In the January 31, 2005 Issue:

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Tech Talkin' Govs 2005, Part Four
The first three 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

Hawaii
Gov. Linda Lingle, State-of-the-State Address, Jan. 24, 2005
"My proposed biennium budget earmarks $20 million in new scholarship funds for the University to ensure that all who can meet the standards and want a higher education can get one. I have also budgeted an additional $25 million for ongoing operations in order to meet what the University believes are its highest priorities...Beyond this, I am proposing tax credits that promote partnerships between the University and business in order to foster world-class research that creates commercial spin-offs and the opportunity for higher paying jobs.

"In the wake of 9/11, the state received millions of dollars in federal funds to support employment-related programs. I am requesting that the Legislature authorize us to spend $20 million of that money on The Workforce Development Act, which will improve access to job training for workers across the state so businesses have the workforce needed to take full advantage of our growing economy.

"...I want to stem the outflow of successful start up companies by increasing investment capital. I am asking you this year to implement the State Private Investment Fund that you passed in outline form last year. This novel investment approach will provide financing to take promising companies beyond the start-up stage."

Maine
Gov. John Baldacci, State-of-the-State Address, Jan. 25, 2005
"In my bond package I will strongly support biomedical research and sustained research and development funding...Tonight I am pleased to announce three initiatives that will enhance both the biomedical sector and eastern and northern Maine by creating a biomedical triangle.

"...The University of Maine trustees yesterday announced their intention to create a new graduate school of biomedical sciences at its Bangor campus...This will join a new college of allied health professionals, also at the Bangor campus, a joint venture of the University of Maine and Eastern Maine Community College...Third Eastern Maine Health Care, the Jackson Laboratory, and the University of Maine are joining together to create a new Maine Institute for Human Genetics and Health in a Pine Tree Zone in Brewer...Our new biomedical triangle will complement and augment Southern Main's efforts and create a collaborative approach to research statewide.

"Supported by my budget and bond proposal this year, these three new institutions will build on the strengths of Bangor and Brewer and surrounding towns...This effort, along with southern Maine's successes, will provide the critical mass to create jobs and improve public health, create research and development capacity, and develop our health care workforce.

"Science is one part of our economic development strategy. The creative economy is another. Today I signed an executive order to create a 21-member Maine creative economy council, to build a vibrant economy on a foundation of investments in our youth, our cultural institutions, entrepreneurship and technology...

"Our budget proposes new efforts to support the creative economy at the Margaret Chase Smith Policy Center, at our film office, in arts education and at our new Office of Innovation...We must embrace innovation and entrepreneurship in our schools and workplaces.

"...Tonight I am announcing 'Connect Maine,' a broad and aggressive telecommunications strategy for this state. Connect Maine will give nearly every Mainer the opportunity to plug into the global economy from their community. It will ensure that 90 percent of Maine communities have broadband access by 2010; 100 percent of Maine communities have quality wireless service by 2008; and Maine's education system has the technology infrastructure that leads the nation.

"...Tonight I am also announcing my support for the creation of a sunrise business and career center...The center will provide secondary education and career re-training for adults adversely affected by our challenging economy. It will also have a small business incubator to stimulate new job growth in Pine Tree Zones across Downeast Maine."

Maryland
Gov. Robert Ehrlich, State-of-the-State Address, Jan. 27, 2005
"Two important tax credits will keep Maryland at the forefront of the new economy by stimulating creation of – and investment in – early stage bioscience and advanced technology businesses.

"First, we should extend our research and development tax credit to 2011, increase the limit of each to $6 million, and add to our new arsenal an 'Entrepreneurial Investment Technology Tax Credit' which investors in biotechnology or venture capital firms may apply towards their state income or insurance premium tax bill."

Missouri
Gov. Matt Blunt, State-of-the-State Address, Jan. 26, 2005
"[T]o spur economic growth, we must help Missouri's entrepreneurs and employers create and retain good, family-supporting jobs.

"I support full funding for the bio-diesel and ethanol incentive funds, which will help position Missouri as a national leader in the fast-growing renewable fuels industry. This action will create new jobs in rural Missouri and lead to improved air quality for every Missourian.

"Tonight, I assure communities all across our state that my administration will fully implement the Missouri Rural Economic Stimulus Act, which allows rural communities and counties to knock down barriers and create cutting edge agricultural opportunities."

Nevada
Gov. Kenny Guinn, State-of-the-State Address, Jan. 24, 2005
"I am providing higher education with an additional $250 million for much-needed faculty, infrastructure, and research.

"Our state has evolved to a point where we can attract and develop cutting-edge programs in medical research. That is why I am excited about the beginnings of two historic partnerships. One partnership is between the Nevada Cancer Institute and the University of Nevada School of Medicine...The other partnership is between the Lou Ruvo Center for Alzheimer’s Care and Research and our School of Medicine. Each partnership will create joint research facilities combining our state’s finest medical minds in the fight against cancer and Alzheimer’s. I am pledging more than $11 million in support of these two partnerships.

"These partnerships will provide cutting-edge research and health care. They will also bring exciting possibilities for economic development, technology transfer, and the promise of new, high-paying jobs."

Texas
Gov. Rick Perry, State-of-the-State Address, Jan. 26, 2005
"I ask you to not only replenish the Enterprise Fund, I ask you to make investments to grow our world-class research institutions, develop cutting edge technologies and harvest the miracle of modern science with a new $300 million Emerging Technology Fund.

"Over the next ten years, California is investing $3 billion in one area of biotechnology, Ohio is putting up $1.1 billion for technology commercialization and Kansas is investing half a billion dollars in biotechnology. We can't afford to be left behind."

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Independent MTI Assessment Reveals Economic Impact
If the success of its funded companies is revealing, the Maine Technology Institute (MTI) has done well to spur innovative activity in Maine, suggests an independent analysis recently released in the state.

An evaluation of MTI, a state-supported nonprofit, shows the organization's clientele saw employment grow by 11 percent over the last two years. This rate of growth, which surpassed that of Maine's cumulative 3 percent, resulted in nearly 600 jobs added to the economy. The University of Southern Maine's Center for Business and Economic Research (CBER) conducted the evaluation, examining MTI-funded companies that completed their projects prior to June 30, 2004.

Employment in assisted companies increased by an average of 300 jobs in both 2003 and 2004, CBER data show. For every dollar of MTI assistance, more than $26 also is leveraged in external financing. The $8.1 million in MTI funds distributed over a three-year period, including 2002, were matched by $16 million in private funds. Recipients also attracted about $194 million from federal government agencies through grants, contracts and sales.

“This evaluation demonstrates how valuable a little state money can be in helping Maine’s small businesses, entrepreneurs and innovative economy,” said Janet Yancey-Wrona director of the state Office of Innovation.

Because MTI invests in projects during the research and development stage, Yancey-Wrona added, true statewide impact is not expected to be seen for another 5-10 years. Yet, 46 percent of MTI-funded research projects have led to new products and 24 percent of projects have resulted in products that are already offered for sale.

MTI funds companies in Maine's seven targeted technology sectors, but has helped stimulate the most employment growth in composites. The remaining six sectors include aquaculture and marine, biotech, environmental, forestry and agriculture, information, and precision manufacturing. In terms of growth rate, marine technology outpaced all others. Job losses were reported mainly in the forestry/agriculture and precision manufacturing sectors.

MTI's cluster enhancement program, one of a portfolio of such programs dedicated to forming and growing tech businesses, had modest returns on investments made up to June 30, 2004. Eight awards totaling $398,000 were matched with $1.58 million in other funds.

Of all of Maine's technology sectors, the report notes, "those with the highest growth potential have lagged somewhat in their product development." This includes biotech, composites and environmental technologies. The authors suggest future awards could be targeted to the biotechnology sector, which garnered the fewest awards over the measured period. To track the effects of cluster awards, the authors recommend a system in which recipients self-report their awards' impacts on an ongoing basis.

For more information on MTI or its programs, visit http://www.mainetechnology.com. The CBER report is available for download at: http://www.usm.maine.edu/cber/

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Pennyslvania Outlines Role and Function of Its TBED Portfolio
Is Pennsylvania getting enough bang -- or the right bang -- from its investments in promoting a tech-based economy? The state has been one of the nation's leading public investors in technology-based economic development (TBED) for more than 20 years. Programs have evolved and been added over the years as factors affecting innovation and private sector growth changed. The result is now Pennsylvania's researchers and entrepreneurs have a complex portfolio of public-private resources available to them.

Understanding the function served by the various TBED policies, programs and TBED initiatives toward transforming the state's economy is a goal of a new report from the Department of Community and Economic Development (DCED).

Resulting from a collaboration among 35 of the state’s TBED organizations, the 2005 Pennsylvania TechFormation report gauges Pennsylvania’s entrepreneurial position and provides the basis for continued improvement strategies. According to DCED Secretary Dennis Yablonsky, the Commonwealth and its partners will use the report to pinpoint areas for improvement in TBED efforts.

The report is divided into the five stages of the business lifecycle: concept, formation, growth, maturity, and reinvention. In describing these stages, the report outlines the needs of companies at each stage and provides insight as to which Pennsylvania TBED organizations may help firms to meet those needs.

TechFormation also presents the state's first attempt to outline growth indicators for TBED, according to the governor’s office. Because of their demographic and economic similarities to Pennsylvania, Maryland, Massachusetts, Michigan, New Jersey, New York and Ohio provide benchmarks for comparison.

The report is available at: http://www.newpa.com/

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New Agency Spun Out of Illinois Coalition
Goal is improved service delivery, advocacy for tech community
To produce a more focused and effective effort in the areas of commercialization and advocacy, the Illinois Coalition has divided into two separate public-private organizations.

The coalition’s historical goal of enhancing Illinois’ research structure by advocating for large-scale research and development (R&D) investment will remain the same, while the newly formed entity, the Illinois Technology Development Alliance (IDTA), will work with technology enterprises in accessing capital and establishing growth.

The reorganized coalition hopes to improve the flow of federal research dollars by exclusively focusing its efforts on attracting large research grants for labs, universities, and large corporations, and conducting market development activities to pave the way for future contracts. In doing so, the coalition expects to bring more science and technology jobs to the state.

According to the coalition, the U.S. Department of Energy has two major projects coming up for bid, the Rare Isotope Accelerator and FutureGen. The new structure will enable the coalition to aggressively pursue these projects and others in the future. Funding for the coalition will continue through a public-private partnership with contributions coming from the state, universities and laboratories, and corporations.

The newly formed IDTA will have a two-pronged approach that will consist of providing business assistance and access to capital, and developing and maintaining a network and information bank. IDTA will employ the following strategies to achieve these goals:

IDTA will be led by Tom Thornton, formerly president of the Illinois Coalition, and governed by a 10-member board. The organization will be funded through contracts with the Small Business Association, the Department of Defense Office of Naval Research, and private contributions. New leadership for the restructured Illinois Coalition has yet to be named.

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Kauffman Foundation Launches 'Giving Back' Website
The Kauffman Foundation recently launched "Giving Back to Entrepreneurship," a website dedicated to informing entrepreneurs how they can use their energy and creativity to support their communities and help jumpstart the next generation of entrepreneurs.

Giving back can include both financial and service contributions. For example, dedicating one's time and expertise to activities such as mentoring, serving on boards, teaching or contributing to online or print publications for entrepreneurs provides valuable services without a financial commitment.

Companies also can provide services such as in-kind donations, which can include products, consulting or office space, sponsoring internships and scholarships, offering employer-sponsored programs, or establishing a company foundation. In terms of a financial contribution, the Kauffman Foundation suggests joining an angel investing group, donating to entrepreneurship education through high school, college, or postgraduate levels, or starting a new foundation.

The website provides many features, including a giving scale that displays how much time and money one can expect to devote within various option groups, and profiles of past contributions made by entrepreneurs. More information is available at: http://givingback.kauffman.org/

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Silicon Valley Index Paints Complex Picture for Region's Economy
As a percentage, Silicon Valley has lost more jobs over the past four years than any U.S. metropolitan area since 1939, but evidence shows the region is stabilizing with a return to levels reminiscent of the late 1990s. Funding for venture capital is up, per capita income is increasing, and research and development funding has reached new highs. Yet, the region's most striking feature of late is, perhaps, the way it is growing, according to the 2005 Index of Silicon Valley.

The index, recently released by Joint Venture: Silicon Valley, shows the state of the region's economy is a muddled picture depending on how far back one goes to measure it. Since 2004, the results are positive, but medium-term-and-beyond comparisons reveal sharp declines. If one benchmarks the region against pre-dot.com levels, then it would appear the Valley has "resumed an incremental pattern of growth," the authors say.

Silicon Valley has experienced a change in how it grows, the index states. It has grown in terms of productivity, but not in terms of jobs, and evolving patterns of housing development attest to the change.

"The technology revolution and intense global competition have led Silicon Valley companies to achieve high productivity gains without adding to their payroll, creating a strange new world in which economic growth is strong even while job growth is sluggish," says Russell Hancock, president and chief executive officer of Joint Venture: Silicon Valley.

Local governments are challenged to make difficult budget choices, as revenue streams destabilize, Hancock adds.

The 10th annual index, which continues the work set forth in past editions, considers 37 indicators or measures of the region's health. The latest edition tracks those industry drivers that collectively employ 32 percent of the region's workforce, using the North American Industry Classification System, and provides employment and wage data for other major industries.

Each of the annual indexes have aided Joint Venture: Silicon Valley in the effort to monitor progress of those goals outlined in the group's first strategic plan, Silicon Valley 2010. The 2005 edition includes tables depicting each goal with progress made and questions to be answered. The Joint Venture: Silicon Valley index is available at: http://www.jointventure.org/

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Recent Research
A Response to the Morrison Paper on Leading Firms

Editor's Note: Last week's issue of the Digest included a Recent Research item, Are Leading Firms Team Players? that drew an animated reaction from a reader whose opinion SSTI holds in great respect because of his contributions to improving the understanding and delivery of technology-based economic development initiatives. As a result, Dr. Jerry Paytas, director of the Carnegie Mellon University Center for Economic Development, accepted our request to prepare an alternative review of Andrea Morrison's "Gatekeepers of Knowledge" within Industrial Districts: Who They Are, How They Interact. He is joined in this response by Dr. Donald F. Smith Jr., university director of economic development for Carnegie Mellon University and the University of Pittsburgh.

SSTI believes this guest article, while rare, is a welcome addition to the Digest. There needs to be greater discourse concerning the practical and policy implications of academic research in the field as well as the validity of conclusions drawn from or within that research -- including our own. The Digest may present the best medium for reaching the broadest population of tech-based economic development practitioners so we embrace this opportunity.

A Review of Morrison, Andrea.  2004. "Gatekeepers of Knowledge" within Industrial Districts: Who They Are, How They Interact. Working Paper 163.  Centro di Ricerca sui Processi di Innovazione e Internazionalizzazione (CESPRI).
by Jerry Paytas, Ph.D., and Donald Smith, Ph.D.

Morrison's (2004) analysis is an important contribution to our understanding of the limits and dynamics of clusters and the role of leading firms in the dissemination of knowledge. As Markusen (1996) demonstrated, there is more than one kind of cluster and the different dynamics of cluster types can determine the impact of a cluster on regional growth. More simply, all clusters are not created equal. The analysis of the sofa triangle focused on the two leading firms in the Murgia Industrial District, a cluster with a total of 121 firms and less than 6,000 employees. The study concluded that the leading firms are not effective transmitters of knowledge, particularly the tacit kind that is a key component of cluster development. The analysis does show, however, that these firms act as nodes in less important information networks.

The researcher concludes that caution is required in attracting leading firms to anchor a cluster. There are two fallacies in this conclusion. The first is the assumption that the "transmission of technical know-how" is the only reason for recruiting a leading firm, when in reality there are a variety of reasons. For example, leading firms can act as magnets for talent and for other firms. Tacit knowledge may be transmitted when employees leave these leading firms - a mechanism for transmission that was not captured by the study's methodology. Leading firms can also be generators of spin-out companies that not only transmit knowledge but grow the cluster, as in the case of Fairchild Semiconductors in Silicon Valley and Hybritech in San Diego.

The second and most critical fallacy is that there is nothing to suggest that these results can be generalized to other regions or industry clusters. The sofa triangle is an established, but not very large cluster. It may be that characteristics of this specific cluster or the furniture industry influence the transmission of knowledge. The analysis also demonstrated differences in the knowledge networks of the individual leading firms. The employees and departments at Calia appear to play a more central role in the knowledge network than their counterparts at Natuzzi. This suggests reason for caution when recruiting a leading firm as not all "leaders" provide the same benefits.

Morrison (2004, 30) provides an appropriate caution in her conclusion that "public interventions supporting individual leaders, intended as engines of growth for local systems, should be implemented cautiously." In fact, there are many reasons for caution when implementing an attraction strategy, not the least of which are the balance of costs and benefits.

SSTI's summary of the study may have overstated the evidence provided in the study, which does not suggest that attracting leading firms won't work for any cluster in any region.

"Gatekeepers of Knowledge" within Industrial Districts: Who They Are, How They Interact is available at: http://www.cespri.it/papers/WP163Morrison.pdf.

Reference:
Markusen A. (1996), 'Sticky places in slippery space: a typology of industrial districts', Economic Geography, pp.293-313.

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People

Gov. John Huntsman, Jr. named Jack Brittain, dean of the University of Utah Business School, vice president in charge of the new Office of Technology Ventures. Brittain, dubbed the "innovation czar," will continue to lead the business school in addition to his new position.

Gov. Jim Doyle named Mary Burke as the new head of the Wisconsin Department of Commerce. Burke replaces Cory Nettles, who resigned last month.

Rose-Hulman Ventures President Jim Eifert and Executive Vice President Brij Khorana resigned their positions to return to faculty duties at the Rose-Hulman Institute of Technology.  

John Maxson, former president of the Illinois Coalition, was named CEO of The Greater North Michigan Avenue Association.

Michael Relyea was named deputy executive director of the New York State Office of Science and Technology Academic Research.

Gov. Matt Blunt appointed Greg Steinhoff to head the Missouri State Department of Economic Development.

Mel Ustad, current interim vice president for research at the University of South Dakota, is the new director of the state's first Office of Commercialization.

The Kauffman Foundation named Patrick Von Bargen CEO of the Center for Venture Education. Von Bargen was the former managing executive for policy and staff at the U.S. Securities & Exchange Commission.

Tom White, president of the Greater Durham Chamber of Commerce, announced he will resign his position after 28 years with the organization.

Kim Zentz, CEO of the Spokane Transit Authority, announced she will take a one-year position as interim executive director of the Spokane Intercollegiate Research and Technology Institute.

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Funding Supplement
A funding supplement is available here.

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