In the April 26, 2004 Issue:

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Florida Commits $1B in Pension Funds to Venture Capital Firms
In an attempt to attract more bioscience firms, Florida will invest up to $1 billion of its $102 billion employee pension fund into venture capital, the State Board of Administration recently announced. A forum was held last week by Enterprise Florida, the state's economic development agency, to outline the investment plan to more than 80 venture capitalists in attendance.

Leading the forum was Coleman Stipanovich, director of the State Board of Administration, Richard Lerner, president of the Scripps Research Institute and Gov. Jeb Bush. The pension fund is part of $5 billion the state puts into alternative funds to be used for higher risk investments, Stipanovich said. The first installment will be $350 million during the next 12 months.

With the Scripps Institute set to receive $569 million in state and county funds to build a research campus in 2006, spinoff research likely will be passed on to new companies in Florida, the Palm Beach Post reports. The message being sent to investors, the newspaper contends, is Florida becomes a good place to invest capital. The Scripps Institute is obligated to create only 525 jobs; however, 40,000 spinoff jobs could be created within the next 15 years, Gov. Bush said.

Some investment experts say using retirement funds for political or economic development goals may be too risky. When the Houston-based Enron Corporation collapsed in 2001, Florida’s pension fund lost $325 million on Enron stock, more than any other public pension fund. However, the state's lack of venture capital forces entrepreneurs to look for other sources of funding, something Gov. Bush said he intends to change. Lerner and Gov. Bush both want to tap the South Florida community of wealthy angel investors who have retired there or vacation frequently.

More information on the investment plan is available at: http://myflorida.com/b_eog/owa/b_eog_www.html.main_page

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Wisconsin Gov. Signs Bills to Create Start-Ups, Improve Manufacturing Climate
Two legislative bills encompassing economic development priorities of Gov. Jim Doyle’s Grow Wisconsin initiative recently were signed to provide assistance for both entrepreneurs and manufacturers.

Senate Bill 261 creates two tax credit programs to spur investment in start-up companies and fosters a new measure to provide funding and technical assistance to entrepreneurs. To encourage investors to take a chance on new Wisconsin companies, SB 261 offers $65 million in tax credits over the next 10 years. When fully deployed, the credits will leverage more than $260 million of investments from the private sector, Gov. Doyle said. The second part of the act provides $2.6 million for technology commercialization grant and loan programs in order to create a network of assistance centers to support entrepreneurs.

Also signed was Assembly Bill 859, which aims to restore Wisconsin's manufacturing sector. Gov. Doyle noted that the industry has lost more than 84,000 jobs in the last three years. Under the legislation, $1.5 million in funding will be allotted to manufacturing extension programs intended to help to manufacturers modernize and stay competitive.

The Milwaukee Journal-Sentinel reports that SB 261 is much less ambitious than the governor’s original proposal to create a $300 million pool of venture capital for start-ups. To no avail, some legislators had tried for a $75 million expansion program within the bill to give tax subsidies to certified capital companies.

Both of the legislative measures stem from the governor’s request to build a strong venture capital base as part of Grow Wisconsin, a comprehensive plan to improve job training, promote high-tech industries and upgrade manufacturing. The bills are available in their entirety through the Wisconsin State Legislature at: http://www.legis.state.wi.us/

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Nation's Position as Innovation Leader at Stake, Say Industry and Academia
The U.S. cannot take its position as a world leader of innovation and research for granted, suggest new initiatives sponsored by the National Science Foundation (NSF) and the Task Force on the Future of American Innovation. A report released on April 21 by NSF states the U.S. must take action, pointing out that invention requires both ingenuity and a skilled workforce. The task force - a group of 14 organizations associated with business and academia - unveiled its own advocacy campaign a day earlier, calling upon the federal government to grow the budgets of several key research agencies.

Targeted for policymakers and the public, the task force's initiative is aimed at reversing a decline in federal investment in basic research in the physical sciences and engineering. The decline, the task force says, puts at risk the development of new technologies, new industries and high-value jobs.

Basic research in areas such as chemistry, physics, nanotechnology, genomics and semiconductor manufacturing has brought about some of the most significant innovations of the last 20 years, the task force argues. The group points to the development of the World Wide Web, magnetic resonance imaging and fiber optics as evidence of the importance of basic research. The semiconductor industry alone has led to 226,000 jobs, the group notes, and basic research performed at America's universities has resulted in 4,000 spin-off companies hiring 1.1 million employees.

Despite their importance and economic impact, however, funding for such efforts has remained flat in constant dollars or decreased by 37 percent as a share of gross domestic product, the task force says. This has created "a serious risk that the American discovery stream will be reduced to a trickle with a negative impact on innovation in the U.S." Decreases in basic research funding in the President's recent budget request reflect the trend, as in past Administrations, the group adds.

In response, the task force launched an advocacy campaign that includes paid advertising and outreach to policymakers. The group is calling on the federal government to increase funding by 10 percent to 12 percent per year over the next 5-7 years for NSF, the National Institute of Standards and Technology, the Department of Energy's Office of Science, and the Department of Defense Research Accounts. The initiative will partly rely on testimony from U.S. companies and academics with experience in basic research.

The NSF report, INVENTION: Enhancing Inventiveness for Quality of LIfe, Competitiveness, and Sustainability, is the culmination of a year-long study by 56 leading scholars and practitioners. Over a series of five workshops, the group reviewed some of the pillars of invention and sought to better understand the role of inventive ingenuity in solving global problems. The resulting report asserts that the government, business and education sectors must actively foster inventiveness to safeguard the nation’s innovative edge in an increasingly competitive global market. Recommendations include:

An executive summary of NSF's report and other backgrounders, including summary reports on each of the five workshops, are available at: http://web.mit.edu/invent/report.html

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Small Firms Play No Small Role in Innovation Economy
Small firms, as much as large ones, may be key to the nation's ability to innovate, particularly in emerging fields, according to data published by the U.S. Small Business Administration (SBA). A report released earlier this year by SBA's Office of Advocacy shows that large firms in the biotechnology, medical electronics, semiconductor, and telecommunications industries are citing patents by small firms in higher-than-expected numbers.

The report, Small Firms and Technology: Acquisitions, Inventor Movement, and Technology Transfer, examines small firms' contribution to the innovation process through acquisition by larger firms and the hiring of elite inventors. Also considered is large firms' dependence on small firm technology through patent citations. The report's conclusions are drawn from two 1,000-plus databases of company patent activity from 1996 to 2000 and from 1998 to 2002.

Small businesses represent a growing share of the country's highly innovative firms (defined as those with 15 or more patents during either of the two study periods), increasing from 33 percent of the pool in 2000 to 40 percent in 2002. Small businesses also represented 65 percent of the new companies in the report's list of most highly innovative companies in 2002.

Small firms' contributions to technological innovations are best measured industry-by-industry, the report finds. Their importance is not immediately apparent when viewed in the aggregate, because small firms tend to be excluded from some key capital-intensive industries. The report cites examples such as the automotive, aerospace and oil research industries. The story becomes quite different for the emerging research and technology-intensive fields, however.

In biotechnology, small firm research and technologies are said to be used by large firms at a rate 60 percent higher than expected, and 41 percent of all biotech patent citations go to small firms. In fact, 66 percent of citations from large biotech company patents and 79 percent of small company patents are associated with the earlier work of small firms. This finding conforms well with the generally held notion that small firms lead the creation and technological growth of emerging industries before larger firms take on dominant roles through consolidations, mergers and acquisitions.

In terms of inventor movement, small company offices proved to be an attractive venue for elite inventors previously involved in the public sector. Those working for public sector organizations were 10 percent more likely to relocate to small firms than the researchers expected, based on estimates of all inventor migrations. However, large firms more than small ones demonstrated the greater likelihood to retain elite inventors, with nearly 75 percent of large firm inventors staying vs. about half for small firms and the public sector.

The study also finds larger firms are more likely to use the patents and technologies generated by small firms than acquire the firms in their entirety. In fact, based on a sampling of 43 acquisitions between 1994-1998, only a small number involved large firms buying small ones. The balance of the study group were mostly large firm acquisitions by even larger ones. This finding somewhat contradicts conventional wisdom that large firms gain their technology strength by gobbling up smaller, more innovative companies.

The SBA Office of Advocacy independently represents the views of small business to federal agencies, Congress, and the President. To obtain a copy of this report, visit http://www.sba.gov/advo.

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Useful Stats: 2001 Federal Extramural R&D by State
The National Science Foundation has released a new statistical report entitled Federal Funds for Research and Development: Fiscal Years 2001, 2002, and 2003. Included among the 112 tables are 10 presenting the 2001 data by geographic distribution, performer and federal agency.

Federal obligations for research and development in 2001 totaled $78.078 billion. One-fourth of the total was for intramural R&D -- research activities taking place within many federal labs, research centers and military installations. With $5.435 billion, Maryland captures the greatest share of federal intramural research. California, the District of Columbia and Virginia make up distant second, third and fourth place finishes, respectively.

The extramural, or external, portion of federal R&D expenditures is performed by industry, academia, federally funded R&D centers (FFRDCs), other nonprofit institutions and state and local governments. These funds, in excess of $58.5 billion in 2001, are awarded through a variety of competitive and noncompetitive methods. It is important to note, the FFRDCs include R&D activities that many would consider deep within the federal system and, perhaps, more appropriately classified as intramural. Examples of FFRDCs include the Department of Energy's labs (for example, Oak Ridge, INEEL, PNNL and Ames). A complete list of FFRDCs is available at: http://www.nsf.gov/sbe/srs/nsf04310/sectb.htm

SSTI has prepared a table presenting the 2001 federal extramural R&D budget by state, ranked on a per capita basis for the purpose of standardization. The results are available at: http://www.ssti.org/Digest/Tables/042604t.htm

On a per capita basis, the top five states were the District of Columbia ($1,375), New Mexico ($1,141), Maryland ($716.14), Massachusetts ($618) and Virginia ($455). Four of the top five rankings are held by states with significant federal presence, the only anomaly being Massachusetts. (Note: New Mexico benefits from the two large DOE labs, Los Alamos and Sandia.)

The order of the second five states is more interesting and perhaps less easy to generalize regarding an explanation: Connecticut ($374), Georgia ($368), Maine ($344), Alabama ($328), and California ($301).

Surprisingly, three of the top 10 states for extramural R&D obligations on a per capita basis meet the requirements for inclusion in the Experimental Program to Stimulate Competitive Research (EPSCoR) administered by several federal agencies to increase R&D activity within "underperforming" states. Conversely, and more consistent with the intent of the EPSCoR program, 13 of the bottom 16 positions in SSTI's table are held by EPSCoR states.

The full NSF report is available at: http://www.nsf.gov/sbe/srs/nsf04310/start.htm

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Research Park News

Alexandria, La.
An Alexandria native is looking to give his city its first research park, according to the Daily Town Talk. Originally proposed in November 2002, developer Jeff Richardson's plan would combine city resources as well as those of Louisiana State University and Southern University. The plan's first phase would cost $1.1 million annually, employing 15 workers, as part of a U.S. Navy project. The second phase would average about $1.5 million annually and add 10-12 positions.

Farmingdale, N.Y.
Following several years of anticipation, supporters of the Broad Hollow Bioscience Park expansion at Farmingdale State University can finally breathe a sigh of relief. The park will add a second building to its campus, starting this August, with the $17.2 million it received from the State University Construction Fund earlier this month, Newsday recently reported. Approval for financing of the 50,000-square-foot addition was in the works since the first building opened in 2000. Of the 20 acres available, only six are presently used by the park. A third building that would act as an accelerator for companies may be in future plans, supporters say.

Jacksonville, Fla.
A Jacksonville research park that ultimately was unsuccessful in attracting high-tech companies was purchased by the University of North Florida for $14 million, a sale pending on state approval, the Florida Times-Union reported last month. The First Coast Technology Park's 248 acres were first donated to the city's Research and Development Authority in 1987; however, the park only attracted the likes of a call center, a construction company, a security services facility and other non-high-tech companies.

The authority, which had been charged with overseeing the park, was not not certain about new use of the land at the time the Florida Times-Union story was published. A Jacksonville economic development official had indicated that research and development activities remained important to the city. Another official had said land situated near the university could serve as possible grounds for a research park elsewhere.

Madison, Wis.
To lure high-tech jobs to the city, the Madison City Council has approved plans to build a second university research park, the Capital Times recently reported. City council members stated during their April 20 meeting that the park would generate money from property taxes. The park and new housing also approved by the council would be located on property west of the Beltline and south of Mineral Point Road.

Memphis, Tenn.
If approved by the state's General Assembly, $10 million included in Gov. Phil Bredesen's new budget will go toward the University of Tennessee Baptist Research Park, according to the Commercial Appeal. The Memphis-based newspaper stated the funding, combined with funds from other sources, would be used to demolish an old hospital to free land for the proposed $300 million to $350 million research park. With the $10 million obligation to the Memphis Biotech Foundation, city council members approved a three-year commitment of $5 million required for the state funding. Demolition would begin within the first half of 2004 and continue for 12-18 months.

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