In the August 8, 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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Congress Authorizes $43.3B in Science and Technology Spending
After months of negotiations, the House and Senate have approved the most significant bill in years to bolster U.S. research. The America Creating Opportunities to Meaningfully Promote Excellence in Technology, Education and Science (COMPETES) Act authorizes over $43 billion in new federal spending over the next three years, which will support U.S. math and science education and federal research agencies. In fact, the legislation would double the budget authorizations of the National Science Foundation (NSF), the Department of Energy's (DOE) Office of Science, and the National Institute of Standards and Technology (NIST) laboratory activities.
 
Past issues of the SSTI Weekly Digest have covered the progress of the COMPETES Act (see the April 23, 2007 and June 20, 2007 issues). Earlier this year, both houses of Congress passed legislation that incorporated many of the recommendations provided by the influential National Academies report Rising Above the Gathering Storm. The current, reconciled bill, passed by the House and Senate last Thursday, contains many provisions that directly result from the report. These include a requirement that all research agencies contribute funds to multidisciplinary research and that DOE create a program to support researchers early in their careers.
 
The COMPETES Act provides a major increase in funding authorizations for federal research agencies; however, the amounts included in the final bill more closely resemble the authorizations in the more frugal House bill rather than the more generous Senate legislation. Agency and program authorizations affected by the bill include:

The legislation establishes several new federal programs to encourage innovation and commercialization. The new NIST Technology Innovation Program will replace the existing Advanced Technology Program by providing competitive grants to small- and medium-sized businesses commercializing a critical new technology. Single companies may receive up to $3 million over three years, while joint ventures may be eligible for $9 million over five years. The bill also creates a new ARPA-like program within DOE to develop technologies that help overcome the country's long-term energy challenges.
 
President Bush is expected to sign the COMPETES Act, despite the Administration's strong reservation about some aspects of the legislation, including ARPA-E. In a statement following the initial passage of the Senate bill, the president argued that the ARPA-E program would redirect resources from basic research priorities at DOE. The current bill omits several of the measures that had originally drawn the ire of the Administration, including a requirement that all federal science agencies set aside 8 percent of their R&D budget for novel, pan-disciplinary research.
 
The American Institute of Physics plans to run a series of articles in its FYI science policy news bulletin examining the details of the new legislation and its likely implications for U.S. scientific research. The latest issue of FYI is available at http://www.aip.org/fyi/.

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Massachusetts, Ohio Announce Broadband Initiatives
While many parts of the country are looking for innovative means to increase the number of citizens and businesses connected to high-speed Internet in both urban and rural areas, two governors recently announced initiatives targeting the further extension of broadband services throughout their states.
 
Massachusetts Gov. Deval Patrick declared the commonwealth would invest $25 million into a new “broadband incentive fund” to be managed by a division of the Massachusetts Technology Collaborative (MTC), named the Broadband Institute. Under the plan, private companies will compete for funds to install equipment such as network fiber and wireless towers in rural areas that currently do not have broadband. According to the MTC, 32 towns in Massachusetts lack broadband access and 63 municipalities only have broadband in a limited area. The program’s goal is to make broadband available to all communities by 2010.
 
Ohio’s recent moves have targeted the expansion of broadband delivery to multiple stakeholders, including state and local government. Gov. Ted Strickland signed an executive order that extends and strengthens the state’s broadband network to all of Ohio’s counties and creates an organization to oversee future high-speed internet development.
 
The order directs some of the available bandwidth from the 1,850-mile, 10-gigabit Ohio Supercomputer Center Network (OSCnet) to a new entity named the Next Generation Network. This entity will be dedicated to the consolidation of service delivery and improved connectivity for state and local government, county and city network rings, public safety, the courts system, underserved populations, and additional public/private initiatives. OSCnet will concentrate exclusively on computing and connectivity resources for Ohio colleges and universities, small- and medium-sized companies, K-12 schools, hospitals, public broadcasting stations, and local, state and federal research centers. Together, the two networks will be administered as the Broadband Ohio Network.
 
The newly formed Ohio Broadband Council will be responsible for efforts to extend the Broadband Ohio Network to all of the state’s 88 counties. Additionally, the council is expected to coordinate future broadband programs funded by the state, to pursue federal investments in broadband, to address the digital divide in the state’s rural and urban areas, and to promote both public and private broadband initiatives. The council's website is http://www.ohiobroadbandcouncil.org/.
 
Gov. Patrick’s Broadband Incentive Fund is a component his $12 billion, five-year capital investment program released Monday. The details of the program can be accessed at:
http://www.mass.gov/Eeoaf/docs/fy08_capital_budget.pdf

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India’s Government to Support 100 Incubators in Emerging Industries
The India Ministry of Micro, Small and Medium Enterprises announced last week a plan to provide funding to 50 universities and training institutions for the creation of up to 100 enterprise incubators within innovative fields.
 
While the details have yet to be released, the Ministry plans to provide funding to 50 universities to create up to 100 incubators that will host approximately 1,000 micro and small enterprises over five years. The government will provide grants of Rs. 5 lakh per incubator - about $62,000 USD - to help support and promote emerging industries, including biotechnology and pharmaceuticals.
 
Last year, the Parliament enacted The Micro, Small and Medium Enterprises Development Act of 2006, calling for the “promotion and development and enhancing the competitiveness of micro, small and medium enterprises.”
 
More information about the Act is available at: http://ssi.nic.in/MSME%20Development%20Gazette.htm

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Recent Research
Global Perspectives on Effectiveness of R&D Subsidies
Policymakers and researchers in the U.S. continue to debate the effectiveness and value of providing R&D subsidies to firms in the hope of spurring technological developments and wealth generation. At the national level, several organizations have called to make the federal R&D tax credit, also known as the Research and Experimentation Tax Credit (RETC), a permanent incentive program. Researchers centered in countries outside of the U.S. are looking at the effectiveness of R&D subsidies in their nations, as well.
 
Three recent papers, which separately review Canadian, Catalonian (a region of Spain), and Norwegian efforts to support industrial R&D, find subsidies do influence company performance, mostly positively. In the Norwegian paper, however, not all impacts at the firm level are the desired ones. All three papers are highlighted below.
 
Charles Bérubé and Pierre Mohnen explore data from manufacturing firms responding to the 2005 Canadian Innovation Survey in order to distinguish if firms that received R&D grants and R&D tax credits produced more innovative outputs than firms that received only R&D tax credits. In Are Firms That Received R&D Subsidies More Innovative?, the authors chose three outputs – the creation of a world-first innovation, the number of new or significantly improved products, and the percentage of revenue from their innovative products – to show that in all three cases, firms that utilized both types of incentives were significantly more productive. For example, 25 percent of firms using both tax credits and grants mentioned they had produced a product that new the global marketplace within the last three years, compared to 17 percent of firms that used tax credits alone. To compare the two sets of firms, the authors incorporated an algorithm into their dataset that extracted sets of companies resembling each other in such characteristics as provincial location and manufacturing sector orientation. Using this method to control for firm differences, they concluded that a mix of both tax incentives and grants to stimulate innovation are more effective than using tax credits alone.
 
The authors Nestor Brown, Daniel Estivill, and Mauro Mediavilla utilize a similar technique of firm matching methodology in their research on Catalonian firms, but they observe the effects of subsidies at a regional, rather than a national, level. Evaluating the Impact of Public Subsidies on a Firm’s Performance: a Quasi-experimental Approach investigated the effect of subsidies from a regional agency located in the Catalonia region, whose industries represent 25 percent of Spain’s total industrial base. After controlling for differences between the characteristics of firm, the authors found that subsidies had an impact on the amount of a firm’s value-added growth rate within a two-year period after being awarded. They ran various models that altered the sample population, and among the models, the value-added growth rate for firms that received subsidies were on average between 3.5 and 5.6 percent higher than firms that did not receive the subsidy. It should be noted that the study did not elaborate on the kind of subsidy provided by the region, and many of the 421 firms that received funding were in the manufacturing or “high technology” fields.
 
In Do Subsidies Have Positive Impacts Upon R&D and Innovation Activities at the Firm Level?, Tommy Hoyvarde Clausen investigates the impacts of governmental R&D subsidies on firms in Norway, separating a handful of funding programs from the European Union and the Norwegian government into two categories, either “close to the market” or “far from the market” subsidies. Clausen’s approach considers not only how these two types of subsidies effect, stimulate or substitute various expenditures of firms, but also the quality of R&D done at the firm level. As a proxy for R&D quality, Clausen uses data on the number of hours worked by people with advanced degrees within a firm.
 
His conclusions include that “far from the market” subsidies increase a firm’s expenditures on research activities and improve the quality of R&D done at the firm level. Alternatively, the “close to the market” subsidies decrease the funds devoted to development. Thus, “far from the market” subsidies stimulate R&D spending, and “close to the market” subsidies are a substitute for R&D spending.
 
Using this reasoning, the amount, quality and type of R&D performed by firms in the private sector can be enhanced by providing funds to projects that are far from the commercialization stage. Additionally, the effectiveness of R&D subsidies may be dependent on the type of research the subsidies are targeting. This work boosts the notion that governments should spend funds on basic and novel research, which are far from the point of commercialization.
 
Bérubé and Mohnen’s paper (Canada) can be read at:
http://www.merit.unu.edu/publications/wppdf/2007/wp2007-015.pdf
 
Brown, Estivill, and Mediavilla’s paper (Catalonia) is available at:
http://www.pcb.ub.es/ieb/aplicacio/fitxers/2007/4/Doc2007-3.pdf
 
Clausen’s paper (Norway) can be found at: http://www.tik.uio.no/InnoWP/Tommy%20IPP15%20WPready.pdf

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Rising Health Care Costs Likely to Cause State and Local Fiscal Challenges
An expected explosion of health-related expenditures combined with no new policy changes will likely result in fiscal challenges for state and local governments within the next decade, says a new report from the Government Accountability Office (GAO). The result could put downward pressure on public funding available to support TBED initiatives.
 
The expected continued rise in health care costs poses a fiscal challenge not just to government budgets, but to American business and society as a whole, according to the report. Using data from the National Income and Product Accounts, GAO ran long-term simulations extending until 2050 that indicate the combined effects of demographic changes and growing health care costs drive increasing federal deficits and debt levels. GAO’s fiscal model of the state and local sector projects the level of recipients and expenditures in future years based on historical spending and revenue patterns.
 
Findings of the simulation indicate that two types of state and local expenditures will rise quickly because of escalating medical costs: Medicaid expenditures and health insurance for state and local employees and retirees. Conversely, other expenditures such as wages and salaries of workers, pensions and investments in capital goods are expected to grow slightly less than gross domestic product.
 
Although the GAO report does not offer recommendations, the authors conclude that because the fundamental fiscal problems of the federal government and state and local governments are similar and linked, solutions to address the challenges should be considered in tandem.
 
As a result of constricting state budgets due to health care costs, 34 governors introduced plans to reduce the number of uninsured residents in their states, according to the Fiscal Survey of States released in June. Proposed fiscal year 2008 funding for these programs totals nearly $18.4 billion.
 
State and Local Governments: Persistent Fiscal Challenges Will Likely Emerge within the Next Decade is available from the GAO at: http://www.gao.gov/new.items/d071080sp.pdf
 
Links to this 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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Do Cities Still Matter?
In today’s world, a trip to the doctor may entail your test results to be analyzed in India, your specialist to be called in Canada, and your billing information to be processed in South Africa. Given the prevalence and speed of modern forms of communication, information can be sent around the globe at a moment’s notice, hastening the speed of business.
 
With this in mind, from an economic development standpoint, is it still important to organize ourselves, our businesses and our economic development strategies within the confines of cities?
 
The answer is a resounding “yes”, according to a recent working paper by Glenn Athey, Max Nathan, and Chris Webber titled What Role Do Cities Play in Innovation, and to What Extent Do We Need City-Based Innovation Policies and Approaches? The authors make the compelling case that cities are extremely important in the context of innovation production and economic development. They contend attraction to cities is dependent on three basic advantages: proximity, density and variety.
 
In their review of existing literature, the authors present reasons why levels of urbanization are increasing all over the world. From the encouragement of knowledge sharing between workers to the creation of transportation and communication hubs, urban areas assist the development of markets and enable innovation.
 
Also provided in the study is a model incorporating the authors’ “hubs” and “links” typology. In this case, hubs focus on urban assets, markets and business networks, while links focus on the role of institutions, knowledge networks and public-private cooperation. Using examples from the U.K., the authors use hubs and links to examine the categorization of urban innovation.
 
For example, London has a strong hub because of its huge domestic economy and has strong links because of things like the city’s creative industries and financial services sectors that reach out into international markets. Alternately, the authors contend a place like Cambridge has a weak hub because of its relatively small size, but has strong ties because of the economic opportunities that are developed in and around the university.
 
Because both the relative size of a city and the actions of firms within a city can be so varied, policies to encourage innovation need to be tailored to the various characteristics of urban areas. This is especially important to consider as the array of policies that exist to encourage innovation are very different from national to local levels.
 
The paper provides an overview of many theories as to the importance of cities and can be found at: http://www.nesta.org.uk/assets/pdf/cities_and_innovation_working_paper_NESTA.pdf

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Useful Stats
Industry-financed R&D at Colleges and Universities, FY 2005
Every year, the National Science Foundation releases its Academic R&D Expenditures report, filled with statistics related to the characteristics of R&D at U.S. colleges and universities. Using these reports, SSTI has prepared two tables detailing the funds provided by industry in fiscal year 2005 for the 100 institutions with the highest amount of industry-financed R&D.

The first table displays FY 2005 data by the amount of R&D funding from industry and by total R&D expenditures for the institutions, with rankings for each measure. Topping the list for the amount of its industry-financed R&D was Duke University with $135 million. This was followed by all campuses of Pennsylvania State University and Ohio State University at $88 million and $81 million, respectively. MIT and the University of Maryland Baltimore rounded out the top five.

When considering total 2005 R&D funding, Johns Hopkins University had the top spot at $1.44 billion. All campuses of the University of Michigan followed at $809 million, and the University of Wisconsin-Madison ranked third at $798 million. The University of California-Los Angeles and the University of California-San Francisco completed the top five.

The second table ranks the top 100 institutions according to their industrial R&D as a percent of their total R&D in FY 2005. The New Mexico Institute of Mining and Technology led all institutions with 27.9 percent of its R&D funded by industrial sources. Duke University, New York Medical College, the University of Maryland Baltimore, and the University of Central Florida rounded out the top five in this measure.

To see where each of the top 100 universities and colleges ranks, visit SSTI's tables at http://www.ssti.org/Digest/Tables/080807t.htm (ranked by amount of R&D financed by industry) and http://www.ssti.org/Digest/Tables/080807t2.htm (ranked by percent of industry's share of total R&D).

Academic Research and Development Expenditures Report: Fiscal Year 2005 is available at:
http://www.nsf.gov/statistics/nsf07318/

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Last Chance to Become SSTI Conference Partner
SSTI is wrapping up the conference brochure for our 11th annual conference, Transforming Regional Economies, a mailing that goes to more than 12,000 TBED practitioners. Your organization could be included if you become a conference partner by August 17. Contact Noelle Sheets, director of membership services, to discuss which partnership opportunity best fits your marketing strategy.

SSTI’s annual conference provides the opportunity to place your organization at the center of the most dynamic and influential community of tech-based economic development professionals, reinforce your brand, and build relationships in 2007 and beyond.

Your organization will enjoy outstanding exposure. In all the right company.

As an SSTI conference partner, you have the chance to showcase your organization with the decision makers responsible for crafting and implementing local and state-level policies and programs that directly contribute to the nation's competitiveness. No other event brings together the nation’s top players in the TBED community.

Take advantage of our annual conference’s powerful reputation to help your organization:

This is the nation’s premier TBED event, gathering more than 350 of the most powerful decision makers from around the country each year.

All types of organizations are represented! Attendees include:

Last year’s conference included representation from 46 states and 4 countries - the only thing missing is YOU.

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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 Life Sciences Discovery Fund (LSDF), a Washington State agency that functions like a foundation, is seeking a grants administrator to help shape the organization during its start-up phase. The LSDF supports innovative research in Washington State to promote life sciences competitiveness, enhance economic vitality, and improve health and health care. The grants administrator will manage aspects of a grants portfolio of approximately $35 million per year and will be responsible for information management regarding LSDF’s grant administration processes. He or she also will report to the LSDF Director of Programs. A bachelor’s degree and five years of experience in grant-making or grants administration, or an equivalent combination of education and experience, are required.

The New Jersey Economic Development Authority (EDA), an independent, self-supporting state entity dedicated to broadening New Jersey's economic base, has a position opening entitled Edison Innovation Fund Officer. EDA is seeking someone for this position in two locations. At each location, he or she will be responsible for using EDA’s resources to assist in the revitalization of the specific IZ and greater region through technology-led economic development. A bachelor's degree in business administration, preferably in finance or marketing, and/or equivalent professional experience is required. In addition, candidates should have two years of experience in customer relationship or corporate account management.

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Ohio Location Chosen as Home for New Defense Metals Technology Center
North Canton, Ohio, has been chosen as the site for the nation's newest Department of Defense (DoD) Center of Excellence. Centers of Excellence deal with specific military technology needs that are deemed critical to the nation's defense and security.

The Defense Metals Technology Center (DMTC), to be located at Stark State College, will become the principal repository of data and coordination of the various academic, government and industrial entities involved with highly specialized and strategic metals, including titanium.

The result of the vision and creative effort led by Congressman Ralph Regula (R-OH), the DMTC is being funded by the 2006 National Defense Appropriation Bill and the State of Ohio Department of Development. The center's executive director will be Charlie Clark, who previously served as director of government relations for the University of Akron.

The center is expected to link academia, national labs, industry, and DoD, with a goal of maintaining a globally competitive industrial base to support the cost-effective manufacture of military hardware.

More information is available at http://www.defensemetals.org/.

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People & TBED Organizations

David Boncosky will become the director of Indiana Economic Development Corporation's life sciences initiative Aug. 6.

Arizona Technology Enterprises, the organization responsible for overseeing licensing and commercialization activities at Arizona State University, has selected Augustine Cheng as its new managing director.

Tom Clarkson is the new chief executive officer of Wake Forest University's Babcock Demon incubator. Clarkson replaces Paul Briggs, who retired.

The Four-County Economic Development Corp. in Portland, Ore., has changed its name to Greenlight Greater Portland.

Graham Evans has joined Washington Technology Center as director of research and program operations.

The Georgia Department of Economic Development has promoted Carol Henderson to director of its Innovation and Technology Office.

Sen. Patrick Hogan announced he would step down from the Maryland State Senate to become vice chancellor for government relations for the University System of Maryland.

Steve Lehmkuhle was named the first chancellor of the University of Minnesota-Rochester, effective Sept. 7. Lehmkuhle previously was the vice president for academic affairs at the University of Missouri.

Joan Myers resigned as president and chief executive of the North Carolina Technology Association to join the global public policy division at a local software company. Myers' resignation is effective Aug. 21.

The New Mexico SBIR Outreach Center exists again, following a year's hibernation.

The Northern Kentucky E-Zone has become a part of the Northern Kentucky Tri-County Economic Development Corp. The E-Zone will operate as a program of Tri-ED, with Casey Barach, the former head of E-Zone, leading the program as vice president of entrepreneurship services for Tri-ED.

The Oklahoma Alliance for Manufacturing Excellence is now the Oklahoma Manufacturing Alliance.

Elaine Pullen resigned as chairman of Connecticut Innovations to focus on her consulting business.

Colin Scanes is the new vice chancellor for research and economic development at the University of Wisconsin-Milwaukee. Scanes formerly was the chief economic development strategist at Mississippi State University.

John Weete, president and executive director of the West Virginia University Research Corp., was named executive director of the Auburn Research and Technology Foundation. Weete starts his new position Sept. 1.

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Digest Takes Summer Vacation
No issues of the SSTI Weekly Digest will be published during the next two weeks so that SSTI staff can focus their energies on annual conference preparations. The SSTI 11th Annual Conference, to be held Oct. 18-19, 2007, is an event you will not want to miss. For more information, visit http://www.ssticonference.org. Publication of the Digest will resume with the Aug. 29, 2007, issue.

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