In the January 24, 2003 Issue:

Copyright State Science & Technology Institute 2003. 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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Tech Talkin' Govs III
New and re-elected Governors gave inaugural addresses in Alabama, Oklahoma, Pennsylvania, South Dakota, Tennessee and Texas during the past 10 days. Additionally, State of the State addresses were made in Hawaii, Montana, Nevada, New Mexico, Ohio, South Carolina, South Dakota and Utah. Building tech-based economies remains a high priority for many Governors, as evidenced in the following:

Nevada
Governor Kenny Guinn, State of the State Address, January 20, 2003

"I want to see higher education in Nevada become a center for research and new partnerships between business and academia. A key step to enhance higher education and economic development will be the new Science, Engineering and Technology Center at UNLV. This project will be funded with $47 million in public dollars, and $25 million in private funds; this is truly a wonderful partnership. This project includes the short-term benefit of new construction jobs, and the long-term benefit of an expanded academic facility in science, engineering and technology: the wave of the future."

New Mexico
Governor Bill Richardson, State of the State Address, January 21, 2003

"I want incentives for startup technology companies, renewable energy companies...

"We must make the state of New Mexico a hospitable place for entrepreneurs to start and grow their business ideas. Whether from outside or from homegrown visionaries, ground-up business development must be encouraged and nurtured by state policy...

"We need to strengthen the teaching of business and entrepreneurial skills in our schools. Our young people must be taught the basics of business risk and reward so that more of them will take to improving their lives and building the economy of our state from within. Small business incubator programs in the population centers of the state must be strengthened and improved.

"Access to capital is critical, and because we lie so far from the money centers of the coasts, we remain below the radar of much of the venture capital market. The Legislature invested $10 million in the New Mexico Small Business Investment Corp., but the money has languished in a bank account for lack of an implementation strategy.

"I will build that implementation strategy. I further propose that we invest up to $200 million - just 2 percent of the total in the state's permanent funds - in New Mexico businesses. This will jump-start an entrepreneurial arm of New Mexico's economy...We will partner with private capital...

"To facilitate all these ambitious development goals, I ask the Legislature for seed money... $9 million in a one-shot expenditure to complete the funding of endowed chairs in business and technology research at the University of New Mexico, New Mexico Tech and New Mexico State University...

"Even as we are rich in hydrocarbons beneath the surface, we are rich in wind, solar, geothermal and biomass energy potential across our landscape. I have set a goal of having 10 percent of New Mexico's energy come from renewable sources by 2010."

Ohio
Governor Bob Taft, State of the State Address, January 22, 2003

"My budget provides over $40 million for Third Frontier programs in the next two years...I ask the General Assembly to quickly pass our proposal to place a 10-year, $500 million bond issue on November's ballot. This money, if approved by the voters, will allow us to recruit scholars in fields that are vital to our economy, attract more research dollars, and move new ideas from the laboratory into the marketplace... The Third Frontier Project is not a luxury, even in our most difficult budget hour. We must make this investment today to make Ohio better tomorrow. "

South Dakota
Governor Mike Rounds, State of the State Address, January 14, 2003

"There will also be a new Department of Tourism and State Development.  It will combine Tourism
and the Governor’s Office of Economic Development...

"When it comes to economic development, we should not forget about new industries as well. Wind power—some states have already begun to develop. In South Dakota we’ve done some, not enough. I believe that long-term, wind power has huge opportunities within our state. We need to jump-start it...

"I want to entice our college graduates to stay here. And I believe that we can do that by offering what I call a Dakota Core Scholarship Program. I want for young people who agree to come to South Dakota and serve as public servants in areas that we have a tough time filling positions — teachers, engineers, perhaps nurses. For those individuals, I would like to offer a tuition-free education at a public or private school within our state. And if they stay here for a period of 5 years thereafter, we will forgive one-fifth of that amount each year over that 5-year period of time...

"I would ask for your thoughts and participation in working with myself and the Board of Regents on the issue of intellectual property. I want to make sure that our rules are competitive so that our people see the opportunity to improve themselves and are encouraged to develop new ideas. We can make a win, win, win situation. Professors can get rewards for advancements that have commercial applications, students will be more motivated by being involved in cutting-edge ideas, and there is the possibility of high quality, good paying jobs being created. To that end, I will work with any community that has a university attached to it, and incubator settings in which we develop new programs whether they be ag related, or technology created, or business related in which the local communities participate with our local institutions of higher education, we as state government should also participate, and I’ll look forward to working with them to set up these incubator positions where individuals who work as professors within our universities can come and make an offer or an idea and find it put into a business setting.

"In addition to that, I want to also push the issue of business internships in South Dakota...We’re going to start an internship program here in conjunction with the Board of Regents, expand those programs that are already out there, and, in working with private businesses, we’re going to keep our kids in South Dakota."

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IT, Biotech Positioning in Massachusetts
Many states and communities are focusing their limited technology-based economic development funds toward cluster development, concentrating on those sectors in which some assemblage already exists within the jurisdiction. Proponents of the approach suggest the public sector is able to maximize its investments in those areas already showing some strength.

But what does a state with a new governor do when it is one of the top states in the country for two of the sexier tech sectors – biotechnology and information technology – and public resources are growing more scarce?

In Massachusetts, perhaps fearing an either/or option in public policy direction awaits, both sectors recently issued studies charting the potential benefits or risks impact of state action or inaction. MassBiotech 2010: Achieving Global Leadership in the Life Sciences Economy has implications for any state or region hoping to develop a life sciences economic cluster. Similarly, The Telecommunications Industry in Massachusetts: A Time of Transition identifies common issues affecting future growth of the telecom industry. Both study's findings, policy recommendations and suggestions for the companies within each sector have value throughout the country.

MassBiotech 2010 argues the Massachusetts industry could be responsible for creating as many as 150,000 new jobs by 2010, with one-third directly in the biotech industry and the rest in related business services. The state already is home to 280 biotech companies, 230 of which were founded in Massachusetts, and about 18,000 biotech workers. In 2001, these companies accounted for $6.7 billion in revenue and 8 percent of the global drug development pipeline, the study asserts. The state's biotech industry in 2001 also was responsible for 27 percent of the $8.5 billion spent by the state's public companies on R&D, 15 percent of the venture capital funds raised, and 18 percent of all patents filed.

Whether the state's biotech jobs will stay in Massachusetts remains an open question, however. Massachusetts has a relatively poor record in retaining the manufacturing jobs that result when a new drug is approved for the marketplace, the study contends. States such as California and North Carolina, the researchers say, are better organized to capture new biotech development and jobs. Also, Massachusetts, while enjoying double-digit rates of growth and the arrival of major new employers, has witnessed its share of national biotech jobs decline over the last five years.

Massachusetts needs to address several challenges to stay competitive with other regions, according to MassBiotech 2010. The authors call on the state government to work with local communities to speed the zoning and permitting process for biotech development. In the same vein, industry and academic leaders in the life sciences community are called upon to organize clear leadership focusing on the success of the life sciences as a whole.

MassBiotech 2010 was conducted by The Boston Consulting Group and the Massachusetts Biotechnology Council, a nonprofit association of about 400 biotechnology companies, academic institutions, agencies and service organizations. It is available at http://www.massbiotech2010.org/.

Released by the Massachusetts Telecommunications Council, The Telecommunications Industry in Massachusetts puts telecom employment in Massachusetts at 131,790, an increase of 40 percent since 1998 and 135 percent since 1993. In the second quarter of 1998, the industry employed 93,988. Since 1995, telecommunications companies have been on the receiving end of $12.8 billion in venture capital investments, the report states. And, since 1998, 80 percent of the industry's job growth has been in firms with fewer than 250 employees.

Communications services, the largest segment of the industry, will be key to continued growth in overall telecommunications employment, according to the study. The sector accounts for 37 percent of total industry employment. Jobs in communications services have almost doubled since 1998, going from 24,660 to 49,135. During the same period, communications equipment manufacturing – the second largest segment of the industry – fell from 24,392 jobs in 1998 to 24,137 in 2002, a loss of nearly 1,600 jobs. In the last year alone, the sector has undergone a 6 percent decrease in employment.

Recognizing the telecom industry is in a period of transition, focus groups participating in the study convened to identify issues expected to impact the industry's future in Massachusetts. Broadly speaking, the issues identified include increased broadband deployment, ongoing support for workforce development, a substantial monetary commitment to R&D efforts, and regulatory and tax policies that encourage competition.

Educational development also is cited as a key issue for the telecom industry. The study notes only 6 percent of Massachusetts students taking the SAT in 2001 expressed an interest in engineering or computer science. In addition, only about half of all engineers who graduate from the state's colleges and universities have stayed in-state to pursue careers. Designing schools that can accommodate best practice in instruction such as project-based learning and technology would help address the industry's workforce needs, the study concludes.

The Telecommunications Industry in Massachusetts was developed with economic research support from the UMass Donahue Institute. The Massachusetts Telecommunications Council includes approximately 250 telecommunications, Internet, data communications and affiliated organizations throughout the Commonwealth and New England. The report is available at: http://www.masstel.org/industry/whitepapers.html

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Encouraging Youth Entrepreneurship
Whether the reason is to spur more innovation among students, fight the brain drain of graduates or simply help to build tech-based economies, many states, communities and universities are targeting a portion of their efforts toward encouraging tech-based entrepreneurship among their young residents and college students.

If the purpose is to encourage students to consider more risk-taking career options like tech-based entrepreneurship after graduation, then business plan competitions may prove beneficial. While only a few team or individual business plans may win the award in a given award cycle, the process of developing the concept and preparing the plan for all applicants can be useful for launching a more entrepreneurial mindset in the college or university.

For example, the Student Business Plan Competition recently launched by the Tennessee Technology Development Corporation (TTDC) promotes entrepreneurship at Tennessee colleges and universities by encouraging submission of plans of original business concepts. Business plans in technologies or life sciences are particularly encouraged; however, any commercial endeavor is valid. The winning individual or team for each of three regional competitions receives a $3,000 cash prize.

Under the TTDC competition guidelines, each team must have at least one Tennessee graduate or undergraduate student, being student led. The plan must describe a new business or an early-stage company. Award criteria consider the commercial potential of the business, the innovative nature or technical feasibility of the idea, the likelihood of longterm success, and the credibility of the individuals or team. To help level the playing field, ventures that have already received more than $250,000 in seed financing are not eligible. Award selection for 2003, to be announced in April, ultimately will go to those teams in which the judges would most likely invest their money.

Business plan competitions also can be integral components of more intensive strategies to encourage entrepreneurship. Like TTDC, the University of Maryland also offers a business plan competition that aims to find new venture ideas and build successful businesses. All UM undergraduate and graduate students, as well as alumni who graduated in the last five years, can compete for up to $50,000 in prize money under the University of Maryland Business Plan Competition. Prizes were made in three categories – emerging company, small business and concept-stage – to three groups in both 2001 and 2002. Up to six teams will compete in May to become finalists in the 2003 competition.

The UM business plan competition is just one part of the university's Hinman Campus Entrepreneurship Opportunities (CEOs) program, however. The program is open to select students from all academic disciplines, and participants are referred to as CEOs. One of the program's unique features is a special residence hall equipped with conference rooms equipped with teleconferencing systems and IP view stations, a computer lab and state-of-the-art technology that provides CEOs with an incubator-like business environment. Each resident's computer has voice, data and video communications capabilities and wireless access.

In conjunction with the CEOs program, the University of Maryland also oversees the Maryland Technology Enterprise Institute, which includes the Technology Advancement Program, the university's incubator for technology start-ups. In addition, UM's Entrepreneurship Citation Program, a selective program with sequential courses, is open to undergraduates, and the Smith School's Dingman Center for Entrepreneurship provides community outreach programs in entrepreneurship.

Alternate approaches, like those taken by Case Western Reserve University (CWRU), focus on encouraging entrepreneurship exclusively in science and technology. Last fall, CWRU's Weatherhead School of Management created a new MBA specialization in Bioscience Entrepreneurship, the first such program in the country the school claims. In the program, MBA students are given the opportunity to carry an extended internship in bioscience, working with start-up biotech and bioscience firms or developing "intrapreneurial" market initiatives in larger organizations.

Case Western also has launched other programs to blend entrepreneurial thinking into the college experience of S&T students, such as the Institute for the Integration of Management and Engineering, the Physics Entrepreneurship Program, and the Science Entrepreneurship Program (SEP). In SEP, students are paired with a mentor from a participating science, math or statistics department, and the mentor acts as an academic advisor over the course of the two-year program.

Over the next few years, Weatherhead plans to develop a Center for Bioscience Entrepreneurship. The center will promote research and education on the commercialization of bioscience with research grants, academic conferences and expanded, non-degree executive education offerings.

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Is Meaningful Evaluation of Public ED Efforts Possible?
More rigorous evaluations of local economic development programs and policies are feasible argues a recently released working paper by Timothy Bartik, a senior economist at The W.E. Upjohn Institute for Employment Research. Evaluating the Impacts of Local Economic Development Policies On Local Economic Outcomes: What Has Been Done and What Is Doable? stresses the importance of evaluation in local economic development. The ability to distinguish the true impacts of proposed policy in providing economic development benefits is crucial in having well-functioning state and local governments, the report claims.

Bartik contends that in the U.S., rigorous evaluation does occur, but it is the exception rather than the rule. When these evaluations are completed, Bartik states, they usually show that services to small and medium-sized firms can be effective in advancing the performance of these organizations. Economic development strategies targeting distressed areas tend to be ineffective if they only provide moderate resources, but are more successful if they offer broad resources over an extended time frame, the author suggests.

Many agencies assert that they do, in fact, perform evaluations on their programs; however, they really do not, Bartik explains. It has become commonplace for state and local economic development organizations to assemble large quantities of data on program activities such as jobs created. These job creations are then declared as a program impact, which inaccurately presumes that none of the economic activity would have occurred without the program. Also, agencies will detail local economic conditions, such as jobs created during a specific time period or reductions in the unemployment rate, and claim again such progress as program impacts. Once again, by assuming improvements in the local economy are due exclusively to local economic development policies, this approach is flawed.

Bartik stresses the importance of "outcome impact" evaluations. Understanding fully how and why the policy has its estimated impacts are critical to evaluations, he says; therefore, evaluations should include estimates of how program impacts may change with any variation in the structure or administration of the program. A model evaluation, argues Bartik, would not only report on local business activity but also the impact on the economic well-being of local residents — the definitive target of local economic development policies.

Numerous ways in which more rigorous evaluations can be performed are presented in the paper. These include random experimentation, statistical analysis of program users and comparison groups, surveys and focus groups, and linking regional econometric models with fiscal impact and local labor market models. Bartik suggests that encouragement for more rigorous evaluations must come from outside pressure and funding. This outside pressure can come from legislatures, governmental audit bureaus, and higher levels of government.

One of the many reasons that evaluations are not performed enough is the fear of negative evaluations being used as a pretext to terminate a program, Bartik concludes. As a result, economic development agencies may not pursue thorough evaluation. The article states rigorous assessment is more likely to be used in the future if the results are used to improve programs, rather than end them.

The working paper can be downloaded at: http://www.upjohninst.org/publications/wp/03-89.pdf

Resources for Evaluating Programs
To encourage more thorough and useful review of technology-based economic development programs, SSTI added several exceptional titles on evaluation to its current publication catalog including:

Ordering information is available in SSTI's Publication Catalog, Resources for Building Tech-based Economies, which is available online at: http://www.ssti.org/Publications/Onlinepubs/catalog.pdf

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TBED Briefs

Midwest Angel Network Association Launched in Illinois
Several Chicago area investors and numerous local organizations have launched MANA, or Midwest Angel Network Association, in an effort to make seed-stage investment a greater reality. MANA will be dedicated to strengthening the existing angel community and providing assistance and education to potential investors looking to join or form an angel fund or network. Although MANA does not provide angel funding directly, entrepreneurs can also look to MANA's website for direction in how to access angel funding and advisors or service providers who want to help start-ups.

New Orleans Eliminates IT Tax
The City of New Orleans has eliminated a 5 percent sales tax on custom software to aid the cause of local information technology firms, according to The Times-Picayune. As a result of the tax cut, the city is expected to lose $646,500 annually in tax revenue. Software executives in New Orleans say the ordinance will encourage business expansion and investment. Last spring, the Louisiana State Legislature voted to eliminate the state's custom software tax over a span of four years.

$12M Institute, Incubator Created in Harrisburg, PA
The Harrisburg Polytechnic Development Corp. is using $12 million in capital budget redevelopment assistance to create the Harrisburg Polytechnic Institute. As the project's first phase, a high school specializing in math and science is scheduled for completion in September 2003. The school will serve 144 ninth- and 10th-grade students from Harrisburg High School. Future plans for the institute include undergraduate and graduate colleges and an incubator for start-up companies. Ten businesses will be housed by the incubator when it opens in the fourth quarter of 2003. Also, the institute will include centers for workforce development and conferences.

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People

Todd Bankofier has been appointed president of the Arizona Technology Council.

Alaska Governor Frank Murkowski has named Edgar Blatchford, a journalism professor at the University of Alaska, to serve as commissioner for the Department of Community and Economic Development.

John Harrison is Governor Bob Riley's pick to serve as director of the Alabama Department of Economic and Community Affairs. Harrison was the Mayor of Luverne, Alabama for the past 14 years.

Ellen Hemmerly has been named president of the nonprofit Association of University Research Parks.

David Iannucci is the new head of the Baltimore County Department of Economic Development.

Arizona Governor Janet Napolitano named Gilbert Jimenez to lead the Department of Commerce and has asked Gail Howard to serve as her policy advisor on economic development. Jimenez was Bank One International's Senior Vice President and Regional Manager for Mexico/Latin America. Howard comes to the administration from Arizona State University, where she has served since 1990 as the University's Director of Economic Development and Constituent Outreach.

Charles W. Steger, President of Virginia Tech. has been elected chairman of Virginia's Center for Innovative Technology. Paula S. Gulak, Founding Partner of SyCom Technologies, is the new Vice Chairman.

Dennis Yablonsky, chief executive officer for the Pittsburgh Life Sciences Greenhouse, is Governor Ed Rendell's pick to serve as Secretary of the Department of Community and Economic Development.

Central California's Regional Technology Alliance has changed its name to the Inland Empire techSOURCE.

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