October 12, 2001 -- SSTI Weekly Digest

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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Report Shows U.S., Japan Still Lead EU in Innovation Capacity
The European Commission's 2001 European Innovation Scoreboard, characterizing the strengths and weaknesses in the capacity for innovation of the European Union (EU) and its member states, shows the EU continues to lag behind the U.S. and Japan.

Released October 1, the scoreboard uses 17 indicators to rate each member state's capacity for encouraging innovative business and improving the competitiveness of their industry through innovation. The aspects of the innovation process measured by the scoreboard are:

Availability and the use made of people with the right skills, using figures including the supply of new scientists and engineers and the percentage of the workforce employed in technology sectors of industry.

Creation of new ideas, based on figures for R&D expenditure and patent applications.

Innovation by firms as measured by statistics such as the percentage of small and medium-sized enterprises (SMEs) that develop product or process innovations themselves or in cooperation with other firms.

A group of indicators covering a range of issues including the supply of high-tech venture capital, new-to-market products as a percentage of sales by manufacturers, and value-added in high-tech sectors.

Comparing current EU and U.S. performance, the most significant U.S. advances over the EU include the level of R&D by business (74 percent higher than the EU mean), the amount of new capital raised (73 percent), the level of high-tech patenting (up to 65 percent), and the percentage of the working population with some form of post-secondary education (65 percent). The EU leads only in the supply of new science and engineering graduates (28 percent).

Japan leads the EU in the level of R&D by business (almost double the EU average) and to a lesser extent in supply of science and engineering graduates and share of the working population with a post-secondary education. The EU leads Japan in the level of public spending on R&D and spending on information and communications technology equipment and services.

The overall innovation performance of the EU is improving. Trends in the indicators show countries such as Finland and Denmark, whose performance already is considered strong, are moving ahead. Greece and Spain also are approaching the EU average, although from a relatively low level. The three largest EU economies – France, Germany and UK – are improving, but at rates below the EU average.

Sufficient data on ten of the indicators allows assessment of each indicator's trend over the past four to six years. On average, these indicators have improved by about 30 percent, but three of them show a decline for the EU as a whole: levels of public R&D spending, spending by business on R&D, and value-added from high-tech manufacturing.

Overall, the gap between the best-performing and weakest-performing member states appear to be growing. For most of the indicators for which comparable data is available, the U.S. and Japan are outperformed by at least one of the member states.

The European Innovation Scoreboard was requested by the Lisbon European Council of March 2000 as part of its strategy for turning the EU into the most competitive and dynamic knowledge-based economy in the world within the next decade. The scoreboard, to be updated and published annually, is available at: http://www.cordis.lu/innovation-smes/scoreboard/home.html

BIO Inventories State Biotech Initiatives
The Biotechnology Industry Organization (BIO) released State Government Initiatives in Biotechnology 2001, the results of the first comprehensive survey of state government efforts to attract and grow the biotechnology industry. The report, prepared by Battelle Memorial Institute and the State Science and Technology Institute (SSTI), contains information from 48 states and shows state governments becoming increasingly active in recruiting and supporting biotechnology companies.

As an example of state government innovation in biotechnology initiatives and the valuable information contained in the report, 16 states are utilizing their tobacco settlement funds for bioscience-related research and development. In addition, 28 states reported having at least one publicly supported venture fund that can invest in bioscience-related companies. The majority of states responding to the survey have research and development tax credits, sales and use tax exemptions, or investment tax credits related to biotechnology.

The report shows trends in a variety of financing ventures, higher education initiatives, networking mechanisms, research parks and academic health centers involved in biotechnology.

With profiles of each state, the full 224-page State Government Initiatives in Biotechnology 2001 is available on BIO's website: http://www.bio.org

NTIA Grants Benefit 74 Nonprofits and State, Local Governments
Nearly $43 million in grants were awarded October 1 to 74 non-profit organizations, including state and local governments, by the Commerce Department’s National Telecommunications and Information Administration (NTIA).

NTIA made $42.8 million available through its Technology Opportunities Program (TOP), which extends the benefits of advanced telecommunications technologies to underserved communities and neighborhoods. The grants subsequently were matched by $46.7 million in contributions from the private sector and state and local organizations.

Grant winners from across the U.S. and in Puerto Rico provide services in such areas as telemedicine, public safety, distance learning, community information, and other innovative services.

A complete list of the TOP awards, including descriptions of the grant winners, is available on the TOP website: http://www.ntia.doc.gov/otiahome/top/index.html For your convenience, SSTI has prepared a table showing award totals by state at: http://www.ssti.org/Digest/Tables/101201t.htm

Fed Explores Relationship between State Taxes and Corporate Investment
As Congress and the Bush Administration look at national economic stimulus packages, debate is beginning in some states to enact similar measures to reverse the direction of their local economies. Various tax cuts for businesses invariably are included in the states’ discussions. The most recent edition of the Federal Reserve Research Roundup (3rd Quarter, 2001) includes a timely review of a recent working paper from the Federal Reserve Bank in Boston that looks at the relationship between corporate investment decisions and state and local taxes.

The Research Roundup article by Monique Morrissey follows in its entirety (reprinted with permission from the Financial Markets Center ):

State Corporate Taxes. According to a Boston Fed working paper, firms’ “user cost of capital” – a theoretical construct defined as the annualized cost of purchasing an additional unit of capital – varies little from state to state despite wide differences in state marginal tax rates. The implication: state and local taxes may have little impact on corporate investment decisions.

Adapting the capital budgeting model of Robert Hall and Dale Jorgenson, Charles Ian Mead examines the adhesives, electronic transformer, pharmaceutical and semiconductor industries between 1963 to 1997. Mead finds that changes in the federal tax code created substantial year-to-year fluctuations in the overall user cost of capital that tended to swamp any differences among states in a given year. For one reason, state and local taxes are roughly one-eighth the size of federal corporate income tax rates; so even wide differences in state marginal tax rates have little practical import. Other factors, such as the deduction of state and local taxes from the federal tax base, tend to smooth out variations between states.

Mead’s paper ignores many complicating factors, such as discretionary incentives negotiated between a firm and state or local officials. But he still provides a readable, interesting discussion of state business tax practices. (Charles Ian Mead, State User Costs of Capital, FRB Boston Working Paper 01-3)

The complete online issue of the Federal Reserve Research Roundup (3rd Quarter, 2001), which includes a survey of many research papers from the Fed, can be downloaded from: http://www.fmcenter.org/pdf/roundup01Q3.pdf

Council Outlines Strategy to Strengthen Rhode Island Economy
A Rhode Island Economic Strategy: 10 Ways to Succeed Without Losing Our Soul recently was released by the Rhode Island Economic Policy Council. The report outlines 10 economic development initiatives through four themes centered on places, people, clusters and connections.

Rhode Island must "strike a balance between collaborating and competing with its neighboring states" if it wishes to remain a center of New Economy activity, according to the report. To do so, the state must secure its share of the Boston Metro's high-wage industries while addressing infrastructure and the region's global competitiveness.

Some highlights among the report's 10 key strategies:

Copies of A Rhode Island Economic Strategy: 10 Ways to Succeed Without Losing Our Soul may be obtained by visiting the Rhode Island Economic Policy Council at: http://www.ripolicy.org/Ten%20Ways.html

Incubators in the News

California
Capital Valley Ventures, a business accelerator with a three-month training program for tech entrepreneurs, is coming to the Sacramento region, the Sacramento Bee reported. The venture is being spearheaded by Jack Crawford Jr., founder of NetLink, NetSource, 2Publish and Campus Engine. Crawford reportedly plans to start a workshop series capable of holding 25 people interested in beginning new businesses. The series, scheduled to begin this month, will involve three-hour sessions held once a month for three months and offer training on raising capital, forming a management team and generating revenues. More information is available at: http://www.capitalvalleyventures.com

Georgia
An agricultural incubator is in the works for Columbus, Ga., and the surrounding area, according to the Columbus Ledger-Enquirer. The area has received $500,000 from the One Georgia Fund (tobacco settlement money) but needs $2.1 million to complete the project. To receive additional One Georgia money, the remainder of the funding has to be secured, most likely through fund raising efforts. Goals for the incubator, which may house up to 10 start-up companies, include bringing in new businesses, growing businesses and increasing entrepreneurial development.

Oklahoma
Downtown Tulsa will witness on Oct. 17 the grand opening of the Enterprise Center, a business accelerator to lease 13,200 sq. ft. of office space and facilitate technology start-ups, the Tulsa World reported. The center recently was unofficially opened by the Oklahoma Technology Commercialization Center (OTCC), a private, non-profit corporation funded by the state and based in Oklahoma City. Occupants of the Enterprise Center will be able to utilize teleconferencing and videoconferencing technology and an inter-office wireless network. Occupants also may apply for funding from OTCC's Business Finance Program.

Virginia
Virginia Tech, three private firms specializing in technology start-ups, and other private investors have combined for almost $2 million to establish VT KnowledgeWorks, the Roanoke Times reported. The new business accelerator is expected to spur the creation of more than 40 new companies in the next five years, giving Southwest Virginia an economic boost. Officials at Virginia Tech Intellectual Properties reportedly will work with the three partnering firms – LaunchFuel, Redleaf and eIncubator – to name the potential new companies.

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SSTI Conference Update
SSTI's fifth annual conference, Creating Opportunity: Tools for Building Tech-based Economies, will take place December 3-4, 2001, at the Omni William Penn in Pittsburgh, Pennsylvania. The conference agenda remains intact from the original mid-September dates with almost all speakers reconfirmed. (see the conference agenda on SSTI's webpage: http://www.ssti.org/Conf01/agenda.htm [expired] )

More Seats Available!
While the event was sold out for the September dates, the new schedule allows the conference to accommodate a greater number of participants because of the additional meeting space available. Interested parties are encouraged to register online through the conference web center: http://www.ssti.org/Conf01/conf01.htm [expired]

Accommodations at the Omni William Penn
The hotel is offering SSTI conference registrants a discounted room rate of $129 per night for all reservations made on or before November 2, 2001. Reservations may be made by calling the Omni William Penn directly at (412) 281-7100 and mentioning SSTI's conference.

Please note, hotel reservations from the original September conference dates were not automatically rolled over. We apologize for the inconvenience, but each registrant must make new room reservations with the Omni William Penn. We encourage you to make your reservations as early as possible to avoid being closed out.

US Airways Extends SSTI Conference Travel Discount Offer
US Airways, the official airline service for SSTI's 5th Annual Conference, has extended wonderful discounts for travel to and from the conference. To take advantage of the conference special, please refer to Gold File Number 13131883 when you make your reservations via (877) 874-7687 (US Airways' Group and Meeting Reservation Office).

Additional logistical information concerning the hotel, air transportation and nearby parking is available on SSTI's website: http://www.ssti.org/Conf01/hotel.htm [expired]

People

Gov. Don Sundquist has named Tony Grande to be the new Commissioner of the Tennessee Department of Economic and Community Development (ECD). Mr. Grande formerly was ECD Deputy Commissioner as well as its Assistant Commissioner of Tennessee business services and director of manufacturing services.

Marianne Hudson is leaving her position as Vice President - Marketing & Communications with the Mid-America Manufacturing Technology Center to become a program manager at the Kauffman Center for Entrepreneurial Leadership.

Bruce Johnson is the new Director of the Ohio Department of Development. Mr. Johnson formerly served in the Ohio Senate.

Senate nomination hearings were held this week for John Marburger, President Bush's nominee for Director of the Office of Science and Technology Policy, and Phillip J. Bond, nominee for the position of Undersecretary of Technology for the Department of Commerce.

Gov. Ronnie Musgrove is appointing Robert J. Rohrlack, Jr. as the new Director of the Mississippi Development Authority. Mr. Rohrlack is currently the Chief Executive for the Alliance for Economic Development in Gainesville, Florida.

David Satterfield is the new Executive Director of the West Virginia Development Office. Mr. Satterfield was Gov. Bob Wise's chief of staff.

The Information Technology Industry Council (ITIC) has announced that James Thurston has joined the ITIC team as Director of Technology Policy. Mr. Thurston has worked for NIST's Manufacturing Extension Partnership for several years.

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