In the April 23, 2007 Issue:

Copyright State Science & Technology Institute 2007. 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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Senate Passes Competitiveness Act, 88-8
With the title America Creating Opportunities to Meaningfully Promote Excellence in Technology, Education, and Science Act, it isn’t surprising that S. 761 had 69 cosponsors in the U.S. Senate. The bill’s passage last night by an 88-8 vote by the full chamber sends an even stronger signal that the vast majority of the Senate has heard the message regarding the need for the federal government to be more aggressive in its support for science and technology.
 
This morning’s online issue of the Chronicle of Higher Education states “the Bush Administration had expressed ‘serious concerns’ about the measure” but indicates no specific veto threat has been issued.
 
S. 761, a 210-page bill, compiles the recommendations of the National Academies of Science’s report Rising Above the Gathering Storm, the President’s American Competes Initiative, and a few additional initiatives. The House of Representatives, by contrast, is considering several separate bills.
 
The Chronicle article by Jeffrey Brainard reports S. 761 creates 20 new federal programs. A quick scan of the bill by SSTI yields the following examples or highlights:

The eight dissenting senators were Allard (R-CO), Coburn (R-OK), DeMint (R-SC), Graham (R-SC), Gregg (R-NH), Inhofe (R-OK), Kyl (R-AZ) and Thomas (R-WY).
 
S. 761 is available at: http://thomas.loc.gov/cgi-bin/bdquery/z?d110:SN00761:

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NSF: 2006 R&D Spending Up, But Growth Rate Slows
The National Science Foundation (NSF) projects U.S. spending for R&D in 2006 will be 6 percent higher than it was in 2005, once all figures are compiled for all sources of funds surveyed: industry, the federal government, universities, colleges and other nonprofit institutions. (Note: State sources of funds are captured only through the separate surveys of industrial and university performers.) Total 2006 U.S. R&D expenditures are expected to surpass $342.9 billion, up $19 billion from 2005.

Estimated figures for 2005 were 7.8 percent higher than 2004 in current dollars, NSF reports in its April 2007 InfoBrief. Accounting for inflation increases the difference between 2005 and 2006 growth rates even more, as inflation picked up speed in 2006. Increases in R&D spending outpaced inflation in both years, however. The 2005 figures are 5 percent greater than 2004 after inflation, while 2006 is only 3.5 percent higher than 2005. 

NSF notes the increase in real R&D in 2006 primarily reflected growth in R&D performed by for-profit companies operating in the U.S. R&D performed by the federal government declined by $800 million over 2005 estimates, while industrial R&D grew by more than $9 billion.

The InfoBrief is available at: http://www.nsf.gov/statistics/infbrief/nsf07317/

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Regional TBED Strategies: New Announcements, Past Experiences and Some Thoughts
Over the last few months, three states have announced new strategies to encourage regional tech-based economic development. Several states have experimented with how best to support or encourage regional TBED in the past, resulting in both successes and failures. In some cases, state sought partnerships at the local level in the creation of new programs while other states took a more hands off approach, such as providing seed funding to create regional technology councils.
 
In Massachusetts, the John Adams Innovation Institute released its first grant solicitation inviting government and nonprofit organizations to develop projects that advance opportunities for the development, retention and growth of local cluster employment in tech-related sectors. Through its Project Award Program, the Institute offers two rounds of funding per year, with one-time grants ranging from $250,000 to $500,000. The $4 million program falls under the Innovation Institute Fund, a $15 million fund that supports regional TBED initiatives throughout the state.
 
In announcing the new initiative, the Institute notes, “Applicants must demonstrate a fundamental understanding of emerging market opportunities or barriers/constraints that inhibit economic growth in a region or cluster and make a persuasive case about how they propose to address them and thereby create new opportunities.” The John Adams Innovation Institute will allow projects to be structured over three years.
 
Proposals are being solicited from partnerships represented by municipal governments, economic development agencies, industry associations, educational institutions, and other nonprofit organizations. Private entities are expected to be involved but cannot receive funds through the program.
 
Officials in Indiana are taking a similar approach with the creation of a new grant program that provides matching dollars to organizations that create and implement initiatives that increase regional competitiveness. The award size, however, is smaller than those offered in Massachusetts.
 
The Regional Economic Development Partnership Program, founded by the Indiana Economic Development Corporation (IEDC), released a Request for Proposals (RFP) in February that requires multi-county collaboration and consultation with area businesses and education and community leaders. The objective is to build on the state’s strategic plan released last year, titled Accelerating Growth (see the May 1, 2006 issue of the Digest). Groups are eligible to receive up to $150,000, and applications are reviewed on a rolling basis throughout the year.
 
Funds can be used to complete regional strategies, begin implementation of previously defined initiatives or even seed a regional venture capital fund. State funds must be matched on a one-to-one basis.
 
Last week, Wisconsin Gov. Jim Doyle signed Executive Order 193, creating the Governor’s Business Council. The council, whose mission is to provide a forum to share best practices and develop new policy, is comprised of leaders of the state’s regional economic development organizations. Gov. Doyle’s budget commits up to $1 million to support regional projects through the business council.
 
Other states applying regional strategies in the past include Mississippi and Virginia. In 2003, the Mississippi Technology Alliance awarded more than $90,000 in small grants to communities around the state to establish regional tech councils (see the Feb. 21, 2003 issue of the Digest). The state also has a Certified Technology Communities Program that identifies needs or gaps in a community and provides resources to resolve those needs and gaps.
 
Many regional tech councils that receive start-up funding from states face financial challenges quickly. Tech councils that fail to become self-sustaining or secure other types of funding often quickly merge with other similar councils or dissolve altogether. In 1996, the Virginia General Assembly established a Regional Competitiveness Program that provided funds to 31 projects that promoted regional cooperation and addressed economic competitiveness. Both the Hampton Roads Partnership and the Hampton Roads Technology Council were funded under the program until the 2002-03 legislative sessions when funding for all of the regional councils was eliminated in the state budget. Today, the Hampton Roads Partnership is funded through memberships and investments by localities in the region.  
 
Ohio and New York introduced programs in 2005 focusing on entrepreneurship and technology commercialization at the regional level. Ohio voters approved a $500 million bond issue that included funding for the Entrepreneurial Signature Program (ESP), which is part of the state’s Third Frontier Initiative. The $85 million program was created to increase tech-based entrepreneurial commercialization outcomes in six geographic regions. After the first round of funding in November 2006, news reports across the state were full of complaints about the “fairness” of the distribution of funds, most of which will support regional equity capital investment programs. A second distribution of funds last month balanced the total awards more evenly across the regions.
 
The New York State Office of Science, Technology and Academic Research (NYSTAR) recently released an RFP seeking input and guidance as to how the state’s Regional Partnership Program will be structured. The initiative is designed to help improve the ability of emerging and established technology-related companies to grow by connecting entrepreneurs to management expertise and financial resources. Proposals will be used to structure the program and certify up to 10 regional partnerships, one for each economic development region in the state, according to NYSTAR. The RFP serves as the first step in developing an effective system for sharing knowledge and commercializing new technologies.

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Recent Research
A New Way of Mapping Innovation Systems
Universities, federal laboratories and incubators frequently receive top billing in technology-based economic development – and for good reason. These institutions play host to a variety of resources that are indispensable for economic growth, including cutting-edge research, nascent high-tech businesses and commercialization programs. Their presence is tangible evidence of support for the knowledge economy, and without them, burgeoning high-tech industries would face dim prospects for sustainable growth.
 
Since the early 1980s, academic researchers alike have been emphasizing the importance of these institutions in supporting national growth. According to the literature of National Innovation Systems (NIS), differences in the relative performance of successful and unsuccessful economies can be explained by the combination of policies and institutions that support innovation. Thus, the success of national growth strategies hinges on shaping effective policies and tailoring the services offered by support institutions to build successful high-tech industries.
 
A recent paper by Marko Hekkert, Roald Suurs, Simona Negro, Stefan Kuhlmann and Ruud Smits, however, finds that this approach has two major drawbacks. First, this model of innovation is too static, they believe. The authors contend that disruptive technologies do not emerge in the same way as the technologies that preceded them, which are often the ones upon which NIS policies and structures are based. In a related presentation, Hekkert, et al., point to the wind power industry as an example. The motivations and challenges of the emerging wind power industry differ from those of the well established coal industry. As a result, wind researchers and entrepreneurs require a different set of services and policies to thrive. This customized mix of resources comprises a competing innovation system, one that expands along with the industry and one that uses institutions in different ways.
 
Second, the traditional model of regional innovation systems tends to emphasize the importance of policies and institutions, while downplaying the role of entrepreneurs.
 
Hekkert, et al., believe these drawbacks can be addressed through a different model of innovation systems. Instead of focusing on the institutions, their model attempts to capture the driving forces, obstacles and needs of specific high-tech industries.
 
The authors argue that in order to assess and assist emerging industries, researchers can begin with the previous commercialization success stories in that technology field. From there, they can begin to document the policies, services and organizations that already support innovation in that field. These resources can be broadly grouped into seven functions, which are required within all innovation systems. These include:

This approach shifts the focus away from institutions as quasi-static actors and toward the functions that the institutions serve in bringing specific types of technologies to market. The categories help to capture the resources that are already being used by emerging industries and which can be expanded to help these industries succeed. The paper concludes that by tracking the functions, and not the structures, of innovation systems, strategies can overcome the shortcomings of the NIS model and begin tailoring initiatives to benefit the most promising industries for future economic growth.
 
Purchase "Functions of Innovation Systems: A New Approach for Analyzing Technological Change" from the May 2007 issue of Technological Forecasting and Social Change at: http://tinyurl.com/26fwnu

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New Study, Online Database Released to Help Rural Communities
Which strategies should rural areas employ to encourage future growth? Many states and community leaders are asking themselves this question as they attempt to compete in a global economy. Several regions recently proposed to build ethanol plants in their areas to capitalize on the energy-production market. Other rural areas are promoting their cultural assets and natural resources to attract tourism.
 
But what works best for each individual county?
 
Unlocking Rural Competitiveness: The Role of Regional Clusters explores this question, highlighting the complex relationship between rural areas, economic performance, and the different types of industries spread throughout the country. Perhaps the most useful component for practitioners is an online database that contains information for every state and U.S. county such as: the number of establishments and employees in each of the study’s 17 industry clusters and six manufacturing subclusters; educational attainment; average wage per cluster; housing information and building permits; labor force statistics; demographics; and, varying indices of rurality.
 
The authors, a team from Purdue University’s Center for Regional Development, the Indiana Business Research Center at Indiana University’s Kelley School of Business, and the Strategic Development Group, stress that rural economies are driven by more than just agriculture and that counties should not be classified as either rural or urban, but instead should fall along a continuum between the two extremes. To measure where a county falls on the continuum, the team created an Index of Relative Rurality (IRR) calculated from the population, population density, the extent of urbanized area, and the distance to the nearest metropolitan area. Based on the value of the IRR, each county was then separated into seven distinct categories of relative rurality.
 
Within each of the seven categories, the team explored further correlative relationships between both the employment size of various industry clusters and selected economic indicators, such as median household income, unemployment rate, poverty rate, and average wages. In all, 17 major industry clusters were used in the study, including business and financial services, energy, advanced materials, and transportation and logistics, among others. Additionally, the manufacturing cluster was broken up into six smaller subclusters in the analysis. The geographic locations of clusters were found to vary dramatically around the country. The tendency of some industries to co-locate, to interrelate with other industries, may allow regions to consider “diverse specialization” strategies instead of choosing one single industry to target.
 
The report also contains a case study in which the team's online database was used to help develop a regional economic development strategy. Using an eight-county region in southwestern Indiana that included four metropolitan counties and four non-metropolitan counties, the authors describe the step-by-step process in which they used the database - supplemented with personal interviews and surveys from the business community - to chart out a strategy for future development. They found that the region specializes in the forest and wood products, life sciences, chemical products, and advanced materials industries. The key to future development of the region, they suggest, is the linkage of the interrelated clusters and the region’s proximity to other metropolitan areas.
 
Unlocking Rural Competitiveness: The Role of Regional Clusters is available at http://www.ibrc.indiana.edu/innovation/reports.html. To view maps illustrating the location of industry clusters across the country, visit http://www.ibrc.indiana.edu/innovation/maps.html.

The online database may be accessed by visiting http://www.ibrc.indiana.edu/innovation/data.html.

Links to the report and more than 4,500 additional TBED-related research reports, strategic plans and other papers also 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
2004 Industrial R&D Intensity by State
California accounted for 22.4 percent of the nation’s total industrial R&D in 2004, leading the U.S. with $46.6 billion in total industrial R&D expenditures, according to the National Science Foundation’s (NSF) Survey of Industrial Research and Development: 2004. Michigan ($15.2 billion), Massachusetts ($11.8 billion), New Jersey ($11.0 billion), and Texas ($11.0 billion) rounded out the top five.
 
When ranked by industrial R&D intensity, Michigan placed first at 4.14 percent, followed by Connecticut (3.93 percent), Massachusetts (3.78 percent), Washington (3.49 percent), Rhode Island (3.15 percent) and California (3.07 percent). The national average in industrial R&D intensity for 2004 was 1.79 percent.
 
Using the NSF data, SSTI has prepared a table presenting state rankings of industrial R&D intensity for 2004. Industrial R&D intensity, or the ratio of industry R&D to gross state product, is shown for all 50 states and the District of Columbia. The table may be accessed by visiting http://www.ssti.org/Digest/Tables/042307t.htm.
 
For 2003 state industrial R&D intensity data, visit http://www.ssti.org/Digest/Tables/040306t.htm.
 
NSF’s InfoBrief on the survey is available at http://www.nsf.gov/statistics/infbrief/nsf07304/.

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SSTI Job Corner
Complete descriptions of the position openings described below are available at http://www.ssti.org/posting.htm.

The Georgia Medical Center Authority (GMCA), a state authority whose mission is to develop the life sciences industry in Georgia, is seeking an executive director. Reporting directly to the GMCA board, this individual is responsible for managing the Augusta BioBusiness Center, the provision of bond financing for life science R&D and manufacturing facilities statewide, leadership in developing a research park in east central Georgia, recruiting companies, and performing other duties. The successful candidate ideally will have educational and work experience related to life sciences business development and bond financing, and be a proven executive with outstanding communication and interpersonal skills.

The University of Maine is seeking a director for its newly created Student Innovation Center. Reporting to the senior vice president for academic affairs and provost, the director is primarily responsible for providing leadership for the center, which includes all academic, fiscal, strategic planning and personnel matters. Applicants must have a bachelor’s degree and business operations knowledge, management or creative entrepreneurial experience – typically seven or more years. A master’s degree is preferred.

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People

The Arkansas Department of Economic Development has been renamed the Arkansas Economic Development Commission.

Leadership Oklahoma announced that Doug Fuller will be the organization's new director, effective May 7.

Beth Gorin stepped down as CEO of the Lehigh Valley Economic Development Corporation.

Rick Homans will step down as secretary of the New Mexico Economic Development Department to become executive director of the New Mexico Spaceport Authority, effective May 1.

The Greater Phoenix Economic Council has named Robert Hooley as vice president of emerging technology.

The Montana SBIR Outreach Program is changing its name to the Montana Technology Innovation Partnership.

J.D. Stack replaces Oleg Kaganovich as the new CEO of the Sacramento Area Regional Technology Alliance.

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