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The economics of an activity such as research and development (R&D) should not be the sole motivating factor for performing work at a university. Knowledge and understanding ourselves and the universe around us play an important role in the undertaking of these pursuits – but they cannot be the only output we expect from R&D.

As was summarized in the last policy position paper [1], Mexico is one of the worst-ranked OECD countries on almost every measure of R&D, policy, and outcomes. The reports consistently place Mexico among the worst investors in R&D, percent of employees who are in R&D, and the results of that investment as evidenced by patents and patent families. Possibly even more alarming is the science performance ranking (PISA) which measures the scientific literacy of 15-year-olds in a given country. Mexico was the 4^th worst ranking member in the latest OECD report. [2] Not only are our current outcomes very poor, but the outlook for the next generation of scientists is not much better without serious improvements. Because UPAEP has a presence from basic to graduate education, it is well-placed to make an important impact on these statistics.

If we are to provide a truly transformative effect upon Mexico and the world at UPAEP, our strategies must focus on finding ways to become a differentiating factor in national development. We need look no further than our partner institution, the University of Notre Dame (UND), to get a small-scale glimpse of the kind of impact an economically vibrant version UPAEP could be. (The social and cultural impacts of an institution are also very important and are well-exemplified by UPAEP and UND, but remain beyond the scope of this paper)

UND is a private, Catholic university of approximately the same student population (undergraduate and graduate) as UPAEP. Unfortunately, the similarities do not extend into the financials. In an annual report on economic impacts [3], UND reported a budget of US$1.146 billion, of which 27% ($306 million) came from tuition and fees, and 39% ($447 million) came from auxiliary enterprises (27%), donations and private organizations (6%), and investment income (10%). Excluding federal, state, additional assets and restrictions and any other income, the non-tuition income was 44% greater than the income generated by tuition and fees. On the expenditure side, UND spent nearly 44% of its budget ($502 million) on wages and benefits (63% more than the total income from tuition and fees). This budget was generated almost entirely sources mostly outside of the county in which the university is located, but UND generated $1.3 billion in local economic activity in the surrounding community (113% of the UND budget). UND employs under 6,000 people and yet generates over 13,000 additional jobs in the community. The research budget for 2016 was $202 million, an increase of 157% from 2006. This budget came from federal funds (43.1%), UND direct investment in research (37.6%), and private foundation and industry (12.5%). This research investment led to 26 new patent applications, 26 new patents granted, a cumulative total of 28 patents in licensing/options over 6 years, and 2 new startup companies bringing the total to 16 over those same six years. While the federal participation was important, a very close second was direct university funding (6.7% of the total annual budget for UND).

This kind of impact, while impressive and worthy of emulating is only scratching at the surface of the potential that R&D has on economic development. A mid-scale example is the University Research Corridor (URC) in Michigan, which released its tenth annual report of the economic impact of the cluster of three universities (Michigan State, Michigan, and Wayne State). [4] The three universities, with a combined total student population over 130,000 spent $2.150 billion on R&D and generated an economic impact of $16.5 billion in the region. Finally, as large-scale example, Google (now Alphabet) was founded by two Stanford students who participated in the Stanford Integrated Digital Libraries project and developed their Page Rank concept which became the core of the Google algorithm. [5] A federally-funded grant of $4.5 million and two innovators has become a company of almost 62,000 employees valued at over $100 billion with yearly sales of $80.5 billion in just 19 years. That’s a return on investment (ROI) of 22,222:1!

For a more realistic long-term ROI, we can see the results reported in a single sector in the USA, Medical Colleges and Teaching Hospitals. [6] In this report from 2011, they state that $2.60 in economic activity were generated for every $1.00 in research funding. This was similar to the claim by the National Institutes of Health (NIH) itself which said that for every $1.00 it invested in funding research, $2.21 in goods and services were produced within 1 year. [7] While this NIH report is sometimes criticized by economists, the AAMC was correct in pointing out that it is hard to measure the full breadth of the economic impact of medical technologies through the improvements to quality of life and survivability. [6] In Europe, a 2015 study for the League of European Research Universities (LERU) concluded that the 21 LERU institutions generated €71.2 billion and over 900,000 jobs. [8] While R&D ROI may be difficult to measure, assess, and predict (especially when crossing countries and cultures with strategies) – but the convergence of data seems to point towards a net gain from investing in R&D.

Very few Googles will be created in this world – but the next such company will most certainly not be created without a serious policy for R&D which finds innovative ways to not depend purely on federal investments. If UPAEP is to become a transformational leader in Puebla and then Mexico, we must urgently find ways to increase our research intensity and expenditures, bring our innovations to market, and set the stage for the next socioeconomic (r)evolution. We have the people, the talent, the opportunities, and the country waiting and in need. It will take a bold vision and courageous, transformational, status quo-busting disruptive leadership at all levels from individual collaborators, directors and deans all the way up to the president and board of trustees to get us there. UPAEP as the national leader in economic development through innovation…it’s within our grasp, but it will take all of us. Let’s get to work!

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