Higher Education in Europe, Vol. 30, No. 1, April 2005 The Entrepreneurial University in the Knowledge Society SORIN E. ZAHARIA and ERNEST GIBERT Higher Education – A Perpetual Reform The knowledge society and economy require a radical reconfiguration on the part of both universities and industry, the interests and domains of which now overlap more than ever. This article highlights an increasingly uncertain environment, a surge in demand for higher education, and the internationalisation of education and research as dominant factors of change for the university. These factors drive new expectations of the university role and of its relations with industry. The entrepreneurial university and the knowledge organisation are both on new trajectories of transformation in the context of the knowledge economy. The reform of higher education is a phenomenon characterized by its historical continuity. More than once, this reform has also shown cyclical features. Created as autonomous institutions, European universities have always been in some type of interaction with society. Their appearance in the Thirteenth Century came about in a specific context relative to the social and economic circumstances of the age. Throughout the Sixteenth and Seventeenth Centuries, reforms of early higher education proliferated, for the most part under the imposition of princes and royalty. The major objective of these reforms was to reinforce state control, establish regularity in delivery and assessment, and introduce some new branches of study. The reforms and reform bills of the Eighteenth Century are of greater importance to us, as they reflect – in accordance with the spirit of the Enlightenment – a genuine desire for modernisation through better adjustment to the requirements of professionalism and of early nation-states. It is also to be noted that, apart from a few colleges in England and those that owned land or had significant private means (such as the University of Salamanca), during this period, educational institutions very rarely had satisfactory resources of their own. Today, the university faces a new and major challenge: the knowledge-based society and economy, in which the creation or acquisition of knowledge – therefore both individual and collective learning – assume increasing importance. For its growth, the knowledge-based society depends on the production of new knowledge, its transmission by way of education and training, its distribution via information and communication technologies, and its utilisation in new industrial processes or services. At the same time, new means of production, transmission, and utilisation continue to emerge; they associate larger numbers of operators, often networked in an increasingly internationalised environment. Established at the crossroads of research, education, and innovation, universities hold the key, in many respects, to the knowledge-based economy and society. Universities are unique in that they participate in all of the above processes owing to their fundamental role in three areas: research and utilisation of results through industrial cooperation and ‘spin-offs’, education and training, especially of researchers, ISSN 0379-7724 print/ISSN 1469-8358 online/05/010031-10 DOI: 10.1080/03797720500088038 # 2005 UNESCO 32 S.E. ZAHARIA AND E. GIBERT and finally regional and local development. Universities, representing the academic world, are called upon by the knowledge-based society; so are enterprises and businesses, essential players in the development of an economy. The two worlds, the academic and the economic, adjust, respond, and work together. By way of new and increasingly converging interests, these two worlds start to learn more from each other. New Challenges Across the world and particularly in Europe, universities face a series of profound mutations: an increasingly unstable environment; a concurrent growth and diversification of demand for higher education; the internationalisation of education and research; the emergence of new social expectations; the de-localisation of knowledge production and distribution, and the development of closer and more efficient cooperation with industry and the wider economic world. Businesses have become a privileged location for the creation of knowledge, and the challenges they face are manifold. The creation of knowledge and the capacity for permanent learning have become fundamental elements of competitiveness and longterm performance. Knowledge is a key organisational resource, and the learning process that creates it constitutes a significant competitive advantage. Knowledge and innovation thrive on each other. The Increasingly Unstable Environment Higher education is again in flux; the necessary reforms are no longer imposed by princes, but driven by an increasingly and diversified societal demand for access, for new fields of learning, for multidisciplinary research strongly influenced by new information and communication technologies. The economic outlook becomes less predictable, and the new economy does not only refer to ‘high-tech’ sectors: it concerns any sector with perceived prospects. The continuously changing nature of societal demand leads universities and the economy to more innovative and creative iterations, with new and ever-present references to the knowledge society. In order to adapt to this environment however, universities must be able to control certain processes such as the quality of education and research; ‘just-intime’ provision of educational and research services; the exchange of computer data through ‘e-university’ and ‘e-science’ structures; and information-sharing. To meet these requirements and in order to create and distribute knowledge within a knowledge economy, universities need to ensure the systematic creation of knowledge, in the short- and the long-term. With that end in view, universities must oversee the creation of knowledge at three levels (the individual, the group, and the organisation), and ensure correct interaction between them. They must effectively manage the competencies of the staff involved in education and research, a strategic asset. They must develop highperformance tools, adapted to innovation, education, and research. Finally, they must clearly define their objectives in the areas of education, research, and technology transfer. The Increasing Demand for Higher Education Demand will undoubtedly continue to increase in the years to come, under the double pressure of governments seeking to increase participation and of new requirements THE ENTREPRENEURIAL UNIVERSITY 33 related to education and lifelong learning. This increasing demand will generate capacity saturation in several universities. How to absorb this growing demand, taking into account limited human and financial resources? How to ensure a sustainable financing of universities? Moreover, education and the generation of knowledge and competencies are also features of new learning organisations, which conduct their own training and research units. Such enterprises sometimes enter into partnerships with universities, yet this is not their only area of interaction. The Internationalisation of Education and Research Accelerated by new information and communication technologies, internationalisation translates into increased competition between universities, between countries, and between universities and other types of institutions. A growing share of funding allocated to universities on a competitive basis implies progressively more intense competition in order to attract and keep talent. Competitive financing therefore requires outstanding human resource management, in order to take advantage of competence and creativity. However, European universities attract fewer foreign students, particularly fewer foreign researchers, than their American counterparts. The former received in 2000 some 450,000 foreign students, while the latter counted over 540,000, most of them Asian. In the United States, most foreign students pursue advanced studies in Engineering, Mathematics, and Information Technology. Significantly, a large number of doctorate-holders also remain there: about 50 percent of the Europeans who obtain their degree in the United States remain there for several years, and a quite significant percentage remains there on a permanent basis (CEC, 2003). European universities offer researchers and students a less attractive environment, partly because they often do not have the critical mass of resources required; hence the creation of networks and joint courses or degrees. Yet other factors, beyond the control of the university, play an equally important role: the inflexibility of the labour market, a less developed entrepreneurial spirit, and a limited labour market in the innovative sectors. This translates into lower European performance in areas such as research financing, connections with industry, number of patents and ‘spin-offs’, etc. Furthermore, when working on a project basis, the traditional organisational structure of universities is not adequate for project-based administration. Consequently, Europe’s universities rally in the continent’s Higher Education Area, building education and research through networks of excellence, the pôles universitaires, or other projects involving multiple stakeholders. These trends also underpin the creation of the European Research Area. Today, the globalisation of markets and the revolution of information bring us into a new world, the Net-economy. The Neteconomy is the knowledge economy network: open universities and distance education, which herald, on the one hand, the emergence of new forms of knowledge sharing and, and, on the other, new means of commercial exchange. The Emergence of New Expectations As part of its fundamental mission of initial education, the University must respond ‘just in time’ to new needs in education and training, such as scientific and technical education and possibilities for lifelong learning. European universities are directly 34 S.E. ZAHARIA AND E. GIBERT concerned with the former, particularly in that they train science teachers for secondary education. The contribution of universities to lifelong learning includes a diversification of access, greater openness to the labour environment, and improved student services. Furthermore, the university can and must open itself to society by becoming a space of reflection on knowledge, of debate and dialogue between scientists and citizens. Because it lives on significant public or private financing, and because the knowledge it produces and transmits has an impact on society, the university is responsible to its partners for the way it manages its activities and budgets. Increasingly, representatives of the non-academic world integrate into the management and administrative structure of universities. Universities have also created horizontal organisational structures to meet their needs: departments of continuing education, industry representation, innovative ‘incubators’, technology transfer centres, and the like. In turn, the business network has a variable geometry; it evolves with its environment and privileges autonomy and rapidity. This is one of the reasons why the small- and medium-sized enterprises (SME) turn into basic cells of the market economy and important reference models for entrepreneurship. A living organism it adapts, grows, and multiplies in order to develop. Long neglected in favour of large centralised structures, SMEs are now a crucial element of economic change. Consequently, university associations and business associations are networks of flexible, interdependent institutions, sharing knowledge or expertise. Delocalisation of Knowledge Production and Distribution Today, we witness the appearance of a new type of enterprise, potentially called the ‘knowledge enterprise’ or ‘knowledge organisation’. This type of enterprise has permanent innovation as its basic activity, and thus shares significant features with a university. In the knowledge enterprise, most of the employees are highly qualified professionals, i.e. knowledge ‘workers’. Their duty consists mostly in transforming information into knowledge, through their own capacities or those of specialised suppliers. These enterprises tend to develop their own research or education centres and reduce the amount of research subcontracted to universities. Another tendency is the creation of joint structures of research and education in partnership with universities. Thus, new relations superimpose on the traditional ties between universities and industry, and geographic proximity is no longer a major criterion. High-technology enterprises, on the other hand, tend to settle next to leading universities and shorten the intervals between discovery, application, and marketing. Such approaches require new structures and management for both parties; they also intensify competition between universities: they must be increasingly attractive to industry in order to obtain contracts for research or vocational training. Two aspects express the reorganisation of knowledge: the growing diversity and specialisation of knowledge, and the emergence of increasingly specialised research and education fields. Concomitantly, there is an urgent need for the academic world to adapt to the interdisciplinary character of fields tied to great issues of society, such as sustainable development, risk management, etc. Despite the trends outlined above, the activity of universities remains organised, often compartmentalised, according to traditional notions of curriculum. The reorganisation of knowledge also expresses through a certain blurring of the boundaries between fundamental and applied research. Fundamental research remains a privileged domain of the university, and the capacity of large American universities in THE ENTREPRENEURIAL UNIVERSITY 35 this field make them attractive to industry. In Europe, universities are inclined to conduct research with direct commercial application, which could endanger their contribution to the progress of fundamental knowledge. Co-operation between Universities and Industry There is a self-evident need to reinforce cooperation between universities and knowledge enterprises on both national and regional levels. Yet, innovation, the creation of new enterprises, and the transfer and dissemination of knowledge remain paramount in higher education. From the perspective of competitiveness, it is indispensable to propagate knowledge generated in the academic environment. In this regard, the three principal mechanisms by which knowledge and expertise can be directly transmitted to industry are intellectual property rights, campus-type enterprises, and ‘start-ups’. If we consider the economic and academic worlds, such mechanisms are surely elements of their intersection (Figure 1). ‘Start-ups’ are currently an essential vector of wealth and employment. The main assets of a ‘start-up’ reside in its flexibility and its responsiveness. The active promotion of university-enterprise relations would facilitate the dissemination of knowledge to European industry, including its SME sector. Actually, the performance evaluation of universities should include such a criterion. Certain transformations generated by the economic world have an impact on the academic world, while certain higher education reforms have long-term consequences on the economy. Moreover, there are some transformations and reforms inevitably experienced jointly. Transformations of the University and the Knowledge Enterprise The Knowledge Enterprise In an economy characterised by uncertainty, the principal sustainable competitive advantage is knowledge. The successful enterprises are those that constantly create new Figure 1. Intersection of the academic and economic worlds 36 S.E. ZAHARIA AND E. GIBERT knowledge and integrate it into new technologies and products. The knowledge enterprise has permanent innovation as a strategic activity. On the New York Stock Exchange, Microsoft shares trade for an average price that is ten times higher than their book value. In other words, for each dollar of book value, the stock market is ready to pay a premium of nine dollars, which do not appear on Microsoft’s balance sheet… (Sveiby, 2000). How can this enterprise be worth ten times the amount of its assets? Another example of success is that of some Japanese enterprises, such as Honda, Canon, Matsushita, NEC, and Kao, which remains a mystery for most Western observers (Sveiby, 2000). They are not particularly efficient or entrepreneurial, yet they have slowly but surely improved their international competitive position. Financial analysts will explain that the difference between the quoted price of shares and their book value lies, in the case of Microsoft for instance, in extreme profitability and extraordinary growth. Why is Microsoft so profitable and why has it developed so fast? What is this mysterious and highly productive asset of both Microsoft and the Japanese enterprises? Many agree that the industrial vision of the world is fading, but few can predict what will replace it. Clearly, however, information and knowledge are becoming more and more important. The secret of corporate success appears to lie in managing the creation of new knowledge. Peter Drucker argued over ten years ago that knowledge is not only a new resource added to traditional factors of production (labour, land, capital etc.), but the only one which has real significance today (Drucker, 1993). The knowledge economy offers unlimited resources, as the human capacity to create knowledge is infinite. Contrary to tangible resources, knowledge grows when shared. This is why we witness a conversion process, from knowledge into new products and systems and back again. It is precisely this dual movement, which fuels continuing innovation, while leading to competitive advantage and organisational development. For most present-day enterprises, the value of intangible assets exceeds the value of tangible assets (Sveiby, 2000). We are witnessing a revolution in the management of new enterprises, with the dual management of creative knowledge: learning and innovation (Figure 2). The University Confronted with this creative duality on the part of businesses, how must universities respond? Should they change their missions, or rather their knowledge management practices? In 1993, a German consulting company identified the University of Warwick (UK) as being capable of establishing and maintaining the most efficient business relations out of a group of universities analysed including the Institut Fe´de´ral de Technologie of Switzerland, the Technical University of Karlsruhe (Germany), and the Technological University of Compiègne (France). Why this evolution? Why these results? The University of Warwick changed its strategy. Universities must take advantage of their autonomy and react to changing circumstances appropriately. In other words, universities must pursue their encounter with the knowledge economy. This means not only preserving the missions of the classical university, but also adding the newer imperative of the entrepreneurial university. THE ENTREPRENEURIAL UNIVERSITY 37 Figure 2. Dual management of creative knowledge The Entrepreneurial University and the Knowledge Enterprise Depending on their reaction to an increasingly complex and uncertain environment, (the ‘entrepreneurial reaction’), European universities will fall into different categories. A proactive university, for instance, is characterised by a dynamic, interactive attitude towards society; it influences the environment to the same extent that the environment, in turn, influences it. Therefore, its harmonisation of scientific and managerial competencies may define the entrepreneurial university. In this context, the systematic transfer of knowledge supplants the classical missions of research and education: technology transfer, continuing education, and adjustment to labour market demand. In order to play their part, universities must adopt an entrepreneurial attitude in managing people, knowledge, and competencies. Therefore, its educational mission and entrepreneurial management define the entrepreneurial university. Alternatively, some universities may choose to maintain their traditional form, remain financed mainly by a national or regional Ministry of Education and/or Research, and be limited by insufficient financing and by an ossified internal structure. In many situations, this insufficiency goes together with an increasing feeling of institutional powerlessness. The way in which universities attempt to control this imbalance will prove decisive in their evolution as entrepreneurial universities. The strategy for changing the classical university into an entrepreneurial university could be organised around four main axes: Institutional Construction - The construction of entrepreneurial academic structures (Zaharia, 2002) or of a dynamic periphery (Burton, 1998); - New specialisations, departments, or types of education; - The implementation of a consolidated decision-making centre. 38 S.E. ZAHARIA AND E. GIBERT Human Resource Management - The creation of a dynamic academic nucleus; - The development of an integrated entrepreneurial culture. Organisational Management - Knowledge management; - Project management; - Diversification of financing. Openness and Internationalisation - Academic poles, multinational universities; - International research networks; - International projects. These concerns for entrepreneurial transformation are perceptible in most universities and, even if they do not occur in all cases at the management level, there are academic nuclei in certain departments or faculties that impart entrepreneurial attitudes and represent a basis for entrepreneurial transformation. In Romania, as elsewhere in Europe, there are universities where institutional change is afoot, generating changes in the attitude of academic staff regarding the university’s social mission. The fact that entrepreneurial structures already exist in universities such as the Polytechnic University of Timişoara, the Technical University of Cluj-Napoca, and the Transylvania University of Braşov suggests that pan-European higher education reforms are beginning to show significant results. The transformation of traditional Romanian universities into entrepreneurial universities is confirmed by the interest of certain higher education and research institutions in partnerships, regional development programmes (such as PHARE), and research networks. These institutions include the Polytehnica University of Bucharest, the Technical University of Iaşi, Iuliu Haţieganu University of Medicine and Pharmacy of Cluj-Napoca, the National School of Political and Administrative Studies, the University of Piteşti, Petrol-Gaze University of Ploieşti, and Dunărea de Jos University of Galaţi. Romania’s National Agency for the Partnership of Universities with the SocioEconomic Environment (APART), established three years ago by the Ministry of Education and Research, plays an important role in the involvement of universities in various networks. An example in this sense is the proposal by APART of over 15 projects in three years within the framework of the PHARE, Leonardo da Vinci, Socrates, and Europa programmes. All these activities will take place in the context of a new Romanian legislative framework, which grants universities sufficient autonomy for their transformation into entrepreneurial universities. In the Romanian academic environment, an entrepreneurial culture is beginning to emerge. Some universities now have entrepreneurial structures in place at the university level; in others, entrepreneurial concerns appear only at the level of certain faculties or departments, but these will nevertheless contribute to the emergence of entrepreneurial THE ENTREPRENEURIAL UNIVERSITY 39 academic structures through their involvement in regional research and development programmes. The process of entrepreneurial transformation is lengthy and varies from one university to the other, influenced as it is by traditions, economic development, cultural factors, and legislative frameworks. In some universities, the academic management generates the change, followed by the academic staff. In other cases, departments are the starting point of transformation, and gradually generate a movement of transformation up through the institutional structure. At a certain point of the transformation process, a university may be considered an entrepreneurial university, but that moment is not simply a rite of passage. On the contrary, it is only when a university is engaged in a process of permanent transformation that it becomes entrepreneurial. If the university is flexibly organised, if it can adjust or readjust in the best possible way to the continuously changing demands of society, it can ensure its entrepreneurial response. Conclusion This article draws a parallel between two worlds, the economic and the academic, and provides an overview of the in-depth changes undergone by both of them as well as the challenges of the future. Relatively isolated for a very long time with their funding ensured and their status protected, European universities have gone through the second half of the Twentieth Century without really questioning their role or the nature of their contribution to society. The changes they must submit to, today raise a fundamental question: can European universities, in their current form and organisation, hope to preserve in the future their place in society and in the world? - The current evolution of society increasingly transforms the university into an economic system of prime importance. The university is a first-rate economic operator due to its role on the labour market and the place held (or should hold) in strategic planning. The university mission aims at long-term results, implying considerable investments and a certain inertia in time. A transformation of the university is in order to develop an entrepreneurial culture; - The university is an important actor in the knowledge society, as it is capable of supplying knowledge and information to enterprises and, on a wider scale, to society. Knowledge improves competitiveness and, once utilized, brings about the generation of new knowledge: it is a valuable yet highly perishable commodity, hence the particular importance of appropriate knowledge management. In the knowledge society, no organisation can be competitive and face the changing economic and social environment unless it associates itself with others. For this reason, each university must prepare its evolution based on a sound analysis of results, of the economic and political context in which it operates, of regional demand, and of international trends in higher education. In the entrepreneurial world, strategy defines the allocation of resources for competitive advantage; in the entrepreneurial academic world, the strategy takes a more complex form. - The structures created within a university may help it evolve in an entrepreneurial direction. Each university must choose its own way starting from a realistic analysis of its conditions and possibilities. A special focus on ‘incubators’ implies a strategy 40 S.E. ZAHARIA AND E. GIBERT of outreach to SMEs and high-technology research; likewise the creation of technology parks requires a more significant overture to large corporations. Not all solutions apply to all universities, or to the region where a given university operates. In Romania, the creation of a technology park may be a solution for the Polytechnic University of Timişoara, which has a tradition in scientific research and is close to large enterprises such as Alcatel, Continental, and Siemens; but this would not be appropriate for Constantin Brâncuşi University of Târgu Jiu, situated in a region facing economic difficulties. - A university cannot become entrepreneurial by simply creating entrepreneurial structures; it must indeed change its conceptions regarding the mission of the university in society. In France and in the United Kingdom, the practice of contractual policies based on institutional projects constitutes important progress in this direction. This system was introduced in Romania within the Phare programme for higher education reform, but in most cases the plan is only superficially worked out at a central level; - The university management team plays a very important role in its entrepreneurial transformation. Therefore it is necessary to clearly define the role of the persons who manage a university. In the present context, leaders are often expected to possess multiple competences without the benefit of appropriate training. Hence an increasing necessity to train ‘academic managers’ and, at the same time, to create the structures required for efficient administration; - Society evolves, and the universities that have understood their new role can evolve at the same pace. Entrepreneurial universities already exist and are increasingly common. Other universities have just begun this long journey, filled with risks and surprises. This path will unmistakably lead to new forms of knowledge, new types of students, new relationships governing existing human resources, and new solutions to the problems faced by European national governments and economies. This is why it is imperative to consolidate the partnership between universities and enterprises, as this partnership becomes the key factor of success. It is up to us all to learn from one another at the national and international levels, and to implement the transformation of the proactive university. The comparative analysis undertaken here prompts the authors to conclude that the interaction between entrepreneurial universities and knowledge enterprises will undoubtedly promote innovation and therefore the development of the knowledge society as a whole. Bibliography BURTON, R.C. Creating Entrepreneurial Universities: Organizational Pathways of Transformation. Paris and Oxford: IAU and Elsevier Science, 1998. COMMISSION OF THE EUROPEAN COMMUNITIES (CEC). Le role des universite´s dans l’Europe de la Connaissance. Communication of the Commission of the European Communities. Brussels, 2003. DRUCKER, P.F. Post–Capitalist Society. Oxford: Butterwnth Heinemann, 1993. SVEIBY, K.E. Knowledge Management: La Nouvelle Richesse des Enterprises. Paris: Editions Maxima, 2000. ZAHARIA, S.E. ‘‘Aspects du passage de labour l’université classique à l’université entrepreneuriale’’, UNIversite´ dans la SOcie´te´ - UNISO 2002. Bucharest: Paideia Publishing House, 2002.
