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Charles W. Wessner, Rapporteur Committee on Competing in the 21st Century: Best Practice in State and Regional Innovation Initiatives Board on Science, Technology, and Economic Policy Policy and Global Affairs

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THE NATIONAL ACADEMIES PRESS 500 Fifth Street, N.W. Washington, DC 20001 NOTICE: The project that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competences and with regard for appropriate balance. This study was supported by: Contract/Grant No. DE-AT01-06NA26358, TO #28, between the Department of Energy and the National Academy of Sciences; and SB134106Z0011, TO #4, between the Technology Innovation Program of the National Institute of Standards and Technology and the National Academy of Sciences. U.S. Department of Commerce, National Institute of Standards & Technology (NIST). This report was prepared by the National Academy of Sciences/National Research Council under award number 99-06-07543-02 from the Economic Development Administration, U.S. Department of Commerce. The statements, findings, conclusions, and recommendations are those of the author(s) and do not necessarily reflect the views of the Economic Development Administration or the U.S. Department of Commerce. Additional funding was provided by The Heinz Endowments, Acciona Energy, Dow Corning Corporation, IBM, SkyFuel Inc., and the Association of University Research Parks. Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the views of the organizations or agencies that provided support for the project. International Standard Book Number-13: 978-0-309-15622-6 International Standard Book Number-10: 0-309-15622-X Limited copies are available from Board on Science, Technology, and Economic Policy, National Research Council, 500 Fifth Street, N.W., W547, Washington, DC 20001; 202-334-2200. Additional copies of this report are available from the National Academies Press, 500 Fifth Street, N.W., Lockbox 285, Washington, DC 20055; (800) 624- 6242 or (202) 334-3313 (in the Washington metropolitan area); Internet, http://www.nap.edu. Copyright 2011 by the National Academy of Sciences. All rights reserved. Printed in the United States of America

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The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. Upon the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Ralph J. Cicerone is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. Charles M. Vest is president of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, upon its own initiative, to identify issues of medical care, research, and education. Dr. Harvey V. Fineberg is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy’s purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Ralph J. Cicerone and Dr. Charles M. Vest are chair and vice chair, respectively, of the National Research Council. www.national-academies.org

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COMMITTEE ON COMPETING IN THE 21ST CENTURY: BEST PRACTICE IN STATE AND REGIONAL INNOVATION INITIATIVES* Mary L. Good, Chair Michael G. Borrus, Vice Chair Donaghey University Professor Founding General Partner Dean, Donaghey College of X/Seed Capital Management Engineering and Information Technology W. Clark McFadden II University of Arkansas at Little Partner Rock Dewey & LeBoeuf LLP and STEP Board David T. Morgenthaler Founding Partner Richard A. Bendis CEO Morgenthaler Ventures Bendis Investment Group, LLC Edward E. Penhoet Director Susan Hackwood Executive Director Alta Partners California Council on Science and Technology Tyrone C. Taylor President Capitol Advisors on Technology William C. Harris President and CEO Science Foundation Arizona Mary Maxon Initiative Lead Marine Microbiology Initiative Gordon and Betty Moore Foundation * As of June 2009. v

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Project Staff Charles W. Wessner Study Director Alan Anderson David E. Dierksheide Consultant Program Officer McAlister T. Clabaugh Adam H. Gertz Program Officer Program Associate (through June 2010) David S. Dawson Senior Program Assistant Sujai J. Shivakumar Senior Program Officer vi

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For the National Research Council (NRC), this project was overseen by the Board on Science, Technology and Economic Policy (STEP), a standing board of the NRC established by the National Academies of Sciences and Engineering and the Institute of Medicine in 1991. The mandate of the STEP Board is to integrate understanding of scientific, technological, and economic elements in the formulation of national policies to promote the economic well-being of the United States. A distinctive characteristic of STEP's approach is its frequent interactions with public and private-sector decision makers. STEP bridges the disciplines of business management, engineering, economics, and the social sciences to bring diverse expertise to bear on pressing public policy questions. The members of the STEP Board* and the NRC staff are listed below: Edward E. Penhoet, Chair Mary L. Good Director Donaghey University Professor Alta Partners Dean, Donaghey College of Engineering and Information Lewis W. Coleman Technology President & CFO University of Arkansas at Little DreamWorks Animation Rock Alan M. Garber Amory Houghton, Jr. Henry J. Kaiser, Jr. Professor Former Member of Congress Professor of Medicine David T. Morgenthaler Director, Center for Primary Founding Partner Care and Outcomes Research Morgenthaler Ventures Stanford University Joseph P. Newhouse Ralph E. Gomory John D. MacArthur Professor Research Professor of Health Policy and Stern School of Business Management New York University Harvard Medical School and President Emeritus Arati Prabhakar Alfred P. Sloan Foundation General Partner U.S. Venture Partners William J. Raduchel Chairman Opera Software ASA *As of May 2009. vii

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Jack W. Schuler Alan Wm. Wolff Partner Of Counsel Crabtree Partners Dewey & LeBoeuf LLP STEP Staff Stephen A. Merrill Charles W. Wessner Executive Director Program Director McAlister T. Clabaugh Adam H. Gertz Program Officer Program Associate (through June 2010) David E. Dierksheide Program Officer Daniel Mullins Program Associate David S. Dawson Senior Program Assistant Sujai J. Shivakumar Senior Program Officer viii

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CONTENTS PREFACE............................................................................................. xiii I OVERVIEW ......................................................................................... 1 II SUMMARY OF PRESENTATIONS .............................................. 29 Welcome .............................................................................................. 31 Charles Wessner, The National Academies Opening Remarks............................................................................... 35 Susan Crawford, National Economic Council, The White House Keynote Address: The Role of Research Universities in the Formation of Regional Innovation Clusters: The Impact of Arizona State University on Metropolitan Phoenix...................... 39 Michael Crow, Arizona State University Panel I: Why Clusters Matter: Innovation Clusters and Economic Growth .............................................................................................. 47 Moderator: William Kittredge, Economic Development Administration, Department of Commerce Cluster Development: A Path to Growth .................................... 47 Maryann Feldman, University of North Carolina Stimulating Regional Economies ................................................. 52 Andrew Reamer, The Brookings Institution Panel II: Regional Innovation Clusters: The Obama Administration’s Innovation Initiative .......................................... 57 Moderator: Jean Toal Eisen, Department of Commerce The Geography of Innovation: The Federal Government and the Growth of Regional Innovation Clusters......................... 57 Jonathan Sallet, The Glover Park Group New York State’s NANO Initiative ............................................. 61 Pradeep Haldar, Energy and Environmental Technology Applications Center (E2TAC), Albany, New York ix

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x CONTENTS The Technology Innovation Program: Connecting the Dots .... 65 Marc G. Stanley, Technology Innovation Program, National Institute of Standards and Technology (NIST) Panel III: State and Regional Initiatives .......................................... 71 Moderator: Ed Paisley, Center for American Progress Clusters Growing in Pennsylvania .............................................. 71 Rebecca Bagley, Pennsylvania Department of Community and Economic Development Building and Branding Clusters: Lessons from Kansas and Philadelphia .............................................................................. 74 Richard Bendis, Innovation America Virginia Industry Cluster Analysis.............................................. 80 John Mathieson, SRI International The Washington State Innovation Economy .............................. 83 Egils Milbergs, Washington Economic Development Commission Luncheon Address .............................................................................. 89 Karen Mills, Small Business Administration Panel IV: The University Connection............................................... 93 Moderator: Robert Samors, Association of Public and Land-Grant Universities The Akron Model .......................................................................... 93 Luis M. Proenza, University of Akron The South Carolina Innovation Ecosystem ................................ 97 David McNamara, South Carolina Research Authority California Initiatives ..................................................................... 99 Ed Penhoet, Alta Partners Panel V: Filling the Gaps: The Role of Foundations .................... 105 Moderator: Jim Turner, Association of Public and Land-Grant Universities How Innovation Clusters Are Reviving the Economies that ‘Urban Renewal’ Destroyed .......................................... 105 Christina Gabriel and Bomani Howze, The Heinz Endowments Building the Workforce and the Universities ........................... 108 George W. Bo-Linn, Gordon and Betty Moore Foundation

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xi CONTENTS Roundtable: Key Issues and Next Steps Forward ......................... 115 Moderator: Charles Wessner, The National Academies Luis M. Proenza, University of Akron William P. Kittredge, Economic Development Administration, Department of Commerce Jim Turner, Association of Public and Land-Grant Universities R. Lee Cheatham, Washington Technology Center III APPENDIXES ............................................................................... 123 A Agenda ........................................................................................... 125 B Biographies of Speakers ............................................................... 129 C Participants List ........................................................................... 147 D Bibliography ................................................................................. 153

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PREFACE Responding to the challenges of fostering regional growth and employment in an increasingly competitive global economy, many U.S. states and regions have developed programs to attract and grow companies as well as attract the talent and resources necessary to develop innovation clusters. These state and regionally based initiatives have a broad range of goals and increasingly include significant resources, often with a sectoral focus and often in partnership with foundations and universities. These are being joined by recent initiatives to coordinate and concentrate investments from a variety of federal agencies that provide significant resources to develop regional centers of innovation, business incubators, and other strategies to encourage entrepreneurship and high-tech development. This has led to renewed interest in understanding the nature of innovation clusters and public policies associated with successful cluster development. Project Statement of Task An ad hoc committee, under the auspices of the Board on Science, Technology, and Economic Policy (STEP), is conducting a study of selected state and regional programs in order to identify best practices with regard to their goals, structures, instruments, modes of operation, synergies across private and public programs, funding mechanisms and levels, and evaluation efforts. The committee is reviewing selected state and regional efforts to capitalize on federal and state investments in areas of critical national needs. This review includes both efforts to strengthen existing industries as well as specific new technology focus areas such as nanotechnology, stem cells, and energy in order to better understand program goals, challenges, and accomplishments. As a part of this review, the committee is convening a series of public workshops and symposia involving responsible local, state, and federal officials and other stakeholders. These meetings and symposia will enable an exchange of views, information, experience, and analysis to identify best practice in the range of programs and incentives adopted. xiii

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xiv PREFACE Drawing from discussions at these symposia, fact-finding meetings, and commissioned analyses of existing state and regional programs and technology focus areas, the committee will subsequently produce a final report with findings and recommendations focused on lessons, issues, and opportunities for complementary U.S. policies created by these state and regional initiatives. The Context of this Project Since 1991, the National Research Council, under the auspices of the Board on Science, Technology, and Economic Policy, has undertaken a program of activities to improve policymakers' understandings of the interconnections of science, technology, and economic policy and their importance for the American economy and its international competitive position. The Board's activities have corresponded with increased policy recognition of the importance of knowledge and technology to economic growth. One important element of STEP’s analysis concerns the growth and impact of foreign technology programs.1 U.S. competitors have launched substantial programs to support new technologies, small firm development, and consortia among large and small firms to strengthen national and regional positions in strategic sectors. Some governments overseas have chosen to provide public support to innovation to overcome the market imperfections apparent in their national innovation systems.2 They believe that the rising costs and risks associated with new potentially high-payoff technologies, and the growing global dispersal of technical expertise, underscore the need for national R&D programs to support new and existing high-technology firms within their borders. Similarly, many state and local governments and regional entities in the United States are undertaking a variety of initiatives to enhance local economic development and employment through investment programs designed to attract knowledge-based industries and grow innovation clusters.3 These state and regional programs and associated policy measures are of great interest for their potential contributions to growth 1 National Research Council, Innovation Policies for the 21st Century, Charles W. Wessner, ed., Washington, DC: The National Academies Press, 2007. 2 For example, a number of countries are investing significant funds in the development of research parks. For a review of selected national efforts, see National Research Council, Understanding Research, Science and Technology Parks: Global Best Practices, Charles W. Wessner, ed., Washington, DC: The National Academies Press, 2009. 3 For a scoreboard of state efforts, see Robert Atkinson and Scott Andes, The 2010 State New Economy Index: Benchmarking Economic Transformation in the States, Kauffman Foundation and ITIF, November 2010.

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xv PREFACE and U.S. competitiveness and for the “best practice” lessons they offer for other state and regional programs. STEP’s project on State and Regional Innovation Initiatives is intended to generate a better understanding of the challenges associated with the transition of research into products, the practices associated with successful state and regional programs, and their interaction with federal programs and private initiatives. The study seeks to achieve this goal through a series of complementary assessments of state, regional, and federal initiatives; analyses of specific industries and technologies from the perspective of crafting supportive public policy at all three levels; and outreach to multiple stakeholders. The overall goal is to improve the operation of state and regional programs and, collectively, enhance their impact. This Summary The symposium reported in this volume brought together state and federal government officials, leading analysts, congressional staff, and other stakeholders to explore the role of clusters in promoting economic growth, the government's role in stimulating clusters, and the role of universities and foundations in their development. Attention was drawn to specific strategies planned or in place around the country to promote cluster development as well as the challenges faced in growing and sustaining clusters. This summary captures the presentations and discussions of the 2009 STEP symposium on innovation clusters. It includes an overview highlighting key issues raised at the meeting and a summary of the meeting’s presentations. This workshop summary has been prepared by the workshop rapporteur as a factual summary of what occurred at the workshop. The planning committee’s role was limited to planning and convening the workshop. The statements made are those of the rapporteur or individual workshop participants and do not necessarily represent the views of all workshop participants, the committee, or the National Academies. Acknowledgments On behalf of the National Academies, we express our appreciation and recognition for the insights, experiences, and perspectives made available by the participants of this meeting. We are indebted to Alan Anderson for writing a summary of the meeting and to Sujai Shivakumar of the STEP staff for writing the introduction to this volume.

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xvi PREFACE National Research Council Review This report has been reviewed in draft form by individuals chosen for their diverse perspectives and technical expertise, in accordance with procedures approved by the National Academies’ Report Review Committee. The purpose of this independent review is to provide candid and critical comments that will assist the institution in making its published report as sound as possible and to ensure that the report meets institutional standards for quality and objectivity. The review comments and draft manuscript remain confidential to protect the integrity of the process. We wish to thank the following individuals for their review of this report: Saul Behar, University City Science Center; Joseph Cortright, The Brookings Institution; Daniel Berglund, SSTI; Brian Darmody, University of Maryland; Timothy Franklin, The Pennsylvania State University; and James Gambino, Ben Franklin Technology Partners. Although the reviewers listed above have provided many constructive comments and suggestions, they were not asked to endorse the content of the report, nor did they see the final draft before its release. Responsibility for the final content of this report rests entirely with the rapporteur and the institution. Charles W. Wessner Mary L. Good