Investing in Tomorrow: Approaches to Building Techbased Economies

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Investing in TomorrowApproaches to
BuildingTech-based Economies

• Presentation by
• Dan Berglund
• President and CEO
• March 30, 2006

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State Science and Technology Institute

• Mission
• Enhance initiatives, particularly those at the
  state level, that encourage economic growth
  through the application of science and technology
• Advance cooperation in science and technology
  between the states and the federal government
• Funders
• Kauffman Foundation
• MEP, EDA
• More than 30 states and 100 universities,
  cities, and TBED organizations

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Kentucky vs. North Carolina
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• ...we are actually in the middle of two
  struggles right now. One is against the Islamist
  terrorists in Iraq and elsewhere, and the other
  is a competitiveness-and-innovation struggle
  against India, China, Japan and their neighbors.
  And while we are fixated on the former..., we are
  completely ignoring the latter.
• Thomas Friedman
• New York Times
• April 22, 2004

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The world and the U.S.

• In the mid-1990s, the European Commission
  reported that Europe surpassed the U.S. in the
  mid-1990s as the worlds largest producer of
  scientific literature
• Between 1980 and 2003, South Korea, Taiwan and
  Japan went from 12 percent of US patents to 26
  percent
• Physical Review, a series of physics journals,
  reported that American papers fell from 61
  percent to 1983 to 29 percent in 2003
• New York Times, May 3, 2004

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U.S. in a Global Environment

• By 2000, the global economic world expanded to
  encompass 6 billion people. As a result of this
  widening, another roughly 1.5 billion new workers
  entered the global economic labor force.True,
  maybe only 10 percent of this new 1.5
  billion-strong workforce entering the global
  economy have the education and connectivity to
  collaborate and compete at a meaningful level.
  But this is still 150 million people, roughly the
  size of the entire U.S. workforce.
• Microsoft has a saying about its research center
  in Beijing, Remember, in China when you are one
  in a million there are 1,300 other people just
  like you.
• in the 1980s and 90s, two-thirds of workers
  who lost jobs in manufacturing industries hit by
  overseas competition earned less on their next
  job. A quarter of workers who lost their jobs and
  were reemployed saw their income fall 30 percent
  or more.

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China

• SE degrees now represent 60 percent of all
  bachelors degrees earned in China vs. 31 percent
  in U.S.
• By 2010, China will surpass both Japan and the EU
  in RD expenditures and be at 80 percent of the
  U.S. level by 2012 Chinas GDP will equal the
  United States
• At the heart of the imbalances in the Chinese
  economyis an unsustainable investment boom that
  has been in the making for at least four years
  and that will probably take at least several
  years to undo.
• the divide between rich and poor is greater
  than before the peasant-led revolution that
  brought the Communist Party to power in 1949.
• Three transitions 1) from communism to market
  system, 2) hundreds of millions from country to
  city, and 3) where stability and duty once
  reigned, risk-taking is now the order of the
  day.

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China Demographics

• In 2004, those 60 and over make up 11 percent of
  population in 2040, they will make up 28 percent
• In Europe, the elder share of the population
  passed 10 percent in the 1930s and will reach 30
  percent in the 2030s (a century) it will take
  China single generation to do that
• The Graying of the Middle Kingdom
• As reported by FuturePundit.com/archives/002075.ht
  ml

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Who Cares About Trade Deficits?

• In broad schematic terms, the United States
  imports and the rest of the world exports the
  United States borrows and the rest of the world
  lends. Financial flows are so lopsided that last
  year America soaked up nearly three-fourths of
  the surplus savings in the entire world.
• 600 billion a year in loans to the United
  States. Without that injection of borrowed money,
  the United States would be hard-pressed to fund
  both consumer credit and its huge budget deficit.
  Interest rates would rise, making consumption
  more expensive.

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U.S. Workforce

• Among adults 25-34, U.S. is ninth among
  industrialized nations in share of population
  with at least a high school degree
• Among adults 25-34, U.S. is tied with Belgium for
  seventh in share of people who hold a college
  degree
• As recently as 20 years ago, U.S. was first in
  both
• 40 percent of ninth-graders nationwide go on to
  graduate from high school and immediately enroll
  in college

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Calls for Action

• Council on Competitiveness Innovate America
• AeA Losing the Competitive Advantage?
• Task Force on the Future of American Innovation
  The Knowledge Economy
• SACI Advisory Committee
• NAS Rising Above the Storm
• A coalition is calling for a doubling of
  engineering, math and science grads in the next
  10 years.
• Coalition includesAeA, the Business Roundtable,
  the Council on Competitiveness, the Semiconductor
  Industry Alliance, TechNet and the
  Telecommunication Industry Alliance

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Elements for Tech Cluster

• Intellectual infrastructure
• Spillovers of knowledge
• from universities
• from informal networks
• Physical infrastructure
• Technically skilled workforce
• Capital
• Entrepreneurial culture
• Quality of life
• Source Regional Advantage by Annalee Saxenian

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ST Indicators for NE

• Per capita personal income
• Ranked 33rd in percent change from 1999-2004
• Stayed at 26th
• Business churning, 2003
• Ranked 45th
• Percent of Population (25Up) w bachelors, 2002
• Ranked 19th
• Brain Gain, 1995-2000
• Ranked 35th w loss of 4,211
• SBIR Phase I Awards, 2001-04
• Ranked 47th w 29 awards

• Per capita RD in 2003
• 38th w 409
• US was 954
• Industrial RD Intensity, 2003
• 39th with 0.56 of GSP
• US was 1.81
• Academic RD exp from Industry, 2003
• 5th w industry as source w 7.31
• US was 5.40
• RD mix in 2003 varied from US avg
• Indus performed 51.1 (vs. US 71.4)
• Univ coll performed 42.4 (vs. US 14.4)
• Feds performed 5.8 (vs. US 7.9)

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Intellectual infrastructure activities

• Strengthen states higher education system RD
  capacity
• Example Kentuckys Bucks for Brains
• Invest in basic research in hopes of seeding
  economic development and new industries
• Example Californias Embryonic Stem Cell
  Institute
• Invest in higher ed in areas of industrial
  relevance
• Example Georgia Research Alliance
• Invest in areas to diversify economy
• Example Michigans Life Sciences Corridor, Prop
  301
• Encourage greater university-industry interaction
• Example Ohios Thomas Edison Program

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Spillovers of Knowledge

• Identify and remove barriers to commercialization
  of university-developed technology
• Example Oklahoma and Oregon
• Encourage commercialization of university-develope
  d technology
• Example Utahs Centers of Excellence
• Encourage commercialization of federal lab
  technology
• Example Technology Ventures Corporation
• Provide seed funding to industry associations and
  technology councils
• Examples MD, VA, and WA more than 200 groups

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Spillovers of Knowledge

• Improve competitiveness of existing manufacturers
• Example Manufacturing Extension Partnership

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Physical Infrastructure

• Research parks
• Example Centennial Park
• Examine quality of infrastructure
• Example e-Com Ohio, ConnectKentucky
• Improve it through public or private action
• Example Berkshire Connect, e-NC, Philadelphia

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Technically Skilled Workforce

• Increase exposure to math science in K-12
• Example Maines Laptops for 7th graders
• Encourage more students to enter SE fields
• Examples SciTech Scholars and GI Bill for the
  New Economy in Pennsylvania
• Subsidize tuition for undergraduate education
• Example Hope Scholarships
• Training for workers in technology-based
  companies
• Example Marylands Partnership for Workforce
  Quality

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Capital

• Use state funds to invest in technology companies
• Example Massachusetts Technology Development
  Corporation
• Use state funds to leverage private funds to
  invest in technology companies
• Example Maryland Venture Capital Trust
• Encourage angel investing
• Example Arizona angel investor tax credit
• Provide assistance to companies to access
  financing sources
• Examples Oklahoma Tech Comm Center, Venture
  capital conferences, SBIR assistance

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Entrepreneurial Culture

• Improve survival rate of start-up companies
• Example Ohios Edison Incubators
• Work intensively with entrepreneurs to develop
  their businesses
• Example Oklahoma Technology Commercialization
  Corp.
• Recruiting management talent
• Examples Kentucky, BFTP/Central
• One-stop resource directory
• Example AzTechBizDev.com

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Observations Lessons Learned

• Committed high-level leadership is required that
  understands
• Economic impact further down the road than other
  approaches
• Research does not always succeed
• Significant cultural differences between actors
• Action should be based on
• Understanding of needs, capabilities, and gaps
• Filling gaps to encourage change in private
  sector behavior

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Observations Lessons Learned (cont.)

• Scale and structure of investment matters
• Undertake only those activities that you can do
  well
• Metrics for programs should be established at the
  onset
• Funding should be competitive with any funding
  going to companies made as investments rather
  than grants
• Operation of programs through non-governmental
  intermediaries permits greater flexibility of
  action
• Should be industrially driven (where appropriate)

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Observations Lessons Learned (cont.)

• Characteristics of successful TBED programs
• Three hallmarks for long-term sustainability
• Do good work
• Measure whether theyre doing good work
• Telling people theyre doing good work
• Champions from more than one sector (ideally all
  three)
• Private sector, university, government (gov or
  legislature)
• Effective management and staff
• Portfolio of programs that covers the pipeline of
  ideas or close integration with other programs
• Entrepreneurial in approach/responding to change

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A Closing Thought

• In China today, Bill Gates is Britney Spears. In
  America today, Britney Spears is Britney Spears
  and that is our problem.
• World is Flat, p. 265

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Contact Information

• For more information, contact
• Dan Berglund
• State Science Technology Institute
• 614/901-1690
• berglund_at_ssti.org
• To sign up for SSTI Weekly Digest go to
• http//www.ssti.org