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The research university,

entrepreneurship and regional
development: Research propositions
and current evidence
a b c
Helen Lawton Smith & Sharmistha Bagchi-Sen
a
Department of Management, Birkbeck College , University of
London , Malet Street, Bloomsbury, London WC1E 7HX , UK
b
School of Geography and the Environment , University of
Oxford , Dyson Perrins Building, Oxford OX1 3QY , UK
c
Department of Geography , State University of New York at
Buffalo , 105 Wilkenson Quad, Buffalo NY 14261 , USA
Published online: 18 Aug 2011.

To cite this article: Helen Lawton Smith & Sharmistha Bagchi-Sen (2012) The research university,
entrepreneurship and regional development: Research propositions and current evidence,
Entrepreneurship & Regional Development: An International Journal, 24:5-6, 383-404, DOI:
10.1080/08985626.2011.592547

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 Entrepreneurship & Regional Development
Vol. 24, Nos. 5–6, June 2012, 383–404

The research university, entrepreneurship and regional development:

Research propositions and current evidence
Helen Lawton Smithab* and Sharmistha Bagchi-Senc
a
Department of Management, Birkbeck College, University of London, Malet Street,
Bloomsbury, London WC1E 7HX, UK; bSchool of Geography and the Environment,
University of Oxford, Dyson Perrins Building, Oxford OX1 3QY, UK;
c
Department of Geography, State University of New York at Buffalo,
Downloaded by [Florida State University] at 05:19 20 December 2014

105 Wilkenson Quad, Buffalo NY 14261, USA

The objective of this paper is to set a framework for examining the

conditions under which a research university becomes more than a latent
asset [Power, D., and A. Malmberg. 2008. The contribution of universities
to innovation and economic development: In what sense a regional
problem? Cambridge Journal of Regions, Economy and Society 1, no. 2:
233–46.] in regional economies. The framework is comprised of four
propositions used to identify drivers of change, evidence of change and
evidence of impact. As an exemplar, we examine the University of Oxford’s
growing engagement in its local region. This paper shows that the
convergence between the interests of the university and the local high-
tech economy is particularly associated with broader technological trends
and with the University’s capacity to draw on national funding
programmes designed to stimulate ‘third-stream’ activities, including
entrepreneurship courses and regional networking activities.
Keywords: research universities; regional development; Oxford University;
Oxfordshire

1. Introduction
Identifying the formal role of universities in stimulating regional technological and
economic development is relatively new (Youtie and Shapira 2008). As recently as
the 1980s, factors other than universities, such as the importance of government
spending on defence, were considered as the main stimuli to high-tech development
in North America (Christy and Ironside 1987) and in the UK (Breheny and
McQuaid 1987). An early exception to this was a report in the UK, The Cambridge
Phenomenon (Segal Quince and Partners 1985), which argued that Cambridge
University exerted a direct and indirect influence on the genesis of the high-tech
economy. In the US, Saxenian’s (1983) article on The Genesis of Silicon Valley
appeared in the same year as Etzkowitz’s paper on ‘the entrepreneurial university’. In
the 1990s, notable works were by Luger and Goldstein (1991) which reflected the
growing number of science and research parks, and by Anselin, Varga, and Acs
(1997) on local geographical spillovers from university research.

*Corresponding author. Email: [email protected]

ISSN 0898–5626 print/ISSN 1464–5114 online

ß 2012 Taylor & Francis
http://dx.doi.org/10.1080/08985626.2011.592547
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 384 H. Lawton Smith and S. Bagchi-Sen

By the 2000s, the wealth creation perspective had become pervasive in academic
research and public policy, and the regional role was well established. Universities
are now variously described as ‘engines of growth’ and numerous other epithets are
ascribed relating to their roles as machines, or as biological agents relating to
incubating new firms or as central nodes in networks of innovators (Arbo and
Benneworth 2007). These roles are associated with the ‘third-stream’ activities’, that
is, targeted engagement with external organizations, outreach, enterprise formation,
etc. (PACEC 2009).
The basis for the argument that universities stimulate economic development
over and above general economic impacts through local spending on wages and
services is that university research promotes local knowledge spillovers which lead to
regional innovation processes (Goldstein and Renault 2004; Arbo and Benneworth
2007; Geuna and Musico 2009). Studies which test the hypothesized techno-
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economic impact of universities have examined human capital, research (basic and
collaborative), technology assistance, technology transfer (including spin-offs,
patenting and licensing and consultancy). They have used a wide variety of
methodologies (see Goldstein (2009) for a review).
Lendel (2010) demonstrates that quantitative studies focused on a single or small
number of factors produce mixed results. For example, Link and Rees (1990), Beeson
and Montgomery (1993) and Gottlieb (2001) studied the impact of universities on
local labour markets. Qualitative studies have explored culture and strategy to assess
differences in impact. For example, Saxenian (1994) found that Stanford University
and its faculty were much more engaged than MIT in their respective region’s
development. Feldman (2001) recorded the limited role in technology transfer in
the Capitol region of its research universities (Johns Hopkins, the University of
Maryland, Georgetown and George Washington). Methodological problems remain
rife. The multifaceted or ‘multi-product pathways’ by which technology is put into use
(Hill and Lendel 2007) make it difficult to assess the impact of each component of
these pathways, especially taking into account the specifics of regional path
dependencies and business and economic cycles (Lendel 2010).
This paper focuses on research universities, i.e. those characterized by research
intensity to examine issues relating to their regional impacts. The US-based Carnegie
Foundation classification of 34 types of higher education research provides a useful
guideline for defining research universities. That classifies research universities as:
very high research activity, high research activity and doctoral research universities.
Here, ‘research universities’ refer to the first two. There are few such universities and
their distribution is highly skewed towards the US and the UK. The first two account
for less than 6% of the 4400 US degree-awarding institutions. In both the QS and
THE rankings of universities, the UK has four of the world’s top 10 research
institutions: Oxford, Cambridge, Imperial College and University College-London,
the rest being in the US.
Against this background, the objective of this paper is to answer the research
question: under what conditions do research universities actively engage in local and
regional economies becoming more than a ‘latent asset’ (Power and Malmberg
2008)? While research universities have distinctive characteristics, they are far from
homogenous in their engagement and impact in their geographical hinterlands. The
University of Oxford and changing relationships with its home county, Oxfordshire,
is used as an exemplar of these complexities. The discussion draws on published data
 Entrepreneurship & Regional Development 385

from the University of Oxford and from a series of studies on the Oxfordshire
high-tech economy.
The remainder of this article has three sections. The first establishes the rationale
for four propositions that form a framework which is used to examine the drivers,
evidence and the impact of those relationships. In the second, the propositions are
examined in the case of Oxford University and Oxfordshire. In the final section,
conclusions are presented along with suggestions of possibilities for future research.

2. Research context and propositions

Four propositions are now presented in order to provide a better understanding
of the ways in which research universities intentionally contribute to regional
development. These are that the extent of regional impact depends on (1) the internal
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characteristics of the university, (2) how the university responds to exogenous shocks
(Feldman and Francis 2006), (3) the nature of funding for higher education
institutions which accompanies agenda-setting by national and regional political
bodies in relation to wealth creation and (4) the attributes of the regional economy
(Varga 2001; Lendel 2010). Each of these is examined with respect to drivers of
change, evidence of change and evidence of impact. Note that evidence of change is
not necessarily evidence of impact.

2.1. Proposition 1: It depends on the internal characteristics of the university

Drivers of a university’s intent to become more than a ‘latent asset’ in a regional
economy are affected by its response to external and internal pressures to improve its
economic impact. It can do this by becoming ‘entrepreneurial’ (Clark 1998; Siegel
et al. 2004; Bercovitz and Feldman 2006), a variety of being entrepreneurial:
‘commercial’ or ‘connected’ (Kitson et al. 2009), or all three. Kitson et al. describe
the ‘connected university’ as engaging in building clusters, connecting to national
and international economies, and bringing together thinking, practice and finance
for regional development.
Clark’s (1998) take on the entrepreneurial university is that it is one where the
ethos of entrepreneurship is pervasive. It has a strengthened steering core, formal
means of university–economy–community interaction and diverse source of funding
which underpin interaction and implementation (Rinne and Kovivula 2005;
Siegel et al. 2003). In some cases, motivation driving universities to become
entrepreneurial is external such as national legislation and public policy. In other
cases, it is internal pressures – both can result in new opportunities, creation of
incentives and rewards for technology transfer, and increased industrial funding
(Geuna and Muscio 2009).
In the USA, drivers of change and the rise of entrepreneurial scientists and the
entrepreneurial university have been identified as the outcome of a revolutionary
process with big science programmes launched after World War II (Etzkowitz 1983).
Franzoni and Lissoni (2009), however, suggest an alternative perspective, that is, the
American model of entrepreneurial university appears more deeply rooted in the
gradual evolution of US universities from teaching colleges to modern research
institutions. Moreover, the regional role of land grant universities, which include
some of the top research universities (e.g., University of California and MIT), was
enshrined in their establishing principles.
 386 H. Lawton Smith and S. Bagchi-Sen

Another debate in the US is the impact of national regulatory frameworks

on technology transfer, in particular the 1980 US Bayh–Dole Act, which allowed
universities to patent the results of publicly funded research. It has been suggested
that this did not have the intended positive impact on commercialization of federally
funded research results (Litan, Mitchell, and Reedy 2007) and that the current
university ownership model might not be optimal in encouraging entrepreneurship
(Mowery and Sampat 2005; Kenney and Patton 2009).
In the UK, the first country to develop a national university commercialization
policy (Geuna and Muscio 2009), a similar regulatory change was enacted half
a decade later but without the same contentious outcomes. In 1985, the British
Technology Board lost its monopoly access to intellectual property arising from
universities and public sector research institutions from Research Council-funded
projects. The intention was that universities would (1) give the fullest opportunity
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and scope to researchers to assume responsibility for exploiting their research

findings, (2) encourage researchers to assume this responsibility and (3) provide
guidance and help for those researchers (Harvey 1992).
Whether a university becomes an active regional player results from how a
university manages its portfolio of products as ‘defined by its mission statements and
expressed through its function and policies’ (Lendel 2010, 212). Of particular
relevance is the interpretation and adoption of policies derived from the
interpretation and adoption of national rules relating to IP governance. Such
policy decisions are especially influenced by the scope of the university (e.g.,
research-intensive, teaching intensive; Andersen and Rossi 2010) and by universities’
capacity and/or willingness to exploit opportunities presented by research and other
creative activities. Fulfilling the entrepreneurial role, moreover, requires ‘a strong,
positive knowledge exchange (KE) culture at senior management levels’ (PACEC
2009, 7).
The implementation of a business-like style of technology transfer whereby the
productivity of technology transfer offices (TTOs) is improved is also identified as
being a pre-requisite for success in commercializing university intellectual property
(Kinsella and McBrierty 1997; Lockett et al. 2005; Moray and Clarysse 2005; Wright
et al. 2007). The formulation of a selective incubation strategy for spin-offs (Degroof
and Roberts 2004; Clarysse et al. 2005) and the development of relationships among
academics, TTO personnel and investors (Wright et al. 2007) are aspects of this
model. These ideal circumstances, however, rarely exist.
The extent of impact of TTOs have been found to be subject to human factors
varying from management decisions on which technologies to commercialize (Siegal,
Wright, and Lockett 2007), the extent to which profit maximization is the driving
motivation (Muscio 2010) and the likelihood of academics revealing their inventions
to the TTO (Siegal et al. 2004). Markman et al. (2005) found that the speed of
commercialization and increase in revenues were higher when inventors collaborate
actively with TTOs. Muscio (2010) found in Italy that research performance drives
the academic use of TTOs. Higher levels of research are associated with more
contact. Companies are more likely to contact TTOs in universities with
good research rankings.
Assessment of impact is also complicated by differences in interpretations of
indicators of TTO performance (Lockett and Wright 2005; Chapple et al. 2005;
Rothaermel, Agung, and Jiang 2007; Huggins 2008), timescales used and types of
 Entrepreneurship & Regional Development 387

universities being compared. Immediate impact is difficult to assess when indicators,

such as patents and university spin-offs, are used (Geuna and Muscio 2009) given
that revenues from paid consultancy can be higher even in the most elite universities
(HEFCE 2010).
Impact as measured by commercialization of university IP is sometimes but not
always associated with research intensity and reputation as much as by the
tech-transfer model adopted. In the UK, the most research-intensive universities
produce a wide variety of research outputs and hence generate a large variety of IP
(Andersen and Rossi 2010, 43). The top four UK universities have the highest
number of university spin-offs (HEFCE 2010). US universities with the most spin-
offs in 1995–2001 were flagship entrepreneurial universities (MIT, the UC system,
Stanford and Caltech) (O’Shea et al. 2005), while other top-ranked research
universities (Harvard, Yale and Princeton) have not been noted for their spin-offs
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(Lawton Smith 2006). Research reputation may have an indirect influence on levels
of academic entrepreneurship as it may signal the quality of new ventures to both
investors and potential partners (Mustar et al. 2006). This may help spin-off firms to
obtain access to external financing and recruit high-quality personnel (Shane and
Stuart 2002; Degroof and Roberts 2004; Binks et al. 2005).
At the regional level, a university’s impact is multi-faceted. Hill and Lendel
(2007) identify seven possible products: (1) education, (2) contract research, (3)
cultural products, (4) trained labour, (5) technology diffusion, (6) new knowledge
creation and (7) new products and industries. Each has its own market niche and can
be an asset used by the regional economy or ‘exported’ outside. Assessment of
separate outcomes, they argue, is impossible due to the inter-relationships
between university products and the bundled nature of their effect on regional
economies.
Evidence from a study by Martinelli, Meyer, and Von Tunzelmann (2008) of
Sussex University in the UK (a high research university) illustrates a slightly different
point: that even becoming more entrepreneurial does not necessarily mean a stronger
regional impact. They show that, ‘the university is at the centre of a dense network of
relations with non-academic partners’. Such faculty relationships are described as
indicators of entrepreneurialism. They also find that the form of entrepreneurial
activity is related to academic discipline, with differing attitudes towards technology
transfer. Life sciences had mainly collaborative research agreements, while science and
technology faculty preferred consultancy agreements. In general, links were more
likely to be contract research, collaborative research and consultancy rather than
patenting, licensing and spin-offs. Sussex University as a type is more ‘entrepreneurial’
and ‘commercial’ rather than ‘connected’: its links are mainly outside the region.
Hence, Martinelli et al. conclude that KE processes may not have the kind of regional
impact that stakeholders would wish for.

2.2. Proposition 2: It is related to exogenous shocks relating to technological

opportunities
Exogenous shocks, as drivers of economic change, encompass economic and business
cycles as well as Schumpeterian patterns of technological change (Feldman 2001).
Entrepreneurship is about timing. Drivers of change, as is the case for start-ups
in new industries generally, can be seen in the Schumpeterian tradition
(Schumpeter 1934). A particular strand in the academic literature of the 1980s
 388 H. Lawton Smith and S. Bagchi-Sen

concerned techno-economic changes (Freeman and Perez 1988) associated with

the fifth Kondratieff wave, where entrepreneurship was a key component. The
importance of scale economies was reduced in the fifth wave and new indus-
tries with new organizational forms emerged offering associated niches for
small firms and limited consolidation through vertical integration or mergers
(Radosevic 2007).
The rate at which academics become entrepreneurs is associated with such
techno-economic changes. Academic entrepreneurs, ‘start firms that capitalize on
technological opportunities, adapting scientific breakthroughs and generic technol-
ogies to create new product markets and reorganize economic activity’ (Feldman and
Francis 2006, 115). Most are found in ‘emerging sectors’ such as biotech (Kenney
1986) and information technology (Feldman 2001; PACEC 2003), ones which have
grown rapidly since the 1980s. Around the same time, public and private spending on
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university science parks and incubators increased to capitalize on university research

(Phan, Siegel, and Wright 2005): in the US, there were 12 business incubators in 1980
and 950 in 2002, and in the UK 25 in 1997 and 250 in 2002. The number of science
parks increased but at a slower rate.
A further dimension of a regional impact is the extent to which research
universities can ameliorate the effects of down-turns in the economy and boost
upturns. Lendel (2010) shows that the impact of research universities is very strong
during the expansion stages of business cycles but only the very top research
universities have positive impacts on regional economies in periods of economic
decline. Their consistently high levels of research income, stable flows of students
and high academic salaries allow for consistent outcomes.

2.3. Proposition 3: Specific regional direct and indirect effects depend on the nature
of funding
This driver of change needs to be considered from the perspective of the
balance between national and regional policies (Rip 2002) with respect to the
activities that universities ‘should’ be doing and how funding is allocated. Types
of funding for ‘third-stream’ activity include: (1) non-spatial research grants with
conditions relating to projections of impact for example those funded under the
seven UK research councils (Research Council UK, http://www.rcuk.ac.uk/Pages/
Home.aspx); (2) funding programmes specifically designed to have commercial
outcomes (e.g. spin-offs) and (3) funding that has regional/local engagement or
governance built in. Funding can have a beneficial indirect impact (Huggins 2008,
197), that is, ‘the probability of investment from the private sector increases with the
amount of public funding secured’.
In the US, state-level policy makers drive change by pressing universities to
articulate how they can contribute to the economic well-being of the state. Some
research universities have adapted to this priority believing that it can result in a
more favourable financial treatment by the legislators (Powers 2003). An example is
the Georgia Institute of Technology, an entrepreneurial research university, used to
spearhead an innovation-driven economic development strategy (Youtie and Shapira
2008). The authors show that state funding has enabled the university to have a local
impact by becoming a ‘knowledge hub’ employing the kinds of activities listed in
 Entrepreneurship & Regional Development 389

Proposition 1. These have resulted in ‘boundary-spanning’ roles that ‘mediate among

academic, educational, entrepreneurial, venture capital, industrial and public
spheres’ (p. 1188).
National UK policy and funding have had impact on universities’ perceptions
of their regional role (PACEC 2009). This is illustrated by the 2008–2009 HE-BCI
survey of university–business interaction. This shows that over a third of universities
see meeting regional skill needs as a priority right after collaboration with industry
and improving access to education. Evidence of the recent importance of UK
universities in regional governance was inclusion of universities by regional
development agencies (disbanded in 2010) in economic development strategies
(Benneworth 2010). Other initiatives involving universities include ‘Science Cities’,
six of which were established by central government in 2005, ‘to lead the
development of deeper links between business and the science base and ensure
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that science, technology and innovation succeed in becoming the engine of economic
growth’ (THE, http://www.timeshighereducation.co.uk/story.asp?storyCode=
198532&sectioncode=26).

2.4. Proposition 4: Impact depends on the attributes of the region

A match between the assets of the university and regional conditions is needed to
experience regional impact, but this is contingent on factors such as diversity of
university-regions and type of academic research. Boucher, Conway, and Van der
Meer (2003) offer a taxonomy based on the functional role of US universities in
territorial development: single-player universities in peripheral regions, multi-player
universities in peripheral regions, traditional universities in core regions, and newer
technologically oriented universities in core regions. Rutten and Boekma (2009)
distinguish the impact of different types of academic research in regional economic
development as follows: knowledge dissemination (Mode 1) depends on the
absorptive capacity of actors in the university’s home region and the degree to
which actors with high levels of absorptive capacity are regionally networked. The
more networked actors, the greater the chances of local direct and indirect
knowledge transfer or exchange. Mode 2 (interactive, multidisciplinary form of
knowledge production) requires face-to-face contact with practitioners and is often
locationally bound. The notion of ‘strategic science’ (Rip 2002, 125) offers a
complementary perspective to this, combining relevance (to specific contexts,
possibly local) and excellence (advancement of science as such). Strategic science
is basic research carried out with the expectation of producing a broad base of
knowledge likely to form the background to the solution of recognized current or
future practical problems (Irvine and Martin 1984, in Rip 2002, 125), a modified
version of division of labour between research and uptake of research. It always has
a local or contextualized component, and contributes to the ‘glocalization’ of the
region with the effect of universities becoming internationally recognized attraction
poles (Rip 2002).
Drawing on these ideas and adapting Berglund and Clarke’s (2000) seven
elements of a technology-based economy, pre-conditions that would enable
universities to create regional competitive advantage (Lendel 2010), we suggest five
main regional conditions: (1) local absorptive capacity. that is, local firms that are
able to engage with university research (Rip 2002; Chapple et al. 2005; Lester 2005;
 390 H. Lawton Smith and S. Bagchi-Sen

Feldman and Francis 2006), (2) a nascent or competitive infrastructure (e.g. physical,
service), (3) a technical and professional labour market, (4) an entrepreneurial
culture with co-existing entrepreneurial activity and (5) quality of life from
residential amenities.
Picking up on two of these, infrastructure extends beyond science parks and
incubators. A study by Warren, Hanke, and Trozer (2008) on the availability of
venture capital, an important element of infrastructure required for incubation, finds
that universities isolated from supportive innovation systems have reduced possi-
bilities of technology transfer. The authors suggest that areas where there are weak
entrepreneurship communities, early-stage innovators rely on the universities for
early-stage financing and facilities. Hence, close relationships are those with the
university not with other actors. Other studies have suggested that in some places,
the impact of university spin-offs staying local includes stimulating business support
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services and infrastructure (Zang 2008), other start-ups (Lockett et al. 2005),
knowledge spillovers (Acs 2009), as well as jobs. The third, recruitment by
local firms, is critical as it is the dynamism (increasing stocks and flows) of the
local labour market that accounts for dynamism in clusters (Malmberg and Power
2006). However, not all regions can absorb graduates and skilled labour
often leaves an absence of jobs or entrepreneurial opportunities (McCann and
Shephard 2001).
Moreover, Lendel (2010) as well as Harrison and Leitch (2010) show that the
local impact of research universities is limited to a small number of places. Lendel
(2010) highlights the importance of regional demand for university products:
consumers of university products are not necessarily local. Larger metropolitan
regions with large companies are more able to absorb the products of universities;
hence, demand and impact are stronger than in smaller regions. In the US, top
universities are usually located in metropolitan areas with local markets for certain
outputs from universities. Two of the top 10 UK universities are located in London
and Oxford and Cambridge Universities in relatively small cities, where local
demand might be expected to be lower but other impacts might be relatively higher
for reasons given above.
Such caveats on the universality of university’s regional impact are supported by
Goldstein (2009, 28), who identifies measurable effects on the impact of technology
transfer of universities by distance, types of research and kinds of universities. He
finds spillovers from basic research to be less localized than for applied research with
spillovers from highly ranked research universities more geographically widespread.
In the UK, there are regional differences in the relative importance of revenue from
IP and university spin-off – South East England is one of the very few regions where
income from spin-offs realization and IP is above average (Harrison and Leitch
2010).
Overall, factors that appear to facilitate change and induce impact are the
university strategies and research reputation, the national context, the facility to
capitalize on and drive technological change, and the characteristics of the region.
There is a difference between being represented in the regional systems by
coincidence and being active in forwarding regional agenda. Regional leadership
by universities, however, may take the form of direct connections with other
organizations, and co-opting regional governance actors rather than vice-versa. A
summary of the propositions is found in Table 1.
 Downloaded by [Florida State University] at 05:19 20 December 2014

Table 1. Four propositions setting out reasons why universities might change from being latent assets to active agents.

Propositions Drivers of change Evidence of change Evidence of impact

1. It depends on the internal Recognition of opportunities, Institutional change Income from wealth creation
characteristics of rewards and incentives for Self-interest in exploiting assets, activities, e.g. spin-offs, patents,
university change setting terms by which university licenses and consulting
(1) for the individual IP is exploited
(2) for the university Establishment and expansion of
Ability of capitalize on those TTOs’ activities
opportunities
2. It is related to responses to Technological change Development of new industries and Rising numbers of innovative firms
exogenous shocks Schumpeterian patterns of technologies localized in particular including university spin-offs
entrepreneurship places. Investment portfolios of university-
Regulatory change Rates of university spin-offs and associated business angels
growth Tenants in science parks
Science parks and incubators Amelioration of negative effects of
Economically resilient economies recessions
Regional outcomes of national policy Increased wealth creation activities
change or events by universities observable in the
region.
3. Political agenda National and regional policies Competition for funding from Wealth creation and outreach work-
and funding to encourage universities ing in practice
exploitation of university ‘Regional’ facing universities Alignment of interests
Entrepreneurship education and Increasing number of student and
awareness raising other entrepreneurs
Entrepreneurship & Regional Development

4. Impact depends on the Regional absorptive capacity, Changes in the regions (e.g. increas- Networking activity producing tan-
attributes of the region associated with innovative ing size of high-tech economy), gible and intangible outcomes such
firms and high quality local local measures targeted at as business opportunities
labour markets developing entrepreneurial culture Increasing local recruitment from the
Local recruitment from the university university
Involvement in local governance Tangible changes in policy towards
innovation-led economic
development
391
 392 H. Lawton Smith and S. Bagchi-Sen

Oxford Science Park

1991
Review of Technology
Transfer Arrangements
1994
New head of Isis
Innovation
1997
Regional Liaison
Officer appointed
1999

1960s 1970s 1980s 1990s 2000s

University & Isis Innovation Begbroke Science Park

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Industry Committee 1988 2000

1965 Isis Angels Oxford University Consulting
Network 2001
1988 OxSEC
Industrial Liaison 2001
Officer Venturefest
1989 2001
Entrepreneurship Said
2006
Oxford Spin-Out Equity Management
2008
Knowledge Exchange & Impact sub-committee
2009
Oxford Invention Fund
2011-02-21

Figure 1. Timeline of major Oxford University ‘third-stream’ initiatives.

3. Oxford University and Oxfordshire

This paper now turns to the changing relationship between the University of Oxford,
its departments and some of its 38 independent colleges and six private halls, and the
county’s high-tech economy. Although activity was in evidence before the 1980s
(indeed academic entrepreneurship can be dated to the 1940s), it was then that
academic entrepreneurship started to take off, national public policy encompassed
both university entrepreneurship and science exploitation, and Oxford University
took the first formal steps towards creating a more supportive environment for
academic entrepreneurship. The timeline of changes in Oxford University referred to
in the text is shown in Figure 1.

3.1. Proposition 1: It depends very much on the university

3.1.1. Drivers of change
In the 1960s, early university efforts to improve links with industry over and above
the long-standing collaborations by individual academics and departments included
the University and Industry Committee (established in 1965, disbanded in 1987).
In the 1970s, some departments established consortia with other universities to work
on industries’ problems. For example, Oxford was a founder member of the UCINA
consortium formed in 1979 by a group of applied mathematics department in five
 Entrepreneurship & Regional Development 393

universities to address practical problems in industry as well as to stimulate new and

relevant research in numerical analysis (strategic science, Rip 2002).
In the 1980s, commercializing research became a priority but this still did not
include enterprise formation. The driver was internal pressure for the university to
benefit from its academics’ commercial activities. The outcome was Isis Innovation,
the university’s wholly owned technology transfer company, established in 1987
originally as Oxford University Research and Development Ltd and renamed Isis
Innovation in 1988. Initially, its main activity was networking. It established Isis
Angels Network connecting private individuals and companies with potential
interest in investing in spin-out companies from Oxford University. In 1990, the
Oxford Innovation Society was set up to run networking events for scientists and
potential funders/acquirers of university research. In 1989, the University took its
first major shareholding in a company commercially developing and manufacturing
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products resulting from scientific breakthroughs of its own scientists: Oxford

Glycosystems (later Oxford Glycosciences). By 1997, three companies had been
established through Isis Innovation but Isis had not provided the support to help
academic entrepreneurs establish their businesses. In 1989, a full-time industrial
liaison officer was appointed, but the role was not intended to have a local remit
(Lawton Smith 1998).

3.1.2. Evidence of change

The failure of the university to capitalize on the profits made by spin-off firms
formed by academics, technicians and sometimes students independently of the
university was the reason why there was the Review of Technology Transfer
Arrangements in 1994 (Report published in 1995). The Report recommended that the
University assert its rights to the intellectual property of its academics, students and
visitors (Lawton Smith 2003). A consequence was that a more professional
commercialization organization was required to improve returns from university-
owned intellectual property.
The Review made it possible for the appointment in 1997 of an entrepreneur
as CEO of Isis Innovation. Over time, Isis has added extra functions to market
its ‘products’ (Hill and Lendel 2007). It set up Oxford University Consulting in
2001 with the University Research Support Office to facilitate academics in selling
their time and helping industries find experts within the university. It is now part of
Isis Innovation. In 2008, it established Oxford Spin-out Equity Management to
manage the University’s interests in its spin-out companies. In 2011, a new fund,
The Oxford Invention Fund, was launched to overcome the ‘innovation gap’ at
early stages of an invention, and is funded by donors to the university. By the
mid-2000s, Isis Innovation was widely regarded as ‘one of the best technology
transfer offices in the country’ (HM Treasury 2003) and had grown to having the
largest number of commercialization staff of any UK university (Minshall and
Wicksteed 2005).

3.1.3. Evidence of impact

The impact of Isis Innovation can be seen in the rate at which research is
commercialized through spin-offs, the robustness of those firms, the amount of
resources attracted for the spin-off process and the value realized to the university.
 394 H. Lawton Smith and S. Bagchi-Sen

Since 1997, Isis Innovation has on average created a new spin-off company every
2 months and has been responsible for creating 59 spin-out companies based on
academic research generated within and owned by the University of Oxford. Nearly
90% survive. It has raised an additional £280 million in follow-on venture funding
rounds. By 2007, the combined value of Oxford’s companies, of which four firms
have been launched on AIM (the Alternative Investment Market, London Stock
Exchange’s international market for smaller growing companies), had reached £2
billion using quoted market capitalization and investor valuations for unquoted
companies (£30 million in seed capital/angel and £252 million in venture/institutional
funding). Some £4 million has been invested in equity stakes in 21 spin-offs, which
have attracted £40 million in seed/venture investment (http://www.isis-innovation.
com). In 2008, Isis returned £2.4 million on a turnover of £4.7 million to the
University for distribution to university researchers, departments and central funds,
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an increase of 30% over 2006 (Annual Report 2008).

3.2. Proposition 2: It is related to a response to exogenous shocks

3.2.1. Drivers of change
Exogenous shocks here refer to technological evolution which gave rise to high-tech
entrepreneurial activity from the 1960s onwards in particular locations, for example,
Silicon Valley and Route 128 in the US (Saxenian 1994 and the ‘Western Crescent’
around London, from Cambridge to Berkshire by way of Oxfordshire in the UK
(Breheny and McQuaid 1987). These were places dominated by research in the public
and private sectors, but very different in scale, location and focus of research.
Berkshire and the M4 corridor were characterized by big firms and defence
(electronics and big pharma in high tech), while Oxford’s and Cambridge’s high-tech
firms were generally small and their concentrations of public sector, private sector
and charitable trust-funded research were civil rather than defence (Garnsey and
Lawton Smith 1998).
The increasing number of university-based firms has been a driver in the growth
of Oxfordshire’s high-tech economy. By the mid-1980s, there were 182 R&D-
intensive advanced technology firms in the county which employed 10,659 people.
The majority were in manufacturing (125), followed by R&D/consultancy (32) and
software (25). These figures reflect national trends. Between 1979 and 1986, while
UK manufacturing as a whole was in steep decline, employment in high-tech
manufacturing fell less sharply and output increased rapidly. Computer sectors (both
hardware and software) showed significant job and firm formation over a similar
period (Keeble and Kelly 1986).
More recent data shows that growth of entrepreneurship in Oxfordshire has
accelerated. In the absence of local data, the Office of National Statistics (ONS) data
show that in 2008 Oxfordshire had some 3500 high-tech firms employing 45,000
people. Around 14% of the county’s workforce1 is in 12% of businesses in
Oxfordshire. Using these figures, the county has the third largest high-tech
employment among UK counties (high-tech as a percentage of total employment).
The county is characterized by ‘diverse specialization’ with leading sectors being
high-tech services, including software consultancies and biotechnology. Larger
businesses are in high-tech manufacturing, including pharmaceuticals, medical
instruments and computers.
 Entrepreneurship & Regional Development 395

3.2.2. Evidence of change

In the mid-1980s, the rise in the high-tech economy was matched by a recognition by
some of the colleges, but not yet the university, of the possibilities for commercial
opportunities presented by the growing number of local high-tech firms including
university spin-offs. Magdalen College, established the Oxford Science Park in 1991
succeeding where other colleges such as Wolfson, Exeter and Corpus Christi had
failed. Other organizations were more successful in doing so. The provision of space
on science parks and incubators is now a defining feature of Oxfordshire’s high-tech
entrepreneurship infrastructure. By 2008, the county had more incubators and
science parks than any other – this is based on the United Kingdom Science Park
Association (UKSPA) members and technology-based incubators. It had four
UKSPA members and 10 incubators.
Oxford University’s own Science Park at Begbroke established in 2000 is a
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science park incorporating an incubator with space for university spin-offs and local
start-up companies. It therefore scores in each UKSPA category. Both the Centre for
Innovation and Enterprise are engaged in third-stream activities. These include the
development of new courses based on applied research with the Department of
Continuing Professional Development.

3.2.3. Evidence of impact

Impact is associated with Schumpetarian patterns of entrepreneurship in emerging
technology-based industries. Oxford University was an important source of high-
tech firms and employment by the mid-1980s. By then, some 40 firms had been
established by academics, technicians and former students, here generally classified
as spin-offs. Most originated in the departments of Engineering Science, and
Metallurgy, but already the medical research units and life sciences had produced
a number of firms. Examples include Penlon (medical products) (established 1943),
Littlemore Scientific Engineering (1954) and Oxford Instruments (scientific instru-
ments; established in 1959), which has had the greatest impact through expansion of
its own operations and an incubator of firms formed by former employees. These are
all still in existence, although Littlemore Scientific Engineering has moved out of the
county. By the mid-2000s, Oxford University spin-offs contributed to nearly 3% of
the county’s total workforce (Lawton Smith and Ho 2006), thereby contributing
to path-dependent processes (Martin and Sunley 2006) of growth in the high-tech
economy.

3.3. Proposition 3: Specific regional direct and indirect effects depend on the nature
of funding
3.3.1. Drivers of change
It was in 1964 that Prime Minister Harold Wilson set his vision for modernizing the
UK economy ‘in the white heat of technology’. Successive Conservative governments
(1979–1997) established the paradigm of universities as wealth creators, continued by
successive Labour governments (1997–2010), albeit with greater funding for research
in universities, for entrepreneurship, and for university–industry interaction.
The Higher Education Innovation Fund (HEIF) has been the most comprehen-
sive measure, set up in 2001 as a single, long-term commitment to ‘support
 396 H. Lawton Smith and S. Bagchi-Sen

universities’ potential to act as drivers of growth in the knowledge economy’. The

Science Enterprise Fund (SEC) and the Universities Challenge Fund (UCF) were set
up as separate funds under HEIF 1. The 2003 White Paper The future of higher
education (DfES 2003) introduced a spatial dimension as Regional Development
Agencies were given a stronger role in steering the HEIF. Under HEIF 3, support
would be given for ‘less research-intensive’ university departments. Similarly, in line
with the Sainsbury Review recommendations that more funding be directed towards
business-facing institutions, HEIF 4 increased to £150 million in 2010–2011, its final
round, and is intended to redistribute funding from the richer to poorer universities.
An upper limit was set on the amount received by each university, including those in
the larger research universities (Gill 2008).
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3.3.2. Evidence of change

National funding has enabled Oxford University to expand its ‘third-stream’
activities. It has won funds from each round of HEIF as well as awards from all of
the other outreach programmes. These include the UCF (1999) which granted seed
funding to help universities make the most of research funding through support for
early stages of commercial exploitation of new products and processes. Under
HEIF2, the university was awarded £2.36 million to increase access to the
university’s innovation system by funding Isis Enterprises to make technology
transfer expertise available to other universities, make science entrepreneurship
business courses available to scientists from regional companies and expand the
Begbroke Science Park Enterprise Fellows scheme, which supports scientists moving
out of academia, enabling them to translate academic innovation into commercial
applications.
In 1999, a Regional Liaison Director was appointed. He was initially on
secondment from Barclays Bank. Funding from HEIF 1 enabled Oxford to establish
the Regional Liaison Office, thus giving a more permanent base, albeit one still
reliant on HEIF funding. The appointment, ‘underlines the University’s commitment
to play a more prominent part in local economic development’ (http://www.ox.
ac.uk/gazette/1999-00/weekly/071099/news/story_4.htm). The director is actively
involved in local governance, being the university’s representative on a number of
local bodies including the board of the Oxfordshire Economic Partnership (OEP),
which represented public and private stakeholders in the Oxfordshire economy. The
Office was absorbed into Isis Innovation in 2008.
In 2001, Oxford University was awarded SEC funding to establish OxSEC in the
Said Business School with the central tenet of promoting entrepreneurship within the
university. OxSEC has sought to add value through entrepreneurship education in
three specific areas, namely: teaching entrepreneurship, knowledge transfer and links
to business. From the outset, a strategic decision was made that all programmes were
to be open to Oxford-based entrepreneurs, high-tech companies and to university
members. Oxford Entrepreneurs was launched in 2003. This is a network for students
and alumni of the University of Oxford aiming to encourage and support student
entrepreneurship. In 2006, Entrepreneurship Said was set up as the focal point for
entrepreneurship among academics, students and the business community.
Subsequently, funded by HEIF 2 funding, HEIF 3 funding and competitive research
income, OxSEC has grown to five full-time staff. It has well-established connections
with other parts of Oxford University such as Isis Innovation and the Begbroke
 Entrepreneurship & Regional Development 397

Science Park and with local organizations such as The Oxford Trust and Oxford
Innovation.
Other external pressures are driving change. In 2009, in response to the ‘impact’
agenda relating to measuring outcomes of university research as part of the next
round of the research assessment process (the Research Assessment Framework,
2013), Oxford University established the Knowledge Exchange and Impact Sub-
Committee, which reports to the planning and resource allocation committee. Part of
its remit is advising on, ‘Recognition for the wider application of KE and ways
to enable development in areas such as teaching and learning, local, regional and
national engagement, including public, commercial and industrial engagement’
(http://www.admin.ox.ac.uk/pras/committees/research/knowledge/). This is evidence
of an institutionalization of a regional economic and societal role within the
university system, albeit at a sub-committee level, and is therefore institutionally not
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analogous to Georgia Tech (Youtie and Shapira 2008).

3.3.3. Evidence of impact

Evidence of impact of the institutionalization of measures to support entrepreneur-
ship within Oxford University is attendance at entrepreneurship education courses
run by OxSEC. That is, there is a spatial dimension to this non-spatial policy
initiative. Since their launch in 2001, over 9000 people have attended an OxSEC
training course, networking event or seminar with annual attendance reaching in
2005/2006 to just over 3200. Its main teaching programme around science
entrepreneurship is attended by an average of over 300 people per session (Lawton
Smith, Glasson, and Chadwick 2007). The number of attendees has risen dramat-
ically. For instance, attendance in 2008–2009 was double that in 2005–2006. This
suggests that changes within the university have had the impact of sensitizing large
numbers of university and non-university people to opportunities for
entrepreneurship.

3.4. Proposition 4: Impact depends on the attributes of the region

3.4.1. Drivers of change
This driver for the change on the part of Oxford University to become more than a
latent asset is the increasing absorptive capacity of local region (Rip 2002). This is
indicated by the size and entrepreneurial culture of the local high-tech economy, the
associated labour market and the presence of networks which provide support for
its spin-offs, particularly for finance (Warren, Hanke, and Trozer 2008). Combined,
local engagement by Oxford University with regional organizations over time
became a viable proposition, with a higher demand for more of the university
products (Hill and Lendel 2007) at the local level.
Oxford University indirectly contributed to the establishment of norms of high-
tech entrepreneurship in the county as well as the physical and social infrastructure
through networks and networking and labour markets (elements in Berglund and
Clarke’s 2000 technology-based economies). In 1985, the founders of Oxford
Instruments established The Oxford Trust. The Trust set up the county’s first
incubator units for high-tech firms near Oxford Instruments with six units and
networking events for entrepreneurs, would-be-entrepreneurs, professionals with
business interest in high-tech entrepreneurship (bankers and lawyers) and local
 398 H. Lawton Smith and S. Bagchi-Sen

policy makers. The Trust’s activities include networking events, an online business
network and the Oxford Investment Opportunity Network (1995), which matches
investors to firms. Oxford Innovation, the Trust’s spin-off company, has set up four
more specialist investment networks for early-stage finance. The county now has
some 65 business networks including ones dedicated to biotech/medical instruments
sectors. The Said Business School is an important host for many networking events
open to university and non-university people (Lawton Smith 2010).

3.4.2. Evidence of change

The growing convergence of interest by the university in the local high-tech tech
economy and the impact it has on delivering support for enterprise is illustrated by
Venturefest. In 1999, it was launched by an academic in St. Catherine’s College as a
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two-day annual event with the objective of bringing together entrepreneurs and
venture capitalists. It attracts about 1500 attendees from Oxfordshire and adjacent
regions. Over time, it has been formally supported by the University. Its
management team is drawn from representatives of the universities, the local
research laboratories, local policy makers and business. Thus, Oxford University was
able to be part of the process of building on local physical and network innovation
and entrepreneurship infrastructures already in place.

3.4.3. Evidence of impact

The growth in the number of high-tech firms is a possible explanation for increasing
impact through local graduate recruitment, suggesting greater alignment between the
economy and the university. The effect is twofold. The first is more local recruitment.
Higher Education Statistics Agency 2004 data suggest high levels of local retention
from both Oxford universities. About a third of Oxford University (32.62%) and
Oxford Brookes University (34.6%) students stay in the county after their first
degree. These figures need to be treated with caution. They may also reflect the much
greater propensity for Oxford University graduates to stay on for further degrees: a
quarter of all Oxford undergraduates go on to study further (Waters and Lawton
Smith 2008). The second is the probability of high-calibre people in the university
and in local organizations working together on a range of initiatives as well as
through local recruitment, that is, a ‘Mode 1’ knowledge dissemination effect
(Rutten and Boekma 2009). In 2008, well over a third (38.6%) of Oxfordshire
residents were qualified to degree level so that the county ranked as the third most
qualified county in England and Wales.

4. Conclusions
The purpose of this paper is to explore the conditions under which research
universities become more than latent assets in their regional economies (Feldman
and Francis 2006; Power and Malmberg 2008). Four propositions, which provide the
basis for evaluation of regional development impact, are offered and tested using
Oxford University as an exemplar: the regional impact of universities depends on (1)
the internal characteristics of the university; (2) how the university responds to
exogenous shocks (Feldman and Francis 2006); (3) the nature of funding for higher
education institutions which accompanies agenda-setting by national and regional
 Entrepreneurship & Regional Development 399

political bodies; and (4) the attributes of the regional economy (Varga 2001;
Lendel 2010).
With respect to the first, there is an analogy between Meyer’s (2003) distinction
between ‘entrepreneurial academics’ and ‘academic entrepreneurs’. Some universities
have elements of entrepreneurship (academics who undertake commercial activities)
and some have a strategic commitment to be entrepreneurial (academics who run
businesses). Oxford University, one of the world’s top research universities has both.
It has a high rate of spin-offs and other indicators of commercialization. Strategic
commitment in Oxford University is devolved to three poles: Isis Innovation, the
Said Business School and the Begbroke Science Park. While the university benefits
from the kudos associated with these successes, it is more a ‘connected’ university
(Kitson et al. 2009) than an entrepreneurial university in that it lacks a central
steering core (Clark 1998). Of the three poles, Isis Innovation is the lead
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organization. Its impact has grown broader and stronger as it has captured more
of the wealth creating and outreach roles working closely with the other two and
with the research support office.
Drivers have been both internal and external. External drivers are derived from
national policy. Internal pressures to capture the financial rewards from the IP of
staff and students have resulted in a range of extensive wealth creation activities.
While the university has produced spin-offs for over 60 years, the evidence suggests
that the last 12 have seen Isis Innovation manage the process more effectively. It has
been successful in commercializing research through robust spin-offs, patents and
licenses, thereby increasing the value realized to the university of its IP and in the
amount of internal and external resources it has attracted for the spin-off process.
On these criteria, it has a very effective business model for technology transfer
(Mustar et al. 2006; Wright et al. 2007; Huggins 2008; Muscio 2010).
The rate of spin-offs, however, did not occur independent of broader changes
in the economy, the kind of exogenous shocks suggested in Proposition 2, which led
to the rise of high-tech economies in a few favourable locations. The increasing rate
of university spin-offs is especially in sectors associated with the fifth Kondratiev
wave (Freeman and Perez 1988) – biotech and ICT. The impact is twofold. First,
spin-offs contribute to path dependent economic development processes through the
formation of new firms. Second, growth in numbers of new firms formed by both
university and non-university personnel has stimulated Oxford University’s
colleges and later the university itself to expand the physical infrastructure
and associated support structures for local high tech industry (Phan, Siegel, and
Wright 2005).
Proposition 3 states that national public policy drives change and has direct and
indirect impacts on a university’s incentive to become entrepreneurial and regionally
engaged. Oxford University has been extremely successful in winning funding from
all post-1997 third-stream policy measures. It is very unlikely to have become
‘connected’ (Kitson et al. 2009) and as entrepreneurial without central government
funding. The university now has an ‘innovation structure’ which comprises
awareness raising, education and training, supporting services, as well as wealth
creation strategies. Evidence includes an increasing number of participants in
entrepreneurship courses and collaboration with local organizations. How embedded
these activities are will in part depend on the nature of future funding under HEIF
and other outreach programmes, and in part on what follows from the decision by
 400 H. Lawton Smith and S. Bagchi-Sen

the Coalition Government elected in 2010, to abolish ‘the region’ as a concept and
scale of policy delivery.
The last proposition is that transformation depends on the attributes of region:
that is the latent or nascent assets of the university and the region become
increasingly interconnected. Assets are drivers of change because of the possibilities
they create, and include the absorptive capacity of actors (firms, the public sector
and local governance bodies; Rip 2002; Rutten and Boekma 2009) in the university’s
home region. In turn, these relate to quantity and quality of skills in the local labour
market and the hosting and engagement of business networks in local systems of
governance. Oxford University has become active in both.
As Lendel (2010) points out, the bundled nature of university production and the
complexity and interdependency of external and internal pressures make it difficult
to assess which factors are the most important in facilitating regional impact. The
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evidence suggests that all are required. However, as Martinelli et al. (2008) show,
technology transfer can be effective, but it is likely to be discipline-related and its
impact not necessarily regional. As Rothaermel, Agung, and Jiang (2007) point out
there is a great need for longitudinal data to establish more clearly the degrees of
association between now observed and causal processes at work in influencing the
evolution of academic entrepreneurship and their connection to local entrepreneurial
activities and regional development. Finally, many governments seem to be
attempting to establish further elite, research universities. This study suggests that
this may or may not have desirable regional effects right away (Arbo and
Benneworth 2007).

Note
1. ONS uses data from the annual Business Inquiry which uses a more comprehensive
dataset with a less restrictive definition of high-tech and includes higher enumerate
numbers of businesses in IT and computer-related services.

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