SSTI Weekly Digest
A Publication of the State Science and Technology Institute
SSTI, 5015 Pine Creek Drive, Westerville, Ohio  43081
Phone: (614) 901-1690 http://www.ssti.org

In the November 14, 2007 Issue:

• Toronto Regional Innovation Gauge Released along with Other Competitiveness Reports
• Colorado Governor Unveils Climate Action Plan
• Hawaii's Controversial Tax Credit Generates $821M in Investment
• Broadband Programs Transform Rural Economies
• Incubator RoundUp: New Incubators Help Grow Specialized High-Tech Companies
• Useful Stats: 2005 Federal R&D Obligations Per Capita to Universities and Colleges
• Next Digest 11/28

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.

ARCHIVED ISSUES (1996-present): Previous issues of the SSTI Weekly Digest are available and searchable on our website:
http://www.ssti.org/Digest/digest.htm An index of all state and local stories may be found at: http://www.ssti.org/Digest/Indices/indexstate.htm

TO SUBSCRIBE/UNSUBSCRIBE: Subscriptions to the SSTI Weekly Digest are free. To subscribe, please visit: http://www.ssti.org/Digest/digform.htm To unsubscribe, please visit: http://www.ssti.org/Digest/digform_unsubscribe.htm

Toronto Regional Innovation Gauge Released along with Other Competitiveness Reports
A handful of competitiveness reports have been released in the past two weeks, each comparing various geographic locations and incorporating a range of innovation metrics. Perhaps the publication garnering the most international press has been The Global Competitiveness Report 2007-2008 by the World Economic Forum. Produced since 1979, this year’s version of the Report includes the Forum’s Global Competitiveness Index, which incorporates 12 “pillars of competitiveness” consisting of roughly 120 variables to rank 131 countries. These pillars range from Infrastructure and Macroeconomic Stability to more advanced groupings such as Technological Readiness and Innovation.

The U.S. and Canada are ranked first and 12th, respectively, in the report's Innovation subgroup. Each country’s Innovation ranking was calculated using such variables as the quality of scientific research institutions, company spending on R&D, government procurement of advanced technology products, the availability of scientists and engineers, and intellectual property protection, among others. The top five countries in terms of the composite GCI score were the U.S., Switzerland, Denmark, Sweden and Germany. The study ranked Canada 13th in the world, in terms of overall competitiveness.

A second recently released report, Raising Productivity Growth: Key Messages from the European Competitiveness Report 2007, delves more into the drivers of competitiveness in the European Union, especially in terms of productivity. The report notes that the labor productivity gap between the E.U. and the U.S., after widening continuously since 2001, is beginning to diminish. While the difference in annual productivity growth was relatively small at 0.1 percent, productivity measured as gross domestic product (GDP) per employed person was 38.6 percent higher in the U.S. than the E.U. and, if measured as GDP per hour worked, was 25 percent higher in the U.S. The report contends the main reason for this gap is the productivity growth from factors such as technical progress and organizational innovation. Policies designed to foster the use of information technologies, increase investment in R&D, and induce competition with product market reform should lessen the gap by driving productivity.

The first Annual Toronto Region Innovation Gauge, assembled by the Toronto Region Research Alliance, was also just released. The report benchmarks the greater Toronto region against 10 U.S. states with a relatively comparable population and economic size identified as leaders in technology -- California, Connecticut, Illinois, Massachusetts, Minnesota, New Jersey, New York, North Carolina, Pennsylvania and Virginia. This region - with a population of 6.8 million - contains North America’s second-largest financial services cluster, second-largest automotive cluster, third-largest ICT cluster and the continent’s sixth-largest pharmaceutical cluster, the report observes.

Modeled on the Massachusetts Innovation Economy Index produced by the Massachusetts Technology Collaborative, the Innovation Gauge organizes indicators into three categories - innovation inputs, innovation processes and innovation outputs - in order to assess strengths and weaknesses. This 2007 version states three main findings:

• The first is that the Toronto region is not achieving its potential in terms of economic impact, even though it contains the fundamental ingredients for success. For example, the region is ranked second in terms of the proportion of the population over 25 years of age with a postsecondary degree or diploma (44 percent) and second in terms of engineering degrees awarded per capita. However, compared to the 10 benchmark states, the median household income was ranked eighth, and in terms of patents issued per capita, the Toronto region was ranked 10th.
• The perceived shortcomings of the first finding are perhaps connected to the second finding, which indicates that funding for R&D and new businesses is lacking compared to other competitor regions and countries. Out of the 11, Toronto was ranked seventh in private R&D expenditures per capita and ninth in venture capital investments.
• The third finding describes how a lack of information on the Toronto region’s innovation system postpones instituting the needed changes to improve performance. Already, work on the 2008 Innovation Gauge has begun, with the intention of adding more measurements to future editions. By further outlining the situation, the authors hope to continue the process of informing, engaging and building consensus among the region’s stakeholders.

Additional details about the Global Competitiveness Index, including the methodology used to calculate scores for each of the 12 pillars for all of the 131 countries, can be found at www.gcr.weforum.org/.

The E.U. Competitiveness Reports for 2007, all the way back to 1999, can be accessed at:
http://ec.europa.eu/enterprise/enterprise_policy/competitiveness/1_eucompetrep/eu_compet_reports.htm

The 2007 Annual Toronto Region Innovation Gauge can be downloaded at:
http://www.trra.ca/trratorontoregion

return to the top of the page

Colorado Governor Unveils Climate Action Plan
In support of his New Energy Economy Initiative, Gov. Bill Ritter introduced last week a statewide action plan to expand renewable energy opportunities and reduce the impact of climate change.

Two key components of the plan include R&D for coal, natural gas and renewable energy and fostering an educated workforce. Under the plan, the state will partner with research institutions and industry to expand R&D in these areas and develop clean-coal technologies. No additional funding is requested in the governor’s fiscal year 2008-09 budget proposal for these initiatives; however, the key departments involved in the action plan have committed to using existing funds to implement the action items.

The plan also calls for promoting the R&D of new energy resource technologies through the Colorado Renewable Energy Collaboratory -- a partnership between the National Renewable Energy Laboratory and Colorado’s three science research universities established in 2006. Gov. Ritter signed HB 1322 last year, allocating up to $2 million per year for three years to the partnership.

The Governor’s Jobs Cabinet, consisting of business leaders and representatives from higher education and K-12, was created last year to develop a well trained workforce for the New Energy Economy. The plan calls for partnering with higher education to train the workforce needed for the New Energy Economy and partnering with K-12 educators to develop and teach sustainability criteria.

Gov. Ritter calls on the federal government to “step up its obligation and provide national leadership on this front.” Recommendations for federal support include providing funding for the following:

• Loan guarantees to research clean coal technologies that capture carbon dioxide and move from the pilot phase to full-scale commercial use;
• R&D for biofuels, particularly cellulosic ethanol; and,
• Expanded funding for the key federal scientific research institutions in Colorado, including the National Renewable Energy Laboratory, National Center for Atmospheric Research and National Oceanic Atmospheric Administration that are working on cutting-edge climate change research.

In his FY08-09 budget submitted to the legislature’s Joint Budget Committee last week, Gov. Ritter recommends $2 million for rebate and incentive programs for the installation of solar panels and replacing existing state vehicles with E-85 and hybrid vehicles for a reduction of the budget by approximately $443,000. For geothermal research relating to the Colorado Geological Survey and for carbon sequestration, the governor recommends $72,000 per project.

The Colorado Climate Action Plan is available from the governor’s office at www.colorado.gov/governor/ .

return to the top of the page

Hawaii's Controversial Tax Credit Generates $821M in Investment
Hawaii's research and investment tax credits for high-tech companies have been a issue of debate for nearly a decade. In a survey conducted earlier this year, 45 percent of a sample of high-tech business owners said these credits played a "major influence" in their decision to grow and expand in Hawaii. Opponents, however, claim that the program's generous tax breaks overstep their bounds by extending incentives to movie and television companies.

A new report from the Hawaii Department of Taxation suggests that, despite these concerns, the two credits have been successful in generating greater technology investment. The department claims that participating businesses attracted more than $821 million in investment, paid out $506 million in salaries, and have been a major driver of technology business in Hawaii since the credits were introduced.

Hawaii residents claimed $195.6 million in investment tax credits between 1999 and 2005. The tax department reports that qualifying businesses spent $1 billion on salaries and infrastructure and created more than 5,300 jobs in Hawaii. The most frequent applicants have been computer software firms, which have created 921 new jobs and attracted about $232 million in investment. Qualifying biotechnology firms created 217 jobs and spent about $80 million. Other firms participating in the program include companies in sensors and optics, ocean sciences and non-fossil fuels.

The report, however, includes several caveats to those findings, particularly its figures on employment. More than half of the new jobs cited by the department were created within performing arts companies. This represents about 2,800 new jobs. Performing arts businesses, however, employed only 307 people in 2006. The report explains that many of these jobs existed only for a short time. The tax department admitted that the jobs figures were not reliable since they also included jobs created outside of the state and by company suppliers. Also, the report does not differentiate between part-time and full-time jobs.

Though performing arts attracted an amount of investment on par with the more conventional high-tech industries and a large number of jobs, these jobs tended to pay much less than those industries. Between 2003 and 2006, the average salary paid to employees in the performing arts was only $17,412, compared to $32,191 in biotechnology and $31,935 in computer software.

Both the research and investment credits have been reformulated several times over the years to keep pace with the business interest in the program and to respond to the objections of many in the state who believe that the program definition of qualified expenses remains too inclusive to be beneficial to the state economy.

As interest in the credit grew, the state expanded the program in 2001. Act 221 increased the credit for qualified investments from 10 percent to 100 percent. The investment credit now provides a full return on cash investments over five years: 35 percent in the first year, then 25 percent, 20 percent, and 10 percent in the final two years. Up to $2 million in credits are available for each qualifying high-tech business per year. Businesses that qualified for the investment credit include computer software design, biotechnology, ocean sciences, sensor and optics technology and, over the objections of many in the state, the performing arts.

This flexibility led to increased concern that the incentives, particularly the investment credit, were not being properly targeted to benefit the high-tech economy. In 2004, the state legislature amended the credits to tighten the restrictions qualifying businesses. Act 215 requires firms to first apply for status as qualifying high-tech businesses (QHTBs) in order to receive either credit. All applicants for the credit must now demonstrate that more than 50 percent of their total business activities are qualified research and that 75 percent of that research occurs in the state of Hawaii. Additionally, more than 75 percent of a firm's gross income from qualified research must be generated by sales, manufacturing or production within the state of Hawaii.

While these restrictions did reduce the number of qualifying businesses, they did not eliminate the inclusion of performing arts firms as QHTBs. Opponents claim that these firms often provide only temporary employment while filming movies or television series and rarely contribute to the state's long-term high-tech growth. By providing an investment tax credit to these firms, the state merely creates a tax loophole for movie and television production companies.

A frequent objection to the administration of the credit has been its lack of transparency. Throughout most of the program's history, Hawaii's Department of Taxation did not release the names of businesses and investors participating in the program. That changed this summer following a report from the Tax Review Commission that criticized the program's lack of appropriate metrics, according to the Honolulu Advisor. The department will now identify participants so that the program can be evaluated in the before the sunset of the program in 2010.

Read the Hawaii Department of Taxation's report on the High Technology Business Investment Tax Credit at: http://www.hawaii.gov/tax/pubs/2007hitec_rpt07a.pdf

return to the top of the page

Broadband Programs Transform Rural Economies
Despite pioneering the development of the Internet and the World Wide Web, the U.S. for years has lagged behind other industrialized countries in offering broadband services to its citizens. The U.S. ranks 16th in per capita broadband subscribers, and even when Americans do receive high-speed Internet services, they frequently pay more for lower speeds that their counterparts in Asia and Europe. A new report from the Alliance for Public Technology, the third in a series of reports on U.S. broadband, calls attention to the need for improved broadband services and provides some examples of states and regions that have stepped in to make sure that their economies benefit from the Internet revolution.

The group offers several policy recommendations to frame a national broadband strategy that could help the U.S. bridge its substantial gaps in broadband adoption. These include establishing national goals for deployment, setting standards for reporting broadband data, fostering private investment and competition, requiring Universal Service Fund recipients to offer broadband, providing new incentives for providers, and creating a federal Office of Broadband. They also recommend that the federal government employ non-traditional, non-telecommunications-based strategies to increase adoption, as has been done in many states.

The authors highlight regional programs across the country that are expanding and leveraging their broadband infrastructure to drive community development, disability access, education, health care, labor and economic growth and public safety. The report cites several state and regional programs that have helped to improve regional economies, including the Beyond Tobacco technology development program in Greene County, N.C., a heavily tobacco-dependent rural community. The initiative offers free computer and web classes, online agricultural resources and worker training to improve broadband adoption and demand. A county-wide wireless network has been paired with the initiative to modernize the community's economy.

Download Broadband Initiatives: Enhancing Lives and Transforming Communities at: http://www.apt.org/publications/reports-studies/broadband_initiatives.pdf

Kentucky's statewide broadband initiative, ConnectKentucky, launched in 2004 to extend the benefits of high-speed Internet to underserved communities. Though the key mission of ConnectKentucky is to achieve full broadband deployment by the end of 2007, it has also worked with local governments, private companies and universities to increase the use of Internet resources. During its three years of operation, the share of Kentucky citizens and businesses that are able to access high-speed connections has leaped from 60 percent to more than 90 percent. A recent article published by the Federal Reserve Bank of St. Louis examines the effect that the increased availability of broadband has had on the state's county economies and finds that these efforts have had a significant positive impact on the levels and nature of employment

In particular, the study finds that broadband deployment contributes to regional economic dynamism by reducing employment in stagnant, lower-paying sectors while creating new jobs in higher-paying ones. Mining, construction, information and administration sector jobs clearly grew as a result of new IT infrastructure, while real estate and arts and entertainment showed some signs of broadband-related growth. Deployment, however, appears to be linked to the disappearance of accommodation and food service jobs, which the authors believe may be related to the replacement of employees with IT equipment and services. By eliminating these lower paying jobs and increasing the demand for IT services and skilled workers in other areas, broadband availability helps fuel a healthier, growing economy.

The contribution of broadband access appears to be greatest as a regional economy begins to fill in holes in its IT infrastructure. Counties that were just beginning to offer high-speed access and counties that were approaching universal access both benefited less from increased deployment. The authors suggest that in order to maximize the economic benefit of broadband programs, states would target their efforts to communities with average levels of availability and underserved communities that will soon be capable of reaping greater benefit from full deployment.

Read The Economic Impact of Broadband Deployment in Kentucky at: http://research.stlouisfed.org/publications/red/2007/02/Shideler.pdf

return to the top of the page

Incubator RoundUp: New Incubators Help Grow Specialized High-Tech Companies
Over the past several months, universities, city and state governments, and private companies alike have announced the creation of high-tech incubators that will serve as springboards for developing specialized companies to help grow the regional economy. Following is a sampling of recent incubator news from across the nation.

In September, U.S. Sen. Evan Bayh (D-IN) announced a $50,000 Rural Business Opportunity Grant from the U.S. Department of Agriculture to be used toward the creation of a high-technology incubator in Grant County. In partnership with Taylor University’s Center for Research & Innovation, Grant County Economic Growth Council will receive the bulk of the money to develop the Grant County Innovators Network Center, providing space for one anchor tenant and up to 20 incubator clients.

The Greater Owensboro Economic Development Corp. is in the development phase for its planned Emerging Venture Center of Innovation. The goal is for the center to become a satellite of Kentucky’s Central Region Innovation and Commercialization Center. The second phase of the plan includes incubator and accelerator space with science laboratories for new companies.

A technology incubator is set to open early next year in East Lansing as part of the Lansing Regional SmartZone. The 7,000-square-foot facility will work to develop Michigan State University spin-offs and support other local high-tech ventures. The city’s Downtown Development Authority is providing $250,000 to build the space, according to the Lansing State Journal.

Last month, Kettering University broke ground on a 12,000-square-foot multi-tenant facility called the Kettering University Science and Technology Incubator Building. The facility will support scientific and technologically-based start-up companies and will include 10 dedicated research laboratory suites, executive offices and shared equipment and support facilities. Funding for the $2.7 million facility came from the U.S. Department of Commerce and State of Michigan funds.

As part of an overall effort to drive the development of the bioscience industry in Rochester, Minn., Rochester Area Economic Development Inc., the city’s economic development arm, announced the creation of the Minnesota BioBusiness Center. The 150,000-square-foot facility will be located near to the Mayo Clinic and the Minnesota Partnership for Biotechnology and Medical Genomics and will provide office and lab space for companies that could benefit from Rochester’s bioscience assets.

A privately owned technology business incubator, called the Turbine Flats project, opened last month in Omaha, Neb. The owners converted an old manufacturing building into 27,000 sq. ft. of office space. The project also includes a community venture fund to provide small and preferably matching seed funds to start-up companies.

The city of Akron, Ohio, recently held an open house to reveal its newly expanded incubator, renamed the Akron Global Business Accelerator. The city received a $1.7 million federal grant for renovations that allowed them to open several more floors for start-up businesses. The University of Akron Research Foundation also announced the creation of the Akron Innovation Campus geared toward university spin off technology companies.

The city of Dayton recently invested $1.4 million to create the Dayton RFID Incubator Corp., an economic development project to attract and develop radio frequency identification-related businesses. CityWide Development Corp. will develop and manage the incubator, which is expected to open sometime next year.

The University of Toledo (UT) won a second $2 million grant from the U.S. Department of Commerce’s Economic Development Administration in September to establish a second high-tech incubator. UT will construct a 40,000-square-foot building next to the existing Clean and Alternative Energy Incubation Center that will house a broader spectrum of companies.

A new bioscience incubator at the University of Texas-Austin will become the fourth incubator formed inside the Austin Technology Incubator. The city of Austin invested $125,000 in the new incubator that will focus on biotech and life sciences industries.

return to the top of the page

Useful Stats
2005 Federal R&D Obligations Per Capita to Universities and Colleges
At $453.28, the District of Columbia led the nation in federal R&D obligations per capita to colleges and universities in 2005, according to recent National Science Foundation (NSF) report. For the U.S. as a whole, the per capita amount rose 25.8 percent from 2001 to 2005.

The District of Columbia was followed by Maryland ($261.49), Massachusetts ($214.11), California ($136.62), and Hawaii ($133.94) in 2005, based on the NSF data. The national average in 2005 was $84.35 per person. At the other end of the rankings, Puerto Rico experienced the lowest average at $16.29 per capita. This ws followed by Maine ($23.06), West Virginia ($27.27), Oklahoma ($30.97), and Florida ($33.12).

States experiencing the largest increase per capita from 2001 to 2005 were North Dakota at 107.2 percent, Idaho at 67.7 percent, Nevada at 66.5 percent, Hawaii at 61.7 percent, and Louisiana at 59.8 percent.

SSTI has prepared a table illustrating the NSF data for every state, the District of Columbia and Puerto Rico for each of the five years from 2001 to 2005. Additionally, the percent change in obligations per capita over the five-year period has been calculated.

“Obligations are the amounts for orders placed, contracts awarded, services received, and similar transactions during a given period, regardless of when the funds were appropriated and when future payment of money is required,” the NSF report states. “Obligations differ from expenditures in that funds allocated by federal agencies during one fiscal year may be spent by the recipient institution either partially or entirely during one or more subsequent years.”

SSTI's table is available at: http://www.ssti.org/Digest/Tables/111407t.htm

Federal Science and Engineering Support to Universities, Colleges, and Nonprofit Institutions: Fiscal Year 2005 is available at: http://www.nsf.gov/statistics/nsf07333/

return to the top of the page

Next Digest 11/28
Due to the Thanksgiving holiday, no issue of the SSTI Weekly Digest will be published during the week of Nov. 19. Publication will resume with the Nov. 28 issue.

return to the top of the page

end of page