In the January 24, 2005 Issue:

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Tech Talkin' Govs 2005, Part Three
The first two installments of SSTI's annual look at how TBED will play in the 2005 legislative priorities of the governors can be found in the Digest archives on our website: http://www.ssti.org/Digest/digest.htm

Indiana
Gov. Mitch Daniels, State of the State Address, Jan. 18, 2005
"I ask you, in particular, to provide a Small Business Investment Incentive, giving modest relief...to small firms that take the risk to add jobs. To stimulate the formation of new small businesses, I propose that existing local economic development funds be freed to establish new venture capital funds in each region of our state.

"To help towns hit hard by the retreat of traditional manufacturing, I ask for the passage of brownfields legislation to encourage new investment in abandoned sites, and for new pre-permitting authority to speed the time for new investor interest to turn into new jobs. Meanwhile, we must modernize our tax laws and build out our broadband infrastructure, so that we become as hospitable to the jobs of the knowledge economy and motorsports as we are to manufacturing."

Minnesota
Gov. Tim Pawlenty, State of the State Address, Jan. 18, 2005
"[T]oday I'm announcing a proposal for the Rochester area to take greater control over its own higher education destiny. Today, I propose that we create a university here in Rochester. The first step in this process will be to create a legal and governing entity that will be responsible for all current operations at the University Center...My budget announcement next week will include more than three million dollars to get this new University leadership structure started.

"...The partnership I announced two years ago had two key components. The first is construction of a new Mayo-U Genomics Lab here in Rochester. It was in my bonding bill proposal last year, and it's in my bonding bill proposal this year...The second part of my partnership plan is operating funds for research...Today we're making the next installment payment and committing 20 million dollars more in funding for research. Fifteen million dollars will come from the State."

New Mexico
Gov. Bill Richardson, State of the State Speech, Jan. 18, 2005
"We must never forget that it is the private sector­not government­that is the engine of economic opportunity. Businesses, particularly small businesses, flourish and can provide good jobs when government acts as a productive partner. We can spark even greater economic growth by giving a three-year tax cut for high-tech start-up companies, and a five percent personal income tax credit for people making qualified investments in New Mexico corporations.

"We want to provide tax exemptions for our promising aviation industry, and create the New Mexico Spaceport Authority to develop this important and innovative opportunity. We have the chance to turn research and development into new investment and new jobs."

Rhode Island
Gov. Donald Carcieri, State of the State Address, Jan. 18, 2005
"This year, I will introduce to this General Assembly a bold plan called the Jobs Partnership Act. This plan will focus on both the small businesses that are the backbone of our jobs base, and the cutting-edge technologies, that will create the high-wage jobs of tomorrow. We will look not solely to tax breaks to lure new jobs, but to creative solutions to the problems that entrepreneurs face.

"We must provide small businesses access to capital so they can grow. We must develop quality sites for emerging technology industries. We must capitalize on our strengths in the marine and bio sciences by promoting research and facilitating innovation."

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SC, UT Chambers Want Bigger TBED Efforts
Business community advocacy for public investments in technology-based economic development (TBED) may make the difference between legislators appropriating programs $1 million or $100 million. Most importantly, active private sector engagement in establishing, implementing and overseeing a state or community's TBED agenda speeds realization of the true benefits of public-private TBED partnerships: more competitive and innovative companies, more high-yield investment opportunities, more high paying jobs, and a more skilled workforce.

Unfortunately, often the largest business associations in town -- the chambers of commerce -- are the last to embrace the long-term investments necessary to effect real positive change in their communities or states. In other regions, chamber involvement stems from a one-upmanship philosophy that also grips many politicians, as we're seeing in the escalating battle between the states to simply spend the most in stem cell research.

There are promising alternatives that focus inward, however, as the two stories below from South Carolina and Utah reveal.

South Carolina Chamber of Commerce Supports TBED Agenda
Increasing per capita income and boosting the state’s competitiveness are among the legislative priorities outlined by the South Carolina Chamber of Commerce for the upcoming year. The 2005 Business Agenda released by the chamber also seeks to attract new business investment, particularly in life sciences and technology fields.

An article in The State reports the push for these goals stems from a study on the state’s economy recently presented by Harvard economist Michael Porter. South Carolina’s per capita income has traditionally lagged that of neighboring states. The chamber reports South Carolinians earn 82 percent of the national average.

Two of the five items on the chamber's agenda, "Preparing Tomorrow’s Workforce" and "Encouraging Economic Development," focus on achieving these goals.

The workforce initiative is designed to help students see the relationship between academics and later career success. This includes support for the Education and Economic Development Act, comprehensive legislation that includes focusing electives around career clusters to prepare students for post-secondary education and the workforce.

To encourage economic development, the Chamber seeks to raise worker productivity and reduce business costs, which it hopes will result in increased per capita income. This initiative includes continued support for the Endowed Chairs program, improvement of investor tax credits to support innovative start-ups, extended job tax and job development credits to small and existing businesses, and ensured funding for the South Carolina Manufacturing Extension Partnership.

Items on the agenda were selected based on their connection to a series of key economic drivers developed by the Hudson Institute, according to President and CEO of the Chamber, S. Hunter Howard, Jr.

A grading system also will be developed by the Hudson Institute to help track the state’s progress measured under five key areas including education and workforce, business costs, government/regulatory, infrastructure/quality of life, and dynamism/entrepreneurship. More information is available from the South Carolina Chamber of Commerce at: http://www.scchamber.net

Report Urges $400M Investment for High-Tech R&D in Utah
Utah must take immediate action to significantly invest in high-tech research and development (R&D) in order not to forgo significant economic development opportunities, according to a report from the Salt Lake Chamber of Commerce.

Despite its early success in tech-based economic development, the state is now at a crucial crossroad, the report authors contend. Studies indicate that Utah's large concentration of young people are leaving the state for better opportunities and without the critical mass of intellectual capital provided by this group, homegrown innovation and high-tech businesses and products will become increasingly scarce.

The proposed initiative calls for R&D to be organized into 25 different research clusters and carries a price tag of an estimated $400 million. Facilities would cost approximately $270 million and be housed mostly at Utah’s two research universities, the University of Utah and Utah State University. Investments in research clusters and technology commercialization would require an additional $130 million, or $26 million per year for five years, the report indicates.

Financing options include general fund appropriations, general obligation bonds or bonding through the state Building Ownership Authority Act, supplementation through the Redevelopment Agencies Act, and seeking private contributions and matching federal funds. The start-up phase would require state funding, the authors say. Once the new research is established and technologies are being transferred to the private sector, however, the initiatives would be self-sustaining and could provide a substantial return to Utah’s economy.

The most likely niches where R&D resources would be deployed are in the five areas in which the chamber believes Utah already has strengths:

The authors urge the Utah State Legislature to take action in the 2005 legislative session. No bills have been drafted for the initiative, although legislation will be introduced during the 2005 General Session, according to the chamber.

The report, Economic Development and the High Technology Industry in Utah: Trends, Implications and Recommendations, is available from the Salt Lake Chamber of Commerce at: http://www.slacc.org/

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Update on TBED Resource Center Website
We greatly appreciate the praise and suggestions we've received from readers regarding the Tech-based Economic Development (TBED) Resource Center, a cooperative project of the U.S. Department of Commerce's Office of Technology Policy and SSTI. The new online library contains links to more than 1,300 research reports, strategic plans, best practices and impact analyses from state and federal government, university researchers and foundations.

Based on initial user input, we've added capability to search by author and by date entered. The year of publication also will be shown in search results.

We welcome additional suggestions for the site and recommendations of materials to include in this free resource. To browse the collection or make a suggestion, visit: http://www.tbedresourcecenter.org.

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South Dakota Creates Office of Commercialization
To fulfill a goal within the state's 2010 Initiative of becoming a recognized leader in research and technology development, the South Dakota Department of Tourism and State Development will operate an Office of Commercialization under the direction of Mel Ustad, current Interim Vice President for Research at the University of South Dakota.

The Office of Commercialization serves two purposes, according to Jim Hagen, secretary of the Department of Tourism and State Development. Its main function will be to coordinate technology transfer from university and private research centers to the private sector. The office also will facilitate the commercialization of that research, Hagen said.

Ustad said he would focus on trying to create new technology ventures at the universities and to more effectively coordinate the entrepreneurial activity of various entities in the state. The 2010 Initiative consists of five goals for economic growth and visitor spending in the state by the year 2010. More information on the Initiative is available at: http://www.2010initiative.com/index.htm

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GEM Finds World's Entrepreneurs Fly Solo
Anyone working with an entrepreneur knows they like to write their own rules. The latest survey characterizing the world's pool of entrepreneurial talent finds a large majority of them also write their own checks to finance their businesses. It's easier to write - and change - the rules when you also control the purse strings.

Seventy-three million people are nascent entrepreneurs or own or manage a young business, according to the 2004 Global Entrepreneurship Monitor (GEM) released today. Directed by Babson College and the London Business School, the report is the largest annual measure of entrepreneurial activity worldwide.

The report strongly supports the notion that self-funding and informal investment are critical to an entrepreneurial society. About 99.9 percent of nascent entrepreneurs launch new ventures without formal venture capital or business angel investments, the report states. Entrepreneurs themselves provide 65.8 percent of the start-up capital while others, mainly informal investors, provide the remaining 34.2 percent.

Of the nation's 500 fastest-growing private companies, the report adds, 88 percent never received financing from business angels. In contrast, 33 percent of the same 500 companies raised start-up capital by tapping the assets of family and friends.

New to this year's report is analysis demonstrating a relationship between Total Entrepreneurship Activity (TEA) and per capita Gross Domestic Product (GDP). Entrepreneurial activity declines as countries attain higher national income, reaching its lowest point at about $30,000 (US) per capita GDP, the report observes. Beyond that level, TEA begins rising slowly and steadily as GDP continues to rise.

The 2004 U.S. GEM report is available at http://www.gemconsortium.org.

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Recent Research
Are Leading Firms Team Players?
Large industrial or technology firms are often sought by economic development recruiters to serve as anchors for cluster development. Once an anchor is attracted, policymakers often nurture local industrial districts as ways to promote transmission of technical know-how and deepen industrial relationships. Does the strategy work?

Not always, according to a recent working paper by Andrea Morrison of Universita del Piemonte Orientale, Gatekeepers of Knowledge within Industrial Districts: Who They Are, How They Interact.

Based on interviews with two leading firms in the Italian furniture district of Murge, Morrison concludes that employees and executives with two top firms glean significant technical knowledge from research groups within the area’s science parks, regional universities, and service centers. However, individuals within these companies do not share this knowledge widely with firms within the industrial district, Morrison finds. Only a handful of clients and suppliers gain from the compiled external knowledge of these industry leaders.

Morrison uses the data from interviews and a handful of surveys to construct a network analysis. She identifies a few key individuals, or gatekeepers, of knowledge flow and traces the flow of external knowledge into and out of these gatekeepers.

Morrison cautions policymakers about supporting programs focused on individual leaders as “engines of growth.” Leaders with the strongest external networks may bring the best suppliers and subcontractors within their own production chain rather than sharing their know-how with other firms within the industrial district. These leaders may run the most efficient companies and supply chains, but they do not contribute significantly to a more competitive industrial district.

Gatekeepers of Knowledge within Industrial Districts: Who They Are, How They Interact is available at:
http://d.repec.org/n?u=RePEc:cri:cespri:wp163&r=all

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Recent Research
Science Park Success Depends on Local Strengths
Many regions support local knowledge clusters in the hopes that geographic proximity will promote technology diffusion and enhance industrial competitiveness. A working paper from Italy suggests the effectiveness of such clusters or science parks depends upon the nature of the firms and institutions involved.

Roberta Capello of Politecnico of Milan and Andrea Morrison of Universita del Piemonte Orientale compare survey data from firms in two Italian regions (Pisa and Genova) where knowledge facilitators actively operate. In their working paper, An Evaluation of the Effectiveness of Science Parks in Local Knowledge Creation: A Territorial Perspective, the authors evaluate innovation based on these efforts to facilitate knowledge exchange via internal and external networks.

Using regression and cluster analyses, Capello and Morrison examine the effectiveness of these networking efforts. The research demonstrates that science parks play a critical role in building relationships among local businesses and institutions ­ particularly for smaller firms. However, efforts to facilitate external relationships do not generally help tenant firms innovate, Capello and Morrison find. Knowledge facilitators succeed most with firms that already have a track record in absorbing new technology and existing business networks, according to their analysis.

Capello and Morrison suggest science parks tailor their efforts to capitalize on local characteristics and potential customer base. Efforts to promote geographic knowledge clusters based solely on proximity will fail to realize significant knowledge diffusion and will not boost the region’s economy.

An Evaluation of the Effectiveness of Science Parks in Local Knowledge Creation: A Territorial Perspective is available at: http://www.schumpeter2004.uni-bocconi.it/dwload.php?download=download&id_pap=271

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Useful Stats
Chinese Institute Issues Its 2004 World Academic Rankings
A recent collection of weekly headlines gathered by the Montana Associated Technology Roundtables brought to our attention the annual world academic rankings compiled by the Institute of Higher Education at Shanghai Jiao Tong University.

For the past two years, the school has identified the world's top 500 academic institutions based on a weighted scale of six indicators:

For each indicator, the highest-scoring institution is assigned a score of 100, and other institutions are calculated as a percentage of the top score. The distribution of data for each indicator is examined for any significant distorting effect. Standard statistical techniques are used to adjust the indicator if necessary.

Further evidence of U.S. research leadership eroding? U.S. institutions captured 57 of the top 100 rankings in 2003 and "only" 54 in 2004.

The 2004 and 2003 rankings are available at: http://ed.sjtu.edu.cn/rank/2004/2004Main.htm

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