In the May 1, 2006 Issue:

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Indiana Outlines Objectives to Raise Per Capita Income by 2020
Just over a year since its creation, the Indiana Economic Development Corporation (IEDC) has released a strategic plan calling for the state to potentially increase its support for several new tech-based economic development initiatives. IEDC's Accelerating Growth: Indiana's Strategic Development Plan outlines nearly two dozen action items along three themes: innovation, talent and investment.

All of the action items, according to the plan, will help IEDC achieve its goal of reaching the national average in per capita income and average annual wages by 2020. Indiana's per capita income has slipped from 106.4 percent of the national average in 1953 to 91.4 percent today. Indiana now ranks 35th out of 50 states in overall economic performance, according to the 2005 Indiana Chamber of Commerce Vision 2010 Report Card. To reverse these trends Accelerating Growth calls for the state's development policies to emphasize the importance of high wage and high growth business.

The innovation-related initiatives include:

IEDC also proposes creating a $3-5 million regional investment fund to provide matching support for the creation of several regional investment consortia (RIC) comprised of area political, business and civic leaders to work with IEDC, academia, workforce boards and various political jurisdictions. The funds will be used to develop regional plans, conduct regular progress assessments and to competitively support major regional development projects.

How the plan's funding requirements impact existing economic development programs and appropriations remains to be seen. Along with the $75 million already appropriated to Indiana's 21st Century Jobs Fund for the current biennium, the state plans to spend nearly $60 million in several economic development programs and IEDC administrative costs. While specific dollar ranges are presented in the plan for the proposed R&D Growth and High Growth funds, totaling a combined $50-100 million, no figures are provided for the 21st Century Fund. As a result, whether the Accelerating Growth recommendations result in a net increase or decrease in the state's economic development investment is not clear.

Feedback and recommendations for the plan were drawn from more than 600 decision-makers from around the state representing a wide range of stakeholders in Indiana's economic future. Accelerating Growth notes that the successful development and implementation of the plan requires close collaboration among state, regional and local public institutions, as well as the support of the business and academic community. Accelerating Growth: Indiana's Strategic Development Plan is available from IEDC at: http://www.in.gov/iedc/pdfs/Strategic_Plan.pdf

Links to this report and nearly 4,000 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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KTEC Pipeline to Match Kansas Entrepreneurs with Training, Mentors, Money
The metaphor of a pipeline is often used for describing the innovation process and, specifically, the health of a regional innovation system. Sustaining knowledge-based growth requires a steady flow of ideas, people and capital. Often, the flow can be weak in one of these areas -- or clogged by other factors such as lack of key resources or programs.

A new program by the Kansas Technology Enterprise Corporation (KTEC) moves the pipeline metaphor toward a more tangible reality to help nurture the entrepreneurship climate in the state. The new program, KTEC Pipeline, will "identify talented and entrepreneurial Kansans, match them with best-in-class training, resources and mentors and encourage them to pursue a career as a technology entrepreneur in Kansas," KTEC President and CEO Tracy Taylor said.

There is some disagreement in those circles that discuss entrepreneurship and innovation on the academic or theoretical levels as to whether or not entrepreneurs can be nurtured through training and advice or if entrepreneurship requires some sort of innate natural ability. The latter position suggests the entrepreneurship assistance efforts of many states and organizations are for naught. KTEC Pipeline presents a model combining elements of both camps to ensure its class of eight competitively selected "Innovators" will be in the best position possible to succeed by connecting them with the training, mentoring and financial resources required for their success.

The application process begins next week for what KTEC anticipates will be a highly competitive and highly selective effort. The expected qualifications for the first class of eight Innovators reads much like a job description:

Inductees receive one-year assistance and a $36,000 stipend. In addition to being matched one-to-one with an experienced and successful tech entrepreneur, Innovators will receive best-in-class training in the fundamentals of technology entrepreneurship and three-day formal learning sessions each quarter focusing on education, skill-building and networking. Pipeline mentors will be tech-oriented, proven leaders in their field or industry. Participants also will have access to other business experts, technologists and venture capitalists with the capabilities of financing early stage technology companies.

Nurturing entrepreneurial people to be successful locally is the goal of the program, one spinoff result anticipated is for these same people to provide inspiration and examples to encourage others to become entrepreneurs as well.

More information is available at http://www.ktec.com .

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NSF: Drop in Industrial Support for Academic R&D Continued into 2004
For the third consecutive year, industrial support of U.S. academic research dropped, according to an April 2006 InfoBrief by the National Science Foundation (NSF). The 2.6 percent decrease in fiscal year 2004 from the previous year is the sharpest yet in the three-year trend, following a 1.1 percent reduction in FY 2003 and 1.6 percent in FY 2002. Author Ronda Britt notes "the industrial sector is the first source of academic R&D funding to show a multiyear decline" since the survey inception in 1953. At only 4.9 percent of the total academic R&D in FY 04, the industrial share now parallels its FY 83 levels.

While the recession and dot-com crash may explain some of the drop, NSF does not offer any conclusions regarding potential causes for the drop. Others have offered globalization as a potential explanation. They see industry R&D migrating toward the markedly improved capabilities within the international academic community.

For example, basing their findings on a survey of more than 200 multinational companies, Drs. Marie and Jerry Thursby discovered more than half of the corporate respondents who identified the U.S. as their home country report that they have either recently expanded or planned to locate R&D facilities in China and India vs. other developed countries. Among the study's more surprising findings, according to the researchers, was the role university collaboration plays in the decision-making process for locating R&D facilities. In fact, collaboration with universities was particularly prevalent as a factor for expanding to emerging countries, even though these countries provide lesser degrees of IP protection. [See the Feb. 20 issue of the Digest for more details on the study.]

State support for programs encouraging university-industry research partnerships has varied over the years. Much of the recent surge in state TBED investments, for instance, has focused predominantly on overall university research infrastructure capacity building, faculty recruitment, and centers of excellence in a few targeted sectors driven by a pursuit of federal R&D investments, such as the life sciences and nanotechnology. Whether these strategic investments will be enough to woo industrial R&D spending back to the academic fold remains to be seen.

The new NSF InfoBrief is available at: http://www.nsf.gov/statistics/infbrief/nsf06315/

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International Innovation Investments Announced in France, Russia, China

France
President Jacques Chirac announced last month plans to invest nearly 600 million euros ($758.6 million US) into five high-tech government-industry projects. The projects center on making France a European leader in innovation, as well as restoring national pride, which is currently low, according to Global Insight. The five initial projects were selected by France's Agency for Industrial Innovation (AII), which was launched last year with an investment budget of 2 billion euros ($2.5 billion US). Following is a description of each project and funding levels:

A sixth yet-to-be-funded project is already underway by the French car maker PSA Peugeot. The company is creating hybrid diesel vehicles that average 82 miles per gallon. According to the Financial Times, the project will be presented to AII sometime this month.

Russia
Economic Development and Trade Minister, German Gref, announced plans to invest up to $500 million (US) into a new Venture Fund next year. The initiative is set up as a "fund-of-funds," with the federal government and private partners investing in venture capital funds on a 50-50 basis, the Moscow Times reports. According to Prime-Tass, the fund is expected to contribute to the creation and development of venture investment companies, and it is the third major fund set up by the Russian government.

The fund is aimed at encouraging venture investment and a strategy is being drafted to foster the development of venture infrastructure in 2006-08, according to the Moscow Times. Gref also announced plans to create five technology parks across Russia next year to help businesses become established and profitable during their start-up phase.

China
The Ministry of Science and Technology announced plans to build 30 new science and technology parks by 2010. The goal is to increase technology commercialization from China's research universities. According to the Science and Development Network, the parks serve as incubators for small and medium-sized high-tech companies, many of which are set up by the universities or students. The move will bring the total number of parks to 80.

The parks will be privy to number of tax breaks beginning this year following policies announced in February by the State Council. The Science and Development Network reports that in February, the State Council announced a strategy to increase annual investment in R&D to 900 billion Yuan ($112 billion US) by 2020. One of the strategies consists of tax breaks to encourage private investment R&D.

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Recent Research
Eminent Scholars and Economic Development
[Editor’s Note: The following discussion regarding the research’s relevance to state and regional TBED policy is SSTI’s. It will not be found in the working paper, nor do we mean to suggest these conclusions were drawn by professors Zucker and Darby.]

Like moths to a flame, tech firms over the past 24 years appear to have migrated toward star scientists and engineers, according to a new working paper from Lynne Zucker and Michael Darby. The latest findings by the two UCLA professors suggests the mere presence of star researchers is sufficient power to attract technology businesses to certain regions of the country – regardless of the discoveries made by these scientific superstars or their field of research.

Movement of Star Scientists and Engineers and High-tech Firm Entry traced the careers of 1,838 stars between 1981-2004 (stars are defined based on patents and citations in the leading citation indices) to reveal the apparent extraordinary magnetism of the world’s top scientists and engineers as far as economic development is concerned.

This would appear to be good news for the states investing heavily in tech-based economic development programs tailored to attracting, equipping and financing these star researchers. Eminent scholar and endowed chair programs have grown in popularity around the country; the approach is included, for instance, in Indiana’s new strategic plan described elsewhere in this week’s Digest.

The good news seems fleeting, however, with other findings in the paper. Over time, stars have become more concentrated, choosing to locate in areas already occupied by their peers within the same discipline, the paper observes. This would suggest states may have to sweeten the pot to pull stars apart or will need to attract multiple stars at a time. Investments in young, rising stars may also be a productive approach, albeit potentially short lived if they relocate to larger centers of concentration, “star clusters."

The implications of the research further warn of a potential among state and regional TBED programs toward bidding wars for star researchers, a technique most often reserved in the zero-sum game of states competing against each other for large manufacturing facilities.

Adding to the bad news, by expanding their work to track stars and high-tech firm movement in 24 other countries and the U.S., Zucker and Darby find foreign-born American stars tend to “return to their homeland when it develops sufficient strength in their area of science and technology.” With the significant number of star researchers who are foreign-born and the increased investment other countries are making in science and engineering while the overall U.S. investment is relatively flat, this could be particularly damaging at the national level.

Zucker and Darby’s findings also suggest utilizing alternate approaches for marketing regions to tech firms than are typically employed by traditional economic development efforts. Playing on the presence of star researchers in a community could have far greater impact in selected disciplines or sectors than geographic proximity to population centers or low-wages, for instance.

Movement of Star Scientists and Engineers and High-Tech Firm Entry is available for purchase from the National Bureau of Economic Research at: http://papers.nber.org/papers/W12172

Links to this paper and nearly 4,000 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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Useful Stats
State Patent Figures, 2001-2004
The United States Patent and Trademark Office (USPTO) provides online reports presenting the number of patents filed within each state distributed across technology sector or organization. Patent activity is considered an important indicator for measuring innovation and understanding economic growth.

Using USPTO data, SSTI has compiled a table showing the most recent patent activity per 10,000 residents from 2001-2004. Idaho, which ranked first between 1998-2001, continued its reign on patent activity by holding the top spot throughout the four-year period. Kansas showed the greatest increase in patents per 10,000 residents, moving up 10 positions from 39th in 2001 to 29th in 2004. Nevada and the District of Columbia tied for the second-largest increase, moving up six positions over the four years.

In contrast, North Dakota experienced the largest drop in patent activity per 10,000 residents - from 35th in 2001 to 44th in 2004 - and was followed by Oklahoma, which dropped seven positions to 37th in 2004.

SSTI's table is available at: http://www.ssti.org/Digest/Tables/050106t.htm

Also available is an SSTI table showing 1998-2001 data: http://www.ssti.org/Digest/Tables/031403t.htm

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People

The Birmingham News reports Michael Alder, executive director of the Biotechnology Association of Alabama, is leaving to become director of technology finance at Brigham Young University.

Tino Breithaupt, formerly vice president of Technology Tri-Corridor with the Michigan Economic Development Corporation (MEDC), is the new senior vice president of economic development for the Traverse City Chamber of Commerce. Vince Nystrom has been named Director, Technology Business Development of MEDC.

Rhode Island Gov. Donald Carcieri promoted Saul Kaplan to serve as the new director of the Rhode Island Economic Development Corp. Kaplan replaces three-year veteran Michael McMahon, who left to launch a new equity firm.

Keith Ridley was named manager of the Tennessee Valley Authority's (TVA) Valley Business Ventures, a new division created to increase jobs and capital investment in high-growth industries and in companies owned by women and minorities in the TVA region.

Just four months into the job, In-Q-Tel's CEO, Amit Yoran, resigned for personal reasons. In-Q-Tel is the venture capital arm of the Central Intelligence Agency.

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