Higher Education, Innovation and Economic Development

Abstract

This paper links higher education to economic development through an analysis of how graduates contribute to innovation and learning and it draws policy implications for economic development. The starting points are two original contributions to the understanding of the role of higher education in relation to economic change (Nelson and Phelps 1965; Schultz 1979). On this basis we move ahead and referring to recent empirical research we demonstrate that graduates act both as innovators and equilibrators in what we call the learning economy. We end the analytical part concluding that investment in higher education may not give substantial rates of return in a technologically stagnant economy. Since the alternative to invest in higher education is to remain in stagnation forever, we focus our policy discussion on two questions. First, how to design higher education in such a way that it helps to break the vicious circle of stagnation and stagnating demand for graduates? Second, how to design a general strategy for vitalising national innovation systems that includes investment in higher education as important element? We recommend less developed countries to build universities more strongly rooted in the regional context – a model referred to in the paper is the US land grant college including its extension

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