In the August 22, 2005 Issue:

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Kentucky Aims to Achieve World-Class Status in Life Sciences
With the proper utilization of existing resources, the development of key new programs, strong leadership within state government and coordinated efforts among all programs and stakeholders, Kentucky has the opportunity to become a world leader in specific niches of the life sciences industry, says a report from the Governor's Life Sciences Consortium.

The consortium, created in July 2004 by Gov. Ernie Fletcher, is comprised of experts in professional, entrepreneurial, governmental, and academic fields. The group recently released a strategic plan for positioning Kentucky a leader among states and regions in the life sciences by focusing on four key areas: natural products, medical devices, health technology services, and niche pharmaceuticals and niche biotechnology.

The report, which outlines a strategy for leveraging current assets and developing new opportunities, notes that Kentucky is considered to be an emerging novice state in the life sciences area, particularly in commercialization of research. An aggressive economic growth plan is needed for the life sciences because the state is so far behind, according to the report. For example, Kentucky ranked 48 out of 50 states in the most recent Milken Institute Technology and Science Overall Index, and the index places Kentucky in the bottom tier for S&T. Neighboring states Tennessee, Indiana and Ohio fall in the second tier.

The report recommends 11 action steps across four areas for Kentucky to successfully compete and excel in the life sciences industry: research, commercialization capital, business talent and infrastructure. Among the recommendations are:

Other proposals include establishing a $100 million, low-interest loan fund for life sciences companies wishing to move to/expand in the state and providing $750,000 per year for a life sciences commercialization program within the state. A Lexington Herald Leader article states that the initiative could cost more than $200 million if approved by the governor and funded by the legislature.

The Life Sciences Consortium report is available at: http://governor.ky.gov/NR/rdonlyres/ABA456B0-26B2-4AF6-BC14-CA35C874FEFF/0/ReportRollOutEdition.pdf

Links to this report 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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Recent Research
What Is a Cluster Anyway?
Cluster theories for explaining geographically distinct areas of economic activity have guided state and local economic development policy to varying degrees for the past 25 years. Encouraging cluster growth will be hot in one state’s strategies to encourage growth while cooling or completely absent from its neighbors.

The confusion as to what works and what doesn’t for cluster development extends well beyond the level of  practitioner, however. The more abstract and theoretical world of academic research also suffers from muddled language in attempts to be original and shared terms with more than one meaning.

It essentially boils down to one man’s cluster is not necessarily another’s.

A recent working paper by Peter Maskell, on the faculty of the Copenhagen Business School and one of the major contributors to understanding regional innovation systems, and his colleague Leila Kebir, dares to answer the question, What Qualifies as a Cluster Theory?

The paper, released through the Danish Research Unit for Industrial Dynamics (DRUID), investigates the theoretical backgrounds of the "cluster" and proposes a framework aimed at drawing the contour of cluster theory.

The authors point out so much attention has been paid to the concept in such a mishandled matter that “we run, perhaps, the risk that the cluster concept will join those rare terms of public discourse that have gone directly from obscurity to meaninglessness without any intervening period of coherence.”

[Editor’s Note: This observer at the May 2005 meeting of Canada’s esteemed Innovation Systems Research Network as wondering the same thing with the concluding session’s title, “Cluster Theory Evidence: What Remains of the Concept?” That’s one of the reasons SSTI is looking forward to the breakout session at its ninth annual conference entitled "Rethinking Regional Innovation and Change." See the conference program for more a session description and registration information: http://www.ssti.org/conference05.htm]

Maskell and Kebir begin by identifying four fundamental issues associated with the cluster concept:

Each of these four issues is examined in terms of three relevant major theoretical frameworks that can be brought to bear on the cluster concept. The paper considers approaches based on the idea of local spillovers or externalities (illustrated by the Marshall's work on "Industrial districts"); on a competitiveness issue (illustrated by Michael Porter’s theory of cluster growth); and, on a territorial perspective (illustrated by the approach emerging from research by the European Research Group on Innovative Milieux, or more commonly, GREMI).

The policy implications and limitations of each theoretical approach are then considered, drawing the authors and readers to the sobering conclusion:

"Countless well intentioned but ineffectual cluster policies from all parts of the world seem to highlight the limits of the nation state, or any other political authority, in creating economically sustainable competitive advantages by design from above.  No kind of vogue phrasings or remolded instrument packages can apparently alter the fact that the role of policy in the development of cluster advantages can only be marginal, indirect, and long term. Results are measured in decades, if measurable at all."

What Qualifies as a Cluster Theory? is available at: http://econpapers.repec.org/paper/aalabbswp/05-09.htm
Links to 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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"Maximizing Impact" Pre-conference Workshop Ideal for Advanced Practitioners
When it comes to managing a portfolio of programs, do you know what really works to ensure they will have the most impact for building a tech-based economy? "Maximizing Impact: Evaluating Science and Technology Programs," one of four full-day pre-conference workshops to be held at SSTI's 9th Annual conference on Oct. 19-21, 2005, strives to answer the question.

Designed for those advanced in the field, this engaging workshop will examine the programmatic and political effectiveness of different evaluation models, dissecting applied evaluation tools to assess their replicability across states and regions. One of several objectives for the day is to give attendees the evaluation research design tools they need for building sophisticated evaluations. The session will focus on:

Upon completion of the workshop, attendees will be equipped to identify the appropriate indicators for a given intervention, choose the appropriate method or methods for the evaluation, address causality and attribution; and effectively communicate the analysis and results to different stakeholders.

Presenters include Norman Chagnon, staff director of Ohio's Third Frontier Commission, Catherine Renault, program manager of RTI International's Center for Technology Applications, and Tab Wilkins, director of regional and technical services for the Washington Technology Center.

The full session description for "Maximizing Impact: Evaluating Science & Technology Programs," complete conference agenda, and registration information are available through the 2005 SSTI Conference website: http://www.ssti.org/Conf05/preconference.htm

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Recent Research
"Neither a borrower..." Scratch That. Start Again.
There is increasing speculation that China's surge in the global economy is unsustainable, in part, because of its debt (see the Aug. 22, 2005 issue of Business Week). Closer to home, others point out, with the addition of the recent record U.S. budget deficits, America’s national debt will be too burdensome on generations X and Y and whatever letter comes next.

But at "only" $7.9 trillion (most recent figure), the federal government can write smaller IOUs than its citizens can, according to a March 2005 brief by the Center for Retirement Research.

Will Baby Boomers Drown in Debt? reports total household debt for the U.S. is nearing $10 trillion, rocketing up from less than $6 trillion only five years ago. To put the figure into perspective, the current total is equal to a staggering 83 percent of the country’s annual gross domestic product. As one might expect, personal bankruptcies also have risen, climbing by 50 percent during the last decade.

The focus of the report is on baby boomers, those aged 50-62, whose looming collective retirement launched discussions of modifying Social Security. Will these pre-retirees, in a few years' time, trigger financial collapse when they no longer can meet their debt obligations? Probably not, according to the report, but there are trends that warrant consideration by the tech-based economic development community.

Why be concerned? Personal equity and debt are critically important elements for fueling pre-angel entrepreneurship. Nearly every aspiring inventor or tech entrepreneur taps out his or her own credit or family contributions prior to exploring structured financing. Secured debt can be the source of some angel investor funds as well. If too much of a person’s monthly cash flow is obligated for other personal debt, might there not be less entrepreneurship financed?

The good news is the debt burden of pre-retirees has not risen over the past decade, despite the rapid rise in the total owed – meaning mom or dad and the grandparents still may be able to fork over some cash when asked to personally finance the next Google. The reason for this is that assets have risen in value at a faster rate than debt. As a result, debt for pre-retirees as a percent of assets remained around 10 percent in 2004, the same as calculated for 1992. Debt payments as a percent of income actually rose by half a percent in the same time period to 10.2 percent in 2004.

Lower overall interest rates and the use of home equity loans instead of unsecured debt (home equity loans traditionally carry lower interest rates) allowed debt load to increase at an affordable rate. But what happens as interest rates rise? This is only a problem for boomers presently with adjustable rates (estimated to be one-third of boomers’ debt) and those trying to increase their debt load.

Dramatic, negative changes in housing values, however, could be more problematic, the report notes.  Also, sudden changes in employment status, as the economy continues to restructure to global realities, can be more catastrophic.

Because of its focus, what the center does not discuss in the paper is of some concern. The report states that households aged 50-62 represent about 20 percent of total American households and hold roughly one-quarter of the debt. Who is carrying all of this new debt if it isn’t the baby boomers?

Will Baby Boomers Drown in Debt? is available at: http://www.socsec.org/research.asp?pubid=785

Links to 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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People
Idaho Gov. Dirk Kempthorne named Idaho National Lab Director John Grossenbacher as the new chairman of the Governor's Science & Technology Advisory Council.

Chandler Howard, co-president of Bank of America, is leaving to become president and CEO of Connecticut Innovations.

Peter McPherson, president emeritus of Michigan State University, is the next president of the National Association of State Universities and Land-Grant Colleges.

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