What is the real return on our research investments in universities?

By J.A.D. (Adam) Holbrook

Policy makers, program evaluators and senior managers in the federal government (and several provincial governments) have, for some time, been pushing research funding organizations and public sector organizations that carry out research to demonstrate the commercial return on their research expenditures. Federal labs and universities are being asked to estimate the financial value of their results. No less an authority than the Clerk of the Privy Council has asked universities, in particular, to show increased commercialization of their funded research and the consequent return on these investments.

This movement runs counter to Canada's longstanding, unwritten, research policy, which has divided the national research effort into three distinct parts: basic research carried out in universities (often funded by the federal government), research in the public interest for regulatory and standards purposes carried out by (mainly) federal labs, and applied research and experimental development carried out in industry, usually with support through the Scientific Research and Experimental Development (SR&ED) tax credit program.

This clear functional separation of research activities is now being eroded by the push for commercialization. While it is useful for all three parties to have strong interactions with each other, and to exchange researchers and projects among themselves, the basic strength of this system is that it assigns clear R&D mandates and responsibilities to each sector.

Although it is usually possible to estimate the value of licences and patents, these forms of codified intellectual property are usually rare outcomes from public sector laboratories. It is no accident that industry performs the bulk of applied research, leaving universities and government labs to carry out basic research and research in the public interest. Research carried out in publicly funded institutions understandably has little or no commercial value. By contrast industry rightly expects to see measurable returns on its research investments.

Other non-fungible outcomes are offered as proof of return on investments in publicly funded labs — numbers of academic papers, reports, research collaborations, and the like. These indicators are indirect measures of the value of the intellectual property generated (commercial or otherwise) but they do not usually satisfy the program evaluators. However, at least in the university system, we are ignoring the economic and social value of our most important output, an output for which it is possible to develop estimates of its commercial value.

The primary function of universities is to educate and research is part of that process. Data from Statistics Canada show us that individuals with a post graduate education command higher salaries than those without, although the difference varies widely by discipline and degree. This does not imply that all graduate students should be funded through research projects, but research should be as much a part of the post graduate educational experience as teaching (or for that matter, working at McDonald's!).

Even though many graduate students with funded research experience do not continue in research occupations, their research experience is as important to their non-research employers as it is for those who stay in research. A high school teacher or a bureaucrat who has research experience is likely to be more valuable than one who does not. Thus evaluators should ask about numbers of students emerging from universities with research experience, and in particular those with research experience gained by working on externally funded research.

The BC government is testing this hypothesis through a project at Simon Fraser University. Based on the StatCan data, we can infer the more skilled an individual is, the higher the economic and social returns to the individual, and the more highly skilled individuals in a society the better it is for that society. Each graduate with research experience is likely to contribute more to society both economically and socially. Differences in starting salaries can be estimated, and used as a measure of return on the research investment. The numbers are large – far more that the relatively small returns from patents and licences.

So lets stop trying to estimate, often with dubious accuracy, the value of the few patents and licences that do come from the university system in Canada, which incidentally has been found in studies by the Association of University Technology Managers to be as productive as that in the US (when averaged over all universities — there are very few outliers such as MIT either in Canada or the US). Let us instead consider what incremental benefits come to society from our newly graduated masters and PhD students, and what proportion of these benefits come from the research projects they have worked on as data collectors, lab assistants and the like. I suspect the results will surprise the bean counters.

Adam Holbrook is an associate director and adjunct professor at the Centre for Policy Research on Science and Technology (CPROST), Simon Fraser University.