Whither U.S. Industry?

The stock market is flirting with record highs. Venture capital coffers are overflowing. Most states and national tax revenues are greater than projected. The bad boys of Enron and Worldcom are in jail. Everythings right in the corporate world, right?



Perhaps. But the generalized character of the U.S. industrial sector emerging in the 21st century seems to be one quite different than the past according to three new papers and tech-based economic development efforts will see the impact if several trends in particular continue to develop along their current lines.



Industrial R&D expenditures are growing, but not at U.S. academic institutions. The sharp decline over 2001-2004 (most recent statistical years available) initially paralleled the impact of the last recession on industrial profits and research investment, but the 2004 survey findings by the National Science Foundation reveals overall industrial R&D expenditures increased while spending by the sector at U.S. academic research institutions continued to decline. The trend holds across both public and private institutions.



Additionally, Where has the Money Gone? Declining Industrial Support of Academic R&D, the latest Issue Brief from the National Science Foundations Science Resources Statistics division, reveals those declining industrial R&D investments are becoming more concentrated in the top 100 research institutions. That is potentially troubling news for the regions striving to improve their economic well-being based on the proximity to a smaller or mid-sized research institution.



University-industry collaboration is one of the fundamental elements of many tech-based economic development strategies. The Issue Brief, though, points toward two more discouraging trends that tech-based economic developers may want to note:

• The percentage of all academic articles with an industry coauthor declined in both 2002 and 2003, following a steady increase between 1993-2001.
• The number of citations of U.S. science and engineering articles in U.S. industrial patents increased rapidly between 1995 and 1998, declined and leveled off for several years, and declined again in 2003 and 2004.

The data raise questions for the field regarding what may be behind the trends. Is the research activity of American research institutions less relevant to the commercial interests of the U.S. industrial sector or are companies abandoning U.S. academia for emerging markets?



It would not be the only area of concern over perceived abandonment, according to a new paper from the Brookings Institution. Corporate Citizenship and Urban Problem Solving: The Changing Civic Role of Business Leaders in American Cities describes a phenomenon that SSTI has heard increasingly around the country. Shifting economic forces of mergers and acquisitions, relocation to suburban/exurban locations, consolidation of manufacturing and production chains, and deregulation of the banking, communication and utility industries have reduced the number of home-grown CEOS, with their personal commitment to their hometown."



CEOs become regional vice presidents, losing much of their autonomy or incentive to invest time and resources into civic and regional economic development and charitable activities. The pool of funds and amount of time available to these leaders for civic engagement is increasingly controlled at headquarters - if it is made available at all because of the travel and time demands required for their positions.



Corporate Citizenship looks into the health and landscape of business civic organizations in 19 U.S. metropolitan areas and concludes:

• The pool of CEO civic leaders is shallower, more transient, and less influential.
• The role of nonprofit employers and foundations has grown, particularly universities, hospitals and foundations.
• Mergers of CEO-exclusive groups with area chambers of commerce have become more common.
• Paid professional managers are more common, displacing the roles and responsibilities of CEOs as volunteers and agenda-setters. And,
• Governing alliances with mayors have weakened as the focus shifts away from the city.

Technology-based economic development, on the regional and state level, is built on a tripartite of universities, government and industry. While it seems two of those partners are increasing their investments to encourage growth, these two papers suggest the third and most critical for sustaining and improving our standard of living is increasingly occupied elsewhere.



Where has the Money Gone? Declining Industrial Support of Academic R&D is available at: http://nsf.gov/statistics/infbrief/nsf06328/



Corporate Citizenship and Urban Problem Solving: The Changing Civic Role of Business Leaders in American Cities is available at: http://www.brookings.edu/metro/mei/20060901_corpcitizenship.htm



Links to these papers 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/