In the September 28, 2001 Issue:

Copyright State Science & Technology Institute 2002. Information in this issue of the SSTI Weekly Digest was prepared under a cooperative agreement with the U.S. Department of Commerce, Economic Development Administration. Redistribution to all others interested in tech-based economic development is strongly encouraged — please cite the State Science & Technology Institute whenever portions are reproduced or redirected. Any opinions expressed in the Digest do not necessarily reflect the official position of the U.S. Department of Commerce.

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Good News for Pittsburgh and Michigan “Brain Drain”
Many areas of the country are lamenting the workforce challenges presented by the out-migration of technically skilled college graduates, a “brain drain” for short. Two studies released during the past few days, however, provide positive data to the contrary for Michigan and the Pittsburgh, Pennsylvania metro region.

Michigan
The Michigan Economic Development Corporation (MEDC) and the Presidents Council, State Universities of Michigan released a study showing the large majority of technically educated Michigan university students remain in the state after graduation. Tracking the patterns of approximately 30,000 high-tech sector graduates from 1997 through 2000, the researchers found Michigan retained 79 percent of graduates in the life sciences, information technology and engineering sectors who entered the workforce in high-tech positions. Even more positive for the state’s technology companies, 55 percent of students who moved to Michigan to attend a public university in these fields stayed in the state after graduation.

The study also reveals that graduates who accept a job out-of-state do so primarily for better job opportunities and salaries, rather than any dislike of Michigan. About 21 percent of the graduates polled left Michigan; of these, 53 percent did so because of better job opportunities, 11 percent moved to be closer to family and friends, and seven percent cited Michigan’s four-season climate as their reason for moving elsewhere.

As a result of the study, the following recommendations were made to further strengthen Michigan’s retention of high-tech university graduates:

An eight-page summary of the report is available under News at the Michigan Economic Development Corporation website: http://medc.michigan.org

Pittsburgh
Pittsburgh tech firms also received encouraging news last week, as researchers conducting a University of Pittsburgh study found 52 percent of 1999 graduates from the area’s three largest schools (Carnegie Mellon, Duquesne and Pitt) worked in the region. The results may reflect the impact of local and state economic development efforts to reverse the local brain drain, since only 40 percent of 1994 graduates were employed in the area.

While showing strong improvement, only one-third of out-of-state students remained in the Pittsburgh region after graduation in 1999. For comparison, only 20 percent of similar graduates from 1994 stayed in town for employment.

Researchers also found graduates who left were more likely to head to neighboring Northeast states than the Sunbelt.

The University of Pittsburgh Graduate School of Public and International Affairs, as a result of the study, recommends that strategies to recruit students and retain graduates or workers should be tailored to specific sector needs and diverse target populations.

For the study, researchers conducted telephone and Internet interviews with more than 2,000 recent graduates. More information and a copy of the report is available by contacting Ron Cichowicz at cich+@pitt.edu

Show ‘em the Money
A common finding of both studies, plus a third survey of Wisconsin graduates, is money – in the form of larger paychecks – was the primary motivator for moving after graduation. For Pittsburgh, despite the city’s lower cost of living than many metro regions, a chance of a higher salary is cited as the main reason for graduates leaving, particularly women and minorities.

Draining Away: Who Is Leaving the State? Where Are They Going?, an August 2001 study of more than 2,000 graduates of the University of Wisconsin-Oshkosh (UW-O) in 1980 and 1990, reports that while nearly 80 percent of graduates remained in Wisconsin, alumni working outside the state made 23 percent more than those who remained in the state.

Fifty-eight percent of graduates with doctorate or law degrees left Wisconsin versus only 10 percent of graduates with master's degrees. The study also holds that graduates in math or science-related fields were 50 percent more likely to move out-of-state for employment than other alumni.

Kevin McGee and Isaac Brannon, the two UW-O economists who conducted the study, conclude the focus of public policy addressing the brain drain should be on creating and attracting high-wage employment opportunities for graduates rather than increasing the number of students enrolled through scholarships, incentives, or other means. They suggest adoption of neutral state tax policies that encourage lower overall taxes, instead of tax credits for sectors that traditionally rely more on physical capital than human and intellectual capital (e.g. manufacturing).

The Wisconsin study can be downloaded from http://www.wpri.org/Reports/Volume14/Vol14no5.pdf

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Return on Federal Biotech Investment Working, NIH Says
Thirteen months ago, the General Accounting Office issued an unfavorable report on the licensing and royalty returns the National Institutes of Health (NIH) receive for commercialization of technologies resulting from federal funds (see: http://www.ssti.org/Digest/2000/081800.htm).

As the Administration and Congress look to increase the NIH budget significantly again in 2002, the issue surfaces again. What level of direct financial return can be expected from the federal investment in life sciences research?

To address Congressional demands to demonstrate a return on investments in research, NIH issued A Plan to Ensure Taxpayers' Interests are Protected this summer, declaring "its stewardship of the federal resources that support biomedical research has protected the taxpayers' interests." The NIH plan calls for little or no modification to the Institutes' existing efforts to capture royalties on federally-funded research.

NIH concludes:

"Current practices in technology transfer have yielded a dramatic return to the taxpayer through the discovery of new technologies that extend life and improve the quality of life and through the development of products that, without the 
successful public-private relationship, might not be available." And,

"Requiring direct financial recoupment of the federal investment in biomedical research can potentially impede the development of promising technologies by causing industry to be unwilling to license federally funded technologies...Such action would diminish the strides made under the Bayh-Dole Act and have the unintended consequence of removing the research from federal oversight, a particular concern when the research involves lines of investigation that are especially critical or sensitive."

In conducting the report, NIH found that only four of the 47 FDA-approved drugs with $500 million per year in sales were partly developed with NIH-funded technologies. NIH also sought research that "examined the impact of federally supported biomedical research and the return on investment that such research generates."

Identifying exactly what specific federal grants in basic life science research lead eventually to new products is a difficult issue, the report states. Requiring grantees and NIH to do so, as some have suggested, NIH concludes would negatively impact the tangible and intangible benefits society accrues from NIH-supported activities.

The University Working Group on Technology Transfer has praised the report, "Key among the NIH's conclusions is their finding that, two decades out from the inception of Bayh-Dole, the nation's system of biomedical discovery and technology transfer is working well." The Association of American Universities (AAU)-sponsored group adds, "The report illuminates the wisdom of Congress in 
crafting the seminal legislation that created our nation's system of innovation, education, and discovery."

A Plan to Ensure Taxpayers' Interests are Protected is available at http://www.nih.gov/news/070101wyden.htm  A complete statement 
put forth by the AAU working group also may be obtained by visiting http://www.aau.edu/research/NIH8.20.01.html

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State & Local Tech-based ED Round Up

Alabama
The State Legislature recently approved income tax relief for small businesses who locate in 23 economically distressed counties and in areas previously known as Enterprise Zones, according to The Associated Press. The counties are said to have "high employment, low incomes and no growth," and the bill gives breaks to companies investing $500,000 and hiring at least five employees. The state reportedly will rank the counties according to their population change, per capita income and employment and will revise the list annually.

Arizona
Chairmen of the Governor's Strategic Partnership for Economic Development (GSPED) recently launched the Arizona Technology Industry Development Association (ATIDA) — a non-profit organization formed to unite organizations interested in developing technology industries in Central and Northern Arizona. ATIDA's membership is comprised of representatives from GSPED's five technology clusters and foundations, economic development organizations, and university and community colleges.

California
The Monterey Bay Education Science and Technology Center (MBEST), a research park on 1,100 acres at the University of California, was established September 17, the San Jose Mercury News reported. Part of the center, the Marina Small Business Incubator, will rent space and provide mentoring to young businesses whose tenancy will be held to two years. Comprised of two 5,700 sq. ft. buildings, the incubator sits on 500 acres of land not retaining natural habitat.

Virginia
Tech leaders and companies looking to give rise to incubating and mentoring high-tech businesses anticipate creating a seed fund in 2002 for technology start-ups, according to The Virginian Pilot. Funding would go to start-ups needing less than $1 million, the article reports. Plans for the seed fund are part of a greater effort to link Hampton Roads with Charlottesville, Roanoke and Richmond, bringing to the region the start-up success that Northern Virginia has had.

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Analysis
 Indicators Suggest Need for Tech-Based ED Growing
A series of separate economic reports, revenue forecasts, and analyses of current trends released during the past week suggests the need for local, regional and state efforts to grow tech-based economies is increasing. As economic development practitioners and policymakers in science and technology prepare for the 2002 program, legislative, and budget cycles, they may want to consider:

The Sept. 26 edition of the New York Times reported the National Venture Capital Association <http://www.nvca.org> says the venture capital industry “is preparing for an extremely difficult economic environment.” The Times says the terrorist attacks have impacted all aspects of the investment cycle from raising capital through determining profitability and initial public offerings.

In SSTI’s Opinion
The need for creative approaches and comprehensive strategies to encourage innovation and public-private partnership for tech-based economic development is heightened in light of these trends. SSTI anticipates increased federal support of research and programs important to state and local tech-based economic development will be difficult to come by when tighter federal revenues are coupled with the economic uncertainty resulting from the terrorist attacks and increased demands on national spending for recovery, military retaliation, and homeland security.

SSTI expects, too, that pressure on state and local budgets from non-economic development sources may make securing funds for new initiatives more challenging. Education, Medicare and welfare (as unemployment figures rise) are likely to capture even more of the political agenda and available revenues. It is important to note, however, that many of the country’s oldest, most enduring state tech-based economic development programs were launched during the deep recession of the early 1980s. Well-conceived strategies with significant support from all critical constituencies will be required for success in tighter fiscal environments.

Additionally, in light of the mood of the venture capital industry, state and local tech-based economic development efforts may plan or expect the demand and role of public sources for research and seed funding to increase in light of shrinking private pools of capital. State technical assistance programs, such as those to help businesses secure federal Small Business Innovation Research (SBIR) or Advanced Technology Program (ATP) funding, also may experience increased demand for their services as companies seek non-internal sources to support their R&D investments.

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Grant Opportunities Highlight Value of Mathematics
The National Council of Teachers of Mathematics (NCTM), through the Mathematics Education Trust, funds special projects that enhance the teaching and learning of mathematics at all levels. An organization valuing the use of instructional technology tools, NCTM currently has at least 10 grant opportunities supporting in-service programs, the improvement of professional competence and other related causes.

Toyota's Investment In Mathematics Excellence (Toyota TIME) grant, for instance, annually awards teachers up to $10,000 for projects that enhance mathematics education within a school. Sponsored by Toyota Motor Sales, USA, Inc., through its partnership with NCTM, the Toyota TIME grant is open to K-12 teachers with three years' experience teaching mathematics. The focus of the grant comes on individual students and classrooms rather than on district-wide projects. In 2002, as many as 35 two-year grants totaling up to $350,000, will be awarded to schools at the elementary, middle, and high school levels.

Proposals for the Toyota TIME grant are due January 10, 2002. Following notification in March 2002, award recipients will be honored at NCTM's 80th annual meeting in Las Vegas, April 21-24, 2002. Information on this grant and others is available through the NCTM website http://www.nctm.org/about/met/

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