In the November 8, 2004 Issue:

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Foreign Grad Student Enrollment Declining in American Universities
Thirty-Six Percent Drop in First-Year Foreign Engineering Students Reported

Increased global competition, changing visa policies and diminished perceptions of the U.S. abroad have lead to an overall decline in first-time international graduate student enrollment, according to a survey from the Council of Graduate Schools (CGS). Overall enrollment decreased 6 percent between 2003-2004, the third straight year of decline after a decade of growth, survey results show.

First-time international graduate school enrollment fell 10 percent between 2002 and fall 2003 and fell 8 percent the year before.

Results from the third survey in a trio of studies conducted by CGS indicate the U.S. may be slipping as a leader in higher education. Although the numbers are distressing, CGS President Debra Stewart says, graduate schools are battling the declines by streamlining their admissions processes, enhancing their use of technology, and forming important international partnerships.

Highlights of the October 2004 survey include:

In the fall of 2003, CGS discovered a 47 percent decline in international enrollments for fall compared to the previous year, prompting them to launch a three-part survey to gather data on applications, admits and enrollment. The first part indicated that international graduate applications through February 2004 decreased by 32 percent. A significant decrease in applications was reported from China, India and Taiwan, specifically in engineering and the sciences.

The second part, administered in June 2004, was designed to ascertain the relationship between applications and to determine the initiatives being taken by schools to counter the declines. Approximately 88 percent of responding institutions reported a decrease in international applications, with programs in life sciences reporting declines averaging 20 percent. Engineering saw the largest drop with applications declining by 36 percent between 2003-2004. In response to the findings, graduate schools reported instituting policy changes to address the admissions process.

CGS notes that first-year declines also must be viewed in the context of overall patterns of graduate enrollment. Other related factors such as economic and labor market cycles may also be driving the enrollment patterns. Another three-part survey will be conducted over the next three years to further evaluate the trends. Complete survey results are available at: http://www.cgsnet.org

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Sustaining Innovation in China
Last year, China replaced the U.S. as the most popular destination for foreign direct investment (FDI). The creation of an IBM Research Innovation Center as an extension of its China Research Lab near Beijing University provides a recent example of U.S. interest in capitalizing on China's emergence as the planet's hottest economy.

As the world's most populous nation looks beyond providing cheap labor for manufacturers, a recent working paper suggests three regions of China are particularly well suited to support the growth of an innovation-based economy.

In Regional Innovation Systems in China, Jon Sigurdson of the European Institute of Japanese studies singles out the Yangtze River Delta, the Pearl River Delta and the Bo-Hai Rim as leading examples for forging various elements of a national innovation system. The regions encompass 5 percent of China’s total land area and nearly 20 percent of the total national population. Combined, the three regions could account for two-thirds of China’s total gross domestic product by 2025, which would likely attract large-scale migration, the author says.

As a result of China’s acceptance into a global innovation system in the early 1980s by allowing FDI, wholly-owned foreign enterprises now play a significant role in high-tech development, the author explains. Foreign enterprises are dominating China’s high-tech exports, for which functional industrial clusters along the coastline are now essential.

The government’s role in establishing various industrial and technological zones also has contributed to Chinese regional development. According to the author, the government selected a number of intelligent-intensive regions and adopted policies to gradually transform them into high-tech development zones with different characteristics. There are currently 53 of these zones expected to become bases for China’s high-tech industrialization.

The initial success of regional innovation systems along China’s coastal areas, Sigurdson finds, is based on having created favorable conditions for a large number of clusters. Many of them require functional proximity, the author explains, for which FDI has offered great possibilities by linking local clusters into global production networks. Long-term success, however, has its roots in the following three areas:

The author contends that China’s long-term perspective is massive inflow of FDI will significantly contribute to extensive export earnings followed by new employment in local areas. Policymakers, according to the author, also predict a large number of technological clusters will form and become self-generating in their support for future innovations in the country.

Regional Innovation Systems in China is available at: http://ideas.repec.org/p/hhs/eijswp/0195.html

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New Resource Guides Angels in Formation of Angel Groups
As the angel investment community continues to evolve from individual investors to sophisticated angel investment groups, the Kauffman Foundation and the Angel Capital Association (ACA) have jointly published a new guide designed to help angels form the most effective angel organizations for their communities.

Angel Investment Groups, Networks, and Funds addresses the decision-making process in forming an angel group, from evaluating whether a particular community can support an angel group to determining the best structure. The 158-page guide offers examples of organizational structures and management functions and provides critical documents such as membership agreements, funding options, term sheet samples and due diligence checklists for more informed investment decision-making.

To alleviate some of the risk and work in angel investing, angels have begun forming angel groups, the guide points out. About 200 such groups were active in 2003, up from an estimated 10 in 1996. The increase, the author says, represents an evolution of the angel investing market as individual investors find many advantages of working together – better investment decisions, enhanced deal flow, the ability to combine funds into larger equity investments, and group social attributes.

“Groups offer numerous advantages over individual angel investing, which is often time consuming and inefficient,” said author Susan Preston, member of the ACA advisory board and Kauffman entrepreneur-in-residence. “In addition, few if any individual angel investors possess all the skills and knowledge necessary to accurately and objectively evaluate an investment opportunity."

Data show angels provided an estimated $12.4 billion in business financing to an estimated 27,500 entrepreneurial businesses for the first half of 2004. This compares to $18.1 billion for all of 2003, which was nearly equal to the $18.2 billion provided by venture capital funds.

Angel Investment Groups, Networks, and Funds is targeted for those interested in forming angel groups and for entrepreneurial support professionals and community leaders looking to expand the financing resources available to start-up entrepreneurs. The guide also contains pointers for accredited investors interested in becoming angels. It is available at: http://www.kauffman.org/items.cfm/590

A second report funded by the Kauffman Foundation highlighting successful youth entrepreneurship programs also may be of interest to Digest readers. Entrepreneurship Education: Learning by Doing profiles six such programs in Chicago, Kentucky, Mississippi, Nashville, South Carolina and West Virginia, respectively. Conducted for the Appalachian Regional Commission, the report is available at: http://www.arc.gov/index.do?nodeId=19

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West Virginia Launches Open Public Computing Platform
Implementation of the Global Grid Exchange, a state-sponsored open public computing grid in West Virginia, is underway. Hewlett Packard will provide the infrastructure technology that will power the grid, an initiative of the West Virginia High Technology Consortium (WVHTC) Foundation.

The Global Grid Exchange utilizes the Internet to aggregate idle or unused computer processing resources throughout West Virginia. HP will furnish hardware such as desktop personal computers for customer service personnel and robust, reliable high-end servers. With access to such resources, the grid reportedly will be the largest open public computing grid in the world.

The nonprofit WVHTC received a $14.7 million grant from the West Virginia Economic Development Authority to launch the grid, according to the Associated Press. The project's first phase cost $2.8 million, the AP reports.

Using Frontier, a grid computing solution from strategic partner Parabon Computation, the Global Grid Exchange enables a cost-effective computation infrastructure that could drive innovation globally, WVHTC says. Users will be able to access the grid for a fee, beginning on Nov. 19.

For more information on WVHTC, visit http://www.wvhtf.org.

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Fed Reviews R&D and Location Decisions of Pharmaceuticals
What policies, investments and programs would be most effective for communities trying to attract, retain or build a local pharmaceutical industry? Research parks? Tax incentives? Biotech seed capital funds?

The answers one gets will vary, but using historical data on patent activity and observing the location of the largest pharmaceutical companies, a group of researchers suggests investments in academic R&D that lead to publications is not a bad place to start.

While earlier research has shown the U.S. biotech industry has grown around "star" researchers, (see Intellectual Capital and the Birth of U.S. Biotechnology Enterprises, for example), a working paper summarized in the latest Economic Paper from the Federal Reserve Bank of San Francisco (FRBSF) finds "exposure to an additional 1,000 scientific papers authored in a locality by individuals at public institutions has about the same effect on a firm's patent count as an additional $1 million of R&D expenditures."

Alternately, "proximity to the labs of competing drug firms that are publishing many scientific papers does not provide a similar boost to productivity -- in fact, the measured effect is negative."

The FRBSF Economic Paper highlights the issues discussed in the working paper, offers a layman's definition of knowledge spillovers, and presents the research findings and policy implications from the paper. The authors caution that the research is based on pre-Internet patent activity and location decisions. The effect of the Internet, which makes access to published research information much easier, is not captured in the results of the research paper. Similarly, the influences of recent trends in academic institutions increasingly to patent their research, instead of publish all of the results, are not examined.

The four-page Does Locale Affect R&D Productivity? The Case of Pharmaceuticals is available at: http://www.frbsf.org/publications/economics/letter/2004/el2004-32.html

The longer Public & Private Spillovers, Location and the Productivity of Pharmaceutical Research can be downloaded from: http://www.duke.edu/~mkyle/Spillovers%20Location%20Productivity%20-%20Sept-04.pdf

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SSTI's Calendar Page Already Lists 100 TBED Events for 2005
If you haven't purchased your 2005 wall calendar or updated your computer-based planner yet, you will need to soon, to schedule travel and update budget requests. At the top of many lists will be SSTI's 9th annual conference, Oct. 19-21, 2005 in Atlanta, but how do you conveniently find out about the many other high quality events happening throughout the year?

While many organizations and associations only post their own events, SSTI maintains an open calendar web page as a service to the larger TBED community. Each of the more than 100 current announcements includes a link or contact to obtain additional information. For example, here is one offering from each of the next four months from the calendar page:

Please email us at <calendar @ ssti.org> if you'd like us to consider adding your event to the SSTI calendar page. All submissions must be for an upcoming tech-based economic development event of interest to a statewide, regional or national audience. Only events sponsored or organized by public agencies, nonprofit organizations, member-based associations, non-governmental organizations, or SSTI sponsors and affiliates will be considered.

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