In contrast to developed Western countries, higher education institutions (HEIs) in transition economies such as Belarus do not have the pretension to being key actors in cutting-edge innovation and in creating entrepreneurship capital. Rather, they tend to educate job seekers or knowledge workers, as well as to adapt, redevelop and disseminate existing knowledge and technologies. At the same time, policy makers in Belarus have realized that transformation of HEIs is needed to respond to the global challenges. In this regard, this policy brief discusses prerequisites and factors conditioning the development of entrepreneurial HEIs in Belarus.
Capitalizing on state-of-the-art academic research, as well as on the custom-made survey of Belarusian faculty members, the brief concludes that Belarusian policy makers need to create a supportive institutional environment before requiring from HEIs outcomes of the entrepreneurial mission. First-priority measures for the current stance are delineated.
Entrepreneurial University and University 3.0
As a productivity factor, entrepreneurial activities started appearing in economic growth models at the beginning of the twenty-first century (Wennekers & Thurik, 1999; Wong et al., 2005). Consequently, the role of HEIs broadened from educating labor force and knowledge creation to development of “entrepreneurial thinking, action and institutions” (Audretsch, 2014) – HEIs took on the third “entrepreneurial” mission.
Well-studied outcomes of this mission are new firms (academic spin-offs, spin-outs, student-led start-ups), patenting, licensing and the development of entrepreneurial culture and attitudes among graduates and academics.
The concept of an entrepreneurial HEI is multifaceted and is explored within different research streams: from knowledge transfer to entrepreneurship education and HEI management. Consequently, there is no consensus in the understanding of the term “entrepreneurial university” that can, for this policy brief, be broadly defined as a HEI that acts entrepreneurially and is a natural incubator, creating a supportive environment for the startup of businesses by faculty and students, promoting an entrepreneurial culture and attitude for the purpose of responding to challenges of the knowledge-based economy, and facilitating economic and social development.
Figure 1. Evolution of the HEIs’ missions
Source: Adapted from Guerrero & Urbano (2012)
Meanwhile, the concept of “University 3.0” –mostly corresponding to the concept of “Entrepreneurial university” and adopted from J.G. Wissema – started appearing in Russian publications, where the number ‘3’ corresponds to the three HEI missions or to the third generation of HEIs. A possible explanation of this renaming is that, on the one hand, in the post-Soviet context entrepreneurship per se still does not have a positive meaning in a broader society and it is not associated to HEIs. On the other hand, it was expected that such numbering makes the evolution visible. However, this led to speculation on this numbering and gave rise to publications on University 4.0 that should correspond somehow to Industry 4.0 – the current trend of automation and data exchange in manufacturing technologies.
Admittedly, the entrepreneurial mission of HEIs is not associated or equaled to start-ups and knowledge transfer any more, but is increasingly considered as a procedural framework for HEI’s and individual’s behavior.
Political, economic, social, technological and legal conditions determine the path and the speed of the evolution of HEIs as well as their contribution to national economies in different stages of economic development. Thus, in Belarus – an efficiency-driven economy, i.e., a country growing due to more efficient production processes and increased product quality (World Economic Forum, 2017), – HEIs are considered to contribute to economic development if they successfully fulfill teaching and research missions. While the outcomes of the third mission are supposed not to be relevant at this stage (Marozau et al., 2016).
However, trying to replicate the success of Western HEIs in the development of the entrepreneurial mission, the Ministry of Education of Belarus initiated the Experimental project on implementation of the “University 3.0” model aimed at the development of research, innovation and entrepreneurial infrastructure of HEIs for the creation of innovative products and commercialization of intellectual activities.
In general, Belarus has a state-dominated well-developed, by some estimates, oversaturated higher education sector that remains mostly rigid and unreformed since the Soviet times. Belarus outperformed all CIS and EU countries except Finland in terms of the number of students per 10,000 population in 2014 (Belstat, 2017) and according to the World Bank has one of highest enrollment rates in tertiary education of about 90%.
Belarusian students have quite high entrepreneurial potential in comparison to other countries participating in the Global University Entrepreneurial Spirit Students‘ Survey (GUESSS). Thus, in five years after graduation, 56.8% intend to be entrepreneurs, while the global average level is 38,2% (Marozau and Apanasovich, 2016). However, curricula of most specialties majors provided by Belarusian HEIs are not supplemented with formal and experiential entrepreneurship education to equip students with entrepreneurial competencies. Innovative methodologies and entrepreneurial approaches to teaching as well as faculty entrepreneurial role models are rare. Moreover, all changes in degree syllabuses need state approval that makes HEIs less flexible and nimble. The situation is further complicated by the fact that supporting entrepreneurial activity has not been an important part of the HEI culture.
We conducted online and face-to-face surveys of 48 Belarusian HEI authorities and faculty members that were based on HEInnovate self-assessment tool widely used by policy makers and HEI authorities (see Marozau, 2018).
Overall, emails were sent out to a population of 284 pro-active and advanced representatives of the Belarusian academic community whose email addresses were available in the databases of BEROC and the Association of Business Education. We benefitted from open-ended questions included in the questionnaire to study how representatives of Belarusian HEIs perceived the Entrepreneurial university (University 3.0) concept as well as its conditioning factors and potential outcomes.
First of all, we revealed that the Belarusian academic community is not unanimous in understanding the concept “Entrepreneurial university”. According to the main emphasis provided by respondents, we got the following distribution of answers about what an entrepreneurial is: 12 respondents associated the concept with knowledge transfer and commercialization; 7 respondents stressed the interrelation of teaching, research and innovations; 5 respondents believed that the concept is about earning money; 1 respondent indicated that an entrepreneurial university means developing entrepreneurial competences.
These findings demonstrate the general misunderstanding or fragmented understanding of the phenomenon that may lead to a negative attitude from both HEI staff and policy makers and stress the importance of raising awareness and providing training at least for decision makers and spokesmen.
Figure 2 demonstrates the results of the assessment of Belarusian HEIs against the categories proposed by HEInnovate (1 – very low; 5 – very high).
Figure 2. Assessment of HEIs
We distinguished pairwise between (i) HEIs that participated in the Experimental project and those that did not: (ii) estimates of faculty members that were aware of the concept and those who were not.
Surprisingly, the representatives of HEIs that were left beyond the scope of the Experimental project and those who were aware of the concept perceived their HEIs more advanced in all the areas.
To understand this paradox, we used the chi-square test for independence to discover if there was a relationship between two categorical variables – awareness of the concept and employment at a HEI participating in the Experimental project. Surprisingly, no statistically significant relationship was identified evidencing that implementation of the Experimental project went without raising awareness and wider involvement of faculty.
The analyses of answers to open-ended questions showed that many environmental factors are not only unsupportive to the HEI entrepreneurial development but jeopardize the sustainability of the higher education system in general.
The main conclusions from the study are as follows:
- Belarus has not reached the stage of institutional development to foster entrepreneurial HEIs and to expect outcomes of the entrepreneurial mission. To some extent, this explains the skepticism and misunderstanding of the concept of “Entrepreneurial university” (University 3.0).
- The main omission of the Experimental project is that the education and training of HEI authorities and faculty are not defined as first-priority measures. Such policy initiatives need to be clear in their objectives, tools, benefits and outcomes as well as evidence-based and open for discussion.
- Comprehensive initiatives in this sphere should be developed and implemented in close collaboration with the Ministry of Economy that is responsible for entrepreneurship, the business environment, entrepreneurial infrastructure as well as the State Committee for Science and Technology that is subordinated to the Council of Ministers and deals with the state policy in its sphere.
An important concern here is whether it is currently feasible to have the measures that are relevant and not-for-show rather than half-way initiatives and sticking plaster solutions despite the lack of funding, and absence of elaborate study in the field.
- Since the weakest area of Belarusian HEIs according to the HEInnovate tool is the problem of ‘Measuring impact’, the state should reconsider short-term target indicators for HEIs such as export growth rate and workforce productivity growth rate to stimulate investments the entrepreneurial transformation. It is worth monitoring such indicators as number of start-ups/spin-offs founded by graduates/faculty members; number of patents, licenses, trademarks co-owned by a HEI, income from intellectual property; number of R&D projects funded by enterprises etc. Alternatively, the Ministry of Education could adopt the ranking of entrepreneurial and inventive activity of universities used in Russia.
- Development of entrepreneurship centers as organizational units at HEIs – ‘one-stop shops’ or ‘single front doors’ for students, faculty, businesses – could be an initial step towards both raising awareness and the integration and coordination of entrepreneurship-related activities within a HEI in order to increase their impact and visibility of these activities.
- Audretsch, David B., 2014. “From the entrepreneurial university to the university for the entrepreneurial society.” The Journal of Technology Transfer 39(3), 313-321.
- Belstat (2017). Education in the Republic of Belarus. Statistical book.
- Guerrero, Maribel, and David Urbano, 2012. “The development of an entrepreneurial university.” The journal of technology transfer 37(1), 43-74.
- Marozau, Radzivon, Maribel Guerrero, and David Urbano, 2016 “Impacts of universities in different stages of economic development.” Journal of the Knowledge Economy, 1-21.
- Marozau, Radzivon and Vladimir Apanasovich, 2016. National GUESSS Report of the Republic of Belarus. http://www.guesssurvey.org/resources/nat_2016/GUESSS_Report_2016_Belarus.pdf
- Radzivon Marozau, 2018. Modernization and development of Belarusian higher education institutions based on the entrepreneurial university framework. BEROC Policy Paper Series, PP no.63.
- Wennekers, Sander, and Roy Thurik, 1999. “Linking entrepreneurship and economic growth.” Small business economics 13(1), 27-56.
- World Economic Forum, 2017. “Global Competitiveness Report 2017-2018”, edited by Klaus Schwab.
- Wong, Poh Kam, Yuen Ping Ho, and Erkko Autio, 2005. “Entrepreneurship, innovation and economic growth: Evidence from GEM data.” Small business economics 24(3) 335-350.
Acknowledgments: The author expresses gratitude to Prof. Maribel Guerrero from Newcastle Business School, Northumbria University for her valuable comments and reviews as well as to Yaraslau Kryvoi and Volha Hryniuk from the Ostrogorski Centre (Great Britain) for coordinating the research project that has resulted in this policy brief.
Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.
This brief discusses the role of external anchors or goals such as WTO accession, NATO and EU accession in Latvia’s development strategy since 1991. On the one hand the external goals ‘depoliticised’ many potentially contentious areas of Latvian life. On the other hand, some developments would not have happened or would not have happened as fast without the constraints imposed by the external goals. For example liberalisation of the citizenship laws was prompted by NATO accession and the balance was tipped when the rejection of Latvia from fast-track EU accession talks in December 1997 led Latvia to abandon its quota or ‘windows’ naturalisation system. Most recently, Eurozone accession was an externally defined exit strategy from the austerity episode induced by the economic and financial crisis. Today there are no big external goals left to guide policy making. Home grown problems such as inequality require home grown solutions. But even now an external dependency persists. For example a long needed reform of the financing model of higher education has had to wait for a World Bank report published in September 2014 for action to be taken.
On January 1st, 2015 Latvia assumed the Presidency of the European Union. This milestone represents a certain level of maturity of the Latvian state and offers an opportunity for reflection on some aspects of how politics and political economy have evolved in Latvia between 1991 and today.
After Latvia regained independence in 1991, it faced (at least) two political economy challenges: one was to disentangle the economy from the Soviet system in which it had been deeply integrated, and the second, perhaps more difficult challenge, was to create an independent nation state. At a formal level, the solution to the latter challenge appeared straightforward – assume continuity of the Latvian state. Effectively this meant reinstating the pre-war constitution, which was indeed done for the most part. Symbolically this continuity was signalled by, for example, calling the first post-Soviet parliamentary elections held in June 1993 the elections for the 5th Saeima (parliament). The elections for the 4th Saeima had taken place more than 60 years earlier in October 1931.
At a practical level the challenges were more complex – Latvia had had no practical experience of statehood for nearly fifty years and mistakes were made. For example, Latvia initially diplomatically recognised Taiwan rather than the Peoples Republic of China.
There was a presumption that newly independent Latvia should become a market economy but little consensus on how this should be achieved. This is in contrast to Estonia where a group of ‘young market economy Turks’ were able to implement a kind of zero option i.e. zero tariffs, fast privatisation, etc. In Latvia there were strong protectionist sentiments and the initial privatisation was a muddled process.
Advice and advisers were abundant in post-independence Latvia. In the early 1990s, Latvia was awash with international advisers: the IMF and the World Bank were both present, the Germans were advising on a constitution for the Bank of Latvia, the British were active in public administration reform, the Danish advised on research and higher education and so on. Advice was often conflicting with different advisers promoting their own visions of structures as models that Latvia should adopt e.g. on legal and education systems. Today, we see something akin to this in the Eastern Partnership countries such as Moldova and Ukraine.
There was a general sense of the desirability of a ‘return to Europe’ but no plan or strategy. Nevertheless, even without a conscious plan a strategy emerged – namely a strategy of external anchors.
The external goals or anchors that emerged included the following:
- World Trade Organisation, 1998
- NATO, 29 March 2004
- European Union, 1 May 2004
- Eurozone, 1 January 2014
The most important effect of the external anchors was that they ‘depoliticised’ many potentially contentious areas of Latvian life. This has been particularly important given the fragmentation that has historically dominated Latvian politics. Thus, in the interwar period, no less than 32 different political parties were represented in the Saeima. In the early post-Soviet parliaments, similar tendencies were observed with newly created parties being the winners in terms of the number of seats in the first four elections. The election of 2006 was the first in which the previously largest party returned as the largest party. Between the first post-Soviet election in 1993 and the 2014 election, there have been no less than 17 governments which mostly have been uneasy coalitions of 3 or 4 partners with divergent views and interests. In this context the benefit of external anchors is self-evident.
The external anchors each contributed in different ways: WTO accession contributed to modify the protectionist sentiments that were rife in the early years of independence. Rather curiously, Estonia, which adopted a radical free trade policy right from the first days of independence, had more difficulties in achieving their WTO membership than ‘protectionist’ Latvia. Estonia was obliged to implement additional economic regulations in order to conform to the rules of the WTO and the EU (to which it was committed to join as its WTO application proceeded), and as a consequence, Estonian WTO accession was delayed to 1999. The WTO accession process also gave Latvia’s fledgling Foreign Ministry invaluable experience of multi-lateral negotiation.
Apart from the obvious security benefit, NATO membership was conditional on the creation of the Latvian anti-corruption Bureau (KNAB) and on the liberalisation of citizenship legislation, the latter because NATO was concerned about the prospect of a member state with a large number of non-citizen residents.
EU accession represents the biggest and most significant anchor. The requirement of candidate countries to accept the EU acquis communautaire took huge swathes of economic and social legislation out of the political arena. While the economic criteria for accession presented few difficulties of principle for Latvia – most people were in favour of a market economy – the requirement of respect for and protection of minorities presented problems for many Latvian politicians and liberalisation of the citizenship law was resisted until after 1997 when the rejection of Latvia from fast-track EU accession talks in December 1997 prompted a rethinking of Latvia’s intransigent position on the quota or ‘windows system’.
It is hard to over-estimate the impact of EU accession on Latvia. What would Latvia be like today if it were not a member state of the EU? There are sufficient tendencies even now in Latvia to suggest we would observe something like a tax-haven, off-shore economy, probably with weak democratic institutions. EU accession has saved the Latvian people from something like such a fate.
Even later in Latvia’s largely self-inflicted financial and economic crisis of 2008-10 it was the ‘Holy Grail’ of accession to the Eurozone that politically anchored Latvia’s famous austerity programme.
What of today? The ‘big’ external anchors are used up, and Latvia today:
- Is the fourth poorest country in the EU with GDP per capita in 2013 at 67% of the EU average (only Croatia, Romania and Bulgaria are poorer);
- Is a particularly unequal society – Latvia has some of the worst poverty and inequality indicators in the EU;
- Has a shadow economy at 23.8% of GDP (data on 2013; Putniņš and Sauka (2014)); and
- Has an internationally uncompetitive higher education system.
These and other problematic aspects of Latvian life and society are home grown and it is hard to imagine external anchors that can improve poverty or inequality, that can reduce the size of the shadow economy, or which can improve the quality of the Latvian higher education system.
Nevertheless, Latvian policy makers seem to be addicted to the external anchor concept and often find difficult to progress without it. The recent experience of reform of the financing of higher education illustrates. Latvia has historically had a funding mechanism for universities and other higher education institutions based entirely on student numbers. The lack of a link between funding and quality has resulted in a Latvian higher education system that is strong on enrolment but low on quality e.g. as measured by peer-reviewed publications. At some level this has been understood and there has been much talk of reform. Although various reports and evaluations have been published, there has been little progress on concrete reform until the Ministry of Education commissioned the World Bank in December 2013 to produce a report on funding models for Latvia. The final report was delivered in September 2014 and action has now been taken to adopt the World Bank recommended three-pillar model where the funding criteria will now include performance and innovation.
Of course, the new model will not solve all the problems of Latvian higher education – far from it – but it illustrates the pervasive nature of policy makers seeming dependency on external anchors.
- Putniņš, Tālis & Arnis Sauka (2014). “Shadow Economy Index for the Baltic Countries. 2009-2013,” The Centre for Sustainable Business at SSE Riga, May 2014.
In Ukraine, having a university degree only provides a noisy signal of one’s productivity, which means social ties and personal relations play a relatively more important role in the Ukrainian economy in general. Therefore it should not come as a surprise that inbreeding is very common in Ukrainian academia; for example, about 50% of faculty obtained their university degree from the university that employs them. Given the absence of clear “quality signs” for fresh university graduates, inbreeding can be viewed as a second-best option for hiring decisions. Our econometric analysis shows that inbred faculty does not differ in its (observable) quality from non-inbred faculty. At the same time, ceteris paribus, inbred faculty has somewhat lower salaries. We also find that the extent of inbreeding is slightly higher in universities with a “national” status and lower in very small universities (of less than 1000 students).
Academic inbreeding is the practice of universities hiring their own graduates to academic positions. Inbred faculty is thus faculty employed at the same university from which they graduated. Inbreeding implies a low level of competition for faculty vacancies possibly resulting in low quality hires. However, inbred faculty can be cheaper, reduce the chance of a mismatch between university and faculty member, and can be better “tailored” to the needs of a certain university or discipline. For some specific narrow disciplines inbreeding can be the only way to hire faculty (for example, if only one university in a region provides courses in a certain discipline, teachers of that discipline most probably will be inbred). In research, inbreeding can help to pass on tacit knowledge but it can also prevent “fresh blood” and new ideas from entering into the university. In developed countries, universities usually try to limit inbreeding in order to first, “disseminate” their graduates and earn a good reputation, and second, hire the best graduates on the market through an open competition. In less developed countries, inbreeding is more common because of the higher role of personal relations in hiring decisions in general.
Although very widespread, academic inbreeding in Ukraine has received little or no attention from researchers or policy makers. Data on inbred faculty is similarly scarce. There is only one recent exception – in the summer of 2013, the Centre for Social Research surveyed about 400 university professors. The survey contains information on a wide range of aspects of faculty employment, such as working hours, publications, participation in conferences, income size etc., including the question on whether a person works at the same university from which (s)he graduated. We used this data to do an econometric analysis of the factors that determine inbreeding and the impact of inbreeding. We complemented the survey data by data from an online questionnaire we distributed among KSE graduates whom we know work in academia, their acquaintances and among the network of KSE partners who work in academia (a total of 59 responses).
Causes of Inbreeding
Besides providing a person with knowledge and skills necessary for a white-collar job, education has several other functions. One of them is signaling, i.e. people who successfully graduate from an educational institution should have higher abilities (ceteris paribus) than those with lower grades or dropouts. This function of education is almost entirely lost in Ukraine because of widespread corruption. In Ukraine, good students can obtain good skills and knowledge together with good grades. However, “bad” students can obtain the same grades for money: besides paying professors for exam grades, students can buy a course paper, a diploma thesis and even a doctoral dissertation. Cheating and plagiarism are also very widespread; not only in students’ work, but also in academic research. Hence, based on the diploma alone, a potential employer will have difficulties telling apart a “good” student from a “bad” one. Therefore, other screening mechanisms are relatively important in Ukraine.
Many private-sector employers, for example, will pay more attention to previous work experience and personal recommendations than formal education. For example, the ULMS-2007 survey shows that from 48% to 68% of people found a job through relatives or friends, which is comparable to the extent of inbreeding found by this study in academics (48.6% in the CSR-2013 survey, 68% in our online survey). This situation pushes students, who do not expect to be hired by relatives or friends, to find a full-time job already in the first or second year of studies, providing them with both incentives and funds to “buy” a diploma. This creates a “vicious circle” – the low value of a diploma makes employers looking at previous work experience, and the need to gain that experience further devalues diplomas.
For universities, “previous work experience” is the student’s performance during their studies. Hence, by inbreeding their own students, universities reduce uncertainty, which they would be facing if they looked for needed candidates on an open market. As the academic career of a person develops, (s)he can develop additional signals of his/her “quality”; first of all, scientific degrees (Candidate of Sciences, Doctor of Sciences) and/or ranks (Docent or Professor) and connected to them publications in Ukrainian and foreign journals (with the last ones being much more valuable). Therefore, as we show, younger and less distinguished faculty (with shorter teaching experience and without a Doctor degree or Professor rank) is more likely to work at a university from which they graduated.
Our econometric estimation showed that the extent of inbreeding does not depend on the quality of a university as measured by its rank in Ukraine. Inbreeding is less common in very small universities (of less than 1000 students), and is independent of the university size after this threshold. Universities with a “national” status have slightly higher level of inbreeding.
We also show that inbred faculty does not differ in “quality” (measured as the number of publications in Ukrainian and foreign journals and the probability to get a foreign fellowship) from other faculty, although, ceteris paribus, inbred faculty do get lower salaries.
Results from both the CSR-2013 survey and our online questionnaire indicate that personal connections are very important both for entering a university and for further promotion. Usually an academic career starts when a person begins his/her Ph.D. studies; at the same time, (s)he starts working as an assistant or a lecturer (when admitting students to Ph.D. studies, universities prefer their own MA graduates). To move up the career ladder, a person should earn scientific degrees or ranks, have certain duration of teaching experience and a minimal required number of publications (all the formal requirements for certain academic positions are stipulated in a Decree of the Cabinet of Ministers). According to the law, currently there is no tenure system, and faculty is hired with one- three- or five-year contracts (the longest contracts can last up to seven years, but only in the universities with a “national” status).
Hiring Procedures at Universities
When a vacancy is open (e.g. a contract expires), a university should make an announcement in a pedagogical journal and/or on its website; then candidates should be interviewed at a chair meeting, and a selected candidate should be approved by the faculty dean. A candidate should have a required teaching experience and publications. There are about 1500 journals on the list of Higher Attestation Commission (the body that organizes the dissertations defense), which means that practically all universities issue at least one journal, and very few of them are refereed. This means that publishing in the home university’s journal is the cheapest and easiest way for a faculty member to get the needed number of publications. Therefore, publications are very often of very poor quality and do not contain any real research, especially in social sciences. To mitigate this problem, the Ministry of Education and Science introduced a new requirement for scientific degrees – since 2013, 20% of publications should be in foreign-refereed journals.
When hiring, all formal requirements and procedures are typically observed – a competition is announced, the chair meeting held, the candidate has the required duration of work experience and the number of publications (their quality is discussed above). However, in reality there is very often just one candidate “for” whom the vacancy is opened, and outside people, even if they apply for a vacancy, are ignored. Usually a chair meeting supports the opinion of a chair head, but either way, a dean could overturn a chair meeting decision, so despite seemingly open procedures, in reality a person’s employment depends on his/her relations with a chair head and/or a faculty dean. Studying at a university is the most common but not the only way to establish these relations. A person can get acquainted with a chair head or a faculty dean at a conference, be his/her relative or friend, or be recommended by his/her relative or friend.
Such a widespread reliance on personal connections is a legacy from the Soviet times when personal ties replaced market mechanisms, and students were allocated to their first workplaces rather than hired on a competitive basis. Since universities were situated in cities, staying at a university implied a better living environment, and salaries were also good. Therefore many students tried to stay at their alma mater by establishing good relations with a chair head or a faculty dean. Nowadays, university salaries are not competitive so students staying at universities are not necessarily the best ones. However, they are not the worst ones either because otherwise they would not be offered a position.
In Ukraine, academic inbreeding provides universities with a relatively cheap and well-prepared workforce. On the other hand, it also fosters isolation of universities and conservation of existing “traditions” – whether good or bad. Given low academic mobility of both students and professors, this situation prevents dissemination of knowledge and lowers competition, which necessarily leads to degradation.
Currently, inbreeding is not on the agenda of either researchers or policy makers. In fact, no one seems to have considered it as a problem. Perhaps, it will not be discussed as a problem any time soon because there are many other “bigger” problems in Ukrainian higher education. To name a few, these are:
- high centralization and insufficient level of university autonomy;
- low salaries and high teaching workload of professors;
- low extent of university research and very low quality of the existing research, especially in humanities and social sciences;
- high corruption and low standards of studying and research work (ubiquitous cheating and plagiarism);
- low sensitivity of educational programs to the needs of modern economy.
Perhaps, introduction of formal limits on inbreeding (setting a quota for both MA graduates admitted to Ph.D. programs and for Ph.D. graduates hired to teaching positions at the same university) could bring some “fresh air” into the system. This measure would extend the pool of candidates available to a university and introduce an element of competition between them. It would also create incentives both for universities to improve their Ph.D. programs and for students to put greater effort into studies.
- Bilyk, Olga and Iuliia Sheron (2012) Do Informal Networks Matter in the Ukrainian Labor Market? EERC Working paper No 12/11E.
- Coupe, Tom and Hanna Vakhitova (2010). Recent Dynamics of Returns to Education in Transition Countries, KSE/KEI Working paper.
- Osipian, Ararat (2009). Corruption and Reform in Higher Education in Ukraine, Canadian and International Education, vol. 38, pp. 104-122.
- Shaw, Marta, Chapman, David and Nataliya Rumyantseva (2011). The Impact of the Bologna Process on Academic Staff in Ukraine, Higher Education Management, vol. 23, pp. 71–91.
- Stephens, Jason, Romakin, Volodymyr and Mariya Yukhymenko (2010). Academic Motivation and Misconduct in Two Cultures: A Comparative Analysis of US and Ukrainian Undergraduates, International Journal for Educational Integrity, vol. 6, pp. 47–60.
“Where scientific enquiry is stunted, the intellectual life of a nation dries up, which means the withering of many possibilities of future development.” – Albert Einstein, 1934 The rampant unemployment rates and the general contraction of economic activity in many western countries rekindled the fear of emigration and brain drain, which for a while seemed to be exclusively a developing-world problem. This brief illustrates a potential new approach to the issue, through a recent experience in a small but oil-rich region of Southern Italy.
Economic Growth and Brain Drain
Since the times of Solow, economic theory represents growth as the result of a process not unlike some sort of portfolio management. Just like any individual investor, countries own and need to manage certain assets, characterized by different properties and returns: some are exhaustible, others are renewable or living, and ensure a sustained stream of income. In the original formulations, the economy’s productive assets were identified in land, capital and labor, to which human capital was soon added. In 2006, the World Bank published estimates of 120 countries’ total wealth, in an attempt to introduce a broader view of what these assets really are . The report classified a country’s capital into three main types: natural, produced (physical) and intangible. A striking pattern emerged. While the share of produced assets in total wealth is virtually constant across income groups of countries, the share of natural capital tends to fall with income, and the share of intangible capital rises. This means that rich countries are largely rich because of the skills of their populations and the quality of the institutions supporting economic activity.
There is an important relation between the different types of assets. In order to avoid illusory and temporary growth based on consuming the readily available natural capital, efficient management through saving and investment can transform one type of asset into another, achieving sustainability over time. Although this may sound as no big news, the analysis of the actual savings and rates of growth in the different form of capital reveals far from ideal situations all over the world. In many resource-rich developing countries, savings rates have been negative for many decades, meaning that resource rents have been at best used for consumption. In the worst cases, they have fueled corruption and private enrichment of small elites, as highlighted by the extensive literature on the “resource curse”.
Also, renewable natural resources are often exploited in an unsustainable fashion. One case in point is the thorny issue of fish stocks, but many more examples are discussed in the literature on ecosystem services. Even the intangible capital is under stress in many places. In the wording of the 2006 World Bank report, “intangible assets include the skills and know-how embodied in the labor force; social capital, that is, the trust among people in a society and their ability to work together for a common purpose; all those governance elements that boost the productivity of labor: an efficient judicial system, clear property rights, and an effective government.” Probably the first component in the list, what is traditionally indicated with the term human capital, is the most tangible, observable and relatively controllable part of it.
Controlling the Brain Drain?
Although there are many arguments in favor of international careers and general workforce mobility, some regions experienced negative and prolonged net outflows – emigrants minus immigrants – to the extent that they now face a real risk of hold ups in their economic development. This, due to shortages of vitally needed high-skilled personnel. Even the economic sustainability of many basic services and businesses is in doubt due to the shrinking customer base.
Southern Italy is one of these regions. The net outflow of people with a bachelor or higher degree is negative even at the national level, -2% over the latest ten years. In southern Italy, with a population of just above 13 million, the net balance of emigrants and immigrants over the same period amounts to -630,000. 70% of these people are aged between 15 and 34, and 25% hold at least a bachelor degree. To this figure, which is based on changes in official residence and therefore grossly underestimates the real size of the phenomenon, must be added the 150,000 that on average every year join the flow of internal migrants or long-distance commuters from the south to Northern Italy. Among these people, 47% are aged between 15 and 34, and almost 30% hold a bachelor or higher degree. The reason for these massive outflows can be identified in the labor market dynamics. If we break down the average 22% decline in job creation for youth between 2008 and 2011, new hires declined by 30% for youth with a bachelor degree and 14% for higher degrees, against 11% decline for youth with only secondary education.
As opposed to physical capital, recent research shows that loss of human capital can have long lasting crippling consequences for economic growth (Waldinger, 2012). Among the policies that have been tried in order to stop or counterbalance the brain drain, a first set targets human capital as embodied in the workforce, i.e. tries to attract highly trained people. Probably the most popular are economic incentives in the form of tax rebates, higher wages or other job-related benefits and amenities. This kind of incentive regime exists in Italy since December 2010, though only targeting Italian nationals. However, for many high-skilled professionals, the important factors are others, such as a generally innovative and creative environment, a network with a critical mass, a transparent and competitive labor market not contaminated by politics, high quality support services, and other conditions that are not as easy and cheap to modify. Some countries have played the card of instead attracting prestigious foreign schools to their national territory to prevent their brilliant youth from leaving in the first place. Many famous western universities have already initiated partnerships with or lent their names to schools and universities in these countries and even built replicas of themselves – mostly in Asia – so as to get a toehold in the world’s largest education market, or in the Gulf States, where financial resources abound. There are successful examples of such partnerships in Italy, too.
A different approach has been taken by the new government, with the realization that the country can benefit from the pool of expatriated talents without moving them permanently back. A program of facilitation for visiting scholars and exchange students was thus launched in September 2012. But a step even further is actually possible. A network of scholars and high-skilled professionals that want to contribute to the development of a particular country or region, for example their place of origin, does not require physical presence on the territory, and not even any formal or institutional bond. The only needed ingredient is the Internet. Not removed from the environment and the conditions where they achieved success, these people can actually contribute even more. This is the idea behind, for example, Innovitalia.net and other smaller independent initiatives inspired by the concept of crowd-sourcing.
The Experience of Basilicata
I recently witnessed (what I hope is) the birth of one such network in the region where I am from. Basilicata, also known as Lucania, is a small, poor region of less than 600,000 inhabitants scattered across 131 different municipalities on a territory of barely 10,000 squared kilometers, between the heel and the toe of the boot that the Italian peninsula resembles. Here, the crisis hit especially hard and migration outflows are since then even stronger, especially among youths. According to SVIMEZ (a think tank focused on entrepreneurship and economic activity in Southern Italy), Basilicata has lost 10% of its regional GDP since 2007, much more than the national average of -4.6%. Compared to other large European economies, Spain is currently at -2.7, while Germany and France, notwithstanding the low annual growth rates, are now back at the same level as in 2007. The youth employment rate (with the generous definition of 15-34) is alarmingly low at 30%, down by 15% since 2007, and only 24% for women. As a result, the consumption level of 27.5% of families is now below the poverty threshold, compared with 11% of families at the country level.
Enter Europe’s largest onshore oil and gas reservoir; about 150,000 oil barrels are extracted in Basilicata every day, covering 12% of the national oil demand. The exploitation started in the late 1990s, although the reservoir has been known since at least the 1970s. It is expected that these oil fields will be operational until 2022, but at least one more reservoir with about the same estimated capacity remains unexploited. The regional government has for the time being blocked any new concession, hoping perhaps to negotiate better conditions. The truth is, there have been strong concerns – related to lack of transparency and in some cases to alleged corruption – voiced at the actual quantities of extracted oil and what is a fair distribution of revenues. After more than 10 years, it is hard to claim any major social impact of the project: there is a clear lack of funds to invest in local small and medium size businesses and, as observed above, unemployment in the area remains a problem while the regional population has plummeted.
Is this a case of “resource curse”? Not really. There is no clear evidence of corruption, or elite capture – the problem seems to be mostly poor management and a lack of ideas, mixed with the deeply rooted penchant of local politics for populism and the clientela system (patronage). To give an idea, creativity in using the oil money did not go much beyond the restoration of many of the small town’s pavements and facades. In 2009, in line with the so called “Development Action Plan” of the Berlusconi government, an 80 euro lump sum was distributed to all residents. After the crisis hit harder, the royalties have also been used to cover holes here and there in the current account. Data from the Ministry for Economic Development shows that capital investment in the region went down by 8.5% per year between 2008 and 2011, while current expenditure went up by 3%. Going back to the importance from the growth perspective of savings and investment versus consumption, it is worth remarking that current expenditure is (in most part) consumption.
Can this bounty instead become an answer to Basilicata’s troubles? This was the question driving the first Sustainable Development School, held at the end of October in Viggiano, a small town in the center of the oil field, hosting 23 oil wells. Sponsored by a number of institutions and associations, local or national, the event attracted a group of 45 economists, sociologists, managers and entrepreneurs, engineers and culture sector specialists, in most part born in Basilicata and working or studying abroad. Seven of these participants were instead citizens of various countries in the Middle East and North Africa region, working or studying in Basilicata. This heterogeneous group worked together for two days on concrete proposals to be put on the administrator’s tables, in five main areas: Regional Economy in the new Euro-Mediterranean context, Energy and natural resources, Environmental protection, Infrastructure for environmental protection, Promotion of the historical, cultural and social heritage. Given the context, most projects focused on alternative proposals for how to use the royalties. The keyword was, however, sustainability. Everybody was well aware of the fact that for them to last longer than oil itself, these resources must be saved and earmarked to some productive use that, leveraging on other locally abundant resources, can start off a process of self-sustained development. The projects highlighted the stimulation of local small-scale entrepreneurship and the creation of employment opportunities as necessary ingredients for a fairer sharing of the revenues but most importantly for long-term sustainability.
Many local resources, not fully utilized at present, were brought in as examples: the abundant wood, the underexploited waterways, even the wastewater from bigger agricultural and animal farms, connected to the potential for small-scale generation of energy from renewable sources. On a slightly different note, the list continued with the historical and cultural heritage, natural beauty and the religious and culinary traditions that could support a much more developed tourism industry than what it does today. All of this, in the proposals of the participants, has the potential to support profitable businesses that bring employment to the community. This ingredient is considered crucial, in the perspective that the long-term survival of any (business) initiative requires tying its success to the welfare of the local communities. The focus was thus overwhelmingly on private initiative, with the public confined to the role of investing partner and provider of supportive infrastructure (material and immaterial) and services.
Overarching is undeniably the question of institutional quality, needed as the underlying canvas to support whatever initiative we hope to see blooming. A proposal that did not make it to the finals, though, involved the creation of a stable watchdog, either on local policies in general (and in particular on the use of the royalties) or more specifically focused on the environmental and health impact of the extractive activity. According to the more politically experienced participants, no administration would agree to finance an independent body with the explicit mandate to criticize them. Never mind that this type of institutions is common in other places. In Italy, the one body that currently operates with a watchdog function on the public administration, although limited to the financial aspect, is facing threats of limitations of its powers. A lot remains to be learned. However, the perhaps most valuable outcome of this experience was, if not yet policy change at least a promising method to produce change, by mobilizing a latent ‘local’ resource and really transform oil rents in durable intangible capital.
- Where Is the Wealth of Nations? Measuring Capital for the 21st Century. Washington, DC: The World Bank, 2006
- The brain drain in Spain is mainly to Spain’s gain, The Economist, April 2012
- The Inclusive Wealth Report 2012, Cambridge University Press, 2012
- Rapporto sull’economia del Mezzogiorno, SVIMEZ, 2012
- Peer effects in science: evidence from the dismissal of scientists in Nazi Germany, Waldinger, F., The Review of Economic Studies, 2012
 Updates on these figures for a subset of 20 countries can be found in the newly released Inclusive Wealth Report 2012 , sponsored by a number of UN agencies, the first of what is intended to be an annual report looking at a broad measure of wealth. From the report: “Wealth is the social worth of an economy’s assets: reproducible capital; human capital; knowledge; natural capital; population; institutions; and time.”
 The Economist recently pointed out that “[w]hat some call “brain-drain” may in fact be a win-win situation for Europe’s economies. […I]n the short run, migration takes away pressure from budgets as the unemployed don’t claim benefits but move [abroad] instead. In the long run, there is a pool of highly skilled workers who have not fallen victim to hysteresis effects and can be re-activated for the [home] economy once the crisis is over.” However, it is not at all obvious that this migration is short-run, i.e. that these high-skilled workers will eventually go back. A survey of Italian scientists working aboard reveals, for instance, that the overwhelming majority excludes ever going back to Italy.
 The “import” of such people generally more than compensates the “export” in other big European countries.
 Source: SVIMEZ, 2012.
 A recent paper analyzing the experience of New Zealand (Davenport, 2040) reviews the waves of brain-drain response policies and calls this latest generation diaspora policies: “Diaspora policies are based on an assumption that many expatriates are not likely to return, at least in the short term, but represent a significant resource wherever they are located. This resource is not just embodied in the individual expatriate but also potentially includes their socio-professional networks. A key advantage of any diaspora option is that such connectivity initiatives do not require a large infrastructural investment in order to potentially mobilize this latent ‘national’ resource.”
 Source: ISTAT.
 Sponsors and partners included the municipal and regional administration, the Italian Institute for Asia and Mediterranean (ISIAMED) and its local branch, CeBasMed, the Val d’Agri National Park, the Regional Environmental Protection Agency, SVIMEZ and the University of Basilicata.
 The Corte dei Conti tribunal.