Publication
Universities and local economic development – a review of academic literature
Published: 2 November 2026
ERC Research Report
Associated Themes
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Business Growth -
Entrepreneurship -
Innovation -
Productivity and performance
The evidence suggests that universities make important—but highly uneven—contributions to regional and national economic development. Across OECD economies, the most consistent empirical evidence points to human capital formation, innovation spillovers, and productivity growth. However, these effects are not automatic. They depend critically on regional context, institutional characteristics, and complementary assets such as firm-level absorptive capacity, skilled labour demand, and effective governance systems.
A central conclusion is that university impacts are mediated through wider systems of firms, government actors, and institutions, and therefore depend on how well these systems function. Universities often act as enabling and coordinating institutions, but can also contribute more directly to developing regional capabilities and processes of economic transformation. In economically advanced regions, universities tend to reinforce existing strengths through high-quality research and innovation spillovers. In lagging regions, human capital development, institutional stability and civic engagement can be particularly important, while the benefits from research commercialisation depend more strongly on complementary business capabilities and wider entrepreneurial ecosystems.
The evidence also underscores the importance of institutional diversity. Research-intensive universities, teaching-focused institutions, and applied or vocational providers contribute in different ways. Attempts to impose uniform expectations—particularly around spinouts and commercialisation—risk overstating the potential of universities in weaker regions while undervaluing broader contributions, such as workforce development and regional coordination.
Alongside concerns about the financial sustainability of UK universities and the implications for their regional contribution, the evidence suggests that effective policy should adopt a place-based, system-oriented approach, recognising that universities are part of wider regional development ecosystems rather than a standalone solution to structural economic challenges.
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