• Summary
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One need only look at the news to be bombarded with examples of corporate malfeasance and the impact such behavior has on a company’s public image, customers, employees, and bottom line. And while these stories grab the headlines, some companies are adopting practices that display awareness of their impact on the globe, whether that be to the environment, its employees and suppliers, or communities in which they do business. What factors are leading to these decisions? What are the benefits and costs of making ethical business decisions and acting in a socially responsible way, however one defines it? Issues in Business Ethics and Corporate Social Responsibility explores these foundational themes across a wide range of topics, including artificial intelligence, workplace surveillance, supply chain management, big ...

Business and Universities: Should Academic Capitalism Shape Teaching and Research?
Business and universities: Should academic capitalism shape teaching and research?
Patrick Brindle
Executive Summary

Policymakers increasingly see universities as engines of economic growth and as “incubators of innovation.” They argue that academic capitalism—an umbrella term for a variety of market-driven university ventures—is an innovative way to fund teaching, research and campus expansion in an era of tight budgets and rising tuition. They also say it benefits businesses, especially start-ups, by giving them access to campus research and facilities. Schools, the community and the economy all benefit. But critics say the close relationship between universities and the business world raises numerous ethical questions and warn that corporate funding can harm the ability of faculty to teach and research freely, two activities essential to good science and a healthy democratic society. Both sides agree that academic capitalism is here to stay and that financial realities will make it even more important to universities in the decades to come.

Overview

In early 2011, life sciences entrepreneur Edward Robinson and his colleagues at Acadia Harvest in Brunswick, Maine, were seeking financial and technical support to develop a radical new approach to fish farming. They wanted to see whether it was commercially viable to harvest two unfarmed species of fish, the yellowtail amberjack and the black sea bass. Moreover, they wished to create a zero-waste sustainable facility, and they wanted that facility to be based on land and indoors, rather than in one of the Gulf of Maine’s many beautiful inlets where it could potentially harm the ecosystem.

The entrepreneurs reached out to the University of Maine’s Innovation and Economic Development unit for help. The university gave Robinson’s team access to state-of-the-art scientific facilities they could not afford to build themselves; it also put them in contact with faculty experts and researchers who could help. That enabled Acadia Harvest to secure a nearly $660,000 National Science Foundation grant that supported more growth. Now Robinson’s company pumps a lot of that money back into the University of Maine as it conducts more research and development.

Partnerships with start-ups such as Acadia Harvest are “a win-win for the university and the local Maine economy because without the money from the companies, there would not be the money for new facilities at the university,” says Renee Kelly, director of economic development initiatives at the Office of Innovation and Economic Development.

Robinson says, “UMaine really understood Acadia’s business and really added value and expertise. Put simply, Acadia Harvest would not be there without UMaine. We would have needed millions in start-up funding.”

In areas such as Maine or upstate New York, still struggling with recession and the long shadow of deindustrialization, policymakers have started to see partnerships between state universities and local businesses as one path to economic growth. University-oriented regions such as Silicon Valley in California and Research Triangle Park in North Carolina serve as models.1

Advocates and opponents of “academic capitalism”—an umbrella term for a variety of market-driven university ventures—agree that the scale of such commercialization is greater than ever before and that it is likely to continue growing. But the rise of academic capitalism raises questions about the relationship between universities and the business world. Many academics now worry that in forging closer relations between business and academia, the universities will undermine their faculty’s ability to research and teach, both of which drive good science and contribute to a healthy democratic society.

Most-Valuable Payoffs in University-Industry Relationships

Note: Bar graph shows what leaders at small/medium-size companies and larger companies judged as the most-valuable payoff in relation to improving products and innovation. Participants were asked to rank these payoffs from most (5) to least (1) valuable—only the most-valuable rankings are shown in the chart. Participants included 102 leaders of high-tech companies.

Source: “Innovosource: Shape the Future,” slide 6, October 2011, www.innovosource.com/shareddocuments/U_I_survey_CFR_innovosource.pdf

In New York, Democratic Gov. Andrew Cuomo’s 2014 START-UP NY is perhaps the most radical incarnation yet of the trend to use state universities to generate economic growth. START-UP NY involves dozens of schools around the state, including private colleges and campuses of the City University of New York (CUNY) and the State University of New York (SUNY). It seeks to “accelerate entrepreneurism and job creation” across the state by creating more than 350 tax-free areas for new businesses near participating universities. Businesses that generate net new jobs will pay no sales, property or business taxes for 10 years—and their employees will pay no state income tax. Participating companies will have access to academic experts as well as the research facilities of the universities to support their research and development needs.2

Critics, however, caution that universities and society should carefully weigh the risks of programs such as START-UP NY, including the risk of losing taxpayer or university money. “There are too many failed experiments and too many failed start-ups,” says Walter McMahon, emeritus professor of economics at the University of Illinois.

“The success rate of such translational activity is not high, although the ones that prove successful are often very profitable,” says John Lombardi, president emeritus of the University of Florida and former president of the Louisiana State University system who is currently a history professor at the University of Massachusetts, Amherst.

Both globally and in the United States, higher education is a vast economy unto itself. In 2009, UNESCO estimated the global student population in tertiary education at 150.6 million—an increase of about 53 percent since 2000. Of those, more than 2.5 million were studying outside their home countries, and the number of overseas students is projected to rise to 7 million by 2020.3 In the United States, an estimated 21.3 million students were enrolled in degree-granting postsecondary institutions in 2015, up 39 percent from 15.3 million in 2000.4

College Enrollment Climbing

Note: Figures projected for 2013–15.

Source: “Digest of Education Statistics: 2013,” Table 301.10, National Center for Education Statistics, U.S. Department of Education, May 2015, http://tinyurl.com/mg4z9f8

Average Student Costs at Public Institutions of Higher Education

Note: The 2012 and 2013 data are from the U.S. Department of Education, National Center for Education Statistics,”Digest of Education Statistics 2013” report. Data for those years are not ranked and do not have calculated median values.

Sources: “Average Student Costs at Public Institutions of Higher Education (State),” in SAGE Stats (website) Washington, DC: CQ Press, 2015, http://data.sagepub.com/sagestats/2160; U.S. Department of Education, National Center for Education Statistics, “Digest of Education Statistics 2013,” http://nces.ed.gov/programs/digest/index.asp

Derek Bok, former president of Harvard University and author of “Higher Education in America,” has estimated that in the United States, spending on higher education amounts to 2.4 percent of national income.5 According to the American Association of Community Colleges, the community college sector alone contributes more than $800 billion to the U.S. economy.6 The U.S. government estimates that postsecondary institutions directly employ more than 3.8 million people.7 Such numbers exclude many research staff and so are likely to underestimate university employment.

Additionally, universities support hundreds of thousands of nearby off-campus workers, according to Shiri Breznitz from the Munk School of Global Affairs at the University of Toronto.8 “Start-ups proliferate wherever universities are located, benefiting the entire local economy,” she says. Entrepreneurs, Breznitz says, have long known that college towns, with highly educated staff and plenty of young people, are great places to open restaurants, shops, coffee bars and other small businesses. Caterers, cleaners, construction companies and the like also rely on universities to sustain their businesses.

Stanford University management professor Charles Eesley has sought to measure the impact universities make on the broader economy in the form of entrepreneurial alumni. In 2012, working with William F. Miller, another Stanford management professor, Eesley estimated that over the decades Stanford alumni had founded nearly 70,000 still-active organizations with combined annual revenue of $2.7 trillion, creating an estimated 5.4 million jobs.9 Eesley and his colleagues then looked at the impact of University of Virginia alumni. “Entrepreneurially active alumni have created approximately 65,000 companies,” they said. “These efforts have generated positive impacts on the global economy—notably 2.3 million people have worked at companies founded or directly supported by U.Va. alumni. The organizations that are active today generate global revenues worth $1.6 trillion annually.”10

While governments and businesses look to universities for economic benefits, the schools turn to industry in search of money for teaching, research and expansion. “We need to rethink how universities are funded—it’s clearly not working,” says Gary Berg, dean at California State University, Channel Islands, and author of “Lessons from the Edge: For-Profit and Nontraditional Higher Education in America.”

“This means paying special attention to the relationship to communities, including businesses,” he says. “Universities can have an enormous economic impact on regions, especially when well integrated with local industry; just look at Stanford and Silicon Valley.” However, he says, universities must be careful about how they develop business relations and what strings are attached to corporate funding. It’s not that corporate investment is inherently bad, Berg says, but that “society at large must ask itself what it wants from the university sector” and understand the cost of what he calls “corporate leveraging of the university sector.”

A common concern among commentators such as Berg and McMahon is that as universities become more reliant on business funding, their appetite to support so-called “pure research”—designed to answer questions of no obvious immediate commercial value or practical application—may diminish, along with research in disciplines not traditionally seen as directly driving economic growth. If university research is focused solely on economic activity, what happens, they ask, to research in the humanities and social sciences, or to more theoretical sciences such as cosmology?

To take one example, the commercial value of quantum physics was far from apparent in the early decades of the 20th century when Niels Bohr, Paul Dirac, Werner Heisenberg and others around the world helped develop the mathematical and theoretical foundations of subatomic physics. Their work was research in its purest, most unapplied form. Yet the commercial value of products derived from quantum physics is huge and incalculable—among them, the transistor and semiconductor, without which modern computers would not exist.11

At the heart of any discussion about academic capitalism is the question of the role of universities in society.

Anthony Picciano, professor of education at CUNY, co-author of “The Great American Education-Industrial Complex” and an entrepreneur himself, says questions about the “moral” or “public” good of universities should be important to the corporate sector, too. Higher education values such as “building knowledge, public service and being critical and evidence-based,” he says, “are values that business should embrace too in a democratic society.”

Commentators on the left—such as Henry Giroux, a social critic who is a professor at McMaster University in Ontario, and Sheila Slaughter, a University of Georgia professor who studies knowledge, power and higher education policy—have written in alarming terms about the moral hazards the corporate world poses to research and teaching.12 They worry about the future of pure research and about the freedom academics will have to research and teach what they like. Others share their worries. Phrases like “conflict of interest” and “strings attached” arise in conversations with academic commentators from across the political spectrum.

Giroux, Slaughter and other writers argue that if universities become too concerned with attracting business sponsorships, they are unlikely to support research that goes against commercial interests. Research into the health effects of smoking and climate change, for example, can make some business interests uncomfortable. Giroux and others say someone must check the truth of claims made by powerful and moneyed interests, and that can only be done by academics doing robust research with no vested interest in the outcome.

Advocates of academic capitalism also ask about the role of universities, but they come up with different answers. “Business needs universities to educate and train future talent,” says Chris Rudd, pro-vice-chancellor at Nottingham University in Great Britain. (See Expert Views, “Pro/Con: Chris Rudd on Working With Industry.”)

The benefits of academic capitalism are self-evident to Acadia Harvest’s Robinson. “Access to the physical assets, the research expertise, the specialist equipment, would all have been out of our reach without the university,” he says. Without them, his start-up would certainly have failed, and the community would have lost the jobs and investment that have come with its success.

As universities increasingly interact with businesses, these are some of the questions under debate:

Weighing the Issues
For universities and businesses, do the benefits of alliances outweigh the costs?

In the modern era of academic capitalism, it is difficult to find a university that does not have some form of business partnership. Schools such as the University of Maine are providing facilities for business start-ups; sending students on business internships; and working with corporate sponsors and donors to fund research centers and build new facilities. Professors in law, medicine, economics, pharmacology and other subjects are taking paid consultancies and placements with businesses. Universities are becoming venture capitalists, investing in research spin-offs and patent applications. Technology transfer offices are coordinating the business of managing universities’ intellectual property rights. State governments are providing tax breaks in university-linked research parks, which increasingly are seen, as in New York, as drivers of economic growth in the new knowledge economy.

“The relationship has been there since the beginning of American higher education, and it takes different forms as the university and business find various ways of extracting mutual benefit from each other,” says Lombardi, the former university president, who is also the author of “How Universities Work.” “The U.S. explicitly encourages and supports the relationship of business and industry” with universities.

Businesses benefit from their engagement with universities in various ways. Lombardi says, “Businesses get cheap high-quality research results from universities, often in fields and areas of high risk. Thus the university does research that is too expensive and with too little immediate return to interest business.”

Lombardi says that even basic or pure research “often, although not necessarily immediately, leads to products that may well have high commercial value, and the corporation can then license or otherwise acquire access to this intellectual property and translate it into product.”

“Businesses save a considerable amount of money by having universities and federal grant money subsidize their research and development projects,” says Catherine Chaput, associate professor at the University of Nevada and author of “Inside the Teaching Machine.” “They also get an opportunity to determine how students are taught, saving them time and money that would be spent doing on-the-job training.”

“Research-driven companies can benefit … in terms of access to cutting-edge research, future employees, and legitimacy gained by the association,” says Elizabeth Popp Berman, associate professor of sociology at the University at Albany, SUNY, and author of “Creating the Market University: How Academic Science Became an Economic Engine.” Businesses also are “helping shape education so that it lines up with employment needs.”

Berg says that employers’ involvement with universities offers students much-needed “real-world perspectives” on work, better preparing graduates for employment. Developing a highly skilled workforce has always been a role of higher education, but, say Berman and Berg, this relationship is optimized as businesses get involved with student learning and research.

Rudd at the University of Nottingham says university partnerships offer businesses “huge value” through “access to talent, ideas, IP, research capacity, a neutral observatory. [Plus,] development opportunities for their staff.”

For small and large companies alike, proximity to a good university brings proximity to high quality, highly trained staff, researchers and interns. Robinson at Acadia says it has been important for his company to take on Ph.D. students to conduct highly skilled work, and that the university partnership allows access to facilities that would be beyond the reach of new, small organizations.

For Kelly at Maine, it is “access to R&D facilities and faculty expertise that really makes the difference for local businesses.”

The university benefits, too. “Cooperation with corporations can increase the total funding available for research,” says McMahon at the University of Illinois. This can be significant to the university, because of the “very high costs of financing big STEM [science, technology, engineering and math] infrastructure to support cutting-edge research,” Chaput says.

There can be problems, though, especially when the expectations of the two sides don’t align. “Universities often just want businesses for their money, rather than to build a meaningful relationship or respond to their needs,” Berman says.

Public College Officers Emphasize Corporate Support

Note: Private doctoral/master’s and baccalaureate programs are nonprofit institutions.

Source: “The 2013 Inside Higher Ed Survey of College and University Business Officers,” Inside Higher Ed, July 2013, p. 15; available for download at http://tinyurl.com/pkz9q8k

Too often, university attitudes to business relations are characterized by “single-mindedness, shallowness and a lack of independent thinking,” says Martijn Rademakers, managing director at the international research and consulting company Center for Strategy & Leadership in the Netherlands and the author of “Corporate Universities: Drivers of the Learning Organization.” The arrangement, he says, can “lack credibility” and thus businesses end up “throwing money at projects corporations do not understand.”

Beyond such mismatched expectations, Chaput says, “businesses run the risks of having others interfere with their projects and/or being the recipient of bad publicity.”

McMahon says that some businesses do not understand the true costs of robust research and are disappointed by negative results. “Research is costly. There are many failed experiments,” he says. “This is one reason that federal funding is essential. It spreads the risk widely.”

Academic and business cultures can clash. For instance, Robinson complains that some of the universities he had tried to work with in the past “simply did not understand me or my business.”

Rudd says, “Navigating large noncorporate organizations can be challenging. Some universities may have suboptimal contracting and project management capacity.” Data security and speed of research are also significant issues, he adds.

Businesses tend to be results-driven, and for them the academic niceties of methodological rigor and valid inference from robust data can get in the way of the need to make quicker, often dirtier decisions.26

Says Breznitz at the University of Toronto, “The issue is that academics take a lot more time than businesses would like. They [academics] have different values, different costs, a different language of research and basically a completely different approach to research.”

For the higher education sector, the fruits of academic capitalism are not distributed evenly. Business funding, and matched funds from the university, tend to focus on specific areas of research in those fields where research applications are most likely to yield a quick and large return on investment. So while engineering, medicine, business studies and biochemistry get most of the money, research in the humanities and social sciences attracts less funding.

“There is a great need for increased support for—and understanding of—basic research as well as for research in the social sciences and humanities,” McMahon says. “Firms are not interested in funding this beyond some small parts of it. Bell Labs does some basic research. The result is research parks at universities that are almost exclusively devoted to research and development in engineering and in various applied aspects on the physical sciences, research outcomes that can be patented. When universities act as though their research parks are virtually the whole enterprise, with the vice chancellor for research in change of them as almost his main or only role, there can be a real distortion to the research agenda.”

Chaput says, “The university rarely makes significant money [when partnering with business]—the costs of building and maintaining labs and/or other facilities often match or even exceed the costs brought in by the external grants. There is also the risk of student and/or community organizations protesting these arrangements for one reason or another.”

Rademakers says if universities lose teaching and research independence, they risk losing credibility. “Short-term financial benefits can bring long-term loss of research quality,” he says.

Does higher education lose its core values when it allies with business?

Academic capitalism raises questions about the guiding values of contemporary universities and whether increased commercialization harms higher education.

Academics say protecting scholarly independence is paramount. “Universities and corporations need to work with each other on many fronts and topics of mutual interest,” Lombardi says. “The only difficulty appears when the relationships are not clearly articulated,” or arrangements are not transparent “to the university administration and others who might need to be reassured about the independence or lack of independence of university work.”

Importance of Private Funding Varies by Country

Note: Turkey, Switzerland and Luxembourg not shown due to lack of data.

Source: “Spending on Tertiary Education,” Organisation for Economic Co-operation and Development (OECD), Sept. 9, 2014, http://tinyurl.com/naxsd6e

Anxieties about the commercialization of universities are not new. “Warwick University Ltd,” a book edited by left-wing British historian E.P. Thompson, was fulminating against the spread of business values into higher education as far back as 1971.27

As Picciano at CUNY says, “We always have to ask what strings are attached with corporate funding of research.”

Berman outlines three interlinked aspects to the debate over university values: “Issues around research (conflicts of interest, shaping research agendas, pressures for certain results); issues around students (the mismatch between skills and jobs, questions of what students should be learning and how, tied to future jobs); and issues around attempts to monetize education directly (e.g. for-profit/university partnerships around online education).”

Says Lombardi: “The key issues begin with the nature of the relationship [between universities and businesses]. Is it at arm’s length? Does the university own intellectual property? Are graduate students employed? Does the balance of effort and revenue between university and corporation favor the university? Are there political consequences for the university in its choices of corporate partners? What conflicts of interest and commitment occur in typical university/corporate relationships?”

For McMahon, an economist, these questions are most apparent when considering the benefits of research and the balance between social and private benefits. “Both are important, but the former by definition involves benefits to others, including future generations, and the latter involves private benefits that are typically captured by patents and thereby internalized,” he says.

In 2007, the energy giant BP gave the University of California, Berkeley, and the University of Illinois a $500 million grant to support the Energy Biosciences Institute. The 10-year deal, thought to be the biggest-ever example of corporate funding of university research, stirred controversy.28 Some students and faculty protested the arrangement, raising questions about research independence, “greenwash”—gaining environmental credibility without actually helping the environment—and the impact on the university’s reputation.29

Rumors of strings-attached corporate medical research funding, including gag orders and suppression of “negative results,” continue to cast a cloud over the reputation of academic capitalism. British science writer Ben Goldacre’s 2013 book, “Bad Pharma,” argues that by entering such deals, universities are potentially undermining their credibility with the public.30

Picciano says there is another modern dimension of academic capitalism—“venture philanthropy.”31 Charitable foundations, such as the Bill and Melinda Gates Foundation, have become major investors in university research and teaching, and organize themselves along the same lines as private enterprises. The often-large sums of money given to universities by such organizations come with provisos and significant monitoring and control over how the money is spent—so much so that these grants are administered with a “strong corporate mentality,” Picciano says.

Berman raises concerns about the degree to which universities are becoming more like businesses. She says, “I think the single biggest issue is whether the shift toward thinking of universities themselves as businesses and students as consumers … will result in public-private partnerships that effectively channel public money into private companies without providing meaningful improvements in education (and possibly lowering its quality).”

Are universities providing the kind of workforce that business needs?

It’s a familiar lament: Business leaders bemoan the failure of the university system to supply the economy with workers possessing the skills needed for companies to compete on the global stage. This year’s version, as reported by The Wall Street Journal, was the finding that four out of 10 college graduates were leaving without the critical reasoning skills needed for white-collar work.32 Business leaders and others also complain that universities do not produce enough engineers, scientists, doctors and STEM teachers.33

The training of a highly skilled workforce, ready to meet the needs of business and industry, is widely agreed to be one of the main purposes of a university. Even critics of academic capitalism say that universities need to optimize their teaching to better support the needs of business, and they agree this support is better when businesses get involved.

California State University’s Berg sees developing a labor force as a fundamental challenge for universities, with an outcome that affects not only business but also the students themselves. “Students are entitled to ask questions about the real value of a university education,” he says.

Creating a trained workforce poses a serious challenge to faculty to better “set out the benefits of non-STEM subjects,” Berg says.

Many universities acknowledge they have to do a better job of providing practical skills, Berman says.

Many faculty members lament falling numeracy and literacy skills among their students, and complain of time and financial pressures to ensure as many students pass as possible. Career training helps by giving students in even the most unapplied programs a taste of the world of work and exposure to the practical transferable skills needed for them to find jobs and thrive in the workplace.34

Universities have begun to embrace the employability agenda more energetically. Students are now encouraged to take courses in study skills, research methods, statistics and writing. Many undergraduate and master’s courses offer internships—at Berg’s school, grad students often get a one year internship—and these have been extended to Ph.D. programs, too.35

Berg says, though, that universities can only go so far in training students for “real-world jobs.” Graduates go off in myriad directions after leaving school, he says, making it impossible for any single course to meet the needs of many diverse employers.

“Most universities are working hard to train their students for work, but train them for what, exactly, when it comes down to it?” Chaput asks. Beyond basic skills, she says, the nature of work is changing so quickly and unpredictably that even a concerted cross-university effort to align student learning with today’s economy would be out of date within a few years. The task of training tomorrow’s workforce gets progressively harder for universities as the sheer volume of students continues to grow, she says, straining resources that could be used to train students in core skills.

Indeed, many universities, Berg says, would love to have more science and engineering students, but they are simply not getting enough suitably qualified applicants.

A perverse irony is at work here. Public and private universities are run as businesses, competing to attract the best and the most students. Courses in the humanities, which are seemingly business-unfriendly, are there to meet a market need, not to make life difficult for employers. Economists such as Denmark’s Bengt-Âke Lundvall argue that knowledge and skills become obsolete much more rapidly now, requiring ever greater flexibility and creativity in the workforce. And that means both business and universities will struggle to know what skills students need to acquire over the long term.36

The face of a “virtual student” appears on a monitor during a taping of a Massachusetts Institute of Technology introductory biology class in 2013. The video was produced by edX, the online learning company founded by MIT and Harvard. The company offers free massive open online courses, known as MOOCs, to students anywhere.

Melanie Stetson Freeman/The Christian Science Monitor/Getty Images

Such ideas have become more mainstream. In 2008 at a meeting in China, education ministers from the nations that make up the Asia-Pacific Economic Cooperation (APEC) identified the key competencies of the 21st century as problem-solving, teamwork, lifelong learning and self-management.37 The international schools-based assessment tests developed by the Organisation for Economic Co-operation and Development (OECD) now place the “4Cs of education”—critical thinking, creativity, communication and collaboration—at the heart of their indices of educational achievement, alongside competencies in mathematics and literacy.38 Much of OECD’s work has been with high school education, but significantly the multinational organization identifies what it calls the 21st century skills of creativity and critical thinking as a core requirement for employers and potential employees alike faced with a future where both will have to “adapt to major changes and to innovate.”39

“Making college relevant,” says Chaput, “is hard when you don’t know what will be relevant 10 years down the line.” Online distance learning courses and other lifelong learning may play a larger role, but Chaput warns against losing sight of the bigger social picture, too, lest the education system become “less oriented to the production of good citizens.”

Background
Universities Before 1862

In 1763 an enterprising employee of the University of Glasgow in Scotland was asked to take a look at the university’s moribund Newcomen engine, a primitive steam-powered device. The employee, whose job it was to maintain the university’s scientific instruments, was James Watt. His improvements to the machine in 1765 transformed the power and efficiency of the steam engine, catalyzing the Industrial Revolution. Watt sought to patent his improved engine and eventually founded a company, Boulton and Watt, to manufacture the engines. Watt was not a faculty member in the modern sense of the term. Rather, in Glasgow, he worked for his own company supplying engineering services to the university.40 Watt’s academic and commercial entrepreneurship, along with his insider/outsider status at the university, presage the relationships that many modern university research parks seek to foster in the 21st century.

For the most part, until modern times, Watt’s story was exceptional. In the United States and Europe, society has long regarded universities and business as separate spheres.

The University of Bologna in Italy, founded in 1088, is considered the first university in the Western world.41 Oxford University in England began to form soon after, to be followed by a smattering of universities in Spain, France, Germany and across western Europe. Over the next 300 years, the medieval universities of Europe adopted a broadly similar approach to education. Most were funded by patrons in the church or nobility and developed curricula to train students in law, theology and, after the Renaissance, classical learning.

Learning a Trade

Training in trade and commerce in medieval Europe remained the fiercely guarded preserve of trade guilds, and education in each trade was passed on through an elaborate and closed system of apprenticeships. The theory and practice of stonemasonry, carpentry and weaving were the responsibility of the guilds, as were the business skills of bookkeeping and gauging demand that were needed for success. Any notion that a university should train its students in applied business skills would have seemed alien and revolutionary to universities and guilds alike. Each had a clear role in society, and each guarded its rights and privileges jealously.

North America’s first college, Harvard, established in 1636, was modeled on the University of Cambridge.42 As in Europe, most of the first American universities emphasized theological and classical learning. Throughout most of the 19th century, universities remained largely the preserve of rich and privileged men. For the moneyed classes, “trade” was a thing to be scoffed at, and part of the value of a university education was that it was not concerned with the kind of “vulgar” practical learning that would befit a trade apprenticeship. There was snob value in keeping a healthy distance between universities and commerce.

An early exception was Benjamin Franklin’s College of Philadelphia (now the University of Pennsylvania) founded in 1749. Franklin wanted his institution to focus on the training of a business and governing class, and even to provide some kind of schooling to students from poorer classes. In practice, the college did not follow Franklin’s design, as it came to rely on Anglican church funding and became a more traditional university.43

In 1819 the Ecole Supérieure de Commerce de Paris became the world’s first business school, setting out to teach economics and business ideas. A handful of other schools of commerce followed in Belgium and Italy in the 1850s, and in 1881 the first U.S. business school was established as the Wharton School at, appropriately enough, the University of Pennsylvania.44

Universities had already started to influence local and national economies in profound yet indirect ways. The work of early scientific and mathematical scholars such as Isaac Newton at Cambridge University created a crucial theoretical underpinning to the development of countless inventions and industrial applications. Without Newtonian physics, most of the inventions of the industrial age would be inconceivable. When Newton published his “Principia” in 1687, most observers would have regarded it as “pure research” with little or no commercial application, yet from today’s perspective the business impact was vast.

Land-Grant Colleges

In 1862, in the midst of the Civil War, President Abraham Lincoln signed the Land-Grant College Act. This law awarded land to states to finance the founding of colleges specializing in “agriculture and the mechanic arts.”

“The Land-Grant Act of 1862 marks a clear watershed in U.S. higher education history, as new state universities were established with the explicit aim of benefiting the local economy,” says Chaput at the University of Nevada. Recipients created schools of agricultural and mechanical arts (known as A&M colleges), where faculty taught courses and conducted research that would support local agriculture and industry. State universities had begun to take on the role played in previous centuries by European trade guilds.

Even the established private and public universities had, by the mid-19th-century, taken important steps to modernize their curricula in science, history, medicine, literature and economics, aiming to make them more relevant to the “real world” and to reduce the focus on theology and the classics. The new universities also started to admit women and students from nonwhite backgrounds. Universities were slowly becoming agents of social mobility as well as maintainers of the status quo.45

By 1900, many universities had become more directly involved in the economic life of industrialized countries in another way: their growing involvement in training and accrediting the emerging professional classes. Doctors, dentists, teachers and engineers were all being professionalized and, rather than establish guilds and colleges, professional bodies piggybacked on the prestige of universities by making universities responsible for training and vouching for new professionals.46 This process snowballed in the 20th and 21th centuries, with pharmacists, nurses, accountants, physiotherapists and many other professions all looking to universities for training.

The Changing Curriculum

By the start of the 20th century, most universities had modern curricula and were playing a growing role in the training of professionals. Universities became ever more important to the sciences in particular, as the levels of theory and specialized resources needed for cutting-edge physics or chemistry became too difficult for the gifted amateurs who had played so prominent a role before.47 The emerging field of economics was also establishing itself as a university-based discipline, as were the “social sciences” of sociology, anthropology and psychology.48

The Great Depression of the 1930s and the world war that followed it enhanced the role played by academic economists in shaping policy. Cambridge economist John Maynard Keynes became one of the chief architects of the Bretton Woods agreement of 1944 that set up the World Bank and the International Monetary Fund (IMF).49 The goal was to regulate the world economy along more scientific lines and to avoid another disastrous depression. Keynes’ influence has waxed and waned since the 1940s, but the door was opened to the ongoing influence of academic economists on economic policy making, and commentators today continue to talk of the “revolving door” between university economics departments and the boardrooms of big businesses, banks, lobby groups and governments.50

World War II boosted academic science, as government agencies recruited the best scientists to create game-changing inventions. Nuclear power, as well as the atomic bomb, emerged from the fusion of academic and government agencies in Los Alamos, N.M. Jet engines and the first computers arose from the British academic war effort, while the Germans forged ahead with rocket science.

Mostly, however, as Toronto’s Breznitz and Illinois’s McMahon both note, the 1950s, ’60s and ’70s saw academics focusing on their teaching and research. Although universities increased in number and in size, they largely did not engage directly with the world of business. Academic capitalism remained small, but the postwar period witnessed the steady growth of academic endowments from corporations and from alumni who sought to give something back to the colleges that had educated them. A small but steady stream of academics, meanwhile, entered the research departments of IBM, Boeing, General Motors and other major corporations.

The postwar period brought some skirmishes between business and academia. The highest-profile debate involved tobacco, where health scientists, worried by what they saw in their research data, sought to publish and campaign about the health risks of smoking in the face of fierce resistance from the tobacco industry.51

Academic Capitalism Emerges

The year 1980 marks a turning point when American universities started to transition from contributing indirectly to local and national economies through research and local employment to being seen as levers for economic growth. “It was the federal government that was the agent of this change, as it latched on to the idea that innovation is an engine of economic growth,” says SUNY’s Berman, who studies the role of public policy in recent U.S. history.

In 1980, Berman points out, the Bayh-Dole Act gave universities the right to claim the intellectual property developed by the university using public funds. This meant that patents and inventions, especially in fields with high commercial crossover, were now a potential source of income for universities and researchers.

Also in 1980, a critical Supreme Court decision, Diamond v. Chakrabarty, was as important as Bayh-Dole in changing policy toward academic capitalism, according to academic capitalism critic Sheldon Krimsky, a professor of urban and environmental policy and planning at Tufts University. (See Expert Views, “Pro/Con: Sheldon Krimsky on Working With Industry.”) Diamond v. Chakrabarty approved the patenting of genes, animals and plants.52 This boosted the emerging biotechnology industry, which relies heavily on university science departments.

Also passed in 1980, the Stevenson-Wydler Technology Innovation Act encouraged state governments to set up cooperative research centers where industry and universities could work together on research-led enterprises.53 The foundations of the modern research parks, with their university spin-offs and technology transfer centers, were laid.

The 35 years since Bayh-Dole has witnessed an intensification of “university entrepreneurialism,” to use the phrase coined by Stanford professor of management Henry Etzkowitz.54 Many universities have invested heavily in research likely to provide a high return via intellectual property rights, with a premium placed on investing in biotech, medical research and computing.

However, according to Berman in “Creating the Market University,” since the 1980s the culture and governance of America’s universities has shifted not only toward commercialization but also toward seeing universities as agents of economic growth.55

For Berman, this trend is most clearly illustrated by U.S. universities’ rush to support research that could lead to patents. By the 2010s, she wrote, universities received roughly 3,000 patents each year, an eightfold increase since the 1980s. More than 150 universities in 2007 had “technology transfer offices”—departments geared to support the commercialization of intellectual property and outcomes from faculty research.56

In 2013 in the United States, industry funding of academic research exceeded $3.5 billion, according to the National Science Foundation (NSF). This may sound like a lot, but it is dwarfed by the $39 billion contributed by the federal government in the same year. NSF estimated total research funding in the United States at more than $67 billion, meaning business funding of research made up only a little more than 5 percent of the whole.57

“Federal and state governments are going to bear the lion’s share of research sponsorship for a long time to come,” Breznitz says. If pure research and non-STEM subjects are struggling for funding, the figures would suggest that’s as much a result of university, state and federal funding decisions as anything else.

Current Situation
Successes and Questions

Kelly at the University of Maine says academic capitalism is paying off there. “In a rural state like Maine, having a land and sea grant university like the University of Maine open and accessible to businesses is key to our success as a state with regard to research, development and commercialization,” she says. “With such a large percentage of the state made up of small businesses, in order to grow and expand through innovation of products and processes we must all work together. On top of product development, we are also positioned to help train a highly skilled and motivated workforce.”

For Kelly, the challenge is marketing. “When the general public think of the university, they tend to think mostly about the work we do with students,” she says. “We have a major hurdle getting the word out about the work we can and do with businesses not just in Maine, but around the country and in many cases globally.”

Maine can be “very humble and modest,” she says. “The fact that we have world-class facilities on this campus doing breakthrough research in everything from wind energy, to bridges, to biodiesel to climate change is not something that is widely known.”

Other states continue to expand academic-business ties with programs such as New York’s START-UP NY. Colorado, for one, has had considerable success attracting entrepreneurs and Internet start-ups to Boulder, home to the University of Colorado and numerous research labs.58

The University of Toronto’s Breznitz says that when it comes to commercialization, “no two universities and no two areas are exactly alike.” Colleges and states pursue varying strategies when it comes to patent rights and intellectual property, as well as equity sharing and the holding of risk. The type of businesses that inhabit research parks vary widely, too. Start-up or spin-off companies established by one or two Ph.D. students can sit next to global corporate giants. At the center of many research parks are university technology transfer offices that support commercialization opportunities.

The spread of academic capitalism continues to raise ethical concerns, including at Harvard. The university pioneered corporate tie-ins with a $23 million deal with biotech firm Monsanto in 1974.59 Since then, Harvard has attracted large-scale investment and corporate deals from other health and pharmaceutical companies. The drug company Pfizer remains a major research funder at Harvard Medical School and, through its work with faculty and students, has early access to cutting-edge research. Pfizer also shares with researchers access to state-of-the-art facilities and equipment. However, some students have questioned their professors’ ties to the drug industry; they and others warn that such relationships can compromise academics’ work and lead to problems in the classroom, including the intimidation of students who raise questions about the impartiality of industry-funded research.60 Other pharmaceutical companies also have been accused of intimidating academics and seeking to suppress negative test results.61

In “Big Oil Goes to College,” a report published by the Center for American Progress, a liberal Washington, D.C., think tank, investigative journalist Jennifer Washburn examined 10 research agreements between the big energy companies and universities totaling $883 million over 10 years. This analysis, the report said, raised “troubling questions about the ability of U.S. universities to adequately safeguard their core academic and public-interest functions when negotiating research contracts with large corporate funders.” It said the contracts “leave the door open to serious limitations on academic freedom and research independence.”62

Climate-change researchers today face conditions similar to those of tobacco researchers in the 1970s and ’80s as corporations that want to maintain the status quo seek to discredit or cast doubt on scientific findings, according to James Lawrence Powell, a former college president who wrote “The Inquisition of Climate Change” and now is executive director of the National Physical Science Consortium, a California-based alliance of universities, government and industry that provides graduate fellowships in science, math and engineering.63 In his book, Powell identified industry-funded networks that support dissenting academic scientists to give the public an impression of doubt and dissent over issues such as tobacco and climate change, thus reducing pressure for action and legislation.64

To provide guidance to professors and universities in working with corporate sponsors, the American Association of University Professors in 2014 listed 56 principles. Those include the need for universities to preserve academic freedom, the right to publish and the ability to control the nature of commercial relationships.65

Academic Capitalism Goes Global

Universities increasingly are international institutions, with campuses in multiple countries and courses available globally.

The number of universities opening international branch campuses has mushroomed. Students can, for instance, attend Cornell University in Qatar, the Sorbonne in Abu Dhabi, or Nottingham University in Ningbo, China. The rise of English as the common language for teaching and research means U.S. and U.K. universities have taken the lead. According to the University of Albany’s Cross-Border Education Research Team (C-BERT), in May 2015 there were 236 international branch campuses worldwide, 33 of them in the United Arab Emirates alone. The research team defined an international branch campus as “an entity that is owned, at least in part, by a foreign education provider; operated in the name of the foreign education provider; engages in at least some face-to-face teaching; and provides access to an entire academic program that leads to a credential awarded by the foreign education provider.”66

Such branch campuses provide a high-risk but potentially lucrative growth strategy for U.S., British and Australian universities, according to education researchers Stephen Wilkins and Jeroen Huisman at the University of Bath in Great Britain. When successful, the campuses enhance not only the originating university’s income but also its global brand, they said.67

The growth of online learning and the emergence of “edtech”—education technology—as a new higher education market has further diversified and globalized academic capitalism and changed how faculty publish and disseminate research and teaching. Publishers, software developers and online educational service providers have all created products to tap into this online market. Learning can now be delivered online and consist of blended collections of text, data, video and learning and assessment tools. Universities administer their courses using online course management systems, and professors from their office in the United States can run real-time seminars with students in Africa, Asia or Europe. This not only represents another growth opportunity for universities to extend their teaching reach but also provides publishing and technology companies opportunities to supply content and infrastructure.

Looking Ahead
Growing Globalization

Financial realities will magnify trends fostering closer university-business ties, according to both proponents and critics of academic capitalism.

“We will see more of what we have seen in the past, although the impact of business investment in university work will grow as other sources of funding for university work such as tuition/fees, federal research grants, public funding through state grants and appropriations decline,” says Lombardi at the University of Massachusetts.

Rademakers at the Center for Strategy & Leadership says the relationship between businesses and universities will get “ever closer because governments have less and less budget, so [higher education will] turn to the corporate world for funds.”

As governments continue to seek ways to save money while expanding access to education, and as the idea that universities are drivers of economic growth in a knowledge economy becomes entrenched, universities will seek more money and involvement from the private sector. What is less certain is what this will mean for pure research and for areas of study that are not attractive to private investors.

To critics such as David Harvey, a distinguished professor of anthropology and geography at CUNY, and Giroux of McMaster University, academic capitalism represents the corrupt embedding of the idea that the private sector should take precedence over the public sector within the university system—it makes society a poorer place by undermining the integrity and objectivity of research and teaching.76 For many university administrators, and for academic advocates of further marketization in higher education such as economist Charles Clotfelter of Duke University and Gerhard Casper, president emeritus of Stanford, academic capitalism brings more dynamism and money to universities and can revive moribund local economies.77

Higher education researchers William Tierney and Michael Lanford of the University of Southern California argue that academic capitalism is increasingly tied to a model of economic globalization that emphasizes the centrality of the knowledge economy and sees universities and tertiary colleges as key players in that economy.78

The further globalization of the higher education economy is likely to continue, with universities opening more campuses internationally and with more students and researchers moving from country to country to seek the best education and research facilities. The cost, scale and complexity of high-end scientific research is likely to drive more cross-university and cross-national collaborations such as at CERN, the Geneva-based European Organization for Nuclear Research, where universities, government and private sponsors pool resources to support state-of-the-art experiments.

The growth of online learning, distance learning and lifelong learning could further enhance the role universities will be expected to play in society and generate new opportunities for universities to expand. Such trends are linked to the emergence of a globalized knowledge economy as a new economic model. As Tierney and Lanford observed, “The emergence of knowledge-intensive trade makes colleges and universities central to workforce development in the twenty-first century.”79

Chronology

1088–1700

Universities are established and begin a slow climb to modernity.

1088

The first Western university is founded in Bologna, Italy.

1096

Oxford University in England is established.

1635

Académie Française, one of the earliest learned societies to disseminate academic and scientific knowledge, is founded in Paris.

1636

Puritans open Harvard College, the English colonists’ first university; it is modeled on Cambridge University in England.

1660

The Royal Society of London is England’s first learned society. Its journal, the Philosophical Transactions of the Royal Society, becomes the world’s first academic journal, disseminating and scrutinizing academic knowledge more widely.

1687

Isaac Newton’s “Principia” is published, establishing an empirical base that would support scientific and industrial breakthroughs.

1700–1930s

In eras of Enlightenment and industrialization, scientific and business principles advance on campus.

1749

College of Philadelphia is founded by Benjamin Franklin—the first U.S. college to engage in the idea of practical and commercial education for the community.

1765

James Watt’s improved steam engine at Glasgow University energizes the Industrial Revolution.

1807

Medical Society of the County of New York founds the first medical college.

1819

The Ecole Supérieure de Commerce de Paris is established in France, making it the world’s first business school.

1881

The Wharton School at the University of Pennsylvania becomes the first U.S. business school.

1893

Johns Hopkins University School of Medicine opens to become the first university-affiliated medical school in the United States, setting a template for professional education.

1908

The Harvard Business School sets up the first MBA program.

1925

The Wisconsin Alumni Research Foundation becomes the world’s first licensing agency, a de facto technology transfer office at the University of Wisconsin, Madison.

1940s–1950s

During World War II and the Cold War, combatant nations harness and apply skills of academic scientists.

1944

At Bretton Woods Conference, academic economists such as John Maynard Keynes play key roles in designing a postwar global economic system.

1951

Stanford Research Park is built adjacent to Stanford University, attracting scientific start-ups and planting the seeds of California’s Silicon Valley.

1970s–1990s

Academic capitalism appears.

1971

The Open University in Britain is established, pioneering distance learning.

1974

Harvard signs an agreement for corporate research funding with agrochemical company Monsanto worth $23 million.

1980

Bayh-Dole Act establishes the legislative underpinning of academic capitalism, signifying a new expectation that universities will drive economic growth…. The federal government amends tax and intellectual property laws, further incentivizing the development of academic capitalism…. Genentech’s initial public offering raises $35 million, demonstrating the riches that scientists and colleges can make through patenting and spinoffs.

1996

Google originates as a Ph.D. research project by Larry Page and Sergey Brin at Stanford University, as a wave of high-profile technology start-ups emerges from leading universities.

2000s–Present

The relationship between universities and business grows closer.

2002

PLOS One becomes the first significant open-access scholarly journal.

2007

The University of California, Berkeley, and the University of Illinois, Urbana-Champaign, share a $500 million grant from BP to conduct biofuel research.

2010

U.S. enrollment at for-profit colleges peaks at 2.02 million; in 2013 it’s at 1.66 million.

2011

Udacity and Coursera—companies that design and promote massive open online courses, or MOOCs—are founded at Stanford.

2012

The year of the MOOC sees an explosion of interest in online courses.

2014

Start-Up NY offers tax incentives to businesses to work closely with New York’s state colleges…. The American Association of University Professors lists 56 principles to guide industry/academic relations, including the need for universities to preserve academic freedom, the right to publish and the ability to control commercial relationships.

2015

The number of international branch campuses—partnerships between U.S. colleges and their foreign counterparts—reaches 236 worldwide.

Update in 2019

Academic capitalism, the close ties between universities and business, has been in the spotlight in recent years, most notably in 2019.

The Massachusetts Institute of Technology came under scrutiny for funding obtained by the MIT Media Lab from and through the late billionaire Jeffrey Epstein, who committed suicide on August 10 in a New York City federal prison after being accused of sex trafficking.80

Meanwhile, the University of Michigan faced questions about ties to its biggest donor, Stephen M. Ross, a real estate developer and professional sports team owner, after Ross hosted a fundraiser in the Hamptons for President Donald Trump. The fundraiser prompted some customers to boycott the Equinox health club chain of which Ross is an owner.

When it comes solely to universities’ research and development activities, business trails the federal government as a source of funding, according to the State Science and Technology Institute, a nonprofit organization that promotes science, technology, innovation and entrepreneurship.

In 2016, the latest year for which statistics were available, SSTI estimated that business accounted for 5.9 percent of funds for R&D activities at universities. That compares with 53.9 percent paid by the federal government.81

After adjusting for inflation, the National Science Foundation estimated that business as a funding source rose by 19 percent between 2010 and 2016, with 34 states reporting an increase. The largest jump came in New York state where business funding increased by 58 percent.82

In total, 2016 business funding accounted for $4.2 billion in higher education R&D, the NSF said. Private universities depended on businesses for about 7 percent of their funding, while business was a source of R&D funding for 5 percent.

The specialty drawing the most business funding was life sciences, followed by engineering, the NSF said.83

The situation also becomes sensitive when a funder or donor is in the news. The MIT Media Lab, known for research and development projects, has been funded by corporate partners including ExxonMobil, Citigroup, PepsiCo, GlaxoSmithKline and Verizon.

“Many of its scientists were conduits for corporate and institutional investment,” wrote Justin Peters on Slate.com.84

Over several years, the Media Lab accepted approximately $1.72 million from Epstein, who also arranged for an additional $7.5 million from other wealthy donors, and who arranged to camouflage his involvement in fundraising, according to The New Yorker’s Ronan Farrow.85

The Media Lab’s director, Joichi Ito, resigned a day after The New Yorker article was published. The president of MIT, L. Rafael Reif, called the allegations “extremely serious” and retained an outside law firm to investigate.86

In the case of Ross, his name is prominent at the University of Michigan where he has donated nearly $300 million. The campus includes the Stephen M. Ross School of Business and the Stephen M. Ross Athletic Campus, a new collection of facilities that serve two-thirds of student athletes at the university.87

In August 2019, Ross hosted a fundraiser for Trump at his home in Southampton, New York, where tickets to attend cost $100,000. For $250,000 attendees could get a photo with Trump. The fundraiser led to a social media campaign, #BoycottSoulCycle, one of the brands that Ross owns.

Scott DeRue, dean of the Ross School of Business, in an email to students, wrote,

“We are a community where people of all backgrounds and perspectives are both welcome and encouraged to share their views. We do not endorse or support this or any other fundraising event for political candidates.”88

The university said it would not remove Ross’ name from any facilities, and that it did not “exclude or include people from our university community based on their political views.”89

—Micheline Maynard

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