In the April 4, 2005 Issue:

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Oklahoma Commits $500M for College Improvement
On the final day of March, Gov. Brad Henry signed legislation establishing a $475 million bond issue for a slate of higher education projects, much of which targets research and laboratory facilities. The Oklahoma Higher Education Promise of Excellence Act of 2005, which the governor called "desperately needed," was one of his top legislative priorities for the year (see the Feb. 7, 2005, issue of the Digest). The bill containing the bond issue, H.B. 1191, also provides $25 million in the form of a bond bank to finance future improvements at the state's colleges and universities.

Projects slated for University of Oklahoma include construction of a chemistry and biochemistry teaching and research-laboratory complex, infrastructure improvements for the University Research Campus, and construction of new engineering and technology facilities. Oklahoma State University will receive $76 million for projects, including a new science and technology research center and renovation of existing research laboratory and office space.

Gov. Henry noted that college enrollments are at record highs, but that the bulk of state colleges and universities have not seen major construction work in more than 12 years. The measure is estimated to have an initial economic impact of $737 million and to result in more than 4,000 new construction jobs.

Financing to repay the bond will be derived from lottery proceeds and a new gross production tax.

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Commerce Department to Have New Deputy Secretary
The U.S. Department of Commerce announced Friday that President Bush intends to nominate David Sampson as Deputy Secretary for the agency. If confirmed, Dr. Sampson will succeed Theodore Kassinger, who will resign effective April 30, 2005.

Prior to becoming Deputy Secretary, Mr. Kassinger served as General Counsel from 2001 to 2004. Mr. Kassinger has served as Deputy Secretary since July 2004.

Dr. Sampson was nominated by President Bush on March 19, 2001, and confirmed as the Assistant Secretary of Commerce for Economic Development by the U.S. Senate on Aug. 3, 2001. Sampson has served as the principal advisor to Secretary Donald Evans on domestic economic development policy.

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Technology Indices Measure Vitality of Regional Technology Sectors
Two organizations with seemingly the same goal in mind recently released statistics on the health of their region's technology sectors. Relying on different methods, the Pittsburgh Technology Council (PTC) and the Sacramento Area Regional Technology Alliance (SARTA) both analyze and report the impact of technology clusters on the local economy.

PTC's annual State of the Industry report gathers growth indicators from state and federal resources to track southwestern Pennsylvania's employment statistics, number of tech companies, and total annual payroll for information technology, life science, advanced manufacturing, advanced materials, and environmental technology industries. According to PTC, the goal is to quantify the impact and draw attention to the region's significant technological resources.

The 13-county analysis also features an overview of eight emerging clusters such as robotics, supercomputing and nanotechnology. In addition to industry-specific measurements, the report also provides numerical data that include R&D expenditures at universities, average annual SBIR funding, and venture capital disbursements.

While PTC utilizes several outside and existing sources to gauge regional technological growth, SARTA created its own tool that measures both private and public companies. The SARTA Technology Index tracks the 50 leading high-tech and life science companies driving growth in the nine-county region. Based on proprietary software developed by SARTA, the numerical value of the index is used to calculate movement in the financial metrics of revenue, employees, and equity capital raised. The index originally was set to a base of 100.00 at its initiation in 2003 and is updated on a quarterly basis, SARTA said.

Through the index, SARTA is able to monitor the tech sector within the region and identify companies that demonstrate success in order to attract venture capital to the area. In 2004, a deal to license the software was made with the Greater Dallas Chamber so the alliance could customize the index for the city. The index is the first regional index of its kind, according to SARTA's CEO Oleg Kaganovich.

Both PTC and SARTA reported overall growth for their respective regions. According to PTC's year ending 2003 report, technology firms represented more than 10.3 percent of all companies in the region and average wages for tech industries increased by 8 percent. With a value of 149.79, SARTA's Tech Index for the fourth quarter of 2004 reflects a 14 percent increase from the preceding quarter and a 32 percent rise for the full year.

The Pittsburgh State of the Industry Report 2005 is available at: http://news.pghtech.org/report.cfm. More information on SARTA's Technology Index is available at: http://www.sarta.org/TechIndex.aspx

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Arkansas Nanotech Alliance Formed
The source of eadership on specific state tech-based economic development activities greatly influences the design and effectiveness of the effort. It remains to be seen then how the recently launched Arkansas Nanotechnology Alliance evolves locally as its direction originates from the nation's capital.

During a recent visit to the Arkansas Research & Technology Park, U.S. Senator Mark Pryor (D-Ark.) announced ANA's formation. Pryor will chair the statewide consortium, bringing together "universities, federal agencies, and private sector partners to develop, launch and nurture nanotechnology initiatives."

He said that, in building an Arkansas nanotechnology community, some of the possibilities include:

No other members of the Alliance were identified in Pryor's announcement and the Mar. 24 issue of the Arkansas Democrat-Gazette reported, "No federal funding is associated with the alliance - yet, Pryor said."

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Recent Research
Will Operating Costs Drive Future Biotech Location Decisions?
There are several factors that go into location decisions for biomedical firms. Proximity to strong university research capacity, other biotech businesses, and technically competent workers are all important considerations. With the financial investments many states and localities are making toward the life sciences, however, the field of prospective locations for successfully launching a biotech firm has grown considerably larger than the "usual suspects."

That is a good thing, based on a recent study by the Boyd Company, a Princeton-based location consulting firm. As highly leveraged biotech start-ups increasingly are pressured by their venture capital backers to reduce operating costs, many smaller cities may present attractive alternatives for new biomedical industry investments, the study suggests.

The Boyd Company compared the costs of operating a biomedical research and product development facilities within 50 North American and European cities. Two U.S. locations included in the study, San Jose, Calif., and Sioux Falls, S.D., respectively, were the most expensive and least expensive, costing $11.3 million and $8.5 million annually. Overall, Dusseldorf, Germany, was the most expensive place to operate, costing $13 million per year.

In determining operating costs, the study included skilled labor, facility lease rates, utilities, corporate travel, and other occupancy factors. Cities chosen for comparison include those that currently house significant concentrations of biomedical industry operations and those projected by the Boyd Company to be emerging centers for biotech investment in the coming years. According to the study, facilities measured had at least 100 employees and occupied a minimum of 75,000 sq. ft.

The study cites recent examples of major biomedical companies relocating or building new facilities in smaller cities, which offer more attractive overall operating costs. Yamanouchi Pharma Technologies, for example, moved from San Francisco - the second most expensive city in the U.S. - to Norman, Okla., the third least expensive city in the study. Hematech, a privately-held company headquarter in Fairfield County, Conn., opened a new research lab in Sioux Falls, the lowest-cost U.S. location in the study.

Operating cost differentials between the U.S., Canada, and Europe also are detailed. For example, weighted average yearly earnings for employees of a biomedical facility in San Jose are $50,502, compared to Vancouver at $49,287 and Dusseldorf at $57,440. In addition, the study provides comparative annual operating costs by region.

With the Boyd Company's permission, SSTI has posted the executive summary at: http://www.ssti.org/Publications/Onlinepubs/Boyd_Biomedical_Facility_Study.pdf

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TBED Efforts to Double Size of Western Carolina University
Western Carolina University (WCU) Chancellor John Bardo recently unveiled plans for a comprehensive regional economic development strategy that would more than double the size of the campus and promote university-industry partnerships.

The recent acquisition of 344 acres adjacent to the current campus would be used to develop a Millennium Campus at WCU, similar to traditional technology parks. The university likens the campus to a multi-use neighborhood that would encompass a mix of academic buildings, research facilities, business, industry, and housing. State-approved legislation in 2000 made it possible for University of North Carolina institutions to seek public-private partnerships and also authorized the Millennium Campus.

According to the university, the Millennial Initiative is designed to engage public-private partnerships to enhance opportunities for students in high-tech programs, facilitate cutting-edge research, and promote economic development.

Potential facilities to be located at WCU include a center for broadband development, a center for entrepreneurial development, and a center for environmental science. Bardo also announced possible private sector partners would include a wireless technology applied R&D company in collaboration with the College of Applied Science and a multi-tenant center for applied R&D engineering, computer engineering and chemistry in collaboration with the College of Business.

The university purchased the land for $2.87 million, using part of their share of funds provided through the 2000 North Carolina Higher Education Bond Referendum. WCU also received a $300,000 federal grant to develop business and marketing plans for the initiative.

"We want to keep the best and brightest of the region's young people from having no choice but to leave home to find the type of high-paying jobs available elsewhere," said Bardo. Although the chancellor announced plans for the campus, a formal plan must be submitted to and approved by the Board of Governors before development can begin.

More information is available at: http://millennial.wcu.edu/

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Recent Research
Local Factors Influencing Tech Commercialization
What are the factors of commercial success? As they say in real estate: location, location, location.

So what makes a good location for commercializing innovation? Innovative ideas clearly thrive where R&D spending flows and local patent activity exists. But, do R&D dollars and level of patents also indicate locations for tech transfer?

Not necessarily. A recent working paper in applied economics finds a more complex web of relationships at work.

Dr. Joshua Rosenbloom of University of Kansas seeks to identify the factors in common for the areas with greatest commercial innovation in The Geography of Innovation Commercialization in the United States During the 1990s. Dr. Rosenbloom analyzes three measures of commercialization: public grants (SBIR and STTR), venture capital investments, and initial public offerings (IPOs) within the 50 largest U.S. metro areas. He also uses econometric models to identify the factors that influence those measures of commercial innovation, or tech transfer.

Controlling for variation due to population, Rosenbloom found that patent activity and the number of doctorates awarded (defined as scientific and engineering capacity) had the greatest influence over his three measures of commercialization.

In his analysis, five metro areas account for at least 40 percent of the three commercialization activities in the U.S. in descending order: San Francisco, Boston, Denver, San Diego and Austin. The extent of commercialization within these regions is highly unequal, with Austin achieving less than half (43 percent) the level of commercialization in San Francisco.

However, patents and doctorates cannot explain all of the regional variation and high concentration of tech transfer in a few areas. For instance, Rosenbloom notes, "Columbus, Detroit, Cincinnati and Minneapolis appear to be doing a relatively poor job of converting patents into commercial innovations."

Using a causal model and assuming a linear relationship, Rosenbloom finds the number of doctorates has a highly significant impact on the commercialization measures. "For instance a 10 percent increase in [doctorates] would increase SBIR/STTR grants by 5 to 6 percent, venture capital funds by 6.5 to 7.5 percent and IPOs by 1.7 to 2.9 percent." When factoring in both doctorates and patenting, only the level of doctorates remains a significant indicator of commercialization. However, IPOs appear to be more connected to the level of patenting than doctorates.

The model suggests the relationship between SBIR and IPOs "appears relatively weak," a finding that may surprise many involved with the federal set-aside for small tech businesses, given recent debate on the role of venture capitalists in SBIR-eligible firms.

Rosenbloom offers several observations that may guide or influence local and regional tech-based economic development policies:

The Geography of Innovation Commercialization in the United States During the 1990s is available at:
http://www.ku.edu/~bgju/2005Papers/200502Rosenbloom.pdf. Statistics for each included metro area are provided in tables 1 and 3 of the study.

[Editor's Note: It is important to note that Dr. Rosenbloom's method of measuring commercialization is relatively narrow and, as a result, his findings should be viewed in that context. One can argue, in particular, that using SBIR grants as a measure of commercialization is a stretch, however. Dr. Rosenbloom faces the problem we all do -- the lack of data to measure what we want to measure. Despite these limitations, we've written about the paper because we believe it provides food for thought for the TBED community.]

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Useful Stats
Change in Per Capita Income by State: 1999-2004
The U.S. Bureau of Economic Analysis (BEA) recently released its preliminary 2004 figures for per capita income, revealing average income received by persons grew by 4.7 percent between 2003 and 2004. The change in income was not evenly distributed across the country. The BEA explains financial activities were a particularly strong accelerating force in the Northeast (New York, Connecticut, Massachusetts and Delaware), construction in the West (Colorado, Idaho, Oregon, Nevada and Utah) and professional services more broadly across the country.

Tech-based economic development practitioners and wise elected officials will note, as well, one-year change in per capita income is not a terribly useful measure for programs requiring longer time periods to yield results. The statistic is relatively volatile between single years, affected by major events such as the dot-com crash and the subsequent recession.

SSTI has prepared a table presenting change in per capita income over the five-year period 1999-2004 and ranking the states using constant 1999 dollars.The result reveals only a 3.98 percent increase, on average, for the nation as a whole. The District of Columbia and seven EPSCoR states - North Dakota, Wyoming, Vermont, South Dakota, Louisiana, Maine and West Virginia - were the only states to post double-digit increases for the period. With the exception of Wyoming, these states remain below the 2004 national average for per capita income of $32,937.

SSTI's 2004 table is available at: http://www.ssti.org/Digest/Tables/040405t.htm

Trends in the five-year change in income may also be a useful measure, as it reveals a state's progress toward economic prosperity for its residents relative to other states and the national average. With this in mind, SSTI also draws readers to the table we prepared last year reporting change in per capital income for the five years 1998-2003: http://www.ssti.org/Digest/Tables/050304t.htm

The BEA data is available at: http://www.bea.doc.gov/bea/newsrel/SPINewsRelease.htm

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Digest Takes Spring Break
The SSTI Weekly Digest will take its annual spring vacation next week. Publication of the Digest and Funding Supplement will resume with the April 18 issue.

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