In the September 18, 2006 Issue:

Copyright State Science & Technology Institute 2006. 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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SSTI Conference Brochure Available Online
SSTI is pleased to give regular Digest readers the first peek at a PDF version http://www.ssti.org/Conf06/brochure.pdf of the brochure for SSTI's 10th Annual Conference, Transforming Regional Economies, to be held in Oklahoma City on October 31- November 2, 2006.

A quick glance at the brochure reveals why the event is the premier professional development experience of the year for the tech-based economic development (TBED) community. The brochure includes:

The brochure also provides a handy two-page spread (see pages 24-25) that breaks sessions out by thematic areas. Whether you're interested in tactical/"how to" or policy sessions, local/regionalism or university sessions, or entrepreneurship, we have a set of sessions addressed to your interests.

We encourage you to check out the brochure or conference website soon to see what we have in store for this year's exceptional conference: http://www.ssti.org/conference06.htm

Note: Heavy traffic on the site may make the above link temporarily unavailable. Please try again shortly or ask us to send you the 1.6 meg PDF file. You are welcome to save the PDF and forward it to others in your TBED and legislative communities that should be aware of this important event.

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Maryland TEDCO Tops VC List for Third Year in a Row
For the third year, the Maryland Technology Development Corporation (TEDCO) has been named the nations most active source of early-stage or angel capital. TEDCO leads the list of the 100 top venture capital firms, based on the quarterly MoneyTree survey published by PriceWaterhouseCoopers, Thomson Venture Economics and the National Venture Capital Association (NVCA). The 2005 list appears in the July issue of Entrepreneur magazine.

Each venture capital firm on the list reported at least three deals in 2005. Because of ties, this years ranking includes 120 firms. Maryland TEDCO improved on its figure of 15 deals in 2004 to fund 23 early-stage firms.

TEDCO bucked the national trend, which showed the number of initial venture capital deals dropping significantly. Entrepreneur reports the total number of companies that won initial capital fell from 654 in 2004 to 608 last year. On average, these companies received $4.8 million, for a total of $2.9 billion. Both figures are at their highest point in four years.

Five organizations on the list managed to complete more than 10 deals last year. California is again the most active state for funding with 56 of the ranked venture capital sources, 12 of which were in the top 25 percent.

Several funds on the list make use of public funds in their capital pools; however, a few are directly supported or administered by state and local tech-based economic development organizations. By making the list, these organizations are highlighting the work and success of public venture capital funds. Examples, with their ranking, include:

1. Maryland Technology Development Corporation (TEDCO). Maryland TEDCO's most active capital funding program is the Maryland Technology Transfer Fund. The fund supports collaborations between private companies and federal laboratories or in-state universities. Up to $75,000 is available per award to defray the direct cost of developing early-stage technology. Participating companies must have fewer than 15 people or be a previous spin-off of a federal laboratory or university founded less than five years before applying. http://www.marylandtedco.org/

 2. Maryland Department of Business and Economic Development. The Maryland Venture Fund, administered by the Department of Business and Economic Development, offers new firm support through its Challenge Investment Program for early-stage seed projects and its Enterprise Investment Fund for high-tech companies seeking initial rounds of private equity. The fund has invested $40 million in 190 Maryland technology companies since it began in 1994. Its number of deals leaped from four in 2004 to 14 last year. http://www.choosemaryland.org/

6. (tied) BioAdvance. BioAdvance's $20 million Greenhouse Fund, allocated from the state's settlement with tobacco companies, supports the growth of the life science industry in southeastern Pennsylvania by investing in promising proof-of-concept projects related to biotherapeutics, biomedical devices, diagnostics, and platform technologies. Applicants can receive up to $500,000 in seed-stage funding in the form of convertible debt. In the two years since its founding, BioAdvance has invested $10.5 million in life science companies. http://www.bioadvance.com/

13. (tied) Center for Innovative Technology (CIT). Northern Virginia's Center for Innovative Technology GAP Fund invested in seven regional high-tech firms in 2005. CIT assists early-stage companies with a significant portion of their operations in Virginia that are commercializing new technologies in IT, communication, biotech, nanotech, and materials or sensors. Companies may receive up to $100,000 in convertible notes. Deals require a one-to-one match of outside funding. http://www.cit.org/

31. (tied) IllinoisVENTURES. IllinoisVentures provides early-stage capital with funding and other support for high-tech start-ups in partnership with the state's Emerging Technology Fund and the Illinois Department of Commerce and Economic Opportunity. The fund targets commercialization of new technologies in IT and software, life sciences, and basic engineering and physical, derived from research at the University of Illinois and several other regional research institutions. IllinoisVENTURES completed five deals in 2005. http://www.illinoisventures.com/
71. (tied) New Jersey Technology Council (NJTC). Since 2001, the NJTC Venture Fund has actively invested in early-stage businesses seeking public funds to leverage additional private capital. Its investments typically have a three-to-seven year horizon and range from $250,000 to $5 million over the course of the company's development. The fund's capital pool is drawn from public and private sources. http://www.njtcvc.com/index.asp

The full list is available on the Entrepreneur site and includes a separate ranking of VC funds supported later-stage companies. The list is available here: http://www.entrepreneur.com/vc100

SSTI's coverage of last years top 100 is available here: http://www.ssti.org/Digest/2005/072505.htm

[Editors Note: The significant roles publicly supported angel and VC funds can play in many regions are often overlooked by the equity industry. It could be, in part, because several programs do not report their deal flow to respected surveys such as MoneyTree. If your publicly supported fund made three or more investments in 2005 but did not respond to the survey, make sure to promote your hard work by participating next year. More information on MoneyTree is available at http://www.nvca.org.]

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ITIF Says: Federal Research Tax Credit Should Be Expanded
The rate of R&D investment by U.S. majority-owned affiliates performed outside of the U.S. increased twice as much as R&D performed within the U.S. from 1998 to 2003, as more countries around the world increased their R&D tax credits relative to those offered by the U.S. In a recent paper by the Information Technology and Innovation Foundation (ITIF), The Research and Experimentation Tax Credit: A Critical Policy Tool for Boosting Research and Enhancing U.S. Economic Competitiveness, Dr. Robert Atkinson makes the case for why the Research and Experimentation Tax Credit should be extended and expanded by the U.S. Congress.
 
When the Research and Experimentation Tax Credit was created in 1981, it was the most generous credit offered by any nation in the OECD. Over the years, additional countries offered more and more financial incentives to attract R&D activities. As a result, in 2004 the U.S. dropped to the 17th most generous OECD nation to offer R&D tax credits.
 
Atkinson cites a variety of recent studies that illustrate, at a minimum, the credit produces at least one dollar of research for every tax dollar forgone. This additional research stimulated by the tax credit leads to faster economic growth. Besides stimulating more R&D, the tax credit may also be responsible for attracting and retaining research investments.
 
The Federal Research and Experimentation Tax Credit is a 20 percent credit that applies only to increases in R&D spending. Other countries provide not just higher percentage rates on increased R&D spending, but additional flat credits for all research conducted. Other entities with taxing abilities may also provide additional credits. In Canada, for example, individual provinces provide credits on top of the federal credits. Most U.S. states also provide their own tax incentives to encourage research locally.
 
The paper can be accessed at: http://www.innovationpolicy.org/pdf/R-D_Tax_Credit.pdf

Links to this paper and more than 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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GAO Confirms Offshoring Trends in Semiconductor and Software Industries
Closer relations to foreign customers, proximity to industry suppliers, incentives supplied by foreign governments, and the availability of both skilled and unskilled human capital are all factors as to why U.S. firms in the semiconductor and the software industry continue to expand their operations offshore, according to a new report from the U.S. Government Accountability Office (GAO). U.S. Semiconductor and Software Industries Increasingly Produce in China and India describes the circumstances by which various duties from labor-intensive manufacturing operations to research-intensive design work have been increasingly outsourced to countries outside of the U.S. over the past four decades.
 
But how has globalization affected these industries in the U.S.?
 
Even though production continues to shift to parts of Asia, the U.S. enjoys global trade surpluses in both the semiconductor and software service sectors.
 
The majority of U.S. exports in the semiconductor sector are chips and wafers used in the assembly of integrated circuits. The majority of U.S. imports are finished integrated circuits, assembled in other countries. Recently, U.S. exports have remained flat, but imports declined more dramatically, creating larger annual surpluses. Employment in the semiconductor industry has been stagnant the past few years, down 25 percent since 2001.
 
In the software industry, total revenue in 2004 has returned to its peak revenue level in the year 2000. The report also contends the growth of computer programming occupations is expected to significantly lag the growth of overall U.S. occupations in the next decade.
 
The GAO recommends investment in research and development, building innovative academic environments to attract excellent students, and encouraging a competitive business environment in order to maintain competitiveness in the semiconductor and software sectors.
 
The entire GAO report is available at http://www.gao.gov/new.items/d06423.pdf

Links to this report and more than 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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Harvard Prof Receives Kauffman Prize Medal for Research on Social Networks and Innovation
The Ewing Marion Kauffman Foundation has awarded its second Kauffman Prize Medal for Distinguished Research in Entrepreneurship to Professor Toby Stuart of the Harvard Business School. The medal is given every two years to a scholar under the age of 40 whose research has made a significant contribution to the study of entrepreneurship and innovation. Stuart accepted the medal last month, along with a cash award of $50,000, at the Academy of Management's annual meeting in Atlanta.

At the ceremony, the Kauffman Foundation cited Professor Stuart's pioneering research on social networks and their effect on entrepreneurship as an example of outstanding contribution to the field. Stuart's latest research suggests that entrepreneurs must be perceived positively within their local entrepreneurship community in order to create successful new firms.

As a service to those Digest readers who do not regularly review the latest academic research in the field, SSTI offers the follow summaries of a selected set of Professor Stuart's most recent articles:

"When Do Scientists Become Entrepreneurs? The Social Structural Antecedents of Commercial Activity in the Academic Life Sciences"
 Stuart and Waverly Ding of Berkeleys Haas School of Business take a randomly selected sample of 5,100 life science Ph.D.s in academia, and examine the link between participation in for-profit entrepreneurial ventures and the presence of an academic social network that supports faculty entrepreneurism. They find that university scientists are more likely to found or join the board of a new firm if other faculty members have already done so, particularly if more prestigious colleagues in their department have created their own start-ups. They also find evidence that more accomplished faculty members are more likely to help commercialize technologies and to lead the way in fostering an entrepreneurial climate within a university department.

"The Impact of Academic Patenting on the Rate, Quality and Direction of (Public) Research Output"
 In this January 2006 paper, Stuart, Ding, and Pierre Azoulay of Columbia Universitys Graduate School of Business examine the patents and research output of 3,862 academic life scientists to determine if the increasing focus on commercialization at American universities is affecting the quantity and quality of published research. They conclude that patent activity has a positive effect on the rate of article publication, but no observable effect on the quality of those articles.

"Gender Differences in Patenting in the Academic Life Sciences"
In this Kauffman-sponsored study, Stuart, Ding, and Fiona Murray of MIT's Sloan School of Management reveal that male life scientists in academia secure patents at more than twice the rate of their female colleagues. The study suggests that women conduct equally significant research, but often find themselves left out of social networks that provide valuable access to the commercial sector. The authors conclude that additional networking groups could help foster greater connections between female researchers and the business community.

These articles and others by Toby Stuart are available through the TBED Resource Center at http://www.tbedresourcecenter.org.

The Kauffman Foundation awarded its inaugural Prize Medal last year to Professor Scott Stern of Northwestern University's Kellogg School of Management. The medal was given in recognition of Stern's outstanding research on intellectual property issues in IP-rich fields, such as biotechnology and pharmaceuticals. Several of his articles also are available via the TBED Resource Center.

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Four Appointed to SSTI Board
SSTI is pleased to announce four new appointments to our board of trustees:

The four appointees will join SSTI's existing eight board members in providing strategic guidance and oversight for the organization's 37 state sponsors and 114 affiliates and supporters. Representation of these sponsors, affiliates and supporters - or SSTI members - ranges fom state and local tech-based economic development organizations and universities to nonprofit organizations providing services to companies.

Existing board members include former Michigan governor and SSTI Board Chairman John Engler, former Massachusetts governor and Vice Chairman Michael Dukakis, John Ahlen, Donald Almquist, Richard Bendis, Luis Proenza, and Phillip Singerman. Their biographies are available at http://www.ssti.org/board.htm.

Engler indicated that he is pleased with the selection of Cassidy, Finney, Godwin and Mehlman.

"They are an outstanding four," Engler said. "Combined, their leadership, vision and expertise will enable SSTI to continue to develop its nationwide network of practitioners and policymakers."

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Job Corner
Maine Department Seeks Director for Office of Innovation
The Maine Department of Economic and Community Development is seeking a qualified, energetic, collaborative person to serve as director of its Office of Innovation. The Office of Innovation seeks to advance Maine's economic well-being and to expand employment opportunities by encouraging and coordinating the state's R&D activities and fostering collaboration among its higher educational and nonprofit research institutions and the business community. A four-year degree; experience in science, engineering, technology and/or business; and experience in the management of organizations that innovate, commercialize and deploy technology are among this position's minimum requirements. More information on this opportunity is available through the SSTI Job Corner at http://www.ssti.org/posting.htm.
 
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People

The Idaho Falls-based Partnership for Science and Technology selected M. Lane Allgood as its new executive director.

Indiana Economic Development Corp. President Mickey Maurer will resign at the end of 2006, fulfilling his pledge to Gov. Mitch Daniels to serve two years.

Michael Relyea has been named executive director of New York State Foundation for Science, Technology and Innovation, the public benefit authority that oversees the New York State Office of Science, Technology and Academic Research (NYSTAR). Dr. Russell Bessette, executive director of NYSTAR, will serve as chief science advisor for the foundation and its board.

Dr. Raymond Taylor has joined the Southern Growth Policies Board leadership team as senior fellow and director of the organization's Council on the New Economy Workforce.

The Kansas Bioscience Authority named Thomas Thornton as its first president and CEO.

Dr. Janet Yancey-Wrona left her post as director of the Maine Department of Economic and Community Development's Office of Innovation to join a new University of New England biotech start-up.

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