In the June 6, 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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Iowa Legislature Passes $503M Values Fund
Package Isn't All Governor Expected; Veto Possible
Changing mindsets within a state to embrace making significant public investments toward building an innovation economy can be a daunting task, particularly with the fiscal environment all state goverments are currently facing. With an aggressive series of town meetings and web forums, and strong vision and top-level leadership, Iowa succeeded to make its first big steps toward that goal with late-night votes by the State Legislature this week during a special session.

Iowa Governor Tom Vilsack began his second term in January with a call for the state to spend a record $500 million over five years for economic development <see http://www.ssti.org/Digest/2003/011703.htm#Govs>. With the passage of two bills at 2:00 a.m. Wednesday morning, the Republican-controled state legislature gave the Democratic Governor what he asked for — intertwined with several tax changes that he was much less inclined to support.

Calling for creation of a five-year, $503 million Iowa Values Fund to support economic development opportunities in the specific areas of life sciences, software and information technology, advanced manufacturing, and value added agriculture, the bills authorize and allocate funds for activities including:

For fiscal years 2004-05, a total of $62 million and $66 million, respectively, is appropriated for the Iowa Values Fund.

The legislation calls for several specific indicators to be used to measure the effectiveness and impact of the state's investments through the Iowa Values Fund. Iowa's performance for each indicator is to be evaluated annually relative to the five Iowa geographic regions, the other seven states in the "upper midwest region" and to national averages.

Gov. Vilsack is quoted in the local newspapers as saying he will need to take some time to look at the fine print of the two pieces of legislation before determining if he can sign either of them. Republican legislators say he has to sign both to get what he wants. By law, the governor has 30 days to act.

House File 683, which outlines the appropriation schedule, and House File 692, which provides the enabling language for the Fund, are available under the link "Passed by Both Chambers" at: http://www.legis.state.ia.us/Mapper.html

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Pennsylvania to Support Clean Energy Tech with New Fund
Breaking new technologies into traditional markets can be challenging, particularly in the energy field it seems. To help overcome that hurdle, the State of Pennsylvania has undertaken a $5 million initiative to help finance the implementation of clean and renewable energy technologies such as biomass and wind power. The initiative, Pennsylvania Energy Harvest, will help improve air quality, preserve land and protect local watersheds while providing economic opportunities for the state’s agricultural community.

Pennsylvania Energy Harvest mixes money from the state's Clean Air Fund, Growing Greener Program, and U.S. Department of Energy grant funding. The initiative is designed to encourage clean and renewable energy demonstration projects that will have real and measurable impacts on pollution reduction, environmental quality and energy generation, rather than projects that focus solely on public outreach and communication. Among some of the projects that could qualify for funding:

Pennsylvania Energy Harvest is part of the plan to get Pennsylvania to meet 10 percent of its energy needs with "green" power by encouraging more state agencies to use energy sources such as those above. Some of the sources are not truly renewable but still offer environmental benefits. Twelve agencies currently participate.

The state's Department of Environmental Protection (DEP) Acting Secretary Kathleen McGinty said DEP and state government in general will continue to look at ways to encourage the development of green power, including regulatory enticements and other credits or incentives. One way, she said, will be to put the state’s resources to work to encourage energy innovation by expanding the state’s Green Power program.

Former Pennsylvania Governors Tom Ridge and Mark Schweiker instituted the program to require state facilities to meet 5 percent of their energy needs through renewable energy sources. Gov. Ed Rendell has pledged to increase that goal.

The Pennsylvania Energy Harvest grant program is open to farmers, local governments, conservation districts, nonprofit organizations, farms, businesses and school districts, colleges and universities. The deadline to apply is Sept. 19, 2003. For more information, type "2003 Energy Harvest Grant" in the PA Keyword field at http://www.state.pa.us.

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Spurring University Tech Commercialization through Incentives
Since her inauguration in January, Arizona Governor Janet Napolitano has pushed legislation intended to increase university tech transfer and commercialization (see related item in this issue). But will it work? Do economic incentives really encourage university researchers to pursue commercialization goals? Or are academics "pure" scientists, truly beyond monetary motives as many would argue?

A new econometric model that looked at the tech transfer policies of 102 U.S. research universities and their licensing/royalty incomes during the 1990s finds that, yes, even academic researchers have their price. Economic incentives, such as royalty sharing arrangements, do affect the number of inventions produced and the licensing income generated by universities, according to Incentives and Invention in Universities. The recent National Bureau of Economic Research Working Paper by Saul Lach and Mark Schankerman posits that, controlling for other factors such as institution size, quality, research funding and technology licensing inputs, universities that provide higher royalty shares to researchers trigger more inventions and higher license incomes.

The 102 universities in Lach and Schankerman's data set averaged 67 invention disclosures per year between 1991-1999, with a mean annual license income per disclosure of $43,000.

With the potential for greater income and economic growth resulting from university tech commercialization, it is vital to recognize what moves academic research and technology licensing activity forward, argue Lach and Schankerman. Their model suggests economic growth and productivity can be affected through the structure of intellectual property rights and other incentives at the university level.

The model also finds researchers in private universities are four times more responsive to incentives than their counterparts in public institutions, so much so that private schools enjoy greater licensing revenues as well (producing a "Laffer effect" in stats jargon).

Overall, "increasing the inventor's royalty share by 10 percentage points results in a 14 percent increase in revenues," the authors write. Separating public and private schools, however, implies "a 10 percentage point increase in royalty share would increase the number of disclosures by about 13 percent and the license income by 57 percent in private institutions."

Explaining why private university researchers outperform public university faculty by this measure was beyond the scope of the paper, the authors point out. They offer that organizational structure and objectives vary greatly among universities. Lach and Schankerman also report the findings suggest technology licensing offices (TLOs) in private institutions "have more effective, commercially-oriented technology transfer activity so that their TLOs are better able to identify and capture innovation rents by licensing to industry."

[SSTI's two cents: Ensuring public universities have the same tools available to encourage innovation and commercialization as private schools – tools not present in most states until the 1990s and still not available in many – helps level the opportunity for success. In Arizona's case, constitutionally giving state universities the chance to benefit financially from the commercialization of academic research would be a step in the right direction.]

Incentives and Invention in Universities is available at: http://economics.huji.ac.il/facultye/saul/LachScahnkerman.pdf

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New Mexico Establishes Statewide Research Collaborative
With a combined annual research budget totaling $4.8 billion, New Mexico's 12 largest research facilities signed a Memorandum of Agreement on May 30 to help turn intellectual property into jobs for New Mexicans. Members of the newly formed New Mexico Technology Research Corridor (TRC) include:

Research commissioned by Technology Ventures Corporation (TVC) identified four opportunity clusters that are a product of the blended core competencies of the 12 research institutions. In addition to securing patents and getting joint technology commercialized, TVC will also help the TRC institutions to collectively submit requests for new funding for cooperative research.

The nonprofit TVC, founded in 1993 by Lockheed Martin, helps entrepreneurs develop businesses around technologies and obtain funding from across the country for New Mexico business formations.

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NACFAM: Technology, Partnerships Key for U.S. Manufacturing Success
While the nation’s manufacturing sector continues to face major challenges, the National Coalition for Advanced Manufacturing (NACFAM) suggests in a new white paper that the U.S. can compete successfully with low-wage countries if industry and government rally around two basic goals — increase labor productivity by greatly accelerating the use of advanced technologies and leverage national resources through a major expansion of public-private partnerships.

In Industrial Transformation: Key to Sustaining the Productivity Boom, unveiled June 4 at the Washington Productivity Forum, NACFAM calls for 1) moving global competitiveness higher on the national agenda, 2) developing and deploying “next generation” process technologies, 3) “incentivizing” American workers to keep pace with technological change, and 4) reducing supply chain vulnerability. These central elements contain numerous specific policy recommendations designed to enable U.S. manufacturers to be competitive in any industry sector, including:

Taking the above steps now, NACFAM concludes, will accelerate the rate of manufacturing innovation, stimulate investment in the most advanced manufacturing equipment, continually improve workforce skills, and create a voice in the federal government to ensure the continuation of manufacturing-friendly public policies.

NACFAM is a nonprofit organization established in 1989 to enhance the productivity of all tiers of U.S.-based manufacturing. Industrial Transformation will be available at http://www.nacfam.org/.

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State and Local Tech-based ED RoundUp

Arizona Legislation to Encourage Tech Transfer Awaits Voters' Approval
House Bill 2403, a measure that ultimately would encourage technology transfer, has been signed by Arizona Governor Janet Napolitano and now awaits approval by voters. Passing the Arizona State Legislature in late May, the legislation provides that Arizona's universities may partner with private companies in business ventures. State agencies and organizations would be able to take equity investments in firms wanting to market products developed at the universities. Arizona voters will decide at the next general election whether to approve the change in the state's Constitution. The complete text of HB 2403 is available at: http://www.azleg.state.az.us/

Shreveport, LA Receives $1.05 million for TBED
The Biomedical Research Foundation of Northwest Louisiana has secured $1.05 million in federal funding to jumpstart tech-based economic development in Shreveport, The Times recently reported. The U.S. Department of Housing and Urban Development's Economic Development Initiative Program is providing the funding, which will go toward obtaining land for the Foundation's InterTech Science Park and purchasing equipment for a $10 million wet lab incubator. Construction of the 60,000-square-foot incubator is expected to begin later this year. The Foundation promotes economic development by supporting enterprises that advance healthcare delivery, medical research and medical technology.

North Carolina's TDA Dissolution Approved
By a unanimous vote, the board of the North Carolina Technology Development Authority (TDA) has decided to dissolve the 11-year-old organization, unable to overcome the political and financial fallout from a 2002 state audit finding of financial mismanagement and inappropriate spending of $1.5 million. The organization, which runs a seed capital fund and a network of incubators, had received $19 million from the state over the years. "The Governor supports the dissolution of the TDA with the return of the assets to the state," Governor Mike Easley's spokesperson said in the May 31 issue of the News Observer (Raleigh). Several proposals are being floated to establish a new entity to provide similar tech-based economic development services for North Carolina.

Rural Utah to Get Broadband with $1.3 million from USDA
Agriculture Under Secretary for Rural Development Thomas Dorr and U.S. Senator Bob Bennett recently presented checks totaling $1.3 million to two Utah businesses that have committed to developing rural broadband services in Utah. Skyline Telecom in Fairview, Utah received an $850,820 grant to provide broadband connectivity to the Goshute Indian Tribe Reservation located in Skull Valley in Tooele County. Uintah Basin Telecommunications Association, Inc. (UBTA), received two separate grants totaling $468,385 to provide broadband connectivity to the Northern Ute Tribe in Whiterocks, Uintah County, and the community of Altamont, Duchesne County.

Communities selected do not have access to broadband connectivity for essential services of police, fire protection, hospitals, libraries and schools. In return for receiving a grant, the communities will provide community residents with computer and Internet access. The grant program supplements USDA Rural Development's standard high-speed telecommunications loan program.

Vermont Creates Department of Information and Innovation
Vermont Governor Jim Douglas recently signed into law a bill creating the Department of Information and Innovation as part of the state's Agency of Administration. The creation of the department aggregates the efforts of Vermont's information technology (IT) employees, provides them with a prominent seat at the table of government, and creates a Technology Advisory Board made up of public, private and academic experts who will assist in guiding the state's technology development and implementation. State employees from existing departments will comprise the new Department, whose commissioner will also be chief information officer.

Entrepreneurs, Small Businesses to Benefit from VCEDA Programs
The Virginia Coalfield Economic Development Authority (VCEDA) has approved two programs that will enable it to more effectively promote entrepreneurial development and small business growth in the coal-producing region, according to the Bristol Herald Courier. "The Entrepreneurial Development Matching Grant program, funded $50,000 annually for the next five years from the authority's undesignated money, would give matching funds to help entrepreneurs in the coalfield region grow businesses," the Courier reported. The second program, the Seed Capital Matching Loan Fund, will help startup and emerging small businesses by providing matching loan funds. Money for the fund, $50,000 a year for five years, also will come from the authority's undesignated money. VCEDA was created by Virginia’s General Assembly in 1988 to enhance and diversify the economic base of seven counties – Lee, Wise, Scott, Buchanan, Russell, Tazewell and Dickenson – and the City of Norton.

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