[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]



                    COMMERCE DEPARTMENT PROGRAMS TO
    SUPPORT JOB CREATION AND INNOVATION AT SMALL- AND MEDIUM-SIZED 
                             MANUFACTURERS

=======================================================================

                                HEARING

                               BEFORE THE

               SUBCOMMITTEE ON TECHNOLOGY AND INNOVATION

                  COMMITTEE ON SCIENCE AND TECHNOLOGY
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                            JANUARY 21, 2010

                               __________

                           Serial No. 111-71

                               __________

     Printed for the use of the Committee on Science and Technology


     Available via the World Wide Web: http://www.science.house.gov

                                 ______





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                  COMMITTEE ON SCIENCE AND TECHNOLOGY

                   HON. BART GORDON, Tennessee, Chair
JERRY F. COSTELLO, Illinois          RALPH M. HALL, Texas
EDDIE BERNICE JOHNSON, Texas         F. JAMES SENSENBRENNER JR., 
LYNN C. WOOLSEY, California              Wisconsin
DAVID WU, Oregon                     LAMAR S. SMITH, Texas
BRIAN BAIRD, Washington              DANA ROHRABACHER, California
BRAD MILLER, North Carolina          ROSCOE G. BARTLETT, Maryland
DANIEL LIPINSKI, Illinois            VERNON J. EHLERS, Michigan
GABRIELLE GIFFORDS, Arizona          FRANK D. LUCAS, Oklahoma
DONNA F. EDWARDS, Maryland           JUDY BIGGERT, Illinois
MARCIA L. FUDGE, Ohio                W. TODD AKIN, Missouri
BEN R. LUJAN, New Mexico             RANDY NEUGEBAUER, Texas
PAUL D. TONKO, New York              BOB INGLIS, South Carolina
JOHN GARAMENDI, California           MICHAEL T. MCCAUL, Texas
STEVEN R. ROTHMAN, New Jersey        MARIO DIAZ-BALART, Florida
JIM MATHESON, Utah                   BRIAN P. BILBRAY, California
LINCOLN DAVIS, Tennessee             ADRIAN SMITH, Nebraska
BEN CHANDLER, Kentucky               PAUL C. BROUN, Georgia
RUSS CARNAHAN, Missouri              PETE OLSON, Texas
BARON P. HILL, Indiana
HARRY E. MITCHELL, Arizona
CHARLES A. WILSON, Ohio
KATHLEEN DAHLKEMPER, Pennsylvania
ALAN GRAYSON, Florida
SUZANNE M. KOSMAS, Florida
GARY C. PETERS, Michigan
VACANCY
                                 ------                                

               Subcommittee on Technology and Innovation

                      HON. DAVID WU, Oregon, Chair
DONNA F. EDWARDS, Maryland           ADRIAN SMITH, Nebraska
BEN R. LUJAN, New Mexico             JUDY BIGGERT, Illinois
PAUL D. TONKO, New York              W. TODD AKIN, Missouri
HARRY E. MITCHELL, Arizona           PAUL C. BROUN, Georgia
GARY C. PETERS, Michigan                 
JOHN GARAMENDI, California               
BART GORDON, Tennessee               RALPH M. HALL, Texas
                 MIKE QUEAR Subcommittee Staff Director
        MEGHAN HOUSEWRIGHT Democratic Professional Staff Member
            TRAVIS HITE Democratic Professional Staff Member
            HOLLY LOGUE Democratic Professional Staff Member
           MELE WILLIAMS Republican Professional Staff Member
                  VICTORIA JOHNSTON Research Assistant














                            C O N T E N T S

                            January 21, 2010

                                                                   Page
Hearing Charter..................................................     2

                           Opening Statements

Statement by Representative David Wu, Chairman, Subcommittee on 
  Technology and Innovation, Committee on Science and Technology, 
  U.S. House of Representatives..................................     6
    Written Statement............................................     6

Statement by Representative Adrian Smith, Ranking Minority 
  Member, Subcommittee on Technology and Innovation, Committee on 
  Science and Technology, U.S. House of Representatives..........     7
    Written Statement............................................     7

                               Witnesses:

Hon. Dennis F. Hightower, Deputy Secretary of Commerce, U.S. 
  Department of Commerce
    Oral Statement...............................................     9
    Written Statement............................................    10
    Biography....................................................    14

Ms. Jennifer Owens, Vice President, Business Development at Ann 
  Arbor Spark
    Oral Statement...............................................    14
    Written Statement............................................    16
    Biography....................................................    17

Ms. Roseann B. Rosenthal, President and CEO, Ben Franklin 
  Technology Partners of Southeastern Pennsylvania
    Oral Statement...............................................    18
    Written Statement............................................    19
    Biography....................................................    24

Mr. Michael Coast, President, Michigan Manufacturing Technology 
  Center (MMTC)
    Oral Statement...............................................    25
    Written Statement............................................    27
    Biography....................................................    62

              Appendix: Answers to Post-Hearing Questions

Hon. Dennis F. Hightower, Deputy Secretary of Commerce, U.S. 
  Department of Commerce.........................................    84

Ms. Jennifer Owens, Vice President, Business Development at Ann 
  Arbor Spark....................................................    85

Mr. Michael Coast, President, Michigan Manufacturing Technology 
  Center (MMTC)..................................................    86

 
COMMERCE DEPARTMENT PROGRAMS TO SUPPORT JOB CREATION AND INNOVATION AT 
                 SMALL- AND MEDIUM-SIZED MANUFACTURERS

                              ----------                              


                       THURSDAY, JANUARY 21, 2010

                  House of Representatives,
         Subcommittee on Technology and Innovation,
                       Committee on Science and Technology,
                                                    Washington, DC.

    The Subcommittee met, pursuant to call, at 10:14 a.m., in 
Room 2318 of the Rayburn House Office Building, Hon. David Wu 
[Chairman of the Subcommittee] presiding.


                            hearing charter


               SUBCOMMITTEE ON TECHNOLOGY AND INNOVATION

                  COMMITTEE ON SCIENCE AND TECHNOLOGY

                     U.S. HOUSE OF REPRESENTATIVES

          Commerce Department Programs to Support Job Creation

        and Innovation at Small- and Medium-Sized Manufacturers


                       thursday, january 21, 2010


                         10:00 a.m.-12:00 p.m.


                   2318 rayburn house office building

I. Purpose

    Small- and medium-sized manufacturers employ millions of 
Americans and are an important contributor to economic growth. 
The Department of Commerce (DOC) has new and existing 
initiatives intended to strengthen these businesses and help 
them create more jobs. The purpose of this hearing is to learn 
about the challenges faced by small- and medium-sized 
manufactures, as well as entrepreneurs marketing new 
technology. The purpose is also to learn about DOC initiatives 
to address these challenges and examine how those programs can 
be made most effective for these enterprises.

II. Witnesses

         LThe Honorable Dennis F. Hightower, Deputy 
        Secretary of Commerce, U.S. Department of Commerce

         LMs. Jennifer Owens, Vice President, Ann Arbor 
        Spark

         LMs. RoseAnn B. Rosenthal, President & CEO, 
        Ben Franklin Technology Partners of Southeastern 
        Pennsylvania

         LMr. Michael Coast, President, Michigan 
        Manufacturing Technology Center

III. Brief Overview

Manufacturing in the U.S. Economy

    Employing 11.8 \1\ to 13 million people,\2\ the 
manufacturing sector plays a critical role in the U.S. economy. 
The Manufacturing Institute estimates that the $1.637 trillion 
worth of goods created by U.S. manufacturers in 2008 would 
position the sector as the eighth largest economy in the world. 
Manufacturing also accounts for more than half of U.S. exports. 
And, in addition to the workers directly employed in 
manufacturing, the industry also supports 6.8 million jobs in 
areas from transportation to insurance. Within this sector, 
small- and medium sized firms vastly out-number their larger 
counterparts. Of the 286,039 manufacturers in the U.S., fewer 
than 3,000 employ more than 500 workers.\3\
---------------------------------------------------------------------------
    \1\ The Facts About Modern Manufacturing, 8th Edition 
(Manufacturing Institute, 2009).
    \2\ Next Generation Manufacturing Study Overview and Findings 
(American Small Manufacturers Coalition, 2009).
    \3\ The Facts About Modern Manufacturing, 8th Edition.
---------------------------------------------------------------------------
    Even prior to the 2008 economic crisis, U.S. firms faced 
increasing competition from foreign manufacturers. Between 2000 
and 2007, U.S. global market share of manufactured exports fell 
from 19 percent to 14 percent. During that same period, the 
Chinese share of these global exports rose from 7 percent to 17 
percent.\4\ An array of factors have contributed to the decline 
in U.S. manufacturing. However, making progress in a number of 
areas could help U.S. manufacturers become more competitive and 
grow. These areas include:
---------------------------------------------------------------------------
    \4\ The Facts About Modern Manufacturing, 8th Edition.

         LWorkforce. The National Science Foundation's 
        Science and Engineering Indicators show that only 5 
        percent of U.S. college graduates major in engineering, 
        compared with 20 percent in Asia. The Manufacturing 
        Institute reports that many U.S. manufacturers have 
        difficulty finding the qualified engineers they need. 
        It also reports that many manufacturers cannot find 
        enough workers with the requisite math and science 
---------------------------------------------------------------------------
        skills necessary for modern manufacturing.

         LEngaging in Global Commerce. In 2008, U.S. 
        imports of manufactured goods from China were seven 
        times greater than U.S. exports to China. The U.S. 
        total share of Chinese imports of manufactured goods is 
        only 8.2 percent, behind Japan's share at 17.7 percent. 
        Increased trade with foreign markets is beneficial for 
        American manufacturers. According to the Manufacturing 
        Institute, U.S. manufacturers in the most trade-
        intensive industries paid their employees on average 47 
        percent more than the average compensation for workers 
        in the least trade-intensive industries. However, in a 
        2009 study of 2,500 small- and medium-sized 
        manufactures by the American Small Manufacturers 
        Coalition only 28 percent of respondents found ``global 
        engagement'' to be ``highly important.'' \5\
---------------------------------------------------------------------------
    \5\ Next Generation Manufacturing Study Overview and Findings

         LGreen Manufacturing. In the study of small- 
        and medium-sized manufacturers by the American Small 
        Manufacturers Coalition, only 16 percent reported that 
        environmental concerns were ``highly important.'' The 
        report notes that increasingly, major companies are 
        requiring robust environmental standards from their 
        suppliers and that adopting environmentally sustainable 
        manufacturing practices are important to 
        competitiveness.\6\
---------------------------------------------------------------------------
    \6\ Next Generation Manufacturing Study Overview and Findings

---------------------------------------------------------------------------
Commerce Department Programs

CommerceConnect
    The CommerceConnect program will set up a website and 
physical centers to provide a ``one-stop-shop,'' where DOC 
staff can counsel businesses on DOC programs that may benefit 
their operations and assist them in applying for these 
programs. Potential services include guidance on exporting, 
assistance applying for grants or patents, and help using 
government census data to do business planning. In addition to 
guiding small- and medium-sized businesses toward available 
resources, the DOC hopes CommerceConnect will integrate 
currently stove-piped programs and reduce the challenge of 
navigating federal bureaucracy. In October 2009, the DOC opened 
a pilot CommerceConnect facility in Plymouth, Michigan.
    The objective of the pilot is to better understand the 
needs of businesses and to develop more effective methods of 
matching them with the relevant DOC programs and services.

The Office of Innovation and Entrepreneurship
    To support the Administration's efforts to encourage 
innovative entrepreneurship, the DOC created the Office of 
Innovation and Entrepreneurship. The Office, which reports 
directly to Commerce Secretary Locke, will focus on a range of 
issues, including:

         LCultivating entrepreneurship;

         LImproving access to governmental data, 
        research, and technical resources for entrepreneurs;

         LAccelerating technology commercialization of 
        federal R&D

         LIncreasing access to capital for seed and 
        early-stage innovation-based companies; and

         LStrengthening interagency collaboration and 
        coordination.

    The Office is also establishing a National Advisory Council 
on Innovation and Entrepreneurship to advise the Secretary. The 
council will include successful entrepreneurs, innovators, 
angel investors, venture capitalists, and others.

The Sustainable Manufacturing Initiative
    The Manufacturing and Services Division within the DOC's 
International Trade Administration includes a website 
(www.manufacturing.gov) that offers market information from 
different industrial sectors, as well as updates from the 
Manufacturing Council, and other information. One of the 
focuses of the Manufacturing Portal under the Obama 
Administration will be the Sustainable Manufacturing 
Initiative, originally begun in 2007. A major goal of this 
initiative is to help American manufacturers increase their 
competitiveness by reducing waste and gaining market share for 
more environmentally sustainable products and processes. As 
part of this initiative, the DOC has:

         LEstablished an Interagency Task Force on 
        Sustainable Manufacturing, as a subgroup of the 
        Interagency Working Group on Manufacturing 
        Competitiveness. The subgroup includes representatives 
        from 15 federal agencies.

         LLaunched (in October of 2009) a central 
        online clearinghouse of U.S. Government programs and 
        resources that support sustainable business, which 
        includes information on 300 federal programs.

         LOrganized Sustainable Manufacturing Showcases 
        where manufacturers tour other manufacturing facilities 
        across the U.S. which have successfully adopted 
        environmentally friendly manufacturing practices.

         LSupported an Organization of Economic 
        Cooperation and Development (OECD) study to create 
        metrics for sustainable manufacturing. Phase II of this 
        study, to be released later this year, will be a tool-
        kit to help businesses assess the cost-effectiveness of 
        adopting more sustainable manufacturing methods.

Manufacturing Extension Partnership (MEP) Program
    The MEP program, run through the National Institute of 
Standards and Technology (NIST) at the DOC, is a network of 59 
centers located in every State and Puerto Rico, providing a 
range of services to small- and medium-sized manufacturers. The 
MEP centers advise these businesses in a variety of areas, 
including Lean Manufacturing, increasing environmental 
sustainability, and information technology. The MEP centers are 
non-profit, university or state-based organizations which 
receive one-third of their operational funding from NIST with 
the matching two-thirds supplied by state funds, other regional 
partners, and revenue from fees paid by manufacturers for the 
services they receive. Since the early 1990s, MEP centers have 
completed nearly 400,000 contracts with small- and medium-sized 
manufacturers. NIST reports that assistance from the MEP 
program has helped create or retain more than 57,000 jobs and 
created or retained $10.5 billion in sales in 2007 alone.\7\
---------------------------------------------------------------------------
    \7\ http://www.mep.nist.gov/documents/pdf/about-mep/impacts/
Final_2009_Making_a_Difference%208.5_X_11.pdf.

---------------------------------------------------------------------------
IV. Issues and Concerns

    Through this hearing, the Subcommittee will explore the 
following issues:

         LWhat are the problems facing small- and 
        medium-sized manufacturers and entrepreneurs?

         LHow will these Commerce Department programs 
        benefit small- and medium-sized manufacturers?

         LSuggestions to improve the programs to best 
        support small- and medium-sized manufacturers and 
        entrepreneurs.
    Chairman Wu. This hearing will come to order.
    Good morning, everyone. I would like to thank everyone, 
especially our witnesses, for coming to this morning's very 
important hearing on Department of Commerce programs to support 
job creation and innovation. The purpose of this hearing is to 
understand the challenges facing small- and medium-sized 
manufacturers, and to learn about the initiatives of the 
Commerce Department which were launched to help these 
businesses.
    The health of the manufacturing sector is crucial to the 
health of the economy as a whole. It is responsible for 
creating over $1.6 trillion worth of goods in fiscal 2008. This 
sector employs between 11 and 13 million Americans, and 
accounts for over half of this Nation's exports. Small- and 
medium-sized manufacturers play a particularly important role 
in American manufacturing, representing the vast majority of 
the 286,000 manufacturing firms in America.
    Even before the economic crisis of 2008, these 
manufacturers had to weather difficult economic circumstances, 
particularly because of foreign competition. The current 
economic situation has made it difficult for these businesses 
to access credit. Many have had to adjust to the slowdown in 
the businesses of their large customers, like the smaller firms 
which supply the auto industry. These are on top of the 
existing challenges small- and medium-sized manufacturers 
already face, such as finding skilled workers, successfully 
exporting to foreign and many times protected markets, and 
keeping pace with rapid changes in technology. In the face of 
increasing foreign competition, capitalizing on our strengths 
in R&D is absolutely crucial. Firms that transition and 
manufacture new technology, produce new services and new 
products will be crucial to growing the U.S. economy.
    I am glad to have the opportunity today to learn about the 
pressing problems of small- and medium-sized manufacturers from 
individuals who are closely connected with these firms. 
Programs like the NIST Manufacturing Extension Partnership have 
a proven track record of helping small- and medium-sized 
manufacturing firms become more competitive and retain and 
create jobs. I visited many of these manufacturers and the MEP, 
the OMEP programs which help them in my home State of Oregon, 
and they are indeed doing heroic work. Manufacturing jobs are 
good jobs, and I hope the success of MEP can be replicated in 
other Commerce Department initiatives.
    Chairman Wu. I now recognize the Ranking Member, Mr. Smith 
from Nebraska, for his opening statement.
    [The prepared statement of Chairman Wu follows:]
                Prepared Statement of Chairman David Wu
    Good morning, I would like to thank everyone, and especially our 
witnesses, for coming to this morning's hearing on Department of 
Commerce programs to support job creation and innovation. The purpose 
of this hearing is to understand the challenges facing small- and 
medium-sized manufacturers, and to learn about the initiatives the 
Commerce Department has launched to help these businesses.
    The health of the manufacturing sector is critically important to 
the health of the economy as a whole, responsible for the creation of 
over $1.637 trillion worth of goods in 2008. This sector employs 
between 11 and 13 million Americans, and accounts for over half of the 
Nation's exports. Small- and medium-sized manufacturers play a 
particularly important role in American manufacturing, representing the 
vast majority of the 286,000 manufacturing firms in the U.S.
    Even before the economic crisis of 2008, these manufacturers have 
had to weather difficult economic circumstances, particularly from 
foreign competition. The current economic situation has made it 
difficult for these businesses to access credit. Many have had to 
adjust to the slowdown of their large customers, like the small firms 
that supply the auto industry. These are on top of the existing 
challenges small- and medium-sized manufacturers already face, such as 
finding skilled workers, exporting to foreign markets, and keeping pace 
with rapid changes in technology.
    In the face of increasing foreign competition, capitalizing on our 
R&D is crucial. Firms that transition and manufacture new technology 
will be critical to growing U.S. manufacturing.
    I am glad to have the opportunity today to learn about the pressing 
problems of small- and medium-sized manufacturers from individuals who 
are closely connected with these firms. Programs like the NIST 
Manufacturing Extension Partnership have a proven track record of 
helping small- and medium-sized manufacturing firms become more 
competitive and retain and create jobs. Manufacturing jobs are good 
jobs and I hope the success of MEP can be replicated in other Commerce 
Department initiatives.

    Mr. Smith. Thank you, Mr. Chairman, and thank you to the 
witnesses for joining us here today. Supporting job creation 
and innovation at our small- and medium-sized manufacturers is 
key to American competitiveness, and I look forward to working 
with you toward reauthorizing the America COMPETES legislation, 
Mr. Chairman.
    At yesterday's hearing, we benefited from the birds-eye 
perspective of our Nation's business leaders, and I am 
particularly interested to hear from our panelists today on the 
details.
    I would like to extend a welcome again to all of you for 
taking the time and sharing your expertise. I know that you all 
are very busy. In this time of economic uncertainty and with 
unemployment at 10 percent, there is much this Congress can do 
to spur manufacturing: increasing access to foreign markets by 
approving trade agreements with Columbia, Panama and South 
Korea; providing long-term certainty in the tax code by setting 
stable low rates and making the R&D tax credit permanent; 
ensuring continued access to private capital for businesses; 
and taking advantage of opportunities to develop our available 
energy resources including wind, hydro, solar and hydrocarbons.
    Within the purview of this Committee, we must work to keep 
the United States a world leader in developing new technologies 
by ensuring our manufacturers have access to the resources 
necessary to spur innovation. This includes developing talent 
through strong STEM education programs, providing necessary 
infrastructure and leadership through NIST, the National 
Science Foundation and the Department of Commerce, and ensuring 
government research catalyzes private investment rather than 
displacing it.
    I look forward to hearing from our witnesses today and to 
learning not only about the very real issues facing small- and 
medium-sized U.S. manufacturers but also ways in which this 
Committee can assist, whether by ensuring access to necessary 
resources or getting out of their way. Thank you.
    [The prepared statement of Mr. Smith follows:]
           Prepared Statement of Representative Adrian Smith
    Thank you, Mr. Chairman, for calling this subcommittee hearing 
today to examine manufacturing innovation programs within the 
Department of Commerce. Supporting job creation and innovation at our 
small- and medium-sized manufacturers is key to American 
competitiveness, and I look forward to working with you toward 
reauthorizing the America COMPETES legislation.
    At yesterday's hearing, we benefited from the bird's eye 
perspective of our Nation's business leaders, and I am particularly 
interested to hear from our panelists today on some of the details. I 
would like to extend a welcome to all of you and thank you for taking 
the time and effort to share your expertise with us today.
    In this time of economic uncertainty, with the unemployment at 10 
percent, there is much this Congress can do to spur manufacturing--
increasing access to foreign markets by approving trade agreements with 
Columbia, Panama, and South Korea; providing long-term certainty in the 
tax code by setting stable, low rates and making the R&D tax credit 
permanent; ensuring continued access to private capital for businesses; 
and taking advantage of opportunities to develop our available energy 
resources--including wind, hydro, solar, and hydrocarbon.
    Within the purview of this Committee, we must work to keep the 
United States the world leader in developing new technologies by 
ensuring our manufacturers have access to the resources necessary to 
spur innovation. This includes developing talent through strong STEM 
education programs, providing necessary infrastructure and leadership 
through NIST, the National Science Foundation, and the Department of 
Commerce, and ensuring government research catalyzes private investment 
rather than displacing it.
    I look forward to hearing from our witnesses today and to learning 
not only about the very real issues facing small- and medium U.S. 
manufacturers, but also to the ways in which this Committee can assist, 
whether by ensuring access to necessary resources or merely getting out 
of the way.

    Chairman Wu. If there are other Members who wish to submit 
additional opening statements, your statements will be included 
in the record at this point.
    It is now my pleasure to introduce our witnesses. First, 
the Honorable Dennis F. Hightower, Deputy Secretary of Commerce 
at the U.S. Department of Commerce. Ms. Jennifer Owens is the 
Vice President of Ann Arbor Spark. And now I would like to 
recognize the gentlelady from Pennsylvania, Ms. Dahlkemper, to 
introduce our next witness.
    Ms. Dahlkemper. Thank you, Chairman Wu, and thank you for 
inviting me to your subcommittee to have the honor to introduce 
a fellow Pennsylvanian. RoseAnn Rosenthal is President and CEO 
of the Ben Franklin Technology Partners (BFTP) of Southeastern 
Pennsylvania, and she has been so since 1996. In this capacity, 
she has earned an international reputation with her development 
of innovative partnerships and initiatives. With a current 
portfolio of over 120 technology companies, BFTP continues to 
build upon its proven track record of supporting hundreds of 
southeastern Pennsylvania technology companies. Through her 
leadership, BFTP partnered successfully with two of the 
region's major universities, the University of Pennsylvania and 
Drexel University, to create the Nanotechnology Institute. 
Furthermore, BFTP's efforts in nanotechnology have become a 
model for similar approaches in energy, and Ms. Rosenthal has 
led her staff in the creation of new technology 
commercialization models. She serves on several public and 
private boards and committees. She has been active as an 
advisor in state and regional nanotechnology initiatives. She 
has served on several national task forces including the U.S. 
Department of Housing and Urban Development and the U.S. 
Economic Development Administration. It is my pleasure to 
introduce my fellow Pennsylvanian, RoseAnn Rosenthal.
    Chairman Wu. Now I would like to recognize the gentleman 
from Michigan, Mr. Peters, to introduce our final witness.
    Mr. Peters. Thank you, Mr. Chairman. It is a pleasure to 
introduce Mike Coast, who is the president and CEO of the 
Michigan Manufacturing Technology Center (MMTC), and I have had 
an opportunity to work with Mr. Coast on numerous occasions as 
we work with helping small manufacturers throughout our state. 
He has been a critical part of the MEP affiliate in Michigan 
for the last 14 years and has been a great asset to the 
business community and manufacturers operating in our state. He 
is responsible for the partnership between the Technology 
Center and the Michigan Economic Development Corporation, a 
partnership that has allowed the MMTC to play a leading role in 
coordinating technology-related services and helping our 
businesses in our state diversify. Under his very astute 
leadership, he was awarded the Not For Profit of the Year Award 
from Automation Alley in 2007. He comes to us with more than 
eight years of technology development experience and 16 years 
of manufacturing experience in addition to his work at the 
technology center, so I am thrilled to have him here with us 
representing us and it is really great, I may add, to have two 
individuals from the great State of Michigan representing our 
great state, and certainly when it comes to small 
manufacturing, we face very tough challenges in our state but 
also some tremendous opportunities, so thank you, Mr. Chairman.
    Chairman Wu. Thank you, Mr. Peters, and I am sure that with 
your leadership and Mr. Coast's leadership that Michigan is 
well on its way back.
    Now to the witnesses, you will each have five minutes for 
your spoken testimony. Your written testimony will be 
introduced into the record in their entirety, and when all of 
you complete your testimony, we will begin with questions and 
each Member will have five minutes to question the panel in 
each round
    Mr. Hightower, please proceed.

  STATEMENT OF HON. DENNIS F. HIGHTOWER, DEPUTY SECRETARY OF 
             COMMERCE, U.S. DEPARTMENT OF COMMERCE

    Mr. Hightower. Thank you. Good morning, Chairman Wu, 
Ranking Member Smith, Members of the Subcommittee. I am pleased 
to be here this morning to discuss the steps this 
Administration and the Department of Commerce in particular are 
taking to spur job creation and innovation, particularly among 
small- and medium-sized businesses, manufacturers and 
entrepreneurs. I have submitted my written testimony for the 
record but would like to spend my five minutes highlighting 
some of the key initiatives.
    As you know, one of the first things that President Obama 
did upon entering office was to sign the Recovery Act to 
stimulate an economy that was in free fall. One year later, 
although we still face troubling and unacceptable economic 
difficulties, there is agreement among economists across the 
political spectrum that the Recovery Act helped to stabilize 
the economy and to create jobs. And with the naming of Ron 
Bloom as his senior counsel for manufacturing policy, President 
Obama signaled that the revitalization of the U.S. 
manufacturing sector would be a key component of the 
Administration's economic recovery efforts.
    The Department of Commerce, we believe, is uniquely 
positioned to complement and build upon the Administration's 
job creation initiatives. While the Department's portfolio is 
diverse, our overriding mission is to improve the 
competitiveness of American businesses at home and abroad, and 
to this end Secretary Locke has identified four key 
departmental initiatives and priorities that will guide our 
activities going forward, and they are first to boost our 
country's innovative capacity, to unlock the tremendous 
potential in promising new green and blue industries, to 
expanding exports through trade promotion efforts, and finally, 
transforming the Commerce Department into an integrated, 
efficient and effective service provider.
    I would like to briefly discuss a number of programs and 
initiatives that support these priorities. First, Secretary 
Locke has established an Office of Innovation and 
Entrepreneurship to foster the creation and success of high-
growth and innovation-driven businesses and to accelerate 
commercialization of federal research and development programs. 
This office will also manage the National Advisory Council on 
Innovation and Entrepreneurship, which will include 
entrepreneurs, innovators, investors and university and 
nonprofit leaders.
    The Department of Commerce is also putting more resources 
into programs that will jump-start American manufacturing. The 
Manufacturing Extension Program, as you know, is an important 
part of the National Institute of Standards and Technology, and 
MEP provides manufacturers with technical assistance, training 
and long-term strategic planning. The MEP program received an 
increase of $14.7 million in fiscal year 2010 and President 
Obama has indicated his support for ultimately doubling the MEP 
funding over the next several years.
    We are also in the process of reconstructing the 
manufacturing.gov portal to provide smaller companies 
information not only on sustainable manufacturing practices but 
also a full range of manufacturing issues, and we are working 
closely with the Manufacturing Council on issues of concern 
specifically to the manufacturing sector. Last fall, Secretary 
Locke opened a pilot CommerceConnect office just outside of 
Detroit. The purpose is to provide Main Street businesses a 
single point of contact, a one-stop shop, if you will, for 
services that are offered by the Department. Experience gained 
from this pilot, which I visited three times in the last three 
months, will be evaluated as a part of our commitment to make 
the Department of Commerce more useful to the everyday 
operation of American companies.
    These are but a few of our initiatives, and I hope you will 
carefully look at my written testimony to see the full scope of 
our activities.
    Mr. Chairman, we certainly appreciate your support and the 
support of the Members of this Subcommittee, and we certainly 
look forward to working with you on ongoing job creation, 
innovation and manufacturing efforts. Thank you.
    [The prepared statement of Mr. Hightower follows:]
             Prepared Statement of Hon. Dennis F. Hightower
    Chairman Wu and members of the Subcommittee on Science and 
Technology, I thank you for the opportunity to appear before you today 
to provide you with an overview of how this Administration and the 
Commerce Department plan to support the U.S. manufacturing sector. In 
particular, I will provide an update on the actions that
    Secretary Locke and I are taking to focus the capabilities of the 
Department of Commerce on supporting job creation and innovation, 
particularly among small- and medium-sized manufacturers and 
entrepreneurs.

An Administration Focused on Recovery of the Manufacturing Sector

    From the day he took office, President Obama has made exceptional 
efforts to provide immediate help to the small- and medium-sized 
businesses that are the source of a significant number of new jobs in 
America. And with the naming of Ron Bloom as Senior Counselor for 
Manufacturing Policy and the recent release of a White House 
manufacturing strategy, he signaled that the revitalization of the U.S. 
manufacturing sector would be the key to the revitalization of the 
American economy.
    As you are aware, it all began with the Recovery Act which was 
essentially divided into three parts.
    One third of Recovery Act funding is going directly to tax relief 
for families and small businesses. Another third of the money is being 
directed to emergency relief like additional Medicaid and unemployment 
insurance funding for those who have borne the brunt of this recession. 
The last third of the Recovery Act funding is for investments to put 
people back to work and lay a new foundation for long-term prosperity. 
These investments include vital infrastructure improvements like 
upgrading our roads and our bridges; and renovating schools and 
hospitals, as well as investments in things like renewable energy and 
broadband expansion. Already, upwards of $140 million has been awarded 
to communities through the Department's Broadband Technology 
Opportunities Program (BTOP), which continues to fund broadband 
infrastructure, public computer centers, sustainable broadband 
adoption, and broadband mapping projects around the country.
    Thanks to the Recovery Act, $100 billion in funding and loan 
guarantees was set aside to encourage and support manufacturing in 
America--much of which will assist smaller enterprises. With overall 
unemployment remaining at very high levels (10 percent) and 
manufacturing employment continuing to fall,\1\ I understand and share 
the frustration that the economy is not getting better quicker. But we 
should remember what the economy looked like at the beginning of 2009 
when this Administration took office. Every day seemed to bring worse 
news. A severe recession had begun, and it was at great risk of turning 
into something even worse.
---------------------------------------------------------------------------
    \1\ Since the recession began, manufacturing employment has fallen 
by 2.1 million.
---------------------------------------------------------------------------
    The Recovery Act--along with our other economic initiatives--has 
begun to stabilize economic conditions and help those harmed by the 
economic crisis. But the true measure of the Recovery Act and of 
President Obama's entire agenda will not be determined in just a few 
months. To put our economy on a sustainable path, we must make 
fundamental changes like we have not seen in America for decades.
    One company I met during my travels retooled equipment designed to 
manufacture hulls for yachts to build wind turbine blades and take part 
in the burgeoning green economy. It is our hope and intention to 
replicate this kind of success with our manufacturing programs.

Focusing the Commerce Department to Better Support Manufacturing

    While the Commerce Department's portfolio is diverse--from 
protecting America's oceans and intellectual property to improving 
companies' efficiency and opening up markets--our overriding mission is 
to improve the overall competitiveness of American business at home and 
abroad. The Department's diversity uniquely positions it to support 
businesses and entrepreneurs through every step of their lifecycle: 
from the birth of an idea, to the creation of a business, to global 
expansion--and at each step, the Commerce Department contributes to job 
creation and economic prosperity.
    Innovation: At the innovation stage, Commerce brings tremendous 
value for the U.S. economy--whether in creating a business climate that 
supports the development of new inventions through the Patent and 
Trademark Office, spurring innovation in manufacturing through the 
Technology Innovation Program at the National Institute of Standards 
and Technology (NIST), or harnessing the vast economic potential of the 
digital economy at the National Telecommunications and Information 
Administration--Commerce is a critical player in supporting the 
creation of tomorrow's firms, industries, and jobs.
    Commercialization: U.S. businesses and entrepreneurs rely upon 
innovations developed through the process of technology 
commercialization to develop new ideas into new products and services, 
which lead to economic growth and job creation. Commerce has a host of 
resources to drive this process--by exploring policies and initiatives 
to foster high-growth entrepreneurship through the Office of Innovation 
and Entrepreneurship, supporting regional innovation clusters through 
the Economic Development Administration, helping drive productivity 
through NIST's Manufacturing Extension Partnership, and helping 
minority-owned businesses capitalize on their market potential at the 
Minority Business Development Agency.
    Global Competitiveness: Once businesses have become established, 
the next stage is growth. With traditional engines of growth like 
consumer spending flagging, accessing foreign markets becomes 
increasingly important. The International Trade Administration, through 
its Manufacturing and Services unit, interfaces with manufacturers to 
understand impediments to the global competitiveness of U.S. 
businesses, such as market access barriers, while its Commercial 
Service unit assists businesses to expand their exports. In addition, 
our Bureau of Industry and Security enables export growth in a manner 
consistent with national security.
    Environmental Stewardship: The National Oceanic and Atmospheric 
Administration ensures that business and economic activity is 
environmentally sustainable--and also ensures that businesses across 
the lifecycle have the benefit of its world-class research to guide and 
shape investments, particularly in the massive market potential in 
green and blue commercial sectors.
    Statistical Infrastructure: Commerce also includes two of the 
premier statistical agencies in the U.S. Government within the 
Economics and Statistics Administration. The Bureau of Economic 
Analysis and Bureau of the Census track changes in the economy, which 
can be critical to helping businesses of all sizes and sectors 
understand their current and future markets.

Departmental Priorities
    Given the diverse range of issues we confront and activities in 
which Commerce is involved, Secretary Locke has prioritized his 
emphasis on key areas with a focus on job creation and economic growth 
in the years ahead. In each in of these areas, support for small- and 
medium-sized manufacturers is a key component.

        -  The first priority area is in boosting our country's 
        innovative capacity, with a particular emphasis on intellectual 
        property and entrepreneurship to create a business environment 
        that cultivates and rewards new ideas, technologies, products, 
        and services.

        -  Second, Secretary Locke is committed to unlock the vast 
        economic potential of the green and blue markets by helping to 
        grow businesses that are based on clean energy and 
        environmental conservation.

        -  Third, we are fundamentally focused on leveraging Commerce 
        resources to generate growth by expanding exports through trade 
        promotion efforts.

        -  Last, Secretary Locke and I are focused on transforming the 
        Commerce Department into an integrated, efficient and effective 
        service provider in supporting business competitiveness and job 
        creation.

    At this point I would like to highlight a few specific initiatives 
that illustrate how the Department will better serve small- and medium-
sized manufacturers and entrepreneurs under these Departmental 
priorities.
    Office of Innovation and Entrepreneurship: Under our ``innovation'' 
priority, we recently established the Office of Innovation and 
Entrepreneurship. In his Strategy for American Innovation, President 
Obama articulated his vision for innovation, growth, and jobs: ``the 
greatest job and value creators of the future will be activities, jobs, 
and even industries that don't exist yet today . . .. It is imperative 
to create a national environment ripe for entrepreneurship and risk 
taking.'' New businesses are the primary engine of job growth in the 
United States, with entrepreneurs creating approximately three million 
jobs a year. Firms less than five years old accounted for nearly all 
net new jobs in the private sector from 1980 to 2005.
    Consistent with the President's vision, the goal of the Office of 
Innovation and Entrepreneurship is to unleash the economic potential of 
new ideas by removing barriers to entrepreneurship and the development 
of high-growth and innovation-based businesses.
    The Office will work closely with the White House and other federal 
agencies to:

          Encourage Entrepreneurs through Education, Training, 
        and Mentoring

          Accelerate Technology Commercialization of Federal 
        R&D

          Broaden Access to Capital for Entrepreneurs

          Improve Access to Government Resources for 
        Entrepreneurs

          Explore Policy Incentives to Support Innovators, 
        Entrepreneurs, and Investors

          Strengthen Interagency Collaboration and Coordination

    The Office will also manage the National Advisory Council on 
Innovation and Entrepreneurship, which will advise Secretary Locke on 
key issues relating to innovation and entrepreneurship. It will include 
a range of stakeholders, such as successful entrepreneurs, innovators, 
angel investors, venture capitalists, non-profit leaders, and other 
experts on these issues.
    Hollings Manufacturing Extension Partnership (MEP): MEP is a 
national network with hundreds of specialists who understand the needs 
of manufacturers. For the past 20 years, they have worked with 
thousands of manufacturers delivering $1.4 billion in cost savings 
annually and $9.1 billion in increased or retained sales in one year.
    MEP provides companies with services and access to public and 
private resources that enhance growth, improve productivity, and expand 
capacity. We work with companies willing to invest in their future, to 
make improvements in the short term, and position themselves to be 
stronger long-term competitors both domestically and internationally. 
In his 2010 budget, the President proposed to double MEP funding over 
seven years, so its centers can expand their efforts to bolster the 
competitiveness of U.S. manufacturers.
    Sustainable Manufacturing Initiative (SMI) and manufacturing.gov: 
Commerce is increasing efforts to encourage sustainable manufacturing 
and increase access to information on sustainable practices that can 
help companies reduce operating costs and help sustain or create jobs. 
We are expanding the www.manufacturing.gov website to provide the most 
comprehensive, and current information on issues surrounding the 
competitiveness of American manufacturers and service industries. 
Through manufacturing.gov, companies can access the Sustainable 
Business Clearinghouse of all major federal programs that support 
sustainable practices. Additionally, we are organizing and leading 
tours of U.S. companies that showcase sustainable practices that can be 
used by small- and medium-sized enterprises.
    CommerceConnect: CommerceConnect is a signature initiative to 
realize our ``more efficient and effective service provider'' priority. 
We are transforming the way we engage with businesses and 
entrepreneurs, allowing them to engage with a single Department of 
Commerce, rather than twelve separate bureaus with their own myriad of 
programs. Here is what this will mean in practice:

        -  If a business is involved in a cutting-edge field like 
        nanotechnology or developing solutions to fight climate change, 
        our CommerceConnect staff will connect it with our world-class 
        laboratories developing the standards, measurements and basic 
        R&D for products and services that allow new industries to 
        flourish.

        -  If a business has manufacturing facilities, we will link it 
        with our Manufacturing Extension Partnership, which has experts 
        who can come onto your shop floor and provide ideas to make 
        your production line more efficient.

        -  If a business wants to start selling its products abroad, we 
        will connect it with industry specialists from the 
        International Trade Administration, including Commercial 
        Service officers in any of 77 countries around the world who 
        will tap their local contacts to find you new customers.

    Three months ago, Secretary Locke kicked off a pilot 
CommerceConnect office just outside of Detroit, Michigan, to develop 
best practices in how to connect with businesses both directly--through 
on-the-ground experts that interact with business, assessing their 
needs and connecting them with the most relevant services--and 
virtually through a web presence and eventually an online tool that can 
be used by businesses.
    In this short three-month period, we have worked with 25 
businesses, successfully connecting them to a wide range of Commerce 
programs. For example, Commerce referred, Machine Tool & Gear, Inc. 
(MTG) of Corunna, Michigan, to the Michigan Export Assistance Center. 
MTG was assisted with their application to join a trade mission to 
help. automotive suppliers seeking to develop business opportunities in 
Italy. MTG's application was accepted and their company representatives 
were able to participate in an automotive trade mission to Turin, 
Italy, last month and will be following up on opportunities that were 
discussed. Also, CommerceConnect has helped connect Vogel Industries, 
located in Marine City, Michigan, to several Commerce programs, as well 
as local programs and other federal agency programs that have assisted 
them in registering for defense contracts, matching them with an 
opportunity that has helped them start engagements with peer suppliers 
involved in relevant joint ventures, and participating in an 
alternative materials workshop to find areas of opportunity for Vogel 
to diversify.
    CommerceConnect has also made connections with businesses through 
the Patent and Trademark Office, the National Institute of Standards 
and Technology, the Minority Business Development Agency, and other 
Commerce bureaus' programs and services. We have also reached out to 
include local Michigan economic development services as well as other 
federal agencies programs and services from the Small Business 
Administration and the Departments of Agriculture and Labor.
    In the next three months, we will continue to refine the 
CommerceConnect approach and offer recommendations on the operational 
construct, procedures, processes and systems for maximum efficiency and 
effectiveness.
    This concludes my statement. I will be pleased to answer any 
questions you may have.

                 Biography for Hon. Dennis F. Hightower
    Dennis F. Hightower is a seasoned business executive with extensive 
global general management experience. His distinguished career spans 
the private and public sectors, including more than 30 years of 
experience in global marketing, strategic planning, operations and 
international general management.
    Most recently, Mr. Hightower was chief executive officer of Europe 
Online Networks S.A., a privately held broadband interactive 
entertainment company based in Luxembourg. From 1987 to 1996, Mr. 
Hightower was a senior executive of The Walt Disney Company, where he 
led multi-billion dollar enterprises as president of Walt Disney 
Television & Telecommunications and president of Consumer Products, 
Europe/Middle East and Africa.
    Hightower has made a continuing commitment to training future 
business leaders as a former professor of management at Harvard 
Business School, where he focused on leadership, building emerging 
markets and global general management. He has also been a guest 
lecturer at business schools throughout the world including IMD in 
Switzerland, INSEAD in France and the London Business School; and at 
the U.S. Military Academy (Bicentennial) and the USMA Preparatory 
School.
    Hightower most recently served on the Boards of Directors of 
Accenture, Domino's Pizza, Lightfleet (a start-up high technology 
company), and privately-held Brown Capital Management. He has formerly 
served as a board member of The Gillette Company, Northwest Airlines, 
PanAmSat Corporation, Phillip-Van Heusen Corporation, The TJX 
Companies, Inc., and as a member of the Price Waterhouse Chairman's 
Advisory Council.
    Previously, Mr. Hightower has demonstrated a willingness to serve 
his country as a decorated Vietnam veteran and as a member of the 
Defense Business Board. Hightower was a Regular Army officer for eight 
years, rising to the rank of Major by age 27. While on active duty he 
was awarded numerous decorations for meritorious achievement and valor.
    Mr. Hightower holds an M.B.A. degree from the Harvard Business 
School and a B.S. degree and honorary doctorate from Howard University. 
He received the Alumni Achievement Award in Business from Howard 
University in 1986, the Alumni Achievement Award from Harvard Business 
School in 1992, and the U.S. Department of Commerce Pioneer Award in 
1996.

    Chairman Wu. Thank you, Mr. Hightower.
    Ms. Owens, my apologies for not greeting you personally 
earlier. You are so young, I didn't realize you were a witness. 
Please proceed.

   STATEMENT OF MS. JENNIFER OWENS, VICE PRESIDENT, BUSINESS 
                 DEVELOPMENT AT ANN ARBOR SPARK

    Ms. Owens. I will take that as a compliment.
    Good morning, Chairman and distinguished Members of 
Congress. In particular I would like to commend Congressman 
Peters and Congressman Ehlers for their leadership in Michigan 
and their work on behalf of our residents. My name is Jennifer 
Owens and I am the vice president for business development at 
Ann Arbor Spark, and I sincerely appreciate the opportunity to 
testify here today.
    The Ann Arbor region that I represent is uniquely 
positioned with an array of assets. Our community is home to a 
world-class university, the University of Michigan, hundreds of 
emerging high-tech entrepreneurial ventures and established 
technology leaders like Toyota, Google, Terumo Cardiovascular 
Systems, the Crawley Company and Thomas Reuters. Ann Arbor was 
recently deemed by a PBS segment as the life preserver of 
Michigan, and even with Michigan's massive economic struggles, 
our region has still remained relatively strong. Yet one of our 
greatest strengths is very much at risk, our manufacturing 
base. These firms are critical to the success of our 
innovation-based startups that need a partner to turn their 
ideas into reality. Our manufacturers can produce a new 
prosthetic limb, sonar device or medical sensor that our 
entrepreneurs design. Over the past three years, we have seen 
roughly 4,000 manufacturing jobs lost in our county alone. The 
remaining manufacturers are some of the strongest and smartest 
in the world. These businesses are at their absolute leanest 
with only critical employees remaining.
    I visited with hundreds of these companies over the past 
two years in my jobs at both the Michigan Economic Development 
Corporation and Ann Arbor Spark, and the theme is all too 
common. Banks are often unwilling to extend credit. The 
remaining employees are taking on the responsibility of three 
full-time positions, and they are all living paycheck to 
paycheck, and this is why programs like CommerceConnect are so 
critical. Manufacturers in crisis mode don't have the time or 
capacity to seek out federal opportunities. They desperately 
need someone to hold their hand through the process, open doors 
for them and to essentially be an additional resource or 
employee. CommerceConnect offers that support, and I commend 
the Department for quickly recognizing the need and developing 
the program.
    However, I implore the Department of Commerce to utilize 
the network of economic developers throughout the country to 
take their message to manufacturers. They should not create a 
new team of outreach professionals, rather educate the local 
economic developers, provide them with funding to grow their 
ranks and allow them to use their existing manufacturing 
relationships to take those programs directly to manufacturers. 
Ideally, CommerceConnect should be integrated into Michigan's 
development tool kit, which regional economic development 
organizations deploy for the retention and growth of companies.
    The current programs offered by Commerce are very helpful 
for manufacturers. Firms that use Manufacturing Extension 
Partnership or the Michigan Manufacturing Technology Center in 
our state have seen dramatic results. Our MEP center has been a 
critical partner in helping manufacturers throughout the state, 
landing roughly $300 million in new contract work.
    However, Commerce cannot ignore what these firms need most 
is missing: access to capital. Michigan manufacturers 
throughout the state are being tossed aside by their banks and 
being forced into loans with double-digit interest rates just 
to keep their business afloat. Unless new programs are designed 
to address the access to capital crisis, our manufacturing base 
will likely be dramatically reduced.
    The time to act is now. Commerce and Congress cannot study 
and research new operations. CommerceConnect as well as new 
manufacturing capital programs must be put into place in early 
2010. Commerce must partner with economic development 
organizations like Ann Arbor Spark to develop new programs and 
take their existing tools directly to manufacturers. Only 
through a true partnership with federal, state and local 
agencies can our manufacturing base be saved.
    Thank you for the opportunity to address you today, and I 
appreciate your consideration.
    [The prepared statement of Ms. Owens follows:]
                  Prepared Statement of Jennifer Owens
    Good afternoon Mr. Chairman and distinguished Members of Congress. 
My name is Jennifer and I am the Vice President for Business 
Development at Ann Arbor Spark. I sincerely appreciate the opportunity 
to testify today on this very important subject.
    The Ann Arbor region, that I represent, is uniquely positioned with 
an array of assets. Our community is home to a world class university--
the University of Michigan, hundreds of emerging high-tech 
entrepreneurial ventures and established technology leaders like 
Toyota, Google, Terumo Cardiovascular and Thomson Reuters. Ann Arbor 
was recently deemed by a PBS segment as ``the life preserver of 
Michigan.'' Even with Michigan's massive economic struggles, our region 
has still remained relatively strong.
    Yet, one of our greatest strengths is still very much at risk--our 
manufacturing base. These firms are critical to the success of 
innovation-based start-ups that need an established partner to turn 
their ideas into reality. Our manufacturers can produce the new 
prosthetic limb, sonar device or medical sensor that our entrepreneurs 
design. Over the past three years, we have seen roughly 4,000 
automotive manufacturing jobs lost in our region. The remaining 
manufacturers are some of the strongest and smartest in the world. 
These businesses are at their absolute leanest with only critical 
employees remaining.
    I have visited with hundreds of these companies over the past two 
years in my economic development role with the State of Michigan and 
Ann Arbor SPARK. The theme is all too common. Banks are often unwilling 
to extend credit. The remaining employees are taking on the 
responsibility of three full time positions. They all are living 
paycheck to paycheck.
    This is why programs like Commerce Connect are so critical. 
Manufacturers in crisis mode do not have the time or capacity to seek 
out federal opportunities. They desperately need someone to hold their 
hand through the process, open doors for them and to essentially be an 
additional resource. Commerce Connect offers some of that support. I 
commend the department for quickly recognizing the need and developing 
the program.
    However, I implore the Department of Commerce to utilize the 
network of economic developers throughout the country to take their 
message to manufacturers. They should not create a new team of outreach 
professionals. Rather, educate the local economic developers, provide 
them with funding to grow their ranks and allow them to use their 
existing relationships to take the programs directly to manufacturers. 
Ideally, Commerce Connect should be integrated into the economic 
development ``tool kit'' which each regional economic development 
organization deploys for the retention and growth of companies.
    The current programs offered by Commerce are very helpful for 
manufacturers. Firms that use Manufacturing Extension Partnership or 
the Michigan Manufacturing Technology Center in our state have seen 
dramatic results. Our MEP center has been a critical partner in helping 
manufacturers throughout the state in landing roughly $300 million in 
new contract work.
    However, Commerce cannot ignore that what these firms need most is 
missing--access to capital. Michigan manufacturers, throughout the 
state, are being tossed aside by their existing banks and being forced 
into loans with double digit interest rates to keep their business 
afloat Unless new programs are designed to address the access to 
capital crisis, our manufacturing base will likely be dramatically 
reduced.
    The time to act is now. Commerce and Congress cannot study and 
research new options. Commerce Connect as well as new manufacturing 
capital programs must be put in place early in 2010. Commerce must 
partner with economic development organizations, like Ann Arbor SPARK, 
to develop new programs and take their existing tools directly to the 
manufacturing community. Only through a true partnership among the 
federal, state and local agencies can our manufacturing base be saved.
    Again, thank you for the opportunity to address you today and for 
your consideration.

                      Biography for Jennifer Owens


    Chairman Wu. Thank you, Ms. Owens. You may take back to Ann 
Arbor that as our last President was fond of saying, help is on 
the way. This Congress and this Administration are working 
mightily to improve small business programs so that both loans 
and grants become more available for capital purposes, and this 
Committee and I have been striving mightily for two Congresses 
to update the SBIR (Small Business Innovation Research ) 
program and enhance the loans, perhaps up to $2 million--I am 
sorry, the grants-so that they be more meaningful.
    Ms. Rosenthal, please proceed.

 STATEMENT OF MS. ROSEANN B. ROSENTHAL, PRESIDENT AND CEO, BEN 
   FRANKLIN TECHNOLOGY PARTNERS OF SOUTHEASTERN PENNSYLVANIA

    Ms. Rosenthal. Mr. Chairman and Members of the Committee, 
thank you for affording me the opportunity address you today. I 
am RoseAnn Rosenthal, President and Chief Executive Office of 
the Ben Franklin Technology Partners of Southeastern 
Pennsylvania, one of four regional private nonprofit 
organizations created through Pennsylvania legislative action 
in 1982. Ben Franklin is the Commonwealth of Pennsylvania's 
partner in innovation, technology and entrepreneurship, created 
at an earlier time of economic recession and job loss in our 
Nation. The Ben Franklin partnership mission was and is to 
catalyze efforts that rebuild Pennsylvania's economy through 
science and technology. Our mission is consistent with that of 
the Department of Commerce's Office of Innovation and 
Entrepreneurship. This office, given the appropriate resources, 
presents an ideal opportunity for implementing new policies.
    The CEOs of the Ben Franklin Technology Partners had an 
opportunity to meet with the staff from the Office of the 
Secretary shortly after the announcement was made. Since then 
we have exchanged ideas around this office's emerging 
priorities, which are fundamental in their support of high-
growth innovative enterprises. We are pleased to understand 
that the work of this office will be informed by a national 
advisory council that will bring the experience, insight and 
ideas of individuals representing state and local laboratories 
of democracy, as David Osborne described such efforts including 
ours back in 1988.
    Mr. Chairman, my associates and I applaud the Committee's 
leadership for holding this hearing and hope that the message 
you and your colleagues take away is that we in the nonprofit 
world at the state and local levels have been commercializing 
technology and seeding enterprises for many years very 
effectively. We can offer concrete, practical suggestions for 
redirecting existing federal dollars to update programs in 
order to maximize federal investment and generate increased job 
creation. I recommend the following elements be considered as 
part of a framework for retooling. One, goals that are few, 
clear and nonconflicting and that keep the ultimate objective, 
economic growth through entrepreneurial innovation, at the 
forefront; two, an approach that is less prescriptive and more 
receptive to new models and allows program design to be driven 
by the specific challenges and opportunities at regional, state 
and local levels; three, flexibility in implementation enabling 
timely response as conditions change; four, programs that focus 
on reducing the barriers to collaboration and innovation; and 
five, designs that catalyze institutional and private 
involvement and investment over time. The goals: increasing 
access to early-stage growth capital and creating effective 
pathways to commercialization.
    In some states like ours, funding for high-growth 
enterprises and commercialization has come through state-backed 
technology development programs. However, with state revenues 
severely constrained, support nationwide has been cut, further 
depleting capital available for innovative enterprises and 
initiatives and straining local infrastructures for innovation 
created over recent years. Combined with the decrease in 
investment activity from among private angel investors and 
early-stage venture funds, companies we seed have nowhere to 
grow. The oft-described valley of death, a gap that stretches 
from the need to demonstrate proof of concept through to early 
revenue generation or sales, invites creative new approaches 
and a retooling of existing federal programs. My full written 
testimony offers some recommendations.
    Finally, the new Office of Innovation and Entrepreneurship 
could be funded to launch broader comprehensive regional 
models. It could be the impetus for a national innovation 
network with funded public-private partnerships able to develop 
the integrated strategies and programs necessary to drive 
innovation through the growth companies that create high-wage 
jobs and to encourage multi-state partnerships able to 
stimulate the growth of natural clusters. The Ben Franklin 
Technology Partnership was launched in similar fashion with a 
state challenge to regions across Pennsylvania.
    Thank you again, Mr. Chairman, for holding this important 
hearing and for the opportunity to share Ben Franklin 
Technology Partners' experience in stimulating innovation, 
enterprise formation and job creation. My colleagues and I 
stand ready to assist the Committee and the Administration in 
every way possible to advance these important goals.
    [The prepared statement of Ms. Rosenthal follows:]
               Prepared Statement of RoseAnn B. Rosenthal
    Mr. Chairman and members of the Committee, thank you for affording 
me the opportunity to address you today.
    I am RoseAnn B. Rosenthal, President and Chief Executive Officer of 
the Ben Franklin Technology Partners of Southeastern Pennsylvania, one 
of four Ben Franklin Technology Partners created through Pennsylvania 
legislative action in 1982.
    Ben Franklin is the Commonwealth of Pennsylvania's partner in 
innovation, technology and entrepreneurship, created at an earlier time 
of economic recession and job loss in our nation. The Ben Franklin 
Partnership mission was, and is, to catalyze efforts to rebuild 
Pennsylvania's economy through science and technology.
    Our mission is consistent with the mission of the Department of 
Commerce's new Office of Innovation and Entrepreneurship. The newly-
created Office, given the appropriate resources, presents an ideal 
opportunity for implementing new policies. We applaud its mission to 
``. . . unleash and maximize the economic potential of new ideas by 
removing barriers to entrepreneurship and the development of high-
growth and innovation-based businesses.''
    The CEOs of the Ben Franklin Technology Partners had an opportunity 
to meet with Esther C. Lee, Senior Policy Advisor to the Office of the 
Secretary, and members of her team, shortly after the announcement was 
made. Since then, we have, exchanged ideas around this Office's 
emerging priorities, which are fundamental in their support of high 
growth, innovative enterprises. We are encouraged that the Office will 
bring together representatives from the multiple agencies whose 
programs impact this important, national objective. We are also pleased 
to understand that the work of this Office will be informed by a 
national Advisory Council on Innovation and Entrepreneurship that will 
bring to the table the experience, insight and ideas of individuals 
representing national ``Laboratories of Democracy'' as David Osborne 
described such efforts, including ours, back in 1988.
    Mr. Chairman, my partners and I applaud the Committee's leadership 
for holding this hearing and hope that the message you and your 
colleagues take away from today is that we, in the non-profit world, at 
the state and local levels, have been commercializing technology for 
many years, very effectively. We can offer concrete, practical, 
suggestions for redirecting existing federal dollars to update programs 
to maximize federal investment and generate increased job creation.
    The Ben Franklin Technology Partners operate as private, 
independent, non-profit organizations, strategically located in four 
regions of our state. We represent a diversity of cultures, span 
geographies from urban to rural, and are in close proximity to 
Pennsylvania's respected research universities.
    For over 25 years, the Ben Franklin Technology Partners, working 
both in our regions and as a statewide network, have assembled public/
private partnerships and developed models that have supported the 
formation and growth of technology enterprises--from their earliest, 
idea stage, through proof of concept, growth, maturity and reinvention. 
Our model has helped Pennsylvania enterprises create over 25,000 \1\ 
high wage jobs in the years 1989 through 2008 . . . over 2,100 of those 
in 2008; and we have worked to retain tens of thousands more. But, 
beyond the number, our model has helped to create and strengthen the 
culture for innovation and entrepreneurship in Pennsylvania.
---------------------------------------------------------------------------
    \1\ 25,371 jobs created (1989-2008)

---------------------------------------------------------------------------
      24,736 jobs retained (1994-2008)

       2,113 jobs created (2008)

       1,221 jobs retained (2008)
    The Pennsylvania Economy League, a nonpartisan research 
organization, conducted an independent, objective evaluation of the 
economic impact of Pennsylvania's Ben Franklin Technology Partners from 
2002 through 2006. It found that the Network boosted Pennsylvania's 
economy by more than $17 billion. Its report documented that:



    Over its history, Ben Franklin has been widely praised and modeled 
by other states and countries. The network was acknowledged by the U.S. 
Department of Commerce in 2008, our 25th Anniversary, with the 
Technology-Led Economic Development Award. In 2009, the International 
Economic Development Council named the statewide Ben Franklin program 
as the winner of its Excellence in Technology-Based Economic 
Development award.
    Important to Ben Franklin's ability to effectively serve our 
constituents has been the flexibility of our enabling legislation that 
allows us to anticipate and respond to market changes and to evolve as 
the needs of our communities change. Often, government-funded programs 
are overly prescriptive, with multiple, conflicting goals that confuse 
their purpose and cloud implementation. The Ben Franklin model charges 
each region to develop comprehensive strategies for the implementation 
of state resources based on the needs and opportunities of our region. 
We develop approaches that attract other investment to match the state 
funding, and then we assume responsibility for results, under the 
direction of our private boards of directors.
    Today, Ben Franklin pursues its mission of growth through 
technology-based entrepreneurship and innovation by:

          Seeding emerging technology enterprises that have 
        gone on to become leading technology employers and partnering 
        to create private investment pools for seed and early-stage 
        investment;

          Providing the facilities, business and technical 
        advice, mentoring, coaching and the networks that help emerging 
        and growing enterprises thrive;

          Developing new pathways to accelerate intellectual 
        property discovered in universities and federal laboratories to 
        the marketplace;

          Helping existing manufacturers and research 
        development companies to source and fund the specific technical 
        and business assistance they need to move a concept to the 
        marketplace quickly, leveraging their existing capacity to 
        generate new revenues;

          Working with leading technology corporations to 
        identify open innovation partners and approaches that can help 
        fill their new product pipeline; and,

          Collaborating with institutions and diverse 
        constituencies in our areas to develop regional core 
        competencies into robust economic development strategies that 
        leverage our strengths to address regional challenges to future 
        growth and prosperity.

    The three part philosophy that drives our actions in Southeastern 
Pennsylvania is one that starts, first, with a focus on the 
entrepreneur as the agent of change and economic growth. Everything 
that we do is structured to assist the formation and growth of 
technology entrepreneurs across all sectors. Our strategy links 
Capital, Knowledge and Networks into a comprehensive framework for 
regional growth.
    Second, we work at the margins. With limited resources, we seek to 
deploy just enough capital and support to stimulate the flow of other 
public and private investment to help insure sustainability; then we 
exit.
    And, third, we operate through partnerships as a way to engage the 
community in the business of innovation, thereby strengthening the 
regional infrastructure for innovation.
    The observations I share, today, are those of an economic 
development practitioner who has worked for just over 40 years to 
leverage and integrate public and private resources into coherent, 
effective, regional growth strategies, and who is gratified to see 
attention to science, technology development and innovative, growth 
enterprises move closer into the mainstream of policy and economic 
development agendas.
    There are many federal economic development programs, tools, and 
structures that seek to spur growth. However, some, designed to address 
needs identified 40, 50, or more, years ago, warrant a fresh look and 
some retooling to accommodate the challenges we face, today, in 
assembling the assets required for sustained innovation.
    The formation and growth of technology enterprises requires access 
to patient capital at the very earliest stages . . . for translational 
research, for pre-seed and seed capital for enterprises, for the 
business and technical assistance needed by both emerging and 
reemerging companies, and for the work of planning and network building 
that is critical to insure returns on the public's investment. Yet, 
that capital is in short supply . . . or in forms that do not quite fit 
the bill.
    Federally-funded research at universities is vital to technology 
breakthroughs and advancement. The goal of this work, however, is not 
the development or commercialization of a new product . . . or the 
establishment of a new enterprise. The ``product'' of that work is the 
knowledge generated. The process of transforming new discoveries into 
technology that has commercial application . . . the translational 
process . . . is not adequately encouraged or supported through federal 
funding, nor does federal research funding support partnerships with 
economic development organizations or private entities able to advance 
this work. The result is that many discoveries remain undeveloped . . . 
and economic opportunities are lost. With the right level and form of 
federal support, organizations like ours could bridge the gap between 
federally-funded university research and high-tech job creation in 
order to generate a greater return on the federal investment.
    The work of identifying technologies worthy of further development, 
exploring the best application of any technology, and mitigating some 
of the early risks in order to attract private technology developers, 
are pre-competitive, technology development activities that could be 
accelerated through support of public/private partnerships 
incorporating market input at appropriate stages of development and 
enabling organizations such as ours, and others, to partner with large 
with small institutions in support of commercialization objectives.
    The Nanotechnology Institute (NTI) is one such partnership. The NTI 
is a joint effort of Drexel University, the University of Pennsylvania 
and the Ben Franklin Technology Partners of Southeastern Pennsylvania, 
funded by the Commonwealth of Pennsylvania, with the participation of 
ten additional universities and research institutions. It has put in 
place systems to accelerate the evaluation and further development of 
federally-funded research by reducing barriers to collaboration and 
partnering with private enterprises, both large and small.
    A key accomplishment of the NTI is the establishment of its 
innovative legal and programmatic structure within which regional 
universities collaborate at all levels to promote nanotechnology 
research with potential payoff in economic development. The NTI model 
incorporates commercialization objectives through the expertise of 
BFTP/SEP. By breaking down barriers between institutions and 
disciplines, and focusing on technology transfer and commercial 
outcomes, the NTI brings the best talent to bear on specific technology 
areas, yielding a tangible increase in IP creation and commercial 
development. The NTT's efforts in increasing the research enterprise, 
linking research institutions, creating new intellectual property, 
fostering a vibrant environment for new ventures, and marketing the 
region nationally and internationally have been highly successful. 
These activities are generating steadily, accelerating, outcomes as 
measured by their ability to leverage federal research and development 
funding to generate new intellectual property, technology licenses, and 
new company spinoffs.\2\ The accomplishments of the NTI became the 
impetus for the Commonwealth of Pennsylvania to support the creation of 
the Energy Commercialization Institute (ECI), managed by our 
organization, and based upon similar principles and practices.
---------------------------------------------------------------------------
    \2\ NTI: 18 months 2008-2009: IP assets: 380; Licenses: 23; Spin-
off companies: 11; federal leverage: $25M.
---------------------------------------------------------------------------
    The NTI and ECI operate at the earliest phase of the pre-enterprise 
formation capital gap. That gap extends as new companies are formed and 
seek investment capital to launch their enterprises . . . the oft-
described ``Valley of Death.''
    Capital for these emerging technology innovators has come primarily 
from the individual entrepreneurs themselves, often in the form of 
sweat equity, and from private investors. However, particularly over 
the past year to 18 months, we have seen angel investments decline as 
individual investors adjust to losses in their own financial 
portfolios. Several states have instituted favorable tax treatment 
designed to encourage the flow of such capital into emerging, growth 
enterprises. Consideration of such incentives at a national level could 
stimulate the flow of private, risk capital.
    Venture capital is vital to many high-growth technology 
enterprises. However, the pace of investment from venture funds has 
also slowed and the number of venture funds making seed and early-stage 
investments has decreased. These funds are critical sources of follow-
on capital . . . but, today, there are fewer of them. In recent years, 
successful repeat funds grew in size and moved further downstream, 
needing to deploy larger sums of capital into later-stage 
opportunities. Smaller, and first-time, early-stage funds find it 
difficult to attract private capital in today's market. Even when 
institutional investors were very active, they sought opportunities to 
place larger sums than could be effectively invested by small, early-
stage funds. And, the funds that do exist are reserving more of their 
committed capital for follow-on investments in their current portfolio 
companies, understandably, and undertaking new investments selectively.
    So, while venture funds remain an important source of follow-on 
investment once companies reach a certain scale and achieve critical 
milestones, by and large, they are not a source of investment capital 
at the earliest stages of company formation and development that are 
characterized by the triple threats of technology, market and 
management risk.
    In some states, like Pennsylvania, pre-seed and seed capital has 
come from state-supported technology development programs. Over our 25+ 
years, the four Ben Franklin Technology Partners have seeded and 
invested in more start up and early stage technology ventures than any 
other similar organization in the nation . . . with investments in over 
3,000 companies and technical support and service to thousands more. 
The Ben Franklin Technology Partners co-invests with individual 
investors and, as our companies mature, with private venture funds. In 
2008, companies funded by Ben Franklin attracted $872 million of 
follow-on investment.
    However, with state revenues severely constrained, support for 
state technology-based economic development nationwide has suffered 
cuts, further depleting the capital available for innovative 
enterprises and initiatives, and straining infrastructures for 
innovation created over recent years. Combined with the decrease in 
angel investing and the reduction in venture activity . . . companies 
we seed have no where to grow.
    This Valley of Death, a gap that stretches from the need to 
demonstrate proof of concept through to early revenue generation or 
sales, invites creative new approaches and a retooling of some existing 
federal programs. I recommend the following elements as part of a 
framework for retooling:

         1) Goals that are few, clear and non-conflicting and that keep 
        the ultimate objective . . . economic growth through 
        entrepreneurial innovation . . . at the forefront;

         2) An approach that is less prescriptive and more receptive to 
        new models, and allows program design to be driven by the 
        specific challenges and opportunities at regional, state and 
        local levels;

         3) Flexibility in implementation, enabling timely response as 
        conditions change;

         4) Programs that focus on reducing the barriers to 
        collaboration and innovation; and,

         5) Designs that catalyze institutional and private involvement 
        and investment over time.

    The core areas: 1) Access to capital and 2) Creating effective 
pathways to commercialization.

    Some examples:
    1) The Department of Commerce Economic Development Administration 
(EDA) has revamped many of its programs over the years to support 
innovation . . . funding incubators and technology partnerships. 
However, the resources available to it for regional strategic planning 
and high-growth innovation are insufficient, may not be available on a 
consistent basis, and are encumbered by regulations that limit local 
creativity and ultimate effectiveness. I encourage EDA to reach out to 
regional and local organizations as part of its process of continuous 
reinvention.
    EDA's University Center Economic Development Program could be 
modified and boosted to enable the formation of ``Commercialization 
Partnership Centers.'' These partnerships could bring together multiple 
universities and research institutions, with regional technology 
development organizations and/or private commercialization entities to 
drive technology to commercialization. Unlike traditional university 
centers of excellence, the Commercialization Partnership Centers would 
not require up front research funding, but be structured to leverage 
university expertise and resources by funding, on a cost-share basis, 
commercialization engagements that produce defined outcomes. Federal 
support could co-fund the engagement activity and the related technical 
and business assistance.
    We have found that this form of direct, targeted, assistance is as 
beneficial to mature, established enterprises, who may not be 
comfortable or have a history of working with universities, as it is of 
benefit to emerging firms. In addition, it offers ways to extract the 
often, specialized, core competencies of small educational and research 
universities and partner them with other institutions to form larger, 
more robust commercialization centers.
    EDA has capitalized Revolving Loan Funds for over 30 years. While 
they were innovative and effective tools designed back then, to provide 
debt financing to existing businesses in distressed areas, they are not 
a fit for today's equity-based investments in pre-revenue, technology 
enterprises, that have no hard assets, and whose choice of location is 
often determined by cost and access to needed technical resources. I 
recommend consideration of a pilot version that updates and retools 
this program as a viable source of co-investment capital, managed by 
qualified, experienced, technology organizations.
    2) The SBIR and STTR research-support programs are useful to 
advance technology development; however, they have a limited focus on 
commercialization. Many recommendations have been offered regarding 
these programs. I would urge action on measures that: a) increase 
funding, particularly for later, commercialization phases; b) enable 
companies to enter the process at any phase; c) recognize the role of 
private capital to the growth of enterprises that require significant 
capital, such as in the life sciences and energy sectors; and d) insure 
consistency of administration to address non-significant, yet real 
barriers such as the form and source of other capital investment in 
enterprises.
    3) The Small Business Administration's New Markets Fund offers a 
template for the creation of a New Markets Innovation Fund. Investments 
in innovative, growth opportunities could be its driving principal, and 
it could offer organizers the operational assistance funds needed to 
support the outreach, coaching and portfolio management functions that 
are time and cost intensive at the seed stage.
    4) The National Science Foundation's Partnership for Innovation 
Program is a creative, yet sorely underfunded and lately, dormant, tool 
that provides incentives for innovative, effective public/private 
partnerships. It should be brought back and updated to enable. 
technology-based organizations to lead collaborative, multi-
institutional, commercialization focused efforts.
    5) NIST's Technology Innovation Program that funds ``high risk'' 
research and solutions that address areas of critical national need and 
societal challenges and that encourages collaborative industry/
university approaches is an example of a successful program reinvention 
. . . but it is sorely underfunded. It could implement measures to 
encourage partnerships with state technology development organizations 
who can aid the partnering between large and emerging enterprises.
    6) Our nation's federal laboratories have a wealth of discoveries 
that can be the basis for commercial growth; however, there is no 
mechanism to help absorb the local cost of transforming those 
possibilities into economic opportunities.
    7) And, finally, the new Department of Commerce Office of 
Innovation and Entrepreneurship. It could be funded to launch even 
broader, comprehensive, regional models, in partnership with states. It 
could be the impetus for a National Innovation Network, with funded 
public/private partnerships able to develop the integrated strategies 
and programs necessary to drive innovation through growth companies 
that create high-wage jobs. Special incentives could be provided to 
encourage multi-state partnerships that can stimulate the growth of 
natural clusters. In our region, the EDA funded the planning effort for 
the Mid Atlantic Nanotechnology Alliance, one such multi-state 
partnership, and efforts are underway to create Power Valley, bringing 
together the region's substantial energy assets.
    The Ben Franklin Technology Partnership was launched in similar 
fashion . . . with a state Challenge Grant to the regions across 
Pennsylvania, to organize and compete for the Ben Franklin designation 
and to match the Commonwealth's investment.
    Thank you, again, Mr. Chairman, for holding this important hearing 
and for the opportunity to share Ben Franklin Technology Partners' 
experience in stimulating innovation, enterprise formation and job 
creation. My colleagues and I stand ready to assist the Committee and 
the Administration in every way possible to advance these important 
goals.

                   Biography for RoseAnn B. Rosenthal
    RoseAnn B. Rosenthal, President, CEO and member of the Board of 
Directors of Ben Franklin Technology Partners of Southeastern 
Pennsylvania (BFTP) since 1996, has forty years of experience in 
business investment, regional planning, and economic development. 
Praised by regional leaders as an invaluable resource for the tri-state 
area, she has earned a strong international reputation with her 
development of innovative partnerships and extraordinary initiatives.
    Since assuming her CEO position, Rosenthal has significantly 
enhanced Ben Franklin's investment, technology commercialization, and 
business service initiatives, creating initiatives that have brought 
the organization national and international recognition. With a current 
portfolio of over 120 technology companies, BFTP continues to build 
upon its proven track record of seeding hundreds of southeastern 
Pennsylvania's technology leaders in biotechnology, information 
technologies, communications, advanced materials, nanotechnology and 
now, energy.
    Rosenthal's leadership and alliance-building attributes proved 
invaluable in 2000 as BFTP/SEP partnered successfully with two of this 
region's major universities--the University of Pennsylvania and Drexel 
University--to create the Nanotechnology InstituteTM. Funded 
with $17.8 million from the Commonwealth of Pennsylvania, the NTI has 
attracted funding and support from the National Science Foundation 
(NSF), the U.S. Department of Education and has leveraged more than 
$110 million in federal research grants and corporate support. 
Moreover, the NTI has attracted national recognition for its multi-
disciplinary, multi-institutional, research to commercialization model.
    Rosenthal serves on the NTI's three-person Oversight Committee and 
co-chairs a regional team that developed the Mid-Atlantic 
Nanotechnology Alliance (MANA that encompasses eastern Pennsylvania, 
Delaware and New Jersey to strengthen and promote the region's 
competitive position in nanotechnology. Founded in 2004, MANA is the 
nation's first tri-state nano collaboration. She also serves on the 
External Advisory Board for the Nano-Bio Interface Center (a National 
Science Foundation-funded Nanoscale Science and Engineering Center) at 
the University of Pennsylvania.
    BFTPs efforts in nanotechnology have become a model for similar 
approaches in energy, and Rosenthal is leading her staff in the 
creation of new technology commercialization models and programs in 
conjunction with the state's $40 million Alternative Energy Development 
Program. BFTP/SEP is a founding partner of the Energy Commercialization 
Institute where Ms. Rosenthal serves as a member of its three-member 
Oversight Committee.
    Rosenthal has led and supported initiatives to stimulate angel 
investments in early stage technology companies, including efforts 
focused on women- and minority-owned technology enterprises. Most 
recently, she led efforts to create the Emerald Stage2 Venture Fund, a 
private fund focused on investments in early stage IT companies across 
the Greater Philadelphia tri-state region. In 2007, she partnered BFTP 
to develop the Building 100 Innovation Center at the Philadelphia Navy 
Yard, a catalyst for the formation of new enterprises and 
commercialization partnerships, particularly in the energy sector.
    Rosenthal garnered 18 years of her economic development experience 
at the Philadelphia Industrial Development Corporation (PIDC). As 
Senior Vice President for Strategic Development at PIDC, she launched 
and implemented several regional initiatives, including the Southeast 
Pennsylvania Export Consortium, now the World Trade Center of Greater 
Philadelphia. As a key member of the City of Philadelphia's Defense 
Adjustment Team, she authored the City's $50-million Defense Conversion 
Fund. She was responsible for shaping, growing and managing PIDC's 
direct-lending capability from an initial resource of $3 million, to 
over $200 million of direct loans to commercial and industrial clients, 
leveraging federal and foundation funds for industrial and community 
development. While at PIDC, Rosenthal served as Acting Executive 
Director of the Delaware Valley Industrial Resource Center, the 
region's NIST Manufacturing Extension Partnership center. Earlier in 
her career, Mrs. Rosenthal staffed efforts in support of manufacturing 
competitiveness, waterfront development and historic district renewal.
    Rosenthal serves on several public and private boards and 
committees. She has been active as an advisor on state and regional 
nanotechnology initiatives through the National Nanotechnology 
Initiative and the National Science Foundation for Small Business 
Innovation Research (SBIR) and Partnership for Innovation programs. She 
has served on several national task forces including the U.S. 
Department of Housing and Urban Development, and the U.S. Economic 
Development Administration.
    Rosenthal is on the Boards of the Fox Chase Bank, the World Trade 
Center of Greater Philadelphia, the America Israel Chamber of Commerce, 
the Mayor's Sustainability Advisory Board in Philadelphia, and the 
Greater Philadelphia Life Sciences Congress. She is on the Advisory 
Committee of Emerald Stage2 Venture Fund, and numerous, regional 
committees focused on technology-based economic growth and 
entrepreneurship, including the Philadelphia Chapter of the national 
Network for Teaching Entrepreneurship. She is active at the national 
level with the National Association of Seed Venture Funds was a Board 
member of the National Council for Urban Economic Development, now the 
International Economic Development Council, where she helped to develop 
the curriculum for its Technology-led Economic Development Course
    Rosenthal has presented and consulted on various economic 
development initiatives around the country and has served on mayoral 
and gubernatorial transition teams through the years. Most recently, 
she was a delegate to the November 2008 Small Business Financing Forum.
    She has a B.A. From Temple University and in 2007 was awarded an 
Honorary Ph.D. in Humane Letters from Philadelphia University. She was 
presented the Early Stage East Founders Award in 2008 and the Blair 
Thompson Lifetime Venture Award from the MAC Alliance in 2009. She was 
awarded 2009 Champion of Small Business Award by the National Capital 
Coalition in July, 2009 and will be honored with Philadelphia 
University's Lifetime Innovation Award in May, 2010.

    Chairman Wu. Thank you, Ms. Rosenthal. We look forward to 
asking you further about your suggestions.
    Mr. Coast, please proceed.

      STATEMENT OF MR. MICHAEL COAST, PRESIDENT, MICHIGAN 
             MANUFACTURING TECHNOLOGY CENTER (MMTC)

    Mr. Coast. Chairman Wu, Ranking Member Smith and Members of 
the Subcommittee, thank you for this opportunity to offer brief 
testimony on the impacts of two federal programs that aim, 
among other objectives, to create and retain jobs in small to 
mid-sized manufacturers. For more than 18 years, the MMTC has 
helped Michigan manufacturers improve quality, reduce cost, 
launch new products and diversity their customer base. 
Nationally, the roughly 7,600 manufacturers served by the 59 
NIST MEP centers credited the work of those centers with more 
than $9 billion in sales, 50,000 jobs and $1.4 billion in cost 
savings. The Federal Government will spend less than $125 
million on MEP in fiscal year 2010. These numbers suggest that 
it has been a good investment and one that should be scaled up 
to have even larger impacts on the critical and struggling U.S. 
manufacturer sector. In that regard, I appreciate the long-time 
support of this Committee and most recently by Congressman 
Peters and Congressman Ehlers to reduce the matching 
requirement for MEP's federal funding at a time when many cash-
strapped states have been forced to reduce their investments in 
their states' MEP centers.
    MEP is the only program specifically designed to assist 
small to mid-sized manufacturers and we look forward to working 
with Congress and the Administration to implement the 
President's campaign promise to double funding for the program 
by 2015.
    Last year, in response to the crisis facing two of the 
three U.S.-based auto makers, Commerce Secretary Locke paid 
multiple visits to Michigan, meeting with dozens of our 
manufacturers, seeing how difficult they found it to access 
help from federal programs even within Commerce. The Secretary 
proposed piloting an effort to make those programs more 
accessible and more responsive to businesses starting with the 
manufacturers. We began by identifying 61 programs within 
Commerce and services related to manufacturers. Next we 
convened a dozen Michigan manufacturers and representatives of 
a dozen federal and state program offices within the state. At 
that meeting we conducted two exercises. In the first we had 
the manufacturers develop a list of and then rank their most 
critical needs. In the second, we had the federal program 
representatives rate how well each of those needs was being 
addressed by their program services.
    The results made clear the manufacturers' lack of knowledge 
of many of the programs and that they do not know how to access 
their services, that programs are not focused on the priority 
concerns of manufacturers and that the programs are often not 
aware of each others' services.
    Based on those findings, a pilot came to be called 
CommerceConnect was established. So far, CommerceConnect has 
worked with 25 companies. It has been fewer than four months 
since the pilot was launched, so my remarks today certainly do 
not represent a full evaluation based on hard data. However, I 
believe that we can begin to draw at least four lessons that 
should inform decisions about whether to launch CommerceConnect 
programs in other states, and just as important, how to design 
the post-pilot phase in a way that delivers the most impact at 
the least cost.
    First, we have learned that navigating the federal program 
requires a good deal to know about what the programs actually 
do. CommerceConnect needs to have permanent staff that can 
invest in learning the programs.
    Second, we have learned that doing case management well 
requires more than just making referrals. There is a great deal 
of follow-up that is needed. CommerceConnect case managers 
sometimes share the frustrations of the manufacturers they 
serve not being able to find personnel able to deal with the 
client's request. This too has a clear implication. Each 
program needs to have a designated point of contact that is 
knowledgeable about its services and explicitly tasked with 
addressing CommerceConnect clients' requests in a timely 
manner.
    Third, we have learned that the manufacturers do not 
respect agency or program boundaries. A given company may need 
loan support from an SBA (Small Business Administration) 
program, IP protection and legal aid from an ITA (International 
Trade Administration) program, and help with lean manufacturing 
methods from NIST MEP program. The clear implication: staff 
need to understand the full range of business assistance 
programs.
    Fourth, we have confirmed that there is a vital role for a 
hands-on navigation function like CommerceConnect. Thus, I 
would recommend that the effort continue in Michigan at 
approximately its current scale. It probably makes good sense 
to charter at least a few more pilots in other parts of the 
country that are less automotive, less manufacturing intensive 
than Michigan to get a sense of how to make federal agencies 
responsive to distribution in service businesses as well as to 
manufacturers. It would, though, be premature to move from a 
pilot to a full-scale program. Much work remains to be done to 
arrive at a design that is both effective and efficient.
    Thank you for the opportunity to speak today.
    [The prepared statement of Mr. Coast follows:]
                  Prepared Statement of Michael Coast
    Chairman Wu, Members of the Subcommittee--Thank you for this 
opportunity to offer brief testimony on the impacts of two federal 
programs that aim, among their other objectives, to create and retain 
jobs in small- and medium-sized manufacturers.
    I am Mike Coast, president of the Michigan Manufacturing Technology 
Center (or ``MMTC''), my state's affiliate of the NIST Manufacturing 
Extension Partnership (or ``MEP''). For more than 18 years, the MMTC 
has helped Michigan manufacturers improve quality, reduce costs, launch 
new products, and diversify their customer base. In the past year, our 
Michigan manufacturer-clients credit us with $430 million in new or 
retained sales and more than 2,000 jobs created or retained, plus 
nearly $50 million in cost savings. Nationally, the roughly 7,600 
manufacturers served by the 59 NIST MEP centers credited the work of 
those centers with more than $9 billion in sales, 50,000 jobs, and $1.4 
billion in cost savings. The federal government will spend less than 
$125 million on MEP in FY10; these numbers suggest that it has been a 
good investment and one that should be scaled up to have even larger 
impacts on the critical and struggling US manufacturing sector. In that 
regard, I appreciate the long-time support of MEP by this Committee, 
most recently Congressman Peters' efforts, along with Congressman 
Ehlers, to reduce the matching requirement for MEP's federal funding at 
a time when many cash-strapped states have been forced to reduce their 
investment in their states' MEP centers.
    MEP is the only program specifically designated to assist small- 
and medium manufacturers, and we look forward to working with Congress 
and the Administration to implement the President's campaign promise to 
double funding for the program, by 2015. As much as I enjoy bringing 
the news of MEP's good works to the Congress, my remarks today focus 
instead on a new initiative, one that holds potential to make the 
federal government's investment go further in helping American 
businesses.
    Last year, in response to the crisis facing two of the three US-
based automakers, Commerce Secretary Locke paid multiple visits to 
Michigan, meeting with dozens of our manufacturers. Seeing how 
difficult they found it to access help from federal programs, even 
within Commerce, the Secretary proposed piloting an effort to make 
those programs more accessible and more responsive to business, 
starting with manufacturers. Secretary Locke asked NIST MEP's director, 
Roger Kilmer, to oversee the pilot, and Mr. Kilmer turned to us at the 
MMTC to help. He also detailed one of his senior program managers to 
oversee the Michigan pilot on a day-today basis. The Commerce 
Department gave MMTC $185,000 of unobligated funds to execute the pilot 
program, so we did not have to pull funding away from our ongoing, 
effective programs. Further funding for CommerceConnect should be 
separate from and in addition to future increases in MEP funding.
    Working with Mr. Kilmer, we began by identifying the 61 programs 
within Commerce with services related to manufacturers. Next, we 
convened a dozen Michigan manufacturers and representatives of a dozen 
federal and state programs with offices in the state. (We included the 
Small Business Development Center, for example, because it is the 
Michigan window for SBA's loan funds, as well as offering other 
services for manufacturers.) At that meeting, we conducted two 
exercises. In the first, we had the manufacturers develop a list of, 
and then rank, their most critical needs. In the second, we had the 
federal programs' representatives rate how well each of those needs was 
being addressed by their programs' services. I attach the prioritized 
list of needs as voted on by the manufacturers. (We convened a second 
group of manufacturers in November during a session with Commerce 
Assistant Secretary Hightower, and the list and the rankings remained 
essentially the same.)
    The results made clear that manufacturers lack knowledge of many 
programs and do not know how to access their services; that many 
programs are not focused on the priority concerns of manufacturers; and 
that the programs are often not aware of each other's services.
    Based on those findings, a pilot that came to be called 
``CommerceConnect'' was established. I stress that this pilot, while 
housed at the MMTC; is not (and logically cannot be) an MMTC program. 
It is an independent effort to help Michigan manufacturers navigate 
among the many relevant programs in Commerce and beyond. So far, 
CommerceConnect has worked with 25 companies. I understand that Deputy 
Secretary Hightower's testimony describes the experiences of some of 
those 25 companies.
    Again, it has been fewer than four months since the pilot was 
launched, so my remarks today certainly do not represent a full 
evaluation based on hard data. However, I believe that we can begin to 
draw at least four lessons that should inform decisions about whether 
to launch CommerceConnect programs in other states and, just as 
important, how to design the post-pilot phase in a way that delivers 
the most impact at the least cost.
    First, we have learned that navigating federal programs requires 
knowing a good deal about what those programs actually do. Their 
websites help, but are not enough. Only now, after nearly four months, 
is the current six-person CommerceConnect staff beginning to understand 
the services of just the dozen or so programs with the most 
manufacturer-relevant services. This has a clear implication: 
CommerceConnect needs to have permanent staff that can invest in 
learning the programs. That staff will be even more effective if it has 
good general business knowledge. Our pilot benefited greatly by having 
three individuals; including NIST MEP's Phillip Wadsworth, with 
substantial manufacturing and business backgrounds.
    Second, after servicing the initial 25 clients, we have learned 
that doing ``case management'' well requires more than just making 
referrals. A great deal of follow-up has been needed to make sure that 
clients actually got relevant assistance from the programs to which 
they were referred. CommerceConnect case managers have sometimes shared 
the frustrations of the manufacturers they serve, not being able to 
find personnel able to deal with the client's request. This too has a 
clear implication: each program needs to have a designated point-of-
contact that is knowledgeable about its services and explicitly tasked 
with addressing CommerceConnect clients' requests in a timely manner.
    Third, we have learned that manufacturers' needs do not respect 
agency or program boundaries. A given company may need loan support 
from an SBA program, IP protection advice and legal aid from an ITA 
program, and help with lean manufacturing methods from NIST's MEP 
program. The clear implication: staff need to understand the full range 
of business assistance programs, though over time they may reach the 
useful conclusion that a subset of the programs are more effective and 
responsive than the others.
    Fourth, we have confirmed that there is indeed a vital role for a 
hands-on navigation function like CommerceConnect. Thus I would 
recommend that the effort continue in Michigan at approximately its 
current scale. It probably makes good sense to charter at least a few 
more pilots in other parts of the country that are less automotive- and 
less manufacturing-intensive than Michigan to get a sense of how to 
make federal agencies responsive to distribution and service businesses 
as well as to manufacturers. It would, though, be premature to move 
from a pilot to a full-scale program. Much work remains to be done to 
arrive at a design that is both effective and efficient.
    Thank you for the opportunity to testify. I stand ready to answer 
your questions.





























                                           Needs and Services Overview
----------------------------------------------------------------------------------------------------------------
                                                                                           Total        Total
                                         Need                                             company      provider
                                                                                           rating       rating
----------------------------------------------------------------------------------------------------------------
Increasing productivity                                                                          88           50
----------------------------------------------------------------------------------------------------------------
Acquiring reduced-cost financing                                                                 81           36
----------------------------------------------------------------------------------------------------------------
Reducing state and/or local tax burden                                                           76           14
----------------------------------------------------------------------------------------------------------------
Training/coaching company leaders and managers                                                   73           49
----------------------------------------------------------------------------------------------------------------
Winning government contracts                                                                     70           39
----------------------------------------------------------------------------------------------------------------
Training the hourly workforce                                                                    70           33
----------------------------------------------------------------------------------------------------------------
Reining in healthcare costs                                                                      70           14
----------------------------------------------------------------------------------------------------------------
Developing business and/or strategic plans                                                       65           52
----------------------------------------------------------------------------------------------------------------
Streamlining process of bidding on government contracts                                          65           30
----------------------------------------------------------------------------------------------------------------
Improving skilled worker pipeline                                                                65           27
----------------------------------------------------------------------------------------------------------------
Acquiring new technologies and/or intellectual property                                          63           30
----------------------------------------------------------------------------------------------------------------
Winning defense contracts (as prime or sub-prime)                                                62           33
----------------------------------------------------------------------------------------------------------------
Addressing unfair trade policies                                                                 62           17
----------------------------------------------------------------------------------------------------------------
Identifying prospective non-automotive customers                                                 57           52
----------------------------------------------------------------------------------------------------------------
Improving quality: reducing scrap, rework, and rejects                                           54           27
----------------------------------------------------------------------------------------------------------------
Translating R and D into volume production                                                       52           33
----------------------------------------------------------------------------------------------------------------
Protecting intellectual property                                                                 52           17
----------------------------------------------------------------------------------------------------------------
Determining the causes of defective products                                                     52           14
----------------------------------------------------------------------------------------------------------------
Increasing exports                                                                               47           26
----------------------------------------------------------------------------------------------------------------
Launching new enterprises                                                                        45           44
----------------------------------------------------------------------------------------------------------------
Improving health and/or safety                                                                   45            9
----------------------------------------------------------------------------------------------------------------
Diversifying into alternative energy                                                             39           39
----------------------------------------------------------------------------------------------------------------
Reducing energy usage                                                                            38           25
----------------------------------------------------------------------------------------------------------------
Finding people with strong electronics skills                                                    36           25
----------------------------------------------------------------------------------------------------------------
Instituting emergency preparedness plans                                                         36           17
----------------------------------------------------------------------------------------------------------------
Retraining displaced employees                                                                   31           27
----------------------------------------------------------------------------------------------------------------
Certifying compliance to quality system standards                                               31,           25
----------------------------------------------------------------------------------------------------------------
Responding to trade-related dislocation                                                          28           20
----------------------------------------------------------------------------------------------------------------
Imposing Buy American requirements                                                               27           14
----------------------------------------------------------------------------------------------------------------
Modifying codes and standards to permit and reward innovation                                    25            9
----------------------------------------------------------------------------------------------------------------
Achieving LEED (green) certification                                                             19           15
----------------------------------------------------------------------------------------------------------------
Reducing company's carbon footprint                                                              14           20
----------------------------------------------------------------------------------------------------------------
Winning more orders for minority businesses                                                      11           26
----------------------------------------------------------------------------------------------------------------
Selecting, assembling, and/or remediating industrial sites                                        3           20
----------------------------------------------------------------------------------------------------------------


                                                                                                     
                                                                                                     
                                                                                                     
                                                                                                     
                                                                                                     
                                                                                                     
                                                                                                     
                                                                                                     
                                                                                                     
                                                                                                     
                                                                                                     
                                                                                                     
                                                                                                     
                                                                                                     
                                                                                                     
                                                                                                     
                                                                                                     
                                                                                                     
                                                                                                     
                                                                                                     
                                                                                                     
                                                                                                     
                                                                                                     
                                                                                                     
                                                                                                     
                                                                                                     
                                                                                                     
                                                                                                     
                                                                                                     
                                                                                                     
                                                                                                     
                                                                                                     
                                                                                                     
                                                                                                     
                                                                                                     
                                                                                                     

                      Biography for Michael Coast



    Chairman Wu. Thank you very much.
    At this point it is in order to open our first round of 
questions, and the Chair recognizes himself for five minutes.
    I would like to ask each member of our witness panel about 
your knowledge of, impressions of how well MEP programs work 
with community colleges in general and how well MEP works with 
especially with community colleges in helping community 
colleges train for locally available jobs. My understanding is 
that there was a MEP study in 2005 which found that roughly 55 
percent of community colleges actually have data on what the 
real training or job needs are of the local economy and adjust 
their programs accordingly. Whoever wants to go first to 
address that set of questions? Mr. Hightower.
    Mr. Hightower. Let me start off by, one, prior to assuming 
my role last August, I had run businesses for the last 35 
years, mostly outside of the United States, manufacturing 
operations, service operations and the like across a broad 
spectrum of industries including being a management consultant 
at McKenzie and Company for a number of years as well. I have 
lived in Asia twice, Latin America twice, Europe twice, and I 
have visited probably 90 countries over that period of time, so 
I am bringing the perspective of actually having worked on the 
ground. I have created companies. I have run--I have been in 
the valley of death twice myself, have been on the boards of 
startup companies that have gone through and made that entry 
and exit from the valley including one as we talked about this 
morning right in the state of Oregon called Light Fleet.
    And when I think about the linkage, and I talked with Mike 
a lot about this as I made a number of trips out to Detroit to 
begin evaluating CommerceConnect is that there are a couple of 
models that I think are instructive. One I was aware of a 
number of years ago and it is very close to us here in the 
greater Washington area. It is right at the University of 
Maryland, Baltimore campus, Freeman Rabowski, who is the 
president of that institution, was I think one of the 
forefront--at the forefront and very much a pioneer in 
incubator companies, how he used the research capacity and 
capability at the University of Maryland to invite some 30 or 
40 entrepreneurs, startup companies where they are currently on 
campus. They are moving from basic research to applied research 
to a level of commercialization where many of the students 
involved in that research, many of the professors involved in 
that research have actually been part of the startup of these 
companies and have subsequently in many cases joined these 
companies through their commercialization and their market 
access. Right in Detroit as we were working with Mike in the 
early startup phases last summer and last fall had the pleasure 
of visiting Tech Town, another institution where you look at 
Wayne State University, the fact that they actually have 
physically moved many of their research and development and 
business capability into that facility to be an on-the-ground 
like so that again ideas can find their way to 
commercialization. As we are looking at the construction today, 
I mean only yesterday I was reviewing the final submissions for 
the members of this National Advisory Council on Innovation and 
Entrepreneurship and you will be interested to know, I think, 
that as that list comes to its final stage after the 
appropriate vetting, there are a number of universities that 
are steeped in research but not only just research for the sake 
of research but research with commercialization as its goal, 
which again will find its way into the MEP programs and other 
programs that will begin to help this revitalization of the 
manufacturing sector.
    And I can say one other thing, then I will turn it over to 
my panel colleagues, is that the thing that concerns me the 
most, as I said, I spend a lot of my time with technology-based 
companies, with basic manufacturing companies, and I have spent 
a lot of time in India over the last couple of years, and when 
you go to Bangalore and you go through the technology and the 
innovation centers there, and of course all the usual suspects 
there, whether it is Siemens, Phillips, Oracle, you name it, 
and they are there. What is amazing and frightening at the same 
time is that as you go through and you look at what is being 
done, you look at who is doing the work, these are mostly young 
people who are under 30 years old with Ph.D.'s in esoteric 
areas that you need a dictionary to sort of spell what it is 
they are actually doing. That is the scary part because they 
have reinvested in their technology. They are reinvesting in 
innovation at a level that outpaces what we are doing, quite 
frankly.
    I mean, with the Chinese--we talked about the STEM 
(Science, Technology, Engineering, and Math) programs. I want 
to mention STEM. You know, The Chinese produce 600,000 
engineers a year. India produces 350,000 engineers a year. We 
produce 70,000 engineers a year. That is telling in terms of 
what we say but where we put our emphasis, where we put our 
resource, so we are looking at many of the ideas that the other 
panelists have promoted already in terms of how we get a better 
linkage so that we don't have to depend on DARPA (Defense 
Advanced Research Projects Agency), you know, for, you know, 
GPS commercialization. We don't have to depend on NASA 
(National Aeronautics and Space Administration) for, you know, 
how do you determine which mattress position or what level of 
firmness you want in your mattress. But how can we do that 
amongst the resource where we have the talent, we have the 
educational capability, we have people who know how to do these 
things but need the facilitation that government and agencies 
such as those who are here on the panel can bring to fruition.
    Mr. Coast. Mr. Chairman, in Michigan we work quite well 
with community colleges, just to mention two, Macomb on the 
east side of the state and Grand Rapids Community College on 
the west. What typically happens is, those community colleges 
go out and provide services to the local communities and the 
MEP offsets another level of expertise to go work with those 
small companies. Those types of relationships are in place 
around the country. If you look at the MEP system nationally, 
there is about 301 of those relationships around the country 
right now, and 113 of those are in community colleges and there 
is 188 of them with universities and colleges. So when you look 
at Manufacturing Extension Partnership, that becomes--you know, 
partnership becomes that one word in that relationship that we 
go out and we leverage the precious dollars that we get from 
the Federal Government to go out and maintain those 
relationships so that we maximize our effectiveness.
    Ms. Rosenthal. Mr. Chairman, let me first say that the 
community college system is critically important. I would not 
be here but for my start in higher education through a 
community college, the Community College of Philadelphia. So I 
understand the importance of community college systems. In our 
area, the manufacturing extension partner and Ben Franklin and 
others have come together to form a STEM compact among the 
deans of engineering from colleges and universities across the 
tri-state area, and through that effort there are programs that 
link the community colleges into these 4-year institutions so 
that there are effective articulation agreements. At Ben 
Franklin years ago, we supported the effort of the Community 
College of Philadelphia at that time with the Wistar Institute 
to develop a model program for training biomedical technicians 
that started with training at the community college and then 
went on to practicans through the Wistar Institute and through 
the Nanotechnology Institute. Years ago we also had a program. 
I worked with Penn State and worked with others to reach into 
the community colleges again and connect them up into the 4-
year institutions as their education developed. So a lot of 
efforts across our region, both through the MEP but also 
through other economic development organizations in the region.
    Ms. Owens. Mr. Chairman, I think you are very correct that 
that connection very much needs to take place and I think Mike 
and his team have done a very great job connecting with their 
community colleges. In Michigan, where that connection has 
happened is a complementary effort where the training program 
that community college may not be the most effective in 
providing, for instance, lean manufacturing, Mike and his team 
will come in and provide that innovation.
    The challenges we have in Michigan in terms of 
opportunities or job opportunities in manufacturing is, 
currently there are not a lot of opportunities in our 
manufacturing environment, so what we are facing is kind of a 
wealth of very skilled talent that need to be retrained and 
refocused in terms of their efforts, so we have developed a 
program called Shifting Gears, which takes manufacturing 
talent, skilled talent, and connects them with our 
entrepreneurs and provides a partnership between those groups. 
So it is essentially an internship for displaced manufacturing 
talent who can try out the entrepreneurial climate and pair 
their assets together. So I think that is something that is 
very important is looking at retraining, you know, our 
displaced workers in the manufacturing environment we have and 
connecting them with the innovation that is taking place.
    Mr. Hightower. If I can make one final comment to piggyback 
Ms. Owens and also Mr. Coast's comments, particularly as it 
relates to this retraining and sort of retooling of the human 
capital that we are talking about, there is a real story in the 
State of Washington in conjunction with our own economic 
development, the people who are actually funding grants at the 
community level and working in conjunction with some of the MEP 
capability there as well. There was a company that specialized 
in making fiberglass hulls for recreational yachts. Well, in 
this environment, there aren't too many people buying 
recreational yachts. This company was teetering on the cusp of 
going out of business. In working with them through EDA 
(Economic Development Administration) in this case and MEP, we 
had them look at what were the other applications of that 
technology. They are now one of the leading providers of wind 
turbines, so they are now--they have taken that technology that 
was sort of the old application and reapplied those skills into 
a growth industry, a green industry where their current product 
has been assessed by NIST as having better capacity, stronger, 
20 percent more life to it, and instead of laying off and 
perhaps as a second- or third-generation company going out of 
business, they are stabilizing and are beginning to move in a 
different direction. So we have got to find more of those kinds 
of ways to not only retool but to reskill and apply those 
skills.
    And to Mike's earlier point about looking at areas, other 
areas of opportunity, we have one model that we are evaluating 
in Plymouth, greater Detroit area, but as we think about it and 
we are doing that analysis now of other areas that may have 
very different demographics or maybe there are regions where we 
can have a center that can be pulled together to provide the 
kind of activity that is being provided by CommerceConnect in 
Detroit. This is where I think directionally we are going to be 
heading.
    Chairman Wu. Thank you very much, Mr. Hightower, and I 
thank the entire panel for your very through answers to that 
question.
    Mr. Hightower, you point out something very, very important 
about transitioning and adaptation. One of my law-school 
professors was fond of talking about a major Wall Street bank, 
I believe it is Chase, which started out as a small water 
company 200 years ago in Manhattan, and I once heard a talk by 
a Stanford Business School professor on how few companies 
transition well. There is only one survivor from the original 
Dow Jones 12 in the current Dow Jones Index, and I suggested to 
him that he ought to study the Vatican and how it has survived 
over a significant period of time, and he may be taking that 
suggestion under advisement.
    Mr. Smith, please proceed.
    Mr. Smith. Thank you, Mr. Chairman, and again thank you to 
the panel for your time and sharing of your expertise.
    Ms. Rosenthal, thank you. I appreciate the work that you 
do. Can you tell me once the investments have been made in new 
technologies and they are ready for the marketplace and, you 
know, the ball is rolling, how do you ensure that jobs will 
stay either in Pennsylvania or the entire country?
    Ms. Rosenthal. What we do with our investments is, there is 
a provision in the agreement that requires the company to have 
a significant presence in the area or in Pennsylvania, either 
our specific region, or if not in our region, in the state for 
at least five years once the company gets rolling. Beyond that, 
we can't restrict the company. If they have to move, then we 
need to negotiate a settlement with them for a clawback of the 
investment that was made.
    Mr. Smith. And that is for Pennsylvania as a state or the 
entire country?
    Ms. Rosenthal. Pennsylvania, because our funding is from 
the Commonwealth of Pennsylvania so our goal is to keep 
companies growing in Pennsylvania.
    Mr. Smith. When you say significant presence, is there a 
pretty decisive definition of that?
    Ms. Rosenthal. It is going to depend on the company. You 
have to understand that some of our--most of our companies are 
out of the box, one person, two people, three people, so 
significant for three people means two. Significant for 100 
means something else. So we don't have numbers because we will 
take a look at what is the company doing, where are they, what 
kind of value are they creating for the state, what kind of 
downstream purchases are involved, do they have a relationship 
with a local manufacturer. So we take the whole into 
consideration when we make that decision.
    Mr. Smith. Would it be conceivable that your R&D might be 
in Pennsylvania and your manufacturing might be elsewhere?
    Ms. Rosenthal. It is conceivable. It is conceivable. That 
is right.
    Mr. Smith. Okay. Thank you.
    Mr. Secretary, thank you. I appreciate your time and 
certainly your impressive resume with us here today. I hear a 
lot from manufacturers in my district, small- and medium size. 
I hear a lot from ag producers, which in many cases are 
manufacturers as well in a little different way or take the 
processing of various things and they are very concerned about 
various issues, and I know that the Administration's 
priorities, whether it is cap and trade, health care and the 
commensurate taxes included, the Employee Free Choice Act. Can 
you elaborate on how those would help small- and medium-sized 
manufacturers?
    Mr. Hightower. Thank you, sir. I think in sort of the 
larger setting, it is--I think the objective as an umbrella 
would be innovation-driven scale of operation, which then leads 
to sustainability, and I think it is my experience in being in 
all phases of that spectrum of whatever lifecycle your company 
might be in, if we are able to bring programs that intersect at 
that particular need whether you are a farmer company, whether 
you are a farmer, whether you are in medical devices, whether 
you are in a product or service, it is bringing those resources 
to bear whether we either get leverage and/or collaborative 
effort, realizing that Commerce can't do it all, Treasury can't 
do it all, the Department of Agriculture can't do it all but in 
more of an interagency level of cooperation, and that is what 
we are beginning to see and what we are beginning to actually 
find that is taking hold, and as we go through, for example, 
with the CommerceConnect activity, 62 different elements within 
Commerce are there but we are also working with SBA (Small 
Business Administration) on the capital issue, we are also 
working with the Department of Labor, who have these 3,200 
training centers around the country, where do you get the 
pipeline, which gets to the sustainability issue, and how does 
EDA, for example, work with you on figuring out what the right 
strategic plan is, and a part of that strategic plan is the 
scalability of the operation for long-term stability.
    Mr. Smith. So do I tell these constituents of mine that 
these are really good programs for them even though they are 
opposed to those programs?
    Mr. Hightower. Well, here is what I found. I have found as 
I have gone around companies that national pride trumps 
whatever their particular local political persuasion might be, 
and I say that gingerly and with great respect because it 
doesn't really matter when you are working 100 hours a week or 
you have a payroll to meet and the bank has changed the 
coverage ratios on you, it really doesn't matter. What you are 
concerned about is whether you can finance your inventories, 
whether you can feed your family, whether you don't have to put 
a second mortgage on the house, and many of the young 
entrepreneurs that I have been talking to as I go out into 
where sort of the rubber meets the road, that is what they are 
concerned about, and the extent to which we can bring these 
kinds of services and resources to bear will help, I think, 
that issue, and I think that is where we have got to find the 
right intersections and programs that work that when we say it 
is going to be delivered, it is delivered and we are there to 
follow through for the sustainability because it doesn't make 
any sense to put all of the effort in to something that in 
three months from now or six months from now they are either 
worse off than they were before or maybe not in business.
    And what I found too is that many of these companies that I 
speak with are second, third, fourth generation owners. They 
are really committed, and it is one thing that whenever I have 
lived outside of the United States, it was very difficult 
getting foreigners to understand that the United States is a 
collection of small towns and communities. It is not Boston, 
New York, Chicago, D.C., Philadelphia, L.A. It is small 
communities where you are a part of that community, a part of 
the fabric of that community, and that is where we have to get 
these programs down to the man or woman, the family business on 
Main Street that provide 95 percent of the jobs in this 
country. It is not the Fortune 1000. It is these 95 percent 
that really we have got to find the best ways and the most 
effective ways to touch.
    Mr. Smith. When you speak of individual workers then, can 
you elaborate maybe on how the Employee Free Choice Act would 
help enhance opportunities and competitiveness for small- and 
medium-sized manufacturers?
    Mr. Hightower. Actually, I am not prepared to talk about 
that today but I do have some points of view on that which I 
would be happy to talk with you but I am not prepared in terms 
of formal testimony to talk about that today.
    Mr. Smith. But are you working and advocating for the 
Employee Free Choice Act?
    Mr. Hightower. Yes.
    Mr. Smith. You mentioned generational transfer of 
businesses and so forth, and I appreciate that because that is 
a reality--
    Chairman Wu. Mr. Smith, perhaps you could save your next 
inquiry for the next round of questions, unless they relate to 
your current set of questions.
    Mr. Smith. I was following up on some remarks of 
generational--
    Chairman Wu. Please proceed.
    Mr. Smith. Thank you.
    It is very concerning to me on generational transfer when 
it comes to the death tax, and can you tell us--I know that we 
are in a bit of limbo with death tax and its amounts and the 
transition here. Can you tell me what the Administration is 
doing in terms of advocating for a rate or a compromise or 
something to that effect?
    Mr. Hightower. My direct answer is, no, I can't, but I can 
tell you as the son of an entrepreneur who died nine years ago, 
there are issues that, you know, strike one personally as 
opposed to the academic approach to this and, again, but that's 
not again in my area of expertise at all.
    Mr. Smith. Okay. I think I will save questions for another 
round. Thank you.
    Chairman Wu. Thank you, Mr. Hightower. Thank you, Mr. 
Smith.
    Mr. Hightower, you are obviously someone who has operated a 
business and know business very, very well. Let me take a crack 
at answering some of Mr. Smith's questions, since what we do 
around this institution is politics but try to bring this back 
to a policy discussion somewhat. The interesting thing about 
green energy and clean energy is that it is a straight transfer 
payment from one sector of the economy to another and one that 
results not only in bringing externalities in but it also makes 
us more competitive internationally. I came to this conclusion 
in visiting a business in my own community which makes fume 
hoods, and they are anti-regulation, they are anti-tax, they 
are anti-government, but it is also the case that their entire 
business is predicated on EPA (Environmental Protection Agency) 
regulation, and without that EPA regulation they would have no 
business, and their revenues are derived from payments made by 
other American businesses and they also export their products. 
That industry is created by EPA regulation. It makes our 
environment cleaner and it creates jobs in my home State of 
Oregon, and yes, it does cost a manufacturer somewhere else. It 
forces Burger King to clean up its exhaust fumes.
    Number two, health care. No one thinks of health care as 
related to the American economy. David Kennedy, a historian at 
Stanford University, argues very persuasively that the programs 
of the Franklin Roosevelt Administration are responsible for 
the post-World War II prosperity of America in the following 
way. Without Social Security, without unemployment insurance 
and without access to housing, individuals would be much more 
risk-averse because they have no safety net. By empowering 
individuals to take risks, by empowering individuals to move 
from place to place in America, we created a more efficient 
economy in addition to a more humane society. The Employee Free 
Choice Act is a realignment of power between employees and 
employers. Under the prior Administration, rapacious capitalism 
became prevalent rather than a working market economy. It is 
time. There have been generations during which employees have 
been denied their rights of association by very skilled 
consultants and employers who are not as publicly spirited as 
Mr. Hightower. No matter what one's views are on the individual 
requirements of the Employee Free Choice Act are, it is a 
realignment which is probably helpful.
    And finally, let me address the inheritance tax, which was 
first created by Abraham Lincoln, endorsed by Theodore 
Roosevelt, and which prevents the creation of a permanent 
economic plutocracy in our society. I work with small 
businesses. I help create small businesses. I try to get folks 
like Mr. Hightower to be my clients. The most important factor 
in generational transfer of businesses is not the inheritance 
tax, it is having a next generation in the family which is 
willing and capable of taking over the business.
    Mr. Peters, five minutes.
    Mr. Peters. Thank you, Mr. Chairman. I thank you for the 
panelists as well. There has been a very interesting discussion 
here related to manufacturers.
    Mr. Coast, I want to get back to the MEP, and as you know, 
the full Science and Technology Committee is working on the 
America COMPETES Act, which there will be reauthorization of 
MEP as well in that process. I want to get a sense from you, 
one, some of the challenges that you see for the MEP program in 
the coming years. I know you mentioned the financial ones, and 
perhaps you could flesh out a little bit some of the challenges 
that we have, particularly in Michigan but in other states that 
are also seeing a state match, which is why Mr. Ehlers and I 
have sponsored a bill dealing with that. If you could talk 
about the ramifications of that bill with the MEP program and 
some of the challenges that you will have going forward and any 
suggestions that you may have as to how we can make the program 
even better.
    Mr. Coast. Thank you very much. When you look at--I was 
surprised last week. We went to a national meeting in Utah with 
all of the center directors, and as this Committee knows, there 
are 59 centers around the country, and I was surprised when we 
sat down and talked to all of the centers, we found out that 
about ten of those centers, their state funding at this point 
had stopped. That means that 49 obviously of the other centers 
are in trouble. And when you take a look at that, the services 
that we go out and provide the small to mid-sized manufacturers 
are going to be in trouble because centers are going to start 
to cut staff because they won't have some of those precious 
dollars.
    And so with the bill that you are going to put into place 
is going to allow us to go out and reduce the match and it goes 
from 33 percent to 50 percent. That will allow the MEP centers 
to continue to go out and provide those services to the 
manufacturers. There are states that are around the country 
right now that have literally none. I mean, Illinois does not 
have any state match, California doesn't, New Jersey doesn't. 
We can certainly provide you a list of those, a more 
comprehensive list, but it is fairly typical, but as states go 
through this type of budgetary issues right now, that those 
numbers are going down, ten percent cuts, 50 percent cuts. And 
so the system is fragile, in my humble opinion, right now and 
it needs that federal investment to go out and continue to help 
those manufacturers. As Deputy Secretary Hightower said, the 
vast majority of manufacturers you there are the small 
companies. You know, there is 330,000 small to mid-sized 
manufacturers, you know, in America. Eighty-five percent of all 
the manufacturing is out there in those small companies. And so 
when you are looking at what the MEP system does, that is what 
we do. We go out and we provide that kind of assistance to help 
them pick themselves up by the bootstraps and stay in the game 
and employ people.
    Mr. Peters. Thank you.
    Mr. Hightower, maybe you can comment on some of that as 
well, that you have got those states in the case of Michigan, 
for example, where the services of MEP and other support for 
manufacturers is most critical. In fact, as you know, most of 
the manufacturing jobs that have been lost in this country and 
hundreds of thousands but the vast majority of them have been 
in one state or concentrated in a group of states. What is the 
sense of the Commerce Department to help out those states that 
are being hit the hardest and yet their small manufacturers are 
in the greatest need?
    Mr. Hightower. Thank you, sir. I think what is often missed 
when we think about the tremendous impact that Michigan has 
felt is that we have to also look at it from the supply chain 
aspect. You look in the old days when I was doing work in the 
auto industry, every one job meant maybe 10 to 12 additional 
jobs. Well, that is probably double now in terms of the supply 
chain implications. So it is not just concentrated, as you 
certainly know, in Michigan. You still have Ohio, you have 
Pennsylvania, you have as far out as California, you have 
Texas, you have South Carolina, North Carolina where other 
elements of that supply chain have expanded. So I think one of 
the things that we have been thinking about and we have 
certainly talked, you know, to Mike about this and are going to 
continue is that as we think about these regional programs such 
as the one Ms. Owens has with Spark--I was in Detroit about a 
month ago talking with one of the southwest regional councils 
there about how one of the other agencies, the Economic 
Development Agency, has been working with them to help them 
with their strategic planning process of how that region or 
that subset of the southwestern extension of Detroit, how will 
they come about and come around. There are other centers that 
we are looking at through EDA particularly in conjunction with 
CommerceConnect to figure out where, one, that effort should 
be, and what the nature of that service or resource, where are 
the opportunities for public-private partnerships and other 
strategic alliances, where as the Innovation and 
Entrepreneurship Advisor Council gets underway, how do we get 
those former small company startup entrepreneurs who are now 
successful, how do they reach back and sort of climb to go back 
into those communities to help figure out what the right plan 
is, how to get that capital, how to get you kick started if you 
have already gotten to the point of commercialization, then is 
there an export opportunity. It is bringing again that full 
range of services to bear, and we are actively looking at other 
areas that those kinds of services can be provided to begin to 
look at the effect of that one particular industry called auto 
and the supply chain impact that it has had in areas that 
heretofore had not been really fully appreciated.
    Chairman Wu. Thank you very much, Mr. Peters.
    We are going to recognize all the Members of the 
Subcommittee first and the we will proceed to non-Subcommittee 
Members. Mr. Garamendi, five minutes, please.
    Mr. Garamendi. Thank you very much, Mr. Chairman, and thank 
you for your comments.
    Years ago, back in the early 1980s, California was faced 
with heavy-duty competition, and I was then chairman of the 
joint science and technology committee in the legislature. We 
undertook a study and we came out with six things that needed 
to be done to maintain the competitiveness of then the 
California economy. First was education, much of what was 
discussed yesterday by the full Committee, and I note that the 
witnesses which represented the major manufacturers of this 
Nation were unwilling to really put their money where their 
mouth was, that is, to invest heavily in education. All the 
talk in the world about STEM, all the talk about the need for 
scientists, engineers and the like is of no value unless we are 
willing to pay for that crucial investment. I appreciate the 
testimony of Mr. Hightower this morning, once again pointing 
out that need. But again, it takes money to do this and 
apparently America is not willing to spend its vast resources 
in this critical way. The second thing we talked about was 
research, which will undoubtedly be a subject that we will pick 
up in later hearings. The third was manufacturing. The fourth 
was infrastructure and then the fifth was international and 
finally ending with the critical word called change. We have to 
be willing to change.
    Let us focus on the manufacturing here for a while. Bottom 
line, it takes money. There are wonderful networks out there. 
That issue of coordination of all of those networks, some of 
which were discussed by our witnesses today and even more are 
critical and I would recommend that we spend some time really 
looking at the issue of coordinating all of the resource, state 
and federal, private, on the interrelationship and the 
necessity of coordinating those. But my issue here really goes 
to money once again. There is a lot of talk around these 
buildings about making money available. Some of it is called 
direct lending by the Federal Government. What I would like to 
focus on is the indirect lending, that is, loan guarantees, the 
Small Business Administration and other loan guarantee 
mechanisms. So my question goes to Mr. Hightower and then to 
the other witnesses. Let us talk about loan guarantees, 
otherwise known as leveraging the federal dollar, using the 
existing private sectors. What do we need to do to really 
maximize the availability of money to entrepreneurs, 
manufacturers so that they can once again have money to carry 
on their businesses? Mr. Hightower?
    Mr. Hightower. Thank you. My view on this comes from again 
speaking with those companies as we travel throughout the 
United States who are suffering from the relative inability to 
access what has been granted. Part of it I think is a function 
of the will to put the money at the local levels, the small 
banks, and not change the ground rules. If I have heard it 
once, I have heard it at least 50 to 80 times, that is as many 
companies that I have spoken with a cross-section across the 
United States, and that is, they know what has been granted, 
what has been authorized, whether it is from SBA or other 
funding sources. They know that the banks are getting it but 
they are saying it is not getting to us. To the extent that it 
gets to us, the rules keep changing on us in a setting where 
revenues are down, operating margins are low to nonexistent, 
profit margins are negative, why do the banks, my local bank, 
why do they impose a different coverage ratio on me than I had 
in the good times? So it is a double whammy. It is almost a 
triple whammy. So unless we can figure out how to enforce the 
grant-making process, because I am more of a grant maker than a 
direct--I don't think that is the government's role. But the 
granting and the loan guarantees and the applauding of moving 
those guarantees from 75 to 90 percent is fine but it is not--
it doesn't mean anything if the money doesn't actually get down 
to the areas where it is needed.
    Mr. Garamendi. If I might just hone in on that or drill 
down, which is the current word, I talked yesterday to the 
former president of the National Bankers Association about this 
issue and he was saying that there are two problems. One, he is 
in a bind. He continues to be a banker in Georgia. And he said 
I'm in a bind, I want to make the loans but the oversight 
agencies keep coming down on me about the requirements, part of 
what you talked about here. It seems to me that the loan 
guarantee program should give those federal regulators, bank 
regulators, a high level of assurance that that loan is going 
to be paid off if not by the company, then by the Federal 
Government. So we have a problem here with the regulators and 
the bankers. He mentioned the other problem being the SBA is 
almost impossible to deal with. Their mechanisms for giving a 
loan or for--not giving but underwriting a loan is obtuse, 
complex, constantly changing, and if streamlined, he would be 
in much better shape to make loans that are guaranteed by the 
Federal Government, 90 percent or whatever. I would recommend 
90 percent. The remaining 10 percent, he can put on his books 
and be responsible for and the federal regulator would then say 
oh, okay, let us move forward. We have to make the money 
available. Otherwise this is just a lot of talk.
    Ms. Owens. I agree with you completely and I think the 
money has to be available. The issue with our manufacturing 
base is they aren't bankable so, you know, they are continually 
losing profits. Their assets, their equipment is valued at a 
quarter of what their loans are. So banks are in some cases 
making a smart decision because it is not a good risk for them. 
So if these manufacturers want to move forward, we have to look 
at other options outside of the banking community or provide 
some type of way to allow banks to be able to take that extreme 
risk, because it is an extreme risk.
    Mr. Garamendi. That is what the loan guarantee is all 
about, isn't it?
    Ms. Owens. But I still have--I have companies who look at 
SBA loan guarantees and cannot find a banking partner who is 
willing to do that even with the program right now. It is 
intended to do that but I still find very much in Michigan 
financial institutions are not trusting in our automotive 
sectors or any manufacturers at this point.
    Mr. Garamendi. I think that comes back to the issue of the 
regulators on the back of the banks and setting down 
regulations that do not take into account the loan guarantee, 
picking up 90 percent of the risk.
    Ms. Owens. Right, and I actually have a small business that 
was started because of an SBA loan guarantee about four or five 
years ago so I think the program can work, but I think the 
automotive sector is so different right now that the loan 
guarantee program just, either the banks aren't educated or 
they are not willing to take that risk for our manufacturers.
    Mr. Garamendi. I notice my time has long since expired so I 
will pass it off, but with one final comment. It seems to me 
that if we are going to deal with manufacturing in the small- 
and medium sector, it is all about money. They have to have 
access to money, and there is something terribly wrong here. 
The loan guarantee seems to me to be the best way to proceed 
and then to couple that with administration modifications at 
the regulatory system to take into account the significant 
reduction in risk to the bank or to the lender and the process 
that is necessary even to go through all the paperwork. I think 
we have to hone in on that. The rest of it is just a lot of 
talk. Thank you, Mr. Chairman.
    Chairman Wu. Thank you, Mr. Garamendi.
    The gentleman from New York, Mr. Tonko.
    Mr. Tonko. Thank you, Mr. Chair.
    Ms. Owens, you deal with a number of companies and we have 
had a very difficult economic period over the last several 
years, and I am certain there are success and failure stories 
that are part of the networking that you have done. Can you 
tell us, are there any bits of information you can share 
concerning those success stories, why they have endured, how 
they have made it through a tough cycle and is there anything 
we can learn from them as an example?
    Ms. Owens. I think the manufacturers in particular who are 
willing to recreate themselves to learn, to discover new 
industries and opportunities, to take amazing risks have been 
successful in Michigan. We have an array of small manufacturers 
in Washtenaw County in particular who are 100 percent 
automotive and have now transitioned fully to other industries 
or 20 percent into automotive but how they have done that is, 
they have taken tremendous risk. They mortgaged their homes, 
they mortgaged all their assets, they have taken in Mike Coast 
and the MEP center and welcomed them with open arms, all the 
opportunities that are available. They have used the 
procurement technical assistance centers, which are a wonderful 
resource, so they are willing to take that risk and take the 
education.
    Secondly, I think for manufacturers today, a lot of them in 
the auto industry have lost the ability to sell and market 
their products and so they have been essentially order takers 
who just kind of waited for the orders to roll in. The 
manufacturers have invested in sales and marketing and can 
recreate themselves for the other industries. Marketing the 
auto industry is very different than marketing to the medical 
device industry. Those are the ones that have been successful. 
There are many manufacturers who kind of dug their heels in, 
have seen the auto industry go up and down and are just waiting 
for the phone to start ringing again. Those are the businesses 
that have closed. The ones who have taken extreme risk, offered 
all the help and assistance provided by the state and the local 
government are the ones that have been successful and have been 
able to diversify.
    Mr. Tonko. Have any concentrated on export opportunities? 
Secretary Hightower.
    Mr. Hightower. Yes, in fact in Michigan there is a company 
by the name of Vogel Industries, a precision machining supplier 
which at one point was about $140 million company with 425 
employees, which in the last couple of years is now a $6 
million company with 35 employees. When they came to Mike's 
operation and we worked with them in coordination with the 
CommerceConnect pilot, we introduced them to the export 
assistance center to find opportunities for export, and we also 
introduced them to the Department of Energy to apply for a 
grant which will now help them to develop an alternative-energy 
product so again it is that transition issue and providing the 
way that if they get this, which we think there is a fair 
chance they will get the alternative-energy grant, this will 
actually mean reemploying 250 workers. So the more and more we 
find those kinds of companies and work with them on that 
transition process, this is where I think we are going to get 
the payoff for these kinds of programs.
    Mr. Tonko. Are there--Mr. Coast. I am sorry.
    Mr. Coast. If I might follow up on that, I have got two 
examples of companies that we have worked with. One is a screw 
machine company. They used to make parts that went into the 
Chevy Roadster. If you know anything about the Chevy Roadster, 
you know that it is now obsolete. And they had 25 employees. We 
helped take that company, that particular company from making 
parts for that roadster. They now make parts that go into a 
prosthetic leg. And the good news is, there are still 25 
employees there. So they still have those folks. Another one 
happens to be in Congressman Peters' district, which is non-
automotive, and the company is called Total Door, and they have 
made a complete transformation. So when you start to look at 
this particular company, they moved from one facility. They 
used to have 12  12 wood beams in it, completely transformed 
themselves and went into another building and they have product 
flow that is in place now and they are competitive. And when 
you take a look at what they have done with technology, they 
have also used some of the current technology, off-of-the-shelf 
technology that is out there. They used to paint doors. And so 
now what they have is a way--and when you paint doors, in the 
old days you had a lot of fumes, VOCs (Volatile Organic 
Compounds), that kind of thing. Well, now they paint the doors 
and they cure them with ultraviolet light, and so when you 
start talking about green technologies and off-the-shelf 
technologies, that is another example of those opportunities 
that are out there for these companies so they can go do this 
kind of work.
    And back to a point Jennifer made is that the companies--I 
can give you dozens of examples of companies that will show up 
to a bank with an order in hand, an order in hand for $10 
million but they can't get a loan from the bank to go buy the 
materials to make the product. You know, I am not sure--I am an 
old manufacturing guy, okay? And so I am not sure about all the 
intricacies of how to move that money down the supply chain. 
TARP (Troubled Asset Relief Program) money might be a 
possibility. I don't know. But I know it is not getting down to 
the small guys, and they have--once again, they have orders in 
hand. You want to bring people back off unemployment? Give that 
guy, a stamper in Detroit, access to that capital and he will 
bring 30 people off of unemployment tomorrow.
    Mr. Tonko. Creatively speaking, what would be the best 
option to provide for that economic need, for that cash flow, 
that businessperson needs?
    Mr. Coast. Well, the SBA in Michigan, I don't know about 
the other states but we work real well with the one in 
Michigan, and they are somewhat constrained sometimes because 
they are backing up--the company has to go to the bank and then 
the SBA will back up the loan, and that seems to be a 
bottleneck. So we have had good experience with the SBA in our 
state. It is just a matter of trying to figure out banks that 
will go out and lend to companies, and the automotive guys. 
That is another huge issue because you have automotive--we do a 
lot of market diversification with companies and so they are 
automotive and so you want to move from automotive into 
aerospace, wind turbine, you know, defense but they want to 
make the transition. They go to the bank and say you are 
automotive, red-lined.
    Mr. Tonko. Ms. Rosenthal, you were going to respond to 
that?
    Ms. Rosenthal. Yes, please. In Pennsylvania, the companies 
that we work with are both startups for which, back on the 
issue of debt or guarantees, has no bearing. It is just totally 
irrelevant. In terms of companies that are reinventing 
themselves through the commercialization of a new technology, 
what we will do is provide them capital on a joint basis so 
they can take those steps that are highly risky. We wouldn't 
expect a bank to lend against those kinds of needs. We can help 
capitalize the company to move that product, that technology 
into the marketplace in a very--in an equity-like--with an 
equity-like vehicle. We don't want it to look like debt. We 
don't want to burden the company with that debt but we are 
taking the risk with the company and hope to get the reward 
downstream. So sometimes I have worked with debt programs and 
guarantees in my career. They are not necessarily appropriate 
for a company that is taking a high-tech risk and so we have to 
find other ways of creating vehicles that are more equity like 
than debt like.
    Mr. Tonko. Thank you.
    Mr. Chair, I think I have gone well beyond my time so I 
appreciate your tolerance.
    Chairman Wu. We have a soft gavel in this Subcommittee.
    Mr. Tonko. Dr. Ehlers, five minutes.
    Mr. Ehlers. Mr. Chairman, I am assuming the soft gavel 
because I have been sitting here watching all the minutes 
accumulating elsewhere. But in any event, first I want to 
commend Mr. Garamendi for his comments and say we have faced 
exactly the same problem in Michigan. We have the highest 
unemployment in the country. We are probably-California is in a 
race with Michigan to see who can reach the bottom first, but 
we face the same problem, and the loans, it is a problem. It is 
right. The federal regulators come into the banks and say you 
need more assets on hand to meet your responsibilities and so 
they don't have the money to loan.
    Mr. Coast, I had the identical situation with one of my 
manufacturers. He needed a $750,000 loan just to buy the 
equipment for--pardon me--to buy the parts and so forth that he 
needed to manufacture the machine and could not get a loan 
anywhere, even though he had the firm orders in hand from 
reliable companies. Loan guarantees may be a good approach for 
that particular part of it.
    But let me get back off that a bit and get to the broader 
question, which involves the Congress as well as the 
Administration, and Mr. Hightower, or Mr. Secretary, I 
certainly commend you for the comments that you have made and 
the experience that you have. I don't want to irritate Mr. 
Smith, who represents highly agricultural areas, and I am not 
trying to denigrate agriculture in any way. Most of my 
relatives are farmers. But I find it striking, we go back to 
1880, 80 percent of the workforce in this nation was in 
agriculture and we had an agriculture department, a very 
important department. Today, roughly 2 percent of the workforce 
is in agriculture and we still have the same agriculture 
department. Cooperative Extension Service has been marvelous 
throughout the country. It really established agriculture and 
helped them, and I certainly don't denigrate that. I think it 
is wonderful. But today we need a Manufacturing Extension 
Partnership, and I have fought hard for MEP and for its funding 
every year, and I think it is nonsense that the Congress and 
the Administration over the years has maintained $400 million a 
year for the Cooperative Extension Service in agriculture, and 
that is fine. They need it. It is well worth it. But at the 
same time, manufacturing has 15 percent of their employees in 
the country and I had to fight like mad just to keep the 
funding constant for MEP. Every year was a battle, and I 
appreciate Mr. Peters offering this bill. That is going to 
help, if we can get it passed. But when Joe Nolenburg was here, 
the predecessor for Mr. Peters, he was on the Appropriations 
Committee and he and I worked very hard every year. About the 
best we could do is just maintain the level of MEP, not even 
keeping up with inflation. We have to change our attitude in 
the Administration and in the Congress about programs such as 
MEP. We know it works. Why don't we fund it appropriately for 
the number of workers in that field?
    I do want to add another factor, and, Mr. Hightower, that 
is why I appreciate what you are doing. But more needs to done 
in the Department of Commerce. Again, I fought for a number of 
years to have a deputy secretary for manufacturing within the 
Department of Commerce. We should have it. We have an entire 
department in agriculture and I couldn't even get one position 
for manufacturing in the Department of Commerce. What I did get 
was the creation of the council that Mr. Fred Keller from my 
district has so ably chaired, and they have done marvelous 
work. But we need greater infrastructure within the Department 
of Commerce to deal with manufacturing. You don't have the time 
with all of your responsibilities to devote full time to 
manufacturing. There should be someone in roughly your position 
that deals entirely with manufacturing. And so I hope that the 
Congress and the Administration can work together to put more 
emphasis on manufacturing. I don't put it in your hands, Mr. 
Secretary, because you have got enough to do, but the Congress 
working with the Administration should create an infrastructure 
within the Department of Commerce that recognizes the 
importance of manufacturers and manufacturing and does provide 
the funding and the administrative ability, the sufficiency 
that they can really tackle the problems of manufacturing in 
this country. They do it in other countries. That is why they 
are beginning to beat us hollow.
    I have the bad habit of falling into a preaching mode 
because my dad was a preacher, but this is one area I feel very 
strongly about and I will be happy to preach to anyone about 
the importance of manufacturing and what we should be doing. 
The MEP should be at least close to the $400 million a year we 
spend on the agricultural Cooperative Extension. I could easily 
argue it should be double or triple that. And I don't mean to 
lower agriculture's. It is beautiful. It works. Why not 
transfer that model fully over to manufacturing and the 
Department of Commerce and make it a higher priority?
    Mr. Hightower. Yes, sir. Thank you for your comments. We 
have made a little bit more progress since your last awareness 
that we do now have an assistant secretary who does focus only 
on manufacturing and services--she just had her hearing just 
before Christmas--and again, working now very closely with Ron 
Bloom from the White House on these issues. I think it just 
sort of gets to your point of the focus and putting the 
resources behind it. So yes, there is a lot more to be done but 
at least we do have someone at a level from a policy standpoint 
and with background in that area. She happens to come from 
Detroit, so she does understand the issues and I think will 
make a tremendous contribution once she is confirmed.
    Mr. Ehlers. Well, we will see if this all results in more 
manpower and more money for the project. I commend you for what 
you are doing. I am just saying you have got support here in 
the Congress.
    Mr. Hightower. Thank you very much.
    Mr. Ehlers. We have to work together on it so that we are 
trying to achieve the same objective. I notice Mr. Garamendi 
has moved on here so apparently he is going to join the 
Republican Party. Thank you very much.
    Mr. Coast, you had a comment?
    Mr. Coast. I do, and at the risk, if you will, of sounding 
self-serving, if you want to make an impact, get those precious 
dollars you are talking about out into the MEPs and to the 
centers and the results will be feet on the street, create 
jobs, work with the companies, they hire people. So I know it 
sounds self-serving. But you have a shovel-ready program in 
place now.
    Mr. Ehlers. Well, but--
    Mr. Coast. We just need more engineers and more 
manufacturing specialists out there.
    Mr. Ehlers. Let me just say that don't worry about being 
self-serving. That is the only way you will get anywhere in 
this city. We expect you to be self-serving.
    Also on the issue of loans, you mentioned TARP. It is very 
frustrating, and I have tried to work with the Administration 
on this too. It is very frustrating that we bailed out the 
banks, the big banks, and none of that money is coming down to 
the small manufacturers, the local communities, and loan 
guarantees are wonderful, that would be great, but I would like 
to see the TARP reimbursements allocated as they come in, 
allocate them to this particular field. Manufacturers 
desperately need to be able to borrow the money.
    With that, I will yield back, Mr. Chairman.
    Chairman Wu. Thank you very much, Dr. Ehlers.
    Mr. Garamendi, please let me know if this is a permanent 
move for you.
    And Mr. Smith and I are in full accord that we support 
getting a person in place as soon as possible but not a czar. 
An assistant secretary will be just fine. In fact, one czar at 
a time would be just hunky-dory.
    Mr. Hightower, I understand that you need to leave by noon 
or a little bit more. We will accommodate that schedule. There 
is also a Floor vote which is scheduled to occur sometime or be 
called sometime in the next 15 minutes but let us go on for as 
long as we can.
    For the outside witnesses, I would like you to comment on 
whether Department of Commerce folks have sought your input in 
developing their initiatives like CommerceConnect and the 
Office of Innovation and Entrepreneurship. Do you feel 
consulted? Were you consulted? And was your input acted upon?
    Ms. Rosenthal. I would be happy to lead that one off. We 
have been consulted, as I mentioned in my comments, both long 
and short. We have had good dialog in terms of what can be 
done, where we see in the field the gaps. Again, to pick up the 
recommendation to be self-serving, there is a need for capital 
to flow to the very youngest companies so that they can some 
day grow up to the manufacturers of the Nation. So that is our 
sweet spot in terms of looking at that. Also, flexible capital, 
that will help companies reinvent themselves, connect with 
universities, move forward with new technology-based products. 
Those are not needs that are adequately addressed by current 
programs. We can retool those programs. It doesn't necessarily 
mean new money but it means a restructuring of existing 
programs. You have the manufacturing base that can take a look 
at and be supported by more traditional financing. You have the 
new company base and the company transitioning that needs 
flexible equity-type capital.
    Ms. Owens. Previous to this career, I was with Michigan 
Economic Development Corporation and we worked very closely 
with Mike and the Department of Commerce and the 
CommerceConnect program. My organization, Ann Arbor Spark, was 
not consulted so this is a new thing, and that is kind of what 
I brought to the organization was an education for them. The 
Office of Entrepreneurship, we have not met with that group and 
actually are looking forward to later today to meet with them 
and learn about that. I know that they have worked with the 
University of Michigan and have kind of met with the university 
to ask about their insight and input. Our organization manages 
a venture capital fund and three incubators that have turned 
out roughly 300 high-tech startups, so we are very excited 
about collaboration and opportunities that can take place 
between Ann Arbor Spark and this new office.
    Chairman Wu. Thank you very much.
    Mr. Coast.
    Mr. Coast. I can say from a CommerceConnect perspective 
that we have worked hand in hand with the folks at the 
Department of Commerce. The way that it is structured, I think 
some of it was in my testimony. The written testimony is, we 
actually have four people from the Department of Commerce 
collocated in my building, and one of my staff that is also a 
manufacturing person, so we have gotten the good people that 
they have brought, and they have been very energetic and very 
open to this process. But that is also one-half of the pilot. 
The second half of the pilot is trying to figure out how to 
reach inside the Department of Commerce and find those programs 
and have them become customer friendly, if you will. But that 
process is well on its way. That is the second half of the 
pilot that you are looking at. And one of the things that I 
would offer up, and when we work with a small company we go in 
and we talk to them about improving their processes before you 
automate them, and so there are many steps down the road that I 
think need to be taken that can put into place a good, 
sustainable system that is going to allow for us, and one other 
point that Jennifer mentioned was one of the critical parts of 
that is to use the economic development folks that have feet on 
the street already that know some of these things and so you 
leverage those, and that is also part of the mix but it has 
been--they have listened and we are in the process of getting 
through that final design so that the end product will be 
something that works.
    Chairman Wu. Thank you very much, Mr. Coast. And offline we 
will take your and Mr. Hightower's comments on when 
CommerceConnect will expand beyond Michigan and what the time 
frame for that expansion will be. In connection with the 
Commerce Department's emerging innovation programs, I would 
just like to add that I have followed the Brookings and ITIF 
(Information Technology and Innovation Foundation) 
recommendations on systematizing and creating some structure 
for the study of innovation and the promotion of innovation. 
Other countries have systematic ways of promoting innovation. 
We have had a very innovative society. We have been good at 
invention. It has been a byproduct of a very strong science and 
R&D enterprise. We do not have a systematic way of promoting 
innovation whether it be in finance, regulatory hurdles, the 
best and fastest way of transferring intellectual property, et 
cetera. I used to do university technology transfer and it is 
akin to Boswell's comments about a dog walking on its hind 
legs. It is not done well but one is amazed that it is done at 
all. We have led the world in innovation. People do come here 
to look at our innovative companies but they no longer come 
here to look at the systematic promotion of innovation. That 
activity is really being led by the Europeans, Japanese and 
some other folks.
    So looking at the potential for an innovation institute or 
innovation foundation or locating that office at NIST or 
Commerce or OSTP (Office of Science and Technology Policy) or 
NSF (National Science Foundation), that is something that I 
think this Subcommittee and the Full Committee would like to 
explore. Perhaps creating such an entity will not take quite as 
long as the creation of the National Science Foundation after 
World War II but I think that we should approach it in a 
careful and systematic way because the goal is to promote 
innovation in an appropriate federal way, to study it, to 
understand it, to promote it in the private sector, to promote 
it in state and local government and also Federal Government 
policies. The goal is very much to avoid injecting bureaucratic 
process in what is an inherently vibrant and bubbling activity.
    Mr. Smith, five minutes.
    Mr. Smith. Thank you, Mr. Chairman, and again thank you for 
your time with the panel.
    I take very seriously my charge as an elected 
representative of the 3rd District of Nebraska, one that is 
quite diverse but certainly agriculturally based, and my prior 
questions are only a result of the hearing charter stated as 
the purpose of this hearing is to learn about the challenges 
faced by small- and medium-sized manufacturers. Again, I take 
that very seriously, and I am simply conveying the concerns 
that I hear from my constituents, and while I am a product of a 
community college, proudly so, I know that we need community 
colleges. I know that Nebraska has literally thousands of 
automotive-based manufacturing jobs. What I am saying is, we 
are in this together. Nebraska enjoys a far lower unemployment 
rate than does Michigan, but acknowledging that, please know 
that we are all in this together. And while we do need to 
support community colleges, we do need to support various 
programs of extension and otherwise, there are many and 
numerous other concerns out there facing manufacturers, and 
that is simply why I bring up the issues that I have today. And 
I guess I would only wish that we could have a Treasury 
Department representative here today given the fact that we 
have talked about lending and how the shortage of lending is 
causing problems for all businesses, small and large, and I 
struggle to think that creating new regulations on financial 
institutions who are now bad actors, have not been bad actors, 
would increase lending, and I guess I am in the preaching mode 
too, Mr. Ehlers. But I also struggle to think that the creation 
of new regulations because it would require job creation 
following those regulations is a good reason for creating new 
regulations. That is not sustainable economically. And I hope 
that we can get to the bottom of some of these things. I look 
at the trade issues and how important those are across the 
board, though. For example, I have in my district the largest 
natural wool yarn manufacturer in America, a whopping 45 
employees. Now, I am kind of proud of the fact that they not 
only are in my district but right down the road from where I 
live, even though I don't really use their product, but they 
get my attention when they say that the estate tax would 
devastate their business. Those are their words. I am prompted 
by any question that I had when I visited their facility. And I 
look forward to working together.
    I admire each and every one of you for working in the 
trenches and it is not about improving your own lot, it is 
about improving many, many others, and so that is why I am 
grateful for not only my opportunity but I am grateful that you 
would share your expertise as well. So please know that I just 
want to share information and convey a message of concern for 
my constituents.
    Now with a question. Sorry. Uncertainty. The marketplace is 
uncertain enough on its own but the marketplace in terms of 
ancillary concerns appreciates certainty. What would you like 
to see the government do or the Federal Government, the Science 
Committee, the Innovation and Technology Subcommittee perhaps, 
do to ensure more certainty? Is it the CommerceConnect? Where 
would that be, and if any of you would choose to answer, maybe 
starting with the Secretary if you would choose to answer.
    Mr. Hightower. I think, one, it is important to say that we 
have enjoyed a tremendous amount of support and openness and 
accessibility for the Subcommittee and your support of NIST as 
one of the major elements of the Department of Commerce. As we 
move forward, I would want to be sure that this would be an 
opening or beginning, if you will, to the opportunity to 
continue to bring these ideas forth because there are going to 
be a number of new and innovative and untried and untested 
approaches, and we all know from a business perspective that 
when you start laying out new ideas and new programs, those 
that have a track record will always win against those that 
have no track record where the idea is at its early stage of 
coming into being. So we would ask for sort of your forbearance 
and your understanding that every time we want to do something 
new and different, it may not have the legs that a program that 
has been around for 15 or 20 years might have. And it goes back 
to something I learned in my first general management job under 
Jack Welch from 30 years ago, and that is that if you know 60 
percent of everything you want to know before you make a 
decision, you are lucky. What you get paid for is the other 40 
percent which is your judgment. So hopefully you will accept 
our judgment when we come to you having talked to our 
stakeholders, talked to the clients, if you will, the users of 
the intended services, and we will bring as much of that to 
bear as we can and discuss the merits and the pros and the cons 
and hopefully come out of that with your support for some of 
these very risky, quote-on-quote, new ventures that we think 
are important to help get back this economy back on its feet 
again.
    And with that, I do respectfully request that I can leave 
now because my next meeting is on trade.
    Chairman Wu. I understand. I got a note that the White 
House is looking for you, and perhaps you could share with them 
Mr. Smith's concerns, and for me to ask them to, counter to 
what the President said yesterday, let us get health care done 
quickly so that we can reduce risk for individuals so that they 
can assume risks elsewhere and truly engage in entrepreneurial 
activity.
    Mr. Smith, I completely respect your efforts to represent 
your constituents and your constituents' concerns. We all take 
these concerns very, very seriously, and our oath of office and 
Constitutional duties. I carry a copy of the Constitution in my 
hip pocket. It is the authoritative Cato Institute version. 
There are many things on which we will continue to work 
together, and in that bipartisan spirit, Mr. Ehlers and I have 
worked mightily to preserve as much of the MEP program and the 
ATP (Advanced Technology Program) program, now the TIP 
(Technology Innovation Program) program, because there are 
important and legitimate public interventions in the private 
sector to compensate for externalities, market defects and 
underinvestment in things like science and research. I just 
want to note that we spend more on fishing tackle and potato 
chips, not combined but individually, than we do on the space 
program or on NIH (National Institutes of Health).
    Are there any further--Mr. Ehlers? Oh, Mr. Hightower, 
please--
    Mr. Hightower. Thank you very much, and really, I thank you 
and the Committee for the opportunity to appear before you 
today and hopefully, again, this will be the beginning of a 
mutual exchange where we can really move this forward and get 
people back to work in this country. Thank you very much. I 
look forward to it.
    Chairman Wu. Thank you, Mr. Hightower.
    Dr. Ehlers, any further--
    Mr. Ehlers. I think I pretty well concluded my sermon. It 
would probably help if we had a few amens from the chair.
    Chairman Wu. Amen.
    Mr. Ehlers. Thank you. Let us go do it.
    Chairman Wu. Mr. Smith?
    I want to thank the witnesses for being here today, and 
please pass on my good wishes to Assistant Secretary Hightower. 
This hearing is now adjourned, and comments and questions will 
be submitted to the witnesses in writing. Thank you very much 
for being here today.
    [Whereupon, at 12:01 p.m., the Subcommittee was adjourned.]
                               Appendix:

                              ----------                              


                   Answers to Post-Hearing Questions




                   Answers to Post-Hearing Questions
Responses by Hon. Dennis F. Hightower, Deputy Secretary of Commerce, 
        U.S. Department of Commerce

Questions submitted by Chairman David Wu

Q1.  What criteria do you use to judge the success of innovation 
services/programs provided for small- and medium-sized manufacturers?

A1. The Manufacturing Extension Partnership (MEP) uses a client impact 
survey to collect impacts from clients receiving MEP services. Specific 
measures that capture the impact of innovation services include new and 
retained sales along with new and retained jobs. Recognizing that 
innovation-type services may generate longer-term measurable impacts 
that would not be captured in a survey administered six months after 
project completion, MEP has modified its data collection process to 
collect these impacts over time. As MEP expands the innovation and 
growth services offerings for U.S. manufacturers, the program will 
continue to explore measure and options to collect the impact of these 
services.
    For more information on the MEP Client Impact Survey and the latest 
results, refer to: U.S. Department of Commerce, National Institute of 
Standards and Technology Manufacturing Extension Partnership Delivering 
Measurable Results to Its Clients, Fiscal Year 2008 Results, January 
2010 http://www.mep.nist.gov/documents/pdf/about-mep/impacts/
fy2008_dmr_final.pdf.

Q2.  In her testimony, RoseAnn Rosenthal made several suggestions for 
retooling existing federal programs to increase their impact on 
innovation and job creation. For example, she suggested modifying the 
Economic Development Program to create Commercialization Partnership 
Centers. Could you please give us your views on the recommendations in 
her testimony?

A2. In her testimony, Ms. Rosenthal suggested two core areas to retool: 
1) Access to capital and 2) Creating effective pathways to 
commercialization. These issues are of paramount importance to the 
Obama Administration and the Department of Commerce (Commerce).
    The Economic Development Administration (EDA) at Commerce strongly 
supports university-led economic development and technology 
commercialization as a strategy to support collaborative regional 
innovation to create sustainable growth in American regions. EDA's 
University Center program is a diverse and flexible tool that supports 
a broad range of economic development activities from technical and 
financial support to businesses and entrepreneurs, to helping 
communities grow innovation clusters, to support for university-led 
technology commercialization partnerships. EDA recognizes the great 
benefits that such partnerships afford and will look for ways to 
continue to prioritize and support such activities in the future.
    Additionally, Commerce's Office of Innovation and Entrepreneurship 
is working closely with the Small Business Administration, the National 
Science Foundation, and other federal agencies to address other 
programs that can be more focused on innovation and commercialization, 
including the SBIR and STTR programs.

Q3.  All of the witnesses stated that access to capital is the top 
priority for manufacturers. What specific programs or mechanisms does 
CommerceConnect have in place to help connect manufacturers with 
available funding through the Small Business Administration?

A3. As you know, the first pilot office of CommerceConnect is located 
in Plymouth, Michigan. The CommerceConnect case managers have a base 
knowledge of the federal, Michigan state and local loan and grants 
programs. They also have developed working relationships with local 
Small Business Administration (SBA) representatives to help connect 
local companies with information on various SBA loan programs. SBA 
representatives have introduced local lending institutions to 
CommerceConnect case managers to help them better understand the 
specific business requirements needed before referring their clients to 
apply for SBA loans directly to local lenders. CommerceConnect case 
managers also follow up with their clients after the meetings with SBA 
and lenders to determine if they need to search for additional 
suggestions for alternative financing.
                   Answers to Post-Hearing Questions
Responses by Jennifer Owens, Vice President, Business Development at 
        Ann Arbor Spark

Questions submitted by Chairman David Wu

Q1.  What criteria do you use to judge the success of innovation 
services/programs provided for small- and medium-sized manufacturers?

A1. The success of programs are usually determined by the business 
served staying in business and investing in their facilities. Success 
should not be judge by the creation of job as most manufacturers who 
are adding new equipment, implementing lean practices and increasing 
innovation will often maintain status quo employment levels or even 
reduce employment as they become more efficient. Investment in 
facilities be it through research or machinery and equipment by 
manufacturers served is often the best sign that a company is headed 
toward success.
                   Answers to Post-Hearing Questions
Responses by Michael Coast, President, Michigan Manufacturing 
        Technology Center (MMTC)

Questions submitted by Chairman David Wu

Q1.  What criteria do you use to judge the success of innovation 
services/programs provided for small- and medium-sized manufacturers?

A1. Judging the success of a ``new Program'' is always interesting. 
Innovation falls into that category. We--the MMTC and MEP from a 
national perspective have been looking for the next best ``Innovation 
Tool'' to put into our tool box. The best measure over the years has 
been the ability of the small- and medium-sized manufacturers (SMM) to 
purchase the ``services''. With the thought that if they find value in 
the services they will but it. Which then follows that if they buy it 
and then use it there will be a return on investment (ROI). In this 
case the ROI would come in the form of increased sales. One way NIST 
measures this is with the NIST/Turner system--which is a post project 
survey of the companies. Unfortunately they do not break it out by 
product line--Quality, Lean manufacturing, market diversification, 
growth services, product development, etc. So the main criteria is 
increased sales--or in some cases increased RFP's which lead to sales. 
The national system numbers as reported by Turner/MEP HQ is:




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