A response to the Avenir Suisse report: Two more points to consider

The Avenir Suisse report on Swiss universities with its reform agenda to increase their efficiency and effectiveness is most interesting and opens up numerous opportunities for discussion. As it’s not possible to comment on all of it, I’ll concentrate on two points: firstly, the problems, extensively discussed in the report, of duplication, waste and scattering of resources, linked with a tendency towards a certain uniformisation of institutions especially via the “academisation” of universities of applied sciences (UASs). And secondly, the problems of innovation to renew this old industry of higher education, which the report, rather strangely, barely mentions.

The first point is one of the report’s hobbyhorses. It concerns the concentration of resources – to reduce duplication and its dissipative effects – which is itself produced by a weakening of the differentiation between institutions (particularly UASs) and regional/cantonal policies that create distortions in the resource allocation process.

Concentration is certainly a good thing in the knowledge economy (research, education and technology transfer) where the efficiency of activities is partly determined by effects of scale, scope and spillovers that, in turn, are dependent on sufficient critical mass. But to promote more concentration, we also need to verify whether a duplicative and dissipative process really does exist or whether the various types of institutions fulfil different functional objectives that they manage to achieve especially by preserving incentive structures and institutional logics that are also different.

The report maintains that everything is becoming uniformised – universities of applied sciences are becoming more academic and universities are adopting a more practical orientation. The problem is that there is no evidence in the report to prove that. The academisation of UASs is “demonstrated “ by a reference to the article of Powel and Solga (p.34) that does indeed study this problem but not in the case of Switzerland and to the research of Criblez (p.34) which involves a few speculations on the foundations of such a supposed trend but no strong evidence. As for the practical orientation of universities today, this is a very complex subject – there are in fact trends in the opposite direction – for example the PATT (publish or perish) system – and in any case, how can they be anxious about a touch of practical orientation in universities (p.34) whilst considering cooperation between Swiss higher education institutions and private companies as being extremely desirable (p.69)?

The functional and institutional uniformisation – denounced in the report – is thus more a matter of speculation (sometimes inconsistent) than empirical analysis. The problem is that empirical analyses regarding Switzerland do exist, that they are not taken into account here and that they tend to veer in the opposite direction. In their recent study, Pfister et al. (2017) show thanks to meticulous econometric analysis that the effects of the reform of UASs on the quantity and quality of innovations in the regions concerned have been positive: an increase of 8.5 to 14% in terms of regional patents followed the reform as well as an increase of between 2 and 2.6% in terms of citation (which is a measure of patent quality). How can this effect be explained? There are two mechanisms: the increase in R&D cooperation and partnerships between these UASs and regional industry and students’ access to regional labour markets, these students being those who will subsequently innovate in regional companies. There are indeed therefore specific objectives for UASs – to serve regional innovation – and these seem to have been fully attained.

Another publication from the same research group (Leading House on Economics of Education) establishes econometrically that Swiss companies are not characterised as in most other countries by spillovers (effects of the efficiency of certain employees on the productivity of certain others) that would be only unidirectional – i.e. from the top (managers and engineers) to lower levels (machine operators, technicians or employees). But we also observe a reverse spillover effect according to which machine operators, technicians and employees have positive effects on the productivity of managers and engineers. This means that what the technicians and machine operators have acquired is not “the same knowledge but less of it than managers” (in this case – as in France – they do the same studies but the former either stop much sooner or fail) but they have acquired different and complementary knowledge, which explains the effects on managers and engineers’ productivity. So here again we see the specific objectives for universities of applied sciences – the acquisition of practical knowledge that is complementary to the more theoretical knowledge of university graduates – and econometric analyses seem to confirm that these objectives have been fully achieved – at least in the past.

All these factors help to confirm that functional differentiation remains strong in Switzerland and that the positive effects of UASs on innovation and productivity have been proved. Far from producing duplicative and dissipative effects, the presence of the universities of applied sciences is a key factor for enriching the country in terms of innovation and productivity gains. We don’t claim that the situation is stable. We’re simply saying that, until recently, the UASs in Switzerland have managed to avoid academisation or at any rate this purported academisation has not prevented these UASs from fulfilling the specific missions assigned to them, which is what, in the final analysis, matters most. It is however up to the institutions themselves and the policies that support them to acknowledge these specificities, to understand their value for regional innovation systems and to reinforce them. By doing so, UASs will remain a key instrument for regional innovation and growth policies

The second point precisely concerns innovation in the Swiss higher education system as a whole. The report describes the rise in education expenses and resulting logical problems very well. However if the solution does not lie essentially in the reduction of duplicate effects, it should lie in innovation. And yet there the Avenir Suisse liberals exhibit a caution that is not very … liberal! They do not wish to go too far and especially not ask themselves why ultimately the phenomena of disruptive transformation– in other words the entry into a well-established industry of outsiders who offer new products, new services and new business models, finally resulting in the profound disruption of the foundations of the industry in question – have not occurred within the framework of the higher education industry?

At first glance, it could be thought that there’s nothing to obstruct the disruption. On the one hand the technologies are certainly there (for example the famous massive open online courses) and on the other it is a relatively inefficient market with soaring prices (in some countries) and an obvious lack of information concerning the value of the training programmes offered by each organisation. However the disruption did not take place and it’s difficult to imagine that Stanford or MIT or EPFL could be subjected to the unenviable fate of Kodak or Blockbuster (textbook disruption cases). It’s interesting to wonder why this market seems relatively protected – which the Avenir Suisse report does not do. And yet it’s a central question for arguing in favour of a liberal evolution of the system! The explanation is simple. It lies in the fact that universities provide two things at once: training and certification. Therefore, all the start-ups in the world can come and offer study aids and innovative programmes, but they will not succeed in conquering this market as long as learning and certification remain intrinsically linked and are produced under the same roof. This privilege is quite unique by the way and creates very inefficient situations of some kind of conflicts of interest and the well-established universities are well advised to defend it. Break down this barrier (by creating a system of certifying studies by third-party organisations for example) and the whole system would be disrupted [Kennedy et al., 2016]. This would facilitate the entry of new entrepreneurs and business models (each could enter the market with a good chance of conquering part of it); it would increase the variety of options for talented students – often numerous – who do not necessarily want to go through all the rituals and be crammed into the packed auditoriums of a prestigious institution in order to gain access to the labour market; it would also provide much better information and transparency regarding the quality of training courses – something that cannot be offered by a system in which the entity providing the teaching also provides the certification. It is very clear that in Switzerland universities (in other words the incumbents in the disruption theory) are sufficiently agile to absorb or produce many innovations and they offer high-quality education programmes; this is indisputable and perhaps the solution discussed here is not very pertinent. But it’s still surprising that a liberal think tank disregards this problem of “impossible entry“ – caused by a sort of unjustified privilege – and thus refuses to envisage an essentially liberal reform, which would be far more fundamental than that presented in the report [1] as it would focus on the very structures of the activity.

References

Avenir Suisse – Les hautes écoles suisses – plus d’excellence, moins de régionalisme, Zürich et Genève, 2018

Backes-Gellner U., Rupietta C. and Tuor S., Educational spillovers at the firm level: who benefits from whom? Wp n°65, Swiss Leading House Economics of Education, 2015

Kennedy J., Castro, D. et Atkinson R., Why it’s time to disrupt higher education by separating learning rom credentialing? ITIF, Washington D.C., 2016

Pfister, C., Rinawi M., Harhoff D. and Backes Gellner U., Regional effects of applied research – Universities of applied sciences and innovation, Wp n°117, Swiss Leading House Economics of Education, 2017

[1] If truth be told, I provided them with the key reference (Kennedy et al., 2016) concerning this problem to stimulate their reflection. This didn’t work very well. The paper is cited but that’s all !