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Recommended Cita tion:Technology, Inn ovation, and Regional Econom ic Development : En couragin g High -Techn ology

Development–Background Paper #2 (Washington, D. C.: U.S. Congress, Office of Technol-ogy Assessment, OTA-BP-STI-25, February 1984).

Library of Congress Catalog Card Number 84-601013

For sale by the Superintendent of Documents,U.S. Government Printing Office, Washington, D.C. 20402

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Preface

This background paperof Technology, Innovation,

contains information gathered by OTA during its assessmentand Regional Economic Development. The information is be-

ing made available at the request of Committees of Congress, State and local officials, andothers with an interest in high-technology development programs that are being mountedat the State and local levels. OTA hopes that its timely publication will prove helpful toreaders who have an immediate need for more detailed information than will be availablein the formal report of this assessment.

. . .Il l

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Technology, Innovation, and RegionalEconomic Development Advisory Panel

William C. Norris, Chairman

Chairman and CEO, Control Data Corp.

William J. Abernathy*Gradua te School of Busin ess

Harvard Un iversity

William F. AikmanPresident

Massachu setts Technology Developm ent Corp.

Hon. Henry Cisneros Mayor

San Antonio, Tex.

Ella FrancisPresident

Parkside Association of Philadelphia

Aaron GellmanPresident

Gellman Research Associates, Inc.

Don Lee GevirtzChairman

The Foothill Group,

George W. HaighPresident and CEO

Inc.

The Toledo Trust Co.

Quentin LindseyScience and Public Policy Advisor

Office of the Governor

State of North Carolina

Neal R. PeirceContributing Editor

National Journal

David V. RagonePresident

Case Western Reserve University

J. David RoessnerT echn ology an d S cience Policy Program

S chool of S ocial S ciences

Georgia Institute of Technology

John Stewart Assistant General Manager

Tennessee Valley Authority

Ellen Sulzberger StrausPresident, WMCA Radio

Member, New York City Partnership

Alexander B. TrowbridgePresident

National A ssociation of M anu facturers

Thomas L. Yount, Jr.Commissioner of Employment Security

State of Tennessee

The Advisory Panel has provided advice and suggestions, but it does not necessarily approve, d isapprove,or endorse the contents of this background paper, for which OTA assumes full responsibility.

*Deceased.

iv

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OTA Technology, Innovation, and RegionalEconomic Development Project

John Andelin,Science, Information,

Staff

Assistant Director, OTA

and N atu ral Resources Division

William F. Mills,* and Nancy Naismith,** Program Manager

Science, Transportation, and Innovation Program

Paul B. Phelps, Project Director

Barry J. Holt, Analyst

Caroline S. Wagner, Research Assistant*

Jeffrey E. Seifert, Research Assistant**

Brian R. Land, Research Assistant***

S tud ent I ntern (fall 1983)

Jay M. Berma n, Student Intern (fall 1982)

Mary Ann Wall, Student Intern (spring 1983)

D. Douglas Caulkins, Faculty Intern (fall 1983)

Marsha Fenn, Administrative Assistant

R. Bryan Harrison, Office Systems Coordinator

Contractors

Renee A. Berger

The Fantus Co., Charles Ford Harding, Principal Investigator

John Rees, Syracuse University

Research Triangle Institute, Alvin M. Cruze, Principal Investigator Rhett D. Speer

Carol Steinbach

OTA Publishing Staff

John C. Holmes, Publishing Officer

John Bergling Kath ie S. Boss Reed Bu nd y Debra M. Datch er

Joe H en son Glen da Law in g Linda A. Leahy Cheryl J. Manning

*~rough September 1983.

**Afier September 1983.

* * * A f i e r January 1984.

v

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Contents

1 . -

2.

3 .

4 .

5.

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Overview . . . . . . . ............................00. . . . . . . . . . . . . . . . . . . . . . . .The Allure of High-Technology Development. . . . . . . . . . . . . . . . . . . . . . . . . . . . .Common High-Technology Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Factors That Contribute to Success . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

State Government Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......0. . . . . . . . . . . . . . . . . . . . .Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Program Design and Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Program Effectiveness and Impacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

University Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .University-Based Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .State Government Involvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Conditions That Foster

Local Initiatives . . . .Summ ary . . . . . . . . . . . . .Introduction . . . . . . . . . .Community Typology .Common Initiatives . . .

Success . . . . . . . . .. $ . . . . . . . . . . . . . . . . . . . . ...4..... .

. . . . . . . . . . . . . . .q q q

$$.....

Program Design and Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Factors Affecting Success . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Private Sector Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . .....Summary. ..... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... . .Introduction ..., . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , . . . .......:.

Private Sector Roles and Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Factors Affecting Success . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Appendix A—Descriptions of Local High-Technology Initiatives. . .

Appendix B—Index of In i t ia t ives Ci ted in This Background Paper .

Page

33

4

5

7

1111

12

14

20

2 727

28

29

33

34

39 39

404044

4648

5 353

53

55

63

6 79 1

Tables

Table No. Page

I. State High-Technology Programs by Type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132. Distribution of Survey Respondents by State . . . . . . . . . . . . . . . . . . . . . . . . . . . 143. Targeted High -Technology Indu stries and Business Activities in the Survey States 154. High-Technology Development Programs in the Survey States, by Type . . . 175. Number of Programs Providing Specific Services in Survey States . . . . . . . . . 186. Additional High-Technology Initiatives Desired . . . . . . . . . . . . . . . . . . . . . . . . . 217. Employment in the Survey States 1980. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238. Employment Change in Survey States, 1975-80 . . . . . . . . . . . . . . . . . . . . . . . . . 24

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CHAPTER 1

Summary

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CHAPTER 1

Summary

Overview

In the last 10 to 20 years, several regions of theUnited States have developed strong local econo-mies based on fast-growing “high-technology” in-du stries. Encouraged by these successes, pu blic andprivate sector groups in other regions are launchinginitiatives to promote similar high-technology de-velopment (HID) of their own. These initiatives arethe subject of this background pap er, which presents

information gathered by the Office of TechnologyAssessment (OTA) in its ongoing assessment of Technology, Innovation, and Regional Economic

Development.

The following chapters focus separately on theroles that are being played by State and local govern-

ments, un iversities, and the p rivate sector in encour-

aging high-technology ind ustrial developmen t. This

organization may be somewh at misleading, however,

since State governm ent p rograms, for examp le, usu -ally involve the participation of university, localgovernment, and/ or private sector groups, just as

university and local initiatives often seek to createcloser and more productive relationships with pri-vate ind ustry. Forging these innovative, cooperative

linkages between sectors has in fact been one of theobjectives and major accomplishments of these ini-

tiatives.

Similarly, Federal Government programs haveplayed at least an indirect role in man y of these ini-tiatives. As the various chap ters show, some of these

efforts were encouraged by Federal pilot studies orplanning grants; in others, Federal agencies or offi-cials have provided adv ice and t echnical assistance;and in man y cases, these initiatives have m ade in-novative use of Federal funds and other develop-ment tools. In addition, recent changes in Federalpolicies and programs may have provided at leastpart of the stimulus for the increased concern and

activity at the State and local levels. How ever, OTAhas not yet completed its investigation of the roleand impacts of Federal policies and programs inregional HTD.

State governments are becoming increasingly ac-tive in promoting HTD. State officials define HTDin many different ways, but in most cases they con-sider their high-technology initiatives to be naturalextensions of their various economic developmentstrategies. High-technology initiatives are usuallybased on an analysis of the State’s existing industrial

base, and are generally und ertaken in conjunctionwith more traditional economic development activ-ities. OTA’s investigation suggests that, while gen-eral industrial development programs may have amore direct influence on high-technology location

decisions, the more recent targeted programs haveimportant indirect effects and can be particularlyimportant to high-technology startups and expan-sions. Most of these initiatives have been launchedin the last 3 years, so it is too soon to tell what theirlong-term effects will be. Nevertheless, most respond-

ents to an OTA survey—public officials and high-technology executives alike—wou ld favor add itional

initiatives by both State and Federal governments.

Public universities are often important compo-nents in these State initiatives, but public and pri-vate universities alike have been playing a signifi-cant role in regional economic development for dec-

ades—the Stanford Industrial Park dates from the1940’s and North Carolina’s Research Triangle Park

from the 1950’s. Universities train technical workersand expand the base of scientific knowledge; bytransferring this talent and know ledge to the private

sector, they contribute to the diffusion of innova-tion and the creation of new firms and industries.The growing economic impor tance of technologicalinnovation creates a greater need, and new op por-tunities, for cooperation between universities andindustry. Recent studies suggest that, given strongleadership and stable, long-term fun ding, these ini-tiatives can enhance technological innovation andregional economic development.

Local initiatives also influen ce the su ccess of Stateand un iversity initiatives, and in man y commu nities

3

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4 q Bac k g r ound Paper #2—Encouraging High-Technology Development

governments and quasi-public groups are taking anactive role in encouraging HTD. These efforts usual-

ly address perceived weaknesses in an attempt todevelop the resources and characteristics of suchmod els as California’s Silicon Valley and Massachu-setts’ Route 128. Common initiatives include zon-ing changes and high-technology marketing pro-

grams, education and training programs, and part-nerships w ith local universities and business group s.

Several highly publicized location decisions, suchas the Microelectronics & Computer TechnologyCorp.’s recent choice of Austin over 50 competitors,suggest that these local efforts can have a positiveimpact on regional HTD.

OTA’s investigation also suggests that private sec-

tor participation is an important factor in the suc-cess of State and local HTD programs. High-tech-nology industry is the immed iate target and u ltimate

beneficiary of most of these efforts, but in m any cases

individual firms or bu siness groups h ave taken thelead. Ind ustry contributes to regional d evelopment

through site location decisions and business opera-tions. In addition, the private sector works closelywith u niversities to strengthen instruction and pro-vide support for research and entrepreneurship.Found ations and business executives also contribute

to regional development through local investmentfunds and public advocacy programs.

The Allure of High-Technology Development

State and local government leaders are attractedto high-technology industries because of this sector’s

rapid expansion and its presumed job-creating po-tential. Some also believe that high-technology in-dustries can be a major force in the revival of dis-tressed regions and cities, especially in the Midwest.

In addition, they are assumed to be a key sourceof the innovative ideas, products, and processes thatare essential to modernizing older industries andmaintaining U.S. technological and economic com-petitiveness. Some critics, however, believe thathigh-technology job projections are unrealisticallyhigh or th at its potential for reviving distressed areas

has been overstated. Others suggest that the suc-cesses of California and New England in th e 1970’smay not p rovide useful mod els for the Midw est andother regions in the 1980’s. Some of the strongestcriticisms of these initiatives come from those whosee in the rush to high technology a distinct dangerof ignoring p olicies and program s that could be m ore

beneficial to a State or local economy.

A related issue concerns the appropriateness of government intervention in HTD at any level.Many observers, however, point ou t that the UnitedStates already has an ad hoc industrial policy, and

they can point beyond Washington for evidence.In the area of HTD, State and local governmentsare far more active than the Federal Government.The intense competition for HTD has generated lit-

erally hundreds of State and local programs, andin some areas their innovative strategies are un-doubtedly making a contribution to public policy.They are encouraged in their efforts because thehigh-technology sector is expanding rapidly beyond

its original strongholds: places that have been un-suitable for high-technology research and productdevelopment may be well suited to high-technology

production activities. The more immediate result,how ever, is that the a d hoc national indu strial policy

and the nu merous State, local, and private initiatives

may be uncoordinated and overlapping.

As a result, State and local economic developmen tpolicies are at a crossroads. Their high-technologyinitiatives may have only a marginal imp act on HTDin the short term, and m aybe a zero-sum game fromthe national p erspective if resources are spen t simpl

y

to entice a firm to locate in one city or State ratherthan another. But while some States and cities maystill condu ct “raids” on their neighbors, they are also

beginning to take actions to encourage economicactivity that would not have happened without gov-

ernment intervention. This form of competition forHTD promises to have positive net results, becausethe emphasis is shifting toward strengthening the

linkages am ong th e financial, academic, and b usinesscomm unities; promoting entrepreneur ship; and im-proving th e overall scientific and technological baseof State and local economies.

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Ch. l—Summary q 5

Common High-Technology InitiativesThe HTD initiatives investigated by OTA are as

varied as the locales in which they were launched,but they seem to sh are three common goals: emp loy-

ment, business development, and economic diver-

sification. In most cases, strategies attem pt to achievethese goals either by mobilizing the necessary localresources or by removing barriers to HTD. The em-ph asis of the resulting initiatives falls into six general

categories:

. research, development, and technology transfer;q human capital;. entrepreneurship training and assistance;q financial capital;q physical capital; and. information gathering and dissemination.

Research, Development, andTechnology Transfer

Perhaps the m ost fun dam ental initiatives are those

that aim to quicken the flow of innovation itself.Since most basic research is still performed by uni-versities, many of these initiatives focus on imp rov-ing linkages between universities and industry.Some, like joint research ventures and researchconsortia, involve formal, long-term collaborationbetween a university and one or more companies.Others, like research centers and technical ex-tension services, provide technical assistance or

perform short-term research for local firms in ex-change for fees or other support. In other cases,alumni groups have become active in patenting and

commercializing the results of university research.

In all of these cases, the object of the initiativeis to make university resources more widely avail-able, to raise the level of formal and informal com-munication between academic and industrial re-searchers, and to increase the speed with whichresearch results become available to industry. Re-cent studies suggest that, given strong leadership and

a stable source of funding, such initiatives can con-

tribute to regional economic development by re-orienting university research toward the needs of industry, by attracting outside firms to the region,by imp roving the prod uctivity of existing firms, and

by encouraging the creation of new firms.

Human Capital

Other initiatives focus on developing the hu mancapital needed to exploit these innovations. Two im-

portant seconda ry effects of university/ indu stry col-laboration are improving science and engineer-ing training and providing continuing educationfor those already employed by industry, but formany initiatives these are the principal goals. Someuniversities, for instance, provide student intern-ships in high-technology companies or, in coopera-tion with State governments and local employers,offer special training or retraining programs fortechnical workers. Local governments frequentlylobby for engineering programs at nearby State col-leges or develop special “magnet” high schools ortechnology-based curricula in their vocational edu-

cation programs. Several high-technology com-panies also contribute funds, equipment, or per-sonnel to upgrade science and mathematics in-struction in the local public schools. In other cases,local initiatives focus on creating employment op-portunities for engineers or technical workerswho might otherwise leave the area because of cut-backs at a nearby research installation.

Entrepreneurship Trainingand Assistance

A special subset of hum an capital is entrepreneur-

ship, and many initiatives by both u niversities andprivate sector group s are designed to pr ovide train-ing, technical and management assistance, andother support needed by those who create newtechnology-based companies. As many as 400 col-leges and u niversities now offer courses in the crea-tion and management of small businesses, oftenwith financial supp ort from local firms or m ajor cor-

porations as well as State governments. Some of them also conduct seminars and conferences orprovide evaluation, consulting, and referral serv-

ices for local inventors and entrepreneurs. In manycases, they offer this assistance in connection withan innovation center or “incubator” facility dedi-cated to nurturing new ventures by students andlocal entrepreneurs.

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6 q Background Paper #2—Encouraging High-Technology Development

Financial Capital

Many universities have also begun to invest intechnology-based spinoffs, either directly or through

seed capital funds and venture capital partner-ships. In addition, almost half of the State govern-ment initiatives identified by OTA provide some

form of financial assistance to high-technologyfirms. Most of this assistance is indirect, taking theform of tax credits, ind ustrial revenue bon ds, or loan

guarantees. While many State program s help firmsto locate seed or venture capital, very few actuallyprovide risk capital themselves.

Venture capital investing is still dominated byindepen den t firms and corporate subsidiaries, wh ose

investments tend to go where the returns are ex-pected to be greatest. In recent years this has meantthat California and Massachusetts have received the

most su pp ort. Several universities and local govern-

ments h ave tried to attract these investments to theirareas by holding venture capital conferences. Inaddition, several State and local governments, incooperation with local business groups and foun-dations, have recently established venture capitalfunds with explicit geographic requirements.Seed capital, invested at the earlier and riskier stagesof a new v enture, does tend to stay local, and several

initiatives attemp t to increase the level of local seedcapital investments, often in connection with en-trepreneurship services and incubator facilities.

Physical Capital

Local governments often seek to encourage HTDthrough changes in land use and zoning, as wellas the p rovision of pu blic services and facilities. In-cubator facilities, which provide low-cost officeand laboratory space for entrepreneurs and strug-gling firms, are one form that this type of initiativecan take. Far more common, however, are researchand science parks—parcels of land set aside forresearch-intensive firms and facilities, with varyingtax incentives and eligibility requirements. These

parks are usually accompanied by improvementsin local utilities, transportation systems, andother infrastructure. Both types of initiative havealso been undertaken by universities on sites adja-cent to the campus, often in conjunction with en-trepreneurship programs or technical centers. Thisarrangement gives businesses access to student

workers and faculty consultants, as well as labora-tory, computer, library, and other universityresources.

Information Gatheringand Dissemination

The first step in almost any Statehigh-technology strategy is the creation

or localof a task

force or commission, usually with university andprivate sector participation. Task forces serve tofocus local attention and often have a pronounced

networking affect. They also perform a valuable serv-ice in gathering information about the needs andproblems that can be addressed through HTD; theinstitutional and economic resources that can bebrought to bear; and the kinds of actions that m ightbe undertaken. OTA identified several cases inwhich task force recommendations were the basisfor subsequen t initiatives, and in some instances thetask force itself became a permanent council or foun-

dation charged with implementing and overseeingthese activities.

The complement to these activities is information

dissemination, usually in the form of governmentmarketing programs aimed at target firms and in-du stries. Business group s also un dertake p romotional

campaigns, usually advocating desired changes inpublic policy but occasionally aimed at increasingthe development efforts of member firms. Thesebusiness advocacy programs are a valuable meansof building consensus and bringing private prestigeto bear on public problems, just as public advocacyprograms give recognition to the contributions of business groups and individuals.

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Ch. l—Summary Ž 7

Factors That Contribute to Success

The initiatives investigated by OTA hold consid-erable promise for promoting both technological in-novation and regional economic development, bu tthey are too recent and too varied to evaluate sys-

tematically. Most have been launched in the last3 to 5 years, and the majority have undergone noformal evaluation or comparative an alysis. Some a re

designed to attract new industry in the short run,while others are building the technological infra-structure for growth in the future. Many involveinstitutional changes that might take d ecades to bear

fruit.

In fact, since their most important effects maybeindirect, their effectiveness will always be difficultto measure. In some cases, relatively mature initia-tives have been very slow to produce any signifi-

cant results, while more recent programs elsewhereare already considered successful. Furthermore,many of the States and communities investigatedby OTA had already experienced a considerableamount of HTD before launching their initiatives,and other regions have experienced a great d eal of HTD even without a dedicated initiative.

No single factor explains why some communitiesand regions have been m ore successful than othersin nurturing and benefiting from HTD. For everylocational determinan t identified in economic theoryor imp licit in government pr actice, examp les can be

provided of cities that have several or all of the in-gredients but have not yet achieved success. Astrong research un iversity, skilled labor p ool, avail-able financing, the presence of corporate headquar-ters, transportation, good climate, cultural ameni-ties-all may be d esirable or necessary precond itions,

but they are not always enough. OTA’s investiga-tion suggests that the following additional factorsincrease the odd s of success for State and local HTDinitiatives:

. identifying local needs and resources;

. adapting to external constraints;q linkage with broader development efforts;q local initiative and partnership; andq sustained effort, often over a p eriod of d ecades.

In short, it appears that cooperation and commit-ment by pu blic and private individuals and organ iza-

tions provide a necessary catalyst to bring the in-gredients together.

Identifying Local Needs and Resources

Different regions have different needs and different

resources with w hich to add ress them; no single, all-

purpose approach or program design will work inall settings. While ind ividu al States and commu nities

can learn from the successes of others, therefore,success also requires a detailed knowledge of localconditions and a clear recognition of the local at-tributes, both strengths and weaknesses, that influ-ence a region’s ability to attract or spaw n high -tech-nology industry. These analyses are typically con-

du cted by task forces representing government, un i-versity, and industry, or by outside consultants.

State governments, for example, appear to be im-plementing the program s they jud ge to be most ef-fective in meeting their needs, based on an analysisof the State’s existing industrial base, rather thanmerely copying the activities of other States. Publicofficials in almost all States also indicate that theyhave targeted specific high-technology industries for

encouragement. States with more recent initiativeshave a slightly higher percentage of programs in-volving capital assistance, reflecting their perceptionthat capital availability is an area of great impor-tance if they are to compete with traditional high-technology leaders, such as Massachusetts andCalifornia.

Adapting to External Constraints

What works in one area may not w ork in another,and there are many factors over which a community

has little control, such as climate, terrain, and prox-imity to existing high-technology centers. Successful

States and communities recognize these external

constraints an d adjust their objectives and strategiesaccordingly. Those without an existing high-tech-nology base, for example, typically focus their ini-tial marketing efforts on branch p lants rather th anon research-or technology-intensive establishments.

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—

8 . Background Paper #2—Encouraging High-Technology Development

Over time, as these branch plants create a skilledlabor force and technical infrastructure, the com-munities will be able to attract more sophisticatedoperations and encourage local spinoffs.

Linkage With BroaderDevelopment Efforts

High-technology initiatives that form part of abroader development strategy often app ear to pro-duce the most substantial results. Efforts to attracthigh-technology bran ch p lants, for examp le, are gen-

erally pa rt of a broader effort to strengthen or diver-

sify the local industrial base. Most State officials,in fact, consider their high -technology initiatives tobe a logical and perhap s u navoidable extension of more traditional economic development efforts. This

attitude apparently is correct-the majority of high-technology executives who stated that their loca-tion decisions had been influenced by a State pro-

gram identified a general economic development ortraining program , rather than a high-technology ini-

tiative. Similarly, most local strategies involve notonly incubators and technical centers but also moretraditional initiatives to make the community moreattractive to technology-based firms, such as infra-structure improv ements or the construction of a cul-

tural center.

Local Initiative and Partnership

High-technology development efforts generally will

be most successful if they are initiated and imple-

men ted locally. Some comm un ities receive substan-tial help from State governments in developing u ni-

versity resources and complementing the local mar-keting program; others use funding and a numberof development tools made available by the FederalGovernment. But in most cases, the objectives andstrategies are developed locally, and local repre-sentatives play a major role in the design and im-plementation of the initiatives.

In add ition, government cooperation or “partner-ship” with local entrepreneurs and business groupsplays an importan t role in successful p rograms, since

the public and private sectors are far less distinctat the local level. Social and economic conditionsaffect the willingness of business to participate in

these development programs, but more importantis the past history of public/ private initiatives in the

commu nity: a strong history of collaborative effortsprovid es a found ation of positive experience, as well

as building trust and understanding between busi-ness, government, and community groups. Stablepolitical climate and local government with an effi-

cient, probusiness image are positive influences, asis the existence of intermediaries, brokers, or orga-nizational mechanisms to bring together public andprivate leaders.

States and comm unities that have benefited m ostfrom th ese factors h ave three characteristics in com-mon:

•

q

q

an organizational culture that promotes acommon civic perspective and a positiveattitude about the region’s attributes andprospects;

an environment that nurtures leaders, both

public and private, who combine an estab-lished track record for innovation with abroad view of their community’s resourcesand promise; anda netw ork of business/ civic advocacy or-ganizations that attracts the membership of top officers of major comp anies and receivesfrom them the commitment of time and ef-fort to work on issues of mutual concern, in-cluding cooperation with the public sector.

Sustained Effort

States and communities are not likely to reap im-mediate benefits from HTD initiatives. Some havebeen able to strengthen their economies quickly byattracting branch plants of technology-based com-pan ies, but few h ave d eveloped large concentrations

of high-technology establishments in a short periodof time. Based on the few initiatives that have beenin place for a significant period, a minimum of 10or even 20 years may be a realistic period to d evelop

to the stag e wh ere a significant n um ber of local jobscan be credited to products created by local entre-preneu rs or research establishmen ts. As a result, suc-

cess will dep end in p art on sustained effort and com-

mitment, including stable long-term funding.

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CHAPTER 2

State Government Initiatives

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CHAPTER 2

State Government Initiatives

Summary

State governments are becoming increasingly ac-tive in promoting technological innovation andhigh-technolog y development (HTD). OTA’s cen-sus (pu blished as a background pap er in May 1983)identified 153 State government programs with atleast some features directed toward HTD. Of these,38 programs in 22 States were “dedicated” initiatives

specifically targeted on the creation, attraction, orretention of high-technology firms. Some of theseinitiatives date from the 1950’s, but most are toorecent to evaluate systematically. A survey was con-ducted in 16 States to gather further informationon the design, operation, and effectiveness of these

initiatives.In general, the survey States appear to be imple-

menting the programs they jud ge to be most effec-tive in meeting their needs, often based on an anal-ysis of the State’s existing ind ustr ial base, rather than

merely copying the activities of other States. In m ostcases State officials consider their high-technologyinitiatives to be a natural (and even unavoidable)extension of their various economic developmentstrategies. A high-technology task force was the most

comm on m echanism for identifying n eeds and for-mulating policy recommendations, and the Gover-

nor’s Office was identified as the primary initiatorof 58 percent of the programs in vestigated. The roleof the private sector was generally that of adv ice and

consultation, the same role commonly played byuniversity officials. Respondents reported that localgovernments had no involvement in the establish-ment of over half of the State programs investigated.

About one-third of the programs in the surveyStates w ere classified as “labor an d t echnical assist-ance” (primarily training programs). States witholder initiatives had a slightly higher percentage of “high-technology edu cation” p rograms, w hich m ayreflect their gr eater un iversity resources. States w ithmore recent initiatives had a slightly higher percent-

age of “general industrial development” programswith special provisions for high-technology firms,

as w ell as programs involving capital assistance. Thelatter may reflect their perception that capital avail-ability is an area of great importance if they are tocompete with traditional high-technology leaders,such as Massachusetts and California. However,wh ile man y State programs h elp firms to locate seed

or venture capital, very few actually provide riskcapital themselves.

Most of these initiatives have been launched inthe last 3 years, and the vast majority (85 percent)have un dergone no formal evaluation. Preliminaryanalysis of their effectiveness and impact is incon.elusive and often contradictory. OTA’s investiga-tion suggests that dedicated p rograms have servedrelatively few businesses directly, and that high-technology location decisions by existing firms aremore likely to be influenced by general economicdevelopment programs than by high-technology ini-

tiatives. Nevertheless, dedicated initiatives providea wid e range of technical and financial services thatare particularly useful to high-technology startupsand expansions. Their principal achievement to date

may be in terms of institutional rather than tech-nical innovation—i.e., policy development, consen-sus-building, and the encouragement of cooperative

linkages among governments, universities, and in-dustry. Most respondents–State officials and high-technology executives alike—wou ld favor add itional

initiatives by both State and Federal governments.

Analysis reveals that during the 1975-78 period,high-technology employment grew faster than over-

all manufacturing emp loyment in all 16 of the survey

States. During the 1978-80 period, which includespart of the recent recessionary cycle, survey Statesthat had high-technology programs in place expe-rienced a continued expansion in high-technologyemployment sufficient to offset what would other-wise have been a decline in overall manufacturingemployment. By contrast, survey States that hadnot launched their program s experienced a d eclinein high-technology employment that contributed to

11

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12 qBackground Paper #2—Encourging High-Technology Developm ent

their general decline in manufacturing employment. States may have encouraged the other survey StatesThese comparisons do not provide a statistically (and m any other States not included in the survey)sound proof of the effectiveness of State HTD pro- to initiate their own high-technology programs.grams, but the more favorable experience of these

IntroductionHigh-growth, technology-based firms and the in-

dustries they compose are becoming the targets of numerous State economic development strategies.In some cases, these strategies involve organizational

innovations designed to identify, integrate, and mo-bilize existing State resources for technological in-novation. In many cases the strategies also includethe d evelopm ent of government p rograms sp ecifical-

ly designed to stim ulate, attract, or retain high-tech-nology industrial development. The impetus forthese dedicated programs comes from an increas-

ing awareness of the impact of State and local ini-tiatives on the creation of new businesses. In addi-tion, recent changes in Federal policy have putincreasing emphasis on the role and responsibilityof the States in controlling the distribu tion of publicfunds and in promoting their own economic devel-opment and well-being.

The Task Force on Technological Innovation of the National Governors’ Association (NGA), withfunding from the U.S. Economic Development Ad-ministration (EDA), has an alyzed m any of these new

State policies and programs.1 The NGA study found

that most States are actively pursuing short-termefforts to compete for technology-based research and

manu facturing firms, and that they are also develop-

ing medium - and long-term strategies based on en-couraging modernization in traditional industriesand creating a favorable environment for entrepre-neurship and technological innovation.2 As a resultof these activities, according to the NGA report,both the center of gravity for technological innova-tion and “the real and effective initiative for eco-nomic development and for the provision of jobs

1Task

Force on Technological Innovation, Technology and Growth:

State Initiatives in Tmhnol~ical Innovation (Washington, D. C.: Na-tional Governors’ Association, October 1983); see also State Init iatives

in Technological Innovation: Preliminary Report of Survey Findings,

February 1983.ZTask Force on Technolqical Innovation, NGA, OP. cit., pp. 9-10.

is shifting from the Federal Government to theStates.”3 The report acknowledges that most of theseState initiatives are too new to evaluate, and that“no State has yet devised a fully integrated, compre-

hensive policy” for promoting HTD; but it assertsthat these efforts “already show great promise formeeting pressing national economic needs.” 4

Researchers at the Urban Institute have testifiedthat these initiatives provide a potential alternativeto a Federal industrial policy: State economic de-

velopment p rograms, if “reoriented” to serve nation-al interests and integrated into a “ ‘federalist’ in-dustrial policy,” might “increase overall economicactivity in the Nation rather than simply rearrang-ing the location of a fixed amount of activity. ” They

also noted, however, that “total development ex-penditures by States maybe smaller than optimal”because they are unable to capture all the benefitsof their outlays, and that “less than 1 percent of theallocated resources in 1981 were targeted to sp ecificindustries, high-technology firms, R&D activities,small firms, m inority firms, or d istressed geograp hic

areas. ”5

OTA conducted a p reliminary census of State gov-

ernment initiatives in December 1982 and January1983.6 This census identified 153 State programs

jTask Force on Technological Innovation, NGA, op. cit., P. 8.

+Ta5k Force on Technological Innovation, NGA, OP. cit., PP. 102,

104, and 8.q..rry C. ~debur and David W. Rasmussen, “Toward a Federalist

Industrial Policy: The Role of State Industrial Development Programs,”testimony before the Joint Economic Committee of Congress, July 14,1983; see also “The Role of State Economic Development Programsin National Industry Policy,” Policy Studies Journal, vol. 2, No. 4, May1983, pp. 750-761. Further discussion of this topic, as well as a com-prehensive listing of State economic development programs, can be

found in Directoryoflncentives

for Business Investment and Develop-ment in the Un i tm i States: A State-by-State Guide (Washington, D. C.:Urban Institute Press, 1983).bcensus Ofstate Government Initiatives for HigLTecbnology In-

dustrial Development (Washington, D. C.: U.S. Congress, (Mce of Technology Assessment, OTA-BP-STI-21, May 1983).

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Ch. Z—State Government Initiatives q 13

with at least some features directed toward HTD(table 1). Only a few of these programs, however,focused specifically on the needs and problems of technology-based businesses. Using the narrowerdefinition of a “dedicated” HTD initiative–char-tered and at least partially fun ded by the State gov-ernmen t, and specifically targeted on the creation,attraction, or retention of high-technology firms—OTA identified a total of 38 programs in 22 States.In addition, OTA identified 15 high-technologyeducation (HTE) initiatives, undertaken in conjunc-tion with State universities, designed to equip entre-preneurs with the skills needed to create firms orto help existing firms commercialize emerging tech-nologies. (These 15 programs are only a fraction of the high-technology initiatives that have beenlaunched by U.S. colleges and universities—see ch.3.)

In order to gather more detailed information on

State government initiatives, OTA contracted withthe Research Triangle Institute (RTI) to conduct asurvey and comparative analysis of high-technology

initiatives in 16 States-8 that had implemented ded -icated programs before 1981, and 8 that initiateddedicated programs in 1981-82. The sample Statesselected for the survey were:

Pre-1981 States

CaliforniaConnecticutGeorgiaMassachusettsNew York

North CarolinaTennesseePennsylvania

1981-82 States

IndianaIllinoisMichiganMinnesotaMissouri

New MexicoOhioRhode island

A total of 321 interviews w ere completed d uringFebruary an d March 1983. The d istribution of theserespondents among the 16 survey States is presented

in table 2. RTI gathered information on a total of 68 HTD-related program s in the su rvey States, butit investigated their impacts and effectiveness onlyin the pre-1981 States, on the assu mp tion that theseinitiatives might be old enough to have producedmeasura ble results. The findings of this survey are

presented below.

Table 1 .-State High-Technology Programs by Type.

State HTD TF HTE LTA CPA GIDAlabama . . . . . . . . . . . — — — — — 1Alaska . . . . . . . . . . . . . — — — — 2 —Arkansas . . . . . . . . . . . — — — 2 1 —Arizona . . . . . . . . . . . . — — 1 1 1 1California , . . . . . . . . . 1 — 1 1 — —Colorado . . . . . . . . . . . 1 1 — 1 — 1

Connecticut . . . . . . . . 3 — — 1 1 1Delaware . . . . . . . . . . . — — — — — 1Florida . . . . . . . . . . . . . 3 — 1 — — 3Georgia . . . . . . . . . . . . 1 — 2 — — —Hawaii . . . . . . . . . . . . . 1 — — — — —Idaho . . . . . . . . . . . . . . — — — 2 — 1Illinois . . . . . . . . . . . . . 2 1 — 2 1 —Indiana . . . . . . . . . . . . 1 — 1 — — —Iowa . . . . . . . . . . . . . . . — 1 — — — —Kansas ., . . . . . . . . . . — 1 — — — 1Kentucky . . . . . . . . . . . — — — 1 1 1Louisiana . . . . . . . . . . — 1 — — —

Maine . . . . . . . . . . . . . — — — 2 2Maryland . . . . . . . . . . . — 1 — 2 3 –Massachusetts . . . . . . — 1 1 1Michigan . . . . . . . . . . . A – : 1 1 –Minnesota . . . . . . . . . . — — 1 — — 1Mississippi . . . . . . . . . 1 — — 1 1 1Missouri . . . . . . . . . . . 1 — 1 2 2 2

Montana , . . . . . . . . . . — — — — — 1Nebraska . . . . . . . . . . . — — — 1 — 1Nevada . . . . . . . . . . . . — — — — — 1New Hampshire . . . . . — — — — — 1New Jersey . . . . . . . . — 1 — — — —New Mexico . . . . . . . . 2 — 1 — — —New York . . . . . . . . . . 2 — — 1 2 —North Carolina . . . . . . 1 — 2 — — 1North Dakota . . . . . . . — — — — 1

Ohio . . . . . . . . . . . . . . . 1 — — — 2 1Oklahoma ., . . . . . . . . — — — — — 1Oregon . . . . . . . . . . . . — — — — — 1Pennsylvania . . . . . . . 2 — 1 1 1 —Puerto Rico . . . . . . . . — — — 2 1 —

Rhode Island . . . . . . . 1 — — 1 1 —South Carolina . . . . . . — 1 — 1 — —South Dakota . . . . . . . — — — — — 1Tennessee . . . . . . . . . . 2 — 1 — — —Texas . . . . . . . . . . . . . . 1 — — 1 — 2Utah ... , . . . . . . . . . . . — — — — — 1Vermont . . . . . . . . . . . — — — — 1 —Virginia . . . . . . . . . . . . 1 1 — — — 1Washington ... , . . . . 1 — 1 — — —West Virginia . . . . . . . — — — 1 —Wisconsin . . . . . . . . . . — — — — — 3

Wyoming . . . . . . . . . . . — — — — — 1Totals . . . . . . . . . . . 38 9 14 28 27 37

a

HTD = high-technology development; TF - task force; HTE - hiqh-tech-nology education; LTA - labor/technlcel aasietance; C PA - capltel provi-

siordesslstance; GID - general Industrial development.

SOURCE: Office of Technology Assessment.

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14 • Background Paper #2—Encourging High-Technology Development

Table 2.–Distribution of Survey Respondents by State

State Program Other High-technologyStates policy makers managers participants firms Total

Pre-1981 states:California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Connecticut . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Georgia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Massachusetts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

New York . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .North Carolina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Pennsylvania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Tennessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 9 8 1 - 8 2 s t a t e s

Illinois . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Indiana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Michigan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Minnesota . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Missouri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .New Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Ohio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Rhode Island . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total all survey States . . . . . . . . . . . . . . . . . . . . . . . .SOURCE: Research Triangle lnstitute.

1

1

2

2

12

2

1

12

763

5344

35

1 3

1 3

1 91 2

2 6

1 3

1 61 2

9 34

21

69

Program Design and

State Goals and Strategies

States appear to define HTD in many differentways.7 States with dedicated initiatives, for exam-ple, tend to be those that had a sophisticated re-search base and considerable high-technology in-

du stry even before these programs w ere established;their objective in part is to strengthen and retainwhat was already there. However, in States wherethe economic base consists prim arily of ’’sun set” in-dustries, the ’’high-technology” strategy tends to em-

ph asize economic diversification and the ap plication

of new production technologies intraditional man-ufacturing sectors. Still other States, notably thosethat are less highly industrialized, base their strate-gies on the aggressive pursuit of the production fa-cilities of expanding high-technology firms as partof a broader effort to bolster their industrial baseand build the foundation for future development.

Thebalanceofthischapter is based onthe contractorreport, StareZru”tiatives Survey , prepared for OTAbytheResearch Triangle Institute,Alvin M. Cruze, principal investigator May 1983.

These

2

2

3

4

74

4

5

31

4

4

0

o2

4

1

23

17272224

1831

;;

177

0

00

:o00

0

54177

27363035

29402533

255

7

812

986

11

4

66

321

Operationpatterns suggest that, for most States, at-

tention to high-technology industrial developmentis not distinct from economic development in gen-eral. They also suggest that in launching their ini-tiatives, the States have given attention both to thespecial needs of technology-based enterprises and

to their own comparative adv antage vis-à-vis the ba-sic stages of technological innovation and commer-cialization. In most cases, State officials considertheir high-technology initiatives to be a natural (and

even unavoidable) extension of their different eco-nomic development strategies.

The overall goals the 16 survey States hope toachieve through their high-technology initiatives fallinto th ree general categories: jobs and income; bus-iness development; and economic diversification.State policymakers in 13 of the 16 States were ableto identify specific policy goals in each of these

categories that guide their high-technology strategies.

. job and income goals focus primarily on creat-ing new jobs and increasing per capita income.States in the industrial Northeast and North

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Ch. 2—State Government Initiatives q 15

Central regions reported a greater emp hasis oncreating new jobs; Pennsylvania and Michigan,both of which have been hard hit by structuralchanges in their industrial base, indicated thatreducing job losses and unemployment werealso major goals. Emphasis on increasing percapita incomes was more common in Sunbelt

States. Busin ess development goals focus on the crea-tion of new ventu res and the expansion of ex-isting firms. States in both groups also striveto attract new bu sinesses, but r etaining existingbusiness is a more common goal in the p re-1981

States. Pennsylvania and Ohio, on the otherhand, report that modernizing existing industry

is a major goal. Industrial development goals in almost everysurvey State focus on diversifying the ind ustrial

base, but several States are also trying to in-crease the geographical distribution of their in-

dustry. Respondents in almost all of the surveyStates indicated that they had targeted manu-facturing or R&D as the key business activityto be encouraged. On the other hand, onlythree States, all with fairly recent initiatives—Michigan, Missouri, and Ohio–specified theservices as business activities of interest. Inaddition, every survey State except Ohio has

targeted specific high-technology ind ustr ies forencouragement (table 3).

Program Design

High-technology economic developm ent program s

app ear to be initiated in one of four d ifferent w ays,

each of which may affect the design and operationsof the program:

q

q

To alleviate specific needs id entified by S tate

task forces or com m issions. Examples includethe Connecticut Product Development Corp.(created in 1972 by legislation growing out of the State’s Full Employment Task Force); Geor-gia’s Advan ced Technology Developmen t Cen-ter (created as a result of a study commissionedby the Governor in 1979 to determine how topromote th e growth of high-technology indus-try); the Bay State Skills Corp. (evolved from

a gubernatorial plan to meet Massachusetts’need for more skilled an d trained w orkers); and

Tennessee’s Technology Corridor Foundation(created as a result of recommendations of theGovernor’s Technology Corridor Task Force).Through the evolution of traditional economic

development organizat ions, which have been re-

directed or strengthened to form the basis of

Table 3.-Targeted High-Technology industries and Business Activities in the Survey States

Pre-1981 States 1981-82 States

CA CT GA MA NY NC PAa TN IL IN Ml MN MO NM OH RI Total

Targeted high-technology industires: Space/Avionics . . . . . . . . X —Transportation . . . . . . . . . — —Communications . . . . . . . X —Electronics . . . . . . . . . . . . X XMicroelectronics . . . . . . . — XRobotics . . . . . . . . . . . . . . — —Computer hardware . . . . X —Computer software . . . . . — —Lasers . . . . . . . . . . . . . . . . — —Energy . . . . . . . . . . . . . . . . — —Biotechnology . . . . . . . . . — —Biomedical . . . . . . . . . . . . — XPharmaceutical . . . . . . . . — XNone targeted . . . . . . . . . — —Targeted business activities:

Manufacturing . . . . . . . . . X XR&D . . . . . . . . . . . . . . . . . . X XServices . . . . . . . . . . . . . . — —aPennsylvanla haa targeted 27 specific Industries.

SOURCE: Reeearch Triangle Institute.

x – – – – — – – – – x – – — — — — — — — — x – – – –x — – x — x — — x –

— — — — — — — x – – - - 5 — x – x – – x — – — – – – — — — — — — — — x – – – –x x x x – – x – – – – – –x – x – – – x – – – – – –x – – – – – – – – – – x –

x

— 3 —

1 — 5

4 — — : — 3

2

2 — 7

X 7 — 4 — 1

10 — 8 — 3

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16 qBackground Paper #2—Encouraging High-Technology Development

a new program . An example of this type of evo-

lutionary design is the Pennsylvania IndustrialDevelopment Authority, which has providedlow-interest loans to businesses for over 20 years

but has recently been directed to set aside 25percent of its funds for advanced-technologybusinesses.

To allevia te localized problem s or needs, an dlater expanding to include additional locales.Programs designed for localized impact include

Science Park in New Haven, Corm. (designedto attract companies engaged in developing and

producing new products, in order to increasethe economic vitality of the surrounding area)and the Center for Industrial Cooperation atUniversity of New York at Stony Brook (formed

in 1978 to link the resources of the Universitywith the needs of local industry).To take advantage of Federal initiatives and

finding. Examples include the Innovation De-

velopment Loan Funds in both California andConnecticut (created to obtain EDA grants,which are then u sed to p rovide financial, man-agerial, and technical assistance to inventorsand small high-technology businesses) and theMassachusetts Small Business DevelopmentCenter (created to obtain U.S. Small BusinessAdministration funding to develop five centersto assist small businesses).

Public/Private Participation

Since econom ic well-being has b een an ov erridin g

political issue at the State level in recent years, andsince many p resent Governors campaigned on p lat-forms th at included economic revitalization, it is notsurprising that they have played an extensive rolein initiating and designing high-technology pro-grams. The Governor’s Office was identified as theprimary initiator of 58 percent of the programs in-vestigated. A high -technology task force or commis-sion appointed by the Governor was the primarymechanism for identifying needs and formulatingpolicy recommen dations in each of the surv ey States

except Indiana and Missouri. Programs created inthis way bring with them whatever political clout

or liability the Governor and his commission pos-sess. This can be relatively advantageous until achange of adm inistration: program s designed to ad -dress problems identified by a previous Governor’s

“special commission” may be viewed more critical-ly by his successor than program s that have evolved

more natu rally; this appears to be happ ening at pres-

ent in California.

The legislature’s role is also important, since 75percent of the programs required enabling legisla-tion, and this body is also the key provider of fund -

ing (see below). How ever, the role of the legislaturevaried widely among the survey States, from littleor no involvement in Indiana and New Mexico tothe driving force in Ohio. The State economic de-velopment office takes a lead policy role in Con-necticut, Massachusetts, North Carolina, Indiana,and Missouri, but a less direct role elsewhere.

Another m ajor factor is the p articipation and sup-port of local officials and business leaders, but re-spondents reported that local governments had nodirect involvement in the establishment of over half of the program s investigated; local governments gen-

erally participated indirectly, through their legislativerepresentatives. The role of the private sector wasgenerally that of advice and consultation (64 per-cent of the programs), but the private sector alsowas cited as the primary initiator of 10 percent of the programs and as an important contributor tomost program s. University officials also prov ided ex-

tensive advice and consultation (48 percent of theprograms), and they w ere identified as the primaryinitiator of 16 percent of the programs.

Program Types

Table 4 shows the distribution of programs im-plemented by the survey States to accomplish thegoals outlined above. Analyzing the 68 initiativesby program type reveals little significant differencebetween th e two group s. States with older initiatives

had a slightly higher percentage of HTD and HTEprogram s, perhap s a reflection of their existing high-

technology base and greater university resources.States in the 1981-82 States, on the oth er h and , havea slightly higher percentage of GID programs withspecial provisions for high-technology firms, a possi-

ble reflection of the relative youth of their strategies.

They also have a slightly higher p ercentage of “cap-

ital assistance” programs, which may indicate theyare designing their initiatives to compete with thetraditional high-technolog y leaders, such as Mas-sachusetts and California, where capital is much

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Ch. 2—State Government Initiatives 17

Table 4.–High-Technology Development Programs in the Survey States, by Type

Programs in Programs inAll programs pre-1981 States 1981-82 States

Typea Number Percentb Number Percent Number Percent

HTD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 44 16 48 14 40HTE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 8 24 6 16

LTA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 34 11 33 12 40CPA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 28 8 24 11 31

GID . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 22 6 18 9 26aH T D = high-technology development; HTE = high-technology education; LTA = labor/technical assistance; CPAIndustrial development.

= capital provision assistance; GID = general

bpercentagesdo not ~umtol~ because some programs are categorized Inrnorethmone Pro9ramtYPe.

SOURCE: Research Triangle Institute.

easier to obtain from the pr ivate sector. Capital pro-vision is also one of the areas in which surveyrespond ents desired more State and Federal Govern-

ment involvement (see below).

High-technology development initiatives ar egenerally key elements in State strategiesbecause they focus specifically on the creation

and expansion of high-technology firms. Six of these 30 programs are task forces, but the others

provide financial services, perform research, ordisseminate information.Financial assistance programs represent exact-

ly half of the 68 programs investigated. Whileonly 6 of these 34 program s are sp ecifically tar-geted on innovation and high-technology in-du stries, several others hav e specific assistancefor high-technology firm s. The financial serviceprovided by the highest proportion of these pro-

grams is assistance in finding venture capital (12programs), but many others offer long-term

loans or loan gu aran tees. The ma jority of finan -cial assistance p rograms are relatively n ew, and

7 have not begun to provide services to busi-nesses.

Training programs, one-third of those surveyed,

operate either directly or through grants toother organizations. Most of these programshave linkages with Federal programs and 12have obtained funding from Federal sources.Some States are analyzing the use of custom-ized job train ing (i.e., specifically tailored to th eneeds of potential employers) in connectionwith new Federal efforts under the Job Train-

ing Partnership Act of 1982. High-technology education programs operating

from a u niversity and involved in fostering thecreation of new high-technology businesses rep-

resent 14 of the 68 initiatives in the surveyStates. One imp etus for such program s app earsto be the role played by u niversities in encourag -

ing new business starts, an important factor inCalifornia’s high-technology development. Cal-

ifornia h as attemp ted to institutionalize this role

through the Microelectronics Innovation andComputer Research Opportunities (MICRO)

program, wh ich provides funding for graduatefellowships and faculty research projects, andis supported by matching grants from privateindustry. The relatively low percentage of HTEprograms results in part from the universe of program s that w ere investigated: strictly u niver-

sity initiatives were not included, despite theirnumber and importance. (These initiatives aredescribed in greater detail in ch. 3.)

Services Provided

The frequen cy and distribution of the services pro-

vided by h igh-technology programs p rovides an in-dication of which actions the States believe to bemost necessary, or most effective, in achieving theirhigh-technology goals. If a State’s programs provide

a large number of financial or training services, forexample, it can be assumed that it has identified theavailability of risk capital or the skills of its workforce as areas for priority attention.

The OTA census found that the services most fre-quently offered by d edicated H TD or HTE program s

involve information dissemination—17 programslink indu stry and university resources, and 8 others

involve promotional activities aimed at advertisingthe State’s resources and opportunities for high-tech-

nology firms. Almost half of the programs also offersome form of financial assistance—9 program s assist

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18 qBackground Paper #2-Encouraging High-Technology Development

entrepreneurs in locating venture capital, another9 deal with industrial revenue bonds, 8 providegrants for R&D, and 4 provide loans to high-tech-nology firms. Other services commonly offered in-clude: m arket developm ent assistance (7 programs);

produ ct developm ent assistance (4 programs); andassistance in training technical personnel (5 pro-

grams). More unique services includ e helping inven -tors to acquire patents, providing laboratory or of-fice space for new and growing businesses, and in-vesting public pension funds in high-technologybusiness.

Table 5 shows the frequency and distribution of services provided by the 68 programs investigatedin the RTI survey, using the service codes developed

for the OTA census. Because these 68 program s in-clude many that were not considered to be “dedi-cated” for the purposes of the OTA census, thenum ber and typ es of services they provide show a

different pattern th an tha t outlined above. The mostcommonly provided services involve labor training,either linked with a university (26 programs), pro-vided by the State (14 programs), or with technicalsupport from the State (11 programs). Other fre-

Table 5.—Number of Programs Providing Specific Services in Survey States

All Pre-1981 1981-82Service category programs programs programsEnterprise zones . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Industrial revenue bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . .Information dissemination . . . . . . . . . . . . . . . . . . . . . . . . . . .

Investment capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Investment in survival . . . . . . . . . . . . . . . . . . . . . . . . . . . .Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Startup . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Grant for jobs created . . . . . . . . . . . . . . . . . . . . . . . . . . . .Training vouchers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Training by State ... , . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Technical support by State . . . . . . . . . . . . . . . . . . . . . . . .Links with university . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Licensing assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Subordinated . . . . . . . . . . . . . . . . . . . . .. .,..., . . . . . . . .Stock or royalty rights . . . . . . . . . . . . . . . . . . . . . . . . . . . .Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Long-term, low-interest . . . . . . . . . . . . . . . . . . . . . . . . . . .

Market development assistance . . . . . . . . . . . . . . . . . . . . . .Office or equipment provision . . . . . . . . . . . . . . . . . . . . . . .Physical plant assistance . . . . . . . . . . . . . . . . . . . . . . . . . . .Patent searches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Product development assistance . . . . . . . . . . . . . . . . . . . . .State resources promotion . . . . . . . . . . . . . . . . . . . . . . . . . .Task forces and commissions . . . . . . . . . . . . . . . . . . . . . . .Tax incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reduction in corporate tax . . . . . . . . . . . . . . . . . . . . . . . .Abatement of property tax . . . . . . . . . . . . . . . . . . . . . . . .Freeze on assessed value . . . . . . . . . . . . . . . . . . . . . . . . .Exemption from sales tax . . . . . . . . . . . . . . . . . . . . . . . . .

Venture capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Direct (startup) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Direct (product development) . . . . . . . . . . . . . . . . . . . . . .Bond issue to raise funds . . . . . . . . . . . . . . . . . . . . . . . . .Royalty or stock rights . . . . . . . . . . . . . . . . . . . . . . . . . . . .Assistance in finding . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

616

4010

10

2

88

7

2

14

26

5

25

32

5

7

4

7

1

99

10

5

04

2

2

2

32

1

1

14

210

3 07

61

5

5

5

0

067

15

1

2

2

2

1

02

7

4

7

1

7

5

61

0

2

1

1

1

2

o

09

2

6

103

4

1

3

3

2

1

84

11

0

3

0

3

1

2

3

0

00

02

4

4

4

02

1

1

1

10

01

5

SOURCE: Research Trlanglelnstitute.

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.

20 q Background Paper #2-Encouraging High-Technology Development

programs in which current funding amounts have to $10 million range. Approximately 14 percent of been established, 9 percent are below $100,000; 21 these program s have financial resources greater than

percent fall in the $100,000 to $500,000 range; and $10 million, but many of these larger budget figures23 percent are ‘between $500,000 and $1 million. The represent loan programs, bond issues, or capital proj-

largest segment (33 percent) fall in the $1 million ects, rather than strictly operating budgets.

Program Effectiveness and ImpactsObstacles and Problems

State p olicymak ers ident ified th e recent economicdow nturn and its effects on th e State’s revenues a nd

employment as the most significant obstacle to theimplementation of their high-technology strategies.Another obstacle identified by State policymakersis one of informa tion: State legislatures find it diffi-cult to get needed information about business ac-tivity in their State and in other States, a problemthat may sometimes lead to confused State policies.In addition, 8 of the 16 survey States had new Gov-ernors in 1983. While most of them have annou nced

no plan to change their States’ programs, this maycreate problems with continuity and momentum.Other obstacles included the State’s image or busi-ness climate an d th e lack of consensu s and coopera-tion on H TD, particularly amon g local groups, labor

unions, and the existing business community.

Program managers, however, identified the pro-gram’s coordinating function (and the cooperativeactivities it has fostered) as its major strength (46

percent of respondents). Another major strengthwas the funding level and general resource base avail-

able to the program (34 percent). At the same time,the major weakness identified most often by pro-gram personnel was inadequate funding and otherresou rces (22 per cent). How ever, the m ajority of pro-gram managers reported no problems. Other par-ticipants involved in program design and operation,on the other hand , identified nu merous p roblems—52 of 54 respondents cited the coordination of pro-gram activities and the difficulty of obtaining thecooperation of the participants as problems.

Program Evaluations

Only 9 of the 68 programs had been evaluatedat the time of the survey, 3 (all pre-1981) throughexternal evaluation an d 6 progr ams (4 pre-1981 and

2 1981-82) through internal evaluation, The vast ma-

jority of programs (85 percent) had undergone noformal evaluation of their effectiveness, and manyrespond ents stated that it was too early to assess pro-

gram impact adequately. In fact, less than three-fourths of the 68 programs were currently in opera-tion: 21 percent were in the planning stages andhave obtained first fun ding, but ap proximately 7 per-

cent of the program s either were waiting for fund -

ing or passage of enabling legislation, or had theiroperations suspend ed d ue to loss of find ing, changes

in administration, or changes in overall high-technology strategy.

Several program man agers, however, were able to

furnish baseline data on the number of businessesthat had been provided with program services.These data suggest that training programs tend toserve m ore firms in th e 1981-82 States, wh ile finan -cial assistance program s prov ide services to a greater

nu mber of businesses in th e pre-1981 States. In gen-eral, the available data suggest that the programsfor which data w ere available had p rovided services

to relatively few businesses: over 80 percent hadserved fewer than 100 firms, and 60 percent hadserved fewer than 50 clients. The responses of high-technology firms (see below) also suggest th atthese programs generally have not had a direct im-pact on a large percentage of the businesses in thepre-1981 States. This may be understandable, how-ever, given the indirect nature of the services pro-vided by many programs and the short history of the majority of them.

Impact on High-Technology Businesses

High-technology firms were su rveyed only in th e8 survey States whose initiatives were in operationbefore 1981, on the assu mp tion that these pr ogram swere m ore likely to have had a m easurable imp act

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Ch. 2—State Government /initiatives q 27

on the high-technology business community. Of the177 businesses contacted, 99 were potential clientsfor program services–29 were startups, 46 had ex-panded, and 24 had relocated since 1980. Of these99 firms, 56 had received services from the Stategovernment, most frequently financial assistance,educational and training assistance, and locational

and business information. Thirty-four of these 54firms said that this assistance influenced their loca-tion decisions, and 18 said that it was a critical orimportant factor. When they were asked to namethe State program involved, the overwhelming m a-

jority of firms named traditional economic develop-ment mechanisms such as industrial revenue bonds,

business recruitment, and general training progra ms,

rather than the dedicated high-technology programs

identified by the OTA census.

In response to an open-ended question about thefactors that influenced their decision to locate in

a particular State, many of the 99 high-technologyfirms said they had done so because their found erslived there (22 firms) or because it w as close to theirexisting operations (22). Other important factors in-cluded the availability of trained manpower (17), ac-

cess to the firm’s markets (12), local transportationresources (12), and quality of life or climate (10).However, many firms cited general State support(13), along with tax rates (4), financial incentives(4), and training programs (3). Other important loca-tional factors includ ed p roximity to u niversity facil-ities (8) and general h igh-technology climate (8), aswell as the overall business climate (5) and the

availability of suitable sites (5) and venture capital

(3). It is in these latter areas where the indirect in-fluence of State high-technology initiatives may have

their greatest long-term impact, by making moreresources available to high-technology firms and im-

proving the general climate for HTD.

Additional Initiatives Desired

Survey respond ents were also asked wh ether theState government should undertake any additionalinitiatives for HTD. The desire for additional ini-tiatives provides some measure of the effectivenessof existing p rograms, although an inconclusive meas-

ure. That is, respondents might desire additionalprograms either because current programs are in-effective, or because they have been effective andadditional initiatives would increase their impacts.While 51 percent of program managers rated theirprograms excellent or very good, for example, 77percent of them would nonetheless desire additional

initiatives by their State government.

Table 6 presents the responses of program mana-gers, other participants, and high-technology firms.Two-thirds of all survey respond ents desire some ad -

ditional State initiative, as do a majority of eachrespondent group: 87 percent of other participants,77 percent of program managers, and 59 percent of high-technology firms. Regarding the type of addi-tional State initiatives desired, education and train-ing program s and financial assistance program s were

mentioned most often (each by 30 percent of re-spond ents), followed by gen eral high-technology as-

sistance programs (26 percent) and additional R&D

Table 6.—Additional High-Technology Initiatives Desired

Program Other High-technologya

personnel participants businesses Total

Response Number Percent Number Percent Number Percent Number Percent

Additlinal State government Initiatives desired?Yes . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 77 41 87 98 59 175 67No . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 13 6 13 47 28 59 23Don’t know . . . . . . . . . . . . . . . . . . . . 5 10 0 0 21 13 26 10

Totals . . . . . . . . . . . . . . . . . . . . . . 47 100 47 100 166 100 260 100

Additional Federal Government initiatives desired?

Yes . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 62 28 58 85 51 149 55 No . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 26 18 38 35 92 34

Don’t know . . . . . . . . . . . . . . . . . . . . 7 12 2 4 23 14 32 11

Totals . . . . . . . . . . . . . . . . . . . . . . 58 100 48 100 167 100 273 100‘Businesses were contacted only in the eight pre-1981 States.

SOURCE: Research Triangle Institute.

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program s (10 percent). How ever, business respond -ents rated training slightly higher, and financialassistance somewh at lower, than d id program m an-agers. On the other hand, startups and expansionssince 1980 cited financial assistance (general su pp ort,

indu strial revenue bonds, ventu re capital assistance,

and R&D or expansion funding) more often than

training or education programs.When respond ents were asked if they wou ld also

desire ad ditional high-technology initiatives by theFederal Government, more than half responded that

they would, including a majority of each respond-ent group (table 6). Sup port w as un iversally w eakerfor Federal initiatives than for additional State pro-grams, but analysis reveals a greater desire for ad-ditional Federal initiatives in States with more re-cent programs. Support for additional Federal ini-tiatives among high-technology bu siness respon dentsranged from 89 percent in California (16 of 17 firms)to only 14 percent in N orth Ca rolina (4 of 31 firms).

When respond ents wh o felt ad ditional Federal ini-tiatives were d esirable were asked to identify them,they again mentioned education and training pro-grams m ost frequently, followed by R&D programsand financial assistance. Many respondents sug-gested that Federal finding for training and educa-tion program s, passed d irectly to the States, wou ldbe the most effective means of Federal involvement.Others wanted an increase in direct research fund-ing by the Federal Government or fund ing to Statesfor R&D initiatives at the State level. Some respon d-ents also mentioned th e need for general assistance

to high-technology firms or for changes in Federalindustrial and trade policies. Thirteen business re-spond ents felt that the Federal Government sh ouldincrease high-technology defense spending.

Employment Impacts inthe Survey States

Given the inconclusive nature of these subjectiveevaluations, RTI also gathered secondary data onhigh-technology emp loyment patterns in the survey

States (table 7). Collectively, these 16 States account

for over half of the manu facturing em ployment an dtwo-thirds of the high-technology jobs in the UnitedStates. They added approximately 352,000 jobs inthe high-technology sector over the 1975-80 period,and their overall manufacturing employment in-

creased by approximately 1.3 million in the sameperiod. These figures, however, should be placed incontext: total nonagricultural emp loyment was ap -proximately 51 million in these 16 States in 1980.While employment in high-technology industriesmay not constitute a significant fraction of totalemployment, it is clearly an important component

of manufacturing employment and has accountedfor approximately one-fourth of the employmentgrowth (and a higher fraction of job creation) in th emanufacturing sector in the 1975-: ~ period. The em-ployment statistics in table 7 show several patternsthat may be useful in evaluating the effects of theirhigh-technology strategies and programs.

First, the survey States demonstrate a wide rangeof employment size and mix, ranging in size fromCalifornia, with over 10 million persons employedoutside agriculture, to Rhode Island, with fewer than

400,000. On average, however, the total work forcein the pre-1981 States is 70 percent larger than thatof the 1981-82 States. Similarly, there is a wide rangeof employment in the manufacturing sector, fromover 2 million in California to less than 35,000 inNew Mexico; man ufacturing ran ges from 35.3 per-cent of total nonagricultural employment in NorthCarolina to only 7.4 percent in New Mexico. How-ever, while the average number of manufacturingemployees is higher in the pre-1981 States, theyrepresent a slightly higher percentage of the workforce in the 1981-82 States.

High-technology employment show s a similar di-versity, ranging from 3,500 in New Mexico to over

600,000 in California. As a share of the manufac-turing work force, it ranges from 34.8 percent inMassachusetts to only 5.5 percent in Georgia, bothpre-1981 States. On average, the pre-1981 Stateshave a substantially higher prop ortion of high-tech-nology employment than the 1981-82 States—21.8percent and 15.5 percent, respectively. However,much of this difference is accounted for by Califor-nia an d Massachu setts; excluding these recognizedleaders redu ces h igh-technology emp loyment to 16.8

percent of overall manufacturing in the pre-1981States, mu ch closer to the level in the 1981-82 States.In addition, Minnesota’s level of high-technology

employment is higher than the average for the pre-1981 States, while thr ee pr e-1981 States–North Car-olina, Tennessee, and Georgia—have high-technol-ogy employment levels lower than the average forthe 1981-82 States.

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Ch. 2—State Government Initiatives • 2 3

Table 7.–Employment In the Survey States, 1980

Manufacturing High-technology

Total employment employment

nonagricultural Percentemployment Number Percent Number of manu- Percent

State (thousands) (thousands) of total (thousands) facturing of totalUnited States . . . . . . , . . . . . . . . , , ... , . . 90,657.0 20,361.0 22.5 3,676.4 18.1 4.1

16Survey States . . . . . . . . ....., . . . . . .

50,821.4 12,879.4 25.3 2,481.0 19.3 4.9Pre-1981 States . . . . . . . . . . . . . . . . . . . . ., 32,037.4 7,757.1 24.2 1,666.5 21.8 5.3

California . . . . . . . . . . . . . . . . . . . . . . . . . 10,104.3 2,008.9 19,9 601.2 29.9 5.9Connecticut . . . . . . . . . . . . . . . . . . . . . . . 1,413.8 440.0 31.1 98.6 22.4 7.0Georgia . . . . . . . . . . . . . . . . . . . . . . . . . . 2,115.1 519.1 24.5 28.7 5.5Massachusetts . . . . . . . . . . . . . . . . . . . . 2,595.7 674.5 26.0 235.0 9.1New York . . . . . . . . . . . . . . . . . . . . . . . . . 7,113.6 1,46.7 20.5 374.5 25.7 5.3North Carolina . . . . . . . . . . . . . . . . . . . . 2,326.5 82.0 35.3 87.1 10.6 3.7Pennsylvania . . . . . . . . . . . . . . . . . . . . . . 4,621.2 1,333.2 28.8 213.8 16.0 4.6Tennessee . . . . . . . . . . . . . . . . . . . . . . . . 1,747.2 502.7 28.8 47.6

a9.5 2.7

1981-82 States . . . . . . . . . . . . . . . . . . . . . . 18,784.0 5,122.3 27.3 794.5 15.5 4.2Illinois . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,692.9 1,239.2 28.4 237.0 19.1 5.1

Indiana . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,137,1 658.0 30.8 134.5b

20.4 6.3Michigan . . . . . . . . . . . . . . . . . . . . . . . . . 3,291.6 988.5 30.0 80.9 8.2Minnesota . . . . . . . . . . . . . . . . . . . . . . . . 1,710.3 371,1 21.7 106.7 28.8 6.2Missouri . . . . . . . . . . . . . . . . . . . . . . . . . . 1,989.8 437.0 22.2 60.3

a 13.8 3.1

New Mexico . . . . . . . . . . . . . . . . . . . . . . 465.4 34.4 7.4 3.5C 13.8 3.1

Ohio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,119.2 1,265.0 30.7 151.4 12.0 3.7Rhode Island . . . . . . . . . . . . . . . . . . . . . . 397.7 129.1 32.5 20.2 15.6 5.1

aTotal employment In high-technology industries notavallable due to lmkofdetalled Information atthe 3diglt SIClevel. Numbar Indlcatad is total employment

in 2digitsectors36 (electronic and electric equipmant)and38 (instruments and related products) These figures represent downwardiybiaaed estimates oftotalhigh-technolgy employment In the state, aa employment in selected 3digit SIC high-technology sectors isomltted.

bEmploymentln stc.gectors~, ~,and 3720nlY.CEmployment in slcsect0r360nly.

SOURCE: Massachusetts Divsion of Employment Secuftty, H/gh-Techno/@yEmp/oyment Mass=husettsMdSe/@ttiStates 1975-81 Ju/ylWl;ati U.S. Department

of Labor, Bureauof Labor Statlstlcs, Supp/&nertt to Ernp/oyment and Eam/ngs, Statt?aml Areas, Suiletlns 1370-13 md 370-16.

These comparisons show little consistent differ-ence between the two groups of survey States, butthey fail to reflect variations in industrial base andother regional differences that may influence em-ployment trends. While the precise effect of thesefactors is unclear, analysis reveals that States withhigh-technology programs in place before 1981 have

experienced a higher rate of growth in both m anu-facturing and high-technology employment in re-cent years. Table 8 presents employment growthrates for the 1975-80 period and for two su bperiod s,1975-78 and 1978-80.

During the 1975-80 period as a whole, high-tech-nology employment grew faster than overall man-ufacturing employment for the Nation as a whole,in both groups of survey States, and in every indi-vidual su rvey State. However, both manu facturing

employment and high-technoloy employment ex-panded far more rapidly in the pre-1981 States, andhigh-technoloy employment outperformed overallmanu facturing by a greater margin. An explanation

for this emerges from the far different patterns thatresult when the 1975-80 period is broken intosubperiods.

Between 1975 and 1978, manufacturing employ-

ment in the 1981-82 States expanded more rapidlythan in the p re-1981 States or the N ation as a wh ole.

Surprisingly, high-technoloy employment growthfor both groups of survey States was lower than th eU.S. average. But du ring the 1978-80 period , wh ichincludes par t of the recent recessionary cycle, a strik-

ingly different pattern of employment growth be-came evident. Manufacturing employment grewmore slowly in the p re-1981 States (1.3 percent) bu tactually declined in the 1981-82 States (-7.6 percent).

The pre-1981 States, which by then had many of their high-technoloy p rograms in p lace, experienced

a continued expansion in high-technoloy employ-ment (9.5 percent); in fact, their high-technologyemployment growth was sufficient to offset whatwould otherwise have been a decline in overallmanufacturing employment. By contrast, the 1981-

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—

24 • Background Paper #2—Encouraging High-Technology Development

Table 8.–Employment Change In Survey States, 1975-80

Percent change, 1975-80 Percent change, 1975-78 Percent change, 1978-80

High- High- High-State Manufacturing technology Manufacturing technology Manufacturing technology

United States . . . . . . . . . . . 11.1 26.1 11.9 17.3 – 0.7 7.5

16 Survey States . . . . . . . . 8.6 21.6 11.3 16.1 –2.5 4.7

Pre-1981 States . . . . . . . . . 122 28.0 10.7 16.9 1.3 9.5

California . . . . . . . . . . . . 26.8 42.9 18.5 24.6 7.0 14.7Connecticut . . . . . . . . . . 12.8 23.2 7.6 14.6 4.9 7.5Georgia . . . . . . . . . . . . . . 18.5 51.0 17.9 36.3 0.6 10.8Massachusetts . . . . . . . . 16.8 40.2 13.0 23.2 3.3 13.9New York . . . . . . . . . . . . . 2.1 9.4 4.3 5.4 –2.2 3.8North Carolina . . . . . . . . 17.6 58.4 15.2 35.8 2.0 16.6Pennsylvania . . . . . . . . . –0.6 8.7 2,2 6.3 –2.7 2.3Tennessee . . . . . . . . . . . . 9.5 30.4

a 14.6 31.0a

–4.4 –O.la

1981-82 States . . . . . . . . . . 3.6 9.9 12.2 14.5 –7.6 –4.1Illinois . . . . . . . . . . . . . . . 2.4 3.1 4.5 5.0 –2.1 –1.8Indiana . . . . . . . . . . . . . . . 4.6

b 14.6 14.8b

–11.3 –8.9b

Michigan . . . . . . . . . . . . . 3.3 10.4 22.7 24.7 –15.9 –11.5Minnesota . . . . . . . . . . . . 19.1 40.8 15.5 28.2 3.1 9.8Missouri . . . . . . . . . . . . . 7.8 26.2

a 12.7 21.6a –4.3 3.8

a

New Mexico . . . . . . . . . . 20.3 20.7’ 16.8 27.6C – 5 . 4b

Ohio . . . . . . . . . . . . . . . . . –0.1 1.7 8.8 12.8 –8.2 -9.9Rhode Island . . . . . . . . . 12.3 26.2 18,5 31.2 –5.3 –3.8

aTotal employment In high-technology Industries notavallable due to l=kofdetalled Information atthe 3dlgit SIClevel. Numbar Indicated ls total employment

ln2diglt sectors 3t3(electronic andelectrlc equlpmant)and38 (lnstrumants and related products). These figures represent downwardly biaaed estimatesof totalhigh-tachnolgy employment In the atate, as employment in selected 3digit SIC high-technology sectors is omitted.

bEmployment in SIC sectora 36, % and 372 only.c Employment In SIC sector w ‘n’y.

SOURCE: Maesachusetta Dlvsion of Employment Security, H/gh-Tectrrro/ogyEmployment.’ kfassactwsetk? and Selected States 1975-81 July 1987; and U.S. Departmentof Labor, Bureau of Labor Statistics, Supp/emer?t to Errrp/oymerrt and Eamhgs, State and Areas, Bulletins 1370-13 and 370-16.

82 States, which h ad not yet imp lemented their p ro-grams, experienced a decline ‘in high-technologyemployment (-4. 1 percent) that contributed to theirgeneral decline in manu facturing emp loyment. High-

technology employment continued to outperformmanu facturing em ployment generally, and in eachindividual State except Ohio and New Mexico; butsix of the 1981-82 States nevertheless experienceda real decline in high-technology jobs, compared toonly one of the States with HTD programs in place.

These comparisons do not provide a statisticallysoun d basis for inferences concerning th e effective-ness of HTD initiatives or the effects of other dif-ferences between the two groups of survey States.Comparable data for the 1980-82 period are not yet

available, for example, and high-technology’s coun-

tercyclical performance m aybe m ore strongly related

to the industrial mix or general economic health of a given region. Far more sophisticated econometricanalysis will be required before these differences can

be attributed even in p art to the p resence or absence

of State government HTD programs. Nevertheless,the far more favorable employment experiences of the pre-1981 States during the early stages of therecent recessionary period may h ave provided mu ch

of the impetus for the 1981-82 States (and manyStates not included in the survey) to initiate theirown high-technology programs in hopes of improv-

ing the employment conditions in their owneconomies.

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CHAPTER 3

University Initiatives

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CHAPTER 3

University Initiatives

SummaryColleges and u niversities play two v ery important

roles in technological innovation and regional eco-nomic development. First, they play a central rolein training scientists and engineers and expand ingthe ba se of scientific and technical knowled ge. Sec-ond, by tr ansferring this talent and information tothe private sector, they provide a vital nucleus forthe diffusion of innovation to existing firms and thecreation of new businesses and indu stries. Although

cooperation between the edu cational and industrialsectors is not a new phenomenon, the growing eco-nomic importance of technological innovation hascreated a greater need, and new opportunities, forcooperation.

The university sector has developed several typesof programs to carry out these roles, including:

q

q

q

q

q

research and science parks, clusters of research-

intensive firms an d facilities on a site near a u ni-

versity;

research and technical centers that disseminate

information, provide technical assistance, andperform short- or long-term research for localbusinesses in exchange for fees and other sup-port;un iversity/ indu stry collaboration, includingcooperative research ventures an d research con-

sortia;entrepreneurship training and assistance, il -eluding courses, seminars, and internships; tech-

nical and management advice; and incubatorfacilities dedicated to nurturing new venturesby students and local entrepreneurs; anddirect and indirect investment, usu ally from en-

dowment funds, in spinoffs, venture capitalpartnerships, and seed capital funds.

These programs bring financial reward s to un iver-

sities at a time w hen m any are experiencing a d ropin stud ent enrollment, a sh ortage of qualified faculty,

and a decline in Federal support for research anddevelopment (R&D). The private sector, recogniz-ing the importance of new knowledge and trainedpersonnel to further innovation, is pr oviding finan-cial and technical support for university-based re-

search centers, as well as grants for sp ecial researchprojects and assistance to precollege technical educa-

tion. State governments, which have traditionallyhad a close relationship w ith higher edu cation (two-

thirds of U.S. Ph. D.-granting institutions are public-

ly supp orted), also are expanding their sup port foruniversity-based initiatives because of the need fora well-educated work force and the recognition thatthe grow th of high-technology comp lexes is closelylinked to the presence of research-oriented educa-tional institutions. The Federal Government’s in-volvement in the development of university pro-grams h as been p rimarily indirect, usu ally taking the

form of research contracts and grants; but the pres-

ence of a Federal facility may in itself be enough toattract other tenants to a university research park.

Collaboration at various levels offers solutionsto several crucial needs of both universities andhigh-technology indu stries. Given strong leadership

and sustained comm itment, as well as stable sources

of long-term fund ing, these initiatives and the coop-

eration they foster could contribute to industrial in-novation and regional economic development by:

q

q

q

q

q

q

reorienting un iversity research towa rd th e needs

and interests of industry;increasing the speed with w hich research results

become available to industry;allowing w ider and more efficient use of un iver-

sity facilities, equipment, and personnel;improving the quality of training for scientistsand engineers;attracting high-technology firms and encourag-ing the creation of new businesses; andimproving the p rodu ctivity and comp etitiveness

of businesses already in the region.

These new developments involve difficult institu-tional changes, and it is too soon to determine theirlong-term effect on the creation an d growth of high-

technolog y businesses. While existing high-technol-ogy firms consider local educational resources andtechnically trained personnel in their decision tolocate or relocate operations, the exact relationshipbetween universit y initiatives and the creation of

27

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28 . Background Paper #2—Encouraging High-Technology Development

n ew high-technology businesses is not fully in this chapter could be transferred to almost anyunderstood. These programs may have less impact university center, although the nature of the pro-on the development of new technologies than on gram will depend on the character of the universi-developing better relations with and services to ex- ty and the needs of local industry.isting businesses. Several of the programs id entified

IntroductionColleges and universities play two very important

roles in technological innovation and its diffusionthrough the economy.1 First, they p lay a central rolein preparing scientists and in expanding the baseof scientific and technical information. Second, bytransferring this talent and information to the pri-vate sector, they foster the commercialization anddiffusion of innovation.

Cooperation between the educational sector and

industrial sectors is not a new phenomenon—Stan-ford Industrial Park dates from the 1940’s and Re-search Triangle Park from the 1950’s. How ever, thegrowing economic importance of technological in-novation h as created a greater need for cooperation.Recognizing this, universities, industry, and Stategovernments have responded by developing pro-grams to mobilize the resources of the educationalsector for local economic development. These effortsaddress not only the preparation of students but also

the needs of new and expanding high-technologybusinesses, particularly the need for increased R&Dand technology transfer and the need to provide

technical/ vocational skills to the local work force.These programs bring financial rewards to univer-

sities at a time when many of them are experienc-ing a drop in student enrollment and a decline inFederal support of R&D. Ironically, it has often been

the u niversity sector th at suffers from the app arent“shortage” of qu alified engineering and science pro-

fessionals. Industry can offer higher salaries and

IThe materla] in this chapter draws heavily on the following docu-ments: U.S. General Accounting Office, The Federal Role in Foster-

ing Un iversity/ Indu stry Cooperation, GAO/PAD 83-22, May 1983;National Science Foundation, University/ Industry Research Relation-

ships: Myths, Realities and Potentials, NSB 82-1, October 1982; “Uni-versities Emerge as an Important Catalyst in the New Business Develop-ment Process,” Venture Capital]ourna), vol. 23, No . 8, August 1983,

pp. 7-12; and National Governors’ Association Task Force on Tech-nological Innovation, Technolo~ and Growth: State Initiatives in

Technological Innovation, October 1983.

more modern facilities, which could attract facultyinto industrial research and management and stu-dents away from graduate study. Industry is sensi-tive to this problem, and both groups have begunto search for solutions.

As the growth of Government R&D funding hasslowed in th e face of inflation and bud getary pres-sures, the education sector has become more activein soliciting funds from industry. In the 1980-81

academic year, according to the National ScienceFoundation (NSF), colleges and universities reported

$778 million in voluntary donations from corpora-tions. 2 This business support takes the form of grants, fellowships, or fees, and it is motivated bythe need for trained technical staff and early accessto basic research results. NSF surveys also show that

two-thirds of all academic engineers now do paidconsulting, compared to only one-third of theircounterparts in the physical and biological sciences. J

The private sector also is collaborating with Stateand local governments to improve the quality of math and science education, and to provide train-

ing, retraining, and employment development.A study by the U.S. General Accounting Office

(GAO) concludes th at these develop ing linkages be-tween un iversity and ind ustry can not only enhancetechnological innovation but can also stimulate re-gional economic development.4 Research and sci-ence parks affiliated with universities attract newhigh-technology firms to their areas, and they alsoprovide excellent seedbeds for spinoff companies.Technical centers and industrial extension servicesbenefit existing local businesses by increasing therate of innovation diffusion and increasing their ac-

cess to facilities, equipment, and expertise. Coop-

ZNational science Foundation, op. cit., p. 10.3National science Foundation, op. cit., p. 11 .

+General Accounting Office, op . cit., pp. 15, 24, 40, 47-48.

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Ch. 3—University Initiatives q 29

erative research activities prov ide ind ustry with early

access to the results of university research andimproved training for scientific and engineeringpersonnel.

While stronger links between the university sec-tor and industry might enhance technological in-novation, institutional differences can make such

cooperation and collaboration difficult. Accordingto the GAO study:

To realize their full potential, cooperative arrange-ments between u niversities and industry m ust recon-cile long-standing differences . . . in [the] researchobjectives, management philosophies, organizations,and reward structures of the two sectors.

5

The most fundamental of these differences is thequestion of research ph ilosophy. The trad itional role

of the university is to educate and conduct basicresearch, but cooperative ventures give the univer-sity a proprietary interest in the results of research.

The university, traditionally the trustee of the “pub-lic good” of basic knowledge, could now own and

5G~~e~~l Accoun t ing mice, op . cit. ! P.10

license information it used to provide freely. In ad-dition, proprietary concerns may restrict the flowof information between individual scientists, thelifeblood of basic research. Several of the newest con -

tract agreements between ind ustry an d universitiesreflect possible solutions to these problems, including

the right of ind ividu al university researchers to pub-

lish their findings.

A second problem is the ownership of intellec-tual property, the main product of research. Theownership of this prop erty is of primary concern tothe universities, their faculty, and the supportingindustries. Universities are examining their policiesin light of the increased patentability of university-conducted applied research, and several of the most

active research universities are interested in retain-ing their rights and commercializing p rodu cts them-

selves.

This chap ter iden tifies a cross section of university-

related high-technology development (HTD) initi-atives, discusses the problems they may create, andidentifies some of the factors and conditions thatmay contribute to their success.

University-Based ProgramsUniversity initiatives in industrial R&D are driven

in part by the need to diversify fund ing sources, re-tain faculty, and attract students. However, chang-

ing technological and economic cond itions h ave alsoled to a greater emphasis on commercializing re-search r esults, particularly wh en the university hasroyalty rights; on providing assistance to small bus-inesses, particularly those started by faculty or stu-dents; and on cooperating more closely with Stateand local governments in economic development.

The university initiatives described below, whichaddress specific business needs that can be servedby university resources, fall into five general cate-gories:

q

q

research and science parks, clusters of research-

intensive firms and facilities on a site near a uni-versity;

research and tehnical centers that disseminateinformation, provide technical assistance, and

q

q

q

perform short- or long-term research for localbusinesses in exchange for fees and other sup-port;

university/ indu stry collaboration, includingcooperative research ventures and research con-

sortia;entrepreneurship training and assistance, in-cluding courses and internships, technical andmanagement advice, and incubator facilitiesdedicated to nurturing new ventures by stu-dents and local entrepreneurs; anddirect and indirect investment, usu ally from en-

dowment funds, in spinoffs; venture capitalpartnerships, and seed capital funds.

Research and Science Parks

An increasingly popular economic developmentinitiative is the research or science park, on or ad-

jacent to a university campus. Such parks general-

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30 qBackground Paper #2—Encouraging H/ih-Technology Development

ly are composed of clusters of research-intensivefirms and facilities on dedicated sites. They are often

encouraged by State or local tax incentives, butmany universities have also seen the advantage of encouraging this type of development.

Four basic benefits can result from locating a re-search or science park near a university. First, in-

creased interaction and easier communication be-tween un iversity and ind ustry researchers helps tobroaden the mu tual und erstanding of problems andneeds. Second, business gains quicker access to new

developments through increased information andknowledge transfer. Third, business also gains ac-cess to student workers and faculty consultants, aswell as laboratory, computer, library, and otherresources. Finally, the increased interaction opensopportu nities for creating new businesses and newuniversity/ industry programs.

q The Stanford Research Park in California is often

cited as the model for university/ industr y scienceparks. So is the Research Triangle Park in NorthCarolina, although it was originally a State gov-ernm ent initiative. A more recent example of thisinitiative is at Washington State University,which recently established a research an d indu s-trial park to provide consulting opportunities forfaculty, employment opportunities for students,and enhanced research finding for the universi-ty. The University of Utah has a science park sp e-cializing in biomedical R&D. Rensselaer Polytech-

nic Institute, a leader in university/ indu stry coop-

eration, has a n ew h igh-technology ind ustrial park

15 minutes from campus. The University of Illi-nois is working with the State to set up a high-technology research park on land d onated by thecity of Chicago. Similar efforts are underway inFlorida, Michigan, N ew Jersey, Connecticut, an dseveral other States.

Research and Technical Centers

University-based research centers perform ap plied

research in exchange for fees and other support,allowing firms to pool their resources to support

long-term research of shared interest. The firms canthereby avoid duplicating expenses for facilities and

equipment, and they also gain access to relativelyinexpensive student labor. At the same time, theuniversity benefits from the fees and increased

research activities and from improved studen t train-

ing. The concentration of technical know-how, andoften the availability of capital and business expe-rience, makes these research centers fertile groundfor the creation of new high-technology businesses.Because they a lso have been cited as a m ajor factorin the development of high-technology complexes,a number of States have begun to encourage thedevelopment of of such centers.

Examples of such research centers include theMicroelectronics Center of North Carolina, theCenter for Applied Microelectronics at the Uni-versity of Wisconsin, and the California MICROresearch center. The Surface Science Center atthe Un iversity of Pittsburgh will provide basic and

applied research results applicable to industrialtechnologies, and the University of Wyoming hasset up an Industrial Fund to provide applied re-search to area businesses.The University of Minnesota’s Microelectronics

and Information Sciences Center (MEIS) wasformed in 1979 with initial finding of $6 millionfrom Control Data, Honeywell, 3M, and Sperry.It utilizes the facilities of the corpor ate participan ts

in order to minimize laboratory investment andhas already attracted almost $1.5 million in Fed-eral research awa rd s. MEIS received $1.5 millionin 1983 from the State legislature, which is alsoconsidering a p roposal to create a Supercomp uter

Institute at the University of Minnesota.

Several univer sities have also set up special offices

or technical centers to provide short-term technical

assistance to local businesses, including patentsearches, technical staff, and other research services.

Rather than establishing long-term research agen-da, these centers tend to emphasize technologytransfer and consulting services. In some w ays, they

can be viewed as applying the Agricultural Exten-sion Service model to nonagricultural industries.Such centers can be particularly helpful in commu-nities w ith fragmented indu strial bases where firmsare unable to pool their resources effectively.

q The Center for Industrial Cooperation at theState University of New York at Stony Brook,

for example, provides research and technical assist-ance on specific industry projects for 15 dues-pay-ing industrial affiliates. Another technical centeris the George Mason Institute at George MasonUniversity in Virginia, which provides technical

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Ch. 3—University nitiatives q 37

assistance to high-technology bu siness and edu ca-

tion groups in the State. The Delaware Technicaland Community College (with funding from theU.S. Economic Development Administration) issetting up a similar center to work with technol-ogy-based businesses in Delaware; the school isalso working with General Motors to develop a

joint training and retraining program for autoworkers. The University of Missouri also is work-ing closely with the auto industry to train andretrain workers for the new technical demandsof automated manufacturing. The New Enterprise

Institute at the University of Southern Mainehelped to introduce computer-aided design andmanufacturing to Maine’s shoe and leather indus-

try. Finally, the University of Wisconsin has anIndu stry Research Program that provides bu siness

with information on the results of its research.

University/Industry Collaboration

In add ition to p roviding funds for research activ-ities, high-technology firms are beginn ing to p artic-ipate more directly in university research initiatives.

(See ch. 5 for a discussion of this and other privatesector initiatives.) Several university/ indu stry re-search p artnerships have been formed to m atch thespecial technical needs of high-technology industryand the unique resources of the educational sector.The two most common forms of cooperative ven-tures are joint ventures between a university and

a single firm, and research “consortia” involvingseveral compan ies and / or universities. Such arrange-

ments can take many legal forms, including long-term research contracts and limited partnerships.

Recent legislation enables industrial partners toobtain tax credits for investments in universityresearch, in addition to capital gains treatment forprofits on the products of the research. However,not all of the problems created by jointly owned in-tellectual property have been resolved. In the past,universities have preferred to receive grants to con-du ct independ ent research, rather than joint own er-ship of discoveries developed with ind ustry technical

personnel and equipment. However, shortages of technical person nel in some fields, as well as the cost

of facilities and operations, have made it necessary—

and in some cases, financially attractive—to shareresearch staff and equipment.

Cooperative Research Ventures. -Althoughseveral substantial ventures have been launched inthe last few years, university/ industry cooperativeresearch ventures still represent a very small por-tion of un iversity research. Most universities app ear

to be waiting to see the results before attemptinga venture of their own. The most visible and sub-

stantial agreements have been signed between H ar-vard University and Monsanto; Washington Uni-versity and Mallinckrodt; Harvard Medical Schooland Seagrams; Massachusetts Institute of Technol-ogy (MIT) and Exxon; Carnegie-Mellon and West-inghouse; and most recently, Washington Univer-sity and Monsanto.

q The Washington University-Monsanto agreementreflects awareness of some of the common prob-lems experienced by previous agreements. The1982 grant of $3 million will eventually grow to$7 million per year, or about 5 percent of theMonsanto research budget. The agreement is in-stitutional in that it avoids a direct relationshipwith any individual faculty mem ber. It providesfor the review of research requ ests throu gh a sys-tem of peer review by scientists from both orga-nizations. Research will be conducted in basicscience areas in which the organizations reportcomplementary expertise; the first research proj-ect will focus on p roteins an d pep tide cellular func-

tion. The university will hold the patents on anyinvention that emerges from the research, withthe royalties accruing to the d epartment respon-sible for developing it. Monsanto will have ex-

clusive licensing rights to such patents, but facultymembers will be free to publish their research re-sults.

Resear ch Con sor tia. —This type of programmay include either one company and several uni-versities, several companies and one university, orseveral companies and several universities. An ex-ample is the research center at Purdue Universityin Indiana, jointly sponsored by five corporations,to develop computer prototypes. Similarly, Penn-sylvania State University has 20 sponsoring indus-tries for a cooperative program in recombinant-DNA technology. Other examples include the CalTech Silicon Systems Project, Stanford’s Center forIntegrated Systems, the Polym er Affiliates Programat Drexel University, and (perhaps the most com-plicated example) the Center for BiotechnologyResearch.

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Ž The Center for Biotechnology Research is spon-sored by Engenics Corp. (itself a Stanford spin-off) along with six other companies: Bendix,Elf Technologies, General Foods, Kopvenco,Mead, and MacLaren. Three universities are in-volved: Stanford, the University of California,and MIT. Resulting patents will be held by theuniversities, with the center receiving royalties,and the contributing corporations having exclu-sive rights to the patent licenses. The object of the center is to provide multiyear funding foruniversity research and to enhance the effective-ness and efficiency of basic and ap plied research.It will also allow universities to benefit from aprodct’s financial success, as well as providing in-

dustry with incentives to justify long-term research

investments.

Entrepreneurship Trainingand Assistance

Universities have also become more active intraining entrepreneurs and supp orting their effortsto create new technology-based enterprises. Thenumber of colleges and universities offering entre-preneurship courses grew from less than 10 in 1960to over 200 in 1980 and has doubled since then. 6

In some cases these programs ar e supp orted by theprivate sector, which sees in them an opportunit y

to promote the values of capitalism as well as theuniversity’s role in entrepr eneurship ed ucation an dtechnological innovation.

The Universit y of Texas, for example, has notonly a Chair of Free Enterprise (established in1976) but also an Institute for Constructive Cap-italism, funded by Mobil, Shell, Tenneco, andother corporations. Similarly, two leading ven-ture capitalists have recently endowed a chair atthe Harvard Business School devoted to the crea-tion and m anagement of new business ventures.The Center for Entrepreneurship and Small Bus-iness Management at Wichita State University,established in 1977, is supp orted by over 50 localbusinesses.

Several universities have also established special

internships or degree programs designed to providestudents with practical experience in technology-

6Ve~~re capital Journal, op cit. P P. 8S

based businesses. Lehigh Un iversity in Pennsylvania,

for example, has a cooperative master’s and Ph. D.program directed toward students employed in in-du stry. The stud ents’ gradu ate work is a combina-tion of professional work (directed by industry ad-visors) and university study and research conducted

in cooperation with professional work. Similar pro-grams exist at Carnegie-Mellon University, theUniversity of Detroit, and other universities andcolleges.

In add ition to courses for full-time stud ents, many

universities also provide seminars and conferenceson business development topics, notably how toraise venture capital, or provide technical andmanagement assistance to local entrepreneurs andinventors. Baylor and Case Western Reserve, among

other universities, provide innovation evaluationprograms in add ition to courses and seminars. Car-negie-Mellon and the University of Pittsburgh joint-

ly sponsor the Pittsburgh Enterprise Corp. to fosternew business d evelopm ent. These efforts are notablefor their success in involving local professionals–lawyers, accountan ts, bankers, consultants, and gov-

ernment officials-as well as university officials insupporting and securing funding for local entrepre-

neurs. The MIT Enterprise Forum, sponsored bythe alum ni association, cond ucts “incubator forums”

in several cities.

Finally, several universities have established “in-cubator” facilities to make their resources availableto new bu sinesses or entrepreneurs d eveloping a new

product or process. Such a center recognizes and

formalizes the university’s role as a seedbed for newtechnologies and new technology-based companies.

This approach incorporates and exploits several re-sources of the university, including low-cost officeand laboratory space, as well as access to capital,business planning, and man agement ad vice from fac-

ulty members and local professionals. While someof these centers extend eligibility to qualifying small

business, their emp hasis is on the enterprising stu -dent or faculty member who needs a head start incommercializing a promising innovation.

q The oldest such facilit y is the University City

Science Center in Philadelphia, founded by 23colleges and un iversities in 1967, but similar cen-ters exist at Rensselaer Polytechnic Institute, Geor-

gia Tech, Carnegie-Mellon, MIT, Wichita State,and the University of Missouri.

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The Utah Innovation Center, set up by the Uni-versity with an NSF grant in 1978, has continuedas a private concern following the loss of its Fed-eral funding.

Direct and Indirect Investment

In addition to their efforts to promote new link-ages with industry, many colleges and universitieshave begun to take a more active role in financingnew technology-based companies. ’ These invest-ments are usu ally mad e from the u niversity’s endow -

ment or alum ni fund, with capital gains rather thannew business development as the object.

In some cases, they invest directly in companiesthat have spun off from research and technical cen-ters. Examples include Boston, Harvard, Lawrence,and Stanford Universities; the Universities of

7Venrure capita l Journa l , Op . cit., pp. 11-12.

Chicago, Notre Dame, and Rochester; RensselaerPolytechnic Institute; and Grinnell College in Iowa.Brown University r ecently acquired a major interestin a spinoff in return for its contribution of tech-nology.

In other cases universities work to make capitalavailable to new starts by investing in ventu re capital

partnerships. About $350 million has been investedin such partnerships, most of it since 1980, by uni-versities such as Carnegie-Mellon, Harvard, MIT,Stanford, and Yale. Michigan Tech has just formedthe first university-based Small Business Investment

Corporation, the Michigan Tech Capital Corp.Other universities (including Carnegie-Mellon,Georgia Tech, Case Western Reserve, and the Uni-versity of Pennsylvania’s Wharton School) are sup-por ting the formation of seed capital fund s for earlystage spinoffs, often in connection with their incu-bator facilities and entrepreneurship assistance pro-

grams (see above).

State Government InvolvementA num ber of State governments are working w ith

their public universities to set up programs aimedat the stimulation of innovation and development.This includes the broader aims of encouraging en-gineering and science education, R&D on campus,precollege science and mathematics training, and

technical skill training. State governments are ideallysituated to encourage these efforts, according to theNational Governors’ Association Task Force onTechnological Innovation:

Of the 184 Ph. D, granting research universitiesof the United States, 119 are pu blic institutions su p-ported by State and local governments . . . [which]are the prime points of contact with respect to loca-tional issues, labor relations . . . provision of capital . . . and other facets of economic activitythat entail industry-government-education inter-action.8

An example is Arizona’s Center for Excellence in

Engineering, a joint program sp onsored by th e Stategovernment and Arizona State University to im-

Y!lovernors James Hunt of North Carolina and Dick Thornburghof Pennsylvania, “To Our Fellow Governors,” July 1983, p. iii.

prove engineering education and coordination of industry and university resources. Wayne StateUniversity in Michigan is the home of the newMetropolitan Center for High Technology, whichwill provide R&D, incubator space, and industrialtraining. Also in Michigan is the Innovation Center

at the University of Michigan, which will helpMichigan firms improve productivity by adoptingnew manufacturing technologies. Similar initiativesare

q

q

q

underway in several other States:

The Illinois Legislature provides part of thefunding for FRATS-Faculty Research Assist-ance to the State—wh ich p rovides comp uterized

information about faculty research capabilitiesto State business.The Florida Research and Development Com-mission is working closely with State universi-t ies to set up several research parks oncampuses.

Science Park, a cooperative venture amongYale, the State of Connecticut, and the OlinCorp., takes advantage of the Connecticut en-terprise zone tax and trade incentives.

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q

q

q

The Industrial Research Extension Center, lo-cated at the University of Arkansas at LittleRock, provides information on technical issuesto both the public and private sectors.The Mississipp i Board of Higher Edu cation hasa similar program at the Mississippi Researchand Development Center. This program pro-

vides information about technology issues tothe State Legislature while aiding in technology

transfer between State universities and indu stry.

Both the University of West Virginia andUniversity of Kansas have State funding for acenter for entrepreneur ship. They provide bothstudents and local entrepreneurs with the man-agement and technical information needed tocommercialize an idea.

A number of community and junior colleges areworking w ith their State, local government, or localindustry to provide training in technical skills

needed by high- technology ind ustry. In some cases,

these programs take the form of a general trainingcourse; in others, these institutions work directlywith a local firm to train the labor needed for ex-pan sion. An examp le of this is the Albuqu erque Vo-

cational-Technical Institute’s Laser/ Electro-Opt icsTechnicians Program, which not only trains stu-

dents in this high-technology field and helps themfind jobs, but also helps local firms with R&D andassists them in m anufacturing imp lementation andproduct inspection.

State and Federal agencies have provided support

for such research cooperatives. Stanford Universi-ty w ill be the location for an inn ovative cooperativeeffort called the Center for Integrated Systems, inwh ich 20 indu strial cosponsors are cooperating w ith

the Federal and State governments to fund the de-velopment of an “umbrella” facility for R&D.

Conditions That Foster Success

The barriers to improved collaboration betweenuniversity and indu stry includ e the sectors’ different

objectives, values, reward structures, attitudes, andresearch agendas. The examples cited above dem-onstrate that these barriers are not insur moun table,or at least can be wor ked ou t to the extent necessaryfor any particular effort. GAO listed the followingfactors as essential to resolving such issues for suc-cessful collaborative arrangements:

q

q

q

q

com m itm ent by both faculty and adm inistrators

at a universit y to the concept of orienting someportion of university research and expertisetoward industrial research;commitment by participating firms to exploreand utilize the strengths of the u niversity w hilesimultaneously honoring university objectives;

flexibility in the university to allow p olicies and

organizational developments for interactionthat are responsive to industrial objectives butdo not comp romise the academic mission of theuniversity;a strong leader highly respected by both theacademic and industrial commu nities to estab-lish and maintain the partnership;

q

q

matching the needs, interests, and resources

(both physical and human) of both universityand industrial partners; andsustained sources of funding.

9

Many of these same factors, as will be seen in thefollowing chapters, are also critical to the successof the public/ private partnerships involved in in-

dustry and local government high-technology ini-tiatives.

In addition to the above conditions, specific fac-tors are also important for the success of differenttypes of u niversity-based initiatives. Efforts are notlikely to be successful u nless the need s and resources

of the participating firms and universities arematched. GAO points out, for example:

Research parks work best at first-tier researchuniversities where a significant proportion of admin-istrators and faculty favor interaction with industry.Indu strial participants m ost likel

yto ben efit from

this arrangement are high-technology firms th at d e-pend strongly on technological innovation for theirsuccess.

gcenera l Accoun t ing mice, OP . cit. , P. SO.

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Cooperative research centers require a universi- Industrial extension services are best performedty with strong departm ents in areas relevant to the by a un iversity with a strong commitment to com-

focus of the center. Industrial participation is most mu nity service and a technology focus to assist local,successful with medium to large-sized firms which fragmented indu strial clients.

17

have their ow n research and development capacitiesadequate to translate the research results into com-mercial technological applications. IOGeneral Accounting OffIce, op. cit., PO 50.

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CHAPTER 4

Local Initiatives

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CHAPTER 4

Local Initiatives

Summary

The success or failure of State and university ini-tiatives for high-technology development (HID) isoften affected by th e complementary efforts of localgovernments. These local high-technology initiatives

are often based on strategies to develop the charac-teristics of such models as Ca lifornia’s Silicon Valley

or Boston’s Route 128. Based on how much theyvary from these models and the resulting initiativesthey undertake, OTA identified five types of com-munities:

high-technology centers, which already have astrong base of high-technology firms, research

universities, and venture capital;diluted high-technology centers, whose largehigh-technology base is diluted in a larger andmore mature local economy;spillover communities, located near high-tech-nology centers, whose proximity allows themto exploit the centers’ resources, amen ities, andhigh-technology base;technology installation centers, where thepresen ce of a ma jor research facility attracts sp e-

cialized su pp liers and creates a local base of re-searchers and skilled workers that can be ex-ploited for economic development; and

bootstrap communities, wh ich lack most of thecharacteristics of high-technology centers butoffer low operating costs and high quality of life

that make them attractive for branch plants of expanding high-technology companies.

Local strategies usually address perceived weak-nesses by exploiting local resources in order to build

on the existing technology base. Some of the mostcommon initiatives are:

land-use planning and zoning, including thecreation of science or research parks;university improvements;

vocational and technical training;incubator buildings;

marketing programs;

high-technology task forces, involving govern-ment, u niversity, and private sector rep resent-atives; andother initiatives, including networking, venture

capital mechanisms, cultural amenities, andpartnerships with local universities or businessgroups.

Local officials report that information for high-technology program design comes from a variety of sources, includ ing journ als and new spap ers, govern-

ment reports, and the experience of other communi-

ties, as well as the community’s past experience with

other types of industry. State and Federal govern-ment officials participate directly in many localinitiatives, and others m ake use of fun ds or d evelop-

ment tools made available by the Federal Govern-ment.

The success of these local programs is affected bya number of factors, including:

q

q

q

sustained effort, often over a period of decades;

identifyin g local needs and resources;

adapting to external constraints, including cli-

q

q

mate, distance from existing high-technologycenters, and other factors over which the com-

munity has no control;lin ka ge to oth er, broader developm ent efforts;

an d

local initiative and partnership in the initiation,

implementation, and operation of the program.

Private sector participation plays an importan t role

in these efforts, but local governments have at theirdisposal a wide range of policy tools that provideincentives or remove barriers to private initiative.These policy tools include the following:

provision of public services and facilities;

tax policies, such a s relief or incentives for inner -

city location, as well as lower overall tax rates;regulatory policies, including zoning changes;administrative reforms, such as one-stop per-

39

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q

mitting or streamlined licensing and inspection for private initiatives and sup port for bu sinesssystems; and interests in State legislatures.public advocacy, including public recognition

Introduction

Chapters 2 and 3 identify a wide range of pro-grams imp lemented by State governments and u ni-versities to encourage HTD, but many initiativesalso have been launched by local governments andother community organizations.1 These local pro-grams u sually arise from th e specific needs and goals

of particular communities, whereas State programsmay not always be appropriate or useful for indi-vidu al cities or regions. University program s, on theother hand, usually focus on improving linkageswith the local business community. Consequently,the success of State and university programs oftenis affected by the p resence or absence of these localinitiatives.

OTA identified and analyzed a representative crosssection of local HTD initiatives in order to deter-mine wh at types of program s have been attempted ,

how well they have worked, and the factors thataffect their effectiveness and their tr ansferability toother communities. The material in this chapter isbased on interviews with commu nity representatives

and detailed investigation of 54 separate high-tech-nology initiatives in the following 22 communities:

Huntsville, Ala. Bingham ton, N.Y.Phoenix, Ariz. Cincinnati, OhioSan Diego, Calif. Portland, Oreg.Colorad o Spr ings, Colo. Philadelphia, Pa.Brevard Cou nty, Fla. Oak Rid ge, Term .Orland o, Fla. Au stin , Tex.

Chicago, 111. San Antonio, Tex.Lowell, Mass. Salt Lake City, UtahMontgomery County, Md. Bur lington, Vt.Minneapolis-St. Paul, Minn. Seattle, Wash .Albuquerque, N. Mex. Milwaukee, Wis.

Concise descriptions of the local high-technologyinitiatives in these communities are presented inappendix A.

IMat~al in this chapter is based on the contractor report, Lwal

High-Technology Zni r ia t i vea S tudy , prepared for OTA by the FantusCo., Charles Ford H arding, p rincipal investigator, April 1983.

Community TypologySub-State and local efforts to stimulate HTD are

driven by th e increased jobs and tax base that would

result for local economies. In deciding to focus onHTD as opp osed to other possible avenues, the com-

munities are generally influenced by the rapidgrowth of technology-based industry compared toother sectors of the economy and by the tremen-dous contributions that high-technology companieshave m ade to th e local econom ies of Silicon Valleyand the Boston area. The use of these areas as mod -els for d evelopmen t is mad e clear by efforts of com-munities to promote themselves as “Silicon Moun-tain,” “Silicon Coast,” or “Silicon Plain.” Thus, one

useful typology of communities is in the degree towhich they vary from these model communities.

Indeed, OTA found that many local initiativescan be described as strategies used to develop thecharacteristics of the model communities. The typeand importance of the resulting initiatives will de-pend, in part, on the principal shortcomings thatcommunity leaders believe are keeping their city

from being a center of HTD like Santa Clara Coun-ty or the Boston area. Using this criterion as thepr inciple means of classifying cities, OTA has id en-tified five types of communities:

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Ch. 4—Local Initiatives q 41

high-technology centers;diluted high-technology centers;spillover communities;technology installation centers; andbootstrap communities.

High-Technology Centers

Typified by Santa Clara County and the Bostonarea, these communities already have a high con-centration of research-oriented companies and a m a-

jor research-oriented university (Stanford and Mas-sachusetts Institute of Technology). The large com-panies and universities, in turn, continually spin off other small companies, generally founded by re-searchers who have an idea for a prod uct that theychoose to develop on their own rather than withinthe environment of the larger firm. While some of these new comp anies fail, enough su cceed and grow

to increase the concentration of firms in the area.

Other important elements of the high-technologycenters include a skilled work force, a universitycatering to the continuing education needs of localresearchers, and the availability of venture capital.The skilled work force is trained by the large com-panies located in the area. The demands that thesecompanies and their smaller counterparts make onthe labor market encourag e local workers to d evelop

skills in technological areas; demand also makes itwor thw hile for local vocational/ technical schoolsto develop appropriate training programs. The depthof the local base of skilled workers, in turn, makes

it possible for entrepreneurs to hire employees theymight not otherwise have the resources to train.

Due to the rapid change of technology, engineersand technical workers at the technology-based com-pan ies must stud y constantly to keep abreast of their

fields of interest. Others may take courses outsidetheir fields of specialization. In both cases, manyworkers find it valuable to be able to continue theireducation in evening programs at nearby universi-ties. Interestingly, in both Boston and Santa ClaraCounty, this service is not provided by the majorresearch university: the largest number of continu-ing education students in Boston attend N ortheast-ern University, while in Silicon Valley they attendthe University of Santa Clara.

Finally, the rapid growth of smaller companieswith new prod ucts attracts the developm ent of ven-ture capital firms that specialize in identifying andproviding capital and managerial advice to new and

expand ing technology-based comp anies. It is not sur-

prising that, betw een 1970 and 1980, Massachusettsand California were the only States that consistently

attracted a positive inflow of venture capital.One problem for the high-technology centers,

however, is that they tend to export many of the jobs that are generated through the innovations of local companies. The rapid growth of local firmstends to push up land and labor costs, and—at thepoint in a product’s lifecycle when it no longer re-quires the highly skilled work force—the companywill have a strong incentive to export its produc-tion to a lower cost area while concentrating theenergies of the skilled w ork force on the innova tions

that require their talents. A commu nity that exportsits technologies must continually develop new onesto keep its economy healthy.

Diluted High-Technology Centers

These cities also have a base of large technolo-gy-oriented companies, skilled work forces, research

universities, and venture capital firms. But in thesecases, the high-technology orientation of the areais diluted in larger, broader, and more matu re econ-omies. Metropolitan areas such as New York andChicago typify this group of communities.

The Chicago area, for example, possesses most of

the characteristics of a high-technology center, in-cluding: major research institutions (Universit y of Chicago, Northwestern University, Illinois Instituteof Technology, University of Illinois at Chicago,Fermi National Labs, and Argonne National Labs);m ajor tehn ology-basee com pan ies (Baxter-Travenol

Labs, G. D. Searle, Abbott Labs, Motorola, Gould,Northrop , and others); continuing education courses

in science and engineering (offered a t the Illinois In-

stitute of Technology); vocational/ technicaZ train-

in g (offered at several 2-year comm un ity colleges inthe area); and venture capital (provided by venturecapital firms and the Continental and First N ationalBanks). However, these high-technology character-istics are diluted in Chicago’s much broader econ-

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omy, many parts of which are unrelated to hightechnology.

This dilution seems to reduce the innovative andentrepreneurial fervor of an area. In such an area,skilled w orkers are m ore likely to be lost to nontech-

nological end eavors, and un iversities are more likely

to support a broader set of community needs. In

addition, venture capital firms may be less likely tospecialize in new businesses based on technologicalinnovation. Consequently, a major focus of high-technology initiatives in such areas has been to in-crease the communication among the various par-ticipants in HTD in the area. Thus, the high-tech-nology newsletter in Chicago and the UniversityCity Science Center in Philadelphia are seen bythose who developed them as a means of bringingthe high-technology players in the community to-gether and making them aware of local resourcesthat they might not otherwise find. It is reasonableto perceive these efforts as attemp ts to overcome theeffects of dilution.

Spillover Communities

Spillover communities are those located adjacentto a high-technology center or diluted centers. While

these communities typically lack most or all of theingredients that m ake up a high-technology center,they are close enough to such a city to take advan-tage of its resources. A high-technology companylocated in such a community can exploit the re-search capabilities at the nearby universities, visitventure capital firms easily, and hire engineers andscientists from the large technical work force around

the high-technology center and within commutingdistance. Employees seeking graduate courses intheir field can commute to universities in the adja-cent city. Typically, the objective of such commu-nities is to capture the spillover of companies fromthe center looking for lower cost land and a less com-

petitive labor market. Three examples of this typeof commu nity ar e Lowell, Mass.; Naper ville, III.; and

Montgomery County, Md.

Lowell provides a particularly instructive case.With the exception of a university, the community

lacked most of the ingredients of a high-technologycenter, but it is located adjacent to the Boston area.Through careful land-use plann ing, the city wa s able

to induce Wang Laboratories to locate a plant in

the area. Later, when Wang was looking for a newheadquarters site, the commu nity successfully pu r-sued and won it with aggressive initiatives. Wanghas since contributed to th e further grow th of high-technology infrastructure and the creation of newfirms in the area.

For communities located adjacent to a high-tech-

nology center, this type of strategy has obvious ap-peal. They often must overcome perceptions of dis-tance and an older image that may not be compati-ble with a high -technology firm. Lowell’s su ccess atovercoming its “mill-town” reputation shows thatthis can be done. A principal means of doing thisis by creating a physical environment attractive totechnology-based companies.

Technology Installation Centers

These communities are the home of a major re-

search or technology-based institution, but they lack most or all of the other ingredients of a high-tech-nology center. The installation creates a local baseof researchers and skilled w orkers, and in som e cases,

this has led to extensive spinoff activities in the local

economy. In other cases, however, the technical base

created by the research installation produces fewnew firms and often remains unavailable to newemployers coming into the area. This is becausepayscales are usu ally qu ite high at su ch operations;additionally, the organization’s rules regarding therights to innovations have sometimes made it diffi-cult for its research staff to start companies of their

own.

As a result, local development initiatives often are

begun after a downturn in the fortunes or fundingof the major research installation. Thus, layoffs atBoeing in Seattle, program cutbacks at the Kenned ySpace Center in Brevard County, Fla., and staff reductions at the Redstone Arsenal in Huntsville,Ala., all resulted in intensified d evelopmen t efforts,usu ally d irected at technology-based comp anies that

could take advantage of the skilled work force re-leased by the installation.

These problems do not always apply, however,

and the installations also attract a wide variety of suppliers that could be useful to other technolo-gy-based enterprises. For this reason, and becauseof the prestige associated with them, competition

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Ch . 4—Local Initiatives q 43

for such installations is usually intense, as was thecase before th e Microelectronics & Compu ter Tech-nology Corp. (MCC) chose to locate in Austin,Tex., after considering over 50 candidate commu-nities. Several communities are seeking to attractor establish such installations in the hope that thiswill attract others from outside the area and, even-

tually, lead to the creation of new, indigenous tech-nology-based firms.

Bootstrap Communities

A number of communities began their develop-ment efforts possessing none of the characteristicsof the high-technology centers. They h ave d epend ed

instead on low operating costs and attractive livingenvironments to attract the expansion plants of high-technology companies. These branch plantsgenerally manufacture products which no longerhave a high technological inpu t; at this stage in their

lifecycle, competitive operating costs are far moreimportant than the research capabilities of a high-technology center. However, when several of theseplants have located in an area, their combined w orkforces create a pool of skilled labor that a moresophisticated operation can build upon. Additional-ly, the combined engineering work forces at suchplants create enough dem and to m erit the additionor improvement of engineering and science coursesat local universities.

As these things occur, the community is able toattract increasingly sophisticated operations and,eventu ally, foster the creation of local spino ffs. Com-

munities that fall into this pattern include Austin,Colorado Springs, Orlando, Phoenix, and San An-tonio. These cities have enjoyed rapid job growthfrom new branch plants of technology-based com-panies. Interestingly, two of the most recent an-nouncements of new facilities in Austin were theresearch laboratories of Lockheed Corp. and MCC.Although th e growth of a local base of “ind igenous”

high-technology firms has been slower, it too hasbeen imp ressive.

Initiatives in these communities generally focuson developing the technical infrastructure and in-stitutional linkages that will permit progressive in-creases in the technological sophistication of newfacilities in the area. Such initiatives include thedevelopm ent or improvem ent of engineering courses

at local universities, the ad dition of vocational/ tech-

nical courses to provide w orkers with need ed skills,and the development of research p arks to create theenvironment desired by technology-based firms.

Implications for Local Initiatives

As one would expect, not all cities fit neatly intothis typology. Minneapolis-St. Paul, for example, fits

somewhere betw een the true high-technology cen-ters and the diluted centers. Cincinnati, on the otherhand, has some of the characteristics of a dilutedcenter, but its high-technology base is limited; itsdevelopment efforts have focused on creating a re-

search installation, developing a venture capitalfund, and increasing the flow of technological infor-

mation among local machine tool companies. Thevalue of the typology is not that any one city fitsit neatly, but rather that by determining w hich typea city most closely approximates, it can launch theinitiative that will be most appropriate and effec-tive in developing a more sop histicated technological

base.

A word of caution however, is in order. Beforedeciding u pon a high-technology program, a com-munity should investigate other approaches to de-velopment that might result in a greater return onits investment. Not all communities can expect toenjoy rapid growth from high-technology opera-tions. For example, OTA experienced difficulty inidentifying small rural communities with effectiveinitiatives; this suggests that relatively few suchtowns will receive direct benefits in jobs and taxesfrom high-technology plants.

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——--—

44 qBackground Paper #2—Encouraging High.Techno/ogy Development

Common Initiatives

Some of the m ost common types of initiatives used

by sub-State and local organizations to attracthigh-technology industry include the following:

q land use, planning, and zoning;q university improvements;q vocational-technical training;. incubator buildings;. marketing programs;q high-technology task forces; and. venture capital funds.

Land Use, Planning, and Zoning

High-technology firms generally are quite con-cerned about the quality of the environment inwhich they are located. They want land use to becomp atible with their own needs but not so restric-

tive that they will find it impossible to expand astheir need for space grows. Many commun ities con-trol land use through planning and zoning with acareful concern for high-technology firms’ require-ments. Such controls include limitations on typesof uses permitted, to ensure that only clean and at-tractive operations are located on the site; coverage,set-backs, construction code, and maintenance re-strictions, to ensure that properties are compatiblein app earance; and park p rovisions. Streets and u til-

ities often are developed by local government to arequired standard, with access controlled to limittraffic. Lowell’s attraction for Wang Laboratorieswas based, in part, on such initiatives. Many local-ly developed research parks (in which parcels aresold only to firms conducting research) can beviewed as a subclassification of this typ e of initiative.

Communities of each of the categories describedabove have engaged in these types of initiative. Suchprograms are not without risk. Carrying costs canbe high if suitable users are not attracted, and theparks can monopolize valuable land that could bepu t to other prod uctive use. Some comm un ities ulti-

mately have had to relax usage criteria to attractnontechnological users. Pressures for such relaxa-

tion is constant, but once underm ined in this man -ner, the research p arks may lose much of their ap-peal to technology-based companies.

University Improvements

A number of communities have worked hard todevelop engineering programs at local universities.Such initiatives have been most important in the

technology installation and bootstrap communities,where local demand for such programs previouslyhad been modest. Such initiatives have been of cru-cial importance in San Antonio, San Diego, Phoe-nix, Colorado Springs, Huntsville, and Seattle, toname the most striking examples identified in thissurvey. Such initiatives include efforts to create anengineering departm ent at a university that has nothad on e; add gradu ate programs; up grade the overall

quality of the program; and/ or bring faculty to theun iversity w ith specializations in areas of imp ortance

to local industry. Another university-related initia-tive is the establishment of a research center to con-duct contract research for industry. (See ch. 3 forfurther information on university initiatives.)

Vocational/Technical Training

As a specific initiative for the purpose of attract-ing high-technology firms, this approach is mostcommon in diluted centers, technology installationcenters, and bootstrap communities. It can take theform of adding specific training programs requiredby local industry or the development of high-tech-nology “magnet” high schools. Such initiatives often

begin with an assessment of what skills are requiredby local industry; courses are then designed withinput from those businesses most likely to hiregraduates.

Incubator Buildings

These are most often built in areas where thequantity of high-quality speculative space for smallusers is limited. Such areas include inner-city por-tions of diluted centers and smaller communitieswithout a large high-technology base. Such facilities

require experienced real estate managem ent, and (as

with research parks) carrying costs can be high if they are not utilized. In addition, technology-basedtenants often require technical and m anagement as-

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sistance. Similar initiatives have been undertakenby both universities and private industry (see chs.3 and 5).

Marketing Programs

Virtually all communities conduct marketing pro-grams to attract new industry. However, those lo-calities with the most sophisticated programsdirected at high-technology companies tend to bethose that already have experienced the greatest suc-

cess in attracting them. These include communitiesin all of the categories listed a bove, with the excep-tion of the high-technology centers themselves, butthe program s differ in their focus depending on thetype of comm un ity involved. For example, the spill-over communities are most likely to direct their ef-forts toward companies located in the city to whichthey are adjacent, while bootstrap communities pri-mar ily seek to attract labor-intensive, less technical

branch operations of technology-based companies.Key ingredients of these initiatives include the

identification of specific firms to which the com-mu nity would ha ve the greatest appeal, the improve-

ment of the commun ity to make sure that requiredinfrastructure or amenities are in place, and a con-certed marketing effort through direct mail, tele-phone contacts, and personal visits to the prospectcompanies.

In some cases, marketing p rograms h ave been con-

ducted without an adequate understanding of therequirements of high-technology firms or without

a thorough evaluation of the comm unity attributesthat high-technology firms are likely to find of in-terest. This can result in missing th e market or ov er-selling the community. In such cases, the time,funds, and effort spent on marketing bring poorresults.

High-Technology Task Forces

Engaged in by m any commu nities and States (seech. 2), this initiative serves to focus local attentionand resources on high-technology economic devel-opment. Local task forces usually are appointed by

mayors, although they are som etimes an adjunct of the chamber of commerce (see ch. 5). They generally

include representatives from industry, education,and government. They are distinct from other ini-

tiatives in that they are not designed to overcomesome limitation in a community’s ability to attractor retain high-technology companies. Instead, theyhave a designing function and, in some cases, par-ticipate in implementation. They also have a pro-nounced networking effect and thu s are used mostcommonly in diluted high-technology centers, suchas Chicago and Minneap olis, wh ere such efforts arethe first step in overcoming the effects of dilution.

Venture Capital Funds

Most of the local representatives interviewed forthis study recognized the importan ce of venture cap-

ital to HTD, but few expressed satisfaction with their

initiatives to fill this need. Planned and existing ef-forts included seminars or conferences for venturecapital firms and local entrepreneurs, the identifica-

tion of local venture capital resources, and consult-ing assistance in procuring venture capital. (For

similar university initiatives, see ch. 3.) Only onecommunity of those surveyed, Cincinnati, was se-riously considering the establishment of a venturecapital fund. However, OTA has identified such ef-forts in a few other communities (see ch. 5).

Effective venture capital programs directed athigh-technology companies presup pose a substan-tial number of high-technology innovations in acommunity each year. Without a major universityor a large existing base of research-oriented firms,it is doubtful that an adequate number of innova-tions with commercial potential will be found in acommu nity. The critical mass of innovations is m ostlikely to be found in the true high-technology ordiluted high-technology centers. These areas are also

the ones most likely to have existing, private ven-ture capital operations, which may explain some of the problems that other communities are havingwith this type of initiative.

Other Initiatives

Other, less common initiatives include efforts toattract a specific company. In some cases, the con-tributions of a single firm to an area were viewed

as being so great and as having such an imp act onthe future HTD of the area, that a major initiativewas devoted to the specific firm. The efforts to bring

Wang Laboratories’ headq uarters to Lowell provide

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46 q Background Paper #2—Encouraging High-Te ’chnology D e v e l o p m e n t

the best example of such a focused marketing d rive;Austin’s successful campaign to attract MCC pro-vides a more recent example.

Also, realizing that companies seeking to recruitlarge numbers of researchers are concerned aboutamenities and cultural opportun ities for these work-ers, one community (Huntsville) developed a large

civic center to house visiting orchestras and othercultural events. Several cities are considering theestablishment of research institutes (private contractresearch organizations not directly affiliated with auniversity), with Cincinnati’s Institute of AdvancedManu facturing Sciences being the m ost developed .In one diluted high-technology center, Chicago, ahigh-technology new sletter was felt to be an impor-tant tool for overcoming the effects of dilution.

nents of the community’s educational and techno-logical base. For example, there is usually a strongrelationship between research p arks (occupied by in-

dustrial research laboratories) and local universities;in man y of the cases discussed in ch. 3, the develop -ment of research p arks w as a cooperative initiativein which the original stimulus was the university.Local vocational/ technical program s, too, typ ical-

ly have strong ties to both State and local trainingprograms, and many h ave received Federal fund ing.

Add itionally, the private sector (and especially th etechnology-based business already located in thecommunity) has made major contributions of timeand effort to local initiatives. This is particularly tru e

of task forces but also of program s to impr ove un i-versity engineering and scientific programs. (See ch.

5 for a discussion of private sector initiatives.)Several initiatives are based on “partnerships” be-

tween local government and the various compo-

Program Design and Effectiveness

Sources of Information

The surveyed comm unities got their ideas for high-

technology initiatives from a v ariety of sources. Most

local officials followed discussions of high-technologyand economic developmen t in journ als, magazines,and newspapers; many also had collected reportsissued by State and local governments on the sub-

ject. Additionally, there was often direct contact

among the communities on high-technology issuesrelated to economic development. (This was also thecase among State initiatives—see ch. 2.) For exam-ple, in several cases, public officials who were in-vestigating the d evelopment of a research park vis-ited successful parks in other communities. This was

true in Binghamton, Chicago, Orlando, and Mont-gomery County, among others. The Puget Soundtask force, which was seeking to improve scientificand engineering education in the Seattle area, in-vited the president of MIT to speak at a meeting.Information on other areas’ initiatives also was col-lected th rough consulting stu dies, phone interviews,

and letter requests.

Another important source of information on ini-tiatives is the industrial prospects themselves. Forexample, public officials in San Antonio began lob-bying for engineering programs in the city’s Statecollege after a major electronics company announced

that it would not build a plant in the area becauseof the lack of continuing education opportunitiesfor its emp loyees. Local ind ustry an d business group s

frequently exerted similar pressure for the improve-

ment of vocational/ technical program s to trainskilled w orkers (see ch. 5). In several cases, the Stategovernment or a statewide bu siness organization en-

couraged initiatives by counties and un iversities toestablish research parks. In Wisconsin, for example,both the State and the city of Milwaukee are par-ticipating in a joint marketing effort directed at therobotics industry. A final source of information forprogram design was the community’s developmentefforts with other types of industry. Many high-tech-

nology marketing initiatives are ad aptations of suc-cessful efforts u sed for ma ny year s by local econom ic

development organizations. Similarly, task forces

were a common mechanism used to address a wide

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Ch . 4—Local Initiatives q 47

range of community concerns long before this tech-nique was applied to HTD.

Implementation

Like information gathering, program implemen-tation followed common patterns in most commu-

nities. The first step was usually to identify the needfor something lacking in the community or the im-portance of a particular service to local high-tech-nology firms or prospects. Once the need or oppor-tunity w as identified, man y commu nities exploredtheir resources and policy tools with consultants,local businessmen, and other know ledgeable inform-

ants. For example, in exploring potential participa-tion of the local government or university in a re-search park, the community would need to knowwhat protective covenants or tax changes wouldhelp as well as what types of firms would qualifyfor the park and h ow m any jobs they would create.In launching and operating the program, commu-nities mu st adap t the experiences of other comm u-nities to their own specific situation and avoid theweaknesses and pitfalls (if any) of their models.

Federal and State Participation

Agents of the Federal Government participateddirectly in the initiatives in several of the surveyedcities. For example, the High Technology Task Force

in Chicago was chaired by the director of the Ar-gonne Nat ional Laboratories. Significantly, the local

organizations responsible for high-technology pro-grams made frequent use of the funds and other de-

velopment tools mad e available by the Federal Gov-

ernment. The most frequently mentioned Federalprograms and development tools in relation to sp e-cific initiatives in 22 surveyed communities were:

Urban Development Action Grants . . . . . . . ........9

Industrial Development Bonds . . . . . . . . . . . . . . . . . . . . 5

Economic Development Administration grants .. ...4

Community Development Block Grants . . . ........3

Comprehensive Education and Training Act

programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........2

Free Trade Zone . . . . . . . . . . . . . . . . . . . . . . . . ........2

Appalachian Regional Commission programs .. .....2Small Business Administration loan programs .. .....1

Although none of these Federal program s were d e-signed specifically to help with high-technologydevelopmen t, this find ing shows that th ey have been

successfully applied to such purposes.

Major Federal R&D installations frequently pro-vided th e base around wh ich high-technology pro-grams are built. In several cases, in fact, it was thereduction of Federal support for these installationsthat prov ided th e impetus for d eveloping a local eco-

nomic development p rogram directed at high-tech-nolog y companies. This was true in both Brevard

County and Huntsville. Also, military bases wereoften cited as good sources of skilled labor forhigh-technology companies located in an area. Thisis true in such cities as San Antonio, San Diego,and Colorado Springs. In such cases, the FederalGovernment has in effect subsidized technical train-

ing for workers wh o subsequ ently feed into the local

private economy.

State governments also participated in local ini-tiatives, frequently through their control of univer-sity and vocational/ technical edu cation resources.State marketing programs also complemented thoseof the local communities. (See ch. 2 for a discus-sion of State government initiatives. )

Innovation v. Attraction

Although most of the local representatives inter-viewed for this survey recognized the importanceof stimu lating new local comp anies built aroun d in-novative products, the greatest efforts were directed

at attracting branch operations of large high-tech-nology firms. This strategy pays more immediatedividends in terms of job creation, but anotherreason seems to be the relatively small number of communities in which a significant number of in-novative new products are developed. In the truehigh-technology centers, there seems to be a “critical

mass” for the creation of new companies, which inturn warrants the concentrated attention of ven-ture capital firms and other development organiza-tions. This critical mass is missing in cities withsmaller technology-oriented industrial bases. At least

initially, it may not be cost effective in such citiesto devote local resources to initiatives aimed at en-trepreneurial ventures. In time, however, the attrac-tion of several branch plants may result in the nec-essary concentration of firms, technical workers, and

potential entrepreneurs. Several cities reviewed forthis study—including Minneapolis-St. Paul, Austin,and San Diego—are reaching the stage at which asignificant number of new high-technology com-panies can be spawn ed, but th ey are the exceptionrather than the rule.

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Factors Affecting Success

Not all of the communities investigated for thisstudy have been equally successful in becominghigh-technology centers. Given the differences intheir goals and strategies, absolute criteria for suc-cess are difficult to determ ine and , as with State ini-tiatives (see ch. 2), these programs have not beensubjected to rigorous compara tive analysis or evalua -

tion. As a result, measures of success are somewhatimp ressionistic. Nevertheless, the collective experi-ence of these 22 commu nities indicates that the fol-lowing factors condition the effectiveness of localprograms for HTD:

q

q

q

q

q

sustained effort, often over a period of decades;

identifyin g local n eeds and resources;

adapting to external constraints, includingclimate, distance from existing high-technology

centers, and other factors over which the com-

munity has no control;lin ka ge to oth er, broader developm ent efforts;

an d

local initiative and partnership in the initiation,

implementation, and operation of the program.

Sustained Local Effort

Although some of the 22 communities were ableto reap rapid results from their initiatives, few havedeveloped large concentrations of high-technologyestablishments in a short time. A minimum of 20years may be a realistic period for a community todevelop to the stage w here a significant nu mber of local jobs can be credited to products created bylocal entrepreneurs or local research establishmentsof larger compa nies. This long timeframe should not

be discouraging, however, since many of the “boot-strap” and “spillover” comm unities imp roved theireconomies quickly and significantly by attractingbranch plans of technology-based companies.Huntsville, Phoenix, San Diego, Colorado Springs,Lowell, and Austin, had all been w orking successful-

ly for many years to attract technology-based branch

operations.

Identifying Needs and Resources

A second factor is clear recognition of the localattributes, both strengths and weaknesses, that in-

fluence a community’s ability to attract high-tech-nology industry. In the more successful cases, suchanalyses of the community were conducted by localrepresentatives or by outside consu ltants. With clear

objectives, the comm un ity was th en able to developappropriate development strategies.

Adapting to External Constraints

There are other factors over which a communityhas little control, such as climate, terrain, and prox-imity to existing high-technology centers. The suc-cessful communities recognized these external con-straints and adjusted their objectives and strategiesaccordingly. Thus, both Colorado Springs andAustin initially focused their marketing efforts onbranch plants rather than on research-or technol-ogy-intensive establishments. Over time, as thesebranch plants created a base of skilled labor andtechnical infrastructure, they have been able to at-tract more sophisticated operations and encouragelocal spinoffs.

Linkage to Other Efforts

The local initiatives that formed part of a broaderdevelopment strategy often produced the most sub-

stantial results. Two examples of this pattern areworth reviewing. San Diego had condu cted severalanalyses to determine the types of industry thatwou ld find th e area most attractive and had targeted

several specific high-technology operations like con-sumer electronics. The community also identifiedthe large qu antity of available land as a m ajor asset,

and most of its initiatives are based on exploitingthis resource to achieve its HTD objective. In Hunts-

ville, community leaders commissioned a detailedassessment at the time of the downtu rn in emp loy-ment at the Redstone Arsenal, and the pool of skilled labor created by th e Arsenal was recognizedas a major attribute that could be marketed to tech-nology-based firms. Other initiatives were alsodeveloped to make the commu nity more attractive

to such operations, including the creation of aresearch p ark and the construction of the commu ni-ty center. Hu ntsville condu cts periodic reassessments

to monitor changes in local conditions that wouldwarrant shifts in this strategy.

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Local Initiative and Partnership

Finally, it is worth noting that in the successfulcommunities, most of the effort has been initiatedand implemented locally. Some communities re-ceived substantial help from State governments indeveloping university resources and complementing

the local marketing program. Others have usedfunding and a number of development tools madepossible by the Federal Government. But in mostcases, the objectives and strategies were developedlocally, and local representatives had a major partin design and implementation of the programs. Inaddition, cooperation or “partnership” with localentrepreneurs and bu siness groups plays an impor-tant role in su ccessful p rograms, since the pu blic and

pr ivate sectors are far less distinct at the local level.

Local Policy Tools

Local governments have at their disposal a w iderange of policy tools that have been used to pro-vide incentives for the necessary private sector par-ticipation. 2 Some, like zoning bonuses or minorityhiring quotas, encourage or require private initia-

2Tom Chmura, et al., Redefining Partnership—Developing Pub-

l i c/ Pr i va te Approaches to Community Problem Solving: A Guide for

Local OMciah (Menlo Park, Calif.: SRI International, January 1982),p. 16; see also SRI International, “Developing Public/Private Approaches

to Community Problem Solving, ” Management Information Service

Reporr, International City Management Association, vol. 14, No. 7,July 1982, pp. 5-6, 17.

tive; others, like administrative reform, tax relief,or infrastructure improvements, remove barriers topr ivate initiative. The effectiveness of som e of thesetools may be constrained by the policies and regu-lations of State or Federal Government; in suchcases, public and private leaders at the local leveloften have joined forces to overcome these con-

straints (see ch. 3). Policy tools that are in the con-trol

q

q

q

q

q

q

of local government include the following:

provision of public services, includ ing improved

pu blic safety, education system reforms, and rec-

reational or cultural programs; provision of public facilities, such as improve-ments to water, sewer, and road systems, im-proved mass transit, and public parks;tax policies, such as relief from property tax orincentives for inner-city location, as w ell as low-

er overall tax rates;regulatory policies, including changes in zon-ing or building codes that will encourage re-habilitation;administrative reforms, such as imp roved finan-cial practices, one-stop permitting, or stream-lined licensing and inspection systems; and

public advocacy, including public recognitionfor private initiatives and support for businessinterests in State legislatures.

The role played by the private sector, and the ini-tiatives it has launched, are discussed in greaterdetail in the following chapter.

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CHAPTER 5

Private Sector Initiatives

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CHAPTER 5

Private Sector Initiatives

Summary

Private sector participation is an important ingre-dient in successful high-technology development(HTD) programs by State and local governments,and both individual firms and business organizations

have un dertaken similar initiatives of their ow n. Re-

cent changes in p ublic policy have mad e their par-ticipation more valuable and more welcome. Thebusiness community has practical reasons for en-couraging commu nity and economic developm ent,as well as the desire to be a good citizen, andhigh-technology firms in particular have manyresources that can be applied to community needsand problems. The nature of their efforts vary with

the size and nature of the firm, but in general theirinitiatives fall in one of four categories:

q

q

q

business investment and operations, notably site

location decisions, but also including targetedbank deposits and real estate development,preferential hiring or procurement practices,and expanded employee services;education developm ent, including philanthro-pic contributions, loaned personnel, donatedequipment, technology-transfer mechanisms,and cooperative research arrangements;business developm ent and risk capital, including

entrepreneurship training and assistance, smallbusiness incubators, and geographic investment

pools for venture and seed capital; and

q business/ civic adv ocacy, usu ally through trad eor business executive associations, to expresssup port for p ublic leaders or policies, encourage

participation by other firms, and promote com-mu nity involvement by individual emp loyees.

Social and econom ic cond itions, as well as the p o-litical and business climate, affect th e willingness of business to participate in HTD programs. Perhapsthe most important factor is the history of public/ private collaboration, but local government has anumber of policy tools with which to remove bar-riers to private sector initiatives. Three factors ap-

pear to contribute to the su ccess of these initiatives:q

q

q

an organizational culture that pr omotes a com-

m on civic perspective and a positive attitudeabout the attributes and prosp ects of the region;

an environment that nurtures leaders, both public and private, wh o combine an established

track record for innovation and entrepreneur-ship with a broader view of their community’sresources and promise; anda network of business/ civic advocacy organiza-

tions that attracts the membership of top offi-cers of major comp anies and receives from themthe commitment to work on efforts of mutual.concern, including cooperation with the publicsector.

IntroductionThe Changing Environment or relocate their bu siness activities. The private sec-

tor, however, is seldom a p assive player in these ini-The preceding chapters have shown that private tiatives; increasingly, corporations and individual

sector participation is an important feature in the executives play an active role as a stimulus or col-

design, operation, and success of HTD initiatives laborator in HTD efforts of State governments, uni-at the State and local levels. The targets of these versities, and local commu nities. Recent changes inefforts, after all, are the decisions of individual en- public policy, including the new emphasis on HTD,trepreneurs and firms about w here to start, expand , have made their participation more valuable and

53

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—..


more w elcome. The past 15 years also have p rodu ced

a variety of successful business efforts that can serve

as models for future initiatives by the private sec-tor in this area of economic development.

Business is directly affected not only by businessconditions but also by conditions in the externalenvironment. For most of the past 30 years, these

conditions have been assumed to be the responsibil-ity of the public sector, and during the 1960’s theFederal Government created a num ber of develop-ment -oriented agencies includ ing the U.S. EconomicDevelopment Administration (EDA), the U.S.Community Services Administration (CSA), andthe various regional commissions, as well as otherprograms in the U.S. Small Business Adminis-tration (SBA) and the Departments of Commerceand Housing and Urban Development (HUD). The1960’s also saw an increase in grass roots activismthat led to the creation of numerous community-based development organizations.

During the 1970’s, however, State and localgovernments and the private sector began to assume

a larger role in commu nity developmen t. In p art this

was due to changes in Federal policy, exemplifiedby the Community Development Block Grant(CDBG) and Urban Development Action Grant(UDAG) programs, which required matching orleveraged funds from other sources. The effort tosecure additional public and private resources ledto the creation of local “partnerships” involvingGovernment, community groups, and the privatesector. Growing public concern about the cost and

effectiveness of government p rograms h as led, in theearly 1980’s, to further reductions in Federal fund-ing for economic developmen t and a further transfer

of responsibility to local jurisdictions. This trend,reinforced in man y cases by similar changes in Statepolicies, is expected to continue.

Studies by SRI International indicate that thischanging environment represents both a challengeand an opportunity for the private sector. On theone hand , responsibility and the burd en of perform-ance are being shifted to local governments, whichsometimes lack the manpower and experience to

deal with economic development problems as com-plex as high-technology industrial growth. At thesame tim e, growing fiscal constraints at all levels of government make it increasing clear that public re-

sources are insufficient to meet all of the problemsfaced by local communities. The public sectortherefore mu st find a w ay of collaborating with theprivate sector to bring its resources to bear on theseproblems. In short, “there app ear to be no viablealternatives to an increased corporate communityinvolvement and private/ pu blic partnership in deal-

ing with local problems. ”

1

On the other hand, there are several problemareas in which corporate action or p ublic/ privatepartnership has been especially successful. Theseinclude economic development, job creation, andeducation and training. SRI also found that it is nolonger as difficult as it once was to launch suchinitiatives and that there are several different ap-proaches that any company can undertake, regard-less of its size.

Reasons for Business Involvement

Business involvement in regional economic devel-opment often results from company policies thatreflect the p ersonal beliefs and commitm ent of theirexecutives. In other cases, business involvement ad-dresses commun ity problems that affect the generalbusiness climate or the particular firm’s operatingcosts and profits. In general, however, the privatesector has three practical reasons for participatingin community and economic development initia-tives:

q

q

q

“business” motives strictly defined, such asreducing the cost of doing business, expanding

markets, and increasing return on investment;meeting the social needs of its employees, inorder to m ake them more reliable and p rodu c-tive; andimproving the quality of life in the community.

Research cited by SRI indicates that companiespay, directly or indirectly, for community problemsthat are not strictly part of the business environ-

iTO~ Ch~U r a , et a]., Redefi’nlng Partnership—Developing Pub l ic /

Private Approaches to Community Problem Solving: A Guide for Local

Miciah (Menlo Park, Calif.: SRI International, January 1982), p. 6;see also SRI International, “Developing Public/Private Approaches to

Communit y Problem Solving,” Management Information ServiceRePrr, International City Management Association, vol. 14, No. 7,July 1982, whole issue. Both reports are based on research conductedby the Public Policy Center of SRI International, with funding fromthe Office of Community Planning and Development of HUD.

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Ch . 5—Private Sector /initiatives q 55

ment. Business needs adequate public services andfacilities in order to operate and grow; it also needsadequate protection for its plant and personnel.Business requires a well-trained labor force and social

and health services to help it be more productivebut business also wants to control its local taxburden and the costs of employee services to reduce

operating expenses. Roads that need repaving, policeand fire departments without funds to respond toemergencies, school systems too poor to improveteaching, service agencies that cannot p rovide tr eat-ment or counseling, high rates of unemploymentand business failures, shrinking tax bases and ris-ing rates—all of these community problems resultin identifiable costs on the firm’s balance sheet.

At the same time, business wants to be perceivedas a good citizen, and an important byproduct of public/ private ventures is the improved commun ica-

tion and understanding that results between par-ticipants from local government and the businesscommunity. Finally, SRI suggests that business “will

probably benefit by keeping its end of the implicitbargain with the Federal Government that socialproblems can be better hand led by the private sec-tor if taxes are reduced and Federal programs cut,as the Federal Government has done. ” 2

High-technology firms ap pear to benefit particular-

ly from economic development and the creation of

new firms or branch plants, both as a source of spe-cialized production inputs and as a potential market

for their innovative prod ucts and services. They also

benefit from the cultural and recreational amenitiesthat attract and retain scientific and managerialtalent. The following material addresses the re-sources that the p rivate sector brings to bear on local

problems, the roles each h as played in economic de-

velopment, and the typical strategies it employs. Ineach case examples are provided that relate thesegeneral topics to specific HTD initiatives.

Z ch m u r a , et al., Op . cit. , P. b.

Private Sector Roles and InitiativesIntroduction

Private sector firms and executives have a widerange of resources that can be applied to prob-lem-solving and economic development in theircommunities. 3 Different types of firms possess dif-

ferent kinds of resources, and these resources oftendetermine the roles firms play, the problems theyaddress, and the specific initiatives they launch. Ingeneral, however, these strategies can be classifiedas follows:

q

q

bus ines s inves tment and operat ions , notably site

location decisions, but also including targetedbank d eposits and real estate developm ent, pref-

erential hiring or procurement practices, andexpanded employee services;education development, including philanthro-pic contributions, loaned personnel, donated

~Tke fo~~owlng materia{ is based on the contractor report, ~r~vare

Sector Initiatives: High Technolo~ and the Local Economy, preparedfor OTA by Renee A. Berger with research assistance by RobertGuskind, April 1983.

q

q

equipment, technology transfer mechanisms,and cooperative research arrangements;business development and risk capital, including

entrepreneurship training and assistance, smallbusiness incubators, and geographic investment

pools for venture and seed capital; andbusiness/ civic advocacy, usually through tradeor business executive associations, to expresssup port for p ublic leaders or policies, encourage

participation by other firms, and promote com-munity involvement b y individual employees.

These four strat egies are generic to all businesses,but the resulting initiatives show distinctive patterns

associated with particular industries. Financial in-stitutions, for examp le, find investment and business

development a logical extension of their normal ac-tivities; their decisions are motivated by profit, butthey also take into consideration the special needs

of the community, such as housing or neighborhoodrevitalization. Nonfinancial corporations, on theother han d, are more likely to use ph ilanthrop ic con-

tributions as the mechanism for commu nity involve-

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.56 qBackground Paper #2—Encouraging High-Technology Development

ment. In addition, the patterns of involvement oftenreflect the particular self-interest of the firm: phar-maceutical companies make donations to medicalschools, accounting firms give to business schools,and high-technology firms focus their donations onengineering or computer science programs.

High-technology firms have made use of all four

of these strategies. As nonfinancial institutions, theyseldom make use of special investment strategies,but high-technology businesses have made substan-

tial contributions to educational institutions, oftencommingled with investments in cooperative re-search and development (R&D) programs (see ch.3). Company size affects the firm’s ability to drawupon internal resources: large, well-established firms

such as IBM, Honeywell, Sperry, or Xerox are ableto draw upon vast amounts of capital, personnel,and business experience, as well as a longstandingnetwork of contacts. Also, as with other corpora-tions, high- technology firms tend to focus their in-volvement near the headquarters, although thereare numerous examples of company involvement at

branch sites.

The sections tha t follow will explore th ese strate-gies and roles, providing examples of initiatives that

have been carried ou t by h igh-technology firms and

entrepreneurs in various regions and comm unities.They demonstrate that, although local economiesare affected by forces over which they have littlecontrol (e.g., demograp hic shifts, stru ctural changesin ind ustr y, and State and Federal policy), local ini-tiatives by the private sector frequently have made

a difference in regional economic development byinfluencing the factors that can be controlled (e.g.,business climate, labor pool, and quality of life).

Business Investment and Operations

New enterprises and business expansions streng-then the local economic base by creating jobs andgenerating revenue. Deciding to start a company orlocate a plant in a p articular commu nity is the mostdirect way of making this contribution, but otherinvestment approaches also can enhance particular

aspects of a local economy. In some cases these ini-tiatives involve targeted bu siness operations; othersare based on a company philosophy of making“socially responsible” investments.

Site Location. -Some high-technology com-panies have contributed to community development

through a d eliberate decision to locate in a dep ressed

or disadvantaged area.

q Wang Laboratories, Inc., after ou tgrow ing its loca-tion in Tewksbury, Mass., decided to locate itsnew h eadquarters in nearby Lowell. Wang made

its decision based on Lowell’s proximity, its highlyskilled labor pool, and the tax and financing in-centives provided by the city. However, Wang isnow building both a new office building and adow ntown research center in Lowell without fur-ther tax breaks, and its p resence has attracted nu -merou s sup pliers who create add itional high-tech-

nology employment.q Digital Equipment Corp. (DEC) has sited a plant

in the Roxbury-South End area of Boston, neara poor and predominantly minority neighbor-hood. The startup cost to the company was $4.2million, of which $2.9 million for land acquisi-tion was financed by an indu strial revenue bond .The plant, which began operations in 1980, nowhas an annual p ayroll of $4 million and its workforce is 63 percent minority.

Site location activity in the greater Boston area,however, may well be unique to that region. MITand Harvard h ave been the incubators for num erous

entrepreneurs w ho have started their businesses inor n ear Boston. Over 80 percent of th e chief execu-tives in the Massachu setts High Technology Coun cil

(including An Wang and Kenneth Olsen of DEC)received their degrees from schools in the greater

Boston area. These people are now part of a tightlyknit network of local entrepreneurs w ho are d evoted

to strengthening the economic base of Massachu-setts. In addition to this entrepreneurial network,Massachusetts provided a highly skilled labor pool,available financing (public and private), and landready for adaptive reuse (particularly mill facilities).

The Wang and DEC decisions result from this mixof economic factors and chief executives’ personalpreferences. The d esire to stay in Massachusetts w as

a pow erful factor in these decisions and, while theyhave had a positive impact on the local economy,they may not be replicable.

Business Operations.—Companies can also ad-dress special needs and provide opportunities for par-

ticular populations through selective real estate

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—

Ch. 5—Private Sector /initiatives q 57

development (see above), targeted banking or bid-ding procedures, and working with minority-owned

businesses. Large companies such as Xerox and IBM,

as suppliers to the Federal Government of stand-ard commercial products, are required to implement

affirmative action purchasing programs.

Xerox has for many years had an affirmative ac-tion program that targets contracting with m inori-

ty owned businesses. Their policy states that “(l)small businesses and (2) small businesses ownedand controlled by socially and economically d isad-

vantaged individuals shall have the maximumpracticable opportunity to become suppliers of materials and services. ” Xerox’s p rogram pred ates

Federal Government requirements.Numerous companies that donate equipment toschools and universities (see below) also see thisas a m arketing opp ortunity. Executives at Hon ey-

well, Sperry, and Texas Instruments acknowl-

edged that they had expectations of selling theirequipment in markets that had been created inthis way.

Company Philosophy.–Some high-technologycomp anies pursu e strategies that combine businessinvestment with broader community objectives.Control Data Corp., for example, has adopted abusiness strategy of “addressing society’s majorunm et needs as p rofitable business opportu nities. ”Rather that advocating p hilanthropy, this approachcalls on corporations to use their business skills toaddress such needs in partnership with government

and other sectors of society. For instance, ControlData is a founder and principal investor in CityVenture Corp., a for-profit consortium that plansand invests in inner-city development projects em-phasizing better housing, job creation, and more ef-fective education and vocational training. RuralVenture add resses these same social needs in r uralareas.

Similarly, Control Data’s Business and Technol-ogy Centers (BTCs) address the need for job crea-tion by prov iding “incubators” for small businesses,

which create the most jobs. BTCs provide entrepre-neurial firms with basic shared services (e.g., com-puter time, office and laboratory space, and man-ufacturing facilities) on an affordable basis. Theseand other Control Data efforts (see below) aredesigned to earn a fair return on investment, and

to create a larger market for Control Data productsand services, by helping communities set up “jobcreation networks” that promote innovation at thegrass roots level.

Education Development

Corporate practices regarding education can beviewed as initiatives to create the innovations andintellectual infrastructure-the raw materials—theyneed to survive. Several research studies have con-cluded that the presence of a major universityresearch facility is essential to fostering HID. Ex-ecutives of high-technology firms also note that thelack of high-quality engineering talent could be aconstraint on their future expansion. As a result,business executives–working as individuals, par-ticipating on advisory councils, or as members of a business organizations—have focused their atten-

tion on ways to strengthen educational institutions,promote R&D, and encourage entrepreneurship.Business benefits by expan ding the labor sup ply, get-

ting tax benefits from contributions, and speedingthe flow of innovation. Universities see a means of achieving several objectives: upgrading education,providing research opportunities for faculty, find-ing jobs for students, and generating income. Busi-nesses are also working with public school systemsto improve primary and secondary science andmathematics instruction. The initiatives they havelaunched to achieve these goals may be classifiedin four general categories:

q

q

q

q

q

philanthropy;lending personnel;donating land and equipment;technology transfer; andcooperative R&D.

Philanthropy.–Many high-technology firmscontribute fund s to u niversities and other nonprofitorganizations. Investments like those describedabove may lead to direct and visible enhancementsof the local economy, but philanthropy involves asimpler adm inistrative mechanism (and greater taxbenefits) while still making a longer ter m (if less visi-

ble) contribution to the community’s physical andhuman capital. Mature high-technology firms suchas IBM, General Electric, and Xerox tend to havediversified giving patterns, ranging from th e arts to

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education and health. The second-generation high-technology firms increasingly are channeling theircontributions to un iversity-affiliated R&D institutes(see ch. 3). Several trade associations have issuedpolicy statements encouraging th eir membership togive at the “2-percent level.”

q

q

q

The American Electronics Association has set agoal of 2 percent of each member firm’s annualresearch budget to be contributed to universitiesfor supp lementing faculty salaries and develop-ing research facilities.Stanford University has received grants from 20corporate cosponsors for the construction andoperation of its $12-million Center for IntegratedSystems.The Massachusetts High Technology Council inJanuary 1982, asked its members to raise theirlevel of support for higher education to 2 percentof their annual R&D expenditures. In December

1982, they announced they had met their $15 mil-lion goal.

Lending Personnel. –Another method of pro-viding resources for economic development is bylending personnel. Company personnel have tech-nical skills that may be of assistance to prospectiveentrepreneurs or to educational insti tutions.Numerous corporations lend personnel, and high-technology compan ies such as IBM and Xerox havebeen leaders in this area, particularly for trainingendeavors. There are two principal motivations forlending personnel: improving the local labor pooland providing technical assistance to potentialentrepreneurs.

q

q

The Harris Corp. in Florida operates an exten-sive program with local junior and senior highschools. Company personnel give lectures andwork with school personnel to promote interestin science and math ematics. Harr is’ activities aremotivated by a desire to retain their presentemployees (whose children attend these schools)and to engender positive attitudes toward tech-nology among high school students (who arepotential future employees).Honeywell is involved in the creation of a new

magnet program in a local high school in Min-nesota. This program will focus on science andmath skills but also will promote a broad skillsbase. Honeywell has worked with the school sys-

q

tern to develop a strategic plan for technical skills

development, and the company has contributedfunds as well as lending personnel.The Minnesota Cooperation Office (MCO) is anonprofit corporation with directors from busi-ness, labor, education, and governm ent that helps

entrepreneurs who w ant to start a new company.

A small permanent staff draw s on a volunteer ad-visory panel of engineers, scientists, and execu tives

to help clients prepare and evaluate business plans

and obtain financing. Financed in its early yearsby contributions and grants, MCO’s goal is tobecome self-supp orting from client fees and return

on investment in client companies. MCO hasserved as a model for similar initiatives in manyother communities, including Competitive Wis-consin and Cleveland Tomorrow (see below),both of which are civic advocacy groups in itiatedby chief executives.

Donating Equipment.–Donating equipmentrepresents a comparatively small but growing com-pon ent of education development initiatives by high-

technology firms. According to Independent Sec-tor, an association representing nonprofit organiza-tions, the value of corporate non cash giving (equip -ment and materials) was approximately $6 billionin 1983. Deductions created by the Economic Re-covery Tax Act of 1982 are expected to increase cor-porate equipment donations. Though data are notavailable, it appears the principal beneficiaries of high-technology equipment donations are univer-sity science and research centers (see ch. 3). Cor-

porations also view donating equipment as cultivat-ing a market for their high- technology products.

q The Massachusetts H igh Technology Cou ncil esti-mates that the 1982 value of equipment d onationsby member companies will reach $40 million.

q Harris Corp., Sperry, Motorola, and Honeywellhave contributed equipm ent valued in excess of $2 million to the new Center for EngineeringExcellence at Arizona State University.

Technology Transfer.–Technology transfer isa means of moving an invention to market and gen-

erating sales or royalty income. Traditionally, tech-

nology transfer has been hand led by university ad-ministrations, but m ore recently this imp ortant com-

mercialization function has been assum ed by p rivate

nonprofit alumni foundations. Some of these foun-

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Ch. 5—Private Sector Initiatives Ž 59

dations are independent of the university, othersare not; but all of them rely on university researchcapability for inventions th at can be comm ercialized.

q

q

q

The Wisconsin Alumni Research Foundation isthe largest and oldest university technology-transfer operation. It is a multimillion dollaroperation. Its 1929 patent of vitamin D has pro-vided $14 million in license income.More typical is the University of Virginia Alum-ni Patent Foundation. Funds for the program were

provided initially by the alumni foundation, butsubsequent fun ds w ere raised from the p rivate sec-

tor and from royalty and licensing agreements.Patent income averages between $50,000 and$100,000 per year. The foundation has processedapproximately 200 faculty and alumni inventions,

working with patent attorneys, arranging forlicensing, and identifying market opportunities.The Washington Research Foundation (WRF), a

nonprofit organization established in 1982, seeksto increase Washington State’s share of the mar-ket in high-technology products and processes.WRF plans to work closely with the State’s univer-

sities as well as other research centers. A bankloan of up to $1 million has been guaranteed bypledges from individuals, law and accountingfirms, and manufacturing establishments.

Coopera t ive R&D.–Numerous un ivers i t ie shave established cooperative relationships with in-dustry and government to expand the high-tech-nology labor pool and to prom ote research. The rela-

tionships vary greatly, from simple corporate grantsto complex contracts giving the private sector firmcontrol over intellectual products. This is a promis-ing source of income for the u niversity (and therefore

the community) as well as for the firm. It is also ahighly sensitive matter because of ethical concernsand questions ov er academ ic freedom . (See ch. 3 formore detailed information on cooperative R&Dinitiatives.)

q The direct grants approach is exemplified by the$6 million, 5-year immunogenetics program spon-sored by DuPont at Harvard; the $7 million,10-year combustion science grant from Exxon toMIT; and the $5 million, 5-year robot develop-ment project sponsored by Westinghouse at theCarnegie-Mellon Robotics Institute. These grantsare are targeted for specific research and have a

turnback arrangement so th at the corporation canbenefit from inventions.A few universities, seeing the potential for income

from cooperative research, have become entrepre-

neurial. Stanford University, in 1981, createdEngenics, a for-profit company to develop large-scale chemical processing techniques, and the

Center for Biotechnology, a nonprofit researchorganization provided with $2 million by the sixcorporate supporters of Engenics. Stanford holds30 percent of the equity in Engenics.There are other university programs sponsoredby individual firms to target p articular p roblems.For example, IBM has a launched a $50 millionprogram of grants and equipment donations toimprove manu facturing engineering, and Exxonsponsors a $16.8 million engineering facultyassistance program to sup plement junior facultysalaries.

Recently, several companies have organized intoconsortia to pool resources for several universities

and special programs. For example the 10 majormakers of semiconductors (including Honeywell,Hewlett-Packard, and IBM) have established theSemiconductor Research Cooperative, which willidentify generic research needs and work withuniversity research departments.

Business Development

Private industry also contributes to regional HTDthrough business development initiatives. These ef-

forts, which are often associated with the educa-tional efforts outlined above, take three forms:

. entrepreneurship assistance;

. small business incubators; and

geographic investment.

En trepreneursh ip Assis tance .–One of themost highly developed set of initiatives for promot-ing high-technology entrepreneurship and smallbusiness development has been created by the pri-vate sector in Minnesota, in cooperation with theUniversity of Minnesota and State and local govern-ments. StarCo (Start-a-Company), sponsored by theMinnesota Business Partnership (see below), is a pro-

gram through which established firms assist in thecreation of new small businesses through technology

spinoff, management consulting, and/ or equity in-

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vestmen ts. Some 35 large corporations hav e alreadycomm itted to assist in the startup of two new com-panies apiece, and smaller firms will assist in thestartup of one new company. A related initiativeis the Minnesota Project Innovation (MPI), launched

in November 1983, which in addition to technologyspinoff and entrepreneu rship assistance will help the

State’s small high-technology firms compete forgrants u nder the Federal Government’s new SmallBusiness Innovation Research (SBIR) program. MPI,

created at the recommendation of the Governor’sCommission on SBIR Grants and initially fundedby a State grant, will be coordinated through anduse the resources of the Control Data BTC in Min-neapolis (see above). Private sector participation insuch initiatives is encouraged by State legislationpassed in 1983 that p rovid es tax credits for technol-ogy transfers or investments in qualified small busi-nesses, as well as for contributions to private sectororganizations like StarCo., MPI, the Minnesota

Cooperation Office (see above), and the MinnesotaSeed Capital Fund (see below).

Programs in entrepreneurship have also beencreated at nu merou s un iversities, typically sup ported

by private sector contributions and individual ex-ecutives loaning their time (see ch. 3). Conferencesand referal services connected with these programshave been helpful in mobilizing local professionalnetworks an d finding financing for aspiring stud ents

and local entrepreneurs.

q

q

q

Wichita State University established a Center forEntrepreneurship and Small Business Manage-ment in 1977. The force behind the creation anddevelopment of the program is a professor whois also a successful entrepreneur, but the Centeris supp orted by over 50 area businesses. In ad di-tion to seminars and pu blications, the Center hasan executive series that has brought in the headsof Federal Express and Mellon National Corp.,as well as local entrepr eneur ial talent. The Centeris about to start a small business incubator.The Institute for Constructive Capitalism at theUniversity of Texas is supp orted by Mobil, Shell,Tenneco, and others.

Cornell University’s Chair in American Enter-prise was endowed with funds from the OlinCorp. and the Continental Group.

Small Business incubators.–Another recentinnovation in business-university relationships is the

small business incubator or technical assistancecenter. Recent data on the role small business playsin innovation and job creation has sparked interestin this mechanism, which is modeled on the suc-cess of the Un iversity City Science Center in Phila-

delphia. In order to sustain the entrepreneur as hebrings his invention into the marketplace, thesefacilities often provide technical and financialassistance as well as low-cost office and laborator y

space (see ch. 3).

• The Advanced Technology Development Center(ATDC) at the Georgia Institute of Technologyis a new effort to promote indigenous high-tech-nology industry in the Atlanta area. The effortis State-initiated, but the private sector will con-tribute $1.7 million of the projected $5.1 millionbud get. Facilities now u nd er construction w ill pro-

vide low-cost space for entrepreneurs. As of 1982,

the Center was working w ith 30 compan ies. Oneof its most successful programs is an annual ven-ture capital conference that brings together start-up hopefuls with potential investors.

Geographic Investment.–Geographic invest-ment is a method of channeling risk capital andother financial resources to targeted areas and op-portun ities. Several State initiatives involve ventur ecapital mechanisms with explicit requirements tofund in-State endeavors (see ch. 2), but because theprivate sector generally prefers operating with no

strings attached, geographic criteria historically havebeen shunned. Recently, a few private sector ini-tiatives in this area have em erged. Organized ven-ture capital is composed of independent firms (55percent), corporate subsidiaries (27 percent), andsmall business investment companies (18 percent).As of mid-1983, the total pool under managementwas $9 billion. Large venture capital firms play animportant role in financing high-technology en-deavors, but the opportunities they identify oftenare not local, so their investments do not stay local.

Seed capital, on the other hand–at least when

flowing from organized seed capital firms-does tendto stay local. (Seed capital is also available from larg e

ventu re firms, but in this case it is difficult to define

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Ch. 5—Private Sector Initiatives q 61

and more difficult to trace.) It has been estimatedthat less than 2 percent of venture activity is targeted

for seed efforts, and there are only a few firms thatspecialize in seed investments, althoug h the n um ber

is growing. Interviews condu cted with four firms inthe San Francisco-Palo Alto corridor indicated thatthey tend to invest in enterprises within a one-hour

drive. In the case of formal seed capital firms,therefore, there appears to be a local economic im-pact; and the tendency may be even more pro-nounced for informal seed capital investments.

q

q

Bay Venture Group was established and com-pleted its first deal in 1976. The limited partnersare primarily wealthy individuals (in excess of $40-million net worth). They assume that fromconcept (seed) to public offering will take from8 to 12 years. Their deals are mad e on the ma rketpromise of “several hund red million d ollars” insales per year. Ideas are found “word of mouth, ”and the firm provides significant technicalassistance.

Alpha Fund is based in Palo Alto and raised $13million from individuals, corporations, and en-dowment funds to support seed investments. Itsbrochure states that “because of the close inter-action between Alpha and its investments,preference is given to opportunities in the SanFrancisco Bay Area.”

Where there is little local venture capital activ-ity, the private sector can seek to establish a“presence” by creating an investment vehicle to pool

local risk capital and en courage local entrepren eurs.

This approach, however, doesn’t necessarily applya geograp hic criterion. There is a greater likelihoodthat locational criteria wou ld be specified at the State

level (by a State government-initiated firm, or bya private sector pool w ith a specified aim of servingState economic needs) than locally.

q The Minnesota Seed Capital Fund was an out-growth of the Minnesota Business Partnership,a statewide business executives group (see below).

The fund has attracted initial capitalization of $10million from individual investors and several pen-

sion funds and support from major Minnesota

corporations. It was formed because capital frommore conventional sources like venture capitalcompan ies and ban ks is often not available to new

firms in their startup and early development

q

q

q

phase. It invests exclusively in Minnesota andworks closely with the Minnesota CooperationOffice, a nonprofit organization that providestechnical assistance to new bu sinesses (see above).

The Michigan Investment Fund (MIF) is a limited

partnership that was initiated by the Charles S.Mott Foundation. The Foundation, working with

a nonprofit small business expert, developed ablueprint for a limited partnership to primarilyserve the economic needs of the State. MIF plansto d irect 60 percent of its investment in-State, butnot all the funds will be invested in high-tech-nology firms. The remaining 40 percent will beused to establish relationships with out-of-Stateventure firms in hopes th at those investments will

lead later to capital returning to the State of Michigan. (The Mott Foundation has a blueprintfor a similar endeavor that will involve threeMichigan counties. Presently in the planningstage, the Flint River Capital Fund w ill work close-

ly with the General Motors Institute on new tech-nologies.)

The Cincinnati Chamber of Commerce, with theaid of the Gannett Foundation, is in the plan-ning stage of creating a venture capital firm. Thefirm will not be required to invest in Cincinnati.The Chamber feels that a local presence willenhance the likelihood of promoting entrepre-neurship but will not be directly responsible forgenerating this capability.In Cleveland, on th e other hand, the Gun d Foun-dation sponsored a study of the city’s economicprofile that recommended the creation of three

entities—one for research coordination, one fortechnical assistance, and one to provide local ven-

ture capital. The first two initiatives are in theplanning stage; the third, Primus Capital Fund,has $30 million capitalization and w ill start mak-ing investm ents in early 1984. These investm entswill be limited to Ohio, with an emp hasis on thegreater Cleveland area, and will be targeted for“high-growth” opportu nities in medical technol-ogies and factory automation.

Business/Civic Advocacy

one of the most p owerful resources that high-tech-nology firms can utilize to influence public policyis the p restige of their executives. Corp orate execu-

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——— —.

62 q Background Paper #2-Encouraging High-Technology Development

tives, because of their position, visibility, andbusiness connections, have the capa city to influencetheir peers and sup pliers as well as pub lic policy. The

“new” entrepreneurs—in California, David Packard

and Stephen Jobs; in Massachusetts, Alex and DeeD’Arbeloff, Kenneth Olsen, and An Wang—havehad considerable influence on public policy, both

as individuals and through the business groups they join. These organizations p rovide a broad-based net-

work for building consensus, generating ideas, andimplementing pr ograms. They also provide a meet-ing groun d for government officials and their private

sector counterparts and thereby play a crucial rolein shaping the economic priorities of States andlocalities.

q A prominent example is the Massachusetts HighTechnology Council (MHTC), one of the mostsuccessful business/ civic adv ocacy organizationsin the Nation. In 1979 they established a “socialcontract” with the Massachusetts government to

create 60,000 jobs if the State brought total taxesto a level competitive with the 17 other Statesagainst which local high-technology firms com-peted for technical talent. Taxes have dropped,and MHTC has fulfilled its part of the contract.

Trade Associations. -Trade associations, whichtry to influence both p ublic policy and the p racticesof their member companies, can be broad-based orspecialized. National trad e associations tend to focus

on Federal policy, but State groups promise to haveincreasing influence as the locus of governmentalresponsibility for economic development shifts to

State and local governments.q The National Association of Manufacturers

(NAM) and the American Business Conference(ABC) are broad-based associations. NAM hasover 13,000 member companies, over 80 percentof which are small businesses (employ under 500people). NAM has issued a white paper on th eimp act of HTD. ABC was established in 1980 andis comprised of mid-size high-growth firms.Membership is limited to 100 firms, and, although

ABC covers all indu stry sectors, high technologyis a particular interest. The chairman of ABC,

Arthu r Levitt, Jr., has prom oted 2-percent giving.• The Compu ter and Communications Indu stryAssociation and the American Electronics Asso-ciation (AEA) are examples of specialized trade

associations. AEA produced a highly publicizedstud y on the shortage of engineers and has issued

a policy statemen t encourag ing 2-percent targeted

giving by member firms.q MHTC is an example of a State-level specialized

trade association. Several governors have alsoestablished high-technology task forces with busi-ness members, but these groups are often tempo-rary bodies that function in an advisory capacity(see ch. 2).

Business Executive Associations.–These or-ganizations, which operate at the national, State,and local levels, usually are made up exclusively of business executives, although some include repre-sentatives of labor, education, and government.They typically have a small staff, rely on borrowedexecutives, and play an initiating role, although afew have implemented ongoing programs. Theseassociations provide a locus of power for business

executives, and in the past few years several localbusiness-executive groups have included high-tech-

nology in their development planning. State busi-ness-executive associations are also likely to become

a focal point for geograp hically motivated high-tech-

nology programs in the future.

q

q

q

Cleveland Tomorrow, Inc., created as the resultof a study of the Cleveland economy, is spear-headed by the business community. It has threeefforts und erway: a venture capital firm that w illinvest exclusively in Ohio, a research programthat w ill specialize in ap plied m anu facturing, anda progr am to p rovide technical assistance to localbusinesses.

The Cincinnati Chamber of Commerce receiveda grant from the Gannett Found ation to establisha venture capital firm. This effort began in part-nership w ith the city, the Cincinnati Enquirer,

and the chamber. Now in the p lanning stage, thefirm will seek private capital but will not havegeograph ic restrictions on investment. The cham -ber is also working with the University of Cin-cinnati to develop a research center specializingin applied manufacturing processes.The Santa Clara County Manufacturers Group,

established in 1978 as a mechanism for businesspeople to work with government on issues of mutual concern, has a diverse membership in-clud ing banking, technology, and real estate com-

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Ch. 5—Private Sector Initiatives q 63

q

q

panics. The organization has established a taskforce with the county district attorney’s office toexplore ways of preventing the loss of high-tech-nology trade secrets.Competitive Wisconsin, Inc. (CWI), establishedin 1981 to strengthen the State economy, is com-posed of representatives from labor, business, agri-

culture, and education. It has established a for-profit venture capital subsidiary that will investin Wisconsin enterprise. CWI will work with Wis-

consin for Research (WFR), a new group designed

to coordinate university research w ith the business

commu nity. WFR already has created a su bsidiary

that w ill be establishing bu siness incubators in the

State.The Minnesota Business Partnership, founded in1981, is credited with fostering the creation of the

q

Minnesota Seed Capital Fund and the MinnesotaCooperation Office, as well as several other H TDinitiatives in the State (see above).A 1981 Harvard Business Review article notedthat, “Besides California, whose organization was

founded several years before the Minnesota Busi-

ness Partnership, business executives in Ohio,Massachusetts, Pennsylvania, and Delaware have

joined to create similar grou ps. . . . Activity is stir-ring also in N ew York, New Jersey, Connecticut,Virginia, Indiana, and a few other States.” 4

~JudWn ~mi~ and John A. Cairns, “In Minnesota, Business is Pam

of the Solution,” Harvard Business R eview, vol. 59, No. 4, July-August1981.

Factors Affecting SuccessDifferent regions and communities have different

needs and different resources with wh ich to add ress

them. What works in one area may not work inanother, and it is unlikely that a single, all-purposeapp roach or program design will work in all settings.

While individual communities can learn from thesuccesses of others, local organizations and in-dividuals will have to experiment and innovate inorder to find their own approach to successfulpu blic/ pr ivate partnersh ip. This calls for creativity

and determination, but it also requires a detailedknowledge of local conditions and factors that arelikely to influence the success of their efforts.

Research conducted by SRI International hasidentified a n um ber of factors affecting p rivate sec-tor initiatives and joint pu blic/ private ventures forcommunity economic developments Perhaps themost important of these is the past history of pu blic/ private development initiatives in the com-munity: a strong history of collaborative efforts pro-vides a base of positive experience to build upon,as well as building trust and und erstanding amongbusiness, government, and comm unity group s. So-cial and economic conditions will also influence

5SN I n t e r n a t i o n a l , op. cit., pp. 2 - 3 .

what initiatives are needed and possible: tensionsin the community or weakness in its economy caninhibit private sector initiatives and cooperation.Stable political climate and local government witha efficient, probusiness image are p ositive influences,

as is the existence of interm ediaries, brokers, or or-ganizational mechanisms to bring together publicand private leaders.

How ever, no single factor explains wh y some com-

mu nities and regions have been more su ccessful than

others in nu rturing and benefiting from p rivate sec-tor initiatives for HTD. For every locational deter-minant identified in economic theory or implicit ingovernment practice, examples can be provided of cities that have several or all of the ingredients buthave not yet achieved success. A strong researchuniversity, skilled labor pool, available financing,the presence of corporate headquarters, transpor-tation, good climate, cultural am enities—all may bedesirable or necessary preconditions. But it appearsthat sustained effort and innovative behavior bypu blic and private individuals and orga nizations pro-vide a catalyst to bring the ingredients together.

OTA’s investigation of private sector initiativesfor HTD indicates that the local communities that

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64 . Background Paper#2-Encouraging High-Technology Development

have benefited the most have had three character-istics in common:

•

an organizational culture that prom otes a com-mon civic perspective and a positive attitudeabout th e attributes and p rospects of the region;

an environment that nurtures leaders, both

public and private, wh o combine an established

track record for innovation and entrpexeneur-

ship w ith a broader view of their commu nity’sresources and promise; anda network of business/ civic advocacy organiza-

tions that attracts the membership of top offi-cers of major comp anies and receives from them

the commitment to work on efforts of mutualconcern, including cooperation with the publicsector.

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Appendixes

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APPENDIX A

Descriptions of LocalHigh-Technology Initiatives

Huntsville, Ala.

High-Technology Related Bases in theLocal Economy

Activity declined at the Redstone Arsenal after WorldWar 11, and in the late 1940’s the 38,000-acre installa-tion was up for sale. In 1950, however, the Army (wishingto centralize its missile activities and make use of its in-vestment at Redstone) moved Wernher von Braun andhis team of 109 technicians from Fort Bliss, Tex., to theArsenal. Between 1950 and 1960 there was a buildup of Government operations and missile activity at the arse-nal. About 14,000 military and civilian personnel workedat the facility during these years.

After Sputnik was launched, President Eisenhower es-tablished the NASA Marshall Space Flight Center ona 1,500-acre island in the center of Redstone Arsenal in1960. NASA, unlike the Army, encouraged contractorsto locate in the area, and many—including Northrop,Lockheed, Boeing, GE, and IBM–came to Huntsville.The population of Huntsville grew from 16,000 in 1950to 72,000 in 1960, 126,000 in 1963, and 139,000 in 1970.During this period of tumultuous growth, the city reactedwith grace under pressure. The private sector built tracthousing, and, at one point, the city government was add-ing a classroom a day to local schools.

Von Braun left Huntsville in 1970, and the peak ex-penditure days of NASA were over. While many researchand development (R&D) people were transferred, how-ever, others stayed on to form their own companies. Thecity concentrated its efforts in the 1970’s on creating a

more diversified, though still high-technology-oriented,industrial base to make use of the skilled work force de-veloped by the arsenal. Today Redstone has 10,000civilian personnel and Marshall 3,500, but by the end

of 1983, commercial high-technology firms employedmore than 23,000 in Madison County and may employ

more than 35,000 by 1987.Besides the University of Alabama in Huntsville, thearea has John C. Calhoun Community College and J. F.Drake State Technical College. There is also one city andone County technical high school.

Initiative #1 —Establishment of University ofAlabama in Huntsville (UAH)

Background.-The establishment of UAH was theresult of the cooperative efforts of the Huntsville CityCouncil, the Madison County Commission, and theUniversity of Alabama in Tuscaloosa. In the early 1950’s,evening classes were offered in rooms of the Huntsvilleschool system. Responding to the increasing need forgraduate engineering and continuing education pro-grams, the city and county donated land to the univer-sity and worked out a financing plan. The first buildingwas opened around 1960. A research institute for pureand applied research also was developed. Today, UAHhas not only a full undergraduate curriculum but alsoa new Center for High Technology Management andEconomic Research.

Cost and Effectiveness. –Through a combination of community fund raising drives and the issuing of bonds,the city was able to proffer to the university initial financ-ing of $250,000, and $900,000 at a later date.

Transferability. -Nocontact was made with other citiesthat had developed or attracted universities.

Federal and S ta te Involvement.—The bond issue forthe research institute had to be approved by the State.

67

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Initiative #2—Research Park District/ Cummings Research Park

Background. -In March 1963, the City zoned 3,700acres as a research park district. (This zone is second insize only to Research Triangle Park). The ordinance pro-vided for a campus-like setting conducive to R&D ac-tivities and high-technology manufacturing. UAH is lo-

cated on 380 acres in this district. Cummings ResearchPark consists of 1,000 developed acres and is contiguousto UAH, which performs contract research for firms inthe park. There are 37 companies in the park, includingIBM, Teledyne, Boeing, and GE, with a total of 11,000employees. These firms are 75 percent nondep enden t ondefense. Almost all, however, are strictly related to theelectronics industry in one fashion or another. The cityrecently purchased 750 acres to expand th e park and willoffer sites at reasonable prices. Incubator space is beingconsidered.

Cost and Effectiveness. —The city paid for the 750 acresout of general funds and will also issue bonds.

Transferability. –The city was aware of Research

Triangle Park.Federal and S tate Involvement.—Possible use of U.S.

Economic Development Administration (EDA) funds forsite improvement.

Initiative #3—Huntsville-Madison CountyJetplex Foreign-Trade Zone/Industrial Park

Background. —In February 1983, 1,300 acres at the air-port became a Foreign Trade Zone (FTZ) after 3 yearsof community wide effort to obtain this designation. Theairport authority is the sponsor and manager. Companiesmay also apply for subzone status, which would give them

the advantages of the FTZ without having to move tothe airport.

Cost and Effectiveness. –Not applicable.Transferability. –FTZs (duty-free areas) are considered

attractive to electronics companies, especially those thatuse high value foreign components in their manufactur-ing processes. Lower duty is paid in an FTZ, and if fin-ished products are shipped outside of the United States,no duty is paid at all.

Federal and State Involvement.–U.S. Department of Commerce’s approval of FTZ status.

Initiative #4—Von Braun Civic Center

Background.-1n 1975 Huntsville built the Von BraunCivic Center. It contains a 9,000-seat arena, an exhibithall, a playhouse, a concert hall, and an art museum.The city was attempting to develop the amenities thatit lacked and that were important to the research andengineering population brought to the area by high-tech-nology operations. Such amenities were felt to be impor-tant to the long-term growth of the city’s high-technology

base. The Huntsville Symphony Orchestra, Broadwayshows, ballets, and professional touring companies ap-pear regularly in the Civic Center.

Local Organizations Working onHigh-Technology Initiatives

Huntsville Chamber of CommerceTelephone: (205) 533-4141Contact: Mr. Bruce Smalley

Huntsville Planning DepartmentTelephone: (205) 532-7353Contact: Mr. Dallas Fanning

Phoenix, Ariz.High-Technology Related Bases in theLocal Economy

High-technology employers in the Phoenix area includeMotorola, Honeywell, Digital Equipment, Sperry FlightSystems, Goodyear Aerospace, and GTE AutomaticElectric. Hughes Aircraft recently began construction of a major aerospace facility in the Phoenix area. ArizonaState University provides a broad variety of technical

degree programs and has conducted contract researchfor local industry.

Initiative #l— Excellence in Engineeringfor the 1980’s

Background.-1n late 1979, officials at Arizona StateUniversity (ASU) and the Phoenix Metropolitan Cham-ber of Commerce began to work together with Phoenixindustry to improve engineering education at ASU. Thesteering group for this effort was the Advisory Councilfor Engineering (ACE), representing over 40 Phoenix-

area companies. ACE developed a 5-year plan knownas “Excellence in Engineering for the 1980’s,” which pro-

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Append/x A—Descriptions of Local High-Technology Initiatives q 69

vialed recommendations concerning engineering educa-tion and facilities at ASU. ACE also acted as an ad-vocacy group, meeting with the Governmor and keyState legislators to obtain funding for needed improve-ments at ASU. The 5-year program emphasizes six areasof learning that are of interest to Phoenix industry: com-puters, computer-aided processes, solid state electronics,thermo sciences, transportation, and energy.

Cost and Effectiveness. –A number of the goals in the5-year plan already have been achieved, notably the crea-tion of 60 new faculty positions at ASU and the con-struction of a 5-story, 120,000-square-foot (ft

2) research

facility on the ASU campus known as the Center of Ex-cellence. The Center of Excellence is to be completedin October 1983 and will house joint university/privateindustry research efforts. The total budget for the 5-yearplan is $32 million.

Transferability.—Many communities and universitiesare aware of what has been accomplished at ASU.

Federal and S tate Involvement .–The State is the major source of funds for this initiative. However, it is ex-pected that local private industry in the Phoenix areawill contribute approximately $20 million to equip thenew research center.

Initiative #2—Zoning and Planning

Background.-The Phoenix Metropolitan Chamber of Commerce is very aware that high-technology companiestypically want to locate new manufacturing facilities inattractive surroundings. In order to ensure a good sup-ply of esthetically pleasing industrial sites, the Chamberhas established a committee to review Phoenix’s currentzoning ordinances. The committee hopes to persuadeCity officials to expand the number of industrial zoningdistricts to include a high-quality research park districtwith more restrictive design standards.

High-TechnologyLocal Economy

Cost and Effectiveness.-Staff time is the only costassociated with this effort. It is too early to judge the com-mittee’s effectiveness since it was just recently formed.

Transferability.–None.

Federal and State Involvement.–None.

Initiative #3—U.S. Small BusinessAdministration Loan Program

Background.-The city of Phoenix makes loans to smallbusiness under the section 503 program of the U.S. SmallBusiness Administration (SBA). The city conducts creditanalyses, and packages and makes loans to businesseswith a net worth of about $6 million for fixed-asset pur-chases. About 20 percent of these loans are made to sup-pliers to area high-technology companies. The city sellsdebentures to finance the program, as well as using Com-munity Development Block Grants (CDBG) funds.

Cost and Effectiveness. -The total budget for theoverhead of the operation is $250,000 per year. Noneof the loans made have been lost.

Transferability. –Tucson and several other cities have

similar programs.Federal and State Involvement .–The Federal govern-

ment has been involved through the SBA. CDBG andUrban Development Action Grant (UDAG) funds havealso been used to finance portions of several deals.


Office of Community ServicesTelephone: (602) 262-6004Contact: Mr. Brian H. Aby

Phoenix Metropolitan ChamberTelephone: (602) 254-5521Contact: Mr. Walter Caddow

San Diego, Calif.

of Commerce

Related Bases in the universities in the area offering programs n engineeringand science.

A number of high-technology companies have opera- Initiative #1 —Attraction of thetions in the San Diego area, including Hughes Aircraft, CaliforniaGeneral Dynamics, Cubic, General Atomic, NCR, Tele-

University of

dyne, Burroughs, and others. The University of Cali- Background. –In the 1960’s, when the University of

fornia-San Diego is a major research institution and is California was developing new campuses around theone of several campuses in the system designed to be State, the city of San Diego donated land to the univer-strong in technological fields. There are also several other sity as an inducement to the State to locate a major

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..

70 . Background Paper#2-Encouraging High-Technoloy Development

branch in th e city. The Un iversity of California-SanDiego was designed as a science-intensive institution fromits inception. The city also developed r oads, sewers, andwater systems in the area.

Cost and Effectiveness.— Since the city already own-ed the land from a Spanish land grant, the only cost asso-ciated w ith the donation w as the opportu nity cost of theproperty. The cost of local utility and road improvementswere also borne by th e city.

Transferability. -The quan tities of land th at the cityowned are somewhat unique. For this reason, transfer-ability is limited.

Federal and State Involvement.—The State was respon-sible for the construction and staffing of the university.

Initiative #2—Research Parks

Background. -At the time the university was built, thecity planned the surrou nding land that it owned for com-patible uses. One of these uses was research parks forcompanies that wanted locations near the university. Thecity prepared the app ropriate zoning laws, developedseveral parks, and managed and sold the land throughits property department.

Cost and Effectiveness. —The cost was only for sitedevelopment. The first development, Torrey Pines Sci-ence Park, is now almost fully developed and houses suchorganizations as the Salk Institute, General Atomic,Aerojet General, and others. The newer Campus PointResearch Park is now about two-thirds occupied by re-search operations of local, national, and internationalcompanies.

Transferability. –The city is aware of research parksin other cities.

Federal and State Involvement.—None.

Initiative #3—Land Development and Sale

Background.-The city has developed additional prop-erty from its land-grant holdings for sale to private in-dustry. Though some


cost discount was offered to the

purchasers in some cases, the principal advantage wasthe availability of fully developed sites in attractive areas.

Cost and Effectiveness. –The opportunity cost of anydiscounts given were the only identifiable costs of theinitiative. Such companies as Cubic and GeneralDynamics have acquired these properties.

Transferability.–The large quantities of land ownedby the city are unique.


Initiative #4—Marketing Program

Background. -At various times over the past 20 years,the city, council of governments, chamber of commerce,and the Economic Development Corp. have conductedstudies to determine the types of industries that wouldfind a San Diego location attractive and developed mar-keting programs to attract them. The most recent of thesestudies, known as “Operation Bootstrap,” was completedin the late 1970’s. Generally, these programs have focusedon such high-technology industries as electronics, aero-space, and biomedical products.

Cost and Effectiveness. –Staff time and organizationalbudgets are the principal costs. Numerous companies lo-cating in the area have worked with these developmentorganizations, including NCR, Sony, and others.

Transferability. –The staff of the Economic Develop-ment Corp. is well aware of the marketing programs runby other cities with which it competes.

Federal and State Involvement.—None.


Department of Planning, City of San DiegoTelephone: (619) 236-6450

Contacts: Mr. Michael Stepner, Assistant PlanningDirector and Mr. Tim O’Connell

San Diego Economic Development Corp.Telephone: (714) 234-8484Contact: Ms. Jane Signiago-Cox

Colorado Springs, Colo.

Related Bases in the solidated Space Operations Center (CSOC), for whichCongress has allocated $67 million, is expected to be fullyoperational by 1987.

The military presence in Colorado Springs is con- Eighty percent of the manufacturing base in the citysiderable. Besides the U.S. Air Force Academy, North is composed of electronics firms, and Colorado SpringsAmerican Air Defense (NORAD) headquarters, Peter- has established ties with venture capital firms in the San

son Air Force Base, and Fort Carson, the Air Force’s Francisco Bay Area. Ford Aerospace plans to add a $100-new Space Command located there last year. The Con- million complex to its current facility because of CSOC

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Appendix A—Descriptions of Local High-Technology Initiatives q 71

and NORAD. An advisory council made up of local elec-tronics executives helps the Engineering School at theUniversity of Colorado at Colorado Springs (UCCS) todevelop its curriculum. NCR Microelectronics has do-nated an integrated circuits laboratory to the university.

Initiative #l—Targeted Marketing Efforts

Background.-The chamber of commerce’s economicdevelopment department was established in 1970, whenit prepared a study that identified high-value, low-bulk products as being most appropriate for manufacture inColorado Springs. Many high-technology products havethese characteristics.

Cost and Effectiveness. –The high percentage of elec-tronics firms in the city is indication of the effectivenessof this initiative.

Transferability. —The chamber was aware of othercities’ marketing efforts.

Federal and State Involvement.-None.

Initiative #2—University of Colorado atColorado Springs

Background. -In 1965 a campus for UCCS did not ex-ist. Over the last 10 to 15 years, the chamber and exist-ing industry have lobbied for university development.Since 1976, there has been an even more determinedpush with incremental goals. The UCCS Task Force,made up of local business leaders who volunteer theirtime, came into being 2½ years ago.

Cost and Effectiveness. –It is expected the UCCS willbe designated a research university in early May, withdoctoral programs in electrical engineering and computerscience. UCCS also hopes to receive funding for a newengineering building.

Transferability.–No other cities which attracteduniversities were studied.

Federal and State Involvement.–The State awards thedesignation of research university. State funds also areinvolved.

Initiative #3—institute for Business andIndustrial Technology (IBIT)

Background.-The idea for this skills center, which hasbeen in operation for a year, emerged when the com-

munity perceived the need for an educational facility thatcould change rapidly with high-technology employers’needs. It trains qualified students to fill entry-level tech-nical positions, and there are currently 150 students inthe standard electronics curriculum, which provides theequivalent of a 2-year associate science degree in only11 months. The title to a condemned school buildingwas given to the city. The city then applied for Federalgrants for rehabilitation purposes. IBIT is staffed byemployees of the city’s Industrial Training Department,and the city also provides services in kind for the Insti-tute. There is no rent, and the city provides the fundsfor day-to-day operations.

Cost and Effectiveness. –The Institute was funded byComprehensive Education and Training Act (CETA)funds until October 1983, when the Job Training Part-nership Act took over. Federal funds are used for instruc-tors, textbooks, training supplies, and equipment. Someequipment has been donated by local industry as well.When Texas Instruments needed optical fabricators, IBITwas able to set up a program quickly. Equipment waspurchased and instructors were hired from Texas Instru-ments’ headquarters in Dallas.

Transferability. —Skills centers in other cities werevisited, but the local tax base in those cities would nothave provided for the extremely up-to-date facilities inColorado Springs.

Federal and State Involvement.–Heavy Federalinvolvement—the city said it could not have created thisfacility without Federal funds.


Economic Development DepartmentColorado Springs Chamber of CommerceTelephone: (303) 471-8183Contact: Mr. Frank O’Donnell

Industrial Training DepartmentCity of Colorado SpringsTelephone: (303) 578-6870Contact: Mr. Michael St. Clair

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72 qBackground Paper #Z-Encouraging High-Technology Development

Brevard County, Fla.High-Technology Related Bases in theLocal Economy

Cape Canaveral, first developed by NASA in 1957,profoundly affected the subsequent development of

Brevard County. Firms that originally came to the areato be close to the Cape (encouraged by NASA, as hadbeen the case in Huntsville) now have worldwide mar-kets. Members of the high-technology community in Bre-vard County include Dictaphone, Collins Avionics, andDocumentation. In 1978, Harris Corp. moved its head-quarters to Melbourne to be closer to its high-technologyfacilities located there. However, there are no local seedor venture capital funds.

Years ago, Kennedy Space Center offered an interac-tive audiovisual program called the Graduate Engineer-ing Education System (GENESYS) with worksite class-rooms from which students can tune into courses any-where in the State. GENESYS has recently been reinsti-

tuted with State and private funds, and Harris Corp. cur-rently uses it. To encourage more sophisticated trainingand continuing education for those in high-technologyfields, the University of Central Florida (UCF) hasopened the Lifelong Learning Center on the BrevardCommunity College campus. Students attend BrevardCommunity College for 2 years and then, if they wish,complete their junior and senior years at UCF’s Brevardcampus. Five master’s programs will be offered.

Initiative #1 —Melbourne Airport Authority“Incubator Facilities”

Background.-The naval air station installation in

Melbourne was deeded to the city in 1947, and in 1951Federal legislation permitted the facilities to be used forpurposes other than those considered airport-related. TheMelbourne Airport Authority saw this as a means of in-creasing revenue. For over 20 years, the barracks wererented at reasonable rates to fledgling businesses, anumber of which were high-technology oriented. Radia-tion, Inc., a company later merged with Harris Corp.,got its start in the barracks, as did Opto-Mechanik.Although most of the original buildings have been de-molished, several firms still claim the airport as home,including Hetra Computer & Communications andCampbell Optics. Florida Institute of Technology (FIT),currently celebrating its 25th anniversary, also was bornat the airport, and today several high-technolog y ex-ecutives are on FIT’s board of trustees.

Cost and Ef fect iveness .-The low cost space has helpeda number of local firms with innovative products getstarted, and the airport authority recovers its coststhrough rental income.

Initiative #2—Labor Needs Survey/ Educational Task Force

Bac&round.–1n 1982, the Brevard Economic Devel-opment Council, Brevard Community College, andother groups conducted a “Labor Needs Survey. ” Firmsin Brevard County were asked to project their labor re-quirements through 1986. An outgrowth of the surveyis the new educational Task Force, whose purpose is toencourage dialoge between industry (especially the high-technology segment) and education. The MelbourneArea Committee of 100 (an economic development unitassociated with the chamber of commerce) spearheaded

this effort, and the volunteer task force members repre-sent FIT and other educational institutions (BrevardCommunity College, UCF, and the branch of RollinsCollege at Patrick Air Force Base), the Brevard EconomicDevelopment Council, and industry leaders.

Cost and Effectiveness. —The Labor Needs Survey waswell received—there was an 80-percent response rate,with large high-technology firms accounting for muchof this—and the results of the survey served as a catalystfor further improvements of technical training and devel-opment.

Transferability. —Familiar with the output of educa-tional task forces in other parts of Florida.

Federal and State Involvement .—None.


Brevard Economic Development CouncilTelephone: (305) 453-9519Contacts: Mr. John McCauley, Executive Director, and

Mr. Bruce Ingram (located at Melbourne Chamber)

City of MelbourneTelephone: (305) 727-2900Contact: Mr. Edward Washburn, on retainer with the

city as city planner

Melbourne Airport AuthorityTelephone: (305) 723-6227Contact: Mr. Edward Foster, Director

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Orlando, Fla.High-Technology Related Bases in theLocal Economy

The University of Central Florida (UCF) will soon

have an endowed chair in Computer Science, the fourthsuch chair in the United States (Yale, Harvard, and MIThave the other three). About 90 percent of the graduatesof UCF remain in the area, which is home to half of allthe engineers in Florida.

The world headquarters of GE Robotics is in Orlando.Martin Marietta, which already has an older facility inthe area, plans to open a new plant in Orlando devotedto research and manufacturing of laser optics and micro-circuits. Westinghouse opened the world headquartersof its Steam Turbine Generator Division in Orlando in1983.

Though there is a shortage of venture and seed capital,the community does not view this as a serious problem.

Initiative #1 —Central Florida Research Park

Background.—In 1978-79, the State passed legislationenabling counties, in conjunction with universities, toform research park authorities. Orange County and UCFpetitioned the Florida Research and Development Commis-sion, the petition was approved, and the Orange Coun-ty Research & Development Authority was formed. Thisfive-person volunteer body, which oversees the park, ischaired by the provost of UCF, and its executive direc-tor is on a leave of absence from UCF.

The park is to the south of the university and is alsoclose to the new Westinghouse and Martin Marietta fa-cilities. It consists of 1,440 acres, 250 of which are com-pletely developed. It is not solely high-technologyoriented: any company, small or large, with researchneeds and/or capabilities in various disciplines is a can-didate. The key to the park is the university/industrylink, but the cooperation of the county has been impor-tant in its development. For example, it has permitted

the park to contract with the university to use UCF’sexcess sewage treatment capability. At some future date,when county treatment facilities are improved, the park will use those facilities.

Cost and Effectiveness.-The park is a privately fi-nanced venture. Some of these funds are borrowed andwill be paid back by the park. The acreage will be soldor leased except for one parcel of land owned by theuniversity, which will be leased on a long-term basis.

Ground soon will be broken for two incubator build-ings, and a third one is scheduled. These facilities arebeing planned and financed by a group of Boston devel-opers.

The American Electroplates’ Society will establish itsnew world headquarters in the park. The authority hasalso granted 40 acres to the Naval Training and Equip-ment Center (NTEC)-an R&D facility for training de-vices—and the Navy plans to invest $25 million in a facili-

ty of up to 300,000 ft2

. The project will be funded in Oc-tober 1984.

Transferability. –Research Triangle Park was studied,as were parks at MIT, Stanford, and Princeton.

Federal and State Involvement .—The Federal Govern-ment is involved only as an occupant of the park. TheState passed the enabling legislation and is involvedthrough the university.


Industrial Development Commission of Mid-Florida, Inc.Telephone: (305) 422-7159

Contact: Mr. Roy L. Harris, Executive Vice President

Central Florida Research Park University of Central FloridaTelephone: (305) 275-2275Contacts: Dr. Ralph Gunter, Executive Director, and

Mr. Ben E. Whisenant, Director of Marketing

Chicago, Ill.

High-Technology Related Bases in the Chicago, and others), well-known medical centers (Rush

Local EconomyPresbyterian –St. Lukes Medical Center among them),two major Federal research installations (Fermi and

The Chicago area is the home of several major univer- Argonne National Labs), and the headquarters of numer-

sities (University of Chicago, Northwestern University, ous technology-based companies in pharmaceuticals

Illinois Institute of Technology, University of Illinois at (Baxter-Trevenol, G. D, Searle, Abbott Laboratories and

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74 . Background Paper #2-Encouraging High-Technology Development

American Hospital Supply), communications and elec-tronics (Motorola, GTE Automatic Electric, Zenith,Gould), and chemicals and petrochemicals.

Initiative #1 —Mayor’s Task Force onHigh-Technology Development

Background.-The task force was established in August

1981 by Mayor Jane Byrne to “advise the City how itcould attract and develop high-technology growth indus-tries in the Chicago area [and] develop strong linksamong the city administration, the region’s universities,industries, and research and development centers. ” Dr.Walter E. Massey, director of Argonne National Labora-tory, was chairman of the task force with membershipfrom government, industry, and academia. In May 1982he also was named to the city’s Economic DevelopmentCommission.

The final report of the task force, submitted in October1982, presented 10 detailed recommendations, includingthe development of a seed capital corporation; improve-ments in precollege math and science programs; increased

cooperation between universities and industries; and theimportance of a welcoming attitude on the part of thecity. It also targeted four growth fields especially suitablefor the area. Since then a plan for the implementationof these recommendations has been developed at the re-quest of the Mayor and the Governor.

Cost and Ef fectiveness . –The time and effort of members of the task force were volunteered. Word proc-essing facilities at Argonne were used (pro bono) so thatall the city paid for was the printing of the report. Thetask force has resulted in increased public awareness andmedia attention to high technology, and it has encour-aged new linkages between various sectors of the city’seconomy.

Transferability.–The idea for the task force was pro-posed by an alderman at a City Council meeting.

Federal and State Involvement.–The chairman of thetask force was a Federal employee. Also, certain membersof the Task Force worked closely with members of Gover-nor Thompson’s High Technology Task Force, since thecity and State were working toward the same ends.

Initiative #2—High-Technology DevelopmentUnit, Chicago Department of EconomicDevelopment

Background. —This city unit was formed in October1981 as a staff initiative for the task force. It serves asa clearinghouse for all sorts of high-technology news andhappenings in the city and as a catalyst for other high-technology programs. It publishes a bimonthly newslet-ter, the “Chicago Tech Connection, ” focusing on perti-nent topics, interviewing area entrepreneurs, and listing

available Chicago resources. It is sent to members of theChicago High Tech Association, which has recently beenformed under the auspices of the department of economicdevelopment. The association also will host bimonthlyluncheons.Cost and Effectiveness. –The unit is funded by the city

budget, and the allotted funds cover staff salaries. Variousexpenses of the unit come under the aegis of other citydepartments. Since the publication of the first newslet-ter in January 1983, the unit has been receiving phonecalls continually, asking to see a sample copy of the news-letter and requesting information about the association.The association already has over 100 members.

Transferability.- The city is not aware of another cityhaving a unit similar to this one.


Initiative #3— Biomedical Research Park

Background.-The University of Illinois, the city, andthe State are cooperating in a joint venture to acquire

46 acres of land (mostly vacant) adjacent to the Univer-sity’s near west side campus and its newly opened genet-ics research center. The site is planned as a high-tech-nology research park, including a building formerlyowned by the Chicago Medical School, which will bedeveloped as an incubator facility. The university’s ar-chitectural school will do the landscaping of the Park.

Cost and Effectivness. –About 85 percent of the landarea of the park is in the custody of the city and theChicago Medical District Commission (CMDC). TheCity will turn over its share to CMDC, which has thepower of eminent domain over areas close to the Univer-sity of Illinois at Chicago. It is expected that the Statelegislature will turn the title to the Chicago Medical

School building over to the university for use by entre-preneurial firms. In a sense, the CMDC will be the man-ager of the park. The city plans to apply for$11 millionin U.S. Department of Housing and Urban Development(HUD) and EDA funds to be used for site planning andinfrastructure development.

Applied Molecular Genetics, Inc. (AMGen), a Califor-nia-based biotechnology firm, plans to break ground soonfor a pilot plant. AMGen chose Chicago because of itscentral location and proximity to scientific and medicalcenters and also because of city and State support. Boththe city and State have worked closely with AMGen tosecure a $2-million UDAG and an $8-million IndustrialRevenue bond (IRB) (guaranteed by Continental Bank).The city has received ny other inquiries about the pro-posed incubator space, where firms would have to makelease-hold improvements but would have ready accessto all the normal funding mechanisms and training pro-grams of the city and State.

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Transferability. -The city studied and/or visited Local Organization Working onresearch parks in Philadelphia, at the University of Utah, High-Technology Initiativesand the Incubator Space Project at Rensselaer Polytech-nic Institute in Troy, N.Y. The Task Force Report sug- High Tech Development Unit,

gests Control Data Corp.'s Business and Technology Chicago Department of Economic Development

Centers as models for incubator facilities. The high tech- Telephone: (312) 744-3911

nology unit has received a number of phone calls from Contact: Ms. Linda Darragh, CityPlanner

neighboring States regarding the new research park.F’ederaland State Involvement.—Federal funds have

been and will be employed as stated above. CMDC isa State-level entity, with members appointed by theGovernor.

- -Montgomery County, Md.


Related Bases in the

Montgomery County, Md., has a high concentrationof medical science installations, including the NationalInstitutes of Health (NIH), the Food and Drug Admin-istration, the National Library of Medicine, and theNaval Medical Center. NIH alone employs 13,000, andit has awarded 21 percent of its total R&D contractbudget to Montgomery County firms. Access to majoreducational institutions is easy—for example, JohnsHopkins, Georgetown University, and the University of Maryland, which provides an applied molecular biologyprogram.

The Department of Economic Development has beencourting high-technology actively since 1978. Its goal isto encourage existing high-technology firms (40 percent

of firms in the County) and to attract new companies.The majority of new high-technology jobs have comefrom the expansion of firms already in the county.

Initiative #1 —Shady Grove Medical Park

Background.-Shady Grove Medical Park is a 230-acremedically oriented science park. The inner core, 40 acres,is devoted to a hospital, an ambulatory care facility, anda psychiatric institute—all private institutions that arecurrently in operation. The outer area is intended formedically oriented companies engaged in R&D or man-ufacturing. The University of Maryland may establisha health research facility in the park.

Cost and Effectivenes s.-The county owned this land,and county funds were used for its development. Theland will be leased below market rate to companies whobuild in the Park. These companies will have access toIRBs, as well as loan guarantees from the Maryland In-

dustrial Development Financing Authority, The coun-ty currently is negotiating with four companies that maylocate in the Park.

Transferability.–A number of counties in Marylandare interested in Shady Grove, and they hope to developa similar type of area. Local officials recently traveled toNew Jersey to inspect Scanticon Princeton, a conferencecenter and hotel located in the Forrestal Center. Thistype of facility is being considered for Shady Grove,

Federal and State Involvement.–No Federal involve-ment. The State is involved only in the sense that thenormal State financing mechanism is available to thosebuilding in the Park.

Initiative #2—Upgrading Skills TrainingProgram/Corporation for Technical Training

Background.-The Upgrading Skills Training Programis run by the Department of Economic Development withCETA/JTPA funds. It involves all types of firms, high-technology included. It identifies firms that need to up-grade their employees’ skills and then works with thecompany to design a curriculum and select employeesfor the program. Half of the time is spent in a classroomand half on the job. Once the employee has been up-graded, the county will refer a eligible client to fill thevacated position.

The Corporation for Technical Training (CTT) is aquasi-public corporation whose board of directors, ap-pointed by the county executive, includes many execu-tives of high-technology firms. CTT's mission is to designand implement training programs that would expand thehigh-technology labor force. CTT will contract with vari-ous educational institutions in the area to provide theactual training. These programs were supplemented in

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December 1983 by the creation of the Technical Occupa-tions Employment Group (TOEG), a private nonprofitlabor exchange program. Using computers, TOEG testsapplicants for general and math skills and refers themto high-technology firms that are seeking new employees.

Cost and Effectiveness. -Instructors are paid by thecounty. The budget for the CETA/JTPA program de-pends on the needs of the companies. This program has

been operational for a year and appears successful. Thebudget for the first year of the (CTT is $230,000, and thatof TOEG is $410,000.

Tran sf erability . -In terms of the CTT, the County didnot study other areas.

Federal and State Involvement.–JTPA funds the “Up-grading Skills Training Program,” and funds for the CTTcome from the JTPA, the State, the county and, even-tually, from the private sector. TOEG’s budget comesfrom matching county and State funds.

Additional Comments

It is debatable whether Montgomery County’s commu-

nication/marketing efforts should be classed as a high-technology initiative since they are similar to many com-munities’ normal marketing approach. However, they aredefinitely geared toward high-technology and should bementioned because of their innovative features.

Of the county’s total economic development budgetof $650,000, some $140,000 is allotted for marketing. Onemonth of advertising in other areas is followed by a directmail campaign, with respondents receiving a booklet on“High Tech Business Opportunities in MontgomeryCounty, Maryland.” The Department also visits existingfirms frequently and conducts a tour of the county every2 years for high-technology executives (the executives pay

their travel expenses).An annual Consensus Conference held in May allows

corporate executives in the county to air their problems;two of the major issues at last year’s Conference weretraining and the lack of venture capital. The county hasbeen working with local and regional banks since thento try to arrange some help. There is also a plan to createa science advisory board to provide a forum for infor-mal communication between the County and the scien-tific community.

Local Organization Working onHigh-Technology Initiatives

Montgomery County Department of Economic DevelopmentTelephone: (301) 251-2345Contact: Mr. Duc Duong, Assistant Director of

Economic Development

Lowell, Mass.High-Technology Related Bases in theLocal Economy

Lowell’s promixity to Boston’s Route 128 and the aca-demic institutions in the Boston area is a key factor inits high-technology strategy. Another resource is the Uni-versity of Lowell, formed in the 1970’s through the merg-er of the Lowell Technological Institute and the LowellState Teacher’s College.

Initiative #1 —Wang World HeadquartersDecision

Background.-1n the mid-1970’s, the most serious issuefacing the city of Lowell was the fact that two-thirds of its industrial property was vacant. Several things oc-curred as a result of this problem. A new city managerwas hired, one from outside the area with no politicalties. The city’s Department of Planning and Developmentwas formed and now has a staff which is the second larg-

est in the State. With the support of this department,the city manager recruited Wang. The company openeda small manufacturing facility in Lowell because of thelow cost of the land. In 1978, when Wang was decidingon its world headquarters location, Lowell responded andeventually convinced the company to locate there.

Cost an d Effectiveness. -Wang chose Lowell for tworeasons. The city obtained a $5-million UDAG, whichwas loaned to Wang at 4-percent interest. Wang was alsoimpressed with the city’s Department of Planning andDevelopment, whose staff of 32 reduced red tape for thecompany and convinced it that development would beattractive and orderly. Since Wang opened in the area,many support industries have also sprung up with 30 to100 employees each. There is currently no vacant in-dustrial land, and the city is considering rezoning. InMay, Wang will begin construction of a $10 million re-search training center in downtown Lowell, in additionto its two 12-story office buildings and 250,000-ft

2man-

ufacturing facility.

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.Appendix A—Descriptions of Local High-Technology Initiatives q 77

Transferability.- Lowell was aware of the tremendous Local Organization Working onpotential and activity in the nearby Boston area and High-Technology Initiativesdeliberately set out to tap it.

Federal and State Involvement.—The Federal Govern- Department of Planning and Development

ment was the source of the $5-million UDAG. There was Telephone: (617) 454-8821

no State involvement. Contact: Mr. James Cook

Minneapolis-St. Paul, Minn.High-TechnologyLocal Economy


The Twin Cities are the home of such major computermanufacturers as Honeywell, Control Data, and CrayResearch. Other technology-based companies headquar-tered in the area include 3M and Medtronic. These largerfirms have spun off many smaller ones that are stilllocated in the area, most recently ETA, a supercomputerfirm. Roughly 34 percent of the area’s manufacturingemployment is high-technology oriented. Several venturecapital companies operate in the area, and the Univer-sity of Minnesota and local private colleges offer manytechnical programs. The area is noted for its activistbusiness leaders and a history of successful public/privatepartnership.

Initiative #1 —Blue Ribbon Task Force onResearch and Technology

Background. –This task force, appointed by Min-neapolis Mayor Donald Fraser, was composed of businessexecutives, venture capitalists, bankers, and others. Itsmandate was to design a program to increase the high-

technology component of the city’s economy. Amongthe recommendations in its report, published in August1983, was the creation of a high-technology park withadditional incubator facilities and low-cost office spacefor small firms.

As a result of the task force recommendations, Min-neapolis has just completed the development plan forTechnology Corridor, a 60-acre riverfront site betweenthe downtown area and the University of Minnesota.The area contains many underutilized buildings that,once renovated, would be appropriate for startups andsmall growing firms. The Minneapolis Business and Tech-nology Center (BTC, see below) and another private in-cubator facility are already located in the Corridor, and

the city hopes that their “graduates” will remain in thearea once their need for special support services is past.In addition, the site is coterminous with a State enter-prise zone, which will provide tax and other incentivesfor existing companies to locate in the Corridor. The city

hopes to attract research installations from some of themajor high-technology corporations in the region.

Cost and Ef fect iveness .-The task force was composedlargely of volunteers, so its cost was modest. Costs forland acquisition and building renovation have not yetbeen determined but may be considerable. The city hasentered into a cooperative, cost-sharing arrangement withthe University of Minnesota and also hopes to obtainadditional seed money from the State. The project willgenerate income in the form of rents and tax revenues,but it is too soon to project the eventual return oninvestment.

Transferability.–Similar task forces have been createdelsewhere, and Technology Corridor is similar to ini-tiatives undertaken in Philadelphia to leverage the re-sources created by the University City Science Centerand BTC (see below). These advantages exist in only afew other communities.

Federal and State Involvement.–No Federal involve-ment. The project will take advantage of State enterprisezone legislation and may obtain State funds for site ac-quisition and preparation.

Initiative #2—Energy Park Background. –Concerned with the loss of population

and employment in the central city, public and privateofficials in St. Paul saw an opportunity for job creationand economic development in the growing importanceof energy-related technologies and the strong high-tech-nology resources of the Twin Cities region. One resultwas Energy Park, a joint undertaking of the City of St.Paul and the State-chartered Port Authority of St. Paul,on which work was begun in 1981. It consists of 218 acresof mixed-use development that includes 950 units of housing, as well as retail, office, and manufacturing space.The buildings include both new and rehabilitated struc-

tures, including some 100-year-old railroad repair shops.All of the buildings are designed or retrofitted to behighly energy-efficient, and they are heated and cooledby a central plant whose heat pumps are connected toan aquifer 500 ft beneath the site.

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Related development efforts in St. Paul include theHomegrown Economy Program, which provides finan-cial and technical assistance and incubator space to newand existing small businesses that will create quality jobsand diversify the local economy; and the recently an-nounced World Trade Center in downtown St. Paul, inwhich 10 percent of the building has been reserved asincubator space for small businesses and spinoffs that will

generate exports. These efforts emphasize modernizationand advanced technology applications, as well as newhigh-technolog y products.

Cost and Effectiveness. –Public costs of Energy Park total almost $50 million, including two UDAGs total-ing $15.5 million and an EDA public works grant of $2.3million, plus $31 million in IDBs issued by the city andloaned to the Port Authority, which administers thePark. The Port Authority has issued additional IDBs,most of which have been bought by private investors andlocal financial institutions. Private investment in the park will eventually exceed $100 million.

The park includes a 240,000-ft2incubator facility, Con-

trol Data’s Energy Technology Center, which houses

some 20 new companies. One of these is ETA, a firmrecently spun off by Control Data to develop supercom-puters, which plans to begin construction of its own200,000-ft

2building in the park in late 1984. Other

technology-related tenants of Energy park include GNBBatteries Inc., a manufacturer of advanced automobilebatteries, as well as a number of small computer- andenergy-related manufacturing and service companies. ThePort Authority hopes that other firms spawned by theEnergy Technology Center and the St. Paul BTC (seebelow) will eventually lease or build in the park, and pro-

jects the creation or retention of 6,500 jobs over 5 years.Transferability. —No other cities’ initiatives were

studied, but the Port Authority has received inquiries

and visitors from a large number of economic develop-ment agencies, utility companies, and foreign countries.

Federal and S ta te Involvement.—Federal involvementincluded an EDA grant and UDAG funds for site acqui-sition and rehabilitation, as well as tax exemptions forIDBs issued by both the city and the Port Authority. St.Paul’s other initiatives have made use of CDBG, UDAG,and SBA loan programs. State funds will be involvedin the World Trade Center.

Initiative #3—Business andTechnology Centers

Background.-The original Control Data BTC was

established in St. Paul in 1979, and the Minneapolis BTC

was established in 1982. These incubator facilities are im-portant components of a “job creation network” that pro-vides small enterprises in the Twin Cities with the serv-ices and facilities they need to survive. The BTCs them-selves are a profit-making venture of the Control DataCorp., but prospective clients are referred to them bythe city governments and local banks. They maintainclose ties with other HTD organizations, such as the Min-

nesota Cooperation Office and the Minnesota Seed Cap-ital Fund, and they provide a necessary foundation forsubsequent business development initiatives like StarCoand Project Innovation (see ch. 5).

Cost and Effectiveness. –The St. Paul BTC consists of two existing buildings that w ere purchased and renovatedby Control Data w ithout financial assistance from thecity, the first containing 200,000ft

2of mixed office and

manufacturing space and the second 100,000 k 2of manu-

facturing space. The Minneapolis BTC contains 200,000ft

2of mixed-use space in a building that was also pu r-

chased and renovated without public funds. The spaceis leased to small new enterprises, and Control Data pro-vides the tenan ts with shared services, including com-

puter time and technical assistance as well as utilities andmaintenan ce, at reasonable rates.

These BTCs have proven to be highly effective in pro-smoting the survival and grow th of small entrepreneurialfirms. The St. Paul BTC has helped to create 126 newcomp anies rep resenting over 1,000 new jobs. While asmany as 80 percent of all new businesses fail in the first5 years, the surv ival rate for St. Paul BTC clients is 88percent over the same period. The Minneapolis BTC isfully occupied after less than 2 years and has alreadyhelped to launch 113 new comp anies. The m ajority of tenants in both BTCs are service companies.

Tranferability.–These efforts have been widely andsuccessfully replicated. BTCs have already been estab-

lished in 10 other U.S. cities, including Philadelphia (seebelow), Toledo, and Baltimore. The BTC in Charleston,S. C., has in 2 years helped to launch over 100 new firms,most of them minority owned. Control Data plans toopen as many as 13 additional BTCs during 1984. Manyuniversities and communities have established similar in-cubator facilities, often citing the BTCs as their models(see above and ch. 3).

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City Planning DepartmentCity of MinneapolisTelephone: (612) 348-2576Contact: Mr. Philip Meininger

Port Au thority of the City of St. Paul

Telephone: (612) 224-5686Contact: Mr. Ken Dzu gan, Project Director

Division of Business RevitalizationDepartmen t of Planning an d Economic DevelopmentCity of St. PaulTelephone: (612) 292-1577Contact: Mr. Alan D. Emory, Deputy DirectorBusiness and Technology CentersControl Data Corp.Telephone: (612) 853-8802

Contact: Mr. Wilbur D. French, Vice President

Albuquerque, N. Mex.High-Technology Related Bases in theLocal Economy

Sandia Laboratories, a federally funded research facili-ty, started operations in the early 1950’s and currentlyemploys 7,000 people, of whom 3,000 have advanced de-

grees in physics, chemistry, and electrical engineering.Other high-technology emp loyers in the Albuqu erquearea are GTE Lenkurt, Sperr y Flight Systems, Intel,Signetics, and Motorola. Albuquerqu e is the h ome of the University of New Mexico, which has a total enroll-ment of 23,000 students and provides technical degreesin a n um ber of fields.

Initiative #l—Venture Capital Conference

Background. -Albuquerque officials were disturbed bythe number of companies that have started up locally

and then have had to relocate to get venture capital. Oneexample of such a company is Microsoft, which is now

a multimillion dollar operator. To counteract this trend,the Albuquerque Industrial Development Service (AIDS)identified sources of venture capital available locally (onlytwo or three) as well as sources in other parts of the coun-try. Last year, AIDS cosponsored a conference on ven-ture capital funding that was attended by 25 to 35 localentrepreneurs who listened to presentations by a numberof persons involved in venture capital financing.

Cost and Effectiveness.-Minimal cost. While no dealswere struck at the venture capital conference (this wasnot its purpose), it did serve to acquaint local businessinterests with the financing opportunities available. AIDShas no plans to sponsor a similar conference in the futurebut plans to work on an individual basis with companies

seeking this type of financing.Transferability. -AIDS is aware that other communi-

ties have sponsored conferences of this type, but did notspecifically seek the advice of other communities.

Federal and State Involvement.–Former U.S. SenatorJack Schmitt gave the keynote ad dress at the venturecapital conference.

Initiative #2—incubator Space

Background.-AIDS owns a 40,000-ft2

building whichit leases at below market rates to encourage developmentof new or expanding industry. In the past the facility hasbeen used primarily as temporary quarters by such high-technology companies as Motorola and EG&G. A newcompany planning to manufacture wind-driven energydevices (a Sandia Labs spinoff) began leasing 5,000 ft

2

in May 1983.Cost and Effectiveness. –AIDS has owned its building

since 1962, so the only ongoing costs are for insurance,property taxes, and utilities. When the building is fullyoccupied, the organization breaks even on expenses.AIDS is pleased with the building since it provides onemore way that it can accommodate the needs of new and

expanding industry. Discussions have been held aboutbuilding more space, but this has met resistance fromlocal real estate developers who do not want additionalcompetition.

Transferability.-AIDS has not investigated incubatorbuildings in other communities, nor have other commu-nities inquired about its space.



Albuquerque Industrial Development ServiceTelephone: (505) 842-0400

Contact: James A. Coven

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Binghamton, N.Y.


The Binghamton area contains a number of high-tech-nology companies, including IBM, General Electric-

Aircraft Equipment Division, Singer-Link Division, andUniversal Instrument. In addition, Savin Co. opened anew facility in the Binghamton area in 1981. The StateUniversity of New York (SUNY) at Binghamton beganoffering a master’s degree program in electrical engineer-ing in fall 1983.

Initiative #1 —High Technology Council

Background.-The Broome County Chamber of Com-merce formed the High Technology Council in 1980. Thecouncil is composed of representatives from local govern-ment, private industry, educational institutions, andother organizations. The chamber of commerce serves

as staff for the council. The main thrust of this grouphas been to improve educational opportunities for en-gineers in the Binghamton area. The council found thatdevelopment of local graduate engineering training wasthe area’s biggest need in order to retain, expand, andattract high-technology employment. The council com-missioned a study by the National Center for Higher Ed-ucation Management Systems to verify the area’s needand worked actively at the State level to obtain approvaland funding of the engineering program at SUNY-Bing-hamton.

Cost and Effectiveness. -SUNY-Binghamton began of-fering a master’s degree in electrical engineering in fall1983. Local employers are pleased that the program was

approved and that the State legislature reacted so quicklyto the area’s need. By 1987, it is expected that SUNY-Binghamton will award master’s degrees in mechanicaland industrial engineering, and provide the last 2 yearsof engineering training at the undergraduate level.

Transferability. –The High Technology Council isaware of efforts by other communities to attract and re-tain high-technology employment. Specific areas investi-gated included Long Island, N. Y., and Raleigh, N.C.

Federal and S tate lnvolvement.-State funds will pro-vide the bulk of money for the engineering program at

SUNY-Binghamton. Local industry also plans to donatefunds and equipment to the engineering program.

Initiative #2—incubator Space

Background.-A 27,000-ft

2

incubator facility has beenin operation in the Binghamton area since themid-1970’s. The building is owned and operated by theBroome Country Industrial Development Agency, a unitof county government. The building, formerly a bowl-ing alley, was donated to the county by a local companyand has been used to foster growth of emerging high-tech-nology businesses and to serve as temporary quarters forcompanies locating in the Binghamton area. The coun-ty has used two low-interest revolving loan funds to pro-vide financial assistance to building occupants.

Cost and Ef fec t iveness . –Local officials are pleased withthe success of the incubator building. Two high-technol-ogy-related companies employing a total of over 200

workers have been developed in the facility and now areoperating independently. The building currently is oc-cupied by four companies, three of which are high-tech-nology-related.

Transferability. –Binghamton’s incubator facility hasbeen publicized in economic development journals andhas been investigated by other communities.

Federal and State Involvement . —The county receiv-ed a grant from EDA to modify the building for industrialuse. EDA funds were also used to establish one of thecounty’s low-interest revolving loan funds. AppalachianRegional Commission funds were used to establish theother loan fund.


Broome County Chamber of CommerceTelephone: (607) 772-8860Contact: Mr. Hal Kammerer

Broome Country Industrial Development AuthorityTelephone: (607) 772-8212Contact: Mr. Peter Kay

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Appendix A—Descriptions of Local High-Technology Initiatives . 81

Cincinnati, Ohio


Cincinnati is the home of Cincinnati Milacron, aleader in the robotics industry, and General Electric has

its jet engine operations in the area. The University of Cincinnati offers a variety of technological degrees. TheU.S. Environmental Protection Agency (EPA) also hasa major research facility in the area.

Initiative #l —Cincinnati VentureCapital Fund

Background.-In October 1982, the city asked for andreceived a grant of $150,000 from the Gannett Founda-tion (the Cincinnati Enquirer is a Gannett paper). Thecity will contribute at least $50,000 (using CDBG funds)and, combined with the Gannett grant, this will providethe startup for a venture capital pool. A blue ribbon com-

mittee hopes to raise an additional $15 million in privatefunds. The venture capital fund will be private once inoperation.

Cost and Ef fec tivenes s . –The cost to the city will beat least $50,000. It is felt the fund will be most effectiveon a private basis. It will lend capital wherever deemedappropriate, anywhere in the country, but will encouragerecipients to explore the possibility of moving to Cincin-nati with potential investments. The board of directorswill be made up of knowledgeable people from the privatesector. The chamber and the city will have direct input.

Tran sferability. -Minn es otans program was studied,though it was decided that a State fund was too restric-tive and could not be as successful as a private one.

Federal and State Involvement .–Use of CDBG funds.

Initiative #2—Long View Research/ Manufacturing Park (tentative name)

Background.-The city bought a former State hospitalproperty (Long View) for $1.25 million and hopes theState will give additional acreage to forma 150-acre site.There is also a 150-acre golf course adjoining this prop-erty, which the city also hopes to buy through a grantarrangement using UDAG, EDA, or CDBG funds. Siteimprovements for this intiative will cost about $6.5 mil-lion more, and again the city will have to arrange financ-

ing, possibly through a combination of Federal, State,and city funds. Federal and State funds also will be re-quired to complete a highway interchange in the area.

Cost and Effectiveness. —The $2 million for the first150 acres will come out of the city’s budget.

Transferability.—City officials are aware of researchparks in other cities.

Federal and State Involvement.—Definite use of Fed-eral funds. State funds will probably be used also.

Initiative #3—institute of AdvancedManufacturing Sciences (IAMS)

Background. -LAMS will be located at Long View andwas created at the initiative of the city and chamber of commerce. The State will lend the city $8 million for itsconstruction, and the city will donate its 300 acres tothe Institute. IAMS will support itself through con-tractual research, Federal research grants, and by leas-

ing the land to appropriate tenants, i.e., those who ar eresearch-oriented. It will be a combination of a factory/ laboratory environment, where new technologies maybe developed or new applications discovered for existingones. The University of Cincinnati is 10 to 20 minutesaway, and it is hoped there will be interaction. IAMSalso would attract faculty members to the university.

Cost and Effectiveness. –The startup costs of IAMSwould be paid from the university (State budget) and pri-vate contributions.

Transferability.–No apparent transferability, thoughinitiative is not unlike other specialized research centers.

Federal and S tate involvement.—Heavy State finan-cial involvement.


Department of Development, City of CincinnatiTelephone: (513) 352-3783Contact: Mr. Ralph D. Grieme, Jr. (industrial

development consultant on retainer to the city)

Cincinnati Chamber of CommerceTelephone: (513) 579-3100Contact: Mr. Bruce Crutcher

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Portland, Oregon


High-technology companies in the Portland area in-clude Tektronix, Electro-Scientific Industries, Intel,

Floating Point Systems, Wacker Siltronic, and HewlettPackard. Technical degree programs are offered at severalschools in the area, including Portland State Universi-ty, the Oregon Graduate Center, and the Oregon HealthSciences University.

Initiative #1 —Marketing the Portland Area

Background. -Officials in the three-county Portlandarea have begun a coordinated effort to market and de-velop their comm un ity to attract new ind ustry. Muchof this effort is directed toward attracting high-technology

jobs. A steering group for this effort was formed in early1983 and is called th e Metropolitan Chambers Economic

Development Council. The steering group has estab-lished six task forces composed of representatives fromlocal government, private industry, chambers of com-merce, educational institutions, and other organizations.The task forces are addressing such issues as coordinatedprivate/public funding of marketing efforts in the Port-land area; labor availability and training; retention of existing industry; development of industrial sites; andState legislation that would encourage Oregon’s devel-opment.

Cost and Effectiveness.—Portland area officials arepleased with the success of their marketing efforts, asdemonstrated by recent plant location activity. Costs formany of the area’s marketing activities (advertising, bro-chure preparation, direct mail campaigns) will be sharedby both the public and private sector. Mayor Frank Ivan-cie has made a special effort to recruit Japanese high-tech-nology companies into the Portland area.

Transferabiility.-Of ficials are aware of high-technologymarketing efforts in other communities.


Initiative #2—Portland State UniversityExpansion

Background. —Portland State University, the area’slargest technical-degreegranting institution, is locatednear Portland’s central business district where expansionspace is limited. A university benefactor recently donateda high-powered computer to the school, and the univer-sity faced the possibility of not having sufficient spaceto house the new (and much needed) computers. Thecity of Portland agreed to lease a vacant city-ownedbuilding to the university for $1 per year. The buildingis being renovated and will contain, in addition to theuniversity’s new computer, PSU’s enginering school andphysics department.

Cost and Effectiveness.-Th e city’s action has been wellreceived by community leaders. The cost to the city forthis initiative consists of the revenue lost because thebuilding is not leased at market value. However, the uni-versity will have to purchase the building or pay marketvalue in the near future.

State and Federal Involvement.–State funds were usedto prepare the city building for occupancy.


Portland Chamber of CommerceTelephone: (503) 228-9411

Contact: Ms. Sharon KafouryPortland Development CommissionTelephone: (503) 796-5300Contact: Mr. Carter MacNichol

Philadelphia, Pa.

High-Technology Related Bases in the Laboratories, Commodore Computer, Sperry Univac,

Local Economy General Electric-Space Division, Franklin Computer, andKulich & Soffa. Among the many colleges and univer-

The Philadelphia metropolitan area is the fourth most sities located in the area are the University of Pennsyl-populous in the country. As such, it is a major manufac- vania, Drexel University, and Temple University. Theturing, banking, education, insurance, and trade center. Philadelphia area also has one of the highest concentra-High-technology companies operating locally include tions of medical schools—six—anywhere in the UnitedSmith-Kline Beckman, McNeil Pharmaceutical, Wyeth States.

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—.Appendix A—Descriptions of Local High-Technology Initiatives q 83

Initiative #1 —University City Science Center

Background.–According to Philadelphia officials, theScience Center is the country’s only urban researchcenter. The center is located in West Philadelphia on 16acres of land that were cleared and prepared for redevel-opment by the city of Philadelphia. The city, in turn,sold the land for development to a consortium of 28 col-

leges, universities, and professional health institutions.The city and the consortium currently have a redevelop-er’s agreement whereby the city will sell additional landas it is needed. At the present time, the Science Centerhas nine buildings containing 1.1 million ft

2 of space andhouses over 60 companies and organizations employingapproximately 5,000 workers. Many of the companies areengaged in high-technology activities, and the center hasbeen a breeding ground for over 30 new businesses, someof them also in the high-technology sector. The two mostnotable examples of high-technology companies that gottheir start in the Science Center are Centocor and Bio-logical Energy.

Cost and Effectiveness.-It is hard to estimate the cost

of this project. Front-end costs for the cit y of Philadelphiaincluded land acquisition, demolition, and upgradingutility services. Local officials are pleased with the suc-cess of the Science Center to date, Long-range plans forthe Science Center call for it to contain 5 million ft

2of

space (representing an investment of $250 million) andhouse 20,000 employees.

Transferability. —The Science Center has been visitedby representatives of over 50 cities in the United Statesand abroad.

Federal and State Involvement.—Federal urban renew-al funds were used to prepare land for development. TheFederal Government is also one of the major tenants inthe center, with regional offices employing a total of 2,000people. Pennsylvania Industrial Development Authori-ty funds were used to help finance construction of build-ings. A $5-million UDAG has been received for construc-tion of a residential conference center.

Initiative #2—Business and TechnologyCenter

Backgr ound .–Con tr o l Data Corp. has agreed toestablish a Business and Technology Center (BTC) in

the city of Philadelphia. Control Data has purchased anexisting 300,000 ft2 building that will be renovated andleased to other companies, The building is located ona 5-acre site adjacent to a 60-acre abandoned railroadyard, which the city of Philadelphia plans to purchaseand redevelop, using the BTC as an anchor. It is hopedthat companies that outgrow the BTC will constructfacilities in the adjacent parcel. Local community groupsand colleges have initiated training programs in connec-tion with th e BTC.

Cost and Effecriveness.-It is too early to judge the ef-fectiveness of this initiative. However, city officials hopethat this development will offer reasonably priced alter-natives for companies once they pass the product devel-opment stage. Cost of purchasing and renovating the300,000 ft

2building is $5.9 million. It is hoped that half

of the building will be ready for occupancy by the endof 1983. Costs of purchasing the adjacent 60-acre site andpreparing it for development have not been determined.

Transferability. –Control Data Corp. has establishedsimilar developments in 11 other cities, including Balti-

more, Toledo, and Minneapolis-St. Paul, and plans toopen as many as 13 additional BTCs in 1984 (see aboveand ch. 5).

Federal and State involvement.–A $1.3-millionUDAG grant was obtained to purchase the 300,000-ft 2

building.


Departmen t of Comm erce, City of Philadelph iaTelephone: (215) 686-7302Contact: Mr. John ClaypoolParkside Association of Philadelphia

Teleph one: (215) 877-1199Contact: Mrs. Ella Francis, Presiden t

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————.


Oak Ridge, Term.


The U.S. Department of Energy’s (DOE) research and

manufacturing facilities employ 17,000 people in the Oak Ridge area. Other high-technology employers are EG&G-ORTEC, Boeing Co., Tennelec, Remote Technology,and Elo Graphics. The University of Tennessee at Knox-ville (located 25 miles east of Oak Ridge) offers a widevariety of technical degree programs. In addition, theUniversity of Tennessee operates the Oak Ridge Schoolof Biomedical Sciences.

Initiative #1 —Incubator Space

Background.-The city of Oak Ridge owns a 12,000-ft2

incubator building which has been operating for 2 years.This is the city’s second incubator building; the first con-

tained 7,500 ft

2

of rentable space, was in operation for15 years and was recently demolished.Cost and Ef fect iveness . -Cost of constructing the new

building was $300,000, and it is currently fully occupiedby seven companies, six of which are classified as high-technology firms. The first incubator building led to de-velopment of at least two manufacturing companies nowemploying a total of 110 people, although neither of thesecompanies was in a high-technology field.

Transferability.-The city is aware that other commu -nities have built incubator space but has relied solely onits own experiences.

Federal and State Involvement.–The city received a$96,000 grant from the Appalachian Regional Commis-

sion to help construct the new incubator building.

Initiative #2—industrial Site Program

Background .–Since 1965 , the city of Oak Ridge h asdeveloped three industrial parks containing a total of 300acres. Roughly half of the acreage has been sold to newand expanding industry and roughly 20 percent of thisamount (30 acres) has been purchased by high-technologycompanies.

Cost and Effectiveness. -Generally, the city purchasesland for development at the prevailing market rate, paysto extend utilities to the site, and then resells the landto industrial users for less than the cost of comparable

land in the Oak Ridge area. The city is pleased with itsindustrial site program and is currently negotiating to

buy an additional 280 acres for industrial development.In the last 3 or 4 years, city officials have seen an increasein the number of high-technology companies interestedin low-cost industrial land.

Transferability. -other communities in east Term=have visited Oak Ridge to investigate the city’s industrialparks.

Federal and S tate Involvem ent.–The city of Oak Ridgehas used DOE funds to purchase land for this program.In addition, the city received a $276,000 grant from theAppalachian Regional Commission to provide utilityservices at one industrial park.

Initiative #3—Selection of New Contractor-Operator for DOE in Oak Ridge

Background.-DOE recently selected Martin-MariettaCorp. as the new contractor-operator for its Oak Ridge

facilities. The Oak Ridge Chamber of Commerce andcity officials had desired that the company selected byDOE address the community’s private employment needsby encouraging development of spinoff companies andassisting in attracting support industries to the area. DOEtherefore agreed to add a clause in its request for pro-posal that emphasized the need for the new contractor-operator to be responsive to the community’s privateemployment concerns.

Cost and Effectiveness. –Staff time is the only costassociated with this initiative. It is too soon to gauge itseffectiveness since the new contractor-operator has onlyrecently been selected.

Transferability.-Oak Ridge officials report that this

approach was also used by a community in the State of Washington.

Federal and S tate Involvem ent.—DOE cooperation isrequired.


City of Oak RidgeTelephone: (615) 483-5671Contact: Mr. Ric Sonnenburg

Oak Ridge Chamber of CommerceTelephone: (615) 483-1321Contact: Ms. Louise Dunlap

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Austin, Tex.


The University of Texas is a major institution of higherlearning and one of the wealthiest, with a permanent en-dowment fund of approximately $2 billion. There areabout 25 science and engineering laboratories at the uni-versity’s 475-acre Balcones Research Center. Plans callfor a new facility to house the Center for Electromechan-ics and the Center for Energy Studies.

In the late 1950’s, four graduates of the University of Texas School of Engineering founded Tracer, Inc., whichnow employs about 1,500 at its Austin headquarters. Be-tween 1965 and 1980, Austin’s manufacturing employ-ment increased by 25,(X)0 jobs. IBM, which arrived in1967, focuses its worldwide development of office systemsin Austin. IBM has been joined by Texas Instruments,Motorola, Data General, Advanced Micro Devices,

Rolm, Tandem Computers, and others. This high-tech-nology base is one of the reasons Austin was recentlyselected over 50 other communities as the site of theMicroelectronics and Computer Technology Corp.

Initiative #l—Targeted Marketing Effort

Background.–In the early 1960’s, local leaders of Austin were aware that the job base of the city had tobe expanded. Austin was not as well situated geograph-ically for heavy industry as some Texas cities, and therewas concern for the environmental problems those in-dustries might bring. A University of Texas Bureau of Business Research study recommended that the cityshould recruit high-technology industries.

Cost and Effectiveness. —Since the mid-1960’s, the Eco-nomic Development Department has actively solicited


these “clean” industries. Their efforts have met with greatsuccess. This year’s economic development budget is ap-proximately $170,000. Between 70 and 80 percent of thisbudget is geared toward attracting high-technology firms

and the remainder toward nonpolluting low-technologyoperations that would provide jobs for less skilledworkers.

Trans ferabi l i ty .—Aus t in is aware of other cities’marketing efforts.


Initiative #2—Austin Community College

Background. –Responding to a need in the city thatwas emphasized by the chamber, the Austin Independ-ent School District (AISD) established Austin Commu-nity College 5 years ago. It is housed in AISD facilitiesand offers academic courses at the freshman and sopho-

more levels; occupational and technical education pro-grams such as electronic technology; and adult educa-tion courses.

Cost and Effectivenes s.-20,000 students are enrolledin Austin Community College. The school is funded bythe State and by student tuition.

Transferability. -Other cities have similar facilities.Federal and State Involvement.–State funds employed.


Economic Development DepartmentAustin Chamber of CommerceTelephone: (512) 478-9383Contact: Mr. John H. Gray, Manager

San Antonio, Tex.

Related Bases in the Initiative #1— Mayor’s High-TechnologyAction Plan

High-technology establishments in the San Antonioarea include branch plants of Datapoint, Advanced Mi-cro Devices, Tandy, Harris-Farinon Division, and Con-

trol Data. With the exception of Datapoint, these haveall opened plants in the area in recent years. San An-tonio is also the home of the Southwest Research Insti-tute and the South Texas Medical Center. The Univer-sity of Texas at San Antonio provides degree programsin a number of technical fields.

Background.-San Antonio’s Place in the Technology

Economy : A Review of Opportunities a nd a Bluep rint

for Action, a 65-page report (plus l77-page appendix of

high-technology readings) written by San AntonioMayor Henry G. Cisneros, was distributed to the publicin late 1982. The report addresses eight broad initiativesthat San Antonio can take to expand its base of high-technology employment, including developing researchparks, improving technical education, creating venture

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86 q Background Paper #2-Encouraglng High-Technology Development

capital firms, attracting foreign high-technology invest-ment, and encouraging high-technology development inTexas through State p olicies. Discussion a lso focuses oncurrent and emerging research in five high-technologyindu stries: indu strial processes equ ipment, electronicsand communications, aerospace and defense, agriculture,and biomedicine.

Cost and Effectiveness. —A 22-page questionnaire w asdistributed along with th e m ayor’s report, asking readersto assess the importance of each initiative and its chanceof succeeding in San Antonio. Survey results were tabu-lated by the mayor’s staff and reported to the public inMarch 1983. A network of grou ps h as been formed toadd ress each initiative, and imp lementation of recom-mendations is now under way.

Transferability.— Requests for the mayor’s report havebeen received from business leaders, educators, and gov-ernment officials all over the country. Mayor Cisneroswas subsequently appointed vice-chairman of the Gover-nor’s Task Force on Emerging Jobs and Unemp loyment.


Initiative #2—High-Technology High School

Background.-The mayor’s office also began this initia-tive, with the cooperation of the Alamo Community Col-lege District, United San Anton io, and th e area’s in-dependent school districts. The school opened in fall 1983with 100 stud ents and will develop strengths in m ath,science, and technology.

Cost and Effectiveness. –It is anticipated tha t startupcosts will be $150,000. Operating the school will cost ap-proximately $300,000 per year. Plans are now being de-veloped for second “m agnet” h igh school focusing onmedical technologies and jobs.

Transferability. -Sim ilar schools in Houston , Dallas,and California were investigated.

Federal and State involvement .—State funds will beused for startup and the first 3 years of operation, afterwhich the school most likely will be locally funded.

Initiative #3—Vista Verde South

Background. -Vista Verde South is a 14 S-acre urbanredevelopment area located in San Antonio’s inner ci-ty. The project was initiated by the city of San Antonioand entailed land acquisition, relocation of area busi-nesses and residents, demolition of existing structures,upgrading public utility services, and redevelopment of the project area. Control Data Corp.’s 60,000-ft

2build-

ing, which presently employs 300 people making elec-tronic components, is the anchor for the project. Thecompany is currently completing construction of an ad-ditional 200,000 ft

2

building that eventually could employ

1,000 workers, and Control Data also plans to open aBusiness and Technology Center in Vista Verde Souththat would serve as an incubator facility for new localbusinesses (see above and ch. 5). Several other smallmanufacturers (at least one of which is high-technologyrelated) are located in the development area.Cost and Effectiveness.-Pr eject costs are approximate-

ly $98 million. San Antonio officials are pleased with thebenefits the redevelopment has created.Transferability.-Control Data has been involved in

similar redevelopment projects in several cities, includingMinneapolis-St. Paul and Philadelphia (see above).

Federal and S tate Involvem ent.—T he project wasfunded by an $18.8-million UDAG, plus $4 million inCDBG funds. Highway funds have been made availableto improve access to a nearby Interstate highway.

Initiative #4-Engineering Programs atUniversity of Texas-San Antonio

Background . -Com m unity leaders decided to press forthe creation of an engineering school at the Universityof Texas at San Antonio after a major high-technologycompany dropped the city from consideration for a largeplant because of the absence of engineering courses. Theinitiative was spearheaded by United San Antonio, alocal civic organization with strong representation fromlocal government as well as industry and communitygroups. Studies of need were conducted among local in-dustry, reports were prepared, funds raised, and a lob-bying effort was conducted.

Cost and E ffectiveness. –The community raised over$6 million for faculty salaries, equipment, and other needsof the school. Only 250 students were expected the firstyear, but enrollment is already up to 500. The San An-

tonio Economic Development Foundation has found thatthe community is much easier to market to high-tech-nology prospects now that the program is in place. It isconsidered so successful that the community is now plan-ning an initiative to develop graduate programs inengineering.

Trand erability. -The Oregon Grad uate Center in Bea-verton may be used as a model for developing graduateprograms.

Federal and State Involvement.–The University’sBoard of Regents and Coordinating Board had to ap-prove the establishment of the program, and State fundswere used.

Initiative #5—Marketing to High-TechnologyIndustry

Background.-The San Antonio Economic Develop-

ment Foundation (EDF) was created by the chamber of commerce in 1974 to help attract industry to the city.

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Appendix A—Descriptions of Local High-Technology initiatives q 87

EDF works closely with the city’s Department of Eco-nomic and Employment Development (DEED), andmany of their cooperative marketing efforts have beendirected at branch plants of expanding high-technologyindustries. For example, one of EDF’s newsletters wasdirected toward the electronics industry, and Mayor

Cisneros has accompanied EDF representatives on sales

trips. Other techniques have included direct mail,telephone, and advertising campaigns in nationalnewspapers and magazines.

Cost an d Effectiveness.-EDF’s annual budget of about$700,000 is raised from dues of member firms, but thecity makes contributions for specific programs. A numberof high-technology firms have located in the area afterworking with the foundation.

Tramsferability.-No similar cooperative marketing ini-tiatives were studied, but EDF and DEED have receivedinquiries about their high-technology developmentprograms.

Federal and State Involvement.–Some of DEED’s ac-tivities have been supported by EDA planning grants and

CETA funds, but there is no Federal or State involve-ment in the EDF/ DEED marketing efforts.


Department of Economic and Employment DevelopmentCity of San An tonioTelephone: (512) 299-8080Contact: Dr. Kenneth Daly, Acting Director

Mayor’s Office, City of San AntonioTelephone: (512) 299-7063Contact: Ms. Fran ces Rios

San Antonio Economic Development Found ationTelephone: (512) 226-1394Contact: Mr. Terry J. Britton

United San AntonioTelephone: (512) 277-0207Contact: Ms. Lila Cockrell

. .Salt Lake City, Utah


Some 15 to 30 percent of the manufacturing sector inthe area is high-technology oriented. Sperry-Univac isthe major employer. A number of Eastern venture capitalfirms have investments in Salt Lake City. The Univer-sity of Utah is well known in a number of areas—engi-

neering, physical sciences, law, and medicine, to namea few. The university’s research park is about 12 yearsold, and several firms that have spun off from the univer-sity are located there. Some of these are involved inbiomedical and gene research, and the city is also knownfor its bionic organ development. The Utah InnovationCenter, also located in the park, began with a NationalScience Foundation grant and is now a private venture.

Initiative #1 —Communications andNetworking: the “Key Person Network”

Background. -Within the last year or so, the State, thechamber of commerce, the city, the county, and other

municipalities in the area have pooled and shared theirresources in a determined effort to attract new high-

technology industry. The resulting “Key Persons Net-work” is essentially a joint targeted marketing p rogram.A select group of people will be available to entertainor travel to other parts of the country. They will meetwith those individuals or companies with a vested interestin Utah, such as suppliers and university alumni.

Cost and Effectiveness.-This high-technology develop-ment effort will be funded primarily by the county com-

mission, under the direction of the chamber of com-merce. Aside from the salary of a new staff person, about$25,000 to $50,000 will be allocated for the oper ation of the network.

Transferability.–Aware of other cities’ marketingefforts.

Federal and State Involvement.—The State is involvedbut does not provide funding.


Salt Lake City Chamber of CommerceTelephone: (801) 364-3631

Contact: Mr. Brad Bertock

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Burlington, Vt.


Burlington is the med ical, cultural, and edu cationalcenter of the State. The University of Vermont h as awell-developed medical center, which accounts for theinterest of biotechnology firms. Champlain College spon-sors a nationally known computer camp for children upto 16 years of age.

IBM has been in the Burlington ar ea since 1957. GEhas a facility there, as does Digital Equipment with 180acres. Historically, Vermont has not attacted “smoke-stack” industries. Canadian firms (some of them h igh-technology) also have show n a n increasing interest inBurlington; because of its proximity to the border, Bur-lington is viewed a s a base from which to enter U.S.markets. A research p ark is und er consideration, and th eventure capital process is being explored.

Initiative #1 –Foreign Trade Zone (FTZ) Background. –The Greater Burlington Industrial

Corp. (GBIC) applied for FTZ status, considering it a sig-


Seattle,


Seattle is the home of Boeing, which employs approx-

imately 80,000 Seattle-area residen ts in resea rch, engi-neering, and manufacturing activities. Other high-tech-nology compan ies in th e Seattle area includ e Hew lett-Packard, Fairchild Semiconductor, John Fluke Manufac-turing, Honeywell-Marine Electronics, Digital EquipmentCorp., Physio-Controls, and ELDEC. The University of Washington is the largest source of technical degree recip-ients in the Seattle area, and its research labs have spunoff several biomedical firms.

Initiative #1 —Engineering EducationTask Force

Background.-The Engineering Education Task Forcewas formed by the Economic Development Council(EDC) to upgrade the quality and quantity of engineer-ing education in the Seattle area and the rest of the State.The task force was composed primarily of representativesfrom private industry, and was created in response to

nificant economic development tool due to the city’sproximity to Canada. An area at the airport was desig-nated an FTZ in 1980.

Cost and Effectiveness. —The FTZ was a major factor

in Mitel’s decisionto

establisha

manufacturing facilityin Burlington. The company is now expanding its build-ing at the airport and is constructing a second facilityoutside the FTZ.

Transferability.–Awareness of FTZ in other cities.Federal and State Involvement. –U.S. Customs ap-

proval of FTZ status.


Greater Burlington Industrial Corp.Telephone: (802) 862-5726Contact: Ms. Judy Miller

Wash.

private industry’s concern about current and projectedshortages of engineering skills. Also included were rep-resentatives from the University of Washington, SeattleUniversity, Washington State, and the State Council for

Post-Secondary Education. EDC provided staff supportfor the task force. The task force’s recommendations,pu blished in 1982, included the following: increasing thenumber of baccalaureate and Ph. D. degrees awarded inengineering; offering new continuing education oppor-tunities for d egreed en gineers; forming a Wash ingtonState High Technology Center; offering State tax incen-tives to private industry investing in engineering educa-tion; and increasing opp ortunities for joint ind ustry/ State/ university research activities.

Cost and Effectiveness.— In response to the EDC’sstudy, the University of Washington initiated a bill inthe Washington State Legislature to create a high tech-nology research center and fund it at $17 million.

Transferability. –The task force investigated high-tech-nology research centers at Arizona State University,Stanford, Research Triangle Park, MIT, and other loca-tions. The president of MIT spoke to the task forcemembers.

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Appendix A–Descriptlons of Local High-Technology Inititives q 89

Federal and State Involvement.—State interests wererepresented on the task force by the Council on HigherEducation. There was no Federal participation.

Initiative #2—industry Attraction Program

Background.-EDC also has made a concerted effort

to attract new industry into the Seattle area, and virtual-ly all of its efforts are directed toward high-technologycompanies. Prospects are identified by seeking leads fromSeattle area companies and by inhouse research. Pros-pects are contacted through telephone calls and personalvisits. No funds are spent on media advertising. EDCalso works to overcome any obstacles that might preventa company from locating in the area. This includes work-ing to obtain necessary zoning and environmental approv-als for new industry as well as seeking State and Federalfunds for site improvements (roads, water and sewer lineextensions).

Cost and Effectiveness.-EDC has a budget of $585,000for business development. A number of new companiesrecently have located in the Seattle area, includingbranches of Hewlett-Packard and Fairchild Semicon-ductor.

Transferability.– Similar to targeted marketing strate-gies in many other cities.

Federal and State Involvement.–Federal and State

funds totaling $6 million were used for site improvementsfor the Fairchild Semiconductor facility. Assistance fromthe Washington Department of Commerce and Econom-ic Development is sought on an “as needed” basis to helpobtain environmental approvals for new industry.


Economic Development Council of Puget SoundTelephone: (206) 622-2868Contact: Lee Smith, Executive Director

Milwaukee, Wis.


A number of technology-based companies are head-quartered in the area, including Allen-Bradley, JohnsonControls, Cerac, and the Astronautics Corp. of Ameri-ca. Both Marquette University and the University of Wisconsin-Milwaukee are located in the area and offertechnical degrees. The Milwaukee School of Engineeringhas an Applied Technology Center which performs con-

tract research. The Metropolitan Milwaukee Associationof Commerce (MMAC) works with high-technology de-velopment through two organizations, the New BusinessVentures Office and the Economic Development Group.

Initiative #1 —Milwaukee Area RoboticsTask Force

Background . —The task force is a voluntary coopera-tive effort coordinated by the association to market theMilwaukee area to robotics designers and manufacturers.Members include representatives of the city, MMAC,Wisconsin Electric Power, Milwaukee Area TechnicalCollege, and other companies and institutions. Activitiesinclude sending 30 Milwaukee executives to market thecommunity at Robotics 7, an industry trade show.

Cost and Effectiveness.-The task force made a pres-entation to ASEA, a Swedish manufacturer of robots,which induced that firm to locate its industrial robots

division headquarters in the Milwaukee area. In orderto win the division to the area, the task force asked theUniversity of Wisconsin to design a state-of-the-art com-munication network to link ASEA personnel located inseparate States. The promise of the customized softwareprogram was a crucial element in the firm’s selection of Milwaukee as the headquarters location. It will be paidfor through donations to MMAC and given to ASEA.

Transferabili ty. –Milwaukee is aware Michigan also hasa program to attract the robotics industry.

Federal and State Involvement.—There has been noFederal involvement with the task force to date. TheState has become involved through the university.

Initiative #2—Hilltop Parish Research Park

Background.–This is a newly developed park on thecity’s northwest side. Phase I consists of 30 acres, withanother 50 available for later expansion. The city rezonedthe area from residential to planned development, allow-ing only research activities. A conference center may bedeveloped in the park. Though the park is privatelyowned, the city helped acquire UDAG funds to preparethe site.

Cost and Ef fect iveness . –The UDAG funds totaled$200,000. The owner of the site, Marquette Electronics,curren tly is constru cting its research facility there andso far is the only u ser.

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90 Ž Background Paper #2-Encouraging High-Technology Development

Transferability. —The city and Marquette Electronicswere aware of other research parks. Those in Californiawere cited specifically.

Federal and State Involvement.-The Federal Govern-ment was involved through the UDAG program. Therehas been no State involvement.

Initiative #3—Research Lab Retention

Background . –When Pabst was acquired by anotherbrewer, the company no longer had a need for its sub-isdiary, PL Biochemical, which sells fine research chem-icals for genetic engineering. In order to avoid the lossof this high-technology resource, the city issued industrialrevenue bonds to Pharmacia, the operation’s new owner,to finance rehabilitation of the building. The city willalso apply for UDAG funds for expansion, as required.

Cost and Effectiveness. —Industrial revenue bonds to-talling $8 million were sold. The laboratory was retainedin the area.

Transferability.–N.A.

Federal and S tate Involvement.—Indirect Federal in-volvement through IRB legislation.

Local Organizations Working onHigh-Technology InitiativesDivision of Economic Development, City of MilwaukeeTelephone: (414) 278-2672Contact: Mr. James Sherer, Manager of Redevelopment

Metropolitan Milwaukee Association of CommerceTelephone: (414) 273-3000Contact: Ms. Mary E. Frymark, Economic Development

Representative

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APPENDIX B

Index of Initiatives Citedin This Background Paper

Alabama

Univer s i t y in i t ia t i ves

University of Alabama at Huntsville–Center for

High Technology Management and EconomicResearch, 67

Loca l in i t ia t i vesHuntsville:-efforts to create employment opp ortunities around

Redstone Arsenal, 42, 47, 48, 67—establishment of University of Alabama at

Huntsville, 44, 67–foreign trade zone/ indu strial park, 68—marketing efforts to attract high-technology, 48—research park d istrict/ Cum mings Research Park, 68–Von Braun Civic Center, 46, 68

ArizonaSta te in i t ia t ives

Center for Excellence at Arizona State University,33, 58


Arizona State University–Center for Excellence, 33,58

Local ini t iat ives

Phoenix:—cooperation with SBA 503 loan program, 69–Excellence in Engin eering for the 1980’s, 68—initiative to imp rove local technical edu cation, 44—marketing efforts to attract high technology, 43

—zoning and planning initiatives, 69Pr iva te s ec tor in i t ia t i vesAdvisory Council for Engineering–’’Excellence in

Engineering for the 1980’s” and advocacyactivities, 69

Corporate d onations to Center for EngineeringExcellence, 58

Phoenix Chamber of Comm erce–zoning andplanning initiatives, 69

Arkansas

Univer s i t y in i t ia t i vesUniversity of Arkansas at Little Rock–Industrial

Research Extension Center, 34

California

Sta te in i t ia t ives

Innovation Development Loan Fund, 16MICRO (University of California at Berkeley), 17, 30Targeted industries, 15

Univer s i t y in i t ia t i vesCalifornia Institute of Technology: Silicon Systems

research consortium, 31Stanford University:–Center for Biotechnology Research, 32, 59–Center for Integrated Systems, 31, 34, 58—investment in spinoffs, 32, 33, 59–Stanford Industrial Park, 3, 28, 30—venture capital investment, 33University of California–Center for Biotechnology

Research, 32University of California at Berkeley-MICRO, 17, 30


San Diego:

—establishm ent of Un iversity of California a t SanDiego, 44, 69

–land developm ent and sales, 69—research parks, 70—targeted marketing programs, 48, 70

91

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92 • Background Pater #2—Encouraging High-Technology Development

Pr iva te s ec tor in i t ia t i vesAdvocacy role of high-technology entrepreneurs, 62Alpha Fund–local seed capital investments, 61American Electronics Association—” 2-percent” giving

by members, 58, 62Bay Venture Group—local seed capital investments,

61

Bendix Corp.-Center for Biotechnology Research,32

Center for Biotechnology Research–researchconsortium, 32, 59

Center for Integrated Systems—research consortium,32, 34, 58

Elf Technologies–Center for BiotechnologyResearch, 32

Engenics–Center for Biotechnology Research, 32, 59General Foods–Center for Biotechnology Research,

32

Kopvenco–Center for Biotechnology Research, 32MacLaren Corp.–Center for Biotechnology

Research, 32Mead Corp.–Center for Biotechnology Research, 32Santa Clara County Manufacturers Group, 62Silicon Systems–research consortium, 31

Colorado


Colorado Springs:—establishment of University of Colorado at

Colorado Springs (UCCS), 44, 70—Institute for Business and Industrial Technology,

71

—targeted marketing efforts, 43, 48, 71

Pr iva te s ec tor in i t ia t i ves

Advisory Council–UCCS Engineering School, 71NCR Microelectronics-equipment donation toUCCS, 71

UCCS Task Force, 71

Connecticut


Connecticut Prod uct Developmen t Corp., 15Enterprise Zones, 33Innovation Developm ent Loan Fund , 16Science Park, 16, 19, 33Targeted industries, 15


Yale Univ ersity –Science Park, 16, 19, 33—venture capital investment, 33

Local initiativesNew Haven–Science Park, 16, 19, 33


General Electric–philanthropic role, 57Olin Corp.–Science Park, 33Xerox:—affirmative action plan for small businesses, 57–philanthropic role, 56, 57–program for loaning personnel, 58

Delaware

Univer s i t y in i t ia t i vesDelaware Technical and Comm un ity College:—Technology Research Center (under development),

31—training and retraining program (with General

Motors), 31


General Motors—collaboration in DelawareTechnical and Community College training andretraining program, 31

FloridaSta te in i t ia t ivesFlorida Research and Development Commission—

research parks, 33Gradu ate Engineering Education System, 72

University initiativesFlorida Institute of Technology, 72University of Central Florida:–Central Florida Research Park, 73–Lifelong Learning Center, 72

Local ini t iat ivesBrevard County:—efforts to create employment opportunities around

Kennedy Space Center, 42, 47–Melbourne airport incubator facilities, 72–Labor Needs Survey/Educational Task Force, 72Orlando:–Central Florida Research Park, 73—marketing efforts to attract high-technology firms,

43

Pr iva te s ec tor in i t ia t i vesHarris Co.:–Graduate Engineering Education System, 72–lending personnel to local schools, 58Melbourne Area Committee of 100–Labor Needs

Survey, 72

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_.

Appendix B—Index of Inltiatives Cited in This Background Paper q 93

Georgia


Advan ced Technology Development Center(ATDC), 15, 32, 60

Targeted indu stries, 15

Univer s i t y in i t ia t i vesGeorgia Institute of Technology:

–ATDC, 15, 32, 60—seed capital fund, 33


Corporate contributions to ATDC, 60

Illinois


Biomedical Research Park, 19, 30, 74Faculty Research Assista nce to th e State (FRATS),

33Governor’s High-Technology Task Force, 74Targeted industries, 15

Univer s i t y in i t ia t i vesUniversity of Chicago–investment in spinoffs, 33University of Illinois:–Biomedical Research Park, 30, 74–FRATS, 33

Local i n i t i a t i ve sChicago:–Biomedical Research Park, 30, 74–High-Technology Development Unit, 74–high-technology newsletter, 42, 45–Mayor’s High-Technology Task Force, 45, 47, 74

Indiana


Targeted industries, 15

Univer s i t y in i t ia t i vesNotre Dame–investment in spinoffs, 33Purdue University—computer research consortium,

31

Iowa

Univer s i t y in i t ia t i vesGrinnell College–investment in spinoffs, 33

Kansas

Univer s i t y in i t ia t i vesUniversity of Kansas–Entrepreneurship Center, 34Wichita State University (WSU)–Center for

Entrepreneurship, 32, 59


Supp ort from 50 local firms forEntrepreneurship, 32, 59

Maine


WSU Center for

New Enterpr ise Institute, 19, 31

Univer s i t y in i t ia t i vesUniversity of Southern Maine–New Enterprise

Institute, 19, 31

Maryland


Technology Extension Service, 19 Local ini t iat ives

Montgomery County:–Shady Grove Medical Park, 75— targeted marketing efforts, 76— training programs, 75

Massachusetts

Sta te in i t ia t ivesBay State Skills Corp., 15Small Business Developm ent Cen ter, 16Targeted industries, 15Tax redu ctions—“social contract” with h igh-

technology industries, 62


Boston University–investment in spinoffs, 33Harvard Medical School/ Seagrams research

partnership, 31Harvard University:— chair in creation of new ven tures, 32— investment in spinoffs, 33— venture capital investment, 33Harva rd University/ DuPont research partnership, 59Harvard University/ Monsanto research partnership,

31

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. .


Massachu setts Institute of Technology (MIT):–Center for Biotechnology Research, 32— incubator space, 33— venture capital investment, 33MIT Enterprise Forum, 32MIT/ EXXON resea rch par tnersh ip, 31, 59


Lowell:–land use planning to attract Wang, 44, 46, 56, 76— targeted marketing efforts, 42, 46–University of Lowell, 76

Pr iva te s ec tor in i t ia t i vesAdvocacy role of high-technology entrepreneurs, 56,

62Digital Equipm ent Corp.–Roxbury-South End site

decision, 56Dupont-research partnership with Harvard

University, 59EXXON-research par tnersh ip w ith MIT, 31, 59Massachusetts High Technology Council, 56, 58, 62Monsanto-research partnership with Harvard

University, 31Seagrams-research p artnership with H arvard

Medical School, 31Wang Laborat ories, Inc.—decision to locate in

Lowell, 42, 56, 76

Michigan


High-Technology Equity Loans Program, 19Metropolitan Center for High-Technology (Wayne

State University), 19, 33Targeted industries, 15

Univer s i t y in i t ia t i vesMichigan Institute of Technology-Michigan Tech

Capital Corp ., 33Wayne State University-Metropolitan Center for

High Technology, 19, 33University of Detroit–stud ent internships in

industry, 32University of Michigan —Inn ovation Cen ter, 33


Flint River Capital Fund, 61General Motors Institute–role in Flint River Cap ital

Fund , 61Michigan Investment Fund, 61Mott Found ation–role in geograp hic investment

funds, 61

Minnesota


Enterprise zone legislation-Minneapolis TechnologyCorridor (proposed), 77

Governor’s Com mission on SBIR Grants, 60Microelectronics and Information Sciences Center

(MEIS) at th e Un iversity of Minneso ta, 30

Minnesota Project Innovation, 60Pension fund investments in Minnesota Seed Cap ital

Fund , 60Sup ercomp uter Institute (proposed) at th e University

of Minnesota, 30Targeted industries, 15Tax credits for investment in startups, 60World Trad e Center in St. Paul, 78

Univer s i t y in i t ia t i vesUniversity of Minnesota:—faculty p articipation in Minn esota Project

Innovation, 60–MEIS, 30–Minneap olis Technology Corridor (proposed), 77– Sup ercompu ter Institute (prop osed), 30

Local ini t iat ivesMinneapolis:–Business and Technology Center, 78–Task Force on Research and Technology, 45, 77–Technology Corridor (proposed), 77Port Au thority of St. Paul–Energy Par k, 78St. Paul:–Business and Technology Center, 78–Energy Park, 77–Homegrow n Economy Program , 77, 78— incubator space, 78– World Trade Center, 78

Pr iva te s ec tor in i t ia t i vesControl Data Corp.:–Business and Technology Centers, 57, 59, 75, 78,

83, 86–City Venture Corp., 57–Energy Technology Center, 78—investment in MEIS, 30–Rural Venture, 57–St. Paul Energy Park, 77Honeywell:—investment in MEIS, 30–lending personnel to schools, 58–philanth rop ic role, 55, 57—program to don ate equipment, 57

MEIS–corporate funding, 30

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—— ..—

Appendix B—Index of Initiatives Cited In This Background Paper q 95

Minneso ta Business Par tnersh ip, 59, 61, 63Minn esota Coop erat ion Office, 58, 60, 61, 63, 78Minnesota Mining & Manufacturing Corp. (3M)–

investment in MEIS, 30Minnesota Project Innovation, 60, 78Minnesota Seed Cap ital Fund , 60, 61, 63Sperry Un ivac–investment in MEIS, 30StarCo (Start-a-Company), 60, 78

Mississippi

Sta te in i t ia t ivesMississipp i Research and Development Center, 34

Univer s i t y in i t ia t i vesUniversity of Mississippi–Mississippi Research and

Developm ent Center, 34

Missouri

Sta te in i t ia t ivesHigh-Tech Skills for Autoworkers (with General

Motors), 31Targeted industries, 15

Univer s i t y in i t ia t i vesUniversity of Missouri:—incubator sp ace, 32—training an d retraining for autoworkers, 31Washington University/ Mallinckrodt research

partnership, 31Washington University/ Monsanto research

partnership, 31


General Motors—High-Tech Skills for Autoworkers,31

Mallinckrodt, Inc.–research partn ership with

Washington University, 31Monsanto-research pa rtnership with Washington

University, 31

New Mexico


Targeted indu stries, 15

Univer s i t y in i t ia t i vesAlbuquerque Vocational-Technical Institute:—techn ical assistance to ind ustr y, 34– high-technology training/ retraining p rograms, 34


Albuquerque:—incubator sp ace, 79–Ventu re Cap ital Conference, 79

New York


Center for Ind ustrial Cooperation at SUNY/ StonyBrook, 16, 30

Targeted industries, 15

Univer s i t y in i t ia t i vesCornell University-end owed chair in Am erican

enterprise, 60Rensselaer Polytechnic Institute:—incubator space, 32, 80—investment in spinoffs, 33–Technology Industry Park, 30SUNY at Binghamton-electrical engineering

program, 80SUNY at Stony Brook–Center for Ind ustr ial

Cooperation, 16, 30University of Rochester-investment in spinoffs, 33


Binghamton:-engineering program at SUNY-Binghamton, 80

–High-Technology Council, 80—incubator space, 80

P r i va t e s ec t or i n i t i a t i veBroome Coun ty Cham ber of Commerce–High

Technology Council, 80Continental Group —supp ort for Cornell chair in

American enterprise, 60Exxon—engineering faculty assistance program, 59IBM:–donations to engineering schools, 59–philanthropic role, 35, 56, 57–program of lending personn el, 58Olin—sup port for Cornell chair in American

enterprise, 60

Sperry Rand Corp.:—philanthropic role, 55—program to dona te equipment, 56

North Carolina


Center for Microelectronics, 30Research Triangle Park, 3, 28, 30Targeted industries, 15

Univer s i t y in i t ia t i vesCenter for Microelectronics, 30Research Triangle Park, 3, 28, 30

Pr iva te s ec tor in i t ia t i vesHewlett-Packard-Semiconductor Research

Cooperative j 59

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———.


Honeywell–Semiconductor Research Cooperative, 59IBM–Semiconductor Research Cooperative, 59Semiconductor Research Cooperative, 59

Ohio


Loan to Cincinnati for creation of Institute of Advanced Manufacturing Sciences, 81

Univer s i t y in i t ia t i vesCase Western Reserve:—entrepreneurship assistance, 32—seed capital fund, 33University of Cincinnati–Institute of Advanced

Manufacturing Sciences, 43, 46, 63, 81

Local ini t iat ives:

Cincinnati:—creation of ventur e capita l fun d, 43, 45, 61, 62, 82–Institute of Advanced Manufacturing Sciences, 43,

46, 63, 81–Long View research/ man ufacturing park, 81

Cleveland–creation of local venture capital fund, 61,62


Cincinnati Cham ber of Com merce, 61, 62, 81Cleveland Tomm orrow , Inc., 58, 62Gannett Foundation–Cincinnati venture capital

fun d , 61, 62, 81Gund Found ation—grant to Cleveland venture

capital fund, 61

Oregon


Oregon Gradu ate Center, 82, 86Portland State University expansion, 82


Portland:—expansion o f Portland State University, 82—targeted marketing efforts, 82

Pennsylvania

Sta te in i t ia t ivesIndustrial Development Authority, 16, 83PENNTAP (Pennsylvania Technical Assistance

Program), 19Targeted industries, 15


Carnegie-Mellon University:—incubator space, 32

–Pittsburgh Enterprise Corp., 32–Robotics Institute, 31, 59—seed capital fund, 33—student internships in industry, 32—venture capital investment, 33Drexel University—Polymer Affiliates research

consortium, 31Lehigh University—student internships in industry,

32

Pennsylvania State University–Cooperative Programin Recombinant DNA Technology-researchconsortium, 31

University City Science Center, 32, 42, 75, 83University of Pennsylvania–Wharton School-seed

capital fund, 33University of Pittsburgh:–Pittsburgh Enterprise Corp., 32–Surface Science Center (consortium), 30


Philadelphia:–Business and Technology Center, 83

–University City Science Center, 32, 42, 83Pr iva te s ec tor in i t ia t i vesControl Data Corp.–Business and Technology

Center, 83Cooperative Program in Recombinant DNA

Technology-research consortium withPennsylvania State University, 31

Polymer Affiliates Program-research consortiumwith Drexel University, 31

Westinghouse—grant to Carnegie-Mellon RoboticsInstitute, 31, 59

Rhode Island

Sta te in i t ia t ivesTargeted industries, 15

Univer s i t y in i t ia t i vesBrown University–investment in spinoffs, 33

Tennessee

Sta te in i t ia t ivesTargeted industries, 15Technology Corridor Foundation, 15


Oak Ridge:—incubator space, 84—industrial parks, 84—selection of new contractor at DOE laboratories,

84

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.. —.Appendix B—index of initiatives Cited in This Background Paper q 97

Texas


Governor’s High Technology Task Force, 86

Univer s i t y in i t ia t i vesBaylor University–entrepreneurship assistance, 32University of Texas (UT):– Balcones Research Center, 85

–Institute for Constructive Capitalism, 32, 60UT-San Antonio-engineering programs, 86


Austin:— establishment of Austin Community College, 85— marketing efforts to attract high-technology firms,

42, 43, 46, 48, 86San Antonio:— engineering p rogram s at UT-San An tonio, 46, 86–High-Technology High School, 44, 46, 86–Mayor’s high-technology action plan, 85— targeted marketing for high-technology firms, 43,

56, 86

–Vista Verde South industrial park, 86Pr iva te s ec tor in i t ia t i ves

Control Data:– San Antonio Business and Technology Center, 86— role in Vista Verde South, 86Microelectronics & Computer Technology Corp.–

decision to locate in Austin, 42, 46, 85Mobil—support for UT Center for Constructive

Capitalism, 32, 60San Antonio Economic Development Foundation–

cooperative marketing program for high-technologyindustry, 86

Shell—support for UT Center for ConstructiveCapitalism, 32, 60

Tenneco—support for UT Center for ConstructiveCapitalism, 32, 60

Texas Instruments—program to donate equipment,56

United San Antonio–role in improving localtechnical education, 86

Utah

Univer s i t y in i t ia t i vesUniversity of Utah:–Innovation Center, 32–Science Park, 30, 74, 87


Salt Lake City–Key Person Network, 87


Burlington-foreign

Vermont

trade zone, 88

Virginia


George Mason University–George Mason Institute,30

University of Virginia–Alumni Patent59

Washington

Univer s i t y in i t ia t i vesEngineering Education Task Force, 46,Washington State University–research

park, 30


Seattle:

Foundation,

8 8

and industrial

— efforts to create high-technology employmentopportunities, 42–Engineering Education Task Force, 44, 46, 88— targeted marketing efforts, 88

Pr iva te s ec tor in i t ia t i vesEngineering Education Task Force, 88Washington Research Foundation, 59

West Virginia


University of West Virginia–Center forEntrepreneurship, 34

WisconsinSta te in i t ia t ivesTargeted marketing to attract robotics industry, 46

Univer s i t y in i t ia t i vesLawrence University–investment in spinoffs, 33Milwaukee School of Engineering–Applied

Technology Center, 89University of Wisconsin:–Center for Applied Microelectronics, 30–Industry Research Program, 30Wisconsin Alumni Research Foundation, 59Wisconsin for Research, 63

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96 qBackground Paper#2—Encouraging High-Technology Development

Loca l in i t ia t i ves Metropolitan Milwaukee Association of Commerce—Milwaukee: New Business Ventures Office, 89—efforts to retain biochemical research lab, 89 Wisconsin Alum ni Research Found ation, 59–Hilltop Parish Research Par k, 89 Wisconsin for Research, 63

–Robotics Task Force, 46, 89

Pr iva te s ec tor in i t ia t i ves WyomingCompetitive Wisconsin, Inc., 58, 63

Marquette Electronics–Hilltop Parish Research Park, Universi ty in i t ia t ives89-90 University of Wyoming–Industrial Fund, 30