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Digital skills and the role of universities in driving innovation clusters and economic growth

The good thing about the many emerging innovation and tech clusters around the world today is that the internet has created awareness of what works and what doesn’t in the creation of regional and local ecosystems capable of nurturing successful high-growth tech companies from nothing. In the last few weeks, I’ve been in Cairo, Boston and London, and seen the same questions being debated, obviously to different levels. The fact is, wherever you sit in the world, you can learn from others successes and failings, identify your own ecosystems’ strengths and weaknesses, and then create local solutions to create a thriving environment for economic growth.

This is exactly what happened at the local gathering of the great and the good of London’s tech ecosystem this week, run by Tech London Advocates at the Bloomberg headquarters in the UK. Digital skills and employability of graduates were two of the key issues that the collective said are a hindrance in enabling growth and scalability of the UK’s tech companies. As one headline from the press coverage of the event says, ‘Tech London Advocates tells universities to buck up their ideas’. At a fundamental level, the consensus at the event suggested unanimously that children at schools need to be inspired to learn digital skills as well as learn coding. At the next level, it felt universities were out of touch with their local ecosystems in terms of digital employability.

It’s not surprising then that the UK’s higher education funding council also welcomed a report last week from the country’s City Growth Commission, focusing on the need for universities to do more to play a role in city-scale and wider economic development (read their press announcement here). The report emphasizes the importance of universities in developing high-tech clusters, and of university technology transfer offices in forging close links with local venture capital and entrepreneur communities.

Since the government invests over UK£7 billion in public funds in the higher education sector for teaching and research, it would be useful to see an economic outcome for the city, town or region in which the university is located. Currently, the financial and performance incentives which universities respond to are largely agnostic to the location of their impact. Competing in the global economy, universities will increasingly be important ‘anchor institutions’ in UK cities. In order to respond to growth opportunities related to workforce skills and industrial innovation within the local metro area, a range of measures could be implemented to maximize the local and regional economic growth benefits from university activities.

The report highlights the role of entrepreneurial universities in stimulating innovation ecosystems, the need for collaboration between universities and external partners such as businesses and civic and local partners, and recognizes that many universities are now ahead of government proposals to increase activity on student enterprise, supporting 3,502 additional start-up companies set up by students and graduates in 2012-2013.

The latter point is important – you cannot expect governments to spark innovation and support local clusters. As the UK’s City Growth Commission’s Rohan Silva says, “…there are limits to what Whitehall [central government] can do centrally to spark innovation and support local clusters. Why? Because innovation clusters cannot be dropped from 40,000 feet – they need to be nurtured from below. What’s more, clusters are – to quote the great Jane Jacobs – systems of ‘organized complexity’, and interventions need to be designed with the specific challenges and opportunities of a local area in mind.”

In order to nurture innovation and grow a cluster, Silva says city mayors need to do three things: unlock the growth potential of universities, improve connectivity, and attract bright entrepreneurial people to live, work and start business in the cities.

In terms of unlocking growth potential of local universities, they may be world-class research institutions, but much more needs to be done to encourage academic spinouts and entrepreneurialism on campuses. For example, mayors could make use of their financial freedoms to build startup incubator spaces close to university campuses, and support local angel investment networks that provide the essential risk capital and mentoring for fledgling companies. Mayors could also consider creating their own ‘intermediary institutions’ to support next generation technologies emerging from their local universities.

On connectivity, Silva says since the 21st century economy is increasingly dependent on sharing information, cities need to quickly emulate Singapore’s 1Gb/s broadband speeds to drive inward investment and innovation. This will require mayoral leadership to punch through the planning red tape that impedes broadband rollout, as well as a collective willingness to introduce real competition in the wholesale broadband market. Connectivity also means better transport links between clusters, which have the potential to spark new business partnerships and collaborations between leading technology clusters in different areas.

On attracting talent, Silva cites that 70 percent of Silicon Valley’s engineers were born outside of the United States; similarly, immigration policy can be used intelligently to encourage talented graduates to study and reside in the key urban areas of the UK. He also adds, as the American academic Richard Florida has shown, cities benefit economically when mayors take steps to improve quality of life and support art, culture, live music, food markets and nightlife.

What the UK City Growth Commission report and the Tech London Advocates debate have shown is that to nurture successful innovation ecosystems, and create scalable companies, inspiring the next generation with the right digital skills is important, and giving universities the right incentives to produce employable talent and connect with their local economies is going to be increasingly important.  This is especially so university establishments are to survive in a growing online age, and a future of needing new funding streams other than government.

The US already has some good examples of successful clusters resulting from local universities (eg. Stanford, Harvard, MIT) which have closely integrated themselves with the local innovation, startup and venture capital community. It is clear that in many other parts of the world, universities have a stronger role to play in creating the right environment for local and regional economic growth.

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