Estimating the economic value of the outputs of higher education institutions

1. Estimating the economic value of the outputs of higher education institutions ERSA August 2008 Ursula Kelly and Iain McNicoll University of Strathclyde

2. Impact measurement and metrics • Desire for economic value and impact measures for HEIs (particularly for ‘knowledge transfer’ )driven primarily by government • -For resource allocation • -For evidence of return on investment • -General evaluation of efficiency and effectiveness • -To indicate the economic and social impact of HE • Current measures in use for knowledge transfer are seen as insufficient: • -Because the readily available data encourages a focus on narrow aspects of HEI activity - e.g. patents and licensing, no of ‘spin-off companies’ created • -Because current measures do not capture links between interventions and desired outcomes ( e.g. increase in national competitiveness resulting from funding support for HEI – Business interaction) • -Because they cannot reflect the value of non-market work of HEIs

3. Towards the estimation of the economic value of the outputs of Scottish higher education institutions • Initial pilot case study work ( supported by Nuffield Foundation) 2004 • Methodology development report for the SFC (Kelly, McNicoll & McLellan 2005 available from: http://www.strath.ac.uk/projects/economicrole ) • ‘Next Steps’ pilot project for the SFC (Kelly,McNicoll & Brooks 2008) applying the methodology to 3 areas of activity: • -cultural outreach • -community outreach, • -public policy advisory work • Aimed to use real HEI data to illustrate how these areas of external engagement can be quantified and estimates of economic value made • Also developed conceptual framework further to identify potential PIs or ’metrics’ for some non-market areas

4. Terms, Definitions, Concepts • Our approach founded in fundamental principles of applied economics and statistics • Uses core definitional sources (eg on the European System of Accounts(ESA 95) , the SNA etc • We are focussed on the role of the Higher Education Institution(HEI)and the capabilities of the HEInot ‘Higher Education’ in general • We focus on the outputs of HEIs i.e what the HEIs actually produce • Current difficulty with metrics development is a tendency to focus on outcomes • But only metrics based on outputs can give meaningful performance indicators for HEIs

5. Other factors eg student willingness to attend lecture series Outputs and Outcomes Inputs: e.g. Staff time, IT support, space HEI Activities E.g. organisation of all resources to enable lecture series Mathematics 101to be delivered HEI Outputs e.g. Eight x one hour lectures of Mathematics 101 delivered Outcomes e.g. Student knowledgeable in mathematical principles • Outputs are within the control of the HEI . Their outputs may contribute to outcomes …but outcomes also rely on other factors • Knowledge Transmission may be an output of an HEI • but Knowledge Transfer is an outcome , requiring the • active involvement of other parties and ability to absorb • the knowledge transmitted. Hence an HEI cannot be measured on its success in knowledge transfer as this is beyond its boundaries. Other factors e.g student ability to understand material ( student absorptive capacity)

6. Estimating economic value of HEI outputs • Definition and Identification of outputs • – what an HEI actually produces • Quantification • Volume terms • - how much of each output does the HEI produce • Value Terms • -the market price of each output • Economic Value = Volume x unit price • ALL HEI outputs are, in principle, quantifiable in natural volume units • But many outputs are non-market

7. Shadow-Pricing Non-market outputs • HEIs are not unique in producing non-market outputs • Recognised ways exist of imputing a value to non-market outputs ( and are used by the World Bank, UK Treasury Green book etc) • These include finding parallel markets ( ‘free market’ , equivalents), using ‘contingent valuation’- willingness to pay, willingness to accept - ‘hedonic pricing’, ‘Travel cost’ or ‘Time cost’.

8. Examples of Shadow-Pricing Non-Market HEI Outputs • Parallel markets for: • - Public Policy Advisory Work • - Sports Centre Community Memberships • Time-cost Method for: • - Public Lectures & events open to the public • - Performing Arts Events • - Galleries/Museums/Exhibitions • - Wider Community Use of Library Services

11. Examples of some valid potential metrics • Public Policy Advisory Outputs • - Number of hours of public policy advisory work delivered per member of staff per annum • Public Lectures and General Events open to the public • - Estimated annual attendance numbers and number of attendee hours spent • Wider Community use of Library Services • - Number of external (i.e non-academic) users of HEI Libraries • Wider use of Institutional information resources and knowledge base • - Annual number of full article downloads from institutional repositories • Wider community use of Sports services • - Number of external (community) user memberships of HEI sports facilities and centres

12. Some final remarks… • To consider HEI wider contribution to society or to assess its ‘impact’- it is essential to quantify HEI outputs in the first instance • And in principle ALL HEI outputs can be quantified • Without knowledge of HEI outputs no meaningful measures of efficiency (outputs/inputs) can be derived and • the next step development of measures of effectiveness (outcomes/outputs) will remain unattainable