Economic Development Programs and Higher Education

Economic Development Programs and Higher Education

July 1, 2024
Economic Development Programs and Higher Education
Higher education has long been viewed as a tool of
• knowledge creation;
economic advancement and security, particularly at the
• human capital creation;
individual level. For example, the Federal Reserve found
that in 2023, 87% of survey respondents with a bachelor’s
• transfer of existing capacities and technologies;
degree or higher reported they were “doing at least okay
• technological innovation;
financially.” This compared to 48% of respondents with
less than a high school degree answering the same way.
• capital investment;
• regional leadership;
In recent decades, there has been increased interest in the
potential place-based economic development benefits of
• influence on regional milieu (intellectual, cultural, and
higher education—that is, the advantages that may accrue at
social contributions to the region); and
a regional, rather than individual, level, in areas
• knowledge of infrastructure production (combining a
surrounding a college or university. Such positive outcomes
college or university’s stock of knowledge with the
may result from technological innovation, knowledge
“spillovers” from university
organizational structures supporting its application).
-based research into the broader
business and entrepreneurial ecosystem, and increased
Researchers have examined the effects of higher education
levels of human capital and talent development. Prominent
on economic development. Although there are caveats,
examples of regions that have flourished in part due to the
studies generally show at least some degree of regional
presence of universities include California’s Silicon Valley
economic benefit to having a nearby college or university.
and North Carolina’s Research Triangle, both of which
For example, a 2019 study looking at the economic impacts
have played a part in the idea that higher education can
of higher education in multiple countries found that a 10%
contribute to regional economic growth.
increase in a region’s number of universities per capita is
associated with a 0.4% higher future gross domestic
Recent Congresses authorized new programs that have been
product per capita in that region. Other studies have
used to leverage higher education assets toward economic
similarly found that the presence of research universities
development. For example, the CHIPS and Science Act
can positively affect metropolitan economies, even while
(P.L. 117-167) authorized the Regional Innovation Engines
accounting for cyclical economic changes.
(RIE) program at the National Science Foundation. RIE
activities may include facilitating the adoption,
Some consider IHEs beneficial to regional economies due
development, and commercialization of research results;
to knowledge spillovers. This concept of knowledge
training graduate students and conducting outreach to
spillovers holds that colleges and universities, through their
broaden participation in RIE activities; and reimbursing the
research activities, will generate ideas that will transfer
cost of commercialization activities. The entities eligible to
outside of university settings to nearby areas. This
receive RIE funding are U.S.-based institutions of higher
knowledge transfer may then lead to further innovation and
education (IHEs) and U.S.-based nonprofit and for-profit
entrepreneurial activity. Some researchers have posited that
organizations.
these knowledge spillovers are the primary way that
colleges and universities impact their region’s economy.
Research Findings and Frameworks
Some researchers and practitioners have sought to define
Colleges and universities may also contribute to regional
higher education-based economic development. For
economic development through a formal process of
example, the Association of Public and Land-Grant
technology transfer. The Patent and Trademark Law
Universities’ Innovation and Economic Prosperity Program
Amendments Act of 1980 (Bayh-Dole; P.L. 96-517, as
outlines three areas in which colleges and universities can
amended) permits institutions such as colleges and
work on “economic engagement”:
universities to hold the title to patents on inventions
resulting from government-funded research and to license
• talent and workforce development;
the rights to those inventions to businesses and
•
entrepreneurs. This process of technology transfer can be a
innovation, entrepreneurship, and technology-based
valuable source of revenue for a college or university. Some
economic development; and
have credited Bayh-Dole with increasing interest in
• place development, including through public service and commercializing research generated at colleges and
community engagement.
universities, and many colleges and universities now have
offices dedicated to advancing technology transfer.
One 1995 study identified the following eight areas of
expertise that colleges or universities may use to advance
Another way colleges and universities may facilitate
regional economic development:
economic development is through human capital
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Economic Development Programs and Higher Education
development. By educating individuals, including a number
Entrepreneurship coordinates interagency activities related
who may stay in the area following their studies, colleges
to innovation, commercialization, and entrepreneurship.
and universities may increase the productivity of their
Among the programs OIE administers is Build to Scale
region. Alongside knowledge spillovers and innovation,
(B2S). B2S funds efforts to facilitate innovation and
some studies have found human capital development to be
entrepreneurship and increase access to risk capital. B2S
one of the main ways that higher education may affect
awardees are often IHEs. For example, B2S’s FY2023
economic development.
awardees included at least 14 IHEs.
Selected Federal Programs
Entrepreneurship and Entrepreneurship Education
The federal government operates a number of programs that
Another category of programs seeks to give colleges and
incorporate higher education into their economic
universities a direct role in building entrepreneurship. The
development strategy. While these programs employ a
Minority Business Development Act of 2021 (Division K of
variety of techniques, they also use a few types of specific
the Infrastructure Investment and Jobs Act, P.L. 117-58)
approaches. Those include providing technical assistance;
authorized the Minority Business Development Agency
enhancing research and development (R&D) and
(MBDA) to implement new entrepreneurship education
commercialization; and facilitating entrepreneurship and
development activities, including some that award grants to
entrepreneurship education.
colleges and universities. The law also directed MBDA to
partner with public and private sector entities and
Technical Assistance
educational institutions to support opportunities for
Some programs connect IHEs with technical assistance to
business education, apprenticeships, entrepreneurship
further business and economic development. For example,
training, and related activities for the benefit of socially or
the Small Business Administration’s (SBA’s) Small
economically disadvantaged individuals.
Business Development Centers (SBDCs) provide free
counseling and resources to small business owners. SBDCs
Considerations for Congress
operate in partnership with state governments and IHEs.
As seen with MBDA’s increased responsibilities, in recent
Federal funding for SBDCs is provided through grants to
years, Congress has authorized a number of new federal
state agencies or IHEs that then operate SBDCs.
programs to use higher education to boost economic
development. Some Members of Congress have also
The National Institute of Standards and Technology
expressed interest in expanding existing programs. In the
administers the Hollings Manufacturing Extension
118th Congress, H.R. 6130 and S. 3169 would, among other
Partnership (MEP) program, a national network of centers
things, require a UC in every state.
providing custom services to small- and medium-sized
manufacturers to improve production processes, upgrade
Congress could conduct oversight of any new programs’
technological capabilities, and facilitate product innovation.
implementation to assess their efficacy and consider
One of the statutory goals of MEP centers is to enhance
findings of previous evaluations in attempts to expand other
productivity and technology performance in U.S.
programs. For instance, a 2014 third-party evaluation of
manufacturing through the participation of individuals from
EDA’s UC program found that new and smaller UCs may
industry and universities (among other entities) in
have fewer resources than larger, more established UCs,
cooperative technology transfer activities. Each MEP center
and, as a result, should have a different set of expectations.
is operated by a state government, college or university, or
Congress may want to consider the resources and
other nonprofit organization.
capabilities of newly established UCs in any potential
legislation establishing goals for the centers.
The Economic Development Administration’s (EDA’s)
University Centers (UC) program awards grants to IHEs
According to an October 2023 report from the National
that operate UCs that then provide technical assistance to
Science Board, the federal government funded nearly 55%
public and private sector organizations to enhance local
of academic R&D expenditures in FY2021. The report also
economic development. There are 72 UCs covering 47
found that 131 institutions received nearly 75% of federal
states and territories.
academic R&D funding, out of 3,733 institutions awarding
four-year degrees. There are a number of federal programs
R&D and Commercialization
intended to address the geographic concentration of federal
Other programs provide a role for higher education to assist
R&D funding. These include the Established Program to
with R&D and technology commercialization. The Small
Stimulate Competitive Research (EPSCoR) and EPSCoR-
Business Technology Transfer (STTR) program, centrally
like programs, which are currently active at five federal
administered by SBA but currently operated by five other
agencies. Congress could consider expanding such efforts.
federal agencies, is designed to facilitate the
Congress could also study whether less concentrated federal
commercialization of university and federal R&D by small
academic R&D funding is likely to have any impact on
companies. Agencies with extramural R&D budgets of $1
regional economic development.
billion or more are required to set aside a portion of these
funds to finance an agency-run STTR program.
Adam G. Levin, Analyst in Economic Development Policy
EDA also plays a role in connecting IHEs with technology
IF12701
commercialization. EDA’s Office of Innovation
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Economic Development Programs and Higher Education

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