-level places, creating a situation in which the tertiary system was likely to be

leveled downward rather than upward.

As amalgamation took place, Dawkins developed a policy of targeting research

priorities. The priorities were by and large concerned with political economic goals,

such as technology to stimulate job growth, to protect the environment, and to build

energy self-sufficiency. Intense competition for available research monies made

professors more willing to consider new ways to fund research. By 1993, federal

research agencies funded only 20% of research grant applications (Wood et.al. 1992).

The most obvious pots of money were under the rainbows of the targeted areas, which

usually focused on commercial endeavors that moved academe closer to the market.

Securing these funds often involved university collaborations with industries and

governments, usually through formation of centers of excellence or centers in key

technology areas (Turpin and Hill 1991, Hill 1993, Hill and Turpin 1993). At the same

time, institutions, often working in concert with the several states, began to develop

technology licensing programs and technology parks (Joseph 1989, 1989a).

Altogether, large amounts of research monies previously spent on professors' curiosity-

driven research were re-directed toward government and industry goals that focused on

building Australian competitiveness in global markets (Wood 1992).

As the unified system was directed toward more targeted research, DEET began

to monitor institutions of higher education, whether universities or CAEs, more closely.

Each year, universities and colleges were asked to develop institutional profiles in
 83

concert with the ministry as part of the federal funding process. As a condition of

funding, institution and ministry had to reach common priorities. In 1993, DEET began

conducting quality assurance exercises. These exercises reviewed internal university

procedures for quality control, and institutions able to demonstrate efficacy with regard

to quality procedures were eligible for a share of A$76 million that was set aside as a

reward. Although these monies were but a small part of university budgets, institutions

that won them enhanced their student drawing power immeasurably.

Before the 1990s, in contrast to the United Kingdom and United States, the

Australian private sector did not play much of a role in bringing tertiary education closer

to economic development issues. In the early 1980s, in countries other than Australia,

business groups and organizations worked closely with the government and the tertiary

education community to reform postsecondary education in ways that attended more

closely to economic needs. In Australia, peak business associations and other industry

groups did not join with higher education leaders until 1990, when the Australian

Business/Higher Education Round Table was organized (Marshall 1996). In other

words, change in Australia was led by a Labor government concerned with industrial

competitiveness rather than by industry or university groups.

Like in the United Kingdom and the United States, Australian government

developed national policies that turned R&D away from basic or fundamental research

and toward academic capitalism. Before the United Kingdom did so, Australia

abolished its binary divide, expanding access by forcing institutions to compete with
 84

each other for student places and faculty to compete with each other for research

dollars, overall giving rise to academic capitalism. At the same time, as in the United

Kingdom at the national level and the United States at the level of the several states,

the instructional and curricula work of faculty was more closely monitored through

institutional profiling.

Canada. Like the United States and the United Kingdom, in Canada business

leaders worked closely with university and government leaders to push for change in

the tertiary system, and some changes were initiated at the federal level when the

Conservative government took office in the mid 1980s (Miller 1995). Like the United

States, change at the federal level was largely concerned with the research function

because the Canadian division of powers between provincial and federal governments

gave provinces the responsibility and budget for tertiary education. xiii As in the several

states in the United States, a number of provinces in Canada pushed university-

industry research and development programs that were aimed at stimulating regional

economic development. Again like the United States, change was incremental.

Despite the push by industry leaders, some university and federal government and

provincial leaders, little change occurred in the higher education system, making

Canada the outlier in that respect among the four nations.

In the early 1980s, the Corporate-Higher Education Forum was organized; its

membership consisted of corporate executives and university presidents. The goals of

the Corporate-Higher Education Forum were similar to those of the Council of Industry

and Higher Education in the United Kingdom and the Business-Higher Education
 85

Forum in the United States.

Corporate collaboration helps to optimize the use of Canada's limited

human, financial and physical resources in research and education while

tuning the research effort and the university curriculum more closely to the

needs of the marketplace. (Maxwell and Currie 1984, p.2).

The agenda of the Corporate-Higher Education Forum was developed during a period

of university underfunding by the federal and state governments (Elliott 1995).

Because universities were searching for new streams of revenues the development of a

partnership between higher education and business that led to academic capitalism

had an almost inevitable logic (de la Mothe 1987, Buchbinder and Newson 1990,

Newson 1994).

The government was a third party to the partnership between business and

higher education. Like political leaders in the United States, United Kingdom and

Australia, Canadian leaders viewed technoscience as a vehicle for creating high-paying

jobs that preserved shares in the global market. A goal of the Mulroney government

was to double the share of GNP spent on R&D by 1991. Mulroney established a

National Council for Science and Technology, which he chaired, and a program to

stimulate corporate giving for academic research and development. As a proportion of

total R&D, Canada's privately funded R&D was the lowest of any major industrial

country. The government tried to encourage contributions to R&D from the private
 86

sector by tying increases in university research support to corporate contributions to

universities or the national research councils. As Julien (1989) puts it,

The aims of this policy could not be clearer, the intention being, firstly, to

encourage the private sector to fund university research and, by so doing,

acknowledge its social and economic importance and, secondly, to

strengthen the links between universities and the private sector and

thereby promote and quicken the transfer of knowledge (p.69).

This policy was reflected in goals and priorities of the Science Council of Canada

(1987), an advisory body to government,

Teaching and basic research are major roles of the university and must

remain so. But as knowledge replaces raw materials as the primer of the

world economy, the universities' part in creating wealth--too often

understated--becomes crucially important. The intellectual resources of

the university are needed to help revitalise mature industries and

generate the product ideas needed to create new ones. Canada's future

prosperity increasingly depends on designing effective ways to integrate

the university and the market place.

The federal government supported its commitment to harnessing research to

 87

economic innovation through a wide array of projects, often sharing costs with

provincial and local governments. The InnovAction program, an agreement signed by

the federal government and provincial and local governments, was an early example

(Julien 1989, Buchbinder and Newson 1990). The federal government also worked in

partnership with provincial governments to develop research parks and centers of

excellence. In Canada, research parks linked universities with high technology

companies, and promoted technology transfer from academy to corporation. In the

early 1990s, there were twelve such parks, with the majority started in the 1980s (Bell

and Sadlak 1992).

"Centers of excellence," also called "university-industry research centers" were

modeled on the U.S. National Science Foundation (NSF) programs that had begun

promoting university-industry interactions as early as the 1970s. Like the NSF centers,

the Canadian Centers were run by boards with university and industry representatives.

The province of Ontario was especially active in creating Centers of Excellence in the

1980s: for example, Ontario Laser and Lightwave Centre, Waterloo Centre for

Groundwater Research, Manufacturing Research Corporation of Ontario, Ontario

Centre for Materials Research Centre, Telecommunications Research Institute of

Ontario, Information Technology Research Centre and Institute for Space and

Terrestrial Science. In the early 1990s, the federal government began funding Centers

of Excellence across the rest of the provinces (Bell and Sadlak 1992).

National commitment to science and technology innovation in commercial fields

tipped Canadian R&D from fundamental to applied science. In a Natural Sciences and
 88

Engineering Research Council Survey in 1978-9

33.6% [of scientists] stated they were doing applied work and 66.4%

characterized their work as toward the advancement of knowledge. By

1987-8 the figures had almost reversed themselves with 54.8% in the

applied category and 45.2% in the advancement of knowledge category

(Buchbinder and Newson 1990, p. 375.

Throughout the 1980s, business and government leaders in Canada proposed

initiatives to create industry-higher education-academic partnerships (Skolnik 1983,

1983a, 1987). However, this policy direction was never adopted; instead, Canada gave

the highest priority to increasing and widening access, overtaking the United States in

terms of participation rates in 1988 (Skolnik and Jones 1992). Although Canadian

scientists' view themselves as doing more applied work, for the most part Canadian

academics have resisted rapproachment with business, despite promptings from some

federal agencies. In the words of Glen Jones (1991), there have been "modest

modifications and structural stability." Canadian academics have perhaps been able to

resist pressures by the business and the federal government because Canada has by

far the most decentralized higher education of the four countries (Skolnik and Jones

1991, Skolnik 1990).

CONVERGENCE OF HIGHER EDUCATION POLICIES

 89

In the 1980s and 1990s, the higher education policies of three of the four

countries, Canada being the exception, began to converge. The areas of convergence

were science and technology policy, curriculum, access and finance, and degree of

autonomy. For the most part, these policies are concerned with economic

competitiveness: product and process innovation, channeling students and resources

into curricula that meet the needs of a global marketplace, preparing more students for

the post-industrial work place at lower costs, managing faculty and institutional work

more effectively and efficiently. Each of the countries developed a number of policies

outside these parameters that did not converge. Even in the areas of convergence, the

four countries arrived at similar policies by very different paths. Australia and the

United Kingdom used their ministries of education, the former led by a Labor

government, the later by a conservative government. In Canada and the United States,

the provinces and the several states, as would be expected in relatively decentralized

systems, often developed their own initiative to promote academic capitalism. In the

United States, Congress was more aggressive than the executive branch in creating an

infrastructure for academic capitalism. Despite the very real differences in their political

cultures, the four countries developed similar policies at those points where higher

education intersected with globalization of the post-industrial political economy.

Tertiary education policies in all countries moved toward science and technology

policies that emphasized academici capitalism at the expense of basic or fundamental

research, toward curricula policy that concentrated monies in science and technology
 90

and fields close

to the market (business and intellectual property law, for example), toward

increased access at lower government cost per student, and toward organizational

policies that undercut the autonomy of academic institutions and of faculty.

Research and development was probably the area in which the most dramatic

policy changes occurred. In three countries, national policy shifted from promoting

basic or fundamental research to privileging science and technology policy aimed at

national wealth creation. Even in the United States and the United Kingdom, where

fundamental R&D in the post-war period was to some degree conflated with defense

R&D, strong civilian science and technology policies emerged (Etzkowitz 1995,

Slaughter and Rhoades 1996). The very words used to describe R&D changed.

Research and development was no longer focused on basic or fundamental research,

which came to be referred to rather derisively as "professors' curiosity-driven research,"

but on pre-competitive, strategic or targeted research (Lederman 1989, Wood 1993,

Etzkowitz 1994, 1995, Slaughter and Rhoades 1996).

Pre-competitive research usually refers to research that benefits corporations at

the enterprise level, before specific firms try to gain exclusive knowledge advantage.

The Microelectronics and Computer Technology Corporation agreement in the United

States (see note 7) is a good example of pre-competitive research. Strategic research

refers to broadly targeted research, for example, some areas of biotechnology.

Targeted research refers to narrower commercial programs, for example, the five areas

identified by the Clinton administration as areas for R&D investment, areas addressed
 91

by the Advanced Technology Program. Similarly, we now speak of science and

technology policy, not of science policy, stressing the product/manufacturing dimension

of technoscience (Gummett 1991, Mowery 1994). So too, notions of the way science

and technology move from academy to industry have become more complex, changing

from "spin-off," a concept that did not dwell on the causality of the leap from laboratory

to commercial product, to technology transfer, which envisioned a relatively linear but

highly managed transfer, to evolutionary explanations that make the process more

complex (Gummett 1991, Leydesdorff 1994). The three countries have adopted

discourses to discuss science and technology policy that go far beyond, sometimes

even do away with, basic and fundamental research as central categories. All three

countries see R&D as the font of technoscience, necessary for home-based

multinationals to compete successfully in the global economy.

As part of the transformation of R&D, all four countries have seen the growth of

technology parks, usually sited close to universities, sometimes partially funded by local

or state/provincial governments, but often receiving some federal subsidy. So too all

four countries have seen universities develop technology licensing schemes that join

universities and corporations. Sometimes these are federally sanctioned, as was the

case when the U.S. Congress turned patent ownership over to the institutions. More

often, universities share royalties with federal and state agencies that supported the

research from which invention was derived.

A number of these policy initiatives involve universities in profit-making. The

clearest cases are university technology licensing and university equity positions in
 92

faculty spin-off enterprises. In these instances, universities profit to the degree that

products sell. However, technology parks directly bring profits to universities, if only the

form of rent, and sometimes through housing joint-ventures. Centers of excellence,

consortia with industry, and various university-industry partnerships most often provide

multi-year government and corporate funding for commercially geared R&D, but can

utilize any of the profit-sharing schemes described above: share of royalty or licensing

income, joint-venture or equity position. Changes in R&D policy in the several

countries, then, has moved universities into academic capitalism.

Curriculum policies in all four countries have resulted in cutbacks in the arts and

humanities (with the exception of Australia) and in the social sciences (Martin et. al.,

1992). In countries where the power and budgets for tertiary education are not

reserved for the states and provinces, namely, in Australia and the United Kingdom, the

changes were made through allocation of student places (and, indirectly, faculty

positions), with more students being funded in science and technology than in other

areas. In the United Kingdom, for example, the fees allocated for social sciences and

humanities students were cut by 30%, to $1300, while fees for science and engineering

laboratory courses rose to $2772 per student (Halliday 1993). In the United States

changes were made indirectly, through cutbacks in research funding in non-science

and technology areas, which resulted in fewer graduate student places.

In the United States, where salaries are partially determined by professors'

viability in the market and through individual negotiation between professor and

administration, marked increases in salaries in technoscience areas reallocated

 93

institutional resources to these fields, making them more attractive to students.

Analysis of changes of U.S. faculty salaries by field in the decade between 1983 and

1993 shows that faculty with the highest salaries and percentage increase (70% and

above) were in fields concerned with technology (engineering and computers),

producer services (business and management, law) and health sciences, all fields

focused on knowledge as commodity and on intellectual property strategies (see Table

2.2, and Slaughter and Rhoades 1996). The greatest gains were made by engineering,

an applied science closely geared to R&D competitiveness policies, and by business,

health sciences, computer and information science, and law, all also closely connected

to R&D competitiveness policies, while the physical sciences and mathematics, the

doyens of "pure science," did not make nearly such dramatic gains. Even if salary level

rather than percentage of increase is considered, the physical sciences and

mathematics are substantially below the top tier, with $10,000 to $23,000 annual salary

differences that range between them and salaries in the top tier. The lowest salaries

and the lowest percentage increases are in the third tier, in fields furthest from the

market, those closer to the social welfare functions of the state. xiv The difference in

percentage salary increases between the lowest six fields in the third tier (philosophy

and religion, foreign language, home economics, letters, education, and performing

arts) and the five fields in the top tier ranges from 22 to 30%. As other countries move

toward differential salaries, as the United Kingdom has, the resources concentrated in

technoscience curricula, already rich in student places, will be further concentrated.

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TABLE 2.2

AVERAGE SALRIES OF FULL PROFESSORS BY FIELD, 1983-1993

FIELD Average salary %Increase

($75-90,000)

LAW $89,777 71.1%

ENGINEERING $77,985 84.6%
HEALTH SCIENCE $77,913 78.7%
BUSINESS & MANAGEMENT $77,535 79.0%
COMPUTERS & $75,964 74.8%
INFORMATION SCIENCE

($60-74,000)

PHYSICAL SCIENCE $65,914 63.2%

MATHEMATICS $63,776 59.7%
PSYCHOLOGY $62,567 59.5%
PUBLIC AFFAIRS $62,435 57.6%
SOCIAL SCIENCE $62,352 59.9%
LIBRARY SCIENCE $61,827 59.5%
INTERDISCIPLINARY $61,808 59.0%

($50,000-60,000)

ARCHITECTURE $59,322 57.0%

AGRIBUSINESS $59,178 63.8%
COMMUNICATIONS $58,933 61.3%
PHILOSOPHY & RELIGION $58,424 53.7%
FOREIGN LANGUAGE $57,344 52.4%
HOME ECONOMICS $57,157 54.3%
LETTERS $56,744 52.3%
EDUCATION $56,605 55.9%
PERFORMING ARTS $52,495 61.4%

From American Association of University Professors, "Annual Report on the Economic

Status of the Profession, 1993-1994," Academe March/April 1994, Table 5. Based on
data from national Association of State Universities and Land Grant Colleges.

*Average full professor salary

 95

In all four countries, despite projections to the contrary, enrollments went up,

tuition went up, government share of costs went down, and governments turned more

to loans and grants to support students. Generally, working class and first generation

college students were concentrated in the lower tiers of the system in all four countries.

With the end of the binary divide in Australia and the United Kingdom, this may change

somewhat, although it is likely that middle class students will move into the space

created by competition among institutions, much as middle class students in the United

States moved into state funded four year and comprehensive institutions, and less well-

off students into the community colleges (National Center for Educational Statistics

1995). As tuitions continue to increase and the rate of government spending continues

to decrease, able students from families willing to purchase tertiary education are likely

to occupy the most prestigious places.

The degree of autonomy possessed by institutions and professors has been

reduced in the several areas discussed: R&D, curricula, access. The loss of

institutional autonomy was clearly seen with regard to R&D. In the United Kingdom, the

government agency responsible for buffering institutions from the state--the University

Grants Committee--was abolished and replaced with agencies dominated by members

of the business community. In Australia, the Commonwealth Tertiary Education

Commission, a body modeled on the British University Grants Committee, was

abolished and many of its functions taken over by the Department of Education,

Employment and Training, an agency the very title of which stressed the relationship

between education and the economy (Marshall 1996). In the United States, the agency
 96

concerned with pure science--the National Science Foundation--began to promote

industry-led research (Rhoades and Slaughter forthcoming). To a substantial degree,

the divisions between private and public organizations that had long protected

institutional autonomy began to break down. The rule changes allowed public and non-

profit entities, whether universities, government agencies or non-profit research

institutes, entry into the market, changing our common-sense understanding of what is

public and what is private. Institutions still labeled public and non-profit were able to

patent and profit from discoveries made by their professional employees.

Simultaneously, private, profit-making organizations were able to make alienable areas

of public life previously held by the community as a whole: scientific knowledge, data

bases, technology, strains and properties of plants, even living animals and fragments

of human beings (Slaughter and Rhoades 1996). With the exception of Australia, this

privatization was industry led, held together by government policies and government

funding, and serviced by tertiary institutions trying to augment funds.

Professors lost autonomy when research policies shifted from support for basic

(professors' curiosity-driven) research to more applied research geared to economic

development. Professorial autonomy with regard to curricula was also eroded.

National competitiveness policies, supported by industrialists, government bureaucrats,

university administrators and some faculty, to a considerable degree determined the

direction of curricula through resource flow. Decisions about growth or decline of

curricula were no longer made exclusively by faculty operating in collegium. Instead,

decisions were made at a national level to strengthen technoscience in hopes of

 97

stimulating national wealth creation. As market considerations began to influence

professorial salaries, the collegial model of governance was attenuated as faculty who

professed certain curricula were, quite literally, valued more than faculty who professed

in less well-funded fields.

Professors lost autonomy in other aspects of their work. The various quality

assessment and accountability schemes developed in the four countries often called for

evaluation from bodies outside tertiary institutions, and frequently, from bodies outside

specific disciplines. As decisions about professors' performance of academic work

were moved outside the purview of professional expertise, professors became more

like all other informational workers and less like a community of scholars. Again,

Canada was an exception; it has no external review at the federal level and only one

province has instituted an external evaluation system.

Since 1980, the higher education policies of three of the four countries have

converged, although the countries remain divergent on a number of important

dimensions: for example, degree of centralization, student participation rates, and

student support. The United Kingdom and Australia dealt with higher education and

academic science and technology policy through relatively centralized state agencies,

the United States through less centralized state agencies. Although the United Kingdom

and Australia disbanded the buffer organizations that protected higher education from

the state, the same degree of centralization in these countries persisted throughout the

1980s and 1990s. The United States did not develop more centralized agencies,

although its policies on the relation of education to the economy began to converge
 98

with those of Australia and the United Kingdom. Prior to the 1980s, Australia and the

United Kingdom had relatively low higher education participation rates, with 10-12% of

18-21 year old cohort attending higher education, while Canada and the United States

had relatively high participation rates, with about 30% of the 18-21 year old cohort

attending. Canada overtook the United States in 1988, and now has the highest

participation. Although all countries made plans to increase participation, given their

very different starting points, enrollment patterns held throughout the 1980s and 1990s.

With regard to student financial aid, the United States moved toward high tuition and

toward loans rather than grants, and Australia and the United Kingdom explored similar

policies while continuing to offer much more generous government support to students,

as does Canada, than does the United States. In the United States, graduate students

in technoscience fields are supported primarily from their professors' federal grants and

contracts while in the other countries graduate students are supported by low or no

tuition policies and often have government stipends for living expenses (Lederman

1989).

Despite persistent divergence with regard to organization, access and student

support, a remarkable degree of convergence in higher education and R&D policy

occurred in three countries over the past twenty years. That convergence cannot be

explained solely by the political party in power, given Australia's labor government. We

think that convergence is best explained by globalization theory. The rise of multi-polar

global competition destablized Keynesian nation states, rendering problematic the

implicit social contract between the citizenry and government with regard to entitlement
 99

programs and social safety nets. In the three countries, policy makers responded to

increased competition for shares of global markets by reducing overall rates of increase

in state expenditures and reallocating money among government functions. Generally,

funds were taken away from discretionary programs, particularly from programs thought

likely not to contribute in a direct way to technological innovation and economic

competitiveness.

These macroeconomic policy changes had tangible consequences for tertiary

education in the four countries. Academic research and development policies, the life

blood of graduate education, became science and technology policies, more concerned

with technoscience innovation and building links with the private sector than with basic

or fundamental research that articulated more with learned and professional

associations than with the economy. For the most part, technoscience fields gained

funds while fields that were not close to the market, such as the philosophy and

religion, foreign languages, letters and performing arts, or fields that served the social

welfare functions of the state, such as education and home economics, lost funds.

Positions for faculty, places for students, and research money made technoscience

fields growth areas in tertiary education.

Although technoscience areas generally received more money, and policy

makers took the position that a post-industrial economy called for a higher numbers of

highly educated workers, policy-makers in all four countries planned to expand student

participation rates without comparably augmenting resources for tertiary education.

The increase in student numbers together with the slowing in the rate of increase of
 100

state resources began to change the conditions of faculty labor in contradictory ways.

On the one hand, faculty were encouraged to engage in academic capitalism. On the

other hand, faculty became responsible for larger numbers of students and were more

closely surveilled with regard to the instructional aspects of their work.

The exception was Canada. Although there was a decline in real operating

funding per student and some targeted funding for high technology research and for

collaborations with industry (see Chapter 3), Canadian higher education did not

undergo the same degree of change as the other countries. Even though the

conservative Mulroney government tried to initiate a rapproachment among

universities, industry and government, for the most part there was little structural

change in Canada. Canada's dissimilarity from the other countries is usually explained

in terms of its extreme decentralization (Jones and Skolnik 1992). Canada, then, offers

an alternative to the higher education policies developed by the other countries. The

crucial question in the immediate future is whether this model can be maintained, given

the size of Canada's national debt. Canada's national debt as a percent of GNP/GDP

stood at 40.3% in 1990, almost ten percentage points higher than the any of other three

countries (Oxley and Martin 1991, Table 1, p. 148).

The national policies of three of the four countries promoted academic

capitalism--market and market-like behaviors--on the part of faculty and institutions. In

terms of access, institutions in Australia and the United Kingdom began to tender

competitive bids for student places, contracting with the government to educate

students for a fixed cost. In the United States, institutions increasingly compete to
 101

attract high tuition and fees-paying students. In all three countries, curricula are

supported differentially by the state. The United Kingdom has moved furthest in this

direction, providing differential state support per student according to curricula. All four

countries have instituted policies that treat research and development as a source of

national "wealth creation," although Canadian faculty and institutions are resisting this

change. Faculty and institutions lost autonomy as higher education was more closely

integrated with the market. Individual professors' freedom to pursue curiosity-driven

research was curtailed by withdrawal of automatic funding to institutions to support this

activity and by the increased targeting of R&D funds for commercial research. Faculty

and institutions were pushed toward academic capitalism by policy directives and by

shifts in the resource mix. And some faculty and institutions eagerly turned to

academic capitalism, viewing it as an opportunity to exercise entrepreneurial skills, as a

means to capture resources, or as a strategy for a prosperous future.

Although these countries promoted academic capitalism as a means of

stimulating national growth, the success of these policies to date is mixed. Productivity

and GDP increased somewhat in the 1990s, but income inequality increased in three of

the four countries (Australia, the United Kingdom and the United States, with the

increases being greatest in the latter two [Atkinson, Rainwater and Smeeding 1995]).

National wealth creation, as a policy, may be succeeding in terms of productivity and

profitability, but recovery is not generating highly paid jobs. Indeed, relatively high

levels of unemployment, combined with the growth of poorly paid full time jobs and an

increasing number of part time jobs has given rise to the concept of "jobless recovery"
 102

(Rifkin 1995). Even those with "some college and more" are no longer assured of a

high return on their investment in higher education (Harrison and Bluestone 1990).

(However, young workers entering the job market without some college or more are

very likely to fare less well than their college-educated counterparts.) Paradoxically,

national policies that promote technoscience and its attendent automation and

corporate restructuring may play into the elimination of professional positions formerly

filled by college educated workers (Abbott 1988). The longevity of these trends and

what they will mean in terms of popular support for higher education is not yet clear.

In sum, post-industrial economies are replacing industrial ones even as

globalization of the political economy has destabilized traditional industrialized

economies by replacing bi-polar trading relationships with multi-polar ones, causing the

traditional industrialized nations to lose shares of global markets. In areas where

higher education intersects with the global economy, three of the four countries have

responded by developing policies that promote academic capitalism. Despite very

different political cultures and institutions, the higher education policies of three of the

four countries converged on science and technology policy, curriculum, access and

finance, and degree of autonomy. These policies are, for the most part, geared toward

increasing national economic competitiveness: they are concerned with product and

process innovation, channeling students and resources into well-funded curricula that

meet the needs of a global market place, preparing more students for the post-

industrial work place at lower costs, and managing faculty and institutional work more

effectively and efficiently.

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CHAPTER THREE: ORGANIZATIONAL TURBULENCE AND

RESOURCE DEPENDENCY

In this chapter, we explored the ways in which national policies in Australia,

Canada, the United Kingdom and the United States translate into higher education

finance. We look at financial trends in postsecondary education over a twenty year

period, illustrating the way in which globalization of the economy resulted in a slow

down in the flow of public resources to postsecondary institutions, a slowdown most

marked with regard to undesignated funds. Concomitantly, we examined the growth of

alternative income streams. We make the case that national and state/provincial

restriction of discretionary resources created increased resource dependency at the

institutional level, causing institutions and professors to look to alternative revenue

sources to maintain institutional income. These trends in postsecondary finance

involved higher education more deeply in academic capitalism and pushed higher

education closer to the market.

A single question guided this chapter: If global markets created national policies

that channeled money away from social welfare and education functions of the state,

specifically higher education, then how is this manifested at the national level? In other

words, were the policy changes described in Chapter 2 implemented in ways that could

be measured empirically by higher education financial data?

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The theory that guides our interpretation of data in this chapter is resource

dependency (Pfeffer and Salancik 1978, Pfeffer 1992). Our use of resource

dependency (described later in this chapter) is tied tightly to political economic theories

dealing with the emergence of a global economy, as discussed in Chapter 2. Whether

responding to market pressures, movement of unrestricted capital, or political economic

pressures from the business class, nation states developed policies in the 1980s that

targeted public monies for functions such as technology innovation, intellectual property

management, and producer services development. These policy shifts served as a

rationing device, shifting higher education monies from block-grants toward specific

goals that were consistent with the new orthodoxy of making industry more competitive

in the global market. Given that the federal governments, and, in the United States, the

several states, paid the largest share of all higher education costs, government

targeting of functions for research and program investment means there were fewer

unrestricted public resources available, thereby creating conditions of acute resource

dependency in higher education systems.

Resource dependency theory, discussed in greater detail below, suggests that

as unrestricted monies for higher education constrict, institutions within a national

system will change their resource-seeking patterns to compete for new, more

competitively based funds. To respond to new opportunities, institutions will have to

shift away from basic research toward more applied science and technology. Further,

they will likely increase tuition and become more active in expanding "sales and

services" while lowering labor costs, primarily through substituting part-time staff for full-
 105

time. To manage the shift from more unrestricted to more restricted monies, institutions

will likely spend more funds on administration as they attempt to oversee the transition

as well as to manage new revenue generating endeavors (such as institutional

advancement--fund raising from private sources--and sales and services of their own

educational activities), and academic capitalism (such as offices for patenting and

licensing, technology transfer, arms-length corporations, spin-off companies and

research parks). In other words, we believe changes in the national financing patterns

of higher education will promote academic capitalism.

If universities and faculty are shifting their efforts to maximizing external

funding and lowering instructional labor costs, we should be able to see these trends in

higher education financial data. Using Organization for Economic Cooperation and

Development (OECD) data for the four countries, we consider changes in per cent of

gross national product (GNP) devoted to higher education, of general public funds

allocated to postsecondary institutions, of tuition and fees charged by these

organizations, and of other income generated. We then examine changes in "indicator"

revenue categories: gifts, grants and contracts; and sales and services. Finally, we

look at expenditures: instruction, research, public service, administration, maintenance

of plant, and student aid. Our method is not to compare countries across all these

dimensions, given that the quality of the data and the recording categories vary by

country, but to look at change within each country to see if its postsecondary institutions

are exhibiting resource dependent behavior, winning an ever larger portion of support
 106

from sources other than block grant public funds and expending the resources in new

ways.
 107

THE CONNECTIONS AMONG HIGHER EDUCATION REVENUES,

EXPENDITURES AND ACADEMIC LABOR

Investigators, from journalists to prosecuting attorneys, long ago learned to

follow money trails to track human behavior. In higher education, too, we know that

income and spending patterns explain a great deal about organizational behavior.

Sometimes we observe that financial patterns belie public statements as to official

policy.

This principle, that financial behavior defines organizational behavior, is key to

our thesis. As already seen, shifts in higher education institutional expenditures have

occurred over time. When connected to changes in revenues, changes in expenditures

mean changes in the nature of academic labor.

Expenditure shifts do suggest shifts in the allocation of labor among functions or

activities. For example, if in a given university, expenditures for research increase

faster than the cost of research inputs then the amount of research being conducted

will appear to have increased, regardless of how we choose to measure amount.

Assuming for a moment that research labor costs have increased at the same rate as

the cost of other research inputs, then increased research expenditures mean that the

institution is committing more labor to research. Of course someone may be doing

more teaching, too, or providing more service, but clearly there is more research going

on: Either more individuals are now doing research, the same individuals are doing

more research, or fewer individuals are doing even more research. xv If researchers are
 108

classified as academics, as they commonly are, then in absolute terms, there is more

research being done by academics. Still, on average, taken as a group, all academics

may not be doing more research. If the share of expenditures going to research is

increasing, however, all else equal, then the nature of what academics do is being

altered in relative terms as well. Again, either more academics are doing research, the

same number of academics are doing more research, or fewer academics are doing

even more research, but now the nature of what academics do involves more research,

on average. In simple terms the nature of what academics do, collectively, has been

altered.

This illustration is no different from when spending is classified by object of

expenditure (i.e., personnel, supplies, travel, etc.). Holding the cost of supplies

constant, if a given institution is spending more for supplies than it formerly was, then it

has purchased more supplies. If the share of expenditures going for supplies is

increasing then the nature of institutional inputs is changing.

The second connection between revenues and expenditures is similarly

straightforward. To a greater or lesser degree, those who provide the resources to

higher education expect certain efforts, if not results. In short they expect that the

university, more-or-less, will spend the money in the manner in which it was intended or

required. The degree of latitude permitted in that spending, however, varies

substantially. Sometimes the quid pro quo is explicit; sometimes it is only implicit; and it

xv. For definitions of the terms "faculty" and "academic" see note 2, Chapter 1.
 109

may even be quite vague. The amount of teaching expected of faculty by governments

in return for general institutional aid is one example.

In order to meet whatever fiduciary responsibilities may be stipulated by

resource providers, in the United States accountants have developed the terms

"designated" and "non-designated," "restricted" and "unrestricted" to distinguish among

the relative constraints invoked for various revenues. Those who provide contract

money, for example, routinely specify the products or services expected in return.

Normally, such monies are considered "restricted" funds. Similarly, donors sometimes

specify what their contributions are to be spent for, such as for scholarships to students

possessing particular characteristics; at other times they give unrestricted grants that

permit the institution broad or even total spending latitude. In the former case,

assuming that the accountants are doing their jobs correctly, the donors' contribution

will show up in the expenditure category, Scholarships and Fellowships; in the latter

case the expenditures may be accounted for almost anywhere, but the spending will in

fact be traceable to a particular defined function or functions.

Research grants tend to be similar to contracts, in that grants increasingly have

come to be awarded for specific research purposes, and notwithstanding the

expenditure of research overhead, grant fund expenditures will almost certainly be

found in the spending category, Research. Students have the expectation that their

tuition money will be spent primarily for Instruction although many upperclass persons,

at least, will know that substantial portions of their tuition will go for other purposes.

State governments tend to provide most of their support through general institutional,
 110

that is unspecified, aid although a modest share of state money usually is considered

categorical, that is, designated, if not restricted (a term connoting less spending

flexibility). In the former case, and as reflected in public opinion, the state expects that

a good portion of expenditures will be used for Instruction (a functional category, as are

those that follow), with some amounts going to instructional support categories such as

Academic Support and Student Services, but not to other functions, such as Research

or Public Service, at least in any substantial amount. Designated funds from the state

may be for these latter functions or purposes.

The terms employed by accountants may vary from nation to nation but the

concepts are universally applied. What is more likely to vary among nations is the

degree of spending latitude that is afforded universities.

RESOURCE DEPENDENCY THEORY

Political economic theories that treat globalization (Chapter 2), enable us to

understand changes occurring in national higher education policy. However, these

theories do not speak to the ways in which higher education policies are translated into

practice. Resource dependency theory helps us understand the changes occurring to

the nature of academic labor in specific sets of institutions (Pfeffer and Salancik,

1978).xvi In contrast with most organization theories, which deal with internal

management strategies, resource dependency theory (hereafter, RD) holds that the

internal behaviors of organizational members are understood clearly only by reference

 111

to the actions of external agents. In the case of higher education, the external agents

are the policy makers and policies described in Chapter 2. In particular, RD holds that

those who provide resources to organizations such as universities have the capability of

exercising great power over those organizations. Stated in its simplest terms, "He who

pays the piper calls the tune." As Pfeffer and Salancik put it, "The perspective

developed denies the validity of the conceptualization of organizations as self-directed,

autonomous actors pursuing their own ends and instead argues that organizations are

other-directed, involved in a constant struggle for autonomy and discretion, confronted

with constraint and external control" (1978, p. 257). There are two dimensions of

resource exchange by which resource providers may impact organizations: the relative

magnitude of the exchange, and the criticality of the resource to the recipient (Pfeffer

and Salancik, 1978, p. 46).

Relative magnitude is measured in shares of resources provided. An

organization receiving resources from only one source will be heavily dependent upon

that supplier, which may exercise great power over that organization, should it desire to

do so. Historically, public universities in most western democracies have been heavily

dependent financially upon their governments, which usually have allowed universities

considerable operating autonomy. The principal mechanism that has enabled this

autonomy has been the unstipulated or "block grant" mode of funding, general

institutional aid.

Criticality is the degree to which the organization may continue to function in the

absence of the resource. A steel plant cannot function without iron ore, coke, or
 112

electricity. The absence of any of these, no matter how small a share of overall

resources represented, will place the plant in jeopardy. All are critical resources. For

universities the critical resources include physical plant, faculty, students, utilities and

so forth, but in the end the issue invariably is money.

The ways in which resource providers exercise their control over internal

organizational behaviors are both direct and indirect. Like all living organisms,

organizations seek homeostasis or stability. They abhor disequilibrium or

destabilization (Pfeffer and Salancik, 1978). Unstable environments result in

organizational turbulence. When resources are in a state of major flux, organizational

stability is threatened. Organizational vulnerability occurs. Under such circumstances

organizational efforts are directed at regaining stability, at removing the source of the

threat to the organization. As put by Pfeffer and Salancik (1978, p. 2), "The key to

organizational survival is the ability to acquire and maintain resources." The overriding

long-term organizational goal is autonomy or independence. It is removing

dependence upon resource providers in order to assure continuing stability and

equilibrium (Pfeffer and Salancik, p. 261).

In financial terms organizational dependence is a function of (1) the importance

of the resource to the organization (analogous to criticality), (2) the degree of discretion

the organization has over the resource and its use, and (3) the existence of alternative

revenues (Pfeffer and Salancik, 1978, pp. 45-46).

As Chapter 2 suggests, it is our belief that changes in national higher education

policies resulted in alterations in resource dependency that are driving changes within
 113

western universities, rather than some self-induced change by the academy. Consider,

for example and by way of contrast, that (alleged) faculty diversion of effort away from

teaching toward research may be viewed either as reflecting faculty preferences

(Massy and Zemsky, 1994) or, consistent with our view, as rational faculty response to

resource changes (resource dependency). xvii Of course, each of these no doubt

contributes to the full explanation, but we believe that the former is considerably less

powerful and that vigorous pursuit of the remedies that logically follow (e.g., criticism,

regulating teaching loads) largely would be unproductive. Indeed, the principal remedy,

historically, hortatory solutions, have been employed for decades, without apparent

impact.

As we shall see, financial conditions for public universities in most western

democracies in recent decades increasingly have become uncertain, if not turbulent

(Furstenbach, 1993; OECD, 1990A). Eicher and Chevaillier (1992) view conditions as

in "crisis" and "much deeper than macrostatistics reveal." As we argued in Chapter 2,

changes are in kind rather than degree. In the United States higher education is seen

as entering a new era, and the financial problems are structural and will exist for the

long-term (Breneman, 1993; Leslie, 1995). In Europe at least, there is some sense of

urgency. The 1994 Conference of European Rectors centered its discussions on how

economic forces were "reshaping their institutions" (Bollag, 1994).

The higher education policy changes described in Chapter 2 were followed by

changes in finance patterns. Financial support by governments declined and

alternative revenue sources were sought, with varying degrees of success. Perhaps
 114

more importantly, the form of financial support has changed, especially that from

government, which has placed more conditions on the use of funds supplied. Further,

increased reliance upon alternative revenue suppliers also has meant that increasingly

a larger share of revenues has been stipulated, that is, categorical or conditional, as

opposed to unstipulated or "block grant."

The result is destabilization of universities, greater dependence upon revenue

providers, and lost autonomy (Furstenbach, 1993). xviii "We failed to recognize that our

heavy dependence upon federal funding would encourage significant inroads by the

government against the institution's autonomy" (Kennedy, 1993, p. 148). Universities

seek to regain their stability and their autonomy by reducing their financial vulnerability;

however, the road to reestablished stability and independence is a difficult one. For

U.S. higher education, Breneman (1993), for example, is "bearish" regarding increases

from any revenue sources, even private ones, although he sees the possibility of

substantial increases in tuition income for public universities.

As key organizational actors, academics are affected importantly by the

changing environmental conditions. The nature of what is expected of them and what

they take on for themselves is changing even more dramatically than the university

revenue mix. "This challenge is a feature of academic life across the western world,"

write Barnett and Middlehurst (1993). In a sense faculty are victims of the changes, but

they often are acquiescent. Clark Kerr (1994) perhaps said it best: "But the

enticements are great. Knowledge is not only power, it is also money--and it is both
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power and money as never before; and the professorate above all other groups has

knowledge."

With financing changes there has developed a multiplier effect by which what

might appear to be relatively modest revenue changes have been translated into major

alterations in how academics spend their time. Part of the reason is that by the mid

1990s universities in many OECD countries possessed little organizational slack. Most

financial flexibility had been dissipated with the first few rounds of financial cutbacks.

Additional revenue reductions had almost unprecedented consequences.

For public universities government block grants are the base of the revenue

pyramid. Not only is the relative magnitude of such grants usually great, their criticality

is high also because their (relatively) unconditional nature contributes to institutional

independence. The decline of government support in western democracies, and more

so, the shift in remaining government support to conditional formats greatly increases

organizational turbulence because autonomy is threatened.

Universities seek to capture alternative revenues. But substitutes often carry

stipulations; they require performance of certain acts. Collectively and individually,

faculty perceive their greatest potential source of additional revenues to be in grants

and contracts with government and with the private sector. Taking government block

grants (as well as student tuition revenues) as a given, they focus any marginal

(additional) efforts on proposal writing, patenting and developing and maintaining

relations with potential funders. Often these marginal efforts are directed at research

that may result in scholarly publication, which serves the faculty reward structure well,
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further reinforcing the redirected faculty efforts. The end result is a measurable shift in

faculty effort from activities financed by government block grants and tuition, specifically

instruction and related activities, activities designed to generate revenues in

xix
competitive, "market-like" areas and satisfy the conditions of those awards. In the

words of Barnett and Middlehurst (1993),

Both individually and collectively, academics are being challenged to take

on new commitments and to reshape the balance of their professional

activities. This challenge is a feature of academic life across the western

world....Two obvious general challenges are that academics are having to

be more accountable to external constituencies...and that the profession

is having to be much more sensitive to the different markets....(pp. 110-

111)

Evidence of the shift in both the sources and form of university funding is substantial.

SEPARATING CAUSE FROM EFFECT, AND DATA PROBLEMS

Before proceeding to a discussion of the degree to which sources of institutional

revenues have been altered over recent decades, it is necessary to discuss whether

those revenue shifts appear to be the cause of related actions, or the result. It is also
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important to acknowledge the substantial data problems in reaching any conclusion at

all.

Theory and empiricism are of considerable assistance in regard to the former.

Most political economic theories (see Chapter 2) and empiricism support the conclusion

that academics respond to changing revenue streams rather than cause the changes,

although clearly the direction of the effect is, to some degree, two-way. Almost

certainly, the decline in revenues shares from state governments, the principal source

of public higher education revenues in the United States, has been primarily the cause

rather than the result of relative increases in other revenue categories. The same

principle applies to national funding of higher education in Australia, Canada, and the

United Kingdom.

In the United States, where the emerging financing trends common to most

OECD countries probably began and, with some exceptions, may be further along than

they are elsewhere (OECD, 1990B), the roots of the recent patterns are traceable

directly to changes brought about by national policy statements composed in the early

1970s by federal agencies and national policy groups, including the Committee for

Economic Development and the Carnegie Foundation for the Advancement of

Teaching. Perhaps the earliest of the pertinent federal policy papers, and the most

telling, were the "Mega Documents," which were developed by the Nixon administration

and whose thrust was to shift government support for higher education, most of which

comes from the states, from institutions to students. Important gains were to be

realized in the public higher education sector through the workings of the market.
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The fundamental premise of this paper [Mega Documents] is

that a freer play of market forces will best achieve Federal

objectives in post-secondary education....Accordingly, this

paper describes what we should do to give individuals the

general power of choice in the education market place, and

proposes levels and types of student support which will

make most institutional aid programs unnecessary.

The market direction fits nicely with the goals and aspirations of many institutions and

faculty; many of the former aspire to research university status and the latter benefit

personally from grant and contract funding.

The common element of each of the proposed policy documents was the

redirection of government support from institutions to students. Market forces would

improve allocative efficiency in U.S. higher education in two important ways. By

increasing tuition prices and diverting the savings in institutional aid (primarily state-

level) to needy students, government subsidies would be better targeted on those less

able to pay.xx In short government aid would not be "wasted" on upper- and middle-

income individuals who could and would pay more. The second way, which involved

private institutions, was only one step removed. At the time, the early 1970s, U.S.

private institutions were in difficult and worsening financial condition (e.g., Jellema

1971, 1973). Fear was being expressed that many might even close. Shifting support
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from institutions to students would avoid Constitutional and political constraints on

government aid to private institutions, many of which were church-related. This indirect

subsidy of private institutions would enhance their long-term viability and prevent

substantially increased public sector costs by keeping many students in the private

sector. It was not incidental that many of the U.S. elites who led the policy change

were graduates and benefactors of elite, private institutions.

The student aid initiative was critical, not so much for the consumer power

gained by students, a gain which to date has been modest in public institutions, but

rather for the broader market forces student aid set into motion. Indeed, student aid

was no more, nor less, than a market voucher. The first-level effect was relative

decline in state block-grant support. The second level effect was diverting faculty and

staff efforts to making up for the revenue losses.

In sum this redirection of government aid from institutions to students, with its

accompanying policy of higher tuition, would in one thrust greatly accelerate and

perhaps most importantly legitimize the role of the market in U.S. higher education.

(Canada may well be entering this same phase as we write this volume.) The

somewhat later government push in the science policy area fit beautifully with this new

direction. Slaughter and Rhoades (1993) characterize the transformation as follows:

"Policies and statutes moved from an ideology that defined the public interest as best

served by shielding public entities from involvement in the market, to one that saw the

public interest as best served by public organizations' involvement in commercial

activities." To many academics on campus, eventually, the chase for the dollar would
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no longer be questionable behavior. These were the most important higher education

policy change of the post-war era.

There was no discussion and there were no claims, in these early deliberations,

that the public colleges and universities either could "afford" reduced institutional aid or

that shortfalls could be made up from other revenue sources. That the government

action was to be the precipitator, the cause, of new financing directions was never in

doubt. There was no observable evidence nor was any such evidence ever cited that

university success in raising their own revenues was the cause of the plan to reduce

government aid to institutions. In fact, all of American higher education was considered

to be in financial crisis at the time (e.g., Cheit, 1971). There was little if any expectation

that institutions would increase their revenues from any other sources, save tuition.

From the institutional perspective, the new arrangement was solely between

institutions and their students: Losses in institutional aid were to be made up through

increased student charges. Concerns that tuition increases might not keep up with

institutional aid losses were dismissed out of hand, probably because the expected

benefits were seen as far outweighing any likely negative effects.

Our thesis is that changes in national policy and declines in state share of

support induce academic capitalism within institutions. Cause and effects are,

nevertheless, almost certainly recursive, that is, circular. Generating additional tuition

revenues is only one form. Higher tuition without obvious loss of student opportunity

reduces political opposition and encourages future tuition increases, even if a net

financial loss to institutions results. Any losses or reductions in rates of revenue

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increases create internal institutional pressures to increase revenues elsewhere. The

only major resource the university has that would enable it to address new or expanded

revenue sources is the human capital possessed by academics. The success of

academics in raising alternative revenues not only reduces pressures on government to

remedy past funding deficiencies but encourages additional state subsidy reductions.

If all elements in the public sector were equally capable of generating their own

revenues, the pressures on higher education would be less intense. But most public

expenditure is for transfer payments; the investment sector of government enterprise is

quite limited. (Judging what is investment and what is a transfer payment [simply,

money transfer; nothing is purchased] is sometimes debatable). Burgeoning costs in

entitlement areas such as health and welfare act to reduce resources for quasi-optional

functions such as higher education. Academics and administrators read these signals

clearly, and entrepreneurial efforts are doubled and redoubled. University successes in

fund-raising provide evidence that further government reductions are likely to cause

little damage to the higher education enterprise. Marginal analysis easily supports the

conclusion that increased subsidies to higher education are likely to yield greater

damage in other public functions. A classic substitution effect occurs: Institutions

substitute self-generated revenues for losses in share of state institutional support;

legislators substitute those increases for future government increases.

In our own work with legislative budget committees, we have regularly

encountered evidence of legislative belief that universities easily can make up for

reductions in states' share of subsidy through increases in alternative revenues. In

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response to budgetary pleadings, verbal and written references are made routinely, for

example, to universities' external research support, research overhead revenues, and

endowments. Revenues from athletic events often are cited, too, as are inflation-

exceeding tuition increases, even though state governments themselves either set

tuition prices directly, or indirectly effect the increases through various kinds of

budgetary pressures. Even though institutional claims of pending disaster are made by

universities in each budget cycle, in fact, the sky does not fall. At the outset of this

section, mention was made of data problems xxi. Fortunately, almost all of our analyses

are within, rather than across nations; thus, international data comparability is not

important to our purposes. Further, we were able to obtain quite good data for

Australia and the United States, where our field work was done. Nevertheless,

interpretation of results may vary among readers of different countries. xxii Further, it is

common to experience data comparability problems even within a single country when

data are examined over time, a problem that is important to this volume. xxiii

Our analysis rests primarily on changes within nations. The largest difficulties
xxi. Unfortunately, sources often do not report data for identical time periods. We

have selected the most comparable time periods in the disparate data sources

utilized.

xxii. To identify only a few of the difficulties, financial definitions can and do vary

importantly, internationally, even among developed nations, such as the members

of the OECD. What is considered to be revenue from "government" may vary

widely, and when one attempts to discriminate among categories of government

revenues, such as between general institutional aid versus categorical institutional

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FINANCING HIGHER EDUCATION: THE UNITED STATES

In this section we examine both the background data and the data showing the

decline in government block grant funding of higher education in Australia, Canada, the

United Kingdom and the United States. Although our focus in this book is on public

research universities, it is clear that other kinds of public institutions are experiencing

similar revenue changes and we hold that these changes support our general thesis.

Further, some of the aggregated data do not permit examination of public universities

separately. Finally, in some cases the aggregated figures include data for private

institutions, a fact that calls for a careful examination but actually lends additional

aid, a distinction that is germane to the theme of this book, the difficulties may be

large. Expenditure classifications likely will be even more problematic because

classification systems and definitions will vary widely. One nation may use

functional expenditure categories, e.g., Instruction, Research, Service, whereas

another may use "object of expenditure" categories, e.g., salaries, travel,

equipment, or some combination of the two.

xxiii. For example, the functional categories that are almost universally used today

in the United States were defined differently in past years although the problems

are not serious until one goes more than 20 years back in time. Internal data

comparability problems tend to be larger in many other countries simply due to the

nature and consistency of data collection efforts.

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insight into RD notions. (The fact that the patterns for the public universities persist

even when the private universities and other public institutions are included testifies to

the robustness of our observations.)

A few additional words should be said about the omission of private institutions

from our focus. First, private colleges and universities are of very minor importance in

three of our four nations. In the United States, where (all) private institutions serve

approximately 20 per cent of all students, the research enterprises of private

universities are very substantial. Although limitations on our resources, alone, might

have caused us to eliminate them from our study, there was an additional reason for

our decision: Private universities in the United States receive little in the way of

government block grants; therefore the major factor theorized to drive university

destabilization does not pertain to them. Indeed, U.S. private universities have been

operating in a highly competitive, relatively "unprotected" (by government), environment

for many years, and as we shall see, they do exhibit some of the more important,

projected features. As a mater of fact, private universities in the United States might

well be viewed as prototypes of where public universities are headed, and we reflect on

this reality below.

In general government support of institutions of higher education has declined

with-in Australia, Canada, the United Kingdom, and the United States although the

magnitude and (importantly) form of the declines vary substantially. We began by

examining information from the OECD, which probably devotes more attention than any

other organization to collecting comparable data and to specifying international

 125

differences. Although the OECD information was quite informative, we decided to

move the associated discussion to an appendix out of concern that we would overload

the reader with information.

In the way of summary, although the OECD data are dated, by the mid-1980s it

was already clear that there was a shift away from government funding (see Appendix

Table 1). Generally, trends in the share of Gross National Product (GNP) devoted to

higher education already supported our claim of reduced government support and the

balance of evidence showed a decline in total expenditures for higher education (see

Appendix A for a more detailed treatment). More importantly, revenues from

governments had declined while expenditures actually had increased; clearly, private

resources already were being substituted for government support, as per our claim.

When inflation and enrollment increases were added in, these changes were dramatic.

For our more detailed analyses, we consider first the U.S. data for several

reasons. First, the United States probably is the frontier nation in terms of market

influences in higher education. xxiv This is not necessarily to say that market forces are

strongest in the United States but rather that those forces were evident earlier in the

United States. Second, the U.S. government goes to unusual efforts to maintain

compatible, time-series data. Thus, the U.S. data provide a good reference point.

Third and particularly important, U.S. data are readily available to us and whatever

comparability problems exist, we are familiar with them.

The U.S. data support our thesis strongly. The most timely pertinent data

available in the United States are state appropriations for public higher education, xxvthe
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major revenue source (Federal appropriations to institutions are almost

inconsequential), and accompanying tuition and fee revenues. After a decline to the

early 1980s, inflation-adjusted, per student, state appropriations increased for about

three years, stabilized, and then turned down after 1988. The decline continues. As a

share of collected tax revenues, the decline has been quite steady and even more

steep than the decline in absolute, inflation-adjusted, per student, dollars. However,

similarly-adjusted tuition revenues, reveal a constant state of growth since the early

1980s. This is consistent with the revenue substitution hypothesis: Actions are taken to

make up for revenue shortfalls. The net effect of the appropriations and tuition changes

has been to modulate or temper the declines from the primary revenue source,

government appropriations.

Other revenue, and all expenditure, data are available in a less timely manner.

This time gap is important to our thesis because the largest declines in (theoretically)

pivotal state appropriations have been in recent years, and we would expect some lag

in the time required to increase self-generated funds from other sources.

Table 3-1 contains data for all revenue categories, for all U.S. institutions of

higher education. The data are only through academic year, 1990-91, some four years

prior to this writing. The table confirms the state appropriations and tuition and fees

pattern described in the previous paragraphs. Further, the table shows companion

declines in the share (from this source) of revenues from the Federal government: from

an institutional revenue share of 14.9 per cent in 1980-81 to 12.2 per cent in 1990-91.

Theoretically, declines in state support should push higher education institutions to

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increase revenues from Federal sources, but the amount of Federal funds available is

limited by Congressional appropriations. In fact, exclusive of aid to students, the decline

in the share of Current-fund revenues from Federal sources, since 1969-70, has been

the largest of all changes: from 19.2 per cent to 12.2 per cent (National Center for

Education Statistics, 1993, Table 320). Although efforts to increase Federal grants may

be made by institutions, the fruits of such efforts will not be reflected in aggregate,

national data. (Note that Federal student aid is categorized elsewhere: see Table 3-1,

second footnote.)

The revenue categories ultimately serving to test resource dependency theory

best are Private gifts, grants and contracts; Sales and services; and Other sources. xxvi

Endowment income is not a good test because only endowment earnings are reflected

in this category. Institutions are generally free to determine how much of such earnings

they will allocate to current funds budgets. xxvii Gifts, grants and contracts from private

sources show the hypothesized increase, from 4.8 per cent to 5.6 per cent of Current

Fund Revenues, over the time period; Sales and services exhibit increases also, from

20.9 per cent to 22.8 per cent, although this increase is due entirely to growth in

revenues from hospitals, no doubt reflecting to a considerable degree, rapidly-

escalating costs of medical care in the United States. Still, the revenue gains

associated with Hospitals, in part at least, may represent university efforts to increase

revenues wherever they can.

Each percentage point change reflects more than $1 billion, so these are

significant sums. The smaller increase in "Other sources" is still large in absolute
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terms, reflecting hundreds of millions of dollars. This category is a largely-discretionary

"catch-all" that includes such revenue sources as interest earned and miscellaneous

income.

The data for only public institutions are contained in Table 3-2; private institution

data are in 3-3. The patterns for the public institutions are very similar to those in Table

3-1 because approximately 80 per cent of U.S. students are enrolled in the public

sector. What turns out to be very informative are the comparisons between the public

and the private institutions. Because public institutions are far more dependent upon

government appropriations (private institutions rely heavily on tuition and fees), we

would expect resource dependency effects to be more extreme in the former, where

state appropriations declines have been felt most severely. In fact, that is what occurs,

and more.

While state support of public institutions has declined, though small when

expressed in percentage terms, such support actually has increased for the private

sector, going from 1.9 per cent to 2.3 per cent of institutional revenues over the time

period. In short, private institutions have not felt the impact of decreased revenues

from the state. The growth in state revenues among private institutions is due primarily

to increases in state-supported grants and loans to students, increases reflecting the

new national policy direction of effecting market conditions by shifting state support

from institutions to student-consumers.

Other revenue comparisons are, for the most part, similarly instructive. While

revenue shares from Private gifts, grants, and contracts grew by 1.3 percentage points
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in public institutions, such shares actually decreased by .7 percentage points in private

institutions.xxviii While shares from Sales and services increased by 3-1 percentage

points in the public sector, they decreased by .4 percentage points in the private sector.

Only in "Other sources" were the patterns essentially the same. Clearly, the national

data support the thesis that the decline in state support, the primary source of revenues

for U.S. public institutions of higher education, has been associated with compensating

increases in other public institution revenue categories. Of course part of this growth in

revenue shares is an artifact of the decline in state support rather than an actual

increase in revenues from other categories. xxix

As postulated, expenditure changes follow revenue changes. Expenditure

changes are substantial and, based upon recent dramatic changes in government

support, are expected to grow larger, at least in the public sector.

Considering all institutions, public and private, expenditures for Instruction

decline moderately, from 32.4 per cent of Current-fund expenditures in 1980 to 31.1

per cent in 1990-91 (Table 3-4). The share devoted to instruction had been 36.4 per

cent in 1969-70 and 43.7 per cent in 1929-30 (National Center for Education Statistics,

1993, Table 320). Given that the recent decades were periods of major enrollment

growth in the United States, these are profound declines. Correspondingly, increases

for Research, Public service, Academic and Institutional support (administration), and

Student services also are moderate whereas decreases for Operation and maintenance

of plant and increases for student aid are large (Table 3-4).
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What is most enlightening in these regards are the comparative changes for the

public and private sectors (Tables 3-5 and 3-6). For all public institutions, the

expenditure share for Instruction over the time period tabled declined from 35.1 per

cent to 33.7 per cent; the decline for private institutions was only .4 percentage points.

Comparative changes in most other categories also demonstrate the greater stress

experienced in the public sector.

Within the public sector, between 1982-83 and 1990-91, the rate of change for

Instruction was 79.66 per cent, the smallest of all increases except maintenance and

operation of the physical plant (M & O Operations), and which in the short term offered

the most discretion in spending. Increases for Research and Public Service were 40

per cent and 30 per cent greater than for Instruction, respectively. Another interesting

category is Scholarships and Fellowships, which showed the largest increase of all.

This increase is consistent with the policy change of the early 1970s by which

governments would substitute student aid for institutional aid, in order to capture the

benefits of market functioning.

Expenditure data according to institutional type within the public sector permit

further exploration and allows us, finally, to focus on the public university sector. We

would expect those institutions experiencing the greatest financial stress and the

greatest potential for readjustment to demonstrate the greatest alterations in

expenditure patterns. Over the period tabled, public universities probably experienced

no more stress than did 4-year or 2-year institutions; however, the university capability

for raising external funds presumably was somewhat greater. Its potential sources of
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additional revenues certainly were more varied. In public universities, Current-fund

expenditures shares going to Instruction declined by 2.2 percentage points between

1980-1981 and 1990-1991 (Table 3.7), compared to only .5 percentage points in public

4-year colleges (Table 3.8) and .7 percentage points in public 2-year colleges (Table

3.9). In short all three institutional types reallocated money out of the primary

expenditure category supported directly by state governments, but the possibilities for

making up the lost revenue were somewhat different for the three institutional types, as

the data reflect.

Expenditure shares for research increased by 2 percentage points in public

universities and a slightly smaller 1.6 percentage points in 4-year colleges (Tables 3.7

and 3.8); differences in the absolute dollar increases are much larger because relatively

little research occurs in 4-year colleges (research is almost non-existent in 2-year

institutions). The larger change differences are in other categories. Whereas Public

service declines by .1 percentage points in public universities, the increase for public 4-

year colleges is .9 points. Although the 2-year college Public service change is only +.2

percentage points, the more recent and pertinent (to our thesis) increase is a much

larger .9 points (since 1982-83). In other words in public research universities, where

negative effects of research dependency on public service should be the greatest, this

is precisely what occurs; in fact, in the other public institutions, public service

expenditure shares actually increase. Increases for Administration are substantially

larger in public 2- and 4-year colleges than in universities. It is not clear why this

should be so. Meanwhile, the most "discretionary" spending, for Libraries and
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Operation and maintenance of the plant, decreases in all three types of institutions, xxx

while spending for Scholarships and fellowships increases in all three types, again a

reflection of the national policy change toward higher tuition and more need-based

student aid. Clearly, the changes support our theme: State appropriations decline

relatively in all three types of public institutions; institutions seek alternative revenues,

exploiting their major potential sources; and evolved expenditure patterns reflect the

changes.

It will be useful here to make some explicit connections to RD theory. What RD

theory suggests is that the shift in revenue sources, specifically the decline in revenue

shares from general purpose state appropriations, has destablized public universities.

These universities have responded as best they can, by raising tuition prices (directly or

indirectly) and, most significantly, by increasing shares from sources that require

specific products and services under the terms of related agreements. Both the shifting

revenue shares among resource providers and the different nature of the expectations

of those providers are significant. Losses from state governments are destabilizing in

and of themselves, causing considerable expenditure of university human and financial

resources in attempts to make up for those losses, but worse, terms of the agreements

associated with the substitute revenues mandate specific actions on the part of

university staff thereby accelerating internal changes in the work that must be

performed. The end result of these changes has been reduced university effort in the

area of primary state (and student) interest: instruction, and increased effort particularly

in the area stipulated in contractual agreements: research. The shift away from
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instruction not only may have negative direct consequences for students but it also

contributes to increased university alienation from the general public, thereby

reinforcing secular tendencies to reduce state general support even more, which in turn

further destabilizes the universities and ultimately renders them more dependent upon

and answerable to contracting and granting organizations.

Public 2-year colleges in the United States are a particularly interesting case in

the context of our thesis. Although these institutions conduct little research, they are

considered almost unique in their ability and willingness to adapt. For example, over

roughly the past two decades, in response to growth in student demand that has vastly

surpassed government willingness to increase funding, public 2-year colleges have

come to rely heavily on poorly paid, part-time faculty. The increased reliance largely

explains the two-year colleges' relative decrease in spending for Instruction.

These changes in community college personnel policies may reflect another

facet of RD theory: the tendency for organizations to take on the characteristics of their

resource providers. Community colleges have greatly expanded their instructional

services to business; thus, one might expect these institutions to take on the staffing

characteristics of the business sector. This has indeed happened as both types of

organization have substituted part-time for full-time employees.

Increasing reliance on part-time faculty also may be viewed more simply as an

outgrowth of RD theory, as an alternative to raising more revenues. A complimentary

perspective, which has been applied to higher education (Miller, 1976; Leslie and Miller,

1974), was developed in 1934 by Joseph Schumpeter to describe how private-sector

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firms respond to fiscal stress: They seek new markets, develop new products,

reorganize and restructure, improve productivity, and seek new sources of supply of

factors of production. Only the latter type of adjustment is a direct reflection of RD

theory, although all of these "adjustments" may be viewed as logical outgrowths of that

theory.

FINANCING HIGHER EDUCATION:

THE UNITED KINGDOM, AUSTRALIA, AND CANADA

Initially, we were not at all sure how the four nations would array themselves in

regard to likely changes in academic labor, as reflected in revenue and expenditure

data. We had reason to suspect that U.S. academics were the most heavily engaged in

the academic capitalism; after all, the United States usually is viewed as the prototypic

free market system and much recent U.S. higher education literature has dealt with

topics such as technology transfer, industrial parks, and faculty entrepreneurship within

universities. However, the national policy changes in the four countries discussed in

Chapter 2 suggested that major higher education financing changes were likely in the

United Kingdom, and to some degree in Australia, and perhaps in Canada.

Discussions with British academics and subsequent research in Australia,

however, left us wondering. From academic perspectives in the United Kingdom,

reductions in government support of universities were being viewed as draconian, and

our early impressions in Australia were that academic conditions were not all that
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different from those in the United States. Indeed, we observed that the Australian

universities might be well ahead of U.S. universities in implementing market

mechanisms. Only in Canada did the data suggest and colleagues assure us that the

financial changes impacting the United States were largely yet to be felt, although alarm

already was being expressed about higher education cuts in government funding.

In the end we relied on our theory. If it is really resources that drive academic

behaviors, then relative decline in government support of institutions, generally, and in

the form of government support, specifically, should dictate the degree of change in

what academics do. If this reasoning is correct, then subjectively we probably would

expect the array of national higher education systems to show the greatest changes in

the United States, followed fairly closely by the United Kingdom, with Australia some

distance behind, and Canada clearly being the most stable system.

We remain less than confident in the positioning of the national systems on this

continuum, however, because the appropriate relative weights of the factors involved

are unclear. Further, there is the problem of the insider/outsider perspective: One's

views usually reflect one's closer familiarity with changes in one's own system than with

changes in other systems. Our interviews and conversations with our international

informants suggested that they tended to view changes in their own country as quite

large even though the same changes might have been seen as quite small in other

countries. Such perspectives are due not only to one's vested interest in the financing

system of one's own nation but also in the configuration of one's national financing

system. For example, reductions in government support and increases in alternative

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sources of support that might have been seen as quite minor by a U.S. observer were

seen as major by Canadian and Australian observers in part because of the historic

almost total reliance upon block-grant funding from the central government in the latter

countries.

Then there is the folklore of national systems. Although we came away from our

interviews, site visits, and data analyses almost shocked by the degree of academic

capitalism that had emerged in the higher education systems in the United Kingdom

and Australia (more insider/outsider disparities, no doubt), it was clear that almost all of

our informants in these countries assumed that the U.S. system was much more

market oriented than their own. We were not so sure. Although market forces have

been in existence in U.S. higher education for some time and although the trend is

relatively new in the other countries, the rate of implementation of market mechanisms

in the United Kingdom and Australia has been very high.

In any case we turn next to the United Kingdom as probably the next-most

market-oriented higher education system. In terms of recent changes and perhaps in

absolute terms, the United Kingdom probably is the most heavily impacted of the four

nations. (For an extended treatment of the policy changes in the United Kingdom, see

Chapter 2.) Fortuitously, Gareth Williams (1992) collected and tabulated most

of the British data and information pertinent to our thesis. Williams' book, Changing

Patterns of Finance in Higher Education, describes the major financing changes that

transpired in Great Britain in the 1980s, and his theme that changes in funding

mechanisms have led to important internal changes in British institutions of higher

 137

education essentially is identical to our own. Again, changes in financing the entire

higher education system are important as background, even though our focus is on

universities.

After reminding us of definitional problems in international treatises on higher

education (p.2), Williams describes the 80s as "a period of great turbulence, uncertainty

and change" as well as growth in British higher education (p.3). He notes that the

1980s began with a planned higher education expenditure reduction of 20 per cent,

entailing abandoning subsidies for overseas students and cuts in support of institutions.

These were the largest reductions in real actual expenditures ever encountered in

Britain (the effective cut was 8%) while being accompanied by major increases in

enrollments. The reductions heralded a "watershed in higher education policy," in

Williams words (p.3), with routine increases in government support no longer to be

taken for granted and new expectations of institutions by government to become the

norm: "to help reduce public expenditures; and to increase efficiency by encouraging

institutions to 'earn' a larger proportion of their income from both government and non-

governmental sources, and to be explicitly accountable for it" (pp. 3-4). Williams

observes, "It is misleading to consider the 1980s simply as a period of cuts in higher

education resources. It was rather...one of changing patterns of finance" (p.12).

The altered government policy in regards to overseas students is a poignant

illustration of the nascent, market role in higher education funding in the United

Kingdom, as well as in Australia, but one which has not yet been pursued aggressively

by public institutions in the United States. xxxi In the United Kingdom and Australia,
 138

higher education is seen as an "export commodity," a generator of foreign exchange.

British and Australian higher education is viewed as a valuable national asset to be

exploited along with raw materials and manufactured goods. In the United States,

comparatively, enrollment of oversees students still is seen more as a foreign policy

device than as a service for export, with many such students, especially graduate

students, being largely supported directly or indirectly by U.S. federal and state

government and institutional funds. xxxii From a market perspective, an essential

difference among the three countries is that in the United Kingdom and Australia, but

not in the United States, the full-cost fees collected from overseas students are shared

with the academic units enrolling the students. That the United Kingdom and Australian

policies can be effective is evidenced by large increases in enrollments of overseas

students in both countries, after initial declines when full-fees were introduced.

The data Williams has compiled reveal that "planned public expenditures" on

"core" higher education activities in Britain (comparable to the annual operating

budgets for Educational and General expenditures in the United States) declined in

real, per student terms in the 1980s in large part because of enrollment increases

(Williams: pp. 4-7, Tables 1.1-1.4, and Figure 1.1). Demonstrating the market-like

responses of institutions, the decline in revenues per student was much greater in

polytechnics and colleges than in universities because the University Grants Committee

(UGC), the primary source of university funds prior to its abolition in 1988, threatened

financial sanctions if universities exceeded specified enrollments, while the former

institutions found it necessary to increase enrollments in order to maintain their shares

 139

of government subsidies, which were awarded competitively, based on enrollment

shares (Williams, pp 4-6). In other words it was the changes in the denominator, not

the numerator of the expenditure per student calculation, that differentiated the relative

decline in financial health of the polytechnics and colleges from the universities.

It was less decline in government support per se, however, than shifts in the

forms of government subsidy that appear to have had the greatest effects on U.K.

institutions and that best illustrates the resource dependency thesis among universities.

During the 1980s university block grants from the government declined in constant

dollars from about 75 per cent to 55 per cent of institutional revenues while government

Research Council and Other Government "categorical" (specified purpose) awards

increased substantially (Williams, Table 1.3). Further, university block grants, which

previously had been essentially unstipulated as to use, now were designated separately

for research or teaching (Williams, p.9). Williams characterized the changes as being

"the forerunners of what came to be a more systematic policy of government to steer

resources according to its own strategic priorities."(p.9) Concomitantly, revenues from

other sources showed increases that ranged from large to huge. While "other" income

increased by about 20 per cent, contributions from overseas students more than

doubled, as did income from industry (Table 1.3). The only revenue category that

explicitly reflects "expenditures," as the term is used in the United States, is Research,

which witnessed an increase from 13 per cent of university revenues in 1980-81 to 20

per cent in 1988-89.

 140

In the polytechnics and colleges, similar patterns were observed (although data

problems clouded the issues somewhat). Enrollment levels became far more important

in determining government funding, and financial supplements were added to

accomplish particular ends. Bidding for marginal funding of student places was

implemented, with program cost being a partial determinant of success (Williams, p. 7).

What had been viewed, in both sectors, as "hard" money, now was viewed as

"soft," being dependent upon, as Williams says, "provision of specific services for which

there is an economic demand." (p.14)

Williams writes that by the end of the 1980s, British institutions of higher

education essentially were contracting with government for the education of specified

numbers of students in specified academic programs (p. 9). This same arrangement

was only beginning to be advocated in the United States as a means of setting

government financing expectations of higher education institutions so that the

institutions would be free to develop other revenue sources without fear that

government would substitute those revenues for their own (Leslie, 1995).

The trends continue in Britain. In 1992 the government committed to transferring

substantial shares of its subsidies from institutions to students and to the research

councils. Considering student fees as "earned" income, Williams estimates that as

much as 70 per cent of university income soon will fit this description, along with 40 per

cent of the income of the non-universities (p. 39).

Change is well underway in Australia. xxxiii Actions by the ruling Labor Party have

set a new direction for Australian higher education. In national policy statements,
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higher education is to be a major vehicle for national economic growth. Government

subsidies to universities for research, seen almost as entitlements historically by many

Australian academics, increasingly are offered in competitive forms. The Federal

(Commonwealth) government has set a policy of substantially increasing higher

education enrollments while limiting Federal appropriations increases. Not only are

universities to become more efficient, they are to compensate through such means as

charging students, engaging the private sector in joint money-making activities, and

otherwise raising revenues in whatever ways they can. (For an extended treatment of

recent higher education policy changes in Australia, see Chapter 2).

Among the key developments foreseen by the government in the 1990s are

greater emphasis on continuing education and skills

upgrading; a more competitive and focussed research effort;

increased emphasis on improved management

procedures...; a more outward orientation, reflected in the

development of closer links with industry, TAFE [technical

and further education], and other organisations; and an

expansion of international contacts in teaching and

research. (Department of Employment, Education and

Training, 1993, [DEET] p. xxvii)

 142

The first six factors listed in the description of the associated, new model for allocating

Commonwealth funds to institutions are

State views on priority regions for growth; demographic

trends, unmet demand, trends in retention rates and

participation rates in the institution's catchment areas; the

ability of the institution to sustain growth within national

priority areas; past performance in achieving growth in the

priority areas; demand for external places; and institutional

bids and justification. (DEET, 1993, p.90)

Unquestionably, this is a "market-oriented" list of considerations for institutional funding.

By most measures government financial support of higher education in Australia

has been relatively generous in recent years. As a share of all Federal outlays, higher

education had done reasonably well, increasing in every year but one between 1987-88

and 1992-93 (DEET, 1993, Table 4.9). (Comparatively, shares of Government outlays

have declined markedly in the United States.) Commonwealth subsidies for operating

budgets increased between about 2 and 3 per cent per year during the last half of the

1980s, on a constant dollar basis (DEET, 1993, Table 4.3), and this too compares very

favorably to the United States (most recent data available from government

publications.) Only in funding per student is the seemingly favorable picture in Australia
 143

altered; this anomaly is a function of unusual enrollment growth, which is a reflection of

changed Federal policy.

Commonwealth-provided "total operating resources" per Equivalent Full Time

Student (EFTSU) declined steadily on a constant dollar basis between 1980 and 1991

although such funding was projected to increase from 1993 through 1995 (DEET, 1993,

Table 4.10). Between 1983 and 1991, dollars per EFTSU decreased 11.2 per cent

(Mahony, 1994). "Total resources" from the Commonwealth essentially were stable in

the early years of the data series, grew in the late 1980s and early 1990s, and are

projected to continue to grow through 1995.

Although most university income continues to the present to come from

government and although the major financing change over recent decades is the role

that is served by the Federal versus state governments, revenue shares from other

sources have increased rapidly in accordance with the new policies. While government

funding of higher education has increased in most recent years, like in the United

States, government rate of growth has slowed and, on a per person basis, in Australia

the government funding levels of 1975 were not attained again until 1989 (DEET, 1993,

Table 4.4). Recent changes have paralleled and surpassed those in the United States.

As a share of total university income, government contributions declined from 90.1 per

cent to 78.5 per cent between 1981 and 1990. Correspondingly, between 1981 and

1990 shares increased from 0.0 per cent to 5.9 per cent for "Student contributions"

(comparable to tuition and fees); from 4.4 per cent to 7.6 per cent for Investments,

endowments, donations; and from 5.5 per cent to 8.1 per cent for "Other income"
 144

(DEET, 1993, Table 4.6). By government policy there is to be increasing

"diversification of funding sources" (DEET, 1993, p. xxvii). The forces that could set

changes in academic labor in motion in Australia without question are present, even

though declines in government support are not as large as in the United States.

Second-level analyses comparable to those for the United States are not

possible from available Australian financial data. Australia has a very small private

higher education sector, and its former colleges of advanced education (CAEs), which

were similar to U.S. 4-year colleges, were merged with the universities in the 1980s.

Although its TAFEs (institutions providing Technical and Further Education) are

somewhat analogous to U.S. 2-year colleges, the former are considered as part of the

Australian post-secondary (rather than "higher") education system and data for this

post-secondary sector are lacking.

Although national expenditure data are not published, some evidence of a few

expenditure trends does exist (DEET, 1993, Table 4.10, Department of Employment,

Education, and Training [DEET], 1993). For example, consistent with the most recent

Federal policy direction, according to DEET, funding for research has grown and was to

continue to grow until at least 1995, when a decrease was planned. xxxiv (Australia uses

a triennial funding system.) This growth is particularly relevant to our theme that the

nature of academic labor is changing, because the role of government in Australia is

very large relative to the United States (as is the government role in the United

Kingdom and Canada). Proportionately, more research money comes from the

Commonwealth government; the amount of Commonwealth research funding is

 145

growing; and amounts available are being dispensed on increasingly competitive

grounds.

n sum, the ingredients for important changes in the nature of academic labor are

present in Australia although conclusions specific to the university sector are hazardous

due to our inability to disaggregate data. Whether the ingredients are stronger than

those in the United States and the other countries is difficult to say. On the one hand,

fiscal stress is obviously present in Australia although recent financial trends appear to

be more favorable than those in the United States and the United Kingdom. xxxv On the

other hand, reliance on government is substantially greater in Australia, and the

government message to universities is clear: "Enter the marketplace and raise more of

your own money." Shifting revenue streams confirm that the government message is

being heard. Certainly, our preconception that the United States was at the forefront of

higher education commercialization was severely shaken by our experiences in and

new-found knowledge about Australia.

uthorities on Canadian higher education finance are aware of the afore-

mentioned changes in the United States and United Kingdom, but most do not think

such developments are yet very far along in their country. They do not disagree that

the changes are on the horizon for Canada, however; in fact, they point to related

Canadian developments that are so recent that they do not yet appear in the published

data. For example, they cite a "flattening" and then decline in the government (higher

education) subsidies curve over first three years of the 1990s, and a major fee hike that

was to be implemented in the Fall of 1994. They see the recession that hit the western
 146

democracies in the early 1990s and that arrived somewhat earlier and was more

severe in Canada as a partial explanation for the recent financial developments in

Canadian higher education. Statistics for more recent years, they say, would show

increases in share of institutional revenues from student fees, even if the substantial

fee increases had not been imposed, because of the decline in government support.

(This is the statistical artifact mentioned earlier).

The Canadian higher education system is relatively decentralized. The federal

government gives the provinces block grants for health, postsecondary education and

social welfare, and the provinces then decide how to much to allocate to postsecondary

education. The federal government also provides research money through a

competitive grants process. Until recently, levels of higher education were such that

academics did not generate many alternative revenues. However, during the 18

months in which this book was in progress, evidence of change in Canada had begun

to appear in the literature. (See Chapter 2 for recent changes in Canadian higher

education policies.)

Our first draft of this chapter observed that "there was no emergent government

policy for universities to self-finance, as there was in Australia and the United

States."xxxvi This view now may be obsolete. In 1993 there appeared a paper

discussing the (current) transition of the Canadian University out of a tradition of

welfare liberalism into the "service university," a term that resulted from the Science

Council of Canada's work to link universities and industry (Buchbinder and Rajagopal,

1993, p.273). The authors saw the increased linkage of universities "towards the
 147

market" and several implications of "the development of entrepreneurial professors" for

the nature of academic labor (p. 273).

Clearly, there is growing Canadian attention to the role of universities in

economic growth. A large source of Canadian research funding, The National

Research Council, has shifted its orientation from basic research to applied research

and technology, in a fashion similar to that of the U.S. National Science Foundation

under the Clinton Administration and the Australian Research Council under the Labor

Government.

Further, the Canadian government now has proposed a new student-loan

system, which is to be coupled with a decline in Federal (in favor of Provincial) support

of higher education that is to reach zero by 2006. It has been suggested that the loan

proposal is a harbinger of higher student tuition charges, which in turn could signal

structural changes to come, for it was changes in student funding that greatly

accelerated the move in the market direction in the United States (Lewington, 1994).

Although available Canadian financial statistics are more dated than those of the

United States and Australia, some useful information is available. Expenditures on post-

secondary education were 2.0 per cent of Canadian GDP (gross domestic product) in

1980-81 and were still at that level in 1989-90 (Table 23, p. 78 & 84). Share of Total

expendituresxxxvii provided by the Federal, provincial, and municipal governments

increased slightly, growing from 83.3 per cent to 84.0 per cent between 1980-81 and

1988-89. This increase was at odds with share declines in Australia and the United

States. Despite this small share change, current dollar increases averaged 8.4 per
 148

cent in the 1980s and increased in the last three years of the data from a trough in the

mid-80s.

The small government revenue share increase was, of course, accompanied by

small share decreases in other (combined) categories. While government subsidies to

institutions were increasing by 90 per cent (in absolute, not share, terms), income from

fees and "other" sources were growing by 115 per cent and 47 per cent, respectively.

Although small in absolute dollars, the forerunners of the sorts of large increases in

student charges now manifest in the United States and Australia may already have

been evident in the Canadian data. The government share increase of .7 percentage

points was complemented by a share increase of 1.1 percentage point in fees and a

decrease of 1.9 points for "other" income. In contrast to the United States and

Australia, Canadian higher education came to rely slightly more upon government,

rather than less although the Canadian data are more dated. This difference in periods

covered is important because the Canadian data do not cover any of the recession of

the early 1990s.

For Canada there are some data by institutional type. Although Canada, too,

lacks a substantial private sector, Canadian data for the non-university Canadian sector

do permit comparisons between institutional sectors. Canadian universities, by far the

largest component of Canadian higher education, of course closely follow the total

higher education pattern. The share of total revenues coming from government is two

percentage points smaller for universities than for the total system, but is very stable.

Fees increase from 9.0 per cent to 10.6 per cent of revenues and "Other" revenues
 149

decline from 9.8 per cent to 7.9 per cent, consistent with the previously noted patterns.

The non-university sector shows a bit more change. Non-universities get more of their

revenues from government and the share is increasing moderately. The share from

fees declines noticeably, as does the share from "other" sources.

Here some correspondence with Australian government policy appears evident:

The technical and applied non-university sector relatively is favored by government

and, correspondingly, fees charged students decline proportionately. (Again, these are

1980-81 through 1988-89 data.)

Another inconsistency in the general pattern and one that supports the

suggestion of changing government priorities is the disproportionate increase in

sponsored research within universities, some 145 per cent between 1980-81 and 1988-

89. This increase is substantially larger than the increase in any other revenue

category. The money for sponsored research in Canada comes largely from

government, and coupled with declines in "Other" revenue shares, supports the notion

that government levels of funding were such that faculty were not impelled to find

alternative sources of revenues.

The roots of possible change also may be seen in the expenditure data for

universities. Between 1980-81 and 1989-90, expenditures for Instruction, which serves

as our reference point, grew by 99 per cent. Larger increases were observed for

Sponsored research expenditures, 167 per cent; Student services, 133 per cent;

Administration, 112 per cent; and "Other," 190 per cent. Clearly, resources had been

shifted from Instruction in a pattern similar to that in the United States. Which functional
 150

areas were slighted even more than Instruction? Those that were least relevant to

generating alternative revenues: Libraries, Maintenance, and capital (84%, 74%, and

66% increases, respectively).

Overall, the (unfortunately rather dated) statistics support the perspectives of

Canadian financial observers. In regard to revenues, prior to 1990 at least, stability had

been the case for Canada; there was, as of that year, little evidence of changing

funding patterns. However, as noted in Chapter 2, Canada's net government debt as a

percent of GNP/GDP increased from 26.1% in 1984 to 40.3% in 1990, by far the

highest of the four countries. We would expect debt reduction efforts to precipitate

changes in federal and provincial funding for higher education. Expenditure patterns

provided evidence of the beginnings of change. Internal resource allocations within

universities suggested that growing attention was being paid to diversifying university

revenue bases, probably through entry into competitive arenas. The changes in

revenues that reputedly have now occurred but are not yet reflected in revenue data

may greatly hasten any change. Assuming that the expenditure changes signal

changes that now are reflected in evolving revenue patterns, Canada by now may have

joined the United States, the United Kingdom, and Australia in altering historical

traditions for funding higher education. If so, important impacts upon the nature of

academic labor are likely to follow.

CONCLUSION
 151

Although our ability to reach conclusions about changes in revenue patterns

among public research universities is sometimes hampered by the form and recency of

data available, essentially all information points in the direction predicted: reductions in

shares of resources from government, in particular in critical, block grants, and resulting

alterations in the nature of work performed within universities, as evidenced by changes

in expenditure patterns. We believe these changes in revenue patterns promote

academic capitalism because they push faculty and institutions into market and market-

like behaviors to compensate for loss of share from block grants.

The magnitude and nature of changes in the financing of public higher education

in Australia, the United Kingdom, and the United States appear to meet easily Pfeffer

and Salancik's (1978) conditions for organizational turbulence. Such changes may

have begun in Canada, but are not yet clearly visible in available data. Resource

dependency theory suggests that this organizational turbulence is having major impacts

on the internal operation of higher education institutions, especially universities, in at

least the first three of these countries. Among these impacts are major changes in the

nature of academic labor: changes in what academics do, how they allocate their time,

changes that may be much greater than most academics realize as they undertake

their work on a day-to-day basis. These changes are reflected clearly in the financial

data for several countries. In the following chapters the implications of the changes will

be drawn out in some detail.

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CHAPTER 4: ACADEMIC CAPITALISM: ADVANTAGES AND

DISADVANTAGES

In Chapter 3, we looked at changes in revenue patterns among research

universities in four countries over a twenty year period. In all four countries, we found

similar higher education finance patterns: reductions in shares of resources from

government, in particular in block grants. Because block grants were reduced, faculty

began to compete for targeted government funds and funds from sources external to

colleges and universities in order to maintain institutional equilibrium. In other words,

faculty increased their participation in academic capitalism. In this chapter, we look at

how resource dependency plays out in two universities in one country, Australia. We

interviewed faculty in academic units (departments and centers) involved in academic

capitalism to find out how they viewed the increase of market and market-like activity

prompted by changes in the institutional resource mix. Specifically, we asked them to

identify the advantages and disadvantaged of academic capitalism.

Resource dependency theory guides this chapter. Resource dependency theory

suggests that organizations deprived of critical revenues will seek new resources. In

the late 1980s, Australian national higher education policies abolished the binary

system and created a unified national system. (For a detailed account of these

changes, see Chapter 2.) In the unified national system, the practice of automatically

giving universities research money for each faculty member was eliminated. Instead,

university faculty had to compete for research funds with many professors from former
 153

Colleges of Advanced Education who were now part of the greatly expanded system.

These government research funds were increasingly targeted on national priorities that

were often concerned with Australian economic development. At the same time,

professors and institutions were encouraged by government to bring in funds from

outside the government. Faculty and institutions began to generate funds from external

sources by recruiting full-fees paying oversees students, by developing partnerships

with industry for research and training, by discoverning products and processes

suitable for the market.

In other words, universities and faculty had to compete--engage in market and

market-like behavior--for critical resources. Research money is a critical resource for

universities because universities are prestige-maximizers. Since most faculty teach,

and many faculty perform public service, but fewer win competitive research funds from

government or industry, research is the activity that differentiates among universities.

Resource dependency theory suggests that faculty will turn to academic capitalism to

maintain research resources and maximize prestige. Put another way, if faculty were

offered more resources to teach more students, it is not clear they would compete for

these monies with the same zeal with which they compete for external research dollars

targeted for government priorities or commercial endeavor.

In this chapter we report on perspectives of faculty and professional officers

(academic staff who are non-tenure track) who are in units generating revenues from

many entrepreneurial sources. It is important to note that these were "mainstream," not

highly entrepreneurial, universities. We examined the financial records of two

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Australian universities, identified units that self-generated more than a few thousand

dollars annually, and then interviewed representative project managers and staff who

participated in entrepreneurial agreements as well as unit members who were not a

party to these agreements or the related work. The two universities, Oceania

University and Snowy Mountain University, were, respectively, an urban and a rural

university. Oceania University was ranked near the middle and Snowy Mountain

University near the bottom among Australian universities in terms of revenues received

for basic research.

We began our inquiry by asking central administrators about the effects of faculty

entrepreneurism within the university, which departments were most active, and how

pertinent financial records might be obtained. Unit budgets then were used to select

the sample for intensive examination; roughly, 1 per cent of budget, or at least $20,000,

had to be derived from entrepreneurial activity for the unit to be included. The budgets

and related documents yielded information as to the source of revenues and objects of

expenditure for the entrepreneurial funds. Next, the unit head and the unit financial

officer (usually a department staff member) were interviewed to help identify the

departmental activities that met our operational definition of entrepreneurism: "Activities

undertaken with a view to capitalizing on university research or academic expertise

through contracts or grants with business or with government agencies seeking

solutions to specific public or commercial concerns." Activities such as consulting were

included so long as the associated revenues entered university accounts, university

expertise was directly involved, and the activities were applied or developmental in
 155

nature (excluding basic research). Efforts to generate university revenues through

recruitment of full- or high-fees paying students were excluded in this chapter, as was

basic research.xxxviii

Faculty interviews began with the persons identified as project directors. In

these and subsequent interviews, other faculty entrepreneurs and non-entrepreneurs

were identified. Unit personnel critical of the entrepreneurial activities were sought out

and interviewed. Because the sample was limited to units engaged significantly in

entrepreneurism, however, there were few such critics, although there were many

faculty who had some reservations. The first part of each interview was a subjective

discussion of the impacts of entrepreneurism on the unit and the university. The

second part employed a technique used in economics research to impute quantitative

values for qualitative variables (e.g. Dunn 1977, MacMahon 1982, Haveman and Wolfe

1984). Subjects were asked to rate, on a +1 to 10 scale, the extent to which the

revenues associated with entrepreneurial activity contributed to the university's mission.

Using this as a reference point, subjects then rated the relative benefits and costs of

the qualitative criteria. This permitted a very rough means for assigning dollar values to

the qualitative criteria and for calculating a benefits-cost ratio.

xxxviii. Distinguishing between applied and basic research is always a troublesome

matter. We employ the National Science Foundation (United States) definition:

“Original investigation for the advancement of scientific knowledge...which do(es)

not have immediate commercial objectives” (NSF, 1959, p.124). We explore the

limits of this definition more fully in subsequent chapters.

 156

Our study of Oceania University and Snowy Mountain University was done in

1991, when Australian faculty first responded to changes in national policy that favored

more entrepreneurial activity. In 1994, a study by Philpott xxxix asked most of the same

questions within a university that had been highly entrepreneurial for some time.

Indeed, this university, unlike other Australian universities, claims to take its direction

from the market. Philpott's respondents had considerably more experience with

academic capitalism than ours; his university had become more dependent on securing

such funds. The two studies, Philpott's and ours, offer an informative contrast between

internal university conditions early and somewhat later in faculty responses to a

competitive funding environment.

ENTREPRENEURIAL ACADEMIC UNITS

Our study may be the first broad attempt to examine the economic

consequences of academic capitalism within universities. An extensive search of the

literature revealed several university case studies of a particular form of academic

capitalism--development of intellectual property (Blumenthal et al., 1986a; Matkin,

1990; Weiner, 1987; Slaughter and Rhoades 1990; Rhoades and Slaughter 1991)--but

no studies having either broad or in-depth analysis of a financial nature. This situation

stands in contrast to that in commercial endeavors in the private sector, where several

studies have examined the social returns to research and development (R&D) across
 157

large numbers of companies and across industries (for example, Griliches, 1980;

Mansfield, 1980, 1989; Minasian, 1962, 1969; Terleckyj, 1974).

From the university perspective, what are the costs and benefits of academic

capitalism activities? As non-profit organizations, universities are presumed to be

revenue maximizers in order to serve their clients: students, government, other patrons,

and the larger public interest. Universities are known also to be "prestige maximizers"

(Fairweather, 1988; Weiner, 1986; Winston, 1994), to possess an overriding preference

for those engaging in activities that contribute to high status among universities. Given

that most faculty in postsecondary institutions teach and usually engage in public

service, research is the activity that differentiates among institutions, conferring high

status and prestige. From a public policy perspective, however, university costs and

benefits must be evaluated on the basis of the extent to which they satisfy all

components of institutional missions: teaching, research, and service. In our interviews

we asked respondents to assume this perspective and speak to to the affects of

academic capitalism on teaching, research and service.

Academic capitalism contributed importantly to university income. Even though

the two universities constituting the case studies were described by informed observers

as "not major players" in self-generating revenues from external sources, the amounts

involved were substantial. At Oceania University the sums were $16.3 million in 1989

and at Snowy Mountain University the sums were $12.3 million in 1990. xl These figures

represented a respective 10% and 12% of total University operating revenues and were
 158

18% and 19% as large as the “Recurrent” funding provided by the Commonwealth. xli

Clearly these were important activities from a revenue perspective.

By no means were the $16.3 and $12.3 million distributed evenly across the

departments of the universities (Table 4.1). Less than half the university departments

self-generated significant revenues, and activity was highly concentrated in a few

departments. (Only departments raising substantial revenues are represented in Table

4.1.) The humanities and social sciences were unlikely to have more than a few

thousand dollars in such funding. The same was true of most professional fields

related to the social sciences, although a few notable exceptions existed. More

surprising, the more "basic" natural science disciplines, such as chemistry, physics,

botany, and zoology, tended to generate fairly modest sums, too (even for basic

research, which was excluded from our analysis). It was in the applied fields--applied

natural sciences, agricultural sciences, and engineering--where revenues from

contracts and grants with businesses and governments were substantial. A similar

pattern was observed in the United States by Fairweather (1988) and confirmed by

Levin et al. (1987) from their survey of businesses regarding the relevance of various

scientific fields to technical advances.

====================

TABLE 4.1 ABOUT HERE

====================

Overall, departments identified as having self-generated substantial amounts

averaged 22% of their revenues from these sources, with shares running nearly 50%
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and more in several departments in the applied sciences and agriculture xlii. Centers

and institutes organized specifically to generate revenues often derived 100% of their

income through the academic capitalism. xliii The concentration of academic capitalism

in the centers and institutes is hardly surprising, given that their creation and

maintenance often are for the sole purpose of responding to external funding

opportunities (Hill, 1993; Hill and Turpin, 1993; Stahler and Tash, 1994).

Although less likely, it is by no means impossible to gain significant revenues

outside the applied sciences. Two of the most impressive successes in the case

studies were in a physical education department and a special criminology unit. The

physical education department had generated millions of dollars over the past ten

years, primarily through swimming lessons and exercise and recreation videotapes.

The special criminology unit had obtained from the government a single multimillion

dollar grant to gather and maintain crime statistics, and this small unit was essentially

living off the interest of the block grant that had been paid "up front." (This was in an

era of very high interest rates.) In these units organizational dynamics were unusual.

In the former, some hostility had developed toward the entrepreneurial head, whom

some faculty thought had subverted traditional academic values. In the criminology

unit, it is not an overstatement to say that most typical academic functioning was

absent. There were, for example, no regular faculty other than the unit head.

COSTS AND BENEFITS

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The utility of academic capitalism activities to the university may be seen as

direct or indirect. In the pilot phase of the study, when faculty and administrators were

asked about the value of the revenues generated, both often prefaced their response

by emphasizing that benefits extended far beyond the money itself. These were what

Feller referred to as the important "second-order consequences" of advanced

technology programs (Feller, 1988a, p. 248). Put more directly, the quality of academic

life was seen to be affected in indirect ways by academic capitalism; indeed, the

indirect effects were viewed as the essence of how academic capitalism impacted

academic labor. Thus, it was clear that an adequate estimate of benefits and costs,

and in turn the implications for academics, must include the indirect effects, which could

be seen as relating strongly to the overall market positions of the departments and the

universities.

In order to capture some sense of the relative importance of the indirect benefits

and costs involved in academic capitalism, interviewees were asked to relate direct

benefits and costs of the associated revenues to a list of indirect benefits and costs.

(The list was compiled from the literature and from the pilot interviews.) Always, the

criterion was the extent to which, from the interviewee's perspective, the projects

impacted the university's mission.xliv The process was first to gain the interviewee's

scaled estimate of the direct benefit of the revenues themselves and then, using this

estimate as a reference point, to gain a similarly scaled estimate of the indirect benefit

associated with each item on the indirect benefits list.

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Respondents attached a high value to the direct benefits of the $28.6 million

generated through university commercial ventures. These were the direct benefits

associated with the contracts and grants: individuals employed, departmental operating

expenses contributed, travel paid for, and so forth. (Salaries and wages accounted for

about 50% and equipment about 4% of expenditures in Oceania University; expenditure

breakdowns were not available for Snowy Mountain.) On a 0-10 scale the mean value

assigned to the extent to which the ventures contributed to university mission

accomplishment was 7.0. The mean value for Oceania University, the more "standard"

university, in that curricula were more broadly balanced and most research was basic,

was 7.1; for Snowy Mountain, which was very modestly involved in engineering and

was heavily involved in agriculture, the mean was a slightly lower (and statistically

insignificant) 6.9.

Analogously, the indirect benefits associated with the revenues were put by the

faculty and departmental administrators at 1.83 times as important, or $52.3 million, for

a total benefit of $80.9 million. xlv For Oceania University the indirect to direct benefits

ratio was 1.66:1; for Snowy Mountain University it was 1.98:1, probably reflecting the

latter's relatively larger revenues from academic capitalism. That is, the larger the

revenues, the greater the likely utility. Again, these figures can only be taken as crude

estimates, but they are instructive. xlvi The general view is that indirect benefits of

academic capitalism clearly outweigh the direct, monetary benefits. Of 60 individuals

responding to both questions, 47 considered the indirect or spillover benefits to be

equal or more important. The pattern of responses was consistent across basic and
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applied researchers regardless of the degree of personal involvement in commercial

projects.xlvii

When costs were taken into account, again analogously, net benefits declined to

$64.2 million; the benefit to cost ratio was approximately 3:1. xlviii For Oceania University

the benefit-cost ratio was 3.7:1 and at Snowy Mountain University it was 2.9:1,

reflecting primarily larger perceived costs at the latter. The difference in cost

perceptions may have reflected increased sensitivities at Snowy Mountain University,

where the commercial activities were relatively dominant; in other words as a university

becomes more heavily involved in academic capitalism, some of the pitfalls may

become more apparent. This generalization is supported strongly by Philpott's (1994)

findings at a university considered a "frontier" institution, in academic capitalism terms.

For the two universities, total indirect costs were put at $16.7 million. Only three

of 59 respondents held the costs of academic capitalism activities to be in excess of

benefits. None of these three were themselves involved in commercial activities and all

three were in departments where such activities were considerable but in which the

financial fruits were not shared widely. Two of the three seemed to be disgruntled

regarding related departmental policies, while the third simply thought that applied

research shifted the university focus away from "the more important" basic science
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objective. Philpott's study (1994) showed that this kind of dissatisfaction increases as

staff are expected to generate more and more revenues.

THE BENEFIT-COST TAXONOMY

The benefit-cost taxonomy reflects respondents assessments of the costs and

benefits of academic capitalism, as identified in the literature and added to by the

interviewees in the pilot study.xlix Items are arranged in descending order of importance,

as viewed by the respondents, and statistically significant differences between

universities are noted. The references that follow the mean values relate to literature

sources that suggested the particular cost or benefit.

Relations with external bodies (Mean, 7.0)(Blumenthal et al., 1986a; Feller,

1989). Faculty and administrators strongly believed that university commercial

activities enhanced university relations with external groups, such as business firms,

the public, and government agencies. The mean value for this item was essentially

equal to that assigned to the direct benefits of the revenues themselves. Interviewees

cited the enhanced stature of the university in the eyes of client groups, government

ministries, and the community. They believed that commercial contracts and grants

strengthened the university's political base by enhancing its credibility as a "relevant"

social actor. Only rarely did interviewees speak of negative client interactions that

might be detrimental to university external relations. Of course, by implication, the

respondents were saying that their personal stature was being enhanced, both
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externally and within the university, through this work. It was clear that it was largely

individuals, not the University, who maintained the relationship with clients. A literal

translation of the value assigned to this indirect benefit would be $28.6 million. l

Prestige (Mean, 7.0) (Fairweather, 1988; Weiner, 1986). That universities are

prestige maximizers was supported very strongly by the interviewees, whether vice

chancellor, department head, or faculty member. Clearly, this is a major driving force

behind academic capitalism. As one vice chancellor put it, "It's not the money; it's to

make your mark as a university." Or as put in reverse and critically by an accountant

who recently had joined a university research center, “That's the problem. The faculty

aren't trying to make money as they should be. They're simply striving for excellence.

That's the test. They constantly do more than is required under the contract.”

The one or two respondents who held that academic capitalism actually reduced

the unit’s prestige across the campus were individuals at odds with the entrepreneurial

direction of the unit. They believed that the units were reduced in status by their

involvement in academic capitalism. However, even most of the individual critics of

academic capitalism conceded that academic capitalism enhanced Oceania University

and unit prestige, at least under present conditions. The mean value assigned to

"prestige" was significantly higher in Snowy Mountain University than Oceania

University. This was as would be expected, since Snowy Mountain University relatively

was engaged more heavily in academic capitalism.

What does this mean for the individual academic? There was never a question,

in the interviews, that personal prestige was enhanced by successful revenue

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generation. The assumption was implicit and often explicit: “Clyde is a doer. He is into

everything. In a sense he is a role model for our younger staff. He is well known in

Canberra and he can call his own shots in the University. His opinions are never

ignored.” Individuals who were successful in academic capitalism had very

considerable prestige both within the Oceania Universitynd externally. Logically, we

may conclude that as the importance of self-generated revenues increases, the

prestige of entrepreneurs increases commensurately. It follows also that those who do

not so succeed will enjoy less prestige, all else equal. It was observed at the two

universities that disparate success led to status bifurcation within academic units.

Spillovers to research (Mean, 6.5)(Blumenthal et al, 1986a, 1986c; Crean, 1990;

Geiger, 1989). Under our operational definition, most academic capitalism involved

(applied) research, and as such the spillovers to basic research was usually substantial.

In many units respondents reported that the commercial research projects added

greatly to the research atmosphere of the unit. Among staff of applied science units, a

common response was that unit purpose was applied research, and that this was the

only research funding available to them. Distinctions made between basic and applied

research had little meaning in these units. The mean value assigned to spillovers to

research was significantly higher in Oceania University than in Snowy Mountain,

perhaps reflecting the considerably greater emphasis on basic research in the former.

The one unavoidable conclusion from the responses was that academic capitalism

increased the share of academics' time and university resources devoted to the

associated functions.
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Spillovers to teaching (Mean, 5.9)(Blumenthal et al, 1986a; Crean, 1990;

Fairweather, 1989). "What I learn from my projects is what I teach my students" was a

comment made by a professor of an applied science department. In contrast, a senior

lecturer in a basic science department responded "The applied research involved is far

too esoteric for the undergraduates I teach, the only [teaching] spillover being an

occasional reference to my work." These disparate comments reflected a fundamental

dichotomy in the benefit to teaching of the commercial activities: Some activities were

seen as highly relevant to teaching; others were not. The mean value assigned to this

variable was significantly higher for Oceania University than for Snowy Mountain. This

difference may have had to do with the greater integration of academic capitalism in

academic units in Oceania versus the organizational separateness of many

entrepreneurial activities in Snowy Mountain.

Future consulting opportunities (Mean, 5.6)(Fairweather, 1988; Omenn, 1982;

Slaughter and Rhoades, 1990). Successful academic capitalists quickly become aware

that success breeds success. Commercial contracts and grants build one's reputation

and often lead to consulting opportunities. li Not only are academics' personal incomes

enhanced through consulting, as well as through research contracts and grants,

improved personal financial status translates into reduced control of academics by

universities.

Employment of graduates (Mean, 5.0) (Feller, 1988a; Geiger, 1989; Gilley,

1986). Interviewees usually were quite clear that the projects enhanced the

employability of department graduates, either through the imparting of marketable skills

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and knowledge or through contacts established with contracting and granting agencies

or businesses. This is consistent with a major aim of employers: to "promote [at

universities] state-of-the-art research and to upgrade the training of graduate students"

(Feller, 1988a, p.243). As one very successful faculty academic capitalist said: “These

students are by definition working at the cutting edge of knowledge in our field. Without

these experiences they have only textbook, often out-of-date, knowledge. It is very

common for our graduates to go to work in precisely the same knowledge areas as they

are involved in our projects.” Yet, it was also clear that such "value added" to

graduates was not universal. The many low values assigned to this item suggest that

many commercial projects do not operate in areas that promise jobs for graduates.

One of the personal implications of graduate placement for academics is in the

possibility for future contractual work. The placement of a former student may enhance

one's likelihood of future grant and contract success with the employing organization

(through personal influence), thus increasing further both the time the academic

commits to such activities and the resources and associated financial independence

gained.

Student recruitment (Mean, 4.8) (Blumenthal et al., 1986b; Fairweather, 1989;

Stauffer, 1986). It was strongly held by respondents that departmental commercial

activities were important to the recruitment of postgraduate, but not undergraduate,

students. This difference largely explained the middle range mean value assigned to

this item. Often the individuals employed to work on projects were postgraduate

students. Further, a significant number of commercial relationships resulted in the

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sponsorship of postgraduate fellowships by business or government. But most

important was the view that the projects gave the departments the visibility, the

perceived quality, that was instrumental to the attraction of postgraduate students.

Again, item overlap was noted. The mean for student recruitment was significantly

higher for Snowy Mountain University than Oceania, a result that was consistent with

the greater commercial activity in Snowy Mountain.

Successful academic capitalists are aware of the importance of attracting top

graduate and postgraduate students by their personal success. Not only do such

students contribute significantly to research and other work performed, their success

benefits their faculty mentors. Over a career span, academics come to be known in

part by the quality of their former students and often by subsequent work conducted

with those graduates. Those personal relationships pay dividends in various ways. In

the end it is in increased personal status, income, and independence that the dividends

of academic capitalism are captured.

Services contributed by project personnel (Mean, 4.5) (Fairweather, 1989). In

larger projects and in units where commercial activity was substantial, it was fairly

common for the added personnel to work with one or two postgraduate or honors

students in their research. Less frequently, project personnel did some teaching for the

department. In one department contributed services were so great that all faculty

experienced substantially-reduced teaching loads. This, however, was the exception.

Generally, even though the numbers of project personnel were quite large, usually only

one or two of these persons was involved importantly in academic affairs and quite
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frequently no personnel were so involved; therefore, respondents assessed this benefit

as minor.lii The mean value assigned in Oceania University was significantly higher

than that assigned in Snowy Mountain University. It was clear from the interviews that

Oceania University capitalized more on project personnel than did Snowy Mountain

University.

Academic capitalism leads to the employment of staff who relieve academics of

some of their responsibilities. Perhaps most commonly, graduate assistants employed

for projects assist academics in their research, whether in the laboratory or the library,

but also sometimes are used as assistants more broadly, for example, in preparing for

and teaching courses. Project staff aid faculty in a wide variety of non-teaching tasks,

from gathering data to building apparatus for research to running workshops for unit

clients. Project staff relieve faculty of these duties so faculty can continue to teach

while they are involved in entrepreneurial activity. Project staff may serve as guest

lecturers, especially while faculty are on travel, and academics may "buy out" all or

some of their teaching responsibilities by using grant and contract funds to hire

replacements. Undoubtedly, this is part of the explanation for why research university

faculty teach fewer class hours than in an earlier time. Further, the overhead from

grants and contracts often is used by departments to employ teaching and research

assistants, thereby reducing the requirements placed upon academics. In this general

area are seen major impacts of academic capitalism on the nature of what academics

do.
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Equipment gains (Mean, 4.4) (Stauffer,1986; Fairweather, 1989). Considered

here were equipment available to the universities after project completion plus

equipment donated or offered to the universities at reduced prices. Responses to this

question were distributed bimodally, with one group indicating very little equipment

purchase with these funds, and the other group saying that such funds were the only

means of gaining significant equipment in the present funding environment. (Some

grantors prohibited equipment purchases under the terms of their awards.) Of course,

response patterns also depended upon the capital intensiveness of the discipline. A

few respondents reported that the university had provided extra money for expensive

equipment only so that commercial ventures could be maintained or pursued. The

mean value assigned in Oceania University was significantly higher than in Snowy

Mountain University.

The effects on individual academics is noteworthy. In many areas special

equipment is essential to one's research and thus to success in one's academic career.

Even in non-technical fields, the equipment benefits from academic capitalism may be

substantial. Successful academic entrepreneurs in the social sciences and humanities,

for example, often are able to purchase state-of-the-art personal computers and

software only through their own efforts. Although it may be argued that such

entrepreneurial success merely allows the state to substitute self-generated revenues

for its own support, these are the realities faced by many academics: Either pay for

equipment through your own efforts, continue to use obsolete tools, or do without.
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Employment of students (Mean, 4.2) (Blumenthal et al., 1986b; Fairweather

1988). Usually commercial activities made it possible for units to employ departmental

students, thus serving an important role in student matriculation and persistence. This

was particularly true at the postgraduate level, but undergraduates also gained project

employment, particularly in the summer. The benefit to the university was perceived as

moderate. The benefits to individual academics of attracting students were discussed

earlier.

Recruitment of faculty or staff from clients (Mean, 0.9)(Fairweather, 1988, 1989).

Harvard University is said to have reversed its decision to refrain from commercializing

its biotechnology research out of fear that doing so would result in loss of some of its

best medical and associated faculty to biotechnology firms (Fairweather, 1988; Feller,

1988b). Such losses would represent a "cost" to academic capitalism. When this item

was suggested as a possible cost in the first research center visited, the response was

that the Center had recruited from, not lost its staff to, its clients. Although this item

subsequently was added to the "benefits" list, very few individuals responded that their

units had recruited personnel from client groups. The small number who did reported

that their recruiting success reflected personnel preferences for the university over the

business or government environment.

Other benefits. Occasionally, respondents suggested additional benefits that

were derived from the commercial projects. Cited frequently was the general infusion

of enthusiasm and a research ethos into the department, into the university, and even

into individual staff members. As one center director put it, "Great excitement has been
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added to the University." Many reported that the activities had created a dynamic

atmosphere with greatly improved morale yielding a generally more favorable work

environment. Other significant comments were that the revenues added importantly to

university autonomy, that the funds were responsible for building a research

infrastructure that would not have existed otherwise, that the projects resulted in

additional faculty positions, and that unit status had been greatly enhanced on campus.

Patent development and international service also were cited, as was the projects’

provision of badly needed field experiences for students (e.g., geology) and the

manufacture of equipment for campus use (a computer-assisted design and

manufacture unit). Other comments were more negative; these are included below,

under "costs."

In assessing costs of academic capitalism, interviewees were asked to assume

that project direct costs were paid by project funds, leaving only indirect costs to be

estimated by the interviewees. Often, the response was that all or most indirect costs

were accounted for under the contracts, and in such cases individual indirect costs

were estimated to be quite small or nonexistent. Overall, costs were seen as small in

relation to benefits. There was one exception.

Academic resources consumed (mean -3.1). Most interviewees agreed that

commercial projects consumed substantial university and department resources not

covered by the contracts. Most often the item was valued at l or 2 on the scale, with

about one in four respondents viewing the cost as significant--almost always in

response to a specific problem or inconvenience encountered. Secretarial time,

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telephone costs, copying, and, most of all, physical space were cited. "Space! Space!"

exclaimed one department head, as he observed that the projects consumed large

amounts of space and that the university lacked the funds to build more.

Generally, Philpott's cost results (1994) are substantially larger than ours.

Philpott's research was done several years after ours at a university heavily involved in

academic capitalism. The apparent explanation for why he found greater costs is that

as the scale of academic capitalism increases, the costs become more apparent. Now

consumption of unit resources becomes a substantial problem. Annoyances multiply.

Although it would seem to be a fairly simple matter to reimburse units fully for project

costs, incidental expenses often are overlooked or underestimated in project proposals,

occasionally funders refuse to pay for such costs, or competition is for particular unit

resources (e.g., a specific piece of equipment, a specific secretary) . The result at

times is that the successful entrepreneur purchases his or her own incidentals out of

external funds, leaving others to compete for those of the unit, further contributing to an

internal dichotomy between "haves" and "have nots." The “have nots” may benefit from

reduced competition for unit resources, but they nevertheless may resent the relative

resource abundance enjoyed by the “haves.”

Loss of time for basic research (mean, -2.8) (Anderson and Sugarman, 1989;

Blumenthal et al., 1986a, 1986b; Geiger, 1989; Fairweather, 1989; Matkin, 1990). This

is the major concern about academic capitalism expressed in the literature. Stated

dramatically, the argument is that “a greater emphasis on applied science will deflect
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resources from more basic, fundamental research and thus destroy the `seed corn' of

technological progress" (Matkin, 1990, p. 10-11).

A few faculty and administrators held that the cost of applied commercial

activities to basic research was high; a larger number put the cost in the mid-range; and

most put the cost quite low, holding that commercial activities actually stimulated basic

research activity. Little cost was seen by individuals working in applied fields. The

difficulties were seen as somewhat greater at Snowy Mountain University, which was

more applied in orientation but had a larger commercial bent than Oceania. (The

relationship between basic and applied research is examined more fully in Chapter 6.)

Time of academic support personnel (central administrators) (mean, -2.2)

(Rosenthal and Fung, 1990; Feller, 1988b). The pattern of responses to this item was

similar: A very few respondents put the costs at the high end of the range, usually

observing that a great deal of department head and central administration time was

consumed; a few more saw the costs in the mid-range; while most perceived these

costs as minimal or non-existent. Most opinions were either along the lines expressed

by a Senior Lecturer that "central administrators have little enough productive work to

do as it is," or that the value of such time was small and was often covered by imposed

management fees.

Philpott's findings (1994) are again more extreme than ours. Philpott found that

antagonisms toward administrators were substantial and increasing. Overhead costs

charged by the university administration were resented more and more as academic
 175

units were expected to raise more of their own funds. (See Chapter 5 for a fuller

discussion of tensions between faculty and administrators.)

Revenue substitution (mean -2.1)(Blumenthal et al., 1986b; Fairweather, 1988;

Feller, 1989). There was mixed and tentative concern about this item, which was

presented as a hypothesis that university success in generating revenues through

academic capitalism might result in reduced subsidies from the Commonwealth

government. Evidence to date in the United States indicates either no (Feller, 1989) or

some (Jaschik, 1987) increases in state expenditures for higher education, overall, in

relation to university research contract and grant income.

To some respondents revenue substitution was accepted as an eventuality: they

believed that the Commonwealth simply could not meet all the claims upon it and that

universities would have to do more for themselves. A variation of this response was to

agree with the eventuality but to take a much more pessimistic view of the implications

for universities. Only a few respondents were seriously concerned about the likelihood

of a revenue substitution effect, but it was clear that most simply had not thought about

the issue. In rejecting the hypothesis, several individuals in vice chancellories cited

Commonwealth funding regulations that in fact financially rewarded success in raising

external revenues through commercial ventures. These individuals, however, seemed

focused on their university's relative share of the Commonwealth revenue pie rather

than how large the pie was.

At the worst, most respondents believed that the forces balanced out, that is,

some substitution of self-generated for government revenues, but some additional

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government funds resulting from university success in revenue self-generation. Those

more concerned sometimes cited statistics showing declines in Commonwealth per

student support, along with other financing trends, such as the newly instituted HECS

charges (Higher Education Contribution Scheme) to students and rapid growth in full-

fees courses, which suggested to them a clear government intent to promote

substitution of self-generated revenues for Commonwealth appropriations. Others

pointed to specific cases; an example was the alleged relatively lower than normal

capital appropriations to a university that possessed a substantial endowment. It was

noteworthy that most expressed concerns were by individuals at Snowy Mountain,

which raised considerably more money through academic capitalism and where budget

cuts were recently announced.

Substitution of self-generated revenues for block-grant funds is, of course, the

essence of what is transpiring in most of the OECD countries, including Australia, the

United Kingdom, and the United States. It was noteworthy that at neither of these two

universities did a large number of staff connect revenue self-generation to relative

decline in Commonwealth support, at least in an important way; nor did staff see

revenue substitution as a particular problem; few if any seemed aware of the

consequences of resource dependency changes.

Equipment (mean, -2.0). Included here were "marginal" costs to university

equipment, such as wear and tear and increased demand. Only infrequently were

these costs seen as significant. Just as often it was observed that some equipment

would otherwise have remained underutilized.

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Loss of teaching and teaching preparation time (mean -1.9) (Anderson and

Sugarman, 1989; Blumenthal et al., 1986a, 1986c). Fairweather (1989), in particular, is

concerned that activities associated with revenue self-generation will lead to reduced

faculty attention to teaching; however, respondents generally did not share his concern,

nor is his concern generally supported in the empirical literature (e.g., Blumenthal,

1986c). The most common interview response to this item was a momentary stare at

the interviewer, followed by a comment to the effect that any research or service work

is in addition to one's teaching responsibilities. Representatively, an associate

professor of engineering observed, "One simply cannot short one's teaching." Such

response usually were followed by an assignment of "0" (no cost) to this item. Others

were less sure of the effects, although in most cases the usually small negative values

assigned seemed to be in relation to the extent to which other faculty, not themselves,

probably spend less time in teaching preparation as a result of academic capitalism. liii

Again, Philpott (1994) is less sanguine. His findings suggest that at some point,

in fact, attention to teaching must suffer as staff flexibility approaches zero. In other

words, so long as teaching staff are able to do so, so long as time for academic

capitalism is not too obtrusive, they will continue to devote the necessary time to

teaching matters; however, there must be a point at which one can do no more.

Regardless of whether this point has been reached, it is clear that additional time

devoted to commercial activities reduces the share of time and other resources

committed to teaching.
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Secretiveness/confidentiality (mean, -1.4) (Anderson and Sugarman, 1989;

Blumenthal et al., 1986c; Fairweather, 1989; Johnson, 1984). In our interviews we

mentioned the reports, in the literature, concerning commercial clients who sometimes

required contractees to hold research results in confidence or delay scholarly

publications. Interviewees were aware of the controversy surrounding this practice, but

denied any such personal experience. There was, however, strong agreement that any

such restrictions would have very negative effects on academic values. Perhaps four

or five respondents noted some personal, minor inconvenience with confidentiality

agreements, while all of the few individuals who assigned high negative values to this

item reported having had no personal experience with such problems. Their high

negative ratings simply reflected strong personal values against confidentiality

agreements. In the United States, such agreements already are matters of some

concern, and it may be that problems in this area are inevitable consequences of

academic capitalism.

Departure of faculty and staff to client organizations (mean,-.7) (Dimancescu and

Botkin; Matkin, 1990). This item was added in relation to the afore-mentioned concern

that exposure to clients might result in employment proselytizing. The only reported

direct losses were in the case of staff whom interviewees were "happy to see depart"--

in other words, staff who were not highly regarded. A very few respondents indicated

that there had been some loss of project personnel to clients after the project had

ended, but these were seen as positive events, the employment of redundant

employees. In a physics department it was reported that faculty who gained expertise
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through the projects sometimes left for industrial jobs, but not with former clients. In

one unique case, in which the university had set up its own company to develop a

patent, several university departments were "raided" of top personnel; however, these

individuals merely were transferred to another university enterprise. Though small, the

problem of personnel loss to clients is significantly greater in Oceania than in Snowy

Mountain.

One would expect this cost or "problem" to accelerate, although personnel

losses may not necessarily be to client organizations. In the United States, there

appears to be substantial migration of successful academic entrepreneurs to business

and industry. Some separate completely from universities while others take part-time

or even dual positions elsewhere. Perhaps this is most evident in the biotechnology

field.

Monetary losses (mean, -.5). Most commercial contracts and grants are

structured in such a way as to prohibit losses to the university. One loss that did occur

was in connection with the purchase of an expensive computer by a unit that was not

legally separate from the university. The unit was required to make up the loss in

subsequent fiscal years. This problem was viewed as almost nonexistent in Snowy

Mountain and very small, though statistically greater, in Oceania, where the computer

purchase was made. (For more monetary losses stemming from faculty and institutional

efforts to develop products or processes for market, see Chapter 5.)

One would expect that as academic capitalism grows in scale, losses will

increase, and that both individual academics and universities will bear the
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consequences. For example, the prevailing view within many U.S. research

universities is that it is unlikely that technology transfer revenues ever will equal costs.

This is almost certainly true for most universities at present. Where this is true, already

scarce resources are being taken from other functions, with an additional pressure

being placed on academics for revenue self-generation.

Legal fees (mean -.5) (Geiger, 1989; Blumenthal et al., 1986a; Rosenthal and

Fung, 1990; Weiner, 1986). Very few legal fees had been assessed in relation to the

universities' commercial projects, in part because of the absence of significant patent

activity. Most respondents indicated that legal fees were handled centrally, but if such

costs were experienced, they were held to be covered under the terms of contracts.

Recent experiences in the United States suggest that difficulties and costs in this

area may increase in Australia, although making generalization based on the highly

litigious United States is risky.

Patent/copyright application fees (mean, -.5)(Blumenthal et al., 1986a; Feller,

1988b). Again, there were very few such fees paid in connection with academic

capitalism activities, due to the fact that patent activity is minimal, but increases may be

expected as technology transfer increases in Australian universities.

Product or process liability (mean, -.2) (Anderson and Sugarman, 1989). A

major concern expressed in the literature is that patented products or processes may

lead to large legal liabilities on the part of universities. The notorious case of

thalidomide is often cited. There were no such concerns among the Australian

respondents in this study. The common response was that the university had
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insurance against such claims and, although insurance rates might increase if claims

were filed, no such concerns were seen for the near to intermediate future.

Other costs. Beyond those identified in the literature and the pilot study, several

other costs were suggested. Among the more serious of these was increased stress

experienced in units that have become heavily engaged in academic capitalism. This is

precisely what Philpott (1994) found in the highly entrepreneurial university that he

studied. There were other matters as well: promotions believed missed because of

insufficient time for scholarly writing and basic research, liv unit internal conflicts between

the "haves" and "have nots," and perhaps most seriously, possible conflicts of interest.

In two cases faculty members questioned their colleagues' ability to maintain proper

scientific attitudes when continued or future funding might depend upon obtaining

results favorable to the clients' interests. One individual questioned the propriety of

competing with the private sector for contracts while another cited the greatly increased

tax reporting requirements. Finally, several persons decried the loss of leisure time.

Said one civil engineer, "I might as well have gone into business. The only difference

would have been a higher salary!" (For further examination of "other costs" in the case

of faculty bringing products and processes to market, see Chapter 5.)

INSTITUTIONAL FINANCIAL POLICIES INFLUENCING ACADEMIC CAPITALISM

Generally, the literature on the benefits and costs of commercialization of

knowledge does not address institutional policies that deal with how academic
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capitalism is financed. Because the benefit-cost taxonomy was based on the literature,

we did not raise questions about institutional financial policy with our respondents.

However, a number of interviewees spontaneously addressed issues related to

institutional financial policies.

Administrative or management feeslv are small. Not only are official assessment

rates for academic capitalism projects small, they are seldom collected in full, if at all.

Official rates are as low as 5% of contract amounts in Snowy Mountain, but are said to

be collected only about 10% of the time. Total collections were only $176,000 in 1990,

less than .8% of academic capitalism amounts. Although project directors occasionally

complain about such charges, the level of complaint is relatively low, in our experience,

as are the amounts collected. In Oceania in the unit where complaints are most

serious, total management fees assessed are only about $35,000 of some $3 million in

total R%D revenues (1990). Although the Oceania management fee or overhead rate

is officially a high 35%, 57% of this amount is returned to the unit while about 21% is

retained centrally and 21% is allocated to a University-wide committee. In the same

University, however, an engineering department head reports that all consulting

activities "have been removed from the University" because management rates are too

high. Here it may be that the University's problem is largely one of communicating its

effective management fee rates. The alternative explanation is that effective rates vary

by function, in other words that rates for consulting are in fact so high as to be a

disincentive. (If there is one characteristic of management fee policies in the two

universities, it is that the policies are applied inconsistently, often being based upon
 183

what the client is willing to pay.) For academic capitalism on the whole, rather than

management fees or overheads being too high, there appears to be considerable

potential for the universities to charge more, thereby offsetting real university costs

without importantly affecting incentives and disincentives for academic capitalism.

Interest payments may be a lucrative source of revenue. In the University

enjoying the greatest amount of patent success a major amount of associated revenue

emanates from interest earned on lump-sum patent payments. This is similar to the

conclusion reached in an in-depth study of one of the most successful (patenting)

universities in the United States, the University of Wisconsin-Madison (Wisconsin

Alumni Research Foundation), where the investment of patent revenues have

generated far more income for the University than have the royalties for the patents

themselves (Blumenthal et al, 1986a).

The principle may apply equally for internal units and academic capitalism,

broadly defined. Oceania permits units to capture the interest earned from certain large

sum academic capitalism payments and from departmental operations accounts that

are formally set aside for a minimum period of time and that are in excess of a

stipulated amount. The interest earnings on the former can run into the hundreds of

thousands of dollars per year and may serve as a primary unit revenue source. One

unit is in the unusual position of operating entirely on the interest earned from a single

multi-million dollar grant, which was paid in a single lump sum.

In Snowy Mountain independent research centers and institutes also usually are

credited with interest payments, but interest earned on accounts held by academic
 184

departments generally are retained entirely at the central level. This is a policy that

does not escape departmental academic capitalists. When confronted with claims that

University central costs associated with academic capitalism projects are not fully

recovered through overheads, the academic capitalists sometimes raise the issue of

the interest earned on their academic capitalism accounts. As an Agriculture staff

member rejoined, "We would be happy to pay higher management fees; just ask them

(central administration) to give us the interest earned on our money."

Personal academic accounts are an effective incentive instrument. Faculty and

professional officers (non-tenure track academic staff) are permitted to contribute

certain academic capitalism earnings, particularly from consulting, to personal

university accounts. This policy not only permits some university oversight of faculy

activities, but faculty realize higher net earnings because income taxes are avoided so

long as account expenditures are for university-related purposes. This is a win-win

situation. In the end the personal accounts result in some substitution of faculty-earned

monies for university monies because the accounts commonly are used for such items

as faculty travel, computer software, and professional books.

Although institutional financial policies affecting academic capitalism have not

been studied by scholars writing about commercialization, university-industry

partnerships, and technology transfer, such policies may play an important role in

creating incentives or disincentives for academic capitalism. If administrative or

management fees are inconsistent, some faculty may be reluctant to engage in

entrepreneurial activity, while others may be able to negotiate such low rates that the
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central administration must subsidize academic capitalism, perhaps creating hostility

toward entrepreneurial faculty and units. Interest payments on lump-sums brought in

by faculty and units are important sources of revenue, but there was no consistent

policy on who captured these. Oceania let units keep the monies, while Snowy

Mountain did not. The sharing out of these monies, whether to academic capitalists or

to traditional faculty, would seem to provide a powerful incentive if central

administrators want to encourage entrepreneurial activity. Personal staff accounts are

an example of institutional incentives that create a win-win situation for central

administrators and academic capitalists, but these incentives do not address the

problems presented by units not engaged in academic capitalism.

CONCLUSION

The benefits-cost taxonomy reveals quite clearly what the faculty view as critical

resources. The highest mean values assigned by faculty to academic capitalism were

to prestige (Mean, 7.0) and to relations with external bodies (Mean, 7.0). These ratings

suggested that faculty confronted with reduction in research monies and increased

competition for resources within the unified national system sought to alleviate resource

dependency difficulties by winning external monies, but not just any monies. The funds

they preferred were those that conferred status and prestige. Such monies increased

faculty, unit, and institutional prestige because they were earmarked for research, the

function that distinguishes among universities. These funds were equally valued
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because they contributed to better relations with external bodies. By working on

commercial projects, faculty strengthened their ties with government agencies and

client groups, thereby enhancing their credibility as relevant social actors concerned

with meeting national policy objectives aimed at benefiting the public. These faculty

were eager to alleviate disruptions caused by changes in resource patterns, at least in

part because they were able to do so while maximizing status and prestige.

Faculty were aware that their new focus on commercialized knowledge was

somewhat at odds with the traditional status and prestige system of their research

universities, which venerated basic or fundamental research. Faculty expressed

concern over the shift in the sort of research in which they engaged by ranking

spillovers to research (Mean, 6.5) as a benefit just below prestige and relations with

external bodies. They claimed that their applied efforts in academic capitalism spilled

over to their basic research. In other words, they collapsed the differences between

basic and applied research, legitimizing their work as academic capitalists without

directly challenging the traditional status and prestige system. (We will explore faculty

attitudes toward basic and applied research more fully in Chapter Six.)

Although the monies generated by academic capitalism in our two cases are at

most 12 per cent of total institutional income, faculty spoke frequently about how the

pursuit of competitive funding has altered the ethos of departments and entire

universities. The relatively small proportion of monies needed to change faculty

behavior points to the importance of critical resources. Faculty are willing to change

behavior to pursue resources for research and development because these monies
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fund discretionary activity and confer status and prestige both within the academic

community and with external bodies. The willingness of faculty to pursue monies that

are viewed as critical resources, at the margin (additional), suggests that incentive

programs that are not sharply at odds with faculty status and prestige systems might

make change within segments of universities easier than is commonly thought.

Apparently, when resource dependency articulates with national policy--in

Australia, targeted research for national economic goals--professors are eager to

exploit the new opportunity structures. Indeed, pursuing commercial research,

especially in technoscience fields valued by international markets, may be a way of

furthering differentiation among faculty, upping the status stakes. As faculty noted in

the benefit-cost taxonomy, becoming involved in commercial research sometimes

creates "haves" and "have-nots" within units. As distribution across fields indicates

(see Table 4.1), the division is not only within fields but also among fields. While

technoscience areas are not the only units engaged in commercialization of knowledge,

they account for the great majority. As well as "haves" and "have nots" within units,

academic capitalism may create "haves" and "have nots" among departments.
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CHAPTER FIVE: TECHNOLOGY TRANSFER STRATEGIES AS A RESPONSE

TO RESOURCE DEPENDENCY

In Chapter 4 we looked at academic capitalism without differentiating among

faculty by rank, discipline or types of market or market-like activities. We found that

faculty responded to conditions of resource dependency by pursuing academic

capitalism, especially when such revenues involved research monies for activities that

did not directly conflict with the traditional status and prestige system. In this chapter

we look at a somewhat different group of Australian university faculty. We study faculty

involved in technology transfer. Technology transfer is the movement of products and

processes from the university to the market. We selected faculty involved in technology

transfer for close scrutiny because technology transfer is perhaps the most direct form

of academic engagement with the market and, as such, a signifier of the issues that

academic capitalism might present. Moreover, we disaggregated the faculty, studying

different strata--central administrators, department heads, faculty at various ranks, and

postgraduate students--separately. The questions we ask are (1) How do central

administrators respond to increased resource dependency, particularly with regard to

technology transfer? Do they develop new organizational strategies and forms? (2)

How do center heads involved in technology transfer respond to increased resource

dependency? Do they develop new organizational strategies and forms? (3) How do
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academics other than central administrators and center heads respond to unit

involvement in technology transfer?

We draw primarily on process theories of professionalization, but resource

dependency theory sets the stage. Resource dependency theory led us to expect

central administrators to develop strategies and organizational forms that would

generate the greatest amount of resources for their institutions (Pfeffer and Salancik

1978, Pfeffer 1994). We expected central administrators to encourage faculty to

pursue critical resources, not all resources. In other words, university administrators

would look to maximize resources that contributed to their research profiles and met

national economic priorities, given that these priorities to a degree shaped the

government's willingness to fund research. lvi Because Australian central administrators

are not highly professionalized, we did not expect a cohesive, organized response that

iv. Despite the recently created Department of Education, the United States does

not have a national ministry of education equivalent to those of Australia and the

United Kingdom. Like Canada, U.S. higher education is decentralized. Nonetheless,

the United States makes national higher education policy through federal student

aid policies as well through a wide array of research and develop agencies, ranging

from mission agencies to the National Science Foundation to, most recently, the

Department of Commerce. Policy directions established at the national level are

often complemented by the several states, as with supplemental educational

opportunity grants and university-industry-state government commercial

development projects.
 190

inserted them in the policy making process at the national level.

Process theories of professionalization view professionalization as a process for

which knowledge, theory, expertise and altruism are not enough; organizational,

political and economic skills are equally, if not more important. Process theories of

professionalization look at professionals' active agency, particularly at their intervention

in the political economy, to gain a greater degree of control over their work lives and

v. Producer services are tied to the rise of commercial capital, which has played an

important role in globalization of the political economy. Producer services consist

of non-life insurance and reinsurance, accountancy, advertising, legal services, tax

consultancies, information services, international commodity exchanges,

international monetary exchanges, international securities dealing. Business

schools and law schools participate in the development of producer services and

train graduates to use them (Thrift 1987, Sassen 1991). Castells (1993) argues that

the change from industrial economy to information economy is more important

than the change from manufacturing to services because the service sector

encompasses so many diverse activities that it has become a residual category,

ranging from producer services to janitorial services. He also points out, as do

Thrift (1987), Cohen and Zysman (1987) and Sassen (1991) that there is "systemic

linkage between manufacturing and the service sectors "so that many such

activities are in fact "an integral part of the industrial production process." In other

words, categories such as manufacturing v. services are less meaningful in a post-

industrial economy, and scholars are attempting to develop new categories that

break down old dichotomies and provide greater analytical leverage.

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income streams, through, for example, state licensure laws. Because process theories

of professionalization emphasize the ways that professionals act in moments of great

change in the political economy--for example, the rise of industrialization (Bledstein

1977, Haskell 1977), and the formation of the welfare state (Finegold and Skocpol

1995)--they should help us understand how Australian professors position themselves

vi. As always, there are notable exceptions to generalizations such as the notion

that the science and technology discoveries of the post-industrial revolution were

made by college graduates. For example, Steven Jobs, of Apple Computer, and Bill

Gates, of Microsoft, both dropped out of college, but were nonetheless inventor-

entrepreneurs of two of the most successful high technology corporations formed in

the United States in the last quarter of the twentieth century.

ix. Copyrights and patents are monopolies, protecting their holders from

competition for various periods of time. Patents provide a seventeen year

period, with possible renewal at the end of that time. The Copyright Act

of 1976 provides for copyright for the life-time of the author, plus an

additional fifty years. During the period in which the patent or copyright

is held, it is possible for the owner to gain control of markets and

eliminate competition. The counter-argument is that authors and

inventors would not create intellectual property without the possibility of

being rewarded through royalties and licenses derived from copyright and

licensing, nor would businesses invest in new products unless they were

able to reduce risk somewhat through purchase of copyrights and

patents.
 192

at the advent of global economy.

The center heads we studied were successful, experienced professionals.

Process theories of professionalization suggested they would react to resource

dependency changes by treating technology transfer as a highly promising professional

opportunity structure (Abbott 1988, Brint 1994, Friedson 1986, Perkin 1989, Starr

x. Neave writes about European countries, generally, rather than the four countries

with which we are concerned. Overall, the European Community is developing

policies on commercialization of science and technology congruent with those

discussed here, strengthening the established industrial countries' attempts to

maintain global shares through technoscience. There are however, setbacks to the

general direction of European Community policies, as in the case of the rejection of

patents for living things, whether animal, plant or person. The United States

permits the patenting of life.

xi. Microelectronics and Computer Technology Corporation (MCTC) was a computer

firm, whose CEO, Admiral "Bobby" Inman, formerly of the Central Intelligence

Agency, wanted to create a research consortia of U.S. electronics firms interested in

developing technologies that would enable them to beat the Japanese in the race to

develop a fifth-generation. The consortia required modification of national anti-

trust rules. MCTC was ruled "precompetitive" and therefore allowable (Inman

1986).

xiii. Unlike the United States, the Canadian provinces do not tax directly for all

funds for higher education. Instead, the federal government reallocates tax monies
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1982). We expected the destabilization of Australian science and technology policy to

create a new set of conditions that would allow the heads to engage in market activity

while still being shielded by their professional status. We thought they would move

aggressively to exploit this opportunity, creating new professional organizations,

securing new staff, and developing long-term strategies to safeguard their gains.

to the provinces for education, health and social services. When these monies are

returned to the provinces, no strings are attached, and the provinces are able to

decide how to allocate the monies among functions. For a comprehensive account

of Canadian funding of postsecondary education, see Elliott (1995).

xvi. Pfeffer and Salancik's work on resource dependency parallels the work of

Herbert Simon who advises that organizations rarely gain major economies or

directional shifts in the absence of intense external pressures.

xvii. This characterization is not entirely fair to Massy and Zemsky, who do

acknowledge external forces, even though them seem to favor faculty self-interest

as the primary explanation for the teaching-to-research shift.

xviii. In addition to influences on autonomy, Furstenbach lists changes in patterns

of power within universities, in academic freedom, and quality implications as

consequences of increased third stream revenues.

xix. Our usage of the term market is consistent with our audience here, comprised

of academics in general. For economists, market is a technical term having specific

meanings. For a discussion of these specific meanings in higher education, see

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Process theories of professionalization also suggested that center heads and faculty

involved in technology transfer might begin to develop special organizations at the

national or international level devoted to issues related to marketization, or even begin

to seek special legislation that privileged academics involved in the market. Guided by

process theories of professionalization, we thought faculty would begin redefining

technology transfer as a particularly privileged form of knowledge, a point to which we

Leslie and Johnson, 1974. In describing types of higher education organizations, the

OECD (1990A, pg. 20) describes the systems of the OECD as "mixed," in between

the perfect market at the one end and the method of state planning at the other.

xx. At the time the Federal government was debating whether its aid would be

primarily institution- or student-based. The latter was chosen as the favored

vehicle. Recognizing that most government aid was from the states, the Federal

government also saw Federal need-based student aid as a way of leveraging the

states to follow the Federal lead.

xxiv. The term frontier is used in the research methods sense to connote an

"outlier" or "extreme" case, studied to detect trends and to consider future

implications of new developments.

xxv. This is because it is government revenues that is changing dramatically,

especially general institutional aid, which is appropriated overwhelmingly to public

institutions. U.S. private universities are probably even more market oriented than

public universities because essentially all of the former's revenues are earned

competitively, even those from government.

 195

will return in the next chapter. Generally, we thought center heads would respond to

shifts in national research and higher education policy and subsequent heightened

resource dependency as professionalization theory would predict: They would treat

destabilization as yet another professional opportunity structure.

We did not know how faculty and graduate students below the level of professor

xxvi. Although institutional efforts to increase revenues from discretionary (non-

appropriations) government sources no doubt are expanded, too, as appropriations

decline, these efforts will not be reflected in aggregate U.S. data because public

institutions can only succeed in attracting such revenues as are available. The

amounts reflected in the government categories in Table 3-1 are the amounts made

available by government on an annual basis. To test dependency theory, one

would need to examine institutional accounts to determine whether changes in

institutional revenues from discretionary categories is related to institutional

revenue shortfalls in government appropriations.

xxvii. Institutions have considerable flexibility in deciding how much of their

endowment earnings will be retained in the endowment or will be allocated it to

competing fund groups, such as the Plant (Building) Fund. Comparative annual

additions to the endowment principal would be a good test of RD theory, but the

necessary data are not readily available.

xxviii. The data are in percentage points, not percentages. The difference is

important. For example, suppose a revenue share from a given source is 30 per

cent and declines to 20 per cent. This is a 10 percentage point (30-20=10)and a 33

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would respond. Usually process theories of professionalization focus on high-status

faculty at elite institutions, not on the rank-and-file (Larson 1977, Starr 1982, Friedson

1986; for exceptions see Collins 1979, Abbott 1988, Slaughter 1994). When we

disaggregated the faculty and separately studied faculty and students below the rank of

professor, we saw consistent differences. Rather than seeing destabilization of higher

education and science and technology policy as an opportunity structure, lower-level

per cent decline (30-20/30=33).

xxix. If revenues from source A are merely constant while revenues from source B

decline, the share of revenues from A will increase. What the data in these tables

show usually is relatively less growth in state categories; absolute declines in state

support occurred in only a single year.

xxx. Former Stanford President Donald Kennedy (1993) writes about the related

"chronic, deterioration of institutional infrastructures," which he sees as an

outgrowth of the university financing changes that serve as the base for the ideas

expressed in this book.

xxxi. A thorough discussion of this development is contained in Rh

oades and Smart (forthcoming).

xxxii. According to Williams (1992), the British government still pays approximately

12 per cent of fees of overseas students (p. 15).

xxxiii. An excellent summary of the more recent developments in Australia is

contained David Mahony's 1994 paper in The Journal of Higher Education.

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faculty, postdoctoral fellows and graduate students were confused and ambivalent: they

were reluctant to participate in reshaping the traditional status and prestige system by

embracing technology transfer. Degree of ambivalence increased the lower the

respondent's rank. Gender, too, seemed to play a part, with the very few women in the

study having a response somewhat different from that of the men. By disaggregating

xxxiv. Australians knowledgeable about these data point out that a substantial

portion of the "growth" merely reflects a change in accounting procedures. It would

appear that $79 million of the apparent growth represented a transfer of funds from

the operating grants of the universities to the competitive grants offered by the

Australian Research Council (ARC) (p.89, DEET, 1993).

xxxv. Australian academics with many years experience in financial matters advise

caution in interpreting government statistics. The academics cite a "pliable"

Commonwealth bureaucracy that is strongly encouraged by the pertinent Minister

to present data in a light favorable to the government. These academics believe

that the financial plight of Australian universities is substantially greater than

indicated.

xxxvi. This was not to say that there were no government efforts along these lines

although the relationships of such efforts to government were sometimes indirect.

For example, the Ontario Government established in 1986, "Centres of Excellence,"

which were to conduct research "in areas of strategic importance to the Province."

The Centres, however, were to be kept at "arms length" from the Government.

xxxvii. Whereas the data reported for the United States and Australia were shares
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the data, then, we found variation in response. Faculty who were less well situated to

take advantage of new opportunity structures presented by technology transfer were

less willing to commit themselves to it.

Recently professionalization theorists have examined the way professionals

intersect with the market (Abbott 1988, Bok 1993, Brint 1994). Very often, they attempt

to explain variation in prestige and salaries for different professional fields. We use this

of annual operating budgets, the Canadian data include capital expenditures. This

should not pose an important problem for intra-national comparisons but would

pose a problem if international comparisons were desired.

xxxix. Rodger Philpott was a student of Larry Leslie's and used essentially the

same method as did Leslie, creating a faculty benefits-cost taxonomy based on

interviews. His findings were more similar to those presented in Chapters 5 and 6

than in this chapter. Unlike this chapter, which deals with all units on the two

campuses that generated more than 1% of their budget from academic capitalism,

Chapters 4 and 5 deal with units on campuses that were involved primarily in

market rather than market-like activites. In other words, the units in Chapters 4

and 5 were developing products and processes for commercial markets. Faculty in

these units experienced a great deal of stress and some were quite critical of

academic capitalism as were the faculty in Philpott's study at the university that

had taken its direction from the market. Intense involvement in market activites

may create more problems that routine activities, such as consulting or government

grant and contract work.

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emerging theory to attempt to explain how fields and centers are valued within

universities. Like Brint (1994), we see professors in fields close to the market as most

able to accrue prestige and resources. As a result of the increasing intersection of

professors in particular fields with the market, we see a new hierarchy of prestige and

privilege emerging within universities.

xl. Data were for different years because in University A 1990 data were not yet

available and for University B 1989 was an anomalous year due to institutional

amalgamation with Colleges of Advanced Education. The inconsistency posed no

major problems because the primary purposes of the study were not of a

comparative nature and because most research questions concerned revenue

shares rather than absolute numbers.

xli. This term is comparable to “Current Funds” in the United States.

xlii. In Oceania University, all centers and institutes were amalgamated

with departments, whereas in Snowy Mountain University most centers

and institutes were free-standing. Had university policies been

consistent, shares of department expenditures related to commercial

activities would have been much higher in Snowy Mountain University.

xliii. The difference in the separateness of centers and institutes in Oceania

University versus Snowy Mountain University greatly affects the interpretation of

the data in Table 4.1. In Snowy Mountain University the utility of the center- or

institute-based revenues to departments ranges from only moderate to almost nil.

From the University perspective, the centers and institutes may contribute to
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The information presented in the remainder of this chapter was gathered through

interviews with forty-seven persons in eight units in three universities between January

and July 1991. The units selected were those most deeply involved in technology

transfer. Faculty in these units were turning academic knowledge into intellectual

property, defined as patents and processes, trademarks or copyrights, and organized

research and service in much the same way as do department-based efforts.

xliv. Interviewees were instructed to focus explicitly on university mission;

however, it was clear from responses that many interviewees reacted

partially from a unit or even personal perspective. This does not

necessarily lead to interpretation problems because universities may be

seen as collections of academic and support units--and ultimately of

individuals--but it is an issue about which the reader should be aware and

take interpretative caution.

xlv. One very large outlier was eliminated each from the benefit and cost data. If

the very large values are included, the indirect to direct benefit ratio rises to almost

2.0:1 and the benefit cost ratio rises from 5:2 to 3:1.

xlvi. Although the interviewees appeared to assign values to the total indirect

benefits thoughtfully and thus the monetary values were generally valid, they

seemed to be more liberal in assigning values to individual indirect benefits. As an

illustration, it seemed somewhat questionable that, having placed a direct benefit

value of 7 on $100,000 in commercially-obtained revenue, they would then assign a

7 to recruitment of students, that is that they truly valued the enhanced student
 201

consultancies aimed at the commercial market. Of the forty-seven persons, thirty held

academic-track appointments (graduate students, research fellows, lecturers, senior

lecturers, associate professors and professors), nine were staff (professional officers in

Australian parlance, academic professionals in American) and eight were

administrators. With regard to rank, eight were professors, three with their own chairs.

recruitment equally with the $100,000 in revenue.

xlvii. A recent survey of approximately 100 universities in the United States

demonstrated that faculty, regardless of field or involvement with academic

capitalism, thought that the benefits from university cooperation with industry were

substantial. For details, see Campbell 1995.

xlviii. Only indirect benefits to costs are reflected. Since all revenues generated

(direct benefits) are expended (direct costs) in the non-profit universities, only the

indirect benefit to cost ratio has a clear policy implication.

xlix. Specifically, we conducted an exhaustive search of the literature for possible

costs and benefits, the respondents identified a few additional costs and benefits,

and the respondents assigned weights to each of these.

l. This value is reported for illustrative purposes only; values are not provided for

other specific items because of transformational problems. The problem occurred

primarily at the low end of the scale, particularly for costs, which were rated

relatively low. A common respondent answer to a low-rated cost item was "Oh,

very minor [cost] if any. 1 or 2 [rating]." In other words, the respondent viewed the
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Three were associate professors, four were senior lecturers, six were lecturers and

nine were postdoctoral fellows or Ph.D. students. lvii

The forty-seven interviewees were located at three institutions. One was a well-

established middle-rank university, renamed Outback University (OU) for purposes of

this study; one a relatively new, somewhat experimental university, referred to as New

cost as insignificant or nearly so, but due to the scaling, even values of l or 2

represented millions of dollars in costs--clearly much more than the respondent

intended. At the low end of the scale, imputed amounts could represent costs

greater than the university's total expenditure on the activity, e.g., administration.

li. Respondents were asked to ignore the benefits to the university of consulting

fees paid directly to faculty consultants. The reasoning was that respondents would

not be knowledgeable as to the amounts of such fees and that the benefit to the

university would be very difficult to estimate.

lii. This is in contrast with the American university system, where successful

grantees/contractees often "buy out" some of their teaching time and project

personnel commonly teach entire courses. In general Australian use of project

personnel is much less than in the United States. Differences in the mix of

regulations and traditions explain the contrasts.

liii. In a survey of approximately 100 universities, Campbell (1995) found that

faculty, whether involved or not involved with academic capitalism, found teaching

to be a role they could not give up. Faculty believed that they must teach, if they

were professors.
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Wave University (NWU); and one a top-ranked science and engineering university,

which we called University of Science and Industry (USAI). lviii At Outback University a

single unit was identified and all unit faculty and professional staff were interviewed, as

well as institutional administrators responsible for technology transfer--twenty persons

in all. At New Wave University, two units were identified. Again, all unit faculty and

liv. One study that compared biotechnology faculty "with industry

support" to those "without" found that the former published significantly

more than the latter (Blumenthal et al., 1986c).

lv. Charges assessed by administration for entrepreneurial projects, usually based

upon the total value of the award.

lvi. We believe that administrators' search for resources are also shaped by

institutional resource conditions such as geographic location, investment portfolio,

and the types of expertise that characterize the faculty. In other words, a

university in a major metropolitan area that had a large endowment and faculty

strength in science and technology might pursue a rather different strategy than a

university in a rural area with a small endowment and faculty strength in

professional schools designed to serve agriculture. However, if we explored these

aspects of the universities we studied we would compromise confidentiality, since

such details would reveal to readers the identity of the university.

i. With the exception of the United States, "the state" refers to the executive

branch and administrative arm of government at the federal or national

level; in the United States, when we mean units of government such as

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professional staff were interviewed, as were all administrators whose jobs touched on

commercialization of science-- fifteen persons in all. At the University of Science and

Technology, only administrators concerned with commercialization of science and

heads of departments or units that had developed intellectual property were

interviewed, for a total of twelve persons, five of whom were professors. We shifted

Illinois, Minnesota, or Wisconsin, we will specify the state or use the term

"the several states"; in the case of Canada, for the comparable units of

government, such as Alberta, British Columbia or Ontario, we will use the

term "the provincial governments."

ii.We use the term academic to cover college and university

employees who are professionals or quasi-professionals. In other

words, we include tenure-track faculty, academic professionals, and

administrators in the term academic, since academic capitalism is a

phenomenon that encompasses the professorate, academic support

staff, and administrators. The term faculty is used interchangeably

with professors and refers to tenure-track personnel; when

speaking about a particular rank, that rank is specified, i.e., full

professor.

vii. Total quality management (TQM) focuses on the customer and the point of

production rather than on management. Customer feed-back is very important as

worker input. Workers committed to the corporation should be able to

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emphasis at the University of Science and Technology, focusing on heads rather than

whole units, because we wanted to speak with more faculty responsible for bringing

ideas to the market, and faculty who were successful at technology transfer frequently

became center heads. The interviews were semi-structured and usually took an hour

to an hour and a half to complete although some interviews took two or three hours. lix

constructively criticize and improve the production process, creating more satisfied

customers. TQM depends on shared commitment by management and workers to

company goals, and depends on a commitment on the part of management to

workers, and vice versa (Peters and Peters 1991). A TQM management would be

unlikely to fire large numbers of workers during restructuring, because that would

create distrust, resistance, and undermine efforts to increase productivity. Given

the adversarial relationships that often characterize Fordist manufacturing, the

requisite level of trust is difficult to achieve, especially during periods in which

down-sizing takes place.

viii. As a number of scholars note, the nationality of a corporation is sometimes

very difficult to determine. For example, joint-ventures allow U.S. automakers to

market under their company names popular Japanese cars, as in the case of Mazda

Navajo, which is Ford Explorer made in Kentucky, and Geo Prism, which is a Toyota

Corolla made in California. Conversely, Jaguars are made in England by a wholly

owned Ford subsidiary. The United States insists that foreign companies

manufacturing in the United States have a large "local content." The Japanese

government takes the position that "more than 60 percent of 931 Japanese-owned

companies in the United States obtain at least `two-thirds of their materials in

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The interview material was supplemented by a variety of materials (brochures,

organizational flow charts, contracts, vitae, reports, etc.) Because the supplemental

material was not available for all faculty and centers, we indicated when it was used,

and relied on it primarily for purposes of clarification.

The broad areas covered were: (1) experience with academic capitalism, with

America,' but many of these `American' suppliers are Japanese-owned."

Increasingly, multinationals, regardless of country of origin, use their "overseas

subsidiaries, joint ventures, licensing agreements, and strategic alliances to assume

foreign identities when it suits their purposes" (Barnet and Canvanagh, p.279, 280.)

xii. Legislation is only one aspect of the rule-making structures that shape

competitiveness R&D policies in the U.S. Other legal structures are administrative

interpretations of new laws, rulings by administrative law judges and litigation in

civil courts. For example, the Internal Revenue Service does not tax universities'

royalty income, creating a strong incentive for universities to encourage patenting

and copyrighting (Martino 1992). In 1980, in Charkabarty v. Diamond, the U.S.

Supreme Court ruled that living organisms were patentable. In the same year, the

Patent and Trademarks Office issued the Cohen-Boyer patent on rDNA to Stanford.

In 1988, the Patent and Trademarks Office issued Harvard a patent on the

transgenic mouse (later globally marketed by DuPont as oncomouse, a laboratory

animal for researchers). In 1990, the California Supreme Court ruled that a patient

did not have a property right to his body tissues after they were used by

researchers to develop a commercially important cell line (U.S. Congress 1991).

Rule making modalities other than legislation interact with new statutes to create a
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special emphasis on how commercialization shaped policies, strategies, and plans for

the future; (2) experience with institutional structures for the organization of commercial

science; and (3) understandings about how a academic capitalism shaped careers and

resource flows.

dense administrative-legal infrastructure for the new competitiveness policy.

xiv. With the exception of philosophy and religion, these fields have majority

female student bodies. For an analysis of the gender implications of the

restructuring precipitated in part by competitiveness R&D see Slaughter (1993).

lvii. Six members of the sample were Asian men, one was a senior lecturer, two

were lecturers, one was a post-graduate and one was a graduate student. One of

the professional officers was Asian. There were five women in the same. Three

were on the academic side: one was an associate professor, one a lecturer and one

a graduate student. Two of the professional officers were women. In their

interviews, the Asian men responded in the same ways as did white men of similar

rank, so we do not explore Asian men as a sub-group. However, the two of the

three women on the academic side responded quite differently than men at the

same rank, and we pursue these differences later in the chapter.

lviii. Because we guaranteed confidentiality to the persons we interviewed, we

altered the names of the universities at which they were located, as the name of

the university would have provided a strong clue as to the identity of the

respondent. Thus, we used pseudonyms for all respondents and changed titles for
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CENTRAL ADMINISTRATORS

Central administrators were keenly aware of globalization and how it

shaped national higher education and science and technology policy, creating

conditions of resource dependence at the institutional level. For the most part, they did

not view these changes as creating new opportunities. Instead, they preferred the

former binary system, which had accorded them markers of status and prestige:

exclusive designation as universities and guaranteed government funding for faculty's

curiosity-driven research.

(See Chapter 2 for a discussion of these policy changes.

All of the vice-presidents thought that the Australian economy was in dire straits,

and that universities had a role to play in improving the economy. As one said,

administrators, who were the smallest group and the most well-known, substituting

more generic American titles for the Australian ones. For the same reasons that we

changed university names, used pseudonyms and altered titles, we also changed

the technologies that the administrators and centre heads discussed.

lix. The interviews were taken on a lap-top computer, recorded as the administrator

or department or centre head spoke. We were able to capture about eighty percent

of the spoken responses. We regarded the lap-top as a compromise between

taking notes, or tape recording and transcription. The interviews generated 275

pages of double-spaced typed transcripts and forty-four pages of field notes.

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I'm an intense nationalist, I believe that Australia has to do things for itself.

I think we should pick what we do well, and go out and do it...We have to

tell industry that the best horse is the local horse in the long run...

[universities have]...some very interesting industrial experience... If we

can pull it off, we can be a really powerful nation, small but fulfilling. We

lost our way for thirty or forty years. I think in the post-war period, we

were very big on import replacement, but we got locked into an intense

tariff protection scenario and our industry lost its way from then on.

( USAI)

Generally, they took the position that Australian universities should build technologies

that lent value to Australian raw materials, contributing to formation of processing

industries in Australia rather than overseas. For example, they thought universities

needed to participate in the development of food industry technology that allowed

Australians to do at least the preliminary processing steps in country, even though the

final treatment--packaging, adjusting for particular styles of national preparation--might

be done elsewhere. Australia, then, could find a market niche in secondary processing

of raw materials.

Although the vice-presidents favored bringing universities closer to industry, for

the most part they were not happy with the Dawkins' (Minister, Department of

Education, Employment and Trainining) initiatives (see Chapter 2 for a description of

the policy changes initiated by Dawkins.) They thought Dawkins had gone too far too
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fast, and had undervalued and perhaps jeopardized the research infrastructure in place

before he took office.

So, even in the Dawkins' setup, he's still providing money for research

support, via his formula. Where his system has been criticized and is

deficient is infrastructure support, not connected to students but to

staff...and then there's the questions of new staff and those changing their

directions. (NWU)

They were particularly unhappy with the collapse of the binary divide. In the words of a

dean:

I think it's a disgrace to make them all equal. This world is not equal; it's

not about equality. We should all compete at an equal level, but in the

end, there will be differentiation by ability, otherwise we will have to go to

the lowest common denominator. If we're looking from an educational

point of view...who's going to do what the CAE's used to do?

Technicians--who's going to train them?...Established universities keep

saying this to Dawkins, but the new universities have a direct interest in

becoming universities so they're into it, and they have more students, so

they get better funding. (OU)

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The attitude expressed by this administrator reflected the attitude of almost every study

participant who addressed the new unified national system, whether administrators or

faculty, with the exception of members of one unit, who will be discussed later.

In sum, university administrators supported the movement of their faculty closer

to the marketplace, and their support was undergirded by a belief that development of

technology was necessary for economic growth. However, they were not happy with

the Dawkins initiatives, particularly when these initiatives cut into the prerogatives of

established research universities. They saw the unified national system as eroding

infrastructure at established universities and as undermining the efficiency and

economy of a tiered system that they thought, surveying the situation from the top, had

worked well.

The common response made by university managers to the Dawkins initiatives

was to move closer to the market, although the course they took varied with their

histories and cultures. Outback University was well established, well funded and highly

regarded, and it did not regard academic capitalism as a top priority. New Wave

University was started in the 1960s, was located in a large city but not in one of the two

major metropolitan areas, and was experimental in nature, placing special emphasis on

developing innovative curricula. It was not as well funded as the other two universities.

New Wave vigorously pursued external funds but remained somewhat sensitive to

educational and organizational experimentation. The University of Science and

Industry was established to develop technoscience fields and was located in one of

Australia's two major metropolitan areas. It regarded the Dawkins initiatives as

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complementing its own mission, and it participated enthusiastically in the push to bring

faculty and science closer to the market.

The research leaders at the three universities had quite different strategies for

technology transfer. Outback University took a laissez-faire approach. New Wave

University pursued a targeted commercialization strategy. The University of Science

and Industry followed a corporatist course.

At Outback University, the laissez-faire approach to the market meant there was

little centralized control over commercial ventures. At one point, Outback University,

like many universities, had started a university company to manage technology

transfer. In the words of an Outback administrator, "Five to seven years ago, many

universities established university invention companies, but most of those flopped."

Another administrator explained that the Outback invention company

was put in place to help the business community with consultancy

projects, and then broadened to the whole university. It tried to develop a

product, an electronic device..., but this failed. It had a full time executive

office on a rolling three year contract, plus a staff of six or seven, and

consultants. But the company was simply self-perpetuating, without any

results. The staff got paid whether they brought in contracts, fees or not,

and soon it was losing $200,000 per year, with non-rigorous accounting.

The reason that the company was not successful, according to the central administrator
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quoted above, was the following:

It failed because the process of university administration was too different

from that of the private sector, because universities was not willing to take

risks, could not work on partial information, and were not fluid enough.

At Outback, faculty usually handled patents and relations with corporations or

state agencies. There was no university company. Patent agreements were reviewed

by a university attorney before faculty concluded any agreement, and there was a

university patent committee through which all patents were supposed to be cleared.

However, the administrator in charge of intellectual property said of the patent

committee, "I've never used it once." The university had no plan to invest large

amounts of university monies in technology invented by faculty. Instead, Outback

wanted equity positions and royalties from arms-length companies started by faculty.

The university, according to these administrators, took about 30 percent in overhead

and about 50 percent of the royalties, although there was some disagreement about

these figures, each case seemingly being negotiated on an individual basis. At

Outback, faculty were free to act as independent entrepreneurs, subject to sharing their

profits with the institution. They were very loosely supervised by the central

administration, and virtually not at all by their colleagues.

New Wave University took the position that it owned all faculty intellectual

property. It had a strategy of developing this property by targeting particular areas and
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inventions and investing in them. This strategy was more focused on earning a return

on faculty ingenuity and inventiveness than the Outback approach, and also involved a

greater commitment of institutional funds than did the Outback strategy. The New

Wave strategy was not without problems. The New Wave administration found it very

difficult to identify what sorts of property in which to invest. Moreover, the

administration had difficulty controlling and shaping faculty entrepreneurial energies so

that the university reaped the profit it thought it should. The effort at centralized control

via the university company contributed to conflict between the central administration

and the faculty.

The New Wave administration did not want to prioritize ideas and inventions

according to government initiatives. Rather, New Wave wanted to review ideas

generated by faculty and select a few for investment and further development. As the

administrator in charge of intellectual property said, "We direct what funds we have to

the ideas that have the greatest potential, no matter where they come from."

New Wave was not notably successful in its investment in technologies. The

fission energy source system (FESS) typifies the problems of a targeted investment

strategy. Initially, FESS was supported by New Wave because outside financing was

available and the university had to contribute relatively little. When outside financing

fell through, the project was at the prototype stage. New Wave put $11 million into

bringing it from the prototype to the development stage, but the project was still far from

the market. As a vice-president said:

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FESS...was a promising idea that came up from the academic areas, and

the university saw a potential for commercializing. At the time the

decision was taken to go commercial, the university was not looking to do

it from its own resources, but with an outside financier. It's the only way a

small to medium university can handle such a thing. Only since the

financier got into difficulties has the university gotten into the project from

its own income....[if we had know how much it would cost] we couldn't

have done it, wouldn't have done it. What's really required in Australia is

a venture capital fund, if the government is really serious about the

commercialization of ideas in the university. I can understand why the

government doesn't want to get into it, but they could do policies that

would encourage financial institutions and industry to get into it.

New Wave wanted to realize a big return on faculty ideas, and was willing to invest

modestly in them. However, New Wave was not happy with the risks that went with the

possibilities of big returns.

Because New Wave was eager to realize a return on faculty ideas, the New

Wave university company tried to monitor closely faculty involvements with corporations

and government agencies that wanted to buy New Wave faculty products. However,

unleashed entrepreneurial energy was difficult to contain. As the head of the university

company said,
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They [faculty] need to tell me [about their dealing with external

organizations with regard to intellectual property], but 9 times out of 10

they do not, and I only find out after they've gone down a path and

faltered. They only come to the university company when there's a

problem, which means there's a fire to put out, such as [who's entitled to]

ownership of intellectual property. There's no forethought or planning

that's gone into the commercial avenue they've gone down. They'll talk to

companies and promise them everything, and they have no authority.

The head of the university company gave chapter and verse on the number of contacts

and contracts that faculty, whom he saw as acting irresponsibly, had initiated with

outside organizations. He was very clear that legally the university had ultimate control

over the entrepreneurial activity of faculty: "...the fact is the university owns all the

intellectual property here... it's automatically vested in the university company, and I

can certainly force the issue on anything commercial." But he did not force the issue,

perhaps because he was uncertain as to how the faculty as a whole and the

administration would respond, given that norms around ownership of intellectual

property were unstable.

The vice-presidents too found themselves confronted by competing agendas

held by entrepreneurial faculty. For example, the university planned to develop part of

its acreage to generate an income stream, and several faculty members presented

plans that were at odds with the mandate the faculty senate had given to the head of
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the university company. The head of the company and several faculty members were

besieging the vice-president on this matter. For the moment the vice-president was

backing the university company head, who had a very ambitious plan that included

development of shops, a golf course, and a retirement village. The senate was not

enthusiastic about these ventures, and the various faculty members continued to put

alternative plans forward aggressively. The introduction of an entrepreneurial climate

had unleashed a great deal of intra-organizational competitiveness that was not

necessarily focused on shared institutional goals.

New Wave's emphasis on centrally controlling entrepreneurial activity and

intellectual property heightened tensions between the central administration and

faculty, and exacerbated the conflicts between academic and commercial culture.

When we asked the head of the university company if he had any problems with faculty,

he responded:

Problems with faculty? How long have you got? The different agendas...I

have a commercial lien, I'm under pressure from the senate to--and I

quote, `bring in millions of dollars to the university'. So I'm under

tremendous pressure to bring in money. But the agendas for the faculty

are varied...there's tremendous jealousy. Another problem is the whole

basis of promotion--they're promoted on research funds and papers

published, and those two things don't assist me. First, you don't want to

publish information, you want to protect it, and they apply for a whole load
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of research funds and don't look at commercialization, or at what's going

to happen at the end of a research project...

According to the company head, business and academe were two different cultures.

He acted as the central administration's bridge between the two cultures, but, as he

freely acknowledged, he was firmly committed to the business world. He viewed

publishing and grant writing as thwarting his efforts to commercialize. Moreover, he

saw most faculty as being inept at commercialization:

A lot of academics are not commercial, and I wouldn't utilize them on any

commercial project. I simply wouldn't use them on a commercial project.

On the other hand, there are some who are champions, but the majority I

wouldn't allow out in the real world. I wouldn't let them deal with business

and industry, they're coming from a sheltered environment.

The head of the university company had little time available to educate faculty about

the commercial world. As he said, "Because of the pressure to bring in commercial

return, we can't allow any project to slip by. We have to evaluate every opportunity,

which means I'm spread too thin."

Unlike at Outback University, New Wave administrators tried to control faculty

entrepreneurship centrally. New Wave thought it would obtain a higher return through

active management of academic capitalism, through institutional investment in research

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directed by a university company. However, New Wave was unhappy with the degree

of risk inherent in its strategy and was seeking ways to minimize those risks, primarily

through government incentives or subsidies. New Wave's direct involvement in

academic capitalism via the head of the university company created some tension

between the central administration and the faculty.

The University of Science and Industry had a corporatist strategy for

commercialization of science. Administrators were not so much interested in

developing specific pieces of intellectual property through their university company as

they were concerned with constituting long-term relationships among members of the

university community, business and industry and various government agencies through

Cooperative Research Centers (CRCs). The CRCs were initiated by the federal

government in 1990. They brought together university, government and industry to

fund commercial research, and were scheduled to receive $100 million a year. They

were modeled after the Interdisciplinary Research Centers of the United Kingdom and

the Industry/University Cooperative Research Programs funded by the National

Science Foundation in the United States (Hill 1993). University of Science and Industry

administrators considered CRCs as a way to establish stable and enduring

relationships with external entities in order to develop predictable flows of resources.

The CRCs were regarded as superior to other forms of commercialization because

CRCs provided long-term funds for very large projects, covered patenting and patent

costs, and ensured resources for bringing products and processes from an idea to the

market, covering the costly development stages. Moreover, the risks were expected to
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be spread fairly evenly among the several parties to the CRCs.

According to a vice-president at the University of Science and Industry,

The university company has a catalogue of patents it tries to flog. There

are some successes, but it's not a joy... we've only really made money on

one big windfall. We organized a company that licensed the intellectual

property, and then converted the licensing to shares that went up by a

factor of 20. The money made by the company is on shares sold.

He noted that the university company did not have the large sums needed for investing

in bringing an idea from bench science to demonstration prototype. He looked to the

government for those monies. He viewed the most difficult step in commercialization as

the final step, from prototype to world market. "The $10-20 million that's needed to

bring it to world product" was most difficult to secure. According to this administrator,

the way to secure reliable resources for bringing inventions to the product stage was by

developing CRCs: "The corporations are willing to do it. Patents are useful to selling,

but not worth all that much. The CRCs can be like agricultural research where they

levy funds. It's a factor of four on ARC (Australian Research Council); it's big bananas".

This vice-president considered the most difficult aspect of creating CRCs to be selling

them to industries. He relied on his former contacts with industry and the trust he had

established with corporate leaders over the years to bring them to the point where they

would commit to CRCs. Despite the difficulties he encountered in convincing corporate

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leaders to invest in CRCs, he envisioned fifty CRCs at his university in the near future.

Other administrators at the University of Science and Industry held similar views

of CRCs. Even administrators of the university company realized that there was a need

to move beyond "offering a piece of technology in a shoe box for a fee and royalties".

They understood that intellectual property had to be tied to proposals for research and

development programs and broader research packages.

Unlike those at New Wave University, administrators at the University of Science

and Industry did not place great reliance the university company as a mechanism for

capturing the benefits of faculty invention. One administrator estimated that faculty ran

only 50 percent of their intellectual property through the university. However,

administrators were still interested in securing a share of the benefits from faculty

intellectual property. In their view, CRCs are a more effective way to capture those

benefits than central monitoring schemes. CRCs committed disparate parties--

universities, business and industry, and government--more whole-heartedly to

commercializing innovative ideas than could a university company. University

companies acted primarily as go-betweens, linking individual researchers and

companies, usually at early and tenuous stages of product development. The CRCs

were more likely to provide stable resources and predictable funding over the long

term. The CRCs also brought a substantial government commitment of funds.

The several university administrations had different organizational structures and

different strategies that informed their organizations. Outback University had a laissez-

faire approach that involved no new organizational structures within the university. The
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only new structures were external to the university, in the form of arms-length

companies. The strategy employed by central administrators was to encourage faculty

to act as individual entrepreneurs and hope that they would develop a substantial

number of revenue-generating ventures. The strategy depended on the energy of

faculty rather than that of administrators.

New Wave University established a university company to deal with the

commercialization of faculty inventions. The company was a central organization

responsible for inventorying and monitoring the development of faculty intellectual

property. When a piece of intellectual property looked promising, New Wave was ready

to invest some money, but not a great deal. The New Wave strategy depended on

close monitoring of faculty, targeting certain pieces of intellectual property, and taking

manageable risks to develop these. The University of Science and Industry hoped

for a high return on faculty invention, and used the university company in some cases.

The company was used to inventory and broker, but it did not do a great deal of

monitoring. Faculty were not closely controlled by a central entity. Instead, the

University of Science and Industry turned to CRCs to capture faculty entrepreneurial

energies. As an organizational form, the CRCs called for long-term commitment on the

part of faculty, business and industry, and an array of government agencies.

As resource dependency theory suggests, central administrators developed

organizational strategies and organizational forms to generate resources for their

institutions when national higher education and science and technology policy were

destabilized. However, central administrators, with the exception of those at the

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University of Science and Industry, did not try to devise strategies and organizational

forms that would generate the greatest amount of money for their institution. Only at

the University of Science and Industry had central administrators moved beyond a

focus on specific pieces of intellectual property to a broader strategy--CRCs--that

minimized the capriciousness of the marketplace. The University of Science and

Industry central administrators may have been able to devise a broader strategy than

the others because its expertise in science and engineering complemented national

policy emphasis on commercialization and globalization and was consistent with a new

status and prestige system that put technoscience near the top of the hierarchy.

CENTER HEADS AND PROFESSORS

National policies developed in Australia in the late 1980s destabilized the

academic research environment. (See Chapter 2 for a detailed discussion of these

policy changes.) The unified national system created conditions in which a larger

number of faculty and institutions competed with each other for research monies that

were often targeted to national priorities. By 1993, increased competition within the

tertiary system meant that the Australian Research Council was able to fund only about

20 percent of grant applications (Hill 1993). Moreover, professors were no longer able

to count on institutional research funds, once awarded as block grants to the relatively

small numbers of institutions designated as universities.

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In the mid-1980s, legislation supporting two kinds of centers was introduced.

The first were Special Research Centers "funded by ARC at approximately $500,000 to

$600,00 per annum for 6 to 9 years...[They] concentrate [on] strategic basic research in

areas of national priority by groups with proven research records (Hill 1993)." The

second were Key Centers for Teaching and Research that were developed to meet

industrial training needs in areas of industrial demand. In 1990 these centers were

augmented through legislation that allowed formation of CRCs, lx and several centers of

engineering excellence.

The primary organizational response of faculty to the destabilization of

the research environment was to create interdisciplinary centers. Sixty-five percent of

Australian research centers were established after 1989, while only 12 percent were

organized before the 1980s. Over 900 research centers were formed. Of these, 7

percent depended mainly on internal funding, while 55 percent were funded primarily by

external grants and contracts. It is estimated that at least 50 percent of all academic

research takes place within centers. The centers are usually interdisciplinary (Turpin

and Hill 1991, Hill 1993, Hill and Turpin 1993).

All faculty and professional officers whose voices are heard in this chapter were

in centers, all of which were formed after 1980, most in the mid-1980s and after. One

center was a Special Research Center, three were CRCs, four were centers without a

particular federal designation. All were interdisciplinary. Our sample differed from the

general trends reported by Hill only in that all our units were engaged or trying to

engage with the market and all had external funding, the bulk of which was provided by
 225

the state; in Hill's sample, only 50% had mainly external funding, and the source of

funding (private or state) was not clear. This is because our sample was selected to

study commercialization of science and technology and faculty's market behaviors, not

center formation.

According to the professors in our sample, a major factor in the formation of

almost all centers or institutes was the need to secure reliable resource streams in a

period of research policy destabilization. As one professor said, "In the current climate

in Australia, it was becoming increasingly difficult to get long term funding for anything"

(NWU). He went on:

We're accepted as an institute by the grant awarding bodies and so on;

it's important for raising money--the company in Sydney is dealing directly

with the institute, which gives us a lot more credibility, rather than dealing

with a handful of scattered academics.

Center status also meant that the institutional administration viewed the unit favorably

because the centers enhanced university profiles and indicated university compliance

with federal goals. Institutional favor often meant seed money for various projects.

Centers were valued for the autonomy they conferred as much as they were

appreciated for the resources they attracted. The two were closely related. Centers

conferred autonomy that made it easier for members to enter the market with products

and processes that garnered profits. Among the organizational privileges attached to
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centers or institutes was freedom from securing the consent of their departmental

colleagues for their entrepreneurial endeavors:

An institute was seen as autonomous, with commercial potential, where

possible. When we initially proposed the institute, we got a lot of negative

reaction from senior people, because they thought we were empire

building, and we weren't, in the sense that they thought. We just wanted

to be autonomous, so we could function. So now we're only responsible

to the senate--it's much easier for us to work. (Professor, NWU)

Centers were often designed to engage in commercial work and had developed

policies, approved by central administrators, that streamlined their entry into the

marketplace. For example, heads of centers and senior faculty members were able to

conduct wide-ranging negotiations with external entities, virtually concluding

agreements before seeking approval from the central administration or the senate.

Centers also were able to enter into contracts with external entities. These privileges

stemmed from center autonomy and contributed to enhancing center resources.

Autonomous centers often enabled their members to transcend traditional

disciplinary boundaries, a process that was valuable in several ways. Centers were

able to pluck the outstanding people from within traditional departments; they were able

to pursue avenues of research not approved by conventional disciplines; they were

able to bring together a new mix of people whose synergy enabled them to solve new
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problems in unusual ways.

Heads of centers and senior faculty within the centers often had research goals

that were impossible to realize in conventionally organized departments. For example,

the organizational impetus for one center stemmed from the members' inability to

change the direction of their department. They saw the future of their field in molecular

rather than conventional biology. As the head of the center said,

We...had a perceived need--the school as a school had to get involved in

modern developments in molecular biology, and there wasn't much known

about it, and there was a reluctance on the part of the senior members to

think about taking on people in molecular biology. It would have involved

changes of positions within the school that would have been

difficult...there was very little enthusiasm, so we had to do it on our

own...That meant commercial projects...We don't really see it [the center]

as personal profit, but fulfilling needs we have as researchers, and

dragging the school into biotechnology. It was a matter of necessity.

(NWU)

In another instance, the center head established his organization because he thought

that his research area was disdained by his field. As he said,

I took up an appointment here in 1971. Hearing aid research was

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considered to be cosmetic, like doing research in lipstick. Although there

are 60 million hearing aid users, people didn't take the research seriously.

It was considered something that serious people did not get involved in.

(USAI)

The center organized by the just-quoted head quickly became one of the most

successful centers in his university.

Heads argued that autonomous centers enabled them to bring together faculty in

new configurations to create a synergy that made solving commercial problems easier

than in conventional departments. They saw the freedom and independence of centers

as creating the necessary conditions for entrepreneurship. The heads and senior

faculty members thought that center members developed an elan and esprit d'corps

that enhanced their performance.

The center members saw faculty members in conventional departments as

jealous. As one said:

People on the outside looking in will feel that these groups [centers] are

privileged and get more benefits than they do....There are not major

commercial organizations in Australia doing fundamental research as part

of companies for the next 20 years, so it's this kind of place that will be

doing the work. (OU)

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The interdisciplinary centers conferred special privileges on their members.

Center members were able to attract more resources, had greater autonomy, were

more easily able to enter the market. Center members were able to escape the

confines of traditional departments, often taking other well-known, talented faculty with

them, and to pursue research directions that they defined as important. Center

members, especially heads of centers, also had well-thought out strategies for dealing

with destabilization of the research environment.

Center strategies. The strategies used by heads of centers usually focused on

maintaining and improving the centers' resources and status. The heads of centers'

strategies usually took into account ways the centers could position themselves

competitively in relationship to other academics and ways to position themselves

competitively vis a vis the market; strategies involved plans for expansion and

guidelines to use during expansion. The heads and senior center members were very

consciously trying to position their units to transcend the destablization of Australian

research policy.

We outline two center heads' strategies that we take to be typical, one that we

see as atypical, and one that we view as anomalous but as being very important to

understand because the anomaly has bearing on the impact of centers on universities.

The two heads who had typical strategies led the Center for Petroleum Research (CPR)

and hearing aid CRC. The center head with an atypical strategy led a social science

center closely linked to the Australian Labor Party and deeply concerned with social

justice and the environment. The center head with an anomalous strategy supervised
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no academics. His center was directed and staffed by professional officers and was

self-sufficient as a result of product sales.

The Center for Petroleum Research (CPR), a special research center, was

housed in a school with three large engineering departments. The head of the center,

Robert Alexander, was aggressive and energetic, committed to developing an

organizational structure for the CPR that would provide a revenue stream for his

research interests in hard times. He did not see himself as turning to commercial work

in response to federal initiatives; he took the position that, as a professional engineer,

he had always been concerned with application. He saw the global movement of

capital and Dawkins' white paper as confirming the direction he was already inclined to

take.

The organizational structure that Alexander developed was complex; it was

designed to serve as the infrastructure that would sustain the center through any crisis.

Alexander conceived of the organization as having an academic arm, a consulting arm,

and a commercial arm. The academic arm was composed of four permanent faculty

members while the consulting and commercial arms at various times had six or more

full time employees. The academic arm served students at the undergraduate and

graduate level, and the consulting arm generated fairly routine projects that kept the

faculty "in cash" for their research projects. All of the faculty were able to participate in

consulting, even untenured lecturers whose future with the unit was uncertain. The

commercial arm was more exclusive, and consisted of the head of center and several

professional officers (non-tenure track academic staff) working full time with external
 231

entities, government agencies and a multinational company. Alexander had plans to

expand the commercial arm so that more faculty would be able to participate. He

foresaw expansion as occurring as soon as his first product entered the international

market. At the time of our study, he was in the process of negotiating an agreement

with the multinational company.

He considered the commercial arm as most important for securing a reliable and

predictable resource stream. His strategy in dealing with the private sector was three-

fold. First, he wanted to make sure that the individuals who conceived of and created

products were rewarded. Second, he wanted to ensure that royalties would come to

his unit to support future research for more sustained product development. Third, he

wanted to play a part in commercialization, to ensure that the company made a quality

product and that the product was aggressively marketed.

The head of the hearing aid CRC, Timothy Gill, had a similar strategy, although

he placed much less emphasis on organizational structure and much more on market

demand. He thought there was a virtually untapped demand for his products in Asia

and India. He began to develop hearing aids for the Asian market and to create an

educational infrastructure to inform Asians about hearing aids and how to use them.

Sometimes he focused on specific problems, such as hearing aids for use after the

mastoid surgery so common in India. His staff regularly offered seminars and

workshops in Asia, sometimes serving as many as 2,500 persons per year.

Initially, Gill did not want to work through the university because he saw the

university as taking too great a share of his profits. Instead, he started his own
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foundation, which the hearing aid industry supported with several million dollars a year.

He refrained from working with the university until he was forced to enter negotiations

because he wanted a CRC and access to more students. As a tradeoff, he pledged to

the university buildings his foundation had purchased for a new school of hearing

science, and he agreed to work with the university company to protect his intellectual

property. Because of his commercial successes, he did not have to abide by the usual

formula for splitting royalties; he was able to secure an agreement more favorable to

himself.

Gill saw his unit as expanding in terms of faculty, students, staff. He thought he

would be able to attain more industry support though his CRC and more government

funds than he had thus far been able to attract. In the near future, he thought he would

have to develop a light manufacturing subsidiary. Like the head of the CPR, he saw

himself as being a successful entrepreneur but more as the head of a medium-sized

firm than a small firm.

The head of the social science unit, Thomas Cobb, saw himself as concerned

with community as well as government and industry. He wanted to rectify inequities in

the social system and solve environmental problems. His unit was new and was

composed primarily of lecturers who were charged with securing enough external

contracts to support research with a social justice agenda. Cobb was closely linked to

the Australian Labor Party. Indeed, he saw the center as a Labor think-tank, offering a

resource that the Labor government could use to free itself from dependence on the

conservative civil servants who remained from the Menzies era and staffed so many
 233

state and federal bureaucracies. He saw his unit as a Labor analogue to right wing

thinks tanks such as the Institute for Public Affairs.

His center demonstrated its allegiance to the Labor Party through members'

political affiliation and through their active commitment to Labor policy. This was the

only center where faculty uniformly supported breaking down the binary divide and

establishing a unified national system. The social science center faculty saw the binary

system as conferring unwarranted privilege on faculty in universities, particularly pre-

World War II universities, and thought that the unified national system remedied

inequities suffered by their colleagues in CAEs and promoted access to universities for

working-class students.

Cobb wanted to develop projects that decentralized power. He worked with his

faculty to create a technology park that dealt with low technology or appropriate

technology--windmills, solar power pacs, alternative energy sources. He wanted to

develop a demonstration area together with a training facility. The aim of the training

facility was to encourage people who used the technology to learn how to assemble

and operate it.

The social science center had been successful in attracting enough students to

justify its small staff but had been relatively unsuccessful in securing the consultancies

necessary to make the unit self-sustaining. The director was working on renegotiating

and expanding the center's consulting contracts. In order to secure more resources, he

hoped to work with industry to augment his contracts with state agencies and volunteer

groups.
 234

The social science center had been started with funds from the State Labor

Party in the hopes that the center would work out the organizational and policy bases

for technology development. However, in our sample, the faculty hired were among

those most critical of market behavior. Cobb's unresolved strategic dilemma was how

to find ways to establish lucrative industrial consultancies without compromising his

faculty's values. His short-term strategy was to hire two new faculty members whom he

thought were more attuned to the market.

Ronald Collins was head of the Water Systems Institute, the anomalous group

that was self-sustaining and run by professional officers. His strategy was as

sophisticated as the strategies articulated by the heads of other centers--perhaps more

so. Collins used research grants, royalties, and direct product sales to support his

group. His strategy was to use a diversified approach; he brought to market both low-

and high-technology products, and he made sure that the group's products had a very

high degree of integrity. At the low technology end, he focused on services and simple

product development supplemented by consultancies. At the high end, he tried to

develop patents and intellectual property. At the low end, he created products that

were made in small batches by local manufacturers and that were already generating

royalties. At the high end, he developed sophisticated electronics produced for him in

small quantities by a foreign manufacturer. The electronics depended on two chips that

were used together in a system. Without both of the chips, the system could not

operate. The chips themselves cost very little to manufacture, and the head was not

interested in producing them for the world market. Instead, he used the chips in a
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complex system that he offered under certain circumstances to state agencies that

needed the system. He was able to get hundreds of thousands of dollar for the system

rather than several hundred for the chips.

Collins looked forward to the time when his several projects could be

manufactured on the campus of the university where he worked. He thought his plan

was feasible, especially given that his unit was self-supporting; he turned back tens of

thousands of dollars a year to the university. He saw a future with manufacturing

plants, more electronics systems, a technology park, and spin-off companies.

Unlike most other centers, the Water Systems Institute generated more money

than the university or government agencies put into it. Although most centers sought to

be self-sustaining, few had reached that goal, let alone arrived at a point where they

contributed money to the university. The Water Systems Institute was anomalous in

another regard: it had no students. The Water Systems Institute was concerned with

making profits, not with educating students. Although most centers saw education as a

primary mission, their entrepreneurial activity often called for the addition of more and

more professional staff, who had greater technical capability than graduate students

and who were more reliable, at least in so far as they did not depart after finishing

degrees. Center heads had not consciously developed strategies that called for

reducing the number of faculty or graduate students and adding professional staff, but

that may be an inadvertent consequence of academic capitalism, one we discuss

below.

Whether the heads of centers and senior members would realize their long-term
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strategies was not clear. Sometimes statements made by the center heads were

contradicted by staff members. For example, a center head who saw himself as a

successful leader was considered by most of his staff not to be "the crash-hot people

manager" that he envisioned himself to be. Most of the staff hoped that he would move

away from management. Similarly, university administrators were often not as

sympathetic to centers' strategies as the heads and senior members thought they were.

Most university administrators admired the center heads but regarded them as difficult,

hard to manage, and overambitious. University administrators talked frequently about

the need "to rein in" the heads of centers.

Whether the heads of center and the senior members would realize their long-

term strategies was to some degree unimportant. In the short term, they had

succeeded in building new organizational structures within the universities, were

creating trans-disciplinary knowledge, were engaged with external entities, and were

differentiating themselves from their colleagues. In the process, they were re-shaping

their universities and creating organizations like small firms that were always in the

process of expansion, often in ways not particularly related to the educational process.

Professional Officers and Non-Academic Staff. Over the course of their

existence, the centers hired more and more non-academic personnel or professional

officers. The smallest number of professional officers in a center was two, the largest

was forty-seven, supporting a single faculty member who was the center director. We

failed to establish the exact number of professional staff because we did not realize

how large the numbers of non-academic personnel were until we were well into our
 237

project. Initially, we focused on center heads and central administrators, none of whom

tended to report the number of staff, mentioning them only casually, if at all. After we

realized the extent to which non-academic staff were involved in the centers, we

interviewed all professional staff above the secretarial level at a single center. We use

the data from this case to suggest ways that non-academic personnel fit into centers

and center heads' policy and strategic initiatives.

Six professional staff were interviewed in the CPR. Their positions were

coordinator of applied research, head of technology transfer, business manager,

operations manager, public relations officer, and engineer. The staff had attitudes not

necessarily shared by academic-track personnel or students. The staff had loyalties

only to the head of the center, subscribed to a business ideology, were not involved

with students (and usually did not want to be involved), and were eager to expand their

operations in a non-academic direction.

The professional staff were loyal to the head of the center because he hired

them, because they depended on him and his commercialization agenda for their jobs,

and because they were relatively isolated from the academic side of the enterprise. As

one staff member said, "I was lucky I got this position. It was because of Bob

Alexander". Another expressed his dependence on the head of the center. "If InGen

[the corporation with which CPR was negotiating]...looked at it logically, they'd get rid of

me...but Bob Alexander is very fond of me, and he'd probably keep me on even though

finance is a critical issue. There are not the funds for me". Another professional officer,

an engineer building a prototype, spoke about the relative isolation of the professional
 238

staff, articulating at the same time how isolation fostered his dependence on the head

of the center.

I have a relationship with only one academic, Bob Alexander. I would say

that relationships with other academics are conspicuous by their absence.

Alexander provides direction and then I do the implementation. However,

I also have to formulate the whole thing. The concept is provided by Bob,

and I provide the reality...it's an interactive process between the two us.

(OU)

The business ideology of the professional staff was manifested in several ways.

The professional staff saw the work they were doing in the university as being similar to

the work they had done in the private sector. They saw faculty as not interested in

business, but only in fundamental research, and therefore as sometimes hampering the

process of commercialization. Moreover, the professional staff saw the larger

university environment as an impediment to their commercial goals. The business

ideology of the professional staff was probably strengthened by their relative isolation

from the academic side.

A number of the professional staff made statements like the following:

I'm an electronic engineer, and I head up the electronics support

section...to assist on the technical aspects of commercialization....My

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previous jobs have been with commercial companies. Inevitably the job

is, a contract comes in, we build it, whether government or private, we

build and it goes out to the company. It's the same here, exactly the

same situation. (OU)

I think of it [his work at the center] as a business. (OU)

The professional staff were often somewhat hostile to the faculty. One

professional staff member expressed this hostility when he said business persons were

leery of working with academics because they thought they might "be confronted by a

greying boffin who can't talk if he isn't smoking his pipe (OU)". He saw himself, and

the commercial side of CPR, as projecting an image opposite to the "greying boffin."

Another staff member saw academics as resisting commercialization.

A typical example [of resistance to commercialization] was the time sheet.

Most of the people on this end [the non-academic side], who've worked in

production environments have no trouble with the concept of a time sheet.

But you try to get an academic to fill in a time sheet! You're just as likely

to get a 50 page dissertation on why you shouldn't. Bob Alexander got

them to do it by saying they didn't have to, but he would like them to. (OU)

Another professional staff member put the problem of faculty resistance more

positively.
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To get these academics to do work, you have to motivate them. The only

way to motivate them is to give them a problem that's interesting from the

research side. It puts me in a difficult situation. I have to keep

manipulating the jobs that come so they can be termed research. (OU)

The professional staff saw faculty culture as inimical to business culture. They thought

faculty were resistant to commercialization and to practices that they thought fostered

commercialization, such as keeping time sheets. They tried to manipulate faculty in

order to bring them closer to commercial culture.

The professional staff's attitude toward students was related to their attitude

toward faculty. For the most part, they were not involved with students and did not

want to have to deal with students, but were ready to work with them in relatively limited

capacities if the students could be useful to commercialization. As one professional

staff member said, "My interactions with students are virtually nil, no matter what level

of students (OU)". Another professional officer worked with several postdoctoral

fellows, all of whom did research in his operation. He supervised a number of other

non-academic professionals, and the university was considering assigning some of

them teaching duties. He said, "I wouldn't really like that. Out of the eight [professional

staff], maybe two or three would do something in teaching (OU)". However,

professional staff were willing to work with students when they were useful. One

professional staff member indicated that he would be happy to take student ideas that

lent themselves to commercialization and hire a post doctoral student or lecturer with
 241

the right background to develop the idea. He gave no indication of how the student or

faculty member whose idea might be utilized would be credited or compensated.

Although there was a fairly large contingent of professional staff at the CPR, a

number of staff members wanted to expand. Like the center directors, they had

strategies of their own, and their strategies were directed toward expansion of the

commercial side of the enterprise. The scope of professional staff ambition and

strategy was perhaps best expressed by Harold Gordon, the Coordinator of Applied

Research. Bob Alexander, the head of CPR, had given him this title, but his funded

position was as director of a government laboratory that was closely tied to the center.

The government depended on the center to run the lab, so they put up the money to

fund the staff member's position, allowing Gordon to do what he wanted so long as the

lab kept operating. Alexander expanded and reshaped the government- funded

position, using Gordon to oversee all applied work in the Center; Gordon wanted to

expand yet again. He was promoting and developing more work for the center. He saw

a future in which the center would compete for tender documents (bids) in the

international market. In other words the CPR would try to win contracts with overseas

public or government entities for very large jobs. Gordon knew this was an ambitious

scheme with a number of problems, such as hiring more staff, some of whom would be

out of the country for relatively long periods. However, this was his preferred direction

of expansion. To move in this direction, he thought he would need his own staff.

Generally, the non-academic professionals were loyal to the center heads. They

did not interact much with faculty other than the head, and were not very interested in
 242

teaching, with one or two exceptions. They were much more a part of commercial

culture than academic culture, and tended to bring commercial values to their work. In

terms of strategy, they were concerned with making their centers more like small firms,

with expanding the commercial side, and with generating increased amounts of profits.

As Hill remarked, "The growth in number of centers [has] been quite sudden and

[has] caught many university managers by surprise" (Hill 1993, p.1). Center heads

responded eagerly to the opportunity structures created by the Dawkins reforms, for the

most part seeking to enhance the prestige and resources of their new organizations.

They developed elaborate strategies for making products, entering the market, and

carving out niches for themselves. These faculty thought and acted very much like the

heads of small and medium sized firms, often using the language of CEOs with regard

to market share, competitive position, and plans for expansion (Etzkowitz 1989, 1982,

Louis 1989). They very rarely used the language of professionals whose work related

to broader national and international disciplinary or professional associations, nor did

they use the language of tertiary educators who trained knowledge-producers for the

future. The heads of centers did, however, show great concern about the integrity of

their products and the reputation of their centers. The professional officers carried the

language of the firm to an extreme, often taking the position that the product

development they were doing in the university was no different from that in the private

sector. More new professional officers were added than faculty. The new centers,

heavy with professional officers and oriented to the market, moved the university as a

whole closer to the market, but not necessarily in a way that considered or
 243

accommodated the educational function of the institution.

The only exception to heads of centers seeing themselves as heads of small or

medium sized firms was the social science center. According to Hill, social science

centers constituted about 36 percent of all centers and 24 percent of the centers

formed in the past four years. Social science centers were smallest in size, and

probably had the least resources, given the large amounts allocated to CRCs, which did

not include social science in their purview (Hill 1993). The social science center in our

study was formed in the mid-1980s, was organizationally sophisticated, and was able to

attract students who brought with them state funds. However, the center was unclear

as to whether it would be able to support its social justice agenda given the institutional

and governmental pressures put on centers to generate external monies. Whether the

center would continue to operate if the social justice agenda was dropped or seriously

constrained was not clear.

The social science center illustrates the problems faced by units without a clear

market niche. The center knew it was vulnerable without external monies, so it sought

to find such monies but had difficulties in working with external agencies committed

more to profit than social justice or environmental protection. The rapid formation of

social science centers in response to changes in national higher education and

research policy may be a general indication of the vulnerability felt by the social

sciences in the face of austerity. Many of these centers have been able to secure

external monies, although the type of work they are doing on their outside contracts is

not clear. On the one hand, they may be pursing social justice agendas; on the other
 244

hand, austerity may be directing them toward developing the organizational

infrastructures for university-industry-government market relations.

Center heads and senior faculty saw technology transfer as a professional

opportunity structure. They responded by forming centers devoted to the pursuit of

intellectual property and other commercial endeavors. Centers gave heads and senior

faculty the opportunity to escape from the confines of traditional departments, drawing

together like-minded faculty who shared a commitment to academic capitalism. Center

heads and professors were able to enter national and international markets with the

intellectual property they developed and to generate resources, many of which were

discretionary. For example, center heads and professors were able to hire large

numbers of academic officers (academic professionals), who were often highly trained

researchers, to assist them in their work. Although center heads spoke of themselves

as the CEOs of small or even medium-sized firms, they did not take the risks

associated with entrepreneurship. If their intellectual property or other commercial

endeavor failed, they still held positions as professors.

Center heads and professors did not mindlessly commit themselves to seeking

any and all external resources. Most very consciously pursued intellectual property and

commercial endeavors that complemented their long standing research agendas. The

way they responded to resource dependency, then, was shaped by their understanding

of and adherence to their fields of expertise. Although they sought to expand activities

deemed appropriate for their professional fields, they did not see themselves as

undercutting or challenging established status and prestige systems.

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Although center heads' and professors' entrepreneurial activity was protected

from market because they were state subsidized entrepreneurs--academic capitalists--

they did not appear to seek additional protection through avenues historically followed

by members of professional associations. They did not develop organizations of faculty

concerned with intellectual property or with technology transfer or commercial issues at

the national or international levels, nor did they create special sections in their

professional associations. They did not press for special legislation that would give

them unusual privilege.

With some exceptions center heads and professors responded to changes in

national policy and increased resource dependence as process theories of

professionalization suggest. They saw the destabilized research environment as an

opportunity structure, but they were discriminating in their pursuit of resources. They

devised sophisticated strategies that were somewhat congruent with established status

and prestige systems, but they expanded the system in ways that conferred greater

status and prestige on the activities in which they were engaged.

OTHER FACULTY, POSTDOCTORAL FELLOWS AND GRADUATE STUDENTS

Center heads and professors usually followed collective strategies that

embraced their units as a whole. Faculty below the level of professor, as well as

postdoctoral and graduate students, had developed individual strategies that were

focused on how to ascend the career ladder. Unlike center heads and professors, they
 246

did not see technology transfer or academic capitalism as an opportunity structure.

Instead, they were confused by the shift to entrepreneurial science and technology,

ambivalent about how to position themselves, and reluctant to participate in reshaping

traditional status and prestige systems.

Two of the three associate professors in the study were optimistic about their

chances for promotion. As one said,

It [commercial science] will enhance my career, it will make me appear

more rounded. I'm not just into fundamental research, I've done

commercial where appropriate. It should help for promotion, but the next

thing for me would be a personal chair...(NWU)

He was so certain of his promotion to full professor that his sights were already set on

the next prize, a personal chair. He saw fundamental research as the foundation of his

career but thought that at his career stage commercial research was useful as well.

One of the associate professors thought his chances for promotion to full

professor had been blocked because of his commercial work. His case will be

discussed with that of the four senior lecturers, most of whom related negative

consequences stemming from their commercial activity.

Like the professors and associate professors, three senior lecturers as well as

the one associate professor became involved in the pursuit of intellectual property

because it provided a way to fund interesting research. The three senior lecturers and
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the associate professor were more involved with the scientific laboratory work than the

full professors, and seemed to experience greater anxiety about securing results and

funding. For example, one spoke of unremitting pressure from his sponsor, who more

and more closely monitored his work.

Essentially, I was told by funding bodies--the wheat board--that we should

be looking toward more applied areas, and that there are very few

companies doing disease prevention though biotechnology...They [wheat

board] are my biggest source of funds, and they funded two big

projects...The executive director just visited today...informally, he said

they're working for a more applied rapid return on their money. So having

heard that, I thought I better start thinking about the biotechnology

aspects. The visits are at set periods to review what we're doing.

Previously, it was once a year. Now it's two times. They're monitoring us

more closely. Generally, there's a feeling for more accountability

everywhere, through universities and funding bodies, and a feeling you

should do more applied work. I'm not particularly happy about it because

essentially it's not our primary function. (NWU)

Two senior lecturers told lengthy tales of efforts on their part to find second and third

commercial partners after their initial partner had gone bankrupt or changed ownership

and direction while the researchers' projects were up and running. Neither of these
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senior lecturers was able to secure money to move from the prototype phase to

component manufacturing and demonstration models. One of these senior lecturers

said he spent many sleepless nights wondering if he would be able to secure grants to

keep his project going until he was able to generate adequate industrial funding. The

other senior lecturer, faced with lack of funds, had to lay off his six technical staff, an

action for which he felt responsible and guilty.

The associate professor and all four of the senior lecturers felt blocked in their

careers. The associate professor had been denied promotion to full, and the two senior

lecturers had been turned down for promotion to associate. Those who had been

turned down attributed their lack of success to their heavy commitment to commercial

work.

I was encouraged to apply. I've got so many Ph.D. students, so many

international journal articles. But at the interview, they asked only about

my intellectual property. My head of schools said I should have turned

the discussion at the interview away from the intellectual property...the

head of schools interpreted [my failure] as a result of my emphasis on

intellectual property. (USAI)

Another was unable to publish articles because his patenting plans precluded

publishing. Moreover, the need for secrecy meant that he could not talk about his

research to prospective graduate students, a fact that further impeded his research.
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It's a little bit disappointing for an academic to do commercial research.

When you are living in the university, your whole promotional aspects and

acceptability by academics depends on how many publications you

produce. It doesn't matter what they are, but how many. In the

commercial world, there are two problems. One, you can't do research in

a systematic manner. The commercial world wants a quick fix. Second,

most of the information which is gained becomes confidential property of

someone else and usually it never comes out, remains hidden....That

affects the professional development of academics. Even if the university

allowed me to publish, it wouldn't be the kind of publications the academic

world wants to get--it didn't follow a particular line of thought that assists

you in publication....I didn't have access to students because of secrecy,

and because the project was so big I couldn't take them. At the height of

the project, I had 10 staff members working for me, engineers, chemists,

technicians. It was a very heavy supervisory research role, so to

supervise Ph.D. students was not easy....I could have been associate

professor instead of senior lecturer, but for this project. The fault lies in

the criteria used for promotion. All the rewards and merits that we won on

the project were not to be considered for promotion. (NWU)

Yet another told a similar story. "In Australia we're run by academic purists. I was
 250

ranked first in my school [for promotion], but the deputy-vice-chancellor turned me

down...[He said] we're not doing basic [in my unit], we're doing applied" (USAI).

The promotional stories of two of the aspiring professors shared a turn of plot in

that the universities where they worked had invested heavily in their intellectual

property. How much of their failure to be promoted was due to the universities'

unhappiness with the lack of return on investment was not clear. Neither of the senior

lecturers accused the universities of prejudice on this point. But regardless of whether

the university administrators made judgments on quantity of profits rather than quality

of academic work, they were in a position to do so.

Of the two senior lecturers who had not yet come up for promotion, one was

afraid he would not have the magic mix of basic and commercial work.

I think in promotion that commercialization is important. I'll do a little bit

and not too much. I tried to do a little commercial, some very applied for

the wheat people, and then ARC money which is more fundamental--

that's what's judged highly, it's quality research. But I do perceive it

necessary to do some commercial, because it's thought necessary, to fit

in. But ARC would still be most valued by the promotion committee.

(NWU)

The other senior lecturer thought he would suffer when the time came for promotion

because he was in an interdisciplinary unit and had concentrated on policy studies

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rather than commercial work. "I've done what I wanted to do, so I'm happier," he said,

"But in terms of promotion, it's difficult, because of the disciplinary structure of the

academic system" (OU). At a more general level, he thought that the choice he had

made to pursue his own line of inquiry regardless of the promotional consequences

might become increasingly difficult as the university moved closer to the market.

It's gotten to the point where you're supposed to be a saleable

commodity. If Dawkins has his way, promotion will be dependent on what

you've been doing out there, for industry. I've been able to take the

career track I have because I can rely on the academic structure; I didn't

have to be saleable. (OU)

An alternative interpretation of experience of the one associate professor and

several senior lecturers is that they were unsuccessful in gaining promotion because

they had not done a sufficient amount of quality work. Even if this were the case, the

senior lecturers' experience with commercial science nonetheless suggests that

academics still climbing the promotion ladder had more rungs to pull themselves up

than did academics concerned only with fundamental science. In the unified national

system, those aspiring to professorial rank thought they had to demonstrate their

competence in the commercial as well as the fundamental arena, proficiency in only

one or the other arena was not sufficient. Even if their assessments of their situation

were wrong, their perceptions were still powerful, and will probably make them
 252

discontented permanent employees of their respective institutions.

Untenured faculty--the lecturers--were uncertain about how commercial science

would fit into a conventional career, and they did not know whether the university could

accommodate career paths that deviated from the traditional. The lecturers, on the

bottom rungs of their career ladders, generally experienced commercial science as a

speed-up of academic work. They thought they had to do both fundamental and

commercial work to succeed, and even then, they were not sure that they were inter-

preting their seniors' messages correctly.

You get your promotion more easily if you do commercial...most people

have that feeling. They have to bring in money...I tend to work in priority

areas. When they have a priority area, then most of the people tailor their

research to that area....[but] I got told you wouldn't get a promotion if you

got commercial money but not ARC money. (OU)

Yet another lecturer developed a strategy to guide his selection of commercial

products:

"I have to see a benefit more than actual dollars for me to take the work. My sort of

general guideline is that if I can see a scientific paper that I can publish out of this, then

I'll do it" (USAI). Another lecturer, new to the Australian system, initially did not compre-

hend a system in which funding depended on contract research with very specific ends.

He thought his state sponsor was supporting his general line of inquiry, not product

development. He described his gradually dawning understanding that the money he

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received was tendered in return for a commodity:

There's a different perception of what people want out of it [research

money]. I thought it was just money to do my own thing...on this

problem...then the commercial people told me that they wanted a product

that they could use. It took me awhile to finally figure that out. It's not

publications that they want--they wanted a product. We discussed what

they wanted. It came gradually; they were not rude. It evolved. I came

from a very theoretical background, so that it was hard for me to accept at

first. (OU)

Although this lecturer was willing to do commercial work to sustain his career, he was

very clear that it was not his first choice.

I prefer theoretical. There are no hassles. It's like math. Reality is

always much more complicated. You have to know for sure that whatever

you develop produces a result. In theoretical, I don't have to do that. To

demonstrate that my [product] works is much more difficult. (OU)

Other lecturers, earlier on in their career, and not closely associated with commercial

work, were even less optimistic.

I think that tertiary education might expand, but not create more positions.
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So I think that student-staff ratios will increase. The only way there'll be

more opportunity is if the death rate goes up among older lecturers....It's

almost impossible to get permanent positions, you just roll onto one

contract after another. This is not tenure track, it's contract. (OU)

The researchers and postdoctoral fellows were similar to the lecturers, although

they were less able to imagine themselves as successful professors. They regarded

themselves as being positioned on the bottom rungs of the academic career ladder,

and they expressed uncertainty as to whether they would be able to climb it. Their

greatest fear was that conditions had changed so greatly that they would never reach

the tenure track. As one research fellow said,

Stability of career path--I don't perceive such a thing in Australia at the

moment, because all that seems to be available is short term contracts,

commonly three years, sometimes 5...so we have a dichotomy between

haves and have-nots. The haves have been it for at least 5 years [longer

than I have]. (OU)

Some came to blend their dedication to research with a soul-destroying fatalism.

I know a guy in London who's worked with [a research] organization for

fifteen or twenty years, generating research contracts, and that's how I've
 255

survived the last eleven years, with no tenured position. There's no

ultimate security in that, but I don't tend to think of security as being of

primary concern, compared to doing what I want to do, which is research.

I don't have any superannuation, no annual leave or sick leave, it's all

just--I submit hours every fortnight, and that's it. I don't have any firm long

term aspirations at the moment. I've never found that works for me. I

take things as they come...Every time I have applied for any sort of

position, it's always been unsuccessful, no matter how strong the

application. So I believe you do what you're meant to be doing. I believe

that our lives are beyond human control. (NWU)

Others came to think they did not have what it took.

It [a career in academe]...comes down to personal attributes, whether you

see yourself as determined enough, good enough to demand of the world

a particular career. It comes down to determination as well. I don't feel

that I have thus far in any way proven myself able to take a sufficiently

determined stance to force open a particular career. (OU)

The lecturers and postdoctoral fellows saw themselves as facing a situation

where the rules of the game had changed. Academic careers were not what they had

expected. There were few full-time positions, the competition for those positions was

fierce, and the path to permanency was not clearly marked. The magic mix of basic,
 256

applied, and commercial was elusive. Some of the lecturers and postdoctoral fellows

blamed the system, understood they were caught in a sea-change in tertiary education,

and were bitter. Others internalized failure, blaming themselves for being unable to

wrest an academic career from a grudging system.

Although the junior faculty and graduate students were for the most part not very

optimistic about their futures, they did not turn to collective solutions to overcome the

obstacles they thought they faced. Very few of them saw FAUSA (Federation of

Australian University Staff Association), the academic union, or the various associations

of learned disciplines or professional associations as offering any possibility of

intervening in the changes occurring in Australian academic career structures. When

asked directly, most of them professed to have little knowledge of the union and even

less information about their professional associations. The junior faculty, postdoctoral

fellows, and graduate students reflected the positions of their seniors. With the

exception of faculty at one of the three universities, senior faculty engaged in

commercial science tended to be somewhat anti-union.

Professors at New Wave University, regardless of what unit they were in, were

more pro-union. They saw FAUSA as a vehicle for combating the changes instituted by

Dawkins. In the words of one of the New Wave professors:

In Australia, the man in the street doesn't see us [professors] as anything

special; they just see us as another area of the work force, that's rather
 257

privileged, at that. So we have to see that's what we are, just another

sector of the work force, and we have to have a strong union. The notion

that we're gentlemen, not involved in the day to day fracas, not involved in

the structure of the economy, is ridiculous. We have to be organized to

combat what's going on...I'm not suggesting we become a militant left

wing organization, but we have to resist any effort to centralize and

control, and we'll have to make that clear.

However, the professors' union activity was not mirrored by those at lower ranks at New

Wave, other than by faculty in the social science unit.

With the exception of the professors at New Wave the faculty engaged in

technology transfer did not view collective activity as a way to assert professorial rights.

They were privileged as a result of their commercial activities and wanted to maintain

and augment that privilege. Special centers built on academic capitalism seemed to

increase the centers' staffs' differentiation from other faculty and from organizations

designed to foster faculty solidarity.

Three (10%) of the thirty persons on the academic track were women, and they

were generally on the lower rungs of the promotion ladder. One was an associate

professor, one was a untenured lecturer, and one a doctoral student. These numbers

are not surprising, given the concentration of commercial science in male-dominated

professional schools. Only one was involved in developing intellectual property.

The woman with the highest rank saw no difference between herself and her
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male colleagues; she thought they were treated similarly. The two other women

thought academic careers in science were different for men and women. The doctoral

student noted some differences, one of which was the lack of other women students.

"I'm the only Ph.D. student, and I'm the only one who's been here, and it's going on 10

years" (OU). Her main experience was "just being isolated...I have to put up with 24-

hour discussion on golf and how drunk they got on the week-end." Her concern for the

future was how to integrate marriage and children with career. She lived with a man in

a similar field. They were "prepared to be apart for various periods of time, for several

years, and to see one another only once every three months or so" (OU). Her biggest

concern was the children they were already planning. She thought she would take a

few months after she had a child, and return quickly to work.

KI: We got a lot flack from our friends, mainly the women, who say they'll

never put them [their children] in child care.

SS: Do other women doctoral students say that?

KI: No, the two women I know with Ph.D.'s went back fairly quickly. The

others act like we'll be creating criminals if we put them in child care.

The lecturer had a more highly developed critique of the relations between

gender and science.

 259

By and large there's a perception of women in science that sees women

as butch or asexual or unfeminine characters--having been a scientist,

there's a lot of truth about this. Females are so concerned about making

it in a male paradigm, they can't look at the issues of femininity and

sexuality and at the implications of these things because they'd have to--

that's why I left science, because it felt so alien to my femaleness. I had a

break-down, a burn out...because I was working across my intuitive grain.

I was a Ph.D. student. I finished and decided not to go on, to go into

something with more of a social context, more of community context...the

scientific community tends to be very individualistic.....Most of the women

I know who went through the physics degree with me, who got good

degrees, left science and are working in areas of alternative healing,

education. I can't prove my case, but I think that science alienates

women, not because they can't do it, but because it doesn't value

women's cultural identity. (NWU)

Her critique saw science itself as alienating women, and did not examine the ways that

male ambitions with regard to academic career intersected with science to construct a

milieu that was uncomfortable for women.

The fields that generate technology transfer from university to industry are

heavily male dominated, whether in Australia or in other English-speaking industrialized

 260

countries. Academic capitalism is a specialized activity within those fields and only a

select few are involved in technology transfer. The interdisciplinary groups or centers

that accrue the most resources--through government targeting, government-industry

partnerships, government grants, and industry funding--are most likely to draw their

faculty from male-dominated professional schools and physical science departments.

These groups are even less likely to include women than the traditional disciplines.

When we disaggregated faculty by rank and gender, we found differences

among them. As indicated in Chapter 4 and in the previous section, center heads and

professors responded to changes in national higher education and science and

technology policy that created increased resource dependency by treating

destablilzation of research funding as a professional opportunity structure. They had

sophisticated, long-term strategies for developing entrepreneurial technoscience

activity in their centers. They were enthusiastic academic capitalists. Those at lower

ranks were less committed, even though they were often closer to the day-to-day

science involved in commercialization. Their strategies were individual, geared toward

moving up the career ladder. They were distressed that the rungs were no longer

clearly marked: the lower the rank, the greater the uncertainty. Postdoctoral and

graduate students seemed unable to foresee themselves reaching the career heights

attained by center heads and professors. Women had difficulty envisioning themselves

as part of academic science and technology, let alone as successful academic

capitalists.

CONCLUSION
 261

Process theories of professionalization view professionalization as an on-going

process. Professionals are not automatically accorded respect, deference and descent

salaries when they acquire credentials, a code of ethics, a body of knowledge, state

licensure, or even theory (Collins 1979, Abbott 1988, Brint 1994). Instead, they are

constantly engaged in struggles to establish and defend the salience of their degrees

(O.D.'s v. M.D.'s), the value of their expertise (nurses v. doctors), the boundaries of

their jurisdictions (psychologists v. psychiatrists), and the legal and economic

arrangements that undergird their practice (third party payments for medical services,

student grants and loans for higher education). Professionals strategize individually

and collectively about how to position themselves in changing environments. In this

chapter, we examined how faculty engaged in technology transfer developed strategies

to respond to increased resource development. Their strategies have implications that

occur at three levels: individual, intermediate (centers), and institutional (research

universities).

At the individual level, senior faculty and the professional officers whom they

hired were committed to their work as academic capitalists. As we noted, center heads

developed strategies for their centers that went far beyond a single product. They were

concerned with developing reliable and predictable resource streams to support their

centers' work. The center heads often viewed themselves as managers of small or

mid-sized firms, as was the case with the head of the Center for Petroleum Research,

the head of the hearing aid CRC, and the head of the Water Systems Institute. The
 262

professional staff who worked in the centers often spoke as if they were part of

commercial culture. (See Louis 1989, and Etzkowitz 1992 for treatment of

entrepreneurial U.S. department heads and center heads.)

Unlike the senior faculty, academic track faculty on the lower rungs of the career

ladder had difficulty conceiving of careers for themselves that merged academic

capitalism and conventional academic endeavor. The expansion of the status and

prestige system to include a wider array of activity, including certain forms of

commercial science and technology, created ambiguity and confusion for persons in

the lower ranks. Given that they had not yet attained the security of the senior faculty,

they were uncertain about how to respond to the new demands being made on them.

Their perceptions may change as they move up the career ladder or if career

opportunities increase or career paths become clearer.

Centers are intermediate organizational forms that enable faculty to relate

directly to external markets. Centers bring together faculty with technoscience

expertise in high demand outside the university. These faculty are able to convert

market demand into higher prestige and more resources for research from the

university, from industry and from the state. Although Australian university professors

do not yet have extreme salary variation by field, national priorities now seem to

privilege fields able to engage the market. This privileging of of particular fields may

contribute to the creation of new hierarchies of prestige, that ultimately may be followed

by establishment of new salary hierarchies. lxi Steven Brint's (1994) treatment of

professionals' salaries helps us understand how the market interacts with valuation of
 263

professional fields within the university, and gives us a glimpse of emerging hierarchies

of status that may capture changes in Australia as well as the United States.

When explaining variance in professional salaries in the United States, Brint

sees salary differentials as best explained by professionals relation to the market.

Faculty in some professions and academic disciplines may have advantages in forming

center that relate to the market. Large private group practices usually command the

highest profits and salaries (physicians, attorneys, accountants [Brint 1994]). For

salaried professionals, a key indicator of income is "the industrial location in which

members of the profession are predominantly employed." Income is highest when

professionals are located "in the `industrial-corporate core' (or `technostructure') within

organizations" (Brint 1994, p.67). Brint contends that "technostructure occupations can

be described as having three specific sources of advantage: (1) high value-added

organizational applications, (2) rigorous and demanding technical cultures, and (3) high

levels of integration with management. By the term`high-value added application.' I

mean work that is closely related to profit potentials, critical environmental

uncertainties, or managerial effectiveness" (p. 73). lxii The professions and academic

disciplines closest to the market are business services, followed by applied science,

culture and communications (which includes higher education as a whole), civic

regulation (professions involved with maintaining and enhancing the quality of civic life,

i.e. public works, mass transit, conflict resolution, planning), and human services

(professionals who work on problems so that "society's `minimum standards'" (p.53) are

met, i.e., schoolteachers, counselors, social workers). Although professionals in any of

 264

the five categories can work in the private or public sector, business services

professionals and applied scientists are most likely to work in the private sector, the

culture and communications category is very mixed, while civic regulation and human

service professionals are most likely to work in the public. The professions and

academic disciplines that interact with private sector receive the highest remuneration,

from business services at the high end to human services at the low. lxiii

Among the Australian centers we studied, the most successful were applied

science centers.lxiv Brint views the applied science sector as composed of "people who

apply scientific knowledge to practical problems of production. The sphere includes

nearly all engineers, chemists, geoscientists, biotechnology and product related

medical scientists, production-centered computer scientists, mathematicians,

statisticians, and economists and organizational psychologists working on practical

problems of production (Brint 1994, p.49)." The applied science centers in our study

had "rigorous and demanding technical cultures" and the products and processes they

were developing were likely to have high "profit potential" (Brint, 1994, p.73). The

center faculty in the applied sciences were in a position to act like scientists in small

private sector consulting firms who articulate with the technostructure of corporations

on the basis of technoscience. Like applied science private sector professional firms,

center faculty competed for costly but discontinuous projects--in this case, development

of innovative technology--that corporations often out-source (Brint 1994). lxv

Resource dependency prompted applied science faculty to develop centers so

they could augment their resources through academic capitalism. Although professors
 265

in our study valued basic or fundamental science, as noted in Chapter 4, they were

willing to engage in commercial science and technology if the activity were prestigious,

in that the commercial work utilized advanced science and led to high innovative

products, and if the external entities with which they worked were high in status--if they

were, for example, well-known corporations or government bodies. (See Chapter 6 for

a detailed account of faculty interactions with external groups.)

 266

Not all fields may be able to develop centers that interact successfully with the

market. As would be expected from Brint's work on professionals' relation to the

market, centers in fields in culture and communications, civic regulation and human

services may have difficulty finding clients with the resources to support their research

and expertise. In our study, the social science center did not fare as well as other

centers. The difficulties encountered by the social science center raises the issue of

how academic capitalism will shape opportunities for centers and departments.

At the level of the institution, the proliferation of centers raises a number of

issues. Centers are changing the knowledge base of fields, the organizational structure

of the disciplines and institutional resource allocation patterns. Center formation draws

off talented faculty from traditional departments, relocating them in transdisciplinary

units that are as aligned with the market then with the professions or academic

disciplines. Ultimately, the market may provide more cohesion for center faculty than

the professions or academic disciplines, given the varied backgrounds of center faculty.

Centers are well funded with government and private monies. They were created to

attract such resources. Centers are often units with few faculty and larger numbers of

professional officers, geared to entrepreneurial aims. The role they play in the

education of undergraduates is not clear. The centers show great variation in their

emphasis on undergraduate education, ranging from the center in which no one taught

to the social science center, where teaching was the most important activity.

As the creation of global markets pushes nations toward political choices that

constrict government services in sectors such as human services, civic regulation and
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perhaps even culture and communications, the market opportunities for faculty in those

areas are reduced. They may form centers, but it is not clear that governments will buy

their expertise. For faculty who form centers in fields close to private sector market,

such as applied science and business services, market opportunities may greatly

increase. The implications of faculty market potential for research universities are

great. Faculty in fields close to the market (for example, applied science fields, as

defined above) who have an entrepreneurial bent or who are strongly encouraged by

universities in need of resources may form centers where they spend most of their time

as academic capitalists. They may leave behind in traditional departments faculty who

do not want to become academic capitalists as well as faculty who have no

entrepreneurial talent. Eventually, the faculty who are left behind may bear the burden

of undergraduate teaching. Faculty in fields with uncertain market potential (for

example, culture and communications, which would include the humanities) might be

asked to teach greater numbers of service courses or perform more institutional

maintenance work (committee work, student advising.). Faculty in fields with

diminishing market potential (for example, civic regulation, which encompasses some of

the social sciences, and human services, which includes education and social work,

may be cut altogether, particularly in the numbers of students in their fields diminish. If

academic capitalism restructures universities in this direction, research universities

eventually would be more closely aligned with markets than with the professions.
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CHAPTER 6: ENTREPRENEURIAL KNOWLEDGE

In this chapter, we looked more closely at faculty engagement with academic

capitalism. Specifically, we analyzed faculty accounts of how they invented products

and processes in centers and at how faculty and universities found corporate partners

to participate in product development. In other words, we looked at the process of

technology transfer, the movement of knowledge from the university to the

marketplace.

The research questions we asked were: (1) How do scientist and engineers

conceptualize basic and applied research as the market becomes more central to

public and private investment? (2) How is altruism, once viewed as a distinguishing

characteristic of professional behavior, reconciled with academic capitalism? (3) How

do scientists and engineers describe their market relations? (4) Is there an

epistemology of academic capitalism?

Three quite distinct theoretical traditions deal with technology transfer: the

sociology of science, process theories of professionalization, and theories that treat the

role of science in product innovation and economic competitiveness. The sociology of

science literature built on Merton's (1942) conception of norms of science as

 269

characterized by universalism, communalism, disinterestedness, and organized

skepticism to distinguish between basic, fundamental or academic science and applied

or industrial science, or, as the dichotomy was frequently framed, between basic and

applied research. When university research became more commercial in the 1980s in

response to pressures from globalization of the political economy, changes in national

higher education policy, and resource dependency (see Chapters 2 and 3), sociologists

of science focused on whether basic research, the "seed corn" of science, was being

plowed under, presumably damaging the future of science. Initially, scholars found that

academics were able to do basic and entrepreneurial research simultaneously (Peters

and Fusfeld 1984, Blumenthal et.al. 1986a, 1986b). As pressures on the academy

grew, case studies began to suggest that science was being "re-normed" (Etzkowitz

1989, Hackett 1990, Slaughter and Rhoades 1990, Slaughter 1993). In the 1990s, a

number of large surveys of scientists concluded that the distinctions between basic and

applied research were no longer central, given the contradictory responses of scientists

and engineers, who seemed to be moving toward entrepreneurial norms in complex

ways not easily captured by surveys (Rahm 1994, Campbell 1995, Louis, Anderson and

Rosenberg 1995, Lee forthcoming). Our study of the technology transfer activity of

faculty at Australian universities suggests that basic research may be as much a

signifier of faculty control over the research process as a kind of science that precedes

application, that basic and applied were never salient categories for the many

professional school faculty (engineers, medical school faculty, veterinarians, agricultural

researchers), and that basic and applied were as likely to designate levels of prestige
 270

and sources of funding as they were a fundamental distinction between two types of

research.

Professionalization theory concentrates almost exclusively on professions

outside the university, even though these theorists would certainly grant that university

professors are professionals. Process theorists of professionalization do not speak to

faculty located in non-profit, usually public institutions who participate in academic

capitalism. If we extrapolate from process theories of professionalization (Larson 1977,

Collins 1979, Silva and Slaughter 1984, Freidson 1986, Brint 1994), we would expect

that faculty as professionals participating in academic capitalism would begin to move

away from values such as altruism and public service, toward market values. The

faculty in our sample did this, but not by simply replacing altruism with a concern for

profit. Rather, they elided altruism and profit, viewing profit-making as a means to

serve their unit, do science, and serve the common good. Again extrapolating from

professionalization theory, we would expect faculty to strive to retain the greatest

measures of autonomy and prestige possible. We found that as professors sought

more applied funds as money for basic research was curtailed, they began to define

themselves as inventors and entrepreneurs and sought to negotiate contracts for

themselves, to understand patent law and markets for scientific products and

processes. They knew if they did not sit at the table with industry and government, they

would not be players. They developed extensive entrepreneurial knowledge to protect

their autonomy, prestige and expertise.

In the 1960s and 1970s, theories that dealt with the role of science in product
 271

innovation and economic competitiveness argued that serendipity was the key: basic

research, allowing faculty to follow science where it led, laid the foundation for

innovation, even though the possibilities for product development might not be

immediately obvious. DNA and biotechnology provide an example (Wolfle 1972, Smith

and Karlesky 1978, but see Slaughter 1993). As globalization put pressure on the

economies of traditional industrialized countries, theorists began to be more concerned

with expediting product innovation by more closely managing the movement of science

from university to industry. From serendipity, theorists went to spin-off and somewhat

linear concepts of the role of science in product innovation (Peters and Fusfeld 1984,

Fairweather 1988). Currently, an emerging and somewhat contradictory body of theory

makes the case that the movement of science from laboratory to industry is non-linear,

complex (Mowery 1994), on the one hand, seamless, the boundaries between basic

and applied research collapsed to the point where knowledge is inherently

entrepreneurial (Kennedy 1990, Gibbons 1993), on the other hand, that basic science

is not necessarily related to innovation in industry (Gummett 1991, Leydesdorff 1994).

The scientists and engineers we studied underline the complexity of the product

innovation process, particularly at the point where intellectual property moves into the

market. None of these theories--sociology of science, process theory of

professionalization, theories of the role of science and engineering in product

innovation--are particularly concerned with the university as an organization. As

students of higher education, we are. We conclude this chapter by analyzing how

academic capitalism effects not only colleges of science and engineering, but the
 272

university as a whole.

The data from this chapter is the same as Chapter 5: interviews with forty-seven

persons in eight units in three universities transcribed between January and July 1991.

However, we concentrate on a sub-set of twenty-three of the thirty tenure track faculty.

These twenty-three faculty were working on ten different pieces of intellectual property

(products and processes that could be patented, copyright and protected by trademark,

and sold or licensed to corporations). The method is content analysis of interview

transcripts.

BASIC AND APPLIED RESEARCH

Clear distinctions between basic and applied research emerged in the United

States after World War II. The success of physicists and nuclear engineers with

nuclear weaponry was presented to government and industry as a triumph of basic

research. In their efforts to penetrate the mysteries of physical matter, academics

developed quantum physics and atomic theory during the interwar period (Kevles

1978). Although physicists knew an atomic bomb was theoretically possible, weaponry

was not part of their quest until the war was eminent. After the war the academic

community, led by "boundary-elites" such as Vannever Bush (Koch 1984), made the

case for national funding of basic research, using the bomb as a symbol of the

serendipity that led from basic research to practical discoveries of great import to

industry, the state and the citizenry (Herken 1992).

The post World War II academic science and technology community drew sharp
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distinctions between basic and applied research for several reasons. In part, the

distinction separated what academe and industry did. University researchers worked

on basic science, industry on applied. Industrial leaders did not want universities to

receive government funding for applied science and technology because it might

interfere with corporate efforts to secure competitive advantages with regard to

products and processes aimed at the market (Klienman 1995). lxvi In part, faculty

pursued the distinction between basic and applied because they were able to assert

more control over basic than applied research. In the system that evolved, scientists

made decisions about who received government money through the peer review

process when research was labeled as basic: there was little accountability in terms of

directly meeting societal needs (Kevles 1978). Indeed, historians and sociologists of

science are beginning to consider basic science as a social and economic construct

through which university-based scientists have claimed autonomy and resources.

Although there are undoubtedly differences between working on broad scientific

problems as opposed to concrete applications, the barriers between basic or

fundamental research and applied or entrepreneurial science were probably always

highly permeable (Slaughter 1990, Slaughter 1993).

Academic researchers in the United States were dependent on the mission

agencies--the Department of Defense, Department of Energy, National Aeronautics and

Space Agency and National Institutes of Health--for the vast majority of their federal

funds. The National Science Foundation (NSF), the only federal agency arguably

dedicated to basic science, has never accounted for more than 20% of federal monies
 274

for academic R&D in any given year since 1971. (Indeed, NSF monies declined from a

high of 19.5% in 1973 to 14.1% of all federal monies for academic R&D in 1991 [NSF

1993]). The mission agencies supplied universities with 80-85% of their federal R&D

monies, of which approximately 65-75% were designated as basic (NSF 1993). The

academic science and technology community always interpreted "basic" or

"fundamental" to mean that university-based researchers, following the logical

imperatives of their fields, set direction for their research programs independently of the

mission agencies (Smith and Karlesky 1977, Wolfle 1972). However, even when

monies were tagged as basic, it was not clear how distinct basic was from applied.

Accounts of scientists' and engineers' negotiations with the mission agencies suggest

that the academic interpretation of basic science was only partially shared by mission

agency bureaucrats, many of whom had a much more instrumental definition of basic

science. Some historians of science argue that basic science merely meant

unclassified science, and that basic science was powerfully and directly shaped by

mission agency goals (Forman 1987, Leslie 1993).

We asked everyone we interviewed which was more important, basic or applied

research, and questioned them as well about how entrepreneurial science was related

to basic. When asked directly about the importance of the two types of science,

everyone, with the exception of some professional officers, spoke positively about the

importance of basic research. However, they found it difficult to draw firm dividing lines

between basic and applied, and did not make the two dichotomous.
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My real interest is in basic research, it's just that I've been lucky in that the

diseases and disease agents I study have always been important

medically so there's always an applied as well as basic aspect. (Associate

Professor, NWU)

I think it's good for us academics to be exposed to industry needs. The

challenges are very different. The CPR (Center for Petroleum Research)

operates on the notion that the two--industry and science--should go

together...It's not degrading the quality of fundamental research at all.

(Professor, OU)

If you look at applications today, they usually stem from fundamental

research. But others believe that the fundamental research from one

stream should be applied to the other because funds are more

available...it's money which makes the whole process...go. I believe that

there should be a balance....Then a person can move in whatever

direction is required by society. Fundamental research should remain

intact in the university, while industrial research mixes in as well.

(Associate Professor, NWU)

Other than the social scientists, most of the faculty and professional officers

were members of professional schools. On a number of occasions, they spontaneously

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offered the view that research in professional schools led directly to application, that

there was not a firm distinction between applied and basic. Although these faculty

spoke to the importance of fundamental research, they spoke as forcefully about the

importance of the applied or entrepreneurial nature of their knowledge. As one put it,

"I'm an engineer. To be a fully fledged engineer, you have to apply your work" (Center

Head, OU). Or, as another said,

I've always been aware of commercial possibilities. Logically, where

there's a disease problem to solve, at end of day, if I understand what's

going on, it leads to some sort of way of dealing with disease, and clearly

to do that, you have to get commercially involved if you want to deal with it

on a large scale...[With] pure science, it might be different, but in a medi-

cal area, you are much closer than if you were in a science, in a pure

science area. (Professor, NWU)

When our interviewees were pressed, they often expressed difference between

basic and applied in terms of the prestige of the funding source and the review process

rather than in terms of the nature of the work involved. Most faculty were clear that

funding from the Australian Research Council (ARC), a body that functioned through

peer review, was more highly valued in terms of prestige and promotion than was

funding from the Swine Research Board or the Wheat Council. However, the ARC was

changing. In addition to providing support for basic research, the ARC under Hawke
 277

and Dawkins was the agency through which the government set national research

priorities aimed at making Australia more competitive internationally. lxvii

Faculty did not think that creating knowledge for profit contradicted their

commitment to altruism and public service. Instead, they saw the market as a

mechanism for distributing their discoveries to society.

We would just like to find useful and practical solutions to the problems

that people have...to ameliorate the condition of mankind, and we work on

that principal, that we find solutions to problems that people have. At the

end of the process, it has to bought and sold, that's the reality. (Center

Head, NWU)

I see my work as part of the work that's necessary to save the

environment, to create clean energy, and it will be profitable as well.

(Associate Professor, NSAI)

lxvii. As the ARC under Hawke and Dawkins became more concerned with

competitiveness issues, so the National Science Foundation in the United States

became more involved in university-industry relationships that contributed to the

economy. This concern on the part of the NSF became especially apparent during

the Reagan years. See Rhoades and Slaughter, forthcoming.

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The public good was not envisioned as being at cross-purposes with the market, partly

because most faculty did not see science and markets as having histories that were

part and parcel of power and social class relations. Generally, faculty did not ask

questions about what a fair price was for their products; for example, whether price

concessions should be built into products because the public had heavily, if not entirely,

subsidized large portions of the research involved in the discovery of products for the

market. Nor did they ask questions about the social utility of their knowledge: All

assumed that what they did was beneficial, whether the institutional resources and

faculty time expended were for research on cosmetics or on solar energy.

We found that faculty, professional officers, and administrators were reshaping

their epistemology of science to accommodate professorial interactions with the market.

They began to see commercial application as inevitable, sometimes as intrinsic, to their

inquiry. Professional school faculty, always to some degree concerned with applied

research, did not seem to see a clear difference between the kinds of science they did

for ARC and the work they did as entrepreneurs, other than viewing one as more

general and the other as more specific. They did not see basic and applied as

dichotomies, or see a broad or deep chasm between the two. Their commitment to

fundamental research seemed as much a commitment to a known career path and

support and reward system as a commitment to a particular way of doing science.

While they still spoke about the importance of basic research, they did not dwell upon it.

RECOGNIZING THE MARKET POTENTIAL OF SCIENCE

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Faculty in Australian universities understood that if they were to reap the rewards

from technology transfer they had to acquire market skills and business savvy.

Specifically, faculty had to learn how to recognize the market potential of their science.

They had to learn how to find funding for the product, process, or service they were

trying to develop and promote. They had to learn how to apply for and prove patents.

They had to acquire knowledge about how to develop market strategies and negotiate

with corporations for research contracts and royalties. None of these activities over-

lapped greatly or were congruent with faculty expertise in acquiring university or

government funds for science.

Twenty-one faculty were involved in commercial science and two were in the

process of searching for commercial opportunities. These twenty-three faculty were

working on ten different pieces of intellectual property (products and processes that

could be patented, copyrighted and protected by trademark, and sold or licensed to

corporations). All were engaged in developing market expertise with regard to

commercial science and the process of acquiring that knowledge was often very

difficult.

Government agencies were a major market that Australian faculty sought to tap

for sales of their intellectual property. Government procurement (government agencies

purchases of products, processes and services necessary to outfit bureaucracies and

accomplish organizational missions) strongly shapes commercial opportunities in

Australia. When the commercial potential of intellectual property was client-driven (four
 280

of ten products), the clients were government agencies with strong needs for particular

products (three of the four products). In all three cases, it was possible, although not

proven, that the products also would have private sector demand. In one case, the

possibility was very clear. As the faculty member who developed the product said, "We

knew that we were making better [product] than anyone else. It's easy to quantify and

attract funding with the clear efficiency numbers" (Professor, USAI)." In the fourth case,

the client was industry, but the industry's primary market was government.

In the remaining six cases, three products were discovered during scientific work

that had been a government priority for about two decades. In the fourth case, the

commercial worth of scientific work was discovered during a conversation between two

men who had been graduate school friends, one of whom worked for a university, the

other of whom worked for a multinational corporation. In the fifth case, the faculty

member pursued his product because he saw a vast, almost unlimited Pacific Rim

market for it. In the sixth case, the path to recognition of the commercial value of

research for the particular product was not clear.

Generally, the commercial value of products was recognized without faculty and

professional staff giving much thought to the workings of the marketplace or paying

much attention to the principles of marketing. As the chief administrator of one

university company said about a product he inherited when he started his job, "There

was no business plan for [FESS, Fission Energy Source System], to encourage the

investor, no marketing plan, no export plan or manufacturing or feasibility study--what

does it cost to manufacture? We have an idea, but we don't know specifically" (NWU).
 281

For the most part, faculty approach to the market was energetic but haphazard.

Faculty efforts were sometimes client driven, and frequently the client was government.

When the client was not government, the general area in which commercial

development took place had been suggested by government funding priorities. The

market was not conceived of solely in terms of demand; in fact, market demand played

a major part in the thinking of only one faculty member.

NEGOTIATIONS WITH INDUSTRY AND GOVERNMENT OVER

INTELLECTUAL PROPERTY

Regardless of the ways in which faculty and professional staffs recognized that

their science had commercial value, all faculty had to find a commercial partner to bring

their product to development. For the most part, faculty and professional staff, not

university companies or offices of technology transfer, found commercial partners. This

was the case for eight of the ten pieces of intellectual property. As a professor with a

successful invention put it,

...researchers are likely to have better contacts than university

companies...I found the [partners]. When you're making [energy cells]

that are better, then people approach you after you can quantify that they

are better. Conferences were where I made initial contacts. Then you

have to have a champion in the company to push your product through.

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(USAI)

However, researchers often had to move well beyond routine contacts. An associate

professor gave the following account of finding a commercial partner:

The first place that we were pointed towards [by local contacts] was a

commercial foundation...associated with [another university], and it had a

biotech orientation. It's now defunct. They gave us the run around for

about eighteen months, because the board consisted of academics,

without many commercial inputs. The second commercial entity was a

local company that markets general lab equipment and disposables--

they're only local. They said they saw potential, but couldn't afford to

fund, so they said they'd act as our manager, do all the donkey work,

liaise with us and the university, for which they'd get a percentage. But it

quite quickly became clear they didn't have the experience and weren't

moving fast enough. Fortuitously, I was speaking with a friend about this

who worked for a Swiss Company with an off-shoot in Sydney. He

worked for the firm, and I wasn't even thinking of it, and he said why didn't

we work with them, and it just started to go from there. It [the slow start]

was out of naivete and inexperience, [on our part] and the university as

well. It could have started 18 months earlier. (NWU)

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In Australia the process of finding commercial partners was both more simple

and more complicated than in the United States. The small relative size of the

Australian professional and commercial communities meant that professors could easily

approach companies directly, or be approached by representatives of companies who

had heard of their research. This happened to faculty involved with half of the ten

pieces of intellectual property. However, the Australian business community very often

was unwilling or unable to bring the intellectual property to development. The business

community did not command the capital available in large industrialized countries. In

some cases the Australian companies sold the rights to the product to international

companies; in others, the Australian companies went bankrupt. With regard to

intellectual property that was at the production stage or aimed at international markets,

all but one product was owned or produced by non-Australian companies.lxviii

Generally, faculty saw Australian business as uncreative, and as being centered

on technologies aimed at extracting minerals from the earth or at agriculture, not at high

technology. They thought Australian business was limited by its lack of vision and

relatively small amounts of capital. Several professors and administrators commented

on the difficulties of finding Australian commercial partners:

In Australia, the infrastructure is not well developed to look to

commercialization easily. (Associate Professor, NWU)

Australian industry wants to just buy finished products and not take any

risks. I don't think we'll get an Australian company as a full partner.

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(Associate Professor, USAI)

There's a lot of basic hostility among a lot of Australian business men. It's

a generational issue--many Australian businessmen never went to

university. (Professor, USAI)

Negotiations over ownership of intellectual property were complex and often

difficult for the inexperienced faculty who carried them out. In the eight instances

where property was advanced enough for negotiations, seven were carried out by the

professors.

The accounts provided by professors varied according to the difficulties they

encountered, although the further away from the negotiation they were, the fewer

problems they seemed to recall. For example, a professor whose products were

already being sold on world markets was quite casual:

I've done a lot of quasi-legal work. If the patent attorney's did [all the

negotiating], we would be bankrupt. Another professor with research

contracts showed me what to look for. He was a university-industry

appointment. (Professor, USAI)

However, even this professor conceded that the negotiation took a great deal of time

and that he made a number of mistakes in the process.

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The percentage of royalties that a patent would earn varied from contract to

contract. Even after royalties and licensing agreements were reached between an

industry and the professor, how the amount or share would be divided within the

university remained unclear. If, for example, industry agreed to a 5% royalty rate for a

particular invention, the way the 5% would be divided among faculty member, unit to

which the faculty member belonged, and the university was uncertain. As one

researcher said, "There is no formula, but it's usually understood to be one-third, one-

third, one-third--although it's on a case by case basis" (Professor, USAI). Another

researcher mentioned the same split, but noted that in his case, the university allowed

him two-thirds to further support his work because he was so active with regard to

licensing. In other instances, faculty who had already signed agreements with industry

were not clear as to what would happen when university companies later altered

contracts, making concessions to industry to increase the likelihood of product

development. Nor were they clear as to when they would be able to take their third of

the royalties--before or after concessions.

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Another ownership area that remained unclear involved the government. It was

uncertain to what degree various government agencies would share in royalties

negotiated between industry and universities. Unlike in the United States, Australian

government agencies did not give rights to intellectual property to universities.lxix In

many cases, if a government agency had funded the development of intellectual

property, the agency or agencies expected a share of the royalties. In one instance,

CIRSO held title to a patent and was claiming the royalties to a product on which a

university group continued to do research. As the faculty member said,

We're negotiating. We're having a meeting soon. I think we'll share the

intellectual property 50-50. But the other side [CIRSO] has counted up

the hours they've worked on this over the last 10 years, so now we have

to do it as well. It's quite ridiculous. (Professor, USAI)

Federal agencies were not the only government agencies that sought a share of

royalties on university patents. Any agency that contributed to research costs seemed

to want a share. "The state government [as well as a federal agency] has put money

in, but before doing more they want to work out the contribution for royalties" (Associate

Professor, USAI). As the commercial value of government-funded scientific research

became apparent, federal and state agencies made retrospective claims based on their

contributions. Since almost all scientific research was funded by the government,

whether out of block grants given by the federal government to universities, by state
 287

agencies, or by federal agencies, the potential for claims was great and the legitimacy

of the claims uncertain. The governments' claims generally were not figured into the

one-third, one-third, one-third formulas, which had been established before the

government push began for university researchers to exploit intellectual property.

When we spoke to faculty who had not yet finalized patents, they frequently did

not know how to divide among themselves the one-third to which scientists were

entitled. This process involved negotiation within the research team and was fraught

with tension. The researcher quoted below realized how difficult this decision would be,

and solved it by putting the problem off:

There's a split within the university--same as a consultancy--one-third,

one-third, one-third--so one third goes to the university, one third to indi-

viduals, one third to the institute. The third that goes to individuals, that

will be divided between a number of us. We'll cross that bridge when we

come to it. That hasn't been worked out yet. It's going to be a very

difficult decision. Chris and I were the instigators of the project. We

administer it. But then we have two key figures who are employed on the

project, who work on the project. There would have to be a split to those

other people as well. We haven't worked it out, we haven't worked it out.

One is a post-doc and one is a professional officer. It's a long way off,

because once we have something that's potentially useful...it's going to be

at least six years before the money flows to the university. (Professor,
 288

NWU)

The decision about whom to include on a patent is further complicated by patent

laws. Patent regulations give primacy to the person who conceptualizes the product.

Inclusion or exclusion of persons not contributing to the product can invalidate the

patent. Faculty always saw themselves as conceptualizing the product, but very few

were engaged in the bench science. Their impulse, as indicated in the quotation

above, was to include those who labored on the project, especially if they were col-

leagues or students. Faculty, however, were usually untutored in patent law, and did

not know the metes and bounds of inclusion and exclusion. In the following account,

attorneys representing the university company informed a faculty member of the

conditions surrounding patent claims, instructing him that only the person who had a

novel conception had a claim, that persons who simply executed the conception were

not entitled, and if a novel idea had been presented in the literature, its uniqueness was

lost and it could no longer be patented. The attorneys brought this faculty member to

the realization that he should exclude some persons he initially thought deserved

recognition and with whom he had discussed patenting:

This was the first time I was involved, and I had a different concept of

intellectual property. I thought the honors student should be involved

because she did the work. I thought the post doc who'd demonstrated the

invention in a practical system should be involved too. Then we were

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advised by the attorneys not to do it...It was unpleasant, tough--I had no

idea what an inventor was. It took me a long time to understand. It was

awkward for me to tell them. The post-doc was not happy, but accepted

the chain of events as the attorney suggested. When I filed three

improvements, I was much more aware. If I thought it was novel, I told

them. The honors student did the first experiment. I had the idea; she did

the experiments, and then the post-doc demonstrated....When I discussed

with...the third person [a now retired staff member] his contribution--he

suggested something significant, the use of... [a particular substance], al-

though I worked out how it worked. But in the literature people had

suggested you could use...[the substance]...I just couldn't go back and tell

him [his contribution] wasn't novel. I didn't want to be seen to be trying to

get him off the patent. But [finally I did] and the retired staff said, then no

students or postdocs [should be on the patent], and then the student and

post-doc said not each other. No one understood. It took many hours

with the university company and the university attorneys. (Associate

Professor, USAI)

A central point that emerged from the accounts of faculty members who were in the

process of determining ownership of the researchers' one-third of intellectual property

was their confusion and uncertainty. They did not know whom to include, found the

determination of whom to include very difficult, and often waited until the work was fairly
 290

advanced before making a firm determination, exacerbating the difficulties.

Although patent law is fairly specific as to who has legal claim, definitions of

centrality to discovery are socially constructed in the laboratory, a setting skewed

toward those faculty who directed student work and saw themselves as the

fountainhead of student creativity. Faculty were likely to view themselves always as the

author of novel ideas. Regardless of whether students were included on patents, the

determination of whom to put on a patent was difficult to make, in part because it

brought market conceptions such as ownership and profits from ownership into

relations that were not previously dominated by market considerations.

Another faculty member had a different set of difficulties that stemmed from his

lack of familiarity with the patent process. He was unsure of the commercial value of his

research and as a result,

We almost fell into the trap of publication. Earlier, I took the project to the

University Company, but they said unless I had a company to fully

develop, to license in twelve months, they wouldn't go forward. So, for ...

[product], I didn't think of it and I published two papers. [As a result] I lost

the European rights. (Associate Professor, USAI)

 291

Because the scientific research was published, it became part of the public domain, and

patenting was not possible.

Faculty had difficulty with patenting in part because they lacked patent

experience. Of the twenty-three faculty involved in commercial work, only four held

patents. According to an administrator responsible for commercial research, patents

had become important only during the past two or three years as part of the

government push to bring universities and industry closer together. Prior to that time,

most research funding in Australian universities was public and patents were not an

issue. As a researcher and administrator said, "Patents are useful with regard to

selling [an invention to industry], but not worth all that much in themselves" (Vice-

President, USAI).lxx

Faculty with intellectual property often thought they did not need patents for

protection, at least at the current stage of their research. These faculty thought it would

be too difficult for a competitor to replicate the work they had done, reducing the

invention to practice. For example, a professional officer said,

We don't have a patent on the hydrology system... We took a different

approach. We decided that it wasn't in our interest to patent. What we

did instead was take all the key electronic circuitry and reduce it to

miniature and produced a special electronic chip through Kruger, a big

German company, that contains all the intelligence of the system, and at

the same time we developed a software package that goes in the

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microprocessor, so it communicates with our chip. All the innovation is in

those two chips. Kruger will produce the special chip for us, and only us,

under a confidentiality agreement. (Professor, NWU)

This researcher, like one or two others, was confident that he had sufficient protection

due to the congealed labor embodied in the product, which would be difficult for a

competitor to duplicate before the product entered the public domain through publica-

tion. The two-chip arrangement, which required both chips for the system to function,

was an added protection.

All of the negotiations surrounding intellectual property were complex and non-

routine. Even the university formulas--one-third, one-third, one-third--provided only a

very rough guide, perhaps because they were developed for consultancies, not

intellectual property. In many cases, negotiations over ownership were not step-by-

step, linear, moving from discovery to recognition of commercial worth to discussions

with the university to searching for commercial partners. Negotiations were complex,

fluid, rapid and involved simultaneous decision-making among a variety of partners.

We had a unique opportunity to gain some understanding of the complexity of the

negotiation process, especially negotiations over ownership, because we interviewed

several people in a unit that was undertaking negotiations during the period of our

interviews. We spoke with professor and Center for Petroleum Research head Robert

Alexander after his first round of negotiations. He was very optimistic, very positive,

very certain of the outcome:

 293

We're just entering a phase where we are going to do a joint venture with

InGen... There are 3 components to the agreement. After stage one,

there will be an intellectual property payout for this first item, $500,000 for

four individuals within CPR. The second point, 5% royalty off the retail

price comes to CPR, for as long as the product sells, and 4 years down

the track we estimate that will bring in revenues of $400,000.00 per year.

The third key point was that I would be appointed to the head of the board

of InGen Instruments, which will do the production. Fourth was that we

would form an organization within CPR called Environmental Products, or

some such name, where InGen would invest $100,000 a year and in

return would get the first shot at any intellectual property. Basically, it will

pay Ray's [head of the commercial side of CPR] salary. The $100,000 is

only the start. It pays his salary to bring new products to their attention,

and then they have to bring it up to par, invest lots of money. (OU)

Alexander then turned the remainder of the negotiation over to Ray Dickinson, the head

of the commercial side of his unit. When we interviewed him, Dickinson had just faxed

his response to InGen's counter offer to the professor's first statement of terms and

conditions:

Everything [about the deal with InGen] is in a constant state of flux. They
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don't want to do a joint venture, it's not their philosophy. It will be a buy-

out and we won't have a significant role. There is a philosophy [on the

part of the company] of on-going involvement with CPR, and for a

retainer. There will be intellectual property rights, and Bob [Alexander]

will have a position on the board. But a joint venture just won't work. Bob

was certainly thinking that I would be the executive [of a company created

by a joint venture], but I will remain a facilitator....the lump sum payout

[should be] equivalent to the development costs. I think they'll quibble

about the magnitude. The government partners will agree, or

not...Because there is no share holding anymore [as there would have

been in a joint venture], the government group--five departments--

technically we're seeking their approval....They may ask for a share of our

royalties, but I doubt it, and they wouldn't get it. Only one group could

justifiably ask for it, the local power authority, they were in on concep-

tion....we have acknowledged that [they have a right] to royalties...that

come to CPR and they will have joint administration of these areas of...on-

going research....All our legal and management costs will be paid by the

Company. They'll object to that as well, all that cost, which is substantial.

They'll have to invest $500,000 to get to the next phase and $130,000 to

$150,000 will have to come back to CPR [for costs]. But they may want

[to take it] from royalties, or the lump sum, but we're going to insist

otherwise....At the moment, CPR gets 5% of the royalty on the

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instrument...but we don't know what proportion the university will get, but

Bob will argue it all goes to the Center. All the work was done without

university funding, all done on contract funding, so that minimizes their

claim. (OU)

Dickinson thought he would have a copy of a draft agreement in the hands of all parties

(the company, five government departments, the university, the CPR) by the end of the

week, and then he would wait for objections. In a very short time, the deal had become

quite different from that initially envisioned by Alexander. There was no joint venture

and therefore no position for the head of the commercial side; the lump-sum pay-out

was undecided; the faculty member had a seat on the board rather than being head of

the board; the amount of costs that would be paid for was unclear; and a number of

other claimants--several state agencies and the university--to the 5% royalties had

emerged. The negotiations were complex, fast-moving but time-consuming, and lacked

any clear format. Alexander had an advantage many lacked, in that he had his own

head of commercial operations, Ray Dickinson, to negotiate for him; but even then he

was far from realizing the terms for which he had hoped.

VAGARIES OF THE MARKETPLACE

Even when an agreement was concluded, it was not clear that products leading

to royalty payouts would result. Indeed, three of the products were already
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experiencing difficulties. The difficulties were of two very different kinds. First, there

were difficulties about completing the science and developing a prototype. Second,

companies sometimes failed or sold intellectual property, either of which left

agreements in limbo.

Companies were very concerned with time-lines and bench marks. As part of

their agreements with university researchers, they expected the science to be

developed to specific points at certain times, and if university researchers were unable

to meet time-lines and bench marks, there was a strong possibility of agreement

cancellation. An associate professor talked about his negotiations with the company

and what he had done with regard to the bench-marks:

We left all the legal negotiations, the contractual, to the legal people from

the university and the company. We were involved in negotiating the

grant, how much money we wanted, and the bench-marks....In retrospect,

I think we'd probably be more assertive about the bench-marks. We were

sitting around the conference table drinking their coffee, being taken out

for dinner, and we were over-optimistic, and then you get back to the lab,

and the teaching and everything, and it goes slower than expected. (-

NWU)

The post-doctoral fellow doing the bench science to reach the bench-mark had a differ-

ent take on where the project was:

 297

They gave us what we wanted for the budget...but not for the time period

we wanted. It ended up as a compromise. They only funded for 6

months, with a clause that we had to meet certain bench marks before

they would continue funding for another year. I don't know if we'll meet

them. It's still in balance if we'll meet them by the end of March. It's a

matter of luck if we'll come up with the goods. If we don't get it, the

funding will cease. We could try to renegotiate, but....Unfortunately what's

happened is because I came in at a late stage. They're getting impatient.

Some of the deadlines have been unrealistic from my point of view, but

overall they should have been meetable....It would be ironic if they

stopped funding just as we were about to get what they wanted. But you

never know with these private companies. They may decide to pull the

pin after having gone three years down the track. It's very stressful at the

moment. Some people complain about one or two year grants, but we're

on at 6 months at a time. (NWU)

Although the professor who signed the contract thought the bench-marks might be

difficult to meet, he did not seem to think the project as a whole was in jeopardy. The

post-doc doing the science was not sure he would be able to finish, saw completion as

a matter of luck, and was contemplating the possibility of the project losing its funding.

The time-lines, as he noted, were very different for private companies in comparison
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with government agencies.

Two other projects were unable to move from the prototype stage to the

development stage because the companies to which they had licensed their intellectual

property had encountered financial difficulties. One project involved a joint agreement

with American and Australian companies

...to co-develop the technology, and to take it to commercialization. That

collaboration worked very well. We had a free exchange of information.

We have been to the United States a number of times, and the U.S.

companies have been here. We have been working well, until 1989. The

Australian company...had raised $3 million from the public and that money

was spent in Australia for this research. But in 1989, the funds of the

Australian company were lost in the failure of Duke Securities. That was

a merchant bank. Because of the loss of money, the Australian company

was unable to continue. So we basically had to lay our staff off in 1989.

But luckily we had produced a demonstration prototype at that stage.

Then it was the university's responsibility to look for funds to continue

because after doing so much and bringing the technology so far, it wasn't

worth it just to dump it. But so far, we have not got any funds from any-

where. (Associate Professor, NWU)

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Faculty turned to commercial partners because the risks of taking products to

market on their own were great. Estimates of success rates of start up companies are

one in ten. But even working with well-established commercial partners had risks.

Carefully negotiated contracts with beneficial licensing and royalty agreements could

end up running aground during financial downturns or bankruptcy, leaving the re-

searchers and the university with enormous costs that might not be recouped. In the

case just described, the university had spent $11 million of its own funds trying to

rescue the project. The faculty member had to disband his team, and his own future

was unclear. Another project had come to a halt when the commercial partner had

become part of a take-over and the merged company had displayed no interest in the

project. Still other commercial partners had bought licenses to intellectual property but

had not aggressively developed it.

Faculty attempted to control the vagaries of the market place through political

work.lxxi Since the federal government rather than industry was the leader and in many

cases a major funder in the push toward academic capitalism in Australia, academics

had to develop expertise about how to influence the state with regard to the flow of

resources for commercial science. A handful of academics drew on public relations

knowledge, but most relied on close connections they had with representatives of the

federal government. Senior faculty, especially heads of centers, increasingly had to

develop political skills to advance their commercial endeavors, even if these skills were

not recognized by faculty as such.

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The CPR worked hardest and longest in the political realm, engaging a public

relations officer whose primary task was government relations. As part of their job,

faculty were expected to participate in visits of state dignitaries. The head and public

relations officer arranged these visits, and faculty acted as hosts to a steady stream of

very high level politicians. In the words of one full professor,

When we have any visitor at all, we like to show and tell. Visually

impressive science--that means lab experiments. You can't just show

them oil pumps. [You need] colorful experiments, videos, movies. I'm

involved in coordinating as well as actually running experiments. I'm

always present on tour, and get to meet them, have lunch, shake

hands....four federal cabinet members, the premier of the state, state

education minister and the vice-chancellor, in tow, all came through in two

weeks. So, at least on limited time basis, I have contact with the high

level--Dawkins, Michael Baldwin, the junior minister for higher education,

in particular, special research center grants...The only two who haven't

come through are Bob Hawke and Simon Creane....it's long-term selling.

It's a long-term and continuing exercise. We don't invite someone over the

month before a grant is up. We don't fall in the trap of not selling

ourselves to our political masters. (Professor, OU)

Many professors were not as conscious as those at CPR of the importance of political
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work in securing commercial success. Nevertheless, most of the more senior

professors were involved regularly in pressing their requests on government and

industry acquaintances.

We're a small community, even nationally. I can ring up a federal cabinet

members and say what I think is a problem and what I think should be

done. I know them personally, I went to the university with them. I have a

network that's very useful. (center head, NWU)

Political work, especially when Cooperative Research Centers (CRCs) were involved,

meant putting in long hours with industrial leaders and government leaders, trying to

build the coalitions needed for funding.

I really tried to talk to a lot of people to string it [CRC] all together. It was

a hard sell job. It was getting into the board rooms of companies, and

saying, we should try this. I've spent a lot of time networking...making

contacts, making groups of colleagues, who now have senior positions,

old loyalties, friends I went back with. It's more than friendship, it's trust.

People make a judgment about you, and then if you're promoting

something, they're likely to listen. (Professor, USAI)

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Only the faculty at the CPR self-consciously saw their work as political, political

in the sense that their efforts to secure funds were as much based on promotional skills

as on the merit, usefulness, or competitiveness of their products. Senior faculty at all

three institutions were engaged in similar, though less obvious, promotional work, but

they did not see this effort as political, nor as calling for any expertise. Even so , they

were all highly skilled at using their professional and institutional positions to influence

state and federal politicians as well as business persons.

CONSULSTANCIES

Most of these faculty and professional officers also did consulting work. Almost

all faculty did individual consulting, using the one day a week they were traditionally

allowed. In contrast with the situation in the United States, funds from individual

consultancies did not belong solely to the persons who did the work. Instead,

consultancy monies were divided in thirds, one-third going to the university, one-third to

the department or center, one-third to the professor or professional officer who did the

work. These monies could be put in pocket or in a "private" university account. The

Australian income tax rate was about 50%, and as a result professors often preferred to

keep their monies in untaxed university accounts. Monies in university accounts could

be spent on a wide variety of academic-related activities and equipment. The other

thirds went to the unit and to the university, respectively. Although the individual

profited, so did the units, most of which were organized around commercial science.
 303

Personal or individual consulting, then, was another form of market behavior used to

defray the units' costs for commercial science.

One unit engaged in a somewhat different practice. This group or unit was

organized to exploit its faculty and professional officers' consultancies in order to

finance other university-based research and teaching endeavors. In other words, as

originally conceived, a combination of student fees and consultancies was supposed to

support this relatively new social science unit.

These faculty, put in position where they had no choice but to enter the market,

had a somewhat different set of entrepreneurial problems than did those with

intellectual property. The problems were of two sorts. First, the unit had been

established with substantial seed monies from state government, and that same state

government was their most likely source of consultancies. The state government

expected some consideration with regard to fees in recompense for the seed money,

leaving the unit without a rich source of income. Second, the faculty in the unit were

uncertain what their posture should be with regard to the organizations with which they

did consulting:

I don't see myself as a consultant hack, who will say anything to please

anybody. I think it's very important as an academic consultancy unit that

we retain our credibility and integrity, and I am concerned that this being

bullied into saying something, especially by a powerful client like

government, is an asset-stripping exercise for us. So, the government

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comes to academic institutions to be able to say, here we have an inde-

pendent, reliable, objective organization with scientific rigor, and some

degree of depth of analysis--but then as soon as they bully you into

saying what they want, then you don't get any more consultancies, you've

been written off from that category....They want you to be independent,

but they want you to say what they want. (Lecturer, NWU)

The problem for an academic consultancy unit, according to this faculty member, was

that you were damned if you gave the politically correct advice and damned if you did

not.

A third problem faced by academic consultancy units was conflict of interest.

Most universities had regulations against conflict of interest with private business,

regulations which academics took to mean that they could not enter into open

competition with private groups. As one professor said,

The competition [private business] on the commercial side is very

ambivalent--we're taking a lot of business away from people, and they're

not satisfied that it's fair trade. They say a lot of our hidden costs are

unfairly borne by the government. There's a lot of suspicion. There's

conflict of interest laws--but we're talking about a financial conflict. They

say you're being paid by the federal government and under pricing your-

self....People in the private sector complain about it bitterly--they say we

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can underbid them, we have equipment, students, all free. (Center Head,

OU)

Academic consultancy units were not supposed to engage in routine consulting

because they were regarded as having an unfair advantage, given that they received

basic salaries from the government as well as equipment, space and relatively cheap

student labor. Academic consultancies were supposed to focus on tasks that drew on

staff research skills and were non-routine, thereby differentiating this academic labor

from that of commercial groups. One professor tried to solve his problem with the

commercial sector by including costs and overheads in salary rates so his unit ended

up with almost the same rates as the private sector, blunting what the private sector

thought was the unit's competitive edge. However, this professor's solution did not

address the difference between routine and non-routine consulting, and the line

between the two was very thin. When pushed to raise money to support their research

and sustain their units, professors and professional officers had trouble with the

distinction.

We're governed by a university rule that says we're not supposed to do

standard consulting; they [consultancies] should be research oriented, not

ones that should be taken on by standard...practice...that ruling...is

lapsing because the government is pushing universities into doing applied

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research....In the future, we'll be looking [at]...much bigger jobs and

broader in scope....That will cause me something of a dilemma, because

there's going to be a certain amount of standard [work] in larger type jobs,

and whether we should take this on--because it hasn't got a scientific

component--that's a dilemma. (Associate Professor, OU)

Consulting presented faculty with several problems. If faculty attempted to

sustain their units through consulting, they put their scholarly reputations at risk if they

too often produced information that pleased their sponsors; but they risked future

commissions if they too often displeased their sponsors. Like other faculty, these

individuals also faced of conflict of interest allegations. By increasing their activity in

the market, they entered into competition with private firms engaged in similar activities.

Ironically, by acting as state-subsidized entrepreneurs, faculty were in a position to

push small private sector firms out of the way, impeding the development of a broad

culture of entrepreneurship.

ENTREPRENEURIAL KNOWLEDGE

Faculty and professional officers participating in commercial science developed

an entrepreneurial expertise important to their endeavors. This expertise consisted of

the ability to recognize the commercial value of their science; to protect that science; to

locate commercial partners; and to negotiate for intellectual property rights and

research contracts with a variety of parties, including students and colleagues, their
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academic institutions, various state agencies, and industrial partners. Almost all of

these negotiations were non-routine, a characteristic of professional expertise (Abbott

1988). The time spent acquiring this expertise took professors away from their

laboratories, their students, and university service, as traditionally construed.

There are several possible ways to reduce the need by professors to acquire

commercial expertise, freeing them up to give more time to science and students and

less time to the market. Some of these negotiations could be more highly routinized, so

that professors' and universities' negotiations with the market would mirror the relations

they have with government granting agencies, with fixed overheads and standard

formulas. However, the competitive nature of the market makes a high degree of

routinization unlikely. In contrast to government agencies, business strives to have

universities bear the largest share of research costs possible, making agreements more

beneficial to the profit-maximizing sector than to universities. lxxii Another way to

minimize the amount of entrepreneurial expertise that professors need to develop is to

assign negotiations with external entities to specialists. Indeed, a host of specialists

have already emerged--managers and staff in university companies, technology

transfer officers, research managers--ready to participate in the new opportunity

structures offered by university involvement in the market. However, professors resist

efforts to shift entrepreneurial expertise away from them. Faculty claim that they are

better positioned to negotiate with external groups because they best understand the

problems and possibilities of the science involved. They see themselves as better able
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to make contact with business representatives interested in their work than are

specialists in intellectual property management.

More importantly, faculty understand that they will be able to negotiate the best

deal for themselves and their units only if they are major players in the process. If they

routinize negotiations or turn them over to special agents, they forfeit control over a

mechanisms that allows them to claim more resources and to differentiate themselves

from other faculty. In short, faculty intuitively comprehend that turning negotiations over

to specialized groups will weaken their professional authority and undercut their market

position. Because faculty realize that entrepreneurship is the key to present and future

institutional and cultural preferment, approval and legitimacy, they extensively cultivate

this new form of market expertise.

Although the national government took the lead in redefining commercial science

as the most important form of scientific labor, in this period faculty too began to re-

define entrepreneurial science as a high-prestige activity. As one faculty member said,

It's a tough world outside. It's a completely different world, compared to

what we are [in the university]. But you start enjoying it after awhile, come

to see there is some money to be made. (Associate Professor, NWU)

Or, in the words of another:

The only thing that's rewarding is to make scientific discoveries and then
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apply them--to make things work, that's my only motivation, to make

something better than what's available. (Center Head, OU)

Almost all faculty justified entrepreneurial work on grounds of necessity. They

saw current economic conditions and government mandates as driving them toward

entrepreneurial work. Although entering the market was difficult, painful, even perilous,

for the most part senior faculty seemed to find it exciting and stimulating. They were

entrepreneurs in a culture that valued entrepreneurship (Etzkowitz 1989, Seashore-

Louis 1989; but see also Rhoades and Slaughter 1991, 1991a). Through their science

and skills in negotiation, they were working to overcome the financial straits threatening

universities and academic researchers. All faculty deeply engaged in entrepreneurial

work had hopes of "the big hit," a discovery that would yield an endless and bountiful

stream of resources. They justified their emerging commitment to entrepreneurship in

terms of saving their units and finding the resources necessary to advance science.

They seldom spoke about students, undergraduate education, education in general, or

the institution as a whole.

CONCLUSION

When faculty engage in academic capitalism, they move outside the treatment of

professionals' market relations encountered in process theories of professionalization.

Process theorists treat professionals' market relations in terms of market monopolies

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obtained through various forms of state licensure and accreditation. They take the

position that professions as occupational structures pre-date market formation. When

professionals were confronted with the rise of mass markets in the last quarter of the

nineteenth century, they tried to escape the harsh discipline of these markets. Process

theorists argue that professionals make case that they should be granted monopolies of

knowledge because they altruistically use their expertise to serve the public good rather

than special interests or self-interest. In return for state-enforced control over licensing

and accreditation, professionals attempted to guarantee their integrity. Process

theorists believe the professions became enmeshed in mass markets after World War

II, compromising their claims to altruism and to state protection from the market

(Larson, 1977, Starr 1982, Friedson 1986). Brint conceptualizes professionals as

moving from social trustee professionalism, characterized by "civic-minded moral

appeals and circumscribed technical knowledge" and allied with the regulatory state to

expert professionalism, which "emphasized the instrumental effectiveness of

specialized, theoretically grounded knowledge, but included comparatively little concern

with collegial organization, ethical standards, or service in the public interest" and

intersected with the market (Brint 1994, pp.36-37, italics in original). Process theorists

have started to consider the effects of the market on professions, but do not speak to

the consequences academic capitalism for faculty as a professional group or for

universities as organizations.

On the basis of our case studies in Australia, we think that the sociology of

science literature has concentrated too much on norms of science, particularly on

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distinctions between basic and applied research, and not enough on resource

dependency theory and on globalization conditions and forces that are changing intra-

and inter-institutional relations and are renorming science and technology (Rhoades

and Slaughter 1991, 1991a, Slaughter and Rhoades 1990, 1993, Gibbons 1994). Nor

does the sociology of science literature look beyond colleges of science and

engineering, an oversight we view as problematic because we think the well-being of

professional work depends on the health of the university as a whole, not only science

and engineering.

We think that academic capitalism creates substantial risks for professors,

administrators and public universities. Although only some professors, academic

professionals and administrators are engaged in academic capitalism, the risks they

incur are probably faced by their entire units and by their institution as a whole. These

risks are several: business failure, product liability, failure to meet societal expectations

of economic improvement and job creation, and above all, neglect of students.

Academic capitalists run the risk of failing to recoup the monies their institution,

government or industry has invested in them. Capitalism entails risk; profit is the

reward. In our intellectual property sample, only one product was generating profits

and only one had failed, costing the institution millions of dollars. The remaining eight

pieces of intellectual property were still in the development process. The business

innovation literature suggests that only one start-up company in ten is successful.

In the United States, where intellectual property has been pursued by academic

capitalists since the early 1980s, a small but growing number of institutions generate
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significant income from licensing and royalties. However, even those institutions often

incur as much in legal and other costs as they gain in income. Moreover, published

statistics that report annual income from intellectual property give no indication of the

costs to the university--technology transfer offices, university foundations, university

companies, direct monetary contributions. If Australian universities intellectual property

follows the American pattern to date, more institutions will lose revenues than gain

them.

As in the United States, Australian administrators and faculty entrepreneurs saw

product liability as a potential risk. They raised the problem of what might happen if

intellectual property licensed by a university were implicated in consumer injuries such

as those caused by thalidomide and breast implants. Although product liability is a real

possibility, there have been no legal cases in Australia as yet, and the complex legal

issues surrounding the responsibility of the university as licensing agent for intellectual

property have not yet been clarified.

To our knowledge, failed academic capitalists do not incur obvious penalties for

losing institutional funds. Although several associate professors thought they had not

been promoted because their intellectual property had not been successful, we had no

way to confirm their suspicions, and the alternative interpretation, that their academic

work was not sufficiently meritorious, was equally possible. The faculty member whose

intellectual property had cost his institution $A12 million was not asked to make any

restitution, nor was it clear that his institution would refuse further monies for his project

or decline to invest in another promising project put forward by the faculty member. In
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many regards, academic capitalists are state-subsidized entrepreneurs, cushioned from

the market by their salaries and institutional resources. As we noted in Chapter 1, their

position is somewhat analogous to that of researchers and entrepreneurs in primary

sector industries that are cushioned from the market by government funds because the

industries are perceived as meeting national needs in critical areas such as defense,

food supply, health. Like their counterparts in government supported industry, state

subsidized academic capitalists do not want to face the market without government

funds. In the United States, we discovered that faculty had little interest in leaving the

university to form start-up companies, that a number of faculty participating in

technology transfer had moved from industry to the university, and that they were not

particularly interested in the routine of maintaining a business (Slaughter and Rhoades

1990, Rhoades and Slaughter 1991a).

Another set of risks is presented if universities fail to realize the promises

inherent in national science and technology policy. Governments, whether state or

federal, have provided the lion's share of funds for academic capitalism, supplying

monies in hopes of improving national economies and creating jobs. If academic

capitalism does not contribute to prosperity or contributes to economic growth without

generating high-paying jobs, governments may shift spending priorities, curtailing

monies for university research. (Alternatively, faculty success in raising institutional

revenues through intellectual property might result or may have resulted in revenue

substitution, whereby governments curtail funding because institutions generate their

own resources. For elaboration of this point, see Chapters 3 and 4.)
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Although the consequences of failure on the part of academic capitalists are not

clear in all their particulars, it is likely that the institution would bear the burden of

failure, making fewer resources available for education and non-entrepreneurial faculty

research. Failure could also result in loss of public confidence and litigation, both of

which might prompt greater state regulation or oversight of faculty and institutional

activity. Whether the return on academic capitalism is worth the risks remains to be

seen, as do the consequences of academic capitalism for the institution as a whole.

The science policy-innovation literature that looks closely at the relationship

among academic science and entrepreneurism generally examines neither the risks

entailed nor the broad consequences for institutions of higher learning as a whole. On

the one hand, this literature, in part developed by academic administrators promoting

academic capitalism and in part by science and technology policy units initiated in the

1980s to study how technoscience can make greater contributions to national

prosperity, argues that the very nature of science has changed, impelling academics

toward the market. For example, Donald Kennedy, when he was president of Stanford

University, argued that the trajectory of innovation collapsed as disciplines matured,

"accelerating" the movement between basic and applied:

A number of scientific disciplines are now being recognized as "ready" for

accelerated application. Our perceptions of what is possible are

sharpened in such fields; as a discipline matures in power and

confidence, leaps from the laboratories to applications that once seemed

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intimidating become commonplace. That now appears to be the case, for

example, in immunology and "genetic engineering" as well as in

microelectronics (Kennedy 1984).

Similarly, Michael Gibbons (1994) of SPRUE, a prominent U.K. science and technology

policy unit, describes the emergence of "mode two" science, science that is

transdisciplinary, transinstitutional and transnational, shaped by the drive to reach the

new level to which science has risen, where there is no longer any distance between

discovery and application. Science and product are one. There is no longer a gap

between discovery and application, between laboratory and market. Science and

technology are project specific, not permanently located in units within universities. In

other words, scientists and engineers are part of the post-modern economy, members

of the flexible labor force, signing on to just-in-time production teams, ready to move

anywhere in the world, as the demands of the project and the market determine

(Gibbons et. al., 1994).

On the other hand, evolutionary theorists argue that basic science is not

necessarily related to industrial innovation and application. In contrast to Kennedy

(1984) and Gibbons (1994), who views the gap between basic research and product

development diminishing, these theorists think that discoveries leading to innovation

are often developed in the manufacturing divisions of businesses rather than from basic

research in the academy (Gummett 1991, Leydesdorff 1994). In the United States,

industries are disbanding central laboratories that work on general problems, and are
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moving research into the business divisions (Varma 1993). lxxiii

Although these two lines of argument developed in the science policy literature

are somewhat contradictory, both undercut the primacy of basic research. The "mode-

two" argument makes the case that there is little difference between basic and applied

and that neither need be done in the university. The evolutionists see applied research

as more important to innovation than basic, and do not see a clear relationship between

the two. In other words, increased funding of basic research will not necessarily lead to

business innovations that will bring economic prosperity. The logical conclusion of both

of these arguments, if applied to science and technology policy decisions, would

undermine the need for government funding of autonomous or independent academic

science and technology. If there is no difference between basic and applied, and if the

new research is transdisciplinary and transnational, than there is no compelling policy

argument for investing in particular fields or in institutions of higher education, other

then for their training functions. Contrarily, if basic research does not lead to innovation

and application, the same conclusion follows: there is no compelling policy argument for

investing in particular fields or institutions. In these arguments, research funding

directly serves the economy and is not mediated by professional scientists and

engineers, who are housed in universities. Instead, researchers trained in tertiary

institutions become part of the post-modern, flexible labor force, working intermittently

on industry- or government-led technoscience projects, perhaps training graduate

students when they are not engaged on projects, perhaps not. Our cases point to

professors whom resource dependency pushed toward academic capitalism, but who
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strenuously try to avert becoming project workers of the mode-two type or joining an

industrial firm. Instead, they seek the advantages of professionals--protection from the

market, state subsidy of infrastructure, and control over their own work. They seek to

acquire the entrepreneurial expertise that allows them to act as academic capitalists:

finding funding for the products, process or service they are trying to develop and

promote; applying for and proving patents; developing market strategies and

negotiating with corporations for research contracts and royalties. They have no

intention of leaving the academy. They relish being state-subsidized entrepreneurs.

However, faculty might not be able to have their cake and eat it too. When

faculty in public research universities engage in academic capitalism or mode-two

production of science they probably raise questions about the nature of their implicit

contract with society. The social contract between professors and society suggests that

if professors altruistically serve the public good rather than their own special interests,

then in return they receive a monopoly of practice that ensures them a descent

livelihood as well as societal respect. As professors, stimulated by international

economic competition, national policy emphases, and resource dependency become

more entrepreneurial, they may lose their monopoly on conferring academic

credentials. More options for degree granting agencies may become available, for

example, proprietary colleges and universities or colleges and research groups located

in corporations may rise to compete with established colleges and universities; state

and national legislators may not limit that competition.

As universities develop hybrid research entities that span the boundaries

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between private and public sectors, governments may cut back on overhead for

university research. Cuts to overhead would reduce funding in the sciences and

engineering, but also in a variety of other departments. Loss of overhead funds would

also seriously reduce the amount of money research administrators have at their

discretion. Alternatively, as academic capitalism becomes more established, the

several states and federal governments may deregulate operation of centers so that

centers and institutions bear more fully the risks associated with entrepreneurism.

Forfeiting altruism may mean facing the strictures of the market.

Perhaps the most likely future of sponsored academic research is the

development of corporatist (industry, government, university) funding arrangements,

the priorities of which are determined by national technology policies. In some

countries, such as Australia, these would be government led in terms of priorities, in

others, such as the United States, they would be led by industry, even though it is likely

that government would bear the greatest cost burden (Slaughter 1990, Etzkowitz

forthcoming). In essence, universities would take over the functions previously

performed by industrial laboratories. While such an arrangement would undercut

faculty emphasis on autonomy, it would provide reliable and predictable, if somewhat

reduced, resources for universities. Even if faculty are reluctant to allow external

entities determine their research direction, university officials usually place a high

priority on stable resource arrangements. The Australian Cooperative Research

Centers were a move in this direction, as were the centers of which they were

modeled--the Interdisciplinary Research Centers of the United Kingdom and the

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Industry/University Cooperative Programs in the United States (Hill 1993). The U.S.

Department of Commerce's Advanced Technology Program perhaps points out our

future most clearly. Government works with industry to clarify the areas of research

that companies in a particular field deem important to the mid-term future; government

and industry together fund that research, some of which is sub-contracted to

universities, with the proviso that ownership belongs to the companies (U.S.

Department of Commerce 1995).

None of these theories--sociology of science, process theories of

professionalization, theories of the role of science and engineering in product

innovation--are particularly concerned with the university as an organization. As

students of higher education, we have tried to understand how academic capitalism

effects not only colleges of science and engineering, but the university as a whole. We

see academic capitalism in general, and technology in particular, as bringing about

broad change in higher education, to the point where the center of the academy has

shifted from a liberal arts core to an entrepreneurial periphery (see Clark 1995).
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CHAPTER 7: CONCLUSION

This book examined ongoing changes in the nature of academic labor in the

period 1970-1995, with an emphasis on the 1980s and 1990s. We have argued that

the changes currently taking place are as great as the changes in academic labor that

occurred during the last quarter of the nineteenth century. Just as the industrial

revolution at the end of the nineteenth century created the wealth that provided the

base for postsecondary education and attendant professionalization, the globalization

of the political economy at the end of the twentieth century is destabilizing patterns of

university professional work developed over the past hundred years.

Many of our colleagues have also made the case that higher education as an

institution and faculty as its labor force face change unprecedented in this century.

David Breneman (1993), James Fairweather (1988), Patricia Gumport and Brian

Pusser (1995), William Massey and Robert Zemskey (1994, 1995), Gary Rhoades

(forthcoming) and Henry Etzkowitz (forthcoming) are some of the United States

scholars exploring the dramatic changes in academic work and institutional and system

management. In other countries, other scholars are addressing similar change in

higher education, for example, Burton Clark (1995), Guy Neave (1988) and Guy Neave

and Frans Vught (1991); in the United Kingdom, Gareth Williams (1992, 1995) and

Michael Gibbons (1994); in Australia, John Smyth (1995) and Simon Marginson (1993,
 321

1995); in Canada, Howard Buchbinder and Janet Newson (1990) and Buchbinder and

Rajagopal (1993, 1995). These scholars, too, describe broad changes in higher

education, often focusing on how the center of the academy has shifted from a liberal

arts core to an entrepreneurial periphery, describing the increasing "marketization" of

the academy and detailing the rise of R&D with commercial purpose.

Our book drew heavily on the work of these scholars, and the many others cited

in the preceding chapters, enabling us to paint a broad picture of the changes faced by

faculty and by institutions of higher education. However, our book expanded the work

of these scholars in several ways. We began our analysis by looking outside of higher

education, at global political economic change, so that we could gauge the scope of

change facing faculty and institutions. Because we saw change as precipitated by

shifts in global political economic conditions, we included change in higher education in

several nations through our study of the development of national higher education and

R&D policies in four countries--Australia, Canada, the United States and the United

Kingdom. We followed up our analysis of national policy changes with examination of

shifts in financial patterns in higher education in all four countries over a 20 year period,

approximately 1970-1990. To see the impact of global economic changes, national

policy changes, and changed higher education finance patterns on faculty in research

universities, we conducted case studies of Australian institutions that explored the

affect of academic capitalism on faculty work lives and the creative ways in which

faculty responded to new entrepreneurial opportunities. From our point of view, the

greatest weakness of our book is the lack of comparable case studies in Canada, the
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United Kingdom and the United States. Some scholars, primarily in the United States,

have developed case studies around what we call academic capitalism--Henry

Etzkowitz (1983, 1989, 1992), Karen Seashore Louis (1989), Gary Rhoades and Sheila

Slaughter (1991, 1991a), Sheila Slaughter and Gary Rhoades (1990), but more are

needed to assess fully the changes that research universities are undergoing.

The central argument of our book is that the structure of academic work is

changing in response to the emergence of global markets. As national competition for

global market shares increased, Australia, the United Kingdom, and the United States,

developed national higher education and R&D policies that in the end re-shaped faculty

work, and both undergraduate and graduate education. Increased global competition

interacted with national and state/provincial spending priorities so that less money was

available from government, when measured as a share of higher education revenue or

in constant dollars per student. This precipitated campus reactions of a resource

dependency nature. In all four countries, the block grant as a source of funding for

higher education diminished as a share of higher education revenues, with the result

that faculty and institutions began to compete or increased their competition for external

funds.

We called institutional and professorial market or market-like efforts to secure

external funds academic capitalism. These external dollars usually were tied to market-

related research, which was referred to variously as applied, commercial, strategic and

targeted research, whether these monies were in the form of research grants and

contracts, service contracts, partnerships with industry and government, or technology

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transfer. Institutions also began to compete in the recruitment of more and higher fees-

paying students. Although academic capitalism may seem to many to be an oxymoron,

we thought the concept dramatically captured the changes facing universities. More

than alternatives, such as academic entreprenurism, academic capitalism seemed to

grasp the encroachment of the profit motive into the academy. By using academic

capitalism as our central concept, we defined the reality of the nascent environment of

research universities, an environment full of contradictions, an environment in which

faculty and professional staff expend their human capital stocks increasingly in

competitive situations. In this environment, university employees simultaneously are

employed by the public sector and increasingly autonomous from the public, corporate

body. They are academics who act as capitalists from within the public sector: they are

state subsidized entrepreneurs.

In terms of practical implications, we hope that concept of academic capitalism

will enable faculty, other academic personnel, and administrators to make sense of

their daily lives. When faculty find themselves spending increasing amounts of time in

the pursuit of external funds or in external relationships that might yield more students,

contracts, or partnership arrangements, thus increasing unit revenue, the concept of

academic capitalism may help them put their activities in a meaningful context. Faculty

and administrators may begin to view the rapid rise of costs for academic professionals

as a way of funding academic capitalism, and may begin to wonder when

entrepreneurial activity on the periphery will begin to definitively reshape the academic

core. The concept of academic capitalism may help administrators, who attempt to
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enhance faculty productivity, assist faculty to tap external resources, and develop their

own market schemes, begin to think broadly about how to deploy institution resources

in the changed environment of higher education.

GLOBAL POLITICAL ECONOMIC CHANGE AND NATIONAL HIGHER

EDUCATION AND R&D POLICIES

The emergence of a global political economy has caused structural alterations in

national economies. The rise of multi-polar global competition destabilized the

economies of established industrial nations. In three of the countries we studied--

Australia, the United Kingdom, and the United States--national policy makers

responded to increased competition for shares of global markets by reducing overall

rates of growth in state expenditures and reallocating money among government

functions. Generally, funds were taken away from discretionary programs, that is,

those not of an entitlement nature. Further, within discretionary categories, funds were

reallocated to programs thought likely to contribute in a direct way to technological

innovation and economic competitiveness.

The national policies of these three countries promoted academic capitalism--

market and market-like behaviors--on the part of faculty and institutions. lxxiv In terms of

enrollments, institutions in Australia and the United Kingdom began to tender

competitive bids for student places, contracting with the government to educate

students for a fixed cost. In the United States, institutions increasingly competed to
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attract high tuition and fees-paying students, especially non-resident and overseas

students. In all three countries, state support varies by curricula. The United Kingdom

has moved furthest in this direction, providing differential state support per student, with

the highest amount for students in technoscience fields. All four countries have

instituted policies that treat research and development as a source of national wealth

creation, although Canadian faculty and institutions in particular are resisting this

change. Faculty and institutions lost autonomy as higher education was more closely

integrated with the market. Freedom of professors to pursue curiosity-driven research

was curtailed by withdrawal of more-or-less automatic funding to support this activity

and by the increased targeting of R&D funds for commercial research. Faculty and

institutions were pushed and pulled toward academic capitalism by policy directives and

by shifts in the resource mix.

These national policy changes had tangible consequences for tertiary education

in the four countries. Policies for academic R&D, the life blood of graduate education,

became science and technology policies, more concerned with technoscience

innovation, and building links with the private sector than with basic or fundamental

research that articulated more with learned and professional associations and less with

the economy. For the most part, technoscience fields gained resource shares while

fields that were not close to the market, such as the philosophy and religion, foreign

languages, letters and performing arts, or fields that served the social welfare functions

of the state, such as education and home economics, lost shares. Measured by

positions for faculty, places for students, and research money technoscience fields
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became the growth area in tertiary education.

The immediate implications of national policy changes are several. At the

institutional level, national policies that fund technoscience are likely to increase

differentiation among fields within research universities. Government funding is likely to

tilt fields and disciplines toward entrepreneurial research. Although faculty in all fields

can engage in academic capitalism, fields and academic disciplines best suited for

academic capitalism are more likely to receive greater government funding and be

better positioned to win business and industry funds as well. Amount of external

funding faculty are able to generate through entrepreneurial activity depends to some

degree on markets for professional labor (Bok 1993, Brint 1994). Those professions

and academic disciplines close to the market--e.g., business services and applied

sciences--are likely to gain; communications and cultural fields are likely to gain

unevenly; and civic regulation as well as human services professions and disciplines

may not fare well (Brint 1994). In the United States and Canada, where the several

states and provinces play an important role in funding, in order to remain competitive

public research universities are likely to deploy state funds in such a way as to

strengthen fields with potential for academic capitalism (Volk 1995).

Although technoscience areas generally received more money over recent

decades, as policy makers took the position that a post-industrial economy called for a

more highly educated workers, policy-makers in all four countries sought to expand

student participation without comparably augmenting resources for tertiary education.

The increase in student numbers, together with the slowing in the rate of growth in state
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spending, began to change the conditions of faculty labor in contradictory ways. On the

one hand, faculty were encouraged to engage in a wide variety of entrepreneurial

activities. On the other hand, faculty became responsible for larger numbers of

students and were more closely surveilled with regard to the instructional aspects of

their work.

The implications for these changes for the ranking of institutions in national

systems is not yet clear. If evolutionary science and technology theorists, who argue

that basic science does not necessarily result in technoscience suitable for product

development for the global economy, are correct, universities that do very well at basic

research may not necessarily do as well at academic capitalism (Gummett 1991). In all

likelihood, those universities in all four countries that are at the pinnacle of their

systems in terms of prestige and resources--for example, the pre-World War II

universities in Australia, "Oxbridge" and the University of London in the United

Kingdom--will probably have the resources and thus the flexibility to convert

successfully to accommodate academic capitalism. However, in the short term in the

United States, the elite research institutions lost shares of federal science funding.

(See Feller and Geiger [1993] on the dispersion of research in the 1980s.) Competition

among the many universities in the second tier of research universities will probably

increase, ultimately resulting in a shake-down in this group of institutions. Those

institutions that engage successfully in academic capitalism will probably hold their

positions in ratings schemes, but many will not. In the United States, the public

Research I universities, a group that increased dramatically in the post-World War II

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period, will probably be most vulnerable to increased differentiation. Those public

Research I institutions outside the top 10 have always been volatile with regard to

rankings, as well as the amount of research and development dollars they are awarded,

and some will probably suffer severely in terms of decline in status and prestige.

Australia, Canada, the United Kingdom and the United States promoted

academic capitalism as a means of stimulating national economic growth, i.e.,

productivity and GDP growth, and increasing high paying jobs. Productivity and GDP

increased somewhat in the four countries in the 1990s, but income inequality increased

in all of the countries but Canada, with the increases being greatest in the United

Kingdom and the United States (Atkinson, Rainwater and Smeeding 1995).

Businesses are making greater profits, but recovery is not generating highly paid jobs

(Rifkin 1995). Even those with "some college and more" are no longer assured of a

high return on their investment in higher education (Harrison and Bluestone 1990).

(However, young workers entering the job market without some college or more are

very likely to fare less well than their college-educated counterparts.) Paradoxically,

national policies that promote technoscience, its attendant automation, and corporate

restructuring may play into the elimination of professional positions formerly filled by

college educated workers (Abbott 1988).

Even if national higher education and R&D policies do not deliver all that they

promise, the several nations are unlikely to return to the status quo ante. In the

immediate future, if income inequality increases and the number of high paying jobs
 329

decreases, national higher education policies are likely to promote training that directly

meets business and industry needs. Training programs that prepare students for

immediate entry into the world of work would cut costs for corporations, perhaps

stimulating job creation. Training programs would very likely be concentrated in the

less costly sectors of the postsecondary system--community colleges, TAFEs and

technical schools. This may create difficulties in competition for students among four

year colleges, comprehensive colleges and universities, and some research

universities, although degree of difficulty will depend on student aid polices. To retain a

competitive edge, four year colleges, comprehensive colleges and universities, and

some research universities may also begin to move toward directly training students for

the world of work.

However, training for direct entry into the world of work may be difficult in a post-

industrial economy. Technoscience and automation may eliminate positions in some

professional fields, especially as sophisticated computer software is developed--for

example, in accounting, medical diagnostics, legal research and a variety of social

science statistical applications--although new professions may arise to serve

technoscience with a global reach--for example, producer services professionals,

telecommunications managers, administrators of academic capitalism. The crucial and

thus far unanswered question is whether new professional positions will increase as

quickly as old professional positions are lost, and whether the new positions will have

high salaries, status and prestige attached to them.

Only three of the four countries successfully developed national higher education
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and R&D policies that promoted academic capitalism. The exception was Canada.

Although there was a decline in real operating funding per student and some targeted

funding for high technology research and for collaborations with industry, Canadian

higher education did not undergo the same degree of change as the other countries.

Even though the Conservative Mulroney government tried to initiate a rapproachment

among universities, industry and government, for the most part there was little

structural change. Canada, then, offers an alternative to the higher education policies

developed by the other countries. The Canadian case suggests that changes

stemming from the emergence of a global economy do not have to be met by changes

in national higher education policy that promote academic capitalism. The crucial

question in the immediate future is whether Canada can maintain a system committed

to high student subsidy, basic or "curiosity-driven" research, and faculty and institutional

autonomy, given the size of Canada's national debt. If Canada is able to maintain its

system despite pressures for economic rationalization, the Canadian case should be

studied in much greater depth.

RESOURCE DEPENDENCY AND CHANGING PATTERNS OF

NATIONAL HIGHER EDUCATION FINANCE

Global political economic changes prompted national higher education and R&D

policies that resulted in changes in patterns of national higher education finance.

Although there was some variation by country and postsecondary sector

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(research universities, polytechnics, community colleges), in general the data were in

the expected direction. At the very least, the rate of growth in percentage of GNP

devoted to postsecondary education consistently declined. Further, revenue shifts

were away from block grant funding sources to those that reflected a "competition" or

"market" base. Overall, general public funds for higher education declined, when

considered in constant dollars per student. However, revenue shares from other

sources, such as sales and services increased, as did shares from tuition. Private gifts,

grants and contracts, and sales and services also were up. Expenditure patterns

directly reflected the changes in revenues. As government block grants declined as a

revenue share, instruction declined too; as private and government gifts, grants and

contracts expanded shares expended on research, public service, and administration

increased also. Shares of relatively discretionary funding categories, such as

operations and maintenance of plant and libraries experienced large decreases, while

student aid share increased sharply in correspondence with tuition increases. Very

generally, then, universities and colleges in all four countries seemed to be changing

their revenue-generating patterns, moving from funding by general public means

toward higher tuition and competitive grants and contracts, private gifts, and other

competitive sources of monies, while expenditure patterns changed.

Research universities now face increased problems of a resource dependency

nature. The cause of these difficulties involves a shifting of the responsibility for higher

education support from governments to other resource providers and modifications in

the form of government support that is retained, specifically a decline in block grant
 332

funding and an increase in the use of market funding mechanisms (Wasser, 1990;

OECD, 1990; Neave and Vught, 1991; Williams, 1992; Gellert, 1993; Williams, 1995).

Simply put, major changes in resource dependency relationships have occurred;

universities have been pushed and pulled in the direction of competing in a quasi-

market arena for more and more of their operating funds.

The practical implications for research universities are many. Faculty will have

to pursue competitive funding more actively, but competition for these funds will be

fierce. In Australia, after the unified national system was inaugurated, creating

organizational turbulence and heightening problems of resource dependency, the

Australian Research Council was able to fund a much smaller number of grant

applications, only about 20 percent (Hill 1993); and in the United States, case studies of

research universities indicated that faculty now spend more time on grant applications,

with less success (Slaughter 1987). Administrators may expend extra effort to target

and support faculty, most probably gathered in centers, who will spend increased time

on applications for external funds. Institutional resources very likely will be committed

to support academic personnel or professional officers (non-tenure track, non-

instructional academic professionals) who will help faculty apply for and execute grants,

contracts, partnerships, technology transfer and other entrepreneurial activity. Also,

more institutional funds will be expended on managing entrepreneurial endeavor

(offices for patenting and licensing, technology transfer, arms-length foundations, spin-

offs, research parks). The loss in instructional productivity for entrepreneurial faculty

will most likely be compensated for by hiring more part-timers, to keep labor costs
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down. Indeed, in the United States recently corrected Department of Education data

"reveal that nearly 45% of all faculty held part-time appointments in 1992, up from 38%

in 1987 and more than double the 22% in 1970 (Benjamin forthcoming). Because

academic capitalism will come to permeate institutions as a whole, not just the units

where instruction and R&D are carried out, administration will expand the university's

`sales and services' functions, stocking university shops with products bearing logos

and mascots, privatizing food services by licensing concessions to fast-food chains

such as McDonald's, Pizza Hut, and Berger King. Another area of ever increasing

activity will be institutional advancement. And, of course, tuitions will go up, a point we

will speak to at the conclusion of this chapter.

INCIDENCE OF ACADEMIC CAPITALISM IN UNIVERSITIES

Although there are a number of case studies of departments, centers and

institutes involved in a particular form of academic capitalism--development of

intellectual property (Etzkowitz 1983; Matkin, 1990; Weiner, 1987; Slaughter and

Rhoades 1990; Rhoades and Slaughter 1991)--there are no studies having either broad

or in-depth analysis of a financial nature. In other words, there are no studies that

examine entrepreneurial activity across all academic units within a university and none

that concentrate on the financial costs and benefits of these endeavors. We thought

such an accounting critical to understanding the incidence and impacts of academic

capitalism within research universities.

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At two research universities, we examined those units that derived at least 1% of

their budgets or roughly $20,000, from entrepreneurial activity. The unit budgets and

related documents yielded information as to the sources of revenues and how the

entrepreneurial funds were expended. The unit head and the unit financial officer

(usually a department staff member) helped identify the departmental activities that met

our operational definition of academic capitalism: "Activities undertaken with a view to

capitalizing on university research or academic expertise through contracts or grants

with business or with government agencies seeking solutions to specific public or

commercial concerns." Activities such as consulting were included so long as the

associated revenues entered university accounts, university expertise was directly

involved, and the activities were applied or developmental in nature (excluding basic

research).

At the two universities, we found that, respectively, 10% and 12% of total

university operating revenues were generated through academic capitalism; these

amounts were 18% and 19%, respectively, as large as the "recurrent" or base funding

provided by the Commonwealth. Clearly, these were significant amounts. Indeed, the

importance of these activities no doubt has grown since our work there, as Australian

research universities had only recently encountered reductions in revenue shares

provided by the state, thus pushing them more deeply into entrepreneurial activity.

By no means were the respective $16.3 and $12.3 million distributed evenly

across the departments of the universities. Less than half the university departments

self-generated significant revenues, and such activity was highly concentrated in a few
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departments. The humanities and social sciences were unlikely to have received more

than a few thousand dollars in such funding, although there were important exceptions.

The same was true of most professional fields related to the social sciences, although a

few notable exceptions existed; and the more "basic" natural science disciplines, such

as chemistry, physics, botany, and zoology, tended to generate fairly modest sums, too

(even for basic research, which was excluded from our analysis). It was in the applied

science fields and professional schools--applied natural sciences, agricultural sciences,

and engineering--where revenues from contracts and grants with businesses and

governments were substantial.

A similar pattern was observed in the United States by Fairweather (1988) and

was confirmed by Levin et al. (1987) from a survey of businesses regarding the

relevance of various scientific fields to technical advances. Moreover, the distribution of

funds from academic capitalism in Australian universities follows Brint's taxonomy of the

relation of professions and academic disciplines to the market, discussed in Chapter 5,

with the exception of business-related services. Again, with the exception of business

services, the incidence of academic capitalism mirrors differences in salaries by

professional field and academic discipline in the United States, suggesting that

commercial markets and academic markets are interpenetrating on a global scale.

(Given the different cultures, histories and traditions of the several countries, we expect

incidence of academic capitalism to vary somewhat. For example, we were not

surprised that Australia, which did not have an aggressive business class [Marshall

1996], at least in the early 1990s, exhibited little entrepreneurial activity in business
 336

services. We would expect a higher incidence of academic capitalism in business

services in the United States.)

The location of academic capitalism in departments, centers, and institutes close

to the market strengthens our previous arguments about the likelihood of internal

differentiation within universities. As a result of the emergence of a global economy

and the development of national higher education policy aimed at stimulating economic

growth and innovation in business and industry, fields close to the market gain power

and influence within the university. As organizational turbulence develops in response

to changing revenue streams, faculty in fields close to the market are able to take

advantage of competitive opportunities provided by changes in government policy as

well as opportunities offered by business and industry. Faculty participation in

academic capitalism is likely to increase differentiation among professions and

academic disciplines within universities, since the generation of substantial revenues

seems to be concentrated in the relatively small number of fields close to the market.

Australian academics relatively rapid involvement with the market suggests that

universities and faculty stood ready to compete--engage in market and market-like

behavior--for critical resources. Those resources usually are for research, a fact which

fits nicely with the university orientation toward prestige maximization, since relatively

few faculty win competitive research funds from government or industry, research is the

activity that differentiates among universities. Further, faculty are selective in their

pursuit of external research money. They compete for basic or fundamental research

funds with the same vigor as always and look for commercial research funding that
 337

draws on frontier science and engineering tied to national policy initiatives and

partnered by prestigious firms, usually national or multinational in scope. lxxv

The practical implications of Australian faculty's move toward the market are

several. Faculty behavior may not be as difficult to change as scholars of higher

education have thought. If resources do not undermine faculty status and prestige

lxxv. In the United States, big companies are the only ones with the resources to

sustain multi-year funding of large research projects. For example, in

biotechnology, large pharmaceutical firms initially funded buildings, research staff,

and multi-year contracts in biotechnology (Slaughter 1990). Although a number of

small "spin-off" biotechnology firms were developed by university professors, they

very often were purchased by large corporations (Kenney 1986).

lx. The CRCs were initiated by the federal government in 1990. They brought

together academic, government and industry to fund commercial research, and

were scheduled to receive $100 million a year. They were modeled after the

Interdisciplinary Research Centers of the United Kingdom and the

Industry/University Cooperative Research Programs funded by the National Science

Foundation in the United States (Hill 1993). University of Science and Industry

administrators considered CRCs as a way to establish stable and enduring

relationships with external entities in order to develop predictable flows of

resources.

lxi. Historically, Australian professors salaries were the same at each rank across all

universities, and were collectively bargained, with the exception of medicine.

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systems, a relatively small amount of money at the margins can substantially alter

faculty activity. In other words as state block grants decline, faculty in fields able to

intersect with the market may move swiftly toward academic capitalism. However,

change within public research universities will be uneven because the opportunities for

developing market relations are uneven; nevertheless, there is abundant evidence of

Recently, university and government leaders have been discussing extending

differential salaries to fields other than medicine.

lxii. In other words, technostructure is a concept very close to technoscience,

presented in Chapter 2.

lxiii. Chapter 2, Table 2.2, Average salaries of full professors by field, 1983-1993)

reveals that academic salaries are highest in fields that are closest to the market.

lxiv. We did not study business or producer services fields. In retrospect, we

wished we had studied at least one center in those areas, so we could have

compared it to the applied science fields.

lxv. Brint says that the work corporations contract out to professionals is usually

discontinuous. In other words, the reason the corporations do not do the work

themselves is that they don't have an on-going need for expertise in the area. This

may be the case, and university centers may compete for discontinuous projects,

especially if they are multi-year contracts, but we think faculty in university centers

and university administrators prefer arrangements like CRC's, which offer

predictable and continuous resource flows. We think arrangements like CRCs will
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academic capitalism in units ranging from archaeology and poetry to criminology and

physical education. Within such units, however, there exists wide variation in the

number of individuals who interact with the market. Moreover, faculty in such units are

less able to develop research-related market relations and are more likely to sell

services. How universities might manage the increasing differentiation stemming from

flourish in the traditional industrialized countries, replacing industrial laboratories,

because they socialize the cost of production for industry and meet university

needs for research funding. See Chapter 7 for further discussion on this point.

lxvi. Industry's position about universities doing applied research began to change

in the 1980s. Unlike Australia, Canada and the United Kingdom, the United States

has anti-trust laws that prohibit cross-industry funding of research consortia. In the

1980s, industry pushed very hard to have these laws changed (Flegstein 1990).

Although there was no new legislation, administrative law judges began to make

more lenient interpretations, with the result that broad government-industry-

university agreements such as the Microelectronics and Computer Technology

Corporation were funded (see Chapter 2 for details). As these changes occurred,

industry began to look to partnerships with university to realize its research aims.

lxviii. Two pieces of intellectual property were produced in very small lots for

Australian niche markets, with government as the buyer. Another two pieces had

not yet found commercial partners although one of these was geared primarily to

international markets and the faculty member in charge was looking exclusively at

multinational partners.
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academic capitalism is a question we turn to in the final section of this chapter.

INSTITUTIONAL LEADERS' AND CENTER AND DEPARTMENT HEADS'

ACADEMIC CAPITALISM STRATEGIES

lxix. As noted in Chapter 2, the Bayh-Dole Act of 1980 allowed U.S. universities to

patent intellectual property developed by faculty on federal grants and contracts.

Currently, U.S. businessmen are somewhat unhappy with this arrangement. The

Advanced Technology Program, housed in the Department of Commerce, is the

centerpiece of President Clinton's technology policy. Industry receives matching

grants from government for research and development, frequently subcontracting

to universities. In this program, industry, not universities, have patent rights,

regardless of where the technology is discovered. Universities have objected

vociferously, but to no avail.

lxx. The situation is very different in the litigious United States, where patents are

regarded as necessary to protect intellectual property.

lxxi. Randall Collins (1979) elaborates the concept of political work as work

professionals do in organizations to maintain their positions and prerogatives. We

use the term in a slightly different way, in that we are speaking about work

professors do to secure and maintain streams of external resources.

lxxii. In the United States, for example, researchers and policy-makers expected

the contributions that business made to higher education research to go up in the

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Generally, we found that Australian faculty and institutional leaders were

extremely sensitive to changes in the resource mix at the level of the institution and the

field. In terms of technology transfer, their hope was to develop products and services

that would generate resources through for-profit activity such as licensing and royalties,

direct sales, or shares of faculty consulting.

The approaches administrators used to promote academic capitalism were

various, but encouragement of academic capitalism was widespread. Some

administrators let faculty take the initiative. These administrators provided broad policy

guidelines and offered incentives to encourage faculty to develop products and

processes for the market, but did not otherwise participate. Other administrators

targeted particular products and processes, and closely regulated their development.

1980s, as business drew more heavily on university research. However, business

contributions only rose slightly throughout the 1980s, going from 8 to 9% of the

share of academic R&D costs (National Science Foundation 1993, Appendix Table 5-

2).

lxxiii. It is not clear how much this movement stems from a need for greater

economy and how much from a desire to alter the place of research in the

innovation cycle. Nor is it clear whether industry envisions university research as

replacing the functions once performed by industrial laboratories.

lxxiv. We simply do not possess the information necessary to reach a definitive

conclusion on the fourth, Canada, but believe the changes occurring there are not

as fully advanced as changes in the other three.

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Yet other administrators worked with the business community and government leaders

to create a large resource pool to support the development of complex technologies. In

the latter case, faculty were encouraged to band together in interdisciplinary

arrangements, to act as partners in relatively stable, on-going enterprises.

Overall, we believe that administrators in all four countries will seek to develop

strategies for academic capitalism that stabilize and make more predictable the

resource flows to institutions. Unfettered competition (laissez-faire academic

capitalism) is too risky. In the United States, as early as the 1910s, The Massachusetts

Institute of Technology developed the Industrial Liaison Program to routinize market

relations with corporations. Rather than working with a corporation on a single

contract, MIT organized programs in areas of interest to business and industry and

persuaded corporations to pay them a yearly membership fee for updates on research

in science and technology (Noble 1976). Decades later, many research universities

strong in the applied sciences followed suit, particularly in the 1980s.

Centers that form government-industry-university partnerships serve a similar

function. They routinize support for R&D in much the same way the mission agencies

did, making available large, predictable pools of funds for which faculty compete. This

funding pattern provides some stability in the funding environment for research

universities, even though competition for the monies is fierce.

In Australia, administrators worked with groups of faculty to develop centers that

had government and industrial partners--Special Research Centers, Key Centers for

Teaching and Research, and Cooperative Research Centers. Guaranteed government

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funding for multi-year contracts that ranged from $A500,000 per annum to $A100

million per annum made resources more predictable and reliable. The Australian

centers were modeled on the Interdisciplinary Research Centers of the United Kingdom

and the Industry/Cooperative Research Programs of the United States (Hill 1993),

indicating that this is a strategy common to the three countries. Consultancy

programs are another way to make resource flows from academic capitalism more

predictable. In Australia, faculty and professional officers are permitted to contribute

certain extramural earnings, particularly from consulting, to personal accounts. This

policy not only permits some university oversight of faculty consulting activities, but

allows faculty to realize higher net earnings because income taxes are avoided so long

as account expenditures are for university-related purposes. In public research

universities in the United States, medical schools that have clinical practice plans are

the only units that operate in a somewhat similar fashion. As problems of resource

dependence increase, universities in all four nations may inaugurate organized

consultancies and professional practice plans, making academics use of expertise

more like that of professional consulting firms outside the university.

The heads of departments or heads of centers whom we studied were as or

more active than university central administrators in aggressively developing

procedures for generating revenues from entrepreneurial faculty activity, including

income from technology transfer activities that provided intellectual property and shares

of faculty consulting. They used new organizational structures to create

interdisciplinary knowledge that tapped fresh revenue flows, and their tactics looked
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more like business plans than professionalization strategies. Very often, the new units

added large numbers of professional officers and non-academic staff, who were fiercely

loyal to center or institute heads, did not engage much with faculty, and were not very

interested in teaching. They were much more a part of the commercial than the

academic culture, and tended to bring commercial values to their work, concentrating

on making their centers more like small firms, expanding commercial activity, and

generating increased profits.

Centers and institutes are the organizational vehicles for academic capitalism in

Australia. They are intermediate units, positioned between departments and the central

administration. As they gain power and become responsible for their own financial well

being, the likelihood is that such units will increase at an accelerating rate, given the

new financial environment. If the number of such units increases, academic life within

the university and among individuals in centers and institutes will change. The most

fundamental change of this kind, we believe, is in the associations among members of

the production unit. Some of this effect may be negative but our evidence suggests

that the outcomes are largely positive for most intra-unit relationships. As units become

more responsible for self-financing, their members become more interdependent.

Competition for resources requires that they collaborate with each other, that they

capitalize on each other's strengths while at the same time holding each other

accountable for the production and quality efforts that are essential to the collective

well-being.

There can also be competition within units, and the results can be either positive
 345

or negative. Whereas competition can encourage greater efforts by individuals, our

interviews suggested that, for the unit, the yield from cooperation was substantially

greater than from internal competition, indeed, that unit members often were compelled

to cooperate. Interviewees regularly referred to their determination to avoid the

debilitating effects of internal rivalry.

As we noted in Chapter 5, there can also be internal, unit divisiveness of another

form--between full professors eager to act as entrepreneurs and junior faculty less

ready to pursue academic capitalism. Junior faculty thought performance expectations

had doubled: they felt they were required to demonstrate excellence in basic as well as

entrepreneurial science and technology. Perhaps they will become as committed to

academic capitalism as their seniors as they move up the career ladder or as career

routes clarify.

There are several implications of the various administrative or leadership

strategies--whether central administrators or center heads--for the university. In

whatever form, these strategies direct increasing amounts of faculty and administrative

time toward activities other than instruction, with no clear indication of how resources

from these activities might contribute to instruction. These strategies increasingly

integrate academic, commercial and bureaucratic cultures, decreasing the distance

between universities and business and industry, and between universities and

government. As centers and universities increase participation in the market, the

contract between faculty and society, an implicit contract that grants faculty and

universities a measure of autonomy in return for disinterested knowledge that serves

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the public welfare, may be undermined. To some degree, academic capitalism

undermines the raison d'etre for special treatment for universities and faculty,

increasing the likelihood that universities will be treated more like all other organizations

and professionals more like all other intellectual workers.

FACULTY AS MARKET ACTORS

The tendency for faculty to act more like their counterparts in commercial

organizations was apparent in our examination of faculty engaged in technology

transfer, which was perhaps the most direct form of academic capitalism. Faculty

developed innovative products and processes and tried to find corporate buyers for

licenses to produce and market their work. With regard to altruism, professors

engaged in technology transfer were ambivalent. Although they still hoped their

research would benefit humankind, they began to speak about research paying its own

way. If they were able to support their research with funds aimed at commercial

targets, they saw no reason why other researchers could not do the same. This pattern

also held true in terms of basic v. applied research. Faculty still saw basic research as

the bedrock of science, but saw entrepreneurial research as folded into that strata,

forming a new composite. Merit was no longer defined as being acquired primarily

through publication: instead, merit was defined at least in part by success with market

and market-like activities. (For confirmation of market-like activities figuring in merit

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reviews and promotion and tenure processes in the United States, see Rahm 1994,

Campbell 1995, Lee forthcoming.) For faculty in high-technology fields close to the

market, knowledge was being integrated with the market and was being valued as

much for its commercial potential and resource-generating capability as for the power

of discovery. And discovery was being redefined to included products and processes.

In each of these regards, faculty were changing their conceptions of knowledge more

rapidly than administrators.

Unlike the partnerships and organized consultancy arrangements discussed

above, technology transfer remains relatively risky. As our Australian findings indicate,

securing commercial buyers is often difficult. Even large corporations encounter

economic difficulties; all too often they are purchased by or merged with other

corporations. Any of these conditions may result in canceled contracts. Establishing a

small firm or start-up company also may pose problems. In the United States, only one

in ten start-up companies are successful. Although some universities in the United

States make money from patents, copyrights and trademarks, most do not, even

though the majority of Research I universities now support offices of technology

transfer.

In the future, we think technology transfer initiated by faculty will diminish as an

activity. The United States is the only country in which universities hold title to

intellectual property developed by faculty with federal research grants. In the other

countries, the patent is applied for by the faculty member who makes the discovery, but

royalties are split by the various agencies that contributed to funding the work, usually
 348

involving a split among universities and various government agencies. For all countries

but the United States, the partnership and consultancy arrangements discussed above

are likely to result in more reliable and predictable resource streams than does

technology transfer.

Conditions in the United States are in the process of changing. Historically,

business and industry in the United States did not want to support research in

universities because they could not capture competitive advantage, given anti-trust

laws that prohibited business and industry funding of generic research from which a

pool of corporations could benefit (Fligstein 1990, Kleinman 1995). However, new anti-

trust laws in the 1980s, making it possible for a group of corporations to fund pre-

competitive or generic research (Slaughter and Rhoades 1996). As corporations

reduce their investment in their own industrial R&D laboratories, or disband their

industrial laboratories altogether, as was the case with Bell Laboratories, and move

their R&D dollars into short term efforts in their business divisions, they are likely to turn

to universities for more of the R&D once performed in industrial laboratories. In this

new environment, U.S. corporations will probably discourage university ownership of

patents. Instead, corporations and government very likely will promote partnerships

that supply predictable resources for commercial R&D in universities, but corporations

will probably own the intellectual property produced, in much the same way that they

own intellectual property produced by their employees.

Whether working in university-industry-government partnerships or

independently, faculty will still strive to negotiate with the party or parties involved in
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these market relationships. Only by mastering the intricacies of markets, in much the

same way they mastered the complexities of mission agencies agendas and program

goals, will faculty be able to retain a measure of autonomy over their work. Since

faculty in fields close to the market still possess a scarce commodity--the expertise

needed for product and process innovation--they are likely to retain a strong role

shaping the conditions of their work. However, business is likely to play a greater role

as well, beginning, for example, to participate in the peer review process, judging the

merits of the business plans attached to projects that involve commercial research, as

is already the case in the Advanced Technology Program in the United States (U.S.

Department of Commerce 1995).

Our central thesis at the institutional level is that organizational relationships are

determined or are importantly affected by the changing financial environment. These

changes have numerous implications for the individual faculty or staff members. In

reverse, personal implications may affect the organization importantly. Among the

implications are effects on personal autonomy, power, prestige, and personal wealth.

Of course, individuals may be affected negatively or positively, depending upon their

relative success.

From the viewpoint of the corporate body, internal units that generate revenues

and profits for the larger organization, conceptually, are little different from resource

providers. To a considerable degree, they enjoy the same kinds of powers and expect

the same kinds of perquisites as do external resource providers. Academics have

become important resource providers for the university and as such they possess
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powers and expect perquisites either individually or as collectives. In fact, the informal

operating procedures of universities, their formal rules and regulations, may grant the

individual considerably more privileges than is realized by successful private-sector

employees.

The academic staff who generate millions of dollars for universities contribute

critically to the financing of the university and thus to the institutional mission, broadly

defined. They make important additions to the prestige of the university. They are

highly valued and in demand, and their value can only increase as third stream

revenues continue to grow in importance. "If these million-dollar-a-year staff ever

realize how much they are worth to us, we are in a lot of trouble," ventured an

Australian pro-vice-chancellor. In the United States the eventuality already has

occurred. As economist Gordon Winston (1994) writes,

What's going on appears, in significant measure, to be the working of an

active market for faculty--a national market--in which prestige-seeking

colleges and universities compete with each other to build institutional

excellence. They do it, in important part, through the faculty they hire.

Institutions vie for both faculty superstars...and the best of the new PhDs.

They bid with money but more importantly...[with] discretionary time. (p.

10)

If one is successful, the rewards may be great, but if one is not, the "market" may not
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be forgiving. Some journalistic reports of the early 1990s lend interesting insights. In

letters sent to 48 of its tenured faculty, one U.S. university (admittedly, a medical school

with less than 400 students) threatened to fire faculty who failed to attract research

grants that would provide from 50 to 100% of their salaries. The university went so far

as to specify the journals in which faculty should publish and the areas of research in

which they should concentrate (Mangan, 1994). Reporting on the current environment

in the United Kingdom, Bollag (1994) quotes David Smith, President of Wolfson College

at Oxford, as saying, "If you have a post open these days, you say: 'Let's find someone

who can build a good research center and hope he can teach well, too.' Since research

brings in the money, teaching is losing out."

In Chapter 4 we reported that Philpott (1994) found a high level of stress among

the staff of a highly entrepreneurial Australian university, and that this was in contrast

with our own findings from interviews in Oceania and Snowy Mountain universities,

which were less entrepreneurial universities, but similar to our interviews at Outback

and New Wave Universities, as well as at the University of Science and Industry, where

we interviewed solely faculty involved in technology transfer. In the United States a

contemporary survey (Dey, 1994) confirmed earlier research establishing that time

pressures and lack of personal time were by far the most common sources of faculty

stress. Following were teaching loads, research or publication demands, and concerns

about (job retention) reviews and about promotion. In another study (Wilger and

Massy, 1993), which reflected interviews with faculty at 20 U.S. higher education

institutions, again, found that time was the critical factor. The heading for the section
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labeled "Time" was, "They [the faculty] work like dogs." (p. 4B)

Australian faculty complained vociferously about the increasing use of formal

competition for allocating resources internally. The additional work and related stress

were considerable and were particularly resented because these were funds that

formerly had been distributed, pro forma, and because these additional demands were

on top of already overwhelming requirements for obtaining extramural funds. Whether

to regain lost funds "clawed back" from operating units by central administration, for

teaching or graduate assistants, or even five hundred or a thousand dollars for a small

research grant, virtually every little "extra" now was said to require a proposal.

With the growing importance of individual ability to attract third-stream revenues,

personnel decisions take on added importance. This places stress not only on those

who must render decisions in an increasingly litigious environment, but of course on

those being reviewed as well. Tenure is becoming increasingly stressful, in part

because the standards are being constantly raised (Kennedy 1993).

We were left to wonder whether all of this is manageable in the long run, whether

the amount of stress upon successful entrepreneurs was sustainable. Philpott thought

that the system might be near the breaking point.

ACADEMIC CAPITALISM AND DISTRIBUTION OF POWER WITHIN

RESEARCH UNIVERSITIES

Alterations in patterns of resource dependency lead to changes in power

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relationships. Paradoxically, we see central administrators as gaining power even as

they lose power. On the one hand, central administrators may lose power to centers,

institutes, and departments successful at academic capitalism. In the for-profit sector,

internal organizational differentiation is required so that firms can interact efficiently with

their resource providers; that is, differentiation results in specialized internal units being

organized to deal with subsegments of the external environment (Thompson, 1967).

For the sake of effective and efficient overall operation, it may be required that these

units be granted considerable autonomy by the firm’s central managers (Pfeffer and

Salancik, 1978). In short, the specialized units that are granted significant autonomy

possess important authority to act independently of the larger organization and, as a

result, may possess considerable power within the organization. On the other hand,

central administrators may gain power because they are able to use block grants and

discretionary funds to reward and build up those production units most likely to secure

large amounts of external revenues through academic capitalism.

We argue that a robust test of movements of power is to trace the flow of

resources. If central administrators are becoming more powerful, this will be revealed

in changes in internal allocations to related expenditure functions (in accounting

parlance). In fact, budget shares to administration have increased substantially in

recent years, as shown in Chapter 3 and in many other studies and publications of the

1980s and 1990s, although such shares now appear to have stabilized. (See Leslie

and Rhoades, 1995, for a review of these developments.) These increases are support

for the notion that the roles and tasks of central administration are growing and that
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central administrators are winning out in an increasingly competitive internal struggle

for scarce resources: as discussed in Chapter 3, ceteris paribus, a greater expenditure

share means relatively greater activity in that expenditure category.

It follows that university governance structures will change, and that is the

expectation (State Higher Education Executive Officers, 1994). A decline in collegial

governance appears inevitable. The role of the market in this decline appears clear. In

writing on the implications of the new environment, Breneman (1993) emphasizes the

role of finances. He sees administrators becoming more technocratic than academic

leaders, the process becoming more management than governance. As seen by two

Canadian academics,

The role of the professorate shifted with the development of entrepreneurial professors,

the creation of spin-off companies, the diminution of any force at the department level

and the marginalization of academics and academic work. These developments

diminished academic autonomy and altered even further the role of democratic process

in the universities as they chased after the establishment of a corporate model.

(Buchbinder and Rajagopal, 1993, p.273.)

In a 1994 essay, Clark Kerr wrote about the paradigm shift in academic life whereby faculty

members have become committed less to the academic community and more to economic factors,

the allegiance being to funding agents and outside employers. He has written of reduced willingness

to serve on committees and to accept campus responsibilities. He has blamed the reward structure
 355

that emphasizes individual and group advantage over the university welfare. However, the shift may

be even more pervasive. As departments and centers are reconfigured to match market

opportunities, academics may find their corporate and government counterparts a more meaningful

reference group than their professions or academic disciplines.

Increasingly, universities compete in complex environments. Not only is the

environment characterized by many potential resource providers, often there are

numerous more-or-less autonomous resource-providing units within government

agencies or companies, each with one or more counterparts in a given university. For

example, in the United States, state governments, the Federal government, alumni,

students, and business firms provide resources; within the Federal government, the

National Science Foundation, the National Endowment for the Humanities, the

Department of Human Services, and many others provide research and training grants

and contracts; and companies have special units to deal with grant and contract work

with universities. Even if potential funding agencies are not complex, they may rely

upon review panels composed of specialists, so that success in gaining contracts and

grants is highly specialized; i.e., biochemists relate to biochemists, molecular biologists

to molecular biologists, economists to economists, and so forth. Individual units (such

as departments) and individual academics engage in the critical interactions that affect

the success or failure of these resource exchanges. In contrast, the central

administrators of the university are seldom involved in the vital aspects of the contract

work, nor are they usually engaged in the substantive work or even have any expert

knowledge of the work. However, if universities regular participate in university-

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industry-government research projects, such as the Australian Cooperative Research

Centers and the U.S. Advanced Technology Program projects, administrators may

retain a powerful voice in shaping and approving this large projects.

The contrast between monopoly or monopsony (single supplier) and a

competitive environment is substantial. In the traditional public university environment,

where the government provides the bulk of resources in largely unstipulated fashion

and internal allocations are made by central administrators based upon collegial or

political considerations, internal power is centralized. In the competitive market, those

who generate the resources possesses the lion's share of internal power. Yet, much

power (the ability to force compliance) that affects university actions lies outside the

organization. In the traditional scenario, government exercises substantial control over

the university through regulation; in the competitive case, more varied resource

providers exercise power over the university through market forces.

Devolution of budgets stimulates units to increase competitive revenues and to

control their expenditures. This devolution is an integral part of "marketization"

(Williams, 1995). Budget devolution may serve little purpose when block grants are the

overwhelmingly dominant funding mode and when resources are abundant, but

devolution is almost inevitable under conditions of resource scarcity and competition.

Empirically, there already exists evidence in support of this generalization. In

most universities budget authority and responsibility for more and more functions

increasingly is being transferred from central to operating units as fiscal stress

increases. Wholesale devolution of budgets, however, is a relatively recent

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phenomenon, and the connections to market competition are now more clear. In the

United Kingdom the major changes in financing already experienced have resulted in

extensive devolution of most university budgets (Williams, 1992). lxxvi In the United

States, where changes have been more gradual, lxxvii several private universities have

employed devolved budgets for some time and a few public universities have begun

experimenting with the technique. The functional term commonly employed to reflect

budget devolution is "Responsibility Centered Budgeting," or RCB. That RCB is an

outgrowth of the increasing role of the market is attested to by the fact that U.S. private

universities are dependent upon their successful competitiveness for most of their

revenues, whether from students or from government and industry.

The implications of devolution of financial authority for academic labor are large.

Paramount among these are the implications for the university as community--an

organization where the members act in harmony for the good of the corporate body--

which many believe is what the university is all about (Massy, 1994). Under devolution,

or RCB, the operating unit is allocated the revenues it has "earned," minus any "taxes"

imposed by the university, and it is responsible for meeting its financial obligations from

those revenues alone. The taxes or assessments are to pay for support costs, such as

administration, and for "cross-subsidies" of units presumably having little or lesser

capacity for revenue self-generation.

Financial assessments for central administration never have been well accepted

by faculty--overhead costs for research grants being the best known example--and

subsidization of other units often is not well received either. Further, with devolution,
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central administration attempts to pass on more and more administrative

responsibilities to operating units, often keeping the associated resources at the central

level. We can anticipate an exacerbation of these and other problems in the United

States as the move in the market direction accelerates, as has been the case in Britain.

Budget devolution is the primary vehicle for the decentralization of power and

authority. Some of the implications to staff of greater power being captured at the

operating unit level are direct and apparent; others, which will be discussed below, are

more indirect. Major changes have occurred, and more are on the way.

In seeming contradiction, greater centralization of power is both predicted

theoretically and is evident in public universities in this period of financial stress. While

important budgetary authority and responsibility is being delegated to operating units,

authority also is being transferred to central administrators, along with the financial

means to exercise that authority.

Tensions between academic staff and central administrators are likely to grow.

Many central administrators oppose budget devolution even when market intrusion in

the university is broad and deep (Williams, 1995); no doubt the loss of financial

authority and the accompanying negative effects on community help explain this

reaction. Nevertheless, operating units are in a strong position to press their claims for

autonomy. The costing and pricing of services and products that are necessary in a

quasi-market system is another source of open conflict (Williams, 1995). Subsidization

of university support costs is put under increasing pressure when those costs are

specified in contractual agreements and when those costs increase routinely.

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From both theoretical and empirical bases, it is evident that in a stressful

financial environment, there is greater willingness by organizational stakeholders to

vest in central management the power to deal with external agents. The demand is for

increased central coordination of efforts and reporting mechanisms--in short, greater

centralization of efforts to manage the environment on behalf of the larger organization,

because, as Pfeffer and Salancik put it, "solutions...require the concentration of power"

(1978, p. 284).

In the competitive environment, staff perceive that the university is at risk and

that resources are inadequate to maintain existing functions. The perception is that the

government philosophical support of the university is less, if the university is not

actually under government attack. Institutional preservation requires that central

administration be granted authority to deal with the external environment. The

university must speak with one voice, and the central administration must be able to

coordinate the university response. This empowerment of administration requires that

traditional shared governance procedures be modified, at least temporarily.

Another factor contributing to this centralization of power is that, as operating

units generate more and more of their own resources, their staff members become

aware that most events of importance to them occur at the unit level. There is much to

do if the unit is to survive and excel. There is less time or inclination to be involved in

general university affairs, such as serving on university-wide committees; besides, staff

may perceive that, in the new financial environment, the central administration must

have greater freedom to act, anyhow. Once again, the impact on the idea of
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community is evident.

At the outset of this section, we asserted that power is becoming both more and

less centralized. How is this possible? The seeming paradox can be explained in at

least two ways. Part of the answer is that while unit personnel are gaining greater

power to decide matters of immediate and direct importance to them (for example, the

authority to deal directly with those who provide resources for research projects), they

are surrendering power for general university governance; in turn central administrators

are relinquishing some power for resource allocation (budget devolution) while gaining

greater authority in other areas. Another possibility may be a diminution of power at

middle organizational levels, so that the distribution takes on an hour glass shape. This

answer seems logical. If the operating units have the power to make most of their own

decisions about their own activities, while coordinating and reporting functions are the

domain of the central administration, what is left for the level of the college dean or

division head? We wonder about the functional utility of these offices in the new

environment, where operating units in effect generate the resources and central

administration coordinates and reports. In this environment is their any need for an

intermediate administrative unit?

Perhaps intermediate administrative units--large departments, colleges--will be

important as differentiation increases between units involved in academic capitalism

and all other units. Presumably, centers engaged with the market will interact directly

with central administrators, who are deeply concerned about generation of external

resources. Department heads not engaged in academic capitalism as well as deans of

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colleges that are far from the market will very likely have to manage closely faculty,

including large numbers of part-timers, who bear an ever greater share of the

instructional burden. Indeed, faculty in departments and colleges far from the market

may have double the teaching load that faculty engaged in academic capitalism have,

requiring greater oversight at the intermediate level.

In our four nations, this may be far more a speculation about future events than

a statement of present reality, however. In the United States, for example, middle level

administrators, such as deans, probably have lost little power or few resources

(assuming there is a difference) to date; indeed, although the hard evidence is meager,

the general perception is that deans are growing more powerful, not less. (One such

piece of evidence is a U.S. university case study showing that over a recent five-year

period, administrative expenditures at the college dean level exceeded such increases

at the central administration level [Rhoades, 1995].) Leslie and Rhoades (1995) reason

that patterns of resource allocation within universities reflect unit organizational

distance from budgetary authority: The resources one receives are, in part, a function

of the number of levels one's unit is removed from the resource allocator. Middle

managers, such as deans, are higher in the allocation scheme than are the production

units. Further, middle managers are highly useful to central administration; for

instance, the elimination of deans would greatly broaden central administrators' tasks

and responsibilities. Perhaps the determining factor is that, in the end, it is

administrators who possess the authority to reallocate resources.

In the present environment, the issue is whether resource dependency

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pressures will increase to the point where market considerations overwhelm

convenience and tradition; that is, on a cost-benefit basis, many middle-level university

administrators may not be justified. The recent experience regarding middle managers

in the U.S. private sector, where financial pressures already have resulted in massive

layoffs, illustrates what may occur in public universities. As U.S. productivity declined

relative to other nations prior to the early 1990s, many mid-level personnel were

dismissed, sometimes ruthlessly, as pressures on profits increased. Simply put,

functionally, many middle managers were found to be expendable. It may be that many

middle managers in public research universities similarly may be found to be

expendable, that in time resource dependency pressures will marginalize these

positions. Whether this occurs will depend upon the degree to which public universities

successfully resist many of the growing, natural pressures brought on by revenue

declines from traditional sources, in particular growing resistance to tuition increases

and increasing competition for grant and contract revenues.

In their award winning book, In Search of Excellence (1982), Peters and

Waterman included in their list of the important characteristics of America's best run

corporations, the internal presence of "small, fluid organizations." Since then, in his

weekly newspaper columns, Peters often has reflected back on this principle, going so

far as to conclude that he now believes it is the only principle of any consequence for

long-term organizational vitality. The idea of the small, fluid organization is that

company employees are organized or organize themselves to pursue a particular idea

or area of strategic promise to the firm. Within universities, centers and institutes would
 363

seem to be the embodiment of the Peters and Waterman idea. In contrast academic

departments often are criticized for their resistance to change, for example, standing in

the way of interdisciplinarity. In some cases academic departments have been

notorious for their degree of internal acrimony over the direction the unit should follow.

Of course, the obstacles to reorganizing faculty and staff into new units are

massive. In the absence of departmental restructuring, what occurs is the informal, but

real, internal division of labor, in particular between instruction and research (Barnett

and Middlehurst, 1993). One means by which this occurs is the "buying out" of

teaching and service responsibilities by those able to secure extramural funding and

the assumption of those responsibilities by other unit members. Breneman (1993) sees

this division of labor as desirable; he observes that academic departments could be

assigned output goals and be left to work out the details. In the new environment, we

would expect to see the tendency toward greater division of labor to be expanded. Of

course, such divisions already exist, de facto, in many if not most academic units;

however, the increasingly competitive environment promises even greater demand for

efficiency in use of human resources.

However, in our mainstream Australian universities, under university policy, buy

outs were not an option, nor did faculty entrepreneurs seem inclined to question the
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policy. In the United States, a recent survey of faculty participating in collaborative

activities with industry revealed that faculty were unwilling to consider giving up

teaching in order to engage in academic capitalism. For these faculty, teaching was

what made them different from professionals working for business and industry

(Campbell 1995). However, as Campbell noted when comparing faculty attitudes

toward teaching with faculty reports of responsibilities for collaborative research, faculty

were probably unrealistic in their beliefs that they could continue to pursue both

activities; that is, they were spending approximately three-quarters of their time on

academic capitalism.

. ACADEMIC CAPITALISM AND UNDERGRADUATE EDUCATION IN

U.S. PUBLIC RESEARCH UNIVERSITIES

In the United States, where public university autonomy in the internal allocation

of block-grant and tuition revenues virtually is considered a right, the congruence of

internal university allocations with the (enrollment) bases of government appropriations

often is lacking.lxxviii The result is that there actually may be a disincentive for individual

internal units to enroll additional students: more students can mean nothing more than

an increased workload. Operating units often promulgate regulations, such as higher

admission standards, in order to limit student enrollments, knowing that internal

allocation shares are unlikely to decline accordingly. This tendency is particularly

characteristic of the professional schools, most of which primarily are upper-division or

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graduate schools. If resources do not follow the students, the result may be an

excellent educational environment for the fortunate departments and their graduate or

upper-division students but a poor environment for lower-division students and less-

favored, upper-division students, for example those majoring in the humanities and

social sciences. In short deterioration in the overall quality of undergraduate education

may result because resources are denied to units that educate the masses of students,

resulting in widespread disaffections among students, the electorate, and government

officials. The political pressures mount; faculty are urged to teach more. Meanwhile,

the market mitigates for more functional resource allocation methods.

When universities must turn to other resource providers, they must redirect their

efforts. This is nothing more than the accounting identity from Chapter 3: If revenues

for a particular function decline as a share of all revenues, the expenditure share for

that function will decline, too. If government, the primary provider of resources for

instruction, appropriates proportionately less for universities, there will be

proportionately less university attention paid to instruction, all else equal. Universities

may attempt to redirect their resources, but in the end human resources can be

stretched only so far. Our interviews suggest that something will give, and that the

breaking point may not be far off. In the end the choice is clear: Less money for

instruction means less instruction.

In many countries, the most important source of new or additional income is in

the form of tuition payments from students. The significance of tuition as a revenue

source has increased as its share of university total revenues has grown. With these
 366

increases, student power to affect university decision-making has grown, although

student power remains relatively limited in most settings. Significant student power

already is evident in Australia and the U.K., where overseas students now pay (at least)

full fees, and in the private institutions in the United States, where most students have

long paid a large share of their educational costs. In Australia and the United Kingdom,

overseas students are recruited widely and vigorously; within the universities they are

treated with respect if not solicitude, in particular where a substantial share of their (full)

fees follow them to their units. For example, in Australia the enrolling universities

receive all of the fees collected from overseas students, and the majority of these

revenues are passed on to the units that enroll them. In the three universities where

we conducted most of our interviews, this share averaged 60-70%. In the United

States the income from students in most private colleges and universities (particularly

the former) has composed a large share of institutional revenues for many years; the

result is that students are treated as important clients, particularly in research

universities in which budgets are devolved, that is, where internal units largely are

responsible for generating their own revenues and for making their own spending

decisions. The contrast with student treatment in public universities often is stark.

Although student power within U.S. public universities presently is modest, this will

change as the share of institutional revenues from tuition increases and as inevitable

adjustments are made in internal resource allocation procedures.

Experiences with the full fees paid by overseas students in Australia and the

United Kingdom and with the high fees paid by students in U.S. private universities
 367

having devolved budgets tell us that on-going evolution of financial authority extends to

student-based revenues. The large sums involved usually cause these universities to

develop strategies to recruit these students. Because the departments of these

universities possess the best information about their own programs and staff and

because the recruiting task is so large, eventually recruitment incentives in the form of

tuition "profit sharing" with departments are established.

The sharing of other tuition or other enrollment-based revenues may not

automatically follow, however. In Australia, block grant appropriations are allocated

internally in only general conformance with enrollment distributions, although pressure

is growing for greater enrollment-budget connectedness. Faced with the greatly

increased demand for higher education places among native Australians who do not

qualify for government financial sponsorship, while ever-increasing numbers of full-fee-

paying overseas students are being admitted, the Australian Vice-Chancellors

Committee (AVCC) has urged that government grant permission to enroll the former

students at the full-fee rate. The interaction of market forces and political realities may

lead to approval of the AVCC request. If this occurs, one wonders whether the nation

and its universities will be willing merely to substitute domestic tuition revenues for

those from the overseas students, or rather may choose to expand enrollments further

and thus capture more tuition dollars.

Within U.S. universities, academic capitalism creates two different pressures.

On the one hand, academic capitalism presses for decentralization of power to the

operating units. On the other hand, academic capitalism presses for differentiation
 368

among units. Centers, institutes, and departments involved in academic capitalism and

bringing in substantial amounts of external revenues successfully press central

administrators for decentralization of power and devolution of budgets, and often for

institutional funds for start-up costs for more entrepreneurial work. Central administers

are generally responsive. Because central administrators use institutional funds for

centers, institutes and departments in technoscience fields likely to bring in large

amounts of external fund, they have fewer funds to reward units in the communications

and culture fields, nor in the civic regulation and human services fields, despite the fact

that centers and departments in these fields raise some external revenues, recruit large

numbers of students, and teach service courses for the technoscience and business

services fields. Thus, academic capitalism that brings in substantial and prestigious

revenues is preferred over academic capitalism that brings in fewer revenues, revenues

in less prestigious areas, or increased tuition revenues.

U.S. public research universities are attempting to maximize revenues from

external sources as the several state governments decrease their shares of support.

U.S. public research universities have tried to attract high prestige research dollars for

research and academic capitalism, particularly advanced technoscience research for

government-university-industry partnerships. To do this, university central

administrators use their power to make internal allocations of (marginal or incremental)

block grant or unstipulated funds in accordance with their own perceptions of needs.

The power of universities to allocate block grant funds internally is the very

essence of why these revenues are so important. In our lifetime the orthodoxy, to
 369

which we ourselves have subscribed strongly, has been that government should

appropriate revenues and leave the internal allocations to the universities: Government

may use whatever bases it desires to determine appropriations, but once the money

arrives on the campus those bases can be completely ignored; decisions about the

spending of the money must be left to the institutions. Anything less is mixing policy

making with administration; it is micro management. With great reluctance, we assert

that now may be time for a change.

Initially, we thought public research universities should move to "state-related" or

"independent" status. Elsewhere, we have raised the question as to what separates a

public from a private university and whether there may not now or soon be an

advantage for public universities that attain quasi-public or even independent status

(Leslie, 1995). Most public U.S. research universities receive about 30 or 40% of their

resources from state governments; yet, the states consider public universities to be

little different from any other state institutions, and they regulate them essentially as

though they were 100% state-funded. While lecturing at Harvard, Bruce Johnstone,

then Chancellor of the State University of New York (SUNY), observed that he received

30% of his money and 90% of his headaches from the State of New York. He seemed

to argue for a new relationship. Adjoining New York, the Commonwealth (State) of

Pennsylvania contains a mix of "state-owned," "state-related," and "state-aided" "public"

universities, each experiencing varying degrees of state financial support and control.

The State of Colorado operates state universities through a "Memorandum of

Understanding," whereby relatively modest support is provided the universities and

 370

relatively few constraints are imposed. In Maryland, Oregon, Virginia, and Washington,

trends are in the direction of state-”relatedness,” rather than state ownership.

If the state share of public university funding continues to decline, at some point

the universities will become de facto independent or private, if they are not already.

Breneman (1993) believes that as student charges continue to increase, the body

politic may cease to view state universities as public, causing state support to decline

even more, the political bases for state oversight to diminish further, and stronger

universities and colleges to seek independent status. The Economist ("Universities,

Towers of Babble," 1994) notes that U.S. universities have raised student fees

dramatically and that quasi-market disciplines are being applied in public universities.

The Economist wonders why "universities are still mired in the public sector," forced to

tolerate governments "bent on university reform."

But the move to state-related or independent status will not solve the problem of

administrative reallocation of block grants, unless research universities raised tuition by

extraordinary levels, which would price many students out of the market for public

research institutions. The fact is that university resource allocators acted too rationally.

They shifted substantial amounts of those largely unstipulated resources provided by

government and students to other purposes, which often were at some odds with

government and student interests. They used significant shares of the public and

student monies to leverage additional revenues in the more competitive areas. They

diverted money into research, research equipment and facilities, university companies,

intellectual property offices, university foundations--all for the purposes of increasing

 371

supplementary revenues.

Some of the largest amounts were maneuvered within the instructional budget.

Money was allocated less on the basis of student demand than on the basis of

leveraging extramural revenues, by diverting funds to areas where the greatest

potential for grants and contracts existed. At the margin money was moved to the

natural sciences and engineering and away from the social sciences, the humanities,

and most of the professional schools. The primary object was to recruit faculty who

would attract large sums and prestige to the university through grant and contract work,

faculty who were paid relatively handsomely (Slaughter and Rhoades 1996). The net

effect was to strip high-enrollment units of resources needed to meet student demand

and to create unit disincentives for student enrollments. Some units accomplished this

by limiting class and section offerings; others raised their admissions standards.

The legacy of this era was wide public dissatisfaction with public universities.

Faculty workloads, especially hours taught, came under closer scrutiny. Faculty were

seen as self-indulgent and unresponsive to students (see, for example, Massy and

Zemsky, 1994). Students complained to the university, to university governing boards,

to their parents, and to their elected officials. University administrators were charged

with correcting the problem, and when that was perceived to have failed to achieve

results, they were subjected to regulation and even legislation. lxxix

A system that is a mixture of unstipulated and stipulated funding may be

unworkable in the long run. It is to be expected that universities will move discretionary

money around internally in order to maximize revenues from non-discretionary sources.

 372

Although public universities probably would solve the problem for themselves

eventually, the loss of public confidence in the interim may make it unwise to wait for

university action. The need for remedies in university undergraduate instruction and

the regaining of public confidence is too urgent.

Thus, in what may appear to be a contradiction, we call for state action to insure

that universities permit market principles to operate internally. Very few, if any

university administrators or policy analysts are likely to agree with us; this is a

revolutionary recommendation, which we offer with great reservation. We conclude

reluctantly that in order to regain public confidence in public universities government

action may be required, but to free up internal university procedures, not to regulate

them. Specifically, we urge that governments providing block grants act like any other

resource provider, that they take actions to insure generally that their moneys be spent

for the purposes intended. We believe that in order to increase allocative efficiency

within universities, government should provide incentives for public universities to

disburse state-provided resources in closer concordance with student demand. In

effect we are calling for incentives for budget devolution, the allocation of state block-

grant money in some correspondence with student enrollment patterns and the

provision for sanctions if the principles are ignored.

Some readers will observe that already governments are actively seeking

greater instructional accountability. To us these efforts are having little effect on

internal university operations. The sanctions imposed are sporadic and feeble. They

are no more than attempts to regulate the way out of the difficulty, an approach that
 373

probably has little chance for success in the face of more powerful market forces being

imposed by other resource providers. We wish to emphasize that we are not calling for

government regulation of how government money is spent; rather we are calling for

getting the incentives right.

Gaining responsiveness to students for their tuition money also bears

consideration. Although responsiveness to students probably is improving as tuition

charges increase, students still possess relatively little consumer power in most public

universities. The reason is that public higher education is monopolistic, or at best

oligopolistic, due chiefly to the large public subsidies. The majority of students are

unwilling or unable to pay the substantially higher prices associated with private

education or nonresidency status. Just as administrators and academics mediate the

wishes of the state, so they do also the desires of student (Williams, 1995). Simply put,

student fees are collected by universities and distributed internally as universities see

fit.

What is the solution? We favor devolution of tuition money, but recognize that if

government block-grant providers begin to take on the characteristics of clients,

alterations in the present university resource allocation ethos--including that for tuition

revenues--will occur anyhow. For this reason, we favor using the government aid

rather than student tuition revenue as the vehicle for change. This approach will be

less obtrusive, politically, than using tuition money as the principal mechanism,

because the latter funds often are paid directly to the universities. In short, universities

often view tuition income as their own money, not the state's.
 374

In sum, we see universities facing great changes. As the economy is making

structural adjustments in response to globalization, so public research universities are

trying to accommodate changes in national higher education policies and resource

dependency. Research universities

LAST WORDS

We conclude our book by looking at the implications of our data and theory for

the future of public research universities. Because we are most familiar with the United

States, we will concentrate on U.S. public research universities. Given the risks of

prediction, we draw a worst case and best case scenario. We understand that

predictions often are little more than expressions of hopes and fears, fantasies of the

future as much as scientific forecasting. We start with the worst case, so we can end

on a more positive note, with the best case.

Under the worst case scenario, we see greater globalization of the political

economy, less discretionary funding available at the national (federal) and/or

state/provincial level, and continued acute institutional destabilization in higher

education systems. If these conditions obtain, we think there will be greater

differentiation among research universities, with a number of them being down-graded

to a status more like that of comprehensive universities, offering undergraduate

education, an array of Master's programs, and very few doctoral degrees. We would

not expect to see reduction to a single public research university per state, but think
 375

that private universities might absorb more research functions, with students paying

very high tuition to attend graduate school in all fields, as is now the case with

medicine, and increasingly with law. Major public research universities probably will be

concentrated in those states without a strong private sector and with a high population.

Those public research universities that survive will in effect be privatized, given the high

tuition students will be expected to pay.

Research funds will remain approximately the same or decrease slightly, but will

be even more heavily concentrated on commercial science. Federal funds will be

concentrated in university-industry-government partnerships in areas deemed central to

national technology policy, determined largely by industry. Industry will be heavily

represented by multinational corporations delivering products, processes and producer

services to a global market. Overhead payments to universities will decrease, and

universities will by and large perform the sorts of research once done by industrial

laboratories. Private funds will be of the venture capital variety, and university centers,

acting like small to medium sized firms, will employ high-risk, high technology

entrepreneurs to develop innovative products and processes with high returns. Fields

far from the market will receive little in the way of federal or private funding for

research.

At the same time that differentiation among public and private research

universities occurs, differentiation within public research universities will become much

greater. Faculty able to organize themselves in centers and become successful

 376

academic capitalists will do so, and the remaining faculty will teach more. Even in the

sciences and engineering, some faculty will teach more than others, given that not all

specialties have the same potential for academic capitalism--for example, physics

departments may teach undergraduates while materials sciences centers become

heavily involved in academic capitalism. And of course, some faculty in fields not

commonly thought to have opportunities for academic capitalism will create them--for

example, sociologists might undertake survey research projects for university-

government-industry projects.

Generally, faculty in fields close to the market will teach less, those far from the

market, more. Greater numbers of part-timers will be hired, until teaching departments

have small cores of full-time faculty and large contingents of part-time faculty, graduate

assistants, and technical staff. The full-time faculty in fields far from the market will

have little time for research and scholarship.

 Because of the disparities among faculty, the concept of the university as a

community of scholars will further disintegrate, and management will replace

governance. Administrators will be most responsive to those elements of the institution

that bring in increased revenues--academic capitalists and students. Faculty in centers

involved in academic capitalism will continue to have considerable autonomy, although

they will be closely monitored by central administration because these faculty

increasingly will be critical to institutional revenues. As part-timers replace full-timers to

keep down costs, administrators will assert greater control over departments, beginning

by managing the large contingents of part-timers. Regents and trustees concerned

with rising institutional costs will encourage administrators to take over more and more

planning, until administrators rather than faculty decide which fields will grow and which

will not.

Tuition will increase and grants and subsidized loans for all but the very needy

will decrease. Public research universities will enroll fewer high paying students. As

these changes occur, pressure will build for more teaching by full-time faculty. Over

time research universities will hire more and more full-timers on a contractual basis,

redeploying them as they once did part-timers. Faculty not participating in academic

capitalism will become teachers rather than teacher-researchers, work on rolling

contracts rather than have tenure, and will have less to say in terms of the curriculum or

the direction of research universities.

The best case scenario is that the globalization process stabilizes, nations bring

their budget deficits and debts under control, and funding remains steady or increases

377
modestly at the federal and state level for public research universities. Differentiation

occurs among institutions, and some downgrading takes place, but every state has a

least one, relatively high quality public research university. Graduate education

becomes a state-wide enterprise, with particular fields and schools housed at a single

campus, eliminating duplication. In some cases, graduate students have to move to

the designated campus, but in many cases graduate education is conducted through

advanced telecommunications systems that link campuses in a state system together.

The majority of research money continues to be for university-industry-

government partnerships directed toward successful competition in global markets, but

some state and federal funds are set aside for regional development of small and mid-

sized firms which the community has a voice in developing. A significant portion of

these funds are directed toward companies that met public service needs--for example,

environmental clean-up companies, home health care service firms, and educational

tutoring services. Universities form consortia with corporations, consumers, and local

or regional governments to perform the research necessary for these endeavors.

Public service research universities collect a modest overhead, contribute to local and

region job creation, and build companies that make reasonable profits.

Differentiation continues within universities, but is somewhat different than in the

worst case scenario. If policy changes permit institutional revenues to follow students,

departments and centers have broad scope in planning. They sustain themselves by

recruiting and graduating students, by competing for commercial research funds or

public service research funds, or by some combination of the two. Given that a

378
relatively small number of faculty bring in large grants and contracts, most departments

devote more time to teaching, or, more likely, to developing a mixed portfolio, where

faculty are involved in teaching and research, probably with a heavier emphasis on

teaching. To deal with fluctuation in demand and faculty concern with research, greater

variation in workloads occurs. For example, in some years faculty teach three courses

each term, followed by a semester in residence for research and writing. Although the

research component of faculty work is preserved, more time and attention is given to

teaching.

In this best case scenario, faculty have a greater role in governance, perhaps

replacing middle level management. They capitalize on faculty initiative and develop

small, fluid interdisciplinary units that are matched more closely with student demand

and the external world. These units develop strategies for recruiting students and the

dollars that follow them by creating programs that provide teaching, research

opportunities for students, and research time for faculty to stay abreast of their fields,

varying faculty work load across all members of a unit to meet overall needs.

The best case and worst case scenarios posit the two extremes.

Undoubtedly, the development of the public research university of the future will be

uneven, sometimes more nearly approximating the worst case, sometimes the best. In

the end, developments probably will fall somewhere in between the two extremes.

379
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 TABLE 2.1

SELECTED U.S. LEGISLATION ENABLING A COMPETITIVENESS R&D POLICY

1980: PL 96-480. Stevenson-Wydler Technology Innovation Act, as amended in

1986 and 1990

1980: PL 65-517. Bayh-Dole Act, and Reagan's 1983 Memo on Government

Patent Policy

1982: PL 97-219. The Small Business Innovation Development Act

1983: PL 97-414. Orphan Drug Act, as amended 1984, 1985, and 1990

1984: PL 98-462. The National Cooperative Research Act

1986: PL 99-660. The Drug Export Amendments Act of 1986.

1987: Presidential Executive Order 12591

1988: PL 100-418. The Omnibus Trade and Competitiveness Act

1993: PL 103-182. North American Free Trade Agreement

1993: PL 230-24. Defense Appropriations Act, Technology Reinvestment Program

 TABLE 2.2

AVERAGE SALRIES OF FULL PROFESSORS BY FIELD, 1983-1993

FIELD Average salary %Increase

($75-90,000)

LAW $89,777 71.1%

ENGINEERING $77,985 84.6%
HEALTH SCIENCE $77,913 78.7%
BUSINESS & MANAGEMENT $77,535 79.0%
COMPUTERS & $75,964 74.8%
INFORMATION SCIENCE

($60-74,000)

PHYSICAL SCIENCE $65,914 63.2%

MATHEMATICS $63,776 59.7%
PSYCHOLOGY $62,567 59.5%
PUBLIC AFFAIRS $62,435 57.6%
SOCIAL SCIENCE $62,352 59.9%
LIBRARY SCIENCE $61,827 59.5%
INTERDISCIPLINARY $61,808 59.0%

($50,000-60,000)

ARCHITECTURE $59,322 57.0%

AGRIBUSINESS $59,178 63.8%
COMMUNICATIONS $58,933 61.3%
PHILOSOPHY & RELIGION $58,424 53.7%
FOREIGN LANGUAGE $57,344 52.4%
HOME ECONOMICS $57,157 54.3%
LETTERS $56,744 52.3%
EDUCATION $56,605 55.9%
PERFORMING ARTS $52,495 61.4%

From American Association of University Professors, "Annual Report on the Economic

Status of the Profession, 1993-1994," Academe March/April 1994, Table 5. Based on
data from national Association of State Universities and Land Grant Colleges.

*Average full professor salary

 LIST OF TABLES

Table 2-1 Selected U.S. Legislation Enabling a Competitiveness R&D Policy

Table 2-2 Average Salaries of Full Professors by Field, 1983-1993

Table 3-1 Current-Fund Revenue of U.S. Institutions of Higher Education, by Source:

1980-81 to 1990-91

Table 3-2 Current-Fund Revenue of U.S. Public Institutions of Higher Education, by

Source: 1980-81 to 1990-91

Table 3-3 Current-Fund Revenue of U.S. Private Institutions of Higher Education, by

Source: 1980-81 to 1990-91

Table 3-4 Current-Fund Expenditures of U.S. Institutions of Higher Education, by

Purpose: 1980-81 to 1990-91

Table 3-5 Current-Fund Expenditures of U.S. Public Institutions of Higher Education, by

Purpose: 1980-81 to 1990-91

Table 3-6 Current-Fund Expenditures of U.S. Private Institutions of Higher Education,

by Purpose: 1980-81 to 1990-91

Table 3-7 Educational and general expenditures of public universities by purpose:

1976-77 to 1991-92

Table 3-8 Educational and general expenditures of public 4-year colleges, by purpose:
1976-77 to 1991-92

Table 3-9 Educational and general expenditures of public 2-year colleges, by purpose:
1976-77 to 1991-92

Table 4-1 Commercialization of Science Revenues and Expenditures Total and by

Department in Two Australian Universities

Appendix Table A-1 Percentage of GNP Devoted to Higher Education

Appendix Table A-2 Annual Rate of Growth of Current Expenditures on Higher

Education Institutions

Appendix Table A-3 Average Current Institutional Expenditure per Student

Appendix Table A-4 Sources of Income of Higher Education Institutions

lxxvi. Williams (1992, p. 29) reports that of 14 universities studied, four had

devolved budgets entirely to departments or similar cost centers; three had

devolved everything save academic salaries; four had "partially" devolved their

budgets; and three had not gone very far in this direction.

lxxvii. A U.S. professor of engineering observed that although he had never heard

of devolution, and the concept had never been discussed by his administration, it

was a “done deal” in his university.

lxxviii. In more than half of the states, enrollment-based formulas drive allocations

to universities; in the remaining states, enrollments implicitly serve as a primary

base.

lxxix. For example, in the United States, two states set limits on university
administrative costs.