In the August 1, 2005 Issue:

Copyright State Science & Technology Institute 2005. Redistribution to all others interested in tech-based economic development is strongly encouraged — please cite the State Science & Technology Institute whenever portions are reproduced or redirected.

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Govs Speak Out for Tech-based ED, Research
Partisan politics take a back seat when the nation's governors talk about the need for stronger national innovation policies. Ample proof of this is offered policy position statements approved at the two most recent meetings of the Western Governors' Association and the National Governors Association.

Both resolutions call for increased federal support of basic research. The Western Governors' Association, representing 18 states, American Samoa, Guam and the Northern Mariana Islands, also called for Congress to make the federal R&D tax credit permanent, to provide more funding for science and math education, and to help level international tax policies to encourage domestic investment.

During its recent annual meeting, the larger National Governors Association adopted the first major revisions of its National Research, Development And Technology Policy Position statement since 2003. The statement addresses six issues, including improved technology transfer from federal laboratories and sustained federal funding for the Manufacturing Extension Partnership, the Advanced Technology Program, and aeronautical technology R&D. The first recommendation in the two-page statement is new, however, and calls for the creation of a "State-Federal Technology Partnership to Encourage Commercialization." The statement reads:

"Technology and innovation drive the creation of new companies. Studies of company formation consistently show that a vital fraction of start-ups are founded around spun-out university developed technology. Yet, current practices in commercializing technology from public-funded research are not keeping up with the needs of the states and the nation in this critical area.
It is in the nation's best interest to develop a new system that will commercialize technology efficiently and effectively to increase the state and federal governments' return on investment. This system should be based on states' economic development capabilities in linking researchers and entrepreneurs with each other, and sources of capital and business expertise.
 
Since states have more interaction and knowledge of local marketplaces, this new system could be locally managed by a state, independent entity, or locality, while the federal government could provide support and guidance to encourage the implementation of best practices.
 
To stimulate a more efficient state-federal partnership in the commercialization of technology, the federal government should do the following.

Support federal investment to develop a national network in partnership with the states that will accelerate the commercialization of technology in local marketplaces and assist in the creation and growth of technology companies.
 

Promote greater coordination and communication among federal agencies in their approaches to encourage innovation as an economic growth strategy."

The Western Governor's Association Policy Resolution 05-01 on U.S. Economic Competitiveness is available at: http://www.westgov.org/wga/policy/05/competitiveness.pdf

The National Research, Development and Technology Policy of the National Governors Association is available at: http://www.nga.org/portal/site/nga/menuitem.8358ec82f5b198d18a278110501010a0/?vgnextoid=
229a9e2f1b091010VgnVCM1000001a01010aRCRD

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R&E Tax Credit Growth Outpaced R&D Spending
The yearly dollar amount of research and experimentation (R&E) tax credit claims grew twice as fast as company and other nonfederally funded R&D expenditures between 1990 and 2001, a new National Science Foundation (NSF) InfoBrief reports. In contrast, direct federal funding for industrial R&D declined through much of the 1990s, both in absolute terms and relative to industry-funded R&D.

The InfoBrief considers R&E tax credit data from the U.S. Internal Revenue Service and R&D funding data from NSF's annual Survey of Industrial R&D. For 2001, the latest year for which data are available, U.S. corporate claims for the R&E tax credit totaled approximately $6.4 billion ($6.2 billion in 2000 constant or inflation-adjusted dollars), compared with a high of $7.1 billion in 2000.

The R&E tax credit, established in 1981 as part of the Economic Recovery Tax Act, is one of the nation's better-known policy tools to stimulate company R&D. The credit presently is equal to the sum of 20 percent of the excess of qualified research expenditures for the taxable year over a base amount, and 20 percent of basic research payments. However, legislation introduced earlier this year aims to both expand the tax credit and make it permanent (see the April 18 issue of the Digest).

NSF offers these findings:

NSF notes that its Survey of Industrial R&D is based on a nationally representative sample of all U.S. for-profit companies having five or more employees, with data collected on a calendar-year basis and industry classification based on the North American Industry Standard Classification. The survey is available at http://www.nsf.gov/statistics/industry/.

The NSF InfoBrief, The U.S. Research and Experimentation Tax Credit in the 1990s, is available at http://www.nsf.gov/statistics/infbrief/nsf05316/.

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Measuring Impact: NSF STEM Efforts at 25
As most practitioners know, measuring progress for tech-based economic development efforts can be difficult given the long lead time necessary for most research investments to yield results. Consequently, many programs rely on interim measures to evaluate a policy or program's impact. Still others use input measures such as amount of money distributed through a particular program, the number of grants made, the number of companies involved, or the amount of money leveraged by the state's investment. Unfortunately, none of those measures provide much insight on a program's true impact.

A new assessment of the National Science Foundation's efforts to attract underrepresented population groups into science, technology and math (STEM) fields provides an example of the difficulty programs have assessing interim progress.

Broader inclusion in S&T is an important issue for future U.S. competitiveness given the varied growth rates among population groups and flattening immigration rates. A more diverse and scientifically more literate workforce should lead to significant increases in innovation and opportunity for the entire nation. To address this goal, NSF has increased its financial investments targeted to underrepresented groups by 87.5 percent over the past 25 years.

The increased spending, on its own, sounds like an impressive step and a useful input measure of the agency's commitment to the issue of broader participation. Broadening Participation in America's Science and Engineering Workforce, the new report by the Committee on Equal Opportunities in Science and Engineering (CEOSE), however, reveals the 87.5 increase is only "slightly higher than the overall budget growth during that time period." Efforts to broaden participation continue to capture less than 5 percent of NSF's total budget, similar to 1994 levels.

Now, with the passage of time, CEOSE is able to rely less on input measures to determine whether or not NSF's investment and efforts have paid off. The study analyzes the first 25 years of NSF policies and programs related to broadening participation in STEM fields.

The good news is that persons from underrepresented groups are now submitting a substantially greater number of proposals to NSF and make up a larger percentage of the professional staff at NSF, the report states. More importantly, perhaps, proposal success rates among women, underrepresented groups and people with disabilities are comparable with the foundation-wide average of 31 percent.

However, CEOSE concludes there is still a long way to go before these individuals have full access to STEM education and opportunities, as progress remains uneven across underrepresented groups, science and engineering fields, and career paths.

The report commends NSF for being among the first federal agencies in 1980 to work toward broadening participation of underrepresented groups. This change, however, is proving to be slow and difficult, the report states. Anecdotal evidence suggests that to achieve successful institutional transformation, factors affecting persistence and attachment of students and professionals demand attention. Such factors are said to require focused research and include curriculum, teaching approaches, mentoring, career opportunities, role models, decision-making processes, reward structure, resource allocation, and ways of collaborating.

In addition, it is necessary to overcome the low societal expectations and common biases about the roles and capabilities of women, minorities, and persons with disabilities, the report adds. With a focus on increasing retention rates and broadening participation, CEOSE developed recommendations for NSF within four priority areas:

The report summarizes the results of a quantitative analysis of the trends in participation in STEM over the past 10 years and includes COESE's 2004 Biennial Report to Congress. Recommendations for priorities and directions in the 2005-06 biennium also are provided. The full report is available at: http://www.nsf.gov/od/oia/activities/ceose/

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Recent Research
Where Are the Women? Not in the Competitive Game, Says NBER
Do women shy away from competition? Do men compete too much? In a recent working paper published by the National Bureau of Economics Research (NBER), economists Muriel Niederle and Lise Vesterlund answer yes to both questions after measuring performance and preferences of men and women in a controlled environment.

Niederle and Vesterlund test individuals on their ability to add sums where payments benefit high-performing individuals who select a competitive "tournament" scheme rather than a per-piece payment. More than half of the women select the noncompetitive option, even when they would have likely garnered more earnings under the tournament. Conversely, twice as many men chose the tournament even when past performance indicated the likelihood of no earnings under this choice.

The task was performed equally well by men and women under both schemes. Selection of a competitive payment did not affect the choice and potential payment of other participants. The authors tested various reasons for the gender gap, including risk aversion, confidence, avoidance of competitive performance, and belief of relative rankings.

Niederle and Vesterlund found that men were overconfident, rating their ability more highly than women rated theirs regardless of actual performance. However, this overconfidence only explains part of the gender gap. Women passed up the larger financial reward even when they performed the task well in previous tests and did not need to perform it again.

Could these attitudes about competition explain the dearth of women in top corporate management, boardrooms, scientific research, and tech-based careers? Something to consider the next time a company, organization or large research university asks, "Where are the women?"

Do Women Shy Away from Competition? Do Men Compete Too Much? is available at http://www.nber.org/papers/W11474.

We'll be exploring the issue of where the women are in relation to entrepreneurship in science and technology in one of the sessions at SSTI's 9th Annual Conference, Investing in a Brighter Future: Building Tech-based Economies, in Atlanta on October 20-21. Presenters for the session include: Jiahong Juda of the Women Entrepreneurs in Science & Technology (WEST), which is working with women scientists from academia, corporations and entrepreneurship to provide women with another career option: entrepreneurship; and, Nancy Sullivan from the Center for Women Entrepreneurs in Technology at Northwestern University, which provides access to resources, training, and networks to enable women to turn innovative ideas into companies. For more information on SSTI's Conference, go to: http://www.ssti.org/conference05.htm

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Santa Fe to Nurture Clusters to Diversify its Economy
A community essentially has two options for strategies to diversify its economic base: traditional economic development or technology-based economic development (TBED). The traditional approach of recruiting or inducing companies to relocate to their community from elsewhere creates an atmosphere of competition, rivalry and one-upmanship among cities and regions as they bid to buy firms' location decisions. Often, it is also difficult for small and mid-sized communities to compete on these terms. The result, particularly with large manufacturing facilities, can be publicly financed incentive packages that may prove economically more expensive to a community than the benefits promised by the new development. Increasingly, economic development professionals are learning those promised jobs may never fully materialize.

TBED, on the other hand, provides a more sustainable approach toward economic prosperity by encouraging the growth and expansion of firms through investments in research and technology, innovation and the commercial exploitation of new technologies. Communities within regions see advantages to collaborating together, to encouraging larger state and federal R&D investments, and to working with private and academic researchers to foster an environment conducive to innovation. State and regional TBED efforts benefit by learning from each other regarding the success and failure of their programs and policies, hence the growing popularity of SSTI's annual conferences.

A fundamental concept of cluster theory is that the interactions of firms concentrated in a particular geographic area are beneficial to those firms, giving them a competitive advantage to firms located outside the area. For some industry sectors, additional non-industrial resources of a region - such as risk capital and academic research capacity - also can aid in the development of new technologies and innovation, increasing the firms' abilities to compete globally. Cluster approaches to economic development and TBED share the similar desires of encouraging collaboration, university-industry partnerships for research, and other strategic alliances within a regional innovation system.

Gardening serves increasingly as a useful analogy for developing regional innovation systems in many parts of the country where practitioners are more familiar with the traditional "slash and burn" approach to economic development than with systems theory. The new economic development strategy outlined by Santa Fe Economic Development, Inc. (SFEDI) provides one of the most recent examples of applying gardening terms to cultivate tech-based growth.

The Santa Fe Plan calls on the community becoming more economically diverse while maintaining its quality of life by nurturing the growth of 10 different industry clusters first identified in 1996: biotechnology, publishing, information technologies, film/video production, medical practitioners, indigenous art, light manufacturing, furniture and furnishings, speciality agriculture and outdoor recreation equipment. The goal is to diversify the community by reducing the dependence on the low-wage tourism industry, without threatening the attractiveness of Sante Fe as a tourist destination.

The city's Cluster Cultivation Program, applying the "Economic Gardening Model," contains four basic steps: cluster identification, cluster activation, cluster support, and cluster expansion. The plan identifies a clear benefit to the cluster strategy as the greater likelihood that local and regional economic development organizations are coordinating their efforts and developing a more comprehensive approach to TBED.

Now in its first steps of implementing the plan, SFEDI is conducting roundtable discussions for all of the industry clusters that have been identified and is positioned to recommend specific action items for developing each cluster. SFEDI will facilitate the meeting of cluster members, conduct research to help the cluster define itself, and respond to cluster priorities.

More information on the Santa Fe Plan is available at http://www.sfedi.org/ .

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Recent Research
Start-ups Pose Hurdles to University Tech Transfer
Since passage of the Bayh-Dole Act of 1980, universities across the country have established transfer technology offices to assist in commercializing academic inventions. Efforts to transfer university inventions to the market continue to be a difficult proposition, with less than a third of disclosed inventions resulting in license. Start-ups garner only one in eight licenses.

In University Invention, Entrepreneurship, and Start-Ups, authors Celestine Chukumba and Richard Jensen develop and test a multi-stage game to examine the factors leading to university start-up formation. The economists posit that start-ups occur when development costs remain low due to venture capital contribution, inventor involvement and fewer opportunity costs than in an established firm. The model considers start-ups likely when the technology transfer office determines a high cost of finding a licensee. In these cases, the office shelves the disclosed inventions leaving inventors to pursue start-ups on their own.

Using existing data and multivariate regression, the authors find:

In the working paper circulated by the National Bureau of Economics Research, Chukumba and Jensen conclude that university innovations may be too nascent to attract venture capital, build new start-up companies, and lead to commercially viable products.

University Invention, Entrepreneurship, and Start-Ups is available at http://www.nber.org/papers/w11475. This paper and more than 1,000 additional TBED-related research reports, strategic plans and other papers can be found at the Tech-based Economic Development (TBED) Resource Center, jointly developed by the Technology Administration and SSTI, at http://www.tbedresourcecenter.org/.

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