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PANEL IV
THE UNIVERSITY CONNECTION
Moderator:
Robert Samors
Association of Public and Land-Grant Universities
Mr. Samors reminded the participants that the National Association of
State Universities and Land-Grant Colleges—well known as
NASULGC—had just changed its name about a month previously to the
Association of Public and Land-Grant Universities (APLU). The
APLU’s members included 215 public research universities, 76 land-
grant colleges, and 24 institutions. “Our goal,” he said, “is to help them
become the best possible partners in regional economic growth and
development.”
The APLU has three primary areas of activity:
1. to design better metrics for evaluating how institutions contribute to
“innovation ecologies”;
2. to develop tools institutions can use to assess and improve
participation in regional economic development; and
3. to make available the capabilities of major research universities in
distressed areas, rural or urban, to help maximize their potential, in
partnership with government and industry.
The Akron Model
Luis M. Proenza
University of Akron
Dr. Proenza opened with a summation of the effort to optimize
innovation in Akron, Ohio: “It’s really about relevance, connectivity, and
productivity—making do with relatively little to come to significant
outcomes.”
He began with a nighttime satellite photograph showing clusters of
light around metropolitan areas that he said represented 87 percent of the
nation’s economic activity. These cluster also held 80 percent of the
colleges and universities, he said, and illustrated an important feature of
clustering: there were no visible boundaries between populated regions.
“Often the sub-elements of clusters extend through these regions across
political boundaries and into other states.” He said that greater Akron
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94 GROWING INNOVATION CLUSTERS FOR AMERICAN PROSPERITY
held four million people, and that northeast Ohio, counting Cleveland,
represented the fifth largest market in the United States. He listed 11
industrial clusters in the region, including polymers and advanced
materials, a particular local strength.
Dr. Proenza began working to strengthen the Akron economic and
educational cluster around the year 2000, soon after assuming the
presidency. The region faced significant challenges. First was its image
as part of the Rust Belt. Then there were a local aversion to risk and a
lack of investment capital. The university itself was losing enrollment
and overshadowed by the state’s two dominant institutions, Ohio State
University and Case Western University.
Beginning with the Underutilized Assets
The university focused on what it saw as opportunities, beginning
with underutilized assets and the greater flexibility of the new economic
environment. Akron, like cities anywhere, could take advantage of
globalization and its message that any region could compete with any
other—given sufficient innovation resources.
“We began,” said Dr. Proenza, “with the realization that the
university was nearing its 130th birthday. It was founded as Buchtel
College in 1870, in the same decade and city as four major tire
companies.” The college opened the first rubber chemistry program in
1909, and, along with the tire companies, developed what is today the
“largest polymer program in the world.”
Akron also formed its own research foundation in 2001 to build on its
historical record of research. “This record is very complex and
comprehensive,” he said. “A university’s impact on its region through its
own technology and outreach is far broader than we’d recognized.” The
university began by looking at local knowledge assets. Many companies
were downsizing and could no longer manage their technical libraries.
Some of them donated their libraries to the university, which would
manage them at much lower cost. They took advantage of available
space to work more actively on industry research projects. The Ohio
Research Foundation was developed expressly to offer university
services to other institutions.
Transforming the University and the Region
More broadly, the university began to transform itself and the region
in fundamental ways. It found that 7,000 of its 23,000 students were not
living on campus because housing had been neglected for so long. The
neighborhood around the campus had little vitality. In response, the
university launched an initiative that resulted in a virtual rebuilding of
the campus and improvements to a 40-block area around it. Results
included 15 new buildings, 17 major additions, 36 acres of new space,
30,000 new trees and bushes, new walkways, plazas, terraces, and
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SUMMARY OF PRESENTATIONS
gardens. It built new residence halls and broadened its efforts into a
University Park Alliance that reached beyond campus into the city itself.
“The goal is to make the whole area a nice place to live, learn, work,
shop, and play,” said Dr. Proenza. Summa Health System joined the
university as a development partner, and the Knight Foundation provided
critical seed money. To date, the effort has mobilized some $500 million,
and confirmed results include 920 new jobs, 80 new housing units, $52
million in civic investments, and $300+ million in private investments.
The University Park now includes more than 1,000 acres, and a new
30,000-seat football stadium is scheduled to be ready for the 2009-2010
season.
National Recognition
As the decade progressed, the University of Akron began receiving
national recognition. In 2007, it was ranked seventh in the nation in
licensing revenue among universities that do not have a medical
school—and first in the nation when results were normalized to total
research expenditures.1 By the end of 2008, the university’s technology
and invention portfolio included more than 450 active and pending
patents. The university had generated nearly 30 start-up companies and
hosted 115 active industry-sponsored research projects.
In 2007, the university bought two buildings adjacent to the campus
to create the Akron Innovation Campus, which now houses 17 tenants.
One organizational innovation is the creation of University of Akron
Research Fellows, retired or active entrepreneurs and student interns who
volunteer their time helping various small firms and individuals around
the university. They may participate in small-firm formation and
development, advice on technologies, and facilitate networking. “This
saves the community about $4 million-$5 million a year,” said Dr.
Proenza. “Anything they do adds value to the community.”
The ARCHAngels were formed, a regional network of investors that
hosts financing events and supplements other more established
intermediaries. The group has presented 45 companies to investors at
quarterly events since November 2005, and 22 of them have reported
total follow-on funding of $36 million.
At the request of Proctor & Gamble, headquartered in Cincinnati, the
university also started a series of Open Innovation Seminars. Their
purpose was to promote outreach and networking among companies—to
transform corporate culture from an inward-looking, isolated model to
one of open innovation in which firms are receptive to the ideas of
partners. Its motto is “proudly invented elsewhere.”
1
Association of University Technology Managers (AUTM), February 2009.
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96 GROWING INNOVATION CLUSTERS FOR AMERICAN PROSPERITY
A Bioinnovation Institute
Another initiative, he said, is an example of “the thing that doesn’t
occur to you until it’s obvious.” That thing was named the Bioinnovation
Institute, and grew out of existing local strength in polymers. “The
human body,” he said, “when you take away the water and the calcium,
is basically polymeric stuff. So the concept of biomaterials becomes an
exceptional opportunity to deepen the relationship between materials
science and biomedicine. We asked the three major hospitals in Akron,
as well as a regional public medical school, to join in forming this new
entity. They agreed, and it was catalyzed by another grant from the
Knight Foundation. This initiative is dedicated to making Akron the #1
biomaterials and orthopedic research program in the world.”
Among the lessons learned during this experience, he emphasized the
following:
• Assemble weak assets to create new strengths.
• Assemble “guerrilla” (volunteer) entrepreneurial talent at no cost.
• Be open to unusual partnerships (such as a university without a
medical school teaming with three hospitals).
• Recognize that the university and the city must be close partners.
A Role That Is Still Evolving
He noted that the role of the university in economy development had
been evolving since 1862, when the Morrill Land Grant Act specified a
role for universities that taught applied agriculture and the mechanical
arts. “This role is still evolving,” he said, “toward a much expanded
sense of relevance and connectivity for every university discipline.” In
the 21st century, he said, the university had become central to the
knowledge-conceptual economy. It had also become a convener,
developer of applications, and anchor for clusters of innovation.
He closed by endorsing five elements of a new university strategy,
which he said were adapted from the Department of Commerce’s report
on Strengthening America’s Communities:
• Public purpose, tied to enhancing the health of regional economies.
• Workforce development, fully integrated into parallel strategies at
the national, state, and regional levels.
• Interconnected communities, with critical economic mass.
• A competitive strategy for all regions, and the collaborations to act
on it.
• Public-private-university partnerships, with a system of compacts
or incentives to remove barriers and promote cooperation.
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The South Carolina Innovation Ecosystem
David McNamara
South Carolina Research Authority
Mr. McNamara said that South Carolina, a small and traditionally
rural state, had come only recently to emphasize the importance of
economic development based on innovation clusters. A beginning step
was taken by the state legislature in 2002 when it funded the Endowed
Chairs Act to attract high-quality academic researchers. The legislature
followed this in 2003 with the Research Infrastructure Act to provide the
facilities and equipment for academic research. In 2005, Mr. McNamara
was hired, with a straightforward mandate: focus on the knowledge being
produced by the three research universities—the University of South
Carolina, the Medical University of South Carolina, and Clemson
University—and build an innovation system to commercialize that
knowledge.
For this purpose, the 2005 Innovation Centers Act was passed and
created SC Launch,2 under the umbrella of the South Carolina Research
Authority (SCRA). SC Launch is funded not by the state but out of
competitive federal contracts with mission agencies. He began to rally
support for innovation clusters around each of the research universities,
and to flesh out the details of his mission:
• Help create startups.
• Provide support for applied research and commercialization.
• Promote knowledge-based industries and research facilities.
• Focus SC Launch client efforts on new scientific and technological
advances.
• Foster dialogue between university and industry.
• Assist the universities to increase research capabilities.
The SCRA hired Michael Porter to help produce a five-year plan for
the clusters, and created another entity, the New Carolina Council on
Competitiveness to focus specifically on those clusters. SC Launch
focused on technology sectors that had good commercialization potential
and some strength in the state—primarily advanced materials and fibers,
alternative energy, automotive technology, energy and chemicals, life
sciences/ biotechnology, and related information technology and
software.
2
The website is .
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98 GROWING INNOVATION CLUSTERS FOR AMERICAN PROSPERITY
Innovation Centers (’05)
Research Infrastructure (’03)
Industry Partners (’06)
promotes business
technology
partnerships in research
transfer
The Innovation
Venture Capital (’04)
Ecosystem
keeps high-growth
companies in the state
Endowed Chairs (’02)
develop strength
in research
Education Reform (’06)
strengthens
K-12 preparation
FIGURE 5 The innovation ecosystem.
SOURCE: David McNamara, Presentation at June 3, 2009, National Academies
Symposium on “Growing Innovation Clusters for American Prosperity.”
The group received some seed funding and began to develop criteria
for firms desiring to join the program. These firms had to have:
• Their base in South Carolina, or a commitment to moving there.
• High potential to create jobs and pay attractive wages.
• Intellectual property that was protected or capable of being
protected.
• Linkage to SC research universities (preferred).
Using Leverage to Start Companies
SC Launch, with a budget of only about $6 million, had helped start
about 130 companies start in the last three years, he said. “We have to
use a lot of leverage. We raise money donated by taxpayers, and give
them a tax credit. We have to work with every other entity in the state.
The good news about being small is that we can get all the legislators and
economic development people we need in one room when a company
wants to come to town.” SC Launch offers not only seed funding, but
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also up-front counseling and access to resources, including training,
seminars, networking, access to investors, and coaching.
Despite the organization’s youth, said Mr. McNamara, it had brought
to the state about $65 million in follow-on funding secured by launch
companies. “The average salary in our companies is $77,000,” he said,
“in a state where per capita income is between $38,000 and $50,000,
depending on region.” It has attracted 130 members to its Circle of
Innovation, which provides resource partners who want to participate and
people who can contribute. In 2008, SC Launch received a national
award for “Achievement in Building Knowledge-Based Economies”
from the State Science & Technology Institute (SSTI).
Of the companies helped by SC Launch, several sectors dominated.
Of the 130 companies, 26 were in the engineering and chemicals sector,
27 in information technology, and 44 in life sciences, biotechnology, and
biomedicine. The automotive cluster, he said, was small but successful
and growing rapidly, with research facilities supported by BMW, Toyota,
Timken, a motor sport center at Clemson, and a hydrogen fuel cell
program. He concluded that while SC Launch was not charged explicitly
with the mission of forming clusters, “they seem to be forming on their
own.”
California Initiatives
Ed Penhoet
Alta Partners
Dr. Penhoet noted at the outset that California, home of Silicon
Valley, had had no state program to form or support innovation clusters.
“They’re all home grown,” he said, ”most of them derived from the very
powerful universities.”
Instead, he said, the state has inherited natural assets that originally
drew people to the region, including:
• Geography.
• Climate.
• Natural resources.
• Large population (about 10 percent of the country).
These assets had been used and transformed over the years into
created assets, including:
• Top universities, which had themselves been a major driver of
innovation, especially in biotechnology and information technology.
• Research centers, including leading national laboratories.
• Talented people.
• An entrepreneurial culture.
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100 GROWING INNOVATION CLUSTERS FOR AMERICAN PROSPERITY
• Networks of people in different sectors.
• Vibrant downtowns.
He emphasized the entrepreneurial culture of California. “Talented
people live everywhere,” he said, “but for innovation, you need people
with the courage to start a new business, and an environment that
supports this. The attitude is important. You might say that
entrepreneurial people are cocky, confident that they can do it.”
The Role of State Government
At the same time, he said, entrepreneurial people depend on many
features and actions of state government. The state government is a
partner in this process in several ways:
• Government is a major investor in human capital, from elementary to
doctoral levels.
• It is the major provider of physical infrastructure, including roads,
bridges, highways, ports, and local transit.
• Government often has jurisdiction or regulatory control over
business activities. This control can either hamper or expedite
business choices. “People worry a lot about macro issues,” he said,
“but often your success comes down to whether you can get a permit
from the local sewage agency.”
• Increasingly, government directly funds research and development.
The state government can play a central role in creating a climate for
entrepreneurial activity, he said, by following some common-sense
guidelines. These may include:
• Put all the pieces together. Make R&D investments part of a
coordinated innovation strategy.
• Make the right bets. Each region has its own strengths, and a
regional strategy should build on them. “You do have to choose
winners,” he affirmed. “But this is not the same as creating them.
People often ask how to build a biotech industry, as though there is a
secret formula. They fail to understand that what is required is the
fertile ground to plant the seed.” He said that Germany had tried to
build a biotech industry in the former East Germany by placing a
center in a region that needs economic help. “That simply doesn’t
work,” he said. “You can’t just build some facilities and bring in
some people because you think an area needs economic
development. There has to be a reason to think the business will
thrive where you put it.”
• Innovate for the real world—globally and locally. Research must
be relevant to industry and the community. “We’ve witnessed a
disconnect between ownership and economy activities,” he said.
“We talk about GM and Chrysler being American companies, but
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many countries own those companies. The New York Stock
Exchange is 25 percent owned by foreign entities. The issue is not so
much ownership as where you actually locate economic activity.”
• Invest in collaboration. Innovation needs partners from universities,
industry, and government.
• Listen to the smart people. “There are hard decisions in this
process, and you will need the best advice. Too many groups have
tried to act in isolation.”
• Be consistent while embracing change. Innovation needs both
flexibility and sustained effort.
• Make sure you get what you want, but be patient. It will take time
to accomplish long-term goals, but measuring short-term gains is
critical to getting there.3
California, he noted, is by no means absent from efforts to transform
knowledge into commercial products and firms. It has created a number
of large innovation funds that support both partnerships and focused
research. These include:
• University of California Discovery Grants (1996). The state
invested money in UC to be spent only on projects with private
partners that have an outcome associated with that funding. The
objective of the program is to support activities that are relevant to
society and have a chance of creating a new business. It resembles
the SBIR program in offering seed grants to move projects out of the
laboratory into early-stage development. The University of
California budgets about $15 million for the program, while industry
has contributed about $20 million in a variety of areas, including
electronics manufacturing ($13 million), digital media ($7 million),
and multidisciplinary research in the three categories of energy and
environment, health and wellness, and nanotechnologies ($2M).
• California Institutes for Science and Innovation (2000). These
four institutes were launched by Gov. Gray Davis within the UC
system. The institutes, in information technology, nanotechnology
and biomedicine, were distributed throughout state and have received
a total state investment of $400 million, equally distributed among
the four centers.4 These have generated an additional $800 million in
funds from the federal government and private sector, bringing the
3
Adapted from the National Governors’ Association, Innovation America,
Washington, DC: National Governors’ Association, 2007.
4
These centers are (1) The California Institute for Quantitative Biosciences at
UCSF, UCB and UCSC, The California Institute for Telecommunications and
Information Technology, at UCSD and UCI, The California Nanosystems
Institute at UCLA and UCSB, and the Center for Information Technology
Research in the Interest of Society at UCB, UCD, UCM, and UCSC.
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total investment to about $1.2 billion. The program has been a major
driver of growth.
• Proposition 71 (2004). Voters approved Prop 71 to establish the
California Institute of Regenerative Medicine, which regulates and
funds stem cell research. The measure was paid for by issuing $3
billion in state general obligation bonds, the first time a state has
raised that much money for a specific kind of research. This was
passed at a time when the federal government did not support stem
cell research.
• Climate Change Institute (Proposed, 2009). Funding in excess of
$300 million has been proposed to initiate an R&D program.
Some Features of Propositions
Dr. Penhoet added several comments on Proposition 71. It actually
had two explicit goals. One was to find cures for disease using stem cells
as a therapy or tool. The second was to enhance California’s competitive
position as the world’s leading biotech region. The funding had indeed
built up the most robust stem cell program in the world, he said,
attracting numerous scientists from within and outside the United States.
“So it has had a positive effect.”
At the same time, he noted that Proposition 71 had raised a knotty
political issue. “The Proposition was good for us [in biotechnology], but
bad for the state.” The Proposition specified funding by general
obligation bonds, effectively embedding the obligation in the state
constitution. “This means that the legislature can’t cut the budget,” he
said. “This is one of California’s problems as it tries to deal with the
current financial crisis. Many such things are not under the control of the
legislature, so in difficult times it has limited ability to adjust the
budget.”
Clusters Have Few Rules
Dr. Penhoet offered a comment on cluster formation, illustrating that
there are few firm rules about participation. While first-rank universities
are almost always associated with successful innovation activity, he said,
this is not always true; nor is it true that leading technology companies
depend on cluster membership. In California, for example, the biotech
industry is concentrated largely in two places, San Francisco and San
Diego. Yet the largest independent biotech company, AMGEN, is
located in Thousand Oaks, outside Los Angeles. This company is
isolated geographically, is not associated with any university, and has not
spawned a cluster of smaller startups, as Genentech and other leading
firms have done. He drew no conclusion from this anomaly, other than to
reiterate the lack of any formula for successful innovation.
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Discussion
Mr. Samors asked the panelists to summarize the key elements
needed to create productive partnerships. Dr. Proenza placed proper
incentives at the top of his list. Mr. McNamara commented that different
technology firms regard the language and opportunities of
commercialization in different ways. For example, he said that many
firms considered licensing and commercialization to be synonymous.
Also, he noted that many investigators are reluctant to file their
discoveries because of the time this takes away from their research.
Finally, he said, some researchers had no interest in commercializing
under any circumstances. “We have to win their trust and walk the floor
and encourage them to file that discovery.”
Dr. Muir of the University of Florida noted that many of the
disclosures received by her Technology Licensing Office cross
disciplines. “The collaborations are occurring,” she said, “but they are
occurring because they happen around a particular goal or problem to be
solved.”
Mr. Milbergs asked a question “about headhunting.” Washington
State had hired two global research leaders, in biofuels and
nanophotonics, in hopes that they would attract federal funds, build
partnerships, and help create emerging new industry clusters. He asked
whether such recruitments have this potential. Dr. Proenza affirmed that
many states had a similar “eminent scholars programs,” and that most are
successful. “If the person has stamina, interest, and perhaps an emerging
entrepreneurial track record, the prospects for generating funding are
there.” Dr. Penhoet said such people are difficult to find—especially
those with “good science and reasonable business skills. My own
experience is that it is a recipe for disaster to hire scientists who don’t
understand business, or business people who don’t appreciate science.
You’ll ride off a cliff together unless the communication skills are very
good.” Mr. McNamara said that he had difficulty enticing good
entrepreneurs to a new program, and he was studying the use of an
incentive plan offering several years of salary or income.
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