Lesser lights and stars both draw in cash

Areas near universities with high-rated departments attract substantial private-sector research and development investment, researchers have confirmed. But they also discovered the surprising fact that regions surrounding lower rated departments have a similar effect in some sectors.

A study by the Institute for Fiscal Studies found that private-sector labs were choosing sites near relevant departments rated highly in the research assessment exercise. But some lower-rated departments were also attracting clusters of foreign-owned labs.

A postcode area with a university chemistry department rated 5 or 5* was likely to have nearly twice as many labs undertaking R&D in pharmaceuticals as a postcode area with no 5 or 5* rated chemistry department. Those areas also attracted three times as many foreign-owned R&D labs as areas without a high-rated department, the study shows.

But in the machinery, electrical engineering and aerospace sectors, researchers found evidence that labs were selecting locations near departments rated 4 and below. Laura Abramovsky, research economist at the IFS and one of the authors of the study, said this could be because such departments were more commercially oriented.

The 2003 Lambert review of business-university links highlighted the role of business clusters around academic institutions in spurring innovation.

Ms Abramovsky said her study showed that such links existed and that foreign-owned labs were drawing on British knowledge.

Researchers used data from the Office for National Statistics to study where private-sector R&D establishments were sited and where new ones chose to locate. That information was compared with the location of university research departments to determine the location of R&D activity related to different product groups and to look at the number of foreign-owned establishments.

The researchers conclude: "Given that we find instances of co-location with both lower and high-rated university research departments, this suggests that firms may benefit both from proximity to frontier basic university research and from much more applied, commercially orientated public sector research activity."

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