Engines of Economic Growth

[The complete version of this report is available here.]

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Executive Summary
Developing the Region's Human Capital
The Role of University Research
The Universities' Role in New Business Development
The Research Universities as Employers
Purchasing and Construction
Student and Visitor Spending
Helping Communities Meet the Demand of a Changing Economy
Looking to the Future

Executive Summary
After nearly a decade of robust economic growth, the Boston metropolitan area began in 2001 to feel the effects of the national recession. While the recession may be relatively mild by historic standards, by the end of 2002, a real recovery had not yet materialized. A return to the vibrant growth that characterized the Boston area economy in the late 1990s thus cannot be taken for granted. Those with a stake in the region’s economic future need to identify clearly the Boston area’s strengths, and consider carefully how the region can most effectively build on those strengths. Among these strengths is one that no other region in the U.S. can match. The Boston area is home to eight research universities: Boston College, Boston University, Brandeis University, Harvard University, the Massachusetts Institute of Technology, Northeastern University, Tufts University and the University of Massachusetts Boston. Just as they helped the Boston metropolitan area recover from a severe regional recession in the 1990s, these eight universities are today providing a foundation for renewed economic growth in the years ahead.

The research universities are already well-positioned to play a central role in renewing the region’s economy. They are among the region’s leading employers, and one of its most reliable sources of job growth. Each year they turn out more than 30,000 graduates, providing to the region’s leading industries a steady stream of highly-talented, well-educated workers. Their research programs are creating the new knowledge that will help ensure the Boston area’s continued leadership in emerging areas such as genomics, proteomics and nanotechnology. And they are a seedbed for creation and growth of the dynamic young companies that over the next decade will drive the growth of the region’s economy. A few statistics help tell the story:

• The eight universities spent more than $1.5 billion on research in 2000. Research conducted at affiliated hospitals and institutes pushed the total over $2.5 billion. About 97 percent of this research was funded from federal and other non-local sources.
  
• In fiscal year 2000, the eight universities spent approximately $1.3 billion on purchases of goods and services from Boston area vendors.
• During the next four years, construction spending at the eight universities is expected to average as much as $850 million annually.
• In October 2002 the eight universities employed approximately 50,750 people — roughly equal to the total number of people employed in Massachusetts by Fidelity, State Street, FleetBoston, Raytheon and Gillette combined.
• Because they are less susceptible than many other leading industries to cyclical swings in the economy, the research universities are an important source of stability in the regional economy. Since October 2000, while the overall regional economy slid into recession, total employment at the eight universities grew by 2,000 jobs — an increase of 4 percent.
• The universities’ spending on payroll and on purchases of goods and services within the region supported more than 37,000 full-time equivalent jobs in industries throughout the region in 2002, paying approximately $1.6 billion in wages.
• The universities were granted 264 patents in 2000, signed 250 commercial licensing agreements, and helped form 41 start-up companies.
• The concentration of major research centers in the Boston area — unmatched in any other U.S. region — is a magnet for investment by major U.S. and foreign corporations in new research facilities. Companies that have recently located or are now developing major research operations in the Boston area include Amgen, Merck, Novartis, Pfizer, Cisco and Sun Microsystems.
• Of the fifty early-stage start-up companies in the Boston area that attracted the most outside investment in 2001-02, 25 — including 7 of the top 10 — had connections to one or more of the universities. That is, they were engaged in the commercialization of technology first developed at one of the universities, were founded by a faculty member or graduate, started life in a university incubator, or had a CEO who had graduated from one of the eight.
• Approximately 310,000 of the eight universities’ alumni live in the Boston area. They account for about 30 percent of all residents of the region who have four-year college or higher degrees.
  

This report, commissioned by the eight universities, documents their role in the growth and continued vitality of the Boston area economy. It also highlights challenges that the eight and the broader regional community must address, if they are to realize fully the universities’ potential contribution to the region’s future economic growth. Most important, the report demonstrates that if the universities are to play their increasingly central role in attracting, retaining and developing talent, creating new knowledge and developing new businesses and jobs, they must be able to develop, change and grow. If the research universities are to remain competitive in student enrollment, scholarship and scientific research and development — if they are to remain eight engines of economic growth for the region — they must forge with state and local leaders and with their home communities a new recognition that their continued growth and vitality is inseparable from that of the greater Boston metropolitan area.

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Developing the Region’s Human Capital

• In 2000, 118,000 students were enrolled in undergraduate, graduate or professional degree programs at the eight universities. Together, the eight universities granted nearly 32,000 degrees, thus making available to the region’s employers a steady stream of well-educated, highly-skilled workers.
• In an era in which the pace of economic change increasingly demands that workers become “lifelong learners,” the research universities have emerged as major providers of continuing education. In the fall of 2000, the eight universities enrolled more than 25,000 people in non-degree programs.

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The Role of University Research

• In 2000, research spending at the eight universities totaled $1.5 billion. Together they accounted for more than 95 percent of all college and university research spending in the area. When research conducted at the eight universities’ affiliated hospitals and institutes is included, research spending totaled more than $2.5 billion.
• Funding sources outside the Boston area — federal agencies, foundations and corporations— accounted for 97 percent of all research spending at the eight universities.
• The universities contribute to the continued development of the region’s economy through a wide range of research partnerships with regional companies both large and small. Examples include Northeastern’s Barnett Institute (in biotechnology), Boston University’s Photonics Center, MIT’s Auto-ID Center, Harvard’s Institute for Chemistry and Cell Biology and the Tufts School of Veterinary Medicine’s partnerships with several Massachusetts corporations.
• The breadth of research strengths found among the eight universities creates numerous opportunities for collaboration. Sometimes collaboration occurs within institutions — for example, at Brandeis University’s Rosenstiel Center for Basic Medical Research. Other collaborative efforts involve multiple institutions — for example, the Conte Center, a joint program of Harvard Medical School, Brandeis, Boston University, and Massachusetts General and McLean hospitals, dedicated to studying the neurological bases of schizophrenia. Similarly, UMass Boston’s New England Regional Center for Ocean Science and Education Excellence is a collaborative effort that also includes the Woods Hole Oceanographic Institute, the New England Aquarium and the National Science Foundation.
• Some collaborations also link universities in the region to other research institutions throughout the region and the world. Northeastern’s Center for Subsurface Sensing and Imaging Systems, for example, is a partnership with three universities and five research institutes stretching from California to Puerto Rico.
• The opportunity to participate in major research projects greatly enhances the education of both undergraduate and graduate students at the eight universities. Such participation turns university graduates into the most efficient of all instruments for transferring new knowledge and new technologies from the region’s campuses to its employers.
• The concentration of major research centers in the Boston area — unmatched in any other U.S. region — is a magnet for investment by major U.S. and foreign corporations in new research facilities. Companies that have recently located or are now developing major research operations in the Boston area include Amgen, Merck, Novartis, Pfizer, Cisco and Sun Microsystems.

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The Universities’ Role in New Business Development

• Since the early 1980s, technologies first developed in university labs have become an increasingly important source for the development of new products and new businesses. In 2000, the eight universities:
     – Were awarded a total of 264 U.S. patents;
     – Entered into 280 agreements for commercial use of the results of university research; and
     – Assisted in the start-up of 41 new ventures created specifically to bring to market new technologies first developed at the universities.
• All of the universities have created “technology transfer” offices dedicated to promoting the translation of academic research into new products and businesses. In addition to negotiating agreements with companies that want to use the results of university research for commercial purposes, these offices provide extensive support to faculty members, students and others that want to start new businesses based on innovations developed in university labs.
• Research university faculty have been among the founders of leading Boston-area companies in a wide range of industries, including information technology, biotechnology, engineering, architecture and management consulting. Examples include Genome Therapeutics, Biogen, and Delphi Communications.
• The eight universities provide several types of support to faculty members and others in the university community who are interested in starting new businesses, including:
     – Seed money grants for further work on inventions with significant commercial potential;
     – Assistance in business planning;
     – Introductions to venture capitalists;
     – Assistance in recruiting a start-up team;
     – Incubator space.
• Research university graduates have also been a major source of entrepreneurial vitality in the Boston area. Ventures started by graduates of the eight universities during the past twenty years include notable regional companies such as Teradyne, EMC, Forrester Research, Staples, Mercury Computer Systems, Lycos, and Akamai Technologies.
• Several universities have organized formal programs aimed at educating student entrepreneurs, and helping them launch new businesses — MIT’s “$50K,” Northeastern’s“$60K” and Tufts’ Montle Prize business plan competitions, and Boston University’s Bronner E-Business Center, for example.
• The eight universities are also the primary source of human capital for the region’s venture capital industry; of 135 senior partners and other top executives at the 25 largest Boston area venture capital firms, half are graduates of one or more of the universities.
• Several universities — most notably MIT, Boston University and Tufts — have been actively involved in the development of commercial research and office space, thus helping to accommodate the growth of companies generated (or attracted to the Boston area) by the universities.

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The Research Universities as Employers

• In 2000, the research universities together employed 48,750 people (excluding students) — more than the number employed in the Boston area in banking, or in the manufacturing of computers and other electronic equipment — and had a combined payroll of approximately $2.5 billion.
• The universities offer their employees a wide range of opportunities to upgrade their skills, and thus improve their earning power.

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Purchasing and Construction

• In fiscal year 2000, the eight universities spent approximately $1.3 billion on purchases of goods and services from Boston area vendors.
• During the next four years, construction spending at the eight universities is expected to average as much as $850 million annually. University construction contributes to the continued growth of the regional economy in several ways:
     – Through the employment of local contractors and construction workers;
     – Through development of the facilities needed to support the continued growth of the universities’ research and teaching activities; and
     – By creating an environment that will help universities attract (and help the region retain) talented students and scholars.
• The “multiplier effect” of the eight universities’ spending within the region on payroll, purchasing and construction generated an additional $3.9 billion in regional economic output, $1.6 billion in wages and more than 37,000 full-time-equivalent jobs in 2000.

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Student and Visitor Spending

• In 2000, spending by university students for housing, food, entertainment, transportation and other needs (excluding payments to the universities for tuition, fees, room, board, etc.) totaled an estimated $850 million.
• We estimate that local spending in 2000 by visitors to the universities — people attending major events such as commencement ceremonies, participants in conferences and continuing professional education programs, students’ friends and families, etc. — totaled at least $250 million.

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Helping Communities Meet the Demands of a Changing Economy

• While the continued growth of a knowledge-based economy has created many new opportunities for Boston area residents, it also poses several challenges for communities throughout the region.
• The eight universities are engaged in numerous efforts aimed at improving the quality of elementary and secondary education in communities throughout the Boston area. These include, for example, the Boston University/Chelsea Partnership, under which the University manages the city’s public schools; UMass Boston’s Pipeline program, which helps recruit, train and retain teachers in Boston, Cambridge and Somerville Schools; Boston College’s THEMES program, which works with Boston teachers to more effectively integrate the use of technology into everyday classroom activities; and Northeastern’s MathPower program, which is working to improve math instruction in Boston public schools.
• In addition to helping improve the quality of local schools, the eight universities provide a wide range of educational opportunities for individual elementary and secondary school students. These include, for example, Boston College’s College Bound program, which helps students in Brighton and West Roxbury prepare for college, and Northeastern’s Kellogg Partnership, which provides student teachers for after-school and Saturday programs in Roxbury.
• The universities also participate actively (and in many instances financially) in local community development efforts — from Boston University’s involvement in the revitalization of Kenmore Square to Tufts University’s support for the cleanup of the Mystic River watershed, with the goal of making the river “fishable and swimmable” by 2010.
• During the past several years, the research universities have become more and more active in helping communities address the problem of housing affordability, by:
     – Building residence halls and apartment buildings that can house thousands of students, thus reducing competition from students for a severely limited supply of moderately priced housing. Between 1999 and 2004, the eight universities will have increased by approximately 6,400 the number of students housed in university residence halls and apartments.
     – Participating directly in the financing and development of affordable housing for community residents — for example, through Harvard’s “20/20/2000” program, which provides financing for non-profit housing developers, or through Northeastern’s Davenport Commons project, which includes housing for both students and community residents.

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Looking to the Future
During the next decade, the research universities could make an even greater contribution to the growth of the Boston area economy than they have in the past, for several reasons:

• The steadily growing importance of human capital in determining the economic health of cities and regions.
• The growing importance of scientific research and technological innovation as drivers of economic growth.
• The eight universities’ strength in areas that are likely to be at the leading edge of economic growth during the years ahead, including information technology, genomics and proteomics, photonics and nanotechnology.
• Expected increases in federal research funding in several fields, such as biomedical research and research related to national security.
• The advantages that result, in an age of increasing scientific complexity, from having multiple research institutions with diverse strengths concentrated in one region.
• The universities’ increasing effectiveness in translating the results of academic research into new products and new businesses.
• The universities’ role, in an increasingly integrated global economy, in forging links between the Boston metropolitan area and other regions, institutions and businesses throughout the world.
  

There are, however, several challenges that the universities and the broader regional community will have to meet, if they are to realize fully the university’s potential contribution to the growth of the Boston area economy. These challenges include:

• The need to maintain over the long term a strong federal commitment to basic and applied research, despite the fiscal pressures created by slower economic growth, increased defense spending and tax cuts.
• The need for additional space in which to accommodate the continued growth of the universities’ research and teaching activities.
• The need to keep building on their support for entrepreneurial activity.
• The need to prepare all of the region’s young people to take full advantage of the opportunities for learning that its colleges and universities offer.
  

Meeting these challenges successfully will require active collaboration among the universities, public officials and communities throughout the Boston area. To ensure that the Boston area participates fully in the coming recovery, community leaders, public officials and business decision-makers all need to identify and understand the competitive strengths on which the region can build, as well as the challenges and opportunities that lie ahead. The economic significance of the eight research universities goes far beyond their role as a major industry in themselves. The services that the research universities provide are vital to the continued growth and development of a wide range of other industries — from information technology and biotechnology to finance to the arts — on which the region’s economic future depends. They are, in effect, the intellectual infrastructure that supports the region’s innovation-driven economy. As the Boston area seeks to take advantage of the opportunities for growth that the next round of recovery will offer, it is essential that all of those with a stake in the region’s future understand the role the research universities can play in building that future. Toward that end, the eight universities asked Appleseed — a consulting firm with extensive experience in analyzing the regional economic impact of colleges and universities — to undertake an assessment of their impact on the economy of the Boston metropolitan area.

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