KEYNOTE ADDRESS

The Role of Research Universities in the Formation of Regional Innovation Clusters: The Impact of Arizona State University on Metropolitan Phoenix

Michael Crow Arizona State University

In an effort to establish an appropriate context for considering the relationship of university research to the formation of innovation clusters, Dr. Michael Crow began by underscoring the critical significance of institutional structure and academic organization to the network of innovation. As president of Arizona State University, the nation’s youngest major research institution, he expressed his intent to consider innovation clusters from the perspective of the research university as the keystone of the knowledge creation network driving discovery and innovation. Within this context, he interspersed summary overviews of selected elements of the reorganization of the institution he leads to be considered as representative of a case study in the facilitation of innovation. He explained that ASU is the sole comprehensive baccalaureate-granting university in one of the most rapidly growing and demographically diversifying metropolitan regions in the nation. The population of metropolitan Phoenix has grown by a factor of 13 over the last 50 years, and with a regional economy excessively dependent on population expansion and housing construction, the impact of the recession there has been particularly severe. Property values in the metropolitan region have declined by 50 percent since their mid-2006 peak while state revenues have declined by nearly 40 percent during the last 18 months, following three years of unprecedented annual increases. “I’m from one of the few large North American cities that’s still in its early stages of development,” he said. “ASU is the only research university in a metropolitan area of four million people that is growing to eight million, at which point it will become the size of metropolitan Chicago.”

He further specified that ASU efforts to facilitate innovation be considered within the context of an ongoing comprehensive



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KEYNOTE ADDRESS The Role of Research Universities in the Formation of Regional Innovation Clusters: The Impact of Arizona State University on Metropolitan Phoenix Michael Crow Arizona State University In an effort to establish an appropriate context for considering the relationship of university research to the formation of innovation clusters, Dr. Michael Crow began by underscoring the critical significance of institutional structure and academic organization to the network of innovation. As president of Arizona State University, the nation’s youngest major research institution, he expressed his intent to consider innovation clusters from the perspective of the research university as the keystone of the knowledge creation network driving discovery and innovation. Within this context, he interspersed summary overviews of selected elements of the reorganization of the institution he leads to be considered as representative of a case study in the facilitation of innovation. He explained that ASU is the sole comprehensive baccalaureate-granting university in one of the most rapidly growing and demographically diversifying metropolitan regions in the nation. The population of metropolitan Phoenix has grown by a factor of 13 over the last 50 years, and with a regional economy excessively dependent on population expansion and housing construction, the impact of the recession there has been particularly severe. Property values in the metropolitan region have declined by 50 percent since their mid-2006 peak while state revenues have declined by nearly 40 percent during the last 18 months, following three years of unprecedented annual increases. “I’m from one of the few large North American cities that’s still in its early stages of development,” he said. “ASU is the only research university in a metropolitan area of four million people that is growing to eight million, at which point it will become the size of metropolitan Chicago.” He further specified that ASU efforts to facilitate innovation be considered within the context of an ongoing comprehensive 39

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40 GROWING INNOVATION CLUSTERS FOR AMERICAN PROSPERITY reconceptualization and restructuring of the university initiated in 2002. While the complex redesign is shaped by a host of broad societal concerns, the university has sought to align its public mission with strategies to spur regional economic development, consistent with its role as a center for discovery, knowledge creation, and innovation. The commercialization of academic research is key to such efforts: One of the university’s goals, he said, was to become the “central node of an integrative knowledge discovery and commercialization network.” To advance the role of the university in both knowledge creation and the advancement of innovation networks critical to regional economic development, ASU has developed its own approach to innovation and commercialization, rather than following models developed elsewhere. “We found that all the things that were important in California and in other innovation clusters made sense,” he said, “but could not be copied in Arizona. If you attempt to replicate what was done in Silicon Valley, it just will not work. You need to learn from them, draw on their lessons, and then work out your own solution.” He considered the role of Arizona State University in the regional approach to innovation from the following perspectives: • Reinforcing existing knowledge clusters. While regional economic development efforts generally focus on the formation of new knowledge clusters, metropolitan Phoenix is reinforcing existing industries—those that have been already successful over three or four decades. Rather than “stepping past them and thinking that somehow we’re going to evolve some completely new industrial cluster,” stakeholders are asking the question, what can we do to sustain the success of our industries? A dense concentration of aerospace manufacturing companies, for example, has flourished for decades in metropolitan Phoenix. Apart from their reliance on ASU for engineering graduates, however, these companies have interacted to a negligible and insufficient extent with the university or one another. A first step was thus to help them continue to remain competitive by integrating them into a cluster within which each could draw on and build from knowledge created at the university. • Group problem-solving (1). The second strategy, which Dr. Crow called a “hard-fought lesson,” was to implement the practice of group problem-solving. He used the example of a $100 million grant awarded to ASU by the U.S. Army to develop a flexible display technology that could be worn on soldiers’ uniforms in combat. The university was not asked to “do research, problem solving, submit scientific assessments about new materials, or publish papers,” he explained. He offered the following summary of instructions from the Army: “You cluster yourselves together with whoever you have to and figure out how to manufacture this one thing. If you write academic papers, that’s wonderful, put them off to the side. All we want is a flexible display wearable on a soldier’s uniform in

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41 SUMMARY OF PRESENTATIONS combat.” The university developed a cluster of 30 companies to work together on the project, and some additional companies were created just for the purposes of the collaboration. “We used a completely differentiated mindset,” he said. “Just solve the problem, build the end product.” • Group problem-solving (2). A second problem addressed through group problem-solving techniques is the impact of the built environment on a fragile semi-arid ecosystem in the metropolitan Phoenix region. He characterized sprawling development there as a “huge energy footprint in a very complex natural ecosystem.” In metropolitan Phoenix, he observed, the average nighttime temperature has risen more than 10 degrees Fahrenheit over the last 20 years. “It affects the ecosystem, it affects energy consumption rates, and it affects the quality of life.” Accordingly, the university, the city, and the private sector have jointly agreed to reduce the carbon footprint of Phoenix to the lowest possible number, by whatever means necessary. “That means innovation and problem solving, and modeling and networking, and materials advancement and working together,” he said. “We’re finding that group problem- solving is changing the way we’re able to move forward.” By clearly defining the intended return on investment to stakeholders, the partnership has been able to bring in funding from the university, the EPA, local industries, and private foundations. “We will not know that we are successful,” he said, “until we have collectively lowered the trajectory of the nighttime heat index.” • Innovation laboratories. Another technique developed by the university to promote innovation in metropolitan Phoenix is the formation of a number of innovation laboratories. The concept of “innovation laboratories” is loosely construed as these can assume various forms and configurations according to their purpose, Dr. Crow explained. A leading example is SkySong, the ASU Scottsdale Innovation Center. Unlike conventional university-affiliated research parks, SkySong is a global business and innovation complex that ASU established in collaboration with the city of Scottsdale to advance education, entrepreneurship, and innovation. A number of ASU innovation laboratories are focused on education in entrepreneurship, including initiatives supported by an endowment designated for the advancement of student ideas for new companies. For life sciences entrepreneurs, ASU has established Technopolis, an innovation laboratory to convert ideas into commercially viable businesses, with guidance available for product development, business infrastructure development, proof-of-concept capital formation, and revenue development. The primary objective of these innovation laboratories is to start new enterprises, Dr. Crow emphasized, and depending on the objective, companies from the United States and around the world are invited to participate. Some

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42 GROWING INNOVATION CLUSTERS FOR AMERICAN PROSPERITY innovation laboratories focus on educational technologies and have been created with the objective of improving education at all levels. Other innovation laboratories may be clustered around issues associated with disadvantaged communities or specific societal challenges. The university welcomes input and support from the public sector, private sector, and philanthropic institutions. • Arizona State University Decision Theater. The “standard model” of innovation, by which ideas are thought to move linearly from the laboratory to the prototype to the marketplace, is in itself insufficient and does not adequately represent the processes associated with the formation of innovation clusters in twenty-first century metropolitan Phoenix, Dr. Crow observed. A chief obstacle to the formation of innovation clusters is lack of understanding and communication between the public sector and the private sector, and between scientists and engineers on the one hand and on the other those responsible for the implementation of new technologies, including decision-makers in business, industry, and government. In an effort to overcome this obstacle and allow stakeholders from diverse fields “who don’t speak the same language” to gather together and solve problems, the university raised $6 million to build a facility termed the ASU Decision Theater for the presentation of interactive and immersive, three-dimensional scientific visualizations of complex multivariate relationships based on actual environmental data and modeling results (). A unit of the Global Institute of Sustainability (GIOS), the Decision Theater facilitates collaborative decision-making to address issues such as water management, land use, and public health. In order for Arizona to leverage its potential as a leading center for the development, manufacture, use, distribution, and control of solar-based energy systems, for example, ASU is developing robust modeling and simulations tools to advance the hybrid public-private partnership models and policy-driven market approach that will be required for success. ASU researchers from various units are developing an analytical tool known as RenewSim, for example, that will support the development and deployment of a solar energy roadmap through analysis, design, engineering, financing, and deployment. In order for produce 20 gigawatts of electric power derived from solar technologies for Arizona, Nevada, and southern California, innovation challenges include not only the development of engineering models for energy production and the grid infrastructure but also economic models and quantitative analysis for budgeting, efficiency, environment impact, and land use. The construction of knowledge and research infrastructure is an imperative over and above the urgent requirement for the construction of an adequate civic infrastructure, and in this sense, ASU is breaking down barriers to the formation of innovation clusters in the American Southwest.

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43 SUMMARY OF PRESENTATIONS American innovation policy is limited to the extent that it fails to recognize local expertise and regional innovation capacity, Dr. Crow observed. Potential synergies remain unrealized because of the lack of coordination and collaboration between the public and private sectors, and between the federal government, regional enterprises, and academic institutions. He relayed an example from Karen Mills, administrator of the U.S. Small Business Administration, regarding such lack of regional coordination in her home state of Maine. The University of Maine, he said, was trying to build a materials research center while the nearby University of Massachusetts boasts the world-class Materials Research Science and Engineering Center (MRSEC). “They could be linked to and clustered with this site,” he said. He said that a more synergistic strategy for Maine would be to leverage its expertise in boat technology, including the application of new composite materials for boats and the development new engines. “We need to leverage local assets,” Dr. Crow reiterated. “We need to build regional innovation clusters around local expertise.” Leveraging the Government’s Investment in Regional Growth What should the administration do to leverage its investment in regional economic growth? He proposed that one approach is to identify regional problems of national importance. For example, the federal government could help solve the ecological problems of the Everglades, which he called “a train wreck happening before our eyes,” by assuming leadership for an effort that will require a massive coordination involving the public and private sectors. Solving the problem, he said, would require innovations from mining, agriculture, urban planning, the construction industry, water infrastructure, energy distribution, ecosystem management, and fisheries. With sufficient resolve to solve the impending ecological disaster, a host of innovations in a series of industries could coalesce surrounding the causality of the problem. Such federal leadership, he concluded is nor forthcoming. Within the context of the global knowledge economy, Dr. Crow argued, the present rate of innovation in the United States is inadequate. He pondered, “Where then is the national innovation cluster working on that problem?” He asked how the country could accelerate the process of innovation, and expressed his agreement with Susan Crawford, professor of law, University of Michigan, and special assistant to the president for science, technology, and innovation policy, that the first priority was to clarify outcomes. Today, he said, an outcome is often equated with how many dollars are spent, with the assumption that investment in science will automatically produce positive outcomes. Such investment frequently does produce remarkable returns, he continued, but because we are not sufficiently focused on outcomes, our success often comes in spite of ourselves. A focus on outcomes would require coordination

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44 GROWING INNOVATION CLUSTERS FOR AMERICAN PROSPERITY between the Department of Energy and Department of Defense and the National Science Foundation, for example, as well as investment in education in the STEM fields—science, technology, engineering, and mathematics. It is common knowledge, he observed, that U.S. students lag behind those of other countries in math and science education in grades K-12. “Where is the national innovation cluster working on that problem? Give me every possible tool imaginable that can drive math learning across every cultural cluster in this country in every family of every income.” He concluded by urging a shift in perspective, particularly at the federal level, from the “project mode of thinking” to the advancement of policy that encourages “innovation clusters that are driven by outcomes” followed by investment to facilitate those outcomes. He lamented the present absence of analytical tools to measure outcomes as well as their economic impact. He framed investment in math and science education, for example, as an economic development opportunity. Speaking from his perspective as the president of a research university guiding the economic diversification of the economy in metropolitan Phoenix, he observed, “What I can say is that standard stuff seldom works. The country is evolving rapidly and the problems are challenging. Any standard approach that’s not somewhat regionalized or localized is not likely to succeed. We need customization, and that comes through the establishment of new kinds of innovation clusters guided by new kinds of tools and outcome measures.” Discussion Adam Rosenberg, of the House Science and Technology Committee, asked whether the large energy institutes recommended recently by the Brookings Institution1 might too easily become earmarks that are difficult to terminate, and whether they are needed at all, given the current availability of national laboratories and major universities. Dr. Crow acknowledged the concern about earmarking, which he said had been expressed by Chairman Gordon2 during congressional deliberations on the proposal. However, Dr. Crow, who said that he co-chaired the Brookings study, replied that the danger of earmarking could be addressed by ensuring that the selection of institutes be done on a strictly competitive basis. 1 The Brookings Institution's Metropolitan Policy Program—joined by a number of leading universities, regional alliances, and corporate partners—has laid out a detailed plan for launching a network of energy innovation institutes around the country. These institutes would “serve as the hubs of a distributed research network linking the nation’s best scientists, engineers, and facilities.” 2 Bart Gordon chairs the House Committee on Science and Technology.

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45 SUMMARY OF PRESENTATIONS He noted that the Department of Energy was planning energy hub projects that would likely have many of the features of the energy institutes, but saw two differences between the plans. First, he said, the DoE projects did not focus on solving a regional problem. Second, none of the funding proposed by the Brookings report would go toward infrastructure. The institutes would make use of existing institutions, taking the form of coordinating hubs and distributed networks of participants. He insisted that their efficiency and quality would be ensured by a rule of “strict, rigorous competition, no exceptions.” Dr. Edward Penhoet asked whether a criterion for locating a hub would be local capability. Dr. Crow replied, “Yes, absolutely.” Samuel Leiken, senior director of policy studies for the Council on Competitiveness, commented that in the course of studying universities and regional development, he had visited SkySong,3 the innovation center Dr. Crow described during his remarks. He praised the usefulness of SkySong in creating a “tool that promotes serendipity for free- enterprise capitalism,” allowing entrepreneurs to find a foreign partner, for example, or a university professor interested in collaborating. He said he was troubled by the risk that clusters with strictly defined outcomes might “define out” the essential “serendipity of free-enterprise capitalism.” Dr. Crow replied that SkySong was a “transaction time reduction facility.” He asked: “How do you take your idea and move as rapidly as possible through whatever transaction you need to move it forward.” The development of SkySong was made possible through partnerships with the city of Scottsdale and private developers. More than 50 global and American companies from more than 20 countries are current participants, he explained. He suggested that the way to maintain serendipity is to focus on the problem rather than to establish a rigid regional structure. “You invite everyone to assemble around the problem itself,” he said. “Then all the natural juices inside the university, the start-up company, and the established company flow on their own. Stay focused on the idea, not the structure.” 3 SkySong, located in Scottsdale, Arizona, describes itself as “a global portal connecting the world through technology.” .

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