Universities and medical centres as drivers of regional innovation

In this episode, we chat with Dr. Cullum Clark, Director of the George W. Bush Institute’s Economic Growth Initiative, who will share insights from his report about how universities and medical institutions spark local innovation, retain top talent, and build thriving communities.

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Transcript

Madeline Arkins:

Today, I have the pleasure of speaking with Dr. Cullum Clark, who wrote a report earlier this year, titled “Engines of opportunity: How eds and meds institutions can become more powerful drivers of prosperity in America’s cities”.

Cullum Clark is the Director of the George W. Bush Institute – SMU Economic Growth Initiative, and an Adjunct Professor of Economics at Southern Methodist University (SMU), where he leads the Bush Institute’s domestic economic policy work. With a 25-year career in investment management, he has held roles at Brown Brothers Harriman, Warburg Pincus, Simmering Global Investors, and Prothro Clark Company.

His PhD from SMU focused on monetary policy, urban economics, and economic growth. And to top that all off, he also has degrees from Yale and Harvard. I am very glad to be joined by him today. Thank you so much, Cullum.

Cullum Clark:

Thanks for having me, Madeline.

Madeline Arkins:

To get us started, could you share a bit about your journey and how you came to the focus of this report and your work at the Bush Institute?

Cullum Clark:

Absolutely. The Bush Institute is the think tank and, as President Bush likes to say, the “do tank” arm of the George W. Bush Presidential Center in Dallas. One of the pillars of our work centres around expanding opportunity and economic mobility in America. So, one way or another, we are always going to be interested in that topic.

What I think I have brought to it over the last several years is really a focus on the question of how we can create more opportunity and economic mobility through a geographic lens. How can we create more prosperous, high opportunity places in America? Why place? Because lots of evidence shows that where you are on the map strongly influences your prospects in life.

Also, I have always been very interested in what we call “economic geography”, since my investment days. Why do things happen where they happen? Because place really matters a lot all over the business and economic world, and in other respects as well. That led me to a simple recognition, which I don’t think it is all that earth-shattering:

Places that have strong “eds and meds” institutions, and by that I mean primarily research universities and academic medical centres, have had a good 21st century for the most part.

They have been outperforming other places. It is a simple observation, but I wanted to understand that better. It is easy to make generalisations about it, but I really wanted to dig in. For example, what are the actual mechanisms? What are universities doing to turn those mechanisms up and produce still stronger effects?

That is basically how I came to it.

Madeline Arkins:

It is a very nice and detailed report, so it is clear that you really got into the meat of it. Just to give a flavour of what it is about, could you share some success stories of these institutions and academic medical centres? Or examples of key ways that they can use to become drivers of local economic growth and community development?

Cullum Clark:

Of course. It is good to start there, with just a general statement of why they play an important role in local economy. The basic reason is that ideas travel best at short distance. It could have been otherwise. We could have found that it really doesn’t matter where the universities are in the world.

One could be based somewhere in Antarctica, and it wouldn’t really matter, because people and ideas would spread out everywhere equally around the Earth. But that is not the case at all.

We looked at the whole issue through a three-part rubric. We borrowed this from the University Economic Development Association and APLU, who really came up with this. This rubric can be broken down into innovation, place and talent; these are three ways through which universities have large effects.

1. Innovation: Research universities do a lot of cutting-edge science and related fields. It turns out that when such research spawns a company or some kind of commercialisation effort, there is a very pronounced tendency for that to happen locally in many cases. Later on, we can talk a little bit more about the issues of a very high proximity. But that tendency is really strong. It is a major factor why Silicon Valley and the Boston Cambridge area have done as well as they have.
2. Place: Academic medical centres and big research universities have a big footprint in cities. There is a long history, going back many hundreds of years, of universities being cloistered off. You can think of it as a cloister where nuns might live, for example, in the architectural style of Oxford and Cambridge, which was then borrowed by where I went to undergraduate school, Yale and others here in the United States. Sometimes, they would like to think of themselves as isolated from the surrounding city, but that is really a vain effort in today’s economy. One way or another, they have a large physical footprint, and they are going to affect physically what is going on in their city, if they are sufficiently big.
3. Talent: There is hardly any need to say that universities produce the highly skilled, highly educated talent who are ready for 21st century STEM heavy jobs in our world. What I think is sometimes underappreciated is the strong tendency of great universities to attract talented students from all over the place, and then keep them in that same city or metropolitan area after they graduate. That is a really pronounced tendency. It is certainly the case here in my hometown. I work for SMU, which, if you go back a couple of generations, overwhelmingly attracted students from the greater Dallas area and elsewhere in Texas to some degree. Now, they come from everywhere in the world: a very diverse bunch of students from a very diverse bunch of places. And yet, more than 60 percent of them have their first job out of college in the greater Dallas area. That happens in great university after great university. Talent tends to stay local to a disproportionate extent. Our report has a lot of concrete success stories, which we can get back to in a moment.

Madeline Arkins:

Absolutely. I am from Ireland, and I think what you described as the brain drain of attracting great students into these cities, and then them returning to their homes, or seeking employment elsewhere, is also a great issue in a lot of countries.

Let’s move on to talk about the opportunities and challenges that you came across. In this report, you discuss how there is a number of different stressors affecting these institutions, such as declining public confidence in the power and value of higher education. And certainly, in the Netherlands recently, there has been proposed budget cuts of about upward of two billion to the education system. So, very unsustainable financial models.

To your mind, what are the most urgent changes these institutions need in order to remain effective drivers of this prosperity?

Cullum Clark:

If there is a core message in this report, it is that universities, particularly research universities and academic medical centres, are truly more important in the role they play than they have ever been in our increasingly knowledge-centric economy, but they are also at a crossroads in a number of respects.

Universities face several overlapping crises at once, and I think we have come to a moment in time when the idea of the university needs to modernise, which we have seen at some other points in history.

We need a lot of reform, to boil down a lot of analysis of what this crossroads looks like, I think we can put it this way. Universities need to become more relevant again. What does that mean? On the teaching front, I think we have always had, going back to probably those medieval cloisters, an ongoing debate that has never resolved about to what degree should a college, or for that matter, graduate education, lean more into learning how to do some useful trade in the world for after you graduate versus to what degree should it be about generally enlightening you and enriching you through a broad liberal arts education. That debate will never be resolved. It seems that we have a pendulum that swings back and forth over time in this country, at least, but I am betting that also happens in Europe and elsewhere.

I think we came to a point where, in research universities, the pendulum has been a little bit too much away from the kind of training for practical outcomes in life. In no sense at all would I recommend swinging all the way to the other extreme. I have three daughters. The youngest is a senior in college now. I can tell you I have strongly endorsed in my advice to them. I don’t know if they listen or not, but the liberal arts concept is a good concept, and they should take advantage of it.

Having that said, I think what polls show is that the public in this country is speaking with one very loud voice. And while there are differences, for example, across party affiliation, there is greater distrust for universities among republicans than democrats, for example. Even among progressive democrats, the sense that what they are doing is relevant has been in a dramatic long-term decline. So, first of all, become more relevant on the teaching front. We can talk a lot about that. It is a big topic, and I have got a lot to say about that in the report.

Secondly, become more relevant on the research front. Here is a simple observation that I put up in the report. There are a couple of charts that came from an article in Nature that I wish more people would talk about, since it is a very important article. The researchers in that piece looked at approximately 25 million academic papers that had been published going back to World War II in a range of science subjects, and they had machine learning algorithms grade the papers for to what degree was the science in them breakthrough, transformational, changing our whole notion of how the universe works and giving rise to potentially revolutionary new products versus to what degree was it incremental, confirming what we already know.

Over time across multiple scientific fields, there was a big diagonal line going downwards. The average score for innovativeness of those papers has been going steadily downwards for decades. What we sometimes call meta science is a big topic, the science of scientific inquiry.

We have created a dynamic across fields that gives rise to very strong incentives to do what is safe, rather than what could be breakthrough for university researchers.

There has probably always been some of that, but I would argue that the incentives have just been drifting too far in that direction, and we need to shake it up.

The other piece is the economic and financial equation. People have to believe that, if they as young people, or whatever age they enrol in a program, undertake the cost of it versus the opportunity cost of not working, at least not working full time, that the payoff is good.

Moreover, society needs to believe that when it pours tens of billions of dollars into the research operation, as well as in supporting student tuition and assistance, they are getting a good deal. So, what is the state of things on that? What the survey shows again and again, without any question, is that the percentage of people who believe that a college education, at least in this country, has a good payoff and is worth the cost, has been in headlong decline. I think it has gone a lot further than the facts justify. As economists, we study something called the “college wage premium”, which analyses how much more money do people make by having a college degree. It has been in a long-term uptrend and has not turned downwards. The value, particularly based on getting the right major, provided by studying something that is in demand in the world is as good as it has ever been.

However, the cost of attendance has also gone up pretty fast. In fact, faster than the payoff, which means that, comparing the numerator to the denominator, the return on investment has actually been in decline. It is still good, provided that you study something that the world will find useful, but overall, it is in decline, and I think the public is a little bit ahead of the real trends. It overestimates how much it has declined, and universities do need to educate people on that fact that it has not declined nearly as much as they think. Nonetheless, it is a real challenge.

We need to see some breakthroughs on the financial model. Essentially, the financial model of higher education has barely changed in the last 50 years or so. We need some pretty drastic change in terms of taking costs out and delivering better content at a radically reduced cost. I think modern technology, as we are experiencing it right now, creates possibilities for doing that, but we have only begun to exploit those.

Madeline Arkins:

Absolutely. It does feel like a hamster wheel in terms of catching up to what needs to be on offer. And certainly, at UIIN, we are constantly talking about having more incentives for researchers to engage with agents outside of the confines of academia and more incentivisation beyond just publication, which can be perceived as the safe and easy pathway.

Cullum Clark:

In some ways, I am just citing the nNture piece, that may be the most powerful reform that we could possibly implement. I think we are in desperate need of doing that.

Madeline Arkins:

I am with you on that. Obviously, we are here also to talk about urban innovation districts, which you have also mentioned, and a key finding in the report is the rise of it post-COVID, so a decreasing land use by universities and the growth of urban innovation districts.

You also mentioned that ideas travel faster over a shorter distance. Can you explain what these districts are and why they are significant? Also, how can these institutions better leverage them in from the successes you have seen so far?

Cullum Clark:

Sure, absolutely. One thing that we noticed while working on this report is that one of the fastest growing new dynamics around the world is the rise of what we call innovation districts. Typically, a place on the map is formally defined, you can draw a line around it. You could pretty easily walk from one end of it to the other.

We are talking about places that aren’t very big. And while it is not necessarily the case that it has to be linked to an eds or meds, higher ed or healthcare institution, in practice, it nearly always is connected to one or often more than one. And what we are seeing is what was initially something that only happened in a few places in the last third or so of the 20^th century.

A couple prominent ones, of course, were Research Triangle Park in Raleigh, in the Durham area, North Carolina and Kendall Square in Cambridge, Massachusetts, across the street from MIT. Those were some early examples. They weren’t really widely imitated until we got into the 21^st century. And since then, we have seen an explosive increase in this kind of activity.

I just observed that it was happening and started to inquire into it and look at it. There was a great article put out by Brookings written by Julie Wagner and Bruce Katz, in the mid-2010s, called “The Rise of Innovation Districts” describing this. It is a great kind of key source.

But one thing that I observed was that it didn’t seem that anyone had yet actually tried to quantify how this whole initiative is going and what are the actual results of it. Because it is happening everywhere, it is clearly in vogue, but is it maybe just a fad that will pass, or is it something that actually is the next step in urban placemaking in a way that is likely to have legs?

So, we put together a data set on 36 U.S. innovation districts. I would love to extend that to the world beyond the United States, because it is clearly a fast-growing dynamic in Europe and also in Canada, and certain Latin American countries. They do it somewhat differently, but in some cases there is very large places that are arguably comparable in East Asia.

I would like to do that, but we did rely pretty heavily on data that is of U.S. nature, U.S. census type data.

As engines of economic development, innovation districts are doing great, they are about the best economic development strategy going in the 21^st century.

Maybe the only one that is even better is just to produce a highly educated workforce. That is still probably the greatest economic development strategy around.

We looked at 36 of them and what we found is, on every measure we looked at, they are attracting people to work and live in the area, attracting in particular people of relatively high educational attainment and creating nearby relevant jobs.

We also looked a lot at housing markets, which there is a lot of variety of them across places, since we make it too hard to build new housing in 21^st-century cities in the United States and Europe. But notwithstanding that, nonetheless, the actual growth in the housing stock is far greater in the immediate vicinity of these places than in comparable urban locations elsewhere.

So, it is working. But why is it working? And this comes back to what I said at the beginning of our conversation, Madeline, and it is the concept that ideas travel best at short distances. It just turns out that when people are doing innovative things that involve the transmission of ideas from one person to another person, it is best if they are not in a low-slung sprawling office building surrounded by a gigantic sea of surface parking, and they never run into anyone else who works at any other place, unless they go to the once-a-year conference or similar. It turns out that if they can actually walk over to the coffee shop, not very far from where they work, and get together with someone who works in another place, that is a really fruitful way for ideas to propagate.

There is a Stanford economist, Nicholas Bloom, who with colleagues has been probably the leading academic closely studying this phenomenon. One thing that he and his group have shown is that the effects of proximity in terms of transmission of ideas start to wear off after about a quarter of a mile. So, you go a little bit further than that, and the odds that two people, who are half a mile apart from each other most of the time, will spend time together and move ideas back and forth between them or put two ideas together and produce a third idea, go down a lot.

Also, I think a big emphasis on innovation districts is not just attracting a bunch of office and lab-type real estate. Although that is certainly the heart of it, it is also to create dynamic live-work-play environments where a certain fraction of the people is probably walking to work.

Maybe that is not so shocking to you in Amsterdam, but it is in many American cities. And this walkability part is not just about innovation districts. This is something people yearn for. They don’t get enough of it in American cities. This is a general challenge of our time on the housing front and on the revitalising cities front.

But in innovation districts, it just turns out to be vital. And in part, that is because you are trying to attract a certain kind of workforce that may skew somewhat young, and certainly skews highly educated. And the verdict is in, we know what such people want.

They want a certain amount of walkability. They want to be able to live relatively close to where they work, at least a lot of the time, some of them do. Maybe over time, they will move to a more spacious location elsewhere, but they will still value all of the restaurants and coffee shops and bars and everything else that exists when you have a dynamic live-work-play environment at relatively good proximity and density.

I have visited most of the ones that are in our dataset, and wherever we go, wherever we look across these innovation districts, everyone is trying to create that dynamic live-work-play environment. Some are further along than others, but there is not one who says: “No, we are not interested in that. We just want to be an office part”.

Madeline Arkins:

I listened to the podcast interview you did with your daughter with Southern Medical Foundation, which I really enjoyed. You mentioned the economic concept of “complementing, not substituting” about entrepreneurship, and how entrepreneurship really does complement basic research, even though that is not often the feeling in academia. It seems like proximity is one that could really be an aid, I think, as a natural aid in supporting that kind of relationship between entrepreneurial ideas and basic research.

Cullum Clark:

Sure, you are so nice to listen to that. That was certainly one of the highlights of the last several years for me. My daughter is actually very involved in the creation and the growth of an innovation district in Dallas by happenstance. She has a podcast that is involved in supporting UT Southwestern, our leading medical school here in North Texas.

The point I wanted to make there about “complementing, not substituting” is that, in academia, there is an idea that is outmoded, which is that the more the institution tends to focus on entrepreneurship and the commercialisation of ideas, the more it will detract from the traditional core mission of doing basic research and advancing the frontiers of knowledge, independently of how that turns into products or jobs or enterprises in the real world.

Our data includes not only the innovation district data, but also more general data, which we refer to as the “Innovation Impact of U. S. universities” in the report. This is the impact in the real world, not just advancing the frontiers of theoretical knowledge.

What we show without any question at all is that advancing the pure science goes hand in hand with advancing entrepreneurship, commercialisation and practical applications.

It is unequivocally the case that the institutions that do a better job on one, do a better job on the other. By the way, there is plenty of other literature that shows the same thing. I am not aware of a single study that would support the idea that the one detracts from the other, but it is common out there and we all need to work against it. It is certainly a popular view among a lot of lifetime academics.

But one thing we are certainly seeing, I find this every time I talk to people who are in a position to know in leadership positions and universities, is that there is a generational change afoot. Younger academics are more likely to get the idea that these two things go hand in hand and should advance basic science, as well as devote at least some of their time to entrepreneurship. They don’t have to be the CEO of the new company; they could find a partner. But if they spend some of their time helping figure out how the new science will actually impact the world for the better and helping build something that will make that a reality, it will strengthen their career and would accomplish more. They don’t just observe that, but they want it.

When young, talented scientists and other academics are looking to where they want to work, they value places that will actually give them good outlets, good opportunities, and a great platform for being entrepreneurial as well as doing innovative science.

Madeline Arkins:

It is great to hear that the tide is turning on that, because, as you say, there is so much evidence to support that kind of engagement. And commercialisation efforts really can boost the citation impact, the online engagement with articles or even support future research partnerships.

Time always flies on these fireside chats, and particularly with in-depth insights such as the ones in this report. To close us off, Cullum, you mentioned earlier that obviously The Bush Institute is a think tank, but also, as Bush says, a do tank, very solutions oriented.

Is there any sort of actionable takeaway, either for listeners, policymakers or institutional leaders? You can pick who the priority target of this should be.

Cullum Clark:

May I, Madeline, do one for people who run eds and meds institutions and one for public policymakers?

Madeline Arkins:

Yes, please.

Cullum Clark:

For the people who run the institutions, I think the big message of this report is to figure out new ways to be relevant. I think there have been a number of great leaders in higher ed in recent years. We document a number of these efforts in our report at places like Arizona State University and Purdue University that show that it can be done. Caltech is another example. They show how to make dramatic changes.

They show that some of the trade-offs people believe in are in fact myths, and that you can advance across several fronts at once, in ways where the progression on one front sort of reinforces what you are trying to do on other fronts. Teaching, research, building great surrounding cities and economic development-oriented ecosystems. It can be done, and it is being done, but most universities have long ways to go to really be where they should be on that.

For policymakers. We live in a democratic society, and this general disenchantment that I described a few minutes ago with higher ed does in fact bleed through to our elected representatives.

A lot of them aren’t big fans of higher ed these days. They are at best indifferent, and in many cases, would actively like to punish or undermine universities. My big message is that it is a recipe for disaster. Please don’t say that universities are going in the wrong direction and, therefore, must be further undermined and dismantled. No, not at all. Be part of the solution. Be part of a great reform movement and a time of regeneration and modernisation.

Every level of government can do a lot about that. In the United States, the federal government is by far the biggest funder of research. It can heavily influence not just how much research activity takes place, but the incentives facing researchers. I would suggest increasing the funding, not the other way around, and also figuring out how to turn the knobs on the incentives to promote greater risk-taking and more breakthrough work.

State governments in our country control a majority of the higher ed institutions. They are arms of the state. Basically, state legislatures have it in their power to, for example, incentivise their institutions to figure out new talent pathways and how to re-engineer the incentive schemes around tenure and advancements in universities. Also to build up technology commercialisation offices and operations, as well as greater engagement with industry and entrepreneurs… So, state governments have the power to do that.

In local governments, the most important thing they typically do that affects universities is land use policy and being a partner in building great cities, including innovation districts. It would be very hard to imagine pulling all this off without local government support.

I don’t think local governments aren’t usually, as we would say in American football, the quarterback of the effort, but they can certainly be a supporting player, so I would tell all levels of government: be part of promoting the innovation and entrepreneurship economy. Don’t imagine you can run away from it. Be part of the solution.

Madeline Arkins:

What an energising note to end on. Thanks, Cullum. And at UIIN, we are all about activating the quadruple helix. I think it is always important to bring in the collaboration of all the different actors.

Cullum Clark:

Thanks for the great work you all do, Madeline.

Madeline Arkins:

Thanks so much for your time, for starting your day off with this.

For those who are interested in following your work, where can they find you, where can they reach you?

Cullum Clark:

On our website, the website of the George W. Bush Institute in Dallas, Texas, there is a wide variety of work that I have written, including the main report that you have so nicely referenced, but a lot of supporting shorter pieces. I have been writing about this in various forms for the last several years, so they will find quite a few things about higher ed and academic medical centres.

Madeline Arkins:

We will be reading with interest in that case. Thanks so much again, Cullum, and enjoy the rest of your day. To our listeners, thanks for joining us. See you next time.

Cullum Clark:

Thanks so much, Madeline.

Ready for more?

If you are interested in the topic of cultural change at universities, in our report brief, Fostering engaged and entrepreneurial culture at universities, we explore the findings and recommendations from our research that focus on fostering a culture of engagement and entrepreneurship within Higher Education Institutions.

During the 2023 UIIN Conference in Budapest, we spoke with Monroe France, Vice Provost for Diversity, Equity, Inclusion, and Justice at Tufts University, about how to champion the principles of diversity, equity and inclusion (DEI) across all levels of an institution, including in strategic partnerships approaches. You can hear about it at our episode Towards a more diverse, equitable and inclusive university.

Stay tuned for the next episode on this series and don’t forget to follow us on your preferred podcast platform!