SSTI Digest

Forces weighing on the manufacturing industry, including globalization and technology, do not indicate its decline, says a recent report from the McKinsey Global Institute. Instead, the coming decade will reshape manufacturing as demand grows, technology produces gains and companies find new growth in parts of the value chain. To be able to be able to compete in the future, U.S. manufacturing needs to scale up efforts on multiple fronts, the report maintains.

Last week, The Digest covered newly released data from the National Science Foundation’s National Center for Science Education Statistics, which found that for the first time in five years, federal funding for higher education research and development increased in both current and constant dollars. For the country as a whole, higher education R&D expenditures increased by roughly 10 percent from FY 2011 to FY 2016, while gross domestic product increased by nearly twice as much. This article examines state-by-state trends in R&D activity at colleges at universities.

Overall, there were few changes among the top state performers of R&D at institutions of higher education (HERD), and those changes were relatively small. In a comparison of 2011 and 2016 rankings, 35 states moved just one spot or zero spots. Only one state, Connecticut, moved more than three spots in the rankings.

Asserting that the country’s future competitiveness is linked to a quality education, a recent report from the American Academy of Arts and Sciences Commission on the Future of Undergraduate Education argues that the completion rate of students pursuing post-secondary education must be increased. The report, The Future of Undergraduate Education, The Future of America, found that while nearly 90 percent of high school graduates expect to enroll in an undergraduate institution at some point, completion rates at those institutions average about 60 percent for students pursuing a bachelor's degree and 30 percent for students pursuing associate's degrees and certificates, with significant disparities within those categories by gender, race/ethnicity, and socioeconomic status. To address the problem, three national priorities are outlined: improving students' educational experience; boosting completion rates and reducing inequities; and controlling costs and ensuring affordability.

Adding to the national debate regarding U.S. immigration policy, the Center for American Entrepreneurship (CAE) reviewed the 2017 Fortune 500 list, finding that 43 percent of the companies were founded or co-founded by a first or second generation immigrant. Those companies account for 52 percent of the top 25 firms, are headquartered in 33 different states, and accounted for $5.3 trillion in global revenue in 2016, the CAE analysis found. CAE posits that such analysis provides strong support for the creation of an entrepreneur visa, a piece of the Startup Act, the bipartisan legislation which SSTI has supported.

Tuesday’s announcement by Revolution of the creation of a $150 million Rise of the Rest Seed Fund for companies located outside of Silicon Valley builds on Steve Case’s tour to connect with entrepreneurs throughout the middle of the country. The Rise of the Rest Seed Fund enjoys the backing of more than three dozen other big investors from Jeff Bezos and Eric Schmidt to the Waltons and Kochs, and is intended to provide support and connections to entrepreneurs in small towns and underserved cities. However, Case said in a New York Times article it is not intended as a social impact fund. In order to get investors to change the way they think about the rest of the country, Case said the main goal is “to generate top returns.”

Two recent reports detail the changing nature of jobs and highlight the importance of digital skills for the workforce. To guard against a greater income divide and ensure a competitive workforce, the studies — one from Brookings and the other from the McKinsey Global Institute — outline policy prescriptions that may ease the transition.

This article is part one of a two part series focused on the intersection between economic opportunity and the economic development practice.  

A lack of economic opportunity could threaten American innovation, according to new research from Stanford economist Raj Chetty and other members of the Equality of Opportunity Project. In light of empirical research showing the worsening effects of economic segregation and inequality, the economic development community needs to support new strategies and tactics that can deliver “realistic economic opportunity” to more communities across the country. If the future of American inventiveness depends on place-based economic opportunity and exposure to innovation as the study suggests, troubling times may lie ahead.

The United Kingdom government recently released a new industrial strategy that outlines a number of striking commitments. These include a plan to increase R&D spending from 1.7 percent to 2.4 percent of GDP, £406 million for STEM training, £1 billion for network infrastructure and a new £2.5 billion investment fund. Like many similar U.S.

For the first time in five years, federal funding for higher education research and development increased in both current and constant dollars, according to recently released data from the National Center for Science and Engineering Statistics within the National Science Foundation. In FY 2016, universities reported $72.0 billion in total R&D expenditures, a 4.8 percent increase from FY 2015. Of this amount, more than half (54 percent) came from the federal government. Institutionally financed research represented 16 percent, the second largest source of R&D funds at universities in FY 2016.

NSF’s annual Higher Education Research and Development Survey includes information on 640 institutions reporting at least $1 million in R&D. The authors find considerable stability in year-to-year comparisons of the largest performers of university R&D. Johns Hopkins University ($2.4 billion), the University of Michigan ($1.4 billion), the University of Pennsylvania ($1.3 billion), and the University of California at San Francisco ($1.3 billion) reported the largest R&D expenditures in FY 2016.

When TechShop unexpectedly closed its 10 locations around the country on Nov. 15, announcing its intention to file for Chapter 7 bankruptcy, it not only surprised many who were affiliated with the maker space, but raised questions surrounding the larger maker space community. Dan Woods, CEO of TechShop, cited financial reasons for the closing. They had earlier announced the closing of the Pittsburgh shop, but had opened a new shop in Brooklyn, New York, just weeks before the sudden closure. While the future of those facilities is still undetermined, those in the maker space community say the demand for maker spaces has not diminished and they continue to evolve.

Student impact

Venture-backed startups generate nine times the knowledge spillovers (e.g., patenting activity and citations) when compared to that produced by R&D investment of established companies, according to recent research. In Measuring the Spillovers of Venture Capital, researchers from the University of Munich found that, on average, two-thirds of this increase can be traced to more patenting by other companies within the VC-backed company’s spillover pool (e.g., companies with geographic or industry proximity). The companies that most benefited from the knowledge spillover were large, established companies.

Senate Appropriations subcommittees have advanced the remaining FY 2018 departmental budgets: Defense, Homeland Security, Interior, and Financial Services. Unlike the House’s proposal, the Senate would largely maintain FY 2017’s innovation funding. Highlights include level funding for SBA’s entrepreneurial programs — with $6 million for clusters initiatives and $2 million for accelerators — and level funding for the CDFI Fund.