Third-mission policy goals and incentives from performance-based funding: Are they aligned?

In competitive knowledge-based economies, policymakers recognize the importance of universities’ engagement in third mission activities. This article investigates how a specific policy approach to encourage third mission engagement—the use of performance-based funding to reward universities’ success in this domain—aligns with the broader goals of third mission policy. Considering the case of the UK, the first country to have implemented a system of this kind, we analyse how the system has come into being and how it has evolved, and we discuss whether its implementation is likely to encourage universities to behave in ways that are aligned with the goals of third mission policy, as outlined in government documents. We argue that the system encourages universities to focus on a narrow range of income-producing third mission activities, and this is not well aligned with the policy goal to support a complex innovation ecosystem comprising universities with different third mission objectives and strategies. The article concludes by proposing possible avenues for achieving greater alignment between incentives and policy goals.