SSTI Digest

The yearly dollar amount of research and experimentation (R&E) tax credit claims grew twice as fast as company and other nonfederally funded R&D expenditures between 1990 and 2001, a new National Science Foundation (NSF) InfoBrief reports. In contrast, direct federal funding for industrial R&D declined through much of the 1990s, both in absolute terms and relative to industry-funded R&D. The InfoBrief considers R&E tax credit data from the U.S. Internal Revenue Service and R&D funding data from NSF's annual Survey of Industrial R&D. For 2001, the latest year for which data are available, U.S. corporate claims for the R&E tax credit totaled approximately $6.4 billion ($6.2 billion in 2000 constant or inflation-adjusted dollars), compared with a high of $7.1 billion in 2000. The R&E tax credit, established in 1981 as part of the Economic Recovery Tax Act, is one of the nation's better-known policy tools to stimulate company R&D. The credit presently is equal to the sum of 20 percent of the excess of qualified research…

As most practitioners know, measuring progress for tech-based economic development efforts can be difficult given the long lead time necessary for most research investments to yield results. Consequently, many programs rely on interim measures to evaluate a policy or program's impact. Still others use input measures such as amount of money distributed through a particular program, the number of grants made, the number of companies involved, or the amount of money leveraged by the state's investment. Unfortunately, none of those measures provide much insight on a program's true impact. A new assessment of the National Science Foundation's efforts to attract underrepresented population groups into science, technology and math (STEM) fields provides an example of the difficulty programs have assessing interim progress. Broader inclusion in S&T is an important issue for future U.S. competitiveness given the varied growth rates among population groups and flattening immigration rates. A more diverse and scientifically more…

Do women shy away from competition? Do men compete too much? In a recent working paper published by the National Bureau of Economics Research (NBER), economists Muriel Niederle and Lise Vesterlund answer yes to both questions after measuring performance and preferences of men and women in a controlled environment. Niederle and Vesterlund test individuals on their ability to add sums where payments benefit high-performing individuals who select a competitive "tournament" scheme rather than a per-piece payment. More than half of the women select the noncompetitive option, even when they would have likely garnered more earnings under the tournament. Conversely, twice as many men chose the tournament even when past performance indicated the likelihood of no earnings under this choice. The task was performed equally well by men and women under both schemes. Selection of a competitive payment did not affect the choice and potential payment of other participants. The authors tested various reasons for the gender gap, including risk aversion, confidence,…

A community essentially has two options for strategies to diversify its economic base: traditional economic development or technology-based economic development (TBED). The traditional approach of recruiting or inducing companies to relocate to their community from elsewhere creates an atmosphere of competition, rivalry and one-upmanship among cities and regions as they bid to buy firms' location decisions. Often, it is also difficult for small and mid-sized communities to compete on these terms. The result, particularly with large manufacturing facilities, can be publicly financed incentive packages that may prove economically more expensive to a community than the benefits promised by the new development. Increasingly, economic development professionals are learning those promised jobs may never fully materialize. TBED, on the other hand, provides a more sustainable approach toward economic prosperity by encouraging the growth and expansion of firms through investments in research and technology, innovation and the commercial exploitation of new technologies. Communities within…

Since passage of the Bayh-Dole Act of 1980, universities across the country have established transfer technology offices to assist in commercializing academic inventions. Efforts to transfer university inventions to the market continue to be a difficult proposition, with less than a third of disclosed inventions resulting in license. Start-ups garner only one in eight licenses. In University Invention, Entrepreneurship, and Start-Ups, authors Celestine Chukumba and Richard Jensen develop and test a multi-stage game to examine the factors leading to university start-up formation. The economists posit that start-ups occur when development costs remain low due to venture capital contribution, inventor involvement and fewer opportunity costs than in an established firm. The model considers start-ups likely when the technology transfer office determines a high cost of finding a licensee. In these cases, the office shelves the disclosed inventions leaving inventors to pursue start-ups on their own. Using existing data and multivariate regression, the authors find…

Many community and economic development professionals believe the report released last Tuesday should have predated the President's 2006 Budget to consolidate or eliminate 18 federal programs used by most parts of the country to support growth and well-being (see the Feb. 14 issue of the Digest). Among those targeted in the move are the Community Development Block Grants (CDBG) and the entire Economic Development Administration (EDA) slate of grant programs. What was proposed in the Administration's budget request was a smaller program called Strengthening America's Communities Initiative, or SACI for short. Few details on SACI were released with the budget request other than the new program would be administered by the Department of Commerce, providing opponents to the change with easy ammunition to fight the proposal as Congress considered next year's appropriations. As a result, the House endorsed the status quo, stating there was no authorizing legislation to support the requested funding level (see the May 30 issue of the Digest). That rationale left open the door for the Administration to present a reasoned…

Coming off the heels of the state legislature's approval of a new Emerging Technologies Fund (see the June 13 issue of the Digest), Gov. Rick Perry announced last Saturday that Texas would provide a $50 million grant to establish the Texas Institute for Genomic Medicine (TIGM). The Emerging Tech Fund remains untouched, however, as the $50 million will be taken out of the original $295 million appropriated for the governor's discretionary Texas Enterprise Fund. The nonprofit TIGM is a collaborative effort between the Texas A&M University System and Lexicon Genetics, a private technology firm located in Woodland, Texas, north of Houston. Lexicon will receive $35 million of the grant to create two copies of its library of 350,000 mouse stem cell lines for use by TIGM to identify new drugs for combating human diseases. One copy of the library will be housed in remodeled facilities at the Texas A&M University System Health Science Center Institute of Biosciences and Technology, and another copy will be located at a new research and commercialization facility to be built at Texas A…

Incubators provide an integral and flexible component of many communities' tech-based economic development efforts. When successful, business incubators can provide a focal point for encouraging entrepreneurship in even the smallest cities and metropolitan areas. Ample evidence is presented in the latest survey of incubators supported through the multifaceted $35 million Entrepreneurship Initiative of the Appalachian Regional Commission (ARC). Since 1978, ARC has made 108 grants totalling more than $17 million for business incubation projects. Using 2004 data gathered from 76 of the 85 known incubators in the region, the report summary yields: Appalachian incubators have graduated nearly 1,300 businesses. Nearly half of the incubators are associated closely with a university or community college. The incubators have helped create 38,000 jobs -- 24,500 directly within current tenants and graduate businesses and 13,500 indirectly attributable to these same firms. The average Appalachian incubator provides space to as many as 16 tenant companies and serves an additional 14 non-resident…

For the second year in a row, the Maryland Technology Development Corporation (TEDCO) was the most active source of early-stage or angel capital, according to the July issue of Entrepreneur magazine. The list of the top 100 funds, based on number of deals made during 2004, is based on the results of the quarterly MoneyTree survey published by PricewaterhouseCoopers, Thomson Venture Economics and the National Venture Capital Association (NVCA). Forty-six of the venture capital sources on the list are from California; 17 are from Massachusetts. Some of the well-known angel organizations, such as Tech Coast Angels, Band of Angels and the Angels Forum and the Halow Fund (all from California), were in the top firms with 7-8 deals. To get on the list for 2004, funds had to report at least three deals, up from the two-deal minimum required last year. TEDCO made 15 deals in 2004, the same number as it had in 2003 when it also received the top spot on the list. While several of the list's funds may have public funds in their available capital pools, several funds directly supported or…

In signing the state budget last Thursday, Wisconsin Gov. Jim Doyle approved spending $5 million for two new programs supporting agricultural and forestry bio-based industrial development. Bio-based industries convert the carbohydrates in plants into fuels, polymers, fabrics, and other chemicals. Advocates for bio-based fuels industries argue every function now served by petro-chemicals also can be more simply, safely and sustainably served by bio-chemicals. As part of the governor's new biobased initiative announced in June, the two newly funded programs include: A $1 million grant program for agricultural businesses. These grants will help entrepreneurs develop ways to use plant and animal resources for no-waste, bio-based energy, fuels or products. Up to a $4 million grant program for the forestry industry. These grants will leverage federal dollars for the research, development and implementation of forestry biomass technology in Wisconsin, encouraging the use of forestry biomass as an energy source. In June, Gov. Doyle appointed a Consortium on Biobased Industry to help…

As a precursor to a report expected next month from the President's Commission on Tax Reform, the National League of Cities (NLC) recently issued its findings from a survey citing disapproval of how state and federal tax issues are being handled by the Administration, Congress, and state governors and legislatures. NLC outlined recommendations and called on the federal government to convene a national economic summit to address the issues. According to a research brief summarizing the report, Local Budget and Tax Policy in the U.S.: Perceptions of City Officials, 84 percent of responding city officials said the federal deficit, in particular, poses a problem for cities. The report points to several governmental challenges that are negatively impacting fiscal policy. Among those challenges are federal and state unfunded mandates, cuts or limits in federal and state support, and federal or state preemption of local authority. The majority of city officials stated that if cuts in services are required as a result of revenue and spending pressures, they are likely to eliminate general government…

Can patent insurance protect innovations from predators? Yes, particularly if innovators insure their innovation before rivals enter the market, according to Financing and the Protection of Innovators, a discussion paper by Gerard Llobet and Javier Suarez from the Centre for Economic Policy Research. According to Llobet and Suarez, patents offer limited protection if the innovators cannot demonstrate a willingness and ability to litigate patent predation. Competitors appear to avoid preying upon innovations from large companies that have litigated past patent infractions. However, rivals may view innovators without a history of legal action as easy prey unless they can demonstrate additional protection for their intellectual property. Using game theory, Llobet and Suarez examine the likely behavior of innovators and rivals using internal financing, securing external financing via patent litigation insurance, and securing a loan to cover litigation costs. The authors test the effect of insuring before and after a rival enters the market. The authors also explore the impact of insurance…