Regional impact of higher education institutions in Nordic small towns and rural areas

How geography shapes HEIs’ regional development outcomes

Photo: Jann Lipka / imagebank.sweden.se

The role of HEIs in regional engagement is strongly shaped by context, including national policies, regional characteristics, socioeconomic conditions and cultural or historical factors (Boucher et al., 2003). These contextual elements influence the nature of external partnerships, the manner in which university leaders respond to regional needs and the strategic priorities institutions choose to pursue (Salomaa, 2019).

Geography plays an important role in shaping universities’ “third mission”, including societal or community engagement (Salomaa, 2019). Research indicates that rural contexts often foster stronger third mission engagement, with universities acting both as catalysts of local development and as partners working closely with communities to address their needs (Boucher et al., 2003). In such settings, HEIs frequently prioritise cooperation with local communities over global rankings, aligning their educational and research goals with regional strengths and needs and building an identity focused on supporting and serving their communities (Boucher et al., 2003; Kempton et al., 2021). However, studies also suggest that in rural areas, universities’ wider societal role may become narrowly focused on providing graduates to the local labour market, rather than driving broader innovation, as is often the case in metropolitan regions (Charles, 2016).

Structural constraints in rural areas further shape the outcomes of universities’ societal engagement. Rural economies are often dominated by small businesses and frequently lack other knowledge institutions, limiting opportunities for knowledge-intensive development. Lower levels of human capital and limited absorptive capacity within local companies and labour markets can result in graduate mismatch and underemployment (Benneworth & Dahl Fitjar, 2019; Evers, 2019). Moreover, the demands of local companies are typically broad and challenging to fulfil when universities offer only a limited range of curricula or are narrowly specialised, making sustained collaboration with small local companies a persistent challenge.

Table 1 summarises the contributions of HEIs to regional development, while Figure 1 illustrates these contributions alongside the key contextual factors that shape how HEIs engage with their respective regions.

Table 1. Key regional impacts of HEIs in small towns and rural areas. Source: author’s synthesis of literature review.

Impact	Description
Economic and labour market impact	HEIs support regional economies by training a skilled workforce, connecting employers with talent and stimulating local demand for goods, services and housing through students, staff and investment (Rossi & Goglio, 2020). Most studies show a positive link between HEIs and local GDP, employment and entrepreneurship (Andersson et al., 2004; Lindqvist et al., 2012; Marrocu et al., 2022). However, some research points to more limited impacts, underlining that outcomes are context- and time-dependent (Bonander et al., 2016; Drucker, 2016; Rodríguez-Pose & Wang, 2025).
Developing local human capital	Regional HEIs expand access to higher education and help retain graduates, thereby strengthening the local workforce (Bonander et al., 2016; Evers, 2019; Kempton et al., 2021). However, high graduate mobility means that increased enrolment does not always translate into stronger local human capital (Rodríguez-Pose & Wang, 2025).
Innovation and entrepreneurship	HEIs foster innovation through R&D collaboration, consultancy and knowledge transfer, supporting local companies and regional innovation systems (Bonander et al., 2016; Kempton et al., 2021; Pugh et al., 2018). However, this impact depends on factors such as the location and specialisation of partner industries, institutional incentives for engagement and individual researchers’ motivation to engage (Benneworth & Dahl Fitjar, 2019).
Community resilience and social capital	HEIs build community resilience by promoting lifelong learning, knowledge exchange and civic engagement. Research highlights the creation of local learning communities as a crucial outcome, in which students, staff and local actors generate valuable knowledge together. Over time, these networks may strengthen local welfare and support long-term regional development (Benneworth et al., 2024).
Social inclusion and equity	HEIs reduce inequalities by widening access to education (both geographically and socially) and supporting initiatives that promote inclusion and reduce disparities between urban and peripheral regions (Rossi & Goglio, 2020).
Strategic engagement in policy processes and influence on regional milieu	HEIs can influence and shape policies and new economic initiatives through partnerships with public actors and industry. Their influence, however, may vary depending on institutional goals, governance structures and the extent to which universities, policymakers and industry partners agree on and coordinate regional priorities (Benneworth & Dahl Fitjar, 2019).
Regional attractiveness and retention	HEIs boost the cultural and social vitality of their regions, enhancing the overall attractiveness of small towns and rural areas as places to live and work. Their presence helps anchor students and professionals, counteracts depopulation and supports long-term settlement (Rodríguez-Pose & Wang, 2025).

Impact	Description
Economic and labour market impact	HEIs support regional economies by training a skilled workforce, connecting employers with talent and stimulating local demand for goods, services and housing through students, staff and investment (Rossi & Goglio, 2020). Most studies show a positive link between HEIs and local GDP, employment and entrepreneurship (Andersson et al., 2004; Lindqvist et al., 2012; Marrocu et al., 2022). However, some research points to more limited impacts, underlining that outcomes are context- and time-dependent (Bonander et al., 2016; Drucker, 2016; Rodríguez-Pose & Wang, 2025).
Developing local human capital	Regional HEIs expand access to higher education and help retain graduates, thereby strengthening the local workforce (Bonander et al., 2016; Evers, 2019; Kempton et al., 2021). However, high graduate mobility means that increased enrolment does not always translate into stronger local human capital (Rodríguez-Pose & Wang, 2025).
Innovation and entrepreneurship	HEIs foster innovation through R&D collaboration, consultancy and knowledge transfer, supporting local companies and regional innovation systems (Bonander et al., 2016; Kempton et al., 2021; Pugh et al., 2018). However, this impact depends on factors such as the location and specialisation of partner industries, institutional incentives for engagement and individual researchers’ motivation to engage (Benneworth & Dahl Fitjar, 2019).
Community resilience and social capital	HEIs build community resilience by promoting lifelong learning, knowledge exchange and civic engagement. Research highlights the creation of local learning communities as a crucial outcome, in which students, staff and local actors generate valuable knowledge together. Over time, these networks may strengthen local welfare and support long-term regional development (Benneworth et al., 2024).
Social inclusion and equity	HEIs reduce inequalities by widening access to education (both geographically and socially) and supporting initiatives that promote inclusion and reduce disparities between urban and peripheral regions (Rossi & Goglio, 2020).
Strategic engagement in policy processes and influence on regional milieu	HEIs can influence and shape policies and new economic initiatives through partnerships with public actors and industry. Their influence, however, may vary depending on institutional goals, governance structures and the extent to which universities, policymakers and industry partners agree on and coordinate regional priorities (Benneworth & Dahl Fitjar, 2019).
Regional attractiveness and retention	HEIs boost the cultural and social vitality of their regions, enhancing the overall attractiveness of small towns and rural areas as places to live and work. Their presence helps anchor students and professionals, counteracts depopulation and supports long-term settlement (Rodríguez-Pose & Wang, 2025).

Figure 1. Contributions of HEIs to regional development and key determinants shaping their role.
Source: Author’s own elaboration.