SSTI Digest

While the overall Chinese economy may be facing a slowdown, the venture capital (VC) market continues to report strong growth and became the second largest VC market by total capital invested in 2018, according to a new report from PitchBook. The report, Venture Capital in China, highlights the growing prominence of Chinese startup capital with nearly 30 percent of global VC directed into Chinese startups in 2018.

A recent article from Pew Charitable Trusts shows how routine evaluations can help states make tangible improvements to their tax incentives. According to Pew, 30 states now have laws requiring evaluation of the incentives, and recent examinations in several states included key components that helped to inform the results. When analyses started with an effort to determine the specific goals of each incentive, their effectiveness was more easily determined. High-quality evaluations also measured economic impact. For instance, Rhode Island’s evaluation of the Motion Picture Production Tax Credit showed that revenue gained would never match the cost of the program.

Pew recommends that states should create processes to regularly study tax incentives, produce high-quality evaluations that draw clear conclusions, and use the findings to inform policy decisions. Pew found that when policy makers have high-quality evaluations, they use them, which may mean a decision to end a program that is not performing as expected.

University-based economic development practitioners seeking to improve their relationships with urban areas have a new resource guide available to them, thanks to research from the Thriving Cities Lab at the University of Virginia’s Institute for Advanced Studies in Culture. The lab offers guidance for colleges and universities and in its Field Guide for Urban University-Community Partnerships, authors Joshua Yates and Michaela Accardi conduct three interrelated analyses.  First, their report looks at 100 urban colleges and universities with a focus on how they interact with their home cities. Second, they cluster universities into five-distinct groups based on the types of strategies and activities they employ related to community partnerships.

Innovation initiatives are seeing increased funding in some states as legislatures across the country begin to finalize budget bills and other legislation. SSTI continues to monitor these developments and this week we cover budget bills in Idaho that saw small increases to the Manufacturing Extension Partnership (MEP) program, as well as increases in the Small Business Development Center (SBDC) and STEM Action Center, and new funding for a computer science initiative. South Dakota will see an increase in funding for the Governor’s Office of Economic Development and West Virginia passed bills creating an SBIR/STTR matching grant program, support for community and technical college tuition assistance, expansion of broadband service, and other innovation-related initiatives in its budget that passed earlier in March.

The U.S. unemployment rate is near its 50-year low, but the portion of the population in the labor force is also near a 40-year low. Because business expansion is difficult during periods of extremely low unemployment, a key economic development question is how much the labor force participation rate may increase — bringing more potential employees to the job market and easing the hiring crunch for employers.

An SSTI analysis of American Community Survey (ACS) data from 2013-2017 suggests that there may not be much potential growth for the labor force, at least among those in the prime working ages of 25-54. The participation rate for this group is approximately 82 percent across the country, according to the analysis, and only an additional one percent consider themselves willing to work in the near future (e.g., after a “temporary illness” or have been looking too long to counted as unemployed).

Many people have noticed that the Opportunity Zones tax incentive, intended to encourage investments in economically-distressed areas, lacks the type of reporting requirements that could help determine the real impacts of the incentive. Kresge Foundation is one organization that has been concerned by this information gap and has been working to implement solutions. The ultimate impact of Kresge’s latest effort is to provide further investor incentives in exchange for reporting compliance.

Kresge recently announced it had selected two organizations to receive guarantees for new OZ investment funds. The organizations are Arctaris Impact, which was one of the managers of Michigan’s State Small Business Credit Initiative funds, and Community Capital Management (CCM), which has a history of Community Reinvestment Act investing. Arctaris is receiving $15 million for guarantees against a $500 million fund, and CCM is receiving $7 million for a $300 million fund.

This week, the U.S. Department of Energy (DOE) announced up to $70 million for a Clean Energy Manufacturing Innovation Institute to develop technologies that will advance U.S. manufacturing competitiveness, energy efficiency, and innovation. This institute will focus on early-stage research for advancing cybersecurity in energy efficient manufacturing.

DOE identified two major high priority challenge areas where collaborative R&D can help U.S. manufacturers remain resilient and globally competitive against cyberattacks: 1) Securing Automation and 2) Securing the Supply Chain Network. DOE plans on funding one new award for up to five years, subject to appropriations. Concept papers are due on May 15, 2019. The funding application and submission requirements are available here.

A smattering of recent opinion polls and research papers looking to the future have revealed some grim perceptions about the economy and environment, but a more positive opinion of the role for science and technology (S&T) emerges.

A new Pew Research Center survey found that majorities of Americans foresee a country with a burgeoning national debt, a wider income gap and a workforce threatened by automation by 2050. However, Pew respondents look to science and technology as well ways to help solve the nation’s challenges: 87 percent say S&T will have a very or somewhat positive impact in solving the nation’s problems and another 74 percent feel the same about the role for colleges and universities.

If you are feeling that your money is not buying as much as it used to, that delinquent crime may be increasing as teenagers sit idle, that there is not enough focus on climate change or that corporate responsibility may be lacking, you may validate those feelings through the findings of several recently released research papers. SSTI received notice of the conclusions of five working papers that we thought we’d share.

The Trade War is increasing U.S prices, declines in real income.

NSF is inviting interested parties to participate in a new endeavor, the Convergence Accelerator Pilot (NSF C-Accel). The NSF C-Accel Pilot seeks to accelerate use-inspired convergence research in areas of national importance by facilitating convergent team-building capacity around exploratory, potentially high-risk proposals. The initiative reflects NSF’s commitment to be at the cutting edge, supporting fundamental research while encouraging rapid advances through partnerships between academic and non-academic stakeholders.

NSF C-Accel Pilot will begin with three tracks that are aligned with one of NSF’s 10 Big Ideas themes: Harnessing the Data Revolution (HDR) (track A1) and the Future of Work at the Human-Technology Frontier (FW-HTF) (tracks B1 and B2).

Outside of the private sector, colleges and universities perform the vast majority of R&D in the United States – but where do these funds come from? An SSTI analysis of data from the National Science Foundation’s National Center for Science and Engineering Statistics (NSF NCSES) finds that, across the country, the federal government was the source of more than half (53.5 percent) of all R&D performed at colleges and universities in 2017. Institutional funds (25.1 percent), nonprofit organizations (6.8 percent), businesses (5.9 percent), state and local governments (5.6 percent), and other sources (3.0 percent) comprised the remaining sources of higher education R&D funding. The interactive chart below shows the breakdown of funding sources for research and development at colleges and universities for each state.

In an effort to inform grassroots economic development in rural communities and small- and mid-sized cities, a new report from the Upjohn Institute identifies collaborative strategies that do not necessarily rely on government funding or philanthropic gifts. The report, Building Shared Prosperity: How Communities Can Create Good Jobs for All, is based on findings from Upjohn’s Promise: Investing in Community initiative, which focuses on place-based scholarships, local labor market issues, and economic development policy.