SSTI Digest

Two recent reports provide good news and bad news regarding innovation in America’s rural areas. Only one in six individuals living in rural areas was self-employed in 2016 — down from one in four in 1988, according to a new issue brief from the Small Business Administration (SBA). This represents a decline of nearly 20 percent over that span of time. Meanwhile, a recent report from the Department of Agriculture’s Economic Research Service (USDA ERS) found that between 2010 and 2014 rural businesses in some nonfarm tradable industries are as likely to be substantive innovators as their urban peers. This is especially true across manufacturing industries with nearly identical rates of substantive innovation between both rural and urban companies.

One of the hottest topics at SSTI’s 2017 Annual Conference centered on helping communities build the investment system necessary for local entrepreneurs and startups to thrive.  Led by several panels of experts, the conversations around this topic led to many great ideas, thoughtful solutions, and tough realities. This week we begin a series of stories on how tech-based economic development organizations can help communities ensure a vibrant investment system. This first installment focuses on the necessity of creating a strong deal flow to stimulate the growth and success of the system. In future installments of this series, SSTI will cover topics such as why it is necessary to say no to a deal and building an investment team.

“It doesn’t matter how much money a fund has or how well it is managed, having access to good deals creates a successful fund.” – Conference speaker

The Federal Reserve System has announced a new initiative intended to invest in America’s workforce and improve outcomes for both employers and workers. To introduce the Investing in America’s Workforce initiative, the System released a new report analyzing information from nearly 1,000 leaders in the field to identify the current state of the field, important challenges, and strategies for improving items such as human capital, access to jobs, and innovative funding for workforce development programs. 

The U.S. House this week passed H.R. 2763, which would amend the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs in several significant ways. Most notably, the bill would extend by five years the “assistance for administrative… costs,” which is used for outreach initiatives and some business and market assistance initiatives across agencies. The bill would extend or implement other activities within SBIR/STTR, nearly all of which would improve the programs’ ability to support commercialization in parallel with technological development.

During the debate before the voice vote, a statement from Rep. Stephanie Murphy (D-Fla.) said the bill would help more small businesses pursue the awards and help more firms bring their products to market. Rep. Steve Chabot (R-Ohio) added that the legislation was important for modernizing SBIR.

States have passed more than 230 bills related to clean and renewable energy to date in 2017, according to the National Conference of State Legislatures (NCSL). Broadly, the legislation can be divided between policies directly supporting energy innovation — through R&D expenditures or targeted economic development initiatives — and policies implementing structural changes —through the regulatory environment, incentives for production facilities, renewable portfolio standards and other requirements. This breadth of activity clearly demonstrates that clean and renewable energy is of high interest throughout the country, but will be challenging to innovators and entrepreneurs planning development over time or across states.

Seventeen venture development organizations (VDOs) from across the country shared in the success from a baker’s dozen exits posted in Pitchbook during the third quarter of 2017.  Information tech companies lead the pack, but seven come from other sectors of the economy including life sciences, vehicle manufacturing, materials, polymers, robotics, and chemicals – demonstrating the important role VDOs may play in broadening innovation’s contributions to regional economies.

Snapshots of all 13, along with two more late Q2 deals, follow in SSTI’s third article looking at the economic development impacts of nonprofit and publicly-backed VDOs. The first two stories are available here (Q1:17) and here (Q2:17).

First observed in 2011, Manufacturing (MFG) Day started as a grassroots movement intended to draw the public’s attention to manufacturing and its career opportunities and has become an annual celebration meant to inspire the next generation of manufacturers. Since 2012, both public and industry participation in MFG Day activities have grown, as has its overall scope and goals. This year, an effort is being made to reach out to millennials, many of whom have an outdated image of manufacturing, to connect with a younger workforce vital to filling the openings in an increasingly digital manufacturing industry. 

Creative, digital, design and engineering occupations all have bright outlooks, along with architectural and green occupations, according to a recent report from Nesta, a global innovation foundation. Nesta took into account five major trends in mapping out how employment is likely to change in the future, and the implications for skills.

Nesta used a comprehensive mixed-methods approach in The Future of Skills; Employment in 2030, including consideration of diverse and interacting sources of structural change, which are expected to impact future skills needs. In analyzing both the U.S. and United Kingdom, the foundation assembled detailed information about occupations, which were debated and discussed in workshops. That information was used to train a machine learning classifier to generate predictions for all occupations and estimate the skills that would most likely experience growth or decline.

Senators Jerry Moran (R-Kan.) and Mark Warner (D-Va.) along with Senators Roy Blunt (R-Mo.) and Amy Klobuchar (D-Minn.)  introduced the Startup Act today – legislation that would help regions throughout the country address critical gaps between R&D and economic prosperity. SSTI has worked with the offices on sections of the bill that reauthorize and expand the Regional Innovation Strategies program and would implement a new commercialization grants program. SSTI supports the Startup Act (S. 1877) and calls upon other senators to cosponsor this bill and for the House to take up the legislation.

Do state policies focused on growing opportunity through science, technology, innovation and entrepreneurship work? Which approach has more success: encouraging technology commercialization and entrepreneurship or building and filling incubators and research parks?  To try to answer these questions, new empirical research looks at the effectiveness of sustained state investments in technology-based economic development activities on high-technology job growth.

In the most recent round of Regional Innovation Strategies (RIS) funding, 42 organizations from 28 states were awarded $17 million to support the creation and expansion of tech transformation networks (i6 Challenge) and early-stage seed capital funds (the Seed Fund Support). In total, EDA’s awards leveraged over $22 million in private, state and local matching funds. Eight of those winners are members of SSTI and we heard from several of them on what this award will mean for their organization.  SSTI’s Innovation Advocacy Council has been instrumental in supporting the program, working with members of Congress to ensure its continued success.

In 2015, businesses spent 4.4 percent more on R&D performed in the U.S. than they did in 2014, reaching $356 billion total, the NSF reports. Of the total R&D expenditures in 2015, companies spent $22 billion (6 percent) on basic research, $56 billion (16 percent) on applied research, and $278 billion (78 percent) on development.

Funding from companies' own sources was $297 billion in 2015, a 5 percent increase from the $283 billion spent in 2014. Funding from other sources was $59 billion in 2015 and $58 billion in 2014. Companies in the manufacturing industries accounted for the lion’s share ($236 billion of 66 percent) of domestic R&D, with most of that (83 percent) coming from the companies’ own funds. That spending was also concentrated in a small number of states. Businesses in California accounted for 32 percent of the $297 billion, followed by Massachusetts (6 percent of the national total), Washington (6 percent), Michigan (5 percent), Texas (5 percent), New York (4 percent), New Jersey (4 percent), Illinois (4 percent), and Pennsylvania (3 percent).