In the September 12, 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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New Regional Centers for Biodefense Research Awards Total $350M
Approximately $350 million in grants recently awarded by one of the nation's leading biodefense research agencies are intended to lessen the effects of any future bioterror attack. Administered by the National Institute of Allergy and Infectious Diseases (NIAID), the funding will be spread over five years for establishing eight Regional Centers of Excellence for Biodefense and Emerging Infectious Diseases Research (RCEs).

Each regional center, receiving between $40-50 million, consists of several partner institutions. The eight leads are Duke University, Harvard Medical School, the New York State Department of Health, the University of Chicago, the University of Maryland, the University of Texas Medical Branch in Galveston, the University of Washington, and Washington University in St. Louis.

In light of the terrorist attacks of 2001, Department of Health and Human Services (HHS) Secretary Tommy Thompson said the RCEs will not only prepare the U.S. for a bioterrorism attack, but also enhance the nation's ability to deal with any public health crisis, such as SARS and West Nile virus. NIAID, a part of HHS' National Institutes of Health, will oversee the nationwide group of multidisciplinary centers.

The RCE program's primary role is to foster the physical and intellectual environments in which wide-ranging research on infectious diseases can proceed productively and safely. Economic development impacts are expected from each center through knowledge spillovers and commercialization efforts. All RCEs will:

In addition to the eight RCEs, NIAID is funding two planning grants to support training, research development and resource acquisition that could lead to the future establishment of regional centers. More information on all of the grants, including the winning institutions and their principal investigators, is available through the agency's website: http://www.niaid.nih.gov/biodefense/

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Fed Looks at Biotech Policies, Payoffs for States
Specialization may be the key to successful economic development strategies based on the life sciences, suggests the September issue of the fedgazette, published by the Federal Reserve Bank of Minneapolis. This month's entire e-zine focuses on two issues of importance to many state and local tech-based economic development professionals — biotechnology and clusters.

Because the intellectual capital of the anticipated biotech revolution is highly mobile and the spillovers of bioscience research tend to be localized and concentrated geographically, the broad-brush approaches adopted by many states to build a biotech sector are not likely to have the desired payoff, fedgazette editor Ronald Wirtz writes in the cover article.

“One possible strategy is to eschew efforts to catch up to already hot biotech sectors, like biopharma. Rather, economies that benefit from the bio-revolution likely will be those that identify new biotech opportunities and applications coming up the road that also mesh with regional strengths.”

It follows then, not surprisingly, that Wirtz suggests the five Upper Midwest states represented by the Federal Reserve Bank of Minneapolis should look more closely at niches in ag-biotech, such as commodity-specific applications, biofuels, functional foods, bio-modified manufacturing and the continually controversial genetically modified organisms (GMOs).

The nature of the ag-biotech side of life science research, in which 70 to 90 percent of the patents come from industry rather than universities according to one of the article sources, may play well into the hands of regions lacking an academic biotech research powerhouse. Lower land rents and the availability of people to fill biotech’s many low-skill jobs also can provide an economic development edge for communities in the region, Wirtz adds.

Other articles discuss the difficulty in defining and measuring the biotech sector, given its broad applicability. The September issue of the fedgazette is available at: http://minneapolisfed.org/pubs/fedgaz/index.cfm

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Recent VC Developments in the States…
The availability and use of equity capital for early-stage investments varies greatly across the country. Seen as an integral component of most tech-based economic development, access to venture capital (VC) is on the agendas of several states — but several different approaches are used to address the problem. Recent announcements in four states illustrate the point:

Florida
A small portion of Florida's pension fund will go toward venture capital investments, according to the Orlando Sentinel. Though not widely publicized, the state's pension fund managers have decided to invest up to $400 million in venture capital funds — barely one-half of 1 percent of Florida's pension, which is $90 billion-plus. The Sentinel reports the move should help Florida rebound from its "worsening" venture scenario. Florida has experienced a decline in the venture dollars its companies have received, from a 3 percent share of the U.S. total three years ago to 1 percent today.

Iowa
Gov. Tom Vilsack announced on Monday the creation of a $5 million venture capital fund to help Iowa's start-up companies grow, the Associated Press reported. The Iowa First Capital Fund is fully funded by private money and is presently worth $5 million, thanks to an initial investment by the insurance company AEGON, which has offices in Cedar Rapids. Corridor Management Co., a newly formed corporation based in Cedar Rapids, will manage the fund and will focus mostly on projects in the Cedar Rapids-Iowa City area. The fund is expected to increase to as much as $10 million in the coming weeks, with AEGON pledging to kick in another $5 million if the program is successful. The AP adds:

Vilsack and AEGON officials said the investment fund was established as part of the Iowa insurance industry's commitment to statewide business growth. It also keeps an industry promise made when the Legislature agreed to reduce taxes on insurance premiums in an effort to keep Iowa competitive with other states trying vying for growth and migration in the insurance industry.

Massachusetts
Even in states flush with venture capital, relative to other states, the Massachusetts Pension Reserves Investment Management Board has decided to commit two percent of its $28 billion in assets for economically targeted investments in economic development and housing projects. Types of investments to be considered include seed funding for industries "overlooked" by private venture capitalists. Manufacturing and services are singled out in the Boston Globe coverage of the decision.

Oregon
Gov. Ted Kulongoski signed HB 3613 earlier this summer, requiring that the Oregon Investment Council have at least $100 million in venture capital investment in Oregon businesses by Jan. 1, 2008. Like Florida, Oregon's venture capital funds will come from its pension fund, which is managed by the council. The bill is available in its entirety at: http://www.leg.state.or.us/03reg/measures/hb3600.dir/hb3613.en.html

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NYC Should Rethink its Economic Development Strategy, Study Says
A new study examining the post-Sept. 11 economy of New York argues the city's traditional approach to economic development, one which has banked on a few favored sectors such as financial and business services, is outdated and should be reconceived.

Engine Failure, a report funded by the Rockefeller Foundation, states that many of New York's troubling trends predate the terrorist attacks on the World Trade Center. Such trends – the FIRE (Finance, Insurance and Real Estate) sector losing jobs and market share to the surrounding region and other major cities, among them – were only accelerated by the after-effects of the Sept. 11 attacks and gains in telecommunications technology. Thus, New York's normally reliable industries are expected to produce minimal employment growth in the coming years.

Some of Engine Failure's key findings include:

Advances in technology, the study observes, have enabled firms greater flexibility in choosing whether to create or reallocate new positions, and many companies are increasing revenues without increasing their workforce. The result has been a rise in the number of firms outsourcing high-end service operations such as software programming. In addition, growing broadband and wireless telecommunications services have allowed more workers to stay at home, "miles away from their clients in Manhattan."

To recharge the New York economy, Engine Failure suggests that city officials pursue policies that help to retain fast-growing companies and sectors. It recommends creating a better climate for New York's entrepreneurs and small businesses, maximizing the potential of the neighborhoods and boroughs other than Manhattan, and making better use of the city's human assets. New York also must do more to preserve its immigrant- and minority-owned businesses, which have experienced significant outmigration in the last decade.

Engine Failure was conducted over an eight-month period, during which interviews were held with business owners, developers, ethnographers, government officials and others from across the five boroughs. The report is available at http://www.nycfuture.org/.

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Joint Biomass Initiative Distributes $23 Million for R&D, Demonstrations
Nineteen projects figure to share in the $23 million awarded last week by the U.S. Department of Agriculture (USDA) and the Department of Energy (DOE) for biomass research, development and demonstration activities.

USDA and DOE selected the projects as part of a joint program to increase America’s energy independence through the development of additional renewable energy resources from the agricultural and agroforestry sectors. Biomass is defined as organic matter that is available on a renewable or recurring basis.

“The conversion of biomass into biobased products, fuels and energy offers significant benefits to the nation through healthier rural economies, improved environmental quality and improved energy independence,” Agriculture Secretary Ann Veneman said. “These grants will help develop additional renewable energy resources and expand markets for agricultural products.”

The 2002 Farm Bill allocated $75 million to USDA over six years to fund research, development and demonstration projects under the Biomass Research and Development Act of 2000. The legislation established a governing board co-chaired by USDA and DOE.

USDA’s Natural Resources Conservation Service and DOE’s Office of Energy Efficiency and Renewable Energy coordinated efforts to issue a joint solicitation that is awarding nearly $16 million in USDA funding and more than $7 million from DOE appropriations. About 400 proposals requesting more than $370 million were competitively evaluated.

“This Administration is committed to the development of a next-generation of biorefineries that serve the nation by producing cost-competitive biobased industrial products and transportation fuels such as ethanol and biodiesel,” said Energy Secretary Spencer Abraham. “The development of the biomass industry and biobased products will have a tremendous economic impact on rural America.”

A listing of the 19 selected projects is available at http://www.usda.gov/.

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NSF Commits $2M to Study Nanotech Implications
Two new grants, each greater than $1 million, have been awarded by the National Science Foundation (NSF) to study the societal implications of nanotechnology — the emerging discipline that seeks to control and manipulate matter on a molecular scale. The grants are the largest awards the foundation has ever devoted exclusively to research in societal implications.

Nanotech has been considered by many in the tech-based economic development community to be a "transformative" technology, one that could change the way we live and work as profoundly as did the microchip or the automobile. To speed the development along, NSF and 16 other federal agencies are supporting a nearly $1 billion-a-year National Nanotechnology Initiative.

Davis Baird, a philosopher at the University of South Carolina and principal investigator on one of the two grants, is expected to set up an ongoing dialog on the various uses of nanotechnology. Just as researchers need to consider societal implications from the start, Baird states in a press release, "ethicists and other scholars need to understand what's possible in the lab."

The second grant will go to the University of California-Los Angeles (UCLA), where sociologist Lynne Zucker and her colleagues will study how newly acquired knowledge about nanotechnology makes its way from the laboratory to the marketplace. One of the major products of the UCLA study will be an extensive database on small startup firms in the nanotechnology arena and what factors influence how well ideas succeed in the marketplace.

"It will be a resource for scientists, journalists, policymakers — everyone," Zucker said. "It will help us understand how the knowledge is transmitted, what facilitates that transfer, what blocks it, and what works well."

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Sneak Peek at SSTI’s Annual Conference
Better Tools Build Better Times
Tight budgets are causing many state and local tech-based economic development (TBED) programs to delay new initiatives, even forcing some to scale back on the services already provided. But mottos like "getting more bang for the buck" and "doing more with less" are fast becoming tired, transparent clichés.

Given the economic restructuring underway (economists call it a jobless recovery), some states are beginning to rethink their whole economic development portfolio. During the past few weeks, alone, governors have created new commissions, committees or advisory councils to explore ways to foster better times. Everything is on the table. Elected stakeholders, policy makers, program practitioners and clients must feel the investments made toward building more prosperous economies are the right ones for their community — and that they are paying off.

Given this fiscal and political climate, tremendous opportunity exists for tech-based economic development programs to shine. But to be fully engaged in future efforts to build more diverse state and local economies based on science and technology, TBED management and staff need to know what works and show that they’re making a real difference.

Delivering the message and producing the results don’t always go hand-in-hand as only too many dust-gathering reports, plans and studies can attest. These documents – from the process of developing them to the final polished products – must lead to inspiration, motivation, implementation, improvement and results. But how?

To make your innovation index, annual report, strategic plan or marketing materials a must-read by your current and future stakeholders, there are six “must-attend” sessions at SSTI’s upcoming seventh annual conference. Learn firsthand though interactive and engaging discussions with expert practitioners and consultants from across the country who have done it successfully before.

The conference will be held in Seattle on October 21-22. More information, including a full PDF of the conference program and a registration form, is available at: http://www.ssti.org/conference03.htm [expired]

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Corrected Links for Manufacturing Story in 9/5 Digest
Through an editorial glitch between browsers, the two external links were inoperable in the lead story in last week's issue of the SSTI Weekly Digest, "President Wants Point Person on Manufacturing." Corrected links are available below and on the Web version of last week's issue (http://www.ssti.org/Digest/2003/090503.htm).

The article by the Federal Reserve Bank of New York, "Has Structural Change Contributed to a Jobless Recovery?" is available at: http://www.newyorkfed.org/rmaghome/curr_iss/ci9-8.html

The press release from the U.S. Department of Commerce is available at: http://www.commerce.gov/opa/press/2003_Releases/Sept/01_Manufacturing_position_announcement.htm

We appreciate readers bringing these errors to our attention and apologize for the inconvenience.

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