SSTI Digest

Do tax credits pave the way for more investment in R&D and equity investments in new enterprises? Or, do they reward companies and venture capitalists for investments they would have made anyway?

Discussions on these questions can become quite heated and fueled by data supportive of both sides, as two new academic analyses demonstrate.

The recent studies examine two Canadian business tax credits, but come to opposite conclusions. One study reviews the impact of Canadian R&D tax credits, a permanent feature of the Canadian tax code. A second study focuses on a Quebecquoise investor credit established a decade ago to encourage local venture capital to the region.

Gross State Product (GSP) is considered, at least in theory, to be an effective measure of the "value added" by a state's economy. That is, the figure represents the sum of all net industrial activity within the state, where net activity is defined as total outputs (sales or receipts and other operating income, commodity taxes, and inventory change) minus total inputs (consumption of goods and services purchased from other industries or imported).

Comparing states' GSPs is difficult without some form of standardization, such as population or "per capita." Examining standardized trends over several years for an individual state or for comparison among two or more states may serve as a macro indicator of the state's economic health or direction.

To test this, SSTI has prepared a table presenting:

On the final day of March, Gov. Brad Henry signed legislation establishing a $475 million bond issue for a slate of higher education projects, much of which targets research and laboratory facilities. The Oklahoma Higher Education Promise of Excellence Act of 2005, which the governor called "desperately needed," was one of his top legislative priorities for the year (see the Feb. 7, 2005, issue of the Digest). The bill containing the bond issue, H.B. 1191, also provides $25 million in the form of a bond bank to finance future improvements at the state's colleges and universities.

The U.S. Department of Commerce announced Friday that President Bush intends to nominate David Sampson as Deputy Secretary for the agency. If confirmed, Dr. Sampson will succeed Theodore Kassinger, who will resign effective April 30, 2005.

Prior to becoming Deputy Secretary, Mr. Kassinger served as General Counsel from 2001 to 2004. Mr. Kassinger has served as Deputy Secretary since July 2004.

Dr. Sampson was nominated by President Bush on March 19, 2001, and confirmed as the Assistant Secretary of Commerce for Economic Development by the U.S. Senate on Aug. 3, 2001. Sampson has served as the principal advisor to Secretary Donald Evans on domestic economic development policy.

Two organizations with seemingly the same goal in mind recently released statistics on the health of their region's technology sectors. Relying on different methods, the Pittsburgh Technology Council (PTC) and the Sacramento Area Regional Technology Alliance (SARTA) both analyze and report the impact of technology clusters on the local economy.

PTC's annual State of the Industry report gathers growth indicators from state and federal resources to track southwestern Pennsylvania's employment statistics, number of tech companies, and total annual payroll for information technology, life science, advanced manufacturing, advanced materials, and environmental technology industries. According to PTC, the goal is to quantify the impact and draw attention to the region's significant technological resources.

The source of eadership on specific state tech-based economic development activities greatly influences the design and effectiveness of the effort. It remains to be seen then how the recently launched Arkansas Nanotechnology Alliance evolves locally as its direction originates from the nation's capital.

During a recent visit to the Arkansas Research & Technology Park, U.S. Senator Mark Pryor (D-Ark.) announced ANA's formation. Pryor will chair the statewide consortium, bringing together "universities, federal agencies, and private sector partners to develop, launch and nurture nanotechnology initiatives."

He said that, in building an Arkansas nanotechnology community, some of the possibilities include:

There are several factors that go into location decisions for biomedical firms. Proximity to strong university research capacity, other biotech businesses, and technically competent workers are all important considerations. With the financial investments many states and localities are making toward the life sciences, however, the field of prospective locations for successfully launching a biotech firm has grown considerably larger than the "usual suspects."

That is a good thing, based on a recent study by the Boyd Company, a Princeton-based location consulting firm. As highly leveraged biotech start-ups increasingly are pressured by their venture capital backers to reduce operating costs, many smaller cities may present attractive alternatives for new biomedical industry investments, the study suggests.

Western Carolina University (WCU) Chancellor John Bardo recently unveiled plans for a comprehensive regional economic development strategy that would more than double the size of the campus and promote university-industry partnerships.

The recent acquisition of 344 acres adjacent to the current campus would be used to develop a Millennium Campus at WCU, similar to traditional technology parks. The university likens the campus to a multi-use neighborhood that would encompass a mix of academic buildings, research facilities, business, industry, and housing. State-approved legislation in 2000 made it possible for University of North Carolina institutions to seek public-private partnerships and also authorized the Millennium Campus.

What are the factors of commercial success? As they say in real estate: location, location, location.

So what makes a good location for commercializing innovation? Innovative ideas clearly thrive where R&D spending flows and local patent activity exists. But, do R&D dollars and level of patents also indicate locations for tech transfer?

Not necessarily. A recent working paper in applied economics finds a more complex web of relationships at work.

The U.S. Bureau of Economic Analysis (BEA) recently released its preliminary 2004 figures for per capita income, revealing average income received by persons grew by 4.7 percent between 2003 and 2004. The change in income was not evenly distributed across the country. The BEA explains financial activities were a particularly strong accelerating force in the Northeast (New York, Connecticut, Massachusetts and Delaware), construction in the West (Colorado, Idaho, Oregon, Nevada and Utah) and professional services more broadly across the country.

Tech-based economic development practitioners and wise elected officials will note, as well, one-year change in per capita income is not a terribly useful measure for programs requiring longer time periods to yield results. The statistic is relatively volatile between single years, affected by major events such as the dot-com crash and the subsequent recession.

The SSTI Weekly Digest will take its annual spring vacation next week. Publication of the Digest and Funding Supplement will resume with the April 18 issue.

Nearly every university and community seeks to cultivate a niche in new technologies ­ nurturing venture capital, technology transfer and knowledge networks. Many policies have focused on biotechnology as the kernel of future economic development. Meanwhile, budding nanotechnology has started to show its first blooms in the commercial sector.

Will nanotech be the next technology revolution? How can a community tell whether its scientists are tilling nanotech for new materials? How can one create a fertile place for nanotechnology to germinate, thrive and bear commercial fruit? The authors of a working paper published this month by the National Bureau of Economic Research (NBER) attempt to answer these questions.