In the April 12, 2004 Issue:

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The Value of Statistics for TBED: Part One
SSTI looks at Milken's State Technology & Science Index
During a presidential election year, perhaps more than any other time, the public is bombarded with statistics: voter surveys, polls, budget deficits, climate change, changes in employment or stock markets or trade, and others. It becomes difficult to determine which figures are true and which have been spun or manipulated for a particular purpose. The value of a statistic should be directly related to its quality. Unfortunately, how widely particular statistics are disseminated and repeated more often determines their acceptance or "truth."

Numerous statistics and rankings are often used in the marketing and promotional efforts of state and local economic development agencies and regional chambers of commerce. As a result, an observer has to look closely at what is being measured when multiple states or communities proudly claim to be first in something. They obviously are not all number one, unless, for instance, City A's claim is on an absolute basis, City B tops the list on a per capita basis, and City C has looked at the data as a percent change or relative to some other selected criterion.

More importantly, stats should play a prominent role in developing and refining public policy for tech-based economic development (TBED). Decision-makers should be interested in determining which programs and policies to implement, what issues need to be addressed, and how well existing TBED efforts are working. Reliable and valid statistical measures should be a part of the discussion.

Two recent papers provide quick case studies to illustrate the good and ugly side of applying statistics to TBED policy development. This week, SSTI examines the Milken Institute's 2004 State Technology & Science Index. Next week, we'll consider "Do Science Parks Generate Regional Economic Growth: An Empirical Analysis of their Effects on Job Growth and Venture Capital?," a working paper from the AEI-Brookings Institute for Regulatory Studies.

Milken's second index has received wide coverage in the general media and economic development community since its release a couple of weeks ago, and it should -- but not because of which particular states come out on top, in the middle or toward the bottom of any of the 75 indicators used in the index. With its new index, the nonprofit and nonpartisan Milken Institute dares to ask if these particular indicators are useful for developing a reliable and predictive model for benchmarking tech-based economic growth on a state level.

The 75 indicators are grouped into four input categories or composites - Research & Development Inputs; Risk Capital and Infrastructure; Human Capital Investment; and, Technology and Science Workforce - and one outcome composite called Technology Concentration and Dynamism. If the model is of any value for TBED policy development, the report contends, then the outcome should be "predictable" or explained based on the four input composites.

Results of a regression analysis and other econometrics used by the Milken Institute found 84 percent of variation in the Technology Concentration and Dynamism composite across states could be explained by movement in the other four composites. In addition, the Index also was "able to explain more than 75 percent of the variations in per capita income of the working age population across the states."

These figures are impressive and suggest the model can provide a useful tool, over time and with further refinement, to help states to assess which elements or measures should be the highest priority. For example, looking at the time series properties of the Index, Milken concludes, "the results indicate that for states with the lowest per capita income, the highest rates of return to investment appear to be in the improvements in broad measures of human capital, such as percent of adult population with a bachelor's degree or greater... At the other end of the scale, there is a long time lag between improvements in the R&D infrastructure and technology outcomes, but they are highly significant. Enhancing the entrepreneurial skills and venture capital networks of a state will garner enormous returns."

The 2004 State Technology and Science Index: Enduring Lessons for the Intangible Economy is available on the Milken Institute website at: http://www.milkeninstitute.org/publications/publications.taf?cat=ResRep&function=detail&ID=304

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UVM Tech Center Advances Governor’s Initiative
The launch of a targeted small business development program designed to foster the success of new high growth, high-tech firms in Vermont was announced last month at a press conference by Sen. Patrick Leahy, Gov. James Douglas and University of Vermont (UVM) President Daniel Fogel.

The Vermont Center for Emerging Technologies (VCET) is a key component of Gov. Douglas’ strategy to support business innovation and growth in Vermont. Since the governor has taken office, $500,000 in state funding has been appropriated to support incubator initiatives and an additional $125,000 in the fiscal year 2005 budget has been requested specifically for VCET.

VCET is intended to bring together the resources of existing and planned business incubators in Vermont. The center will tap the technology potential in Vermont and transform that into jobs, Sen. Leahy said.

Also benefiting from the initiative is UVM’s research and development department, which has experienced a steep rise in federal funding in recent years. With the VCET structure in place, research at the university could present significant technology transfer opportunities resulting in new products and companies. UVM has issued nearly 80 invention disclosures and licensed 26 patents over the past three years.

A congressional appropriation of $1 million secured by Sen. Leahy will help to launch the center that will be housed in Farrell Hall on the Trinity College Campus. The UVM press release is available at: http://www.uvm.edu/news/print/?action=Print&storyID=4807

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Illinois’ Hydrogen Highway Promising For State’s Economy
Hydrogen and fuel cell technologies in Illinois could produce sustainable economic growth and environmental benefits for years to come, suggests a report recently released by the Illinois Coalition. Prepared by the Illinois 2 H2 Partnership, The Hydrogen Highway: Illinois’ Path to a Sustainable Economy and Environment looks to establish the state as an international leader in the fuel cell industry.

A true hydrogen economy for Illinois may be years into the future, the report explains, but incremental steps taken today may accelerate and define that future, specifically the hydrogen highway. An area of approximately 120 miles along interstate 90, the hydrogen highway would be a corridor of hydrogen energy demonstration projects with a fueling station situated about every 20 miles. The highway's purpose is twofold -- stimulate the economy while protecting the environment.

Illinois already possesses some advantages over technology-driven states such as California, Connecticut, Michigan and Ohio, the report argues. For example, Illinois has utilized its universities, federal labs, nonprofit research institutes and emerging start-ups to make it a leader in developing hydrogen technology, said Chris Tynan of Illinois 2H2. Advocates also point to a strong manufacturing base.

Recommendations of The Hydrogen Highway fall in three broad categories:

In the final section, these categories are integrated into a specific and actionable goal of the hydrogen highway. The Hydrogen Highway: Illinois’ Path to a Sustainable Economy and Environment is available at: http://www.ilcoalition.org

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West Virginia Passes Two TBED Tax Credits
The jury's still out on the appropriate role or effectiveness of most tax credits to encourage tech-based economic development (TBED), but most politicians and economic development practitioners believe their state is at a competitive disadvantage without at least a few breaks.

With Gov. Bob Wise's recent signature on two bills, West Virginia becomes the latest state to add two tax credits of potential value for the state's growing tech community. Both the High Growth Business Investment Tax Credit and the Strategic Research and Development Tax Credit offer incentives for investment in growth-oriented research and development (R&D) businesses and assisting R&D companies in the early stages of operation.

Guidelines for the High Growth Business Investment Tax Credit include:

The Strategic R&D Tax Credit may be used to offset up to 100 percent of business franchise, corporation net income or personal income taxes. The credit will equal the higher of 3 percent of all qualified R&D expenses and investments for the tax year, or 10 percent of their excess for the tax year over the average of the expenses for a base period. The base period is said to be the three years prior to the tax year when the R&D expenses and investments occur.

House Bill 4047 and Senate Bill 204, which detail the tax credits, are available in their entirety through the West Virginia legislature at: http://www.legis.state.wv.us/legishp.html

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Studies Offer Conflicting Forecasts for Foundation Giving in 2004
Separate reports from the Foundation Center and The Chronicle of Philanthropy indicate that foundations will continue to see their assets recover in 2004. The studies provide differing views on estimated growth in giving for the upcoming year, however.

A notable increase in funding will be seen as foundations’ assets recover, according to the Foundation Center’s annual report, Foundation Growth and Giving Estimates 2003 Preview. The persistent decline of the stock market in 2002 and into early 2003 is cited as a central reason why foundation giving experienced by an overall 2.5 percent decrease in 2003. However, the percentage decline in giving was less than expected considering the loss of more than 10 percent in foundation assets between 2000 and 2002.

The center's study indicates that independent foundations, including family foundations and new health foundations, comprise the vast majority of funding. Their total giving declined by an estimated 3.3 percent in 2003, following a 7.6 percent drop in independent fund assets in 2002. Corporate foundations, the next largest sector to provide funding, decreased by 2 percent, the first decline in giving since the Foundation Center began tracking the figures in 1987.

Community foundations, on the other hand, reported a slight increase of 1.5 percent, following a 5.1 percent rise in 2002. Overall, community foundations saw the least amount of change in their assets possibly due to increased giving and an unchanged level of new gifts into the community foundations, the report suggests.

Not all is gloom and doom for those who rely on foundation funding, however, as giving in 2004 is expected to rise, the Foundation Center observes. According to the latest foundation giving forecast survey, 45.4 percent of respondents indicated they expect to increase giving, while 36.4 expect no change. Only 18 percent of foundations said they anticipate a decline in funding. Independent foundation respondents were most likely to increase giving and nearly half of corporate respondents indicated no change.

While the Foundation Center reports a likely increase of funding in 2004, a new survey by The Chronicle of Philanthropy indicates that charitable funds plan to freeze their grant making at the 2003 levels, citing small economic gains and a volatile market.

Assets did begin to grow in 2003 for the nation’s largest private foundations, according to Standard & Poor’s 500 Index, a catalog of stock prices for 500 publicly traded companies. However, many foundations’ investments are still worth less than they were a few years ago, the survey shows.

The Chronicle surveyed 141 foundations and found that 73 planned to keep grant budgets the same, while only 46 expected an increase. In 2002, the William and Flora Hewlett Foundation cancelled its plan for a $20 million national program to help minority youth due to a rapid loss in its investments. Other foundations are expected to follow suit in 2004, slowing the growth of new programs or putting them on hold even if their giving remains the same because of the loss of assets and their slow recovery, the report indicates.

The Foundation Center study relied on figures reported by large and mid-size independent corporate and community foundations that responded to the foundation giving forecast survey along with figures from year-end fiscal indicators and is available at: http://fdncenter.org/research/trends_analysis/. The Chronicle of Philanthropy article can be viewed at: http://philanthropy.com/summary/v16/i10.htm

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Useful Stats: Top 100 Wireless Cities, Colleges
America loves lists of the top "fill in a number" for almost anything. When the almost anything is actually useful information, then a community or state's ranking can help guide public policy discussion toward moving up or down the list as would be deemed most desirable.

Some rankings, however, tend to serve the lists' developers more than public good (such as those based on ad sales in magazines or poorly constructed samples, formulae or data). Other rankings, because of their wide distribution or coverage in the media, can have unintended negative consequences for policy development. AEA's Cyberstates report is perhaps a good example of how, for many, the definition of high-tech is now limited to or synonymous with businesses in information and communications technologies.

The "Most Unwired Cities and Colleges" lists developed by Intel Corp., makers of the Centrino™ mobile technology, seems to cross list types. Wireless Internet accessibility does allow greater freedom for communication and web-based productivity, but it also requires currently the purchase of broadband service, a router and and some Wi-Fi card or technology, like Centrino.™

Wi-Fi's potential to make Web-access virtually free - because anybody within range with the right technology can connect to the web - has some Internet service providers nervous. Several communities are already working on wireless neighborhoods as an economic development tool (see the Aug. 29, 2003, issue of the SSTI Weekly Digest). Others see it as a cost-effective way to tackle the digital divide.

So it is that Intel's second annual lists of the top 100 unwired cities, colleges and airports is presented:

More information on Intel's method for developing the lists can be viewed at: http://www.intel.com/pressroom/archive/releases/20040406corp.htm

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New Resources: ACA Launches Website
Best practices and a how to guide written by real practitioners of angel financing are just two of the new resources available through the Angel Capital Association (ACA). The following papers for understanding and growing a local seed capital activity within a region are available through the association's website:

In addition, ACA provides a number of tools to guide communities as they develop local angel capital organizations:

Each report, as well as other information about ACA, is available at: http://www.angelcapitalassociation.org/

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People

Several staff changes occur within the U.S. Department of Commerce:

Scott Davis will be the new director for the University of Arizona Office of Economic Development.

Dave Eater has announced his departure from the New Jersey Science and Technology Commission.

Jill Felix, chief executive officer of the University City Science Center in Philadelphia, has announced she is stepping down.

Marye Ann Fox, chancellor of North Carolina State University, is moving on to become chancellor of the University of California, San Diego.

Don Gentry, vice provost for engagement at Purdue University, has announced his retirement.

South Dakota Gov. Mike Rounds has appointed Jim Hagen to serve as secretary of the governor's Office of Economic Development.

Pam Inmann is the new executive director of the Western Governors Association.

Massachusetts Gov. Mitt Romney appointed Ranch Kimball to serve as his new economic development secretary.

The Allegheny Conference on Community Development announced the following three staff appointments: Leigh McIntosh was named special projects director, Katherine Needham is a new senior vice president, and Roger Cranville will serve as senior vice president of business investment for the Pittsburgh Regional Alliance.

Nancy Stark has left the National Center for Small Communities to direct the new Rural Governance Initiative, a joint venture of the Rural Policy Research Institute and the Corporation for Enterprise Development.

Brian Vogt is the new director of the Office of Economic Development and International Trade in the Colorado Office of the Governor.

The Association of American Universities has named Pat White to serve as director of federal relations.

Washington Gov. Gary Locke appointed Juli Wilkerson to serve as director of the Department of Community, Trade and Economic Development, replacing Martha Choe, who is now serving as state coordinator for the Boeing 7E7 project.

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