The Productivity of UK Universities

There is increasing recognition in the UK and other OECD countries of the importance of scientific research in providing the foundations for both innovation and competitiveness. This has resulted in increased public funding for research in the UK and elsewhere. At the same time, there is a lack of systematic evidence on how such investments can lead to increasing levels of scientific output and, ultimately, to better economic performance. Much of the available literature concentrates on the effects of public funding of basic research on either firms' innovative activities (see among others COHEN, NELSON AND WALSH [2002]; KLEVORICK, LEVIN, NELSON AND WINTER [1995]; JAFFE [1989]; NARIN, HAMILTON AND OLIVASTRO [1997]) or firm performance (Adams [1990]), bypassing the question of how to measure scientific output. The reasons for this are the difficulty of identifying a stable causal relationship between the resources spent on the science budget and 'intermediate' scientific outputs. This difficulty originates from the dynamic nature of this relationship. There is a persistent and therefore recursive feedback between inputs and outputs, which is exacerbated by lack of appropriate information for analysis. Among the few studies that have attempted to address the problem, are ADAMS AND GRILICHES [1996] and JOHNES AND JOHNES [1995]. This study is based on and further develops Adams and Griliches's methodology.