SSTI Digest

The strength of personal relationships and social connections are the most important factors for accessing capital markets according to a recent working paper from the National Bureau of Economic Research (NBER). Theresa Kuchler, Yan Li, Lin Peng, Johannes Stroebel, and Dexin Zhou — using a novel modeling system and index of “social connectedness” — conclude that physical, geographical proximity has long served as the primary proxy for measuring how the social connections among firms and investors across geographies affect access to capital markets and investment decisions. These findings may have far reaching impacts for businesses from any region—not just those closer to investment hubs—as well as for entrepreneurial support organizations and other stakeholders seeking to strengthen their local innovation communities.

As Manufacturing Day continues to be recognized throughout the month of October, the Census Bureau issued a press release highlighting the key economic contributions of the manufacturing sector. The release highlighted the increases in the value of shipments and employment in the manufacturing sector from 2017 to 2018, as well as the sector’s nearly 60 percent share of U.S. exports. But a recent report from Policy Matters Ohio and The Century Foundation set a more cautionary note. Analyzing data over a much longer period and focused on four states in the Great Lakes region, the report finds that manufacturing jobs had not yet recovered to pre-Great Recession levels even before the COVID-19 pandemic began, and that the wage advantage of manufacturing has continued to erode compared to other sectors in the region.

Against the backdrop of a recent report from Citigroup Global Perspectives & Solutions that tags the cost of failing to address the racial gaps between Blacks and whites in the U.S. economy over the last 20 years at $16 trillion, the Industry and Inclusion initiative — a joint effort by the Urban Manufacturing Alliance and the Century Foundation — is working towards making Diversity, Equity, and Inclusion (DE&I) the centerpiece of workforce development strategy. Highlighting best practices for supporting people of color in accessing and building wealth through opportunities in manufacturing, the initiative offers a framework for all workforce development organizations to accelerate their efforts in closing racial equity gaps.

Earlier this week, the Departments of Homeland Security (DHS) and Labor (DOL) filed interim final rules related to the H-1B visa application process. The DHS rule is not yet available, but a press release indicates its purpose is to limit the definition of “specialty occupation” and to close “loopholes.” The rule will take effect 60 days after it is published. The primary effect of the DOL rule, effective as soon as it appears in the Federal Register, will be to bolster the calculations employers use to determine prevailing wages in their applications for the visas. The net effect of these changes will be an increased likelihood that companies will have to pay visa-based workers more than their American counterparts — thereby incentivizing companies to try harder to hire American workers. Acting deputy secretary of DHS Kenneth Cuccinelli says the net impact of these rules will be to cut H-1B applications by one-third. This would still leave the department significantly over-subscribed for the 85,000 annual visas. Processing of H-1B visas, along with several other visa categories, had been suspended until at least the end of the year under an…

At a time that is often referred to as “The Age of Technology,” the U.S. has no coherent strategy for maintaining its high standing as a world leader in science, technology and innovation, and has watched as China has overtaken the country on many indicators of prowess in R&D and innovation. That assertion is among among the findings of a new report from the American Academy of Arts and Sciences, one that shows the country at a tipping point and failing to embrace necessary actions to maintain its leadership in science and engineering. The Perils of Complacency: America at a Tipping Point in Science & Engineering is a five-year update to an earlier report (Restoring the Foundation: The Vital Role of Research in Preserving the American Dream) from the Academy and highlights significant developments and emphasizes actions that “remain in urgent need of attention from U.S. policy leaders.” The current report notes that the update was written “because the crucial message in our previous report about the vital importance of research has been reflected in China’s priorities but has not stimulated the much-needed action by the United States.” Many of the original…

The Community Development Financial Institutions (CDFI) Fund recently announced the recipients of more than $204 million in FY 2020 funding. Much of the agency’s funding is used to support banking and lending services, but several SSTI members were among the 357 awardees. Launch NY received a financial assistance award and Invest Nebraska and Vermont Sustainable Jobs Fund received technical assistance awards. Under the financial assistance program, the CDFI Fund provides matching dollars for non-federal funds to increase an awardee’s financial capacity. Technical assistance awards can be used to expand the organization’s operational capacity. All applicants for these programs must be certified CDFIs. Learn more about the CDFI certification process and available funding at cdfifund.gov.

Every year, manufacturers from around the nation gather on the first Friday in October to open their shop doors to students, prospective employees, teachers, and community leaders. Manufacturing Day (MFG Day) is meant to inspire the next generation of manufacturers and showcases the many career opportunities that exist in today’s modern manufacturing space. Last year, more than 325,000 people participated in MFG Day and over 3,000 events were held nationwide. However, MFG Day 2020 is shaping up to be a bit different than years past. MFG Day, held Oct. 2 with events continuing throughout the month, will take place primarily through virtual events. Manufacturers will be hosting webinars and virtual Q&A sessions to engage participants instead of offering facility tours, demonstrations and workshops. While it is difficult to replace the in-person tours of manufacturing facilities and one-on-one informational sessions, some manufacturers are hoping that the event will be an opportunity to increase community engagement and collect data on visitors who are interested in a career in manufacturing. MFG Day sponsor Deloitte has been tracking the reception of the event…

As the shock of the first wave of the coronavirus pandemic settled and the extent of the economic impact began to become clearer, states are developing creative and long-term plans and programs to breathe life back into their economies. States initially focused federal funds from the Coronavirus Aid, Relief and Economic Security (CARES) Act towards the urgent public health needs of responding to the unfolding crisis and to mitigating the impacts of mandatory business closures. Commerce has gradually resumed, yet unemployment remains high, job creation slow, and states face continued revenue shortfalls months after the outbreak. States are increasingly using novel and impactful ways to leverage CARES Act funding to speed the recovery, and to fortify their economies in a persistent environment of uncertainty over the virus.

Government investment in R&D within the health, defense, and energy sectors can provide both immediate and long-term benefits in the form of employment, income, and federal and state tax revenue. A new report released by Breakthrough Energy explores these benefits, while also studying the effects that an increase in public R&D spending could have throughout the nation. The report notes that if the nation increased R&D spending to 1 percent of GDP by 2030, compared to 0.62 percent in 2018, that the investment would support 3.4 million U.S. jobs overall, and add “$301 billion in labor income, $478 billion in economic value, and $81 billion in tax revenue.” By increasing the government’s R&D investments, Breakthrough Energy believes that the U.S. will have a stronger chance of securing long-term economic health while also being better positioned to tackle growing threats such as climate change. Breakthrough Energy’s full report, prepared by PricewaterhouseCoopers LLP, is available here.

The Appalachian Regional Commission (ARC) has opened a new virtual training hub — the Appalachia Nonprofit Resource Center — to help the region’s nonprofits as they navigate the COVID crisis. Teams from regional nonprofits are invited to apply for dedicated technical assistance coaching focusing on long-term operational sustainability during the COVID crisis, and slots for 120 organizations are available. Topics include: short-term financial management; long-term financial management; mission and operations; and fundraising. 

SBA efforts to reign in abuse of the Small Business Innovation Research and Small Business Technology Transfer (SBIR/STTR) program continue, yet companies that seem to use SBIR awards as a primary revenue stream rather than a means to creating future revenue paths through new product and process innovations persist, based on SSTI’s review of award data. Known as “SBIR mills” many of these companies appear to be clustered geographically in specific metropolitan areas, many of which house major federal labs or research centers, the analysis of SBIR data reveals.  This suggests, from a policy perspective, that the federal agencies could be doing much more to curtail the mills and redirect awards into companies more consistently focused on turning innovation into products, profits and jobs. The data reveals the extent of abuse by the small number of SBIR mills among all awardees is not insignificant: awards made to potential mills account for more than 21 percent of all awards made during the period from 2009 to 2019.

The U.S. Small Business Administration announced 24 organizations as recipients of the 2020 Federal and State Technology partnership (FAST) program grant awards. The awards of up to $125,000 focus on “specialized training, mentoring, and technical assistance for R&D-focused small businesses.” The FAST program grants one-year funding to organizations that work to partner with other in-state groups.