SSTI Digest

Traditional economic development efforts at the state level are undergoing increasing scrutiny as budgets are being constrained. Two new studies show a shift in focus away from traditional approaches of tax incentives and reliance on major employers, to broader strategies relying more on the private sector and human capital. A report released by the Delaware Economic Development Working Group recommends shifting many of the core responsibilities of the Delaware Economic Development Office (DEDO) to a new nonprofit. And a report focused on Indiana details the decline in footloose jobs in the state despite local government investments in business attraction, indicating a reevaluation of public policy is needed, the authors contend. Delaware Gov. John Carney created a 14-member working group as his first official act in office in January. The final report from the group, Rethinking Economic Development in Delaware, argues that the state can no longer count on past economic engines like heavy manufacturing to produce jobs. Instead, economic development efforts require a “reset” and should capitalize on new growth sectors like financial technology, health care and…

The Ohio Third Frontier Commission (Third Frontier) has announced investments in entrepreneurial service providers (ESP’s) in the Dayton and Toledo regions. A new collaboration focused on health innovation will lead the initiative in Toledo, while an existing entrepreneurial center will lead programming in Dayton. Both regions had been among Ohio’s largest without a dedicated ESP.  The state also awarded funds for its first joint-university program at Cleveland State University and Kent State University, and for commercialization activities at Cincinnati Children’s Hospital. NextTech, a new partnership comprised of ProMedica, Mercy Health, the University of Toledo and Bowling Green State University, will receive $4.4 million in funding from Ohio Third Frontier to support technology start-ups as the ESP for Northwest Ohio. The investment goes toward Promedica Innovations, the grant’s lead applicant, who is planning to redevelop a warehouse in downtown Toledo to house NextTech as well as an incubator for small businesses. The other partners would match the state’s contribution to fund the initiative in full. Rocket Ventures, the former…

Much has been written – both here and elsewhere – about the role of trade and automation in declining U.S. manufacturing employment. Recently released preliminary research published by the U.S. Census Bureau’s Center for Economic Studies finds U.S. multinationals were responsible for a disproportionate share of manufacturing employment declines from 1993 to 2011. These results underscore the challenges facing economic development in deindustrializing regions, particularly those reliant on the branch plant economy. In Multinationals, Offshoring, and the Decline of U.S. Manufacturing, authors Christoph Boehm and Nitya Pandalai-Nayar from the University of Michigan and Aaron Flaaen from the Federal Reserve Board of Governors, use a new dataset containing production and trade information for U.S. manufacturing firms, augmented with multinational ownership and affiliate information. The authors present three interrelated findings. First, the authors find that U.S.-based multinationals were responsible for a disproportionate share of the aggregate manufacturing decline. Second, they find that U.S. multinationals experienced lower employment growth than a…

SSTI is pleased to announce the call for applications for the 2017 SSTI Creating a Better Future Awards program. The new title of the program is intended to better reflect the ever-changing field of tech-based economic development and celebrate exceptional initiatives that create a better future through science, technology, innovation and entrepreneurship. As a recipient of a Creating a Better Future Award, your initiative represents a standard of excellence that has been recognized by your peers through a competitive selection process. The 2017 Creating a Better Future Awards program will recognize four broad categories of initiatives: Creating a Better Future by Supporting & Converting Research Creating a Better Future through Entrepreneurship & Capital Creating a Better Future through Competitive Industries Creating a Better Future through Economic Opportunity While the Creating a Better Future Awards program is designed to celebrate long-standing achievement with winners serving as models for other states and regions to replicate, SSTI also recognizes the value in showcasing innovative and promising initiatives that will become the future…

The number of companies receiving venture capital investments during the first quarter of 2017 dropped 24 percent compared to a year ago, according to the latest NVCA-Pitchbook Venture Capital Monitor, released Tuesday.  Venture capitalists also parted with 12 percent less money during the quarter, suggesting to the report’s authors that 2017 is on pace to compare to 2013 levels. Deal closings have declined each of the past seven quarters, with all stages seeing drops except late VC, which experienced a slight uptick for the first three months of 2017. Angel and seed funding felt the sharpest percentage declines over the past two years. The number of angel deals fell to 827, a drop of 62 percent compared to one year ago. Note: Pitchbook does not include accelerator program figures in the counts. Despite the decrease in overall activity, VC managers had no problem raising funds last year, massing the largest pool ever of dry powder, capital available for future investment. Perhaps not unexpected with so much cash available and so few deals being closed, the survey found median early stage VC deal sizes jump from $5 million to $5.5 million.  However…

Billion dollar acquisitions and IPOs of young startups capture a lot of media attention, but they are not the norm for the market by any means. Exits do not need to be measured in the billions of dollars to have significant economic development benefit for the states and regions that make sustained investments into startup innovation firms. An SSTI analysis of the Pitchbook and Crunchbase investment databases reveals a number of recent exits by venture development organizations (VDOs) that may provide funding to re-invest in even more innovation-based startups in their regions.  Our analysis reveals that many of the acquired companies appear to be maintaining their local operations as they use the acquisition funds to scale.  Several examples from the past quarter alone demonstrate the value of the VDO approach to supporting regional prosperity. VDOs by definition are nonprofit initiatives committed to starting and scaling innovation companies to encourage higher quality economic opportunity in their regions. (VDOs receive some public funding and manage financial tools – equity, debt and/or revenue-based – as integral parts of their regional…

Ohio Gov. John Kasich is one of the last governors to deliver a state of the state address, which he did Tuesday evening. The former presidential contender assured the audience that he is “not running for anything,” but wanted to thank those who worked on managing the state budget. He used the address to focus on a variety of topics, including tech and innovation initiatives in the state, and educational efforts to support those industries. Kasich did not read a prepared speech and the following comments were taken from a transcript of his address: “In a rapidly changing economic environment, in the digital age, in the age of worldwide markets, we can't do what we used to do. We have to anticipate and meet change head on because if we hesitate, the future will pass us by. And we must leverage change to our advantage, and that means takings risks.” “The new Edisons and Wright brothers, they're out there. Some of them might be right here tonight. And we need to find them and encourage them. That's why I've proposed creating a chief innovative officer for Ohio to help keep us ahead of the curve in a world where technology…

To recruit more STEM students to teach in their field after graduation, pay them more money says a study by the American Physical Society (APS). Recognizing that innovation relies heavily on STEM initiatives and an educated workforce, the APS in collaboration with the American Chemical Society, Computing Research Association, and Mathematics Teacher Education Partnership set out to learn what discourages students in STEM from eventually teaching the subjects. Although STEM students who responded to a survey indicated they may be interested in the teaching profession, their misconceptions about salary and other factors seem to be keeping them out of teaching. In truth, however, middle and high school STEM teachers earn more than the average college lecturer or instructor, the study maintains. The study recommends that STEM faculty and advisors at the college level should be encouraging their students to consider teaching and providing them with accurate information. It also recommends support for strong programs that prepare students for STEM teaching, and advocates for higher salaries and summer stipends for teachers in the hardest-to-staff STEM disciplines. The study,…

On March 28, the Appalachian Regional Commission (ARC) announced nearly $2.5 million in grants to expand and diversify the economy in coal-impacted communities across multiple states. With this latest announcement, ARC has now invested $75.5 million (leveraging an additional $142 million in investments) to diversify the economy in 236 coal-impacted counties across nine Appalachian states through the Partnerships for Opportunity and Workforce and Economic Revitalization (POWER) Initiative. The new round of investments are intended to create and retain hundreds of jobs in advanced manufacturing and agriculture; build a workforce pipeline through the region’s community colleges; and, identify additional economic opportunities for economic growth. New grantees include: $1.5 million award to the Canaan Valley Institute in Davis, WV, for a Sustainable Jobs Initiative to create an economic diversification and entrepreneur training program to grow the apiculture (honey and bee products) and native plant industries across 14 coal-impacted counties in southern West Virginia. $750,000 to the Huntington Municipal Development Authority in Huntington, WV, for the…

Although the U.S. National Institutes of Health may face decreased funding under the new presidential administration, recently published research in Science argues that public investments in biomedical research play an important role in driving private sector R&D. In an analysis of 365,380 grants awarded by the U.S. National Institutes of Health (NIH) between 1980 and 2007, researchers from Harvard Business School, MIT and Columbia University find that 8.4 percent of grants directly generated patents, primarily by hospitals and universities. A much larger share – approximately 30.8 percent – of NIH grants awarded during that time produced research cited by private-sector patents. While policymakers often focus on direct patenting as a measure to capture the economic returns to publicly funded science, the authors’ findings suggest that this may not be the best metric. Instead, they propose that indirectly linked patents demonstrate that publicly funded scientific research builds a foundation for private sector R&D. For additional reading, the study has been covered by numerous outlets, such as The Scientist, Newsweek, The Washington Post, PBS, The Los…

Government offices focused on innovation have been around for several years, yet some states and even the federal government are seeking new ways to incorporate the concept into their offices. This week the White House announced a new Office of American Innovation, while earlier this month Rhode Island used its Office of Innovation to launch a new effort called the  Government Innovation League, and in January Ohio’s governor proposed funding a new state office focused on innovation, emerging technologies and their job-creation potential. In the official memorandum on the new office, President Donald Trump said it will “bring together the best ideas from government, the private sector, and other thought leaders to ensure that America is ready to solve today’s most intractable problems, and is positioned to meet tomorrow’s challenges and opportunities. The office will focus on implementing policies and scaling proven private-sector models to spur job creation and innovation” and will be led by Trump’s son-in-law, Jared Kushner, the senior advisor to the president. At the state level, Rhode Island’s new effort has a…

Noting a growing need for additional education to meet workforce needs, several states have announced programs focusing on education and workforce needs, channeling state funding to grants that will focus on aligning learning opportunities with business and industry needs, or creating new initiatives in the private sector. Reaching a higher educational attainment among a greater percentage of the workforce by 2025 is also a goal set by several of the states. Among the initiatives undertaken are free tuition options in Arkansas through the ARFuture grant, Nevada STEM Workforce Challenge Grants, a grant program in Utah focused on education and industry, and a private sector effort in New Hampshire. In Arkansas, Gov. Asa Hutchinson signed the ARFuture grant bill early this month, providing two years of tuition and fees at an Arkansas community or technical college to any state student who enrolls in a high-demand field of study, such as computer science or welding, or in a STEM field. The new grant will be funded by repurposing $8.2 million in general revenue funds from the state’s Workforce Improvement Grant (WIG), a needs-based grant for adult students 24 years old…