[Senate Hearing 111-517]
[From the U.S. Government Publishing Office]
S. Hrg. 111-517
RESEARCH PARKS AND JOB CREATION:
INNOVATION THROUGH COOPERATION
=======================================================================
HEARING
before the
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
DECEMBER 9, 2009
__________
Printed for the use of the Committee on Commerce, Science, and
Transportation
U.S. GOVERNMENT PRINTING OFFICE
56-410 PDF WASHINGTON : 2010
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC
area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, Washington, DC
20402-0001
SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
JOHN D. ROCKEFELLER IV, West Virginia, Chairman
DANIEL K. INOUYE, Hawaii KAY BAILEY HUTCHISON, Texas,
JOHN F. KERRY, Massachusetts Ranking
BYRON L. DORGAN, North Dakota OLYMPIA J. SNOWE, Maine
BARBARA BOXER, California JOHN ENSIGN, Nevada
BILL NELSON, Florida JIM DeMINT, South Carolina
MARIA CANTWELL, Washington JOHN THUNE, South Dakota
FRANK R. LAUTENBERG, New Jersey ROGER F. WICKER, Mississippi
MARK PRYOR, Arkansas GEORGE S. LeMIEUX, Florida
CLAIRE McCASKILL, Missouri JOHNNY ISAKSON, Georgia
AMY KLOBUCHAR, Minnesota DAVID VITTER, Louisiana
TOM UDALL, New Mexico SAM BROWNBACK, Kansas
MARK WARNER, Virginia MIKE JOHANNS, Nebraska
MARK BEGICH, Alaska
Ellen L. Doneski, Staff Director
James Reid, Deputy Staff Director
Bruce H. Andrews, General Counsel
Ann Begeman, Acting Republican Staff Director
Brian M. Hendricks, Republican General Counsel
Nick Rossi, Republican Chief Counsel
C O N T E N T S
----------
Page
Hearing held on December 9, 2009................................. 1
Statement of Senator Pryor....................................... 1
Statement of Senator Johanns..................................... 2
Statement of Senator Nelson...................................... 3
Statement of Senator Warner...................................... 4
Statement of Senator Begich...................................... 6
Statement of Senator LeMieux..................................... 16
Statement of Senator Udall....................................... 17
Prepared statement........................................... 18
Statement of Senator Klobuchar................................... 20
Witnesses
Hon. John R. Fernandez, Assistant Secretary of Commerce, Economic
Development Administration, U.S. Department of Commerce........ 6
Prepared statement........................................... 8
Charles W. Wessner, Ph.D., Director, Technology, Innovation, and
Entrepreneurship, Board on Science, Technology, and Economic
Policy, National Research Council, The National Academies...... 22
Prepared statement........................................... 24
Brian Darmody, President, Association of University Research
Parks and Associate Vice President for Research and Economic
Development, University of Maryland............................ 26
Prepared statement........................................... 28
Jonathan Sallet, Managing Director, The Glover Park Group........ 30
Prepared statement........................................... 31
Anthony Townsend, Research Director, Technology, Horizons
Program, Institute for the Future.............................. 37
Prepared statement........................................... 39
Appendix
Hon. Olympia J. Snowe, U.S. Senator from Maine, prepared
statement...................................................... 71
Hon. David Vitter, U.S. Senator from Louisiana, prepared
statement...................................................... 72
Russ Lorince, Director, Research and Economic Development Office,
West Virginia University, prepared statement................... 72
Response to written questions submitted to Hon. John R. Fernandez
by:
Hon. Mark Warner............................................. 74
Hon. Olympia J. Snowe........................................ 76
Response to written questions submitted by Hon. David Vitter to
Dr. Charles Wessner............................................ 79
Response to written questions submitted by Hon. Olympia J. Snowe
to:
Brian Darmody................................................ 81
Jonathan Sallet.............................................. 84
Dr. Anthony Townsend......................................... 86
RESEARCH PARKS AND JOB CREATION: INNOVATION THROUGH COOPERATION
----------
WEDNESDAY, DECEMBER 9, 2009
U.S. Senate,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Committee met, pursuant to notice, at 2:34 p.m. in room
SR-253, Russell Senate Office Building, Hon. Mark Pryor,
presiding.
OPENING STATEMENT OF HON. MARK PRYOR,
U.S. SENATOR FROM ARKANSAS
Senator Pryor. Go ahead and call this meeting of the
Commerce Committee to order.
Thank you all for being here; I know that we have several
in the audience. And also my colleagues, thank you.
This is the hearing on Research Parks and Job Creation:
Innovation Through Cooperation.
I want to first welcome the Assistant Secretary, John
Fernandez, for being here today. Thank you for coming, and I'll
give you a chance in a few moments to make your opening
statement. I know we'll have some questions. And then, we also
have a second panel.
The Nation is still experiencing an economic downturn. The
national unemployment rate is right at about 10 percent. At a
time when the economy has stalled and international competition
is growing, we need to do everything we can to provide good-
paying jobs for American workers. While fiscal and monetary
policies provide dollars to bolster the economy, it is
innovation of new ideas, products, and technologies that
provides long-term growth.
During the last several years, the United States has
undergone a dramatic transformation as the Nation moves to an
economy driven by knowledge and technology. However, states and
regions must still have a strong economic base that can support
the creation of the next generation of manufacturing jobs.
Research parks are a typical public-private partnership
that enables knowledge flow, often between parks--excuse me--
park firms and universities, and contribute to regional
economic growth and development. By providing a location in
which researchers and companies can operate in very close
proximity, research parks create an environment that fosters
collaboration and innovation, leading to the commercialization
of new products and technology. A lot of companies and products
are spun out of these. And what they really do is, they
institutionalize entrepreneurship, and they get good momentum
going in certain areas with certain communities and certain
universities, and the successes just keep flowing from that.
Other nations view research parks as the catalyst for the
development of innovative clusters that support rapid economic
growth. One approach to creating regional innovation clusters
is through the deliberate creation of research parks. Today,
successful created innovation clusters, such as the Research
Triangle Park, are being emulated around the world, often on a
much larger scale. Many countries, such as China, Hong Kong,
Singapore, India, Japan, and the European Union, are investing
heavily in research parks to attract talented, educated
workforce. America should, too.
Unfortunately, Federal programs to support research parks
and regional innovation clusters have been lacking, but the
trend is beginning to reverse itself. This Administration's FY-
2010 budget requested $100 million for economic development
administration to support a Regional Innovation Cluster and
Business Incubator Program.
Now, I know that these work, because we have some firsthand
experience in Arkansas, especially in Fayetteville, Arkansas,
around the University of Arkansas. And that Arkansas Research
and Technology Park has created 27 companies, 273 jobs, at an
average salary of $72,000 per person. And they've done a lot of
things that we can talk about there, but, really, if you look
at the national studies, what's going on in Fayetteville,
Arkansas, we're trying to duplicate in Jonesboro, Arkansas, and
Little Rock, as well.
If you look at the national studies, you see that there's a
lot of upside to this. For example, the typical North American
research park is located in a suburban community with a
population of less than 500,000. Most parks are operated by
university or university-affiliated nonprofits. More than
300,000 workers in North America work in a university science
park, and every job in a research park generates an average of
2.57 jobs in the economy. So, we need to continue this, and
invest in this, and not fall behind the rest of the world, when
it comes to these research parks.
But, again, I want to thank the Assistant Secretary for
being here today. I look forward to hearing from you.
But, first, I want to ask Senator Johanns if you have an
opening statement.
STATEMENT OF HON. MIKE JOHANNS,
U.S. SENATOR FROM NEBRASKA
Senator Johanns. Well, Mr. Chairman, thank you.
Very briefly, I want to start out and just tell you how
much I appreciate what you're doing here. This is something
that we can really dig our teeth into and work together on a
bipartisan basis.
There are so many good examples, around this country, of
industry and universities developing very powerful
partnerships. And through these partnerships, they pool their
talents, their resources; they assemble that critical mass of
expertise and training and basic research that results in that
investment that you alluded to in the job creation. Not only is
it a win-win for the direct participants, but the community
wins, the economy wins, the state wins. And that's just good
news, in the current economic environment.
I would be remiss if I just didn't mention a wonderful
example of all this occurring back at the University of
Nebraska. The university is in the process of constructing and
developing what has been called the ``Nebraska Innovation
Campus.'' It's a public-private research campus. It's set on
250 acres that I believe will be an economic catalyst for our
state. And it sits right on the edge of the downtown in
Lincoln.
What you are trying to do here today could complement not
only the efforts of those folks in my state, but other States,
as well. The university and the community are really doing
their best to accomplish several goals. They're reaching out,
they're working with the community to foster innovation, expand
economic growth, and create jobs. They're also putting their
money where their efforts are; they're offering the expertise
of their professors, and technical instructors to help drive
R&D that supports economic development and also advances job
training.
Well, I wanted to be here today to applaud this effort, but
also to applaud your efforts. This really makes a lot of sense.
I think it's going to get a lot of support. I think if we lay
the proper groundwork, we've got a winner, here.
Thank you.
Senator Pryor. Thank you.
Senator Nelson.
STATEMENT OF HON. BILL NELSON,
U.S. SENATOR FROM FLORIDA
Senator Nelson. Mr. Chairman, thank you for having this
hearing. And, of course, it comes at an enormously important
time. And this little agency is--just can be absolutely
critical to helping out a number of areas.
Now, you particularly tied the--this hearing to the
research parks. And when this agency has the premise of helping
Federal economic development by promoting innovation and
competitiveness, then it is exactly--when you tie it in with
the research park, it just makes all the more to create private
investment and to generate jobs.
I have had the privilege, Mr. Chairman, of talking to the
Assistant Secretary before, because we--and I'm going to wait,
because I want you to hear this particular part, because you're
my chairman and I'm going to have to come to you, because we
are about to experience some massive layoffs at the Kennedy
Space Center. Here is some of the finest technical expertise in
the world, and, through no fault of their own, NASA had dropped
the ball in the last 10 years and doesn't have the new rocket
developed in time for when the Space Shuttle is going to be
shut down. And so, the Kennedy Space Center, being the launch
center, doesn't have that business. But, they do have the
beginning of a research park, called Exploration Park, that
does a lot of stuff in life sciences right now. And you're
going to have this wealth of talent, skilled labor, that needs
to be employed.
And so, when we get around to the questions--and I've
already talked to Mr. Fernandez about what could the EDA--and I
think he's going to have some answers--help us with the
situation where 7,000 people are going to be laid off. And you
know how many families that affects. That ripple effect is
three to one; that's 21,000 people, all within a confined
geographical area.
And so, as we get into this, I want to look at the unique
assets that the Kennedy Space Center has, and how that can be
leveraged to increase the private-sector investment and attract
jobs, in addition to what we already have going on there.
So, thank you, Mr. Chairman.
Senator Pryor. Thank you.
Senator Warner, do you have an opening statement?
Senator Warner. No, Mr. Chairman. Are we still on opening
statements?
Senator Pryor. We are.
Senator Warner. Good. OK, I will----
STATEMENT OF HON. MARK R. WARNER,
U.S. SENATOR FROM VIRGINIA
Senator Warner. Thank you, Mr. Chairman.
And a real pleasure to see you again, Mr. Fernandez.
And I just want to make a couple quick comments.
One, I appreciate your service as mayor and as somebody who
has been involved in the nitty-gritty of economic development,
I just want to commend--I know you've got, in your written
testimony--you cite some of the wonderful roles that research
parks can play, particularly in rural communities, and I just
wanted to point out two in my home State of Virginia, one being
down in Danville, Virginia, Mr. Chairman, who is a part of our
State that, not unlike part of Arkansas and part of Florida,
that tobacco, textile, and furniture, where the long-term
industries have been hard hit. We've got a very innovative
collaboration between Virginia Tech and the community, with an
advanced learning research institute, where we've actually
taken some of the research components from the home-based
Virginia Tech in Blacksburg, and moved them down to a rural
community, where they have built a close to $20-million
building--fully staffed up, at this point, about 20-odd start-
ups in and around it. And I appreciate the fact that you
recognize that. And on kind of a more expanded basis, back--
again, citing Virginia Tech, which I think has got some of the
best records of research facility--or research university
trying to branch out around the state, where--and, again, in
more rural Southwest Virginia, the corporate research park
there has now expanded to over 400 companies that are actively
engaged in collaboration with the university.
So, I do appreciate and concur with my colleague from
Florida, Senator Nelson, that the real value of these research
facilities and their economic development potential.
I also want to put a plug in for another issue that you and
I have discussed, and as a--I've got a former mayor, to the
right of me, who constantly reminds me of how much better
mayors supposedly are than Governors. But, whether you're a
mayor or a Governor----
Mr. Fernandez. I'll stay out of that.
Senator Warner.--you'll be----
[Laughter.].
Senator Warner.--you know, one of the things that we have--
we do a lot of in both of these positions is economic
development.
Mr. Fernandez. Yes.
Senator Warner. And--whether it's a state or local economic
development effort--and one of the things we've been working
closely with you on in your department--and this is really to
share with my colleagues--and we've got another Governor, a
good friend, Governor Johanns--or Senator Johanns, behind--
across the table--we've been working on developing legislation,
in conjunction with EDA, that would say, ``How do we supplement
existing State and local economic development efforts for site
location for those companies that--where the jobs might
otherwise be going abroad?'' So, we've got and America Recruits
Act legislation, that we're looking at introducing shortly,
that would add a--up to a $10,000 forgivable loan; basically a
$5,000-per-year credit that would be--for 2 years--that would
be forgiven, as long as the jobs actually stay in this
location, that would supplement existing economic development
efforts. Because, too often, you know, it's--our economic
development is Virginia steals from Arkansas, and Arkansas
steals from Florida, and vice versa. This would be an effort
that would not allow to supplement those efforts, but it would
be for those companies, particularly foreign companies and
others, that are looking at investing in America.
I recall, a few years back, competing for a Dell plant that
ended up--was looking at Korea, as well, where their national
government was putting a lot of resources on the table. This is
a small effort to add, at a national level, supplemental
assistance to the kind of State and local economic development
efforts, so that--again, not to compete between Nebraska and
Virginia, but if we've got that German company that's looking
at choosing Nebraska or Quebec, or that Indian company that
might be talking about moving back some of those mid-tech jobs
that went abroad, that, kind of, call-center-plus, where we
weren't competitive a few years ago, but now, with broadband
and--a lot of our rural communities are much more competitive--
could be that supplemental assistance. It would be money that
would only be spent if jobs were added to the marketplace. It
would not require--it would be a--working through EDA--but it
would not require massive new bureaucracy administration,
because we've already got that in place at the local level or
at the State level; it would be that add on. And for those jobs
that otherwise might end up aboard, to try to make sure those
jobs locate in this country. I think it would be a great value,
and I'd welcome my colleagues' ideas and input on this
legislation. We hope to be introducing it in a bipartisan
fashion in the next few weeks.
And, again, I want to thank, particularly, Administrator
Fernandez for his great effort in helping us get this program
together.
Thank you, Mr. Chairman.
Senator Pryor. Thank you.
Senator Begich.
STATEMENT OF HON. MARK BEGICH,
U.S. SENATOR FROM ALASKA
Senator Begich. Thank you, Mr. Chairman. I'll be brief. I'm
anxious for the Assistant Secretary to talk a little bit about
how he sees this working.
I want to commend you, as mentioned earlier by several of
our colleagues here, for your effort in bringing this forward.
I think this timing couldn't have been better, in a lot of
ways, as we struggle in figuring out how to move our economy
forward with an over-10-percent unemployment rate, and working
to figure out what's the right approach in engaging and
partnering with entrepreneurs, small businesspeople,
universities, and others, to find the best way to bring new
jobs to the equation. But, also recognizing that, as we move
forward, hopefully after the first year, on some new energy
policy for our country--and energy technology is going to be
huge in the future. It's big now, but I think the United States
is losing its positioning in the global markets and the
technology development, and I think this type of research-park
job-creation idea may be able to, again, put us back in the
forefront.
So, I thank the Chairman for bringing this forward. I'm
looking forward to helping support in any way I can, and then
also hearing from the Administration how we can--not only if
successful--the Chairman is successful in bringing the bill
forward to a positive conclusion, how we implement it on a
rapid basis, because I think sometimes we get great
legislation, but it sits idle in the bureaucracy and waits and
waits, and before we know it, we're--you know, other countries
are moving much more--I mean, they're just moving at a rapid
pace. And we have--need to catch up, in some cases, and be the
leaders. And, obviously, in my area, of energy for Alaska, you
know, the scenario--we're losing ground in. And yet, we develop
some of the greatest technologies, but other countries have
moved much further than we are. So, I look forward to it.
Again, Mr. Chairman, thank you for bringing this idea
forward and having this hearing today.
Thank you.
Senator Pryor. Thank you.
I'm going to go ahead and introduce our first panel, our
panel of one, and that would be Mr. John Fernandez. He's
Assistant Secretary of Commerce for Economic Development and
Administrator of the Economic Development Administration. Prior
to his appointment, Mr. Fernandez led the New Development and
Acquisition Team at First Capital Group, an Indiana-based real
estate investment firm. And he has a long resume. I'm not going
to read it all, but very accomplished, very diverse background.
But, to Senator Begich's eternal glee, he is the former Mayor
of Bloomington, Indiana.
So, welcome. Thank you.
STATEMENT OF HON. JOHN R. FERNANDEZ, ASSISTANT
SECRETARY OF COMMERCE, ECONOMIC DEVELOPMENT
ADMINISTRATION, U.S. DEPARTMENT OF COMMERCE
Mr. Fernandez. Thank you, Chairman Pryor.
You've all been so kind, I'd, kind of, like to just quit
while I'm ahead and say thank you, but----
Members of the Committee, I really do appreciate the
opportunity to testify on behalf of the Economic Development
Administration.
You know, our policy priorities are designed to encourage
collaborative regional economic development. You know, you
noted, at the beginning, the title included ``cooperation,''
and I think that's an essential part of what we try to do at
the local and State level as we work to promote
competitiveness, innovation, cultivate entrepreneurship, and
spur our economic development partners to take advantage of
opportunities in a global marketplace.
The Obama Administration has developed a strategy to lay a
new foundation for America's innovation economy, investing in
American innovations, such as fundamental research, world-class
workforce, our physical infrastructure, and information
technology. These all comprise key elements of the President's
strategy.
As the economy begins to stabilize, our focus shifts from
rescue to recovery. And at EDA, our priorities will reflect our
view that, moving forward, we need a new framework for
sustained economic growth.
And this framework builds on two very important economic
drivers, and that's innovation and regional strategies. Now,
this new framework really helps build the 21st-century
infrastructure, which includes science and technology parks.
Science and technology parks, when integrated into the
region's innovation strategy, can help create the environment
where America's world-class scientists can collaborate with
entrepreneurs, they can commercialize technologies, create jobs
and businesses that provide the products and services that are
in demand in the global marketplace.
Science parks are seen by many as a very effective policy
tool to realize larger, more visible returns on the Nation's
investments in research and development. The intent of science
parks is to encourage greater collaboration between our
universities, private research labs, large and small companies,
all in order to convert new ideas into innovative technologies
for the market. They're widely used as a tool to encourage the
formation of innovation, innovative high-tech companies, they
generate employment and make existing companies more
competitive through cooperative R&D, shared facilities, and all
the benefits derived from colocation. These are important--an
increasingly important tool for national and regional economic
development.
As was mentioned by many of you, the investments in
research parks are being launched all over the world. In many
instances, our international competitors come to the United
States, they visit the Research Triangle, they go to other
places around the--our country, and they learn from us some of
the best techniques for building these innovative economies,
and then go back to their countries and invest very heavily in
this same innovative approach to economic development. It's
important, here, that we continue to sustain our efforts and
investments in this proven methodology for innovative job
creation.
The Surrey Research Park outside of London, for example, is
currently a home of 110 tenant companies that help to support
the tech transfer work from the University of Surrey and a
wider knowledge economy into their international commerce
efforts. Now, the Surrey Research Park continues to contribute
significantly to their regional economy, even during the global
recession. These are important sources of income and employment
for all of the southeast region. And this is just one of many
international examples.
As was alluded to earlier, here in the United States there
are many examples that EDA has helped fund. I won't go into all
of them. And we're going to run short on time, so I'll be happy
to, maybe, present some examples, if you need them, during the
Q&A.
But, as was mentioned, as well, the 2010 budget for EDA
includes additional funding to support regional innovation
clusters, which are a part of this important innovation
infrastructure.
I'm going to just wrap it up there, and, again, just thank
the Chairman and the members of the Committee for inviting me
here today, and I certainly look forward to any questions you
might have.
Thank you.
[The prepared statement of Mr. Fernandez follows:]
Prepared Statement of Hon. John R. Fernandez, Assistant Secretary of
Commerce, Economic Development Administration, U.S. Department of
Commerce
Introduction
Chairman Rockefeller, Ranking Member Hutchison, and members of the
Committee, thank you for this opportunity to testify on behalf of the
Economic Development Administration (EDA). EDA's mission is to lead the
Federal economic development agenda by promoting innovation and
competitiveness, preparing American regions for growth and success in
the world-wide economy. Through grants to local government entities and
eligible non-profits to create jobs and generate private investment,
EDA continues to seed our communities for success. Our investments
create the conditions in which jobs are created, often in the midst of
economic hardship or adjustment.
EDA's investments have two major goals: creating higher-skill,
living-wage jobs and attracting private capital investment. EDA's
achievements are a reflection of our policy priorities: to encourage
collaborative regional economic development; to promote competitiveness
and innovation; to cultivate entrepreneurship; and, to spur our
economic development partners to take advantage of the opportunities of
the global marketplace.
Obama Innovation Strategy
The Obama Administration has developed a strategy to lay the
foundation for America's innovation economy of the future. The Office
of Science and Technology Policy and National Economic Council's A
Strategy for American Innovation: Driving Toward Sustainable Growth and
Quality Jobs builds on well over $100 billion of American Recovery and
Reinvestment Act (Recovery Act) funds that support innovation,
education and infrastructure in the Recovery Act, the President's
Budget, and novel regulatory and executive order initiatives. One of
the key areas focuses on investing in American innovation, such as
fundamental research, a world-class work force, physical
infrastructure, and information technology.
EDA is working to sharpen our strategic priorities in order to
better promote innovation and entrepreneurship while integrating
economic growth, environmental sustainability and global
competitiveness. One way in which we can achieve these priorities is
greater support for science and technology parks, which I would like to
address here today.
Science and technology parks provide the perfect environment for
America's world-class scientists to collaborate with entrepreneurs to
commercialize technologies and create the products and services that
the global marketplace is demanding. Some might argue that in today's
world, where advances in telecommunication have made it easier to share
information and collaborate from dispersed locations, the need for
science and technology parks is a thing of the past. However, ongoing
economic research finds that commercialization and technology-based
entrepreneurial activity continue to cluster near world-class
scientific institutions where scientific discoveries take place. U.S.
universities provide the base for new industries and jobs of the
future, but discoveries alone are not enough to form these industries.
This is where science parks come in.
Specifically, these types of science parks are seen by many as an
effective policy tool to realize larger and more visible returns on a
nation's investments in research and development by bringing together
established technology companies, technology incubators, and world-
class universities. The intent of science parks is to encourage greater
collaboration among universities, research laboratories, and large and
small companies, in order to facilitate the conversion of new ideas
into innovative technologies for the market. They are widely used as a
tool to encourage the formation of innovative high-technology
companies, generate employment, and make existing companies more
competitive through cooperative R&D, shared facilities, and the
benefits derived from co-location. Science Parks are a rapidly growing
phenomenon and an increasingly common tool of national and regional
economic development.
International Community
Many nations are currently adopting a variety of directed
strategies to launch and support the development of science parks,
often with significant financial commitments and policy support. To
create a better understanding of the scope and scale of programs
overseas to support the growth and development of science parks and to
improve our understanding of the scale and contributions of parks in
the U.S., the National Academies convened an international conference
on global best practices in science parks. The resulting report
captures the rich discussion of the diverse roles university and
laboratory-based science parks play in national innovation systems. It
was noted that in many cases, science parks are expected to generate
benefits that go beyond regional development and job creation. Science
parks are seen increasingly around the world as a means to create
dynamic clusters that accelerate economic growth and international
competitiveness.
In the European Union, science parks are supported through a
variety of local, national and EU programs. There are many programs
that support the individual companies located within the parks.
The Surrey Research Park outside of London is currently home to 110
tenant companies that help to support the technology transfer from the
University of Surrey and wider knowledge economy into the international
business world. The Research Park, developed by local and county
planning authorities and the University, continues to contribute
significantly to the regional economy, even during the recession, and
is therefore an important source of income and employment for Surrey
and the entire South East region.
In Daejeon, South Korea, the national government began construction
of Daedeok Science Town in 1973, an immense science park that has
evolved today into Daedeok Innopolis, a research and development
district made up of more than 20 major research institutions and more
than 40 corporate research centers. Over the last few years, a number
of IT venture companies have sprung up in this region, which has a high
concentration of Ph.Ds in the applied sciences and is famous for
registering around 30,000 patents in Korea and abroad.
EDA Funded Projects
There are many examples of successful science parks across the
nation, and EDA is proud to have played a role in their development.
The Sandia Science and Technology Park in New Mexico, in
which EDA has invested nearly $3 million, is an entire
community dedicated to linking public sector research with
private sector business opportunities. The park has 30
companies employing over 2,100 people in higher-skill, higher-
wage jobs.
EDA also invested $4.7 million in Recovery Act funds to
support the development of the Arizona Bioscience Park in
Tucson. The new biosciences park will provide a separate
facility designed especially for companies working in
biosciences, biotechnology, life sciences and pharmaceuticals.
Its sophisticated, high-technology biosciences facilities will
be integrated into a multi-use development, including a hotel
and conference center, retail and residential development.
Another example is the Virginia Tech University Institute
for Advanced Learning and Research in Danville. Virginia Tech
established a branch of the University in this very rural area
near the North Carolina border. The regional economic impact of
this science park may be felt well beyond the state line. EDA's
University Center, Planning, and Public Works grants have
supported this effort for its entire history. Most recently,
EDA awarded $1.8 million for technology commercialization
activities (focused on nanotechnology, polymer science, etc.).
The United States has made great progress in park creation and the
generation of high-tech clusters, but we must continue to pursue public
policies that encourage innovation and the commercialization of new
technologies if we wish to remain a leader in high-tech industries.
As you know, the President's Fiscal Year 2010 Budget requests $50
million for EDA regional planning and matching grants to support the
creation of regional innovation clusters that leverage regions'
existing competitive strengths to boost job creation and economic
growth. Science parks play an important role in this equation. The
request would enable EDA to provide greater support for science and
technology parks so that the United States can seed future science park
successes similar to the past successes I have just discussed.
Conclusion
Chairman Rockefeller, Ranking Member, Hutchison, and members of the
Committee, thank you for your time today and for inviting me to discuss
what I consider to be a critical component of our Nation's economic
recovery. Please note that this testimony does not address S. 583,
which is pending before the Committee. Before the Committee considers
that bill, I would appreciate the opportunity to share the
Administration's views on it. Thank you. I look forward to answering
any questions you may have.
Senator Pryor. Thank you.
And what I'm going to do for my colleagues--I'm going to
split my time here, I'm just going to ask one question, and
then go around the horn here with my colleagues, and allow them
to have their allotted time to ask questions.
But, the first question I have, just to lead us off here,
is, How do you envision universities, research parks, business
incubators, regional clusters all working together to make the
U.S. more competitive and to stimulate the jobs that we need in
this country?
Mr. Fernandez. Well, thank you. I think the--you know, the
question sort of frames the answer in a way that, hopefully, is
understandable. But, you know, they have to work together.
Investing in research parks or science parks--it's not the
notion of a ``field of dreams,'' that you just build a facility
and everyone comes. It's really just part of that entire
ecosystem that has to be created to support entrepreneurship
and support innovative-led economic development.
In most instances, there is a strong public-private
organization that brings together all those--the leadership
from those key stakeholders, to ensure that there is a shared
strategy, that every one is moving in the right direction, that
we're leveraging the key competitive advantages of that region.
But, it's through that kind of public-private partnership that
develops the regional strategy that enables all of the
stakeholders to work together in a very smart way.
Senator Pryor. Thank you. And we may have some follow-ups
on that.
Senator Johanns.
Senator Johanns. You mentioned, in your testimony, that
you'd have some examples. I would like to hear about some of
those examples. I'm especially interested in your opinion as to
what they were doing right. What is the combination of things
that make it work, if you will?
Mr. Fernandez. Sure. You know, in Sandia Science and Tech
Park in New Mexico, that's a park that has really supported a
broad public research institution and integrated it well into
the private-sector companies. There are 30 companies there now,
that employ over 2,100 people in very high-wage high-skilled
jobs. Senator Warner mentioned the Virginia Tech example, in
Danville. You know, there are others, but I think the key
element--and that's why I say that, you know, the--this is an
important part of the infrastructure, when it's embedded in a
sound regional innovation strategy. And that way you bring into
it not just the physical component, whether it's the real
estate or a building, but you're pulling together venture
capital, seed capital, you're building in technical assistance
from serial entrepreneurs that can help creative people figure
out the best way to move an idea into an actual business. It's
the support of shared facilities, when appropriate,
particularly in biotech. It's a combination of all these
different elements that create the entire ecosystem that
supports innovation economy.
Senator Johanns. From your perspective, give us some
advice, in terms of what role we might play, here at the
national level. You know, these are going to be driven at the
State level, local level. They will be the main partner, if you
will, the--kind of, the controlling-interest partner. But, what
can we do? If you were to give us some advice, what are some
key elements we should be focused on as we think about our role
here?
Mr. Fernandez. Well, I guess I would just go back to what
was included in our current budget proposal, which--and so, my
comments will be fairly limited to at least the EDA perspective
on this.
I think what we have to do is introduce into the Federal
discussion a strong sense of commitment to the notion of
regional strategies. Many folks referred to the work in the EU
and other parts of the world, and it's very focused on regional
advantages. If you're a small business in--you know, pick your
town--and you're trying to compete in a global marketplace,
independently, that's a much steeper hill to climb than if
you're embedded into a regional strategy where there are
strength in numbers. So, I think keeping a focus on this idea
of regional strategies is very important.
At the EDA, we're trying to, you know, focus the
investments we have by using the regional strategies as a
organizing principle for where our limited resources go into
specific grant requests, because we know if it's tied to that
regional strategy, there are so many more opportunities to
leverage other State and local support, but also private-sector
support, and really build on the competitive advantages of that
area. So, I think the regional component is very important.
Senator Johanns. OK.
Thank you, Mr. Chairman.
Senator Pryor. Thank you.
Senator Nelson.
Senator Nelson. Mr. Chairman, thank you again for your
zeroing in on this subject of the research parks and EDA. And
we're blessed to have quite a few research parks; right now,
ten and another two that are coming online in Florida.
But, I want to confine my question to you about the EDA's
role in helping out the folks that are going to be dislocated
at the Kennedy Space Center, and the fact that we do have the
beginning of this research park there that also augments the
very significant research park over at the University of
Central Florida, in Orlando, this new research park at the
Kennedy Space Center, called ``Exploration Park.'' And given
the fact that the new rocket is not going to be ready for
another 6 years after the Space Shuttle is shut down, a
decision that occurred as a result of budgetary decisions that
occurred over the last decade, and now this dislocation of
highly-talented, highly-skilled people, what are some of the
things that you think that EDA might be able to do to help?
Mr. Fernandez. Well, you know, I guess, fortunately and
unfortunately, depending on how you look at it, EDA has, you
know, a lot of experience in dealing with plant closings and
BRAC changes. So, there's a wealth of experience, in terms of
how to pull together some of the key institutions and develop
renewed strategic plans.
You know, as recent as October, I know the people in our
Atlanta regional office were having discussions with the
Technological Research and Development Authority to look at
potential proposal to expand the original incubator, which EDA
actually helped fund, back in 2005. The Brevard Workforce
Development Board, along with the TRDA, in June 2009, began a
major study of some of the workforce issues around the NASA
facility, and that was an EDA-funded study. So, that work has
already begun, in terms of assessing some of the human capital
and how to develop a longer-range strategy to, kind of, create
the businesses and accelerate some of the job opportunities for
the existing workforce.
You know, and it's kind of a--one of the points I wanted to
mention, that I did not get out very clearly, in the context of
the previous question, is that, you know, when we look at what
makes a science or research park successful, another very
critical piece of it is the workforce and building into the
strategies, you know, the traction of the right kinds of
entrepreneurial activities that feed into the existing
workforce. So, that's clearly a very important ingredient,
among these others, that make a successful research park
environment.
Senator Nelson. Well, are there any particular things that
come to mind, in the Kennedy Space Center's assets that could
be leveraged to increase the private-sector jobs and to attract
jobs?
Mr. Fernandez. Well, clearly, there's an incredible amount
of research talent and engineers and scientists. I won't
pretend that I know the best roadmap today, in terms of how to
connect all the dots that are part of that industry, but there
have been, like I said, the--they are working together at the
local level, already, to start identifying the most strategic
way to leverage those assets.
Senator Nelson. If we just leave it up to those local
institutions--and I've been involved in getting appropriations,
in order to carry out what you said, with the TRDA and the
Brevard Economic Workforce Board--but those are studies. And
studies are one thing. Moving jobs is another thing entirely.
Mr. Fernandez. Yes.
Senator Nelson. So, how do we get from a study over to the
next thing?
Mr. Fernandez. Well, I mean, the truth of the matter is, a
lot of it really does depend on those local stakeholders. We
can provide technical assistance. We can help identify and
build strategies. But, ultimately, it is the private sector and
the local players that have to implement it. And so, hopefully,
we can provide the--some of the resources to help build the
plans. We can seed some of the investments, whether it's in
additional workforce investments, whether it's in support of
the research, or even into the infrastructure. But, you know,
they have to fit into that local strategy if it's going to have
traction that's sustained over the long haul. And we're--you
know, I think we can build a toolkit that can help folks
rebuild their, you know, new future, but the local actors
ultimately have to be highly motivated and engaged to build
that future.
Senator Nelson. And that seeding of the investment, seeding
of the infrastructure; that would apply as well to the research
parks.
Mr. Fernandez. Absolutely. And, you know, we--at EDA, we
certainly have funded quite a bit of infrastructure as part of
research and science parks--incubators, graduation facilities,
et cetera. And, you know, if we embed that into a well-
developed regional strategy, it can be a great way to
accelerate immediate job growth while also building the right
foundation for more sustained effort.
Senator Nelson. Thanks.
Senator Pryor. Senator Begich.
Senator Begich. Thank you very much.
I want to kind of stick on the bill, for a second, if I
can, just, kind of, some technical comment or questions.
First, obviously you've read the legislation, gone through
it, to some degree. What do you believe--do you think, first,
that your department, with the current resources you have and
the ones that may be allocated through this legislation, will
be enough for you to have the expertise and be able to move
requests through in a timely manner, and also set up the
program?
Mr. Fernandez. Yes----
Senator Begich. What do you think some of the challenges
might be that we need to be aware of?
Mr. Fernandez. Well, you know, to--I mean, candidly, the
bill has not been fully vetted through the DOC and OMB
structure, so it's a little difficult to get too technical at
this point, but we certainly are prepared to do that as the
bill moves forward.
I think the--in terms of the personnel, I'm confident that
we have the expertise and the capacity to implement a program
like this. And if the bill moved forward, we would certainly
want to work with committee staff and others to develop the
right kind of application mechanisms and metrics to make it a
very strong program.
Senator Begich. Do you--in recognizing your statement that
it hasn't gone through its whole process on your end of it, do
you have any red flags that have popped up, just from the
cursory review or discussion within your area? I understand
there's more vetting to continue.
Mr. Fernandez. Well, in a general way. The initial
conversations I've had with Chairman Pryor have revolved around
just ensuring that the--as part of the process--and I think
it's something that can be dealt with in the context of
developing the applications--it's to ensure that you really
have that kind of strong public-private governance structure--
--
Senator Begich. Right.
Mr. Fernandez.--so that if--you know, I mean, the private
sector and the public sector are going to have slightly
different objectives, in terms of how to look at investments in
the science part. If it's a fully--if it's strictly a private-
sector investment, their motivations might be a little
different than if it's a broader regional public-private
partnership. And I'm not saying that's a--you know, it's a
better motivation, or a worse; it's just different.
Senator Begich. Just have different criteria, potentially,
in the decision.
Mr. Fernandez. Yes, in terms of----
Senator Begich. Yes.
Mr. Fernandez.--timelines and motivations, in terms of how
they define success. And--but, I think the important thing is
to ensure that you have that broad governance structure of a
public-private partnership that's looking at the entire
regional strategy for innovation-led economic development, so
that you've got the workforce folks involved, the research
folks involved, the business community involved, so it's not
just entirely focused on the real estate component, but the
much broader regional strategy.
Senator Begich. Very good.
And if I can follow up, because the Chairman pointed out,
and I appreciate that it--you know, I love mayors, and I think
they know exactly what they're doing, and so, I appreciate--I
had to do that for my Governor friend, next to me.
[Laughter.].
Senator Begich. But, knowing that--one of the things you
mentioned to Senator Nelson's commentary and concern that he
has, how does EDA engage in local community when they're trying
to figure it all out, in the sense of a situation as he laid
out. How--where does EDA play a role? When do they play a
role?--I guess is the first point. And then, how do you see
their role?
Mr. Fernandez. Well, you know, EDA is administered through
six regional offices, and we have economic development
representatives assigned to various regions within regions. And
so, their daily activities involve maintaining a strong network
and ongoing communications with many of the people on the
ground throughout the region, so that they--like in the case
of--that Senator Nelson mentioned, I mean, those conversations
about what to do when the program slows down, they start well
before the program slows down, because they have that kind of
on-the-ground intelligence. And in that context, there are lots
of opportunities to provide consultation, to point folks in
directions, not just in terms of the programs that EDA is
engaged in, but the entire Federal Government. You know, we're
pressing very hard--and I'm sure you've heard this before, but
the Obama Administration is absolutely committed to blowing up
silos and looking at these things much more from a place-based
solution, not individual programmatic solutions, but how do we
marshal the resources of all the relevant Federal agencies to
come in and engage. And, you know, the people at EDA, in the
regions, are professionals, understand the wide array of
Federal programs that can be helpful.
So, we do that. We do some, you know, networking,
matchmaking, seeding of strategic thinking, and try and support
those projects on an ongoing basis. And in many cases, as was
mentioned with the incubator near the Kennedy Center, you know,
we did the initial investment 5 years ago, but once an
investment's made, we don't--usually that relationship doesn't
stop. There's ongoing communication, and we look for other
opportunities to leverage investments.
Senator Begich. Very good. Thank you. My time has expired,
but thank you very much.
Mr. Fernandez. Thank you.
Senator Pryor. Thank you.
Senator Warner.
Senator Warner. Thank you, Mr. Chairman.
I just want to make one comment and one very brief
question.
The comment is just that I'm very supportive of your
effort, in terms of these innovation centers and research
capabilities, and commend, again, Administrator Fernandez for
some of the efforts that EDA has taken in my State, in
Virginia.
But, you know, one question I'd love us to think about--I'm
not sure this is the right forum, and I'm not going to put the
Administrator on--but, you know, I used to be in the venture
capital business for years, and be one of those folks who tried
to help fund those innovations as they came out of those
research parks, through that valley of challenge or death, 'til
they get to the point where they're sustainable and, you know,
one thing, as an overall system, we've seen in the last decade,
I believe, is an enormous migration that is already in the tax
code, but it seems to have been expanded, of debt over equity.
And, you know, why would anybody go innovate anymore? Why would
anybody go and be an entrepreneur and--if you can go create
some financial engineering instrument on Wall Street? And I've
nothing against Wall Street, but--you know, but if--you can
supposedly get much better guaranteed returns, supposedly with
no risk--and how we rebalance our financial system to give a
little more--to take away some of the preference of
overleveraged debt to equity. We're going to need more equity.
As much as EDA can do, we're going to still need people that
will then be willing to go be innovators, go be entrepreneurs.
And then having a path to success that existed in the 1970s,
1980s, and 1990s, and, I think, unfortunately has--if we look
around our country, in the last decade, has not been as
prevalent as--and in--both from the kind of quality of talent
becoming entrepreneurs and, kind of, the system and where the
financing has gone. I--just a comment.
And my quick question is, I would love for you to take a
moment--and I know this is more about the Chairman's bill and
innovation centers--but, if you wouldn't mind taking a moment
and commenting on the initiative we've been working on, in
terms of having this site location initiative, to try to
support--particularly bring offshore jobs back into America,
that can supplement local economic development efforts. I'd
appreciate any comments on that.
Mr. Fernandez. Thank you, Senator Warner.
The offshoring concept, I think--you know, I guess one of
the things that strikes me about it is that, not only is it a
mechanism to potentially bring back that sector of employment
to the United States, but bring it back into some of the most
highly targeted areas, in terms of distress. So, it could be a
very meaningful way to leverage the competitive advantages of
some of these rural areas while also supporting the broader
national agenda, in terms of bringing those kinds of jobs back
to the United States.
We've not delved deeply into the vetting process on that
particular bill, as well. So, I think I probably need to leave
my comments there. But, we certainly look forward to continuing
the conversation.
Senator Warner. Look forward to working with you.
Thank you, Mr. Chairman.
Senator Pryor. Thank you.
Senator LeMieux.
STATEMENT OF HON. GEORGE S. LeMIEUX,
U.S. SENATOR FROM FLORIDA
Senator LeMieux. Thank you, Mr. Chairman, and thank you for
holding this meeting today and focusing on this important
issue.
Administrator, I want to follow up on something that
Senator Warner just mentioned, this death valley issue, where
entrepreneurs--you have scientists at the bench coming up with
a good idea, but the venture capitalists want to see a
prototype, and that middle section there, where good ideas go
to die. We need funding for those matters. I just had,
recently, some folks in my office affiliated with the life
sciences industry--which I'll also throw a question to you
about in a minute--and University of Florida, which does very
good at tech transfer in Florida--and they tell us that, ``If
we could just get some more funding in that middle area, that
we could bring so many more inventions and so many more jobs to
our State.'' And I wonder if the administration has a theory
about that. Is that a ripe area for us to be focusing on?
Mr. Fernandez. Yes, absolutely. You know, within the EDA,
we don't directly engage in direct investment in private
companies. We've supported revolving loan funds that have the
potential to serve that purpose. There are certainly other
parts of the Federal Government that are focused on this very
clearly. I mean, the SBA has had a number of discussions about
how to accelerate access to capital. Our Secretary of Commerce
has, you know, launched his Office of Innovation and
Entrepreneurship. These are all very front-burner issues for
the administration, although it's outside the focus of the EDA.
Senator LeMieux. Right. I am following up on your thread of
eliminating silos and having everyone work together. I hope
that that's something that you can bring back, because it is a
frustration. We--folks are having a frustration with the SBA.
I'm not casting aspersion as to which administration, but it
just doesn't seem like it's working as quickly as it could
have. And to the extent that you can bring that message back, I
would appreciate it.
Mr. Fernandez. Will do.
Senator LeMieux. I also want to speak to you--Senator
Nelson spoke a lot about the space industry and concerns
there--I want to talk to you about the life sciences industry
in Florida, and research parks. We are very fortunate that
Florida is becoming an emergent life science power, a
bioscience power. But, the challenge that we have--and this
goes to your idea of a regional strategy, and maybe you could
just give us some advice for Florida--is that these life
science centers are spread out all through--across the state.
And I've talked to venture capitalists--it's something I
focused on even before my time in the Senate--and they're
challenged, in Florida. They're challenged by trying to get
around the state. We're a big state. We're geographically
disparate. It's hard to get from one place to the other. We've
got University of South Florida doing life science, we have
University of Florida, we have Burnham in Orlando, we have
Torrey Pines, we have Scripps, Max Planck, down in Palm Beach
County, and the University of Miami. These are tough places to
try to find your way around, as opposed to other places in the
country, where you can do some one-stop shopping.
What advice do you have for emerging industries in
different states, trying to focus on particular areas of the
market, about how they can work together to establish these
clusters? Because I think our challenge down in Florida is that
if you put all of these locations together, we'd be a super
powerhouse. It'd be a life sciences Silicon Valley. But the
fact that they're disparate makes it challenging.
Mr. Fernandez. Yes, and I think--you know, part of that is
developing this--if you will, a public-private partnership that
serves as an umbrella organization that facilitates the
cooperation and integration as strategy among those various
regions or parts of your state. You know, we provide, and can
provide, a lot of the technical assistance to facilitate those
conversations. That's what we're seeing work elsewhere. And
there's no magic bullet here. But, if you can get all the right
people at the table to start addressing those issues and
looking at how they can work in a collaborative way, they can
identify who's doing what and where they can work together and
not compete against each other in certain ways, I think you
make tremendous progress.
I mean, not all--you know, there's an opportunity to do
some of these things virtually, as well, as we've seen with
some other examples--the folks who are up in Cleveland, with
JumpStart, very successful organization that's really designed
to bring together venture capital as well as the innovators, to
accelerate job creation. They've done a phenomenal job of
bridging geography and using, you know, some virtual
mechanisms, as well.
But, I think, at the end of the day, the most important
thing is to get people together and start building those
strategies among the various stakeholders.
Senator LeMieux. I appreciate your answers.
Thank you, Mr. Chairman.
Senator Pryor. Thank you.
Senator Udall.
STATEMENT OF HON. TOM UDALL,
U.S. SENATOR FROM NEW MEXICO
Senator Udall. Thank you, Chairman Pryor.
And let me, at the beginning, just ask to put my statement
in the record, and then get directly to----
Senator Pryor. Without objection, thank you.
Senator Udall.--questions--questioning, here.
[The prepared statement of Senator Udall follows:]
Prepared Statement of Hon. Tom Udall, U.S. Senator from New Mexico
I want to thank Chairman Pryor for holding this hearing today and
for his leadership in promoting innovation and job growth through
stronger science parks.
Senator Pryor's bill to promote science parks, the ``Building a
Stronger America Act,'' would help research parks across America by
providing grants and loan guarantees. These are appropriate investments
to spur innovation and promote technology transfer.
New Mexico is home to five science parks that employ more than
4,200 people. I am proud that Sandia Science and Technology Park,
located in Albuquerque, was recognized by the Association of University
Research Parks (AURP) as the Nation's ``Outstanding Research Park of
the Year'' in 2008.
Sandia Science and Technology Park helps private firms
commercialize technology developed at nearby Sandia National Lab. This
science park helps almost 30 firms that employ over 2100 workers at the
science park.
In addition, the Sandia science park has indirectly created over
5,000 jobs. These are very good jobs, too. The average wage at this
science park is about $70,000 a year, which is almost twice the average
wage for the surrounding region.
This is just one example of how research parks in New Mexico and
across the country help create good jobs and fuel American economic
growth.
However, there are many challenges to building successful
``innovation clusters'' or regional hubs for high technology or other
strategic sectors. Not every science park has been as successful as
those hubs at Stanford in Silicon Valley or the Research Triangle in
North Carolina. America also faces stiff competition from other
countries that are eager to create innovation clusters of their own.
So, I look forward to hearing from Assistant Secretary John
Fernandez and all our witnesses today about what policies will best
assist science parks and spur economic growth in all areas of the
country.
Senator Udall. And thank you for holding this hearing. A
very important subject, science parks, and I'm glad you've
focused in on this. And I also think, Mr. Chairman, you have a
very good bill--S. 583, Building a Stronger America Act--and
I'd like to be included as a co-sponsor on your bill, because I
think----
Senator Pryor. OK. We'll take care of that.
Senator Udall.--it's a fine piece of work.
Senator Pryor. Thank you.
Senator Udall. The--your testimony, Assistant Secretary
Fernandez, on science parks, talked about the Sandia Science
and Technology Park. And you're probably aware, they just
received an outstanding award, called the ``Outstanding
Research Park of the Year,'' which I'm very proud of. Sandia is
in Albuquerque, New Mexico. And it's one of these quality
institutions that's always out there on the cutting edge.
And I'm wondering--you know, your testimony cites that the
EDA has invested $3 million to support this leading science
park, which, last year, this award was given to--and I'm
wondering how that compares. You know, when we talk about
Europeans and other countries investing, how much are they
investing? What are the comparative numbers there, and what do
they tell us?
Mr. Fernandez. Well, you know, I can't tell you that. But,
I know that there are several gentlemen, behind me, who are
coming up here, who have some very detailed numbers on that,
from what I would suspect.
But, the interesting thing about what--at least in part
what I'm hearing, is that while there's a very--I guess--I
can't talk about the numbers, specifically, but I can talk
about the policy framework. And relative to the United States,
at least in the European community, I mean, you have, you know,
Cabinet-level, regional policymakers. And they look at things
in that kind of regional notion, which is a big difference from
the way we are organized here. So, there's a focus that's
different.
In terms of the specific investments, again I'd have to get
back to you on that, Senator. But, I suspect that one of the
folks behind me has got that in their testimony.
Senator Udall. OK. Well, the--and I'm sure they do. I--and
the comparison, I think, is that China and Hong Kong and France
and others--and we're going to probably hear from them--are
investing a lot more. And I think that says a lot about where
we should be heading.
One of the important things that we try to do in New
Mexico, and push Sandia National Laboratory in this area, is
the area of technology transfer. So, you're taking research
institutions and trying to--such as the national labs, and then
trying to get that technology out in the community. And I'm
wondering what else the EDA can do to promote science parks as
incubators and engines for economic growth and job creation in
regions across the country, and especially promoting technology
transfer and commercialization.
Mr. Fernandez. Well, again, Senator, I think we're--the
role we try and play is to, at the front end, ensure that--
either through a process that we fund or just in recognition of
processes that have already happened, ensure that there's a
really well-grounded strategy in place to leverage the
investment. And, as I had mentioned before, it's not a ``field
of dreams'' kind of approach to economic development; you have
to have the other complementary activities and investments in
place so that those facilities really do produce the kind of
job creation that you need.
So, I mean, if the strategy's there, we can build on it. If
it's not, we can help provide technical assistance to build a
strategy. And then, where necessary, get in and actually invest
specifically in the facility.
I'll just make one other comment, if I could. And, you
know, the--Senator Warner was talking about, sort of, the
differences, in terms of how our economy is changing, and one
of the big differences is that many of our large companies, you
know, aren't building the massive R&D labs within their own
facilities anymore. And they're relying heavily on small
entrepreneurial scientists who are developing some of the base
research and early commercialization activities. And then, as
those products or those ideas move forward, they acquire and
bring them into the fold for, you know, further development and
distribution. In the context of that kind of business model,
investing in science parks, investing in wetlabs, investing in
incubators, graduation facilities, that's all very critical
infrastructure for the 21st century economy. And that's why I
think the science parks and other kind of work we're doing with
incubators and graduation facilities is absolutely essential.
Senator Udall. Thank you very much.
Thank you, Mr. Chairman. I yield back.
Senator Pryor. Thank you.
Senator Klobuchar.
STATEMENT OF HON. AMY KLOBUCHAR,
U.S. SENATOR FROM MINNESOTA
Senator Klobuchar. Thank you very much. And thank you,
Senator Pryor, for holding this important hearing. I know
you've been long advocating for this important subject, and
trying to get more research parks out there.
As Chair of the Competitive Innovation and Export Promotion
Subcommittee, I've traveled all around my State to try to
figure out how can we increase jobs and, particularly, high-end
jobs. And one of the things I've really settled upon is this
export market, and with the weak dollar and the possibilities
there. But, the only way we're going to get that export market
going is not just to have the available resources so small and
medium-sized businesses can access these, but it is also to
have the products and the development and the things that we
need to get there. And I come from a State that produced
everything from the Post-it note to the pacemaker. So, we truly
believe in science and research and technology, with
Medtronic's pacemaker starting out in a garage and growing into
a worldwide global company. And a lot of that was, you know,
risks and taking the risk of doing research and putting the
money into it. So, I want to thank you for this.
I guess my question here, Mr. Fernandez, is, first of all,
To what extent do you think that, when you look back--and we
used to have those AT&T, General Electric, IBM labs, during the
heyday of the beginnings of research in this country--to what
extent can research parks or other regional tech collaborations
pick up where those industrial labs left off?
Mr. Fernandez. Well, as I mentioned, I think that's a very
important part of the new, kind of, business model, is to
provide those facilities, to invest in those facilities where
there's some shared risk up front, and bring down the cost, in
some cases, for entrepreneurs. You know, particularly with the
wetlabs and some of those kinds of facilities, it's very
difficult to go out and get financing, to--if you wanted to
build those new ideas within your own, you know, facility, as
an entrepreneur, it can be extremely difficult to get financing
to do.
Senator Klobuchar. Right. You know----
Mr. Fernandez. And so----
Senator Klobuchar.--so I heard some of my colleagues
mention, obviously, other countries--China and Japan and what
they've done. Do you think that they're doing better than we
do, in terms of developing research capabilities? What can we
learn from them? Are we falling behind?
Mr. Fernandez. I think that, you know, America's position
to continue to be a strong leader in innovation--we--you know,
many of the investments that are made abroad are built on the
models we created. And we've not lost the leadership, but it's
threatened. And it's important that we ramp up our commitment
and investment now, to maintain that leadership.
Senator Klobuchar. A recent National Research Council
Report found that soft infrastructure, the human capital that
encourages networking and entrepreneurship, is often as
important as physical facilities in ensuring success,
especially in today's economy. How do we encourage and maintain
those important relationships as we look at these research
parks?
Mr. Fernandez. I'm glad you raised that question, Senator,
because that's often underappreciated, and that's clearly a
place where EDA can play very effectively, in terms of
investing in that soft infrastructure. And that's--you know,
part of my job, I think, is to try and help broaden the
definition of ``infrastructure,'' particularly infrastructure
in the context of an innovation economy. And that soft
infrastructure--you know, seeding those public-private
partnerships, helping to build that structure in place that
ensures effective collaboration and cooperation and
networking--that's very important infrastructure. And in many
cases, especially with the regional strategies, you start
bridging across all kinds of various jurisdictional lines
within a State, across State borders. It's very difficult to
find folks willing to finance those kinds of soft
infrastructure investments. And that's certainly an area where
EDA can play a very important role. And that's why we're trying
to organize our entire framework for sustained economic
development around these regional strategies for innovation.
Senator Klobuchar. Now, one last question. A Minnesota
private developer is working to launch a biomedical-oriented
research park outside of Rochester--obviously, the home of the
Mayo Clinic--it's in Pine Island, Minnesota--with the goal of
recruiting researchers from the University of Minnesota, as
well as Mayo Clinic and other Minnesota biotech companies and
medical device manufacturers. What role do you see private
developers would have in the construction and promotion of
research parks? In other words, if private developers build
these parks, will they come?
Mr. Fernandez. I guess, depending on--well, I--I guess it
depends. You know, if they have a big enough balance sheet and
they're going to seed research and VC-type activities to other
companies, I think they would come. But, I think, again, any--
whether it's a publicly-funded research park or a private
research park, if it's going to have sustained success, there
needs to be a network of other kinds of stakeholders that are
integrated into their strategy, from workforce, especially, to
higher ed, to community colleges, the business community, the
VC community, and others.
So, I think a private research park definitely can be very
successful, but I think it still has to have all those
essential ingredients that bring the stakeholders from the
region into play.
Senator Klobuchar. Thank you very much.
Senator Pryor. Thank you.
I want--Secretary Fernandez, thank you for being here.
Mr. Fernandez. Thank you.
Senator Pryor. You've been great. I really appreciate your
time and your willingness to be here and change your schedule
for us. Thank you very, very much.
I'm going to go ahead and introduce the second panel now.
And what I thought I would do is go ahead and do the
introductions of the individuals on the second panel, as we--as
I do the introductions so that--I mean, as they take their
seats, so that we can do both at once, and save everyone a
little time here.
Let me start by saying that I would very much appreciate
everyone keeping their opening statements to 5 minutes, if
possible. That helps speed things along.
The first witness we have on the panel is going to be Dr.
Charles Wessner. He's Director of the Program in Technology
Innovation and Entrepreneurship at the National Research
Council of the National Academies. He is recognized nationally
and internationally for his expertise on innovation policy,
including public-private partnerships, entrepreneurships, early
stage financing for new firms, and the special needs and
benefits of high-technology industry.
Second, we have Mr. Brian Darmody. He is the Associate Vice
President of Research and Economic Development at the
University of Maryland and President of the Association of
University Research Parks. He's the principal author of ``The
Power of Place,'' a national policy document focused on
technology-led economic development, and serves as co-principal
investigator on the $3.5-million Proof of Concept Alliances, a
Department of Defense-funded commercialization project.
Next, we have Mr. Jonathan Sallet. He's the Managing
Director of The Glover Park Group, but is testifying in his
capacity as coauthor of ``The Geography of Innovation: The
Federal Government and the Growth of Regional Innovation
Clusters,'' published by Science Progress at the Center for
American Progress. And as I understand it, he also used to be a
big celebrity on the Brown campus radio station.
Mr. Sallet. It's a long time ago.
Senator Pryor. And last, but certainly not least, we have
Dr. Anthony Townsend. He's a Research Director for the
Institute of the Future. His work focuses on several
interrelated topics: mobility and urbanization, innovation,
science and technology parks, and economic development.
So, I want to thank everyone for being here. And I would
ask you to keep your opening statements to 5 minutes, if
possible.
Dr. Wessner, would you start for us? Thank you.
STATEMENT OF CHARLES W. WESSNER, Ph.D., DIRECTOR,
TECHNOLOGY, INNOVATION, AND ENTREPRENEURSHIP,
BOARD ON SCIENCE, TECHNOLOGY, AND ECONOMIC POLICY,
NATIONAL RESEARCH COUNCIL, THE NATIONAL ACADEMIES
Dr. Wessner. Thank you very much.
Please let me know if the audio is not what you need.
The--I thank you for the honor of being able to speak
before you today. As mentioned, I direct a program on
technology, innovation, and entrepreneurship.
At the National Academies, we've recognized the importance
of targeted government promotional policies for innovation
around the world. And, consequently, we have been studying
foreign innovation programs, and comparing them to U.S.
programs.
Only too often in this town, strangely enough, we talk
about the global economy, and then we reason, in completely
local, often inside-the-Beltway, terms. And I think it's
important, as a last resort, to do what we would do with any
good football team, and that is, look at what the opposition is
doing. And that is, in essence, what we've been focused on in
our program on comparative national innovation policies.
One of the basic findings we have is that there is an
enormous growth in locational competition. We have jobs, we
have technologies, we have industries, and the rest of the
world--our friends and competitors--are willing to take them
from us. And if we don't work to avoid that, that is exactly
what will happen.
Countries as diverse as China, Singapore, France, and
Mexico are undertaking very substantial national efforts to
develop research parks of significant scale and significant
scientific and innovative potential. One of the Senators,
Senator Udall, just a few minutes ago, asked about the levels
of investment, and was there more overseas. I think the short
answer would be that where we invest millions, our colleagues
are investing billions. We'll have to decide how that comes out
in--over time.
But, the--China, in particular, is a leading practitioner
of research-park strategy for economic and regional
development. They have made enormous investments in order to
grow and become internationally competitive.
If possible, I'd just like to bring to your attention--the
scale there is really significant. On the green side, that's
one park; that's 54 parks. We, on the other hand, have one park
that approaches that size. So, I just assume that we're 50
times smarter than our Chinese friends, or we're being out-
invested very substantially. The park, where you can barely see
it, is the average size of most American parks.
Now, that doesn't mean--I don't mean to imply that we
should invest exactly the way our Chinese colleagues are
investing. But, when you take, for example, the Zhong Guan Cun
science park outside of Beijing, there are some 20,000
enterprises, with nearly a million employees. The park has
attracted almost 10,000 ``sea turtles.'' These are people who
have worked in the United States or elsewhere in the world, who
are first-quality researchers, administrators and managers.
The contribution of parks, I think you understand. Whether
it's Dr. Dan Mote, the President of the University of Maryland,
who emphasizes the key role that it helps the university to
reach beyond its walls and help develop the region, or
President Barker of Clemson University, came to see us, as part
of this conference that is captured in this volume here, where
the Clemson University ICAR technology park has been
instrumental in attracting--in helping to keep technologically
advanced manufacturing in the United States.
Interesting enough, the National Cancer Institute has been
working on a park in Fredericksburg. We provided guidance,
early on, for this very successful Sandia park. Also, for a
park that hasn't been mentioned yet today, the NASA Ames park,
where there were wide-scale predictions that that would never
work. It has been a massive success.
I'm always amused when people say that only losers place
themselves in science parks. I'm not sure that Google and HP
would be included in that category. They're both there.
The U.S., in short, has led the way in park creation and
generation of high-tech clusters. As is often the case, we have
not followed up on that success. But, a message of hope that I
would bring you is that, in the past when we got things wrong,
we redoubled our efforts, as in the semiconductor industry,
where we set up SEMATECH to emulate the effects of the koretsus
in the 1980s. Others have imitated us since then, on a massive
scale.
And I want to stress that we don't need to do exactly what
our competitors are doing, but we do need to recognize the
scale, the focus, the commitment, and the massive investments
that are being made. And the question is, What can we do? And
I'd be happy to discuss more about that in the discussion.
But, just in closing, I would like to commend this volume,
which captures what much of the rest of the world is doing, and
I would also like to extend a small thanks to my colleagues--
who is here today, Dr. Sujai Shivakumar, behind me, who also
played an instrumental role in developing this volume.
Thank you, sir.
[The prepared statement of Dr. Wessner follows:]
Prepared Statement of Charles W. Wessner, Ph.D., Director, Technology,
Innovation, and Entrepreneurship, Board on Science, Technology, and
Economic Policy, National Research Council, The National Academies
Good afternoon, Mr. Chairman and members of the Committee. My name
is Charles Wessner. I direct the program on Technology, Innovation, and
Entrepreneurship at the National Research Council's Board on Science,
Technology, and Economic Policy. The Research Council is the operating
arm of the National Academy of Sciences, National Academy of
Engineering, and the Institute of Medicine of the National Academies,
chartered by Congress in 1863 to advise the government on matters of
science and technology.
Recognizing the importance of targeted government promotional
polices relative to innovation, the National Academies Board on
Science, Technology, and Economic Policy is studying selected foreign
innovation programs and comparing them with major U.S. programs. My
statement today captures the insights and observations made by leading
national and international experts during a high-level conference at
the National Academies that focused on best practices among science and
technology research parks around the world.
The Growth of Locational Competition
There is an intense and growing competition among nations and
regions of the world for economic activity that creates high-value jobs
and improves living standards
Research parks are seen increasingly as a means to create
dynamic clusters that accelerate economic growth and
international competitiveness.
Today, countries as diverse as China, Singapore, France, and
Mexico are among those undertaking substantial national efforts
to develop research parks of significant scale and scientific
and innovative potential.
China is a leading practitioner of the research parks strategy for
economic and regional development.
China's large science and technology industrial parks
symbolize that nation's strong determination to grow and become
internationally competitive through significant national and
regional investments in science-based economic development.
Both the absolute number and scale of Chinese research parks are
remarkable.
China's 54 state-level science and technology industrial
parks are designed to help develop the industrial base for
advanced, high-growth industries in electronics and information
technology, new materials, renewable energy, and bio-medicine.
The average major science park in China is over 10 million
acres. By comparison, the average American research park is 358
thousand acres. Research Triangle Park, one of our largest, is
7 million acres in size.
Figure 1: Research Parks in Comparative Perspective--an Issue of
Scale \1\
---------------------------------------------------------------------------
\1\ ``Average North American Research Park'' data are from
``Characteristics and Trends in North American Research Parks: 21st
Century Directions,'' commissioned by AURP and prepared by Battelle,
October 2007; ``Average IASP Member Park'' data are from the
International Association of Science Parks annual survey, published in
the 2005-2006 International Association of Science Parks directory.
The growth of Zhang Jiang High Tech Park (ZHT) near Shanghai is
---------------------------------------------------------------------------
illustrative.
Beginning almost from a clean slate, Chinese authorities
encouraged more than 30 research institutions to team up with
R&D centers of multinationals to anchor the park site. Some 200
small and medium sized Chinese high-tech companies have joined
these large research centers.
Outside the park, the Shanghai Jiao Tang University and
Fudan University contribute to the park's 8,600 strong
workforce of scientists and researchers
The park also benefits from national polices to attract
Chinese overseas scientists back home with low rent, tax
breaks, and assistance with living needs. There were over 250
such ``sea turtles'' in 2004 alone.
The Chinese government is also a major financial supporter
for biotechnology companies in ZHT Tech Park. This includes:
Grants from the National Technology Innovation Fund for
SMEs.
The establishment of the Shanghai Pudong New Area Venture
Fund to attract additional venture capital. In 2006, this
amounted to more than $2.5 billion in venture funding for
the ZHT Tech Park.
The Zhong Guan Cun Science Park in Beijing is another example of
the scale of Chinese efforts.
The park hosts over 20,000 enterprises and 950,000
employees, receiving total income of 850 billion Yuan (about
US$ 124 billion). More than 800 enterprises among these each
earn $15 million or more in revenue.
The park has attracted almost 10,000 ``sea turtles,'' who
have set up 4,200 companies in Zhong-guan-cun Science Park.
To the extent that they are effective in achieving their goals,
these large-scale, well-funded research parks have the potential to
enhance China's capabilities in leading technological sectors
The Contribution of Research Parks
Research parks are widely seen, both in the United States and
abroad, as an effective pubic-private partnership tool to increase the
return on a nation's investment in research and development.
According to Dr. Dan Mote, President of the University of
Maryland, research parks can play a key role in helping the
university reach beyond its walls and help develop regional
innovation clusters.
Similarly, President Barker of Clemson University sees
research parks as playing a key role in promoting university-
industry collaborations. He cites the Clemson University-
International Center for Automotive Research (CU-ICAR) as a
positive example of how such collaborations can help support
technologically advanced manufacturing in the United States.
Interestingly, leaders of national laboratories, such as
Sandia, NASA-Ames and the National Cancer Institute, have all
found that research parks are an important tool for advancing
their missions by building and maintaining ties to the private
sector, generating greater returns on existing Federal
facilities and capabilities, and helping to grow the local
economy with well-paid jobs.
By advancing the research and commercialization missions of
universities and national laboratories, research parks often serve as
catalysts for the development of innovative clusters.
The co-location of creative activity within the concentrated
geographical area of a research park can help transfer of new
ideas from universities and national laboratories to the
marketplace.
Research Parks in the United States
The United States has led the way in park creation and the
generation of high-tech clusters.
In the United States, innovative clusters and parks have
developed as a result of government action and private
initiatives, and in some cases around government-funded
laboratories.
One example is the high-technology industries that emerged
and grew around the government laboratories and major
universities in the Boston area.
In the case of Silicon Valley, multiple private industries
interacting with a major university, and irrigated with
substantial and sustained Federal funding, created powerful
developmental synergies.
A third approach to the development of innovation clusters
is through the deliberate creation of research parks, such as
North Carolina's Research Triangle Park, begun nearly sixty
years ago, or the Sandia Research Park created in 1999.
Despite our early leadership, the United States is not making
comparable efforts, nor are Federal programs supporting regional and
state efforts to the same degree.
Investments by the world's leading nations in research parks
reflect an appreciation of their capacity to spur knowledge-
based growth and a national commitment to enhance technological
competitiveness through innovation.
While research parks such as those at NASA Ames and Sandia
have recorded significant progress, and new Federal initiatives
such as that of the National Cancer Institute are underway, the
potential of research parks appears to be less appreciated by
policymakers and the public in the United States.
In the United States, support for research parks is principally
undertaken by state and local governments with limited support by the
Federal Government.
Given the limited scale of these efforts, some believe that
the U.S. Government should pursue a more comprehensive strategy
to support the growth of research parks and the benefits of
economic growth and national competitiveness that they bring.
Senator Pryor. Thank you.
Mr. Darmody.
STATEMENT OF BRIAN DARMODY, PRESIDENT, ASSOCIATION
OF UNIVERSITY RESEARCH PARKS AND ASSOCIATE VICE
PRESIDENT FOR RESEARCH AND ECONOMIC DEVELOPMENT,
UNIVERSITY OF MARYLAND
Mr. Darmody. I'm Brian Darmody, President of the
Association of University Research Parks, and Associate Vice
President of Research and Economic Development at the
University of Maryland. And thank you for inviting me to the
Committee.
AURP represents over 300 research parks and communities of
innovation in the United States and the world, and works
closely with other organizations representing technology,
commercialization, seed, and angel investing, incubator
development, and State economic development. And I think some
of these topics have already been discussed in the questions by
the Senators.
Research parks account for over 750,000 jobs in North
America, according to a recent study. This year, AURP held its
annual conference in Vancouver, British Columbia, and I learned
that, in 1927, Charles Lindberg wouldn't fly to Vancouver,
because the airport was too small. Well, the Vancouver
government immediately bought land and built a larger airport
for the fledgling air industry, and that today serves as a
major hub for international trade to the Pacific Rim and
major--as a major job generator for British Columbia.
We view--at AURP, we view research parks as the Nation's
21st-century innovation infrastructure, just as airports and
railroads did in earlier centuries. Innovation is the key to
job creation, and support for innovation is an important global
competitiveness issue for the United States.
The United States invented the research park model at
Stanford in 1951. But, as Dr. Wessner has pointed out, other
countries have copied this model, building large research
parks, and attracting U.S. corporate research and development.
So, we no longer lead the world in research parks.
And, just to bring this--this is a atlas of innovation
from--and the United States section in here is about 10
percent. I've clipped its pages. You can see how heavy this
thing is. This is a worldwide atlas of innovation centers, and
the United States comprises maybe 10 percent of that.
The--but, also importantly, the United States also invented
university technology transfer, with the 1980 Bayh-Dole Act,
linking our best-in-the-world research university system with
technology commercialization. But, we no longer lead in this,
either, as research universities in the United Kingdom now
outperform U.S. universities on a proportionate basis, in terms
of technology commercialization.
We recognize, at AURP, that the U.S. Government is facing
severe budget constraints, but we have a five-point plan to
help harness more innovation and help build our research parks.
Here are our five points:
Number one, we support Senator Pryor's bill on Building a
Stronger America Act, to establish a loan guarantee program for
research parks and park development.
Two, taxes and financing of research facilities. We need to
encourage development of privately financed facilities and
support corporations to keep research and development in the
U.S. Current IRS regulations on tax-exempt bonds need to be
reformed to remove tests on technology licensing, to give
greater flexibility to universities to negotiate with
corporations on intellectual property. And in my testimony, I
have the IRS regulation regarding limitations on tax-exempt
bond and corporations.
Three, the Federal lab system. There has been some
discussion about NASA and other Federal labs. Twenty-five
billion dollars is annually spent in research and development
activity internally within Federal labs. We're suggesting that
Congress create a new intermediary organization, modeled on
best practices at States and at universities, such as the WARF
Institute at Wisconsin, to more efficiently commercialize
Federal intramural technology.
When we--when the Congress wanted to help build--rebuild
Pennsylvania Avenue, they set up the Pennsylvania Avenue
Development Corporation. If we want to develop technology at
Federal labs, we need to think about setting up an intermediary
organization to take on that task.
And we also need to work on programs to allow Federal
researchers work more closely with the private sector. And I
cite--we cite, in my testimony, an article I wrote regarding
that.
Fourth point, improving university technology
commercialization. We have ``cash for clunkers,'' we need cash
for commercialization. There are many ``valleys of death''
confronting university technology commercialization, but the
first valley of death takes place when universities elect to
take title to federally sponsor research under the Bayh-Dole
Act. That's at the very earliest stages. Often, unless an
additional development work is done--and Senator Martinez
mentioned that--these potential technologies lie fallow.
So, developing a program to provide flexibility and
recognize the cost of technology commercialization, and to
develop proof-of-concept evaluations in Federal overhead rates
or as a direct charge to research grants and contracts, would
improve the success rate of university-owned technology
development. That's not an EDA issue, that's really an issue
about funding research at our Federal labs that goes to
colleges and universities. And OMB Circular A-21 is a
reference; it's cited in my testimony.
Finally, supporting science, technology, engineering and
math--STEM programs--they traditionally focus on science and
engineering skills. But, as has been mentioned, the key to
employment growth in the U.S. is, we need to build careers and
companies, not only jobs. Incubators and research parks are
ideal places for new technology formation. Therefore, we want
to suggest that, in the STEM idea, we also add the second `E',
so these would be STEEM programs--move from STEM to STEEM--so
that would be science, technology, engineering,
entrepreneurship, and math. Because, that philosophy is really
what is embedded in the idea of research parks and research
clusters.
The Obama Administration singled--signaled its strong
willingness to work on innovation, entrepreneurship, and we
support what the EDA and others within the Administration are
considering. And we also support, very strongly, Senator
Pryor's bill.
I want to thank the Committee.
[The prepared statement of Mr. Darmody follows:]
Prepared Statement of Brian Darmody, President, Association of
University Research Parks and Associate Vice President for Research and
Economic Development, University of Maryland
I am Brian Darmody, President of the Association of University
Research Parks (AURP), and Associate Vice President for Research and
Economic Development at the University of Maryland.
AURP represents over 300 research parks and communities of
innovation in the U.S. and world, and works closely with other
organizations representing technology commercialization, seed and angel
investing, incubator development and state economic development
policies. Research parks account for over 750,000 jobs in North
America, according to a recent study.
This year AURP held its annual conference in Vancouver, British
Columbia. On his 1927 tour to celebrate his solo flight across the
Atlantic, Charles Lindbergh wouldn't fly to Vancouver because the
airport was too small. The Vancouver government immediately bought land
and built a larger airport for the fledgli ng air industry, which today
serves as a major hub for international trade to the Pacific Rim and
major jobs generator for British Columbia.
We view research parks as part of a nation's 21st century
innovation infrastructure, just as airports and railroads did in
earlier centuries, and high bandwidth Internet backbone serves today.
Innovation is key to job creation, and support for innovation an
important Federal mission.
The United States invented the research park model at Stanford
University in 1951. However, other countries copied this model,
building large research parks with investments from national
governments, and attracting U.S. corporate research and development
facilities. The U.S. no longer leads the world in research parks; See
Wainova Atlas of Innovation (2009), and National Research Council,
Understanding Research, Science and Technology Parks: Global Best
Practices (2009).
The United States also invented university technology transfer with
the 1980 Bayh-Dole Act, linking our ``best in the world'' research
university system with technology commercialization. However, we no
longer lead in university technology commercialization as research
universities in the United Kingdom now outperform U.S. universities on
a proportionate basis in terms of technology commercialization.
AURP recognizes the U.S. Government is facing severe budget
constraints, but we believe we can harness our existing research and
development infrastructure to create new jobs, new opportunities, and
new companies with administrative reforms and relatively modest Federal
direct investments. See, Power of Place , A National Innovation
Strategy AURP (2008).
Here are our five points:
1. Infrastructure for Innovation: Research Parks: We strongly
support Senator Pryor's Building A Stronger America Act to
establish a loan guarantee program to develop research parks,
and grant program for new park development.
2. Tax-exempt financing of research facilities: We need to
encourage development of privately financed facilities and
support corporations to keep research and development in the
U.S., instead of at research parks in other countries. Current
IRS regulations on tax-exempt bonds should be reformed to
remove tests on technology licensing to give greater
flexibility to universities to negotiate with corporations on
intellectual property issues. See, IRS Rev. Pro. 97-14
regarding limitations on university technology licensing in
facilities financed with tax-exempt bonds.
3. Federal Laboratory System: $25 billion annually in research
and development activity takes place internally in Federal
labs. Congress should: (i) create a new intermediary
organization, modeled on what universities (such as WARF at U.
of Wisconsin) and states (such as TEDCO in Maryland) use to
more efficiently commercialize Federal intramural technology;
(ii) develop programs to allow Federal researchers to work more
closely with private sector, and (iii) create more Federal
research parks. See Washington Business Journal, Unleashing
Federal R and D, B. Darmody, Oct 30-Nov. 5, 2009.
4. Improving University Technology Commercialization: There are
many ``Valleys of Death'' confronting university technology
commercialization, but the first potential valley takes place
when universities elect to take title to federally sponsored
research under the Bayh-Dole Act. Often unless additional
development work is done, these potential technologies lie
fallow. Developing a program to provide flexibility and
recognize the cost of technology commercialization and the need
to develop `proof of concept' tests or evaluation of these
technologies in Federal overhead rates would improve success
rates of university-owned technology developed with Federal
funds and create more companies to fill our incubators and
research parks. See, OMB Circular A-21.
5. Supporting Entrepreneurship: From STEM to STEEM: Science,
Technology, Engineering, and Math (STEM) programs traditionally
focus on science and engineering skills. The key to employment
growth in the U.S. needs to include building careers and new
companies, not only jobs. Incubators and research parks are
ideal places for new technology company formation. Therefore we
call for Entrepreneurship to be imbedded in STEM programs and
ideas, so the acronym would be STEEM: Science, Technology,
Engineering, Entrepreneurship and Math.
The Obama Administration has signaled its strong willingness to
work on innovation and entrepreneurship, such as by creating the Office
of Innovation and Entrepreneurship. We look forward to working with the
Administration and Congress to efficiently and effectively build
Communities of Innovation in the U.S. in a comprehensive fashion and
maintain U.S. technological competitiveness.
I want to thank the Commerce Committee and Senator Pryor for
inviting AURP to the Committee.
Senator Pryor. Thank you.
Mr. Sallet.
STATEMENT OF JONATHAN SALLET, MANAGING DIRECTOR, THE GLOVER
PARK GROUP
Mr. Sallet. Mr. Chairman, members of the Committee, thank
you very much for the chance to testify today and to apply some
of the ideas that came out of our paper for the Center for
American Progress to your legislation.
You know, Mr. Chairman, if we were to look at an aerial
view of an area with a science park, if we were up in an
airplane, the landmass of a science park might be very small.
It might not be a big part of the county or city in which it
resides. But, the small mass of land is a very big idea. It's a
big idea because the notion that's in your legislation is that
there are areas that can act as innovation catalysts and
therefore have economic effects, creating jobs much bigger than
merely the area that they occupy. They do that because we
understand how clusters work. And I commend you, Senator Pryor,
for specifically saying, in your legislation, that the goal of
the science parks is to promote the clustering of innovation.
What we've learned about regional economic competitiveness
over the last several decades is that the competitive
advantages of a place, of a region, stand apart from the
Nation, stand apart from the next area. They are unique, but
that they have to be taken advantage of; that they are taken
advantage of with real competition, but also, with very
important collaboration; collaboration, particularly with
universities, with local governments, with community colleges,
and with nonprofits.
This is something that we know. We know they help create
jobs, they help spawn new businesses, and they help spur
economic growth. And yet, as your bill recognizes, for far too
long the Federal Government has administered economic
development programs as if they didn't have to be connected to
regional economic strategies. But, that doesn't make sense.
The key point here is that leadership comes from the local
people, the local businesses, but that there is an important
role the Federal Government can play. It can help frame big
national challenges that ought to be met, that would benefit
the Nation as a whole. Clean energy is a good example. I know,
recently in Arkansas, I think you were at the announcement of a
new wind turbine factory that's being constructed. That will
have a positive impact, not just for Arkansas, but for the
Nation, as we go to renewable energy.
The second thing the Federal Government can do is to help
facilitate success at the local level, particularly through
information exchanges between data that the Federal Government
has, and the local areas need, as well as best practices from
among different clusters.
And the third thing it can do is, in an appropriate way, as
your legislation suggests, is fund activities.
Now, what you call for in the legislation is for
cooperation within a cluster, particularly with institutions of
higher learning, in order to promote technology transfer; and
you would award these funds through a competitive process.
Those are very important goals, because those are the lessons
we've seen in the last two decades.
You also emphasize the importance of ensuring that
innovation comes to every part of America, including rural
America. And that is also a lesson we've seen as innovative
state programs have led to greater development of economic
possibilities in rural areas of America that we might not think
of, at first glance, when we think about innovation.
That's why I believe that this is a very important piece of
legislation, and one that I think can be put into the framework
of a larger national strategy. The Administrator talked, in the
first panel, quite rightly about having regional strategies. We
need to do this at the Federal level. We need the kind of
efforts that he is leading in EDA. We need to make sure all
Federal programs are aligned with the strengths of their
cluster. Export promotion, for example, ought to be promoting
in an area the kind of exports that that area can best create.
And third, there are a series of programs in the Federal
Government, from the Department of Commerce to SBA, including
programs like SBAIR, in the Department of Energy and Labor, in
the Department of Agriculture, where the Secretary has talked
about rural economic development, in the National Science
Foundation, and the Department of Labor. These need to work
together. The Federal Government needs to speak with a single
voice to local leaders to make it as easy as possible to move
forward.
Senator, you were kind enough in your introduction to note
that I was, at Brown, a college disc jockey, and one of the
songs I used to play was the song called, ``Won't get Fooled
Again.'' And, I think a lot about your legislation is that we
won't be fooled again. We won't be fooled again into forgetting
one lesson, that ``Made in America,'' as an economic strategy,
means we have to apply those lessons in America. That's what
your legislation would do, and I hope it's speedily enacted.
Thank you.
[The prepared statement of Mr. Sallet follows:]
Prepared Statement of Jonathan Sallet,\1\ Co-Author, The Geography of
Innovation: The Federal Government and the Growth of Regional
Innovation Clusters, Published by Science Progress, a project of the
Center for American Progress
---------------------------------------------------------------------------
\1\ Jonathan Sallet served as Assistant to the Secretary of the
Department of Commerce and Director of the Office of Policy and
Strategic Planning from 1993-96. He is employed by The Glover Park
Group, a private consulting firm. This testimony reflects Mr. Sallet's
personal views.
---------------------------------------------------------------------------
Summary
I believe that the Federal Government can maximize the benefits of
science and research parks, an integral part of sparking innovation and
creating jobs in the U.S., by supporting regional innovation clusters
to promote a comprehensive, long-term economic growth and development
plans across regions in the United States.
My recommendation is that regional innovation clusters should
become the centerpiece of a reauthorized Economic Development
Administration (EDA), empowering the agency to work with businesses,
universities, community colleges, state and local governments and
community leaders to foster regional competitiveness strategies. This
will help boost job creation and business growth by spurring the
creation and growth of successful regional ecosystems, striking exactly
the right balance between Federal leadership and local responsibility
and between the private and public sectors. Science parks and regional
innovation clusters are two vital parts to a long-term solution--
science parks will drive the clusters forward while the regional
innovation cluster will strengthen and support the local framework in
which the park can thrive. This broader effort will be the most
effective and sustainable.
Testimony
Introduction
Chairman Rockefeller, Ranking Member Bailey Hutchison, and members
of the Committee on Commerce, Science, and Transportation, thank you
for the opportunity to testify today on innovation through
collaboration and cooperation--particularly in the realm of regional
and innovation ``clusters.''
Innovation is central to economic prosperity--driving productivity,
ensuring sustainable broad-based economic growth, creating quality jobs
and shared prosperity, and increasing national competitiveness.
Innovation will aid economic recovery by: creating new jobs in high-
tech and traditional sectors; creating higher returns to workers and
increase living standards from better, more quality jobs; and making
the economy more resilient and dynamic in the long-run, adapting to
future challenges.
With the current economic crisis and increasing unemployment
throughout the nation, state budgets are tighter than ever, reducing
education spending and R&D efforts, making this the best time to
consider how the Federal Government can work with state and local
entities, business, universities, community colleges and communities to
restore long-term economic health to our Nation.
Your focus today on the manner in which research, science, and
technology parks can serve as a model for economic growth is welcome--
and important. For too long, the Federal Government has administered
programs for economic growth disconnected from regional strategies for
growth and development. That is an omission that, in this economy and
in a very literal sense, we can no longer afford.
In September, Science Progress, of the Center for American
Progress, released a paper that I coauthored with Ed Paisley and Justin
Masterman.\2\ In that paper, we set forth the reasons why, we believe,
the Federal Government should take an active role in supporting
regional economic strategies. I should emphasize that when we talk
about ``regional innovation clusters'', we do not mean that regional
growth is necessarily focused on high-technology businesses. Rather, we
mean that local leadership has the resources necessary to promote
innovative strategies for economic growth--from any sector, from any
kind of business, in any kind of region--urban, rural or suburban.
---------------------------------------------------------------------------
\2\ http://www.scienceprogress.org/wp-content/uploads/2009/09/
eda_paper.pdf.
---------------------------------------------------------------------------
Science Progress, led by Ed Paisley, is now engaged in a new
project to extend those lessons to the Pittsburgh region. That
geography includes Western Pennsylvania, Northern West Virginia and
Eastern Ohio. The specific goal of our work is to identify the manner
in which Federal efforts currently contribute to economic growth in
that region, and to recommend specific ways in which the Federal
Government could do an even better job in the future.
We aim to advance the understanding of two important questions:
What is the current impact of Federal efforts on regional
growth and job creation, and
How could the Federal Government be more effective in
supporting local leadership?
In this manner, the study of the Pittsburgh region will, we hope,
yield national lessons of general application.
The Pittsburgh region offers specific advantages to our work. It
crosses state lines, which is characteristic of America's regional
economies but which poses obvious challenges in terms of state
coordination and even the deployment of Federal efforts. It mixes the
old and the new, from hard-hit automobile manufacturing in Ohio, to
web-based start-ups in Pittsburgh and, of course, the National Energy
Technology Laboratory in Morgantown, West Virginia. It spans urban and
rural economies. It includes institutions, including foundations,
universities and nongovernmental organizations that have carefully
considered and implemented strategies of growth. Finally, and like the
rest of America, the people and businesses of the Pittsburgh region are
searching for better, more effective, means of creating jobs and
growing their economy.
In this work, we are building on much that is already known about
the impact of regional economic units.
The Geography of Innovation
We know that ``clusters''--geographically concentrated areas of
specialization--form the foundation of regional, and the basis for
national, competitiveness.\3\ Clusters are geographic concentrations of
firms, suppliers, support services, specialized infrastructure,
producers of related products, and specialized institutions (such as
training programs) whose expertise reinforces one another's. So, for
example, a successful cluster can connect firms with academic
institutions, research labs, and other nonprofit organizations in order
to create the kind of virtuous cycle of competitiveness that creates
jobs, stimulates business formation, and improves productivity.
Examples of U.S. clusters include metal manufacturing in the upper
Midwest, entertainment in Los Angeles, information technology in
Silicon Valley, and furniture in Mississippi. Clusters are common to
every advanced economy.
---------------------------------------------------------------------------
\3\ Among Professor Porter's extensive writings on the importance
and nature of ``clusters'' is a recent paper summarizing both his
academic work and his public-policy recommendations. ``Clusters and
Economic Policy: Aligning Public Policy with the New Economics of
Competition'' (Revised December 17, 2008). His analysis is based on
extensive research into the sources of competitive advantage, which he
first discussed in The Competitive Advantage of Nations, (New York:
Free Press, 1990) and explained in, for example, ``Clusters and the New
Economics of Competition'' (Harvard Business Review, 1998).
---------------------------------------------------------------------------
What are the kinds of advantages that are shared by the
participants in clusters? They could be a set of workers who have honed
particular skills, like building boats in Maine. Or community colleges
that offer training to advanced manufacturing workers in places where
advanced manufacturers have located. Or research centers that conduct
basic research in biotechnology close to biotechnology firms. Anything,
really, that creates what an economist would call a ``positive
externality''--a benefit that is captured not just by a single firm,
but that enriches the community as a whole. Positive externalities are
nothing new--the externalities produced by K-12 education is the basis
for our public school system--but what is new is this: The notion that
regions can consciously focus on the creation of shared advantages
within clusters to create jobs, help businesses be created and, of
course, stimulate long-term economic growth.
Regional clusters enhance collaboration and value-creation, drive
productivity, and play a fundamental role in knowledge creation,
innovation, the accumulation of skills, and the development of pools of
employees with specialized skills. They effectively lower the cost of
capital, increase accessibility to specialized labor, create positive
learning effects and decrease the cost of finding talented workers.
They create an ecosystem that is helpful to the creation of new firms
in which specialized advantages reinforce each other to the benefit of
firms, workers and communities. Their operating principles could be
phrased as ``Innovation, Collaboration, Value Creation.''
Scholarship from leading scholars \4\ has established the real
advantages of ``clusters'' for a growing economy, including strong
correlations between:
---------------------------------------------------------------------------
\4\ Important additional research on this topic includes Karen G.
Mills, Elisabeth B. Reynolds and Andrew Reamer, ``Clusters and
Competitiveness: A New Federal Role for Stimulating Regional
Economies,'' (Washington, Brookings, 2008) and Robert Atkinson and
Howard Wial, ``Boosting Productivity, Innovation, and Growth through a
National Innovation Foundation,'' (Washington, Brookings, 2008).
---------------------------------------------------------------------------
Per-capita GDP and cluster concentration,
Cluster strength and wage levels, and
Cluster strength and higher wages.\5\
---------------------------------------------------------------------------
\5\ Mills, Reynolds and Reamer, ``Clusters and Competitiveness.''
In other words, clusters are good homes for the high-growth, high-
wage companies that move quickly to take advantage of competitive
opportunity and create jobs as a result. And that means, of course,
that successful clusters are important to the creation and application
of successful innovation policy. Innovation--the use of emerging and
old information to create new forms of value--is absolutely critical to
the future economic success of the United States. Indeed, in a
globalized economy, our ability to be a smart economy is basically our
ability to be growing economy. Innovation not only boosts the creation
of value, but it also helps ensure that economic growth is
sustainable--from the perspectives of both economic and environmental
concerns. For example, increased advanced manufacturing correlates
highly with increases in energy-efficient manufacturing--the more
process technologies evolve, the more that they can do more with less.
From this perspective, cluster policy is innovation policy.
If clusters work on their own, what can be done to help them work
even better? Specifically, what kinds of efforts can speed regional
economic growth? In our paper, we identify four ``lessons'' that we
believe are very important for policymakers to understand:
First, Place Matters. It is important for regional economies to
emphasize what they can do best, capitalizing on existing
strengths or new strengths that spring naturally from existing
advantages. Solar power is a good strategy for New Mexico,
hydroelectric power is not. Existence of institutions of
knowledge-creation, availability of capital and the presence of
high-skill labor with programs to spur talent generation will
all be parts of a region's assessment of its competitive
strengths.
Second, Networks Are Key. The economic theory of a cluster
recognizes the importance of both competition, which makes
businesses more successful and increases consumer welfare, and
cooperation, to create an environment of mutual advantage.
Universities and community colleges, for example, can add to
the store of knowledge and help educate workers in a manner
that advantages multiple, even competing, local businesses. But
that is best done with explicit networks of collaboration and
knowledge-sharing of the kind found, for example, connected to
the Albany nanotechnology cluster.
Third, Practice Makes Perfect. As demonstrated by North
Carolina's Research Triangle and the Greater Phoenix cluster,
it can take a long time, even decades, to build a new cluster
from scratch. The observation re-emphasizes our belief that
short-term gains will come mainly from existing advantages that
have yet to be fully realized. For example, in our paper, we
describe an analysis of Tennessee's furniture cluster that both
identifies existing strengths, as in office furniture, but only
areas in which the region can be potentially competitive, such
as mattress manufacturing. Areas of potential strength are
likely to be areas that will result in quicker results.
Fourth, Success Depends on Local Leadership. There is no
substitute for the ability of local businesses, governments,
non-profits, universities and colleges to all work together.
That has been demonstrated in areas and industries as diverse
as San Diego's CONNECT program, Toledo's photovoltaic cluster,
and Minneapolis's medical devices cluster. Toledo is a
particularly good example. University of Toledo (UT),
recognizing its strong engineering and manufacturing science
programs and the city's highly skilled workforce and economic
infrastructure, led a 20-year effort to create a new
photovoltaics and clean-energy cluster. UT has assembled a team
of world-class faculty in photovoltaics and has built
laboratories and support centers that have spun off dozens of
businesses and reinvigorated the city. In partnership, the
state of Ohio committed $18.6 million to UT in 2007 to spur the
continued development of the photovoltaics cluster, generate
new high-tech jobs, and to increase industry revenue. From this
university and government leadership, the Wright Center for
Photovoltaics Innovation and commercializiation is now an
internationally recognized photovoltaics research and
development center with infrastructure attractive to companies
incubating the future generations of photovoltaic technologies.
Federal Support for Regional Economic Strategies
Against, this backdrop what can the Federal Government accomplish?
And how?
Let me begin with the specific proposal, S. 583, introduced by
Senator Pryor to provide support for the development of science parks.
The legislation begins quite specifically, and quite rightly, by
emphasizing the creation of science parks ``to promote the clustering
of innovation. . . .'' That is quite wise, and in complete accord with
the experience of regional innovation that I have described above.
In carrying out its goals, the legislation specifically calls for
cooperation, including with institutions of higher learning, for the
exchange of knowledge, through, for example, technology transfer and
for the award of Federal funds through a competitive process.
In other words, S.583 is an embodiment of the lessons we have
learned for the stimulation of regional economic growth.
Analysis of successful clusters has shown that they succeed with
local leadership from industry, non-governmental organizations,
including universities and community colleges, and the public sector.
Regional leaders have the best grasp of their own competitive
advantages and prospects and they are in the best position to execute
the kind of collaborative, bottom-up strategies that enhance cluster
success.
There is, however, a problem--and one only exacerbated by our
current economic crisis. Cluster initiatives are ``too few'' and they
are ``thin and uneven in levels of geographic and industry coverage,
level and consistency of effort, and organizational capacity.'' \6\
Moreover, traditional clusters are under terrible stress as state
governments, under tight budget constraints, are cutting their own
support for regional economic development.
---------------------------------------------------------------------------
\6\ Mills, Reynolds and Reamer, ``Clusters and Competitiveness.''
---------------------------------------------------------------------------
Now is the time for the Federal Government to play a critical role
in supporting regional efforts by framing, facilitating and funding
cluster strategies. By that I mean that the Federal Government can
identify the critical national goals, like energy independence, that
serve the national interests--an approach endorsed by Congress in the
America Competes Act of 2007. The Federal Government can improve the
efficiency of cluster strategies by improving the delivery of various
forms of Federal expertise to the clusters that need them and by
increasing the ability of clusters to learn from each other. And, of
course, in difficult fiscal times for states, the Federal Government
can provide additional resources that can smartly leverage existing
local and private funds.
Thus, in my judgment, S.583 should be supported by a broader
effort. Rather, an emphasis on any particular means of regional
economic growth, such as science parks or business incubators, should
be incorporated into a broader Federal strategy that supports the full
range of tools that can support regional economies.
First, we need an explicit Federal focus on regional economic
growth. The starting point should be the establishment of the
President's regional innovation cluster initiative at the Economic
Development Administration of the Department of Commerce.
The President's FY2010 budget provides ``$50 million for regional
planning and matching grants within the EDA to support the creation of
regional innovation clusters . . . and $50 million to create a
nationwide network of public-private business incubators to encourage
entrepreneurial activity in economically distressed areas.'' \7\
---------------------------------------------------------------------------
\7\ Office of Management and Budget, ``A New Era of
Responsibility.''
---------------------------------------------------------------------------
My recommendation is that this proposal--the conscious Federal
adoption for the very first time of a plan to work with state and local
governments to foster regional competitiveness strategies--becomes the
centerpiece of a re-authorized EDA. In my view, it strikes exactly the
right balance between Federal leadership and local responsibility and
between the private and public sectors.
For example, the EDA could ask regions, to compete for Federal
matching funds by offering proposals created in collaboration with
their companies, universities, research facilities and nonprofits.
Funding would be provided for implementation of the best strategies.
The EDA should establish a set of criteria that allow the plans with
the biggest impact and best prospects for success to be funded quickly.
Such criteria could include identifying the proposals that:
Move fast, with significant impact,
Use public-private partnerships and other forms of regional
collaboration,
Have a proven track record,
Integrate distressed areas into larger regional economies,
and
Further the goals of national ``challenges'' in areas such
as energy, healthcare, manufacturing and life sciences.
The Federal program should be flexible, of course, in order to
respond to the best ideas that come from the regions. The cluster
initiative could provide Federal matching funds for targeted, high-
leveraged activities, such as university research consortia, business
incubators, for community-college training programs and technology-
transfer efforts focused on small and medium-sized firms.
At the same time, small planning grants would be made available for
those regions that have yet to formulate a cluster strategy. An
advantage of the cluster approach, especially as we move into an era of
budget-deficit reduction, is that the Federal funding need not be
enormous--indeed, the President's proposal of $50 million for regional
innovation cluster and another $50 million for associated business
incubators will get these efforts off to a strong start.
The establishment of this EDA effort would not, of course, be
enough. That is why the second key ingredient for effective Federal
involvement is this: Agencies that already support regional economies
should tie their efforts specifically to locally-led regional economic
strategies.
Right now, the Federal Government spends roughly $150 billion
annually on R&D. But, by our calculation, none of that money goes
specifically to support regional economic strategies and only about
$650 million goes to efforts that indirectly support regional
innovation clusters. Nonetheless, important current efforts could be
better harnessed to this goal, including additional programs from the
Department of Commerce, the Small Business Administration (including
the SBIR and STTR programs), the Department of Energy, the Department
of Labor, the National Science Foundation and the Department of
Agriculture. That should be encouraged.
Third, Federal efforts can work better together and the Federal
Government can work better in support of local leadership.
The implications are larger, of course, than the EDA alone. One of
the advantages of the regional cluster initiative is that it provides
the Executive Branch as a whole with a good way of ensuring that micro-
economic initiatives are effective and efficient. I would like to see
the EDA become an evangelist for high-performance government, tailoring
Federal efforts to best meet regional needs, fostering collaboration
among Federal programs that are too often operated in ``stovepipe''
isolation, and ensuring that Federal funds are well-spent.
For example, the Department of Commerce is the agency that, more
than any other, focuses on economic competitiveness. Its programs range
from assisting exporters to working with minority businesses and the
telecommunications sector, to protecting our seas and coastlines, to
gathering data on our nation, to working with small and medium-sized
manufacturers, to creating industry standards, which are a critical
infrastructure innovation. The National Institute of Standards and
Technology, for example, has a highly successful manufacturing
extension program and has worked with regional economic clusters
through its Partnerships for Regional Innovation. As the EDA implements
its ``clusters'' initiative, the Department more generally can align
its efforts with the specific needs of regional economies. In this way,
for example, the creation of business incubators, as proposed in the
President's FY2010 budget, should be constructed to dovetail
immediately with regional clusters.
The Federal Government also offers many forms of economic
assistance to boost business creation and help communities grow
economies that could be better aligned with regional competitiveness
strategies. Federal efforts in the Department of Labor, the National
Science Foundation, the Department of Energy and the Small Business
Administration could all focus on clusters.
In this way, the Federal emphasis on clusters can act as the
``mortar'' to bind together the ``bricks'' of economic recovery,
providing, in essence, a multiplier effect that makes thriving
initiatives even more successful.
In sum, a huge opportunity beckons when the Nation needs economic
renewal the most. Science and innovation are critical to the overall
renewal of the American economy and to the restoration of the American
job market. We know that clusters represent an increasingly important
economic unit, but unfortunately it is one that has been virtually
ignored in policymaking at the Federal level in the United States. By
including regional competitiveness as a key mandate, a cluster approach
can allow Federal policies to be implemented more effectively by better
connecting them to regional leadership. In addition, Federal policy
based on cluster principles will reinforce economic specialization
across states and regions, increasing productivity in the economy as a
whole. Ultimately, we can create the launching pads for what America
needs the most right now--jobs and long-term, sustainable economic
growth.
Conclusion
Some of our strongest international competitors, including Japan,
South Korea, and many European countries, have invested in significant
national cluster initiatives, directing great amounts of money and
resources toward making innovation clusters the main focus of their
economic and innovation policies. The irony is obvious--foreign
innovation policymakers have come to the United States to study our
successes and consult with our experts and yet the United States has
conspicuously failed to embrace cluster initiatives as an explicit part
of its own innovation policy.
France, for example, has a 1.5 billion program called
Poles de Competitivite that is focused entirely on creating,
supporting, and encouraging the growth of innovation clusters
throughout the country. In fact, 26 of 31 European Union countries have
cluster initiative programs in place. Japan has made similarly large
investments in two cluster programs called the Knowledge Cluster
Initiative and the Industrial Cluster Program, while South Korea has
made innovation clusters the central organizing concept of its
industrial policy. Numerous other countries in Europe and Asia,
especially China, boast nation programs dedicated explicitly to
promoting the development of specific regional innovation clusters.
The lesson is clear. Economic strategies that have been ``Made in
America'' must be ``Applied in America'' by the Federal Government and
local leaders in order to employ more Americans and restore long-term
economic growth. S.583 would be an important step toward implementing
the lessons of clusters by promoting regional recovery and growth.
Senator Pryor. Thank you.
Dr. Townsend.
STATEMENT OF ANTHONY TOWNSEND, RESEARCH DIRECTOR, TECHNOLOGY,
HORIZONS PROGRAM, INSTITUTE FOR THE FUTURE
Dr. Townsend. Thank you, Mr. Chairman, and members of the
Committee, for the opportunity to share my expertise.
I agree that America's research parks are essential
infrastructure for the Nation's future competitiveness.
Currently, I work as a technology forecaster for the Institute
for the Future, which is an independent think tank established
in Silicon Valley in 1968.
I've spent the last 3 years working with research park
managers and developers in the U.S., in Europe, Asia, and the
Middle East. Today, I want to discuss this research park model,
some of its advantages and disadvantages, but, most
importantly, its future prospects.
It's an appropriate time to consider the research park
model, because this year is the 50th anniversary of North
Carolina's Research Triangle Park. This is one of the largest
and oldest and most successful parks in the Nation--in the
world. But, like many parks today, RTP is also facing some
potential threats to its success in the future. Put simply, the
business model that was developed in 1959 isn't going to work
for parks created in 2009. And even established parks are going
to need to evolve, as well.
Three years ago, when RTP looked to the future, it
established a partnership with our organization, to develop a
broad and long-range forecast of the future of research parks,
which you have attached as written testimony. We looked 20
years out, we engaged over 50 experts from over a dozen
nations. We detailed 14 global trends that will shape the
future for research parks, and we developed three scenarios to
explore how parks might navigate a volatile and uncertain
future.
In the best-case scenario we developed, the research park
model gets an upgrade, if you will, in part by building
stronger ties to universities and new online science
communities.
In the worst-case scenario, the traditional business model,
which depends very heavily upon big companies as anchor
tenants, simply disappears as companies cut back on R&D and
then virtualize or offshore whatever is left.
The third scenario, a more decentralized research park
model emerges and starts to challenge the traditional model.
And this model uses digital networks to connect together lots
of small spaces into clusters that function like today's big
research parks, and we call those ``research clouds.'' And
these might form around universities and actually directly
compete with research parks, particularly for smaller
companies.
But, the most important result from these scenarios is that
none of them forecast a world where lots of new research parks
succeed, based on this traditional real-estate-driven model
that we've known for the last 50 years.
And so, I know that you're concerned about creating jobs
quickly, as well as creating this long-term capacity for
innovation and growth that we've discussed this afternoon. But,
I think, rather than solely focusing on encouraging development
of new research parks, we should also consider focusing
investment on reinventing the parks that we already have. And
there ares three key priorities to consider there:
First, you can create jobs immediately by investing in
upgrading the hardware of our research parks. It's a great time
to convert vacant buildings from single-tenant to multi-tenant,
to support startups and younger companies. You can retrofit
buildings with green technologies, create green-collar jobs,
turn our research parks into living labs for a low-carbon
economy. And you can fund shared infrastructure, like large
scientific instruments, that create unique value to research
parks.
Second, you can invest in upgrading research park software.
Research parks need to evolve from a model based on managing
dirt--or land--to managing activities that support innovation.
The best chance we have for rapid job creation, over the
next year or two, is tapping this goundswell of
entrepreneurship happening right now in the country. But, parks
need to beef up their capacity to engage and nurture small
companies, which is very different than attracting and
retaining large ones. Grants that support expanded missions for
research park managers, could greatly enhance their
effectiveness as economic developers.
And finally, as we've heard all afternoon, we should
recognize that research parks are part of knowledge ecosystems;
networks of people, organizations, and ideas that operate at a
regional scale. We can't just build parks in isolation and
expect them to succeed. One reason why Research Triangle has
been so successful is that it has had a strong regional
partnership at its core from the very beginning. CEO Rick
Weddle, of the Research Triangle Foundation, calls this the
``grand vision.'' And it was that vision, that was handed down
from generation to generation, that allowed the project to stay
on track during transitions in political leadership.
Research park funding, such as was proposed in S. 583,
should be tied to regional economic programs, such as what
we've heard about from EDA as well as some other bills that are
in the Senate right now.
Thank you, Mr. Chairman, members of the Committee, again,
for this opportunity. I welcome any questions, and comments you
may have.
[The prepared statement of Dr. Townsend follows:]
Future Knowledge Ecosystems
The Next Twenty Years of Technology-Led Economic Development
Anthony Townsend, Institute for the Future; Alex Soojung-Kim Pang,
Institute for the Future; Rick Weddle, Research Triangle
Foundation
IFTF Report Number SR-1236 \1\
---------------------------------------------------------------------------
\1\ This work is licensed under the Creative Commons Attribution-
Noncommercial-Share Alike 3.0 United States License. To view a copy of
this license, visit http://creativecommons.org/licenses/by-nc-sa/3.0/
us/ or send a letter to Creative Commons, 171 Second Street, Suite 300,
San Francisco, California, 94105, USA.
---------------------------------------------------------------------------
Abstract
The model of self-contained research parks and incubators that
dominated the last fifty years of technology-based economic development
is being challenged by deep shifts in the global economy, science and
technology, and models of innovation . This paper describes fourteen
emerging trends that will set the context for technology-based economic
development in the coming decades. These trends are used to develop
three scenarios for the future of technology-based economic development
over the next two decades. In the first scenario, an incremental
evolution of the research parks model takes place in a world of rapid,
but steady and predictable change. In the second scenario, entirely new
networks of R&D space emerge in a ``research cloud'' that challenges
current models to adapt, sometimes dramatically. The third scenario,
the research park models is in rapid decline as R&D becomes highly
virtualized and parks' legacy cost structure makes them obsolete for
young firms. We conclude by highlighting the strategic implications of
these scenarios for existing and future parks and economic development.
Forecasting Workshop Participants
Forecasting and scenario development workshops were held during
2008-9. Organized by Research Triangle Foundation and facilitated by
the Institute for the Future, these workshops were designed to engage a
broad group of experts from different countries and different
professions in brainstorming important trends and scenario elements.
The results of these workshops are reflected throughout this report.
The authors wish to thank Tina Valdecanas of the Research Triangle
Foundation for organizing these workshops.
IASP 2008
Johannesburg, South
AfricaSue Bell
La Trobe University R&D
ParkJoan Bellavista
Parc Cientific de
BarcelonaNeville Comins
The Innovation HubJeff Finkle
IEDCEsteban Cassin
Fundacion Parque
Tecnologico
Misiones ArgentinaHerbert Chen
Tsinghua University
Science ParkDouwe Dijk
Zernike Science ParkMauricio Guedes
Rio de Janeiro
Technology ParkDennis Kekas
NCSU Centennial CampusLex de Lange
Zernike Science ParkMalcolm Parry
The Surrey Research
ParkJosep Miguel Pique
22@BarcelonaLuis Sanz
Paulo C. De Miranda
IASP
AURP 2008
Rick Weddle St. Petersburg,
Research Triangle Park Florida, USA IEDC 2009
Online Expert Panel
To complement our face-to-face workshops, the Institute for the
Future convened an online panel of experts in March 2009 to map trends
in areas that will shape the future of technology-led economic
development and research parks: real estate, architecture, economic
geography, public policy, entrepreneurship, history of science, and
incubation.
Thomas Campanella
University of North Carolina
Kamau Gachigi
University of Nairobi
Michael Joroff
MIT
Ilkka Kakko
Karostech Ltd.
Steve King
Emergent Research
Mitchell Moss
New York University
Fergus Murphy
SRI International
Margaret O'Mara
University of Washington
Hugh O'Neill
Appleseed, Inc.
Rachel Park
CUH2A
Matthew Zook
University of Kentucky
Part I--Where We Are Today
Introduction: A Postcard from 2030
Fast forward to 2030, and imagine a late afternoon in Soweto, once
a stronghold of resistance to apartheid, now a hotbed of small
technology firms bridging Western technology and African ingenuity and
markets. Scattered across the community's 65 square kilometers, some
150 small factories and wet labs are engaged in short-run, small-batch
manufacturing of lightweight infrastructure technologies of all kinds--
solar-powered ovens, nanomesh water filtration, genetically modified
seed lines specifically designed for micro-climates across the sub-
Saharan region. Collaborative R&D is mostly done in community-funded
pop-up labs, cheap facilities built out of shipping containers and
governed by open patent agreements--whatever goes in or comes out of
them is common property for the whole community.
For many, the future described here may be difficult to imagine,
but it is a plausible one. It illustrates the degree of change that can
happen in twenty years. In fact, the investment decisions we make today
are likely to have impacts for at least this long.
Thus, ask yourself, would I recognize this as a research cluster?
Would I call it a research park? \2\ What does this possibility mean
for how research parks are likely to evolve, in the developing and
developed economies alike? In this world, what is the role of research
park developers, managers and economic development officials?
---------------------------------------------------------------------------
\2\ Throughout this report, we use the terms research park, science
park and technology park interchangeably. All refer to specific,
contiguous development sites targeted to attracting and developing
technology-intensive economic activity.
---------------------------------------------------------------------------
The purpose of this white paper is, firstly, to explore the future
economic, technological and geographical trends that might converge to
make this vision a reality. Second, this is only one of many possible
futures for technology-led economic development. Therefore, we present
a set of three broad scenarios for the future of research parks and
technology-led economic development.
Building on Success: A Brief History of Technology-Led Economic
Development
2009 marks an important moment in the history of technology -led
development. The Research Triangle Park of North Carolina turns fifty,
and over 40 parks are twenty-five years old or more.\3\ As we begin
thinking about the next twenty years of change and innovation in this
field, it makes sense to review how the movement has evolved and the
source of its past successes.
---------------------------------------------------------------------------
\3\ 2009 survey of IASP members by Research Triangle Foundation.
---------------------------------------------------------------------------
The concept of the science city--a city built from the ground up to
house scientific and technical research--emerged during World War II.
The speed of technological development demanded by the war effort
vastly exceeded any existing industrial R&D capability, and the
concentration of existing research centers in cities was a security
risk. As a result, both Allied and Axis powers created massive R&D
facilities, isolated far from population centers. The British
concentrated cryptography researchers in Bletchley Park; German rocket
developers were centered at Peenemunde; and most spectacularly,
America's Manhattan Project built remote complexes dedicated to atomic
bomb research and production in Tennessee, Washington and New
Mexico.\4\
---------------------------------------------------------------------------
\4\ ``Science: Innovation in the City'' Ten Year Forecast: 2006.
(Institute for the Future: Palo Alto, California)
---------------------------------------------------------------------------
While the science city model was certainly effective at massive
breakthroughs in both basic science and its technological applications,
it was frighteningly expensive, and their geographic isolation meant
that there were few opportunities for spin-off economic growth. The
science city model was later used both successfully and unsuccessful in
economies as different as Japan and the Soviet Union. Over time, the
notion of science cities as a specific site gave way to ``technopoles''
as regional concentrations of public and private technological,
financial and human capital.\5\
---------------------------------------------------------------------------
\5\ Manuel Castells and Peter Hall, Technopoles of the World: The
Making of 21st Century Industrial Complexes, NY: Routledge, 1994.
---------------------------------------------------------------------------
In the early 1950s, first at Stanford University and later in North
Carolina, the science city model was adapted to a more manageable
scale. Dubbed ``industrial parks'', ``research parks'' and ``science
parks'' these projects were land-driven strategies primarily aimed at
attracting the regional branch plants of large manufacturing companies.
Over time, these places saw a growing share of their tenants engaging
in research and development functions. In many countries such as Japan,
France and the Netherlands, central governments played a major role in
the creation of research parks. In the United States, research parks
more often were the result of sub-national governments.\6\ Over time,
parks have tended to become more specialized, targeting specific
industries or sectors.
---------------------------------------------------------------------------
\6\ M. I. Luger and H. A. Goldstein. 1991. Technology in the
Garden: Research Parks & Regional Economic Development. (University of
North Carolina Press: Chapel Hill, NC)
---------------------------------------------------------------------------
By the 1980s, the strategic focus of technology-led development
shifted from the attract-and-retain model of industrial parks to a
model based on business incubation. While technology transfer was an
element of the business model behind industrial parks, in incubators it
moved to the forefront. The thinking was two-fold: dating companies was
a zero-sum game playing regions off against each other, and growing
firms locally would be more ``sticky'' and likely to produce secondary
benefits. Beginning with the first known business incubator,
established in Batavia, New York in 1959, thousands of incubators
opened throughout the world. Today, some 3,000 business incubators
exist worldwide, along with thousands of other facilities that perform
similar functions under different monikers.\7\ The incubator model also
marked a shift away from lowering real estate costs as the primary
strategy (though rents are still typically subsidized), to providing
seed capital, management expertise and intellectual property management
needed to grow small companies into big ones. Almost universally,
incubators have been positioned around universities, in the hope of
leveraging their research and talent.
---------------------------------------------------------------------------
\7\ National Business Incubator Association.
---------------------------------------------------------------------------
Today, both the industrial park and business incubator model are
widely used. However, in advanced industrial economies these models are
less effective as the needs of startups evolve. In their 1991 study of
U.S. research parks, Luger and Goldstein found that more than half of
all research parks fail or shift their focus. Furthermore they found
that ``many research parks are unlikely to be appropriate for new
start-up businesses, because minimum lots size requirements and high
land prices make the cost of entry into parks high.'' \8\ Yet, existing
parks still create great value for tenants, surrounding properties and
regions--not because of the business model--but because they have
become key nodes in larger knowledge ecosystems. This accrued value is
being reflected in the market. For instance, land values at the
Research Triangle Park have more than tripled in the last 5 years.
---------------------------------------------------------------------------
\8\ Luger and Goldstein, p. 181.
---------------------------------------------------------------------------
But, as we illustrate through one of our future scenarios, the next
few years may very well be a period in which no significant new
research park projects are launched, and some parks fail. Any number of
factors could drive this scenari o to the forefront--a protracted
global recession, aggressive corporate cost-cutting and
dematerialization of R&D or a return to high energy costs that put
``legacy'' parks at a carbon disadvantage. Signals of this future are
already around us, from the endless delays of Russia's ambitious
national technopark project to bubble-era university-based efforts like
the Harry Reid Technology Park at the University of Nevada Las Vegas.
Even current success stories such as Singapore's Biopolis have been
called into question by the World Bank.\9\
---------------------------------------------------------------------------
\9\ Yusuf S. 2006. Postindustrial Asian Cities: Innovation for
Growth. (World Bank: Washington, D.C.)
---------------------------------------------------------------------------
On the other hand, the threat to existing parks could also come not
from external economic shifts but from the emergence of entirely new
models for building and organizing spaces for R&D. In our second
scenario, ``The Rise of Research Clouds''--digitally connected networks
of small spaces challenge existing parks and by providing more
collaborative, more flexible and less costly homes for invention.
Again, signals of this future abound if we raise our heads and look at
innovative communities outside our own circle of peers.
A third possibility, a very real future for many parks, is
incrementalism--evolving and upgrading infrastructure and services to
the next version, `` Science and Technology Parks 3.0''. Indeed, an
upgrade is desperately needed. Cities and metropolitan regions are
increasingly seen as the drivers of national economic growth, making it
likely that we will see renewed interest in the research park model as
an economic development tool. Yet, while this scenario may involve
survival and a limited degree of prosperity for some, it does not
realize the full potential for innovation and socioeconomic gains that
future scientific breakthroughs may hold. It is a likely scenario for
many parks in the absence of external threats, but not necessarily the
most desirable one.
Toward Regional Knowledge Ecosystems
Despite their stark differences, in all of these scenarios, we find
one common element--regions will play a more important role than at any
time in the last century. In fact, there will almost certainly be
regions in which all three of these scenarios play out simultaneously
over the next twenty years, with upgraded research parks, research
clouds, and vacant tracts of research parks that never were, all exist
ing side-by-side. The simple fact is that the complexity of science and
technology today is too big for any one campus, firm or research park
to tackle in isolation.
The literature on knowledge ecosystems, developed in organizational
studies over the last few years, provides robust framework upon which
to develop a new understanding of how innovation happens in regions. A
knowledge ecosystem refers to the events that occur as codified
knowledge is transformed into tacit knowledge over time through
learning and experience. Studies of knowledge ecosystems focus on how
communities of practice interact with established bodies of knowledge
and the tools and practices for upgrading that knowledge over time.
At least one study has explicitly applied the knowledge ecosystem
framework to understand a technology region.\10\ We believe that this
framework can be used by the research parks and economic development
community to better understand the processes by which communities of
practice, embedded in metropolitan areas, generate ``sticky know--how''
that has real, unique economic value that is difficult to copy.
---------------------------------------------------------------------------
\10\ Bahrami, Homa; Evans, Stuart. 2005. Super-flexibility for
Knowledge Enterprises. Ch. 3.
---------------------------------------------------------------------------
The regional knowledge ecosystem framework has several advantages.
First, it focuses our attention not on the existing institutions of
economic development--universities, research parks, large companies,
venture funds, etc--but on the dynamics of how they interact with each
other and new non-institutional elements (talent, bodies of knowledge,
virtual communities). While the economic development field is awash in
talk of ``networks'', the concept has lost all meaning. A rigorous
application of knowledge ecosystem theory will allow us to begin
specifying the kinds of networks and how they ought to operate. Second,
it brings a holistic approach to how we think of innovation in
regions--not as an isolated activity that happens within specific firms
or clusters, but as a cohesive system. Dysfunctional knowledge
ecologies are costly to organizations, but in a regional context, they
also impose costs on everyone else (if only opportunity costs).
Finally, the knowledge ecosystems approach is particularly attuned to
understanding how organizations perform in ``hyper-turbulent'' chaotic
environments, which certainly describes the global technological and
economic landscape.
Applying a knowledge ecosystem frame to regions immediately yields
several insights that may dictate strategic shifts in the way we
approach technology-based economic development. First, while land and
leased space will continue to underpin the economics of creating
research spaces of all kinds, the real added value will increasingly
come not just from providing services (as many parks already do), but
from actively managing activities and knowledge creation. Second, as
scientific knowledge and tools become available anywhere on-demand,
focusing on global domination of any particular industry will lose
effectiveness. Growing the regional ecosystem elements that provide the
capacity for repeatedly reinventing the cluster will become paramount.
Third, all of these dictate a reduced emphasis on real estate
development and infrastructure, and more emphasis on creating
mechanisms that link local assets to global markets in ways that
generate value.
Our understanding of this tool is in its earliest stages, and will
require further development. However, our forecasting and scenario-
building exercise points toward a crucial need in every technology
region, for new governance structures that are broader than a single
industry. Acting as a custodian of the regional ecosystem frame, this
body could perform several functions. In the short term, new tools are
needed for measuring and mapping networks and flows of knowledge, money
and ideas. In the medium term, new business models for managing
regional assets and creating something that is great than the sum of
its parts. In the long-term, the challenge will be leveraging this
ecosystem and its many networks to help firms and clusters compete
globally--by collectively figuring out where a region fits into global
R&D ``supply chain''. Their goals will be to encourage knowledge
creation at the cutting edge and develop the organizational, human and
social capital to compete in the global economy. It would build
networks that would stretch far beyond the major regional institutions
of today to include informal networks of entrepreneurs, investors,
professionals and hackers and other communities of mentoring and
learning.
This is where the Institute for the Future and the Research
Triangle Foundation find ourselves at the end of this study. This is
merely a beginning, however. We will continue to examine the findings
of this forecast with our partners and the global network of science
parks and technology regions.
We also will be working to develop realistic and implementable
execution strategies that respond to the challenges of this forecast.
These strategies will be shared in a ``field manual'' for existing
research park and technology-oriented economic development managers--
but also a framework for those considering the development of new parks
or innovation-focused development programs.
We believe the only way to invent the future will be through
systematic futures thinking, risk-taking and experimentation. If the
research parks and economic development community does not do it, they
will leave it to others to lead.
Part II--Trends Shaping the Future of Technology-led Development
Our forecast research identified fourteen trends that will broadly
set the context for technology regions and research parks over the next
5-20 years. They summarize keys global shifts in three domains: economy
and society, science and technology, and the models and places for R&D.
Each trend identifies a direction of change and consists of four
main elements:
Headline--a title that describes the overall direction of
change
Description--what is happening in this trend? What are the key
drivers and enablers?
Signals--what early indications of this trend are visible in
the world today?
Impacts--how will this trend shape the context for research
parks and technology-based economic development?
Economy and Society
The first set of trends examines major global social and economic
forces that will set the context for enterprises of every kind.
First, the current global economic crisis will echo for a decade or
more, putting governments at the forefront of funding basic science and
technology research and constraining big new development projects.
Second, new technologies of cooperation will elevate the economic
importance of small groups in elation to corporations and individual
consumers. This will transform entire industries and reshape the need
for collaborative space. Third, as governments and industries work to
address global warming through carbon markets and taxes, the
measurement of the economic value of ecological processes will be
increasingly important.
From Free Markets to Stimulus Capitalism
The economic crisis of 2009 will turn the tables on markets,
putting governments at the helm of the global economy for many years to
co me. Public investments in basic science and research infrastructure
will be used as a primary tool to stimulate both short-term and long-
term growth. In the United States, this shift is well underway, and in
rising science powers such as the Gulf states and China, recent large
public investments in research capacity will at least be are sustained
and potentially will expand.
Signals
Harvard University will house Stem Cell Institute in renovated
building instead of new science campus [http://tr.im/l8Wx]
2009 U.S. economic stimulus provides $100b for science and
technology [http://tr.im/l8Vx]
Corporate R&D spending holding steady, but real risk of decline in
2009 [http://tr.im/ilMz . http://tr.im/ilMH .
http://tr.im/ilMQ]
China and Gulf States continue state-led development of R&D
capacity and science cities [http://tr.im/lZOh . http://
tr.im/mqC1]
Impacts
The economic crisis, and governments' massive response through new
science funding, will have both short-term and longterm impacts.
An ``innovation bottleneck'' will form over the next 3-5 years, as
companies trim R&D spending and focus on short-term, quick-to-market
innovation during the crisis, and before the results of government-
funded research projects can be commercialized.
While companies will expand engagement with universities to
accelerate technology transfer, there are few short-term solutions.
The supply of venture capital will be constrained, as new funds and
less experienced angels who entered the industry in recent years
retrench to safer wealth preservation strategies.\11\ In global regions
where venture capital markets are lacking or under-developed, the
economic situation will slow the development of new funds and investor
networks.
---------------------------------------------------------------------------
\11\ National Venture Capital Assocation and
PricewaterhouseCoopers. MoneyTree Report [https://www.pwcmoneytree.com]
---------------------------------------------------------------------------
The real estate industry will continue to struggle financing new
projects and will avoid taking big risks. Real-estate investment trusts
that focus on research parks and lab space have been especially hard
hit. Even universities acting as developers are not immune to the
slowdown, as endowments have suffered in proportion to overall market
declines of 30 percent or more. Public universities will face large
reductions in government aid, severely limiting their ability to
develop new labs and research parks.
Research clusters in developing economies are likely to make
significant gains in market share for global R&D spending as they
provide lower-cost alternatives to cost-cutting companies.
Finally, existing research parks are likely to see increased tenant
demands for flexible lease arrangements, as they plan for greater
resilience to future economic shocks.
The Group Economy
New tools for cooperation will drive down the cost of forming
groups around any shared interest, identity or activity. New models for
creating wealth will emerge at the intersection of the social web and
grassroots movements. Existing organizations will be transformed
through the adoption of these tools and processes, becoming less
hierarchical, more agile and more collaborative.
Signals
Companies adopt of social software as a knowledge management tool--
Lotus Connections [http://tr.im/l972]
Meetup.com's rapid growth as a platform for organized ad hoc
interest groups for face-to-face meetings [http://www.meetup.com]
Obama campaign financed largely by small donations made online
[http://tr.im/l97d]
Science bloggers convention at Research Triangle Park [http://
tr.im/l989]
Academic studies mapping scientific collaborations [http://tr.im/
l998]
Impacts
As it spurs the creation of new kinds of ad hoc organizations, and
transforms existing ones, the group economy will have major impacts for
the kinds of places and spaces that are needed for collaborative
innovation.
New kinds of organizations will seek ``landing spots'' for meetings
of various kinds--scheduled daily, weekly or monthly meetups, and ad
hoc gatherings around interests, ideas and current events. The space
and infrastructure demands for these kinds of activities are
dramatically different from those supplied traditional research park--
less permanently occupied, private spaces and more think-tank type
collaborative spaces. The need for temporary, flexible and even mobile
spaces will grow dramatically.
The group economy will change the needs of existing organizations'
space as well. Existing tenants will require more meeting and
collaboration spaces, and less space for ``warehoused'' workers. The
goal will be to put collaborative activities in spaces that can amplify
group economies, and provide opportunities for discovery. As open
innovation strategies spread, there will be greater need for co-
locating company employees and outsiders within shared spaces.
Finally, the group economy will place new demands on the
measurement techniques traditionally applied in economic development
and research management. Today, most econometric data looks at outputs
and uses existing organizations as its units of analysis--the firm, the
research park, the region. However, in the group economy, there is are
new needs to measure both the flows between organizations--the ``in-
between stuff''--as well as the dynamics of small groups forming
outside institutional boundaries. How do we measure the substantial
impact of organizations without organizations? \12\
---------------------------------------------------------------------------
\12\ C. Shirky. 2008. Here Comes Everybody: The Power of Organizing
Without Organizations. (Penguin Press: New York)
---------------------------------------------------------------------------
Ecological Economics Comes of Age
As governments and industries work to address global warming by
developing environmental trading markets, carbon taxes, and other
mechanisms, the measurement of the economic value of ecological
processes will be increasingly important.
The first major efforts in this area are around carbon. Today,
carbon trading is based on estimation more than on the measurement of
real systems. Evolving carbon markets from estimation to measurement
will generate complex scientific and technical problems requiring
transdisciplinary solutions. Figuring out precisely how much carbon is
sequestered in a parti cular preserve in Indonesia or Brazil, and how
to turn that scientific knowledge into financial instruments will
require basic research in botany, ecology, climate science, geology,
remote sensing, and even accounting. As a scientific endeavor and
information service industry, this will draw upon technological
advances in sensing and measurement, simulation and supercomputing.
Signals
Carbon trading markets are growing rapidly, estimated to trade
hundreds of billions of dollars of credits worldwide. [http://tr.im/
lZOB]
Efforts to construct valuation of environmental services (beyond
environmental impact studies) [http://www.iftf.org/node/2789]
Growth of bilateral trading regimes (e.g., between Northern
companies and Southern forest preserves), supporting specific
investments or environmental initiatives. [http://tr.im/mqEt]
Commercialization of carbon offsets and their widespread adoption
by travel agents and travel sites.
Growing availability of personal carbon tracking estimators for
travelers. [http://tr.im/lM3l]
Impacts
The next decade will see the introduction of a new generation of
sustainability-related practices, technologies and services, built less
around estimations of the environmental impact of manufacturing,
transportation, and resource/energy use, and more on the measurement of
actual resource use and pollution.
In this new industry research parks can serve as test-beds for
innovative environmental management practices and services. For
companies developing these services, fellow research organizations are
likely to be valuable beta-testers and early adopters. Research parks
located near economically valuable and productive ecosystems could be
attractive locations for both researchers developing tools for
measuring ecological activity, and entrepreneurs developing instruments
for monetizing that activity.
Developing countries seeking to leverage natural resources could
turn carbon offsets into a mechanism for technology transfer. By
linking investment in science and technology infrastructure to carbon
mitigation instruments, they could boost their own capacity for
ecoscience at the same time they provide a valuable ecological service
to carbon-hungry developed economies.
Science and Technology
Evolving in parallel to trends that will transform the economy and
society over the coming decades, the subjects, methods, talent and
institutions of scientific research and technological innovation will
shift as well.
Five trends will have the greatest impact on technology-based
economic development and research parks:
Biology by design will supplant physics as the most scientifically
vibrant and economically important field, letting us read and write
nature's ``source code'' at will.
The spread of ubiquitous computing will create massive new streams
of research data, while simultaneously providing new tools for
scientific collaboration in the lab.
Social networks where people and computers work together to make
sense of data will enable a shift from artificial intelligence to
hybrid sensemaking.
New scientists will transform the practice of science by forging
transdisciplinary fields, multi-sector careers and bringing new
cultural influences to bear.
Science institutions will be transformed as collaborative, open and
online models for collaboration and knowledge sharing break through
obsolete barriers.
Biology By Design: Nature as Source and Code
From synthetic genomics (which seeks to design micro-organisms that
perform useful functions) to stem cell therapy (which seeks to harness
the body's own ability to heal itself), biology will become a central
source of scientific and technological breakthroughs. Key drivers
include global ecological challenges, the health needs of a richer,
aging global population and advances in informatics that help decipher
the code of life. Biological concepts about how to organize systems and
structures will also inspire designs for everything from buildings to
organizations to algorithms. Yet many experts believe the biotech
industry is structurally unsound--without change it won't be able to
fully realize the commercial potential of these new technologies.
Signals
First synthetic genome created by J. Craig Venter Institute [http:/
/tr.im/lfHL]
Scripps Florida biomedical research center opens in Jupiter,
Florida, home of the largest chronically diseased population in the
world [http://www.scripps.edu/florida/]
Massive public investment in biotech at the sub-national level
[http://tr.im/lfMW]
Transdisciplinary and translational biomedical research centers at
Stanford, MIT and UCSF
Google launches venture fund, which will make some investments in
biotech ``to keep an eye out for disruptive ideas to its core search
business that might come from unexpected fields, such as biotech.''
[http://tr.im/lZDi]
Impacts
Biotechnology has not lived up to its economic promises--as Harvard
professor Gary Pisano notes, while biotech has attracted more than
$300B in capital over the last 30 years, it has produced profitless
growth. Synthetic biology may change that, and increase the demand for
research space over the coming decades. So-called ``white''
biotechnology--industrial biotech for producing fuel and materials may
just be mundane and scalable enough to produce sustainable profits,
unlike earlier generations of ``red'' (biomedical) and ``green''
(agricultural) biotechnology.
In the meantime, however, the sector will continue to require
massive public investment in basic science to jumpstart economic
activity. In the United States, state governments have invested heavily
($500M for California's Institute for Regenerative Medicine, $1B for
the Massachusetts Life Sciences Initiative, and $1.2B in North Carolina
over the last decade). None of this will change the fundamental
structural issues in the industry, which is largely borrowed from
Silicon Valley's information technology (IT) industry, and which Pisano
argues are stifling innovation. Larger efforts, involving public,
private and NGO stakeholders will have to address these on a broader
scope.
Biotech will also diverge from the IT industry in the ways and
places in which it clusters. First, the translational nature of
biomedicine means that researchers are often moving from lab to bedside
frequently, requiring them to be located near research hospitals in
large population centers, often in the center of large cities (versus a
suburban research park). Second, it often involves specimens that
cannot be removed from the lab--distributed work is less important
since much of the ``code'' is not portable as in the software world.
Third, while IT infrastructure is becoming highly distributed, many of
the most advanced biomedical research tools are becoming highly
centralized. For instance, the next generation of high resolution MRIs
used in brain imaging research weigh dozens of tons and take up an
entire building.\13\ Finally, biological research will always entail a
certain level of public health risk--while many factors cited above
point toward centralization, the need to isolate hazardous materials
may push in the other direction--some bioresearch will need to be
located far from population centers.
---------------------------------------------------------------------------
\13\ Siemens AG. Fall 2008. ``Magnetic Mission'' Pictures of the
Future. p.88.
---------------------------------------------------------------------------
The sheer complexity of bioscience will require radically new
approaches to designing research organizations. Research at the
intersection of biology and informatics, and biology and
nanotechnology, for instance, requires bringing together different
disciplinary skillsets in the same place or even the same person. Parks
and regions that can tap multiple disciplinary centers of excellence,
or partner with transdisciplinary organizations and research
communities will be well-positioned for biomedical innovation.
Ubiquitous Computing
The spread of ubiquitous computing (ubicomp)--the diffusion of
unobtrusive digital sensing, computation and communications
technologies into ever-larger parts of man-made and natural
environments--will create vast new datasets for scientific research in
fields from public health to civil engineering to marine biology.
Mobilizing this computational infrastructures will require intensive
collaborations between IT specialists, scientists, and engineers. But
once in place, ubiquitous computing technologies will also generate
very large quantities of information from everyday activities like
travel, shopping, and communications. This will have substantial
commercial value to companies that can manage and analyze it quickly
enough. More importantly , it will enable new research in social
science, public health, and field sciences that will contribute to the
further quantification of these fields.
Signals
The growth of environmental sensing research in ubiquitous
computing, such as the Living Environments Lab at Carnegie-Mellon
[http://www.livingenvironments
.net/]
Research in ``smart dust,'' cubic millimeter-scale computers that
within a few years will allow us to place computing and reactive
capabilities in a wide variety of built objects and environments
[http://tr.im/mqIz]
The growth of low-cost displays, and their diffusion into a variety
of use contexts and devices, ranging from cellphones and iPhones to
wall-sized digital billboards.
Impacts
Ubiquitous computing will collapse many of the distinctions we take
for granted when doing everything from designing scientific research
projects to designing research spaces. The distinction between online
and offline environments, digital and physical worlds, even between
natural and artificial, break down. This does not mean that physical
places will become irrelevant: instead, the smart deployment of well-
designed digital resources, and the early adoption of new digital
technologies, will set smart places ahead of the pack.
On the research front, ubiquitous computing creates opportunities
and demands for new forms of cross-disciplinary research. Because
ubicomp creates the potential to blend digital resources with a wide
variety of materials and environments, research parks could create
value by bringing computer scientists and engineers together with
sculptors, textile designers, architects, and anthropologists--or with
craftsmen and workers from established, mature local industries. It
will also create a need for hyper-wired, digitally-mapped, configurable
spaces that can be used as test-beds for new technologies.
Ubicomp will also create a need for ``living labs'' like Seoul
Digital Media City or Singapore's Fusionpolis that combine vibrant
real-world communities with research and prototyping. Ubicomp is as
much about the use of technologies as their deployment; having spaces
in which users can realistically interact with prototypes or enhanced
spaces can generate valuable experiences and insights for researchers,
retailers, and designers.
From Artificial Intelligence to Hybrid Sensemaking
For decades, computer science sought to create artificial systems
capable of duplicating and even replacing human reasoning and
communications. In the last few years, the excitement around collective
intelligence experiments on the Web has established the value of a
different approach: the creation of hybrid structures that combine
social networks and more limited forms of machine intelligence, to
collaboratively filter and extract meaning from data about our
environments and ourselves. Such systems allow computers and humans to
each do what they're good at, and mix together formal and tacit and
social knowledge. More broadly, the growth of these tools reflects a
more nuanced view of intelligence as an inherently social and
contextual thing, not something reducible to computer cycles or logical
statements.
Signals
MIT and NYU trials of workplace infrastructures that mine social
interaction data [http://tr.im/lM8Z]
Experiments with ``artificial artificial intelligence", like
Google's Image Search Game and Mechanical Turk, platforms for small
tasks are trivial for humans but extremely difficult for computers.
A San Francisco-based startup seeks make scientific distributed
computing (made famous by SETI@Home) more accessible by combining a
simple computing infrastructure with social networking tools to reach
small, rich pools of talent or expertise.
The Network Oasis in Joensuu, Finland's GLOW system helps managers
of an incubator space ``manage serendipity'' by understanding who is
present and their skills and interests [http://www.globaloasis.fi/glow/
]
Impacts
Artificial intelligence sought to make humans obsolete--as a
corollary, it would have made place less relevant. But hybrid
intelligence relies on a mix of unique places, strong algorithms, and
vibrant human networks. Hybrid intelligences require interesting or
unique working spaces, workplaces or other infrastructures that
facilitate nonverbal communication.
Not only are there opportunities for research parks to provide rich
physical spaces supporting hybrid intelligences. Hybrid intelligence
could become a distinguishing feature of highly effective collaborative
research spaces. By providing infrastructure and ``reality mining''
services, parks could distinguish themselves and move up the value
chain.
Hybrid intelligences often mobilize around very large, uncertain
bodies of information. These are too complex and specialized to be
usefully analyzed using commercial-grade Internet connections and
servers; the grid computing architecture developed for high-energy
physics is likely to be replicated in other fields. Research parks that
can provide very fast access to grid-scale computational resources,
often in support of groups of scientists or social networks, will have
an advantage over less-connected competitors.
The growing popularity of publications like the Journal of
Visualized Experiments (JoVE) suggest that a new generation of
experimental scientists will see the value of systems that allow them
to communicate tacit knowledge at a distance. By employing hybrid
approaches to map what people are actually doing in research
environments, labs can help codify some of the things that were
previously craft and technique.
The New Scientists
The next generation of scientists will transform scientific
practice, the way scientific careers are constructed and managed, and
the sources of knowledge they draw upon and develop in their work. As
options outside academia grow, publishing becomes more open,
collaborative and real-time, and entrepreneurship gains more
legitimacy, the means by which scientists create professional
reputation will be transformed. These new scientists will be both
transdisciplinary and ultra-specialized, drawing on various disciplines
to answer complex, focused questions. The role of amateurs will expand,
as both independent researchers and partners of professional science.
Scientists from emerging economies will introduce non-Western cultural,
ethical and intellectual traditions into the practice of modern
science. Science will also provide a pat h for women to achieve gender
equality in nations with a high degree of gender segregation.
Signals
Increased competition for academic jobs, as PhD production
increases and tenured faculty stay on staff is driving many doctoral
graduates into private sector jobs. [http://tr.im/m20o]
The Princeton Review and Fortune Small Business now produce annual
ratings of the best schools for entrepreneurs--institutions are
beginning to see these students as a significant segment of their
market.
Reward for entrepreneurship in tenure review is encouraging more
young scientists to develop academic-industrial ``bricolage'' careers,
moving back and forth between universities and business.
Universities are responding to student desires for more
transdisciplinary education especially around design: Finland's Aalto
University (created through the merger of 3 pre-existing universities),
Stanford's D.School, and Design London (a joint program of Imperial
College and the Royal College of Arts) [http://tr.im/lmvl]
``Scientists of the self'' are using ubicomp technologies to
monitor their own bodies and lives, generating volumes of data and
unorthodox research questions. [http://www.quantifiedself.com/]
Science is actively engaging many more amateurs, who may go on to
science careers or make significant contributions to formal research
projects (SETI@Home, Birdsource).
Impacts
New scientists will have dramatically different expectations about
career mobility and the ability to pursue independent intellectual
interests outside of employment contracts. They will have greater
demand for continuing education and learning experiences, and will want
work environments where they can maintain connections to their social
networks and outside sources of knowledge.
The role of social networks will be extended in other ways that
impact econmic development. One of the most important assets being
cultivated by large companies are their corporate alumni networks. As
research parks and technology regions are increasingly selling
community as a highly valuable aspect of location, creating membership-
type organizations for ``park alumni'' might make sense.
Research parks and regions have long marketed themselves as
attractive places for companies. As Richard Florida argues, places now
need to be attractive to workers as well, if not primarily.\14\
However, in between these two layers, parks also need to think about
how they appeal to small groups of new scientists--the clubs, mailing
lists, and other rich networks that really connect and define
innovative communities.
---------------------------------------------------------------------------
\14\ R. Florida. 2002. ``The Rise of the Creative Class: And How
It's Transforming Work, Leisure, Community and Everyday Life'' (Basic
Books: New York)
---------------------------------------------------------------------------
Finally, many of the new scientists will not be professionals, but
amateurs. Parks have historically done a terrible job connecting to
educational institutions and youth, if they have bothered at all.
Connecting to amateurs will entail some of the same challenges, but
also reap potentially larger rewards. As volunteer champions of
science, amateurs represent a vastly under-utilized resource for parks
and their tenants. And the failure to engage them in real world R&D is
a lost opportunity to upgrade the region's human capital through
experiential learning and training.
Science Institutions Transformed
Experiments with new organizational forms, incentive structures,
and rewards will shake the foundations of centuries-old scientific
institutions. Scientific publishing is already under full-scale attack,
its economics and social conventions completely undermined by cheaper,
faster, or more democratic online alternatives and by entirely new
forms of publishing like video. Privately funded research centers like
the Perimeter Institute, Kavli Institutes, and Jenalia Farms are
experimenting new ways of funding and organizing research, and
measuring the output of scientists. Scientific challenges like the X
Prizes are coalescing into a parallel and competing incentive structure
for innovation. Finally, the sheer complexity of the scientific
challenges of the 21st century will require massive new global
partnerships that cross political and organizational boundaries.
Signals
Prizes and challenges are emerging as a substantial incentive for
innovation in sustainability and other global problems. (http://
www.signtific.org/en/signals/technology-prizes-and-challenges-
innovations-sustainability-and-global-problems, http://
www.signtific.org/en/signals/using-prizes-not-patents-support-drug-
development-developing-world)
Hedge funds are partnering with academic mathematicians and
physicists to develop new tools of interest to financial engineering
and science; others are supporting research in high-energy physics.
(http://www.signtific.org/en/signals/hedgefund-university-partnerships;
http://www.signtific.org/en/signals/hedgefunds-new-cool-places-basic-
science ; http://www.signtific.org/en/signals/private-funding-high-
energy-physics)
A wide range of institutions and entrepreneurs are developing
alternatives to traditional scientific publishing, which has helped
shape professional practices and rewards for decades.
Impacts
The growth of new kinds of scientific institutions may create new
clients for research parks: private equity-funded laboratories,
institutes created to solve specific high-profile problems. However,
while some will be working at a scale and pace similar to companies and
academic institutions, others may not, and may be designed to operate
for only a few months or a year.
Research parks need to be sites in which virtual networks can
coalesce into meetups, conferences, etc. They also need to be places
that can support virtual work and new forms of publication. Research
parks might also attract new institutions by developing their own
science or technology prizes, or partnering with organizations offering
prizes.
In some parks and regions, critical science institutions may need
new sources of external support, or risk failing entirely. The crisis
facing the newspaper industry today may be a particularly illustrative
one. Once unthinkable, the failure of a crucial institution that could
have massive impacts on local politics and economies, is now a reality
in every city. Should parks and institutions struggle to save dying
institutions, or help fledgling alternatives grow stronger to take
their place?
Models and Places for Research and Development
The final set of trends looks at how organizational structures and
business models for research and development are changing, and emerging
ideas about how to configure these activities at various scales--the
lab, the building, the campus, the region and the globe.
Six trends are shaping the future of R&D:
A new global map of science is emerging, in which smaller countries
are playing an increasingly important role, challenging the Western
superpowers' centuries-long dominance.
New models of lightweight innovation seek to do more, faster with
less, and cast a broader net for ideas.
Universities will continue their transformation from ivory tower to
economic engine and play a greatly expanded role in economic
development--in time, it could become their primary function, trumping
education.
Economic development practice will shift from trying to copy the
success of others to building sticky know-how--tacit knowledge that
builds on local cultural and industrial resources, and isn't mobile.
Greater attention to the social life of small research spaces will
create dynamic, transdisciplinary places that bring virtual networks to
ground.
Regional knowledge ecosystems will emerge as a new strategic frame,
providing scale, efficiency and global platforms for economic
development.
New Global Map of Science
If science in the 20th century was a pyramid, with the United
States, the United Kingdom, Germany, Russia, and Japan at the apex,
science in the 21st century will be more like a network, with multiple,
linked centers of excellence. Successful countries and sub-national
regions will pursue strategies to blend targeted investments in basic
science with local industrial or cultural resources, to create unique
and hard-to-reproduce centers of excellence. These centers will be
designed to capture critical niches in complex global R&D ``supply
chains''. Meanwhile, the shift from brain drain to brain circulation;
the rising capability of moderate Islamic states to support scientific
communities; and the growth of new ``South-South'' collaborative
networks mean that these centers of global excellence can develop in a
wider range of countries than in the 20th century.
Signals
Growth of South-South research cooperation [http://tr.im/la34]
Chinese universities hiring top global talent [http://tr.im/la6S]
R&D partnership between The Hamner Institutes for Health Sciences
and China Medical City [http://tr.im/lLZd]
Fewer doctoral students staying in the U.S. after graduation
[http://tr.im/la6q]
Globally mobile universities--NYU in Abu Dhabi, JHU in Nanjing,
Georgetown in Qatar
``Bamboo ceiling'' for Asians in U.S. firms \15\
---------------------------------------------------------------------------
\15\ J. Tang. 1997. ``The Model Minority Thesis Revisited:
(Counter)Evidence from the Science and Engineering Fields ``The Journal
of Applied Behavioral Science, Vol. 33, No. 3, 291-315
---------------------------------------------------------------------------
Impacts
New research clusters in developing countries will capture an
increasing share of global R&D investment, and increase the volume and
value-added in technology innovations. Some of this will certainly come
at the expense of existing industries in developed economies, through
offshoring of ``routine'' R&D functions.
Globally networked science will necessitate a shift from zero-sum
competition and efforts to replicate Silicon Valley's broad knowledge
ecosystem, in favor of highly focused efforts to develop niches in
global technology supply chains. This strategic shift will be pioneered
by new clusters in emerging economies, seeking to be globally
competitive at the cutting edge in narrow areas of opportunity.
Global science also means greater mobility of talent. As wage
differentials shrink, returning home will be more attractive to foreign
students--developed countries will need to offer additional value, such
as a better business environment or easier access to startup funding.
U.S. universities are responding by exporting their ``brands'' to
developed and less-developed countries. We will also see scientists
with global mobility that is more complex than simply moving between
two countries--they may migrate multiple times to emerging centers of
excellence.
Finally, global science will create more demand for ``soft
landing'' zones for foreign companies expanding into new markets and
joint ventures, which could provide an additional source of science
park tenants, as ``soft landing'' companies outgrow their incubator
space. Innovative regions will need to provide a broad variety of these
spaces and market them through existing business networks.
Lightweight Innovation
Over the next decade, new economic realities will increase the
pressure to innovate faster and cheaper. New ideas about how to
organize the innovation process, combined with dramatically cheaper
tools for invention that put advanced research technology in the hands
of small firms, will enable new lightweight models fo r commercializing
knowledge. More and more of new product and service development will
happen outside of existing pipelines. Lightweight innovation will
reinforce the strategic shift of innovation activities out of large
firms into broadly defined ``open innovation'' networks.
Signals
Innovations in early-stage investment: BetaWorks,Y! Combinator and
AngelSoft
Falling costs of tools of invention--cloud computing, 3-D
prototyping and desktop genomics
Crowd-sourcing innovation: Kluster [http://www.kluster.com]
Innovation clubs and Fab Labs in Kenya [http://www.fablab.co.ke/]
Impacts
Lightweight innovation points toward a growing role for startups in
innovation systems at every scale--local, regional, national and by
industry. Yet few research parks and economic development agencies are
well-equipped to assess and address the needs of startups.
The most important shortcoming is in the area of startup financing.
A growing array of smaller startups will seriously challenge
traditional venture investing models, which simply cannot produce a
profit on small deals. In some areas like biotech, this early-stage
funding gap is being filled by corporate strategic venture funds. There
will be an increased need for deep local networks of angel investors
and small-scale seed funds--but these need to be run by seasoned
entrepreneurs. ``Dumb money'' from investors without expertise or
connections, has far less value than ``smart money'' that does.
The growth of startups, especially very small ones will create a
``long tail'' market for R&D Space. Instead of a handful of anchor
tenants, a long tail is a large collection of very small firms that add
up to significant demand. Since existing parks are mostly designed
long-term leasing to large companies, a mismatch may emerge.
Incubation of lightweight startups will be a fundamentally new
proposition. Just a few years ago, it took millions of dollars of
venture capital, dozens of programmers, and a year or more to bring a
new software product to market. Today, agile web startups move from
idea to implementation without traditional incubation.
Access to ``heavy'' R&D tools will never disappear completely,
except in a very few areas of technology. Research parks can play an
important role in aggregating demand and subsidizing costly equipment.
Especially in the developing world, where access to equipment is often
the greatest obstacle to innovation for micro-financed inventors, this
will be critical.
New innovation models are driving new approaches to intellectual
property management, which will require managers of research spaces and
communities to rethink how they support companies. The traditional
focus on helping companies protect their IP, may need to shift to
helping them open their IP to potential partners or new communities of
innovation.
Universities: From Ivory Tower to Economic Engine
Several interacting forces will expand the modernization of
universities' role in the economy. First, increased public investment
in basic research will raise public expectations about the social and
economic impacts produced by universities. Second, companies will
continue to outsource research to university partners, amplifying the
need for efficient technology transfer. Third, global competition
between universities will foster more entrepreneurial initiatives to
secure talent and find new sources of financial support. Finally,
developing countries will rely heavily upon universities to jump-start
new technology-based clusters.
There is a great degree of uncertainty about this shift. There is
still considerable debate about whether `'universities should
deliberately do more to encourage the development of products or
companies.'' \16\ And while the .Edu Impact portal (http://www.edu-
impact.com/) has cataloged over 90 economic impact studies of
universities in the U.S. and worldwide, this is largely a defensive
exercise by universities seeking to avoid taxation by local
authorities, not a demonstration of university vision or public policy.
---------------------------------------------------------------------------
\16\ The Future of the Research University: Meeting the Global
Challenges of the 21st Century. 2009. (Ewing Marion Kauffman
Foundation: Kansas City, MO)
---------------------------------------------------------------------------
Signals
Texas--state officials requested that the words ``technology
commercialization'' and ``economic development'' be added to university
and college mission statements.
UK 2015 Research Assessment Exercise will ``for the first time
examine factors like citation rates and the economic impacts of the
research in question.'' \17\
---------------------------------------------------------------------------
\17\ ``Peer pressure'' SEED, April 2009, p. 20.
---------------------------------------------------------------------------
The number of people employed in the technology transfer offices of
U.S. universities more than doubled between 1998 and 2007. [signtific
URL TBD]
Harvard University's Technology Accelerator Fund--$1.5m in annual
grants for faculty to refine research to attract private capital.
Growth of university-based angel networks in the United States,
Canada and Spain.
New technology transfer mechanisms like the Alfred E. Mann
Institutes, ``proof of concept centers'' [http://tr.im/lZPB]
Innovation zones, like the Greater Oakland Keystone Innovation
Zone, a partnership of Carnegie-Mellon, the University of Pittsburgh,
the stat e of Pennsylvania and several non-profit organizations.
Impacts
The most aggressive universities will completely transform their
promotion systems, deeply integrating incentives for entrepreneurship.
Some universities (such as the University of Iowa and Texas A&M) now
identify patents, patent applications and involvement in tech transfer
as evidence in tenure review. Some universities are even willing to
reward faculty who have proven their effectiveness in economic
development as highly as academic stars.\18\
---------------------------------------------------------------------------
\18\ For example, Alain Kaloyeros, who attracted more than $2.4
billion in Federal, state and corporate funding to make the University
at Albany a center of nanotechnology and semiconductor research, was
paid a salary of $696,000 in 2008.
---------------------------------------------------------------------------
As the share and volume of basic research done at universities
rises, technology transfer will either exceed or fail to meet public
and corporate expectations. Flaws in prevailing models for managing
technology transfer will become more apparent, such as the preference
for patents that produce short-term profits over more challenging
longterm commercialization projects. The backlog of research generated
by stimulus funding may skew incentives even further in the wrong
direction, and leave many promising technologies languishing in the
lab.
On the other hand, greater competition between universities will
encourage more experimentation by universities in technology transfer
and IP management. More universities will develop strategies and
resources for supporting other means of promoting commercialization and
entrepreneurship than only patent licensing.\19\ Others will create
internal competition--putting outside agents on equal footing to
compete with their own technology licensing office. Still others will
partner to create multi-university offices that can achieve a more
efficient and effective scale.
---------------------------------------------------------------------------
\19\ R. E. Litan, L. Mitchell, and E. J. Reedy, ``The University As
Innovator: Bumps In The Road'', Issues in Science and Technology,
Summer 2007.
---------------------------------------------------------------------------
The role of research parks, incubators and other facilities for
technology transfer will change rapidly. As expectations for technology
transfer grow, universities will diversify their strategies for spin-
off spaces. This will mean shifting from a single research park model
to investing in entire ``innovation zones''. In this model, rather than
merely developing an urban research campus, universities act as long-
term participants in the ongoing revitalization of urban neighborhoods
or districts. These districts are mixed-use, combining both academic
and commercial research activities with residential, office, retail,
and cultural uses. The goal is to create an en vironment that helps
attract, nurture and retain talent, and to encourage innovation across
a wide range of other enterprises as well. Extending this strategy,
more incubation spaces may be inserted directly into campuses and
university buildings.
Entrepreneurial universities are not without their critics. Gary
Pisano argues that aggressive commercialization of university
bioscience research is actually limiting the industry's development by
reducing the pool of shared scientific knowledge. His solution:
``[t]hey should focus primarily on maximizing their contributions to
the scientific community, not maximizing their licensing revenues and
equity returns.'' \20\ And there is a clear impact on the academic
environment in entrepreneurial universities--when research parks are
close by, the curriculum tends to shift from basic to applied
research.\21\
---------------------------------------------------------------------------
\20\ Pisano G. 2006. ``Can science be a business? Lessons from
biotech'' Harvard Business Review.
\21\ A. N. Link, J. T. Scott. ``U.S. science parks: the diffusion
of an innovation and its effects on the academic missions of
universities'' International Journal of Industrial Organization.
---------------------------------------------------------------------------
Some universities will be unwilling or unable adopt a new model,
and will produce limited economic benefits. We are also likely to see
the emergence of new universities where economic development, not
education, is the primary mission. Most will fall in the middle. As one
study summarized the future: ``In our view, universities . . .
increasingly have no choice whether to be entrepreneurial, although
like for-profit firms, they do have a choice about how they go about
doing so.'' \22\
---------------------------------------------------------------------------
\22\ (Kauffman p. 124).
---------------------------------------------------------------------------
From Knowledge Diffusion to Sticky Know-How
Advocates of innovation economies often see knowledge as both
infinitely mobile and disconnected from its origins. Knowledge can be
produced anywhere, this thinking goes, and high value-added, knowledge-
intensive activities can be decoupled entirely from manufacturing. Both
are wrong.
Many bench scientists can't take their work home, and some can't
work outside one-ofa-kind facilities. Innovation often has a
geographical or social ``stickiness'' to it because it can draw on
combinations of scientific knowledge, technical skill and tacit
knowledge that are place-specific. Nor is innovation so easily
distinguished from manufacturing: many high-tech innovations have
emerged while solving manufacturing problems, and contrary to popular
perception, making things--especially innovative new products--is a
highly complex, creative activity. Indeed, future industries, like the
translational research paradigm emerging in the biomedical world, are
likely to place a higher value on the tacit knowledge required to move
new scientific discoveries from the laboratory to store shelves,
doctors' offices, and living rooms.
Signals
Zaha Hadid's Central Building for BM's Leipzig plant deliberately
seeks to mix white-collar and blue-collar workforce as a spur to
innovation [http://tr.im/lZT5]
Rise of ``guild'' workspaces, such as Pixar in Emeryville, Calif.
where large freelance contractor work forces are co-located with
corporate customers during production.\23\
---------------------------------------------------------------------------
\23\ Myerson J. 2006. Radical Office Design. (Abbeville: New York)
---------------------------------------------------------------------------
Venture capitalists are being recognized as tacit knowledge brokers
who acquire and create intelligence about industries, market
conditions, entrepreneurs and companies through a constant process of
interaction and observation. This knowledge is then used to select
promising industries, find good firms, and assist portfolio
companies.\24\
---------------------------------------------------------------------------
\24\ Zook, M. A. 2005. The Geography of the Internet Industry:
Venture Capital, Dot-coms and Local Knowledge. (Blackwell: New York)
---------------------------------------------------------------------------
Venture capitalists' are the center of a tacit knowledge exchange
system that gives them lots of exclusive know-how. They are also able
to speed this process to provide their portfolio companies an
advantage.
Trade fairs are ``temporary clusters'' that provide mechanisms to
share tacit knowledge exchange over long distances.\25\
---------------------------------------------------------------------------
\25\ Bathelt, H. and Schuldt, N. A. 2008. ``Between Luminaires and
Meat Grinders: International Trade Fairs as Temporary Clusters''.
Regional Studies. 42:853-868.
---------------------------------------------------------------------------
Intel ``Copy Exactly'' in which Intel copies successful factories,
right dow n to the paint colors, on the theory that they don't always
know what makes a factory successful, so just copy everything. [http://
tr.im/lZXh]
Impacts
Partnering or providing space for groups that have skills very
different from conventional R&D, but can contribute to the development
of innovative products or services--arts or cultural groups, human
factors or ethnographic researchers, even financial engineering firms--
may encourage unique cross-fertilizations that forms the basis of
competitive advantage.
Some research parks will be able to maintain their viability if
they can both attract interesting people, and co-locate near useful
industries or important markets.
Boutique parks designed to bring together highly specialized
clusters of existing tacit knowledge could incubate new technologies
and innovations. For example, these could support creative work
combining older industrial knowledge with new high-tech expertise.
For innovations in ``brownfield'' industries, critical challenges
aren't just technological, but also regulatory, legal and financial.
Research parks specializing in areas like cleantech, environmental
remediation, alternative energy, and sustainable development would be
smart to attract experts in finance, law, and technology policy.
Manufacturers who want to move up the value chain could be a target
for new R&D parks.
The Social Life of Small Research Spaces \26\
---------------------------------------------------------------------------
\26\ The title of this section is a reference to Willam ``Holly''
White's pioneering videographic studies of how people use public
spaces, conducted in New York City in the late 1970s, and presented in
a film and book titled The Social Life of Small Urban Spaces. [http://
www.pps.org/info/products/Books_Videos/social_life]
---------------------------------------------------------------------------
Traditional business incubators will fade away, replaced by new
kinds of spaces for entrepreneurship and collaborative research. Pop-up
labs, co-working hubs, mobile incubators and disposable research parks
will provide flexible physical spaces for R&D. Rather than warehousing
workers, they will meet a need for communal collaborative meeting space
in a world of increased mobility within and between workplaces. They
will be neutral places where networks of investors, entrepreneurs,
hackers and customers converge for collaborative knowledge creation and
trust-building, cementing relationships initiated and cultivated
online. Overlaid grids of social software will enhance serendipitous
discovery inside these spaces and knit them together in local, regional
and global networks of collaboration.
Signals
The rise of coworking and communal rent-a-desk and drop-in
offices--[http://tr.im/lkjQ]
Kitchen Budapest, a ``pop-up'' media lab [http://www.kibu.hu/en]
Angel network in residence at Cambridge Innovation Center [http://
tr.im/lkke]
Throw-away research parks--Phase Z.Ro in Singapore [http://tr.im/
lkkt]
Oklahoma City's mobile biotech incubator--relocate the incubator
instead of the growing company [http://tr.im/lklf]
The Hub's global network of social enterprise incubators [http://
the-hub.net]
Charge-by-the-hour incubator space [http://www.globaloasis.fi/]
Impacts
The collaborative magic of small research places depends heavily
upon the ability of managers to ``produce'' and ``direct'' the space
like a ``show'' on a daily basis. This involves coordinating events,
both formal and informal, ensuring a steady flow of new people and
ideas through the space, and making connections between participants.
This is a very different set of skills than the typical research park
manager or economic developer today. The shift from managing land use
and real estate to managing activity (or both) will require a
fundamental shift in perspective.
Small research spaces are the physical side of lightweight
innovation, allowing big companies and their smaller partners to come
into direct contact. As architect Frank Duffy writes, ``Conventional
office developments exclude or marginalize workspace at lower rental
levels and thus diminish the possibility of mutually beneficial
interactions between large, mature businesses and smaller, growing
enterprises.'' Simply moving small bits of the company out of the main
campus (like Corning, Yahoo! and Intel have done in recent years) will
not be enough. Corporations and startups will need to co-locate within
the same buildings, forming ``coalitions of interest''.\27\
---------------------------------------------------------------------------
\27\ F. Duffy. 2009. Work and the City. (Black Dog: London)
---------------------------------------------------------------------------
Small research spaces, because they lack the scale of research
parks, are heavily dependent upon social networks to extend their reach
and connect to external resources. Social networks are the demand
generators for these spaces, as online communities develop needs for ad
hoc, temporary or on-demand meetings, these spaces will need to develop
business models to meet those needs.
The new leasing arrangements of small research spaces--monthly,
weekly, daily, and even hourly rate structures--will overturn the
supply chain for commercial real estate, which evolved around long-term
leases of 10 years or more. As Duffy points out, conventional leases
block feedback from users in the design and construction business. By
providing direct daily feedback to property managers, research
``hotels'' might introduce end-user innovation to architecture for the
first time in a century.
Many of these small spaces are driven by more than just business
objectives. A growing number seek to further social goals by incubating
social ventures (Front Seat Software in Seattle, The Hub in London) or
by gathering disparate firms and communities in just-emerging sectors
like sustainable design (Treehouse Brooklyn).
Finally, small research spaces present an opportunity to make R&D
more transparent--engaging not only partners, customers and suppliers,
but also a broader public as well. Already, we see many firms engaging
lead users through beta tests and iterative design processes--it is
only a matter of time before the physical organization of research
adapts to support these activities.
From Research Parks to Regional Knowledge Ecosystems
Translational research--science that transcends basic and applied
research--and successful commercialization of the resulting technology,
will grow increasingly complex. To succeed, these efforts will require
coordinated investments at the regional level, because no single
organization will have the capacity to perform all of many steps
between lab and market. Because of this, we will see an expansion of
new institutions and governance structures operating at the regional
level whose goal will be to encourage knowledge creation at the cutting
edge and develop the organizational, human and social capital at the
scale needed to compete globally. These institutions will stretch far
beyond the regional networks of today to include not just university
and corporate leaders but also entrepreneurs, investors, professionals
and amateurs. By their very nature, regional knowledge ecosystems will
transcend traditional industry boundaries, seeking to create capacity
to quickly re-invest resources and re-invent industries in response to
global shifts.
Signals
East Bay Green Corridor in California--coordinated regional
approach to growing and attracting cleantech industries. [http://tr.im/
m250]
North Carolina Research Parks Network pooling marketing and long-
term strategic planning resources.
;resund IT, a regional body in Denmark and Sweden, expansive
mission includes identifying and initiating R&D projects. [http://
www.oresundit.com/?id=41]
World Bank infoDev project global incubator network [http://
infodev.org/en/Publication.6.html]
Impacts
The risk-spreading logic behind a regional approach to technology-
led development is parallel to the innovation zone strategy of
universities. In their seminal study of U.S. research parks, Luger and
Goldstein concluded ``one of the few generalizations we can make about
the net benefits of research parks is that they are far from certain.''
By scattering investments across a number of real estate,
infrastructure, venture and human capital investments regions have more
chances of success, albeit on a smaller scale, than a single bet on a
research park.
Spreading risk may also improve resilience and agility in periods
of economic turbulence or great technological change. The strength of
regional knowledge ecosystems is that they can adapt faster than
national systems, which are dictated by national politics, and they can
scale up successful enterprises much more effectively that individual
research parks or municipalities. In fact, one of the best models for
future regional alliances may be the regional readiness partnerships
pioneered by the disaster management community, which are wholly
voluntary , but flexible and effective.\28\
---------------------------------------------------------------------------
\28\ S. T. Ganyard. May 18, 2009. ``All Disasters Are Local'' New
York Times. Opinion/editorial.
---------------------------------------------------------------------------
For these reasons, it is likely that regions will become the new
default starting point for formulating technology -based development
strategies, with the pressure to do so coming both from the top-down
and the bottom-up. National governments will increasingly delegate
research funding decisions to regional networks, while a constellation
of small, local players will require greater assistance in leveraging
regional assets. Regional strategies that anticipate obsolescence and
disruption will permit resources to support the continuous learning of
the workforce and upgrading of research infrastructure.\29\
---------------------------------------------------------------------------
\29\ M. Joroff, W. Porter, Feinberg, C. Kukla. Enabling Work
Practice (Cambridge, MA. MIT School of Architecture and Planning, 2008)
---------------------------------------------------------------------------
For firms, there are many potential gains from public stewardship
at the regional level. The need to tap regional and global knowledge
pools, research infrastructure and talent are at odds with economic
development strategies that focus on particular parcels of land,
campuses or local jurisdictions. Recent research on the dynamics of
technology clusters points toward two important flows of knowledge that
play different roles. ``Local buzz'' is the dialogue of rumors,
knowledge and other information within a geographic cluster. ``Global
pipelines'' are the flows of more codified kinds of knowledge that
firms obtain through business relationships with distant firms.
Regional knowledge ecosystems could become mechanisms that improve both
functions--speeding the flow of knowledge in a regional cluster, but
also making it easier for firms to import knowledge and amplify the
spillover benefits to other firms in the region.\30\
---------------------------------------------------------------------------
\30\ Bathelt, H., Mamlberg, A. and Maskell, P. 2002. ``Clusters and
knowledge: Global buzz, local pipelines and the process of knowledge
creation''. [http://ideas.repec.org/p/aal/abbswp/02-12.html]
---------------------------------------------------------------------------
Regional approaches to technology-based economic development are
not without their critics however. By spreading risk, regional
approaches may spread government research support too thinly across
many institutions, preventing the formation of a critical mass that can
achieve breakthroughs. Some innovation economists also argue that
regional approaches distract policymakers from the needs of firms--and
that it is individual companies that are ``competitive'' not regions or
clusters.\31\
---------------------------------------------------------------------------
\31\ ``The fading lustre of clusters''. Oct. 1, 2007. The
Economist.
---------------------------------------------------------------------------
As regional knowledge institutions develop, and innovation zones
and small research spaces proliferate, it is entirely likely that the
term ``research park'' or ``science park'' will gradually fade from the
vocabulary of economic development. For existing parks, the rise of
regional ecosystems will require a major reinvention. It means
expanding the range of workplaces they connect to and manage--in fact
this will be a major value proposition for them. Park managers can play
a role in helping tenants build bridges between core centrally owned
space and non-core spaces like homes, cafes and airports--all the other
places where people actually work. Buildings need to transform into
platforms that are resilient enough to enable disruptive
reconfiguration.
Part III--Three Scenarios of the Future
Trends are valuable for understanding directions of change in areas
that will help shape the future. But the future is a complex and messy
place, and will be shaped by many trends acting in combination. If we
only look at individual trends in isolation, we will miss the big
picture.
Scenarios are a tool for thinking about the future in all its
complexity. While it is highly unlikely that any scenario we envision
in the present will come true in its entirety, parts of scenarios
might, and the discipline of thinking systematically about the future
allows us to prepare for better decision-making in the present and near
future. Some places may confront one of these scenarios more than
others. Some may confront all three and have to make choices about
which direction they want to go. Others may find these irrelevant but
the process of systematically thinking through how they would react to
them develops future thinking literacy and skills.
Four external trends were pivotal in shaping these scenarios,
because of their broad importance in setting the background for
technology-based economic development. They are also have a high degree
of uncertainty, and may play out in a variety ways. These highly
uncertain trends are:
Universities. Some universities will embrace entrepreneurialism
while others reject a larger role in the economy. But all will face
challenges navigating the conflicting demands and increased strains of
a shifting economic and intellectual role. (see ``Universities: From
Ivory Tower to Economic Engine'', page 25).
New science institutions. Professional societies, journals and
other institutions that set the basic rules of who can call themselves
a scientist, and how they should conduct research and share results,
will come under tremendous strain. Something will replace these
institutions, but how will it connect to existing and new places in the
future? (see ``Institutional Transformation'', page 21)
Sustainability. The cost of energy will drive business and policy
decisions across the board. How will R&D ecosystems react to different
energy frameworks, and the scientific and technological challenges of
battling global warming? (see ``Ecological Economics Comes of Age'',
page 13)
The bio-industrial complex. Bioscience will supplant physics as the
source of great breakthroughs, but will the fundamental flaws in
systems for commercializing those discoveries be fixed, and what role
will places play, if any? (see ``Biology: Nature As Source and Code'',
page 15)
By combining plausible hypotheses about how these factors might
play out in combination, we developed three scenarios for the future of
research parks set around the year 2025, that are intended not to be a
prediction of what will happen, but what could happen, with the goal of
provoking strategic thinking about what we can do today to get ready,
build resilience, and develop the ability to think systematically about
the future:
Scenario 1--Science and Technology Parks 3.0
Incremental Change Adds Up
A time-traveler from 2009 would still recognize the research parks
that are being built in this scenario, all over the world, at roughly
the same level as today. But looking deeper inside them, he will see
that these parks are upgraded versions of their predecessors--faster,
more efficient and with more features. They are starting to bring
conventional tenants together with new kinds of collaborative networks,
and leveraging the intellectual resources of universities more
effectively than today. Put simply, they are doing some things right,
but some opportunities have been passed over due to the risk involved.
Parks have developed deeper formal ties to universities and
companies alike, but technology transfer is still a long, inefficient
and uncertain process, and parks still play a limited role. Regional
partnerships are helping to pool marketing resources and create global
brands, but are not actively managing ecosystems of knowledge, talent
and investment. New science networks overlap and occasionally connect
to parks and campuses, but they still form and grow mostly outside the
sphere of parks' influence. The most successful parks are almost
exclusively housing or incubating biotechnology and biomedical R&D, and
investing significant resources in bridging some of the industry's
structural obstacles to innovation--though progress is incremental.
Universities as Catalysts
Part of why parks haven't changed much is because universities have
changed a lot. Many of the commercial and entrepreneurial functions of
parks are now seamlessly integrated into campuses and curricula. Both
faculty and students are supported and rewarded for entrepreneurial
activity. The humanities shrink in relation to business and
professional training. There has been a lot of innovation in how
universities manage intellectual property and technology transfer. With
private research institutions stealing away the best faculty, they
really had no choice.
Parks as ``Living Labs'' for Sustainability
One area that research parks have made a calculated gamble is in
sustainability. The economy is still going through a managed transition
new energy regime, but it has been expensive and difficult. Early on,
research parks seized the opportunity to distinguish themselves as
centers of experimentation in sensing, energy and resource management.
A select group has pioneered its own performance standards that go far
beyond LEED--they are carbon-negative and are now global centers for
innovation in the booming business around managing carbon.
Bringing Biotech and Big Pharma Closer Together
The Bio Economy hasn't truly blossomed yet, due to continuing
structural deficiencies in the industry's structure. But one outcome of
the Great Recession of 2009 was a vastly expanded role of big pharma's
strategic venture funds in financing early-stage startups.\32\ In this
scenario, parks have positioned themselves as strategic sites for big
pharma and biotech startups to co-locate. Parks provide flexible space
for both short- and long-term collaborative research projects. Parks
that accommodate a wider range of R&D and manufacturing are attractive
to more vertically-integrated biocompanies. The most successful parks
are positioned as key nodes for translation between biology lab and the
marketplace (and back). They have also diversified connections between
science parks and universities, so that life sciences are more strongly
linked than today.
---------------------------------------------------------------------------
\32\ P. Mitchell. 2009. ``Corporate venture funds chase early-stage
deals''. Nature Biotechnology. 27(5):403-404
---------------------------------------------------------------------------
A Spur on the Science 2.0 Highway
New science networks and institutions are blossoming online, and
research parks and their partners are listening to and participating in
these activities. But parks are not the primary places where these
networks are ``coming in for a landing'' in the real world but not
leading. The main highways of Science 2.0 pass by parks, but not
directly through them. The result is that its harder for tenants to
really connect to these vital communities of innovation.
Scenario 2--The Rise of Research Clouds
Disruptive Competition from Outside
On a sunny morning in 2015, ScienceSpaces.com went live. Targeted
at everyone from angel investors to corporate real estate managers,
ScienceSpaces provides a real-time global directory of available
research space at small, independent incubators and pop-up labs around
the world. These spaces are distributed, agile and lightweight. They
pop--up overnight as needs change, and disappear when their usefulness
has run out. Many are tenant-owned cooperatives.
A year later, ScienceSpaces added a rich set of collaboration and
innovation management tools, providing tenants with new ways to
coordinate leasing and research projects across a ``research cloud'' of
small facilities. This model combined the scale efficiencies of
traditional research parks with the diversity and dynamism of small,
social collaborative research spaces.
Research parks everywhere scrambled to respond to this new
competitive threat.
An Oort Cloud Around Universities
Like the Oort cloud of comets that surrounds the solar system,
invisible but carrying the chemical seeds of life, the research cloud
is an almost invisible, but crucial mass orbiting research
universities. Some universities find ways to leverage this, but many
don't.
The universities that don't get it fail to see that they are losing
their dominance as hubs in regional knowledge ecosystems. Their stodgy
IP frameworks and huge cost overhead make them very uncompetitive for
anything other than teaching. Their research parks are trying to re-
invent themselves into the cloud, and are disconnecting from the
university partners that now present more of a liability than an asset.
Academic institutions remain useful as sources of labor.
Ironically, it is universities with the smallest endowments that
embrace the cloud most tightly, as they are priced out of large-scale
expansion. They are aggressively shifting away from the ``research
campus'' model, and toward an ``innovation zone'' model. By engaging
with cloud players, they can spread the risk of spin-off activities
among multiple participants. Development is more incremental, with less
master planning and more evolution. Extensive reuse of existing
buildings will also reduce costs of housing the cloud.
A Crucible for New Institutions and Networks
The research cloud isn't just a hub for new science and technology
institutions--it is a platform for creating them. Since the cost of
forming groups is basically zero, new groups are forming all the time
around emerging fields of research, particularly challenging problems
and new business models.
In the beginning, because it was outside the traditional system,
the cloud had to invent new structures on the fly, and developed new
platforms for reputation and rewards. These workplaces ar e peppered
with sensors that ``mine reality'', helping the inhabitants be more
effective and engineering meaningful chance encounters. But the sensors
also help record people's contributions to the collaborative community.
A sensor-rich environment could automagically note the 15 minutes you
spent mentoring a young entrepreneur by the water cooler and credit
your reputation account.
A small but growing number of research parks are injecting pieces
of the cloud into their campuses, sites and buildings. These spaces are
playing the role of the coffee houses of the 17th century. They are a
place of open discourse among people from business, academia, startups,
craftsmen, policy people, users, amateurs, etc.
Parks Hobbled High-energy Infrastructure Puts Parks at a Disadvantage
Parks and universities are at a competitive disadvantage to clouds,
because they have lots of legacy infrastructure, underused real estate,
and are big targets for regulation and citizen watchdogs. Bioteaming
becomes a popular approach for managing clouds. Research parks that are
connected to manufacturing are quickly adopting industrial ecology
strategies or facing public scorn.
Lightweight Approaches Push Biotech R&D in Productive New Directions
While many critics thought biotech needed vertical integration,
fewer networks and longer investment horizons, research clouds are
showing that going in the other direction, hard and fast, can actually
produce new industry structures capable of major scientific and
technical breakthroughs.
Probably the biggest gain has come from the freedom clouds gain in
how they manage intellectual property due to their lack of
institutional legacy. Clouds make major contributions to knowledge
commons like the Registry of Standard Biological Parts, and because so
much of what they know is tacit, patents don't really matter that much.
When knowledge leaves the cloud, it still has to be translated into
something consumable by more traditional partners, but within the cloud
many of those bottlenecks to knowledge circulation, that serve as
barriers to innovation elsewhere, are gone.
Scenario 3--Dematerialized Innovation
Research Parks in Decline
In 2011, the number of research parks worldwide peaks and then
begins to decline. The beginning of the end was the Great Recession of
2009, which devastated the commercial real estate industry and
decimated university endowments, cutting off two of the main sources of
funding for research parks. But what really spelled the end for
capital-intensive parks was the Energy Shock of 2012, when a renewed
global economy picked up where it left off in terms of resource demand.
Virtual R&D networks made big gains during these crises, allowing
companies to maintain an innovation pipeline in times of austerity,
while gaining greater flexibility and lower fixed costs. During each
successive crisis, this beachhead of dematerialization has expanded,
and today half of all innovations come from research teams that are
highly virtualized--only in the last few steps of development does any
real face-to-face collaboration happen.
There are many possible triggers acting alone or in concert--high
energy costs, falling R&D productivity, or a protracted global
recession. Since technology just isn't solving economic, social and
environmental problems, the few remaining productive research
enterprises become highly virtualized to cut costs. Existing parks fail
to provide value to virtual networks, and don't create local and
regional systems to create sticky know-how. Research parks are
obsolete, mere office parks.
Universities Retreat to the Ivory Tower
Universities have become nothing more than very expensive coffee
shops. Much of what they provide can be replicated in other places, or
online through new platforms. Distance learning, which took off during
the years after the recession, is now serving a large swath of the
student population. DIY and peer-produced education is easy to assemble
from vast learning resources online. People create and share curricula
as pages of hyperlinks to archived lectures, documents and simulated
learning environments.
Parks as Event Spaces
While demand for traditional, long-term leased private space is
shrinking, the rise of distributed teams does not mean that teams never
gather. On the contrary, there is a rapidly growing need for spaces
that can house teams and other gatherings for a few hours, days or
weeks. Some parks are reinventing themselves as event destinations, or
extended-stay research ``hotels''.
Costly Energy Pushes R&D into Cyberspace
Among the many benefits of dematerialization is its much lower
measureable sustainability impact. While some argue that virtualized
research networks merely shift energy consumption from offices to home
and from organizations to their employees, rather than reduce it, it's
very difficult to prove this. Parks are at a severe disadvantage,
because they are geographically contained big targets for ecological
audits.
Biotechnology Stagnates
Parks and universities were probably the best possible sites for
housing the kind of translational bench-to-bedside research that was
needed to prime the biomedical industry for rapid innovation-based
growth. The failure of both to compete effectively head-on with virtual
R&D models means that few places exist that are well suited for
translational research. Virtual networks are more suited to incremental
innovation upon existing technologies. Too much dependence on virtual
networks has also stifled cross-disciplinary conversations as
communities of interest wall themselves off online, like radical
political groups. It turns out that too much of a good thing can stifle
innovation.
Part IV--Strategic Implications
This forecast has sought to identify the trends that will shape the
future for technology-based economic development generally, and
research parks specifically. Throughout Part II we highlighted tactical
impacts of each of fourteen emerging trends.
In Part III, we brought these trends together to describe three
scenarios for the future of research parks and technology regions. Here
we highlight some broader strategic takeaways that arise from these
scenarios.
Building Biomedical Places: From Silicon Valley to Biopolis
Too many assumptions about how technology-led development works are
based on lessons learned from the Silicon Valley experience. However,
these successes have not only proven incredibly difficult to duplicate
but are unlikely to be a good model for successfully growing biomedical
and biotechnology industries.
More and more we are beginning to understand the fundamentally
different nature of biomedical R&D, the current and optimal industry
structure, and the needs of growing firms. While a place like Biopolis
in Singapore has literally reframed our thinking about how to build a
``city of biology'', it has by no means perfected the model. Bio-
industrial regions will cluster along very different rules than IT
hardware and software did. We have identified several driving forces in
this study, but more focused research is needed to understand how
location decisions happen in these future growth sectors.
Building Responsive Universities
As universities become bigger players in R&D and economic
development, their relationship with research parks and regions needs
to be carefully rethought. On some level, the very notion of a
university as solely a center of research and teaching needs to be re-
examined.
In our scenarios, universities are among the least adaptive
institutions. While universities do routinely respond to market and
economic shifts, they do so over very long periods of time. Today,
economic development often responds to the needs of universities. For
regional knowledge ecosystems to become more resilient, they will need
to encourage universities that are responsive to well-articulated
regional needs. Structuring these engagements around mechanisms that
produce tangible benefits for the universities will be crucial.
Future Business Models: from Products to Services
Each of our scenarios point toward a need to develop new business
models for technology-led economic development efforts. The first-
generation and second--generation models in use today are mainly driven
by revenue from real estate development, sales and leasing and
government subsidy. Potential new models are more likely to be built on
venture investments, knowledge brokering and event management. The
overall shift will continue to evolve rapidly from products (buildings,
sites, infrastructure) to services (research ``hotels'', incubation,
technology transfer, knowledge commons).
Rewards for Grand Visions
While the Great Recession may mean the end of big real estate
projects, it does not mean the end of grand visions. In fact, it is
during the downtime of a recession that the window for long-term
strategic planning opens most widely.
Conflicts in large-scale efforts almost always arise from a failure
to reach consensus or develop a shared vision early on. So, as a point
of beginning, regions need to frame and embed a grand strategy in their
thinking. For example, Research Triangle Park served as a primary
mechanism for sustaining a m uch broader grand vision of re-inventing
North Carolina's economy to stem the ``brain drain'' of young talent
leaving for other parts of the country. The park's business model, and
the grand strategy of developing the Triangle region worked together
over a period of several decades.
Making Know-How Sticky
That original grand strategy for the Research Triangle sought to
address that generation's challenge of a mobile work force--the ``brain
drain'' migration of educated workers out of the South. But regions and
places today face a different kind of mobility--of talent, but also of
knowledge.
Figuring out how to create and maintain ``sticky know-how'' as an
immobile asset will be a central challenge for technology regions and
research parks. The first step is simply to assess what your ``know
how'' assets are? What tacit knowledge is locked up in local
manufacturing firms? How can strategic discussions be focused around
core competence that can be upgraded and transformed rather than
replaced?
Working at the Very Large and Very Small Scale Simultaneously
As they develop grand visions, and align interests behind them,
successful regions are going to need to work simultaneously at the very
small scale--unlocking the secrets of small research spaces and finding
new ways to scale them quickly and coherently. Understanding the
research cloud requires understanding its overall mass and shape, but
also the diversity of its many fine-grained parts.
The first step in mapping this cloud will be engaging it.
Identifying various elements and players in the cloud will be
challenging, but we have identified many new players, groups and
elements here--science bloggers, coworking spaces, angel investor
networks. These can be the foundation upon which to begin discovery of
the truly off-the-radar assets. The challenge will be creating venues
and opportunities to bring the cloud out into the open so you can
engage them.
Cultivating a Regional Knowledge Ecosystem
Beyond visioning, there are also several possible drivers of new
institutions that take on the role of knowledge ecosystem managers at a
regional level. As we discussed earlier, in highly successful regions,
this role is played by venture capitalists--the ultimate brokers of
tacit knowledge in technology-based economies.
In aspiring regions, future ecosystem managers might:
--Support and coordinate research across a network of
``boutique'' research facilities
--Coordinate research among universities across a region,
acting as a broker for national research funding streams
--Funding and making available major technology
commercialization infrastructure (e.g., wind tunnels,
supercomputing centers, etc)
--Rather than operate venture funds, invest in capacity for
entrepreneurship broadly to develop the talent and high-quality
startups that will attract private capital as a natural
development.
Leadership for the ``Long Now''
Regions need a leadership structure that can prepare for the ``long
now''--an extended view of how today's actions connect to future
outcomes. Just like the massive science projects it will support,
building and supporting regional knowledge ecosystems will require
sustained, coordinated effort over many years. This is not something
that will be accomplished overnight or under the influence or control
of any one leadership group. This structure will need to bring about
trans-generational hand off of stewardship over the grand vision, to
avoid the zigs and zags that kill most plans. It won't happen
accidentally, so it needs to be ``designed in'' from the beginning.
From Managing Dirt to Managing Activity
As research spaces become more collaborative, and the boundaries
between firms, between institutions and between individuals will need
to be re-designed. Places like the Network Oasis in Joensuu, Finland,
are beginning to develop the tools and skills for ``serendipity
management''. The notion of planning for chance encounters is counter
intuitive, but that is exactly why it is important and why it works.
Creating spaces where firms, individuals and small groups can develop
new trusted relationships will be an enormous source of value creation.
Re-assessing Assessment Tools
There is a pressing need across all aspects of the economic
development profession to develop better ways of measuring assets and
outcomes, and re-thinking just what it is that needs to be measured. As
we shift toward more open innovation networks and regional knowledge
ecosystems, the most important things to understand will be what
happens between institutions. But most assessment tools measure what
happens inside institutions. In addition to understanding the scope of
institutional activity, we need to map the pipelines of people, ideas
and money moving through regions. The goal is to develop a vocabulary
for talking about networks in detailed and specific ways, rather than
the vague ways we do today.
Developing Brands
Because regional knowledge ecosystems will grow increasingly
complex and multi-institutional, brands will become more important, not
only in marketing to outsiders but in describing just what people and
organizations are doing and inspiring them to new achievements.
Today, not many regions do a good job at brand management. In the
future, building a brand as an identity that can describe and
communicate the unique value of a knowledge ecosystem will require
active cultivation on an ongoing basis. The ``grand strategy''
discussed earlier can be a powerful tool in testing and maintaining
consistent and effective brands.
Brands will be crucially important in attracting globally mobile
talent and earning reputation in new group economies.
Senator Pryor. Thank you, Dr. Townsend.
Let me go ahead and dive into some questions, here. And
then I'm going to try to keep my question period short, if I
can, and let Senator Begich ask questions. And I may have a few
follow-ups.
But, Dr. Wessner, let me start with you. You've shown this
graphic, up here, about the--China's 54, I guess, state-level
and technology parks and, you know, how they've been able to
utilize those and help them invent, really, their industrial
base in things like electronics, information technology,
materials, biotechnology, et cetera, et cetera. You alluded to
this in your opening statement, but if you could tell the
Committee here, really, how the United States compares with
China when it comes to this type of innovation and this type of
commitment to innovation.
Dr. Wessner. Well, thank you, Senator. And I can be very
brief.
We don't compare, sir. We don't compare at all. What we're
good at is--we're very strong on the military side. We watch
very carefully what goes on in the world. In the agricultural
sector, we're very strong. We know what's happening in trade.
But, if you're looking at the level of investment in parks, I
think my colleagues here would--at least most of them--would
agree with me that we don't begin to compare. We have small
parks, some of which are highly effective, but we don't have
the type of industrial-scale parks that they have.
And we--I think Brian Darmody made an important point. In
our efforts to make sure that the public and private sectors
retain their respective roles appropriately, we have sometimes
passed conflict of interest--and this is a personal opinion, I
would stress; I'm not speaking on behalf of National
Academies--but, the Chinese excel in very close and seamless
cooperation between their public institutions and the private
sector. And I think we need to weigh how we approach these
things more carefully.
I mentioned a note of optimism. Since we're being out-
invested, the question is, What tools would be appropriate to
invest? And I think what you've identified is part of the path.
I don't work on behalf of EDA. They do sponsor some of our
work, along with about 12 other government agencies. But, I
would stress that their budget, in my view, needs to be very
substantially increased, both for grants, but particularly
where we can get massive leverage through loan guarantees.
Other agencies may have to provide loans.
I'd like to stress the point that was made about leveraging
other agencies' programs so that you get a more integrated
approach.
But, I would also caution that we not spend all our time
trying to integrate everybody. You know, it's easy to say we're
going to knock down the walls between agencies. Well, you and I
are both old enough to remember how the Department of Energy
smoothed out all the differences there, and, of course,
Homeland Security's been complete success. I think we have to
be cautious about how much time we spend on that, and spend
more time--one of your colleagues, Senator Begich here
mentioned, I think importantly, speed. All of us--or, not all
of us; some exceptions--are beginning to get a little gray
hair. And if we're going to give our children and grandchildren
the type environment that they need to grow in and to prosper
in, we need to move much more quickly than we have in the past.
And we need to move on scale.
I have a number of other points. The other point I'd just
like--is tax tools that was mentioned; that's exceedingly
important. We act like we're so good that the industry will
just stay there, because there's no place to go. Well, that
might have been true in the 1950s and 1960s, but that is sure
as certain not true now. And I think Craig Barrett, the former
CEO of Intel, has spoken eloquently, you know, ``How do I
explain to my stockholders that I'm going to take a billion-
dollar less--or, a billion dollars higher in taxes in order to
invest in New Jersey rather than outside of Shanghai or outside
of Dresden?'' The equity investments made in Dresden for the
AMD facility, the loan guarantees, the loans put together a
package of 900 million Euros. And that's why Jerry Sanders put
AMD's lab, Fab, there.
Now, we just have to get in the game. And we also have to
remember that our orthodox economists may have very good
insights, certainly not in anticipating economic downturns or
economic upturns. As John Kenneth Galbraith once said, ``The
main purpose of economic forecasting is to make astrology look
good.'' But, the issue is that the rest of the world is not
playing by the same rules. They're playing a different game.
It's not wrong, morally, it's just the way they're playing the
game. And we need to have effective tools, and your bill is an
important step forward.
Senator Pryor. Thank you.
Senator Begich?
Senator Begich. Thank you, Mr. Chairman.
I do have a 4 o'clock, but I want to, if I can, just do a
couple questions. But, your statements--and all four of you
have--I appreciate.
I've been in small business since the age of 16, so I have
had those great successes, and also those great failures that
go along with them. I'm my own incubator and risk-taker.
[Laughter.].
Senator Begich. And my wife is an entrepreneur, owns four
shops in Alaska, and a variety of businesses. And so,
everything you're talking about rings true to what I'm--what
I've been around most of my life.
But, the last comment was very interesting. And it goes to
my point, when the Assistant Secretary was here. My biggest
worry with some of the work we do here--and I 100-percent
support what the Chairman is doing, because I think it is good
to get some more tools out there, and I'm going to ask you a
second question, in a second, on, collectively, something--an
idea I have, sitting here. But, the Federal Government is so
slow. And that's why China is so successful. And I understood,
when the Assistant Secretary made the comment that we're not--
we're kind of falling a little bit, but not behind. And I--you
know, I would disagree with that. I agree with your statement.
We are behind. Energy technology is one area we're falling
quickly behind, because we spend more time talking about it--
talking about percentages of what we should have for climate
change, and all these other things, which I'm a big supporter
of--but, we're not doing anything. You know, there are little
pockets, as mentioned in Senator Pryor's home State, of the
wind energy--wind--the company making turbines. You know,
great. One. You know? I could talk about one in Seattle that's
doing some stuff, one in Michigan. But, it's not a collective.
And I think we lack, in some ways, the capacity, from a Federal
Government standpoint, to say, ``Get to it,'' because the
majority of the Federal Government are not entrepreneurs. They
never walked on the edge and understood risk, and understood
that you have to take a calculated risk that may not be as
calculated as you like. But, it might jump off and end up in a
great opportunity. That, to me, is the biggest systematic
problem we have.
I mean, I'm going to support this bill, because I think
it's the right thing to do. I like some of your ideas. I'm
going to ask you, collectively, to think about this. As we move
forward--Senator Pryor, myself and others--as we move into
January, we're going to be very aggressive about more job
opportunities in this country. More job opportunities. The
largest and fastest growth area is small business. That's where
we can create some opportunity.
I'm not sure we're going to create the right tools, to be
frank with you. We, marginally, did it in the stimulus bill. I
say, ``marginally,'' with quotations around it. We have to be
aggressive.
And so, I would look to you on some ideas, especially as we
move into the beginning of the first of the year, working,
obviously, with the Chairman here--and I'd be happy to work
with you on four or five very targeted collective ideas that we
can do to help spur the entrepreneur capacity in this country.
I just----
So, I look to that. Your questions and your statements made
me really just want to make a comment, and I'm happy to have
you respond. But, I think our biggest challenge is, you know,
doing what we should be doing, and that's leading, and not get
in the way. We have a habit of leading and then getting in the
way. And I can give you example after example, as you can with
universities, where they are great incubators. You know, we
have the Alaska Small Business Development Center. Fantastic. I
just saw a letter from someone, that was given to me about a
small business, who wants to start-up, but she's struggling to
figure out how to do that.
And so, if you can give me just some quick commentary, then
I--I apologize, I have to leave. But, I'd be very interested in
the second half--and I'm assuming Senator Pryor would, too--and
that is, help us, as we move forward as the U.S. Senate--after
healthcare, we're going to move forward on an America Works
Project bill that's going to be about creating new jobs and
looking to the future. And some of these ideas, the bonding
issue--I know exactly what you're talking about. And I can list
off some ideas there, and that's why I was very intrigued.
So, let me, first, just end there, see if there's any
commentary. My time is limited. But, please, anyone want to
respond?
Mr. Sallet. Could I offer one thought----
Senator Begich. Sure.
Mr. Sallet.--Senator?
It's exactly right. The paradigm ought to be local
leadership, businesses, educational institutions, governments,
NGO's, working together. So, it has a business focus and
immediately reflects the insights of the local business sector.
And then, the Federal Government needs to align itself in
support of strategies that are created at the regional level.
That would take a lot of doing. There are something like 200
Federal programs that have been identified.
Senator Begich. Yes.
Mr. Sallet. What they need to do is to think about
themselves as supporting this kind of regionally-led
strategies. Now, that will require coordination across
agencies. It will require that some programs be changed some,
in their emphasis, to make sure that they are always aligned
tightly with regional economic strategies. But, if we do that,
then we will know that the leadership is coming from where the
leadership needs to come from, but that the support exists at
the national level, because all of the Nation benefits from the
total output of the regional economic strategies.
Mr. Darmody. And, Senator, you know, earlier was mentioned
Sandia Park, and Los Alamos, as well, in New Mexico. And those
parks are Federal, but they're managed by the private sector.
And so, they have a lot more flexibility; government is not in
the way as much as it is for other Federal labs that are
government-owned and government-operated. And we're not going
to, you know, suddenly make all of our Federal labs privately
managed. That, you know----
Senator Begich. Right.
Mr. Darmody.--that's more complicated than the healthcare
bill.
[Laughter.].
Mr. Darmody. But, you could take--you know, reduce the
friction by doing what universities have done. They've created
foundations and other organizations to help the business of
tech commercialization. Take that piece. I mean, we're
investing $25 billion right now, every year, in Federal labs.
And so, if you gave them more opportunities, through a sort of
a foundation--I mean, the Henry Jackson Foundation that--
Congress created that; that's at the Uniform Health Services
University--very effective in tech commercialization. But, it
was a foundation created by Congress. But, it's not
governmentwide; it's for one particular agency.
So, some of those ideas--I think there are best practices
out there. Making them more across the board for the Federal
Government, as well as for universities--some of these ideas
about, you know, helping build the commercialization funding
strategy in our research and development funding programs,
which currently doesn't exist--I mean, we passed Bayh-Dole, but
then we thought, you know, the royalty checks were going to
roll in. It doesn't happen that way. It's a much more
complicated commercialization process. And we need that--OMB
and others to recognize that there's cost in the initial stages
of tech commercialization.
So, there are a number of programs that could be done
administratively, wouldn't even necessarily need significant
legislation.
Senator Begich. Thank you.
I hate to do this. My time was exceeded, so I don't want to
burn up the Chairman's time. But, I thank you for that. I
would--and I will probably follow up with some of you in
regards to some ideas. But, I just--it's frustrating. I set up
a development corporation when I was a mayor, because I didn't
want us messing it up. And, to be honest with you--and we took
a hazardous wastesite, as one example, and turned it into a
$70-million development, using a BEDI grant and a few other
pieces. But, the private sector did the show. And we used a
development corporation to really be the instrument, and kept
us out of it. I still have, I think, local city council members
mad at me because I got--cut them out of the process. But, we
got it done in 14 months. So, it's all about how to do it, not
just sit there and debate it all the time.
But, again, thank you very much.
Thank you, Mr. Chairman, for allowing me a little
flexibility there.
Senator Pryor. Thank you.
Dr. Townsend, let me, if I may, ask you a question. I
believe you used the term ``research clouds.'' Tell me what
that means.
Dr. Townsend. Well, I just want to start out by reminding
everyone this is a forecast and not a prediction. It's sort of
difficult to understand how many different trends that are
shaping the future will intersect 10, 20 years out. But, I
think what we see are a lot of signals in the marketplace that
this traditional model of, kind of, drawing a line around a
piece of land and saying, ``Everyone that does science and
technology, get inside that box,'' is something that's going by
the wayside.
What it is being replaced by are districts, zones,
geographic clusters of facilities, labs, shared workspaces,
university facilities, and private-sector speculative lab-space
developments that are all tied together by the Internet,
basically; by shared social networks, by Facebook, by
scientific communities that form online.
What we think is going to happen down the road is that
someone is going to try to organize that and formalize that.
And the way that might work out in the future is that, rather
than going to a research park to get 10,000 square feet of
space, a company might tap a network and say, ``I need 10,000
square feet of space. I want some of it to be private, some
collaborative, and I want it to be sort of in the same area.''
And that can be provisioned very rapidly and very efficiently.
This model would have lots of advantages. It would probably
be more efficient, in its use of space. It would probably
reduce the risk for everybody involved, because you'd go from
long-term leases to temporary leases. And it would foster
collaboration, because it would also include a lot more shared
space.
Now, this is something we see already happening, naturally,
in places like the--part of Cambridge, Massachusetts, around
MIT. It's also something that's starting to become part of
university-driven economic development strategy. So, if you
look at the greater Oakland Keystone Innovation zone, around
Carnegie-Mellon in Pittsburgh, they're not doing a single-park
expansion of the campus. They're scattering investments,
engaging lots of partners, and doing things in a very organic,
evolutionary fashion.
And so, we think that's a very compelling middle ground
between the model, that we have continuing for 20 years, and
research parks basically going into decline.
Senator Pryor. OK.
Mr. Darmody, let me ask you. Apparently, the University of
Maryland research park, M Square----
Mr. Darmody. Yes.
Senator Pryor.--is that what they call it?
Mr. Darmody. Yes.
Senator Pryor. Could you tell us a little bit about that,
and, kind of, what they're doing there, and what makes them
stand out?
Mr. Darmody. Well, because we're located inside the
Beltway, we have three focus areas, kind of building
partnerships among the university, the Federal Government, and
the private sector. And among the Federal Government--I mean,
we've talked about stovepipes here. So, for example, in food
safety and food security, we have the FDA, the food safety part
of the FDA, headquartered in our park. We also do--we have part
of USDA. So, you know, the way we regulate food safety in the
United States, we have USDA, a piece of it; FDA, another piece
of it. We've brought them together. We've been the
intermediary, as well as the university. And now we're bringing
in private-sector people. And we're doing training, for
example. So, you know, 40 percent of all of our food is
imported, is now a commodity. So, if the food isn't grown
safely and tested in other countries, that's an issue for the
U.S. So, we are doing international training. We're setting up
both regulatory and toxicology training so that other countries
are going to adopt U.S. standards in food safety and food
security, and that will help us. It helps build better science,
because, really, science parks and research parks need to be
thought of a communities of innovation. And, given our
location, we've leveraged a--Federal, private sector, and the
academic sector for that.
And we're doing something similar with global climate
change, where we have Department of Energy, NOAA, and NASA. We
put them all together in the same place. Again, the Federal
Government has some global climate change in each of those
three departments.
We've been the intermediary. And I think that's a good
model. And even the private sector is looking at that, because
insurance companies are--you know, have risk related to global
climate change. They want to know what the proper models are.
So, that has been our experience. But, then other parks
across the United States have had more of a small business--
trying to build innovative companies out of--technologies out
of universities.
So, as the saying goes, ``If you've seen one research park,
you've seen one research park.'' Because, frankly, they are
very, very dissimilar, but they all add value and create new
innovations for the country.
Senator Pryor. Right. Well, thank you.
Mr. Sallet, let me ask you. In the bill, in the Building a
Stronger America Act, it requires the planning grants to be
awarded on a competitive basis and to consider geographic
diversity. Are those the right two criteria? I mean, does that
make sense to you?
Mr. Sallet. It does. The--having a competitive process is
very important, for two reasons. One, the nature of competition
will create the right incentives for local places to create
real strategies. Knowing that they will have to compete for the
money, it will help bring businesses together with the other
parts of the community, to have a really thought-through
strategy.
The second thing it will do is help to ensure the
efficiency of Federal spending, which is very important, in
times of necessary fiscal restraint, by putting money to where
it will have the biggest impact while, frankly, giving people,
even who don't win a competition, the chance to learn from the
experience and do a better job next time.
At the--the provision on geographic dispersion is also very
important. We have a tendency to think about clusters in
innovation as if they're urban phenomenon. They're not. I mean,
there's a lot of manufacturing in rural America that people
don't take enough account of, for example. And we've seen, in
the last year, a sharp decline in that kind of manufacturing
employment. Automobiles, an obvious area. But, that's not just
big cities in the Midwest; it's rural locations, as well. We've
seen a decline in apparel, textiles, and paper products.
And so, it's very important that we understand that the
advantage of geographically concentrated innovation will work
in rural America. And by emphasizing geographic dispersion in
the bill, you've made people focus on that.
Here's one reason why rural America has advantages. We know
that rural America, when it comes to converting patents of
well-established technologies, is just as good at it, has just
as many patents as urban America. We know there are advantages
in costs. For example, in advanced manufacturing, these days,
we used to think of manufacturing as something that can't be
done in the United States because wage costs are too high. But,
as we get, particularly in the area of semi-conductors, in the
world of advanced manufacturing, labor costs actually shrink.
What companies need is to be in a nexus of innovation in places
where community colleges are training workers for those kinds
of advanced manufacturing. What rural economies have a good
base for manufacturing--good wages that provide those kinds of
opportunities. So, we need to keep our emphasis on rural
America.
Indeed, if I could just say, Mr. Chairman, I know that
you've been very busy, of late. And the healthcare debate is a
critical one. It--I think we're all appreciative of the fact
that you've taken a moment out of that healthcare debate to
focus on this, because this isn't the front-page story that
healthcare was this morning, and will be tomorrow. But,
actually, if we're going to have the new building blocks of
American competitiveness, it's fundamentally important. And so,
it's--we're all very appreciative that you've taken the time to
focus on it.
Senator Pryor. Well, thank you.
And thank you all for being here. And I really appreciate
your participation today, and your very thoughtful comments.
And I know that you've helped my staff, and other staff on
the Committee and other member staffs, to help us make this
Building a Stronger America Act even better. And we're going to
continue to improve it. So, if--we're working with Senators on
both sides of the isle, here, to try to really have a good
piece of legislation that we can get very broad bipartisan
support for, and your assistance on this has been invaluable.
And I hope we'll continue to discuss this as we go through the
process.
We're going to leave the record open, here, for just a
week, maybe 4 or 5--let's say 5 business days. We're going to
possibly get some questions from some of the members who either
had to leave early or who--not able to be here today. So, if
you get questions from the Committee, please try to get those
back ASAP.
I really appreciate your thoughtfulness and your time in
trying to help us do something good for this country, and help
us get back in the innovation business in a way that our global
economy wants us to do this right now.
Thank you very much for being here.
And the Committee is adjourned.
[Whereupon, at 4:21 p.m., the hearing was adjourned.]
A P P E N D I X
Prepared Statement of Hon. Olympia J. Snowe, U.S. Senator from Maine
Thank you, Senator Pryor, for holding this hearing today on the
crucial issue of strengthening America's economic competitiveness by
enhancing U.S.-based science research parks. Indeed, this hearing is
truly timely as our Nation's economy hints at a tenuous comeback. With
a high, 10 percent, unemployment rate and millions of jobless
Americans, it is imperative that we continue to focus our efforts on
economic revitalization and job creation. It is therefore critical that
we follow President Ronald Reagan's inspirational message from his
Second Inaugural address that, ``We must think anew and move with a new
boldness, so every American who seeks work can find work; so the least
among us shall have an equal chance to achieve the greatest things. . .
.'' And, the best and most proven way to accomplish this mission is by
investing in American innovation.
In furtherance of that goal, we are here today to explore and
recognize the nexus between science research parks, regional innovation
clusters, business incubators, and the creation of jobs for the 21st
century. Science parks promote an essential culture of innovation,
collaboration and economic competitiveness among universities, research
laboratories, and small businesses--working within close quarters or
networking through ``virtual'' parks where technologies cluster--to
move research from ``mind to marketplace.'' They are a vital part of
our Nation's economy, employing more than 300,000 scientists and
engineers. Significantly, every single job in a research park generates
2.57 jobs outside the park. That is more than three quarters of a
million (770,000) American jobs!
To echo the message of President Obama at the recent jobs summit,
we must take ``every responsible step to accelerate job creation'' and
get the ``biggest bang for the buck.'' Science parks can help us
realize both of these goals.
As Ranking Member of the Senate Committee on Small Business and
Entrepreneurship and a senior member of the Senate Commerce Committee,
I enthusiastically encourage increased investment in science parks and
regional industry clusters. That is why Senator Pryor and I introduced
the ``Building a Stronger America Act'' (S. 583), to provide grants and
loan guarantees for the planning, development and construction of
science parks throughout the United States. This bipartisan legislation
would drive innovation and regional entrepreneurship by enabling
existing parks to make needed renovations while also encouraging rural
and urban states to undertake studies on developing their own
successful regional science clusters. Our legislation would allow the
Secretary of Commerce to guarantee up to 80 percent of loans exceeding
$10 million for the construction of science parks. Additionally, the
bill would provide grants for the development of feasibility studies
and plans for the construction or expansion of science parks. Notably,
our legislation exemplifies the need to think of science parks as more
than just the traditional ``mortar and bricks''--and leverage the
networks of people and knowledge and clusters--if we are going to meet
the economic development needs of the 21st century.
In my home state of Maine, traditional science parks currently do
not exist; and, yet, Maine is a national leader in providing business
``incubation'' services. These incubators are critical to the success
of new companies. To help start-up entrepreneurs in Maine, incubation
centers around the state provide business support tailored to companies
in their regional innovation clusters. The benefit of Maine's seven
technology incubator centers has been nothing short of monumental, as a
remarkable 87 percent of all businesses graduating from these
incubators are still in business and creating new jobs. Under the
``Building a Stronger America Act,'' business incubators as well as
science parks will be eligible for vital assistance that will hopefully
lead to similarly successful results in other states.
More than simply stimulating job creation and strengthening U.S.
competitiveness, this legislation can also help benefit military bases
affected by the base realignment and closure (BRAC) rounds.
Specifically, we can utilize this opportunity to help BRAC communities'
redevelopment efforts and stem enormous job losses. For instance, with
the closure of Naval Air Station Brunswick (NASB) in my home state of
Maine, the Midcoast region is estimated to lose 6,500 jobs and $140
million in annual income. Sadly, the closing will also leave behind a
complex of buildings, state-of-the-art facilities and idle real estate
property. It is essential that we do everything in our purview to
lessen these negative impacts. This is why I plan to work with you,
Senator Pryor, and our colleagues to ensure that one factor to consider
when awarding grants under S. 583 is whether the award would assist in
the transformation of military bases shuttered by the BRAC rounds into
vibrant science parks.
By resourcefully and adequately investing in American science and
technology, we expand opportunities and build on a foundation for a
better tomorrow. We must continue to encourage all avenues for
advancing science and technology if America is to remain at the
forefront of scientific and technology development for decades to come.
In conclusion, thank you again, Senator Pryor, for scheduling this
vital hearing today and for your invaluable and longstanding leadership
on behalf of advancing innovative technology in our economy.
______
Prepared Statement of Hon. David Vitter, U.S. Senator from Louisiana
I want to thank the Chairman for scheduling this important hearing.
Discussing ways the United States can maintain its crucial leading edge
in scientific research and technological development is obviously of
the utmost importance.
I certainly understand and agree with the great value scientific
research parks and consortiums can have, both for achieving scientific
breakthroughs and fostering economic development. In my home state of
Louisiana, I helped form the Stennis-Michoud Aerospace Alliance to
promote the growth of the aerospace industry in the region between
NASA's Stennis Space Center in Mississippi and Michoud Assembly
Facility in New Orleans, as a means to both foster job creation as well
as further scientific and technological breakthroughs in aerospace
engineering and design. And in Shreveport, we have the burgeoning
Intertech Science Park--home of the LSU Health Sciences Center, as well
as private companies--dedicated to research in the biomedical field.
More and more, we hear that America is falling behind--or the rest
of the world catching up--in scientific research and development. As I
noted, I have personally seen in my own state the immense value
research parks and consortiums and cooperation and engagement between
public educational institutions and private companies can have in terms
of scientific research and job creation and economic growth.
Research parks can be a useful tool for maintaining and improving
America's role as the world's scientific and technological leader, as
well as helping to grow local, state, and regional economies, and we
should look for ways to encourage their development.
I'd like to thank Dr. Wessner for his testimony and I look forward
to continuing to discuss ways we can continue to foster scientific
research and the job creation and economic growth that comes with it.
______
Prepared Statement of Russ Lorince, Director, Research and Economic
Development Office, West Virginia University
Science and Research Parks Promote Innovation
The West Virginia University Research and Economic Development
Office submits this testimony in support of S. 583 and the prospect of
developing and constructing science and research parks to promote the
Innovation Economy. Such facilities are essential to the United States'
ability to maintain its competitive edge in the global market place.
Competing in an Innovative World
For the United States to remain a world leader in innovation and to
compete effectively in the global economy, it is critical that
infrastructure be in place to advance science and engineering
education, research, technology transfer and commercialization. In
recent years, alarming statistics indicate that the U.S. is falling
further behind competitors in terms of the number of students engaged
in science and technology fields. While American universities retain
their standing as the world's leading institutions for post-graduate
education, the trend is disturbing.
The innovation continuum constructed around higher education has
been a primary reason that the Nation has continued to move new
discoveries and technologies to the market place and to realize the
economic benefits of that work. That structure has provided a positive
environment that has assured a competitive advantage with the rest of
the world and has brought top researchers from around the world to
American campuses. The Bayh-Dole Act, SBIR/STTR grants, business
incubators and accelerators, industry collaborations and
commercialization programs are among the innovation elements which have
allowed the U.S. to lead the world in productive use of intellectual
property.
Important Role of Science and Research Parks
University research parks have earned their own status as vital
components in advancing technology's role in economic growth. Over the
past 50 years, an increasing number of U.S. institutions of higher
education have added research parks to the innovation continuum, often
as the last needed piece of physical infrastructure. After talented
faculty researchers, world class laboratories, research support,
technology transfer and business incubators have been put in place,
parks add another essential dimension.
Though they are physical places, the value of research parks comes
from the unique economic ecosystem they create. These facilities supply
a fertile environment for higher education, government and industry to
collaborate and partner in ways which have yielded great returns. All
three parties realize benefits from the proximity and regular
interactions which spring from parks, in part from good fortune and in
part from careful planning and management. It is the real estate
element of a park which is most visible, but the true value is derived
from programming which drives opportunities for tenants and visitors to
define common goals, explore partnership options and experience
scientific and economic success.
Support for Science Parks in Other Nations
Recognizing the significant output from research parks in the U.S.,
competitors around the world have undertaken their own projects.
Reflective of different economic systems, national governments
elsewhere have been instrumental in building parks in and around their
academic and scientific assets.
European nations have longstanding parks which provide similar
benefits to their U.S. counterparts. New facilities and expansions of
existing parks are springing up across the continent.
But it is in Asia where governments are investing huge sums in
research parks with scale and scope which are difficult to grasp. In
one extreme example, a single park in China contains 20,000 companies
and 950,000 employees. Of course, the central government funds these
projects in pursuit of economic growth and a greatly enhanced
competitive position.
In contrast, funding for research parks in the U.S. has come from
the state and local level and through private partnership. 5583
provides a new avenue through which the Federal Government can partner
to promote further prosperity and improve return on the public
investment made in research.
WVU Research Park
The WVU Research Park was announced a decade ago and since that
time Phase I has slowly been developed, now offering 24 acres served by
roads and utilities and prepared for construction. One tenant has taken
occupancy of a privately-finance building in the park, creating some
activity and energy. Funding for the facility, which has come through
the WVU Research Corporation, has been sporadic as the State of West
Virginia and local governments have been limited partners.
With the first tenant in place and important agreements and
financing elements pending, the park is at a critical crossroads. The
type of support which would be available through the programs in S. 583
could be crucial to advancing the project. Funding for planning grants,
including a current and more useful version of a 2002 consultant's
report, would reaffirm the concept of the park and its market potential
and possibly attract corporate collaborators to create a public-private
partnership. The prospect of loan guarantees could be of great
importance in finalizing a financing plan for the construction of WVU's
first building in the park, which would serve as an Innovation Center
to support entrepreneurs and start-up firms spun from the WVU research
effort.
While some states have been able to provide significant financial
support for such projects, that hasn't been the case at WVU. Lacking
that backing, the opportunity to compete for Federal planning grants
and loan guarantees would provide wonderful new opportunities to
advance the WVU Research Park.
Conclusion
As the U.S. reassesses its competitive position in the global
marketplace, it becomes clear that we must focus on sustaining and
building the innovation infrastructure. Having the Federal Government
partner with state and local investment in constructing university
research and science parks is a sound strategy to build economic
strength and S583 provides a reasonable means to that end.
Thank you for considering our testimony.
______
Response to Written Questions Submitted by Hon. Mark Warner to
Hon. John R. Fernandez
Question 1. Infrastructure is obviously the first step in the
development of a research park and is addressed in S. 583. However,
early stage high-tech companies quickly hit a source of funds
roadblock. What should the Federal Government's role, if any, be in
facilitating the flow of investment funds to emerging companies in
research parks?
Answer. EDA recognizes that the funding roadblocks are a major
impediment to the full realization of the potential of the early stage
companies that are an important source of employment growth. One study
estimated that companies once backed by venture capitalists accounted
for nearly 17 percent of America's GDP and 9 percent of private-sector
employment (Economist, March 2009). Venture capital is also known to be
important to innovation more generally. Since $1 in venture capital
yields as many patent applications as $3 in R&D, venture funding is
critical to research park success (Kortum and Lerner, 1998).
Venture capital investment in the U.S. is down 51 percent since
last year (Economist, October 3, 2009). However, some industry
commentators believe venture capital was too prevalent and should
become smaller based on low average returns over the last decade and
the risk inherent in normal venture projects (Kauffman Foundation, June
10, 2009). The Kauffman report concludes, ``the venture business should
shrink . . . possibly by as much as 50 percent''. EDA believes that
increased capitalization of its Revolving Loan Fund (``RLF'') program
specifically targeted to supporting the commercialization of innovative
new technologies particularly in markets that ``will continue to grow .
. . including clean technology'' (Kauffman 2009) might be as useful as
a recovery strategy and is currently attempting to estimate if an unmet
need exists in this area.
Question 2. Universities can play an enabling role in the creation
of intellectual property that could form the foundation of companies
that could benefit from a research park environment. How would you
recommend that the universities, especially the land grants, become
incentivized to be more engaged in economic development throughout the
states--especially supporting research parks that might not be adjacent
to them like at Virginia Tech?
Answer. The land grant universities already possess the outreach
tools, such as Extension Service Agents, that will support activities
remote from the university campus. EDA is currently sharing its ``Know
Your Region'' curriculum and web-based local decisionmaking support
tools with our colleagues at USDA Rural Development, who will be
adapting its regional innovation systems core to their environment.
(For example, see EDA's www.statsamerica.org/innovation). EDA is also
collaborating with the Appalachian Regional Commission in a similar way
to adapt these intellectual property transfer mechanisms to that
region. These collaborations could be enhanced through closer
coordination of EDA's University Center program and programs of our
sister agencies. Outreach programs, such as the University of Oregon's
Resource Assistance for Rural Environments (RARE), which provides
students with practical work experience and partial support for their
educational expenses if they work for rural governments and non-
profits, could be supported via competitive University Center grants,
and could significantly increase contact with appropriate tech-transfer
and other science park services. Other models, such as the Idaho
Virtual Incubator, have also shown successful results. Taken together,
EDA believes that successful models and best practices, appropriately
adapted to regional conditions, are a critical component of university
enabled company formation and broad based benefits of intellectual
property creation.
Question 3. I understand that the President's budget requested $50
million in EDA funds for regional innovation clusters, and that a
recent EDA report on regional competitiveness also touted the benefits
of thinking regionally when engaging in economic development. However,
I'm curious how that will work when the ``region'' crosses state lines.
As the former Governor of Virginia, I know how Governors compete with
each other to attract projects and employers--including new science
parks that are likely to create high-paying technology parks down the
road--to their state. How can you create incentives for multi-state
regions to cooperate when each state involved wants to know that they
are getting a return for their share of the investment?
Answer. All of us who had the privilege of serving as elected
officials understand the competition between political jurisdictions
seeking to attract projects and employers to locate within their
boundaries. We seek elected office to improve the lives of our
constituents. This includes promoting their economic well-being and the
tax base that allows us to provide the schools that educate their
children, public safety programs that protect their lives and property,
and the amenities that make their community or state a desirable place
to live and work.
These goals are not inconsistent with a regional approach to
economic development that acknowledges the realities of economic
interdependence and economic spillovers. EDA believes that the higher
probability of improved economic outcomes that arises from a regional
economic development approach is the best incentive, consistent with
bottom-up economic development.
The economic spillovers from the Virginia Tech Institute for
Advanced Learning and Research are a prime example. Its location in
Danville, Virginia is directly adjacent to several North Carolina
communities. While EDA has not attempted to measure the spillovers, it
is difficult to believe the benefits stop at a border that is only a
few highway miles away.
EDA encourages regional thinking because it produces better
economic development outcomes. EDA has developed and deployed a ``Know
Your Region'' economic development curriculum that embodies this
thinking. EDA develops and deploys web-based analytical tools that
support the regional approach. Both have been very well received. USDA
Rural Development adopted the EDA ``Know Your Region'' curriculum and
several other agencies are employing or evaluating our regional
economic development analytical tools.
EDA's educational outreach and the demonstrated economic
development benefits are among the factors driving jurisdictions to
embrace regional economic development collaboration. EDA believes that
the critical path lies in the bottom up approach informed by the best
information we can provide to state and local economic development
policymakers. EDA is beginning to receive more requests that are rooted
in this regional approach.
For instance, EDA is funding a 12-partner collaborative initiative
that involves three universities, three technical (community) colleges,
several nonprofit economic development organizations, and several
government jurisdictions. The members of this collaborative come from
six counties: four in Wisconsin and two in Illinois.
EDA recently designated an Economic Development District that
includes cities and counties in Oregon and Washington. The planning
activities EDA is funding are targeted at developing economic
opportunities for this multi-jurisdiction, two state region.
Other examples exist, such as Mobilize Maine. At Governor
Baldacci's direction, the Economic Development Districts are
collaborating with FairPoint Communications, the State of Maine, and
collaborative investors to develop regional capacity throughout the
State that will build a strong, growing and sustainable knowledge-based
economy for all of Maine.
EDA believes that focusing on the dissemination of information and
best practices that inform state and local government economic
development policymaking is the appropriate role for the Federal
Government and supports improved bottom-up economic development
decision-making.
Question 4. How would the regional economic development model work
within EDA's current structure, for example with EDA-designated
economic development districts? Would they have to be redrawn
accordingly, or dispensed with all together?
Answer. The regional economic development model is already
successfully utilized in many parts of America. Some initiatives are
driven by existing EDDs, while others arose from the work of local
partners independent of any EDD involvement.
EDA continues to support the EDDs as the fulcrum of its planning
activities. They are, and should remain, locally determined. EDA,
through its program of practitioner accessible research, web based data
access and local decision-maker support tools, and ``Know Your Region''
training outreach continues to foster regional perspectives because the
regional perspective increases the probability of better economic
outcomes. Considerable progress is being made. For instance, EDA
recently designated an EDD serving Portland, OR and Vancouver, WA that
includes 5 adjoining counties on both sides of the state line.
In another example, EDA recently funded a complex collaborative
regional innovation cluster planning process involving three
universities, a liberal arts college, three technical colleges
(community colleges), and a number of not-for-profit economic
development organizations. The members of this collaborative cluster
cover six counties, four in Wisconsin and two in Illinois. What makes
this an interesting endeavor is the division of labor within a
framework that crosses town, city, county and state lines.
EDA does not know if local decisionmakers will formally ask to have
EDD boundaries redrawn or otherwise re-structure themselves. What is
clear is that the regional perspective and the importance of innovation
and industry clusters to sustainable long-term economic growth is being
understood and implemented across the Nation. EDA believes that its
continued support of grassroots decisionmakers will continue this
positive trend.
______
Response to Written Questions Submitted by Hon. Olympia J. Snowe to
Hon. John R. Fernandez
Question 1. In order to reverse the present tide of economic
stagnation, America must invest in the creation, development, and
promotion of homegrown technologies. A 2007 National Academy of
Sciences study found that science parks drive regional economic
development and enhance American competiveness by promoting technology
and innovation, pooling local talent, and encouraging the exchange of
ideas.
The ``Building a Stronger America Act'' (S. 583), which Senator
Pryor and I introduced, will provide grants and loan guarantees for the
planning, development and construction of science parks throughout the
United States. This legislation will not only stimulate job creation
and strengthen U.S. competitiveness; it can also help benefit military
bases affected by base realignment and closure (BRAC) rounds. That is
why I pledge to work with Senator Pryor to ensure that one factor to
consider when selecting awards under S. 583 is whether the grant would
help the transformation of military bases shuttered by the BRAC rounds
into vibrant science parks.
Your testimony mentions that EDA's investments create conditions in
which jobs are created, often in the midst of economic hardship or
adjustment. What role could EDA play in assisting BRAC-affected
communities under this legislation?
Answer. EDA's commitment to constructive reuse of BRAC facilities
to transition the economies of affected communities and regions will
not change under this legislation. EDA will continue to support local
decisionmakers as they seek to exploit their region's competitive
advantages, including those offered by science parks, to create jobs
for their citizens and a tax base that adequately supports local
government services.
EDA has a long and successful partnership with DoD's Office of
Economic Adjustment (OEA). The current OEA deputy director and a member
of his staff are EDA alumni and continue to work closely with EDA to
plan and implement BRAC recovery strategies. Typically, OEA focused on
reuse planning, and EDA funded implemention activities, typically
public works projects. The two agencies have always employed a regional
approach to constructive reuse of BRAC facilities and, when appropriate
assets are in place or can be developed, leverage regional competitive
advantages to create science parks.
The additional funding for BRAC communities and the science park
focus can be expected to produce significant results as part of EDA's
regional innovation clusters approach to economic development.
Question 2. A recent Brookings report, Clusters and
Competitiveness: A New Federal Role for Stimulating Regional Economies,
co-authored by now Small Business Administrator Karen Mills, asserts
that regional industry clusters--geographic concentrations of
interconnected firms and supporting organizations--represent a potent
source of productivity at a moment of national vulnerability to global
economic competition. To compete in technology development, a region or
state must differentiate itself and cultivate and sustain areas of
expertise where it can be a world leader. As a result, it has become
more common for science parks to focus on identified technology areas
or industry clusters. However, the Brookings report also asserts that
this Nation's network of cluster initiatives remains thin and uneven.
Given EDA's longstanding tradition of supporting regional
innovation clusters, what can be done to make U.S. industry clusters
more competitive? What can be done to catalyze growth producing
collaboration in key industry clusters and help them realize their full
potential?
Answer. EDA's leading role in the implementation of the regional
innovation clusters approach to economic development focuses on the
competitiveness of U.S. industry clusters though its support of
methodologically rigorous practitioner accessible research, web based
decision support tools, practitioner training, and strategic planning
and implementation investments. Many of EDA's research reports, tools,
and training products have been cited or adopted by other agencies. EDA
believes these form a solid base upon which to build more competitive
U.S. industry clusters and assist them to achieve their full potential.
While continuing to implement and update these activities, EDA's
policy recognizes the importance of the Brookings critique. EDA's 2010
budget initiates a cluster identification and mapping project designed
to strengthen the network of clusters, disseminate best practices, and
integrate across the cluster spectrum from fostering network linkages
beyond the direct supply chain partners to include cluster specialized
banking, consulting, and legal services, universities, and community
colleges.
EDA's 2010 budget includes funding for the initial steps toward a
comprehensive cluster network mapping project that will extend beyond
the European Clusters Observatory (ECO) model mentioned in the
Brookings report. Based on the existing clusters definitions used by
ECO and others, EDA's multi-year project will incorporate workforce
skill set layers, as identified by Labor's Standard Occupation Codes
(SOC), and important network relationships based on secondary and
tertiary relationships. Phased project roll out will provide rapid
access to initial cluster network information and support continuous,
client informed, product improvement, so that the product evolves in
the same manner as EDA's tool and training curriculum projects.
EDA's partnerships with other agencies, including our Labor
Department and Appalachian Regional Commission colleagues, are
producing strong results and more needs to be done. EDA is
collaborating with SBA, Education, Labor, USDA and other Federal
partners to develop more coordinated regional investment strategies.
Additionally, EDA recognizes the need to integrate private sector
actors driving growing and emerging clusters more tightly into the
planning and implementation processes.
Question 3. Small businesses are the engines that drive job growth
and they will lead us out of the current recession. I am deeply
committed to ensuring that they succeed, not only because I am Ranking
Member of the Small Business Committee, but because I truly believe in
the power of small businesses to lift us out of our economic troubles.
The ``Building a Stronger America Act'' (S. 583) is one of many efforts
I have undertaken to encourage small business growth. Science parks
provide small businesses numerous advantages, such as access to a range
of management, marketing, and financial skills and services. At its
heart, a science park provides an organized link to local research
centers or universities, providing small firms with constant access to
the expertise, knowledge, and technology they need to prosper. A recent
Battelle report on science parks found that for each job in a science
park, 2.57 additional jobs are created on average as a direct result.
What do you foresee as the effects of the ``Building a Stronger
America Act'' on job creation in the short- and long-term? How can
investment in science park creation and redevelopment help lead us out
this recession?
Answer. EDA is not in a position to empirically estimate the
effects of the pending legislation. EDA does note that studies by
leading innovation policy authorities with whom it works closely, such
as those at the National Academy of Sciences and OECD, repeatedly find
countries around the world are adopting the parks model. The model is
characterized by substantial public investments in infrastructure, new
organizational approaches (e.g., Belgium's IMEC semiconductor
facility), and public-private research collaboration (e.g., France's
MINATEC).
EDA's direct experience is also telling, especially in the area of
small business development and growth. For instance, EDA's long-term
partnership with state and local officials in the Fargo, ND area
fostered the North Dakota State University Research and Technology
Park, where many of the best practices, including co-location of
private and public research teams, venture capital funding, and
business advising services, continues to produce outstanding results.
The Park's services include the Entrepreneur Program, co-led by
University business school faculty and successful entrepreneurs. The
Park's reach is extended through its Virtual Incubator program, which
connects to even the most rural areas of North Dakota, and beyond.
Question 4. In order to drive innovation, and encourage the
clustering of advanced industries in specific areas, the ``Building a
Stronger America Act'' (S. 583) that Senator Pryor and I have
introduced provides grants and loan guarantees to promote the planning,
development and construction of science, research, and technology
parks. Science parks help drive innovation and regional
entrepreneurship by promoting technology and innovation. In my home
State of Maine, we presently do not have any traditional science parks.
That said, Maine is a national leader in providing business
``incubation'' services that are tailored to companies in their region.
Incubators, like science parks, nurture the development of
entrepreneurial companies, providing business support and helping them
survive and grow during the start-up period, when they are most
vulnerable. The benefit of Maine's seven technology incubator centers
has been nothing short of monumental, as a remarkable 87 percent of all
businesses graduating from these incubators are still in business and
creating new jobs. Many other rural areas in Maine and throughout the
Nation would benefit from this type of targeted economic development.
Can you elaborate on the critical nature of encouraging innovation in
rural areas where populations are not very dense while simultaneously
encouraging the development of science parks in population centers?
What more can we do to strengthen and grow business incubators?
Answer. EDA's regional innovation clusters approach is best
understood as including rather than excluding. Innovation is too often
defined in such a way that excludes rural areas and regions are often
thought to require an urban center. EDA's definitions, approach, and
experience is not consistent with such exclusionary outcomes.
Innovation, broadly considered, is not equivalent to `high tech' or
even `new products'. Innovation is the spirit of America. It is
embodied in everything we are, an innovative society that experiments
with new ideas.
For instance, employing EDA's regional innovation clusters
approach, Minot State University's Bottineau campus is addressing a
unique situation in an incubator-like fashion. Small farmers, unable to
earn sufficient income, were leaving the land, although they preferred
to stay. EDA provided funding that created a low-tech approach to
extending the vegetable growing season, which created market potential.
However, the local groceries, fearful of being dropped by distributors,
refused to buy the produce.
The EDA grantee and local vegetable farmers organized to gain
access to the supply chain via the distributors. As a result of
assessing regional competitive advantages, being innovative both in
growing and entering the distribution chain, the extremely rural area
is fostering an emerging cluster focused on locally grown produce.
Question 5. We live in an increasingly globalized world. Science
parks reflect the needs of a high-tech, innovative, and global
marketplace. Science parks have helped lead the technological
revolution. Our Nation's capacity to innovate is essential to ensure
future economic growth. Ideas by innovative Americans in the private
and public sector have paid enormous dividends, improving the lives of
millions throughout the world. We must continue to encourage the
advancement of this vital sector if America is to compete at the
forefront of innovation. There was a lot of discussion at the hearing
about the need to transform existing parks into more modern,
collaborative environments primed for innovation in the 21st century.
However, we cannot be blind to the technology challenges facing our
Nation. For example, U.S. private corporate research centers are
greatly downsized or, in some instances, no longer exist. Corporate and
Federal support for R&D at universities is declining. And, science and
technology are now global commodities.
How can we better encourage the redevelopment of existing science
parks in ways that will help them compete in a globalized economy? What
specific measures can be taken to ensure that American science parks
are evolving for the 21st century? How critical is it that a science
park be physically located close to a university given that so much
business is now done through networks and virtual environments?
Answer. The National Academies of Science's recent report
``Understanding Research S&T Parks'' identifies several conditions for
creating successful 21st Century research parks. Perhaps one of the
most important factors is the presence and involvement of a large
research university or laboratory supporting a critical mass of
knowledge workers. Also key is the availability of funding over a
sustained period, and a strong and committed leadership guiding the
development of the park's physical infrastructure and quality-of-life
amenities. Finally, and not least, a successful park needs skilled
entrepreneurs and managers. Talented and motivated individuals and
teams in the private sector are needed to commercialize the knowledge
generated. The benefits of a successful park are realized over the
long-term, but short term benefits, such as architecture/engineering
jobs in the design phase, and construction jobs and associated
purchases, should not be overlooked in any evaluation of the park
investments.
Question 6. One of the most beneficial incentives in the tax code
is the Research and Development Tax Credit. This credit enables small
businesses to develop new technologies and create additional jobs.
Unfortunately, Congress is not allowing the R&D Credit to realize its
full potential. According to the Organization of Economic Cooperation
and Development (OECD), the U.S. ranked first in research and
development tax generosity in 1990, but has fallen to 17th since then.
This is unconscionable at a time when our economy has shed 7.3 million
jobs since December 2007. First and foremost, we must make this credit
permanent, as Senate Finance Committee Chairman Max Baucus and I have
attempted to do in ``Grow Research Opportunities with Taxcredits' Help
Act'' (S. 1203). How can the research and development tax credit help
science parks grow and generate innovation? How specifically would
science parks and small businesses therein benefit and grow as a result
of making this tax credit permanent?
Answer. Small and large firms make up an important part of a park's
innovation ecosystem. Tax credits increase the R&D engagement at the
firm level, leading to additional innovation output. Recent research
shows that recipients of R&D tax credits show significantly better
scores on most performance indicators. Especially at a time of slower
economic growth and stagnant employment, it is important to renew the
R&D tax credit. Moreover, making the tax credit permanent will reduce
uncertainty and promote business growth in an otherwise challenging
environment.
______
Response to Written Questions Submitted by Hon. David Vitter to
Dr. Charles Wessner
Question 1. You said that the ``potential of research parks appears
to be less widely understood in the United States.'' To what extent, in
your estimation, has the U.S. fallen behind the curve the rest of the
world is setting in developing and investing in science research parks?
Answer. Success of U.S. Parks Has Led to Their Emulation Abroad.
The United States created the idea of a science and technology park
in the early 1950s. The Silicon Valley clusters--sometimes described as
a large park--and the successful Research Triangle Park in North
Carolina have inspired many governments to believe that they can create
growth and jobs through the geographic co-location of resources.
As documented in a recent report by the National Academies,
Understanding Research, Science, and Technology Parks: Global Best
Practices, countries as diverse as China, Singapore, India, Mexico, and
France arc among those undertaking substantial national efforts to
develop research parks of significant scale and scientific and
innovative potential. Foreign efforts to build research parks often
involve integrating research institutes, large and small companies and,
often, universities, with first-class infrastructure. These ingredients
are often complemented by substantial tax advantages and other direct
incentives.
Comparative Scale of Foreign and U.S. Parks
Currently, one can argue that U.S. parks, in comparison to its
major competitors, lack scale, lack resources, and lack the
infrastructure and facilities needed to compete in the global economy.
On the issue of scale, Figure 1 below compares the size of the
average North American Research Park (at 358 thousand acres) with that
of the average Chinese research park (at over 10 million acres.)
Figure 1: Research Parks in Comparative Perspective--an Issue of
Scale \1\
---------------------------------------------------------------------------
\1\ ``Average North American Research Park'' data are from
``Characteristics and Trends in North American Research Parks: 21st
Century Directions,'' commissioned by AURP and prepared by Battelle,
October 2007; ``Average IASP Member Park'' data are from the
International Association of Science Parks annual survey, published in
the 2005-2006 International Association of Science Parks directory.
The Chinese parks are large, in some cases with numerous top-tier
multinationals, and benefit from significant political authority. In
short, our Chinese colleagues have taken the park concept and put it on
steroids.
The scale of China's investments in research parks might well be
compared to the massive efforts undertaken in the United States during
the Cold War in building national laboratories. To the extent that
these more commercially oriented investments are successful, they may
give a significant boost the competitive position of Chinese industry.
Singapore and France provide two additional points of comparison in
terms of financial support for the development of research parks.
Singapore, with population of 4.5 million, has allocated a 5-year
budget of $10 billion over 5 years to strengthen its research and
development base, especially in the area of biotechnology. Both the
Biopolis and the Fusionopolis urban research parks arc key features of
Singapore's competitiveness strategy. These parks are well staffed,
include international scholars, and benefit from the latest equipment
and close proximity to major universities and the airport. France is
reinventing its innovation system through the development of
competitive clusters, called ``poles de croissance,'' with a budget of
$2.2 billion for a country of 65 million, over 3 years. By comparison,
S583 proposes $500 million over 5 years for the United States, a
country of over 300 million.
What Will Be the Impact of the Growth of Parks Around the World?
The substantial investments that the world's leading nations are
making to grow research parks reflect an appreciation of their capacity
to spur knowledge-based growth and enhance technological
competitiveness through innovations that are supported by government
infrastructure, government research, government finance and, in some
cases, assured national procurement markets. These research parks arc
expected to generate very significant benefits to regional development
and job creation. Indeed, to the extent that foreign research parks are
effective, they have the potential to help shift the terms of global
competition, not least in leading technological sectors.
What must the United States Do?
The acceleration in the pace of planning and development of
research parks around the world shows that research parks are widely
seen as a key tool to improve economic competitiveness through
accelerating innovation. To stay in the game, the United States need to
make commensurate investments basic and applied research, in growing
research parks, and in creating other incentives to encourage the
transition of research to the market. In addition, we need to learn
from the experiences of others and adopt and adapt those lessons to
U.S. circumstances just as other countries are adapting what they see
as positive lessons from the U.S. experience.
Good S&T research parks are not a panacea, but they are an
effective tool to help U.S. firms and American citizens compete in the
global economy. Currently, with regard to parks, we lack the enabling
legislation and resources to compete effectively in the 21'' Century.
Question 2. You said that there are ``challenges of getting these
research parks off the ground and integrating them with their
universities' missions.'' Can you provide examples of the specific
challenges research parks face in their initial development that makes
Federal financial support so important to their creation? In your
opinion, is state funding simply not enough to foster their growth and
help them clear these initial challenges?
Answer. U.S. Research Parks Receive Most of Their Support from
State and Local Governments.
As noted above, science parks now exist in most parts of the world;
they are seen as a proven policy tool to spur economic growth and
enhance technological competitiveness. They benefit from significant
financial and policy support from national and state governments.
The United States remains an exception in this regard, where
support for research parks is principally undertaken by state and local
governments with only limited participation by the Federal Government.
While some state governments are experimenting with technology zones to
support research parks and technology incubators, and to increase
technology-led economic development clusters, others have lagged
behind.
Challenges Facing State and Local Governments in Supporting Research
Parks
The National Academies report, Understanding Research, Silence, and
Technology Parks: Global Best Practices, identifies the availability of
significant levels of funding and policy support over a sustained
period as key to the successful development of a research park. This
requires a policy environment that is patient, adaptable and focused on
commercialization.
Some states like North Carolina have been able to provide the
resources and farsighted leadership needed to grow a successful park.
The state's approach to the development of Research Triangle Park is
particularly commendable in that it recognized the importance of
``patient'' support, especially through the first 10 years of its
existence when the park made little tangible progress.
Other states face balanced budget requirements and/or other fiscal
and political exigencies that preclude the scale and consistency of
support necessary for the development of successful parks. Many local
governments lack the fiscal base to make the scale of investments
necessary to support globally competitive research parks. The paradox
is that the Federal and state governments make substantial investments
in education and research, yet the early-stage investment to
commercialize this research in not readily available.
How Can the Federal Government Help?
While recognizing the traditional role of state and local
governments in local economic development, the Federal Government can
play an important role in providing incentives for states and regions
to undertake significant, long-term investments in research parks, and
by supplementing these investments when merited.
State and local governments can also take advantage of Federal
programs, like the Small Business Innovation Research (SBIR) Program,
to encourage the development of innovation networks between
universities and small firms and to provide seed capital for small
business entrepreneurship. Other partnership programs can help states
and localities leverage the substantial investments the Federal
Government is already making in universities, national laboratories,
and other research facilities around the country.
This can be a win-win proposition for the Federal and state
governments, as the case of Sandia Park illustrates. Here, Sandia
National Laboratories gains from the research park through the
retention of the needed skills base near the Laboratory, while the
community benefits from the commercialization of knowledge and the jobs
and growth made possible by the Laboratory's presence.
______
Response to Written Questions Submitted by Hon. Olympia J. Snowe to
Brian Darmody
Question 1. Ever since the cluster concept was introduced, it has
rapidly attracted attention as a means to enhance the capability for
innovative conversion of science and technology into products,
services, and new business growth. Nowadays, clusters of existing and
emerging science-based activities have been shown to be crucial factors
in shaping the economic winners and losers of the first half of the
21st century. What are some best practices and successful models of
knowledge transfer in science based clusters? What are the necessary
conditions for success and issues of sustainability of clusters?
Answer. First, regional leadership and buy-in by local stakeholders
in the business and academic communities are critical factors. Second,
technologies do not know in which political jurisdiction they are being
developed. Strategies to break down competing political jurisdictions'
natural inclination to control and instead allow initiatives to grow on
a regional basis must be develop, such as establishing a regional
authority. Finally, cluster development can help grow a region but
unless there is some core technology base, declaring a region a cluster
will not help regional technology led economic development. You need
the core technology to grow the regional cluster.
Question 2. In order to drive innovation, and encourage the
clustering of advanced industries in specific areas, the ``Building a
Stronger America Act'' (S. 583) that Senator Pryor and I have
introduced provides grants and loan guarantees to promote the planning,
development and construction of science, research, and technology
parks. Science parks help drive innovation and regional
entrepreneurship by promoting technology and innovation. In my home
State of Maine, we presently do not have any traditional science parks.
That said, Maine is a national leader in providing business
``incubation'' services that are tailored to companies in their region.
Incubators, like science parks, nurture the development of
entrepreneurial companies, providing business support and helping them
survive and grow during the start-up period, when they are most
vulnerable. The benefit of Maine's seven technology incubator centers
has been nothing short of monumental, as a remarkable 87 percent of all
businesses graduating from these incubators are still in business and
creating new jobs. Many other rural areas in Maine and throughout the
Nation would benefit from this type of targeted economic development.
Can you elaborate on the critical nature of encouraging innovation in
rural areas where populations are not very dense while simultaneously
encouraging the development of science parks in population centers?
What more can we do to strengthen and grow business incubators?
Answer. Technology incubators are a key element of any regional
technology strategy. The `Building a Stronger America Act' does
recognize the role of technology incubators in growing small businesses
in the United States, and includes startup incubators in the definition
of `science parks.' Many university research parks have an incubator in
or (as in the case at the University of Maryland) on the campus that
work together, and many startup companies are located in research
parks. Indeed the Bayh-Dole Act is encouraging universities to create
startup companies, and technology incubators are critical in filling
this role. The Association of University Research Parks works very
closely with the National Business Incubation Association (NBIA) on
programs and legislative initiatives such as programs to support
technology infrastructure and technology led economic development.
Question 3. We live in an increasingly globalized world. Science
parks reflect the needs of a high-tech, innovative, and global
marketplace. Science parks have helped lead the technological
revolution. Our Nation's capacity to innovate is essential to ensure
future economic growth. Ideas by innovative Americans in the private
and public sector have paid enormous dividends, improving the lives of
millions throughout the world. We must continue to encourage the
advancement of this vital sector if America is to compete at the
forefront of innovation. There was a lot of discussion at the hearing
about the need to transform existing parks into more modern,
collaborative environments primed for innovation in the 21st century.
However, we cannot be blind to the technology challenges facing our
Nation. For example, U.S., private corporate research centers are
greatly downsized or no longer exist. Corporate and Federal support for
R&D at universities is declining. And, science and technology are now
global commodities. How can we better encourage the redevelopment of
existing science parks in ways that will help them compete in a
globalized economy? What specific measures can be taken to ensure that
American science parks are evolving for the 21st century? How critical
is it that a science park be physically located close to a university
given that so much business is now done through networks and virtual
environments?
Answer. Providing infrastructure support, as provided in `Building
A Stronger America Act', is a necessary, but not sufficient response to
encourage innovation and cluster development. My written testimony
amplifies some other ideas and they are further explored in `The Power
of Place, A National Strategy for Building America's Communities of
Innovation, http://aurp.net/meet/The_Power_of_Place.pdf. A number of
Senators at the hearing asked about the role of Federal labs, and I
have provided some policy ideas below related to Federal, private and
academic sectors to encourage cluster development:
Use Federal Labs and Lab Spin Outs as Anchors in Cluster
Development:
Over $25 billion a year in internal research and development
spending (nearly as much as is spent at colleges and universities) and
tens of thousands of brilliant researchers are employed at Federal
labs, but much of the talent and technology remains inside, and the
Federal labs are not often integrated into the community where they
reside:
Create local technology companies from Federal intramural
research: Create Congressionally-chartered Federal
commercialization intermediary organization, based on best
practices of technology commercialization intermediary models
found at leading research universities (WARF at U. Wisconsin),
in states (TEDCO in Maryland) and individual Federal labs (for
example, the Congressionally-chartered Jackson Foundation at
Uniform Health Science University), through expanding the
funding, authority, venture staffing, and venture acceleration
capacity of the Federal Lab Consortium established in 15 U.S.C.
sec. 3710. Just as when Congress wanted to improve Pennsylvania
Avenue, it chartered the Penn Ave Development Authority to take
on business of redevelopment, a Federal technology
commercialization authority needs to be chartered by Congress
to take on business of tech transfer and to create technology
spin outs to locate near the Federal labs and improve the
communities where Federal labs are located.
Connect Federal researchers with private companies: The
Administration has called on Federal researchers to be more
involved with private sector companies (See, e.g., August 4
2009 OMB/OSTP directive to heads of Executive Agencies). No
comprehensive agency-wide program exists, however, to allow
Federal research assignments with private sector companies.
Issue a Presidential Executive Order on Federal lab technology
commercialization and private sector partnerships (See, e.g.,
EO 12591) based on the NASA Innovation Ambassadors Program.
www.nasa/gov/office/innovation_incubator/
Connect fed labs to local communities: Embed regional
economic development mission into all fed labs missions;
currently Department of Energy labs have this mission; will
help spur Administration's regional cluster initiatives.
Create more private sector involvement near Federal labs in
urban areas: Expand Enhanced Use Lease (EUL) authority (which
allows leasing of fed land and equipment) to all Federal
agencies, not just DOD agencies. See, 10 U.S.C. 2667.
Create culture of Entrepreneurship: Create entrepreneurial
leave programs to encourage Federal researchers to take
temporary assignments with private sector technology firms, and
protect their positions in the fed labs upon their return.
Encourage `entrepreneur in residence' (EIR) programs as all fed
labs and create programs to encourage Federal researchers to
create companies and mentor the process through the EIR
program.
Create regional clusters: Issue GSA/Army Corps of Engineers
policy encouraging fed labs to build and lease in area near
innovation assets, such as research parks, health science
centers, other fed labs, private research centers and colleges
and universities.
Research Universities and Commercialization
Improve University Commercialization in the U.S. by imbedding
commercialization in U.S. grant and contract funding model: The U.S.
created the Bayh-Dole Act that spurred university technology
commercialization around the world but now lags the UK in tech
commercialization since Federal grant and contract policies provide no
funding for tech transfer office or initial proof of concept funding to
make them attractive for follow on investment. Reform OMB A-21
restrictions on overhead to increase by 1 percent overhead negotiated
rates with cognizant Federal agency for cost reimbursement for patent
expenses and seed commercialization fund at universities to bridge
first `valley of death' consistent with the Bayh-Dole Act to create
more companies and jobs in U.S. This can be done without new Federal
legislation, or Federal agency, and can be implemented quickly, without
a new bureaucracy.
Private Sector
R and D Tax Credit: To keep more R and D at home, develop an
enhanced corporate R and D tax credit for projects undertaken in
partnership with college and universities.
Keep more Corporate R and D in U.S.: Remove Federal IRS
restrictions on private use in tax exempt research facilities by
corporations sponsoring research by removing tests related to IP
licensing. IRS Revenue Procedure 97-14 needs to be reformed to allow
corporations to keep more of the IP they sponsor; otherwise they will
continue to ship R and D to universities overseas.
Education
From `STEM' to `ESTEEM': Move from focus on `STEM' (Science,
Technology, Engineering and Math) issues to `ESTEEM' (Encouraging
Science, Technology, Engineering, Entrepreneurship, and Math) skills
since job creation will be dependent on new startup companies.
Entrepreneurship Programs at Department of Education and NSF:
Develop new U.S. Department of Education program, joint with NSF, to
encourage university based partnerships for innovation and dormitories
for entrepreneurs and living learning centers to encourage study of
entrepreneurships and new company formation as basis for economic
growth in the U.S.
Question 4. One of the most beneficial incentives in the tax code
is the Research and Development Tax Credit. This credit enables small
businesses to develop new technologies and create additional jobs.
Unfortunately, Congress is not allowing the R&D Credit to realize its
full potential. According to the Organization of Economic Cooperation
and Development (OECD), the U.S. ranked first in research and
development tax generosity in 1990, but has fallen to 17th since then.
This is unconscionable at a time when our economy has shed 7.3 million
jobs since December 2007. First and foremost, we must make this credit
permanent. Senate Finance Committee Chairman Baucus introduced the
``Grow research Opportunities with Taxcredits' Help Act'' (S. 1203),
which I cosponsored, to make the credit permanent. How is a research
and development tax credit essential for the growth of science parks
and generating innovation? How specifically would science parks and
small businesses therein benefit and grow as a result of making this
tax credit permanent?
Answer. Many of the larger companies in university science parks
avail themselves of the Federal tax credit and making the tax credit
permanent and expanded would be of great help. A program to give an
enhanced credit to corporations doing joint R and D with universities
would help keep more R &D in the United States. Additionally, we need
to focus on the needs of the smaller technology companies, many of whom
may not qualify for the Federal R and D tax credit due to their size or
their tax status. A Federal program to provide a tax credit to angel
investors, who have invested in the startup company, would help spur
more investment in smaller companies.
______
Response to Written Questions Submitted by Hon. Olympia J. Snowe to
Jonathan Sallet
Question 1. You noted during the hearing that ``some of our
strongest international competitors, including Japan, South Korea, and
many European countries, have invested in significant national cluster
initiatives, directing great amounts of money and resources toward
making innovation clusters the main focus of their economic and
innovation policies.'' And, you pointed out an irony that while foreign
innovation policymakers have studied our successes and consulted with
our experts, ``the United States has conspicuously failed to embrace
cluster initiatives as an explicit part of its own innovation policy.''
What are some of the crucial factors in shaping our Nation's economic
winners and losers? What are some best practices and successful models
of knowledge transfer in science based clusters? What are the necessary
conditions for success and issues of sustainability of clusters?
Answer. In our paper from the Center for American Progress
referenced in my testimony, we explain why the critical components of a
national economy are strong regional economies. As we have looked at
the lessons of successful regional economic strategies, we see key
lessons that include:
Place Matters. Not every location can do everything.
Boatbuilding is better suited for Maine than for states far
from the coast, for example. So a key step is for a region to
understand its real and prospective competitive advantages.
Important in the success of a ``place'' is, of course,
leadership from local educational institutions, a supply of
capital, and well-trained workers.
Networks of Collaboration. A region will be successful
because it is competitive and because it hosts businesses that
are fiercely competitive, often with each other. But
collaboration at the pre-competitive is very important as well.
Consider, for example, information processing businesses that
work together to incent local community colleges to offer
education in their field, creating a supply of talented workers
from which all can draw.
Local Leadership. Regional economies are built from the
ground up. Our examination of successful clusters reveals a
high sense of leadership, incorporating the private sector,
universities, local government and civic organizations. And,
equally importantly, that leadership inevitably needs to look
beyond local political boundaries--often to regional economies
that cross state lines.
Question 2. In order to drive innovation, and encourage the
clustering of advanced industries in specific areas, the ``Building a
Stronger America Act'' (S. 583) that Senator Pryor and I have
introduced provides grants and loan guarantees to promote the planning,
development and construction of science, research, and technology
parks. Science parks help drive innovation and regional
entrepreneurship by promoting technology and innovation. In my home
State of Maine, we presently do not have any traditional science parks.
That said, Maine is a national leader in providing business
``incubation'' services that are tailored to companies in their region.
Incubators, like science parks, nurture the development of
entrepreneurial companies, providing business support and helping them
survive and grow during the start-up period, when they are most
vulnerable. The benefit of Maine's seven technology incubator centers
has been nothing short of monumental, as a remarkable 87 percent of all
businesses graduating from these incubators are still in business and
creating new jobs. Many other rural areas in Maine and throughout the
Nation would benefit from this type of targeted economic development.
Can you elaborate on the critical nature of encouraging innovation in
rural areas where populations are not very dense while simultaneously
encouraging the development of science parks in population centers?
What more can we do to strengthen and grow business incubators?
Answer. As a resident of the Eastern Shore of Maryland, which
continues its agricultural base, I see this problem first hand. That's
why I believe that any Federal efforts should be sure to reach beyond
metropolitan areas to include rural AmericAnswer. And why I believe
that local economies should have flexibility to use Federal support in
the ways that they believe will work for them. I have suggested,
therefore, that the science parks initiative, very important on its
own, would be even stronger if it were part of a larger effort that
includes business incubators and other tools of growth. With the kind
of record of success show in Maine, and experience around the nation,
it is clear that business incubators are critical.
Question 3. We live in an increasingly globalized world. Science
parks reflect the needs of a high-tech, innovative, and global
marketplace. Science parks have helped lead the technological
revolution. Our Nation's capacity to innovate is essential to ensure
future economic growth. Ideas by innovative Americans in the private
and public sector have paid enormous dividends, improving the lives of
millions throughout the world. We must continue to encourage the
advancement of this vital sector if America is to compete at the
forefront of innovation. There was a lot of discussion at the hearing
about the need to transform existing parks into more modern,
collaborative environments primed for innovation in the 21st century.
However, we cannot be blind to the technology challenges facing our
Nation. For example, U.S., private corporate research centers are
greatly downsized or no longer exist. Corporate and Federal support for
R&D at universities is declining. And, science and technology are now
global commodities.
How can we better encourage the redevelopment of existing science
parks in ways that will help them compete in a globalized economy? What
specific measures can be taken to ensure that American science parks
are evolving for the 21st century? How critical is it that a science
park be physically located close to a university given that so much
business is now done through networks and virtual environments?
Answer. Collaboration with universities is very important. Although
we may not want to enact a Federal requirement of particular geographic
proximity, we certainly want to ensure that science parks, along with
other tools of regional economic growth, are part of a well-considered,
strategic plan for the region. Ensuring the presence of a strategic
plan is a critical--perhaps the critical--step in ensuring that Federal
monies are well-spent and that local efforts are really tied to areas
of current or prospective economic advantage. And a critical part of
any strategic plan is the inclusion of local institutions of higher
learning. As we write in our CAP paper:
Innovative companies were once innovative ideas, many of which came
from the scientists, professors, and engineers that work at
universities, corporate R&D facilities, and government laboratories.
The ``spillover'' of ideas from these knowledge-creation institutions
(and their intellectual property practices) to the local community and
network of entrepreneurs is the central process that takes place in
fertile innovation clusters. As more and more ideas move from labs to
eager individuals and their business partners, scores of innovative
businesses are started, feeding an auspicious cycle.
Science parks would be a leading beneficiary of this approach.
Question 4. One of the most beneficial incentives in the tax code
is the Research and Development Tax Credit. This credit enables small
businesses to develop new technologies and create additional jobs.
Unfortunately, Congress is not allowing the R&D Credit to realize its
full potential. According to the Organization of Economic Cooperation
and Development (OECD), the U.S. ranked first in research and
development tax generosity in 1990, but has fallen to 17th since then.
This is unconscionable at a time when our economy has shed 7.3 million
jobs since December 2007. First and foremost, we must make this credit
permanent. Senate Finance Committee Chairman Baucus introduced the
``Grow research Opportunities with Taxcredits' Help Act'' (S. 1203),
which I cosponsored, to make the credit permanent. How is a research
and development tax credit essential for the growth of science parks
and generating innovation? How specifically would science parks and
small businesses therein benefit and grow as a result of making this
tax credit permanent?
Answer. Business strategy and investment is always aided by
certainty. The quest to make the R&D tax credit permanent has gone on
for too long. Passage of your legislation is very important.
______
Response to Written Questions Submitted by Hon. Olympia J. Snowe to
Dr. Anthony Townsend
Question 1. What are the trends shaping the plausible future for
science parks? What will happen if we maintain the status quo and who
do you see as the early adopters and the resisters of these scenarios?
Answer. The Institute for the Future identified fourteen external
trends that will shape the future for science parks. Four of these will
play a special role, as their future direction of change has a high
degree of uncertainty, and may play out in a variety ways. These highly
uncertain trends are:
The Economic Role of Universities--Some universities will
embrace entrepreneurialism while others reject a larger role in
the economy. But all will face challenges navigating the
conflicting demands and increased strains of a shifting
economic and intellectual role. As the major developer of
science parks today, the future role of universities is a
critical variable. Realizing the full potential of universities
to drive growth will probably require a painful and extended
overhaul of intellectual property management and technology
transfer frameworks.
Growth of New Science Institutions--Scientific societies,
journals and other institutions that set the basic rules of who
can call themselves a scientist, and how they should conduct
research and share results, will come under tremendous strain.
New science networks are forming, organized via the Internet
and social software, but their future role and their connection
to centers of science could play out in many different ways.
Sustainability--The cost of energy will drive business and
policy decisions across the board. How will R&D ecosystems
react to different energy frameworks, and the scientific and
technological challenges of battling global warming? We expect
this will reinforce the desire to cluster some research and
development activities in science parks, but also create forces
that favor virtualization and dispersion.
The Bio-industrial Complex--Bioscience is supplanting
physics as the source of great breakthroughs, but there are
fundamental flaws in systems for commercializing those
discoveries. It is unclear how to fix the many problems in the
``bio-industrial complex'', the role of the public sector, and
whether science parks will be able to create environments that
address any of the structural challenges, and accelerate
innovation and commercialization.
Question 2. Can you elaborate on the critical nature of encouraging
innovation in rural areas where populations are not very dense while
simultaneously encouraging the development of science parks in
population centers? What more can we do to strengthen and grow business
incubators?
Answer. New technologies for computing and communication, as well
as changes in the nature of scientific collaboration are creating new
opportunities to extend the science park model from its traditional
base in population centers to rural areas. First, many of the tools and
instruments of both basic science and technological development are now
networked and can be accessed remotely. Cloud computing technologies
allow anyone with an Internet connection to access almost infinite
computing capacity on-demand for simulation, data analysis and
visualization and modeling. Second, the practice science and technology
are becoming more global and distributed, reducing the cultural,
organizational and logistical obstacles to participation in
collaborative R&D for researchers in rural locations. Third, we must
note that many colleges and universities are indeed located in rural
communities. As these institutions seek to play a more important role
in economic development they are well-positioned to provide support for
rural scientists and engineers to participate in global R&D networks.
Finally, there are great opportunites to connect networks of
metropolitan and rural science parks in mutually beneficial ways. For
instance, the North Carolina Research Parks network combines the global
brand and appeal of the Research Triangle Park with potentially lower
cost alternatives of the state's seven other science parks. The network
can market a wide range of assets to potential tenants, that combine
benefits of rural or more metropolitan locations.
Question 3. How can we better encourage the redevelopment of
existing science parks in ways that will help them compete in a
globalized economy? What specific measures can be taken to ensure that
American science parks are evolving for the 21st century? How critical
is it that a science park be physically located close to a university
given that so much business is now done through networks and virtual
environments?
Answer. The most important way to redevelop existing science parks
is to recognize that their management needs to be upgraded for the 21st
century. Managing science parks effectively over the coming decades
will mean a greater focus on managing activity than managing buildings
and land. This requires as different kind of manager and developer,
different relationships with tenants, and different tenants themselves.
While large companies will continue to be an important part of the
tenant mix in science parks, small and medium-sized companies will play
a growing role in driving technological innovation. Science parks will
need to learn how to market to them, how to attract them, how to serve
them and help them grow, and how to maximize their local economic
impact.
Specifically, I recommend that the Federal Government support
upgrading and expanding the ``software'' of science parks at the same
time it supports the ``hardware'' of science parks in S. 583. Science
parks could use this funding to expand staff focused on social capital
development--creating new business networks, engaging and cultivating
venture investors and angels, and other kinds of activity that
characterize successful technology clusters like Silicon Valley.
Question 4. How is a research and development tax credit essential
for the growth of science parks and generating innovation? How
specifically would science parks and small businesses therein benefit
and grow as a result of making this tax credit permanent?
Answer. Making the R&D tax credit permanent would expand the market
for science parks by expanding the overall expenditure on R&D in the
U.S. economy. Creative science park managers and developers could
package advisory services on the R&D tax credit with their leasing
programs to help small and medium-sized companies plan for long-term
growth and expansion. This would create a virtuous cycle of investment
supporting the overall business model for new and expanded science
parks.