into universities. In developed countries and regions, their investment to research is
much more sufficient. However, in poor countries and regions, they face stronger
budget constraint, increasing university research funds means reducing other public
expenditures or vice versa. On the other hand, local economic structure determines
the orientation of innovation activity of university. To some extent, the structure of
disciplines and orientation of innovation activities are determined by local industrial
and economic structure. Currently, to most universities, their structure of disciplines
are highly correlated with local economic structure, resulting into the dependency
of research funds on local policies. In other words, except those basic research in
traditional disciplines, universities also play key roles in facilitating regional
innovations in science and technology, which requires universities to serve the
regional needs, and pay close attention to the critical issues of regional economic
and social development, and extend newfields of research.
6.1.1.2 Cluster Effect
The concept of cluster effect is mainly from the studies on industry cluster in
industrial economics. Michael Porter, the authority of competitive strategy, is one
of thefirst to propose the concept of industry cluster in his analysis of competi-
tiveness of nations. He defined industry cluster as a group of inter-related and
inter-linked organizations which gather around particular geographic positions.
These organizations coexist in a particular industry, and link with each other
through certain generality, complementarity, and competitiveness. This cluster
effect also exists for universities.
Referring to the definition of industry cluster in industrial economics, we pro-
pose three points to characterize university cluster. Thefirst is“spatial agglomer-
ation and regional agglomeration”. Universities, located in adjacent areas and in the
same administrative areas, can more easily form university cluster. The second is
“connection between organizations”. There exists certain kind of inter-dependence
and cooperation between clustered universities. For instance, the disciplinary
complementarity naturally formed between basic disciplines and applied disci-
plines. The third is“spillover of knowledge production”. As universities in cluster
located in surrounding areas and have connections between each other, the indi-
vidual university is easy to obtain the benefits of spillover of knowledge, sharing of
resources, and facilities, which are created by informal networks. This trait enables
the individual university in the cluster to compete with each other. The competition
becomesfiercer as more universities are gathering around, which will force them to
improve their efficiency. Meanwhile, the clustered universities would benefit from
the spillover effects in the forms of lowering the costs, improving effectiveness and
shortening the cycles of innovation productions, in order to improve the
input-output efficiency. For example, Wenxiang Sun ( 2005 ) used indicators like
R&D staff, R&D income and expense, number of R&D projects, number of
research institutions, to compare the university R&D capacity between different
regions. Their results showed that the top three regions were Beijing, Jiangsu, and
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