In the October 19, 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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Report Finds Corporate R&D Nearly Doubled in 2000
Public corporations headquartered in the U.S. almost doubled the growth rate of their investment in R&D in 2000, according to new data from the advance estimates of annual U.S. corporate R&D released this week by the Commerce Department’s Office of Technology Policy.

According to the report, R&D investment in 2000 rose sharply by 9.3 percent in inflation-adjusted terms, increasing from $145.6 billion in 1999 to an estimated $162.7 billion in 2000. The increase reverses a five-year trend of slowing annual percentage increases in corporate R&D investment and approaches the high of a 10.2 percent annual increase set in 1995.

Among the report’s highlights:

For the first time, the report is based on the new North American Industry Classification System rather than the decades-old Standard Industrial Classification, and more accurately updates data for the years 1994-2000.

The full report on U.S. Corporate R&D will be available next Spring, but the 18-page U.S. Corporate R&D Investment, 1994 – 1999 with Advance Estimates for 2000 is downloadable at: http://www.ta.doc.gov/reports/TechPolicy/US_Corp_Est_011015.pdf

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FAST, ROP in Funding Trouble for 2002; STTR Reauthorized
With the announcement of the first 30 grants under the Federal and State Technology Partnership (FAST) less than two weeks old (see the October 5 issue of the Digest), the new federal program supporting state efforts to encourage small business technology development and commercialization is in danger of being cancelled.

The House version of the Commerce-Justice-State (CJS) appropriations bill covering the Small Business Administration FY 2002 budget (H.R. 2500) provides no funds to continue FAST or the Rural Outreach Program (ROP) that focuses on underperforming states in SBIR awards.

The Senate version of the appropriations bill (S. 1215) fully funded the President's budget request for the two programs – $3.5 million for FAST and $1.5 million for ROP – which were continuation levels for the programs. The events and aftermath of September 11, however, are causing Congress to identify as much new money as possible for State and Justice Department priorities.

FAST and ROP proponents in the Senate concede that, without some support from the House leadership or conferees, it is very possible that FAST and ROP could be eliminated from the FY 2002 budget during the CJS appropriations conference. House conferees have not been assigned yet, but key figures in the FAST/ROP battle may include Rep. Frank Wolf (R-VA), chair of the House CJS Appropriations Subcommittee, and Rep. Don Manzullo (R-IL), House Small Business Committee chair.

Other members of the House CJS Appropriations subcommittee who may be able to shed some light on the issue include for the Republicans: Harold Rogers, Kentucky; Jim Kolbe, Arizona; Charles H. Taylor, North Carolina; Ralph Regula, Ohio; Tom Latham, Iowa; Dan Miller, Florida and David Vitter, Louisiana. Democrats members include: José E. Serrano, New York; Alan B. Mollohan, West Virginia; Lucille Roybal-Allard, California; Robert E. (Bud) Cramer, Jr., Alabama; and Patrick J. Kennedy, Rhode Island.

STTR Reauthorized
Chris Busch has alerted SSTI to President Bush signing the reauthorization of the Small Business Technology Transfer (STTR) program (H.R. 1860). The law:

H.R. 1860 is available on the Thomas Legislative Locator website: http://thomas.loc.gov/

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Alarm Sounds for New Massachusetts S&T Strategy
"If technology is at the core of the Innovation Economy, then investment in research and development is one of the principal drivers in the creation of that technology."

The sentence, lifted from the new Massachusetts Technology Collaborative (MTC) report, Maintaining the Innovation Edge: The Case for Creating a Massachusetts Science and Technology Strategy, is valid for the entire country but rings especially true for the Commonwealth, a perennial leader in R&D investment and innovation. Past MTC research reveals innovation is at heart of nine key industry clusters in the Commonwealth. In fact, 25 percent of the state's total employment is tied directly to technological innovation.

Written by MTC Director of Federal Programs Bob Kispert, Maintaining the Innovation Edge scrutinizes R&D funding in the state over the past decade and unveils some unsettling trends for the future growth and stability of the Massachusetts economy:

Looking additionally at trends in university enrollment, research outside the life sciences, and competing states, Maintaining the Innovation Edge issues a strong call to action for the Massachusetts science and technology community to create a comprehensive S&T strategy that reinforces the state's economic development goals. The planning effort, Kispert suggests, should focus on three elements of the state's system of innovation: S&T investment, infrastructure, and linkages for technology transfer and commercialization.

The report and more information about the Massachusetts Technology Collaborative is available at: http://www.mtpc.org

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Goldin to Resign from NASA
After nearly ten years as the head of America's space program, NASA's longest-serving Administrator, Daniel S. Goldin, has announced his resignation, effective November 17, 2001. He also announced he has accepted an interim position as a Senior Fellow for the Council on Competitiveness in Washington D.C., as he transitions into the private sector.

Goldin was appointed NASA Administrator April 1, 1992, by President George H.W. Bush. While no replacement has been selected, Goldin says he will work with the Administration before he leaves office to identify an interim Acting Administrator.

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Signs of the Times: Dell's Hometown Plans for Future
If one were asked to identify localized examples of the economic spectacle that was the late 1990s, the metro region of Austin, Texas would be on most short lists. A recently completed economic development plan from the tech-soaked Austin suburb of Round Rock, however, reflects the fundamental upheaval or disruption that characterizes the economies of many regions of the country.

Round Rock has grown quickly, doubling in population during the last decade to become the second largest city in the Austin-San Marcos metro area. It is experiencing for the first time, like many other cities emerging in a decade marked by rapid urban sprawl, the challenges of a recession.

With 62,000 well-educated and well-paid residents, Round Rock appears in many ways to fit the model of any affluent "bedroom" suburbs across the country. A look at the city's tax receipts, however, reveals a community more similar to the "company towns" of mining, logging and other natural resource exploitative economies: one business contributes half of the city's annual sales tax receipts of $31.7 million. That company, Dell Computers, is based in Round Rock and, through a unique arrangement, gives the city 2 percent of the sales tax generated from every Dell computer system sold in the state.

Perhaps not surprisingly, a significant focus of The Round Rock Target Industry and Marketing Strategic Plan calls for diversification in high-tech sectors or local clusters currently weak but with potential to grow: telecommunications, software/multimedia/data, business and professional services, and to a lesser degree, retail and health services. The plan encourages the community as it diversifies its tax and employment base to build upon the strength of the existing computer equipment and electronics firms in town.

As competition for new business grows among neighboring communities, the plan advises Round Rock leaders to develop the economic development strategies already established in many older cities: encouraging and assisting local entrepreneurship; marketing/branding the community; developing a business recruitment, relocation and expansion program; implementing beautification/landscaping programs; and updating the city's incentive package.

The 182-page plan can be downloaded from http://www.angeloueconomics.com/roundrock/

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Bendis Leaving KTEC for Philly
Richard Bendis, president and chief executive officer of the Kansas Technology Enterprise Corporation (KTEC), has accepted an offer to lead the newly created Innovation Philadelphia Corporation. Mr. Bendis has been involved with KTEC since the organization was created in 1987. He was appointed to the KTEC board of directors by the Governor and served as the board’s first chairman. Mr. Bendis served as interim president in 1994 before being named president in 1995.

The decision to leave was tough, Mr. Bendis said, but the Philadelphia job appeals to his entrepreneurial spirit. “I’ll be starting with a blank sheet of paper to build an entity that can help make the Philadelphia region a more vibrant participant in the New Economy.”

According to an Oct. 17 article in the Philadelphia Inquirer, the Innovation Philadelphia Corporation will create local companies to commercialize technology developed at the University of Pennsylvania and other area institutions. The city provided $2.5 million in first-year seed funding to get the corporation started.

At KTEC, Mr. Bendis was instrumental in the formation several affiliated seed capital funds across the state, and has been a tireless advocate for state efforts to stimulate greater access to seed and venture capital for small technology companies in Kansas. He also implemented Return on Public Investment criteria for all KTEC programs so that returns from successful client companies are re-invested to help new clients. During his’ tenure, KTEC has built an equity portfolio of 73 companies and has established royalty agreements with almost 150 companies.

A strong advocate nationally and internationally for state efforts in technology-based economic development, Mr. Bendis is a member of SSTI's Board of Directors and has served as chair of the Federal Business Investment Committee on the Science and Technology Council of the States. The committee's work under Mr. Bendis's leadership was instrumental in the design and creation of the new Federal and State Technology Partnership (FAST) administered by the SBA (see related story in this issue).

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Australia Woos International VC
The Australian Government has enacted new rules to attract international private equity investment in the country’s venture capital community. The rules introduce tax concessions for international investors, including university endowment funds and venture capital fund-to-fund vehicles. The rules will treat these investors in the same way as pension funds, exempting them from capital gains tax on their Australian investments. The government’s impact analysis suggests the plan should attract $1 billion (Australian dollars) in foreign investment and add $350 million to the Australian annual gross domestic product. Venture capital proponents say the new rules levels the investment field with the U.S., the United Kingdom and other industrialized countries. More information is available from the Australian Venture Capital Association Limited by cllicking on News Releases at: http://www.avcal.com.au

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Useful Stats: New NSF Industrial R&D Portal 
The National Science Foundation has launched the new, online Industrial Research and Development Information System (IRIS) to provide easy access to information on industrial R&D performance across a broad range of years and criteria.

The historical database (1953–1998) contains more than 2,500 statistical tables presenting R&D expenditures as a percentage of company sales, by industry, size of company, size of R&D program, type of cost (e.g., wages or materials), state, and source of funds. Data also is arranged to allow easy manipulation of trends analyses and state-by-state comparisons.

A late-September Data Brief from the Foundation (NSF 01-338) describes the new system and provides examples of its value for the S&T community. For more information, see http://www.nsf.gov/sbe/srs/databrf/nsf01338/sdb01338.htm

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Tech-based ED Around the Country

Alabama
Senate Bill 130, which would create $80 million in tech-based venture capital funding if passed, was introduced during the current special session of the Alabama state legislature. Using the certified capital company or CapCo model, the bill allows insurance companies to redirect tax payments into qualified investment firms. According to a recent Birmingham Business Journal article, backers of the bill concede the current fiscal environment and short session will probably lead to the bill’s reintroduction when the regular session begins in January.

Atlanta, Georgia
The Metro Atlanta Chamber of Commerce has created a task force to develop a strategy to position the region as a center for biotech innovation, capital, talent and business. Working in conjunction with the Georgia Research Alliance, the task force includes leaders from the business community, academia, public health organizations and research. Implementation of the Atlanta region biotech strategy is expected to begin later in 2002. More information is available at: http://www.metroatlantachamber.com/

Buffalo, New York
The University of Buffalo (UB) has created a new Office of Science, Technology Transfer and Economic Outreach to commercialize successful university research and to nurture local economic development efforts. The new office will incorporate offices and functions previously under the direction of the UB Business Alliance, and include a new Industrial Liaison Partnership, which will focus on relations with corporations involving economic development issues and a new Research and Venture Funding Division. For more information, visit: http://www.buffalo.edu/reporter/vol33/vol33n6/f2.html

Fairfield, Maine
At an October 4 Town Hall meeting, all but one of the approximately 100 residents in attendance voted to use the community’s good credit rating to borrow up to $2 million for the Fairfield Economic Development Corp. to construct 15,000 sq. ft. of lab space to lease to biotech companies. Jackson Laboratory is expected to sign a lease for a portion of the incubator space before the town borrows the money. The space will be part of the $4.5 million Thomas M. Teague Biotechnology Center of Maine, one of seven applied technology centers established in part with a grant from the Department of Economic and Community Development this year.

Grand Forks, North Dakota
The University of North Dakota Center for Innovation Foundation has received a grant of $3.5 million from Mr. James C. Ray and the Ray Foundation of Minden, Nevada, to create two endowments for entrepreneurship. Mr. Ray established a $2 million endowment to fund the Center for Innovation outreach efforts to technology entrepreneurs and a $1 million endowment to establish a chair of entrepreneurship within the College of Business & Public Administration. The remaining cash gift will fund the initiative until earnings from the endowment can sustain the programs.

The UND Center for Innovation Foundation serves as a link between successful entrepreneurs and the Center or Innovation and its Rural Technology Incubator at the 55-acre University Tech Park on the UND campus. The Center also manages the Technology Incubator, which hosts 18 entrepreneur ventures employing more than 80 people. Since it was formed in 1984, the Center has helped launch more than 300 new ventures and technologies. More information is available from: http://www.innovators.net/

Iowa
In an effort to reverse the state’s brain drain, Governor Tom Vilsack has proposed offering annual tax credits for up to ten years to Iowa college graduates who remain working residents of the state. Under the proposal, community college graduates meeting the qualifications would receive credits of almost 100 percent of their tuition costs, or $200 annually for a decade. Graduates of Iowa's public universities would be eligible for credits totaling roughly 50 percent of their tuition, or $600 annually, and graduates of Iowa's independent colleges would be eligible for credits of nearly 20 percent of their tuition. More than 250,000 graduates of Iowa colleges and universities could be eligible for the tax credit over the next 10 years. For more information, visit: http://www.state.ia.us/governor/news/2001/October/October0901._1.html

Morgan County, Indiana
The Commissioners of Morgan County are considering a proposal to levy a $50 fee on all new lots to support the operations of a new county economic development office, according to the October 13 edition of the Indianapolis Star. The fee is expected to raise $25,000 - $30,000 annually for the proposed countywide office. Morgan County is located in the southwest corner of the Indianapolis metro area.

Nebraska
Today's issue of TechDaily's State Roundup by Liza Porteus alerted us to a bill passed by the Nebraska legislature this year to create a Nebraska Venture Capital Forum. The act requires the Nebraska Department of Economic Development to establish a system to facilitate and match the state's private seed, venture and angel capital funds to local investment opportunities. The bill is available at: http://www.unicam.state.ne.us/PDF/FINAL_LB225_1.pdf

Oldsmar, Florida
The Greater Oldsmar Chamber of Commerce has created a Manufacturers Council to be of more direct assistance to the 160 local manufacturing firms in the community, according to the October 15 edition of the St. Petersburg Times. In addition to providing networking and educational opportunities for manufacturers, the council is to identify specific technical, workforce and other needs that can be addressed through the council, chamber, and other public-private partnerships. To help get it off to the right start, the group is drawing assistance and expertise from the Florida Manufacturing Extension Partnership. More information on the council is available by calling the Chamber at (813) 855-4233.

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Recent Entrepreneurship Items Of Note

A Letter from Bozeman, Montana
The National Commission on Entrepreneurship publishes NCOE Update, a free, high-quality e-newsletter providing insightful looks into the factors and trends shaping the country’s entrepreneurial community. This week’s issue provides a useful examination of the public and private efforts to nurture technology entrepreneurship in Bozeman, Montana. The story and subscription information can be found on the NCOE website: http://www.ncoe.org/newsletter/update/10_16_01.html

Back issues of the biweekly NCOE Update are available under the Newsletter link on the NCOE website.

A Look at the New York City Reinvestment Fund
The latest issue of the Capital Xchange, published online by the Brookings Institution Center on Urban and Metropolitan Policy, includes an article analyzing the success of the New York City Reinvestment Fund. Started in 1996, the Fund has already invested $54 million in 48 projects, creating 2,750 jobs for the city. The authors, Peter Plastrik and Kathryn Wilde, point out though, that it’s the CEO-to-CEO relationships that have made the Fund work. Offering the Fund as a model for replication in other urban cores, the authors highlight five major lessons learned over the Fund’s short history. The article is available at: http://www.brookings.edu/es/urban/capitalxchange.htm

More facts on the New York City Reinvestment Fund are available here: http://www.brookings.edu/es/urban/capitalxchange/plastrik2.pdf

Tools for Entrepreneurship: Building New Economies in Rural America
What are the best tools for local communities to use in helping entrepreneurs develop more homegrown businesses? What roles can national and regional leaders play in strengthening rural entrepreneurship? What investment opportunities are available for private, philanthropic, and public-sector partners to encourage more small business development?

These are among the key questions addressed in a new publication from the Appalachian Regional Commission (ARC) offering the insights and experiences of some of the nation's leading experts on rural entrepreneurship. The 48-page book, based on a national conference held by ARC last Fall, focuses on how rural communities can use entrepreneurship to create more and better jobs.

The document is available online: http://www.arc.gov/programs/reginit/entrep.htm

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