A closer relationship between academics and business leaders could bring both worlds significant and lasting benefits

How should shops react to the digital revolution? How can they integrate online delivery with high street selling in an age when otherwise loyal customers can see rival prices with a glance at a smartphone?

That's the subject of a recently announced 18-month study into the future of retail by the Oxford Institute of Retail Management at the Saïd Business School. It's the kind of initiative that may also signal the future of business school research: a practical investigation sponsored by a private company – in this case Intel, the computing microchip manufacturer.

Much publicly funded business school research is not so transparent. In fact, it often seems incomprehensible to a layman and irrelevant to British business. David Willetts, the universities and science minister, blames the system of rewarding academics for producing peer-reviewed papers in largely American specialist journals. It's been a year since he called for more "high quality, practical teaching".

Nevertheless, research remains important for a school's reputation. In its MBA rankings, The Financial Times allocates 10 per cent of its marks to the number of times a school's faculty have been published in its list of 45 specialist journals.

No student wants to be taught marketing, however, by people who have never dirtied their hands. For subjects like that, ideally, students want a practitioner who, for one reason or other has turned to teaching – a "pracademic".

Now the tide is turning. Behind the scenes, the government's new Research Excellence Framework (REF) is rolling along. By the end of next year, colleges will have to submit grant applications. And this time, 20 per cent of the evaluation will depend not on publication, but on the "impact" the research is likely to make.

"The REF says we have to be seen to be getting bangs for our bucks," explains Dr John Glen, of Cranfield School of Management. Glen is a pracademic. He teaches micro-economics and industrial organisation and has recently completed a sector risk assessment for a European bank. But he has also published several academic papers and defends the need for business research.

"It's important that organisations are continually developing new knowledge," he says. "We have to have a degree of confidence as a society that university researchers are looking into things that are of interest and benefit to us." Research is also useful for clients. "Economics can bore people to death," Glen says. "It's the dismal science. We try to bring the curriculum to life. And because we do so much executive education at Cranfield I can litter the economics curriculum with examples. We do a lot of work with Sony PlayStation. These are intelligent, innovative people. They want the stimulus of a constant flow of new ideas, and that is a part of our remit."

Another pracademic is Jacques Pézier, a visiting professor at Henley Business School's ICMA centre at Reading University. He teaches MSc students portfolio management, hedging and financial engineering, and he certainly has City credentials – he started selling futures and derivatives 30 years ago. His subjects, he says, could not be taught properly by someone who has no business experience. "Finance is not a pure academic subject – it's very much applied. It's important to know about the conditions and constraints in which you can develop new things. It's difficult for someone only in academia to understand those practical considerations.

"For example, I have a course for financial engineers and we're dealing with the design of new products. They have to be as attractive as possible for the client and as cheap as possible for the bank. There is a conflict of interest there. You can't see it easily in books or mathematics. You have to have concrete examples."

Mike Pidd, of Lancaster University Management School, points out that publicly funded academic research represents a small proportion of income for most business schools, perhaps 10 per cent. Nevertheless, he says: "It seems to me perfectly reasonable that our research should have some kind of impact."

But the notion that all research has to reach a market is "plain bonkers", he says. "Ten years ago a colleague at Lancaster started some work on ethics in computing. It sounded incredibly abstract then, but now it's really big stuff."

For business schools, the framework will inevitably mean more bureaucracy, since "impact" will be evaluated by the research councils using case studies.

Organisations will have to be persuaded to vouch for how they have used business school research. "That's going to be difficult," Pidd says. "There are security issues. And if an organisation makes a major change, it's very unlikely to do it based on just one piece of work."

One effect will be the increased co-production of knowledge, predicts Andrew Pettigrew of Saïd Business School. "It means that people like me in university settings co-produce knowledge with people in other settings, such as engineering."

"The idea is that the different interests and priorities of the parties are melded into a different kind of work that wouldn't be possible otherwise. It's called engaged scholarship," he says.

The Oxford institute's supermarket study is an obvious example. The proportion of the assessment criteria allocated to "impact" will be increased next time, Pettigrew believes, and a new generation of scholars will have to think differently. "The message will be 'watch out, this matters'."

Like other schools, Saïd has a carefully chosen list of associate fellows, most of them practitioners, who will be expected to be excellent teachers. But not all practitioners are good enough. "There are people who have great practical experience, but they can't conceptualise it and engage with people in the classroom. Not all academics are good classroom teachers, and neither are all chief executives. They don't have the use of language, humour, energy or commitment."

Perhaps it's the ability to communicate that is really what matters. Robert Cluley, of Leicester University Management School, has spent only three years in business as a graduate trainee. But in his classes he cites his doctoral thesis, an investigation of the production and consumption of music in the UK, and says it goes down well.

Cluley accepts there's a place for pracademics as well. "I always encourage students to do their own research – anyone can distribute knowledge. The most practical thing is to make someone more intelligent."

'They always critique the theory'

Walid Abdulkarim, 37, is studying for an MBA at Leicester University Management School.

"I had 15 years banking experience and I know that the lecturers at Leicester really understand the real world. You can tell by the way they talk about their theories. They try to bridge the gap and that's why I've come all the way from Kenya. They're amazing.

"Some subjects – marketing and corporate finance, for example – lend themselves more readily to real world examples than something like managing diversity.

"But their research is always very thorough. What I like about it is that they always critique the theory, they never just accept it. or me that's what teaching is all about. They ask difficult questions and expect you to answer them."