How can tertiary education deliver better value to the economy?

Publication Details

This paper asks how tertiary education can deliver better value to the economy. It is based on a presentation given at the New Zealand conference of the Association of Tertiary Education Management in Auckland in July 2010.

Author(s): David Earle, Tertiary Sector Performance Analysis and Reporting Division [Ministry of Education]

Date Published: December 2010

Where does innovation come in?

Going back to the theories about how education influences economic growth, we have largely discussed education in terms of its contribution of skills and abilities to the workforce. That is, the human capital theory. However, theories suggest that more there is more to it than that, and that innovation and knowledge transfer play important roles.

Innovation is important because it can provide a step change in economic output. Its effect on productivity is to reduce the amount of effort to produce the same volume of outputs and/or, more importantly, raise the volume of outputs being produced for the same amount of effort. It can also result in shifts toward higher value-added products for the same or similar amount of investment.

Figure 6:  Sources of information for firms with innovation activity

Image of Figure 6:  Sources of information for firms with innovation activity.

Source: Statistics New Zealand (2010a)

Figure 6 above shows the sources of information for businesses that have innovation activity. It shows a consistent pattern over the five-year period of the surveys. Less than 10% of businesses source their information directly from universities and polytechnics. This is not to say that these direct links are unimportant or insignificant. Rather, they are not widespread across businesses.

Information from other businesses is a more widespread source of information for innovation than universities and polytechnics. This may include some spill-over from those working directly with the tertiary sector. The next largest area is conferences and published material. This is an important area where the tertiary education system makes a contribution.

However, at the top of the list are staff, including new staff, and customers. So the most widespread influence of tertiary education on innovation is through the education of students and the skills and ideas they take with them into employment.

It is also interesting to look at the barriers to innovation.

Figure 7:  Factors hampering innovation in business to a high degree

Image of Figure 7:  Factors hampering innovation in business to a high degree.

Source: Statistics New Zealand (2010a)

Figure 7 above looks the factors reported by businesses as having hampered innovation to a high degree. Lack of information is relatively infrequently reported as a factor hampering innovation. The most frequent barrier is the cost to develop or introduce the innovation. This is closely followed by lack of management resource and lack of appropriate personnel. In reality, it is probably the combination of lack of resources (time and money) and skills (technical and managerial) which is the greatest barrier to innovation.

Research commissioned by the Ministry of Economic Development rounds the picture off. The research looked at what characterised high value-added firms and medium value-added firms. These were firms operating in the same market sector and assessed according to their labour productivity relative to their industry. The key finding was that medium value-added firms focused on the production process and the skills of their technical and trade employees. While high value firms did so as well, they also focused on the value of their products and customer requirements and the business skills of a few, professional core employees (Kaye-Blake, et al, 2010).