In the April 19, 2004 Issue:

Copyright State Science & Technology Institute 2004. 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.

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Kansas Primes Biotech, Entrepreneurship with Cool Half-Billion
A minimum $500 million 10-year investment to encourage biotech and entrepreneurship may soon become a reality for Kansas. With Gov. Kathleen Sebelius' approval of the Kansas Economic Growth Act, Kansas will set in motion a variety of new programs to encourage research, innovation and technology commercialization.

Much of the state's multimillion-dollar initiative is carried by its biotech element. A newly-created Kansas Bioscience Authority will oversee and administer the investment, with the goal of recruiting 25 eminent and 35 rising star scholars at state universities. The independent public agency also will provide funds for developing lab space and equipment to conduct biosciences research.

Other programs to be run by the Authority include a research incentive program pairing bioscience companies with Kansas universities, a technology transfer program, and a program to identify patents with commercial potential. In addition, the Kansas Economic Growth Act includes several tax proposals to encourage the growth of bioscience firms (see the Jan. 30, 2004, issue of the Digest).

Funding for all biosciences activities would come from the tax income generated from the growth of Kansas bioscience companies and research institutions over the next 12 years. The $593.1 million in revenue expected to result from this growth does not include any revenue resulting from a proposed seed capital fund or the additional capital gains from private investors in Kansas’ new bioscience start-up companies.

Meanwhile, the Kansas Economic Growth Act also creates five major initiatives to foster entrepreneurship across the state:

Approximately $3.5 million over 10 years is needed to cover the entrepreneurship center's operating expenses and the entrepreneurship fund's initial investment. Additional funding for the Enterprise Facilitation Program has not not been identified.

Collectively, House Bill 2647 and Senate Bills 393, 480 and 520 comprise the Kansas Economic Growth Act. With Gov. Sebelius' signature on all bills, expected today, the Act will become law. More information is available at: http://www.ktec.com/news/legislator/legislativewatch.htm

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SSTI Analysis
The Value of Statistics for TBED: Part Two
SSTI looks at paper on research parks
Last week's issue of the SSTI Weekly Digest included a brief review of a report which, in our opinion, included the use of statistics to potentially advance the discussion of what comprises effective tech-based economic development (TBED). Perhaps econometricians and other academic researchers may take issue with particular elements of the Milken Institute's approach, data set, equations or conclusions, but the model makes sense logically even to those of us without advanced degrees in statistics.

This week, SSTI turns its editorial attention to a recent working paper by Scott Wallsten and issued jointly by the American Enterprise Institute (AEI) and the Brookings Institute,Do Science Parks Generate Regional Economic Growth? An Empirical Analysis on their Effects on Job Growth and Venture Capital. This paper in our opinion represents how statistics and evaluation can result in faulty conclusions from a poorly structured model. The paper provides several lessons in what not to do when attempting to evaluate the effectiveness of TBED programs.

After reading the Science Parks paper in early March, we came to the conclusion it was not worth the attention of our readers. It certainly is not up to the high quality of past reports from the Brookings Institute, no matter how controversial the results or conclusions (for instance, see Signs of Life: The Growth of Biotechnology Centers in the U.S.). However, because so many in the TBED community have now seen only Wallsten's erroneous conclusions in Science Parks, printed as if truth, we feel the need to comment.

One of the major lessons learned from this paper is the effectiveness of any tech-based economic development program or policy should be based on variables and factors known to be related to the individual program or policy. Some programs will fail, some will succeed. But you would never be able to determine which is true in your particular situation if you applied the model used in the AEI-Brookings paper.

The Milken Index asked which generic measures could be used effectively to predict state-level growth of a knowledge-economy. In contrast, Wallsten purports to evaluate the effectiveness of a specific local TBED strategy, creating a local science or research park, using only three generic county-level measures: high-tech employment, number of high-tech firms, and venture capital investments. The difference is significant.

Wallsten contends that since venture capital is associated with strong regional technology clusters and communities establish research parks to create technology clusters, then the creation of a park will result in more venture capital. However, that logic escapes us. One would need to determine first if venture capital investments and research parks are associated strongly with each other, and there's no reason to think that they would be.

How many research, technology or science parks have as their primary goal to increase the amount of venture capital? None of which we are aware. Conversely, how many seed and venture capital groups would say the best way to increase the availability of capital in a community is to establish a science park? Lesson: if you want to determine a TBED program's effectiveness, use measures that are consistent with and related to the purpose of the program or policy.

Another concern is the definition and use of the variable for presence of a science park. The author wants to look at employment five years before and five years after establishment of a park. But what defines the establishment of the park? The date the first shovel is turned for infrastructure improvements? The first tenant that occupies space? The community or university commits or receives funds to establish the park?

The establishment or creation date for a research park can vary significantly in meaning, and which date is picked is one of the variables as to when the clock starts ticking for job creation. The author seems to think the success of any science park can be determined within five years of its establishment. Yet, technology parks generally do not yield immediate results. The second lesson, then, is to be familiar with the time requirements of the particular program or policy.

There exist other significant differences among science parks that would affect their ability to contribute significantly to the county-level data the author uses for this paper, with the park's size being perhaps the easiest to consider here. Research parks can be as small as a few buildings on a city block to more than a thousand acres. A park that can only accommodate a few companies with even several hundred jobs in total is not likely to create much of a blip on the county level data if the county itself is quite large. Proximity of the park to one or more research universities, federal lab or large R&D facility may also be an important variable for determining the success of a park. The amount of money necessary to develop the park and the services, if any, provided in conjunction with the real estate also may play roles in the park's success. A third lesson for those attempting to evaluate a TBED program might be to understand the characteristics of the program, the dif ferent approaches that could be encountered, and the other variables affecting program design and success.

The author concludes that research parks are not likely to help generate technology-based economic growth and that subsidies spent on them are likely to be ineffective. The author's model, however, is so fundamentally flawed that it undermines any potential conclusion -- positive or negative -- at which he would arrive.

Since its inception, SSTI has stressed the importance of evaluation and encouraged state, federal and foundation funders to help advance the field of evaluating the effectiveness and impact of TBED programs. The AEI-Brookings paper does more to set evaluation of TBED back than it does to move it forward.  We eagerly await the results of any credible assessment of the overall effectiveness of research parks; this paper is not it.

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Czech Republic Making $418M TBED Investment
With its economy already outpacing the average growth for the member states of the Organisation for Economic Co-operation and Development (OECD) for the past five years, the Czech Republic is injecting 348 million euros ($417.6 million US) into several tech-based economic development (TBED) initiatives.

CzechInvest will coordinate development of strategic components of the nation's business environment including: the development of science and technology parks, incubators and technology transfer centers; subsidies for applied research projects undertaken by companies of any size; and a wide range of support for small and medium enterprises.

Based on the Czech Republic's population of 10.2 million people in 2003, the country's commitment on a per capita basis would be the equivalent of the U.S. making an $11.8 billion investment in state and local TBED.

Using Ireland and Spain as models, the Czech Republic's focus with the funds is to further develop its overall business infrastructure and build key sectors, including the life sciences, microelectronics and semiconductor industries. The nation is seeking to expand its R&D facilities, continue marketing to foreign investors in selected industries, and create financial support for emerging enterprises. Portions of the funding will also be earmarked for supporting human resource development, the accelerated regeneration of business properties, and to assist small and medium enterprise development in economically weak regions.

The $348 million total is achieved by the European Union's Structural Funds Program contributing 216 million euros in non-reimbursable assistance and a match of 87 million from the government of the Czech Republic.

More information about CzechInvest is available at: http://www.czechinvest.com

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Maine Laptop Program Paying Benefits
When first proposed in 2000, the concept was radical, controversial and expensive. Simply give a wireless laptop to all seventh and eighth grade students and teachers in the entire state of Maine.

The problem of expense, initially estimated to be $50 million for 35,000 laptops, took on greater significance as the state's revenues began to decline. Former Governor Angus King persisted and, 16 months later, a scaled back $30 million program allowed seventh-graders to use the computers in class and sign them out for use at home. The following year, the program was expanded to include eighth-graders.

As those students, who have now used laptops for two years of instruction, Internet research and homework, move into ninth grade, the State Board of Education has unanimously endorsed a statement urging the state legislature to expand the computer program into the high schools.

But is the state's investment making a difference, even with the attractive $300 price negotiated with Apple for each laptop?

The anecdotal evidence regarding decreased absenteeism, increased student engagement in the classroom, and improvements in behavior and achievement has been strongly favorable but not rigorously studied.

The first two reports in a series of several evaluating the program's impact from several difference perspectives, provides an initial structured, objective look into the program's effectiveness. Prepared by the Maine Education Policy Research Institute, The Impact of Maine's One-to-One Laptop Program on Middle School Teachers and Students (Research Reports #1 and #2) used several different surveys of students, teachers and principals to assess the usage, value and impact of the two-year-old program.

Conclusions drawn from the first research report include:

The program does have room for improvement and further research, however, according to the initial report. Teachers reported that the greatest obstacles in integrating the laptop technology more into their curriculum and instruction are the lack of technical support, the lack of more professional development opportunities, and the lack of time. Additionally, superintendents reported some increases in costs with implementation of the laptops.

Teachers surveyed also reported that all types of students are more engaged in their learning and more motivated to learn, particularly at-risk and special needs children. The Maine Education Policy Research Institute's second report specifically considered the perceptions of special education teachers on the use and value of laptops for seventh grade students with disabilities.

The second report concludes that while writing quality and quantity improved, materials were organized more easily, and student engagement increased significantly, "the laptops were perceived to be of clear benefit to the majority of students with disabilities... However, there were a few exceptions. Students who were highly distractible, blind and partially sighted students, and highly anxious students with low tolerance for frustration were all described as students who could not benefit from the use of laptops."

These papers and others on the Maine Learning Technology Initiative, the laptop program's official name, are available at: http://www.usm.maine.edu/cepare/mlti.htm

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Three New Reports Examine Manufacturing Evolution As Restructuring Continues
Plagued by job loss and fierce global competition over recent years, several new reports indicate the manufacturing sector is beginning to see a revival as the industry continues to undergo long-term restructuring. Brief summaries of each report are provided below:

Manufacturing’s Performance and Prospects
Manufacturing has lost approximately three million jobs since 1998 due to structural changes in productivity and overseas competition, according to a report by Mark Zandi of Economy.com. Commissioned by the National Governors Association, Manufacturing’s Performance and Prospects examines the state of manufacturing in the U.S., the impact of productivity and global competition on manufacturing jobs, and the prospects for growth. According to Zandi, the worst of the downturn is over as several industries such as computer hardware and software, transportation, and distribution that were previously struggling are now expanding and demand for manufactured products is rising.

While the free fall in manufacturing is over, the report indicates, it will continue to be a weight on the broader economy’s growth prospects. Zandi forecasts that global competition will remain intense; however, rapid advances in manufacturing will ensure that productivity remains robust.

Manufacturing’s Performance and Prospects is available at: http://www.nga.org/nga/legislativeUpdate/1,1169,C_ISSUE_BRIEF%5ED_6614,00.html

Restructuring in the Manufacturing Workforce: New York State and the Nation
Although the losses in manufacturing jobs have been heavy and seemingly always in the forefront of the news, The Federal Reserve Bank of New York reports that manufacturing employment has in fact been declining over many years. On the contrary, jobs are growing in almost all parts of the country, the report indicates, even the places where job loss has been the most severe. The composition of the workforce is changing dramatically, shifting to the need for high-skilled workers.

Restructuring in the Manufacturing Workforce: New York State and the Nation analyzes the restructuring of the manufacturing workforce over the past two decades by investigating how the occupational distribution of workers has changed and identifies important regional differences in the nature and degree of restructuring. The overall trend reported is that the decline in manufacturing jobs has generally been accompanied by a shift in the remaining workforce composition toward high-skilled occupations. New York’s manufacturing workforce in particular has undergone only a mild degree of restructuring, compared to the Northeast, which has seen the most dramatic changes, the authors note.

Restructuring in the Manufacturing Workforce: New York State and the Nation, is available from the Federal Reserve Bank of New York at: http://www.ny.frb.org/research/regional_economy/upstatenews.html

High Technology Manufacturing and U.S. Competitiveness
With the goal of providing a framework for understanding when and why U.S. policymakers should worry about certain trends in manufacturing, the White House Office of Science & Technology Policy commissioned a report presenting data and analysis focusing on the information technology sector in general, and more specifically on computer hardware and semiconductor manufacturing.

High Technology Manufacturing and U.S. Competitiveness was presented to the President’s Council of Advisors on Science and Technology (PCAST) subcommittee on the heels of a concern that the large share of high-tech manufacturing formerly performed in the U.S. now being sent overseas may have potentially harmful consequences to the economy. Specifically, the PCAST subcommittee was interested in what actions the government should undertake and how to distinguish among serious and less serious concerns regarding the loss of the U.S. traditional and high-tech manufacturing base.

Among some of the conclusions made within the report is that there is no empirical evidence that the U.S. is in danger of losing its overall manufacturing capabilities to foreign competition, and declines in U.S. manufacturing can be directly attributed to increased manufacturing productivity. Also noted is that funding for industrial research and development (R&D) has remained fairly steady over the past three decades and has increased recently despite a decrease in federal funding for industrial R&D.

High Technology Manufacturing and U.S. Competitiveness is available at: http://www.rand.org/publications/TR/TR136/TR136.pdf

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