In the December 5, 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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Important SSTI Weekly Digest Updates

Funding Supplement for Members Only in 2006
As long-time subscribers to the SSTI Weekly Digest know, during the past five years SSTI has published a separate element of the newsletter identifying federal and foundation funding opportunities that support either tech-based economic development directly or scientific inquiry and R&D.

The Funding Supplement began in 2001 as a service to the state and local tech-based economic development organizations (TBED) regularly receiving the Digest. They, in turn, could parse and distribute the funding announcements to their client companies and researchers. It has worked well for that purpose -- dozens of organizations and academic offices across the country redistribute SSTI-generated funding announcements through their own client networks. Our readership grew as hundreds of TBED organizations around the country joined the free subscription service to receive both the Digest and the Funding Supplement.

An unintended phenomenon happened as well, however. Companies began to subscribe to SSTI to receive the Digest and Funding Supplement directly from SSTI. It started off slowly but now numbers in the thousands. Some contact SSTI asking us to help them search for other funding or research opportunities in their specific technical field. Others ask us to help them develop proposals or think we are the ones who make the funding decisions. We refer all of these firms to the appropriate SSTI sponsor and affiliates in their respective states, as our intention was never to become a direct business assistance or TBED service provider.

To address these issues and to help raise revenues to support production of the Funding Supplement, SSTI will distribute the Funding Supplement only to our state sponsors, affiliates and supporters effective Jan. 9, 2006. As one of the oldest and most widely read information sources for the state, regional and federal tech-based economic development community, the SSTI Weekly Digest will remain available as a free e-newsletter for the entire TBED community.

Everyone has the opportunity to continue receiving the Funding Supplement by becoming a member of SSTI. There are three membership categories:

More information including benefits and a link to a secure registration form are available a http://www.ssti.org/benefits.htm. If you are unsure of your membership status check http://www.ssti.org/sponsors.htm for a current membership listing. If you have any questions about joining, please contact Noelle Sheets, director of membership services, at sheets@ssti.org or 614.901.1690.

We strongly encourage TBED organizations that have found value in obtaining both of SSTI's e-newsletters over the years to join their peers in financially supporting production of the e-publications.

2005 Digest Survey Reminder
SSTI extends its gratitude to the readers who have already completed the annual survey started last week. We'd like to hear from the rest of you. With the announced changes to the Funding Supplement, we suspect several thousand of you may have opinions and suggestions to share.

All responses must be received by the end of the day, Friday, Dec. 9, to be included in the analysis. With only eight questions, the survey is easy to complete. There is also ample room to suggest topics you'd like to see covered in future issues or news sources you recommend we should review. The survey is web-based and completely anonymous, unless you opt to provide your name at the end.

Please take a few minutes to complete it now: http://www.ssti.org/digestsurvey05.htm (expired)

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Michigan Gov. Signs Economic Stimulus Bill; Vetoes Tax Break Package
After several months of debate regarding a number of economic development initiatives, Michigan Gov. Jennifer Granholm signed into law a major economic stimulus bill. However, unhappy with portions of a separate tax break package for businesses, the governor vetoed two of the 10 bills.

Gov. Granholm signed into law a bill creating the 21st Century Jobs Fund, first introduced in her State-of-the-State Speech earlier this year (see the Feb . 21 issue of the Digest). The new initiative appropriates $400 million over fiscal years 2006-07 from tobacco settlement money to provide immediate funds for job creation and to increase Michigan's high-technology economy, according to the governor's press office. Funding for the initiative will be focused in three areas:

Additional programs were earmarked to receive $113.5 million of the $400 million investment under the 21st Century Jobs Fund appropriation. Funding for these programs include:

In early November, the governor and lawmakers reached an agreement regarding funding for the $1 billion commitment that reconfigured the structure. Under the agreement, only $400 million of the tobacco settlement funds would be securitized to provide immediate investment in the economy. The remaining $600 million is paid for by committing $75 million per year of the tobacco settlement funds for eight years beginning in fiscal year 2008.

According to an article in the Lansing State Journal, the governor said two of the bills would have created bigger tax loopholes, rather than closed them. In addition, she objected to the decision not to repeal a law that will end the Single Business Tax in 2010 without replacement, the article states. Because the bills were tied together, the vetoes killed the entire package and it was sent back to the legislature.

More information on the 21st Century Jobs Fund is available at: http://www.michigan.gov/gov/0,1607,7-168--130900--,00.html

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President Signs FY06 Department of Energy Appropriations Bill
At the end of November, President Bush signed the fiscal year 2006 Appropriations Bill for the Department of Energy & Water, H.R. 2419. A summary of the Administration's budget request for DOE is available in the Feb. 14 issue of the Digest. Highlights of the bill include:

Department of Energy
The Office of Science is funded at $3.63 billion, an increase of $33 million from the FY05 appropriations and $170 million beyond the Administration's request. Within the Office of Science, $290.6 million is slated for fusion sciences research, the same as the Administration's request. Other Office of Science initiatives include:

Additional DOE programs of interest include:

The Generation IV Nuclear Energy Systems Initiative received $55 million, which is $10 million more than the Administration's request. Hydrogen Technology received $157 million, of which $76 million is designated for fuel cell technologies. Nuclear Energy R&D received $226 million and Fossil Energy R&D received $598 million.

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Looking Back at SSTI's 9th Annual Conference
Sound Strategies for Encouraging Regional Entrepreneurship
Note: This is the first in a series of articles SSTI will be running over the next several weeks to provide synopses of selected breakout sessions from SSTI's 9th Annual Conference, held Oct. 19-21, 2005, in Atlanta. Ideas for 2006 conference sessions can be forwarded to skinner@ssti.org. Look for more news on SSTI's 10th annual conference beginning in late winter.

The Oct. 21 morning conference session, Sound Strategies for Encouraging Regional Entrepreneurship, was presented by two dynamic speakers who offered an array of valuable lessons learned garnered through years of experience promoting growth through strategic science and technology strategies.

Michael Finney, former president and chief executive officer of Greater Rochester Enterprise (GRE), began the session with the story of how the public-private partnership became a success so quickly. A team of practitioners visited 24 regions in the U.S. to interview, learn and observe what was being done to encourage regional entrepreneurship, and what seemed to be working. The GRE team then created a top 10 best practices list from issues that kept surfacing in robust entrepreneurial environments.

To determine the industry specialty, the team looked at the business environment, corporate portfolio, and university research in the Rochester area, Finney said. They realized that the region already had a highly skilled workforce in the areas of optics, biotechnology, food and beverage science, and fuel cell technology. In addition, they were able to identify technology-driven companies in these areas and a good quality of life within the region.

The next step involved marketing the area to both new and existing businesses. According to Finney, GRE spent about 60 percent of their resources on existing industries looking for ways to innovate and focused on linking existing companies with new technologies as a way to promote innovation. GRE also embarked on a heavy advertising campaign to get their message out to the community, using direct mail advertisements to capture the attention of new and existing companies.

Following Finney's presentation, an audience member inquired about the strategies used to attract and encourage minorities. According to Finney, it takes much more than simply putting a sign up. GRE hosted events to lure minority entrepreneurs and incubate them. In addition, programs were designed specifically for that purpose, Finney said.

The second speaker, Bruce Gjovig, entrepreneur coach and chief executive officer of the University of North Dakota's Center for Innovation, elaborated on the challenge he faced in the beginning of his career at the center. At the time, not many entrepreneurs were on campus, Gjovig said. One must find them and they only come when they need something, he added. Gjovig suggested holding business plan contests, venture forums and entrepreneur classes to identify entrepreneurs on campus.

Gjovig stressed there is still a lot of work to be done in order to transform campuses into entrepreneurial-friendly environments. According to Gjovig, there is a fundamental conflict with the university-entrepreneurship culture. For the research scientist, entrepreneurship is a skill set unrelated to being a good scientist and failure rates are high, while financial returns can take years.

Also discussed were lessons learned in the areas of services for entrepreneurs, access to capital, and market innovation. Gjovig offered a list of success factors that include enabling innovation, market and economic assessments to focus on niche markets, entrepreneur networks, flexible deal structure, and the importance of shared passion over credentials and experience.

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Looking Back at SSTI's 9th Annual Conference
Alternative Energy and TBED: A Powerful Opportunity
In another wing of the InterContinental Buckhead Atlanta, site of SSTI's 2005 conference, participants shared what their states and regions are doing in the area of encouraging the development and deployment of alternative energy. Lee Cheatham, executive director of the Washington Technology Center, and Karl Jessen, program director of industry support under the Massachusetts Renewable Energy Trust (RET), led the session.

Cheatham opened his presentation, highlighting the market potential for alternative energy. Worldwide energy use is estimated at 382 quadrillion British thermal units (BTU), Cheatham said. Between 1950 and 2004, energy use in the U.S. rose from 34.62 quadrillion BTU to 99.7 quadrillion BTU.

Historically, Cheatham said, the subject of energy use has been a business and policy matter. However, increased commercial and residential applications, as well as industrial and transportation uses, have resulted in a shift from business and policy to energy as an economic development driver, he said. Opportunities exist with renewable solar, wind, geothermal, fuel cell and ocean wave/tidal or other sources, and enabling technologies.

Jessen offered a picture of the efforts being undertaken by RET, a division of the Massachusetts Technology Collaborative, to promote renewable energy development. RET oversees four program areas - clean energy, industry support, green buildings and infrastructure, and policy interactions with stakeholders - and is funded by a system benefits charge as part of 1998 electricity restructuring. The division's budget is $25 million annually, Jessen said.

As of December 2004, RET investments in more than 350 projects serving Massachusetts totalled more than $119 million, Jessen remarked. The division was supporting approximately 226.52 MW of new renewables, with seven projects in the planning stages expected to result in another 630 MW, he said. Forty-seven green buildings and feasibility studies for 93 others also were funded by that time.

The Industry Support Program for which Jessen is responsible has made more than $10 million in direct investments. As of the SSTI conference, the program was helping to support more than 550 jobs, according to Jessen. Through the $15 million Green Energy Fund, which invests equity venture capital in Massachusetts-based renewable energy companies, the program has reviewed more than 60 applications since June 2004 and made investments of up to $500,000.

Is there an emerging clean energy cluster? Jessen said one may already be in place in Massachusetts.

Based on University of Massachusetts research, the state employed 10,000 workers between energy efficiency and renewable energy fields in 2002-2003, Jessen observed. In the U.S., clean energy investment is projected to grow from $16.1 billion in 2004 to $102.4 billion in 2014, according to other data. The subject deserves closer attention, however, due to the difficulty in discerning clean energy jobs through industry codes, Jessen added.

The Friday morning session did not go without comment on other efforts to harness renewable energies. The Northwest Energy Technology Collaborative, which serves to accelerate growth in the Pacific Northwest, has set a target of 20,000 jobs by 2020, Cheatham noted. Its focus is on collaborative research, commercialization and demonstrations, and regional branding and promotion.

Participants from at least seven other states who were in attendance - Maine, Maryland, Michigan, Ohio, South Carolina, South Dakota and Vermont - also cited efforts underway in their states. They ranged from South Dakota's success in producing biodiesel from soybeans to Michigan's $30 million NextEnergy Initiative.

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Editorial
Should U.S. TBED Worry As Multinationals Increase Overseas R&D Investments?
The rise in the late 1990s in the concept of a "new economy" was coupled with the rapid growth in research and innovation investment within the information and communication technology (ICT) sector. When the dot-com bubble burst, some state and local strategies were revamped to look for the next big thing, which in many places was biotechnology or nanotechnology.

The recent mega investments in R&D by big ICT companies should suggest the return to rosy times for America's info tech advocates, then, right? Probably not.

In fact, some would argue that these strategic decisions, perhaps the latest big one being the $1 billion investment announced by Silicon Valley based Cisco Systems in October or Hewlett-Packards announced new R&D facility, should sound significantly loud alarms for state and regional tech-based economic developers.

Why? Because, as this column's headline points out, these investments are not occurring in the US. Nor are they occurring in other North America ICT research centers like Ottawa. During the next three years, Cisco Systems is putting $750 million into R&D in its Indian facilities. The company also announced plans to create a $100 million seed investment fund to support the growth of India's booming tech entrepreneurship climate and to provide $10 million for rural connectivity in India. The campus, alone, for the new R&D facility costs $50 million and will house up to 3,000 Cisco employees.

Will future innovation be driven from outside the U.S? In September, the National Science Foundation (NSF) reported industrial R&D expenditures in America's academic research institutions declined for the second consecutive year (see Sept. 12 Digest).

On the other hand, why shouldn't these investments occur in India, a country of 1.2 billion people projected to sustain annual growth rates of 7-8 percent, according to a Nov. 9 article in Asia Pulse? The article stated the Asian Development Bank "might scale up assistance to US$3 billion annually and is ready for another Rupee bond issue for funding the private sector."

As top-selling titles like The World is Flat and Three Billion New Capitalists tell us, economic progress in countries such as India and China is a good thing. Improved living standards for the entire globe should be an embraceable goal of any political party. By merely looking at any of the numbers, however, the non-U.S. shift in the balance of global economic power should seem inevitable.

So what should be the reaction of the tech-based economic development community within the U.S.? Calls for protectionism? Paralysis through worry and despair? Shrugging acceptance as a fait accompli? Or, as Berkeley economists Dwight Jaffee and Ashok Mardhan suggest in their new paper Innovation, R&D and Offshoring, should America's tech centers be preparing for a wave of new jobs and economic growth from smaller technology and research firms? The 20-page paper is available at: http://repositories.cdlib.org/iber/fcreue/reports/1005/

All of these trends combined won't trigger a U.S. economic collapse, but the policy decisions and strategic investments we make or fail to make at all levels of government could. Therein lies much to worry about, based on the state of things in the nation's capital.

As solutions don't seem imminent from Washington, states and regions will have to take more significant roles working with their business, academic and research communities to identify and address the impact of trends such as the increased globalization of industrial R&D.

In many states, tax revenues are again in a mild surplus mode, enabling many governors and state legislatures the opportunity to make strategic investments and/or tax reimbursements to strengthen their positions in a global economy. SSTI will be watching and reporting as the nation's governors release budget requests during the next few months.

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Kauffman Launches eVenturing™ Website
To help entrepreneurs start and manage businesses, the Kauffman Foundation recently launched Kauffman eVenturing™ ( www.eVenturing.org). Designed for growth-oriented entrepreneurs, the new website provides access to current information, organized around key subjects such as finance and accounting, people and human resources, sales and marketing, products and services, operations, and the entrepreneur. New collections of articles will be featured monthly, including original material and an aggregation of “the best of the best” existing articles. Fresh content also will be added through a link-blog to articles and tools on a variety of subjects. Visit the website at http://www.eVenturing.org.

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Useful Stats
Five-year Change in Median Income by State
The U.S. Census Bureau has recently released the 2003 Model-based Estimates of Income and Poverty for States from the Small Area Income and Poverty Estimates Program (SAIPE). The estimates are created for states, counties and school districts for the purpose of federal programs and the allocation of federal funds to local jurisdictions.

SSTI has prepared a table ranking the states, including the District of Columbia and the U.S. overall, by percent change of median household income over the five-year period, 1999-2003, in constant 2003 dollars. During this time period, median household income for the U.S. declined 3.67 percent. Areas with the highest percentage increase in median household income were the District of Columbia, North Dakota, Virginia, Wyoming and New Hampshire. Conversely, the bottom five states were Mississippi, North Carolina, Texas, Illinois and Michigan.

SSTI’s table is available at: http://www.ssti.org/Digest/Tables/120505t.htm

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