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April 2009/15
Issues paper

This report is for information

Evaluation of the effectiveness and role of HEFCE/OSI third stream funding
Report to HEFCE by PACEC and the Centre for Business Research, University of Cambridge

This report assesses how third stream funding has secured economic and social benefits, by embedding a culture and capacity within higher education institutions (HEIs) that supports knowledge exchange. 'Third stream' refers to knowledge-based interactions between HEIs and organisations in the private, public and voluntary sectors, and wider society. The report finds there has been considerable progress over the first 10 years of this funding.

Table of contents and summary (read online)


  • Executive Summary
    • X1 Aims and objectives
    • X2 Conceptual framework
    • X3 Rationale for third stream funding policies
    • X4 Empirical methodology
    • X5 Evolution and allocation of third stream funding
    • X6 The legitimacy of the third stream mission
    • X7 Building the capacity and capability to engage
    • X8 Achieving culture change in the HE sector
    • X9 Participating in knowledge exchange
    • X10 The scale and evolution of knowledge exchange outputs
    • X11 Impact on gross knowledge exchange outputs
    • X12 Wider impacts of HEFCE third stream funding on the HEI
    • X13 Impacts on the external partners
    • X14 Summary
  • 1   Introduction
    • 1.1 Introduction
    • 1.2 History of third stream funding
    • 1.3 Higher education institutions, knowledge exchange and innovation systems
    • 1.4 The functions and processes of innovation systems
    • 1.5 Third stream funding in the national innovation system
    • 1.6 Innovation system and impact analyses
    • 1.7 Innovation and the promotion of enterprise: recent policy developments
    • 1.8 Community and voluntary activity
    • 1.9 Report structure
    • 1.10 Range of third stream activities
    • 1.11 Funding inputs: in aggregate and by cluster
  • 2   Methodology
    • 2.1 Introduction
    • 2.2 Programme of empirical research
  • 3   Third Stream Strategies: Building the Capacity and Capability to Engage
    • 3.1 Introduction
    • 3.2 The third stream mission and knowledge exchange strategies
    • 3.3 Organisational structure and infrastructural change at HEIs
  • 4   Achieving Culture Change in the HE Sector
    • 4.1 Introduction
    • 4.2 Motivations for engaging in knowledge exchange
    • 4.3 Revealed academic attitudes towards knowledge exchange
    • 4.4 Internal factors influencing cultural change
    • 4.5 The impact of HEFCE third stream funding on cultural change
  • 5   Constraining Demand: Culture, Supply-side and Demand-side Factors
    • 5.1 Introduction
    • 5.2 The influence of culture on the demand for knowledge exchange
    • 5.3 Supply-side barriers
    • 5.4 Demand-side barriers
  • 6   Participating in Knowledge Exchange
    • 6.1 Introduction
    • 6.2 Participation rates in knowledge exchange
    • 6.3 Scale of engagement in the modes of knowledge exchange interaction
    • 6.4 Factors driving the decision to participate in knowledge exchange: an econometric analysis
  • 7   Outputs of Knowledge Exchange and the Impact of HEFCE Third Stream Funding
    • 7.1 Introduction
    • 7.2 The baseline and the evolution of knowledge exchange outputs
    • 7.3 The impact of HEFCE third stream funding, additionality and the counterfactual
    • 7.4 Value for money of HEFCE third stream funding
    • 7.5 Towards net additionality
  • 8   Wider Impacts of HEFCE Third Stream Funding on the HEI
    • 8.1 Introduction
    • 8.2 Impacts on research and teaching
    • 8.3 Impacts on collaboration
    • 8.4 Ability to attract other sources of funding
    • 8.5 Impact of the movement towards formula funding
    • 8.6 Impacts on the sharing of best practice
  • 9   Impacts on External Organisations
    • 9.1 The role of HEIs in a network of interacting organisations
    • 9.2 External organisationsí motives for collaborating
    • 9.3 Regional and sub-regional engagements
    • 9.4 Impact of interactions: HEI support and absorptive capacity
    • 9.5 Variations in interaction over time
    • 9.6 Future external HEI interaction
  • Appendix A Bibliography
  • Appendix B Acronyms
  • Appendix C Cost-benefit Balance Sheets for the Clusters
  • Appendix D Case Study HEIs, Stakeholders and Survey Characteristics
    • D2 Survey of Academics: Characteristics
    • D3 Survey of External Organisations: Characteristics
  • Appendix E HEI Clusters
  • Appendix F Academic Discipline Groups and Definitions


This report presents an assessment of the extent to which third stream funding by HEFCE and Department for Innovation, Universities and Skills has secured direct and indirect economic benefits, by embedding a culture and capacity within higher education institutions (HEIs) that supports the transfer and exchange of knowledge between HEIs, business and the wider community. The term 'third stream' refers to interactions between HEIs and external organisations in the private, public and voluntary sectors, and wider society.

The report finds there has been considerable progress over the first 10 years of funding specifically for third stream activity. There is strong evidence of additionality in terms of activity funded by the Higher Education Innovation Fund and progress by all HEIs in embedding knowledge transfer within their mission. Initial concerns about whether emphasis on third stream activity would impact negatively on traditional teaching and research roles have proven to be unfounded. Many synergies between knowledge exchange, teaching and research have been realised and there is greater recognition, by both academics and external organisations, of the value and benefits of working together on a diverse range of problems and initiatives.