The Impact of a Business School on Regional Economic Development: a Case Study

Abstract

This paper investigates the impact of a major extension to Lancaster University's Management School on the North West regional economy. It differs from earlier university impact studies since the estimated impact is not confined to backward linkage effects but focuses specifically on the forward linkage effects that will occur as a result of greater engagement with firms in the region's SME sector. The paper demonstrates that the expansion of the university sector can have far greater beneficial effects on their regional economies than is indicated by conventional impact studies. Specifically, the provision of business advice to SMEs can be a significant factor in increasing their sales volume.

Acknowledgements

The authors are grateful to Magnus George for providing the data on which this study is based and to Richard West for his help with the mapping of assisted enterprises. We are also grateful to the editors for very helpful comments on an earlier draft. We alone are responsible for the errors and omissions.

Notes

¹ In 2002/3, the HEIF had a baseline fund of £50 million (Office of Science and Technology). The fund was then increased to £187 million for the two-year period 2004/6 in Round 2 and then to £238 million during 2006/8 in Round 3 (HEFCE).

² The engagement of universities with their regional economies is investigated for fourteen regions drawn from seven EU countries (Finland, Germany, Greece, Ireland, Netherlands, Spain and the UK).

³ See Armstrong & Taylor (2000) for an explanation of these two approaches and for a review of some applications.

⁴ The total impact (J) of these different activities on regional income is estimated by applying the standard multiplier formula:

where: k = regional multiplier; c = propensity to consume out of income; l = proportion of spending retained in region; n = number of units affected (e.g. students, staff, businesses); y = additional income generated per unit; i = type of injection.

⁵ Arthur D. Little Ltd was commissioned by the NWDA to estimate the steady-state effects of the LUMS expansion in advance of the decision to part-fund this development at Lancaster University.

⁶ In comparing the characteristics of the sample with those of all businesses engaged with the IEED, we found that although the mean turnover was greater for the sample of businesses than for the population as a whole, the median turnover was lower for the sample. Moreover, the sample mean is heavily influenced by one large firm, and when this observation is removed the sample mean turnover falls below the mean for all firms. Comparison of the mean (and median) employment levels also indicated that the firms in the sample are representative of the firms currently engaged with LUMS.

⁷ An independent assessment of the impact of the expansion to LUMS was undertaken by Arthur D. Little Ltd., who acted as consultants to the NWDA. IEED regarded this estimate as plausible and prudent.

⁸ A recent evaluation of similar programmes based on interviews with assisted firms, for example, estimated that only 25% of assisted firms had increased (or were likely to increase) their workforce and only 35% had increased (or were likely to increase) their turnover (Regeneris, 2005) as a direct consequence of the support provided by the programme. These findings suggest a significant upward bias in the reported outcome estimates.