London and the REF: Excellent universities will drive the UK's rise

downloadThis is the second of a series on London and the UK’s potential rise to Number 1 globally for entrepreneurship.

In my last blog I asked the question, “Can the UK be Number 1?” My answer: The UK can surely surpass Australia and Canada even though it has a large aspirational deficit. The reason is that the UK has a resource that neither the number two country Canada nor the number three country Australia has—London. London has several key advantages that no other city has:  knowledge, density and immigrants.

On December 18th, the United Kingdom released the results of the Research Excellence Framework (REF) 2014. The REF is a new system for assessing the research excellence of UK higher education institutions. The rankings list research in four categories including world leading, international excellence, recognized internationally, and recognized nationally. While no one should accept these results without reading the fine print, the results were rather impressive in light of my previous observations on London as a powerhouse.

The six leading universities in terms of research excellence (The schools with the highest proportion of world leading research) were: London School of Economics (LSE) 49.9%; Oxford 48.1%; Cambridge 46.8%; Imperial College London 46.4%; University College London (UCL) 42.6%; Cardiff 40.5; and King’s College London 40.2%. For the first time London has overtaken the Oxbridge domination.  Not only did LSE take the first spot, but four of the top seven posts went to the City of London.  This is important for London. But from the UK perspective, six of the seven are in the “golden triangle” of greater London. Cardiff is in Wales. So from a UK perspective, London is a global educational powerhouse all on its own. Need proof?

If we now look at the QS World University Rankings tables we see that the top schools are MIT (Boston); Imperial (London); Cambridge (Cambridge); Harvard (Boston); University College (London); Oxford (Oxford); Stanford (San Francisco); Cal Tech (San Diego); Princeton (Princeton); Yale (New Haven); Chicago (Chicago); ETH (Zurich, Switzerland) University of Pennsylvania (Philadelphia); Columbia University (New York); Johns Hopkins University (Baltimore); King’s College London (London); University of Edinburgh  (Edinburgh); Lausanne (Lausanne, Switzerland); Cornell University (Utica); University of Toronto (Toronto).

So where does London stand globally? From the list of the top 20 universities, London has 5 of the top 20 and three out of the top five. The next city is New York that has three of the top twenty spots if we count Princeton (45 miles away) and New Haven (45 miles away).  So New York City Proper has only one world class institution. No other city has more than one top university including Chicago, Toronto, San Francisco, and Los Angeles.

How is this connected to entrepreneurship?

The Knowledge Spillover Theory of Entrepreneurship (KSTE) tells us that cities that have more knowledge will have more entrepreneurship; the more competition the city has the less entrepreneurship but density will mitigate this effect. Finally, the fewer institutional constraints the more entrepreneurship.[1] Let’s focus on the education.  I view this from positions at both LSE where I am in the Management Department and Imperial Business School where I am a visiting professor—a stone’s throw away form King’s and UCL. Oxford and Cambridge are an hour by train! LSE is the leading social science university in the world and Imperial is the world’s leading technical university. Both UCL and King’s have a very broad knowledge base.

What does this mean for the UK?

First and foremost, London is an educational powerhouse second to none. Second, if enough technology transfers into innovation and entrepreneurship London can pull the U.K. into the first ranks of entrepreneurship, in part because it does not suffer the aspirational deficit that the UK suffers. London with its large immigrant population has a much better aspirational ranking only second to Copenhagen and tied with Paris ( http://thegedi.org/downloads/ ) than the UK as a whole. But London still needs to improve its entrepreneurial ecosystem and its aspirational deficit to overtake Canada and Australia.

Next week we will focus on density.

[1] ACS, Z. J. et al, “The Knowledge Spillover Theory of Entrepreneurship”, Small Business Economics, 2009, http://link.springer.com/article/10.1007/s11187-008-9157-3#page-1