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The importance of universities as knowledge providers and trainers has been stressed by several researchers including Gibbons and Johnston (1974), Pavitt, (1991), Salter and Martin, (2001), Conceição, Heitor and Oliviera, (1998), Azley and Mohammed (2007) and Youtie and Shapira, (2008). All of them emphasize that the higher the workers’

education level, the easier it is for them to learn and adapt with the working environment. For Gibbons and Johnston (1974), education gained in university is the key to developing problem solving skills.

For the writers noted above, the university also plays the most important role in supplying human capital to industry (Pavitt, 1991 and Salter & Martin, 2001). For Pavitt, and Salter and Martin (cited in Nielsen, 2007, p2), industry depends on universities to educate and train workers. Conceição, Heitor and Oliviera, (1998) note that although the university has expanded its roles, namely commercialized its research activities in attempting to meet the industrial sector’s demands, teaching is still one of its core activities. Mavin and Bryans (2000) view the university’s function as not only a learning institutions and a place for generating new knowledge, but also a place to promote an individual’s ability in thinking and working.

Furthermore, as reported by the World Bank in Higher Education in Developing Countries: Peril and Promise (2000), higher education is a crucial factor in sustaining


development. Higher education has never been as important to the future of the developing world as it is today. Since knowledge and skills of people are increasing and are of vital importance to the world’s economy, there is a high demand for high quality education and it is tertiary education that can provide advanced skills. It follows, then, that universities need to develop strategies to assist in producing human capital which is capable of absorbing and adapting to new technology. Most importantly, it should have the ability to forecast the future in order to cater to the potential development requirements. Forecasting the future means the university needs to understand trends and be well prepared to react to the changes.

Rapid technology growth has contributed to globalization. The consequences of globalization is that the market is open to international competition and this has encouraged the need for a continuously improved knowledge and skills in order to produce value added products. Thus, human skills and investing in education become increasingly significant. As the centre for new ideas, innovation and knowledge, the university continuously expands its role in preparing students for the employment market and encouraging R&D activities to fulfil the current demands (Azley &

Mohammed, 2007 and Youtie & Shapira, 2008). In fact, providing consultancy services in its specialised fields and commercialization of the research output appear to be a new business activity for university.

Advances in information and communication technologies have enables the growth of cross-border traffic in higher education (Marginson, 2002). Some of the cross border activities in higher education includes foreign student studying in the provider countries, provider institutions operating in foreign countries, cross-border on-line learning, and institutional partnerships and consortia (Lee,


2004, p5).

The above discussion has provided a new view of the university’s function. The role of the university has changed and they are evolving to becoming centres of innovation.

Based on Etzkowitz (2003b) study of United States research universities, there have been two historical phases in the changing role of the university. The first phase took place in the 19th century. During this era, the university was only seen as an educational institution with its role limited to a teaching centre. At that time, the objective of a university was solely to train professionals and research done was for the sake of knowledge.

However, this role has changed gradually as knowledge has emerged as a key production factor. In the 20th century, knowledge has become the most important commodity replacing the physical commodities and a competitive factor of a country. This marked the change to the second phase. As emphasised by Etzkowitz (2003b), the university is not just a place to train students but is also responsible for generating innovative activities. It is the knowledge accumulation centre and a place that cultivates research traditions. In this era, the university is not only involved in teaching and learning but has also begun to venture into the research and innovation business. It is not only the skills supplier, but also offers facilities which are used to increase creativity (Lim, Furuoka, Kasim & Roslinah, 2007). In other words, the university is now involved in all aspects of development, namely as the knowledge creation centre, skills developer and enabler of the innovation process. Nelson succinctly described the situation in The Sources of Economic Growth (1996):


Universities are an important part of the modern capitalist engine. They are a recognized repository of public scientific and technological knowledge. They draw on in their teaching. They add to it through their research (Nelson, 1996, p73).

The introduction of the NIS in the same era has simultaneously enhanced the role of the university in technological innovation and as one of the major factors in stimulating economic growth. As explained earlier in this chapter, the NIS is a significant concept that has emphasized the role of the university as the transfer agent for knowledge and technology.

This transformation of the university’s role is also highlighted by Etzkowitz and Leydesdorff (1998) in their triple helix model. The triple helix model is a framework that shows the interactions and relations between three different institutions: the university, industry and the government, in promoting innovation. In the helix, the role of universities has been given more prominence (Etzkowitz, 2003a). In fact, in the triple helix model, universities not only focus on research, but are also involved in entrepreneurial activities.

The organizing principle of the Triple Helix is the expectation that the university will play a greater role in society as an entrepreneur. The entrepreneurial university retain the traditional academic roles of social reproduction and extension of certified knowledge, but places them in broader context as part of its new role in promoting innovation (Etzkowitz, 2003a, p300).

Due to the constraints in the governmental funding, the university has begun to search for alternative sources to fund their research. Fortunately, at the same time, the industries are trying to create networking with the university because of the competitive factor.


Thus, industries started to outsource their R&D activities in order to diversify their output. This has encouraged the university and industries to start networking and both parties have mutually benefited from this relationship. Active interaction with the industrial sector has expanded the university’s role to an entrepreneurial organization, in particular through activities such as research contracts, and knowledge and technology transfer.

According to Etzkowitz (2003b) the entrepreneurial university has developed in response to the increasing importance of knowledge in the NIS with the recognition that the university is a cost effective, creative inventor and transfer agent of both knowledge and technology. The entrepreneurial university has the ability to focus on a strategic direction and has the capability to formulate academic goals and translate knowledge produced within the university into economic and social utilities. For Etzkowitz (2004), as an entrepreneurial entity, the university should possess these four characteristics;

capitalization, interdependence, hybridization and reflexivity. Capitalization means that the knowledge capitalization becomes the basis for economic and social development.

Interdependence is where the university interacts closely with the industries and the government without being isolated from the society. Hybridization in objectives means the similarity between the organizations. Reflexivity means the relationship between the universities, the industries and the government is always reviewed in order to ensure that the structure of the university is aligned with the industries and government’s change (Etzkowitz, 2004).


Four processes of knowledge production and use have been determined in the triple helix. The first process refers to knowledge as the transformation agent within these organizations. In this process, knowledge is assumed to as the most important element that triggers changes. The second process is the use of knowledge as ‘the influence factor’ of each organization in bringing about transformation. The third is the creation of new linkages among the three organizations. In this sense, knowledge is used as the medium to link the actors in the innovation systems. And finally, knowledge facilitates the effective integration of the innovation system within the broader society. According to Etzkowitz et al. (2000), these four processes will only be formed if there is close interaction between the university, industries and government.

Despite a large body of literature emphasizing largely the key role of the university in knowledge acquisition, there are also contrary views. For instance, Jacob Mincer (1962) has emphasized that on the on-the-job training is more important than the university.11

11 Mincer (1962) in his research on costs, returns and implications of on-the-job training stated that “…it is important to be reminded that formal school instruction is neither an exclusive nor a sufficient method of training the labour force. Graduation from some level of schooling does not signify the completion of a training process. It is usually the end of a more general and preparatory stage, and the beginning of a more specialized and often prolonged process of acquisition of occupational skill, after entry into the labour force. This second stage, training on the job, ranges from formally or organized activities such as apprenticeships and other training programs to the informal processes of learning from experience. Indeed, historically, skills have been acquired mainly by experience on the job. The vast schooling system and the delayed entry into labour force are distinctly modern phenomena. As history suggests, it is useful to view the two broad classes of training not only as a sequences of stages but also as alternatives or substitutes. In many cases, the same degree of occupational skill can be achieved by ‘shortening’ formal schooling and

‘lengthening’ on-the-job training or by the reverse. The degree of substitutability between the two will, of course, vary among jobs and over time with changes in technology” (p50). Indeed he found that in the United States, large component of investment is made in on-the-job training.

Although not denying the role of the university, Mincer stresses the significance of knowledge and experience gained from the workplace in enhancing skills. This means that investment in formal schooling only is insufficient to train the labour force, as


formal schooling is only a preparatory stage in human capital development.

Gibbons et al. in The New Production of Knowledge (1994) also assert that the university should no longer be the only place for the development of human capital.

According to them, knowledge is no longer produced in the university exclusively but it can also be produced in many different places, such as government laboratories, industries and think tanks. They predicted that in the new production mode, the university will only comprise of a small part of the knowledge production sector (Godin

& Gingras, 2000). The same authors have categorized knowledge production into two modes i.e. Mode 1 and Mode 2 (see Table 2.5). Mode 1 knowledge constitutes of traditional disciplinary knowledge that has grown based on academic practices. On the other hand, Mode 2 knowledge involves the production of knowledge which is carried out in the context of application and is marked by its transdisciplinarity, heterogeneity, organizational heterarchy and transcience, social accountability and reflexivity and quality control (Nowoty, Scott & Gibbon, 2001). In Mode 2, the university is not the only knowledge producer but knowledge can be produced by many different sources such as in the industrial research laboratories and the government research institutions (Nowotny et al., 2001).

According to Gibbons et al., Mode 1 is the traditional way of knowledge production where knowledge is generated within a discipline and primarily cognitive context.

Traditional knowledge production is also a form of knowledge production that is based on enquiry and in line with scientific practice. Meanwhile, Mode 2 consists of a new


form of knowledge production which is created broadly in transdisciplinary social and economic contexts. It emphasizes application rather than disciplinary framework. Mode 2 in not replacing Mode 1; instead, Mode 2 grows from the knowledge production of Mode 1. It is a form of knowledge that emerges from a broader range of considerations and it involves different mechanisms in generating knowledge. Knowledge based on Mode 2 is produced with the interest of various actors from different backgrounds.

Nobody has the monopoly on knowledge in Mode 2 and it does not belong solely to only one group but shared with others in society.

Table 2.5

Distinction between Mode 1 and Mode 2

Mode 1 Mode 2

Problem set & solved in a context governed by the (largely academic) interests of a specific community

Knowledge is produced in a context of application

Disciplinary Transdisciplinary

Relative homogeneity of skills Relative heterogeneity of skills Hierarchical, forms resistance to change Flatter hierarchies, transient forms Accountability to discipline More socially accountable and reflexive Narrow quality control based primarily on

peer review

Still peer review, but quality control also includes a wider, more temporary and heterogeneous set of practitioners, collaborating on a problem defined in a specific localised context

“Science” (certain, straight, detached) “Research”(uncertain, involving, risky) Source: Menzis, Barwick and Link (2000)