Making the Link Between Higher-Ed and Economic Development

Anup Ghosh, founder of Invincea Labs, the kind of company Virginia business leaders would like to see more of emerging from state colleges and universities.Photo credit: Washington Post.

If there’s one thing that big business, colleges, universities, Republicans and Democrats agree upon, it’s that Virginia’s public system of higher education is essential for workforce development, social mobility, economic competitiveness, and building the economy of the future. The unanimity of opinion was on full display today at the 2017 Virginia Summit on Higher Education and Economic Competitiveness in Richmond.

A series of speakers including the Democratic and Republican candidates for governor hammered away at a common theme. Virginia’s economy has slowed, people are leaving the state for the first time since records were first kept in the 1940s, and the Old Dominion has declined in a number of best-state-for-business rankings. To revitalize the economy, Virginia needs to invest in its colleges, community colleges and universities to equip workers with 21st century skills and create innovation ecosystems capable of spinning university research into new businesses and jobs.

If those messages sound familiar, it’s because they largely coincide with the goals announced last week by Growth4Virginia, an initiative of the Virginia Business Higher Education Council, which put on the summit. The council, comprised of college presidents and prominent businessmen, has been working with the Virginia Chamber of Commerce to build public awareness of higher-ed’s contribution to the economy.

Beyond articulating four broad strategies — making Virginia the top state for talent, making Virginia a home for entrepreneurs and innovators, providing affordable access for all Virginians, and preparing Virginians for great jobs and great lives — the conference did not stake out any public policy positions. The event seemed more geared to raising consciousness that something needs to be done.

However, it was not apparent that the consensus strategies, hemmed in as they are by scarce state resources, will accomplish much. Two dissenting themes emerged in the panel discussions. First, Virginia can crank out more graduates, but there is no guarantee that the grads will stay here if they can’t find jobs. Second, Virginia can pour money into university research, but R&D activity won’t generate enterprises and jobs unless other elements of the innovation ecosystem are in place.

Peter Blake, executive director of the State Council of Higher Education for Virginia (SCHEV), set the scene by describing Virginia’s progress toward reaching the goals of the Virginia Plan for Higher Education. The most audacious goal is to make Virginia the “best educated state” in the country by 2030, leaping past Massachusetts, Colorado, Connecticut, Minnesota and Washington. As a practical matter, that means granting 1.5 million undergraduate degrees and workforce credentials between 2015 and 2030. Two years into the initiative, Blake said, Virginia is on track to its goal, having granted 265,000.

Boosting Virginia from the sixth best educated state to No. 1 “will not be a light lift,” Blake said. “It will require sustained attention.”

Neither Blake nor anyone else at the conference gave an estimate of how much it would cost to achieve that goal. But for the most part, Virginia’s business leaders at the conclave accepted the necessity of investing in the higher-ed system.

The Virginia Chamber of Commerce is focused on improving Virginia’s best-state-for-business rankings, and the quality of the workforce is one of the important metrics, said Dennis Treacy, chamber chairman. Particularly essential are the so-called STEM-H (science, technology, engineering, math and health) degrees.

Stephen Moret, president of the Virginia Economic Development Partnership, agreed that the quality of Virginia’s workforce is vital for recruiting out-of-state business. “Human capital is the single greatest driver of prosperity in the economy,” he said. “Incentives still matter, but what matters the most is human capital. If we win on human capital, we win, period.” As for the goal of becoming the best educated state, he said, “I love that goal.”

But he warned that there is a “relatively small correlation between degree production and degree attainment.” In other words, it’s one thing to grant the degrees, it’s another to find jobs for people with those degrees. The reason so many Virginians, half of whom have college degrees, left the state over the past three years is that they can’t find jobs here. Federal budget sequestration has crimped job creation in Northern Virginia, the commonwealth’s economic engine. Moret suggested that it might be prudent to focus resources on graduating students from disciplines for which there is a demonstrated shortage.

Making a similar point, John L. “Dubby” Wynne, former CEO of Landmark Communications in Norfolk, noted that Virginia has a 4.3 million-person workforce and has an acute shortage of employees with information technology skills. Yet Virginia’s higher ed system produces only 4,000 four-year degrees, two-year degrees, and certification credentials in computer science per year.

The other big sticking point was the goal of investing more in Virginia universities’ research capabilities. It is a truism that in a technology-driven economy, research universities are engines of economic growth. Look no further than Stanford, Berkeley and Silicon Valley or Harvard, MIT and Boston. But given the size of its economy and the high regard of its public universities, Virginia punches below its weight.

Virginia’s six research universities generate about $1.4 billion in research annually, said Angel Cabrera, president of George Mason University. That’s less than the University of Michigan alone. Virginia is attracting less than its fair share of federal research dollars. If the commonwealth wants to be a player in research, he said, “you have to make investments to get it.”

Cabrera gave examples of the kind of economic benefits that accrue from R&D activity. Annup Ghosh, founder of Invincea, which describes itself as a next-generation anti-virus company, sold the company earlier this year for $120 million. Ceres Nanosciences, which developed a highly accurate diagnostic test for Lyme disease, has raised millions of dollars in growth capital. Both came out of GMU.

However, GMU is embedded in a dense innovation ecosystem. Ghosh, for instance, had worked at DARPA, the Defense Advanced Research Projects Agency, which funded his research at GMU. He tapped the Center for Innovative Technology for funding, and he found other early-stage funding in Northern Virginia. Thanks to the region’s ties to the defense and intelligence agencies, entrepreneurs also can draw upon world-class technical and executive talent in cyber-security.

Other regions in Virginia don’t have such well-developed innovation ecosystems. With an eye to building innovation assets in Hampton Roads, Wynne conducted a gap analysis comparing Hampton Roads capabilities with best practices. The regional fell woefully short. The NASA Langley research facility and the Thomas Jefferson Lab conduct about $1 billion in research between them, but a scientist seeking to commercialize a technology would find few resources to help him, he said. Wynne said he is working on building a business accelerator and developing a source of seed funding.

Bacon’s bottom line: While strong colleges and universities are essential components of technology-driven economic development, they are not sufficient in and of themselves. It is possible for the commonwealth to invest too much in higher-ed, getting ahead of the demand for graduates and the ability to commercialize R&D. Investment in higher-ed has to be carefully calibrated with demand for particular skills and the slow and painstaking development of innovation ecosystems around research universities. If state leaders are not careful, they could wind up subsidizing at great expense the workforce of other states and building research capabilities that generate little economic spin-off.