Cognitive Capitalism: Don’t Forget the Financing

The role of universities in regional economic development is the topic of a recent, 100-plus page review of just the economic literature on the subject. The Organisation for Economic Co-Operation and Development-sponsored paper, titled “Understanding the Regional Contribution of Higher Education Institutions: A Literature Review,” is chalk full of information on a wide array of roles played by universities in fostering innovation, lifelong learning, local policymaking and sustainable development.

For our purposes at Science Progress, the study highlights many of the ways in which different schools of economic thought have sought to persuade academics—and particularly those within science and technology departments—to become more directly engaged in moving knowledge from labs and classrooms into local economies. One key section on Cognitive Capitalism (it’s on page 38) is particularly informative.

Yet the OECD study fails to examine one key connection between all four of these university roles and any regional economic development plan—entrepreneurial money in the form of angel investor capital and venture capital. The relative absence of private capital in this review of the economic literature is most evident in the almost complete lack of focus on Silicon Valley and the Route 128 corridor in Boston.

There are, of course, venture capitalists, angel investors and so called repeat entrepreneurs—most of them straight out of academia—who provide the financial firepower for applied innovation in both of those high-tech centers. This deep base of risk capital is the envy of other regional centers of learning, many of which are trying to replicate the Silicon Valley experience but with decidedly mixed results.

Many finance-related web sites and scholarly journals publish plenty of information on regional development, universities and venture capital. Here is one example (subscription required) that examines the travails of wannabe Silicon Valleys around the United States, and here is another example of a solid high tech start up that had the misfortune to be based in Cincinnati. The reasons for these failures and many others should be part and parcel of any economic review of university-led innovation and regional development.

One of the goals of Science Progress is to bridge this academic divide between those who think about innovation and economic development and those who practice early-stage venture and angel financing of high tech startups. Once that happens, both groups can get together to think about government policies that might help finance innovative regional economic development.

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