In the May 21, 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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Funding Cleared for $3B Stem Cell Research in California
Texas Voters Likely to Decide on Similar Level for Cancer Research
After years of legal challenges to the California Stem Cell Research and Cures Act, the path for funding the $3 billion initiative has been cleared by the California Supreme Court. Texas may soon join the race to fund medical research with its own $3 billion bond issue supporting cancer research.
 
The California Supreme Court last week declined to hear an appeal challenging the constitutionality of Proposition 71, effectively ending the lawsuits that have held up most of the bond funding for three years, according to the California Institute for Regenerative Medicine (CIRM), the state agency that manages the project.
 
Voters in 2004 approved the bond issue, which immediately faced challenges from groups opposed to stem cell research. A ruling last year from the Superior Court and Court of Appeals deemed the act to be constitutional in its entirety.
 
Despite the legal setbacks, CIRM went ahead with its first round of funding last year through the purchase of bond anticipation notes and a $150 million loan from the state’s general fund authorized by Gov. Arnold Schwarzenegger. The agency funded $158 million in stem cell research projects, including 103 research grants at 23 nonprofit institutions and 169 research fellows throughout the state.
 
The Supreme Court decision maintains that no additional litigation can delay issuance of the bonds and allows CIRM to move into the next round of funding. This includes up to $48.5 million in shared laboratories grants and loans and $222 million for major facilities at California universities, research hospitals, medical schools, and research institutes.
 
A similar bond issue focusing solely on cancer research is likely to make it on the November ballot in Texas. Pending approval by the Senate, voters will be asked to decide on a $3 billion bond issue that provides grants to the Cancer Prevention and Research Institute of Texas. The constitutional amendment calls for grants of up to $300 million annually over the next 10 years through general obligation bonds. The House approved HJR 90 earlier this month.
 
Although Gov. Rick Perry supports the measure, he pushed for an alternative funding source earlier this year. In his State-of-the-State Address, Gov. Perry proposed using proceeds from the sale of the state lottery instead of a bond proposal for a caner research trust fund that he said could generate more than a quarter-billion dollars each year (see the Feb. 19, 2007 issue of the Digest).

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Missouri Approves $32M for Bio-Ag Research, TBED
Two bills passed by the Missouri General Assembly last week include more than $32 million to support new initiatives to promote TBED activities in the state. Programs to support bio-agricultural research, technology commercialization and business growth won the lion's share of the new appropriations.

Funding for Missouri's Life Sciences Research Trust Fund, which was stalled during last year's legislative session, finally made it through the legislature, with last week's passage of the 2008 budget bill. The Trust Fund was created in 2003 to support life science research, commercialization and technology transfer. HB 688 allocated 25 percent of the state's tobacco settlement funds beginning in fiscal year 2007 to the Life Sciences Research Board, which administers the fund. However, concern over funds being used for embryonic stem cell research led the General Assembly to divert the $37.5 million appropriation last session. In November, voters approved an amendment to the state constitution that prohibits state or local governments from preventing embryonic stem cell research (see the  Nov. 13, 2006 issue of the Digest).

Steering clear of any further controversy this year, legislators approved a $13.4 million appropriation for research focusing on animal health and nutrition, renewable energy and plant science. The funds are limited to a one-time appropriation.

The state has an aggressive animal sciences corridor, and the trust will invest in projects to invigorate the research base to help encourage and support this industry cluster, said Mike Mills, deputy director of the Missouri Department of Economic Development.
 
The General Assembly also passed HB 16 last week, which includes more than $15 million from the Lewis and Clark Discovery Fund for several new TBED initiatives through the Missouri Technology Corporation, including:

In addition, HB 16 also includes $5 million for construction of a new business incubator at Missouri State University.

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SSTI Announces Inaugural Awards for Excellence in TBED
SSTI is pleased to announce the creation of the Excellence in TBED Awards. This new program is designed to celebrate exceptional achievement in technology-based economic development (TBED), the approaches used to help foster a climate where innovative companies developing and adopting technology thrive.

In celebrating exceptional achievement in TBED, the awards program: requires applicants to provide a clear explanation of the need for the initiative, a logical approach to addressing the need, and demonstrable results; will be highly selective with applications reviewed by a committee of distinguished current and former practitioners; and, will be rigorous but fair in its evaluation.
 
Any TBED program or practitioner is eligible to apply. Each application will be reviewed by a committee of distinguished current and former practitioners with knowledge and experience within a given award category. Selection committee members are chosen by SSTI based on their experience, knowledge of the field, and accomplishments. 
 
Award categories are shown below. Examples listed should be viewed as illustrative rather than restrictive.

Winners will be announced and awards presented at SSTI’s annual conference being held Oct. 18-19, 2007 in Baltimore.
 
Applications are due by July 20, 2007. The award application and additional information are available at: http://www.ssti.org/awards.htm

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Canada Releases New National Science and Technology Strategy
As the development of a nation's science and technology capacity becomes a critical component for economies around the globe, it is becoming even more critical for countries to implement strategies that will enable future competitiveness. This is particularly true for the world's leading economies, which is why, for example, the European Commission increased the resources invested toward research and innovation (see May 2, 2005 and Oct. 22, 2006 issues of the Digest.)

With the recent release of a national science and technology strategy, Canada becomes the latest developed nation to outline specific steps to maintain its competitive position. Mobilizing Science and Technology to Canada's Advantage centers around themes to encourage more private R&D and concentrates federal research support in the areas of natural resources, the environment, health and information technology. The strategy follows up on the government's November 2006 release of Advantage Canada, a report that recognizes the competitive strengths of the Canadian people and infrastructure and emphasizes the necessity to do more to create innovation and spur improvement.

The emphasis on private R&D investment is supported by various statistics illustrating Canada's current position. In 2005, the strategy observes, only 54 percent of the $27 billion of the R&D performed in Canada in 2005 originated from the private sector (note: all figures are in Canadian dollars). Comparatively, this is well below the average of countries in the Organisation for Economic Cooperation and Development (OECD), where private sector R&D averages 68 percent of total expenditures. Among the G7 nations, Canada has the highest ratio of public R&D investment to national gross domestic product (GDP). But when the private sector is factored in, total R&D spending is only 2 percent of GDP, less than most of the G7 economies.

From a workforce perspective, Canada is the OECD country with the highest share of its population with an undergraduate degree. However, it is ranked 20th in natural science and engineering degrees, as a share of total degrees, and 17th in the number of people in science and technology occupations, as a share of total employment. The report concludes that Canada's private sector "does not provide enough incentives for students to strive for advanced S&T and business management skills."

Policy recommendations are organized into three categories: a collection of steps to ameliorate Canada's entrepreneurial advantage, its knowledge advantage, and its people advantage. Some of the highlights of these recommendations include:

Entrepreneurial Advantage

Knowledge Advantage People Advantage

Mobilizing Science and Technology to Canada's Advantage is available at:
http://ic.gc.ca/cmb/welcomeic.nsf/vRTF/PublicationST/$file/S&Tstrategy.pdf

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Tech Incubators Continue to Pop Up across the Country
Alternate financing schemes increasing to pay for popular TBED tool
State and local strategies to assist new technology business formation often focus on three elements: helping firms secure much needed funding or capital (either private or public), lower their operating costs, or gain access to the intellectual and knowledge resources necessary to succeed. Since successful technology business incubators or accelerators usually address all three elements, the nation’s newspapers are continually reporting on the planning, construction or expansion of these useful TBED tools. A few recent announcements are highlighted below.
 
Arizona
Redevelopment of the U.S. Geological Survey (USGS) campus in Flagstaff soon will include a new $3.6 million, 10,000 sq. ft. technology and business incubator. The April 23 Arizona Daily Sun reports the facility is included in the Innovation Campus master plan for the city-owned property. Financing for the facility and future technology park derives from a $62 million bond, to be repaid by USGS rental of other buildings on the campus.
 
California and Michigan
Pfizer, which recently laid off thousands of scientists and researchers in Michigan and donated its $50 million lab facility to Michigan State University, has set aside 26,000 sq. ft. and $10 million per year for five years to incubate new biotech companies in Torry Pines, outside of San Diego. The May 4 edition of the San Diego Union-Tribune reports, “Tenants will have to agree to an up-front equity-share agreement with Pfizer. When research is done, Pfizer will have an option to acquire the rights at a fair market price.”

[Editor’s note: Connect and Biocom, the Southern California industry trade group, are reported as supportive of the project in the article, but we wonder how much local economic development will result from big pharma mining initiatives like these.]
 
Florida
The research park at Florida Atlantic University added 3,000 sq. ft. to its technology business incubator, allowing the facility to accommodate an additional six companies. Currently, the Boca Raton Technology Business Incubator houses 16 companies in 11,000 sq. ft.
 
Maryland
On a less encouraging note, the Chesapeake Innovation Center, based in Annapolis and dedicated to helping launch homeland security businesses, is downsizing by 77 percent – from 24,000 sq. ft. to 5,400 sq. ft. The number of start-ups to be served will only be reduced by half, according to the Apr. 17 edition of the Washington Business Journal.
 
Missouri
The April 23 St. Louis Business Journal reports the University of Missouri – St. Louis is purchasing a 56,300 sq. ft. building to house a business incubator specializing in the start-up needs of businesses in technology hardware and software development. The U.S. Economic Development Administration provided $1 million toward the purchase price of the building, the paper notes.
 
North Carolina
Once completed, the new Applied Technology Building on the Transylvania County campus of Blue Ridge Community College in Brevard will include incubator space to house up to seven businesses. The center also will house programs for automotive systems, applied health and distance learning. A Community Development Block Grant provided $400,000 of the funding for the incubator, according to the Apr. 12 edition of the Asheville Citizen-Times.
 
Oklahoma
The Oklahoma Technology and Research Park board approved plans for construction of a 24,000 sq. ft. business accelerator in Stillwater. The facility, to be named after a state legislator who was instrumental in securing funding for the project, is anticipated to be ready for occupancy by next May.
 
Pennsylvania
The building that houses the bus and Amtrak stations in Harrisburg is transforming its commercial space into a technology incubator. The center, owned by Amtrak, will be run by the Technology Council of Central Pennsylvania.
 
Tennessee
The University of Tennessee is opening its Innovation Valley Center for Entrepreneurship, located on its agriculture campus in Knoxville, this summer. The new facility will be managed by the Tech2020 Center for Entrepreneurial Growth, which already operates three tech incubators in eastern Tennessee.

Also, in Nashville, the Advancement of Research Technology and Entrepreneurship Center will not open as planned, due to a shortage in funds for construction costs. A May 21 article in the Nashville Business Journal reports construction estimates for the nonprofit technology incubator recently came in at $2.2 million -- more than $1 million above what project officials were expecting. The center's management had already paid $3.8 million for a 138,000-square-foot building that was going to be renovated, using the construction money, but sources of funding totalled only $4.5 million. The ARTE Center, which was two years in-the-making, is being liquidated as a result.

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BEA: Educated Workers Keep U.S. Competitive in Corporate R&D
In recent years, much has been said about the migration of corporate research from R&D centers in the U.S. to new sites in developing countries where many multinational companies have found large pools of skilled labor and access to the world’s fastest-growing markets. A report from Booz Allen Hamilton last year found that India and China were the fastest-growing sites for foreign-based research at U.S. multinationals and that 77 percent of all new R&D centers planned for the next three years were slated for sites in those countries (see the May 22, 2006 issue of the Digest).
 
A new benchmark survey from the U.S. Bureau of Economic Analysis (BEA) finds that while India and China remain the fastest-growing hosts of multinational research, many companies have elected to increase their domestic research presence. BEA’s Daniel Yorgason reports that, as of 2004, 85 percent of all R&D spending by U.S. multinational companies funded domestic research. This represents a 2 percent drop since 1999; however, domestic R&D expenditures have still grown substantially in recent years. At multinational parents in the U.S., R&D spending rose by more than $26 million between 1999 and 2004, while spending on majority-owned foreign affiliates rose by $9 million.
 
Yorgason posits that the “relative abundance of U.S. scientific and technical workers, including highly educated workers” has contributed to the continued vibrancy of domestic research. Also, new U.S. R&D centers can often be established with little additional investment in collaboration. Information generated at one site may then be shared with other sites at little cost.
 
Total R&D spending at U.S. multinationals appears to be rebounding from its slump earlier this decade. Multinational R&D spending had peaked in 2001 at $142 billion before declining slightly after the worldwide recession. In 2004, however, R&D spending jumped by more than $19 billion, reminiscent of the rapid growth that occurred in the late 1990s. The majority of this increased spending was directed toward domestic research.
 
The study confirms that multinational R&D is becoming more broadly dispersed. Multinational firms are spending less on overseas R&D in the top host countries, and the number of countries hosting U.S. R&D rose from 66 to 77. The United Kingdom, Germany, Canada, France, Japan, and Sweden now host 65 percent of U.S. foreign-affiliate research, down from 72 percent in 1999. More than half of the growth in U.S. foreign R&D expenditures between 1999 and 2004 was invested in Europe. Overall, however, Europe’s share of U.S. R&D declined slightly during that period.
 
India and China both experienced significant gains in U.S. R&D investment, but still receive much less than many European countries. Between 1999 and 2004, R&D expenditure in India jumped from $20 million to $163 million and China’s almost doubled from $319 million to $622 million. Asian and Pacific countries overall, however, remained relatively stabile in their role in U.S. research, receiving about 18 percent of investment throughout that period.
 
Canada also became more vital to U.S. corporate research over the early part of this decade. Between 1999 and 2004, R&D employment at Canadian affiliates more than doubled. Canada is the only host within the top six countries for U.S. foreign research that saw an increase in its share of U.S. foreign R&D. The country now receives more than 10 percent of U.S. overseas R&D expenditure.
 
So while the next few years may bring a flurry of new research activity in China and India, Europe and Canada remain key partners in U.S. innovation. Though research has become more dispersed, the U.S., Europe and Canada continue to hold an edge in hosting R&D by providing educated workers and low-cost collaboration.
 
Download the BEA article “Research and Development Activities of U.S. Multinational Companies” from the March 2007 issues of the Survey of Current Business at: http://www.bea.gov/scb/toc/0307cont.htm

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Useful Stats
Value-added Manufacturing by State, 2001-2005
Every year, the U.S. Census Bureau releases its annual Geographic Area Statistics report, filled with detailed statistics collected from its Annual Survey of Manufacturers. The report provides data for the nation as a whole, every state, and the District of Columbia for numerous sectors within the manufacturing field. Included in the report are statistics for the number of employees, payroll, value added, value of shipments, capital expenditures, cost of materials, and cost of electric energy for heat and power.

Using this data, SSTI has prepared a table showing the state rankings for the percent change between 2001 and 2005 for the total manufacturing value added, the value of shipments, and the value added per employee.

For the entire U.S., the country’s value added increased 18.9 percent over the five-year period. Louisiana led all states in both the increase in value added (210.1 percent) and the value added per employee in the manufacturing sector (250.5 percent increase) from 2001 to 2005. New Mexico had the highest percentage increase of manufacturing shipments, at 133.3 percent. Of the five states experiencing a decrease in shipments, South Dakota had the largest such decrease at -6.6 percent. As a whole, the total value of U.S. manufacturing shipments increased by 19.3 percent over the five-year period.

Arizona was the only state to witness a decrease in the value added per employee 2001-2005, dropping by 2.1 percent. Nationally, during the same period, the total value added per employee increased by 43.4 percent.

To see where each state is ranked in these categories, visit SSTI's table at: http://www.ssti.org/Digest/Tables/052107t.htm

Annual Survey of Manufactures, Geographic Area Statistics: 2005 is available at: http://www.census.gov/prod/2006pubs/am0531as1.pdf

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Job Corner
TTDC Seeks President & CEO
The Tennessee Technology Development Corporation (TTDC), the lead organization in Tennessee for technology-based economic development, is seeking a president and chief executive officer (CEO). This position is responsible for the overall direction and management of TTDC and its programs, including resource development, finances, contracts, compliance reporting and operational policies. He or she will work with a 22-member board of directors to establish and successfully implement a work plan that fulfills the organization's mission. At least 10 years of leadership experience and a graduate degree in business or relevant scientific field are required. For a full description of this opportunity and others, visit the SSTI Job Corner at http://www.ssti.org/posting.htm.

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Digest Takes Spring Break
With Memorial Day on May 28, the SSTI Weekly Digest will not be published next week. Publication will resume with the June 6 issue.

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