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I
OVERVIEW
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Overview
Arkansas is seeking to reinvent itself as a knowledge-based economy.
This transformation continues the state's longstanding efforts to adapt to
changing economic conditions. When the post-World War II automation of
agriculture displaced much of the state's predominantly agrarian work force, the
state succeeded in attracting manufacturing industries based on Arkansas' low
wages and favorable business climate. When these industries began moving
offshore in the 1970s, the state experienced a steady erosion of manufacturing
jobs that continues to the present day. Arkansas began building the
infrastructure for technology-based economic development in the 1980s.
Recognizing the growing importance of knowledge-based industries, Arkansas'
leaders are once again taking steps to secure their future economic growth.
To review the states recent initiatives to develop a knowledge-based
economy, the National Academies' Board on Science, Technology, and
Economic Policy (STEP) and University of Arkansas at Little Rock convened a
conference on Building the Arkansas Innovation Economy. Held at the Clinton
Presidential Library in Little Rock, the conference drew Arkansas business,
political, and academic leaders along with senior U.S. government officials and
national experts to highlight the accomplishments and growth of the innovation
ecosystem in Arkansas, while also identifying needs, challenges, and
opportunities. The participants at this conference discussed a series of proposed
initiatives to strengthen Arkansas' innovation and technology infrastructure and
identified areas where federal, state, and foundation contributions could generate
positive synergies.
As this report of the conference documents, Arkansas' business,
academic and government leaders recognize the economic and technological
challenges confronting the state. They have studied successful economic and
research programs in other states and drawn on national experts to develop
strategic plans to promote economic growth and in recent years to enhance
the state's standing in the knowledge-based economy of the 21st century.
Arkansas benefits from homegrown entrepreneurial ingenuity and pluck, its
reputation as a highly pro-business state, strong transportation links, and a
geographic location in the center of the North American market.
3
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4 BUILDING THE ARKANSAS INNOVATION ECONOMY
FIGURE 1 Location of Arkansas in the United States
At the same time, the state's development continues to be hampered by
weaknesses in its knowledge and skills base, the out-migration of college
graduates, a dearth of venture capital, and a relatively low level of federal
research funding (See Table 1). Many of the Arkansas' economic and
technology development initiatives were designed to address these areas of
vulnerability.
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OVERVIEW 5
Table 1 Innovation Indicators for Arkansas
Category Arkansas U.S.
Average
State funding for major public universities per $10, 825 $9,082
enrolled student (2010)
Engineers in the workforce (2010) 0.53 1.12
Life and physical scientists in the workforce 0.3 0.45
(2010)
Federal R&D obligation per employed worker $112 $862
(2008)
Federal R&D obligations per S&E occupation $4,947 $21,594
holder (2008):
Academic S&E articles per 1000 science doctorate 477 579
holders in academia (2008)
Patents per 1000 S&E occupation holders (2010): 4.9 19.4
Venture Capital deals per high tech establishments 0.0 0.59
(2008):
High tech to all business establishments (2008) 7.02 8.52
Business performed R&D to private industry 0.52 2.14
output (2008)
Source: NSB Science and Engineering Indicators 2012 State Data Tool
THE INNOVATION IMPERATIVE
The twenty-first century is witness to fundamental changes in the
world's economies. Knowledge-based economic activity is recognized
worldwide as the basis for sustained growth. The prosperity of individual
regions is based increasingly on their relative success in attracting and retaining
knowledge-based activities and assets and utilizing them for economic
development. At the same time, the globalization of trade and investment as
well as advances in communications and transportation has created an
increasingly integrated global market. Reflecting the growing mobility of
capital and labor, states and regions are increasingly vulnerable to companies,
industries and jobs moving to other parts of the U.S. or to foreign countries that
offer a skilled and flexible workforce, often at lower cost, and greater incentives
for investment. The nation's states and regions therefore face an imperative to
foster innovation and start, grow, and retain innovative firms if they are to
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6 BUILDING THE ARKANSAS INNOVATION ECONOMY
sustain and augment their standard of living and ensure their long run economic
well-being.1
BOX 1:
Addressing the Innovation Imperative in Arkansas
In his conference keynote, Governor Beebe of Arkansas said that
among the state's advantages are its strong work ethic and entrepreneurial spirit.
He noted Arkansas' reputation for successful businesses, beginning with Sam
Walton's Wal-Mart, and continuing with Tyson, J. B. Hunt, Stevens, Acxiom,
and Alltel, which had become part of Verizon. "Those success stories were the
basis for what was yesterday," he said, "but they provide us with a roadmap for
tomorrow. We're probably not even aware of how our children and
grandchildren will live 10, 15, or 20 years from now. But those who embrace
technology and innovation and entrepreneurship; make the marriage between
education and economic development; and learn that science is the basis for
tomorrow's economy will reap the benefits for themselves, their employees,
their loved ones, and their region."
Acknowledging that the state lags in per capita baccalaureate degrees,
where it stands 49th in the nation, Governor Beebe said that he was determined
to change that ranking.2 The state has initiated policies that include higher
standards, higher expectations, and more advanced placement. The state has
approved a lottery, with all of its available revenues targeted for college
scholarships. "There will be no excuse for Arkansas to stay 49th in per capita BA
degrees," he said.
In his conference remarks, Richard Bendis, of Innovation America,
outlined the key issues for building knowledge and innovation-based economies.
He defined innovation as "the creation and transformation of knowledge into
new products, processes and services that meet market needs." Knowledge
economies are "based on creating, evaluating and trading knowledge." Bendis
observed that the public, academic and private sectors each have essential roles
in innovation. Academia must focus on the creation, integration and transfer of
1
Ross De Vol, et al., Arkansas' Position in the Knowledge-Based Economy Santa Monica: Milken
Institute, September 2004, p. 1.
2
Recognizing these realities, Governor Mike Beebe's Strategic Plan for Economic Development
points out that Arkansas is "at a critical disadvantage in competing for opportunities in the 21st
century economy," and that the state had "not kept pace" with the requirements of the global
knowledge-based economy. See, the Executive Summary of Governor Mike Beebe's Strategic Plan
for Economic Development, Little Rock: Arkansas Economic Development Commission, 2009.
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OVERVIEW 7
knowledge itself. Industry must use that knowledge to create wealth in the form
of commercial products, processes and services. Governments must develop
policies to encourage innovation, engage in long-term vision and planning,
invest in under-supported areas, and participate in public-private partnerships
with industry.3
He added that technology clusters, which facilitate innovation through
physical proximity and the close interaction of many actors from different
sectors, serve as catalysts for innovation and the creation of start-ups. While
Silicon Valley, Route 128 in Boston and Research Triangle Park in North
Carolina are widely cited as examples of successful technology clusters,
growing successful clusters by stimulating the development, commercialization
and financing of technology-based firms is a significant challenge.4 In this
regard, Bendis stressed the role of "innovation intermediaries" to coordinate
local technologies, assets and resources to advance innovation in a jurisdiction.5
Bendis further observed that successful development of economic
activity within a region requires a "three-legged stool." First, the region must
attract companies from other regions; second, it must retain companies that are
already present; and third, it must create new companies. Creating new
companies is both the most important element and the one that is most difficult
to achieve. It is important because small and medium enterprises (SMEs) are a
major source of innovation and new jobs.6 However, as Jeff Johnson, CEO and
President of ClearPointe Technology, a managed service provider based in Little
Rock, noted at the conference, "very few new firms have adequate cash to get a
new business through the first year, and we were no exception."7 The result,
according to Bendis, is that most start-ups with new ideas do not move to the
commercialization stage at present of 150-200 small firms that develop
business plans, only about 10 draw the interest of venture capitalists, and only
one is actually funded. Most small firms that need financial backing are in the
proof-of-concept, start-up or seed capital phases, and typically need $500,000 to
$2 million for the development of prototypes.8 This need is not being met; seed
3
See the summary of the presentation by Richard Bendis in the Proceedings chapter in this volume.
4
For a review of the nature of innovation clusters and state policies to grow innovation clusters, see
National Research Council, Growing Innovation Clusters for American Prosperity, Charles W.
Wessner, rapporteur, Washington, D.C.: The National Academies Press, 2011.
5
See the summary of the presentation by Richard Bendis in the Proceedings chapter in this volume.
6
Small and medium enterprises generate 13 times as many patented technologies as large firms, and
are an important source of innovation for large firms that often partner with SMEs. In the three
years after the recession of 2001, companies of less than 20 employees created 107 percent of net
new jobs while companies over 500 employees eliminated a net of -24 percent. See the summary of
the presentation by Richard Bendis in the Proceedings chapter in this volume, where he cites data
from the Small Business Administration.
7
See the summary of the presentation by Jeff Johnson in the Proceedings chapter in this volume.
8
See the summary of the presentation by Richard Bendis in the Proceedings chapter in this volume.
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8 BUILDING THE ARKANSAS INNOVATION ECONOMY
stage investments by the U.S. venture capital industry declined by 48 percent in
2011 to $919 million, or 3 percent of all venture capital investment.9 In effect,
venture investment is moving downstream, away from risk, a phenomenon that
is acting as a drag on start-ups in Arkansas and elsewhere.
Responding to this innovation imperative, governments around the
world have implemented a variety of policies and programs designed to promote
innovation-based economic growth.10 Many of these efforts emulate U.S.
public-private initiatives that are widely seen as successful. Indeed, the United
States has a long tradition in public-private partnerships, beginning with a 1798
government grant to Eli Whitney to produce muskets with interchangeable parts,
and continuing through government support for development of the telegraph,
the airplane, jet aircraft, semiconductors, computers, nuclear energy and
satellites.11
As we see next, Arkansas' recent economic and technological
development efforts are a part of this long national tradition in cooperation and
pragmatism in fostering economic growth and addressing common missions.
BACKGROUND: ECONOMIC DEVELOPMENT EFFORTS IN
ARKANSAS, 1955-2012
For most of its history, farming and forestry dominated Arkansas'
economy. During the mid-20th century, sharecroppers and poor migrant laborers
were displaced by agricultural automation. While many migrated, others stayed,
making up the state's pool of low cost surplus labor. In 1950, Arkansas' per
capita income was 56 percent of the national average, and its population was
declining. In 1955, the state legislature established the Arkansas Industrial
Development Commission (AIDC) with a mandate to promote industrial
development. Under the leadership of its first chairman, Winthrop Rockefeller,
the AIDC began to court out-of-state businesses aggressively.12 The result was
9
PWC MoneyTree Venture Capital Report, 2010.
10
For a review of innovation polices of leading nations and regions in Asia, Europe, and North
America and the challenges facing the United States, see National Research Council, Rising to the
Challenge, U.S. Innovation Policy for the Global Economy, C. Wessner and A., Wm., Wolff, eds.,
Washington, DC: National Academies Press, 2012.
11
For an abridged history of US public private partnerships and an analysis of factors characterizing
successful partnerships, see National Research Council, Government Industry Partnerships for the
Development of New Technologies, C. Wessner, ed., Washington, DC: National Academies Press,
2003.
12
The AIDC was formed pursuant to Act 404 of 1955, which also authorized incorporation of local
industrial development corporations and issuance of local industrial development bonds. Today the
AIDC operates as the Arkansas Economic Development Commission (AEDC), with a current
mandate to promote economic development and develop strategies that produce better-paying jobs,
support communities and support workforce training. See the summary of the presentation by Watt
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OVERVIEW 9
an influx of manufacturers seeking low wage labor and cheap land. Between
1955 and 1960 Arkansas added over 51,000 jobs.13 In 1997, AIDC was
renamed the Arkansas Economic Development Commission (AEDC) to reflect a
broader emphasis on developing service and high technology industries in the
state.
By the 1970s the "smokestack" industries that had located in Arkansas
during the preceding decades came under international competitive pressure and
began to move offshore. The percentage of manufacturing employment in the
state began a long decline, from 32 percent in 1975 to 17 percent by 2005. Per
capita income rose through the 1960s and 1970s, but leveled off in 1978 at about
77 percent of the national average where it has "refused to budge despite the best
efforts of economic developers in the state."14 Arkansas' unemployment rate,
which stood at 5.0 percent in 1970, nearly doubled to 9.5 percent in 1975.
Unemployment peaked at 9.7 percent in 1983 and remained above seven percent
through the entire decade of the 1980s.15 In 1979, the AEDC released a report
that warned that the state's future economic growth was limited by a strategy
that sought to recruit firms that provided labor-intensive, low skill, minimum
wage jobs to Arkansans.16
During the 1980s the state took a number of steps to counteract the loss
of businesses and jobs. Two new development agencies were established: The
Arkansas Science & Technology Authority (ASTA) was tasked with promoting
innovation, scientific research, and science, technology, engineering and
mathematics (STEM) education.17 The Arkansas Development Finance
Authority (ADFA) was established to provide tax-exempt bonds to finance
businesses and education.18
Gregory in the Proceedings chapter in this; See also Governor Mike Beebe's Strategic Plan for
Economic Development, 2009, op. cit., p. 2.
13
Governor Mike Beebe's Strategic Plan (2009), op. cit., p. 3.
14
Report of the Accelerate Arkansas Strategic Planning Committee, Building a Knowledge-Based
Economy in Arkansas: Strategic Recommendations by Accelerate Arkansas (September 2007), pp.
16-17.
15
Governor Mike Beebe's Strategic Plan, (2009), op. cit., p. 5.
16
AEDC, Arkansas Climbs the Ladder: A View of Economic Factors Relating to Growth of Jobs and
Purchasing Power (1979).
17
Galley Support Innovations (GSI) is a California-based manufacturer of galley locks and latches
for OEMs in the aerospace business that relocated to Arkansas in 2005. Hit hard by the economic
downturn that began in 2008, it sought assistance from the Arkansas Science and Technology
Authority's Arkansas Manufacturing Solutions program. GSI was awarded to ASTA Technology
Transfer Assistance Grants (TTAG), which enabled GSI to secure a large multi-year contract with an
estimated positive financial impact of $5 million over six years. "AMS Grant Helps Local
Aerospace Manufacturer Turn Business Around," Arkansas Business (January 5, 2012).
18
(2009) op. cit., p. 6. The Arkansas Science and Technology Authority was created by statute in
1983 to "support scientific and business innovation as an economic development tool." In 2009, it
completed 31 projects involving about $8 million in grants and tax credits. It has provided grants to
support the Arkansas High-Performance Computing Center at the University of Arkansas and to the
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10 BUILDING THE ARKANSAS INNOVATION ECONOMY
Despite difficult economic circumstances, Arkansas has spawned a
significant number of world-class companies.19 Wal-Mart, which began with
one retail outlet in Rogers, Arkansas, in 1962, became the nation's largest
retailer in 1991.20 J.B. Hunt, founded in 1961 in Lowell, Arkansas with five
trucks and seven refrigerated trailers, became the largest US trucking company
by the early 1990s. Tyson Foods, based in Springdale, Arkansas, and which
originally consisted of a farmer driving a single truck to deliver chickens to
Chicago, became the largest U.S. processor of poultry and the world's second
largest processor of chicken, beef and pork. Murphy Oil Corporation, based in
El Dorado, Arkansas, operates onshore and offshore oil and natural gas drilling
operations globally, and in 2008 ranked 134th on the Fortune 500 list.21 Other
major companies with origins in the state include Riceland, Stephens Inc.,
Dillard's, Alltel and Acxiom. While most of these companies are not regarded
as technology-intensive firms, many of them have applied technology in their
business processes with dramatic and in some cases revolutionary impact.22
Arkansas Research and Education Optical Network (ARE-ON), a communications network linking
Arkansas' four-year public universities. The authority provides financial support for technology
transfer to local businesses, provides working capital for small start-up businesses (usually pursuant
to royalty-based agreements), and sponsors professional development workshops for teachers and
grants to individual STEM teachers for equipment and supplies. See the presentation by Watt
Gregory, "Evolution of Innovation in Arkansas," in the Proceedings chapter of this volume. See also
the Arkansas Science and Technology Authority website, http://www.asta.arkansas.gov accessed
January 11, 2012.
19
Giang Ho and Anthong Pennington-Cross, "Fayetteville and Hot Springs Lead the Recovery in
Employment," The Regional Economist (October 2005).
20
Wal-Mart, with one of the most sophisticated and innovative supply chains in the world, has
attracted distribution centers from its major vendors to Arkansas, including Heinz, Clorox, Pfizer,
General Mills, Mattel, PepsiCo, Procter & Gamble, Coca-Cola, Johnson & Johnson and Hershey's.
"Arkansas: A Natural Wonder," Inbound Logistics (May 2009).
21
The company offers to pay college tuition and fees for all El Dorado high school students.
"Murphy Oil Company," Arkansas Business
http://www.arkansasbusiness.com/company_info.asp?sym=MUR
22
Wal-Mart's emergence as the world's largest retailer and the world leader in supply chain logistics
is attributed largely to its pioneering practice of tracking inventory by high performance computers.
22
See the summary of the presentation by Watt Gregory in the Proceedings chapter in this volume.
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OVERVIEW 11
FIGURE 2 Map of the State of Arkansas
Source: U.S. Department of Interior, U.S. Geological Survey
Arkansas' location in the center of the North American market, reinforced by a
strong rail, highway and river-based transportation network, (see Figure 2) has
proven a major advantage with respect to attracting and holding some traditional
industries.23 Some local manufacturers have found that Arkansas' location
lowers transportation costs and thus makes them cost-competitive with products
made in China.24 It is becoming evident that Arkansas enjoys geographic
23
Arkansas has over 1,000 miles of navigable waterways and port facilities on the Mississippi and
Arkansas Rivers. Three carriers provide rail service including intermodal freight service. Eight
interstate highways cross various parts of the state. Nucor Steel located a mini-mill in Hickman,
Arkansas, which makes thin-slab steel coils for use in pipes, tubes, processors and automotive
applications, citing location and transportation infrastructure as key decisional factors. Mike Parrish,
a Nucor Vice President who managed the Hickman plant, said in 1996 that "What's great about this
area is it's centrally located in the country. It's great to advertise in this area. You're on the
[Mississippi] River. You can not only ship anywhere in the country, you can ship anywhere in the
world," "Nucor Makes Blytheville Steel Capital of the South," Arkansas Business (December 16,
1996).
24
In 2011, the designers of five-gallon Kosmo coolers, a proprietary product, abandoned plans to
have them manufactured in China, a decision based on "prohibitive" shipping costs. Instead most of
the parts for the coolers will be manufactured by custom injection and blow molder River Bend
Industries LLC at its factory in Fort Smith, Arkansas. River Bend worked with the designers,
Arkansas entrepreneurs Tim Mika and Steve Bowman, developed a mostly US-made product (only
the metal legs will be sourced from China) containing blow-molded and injection molded parts and
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36 BUILDING THE ARKANSAS INNOVATION ECONOMY
industrial collaboration center for global users, which include companies and
universities.104 It is the only facility in the world offering programmability and
reconfiguration operations at six megawatts.
Southwest Power Pool
The Battelle study also identified the Southwest Power Pool (SPP) as
an important asset in developing the states' potential in electric power
transmission.105 At the conference, Nick Brown described the Southwest Power
Pool as a cooperative organization that was originally formed in Arkansas
during World War II to ensure sufficient electricity to support production of
aluminum for the war effort.106 SPP was created because the aluminum plants'
electric power needs exceeded the entire generating capacity of the state,
necessitating the formation of a pool originally comprised of 11 regional
utilities. Originally comprised of 11 utilities in the region, SPP has expanded to
56 members operating in nine states.107 SPP manages the flow of power over
electrical networks, operates as a wholesale sales agency for power and serves
as a "one-stop shop" for the sale of transmission services.
Wind Energy
According to Joe Brenner of Nordex, a manufacturer of wind turbines,
Arkansas is already "a manufacturing powerhouse for the wind industry," and
has become a manufacturing base for some of the most competitive makers of
wind equipment in the world.108 Arkansas is located at the edge of the "Saudi
Arabia of wind" the U.S. great plains states and its strategic geography has
been cited by wind power equipment manufacturers as a key factor in their
2030. See the summary of the presentation by Alan Mantooth in the Proceedings chapter in this
volume.
104
NCREPT won an "R&D 100" award from R&D magazine for innovation in 2009 for the
development of a 3"x5" power electronic module for hybrid electric vehicle motors. Current
modules must be actively cooled by the radiator, but the NCREPT device can operate at 250 degrees
C., does not require water-cooling, and is lighter and more resilient than existing models. The new
module was developed with funding from Japan's Rohm Semiconductor and Sandia National
Laboratory, and was manufactured in Fayetteville by NCREPT and Arkansas Power Electronics.
See the summary of the presentation by Alan Mantooth in the Proceedings chapter in this volume
105
Battelle Study (2009) op. cit., p. 21.
106
At the beginning of the 1940s Arkansas had the largest commercially exploitable deposits of
bauxite in the United States. Alcoa and the Reynolds Metal company established plants in the state,
and a United States government entity, Defense Plant Corporation, built an aluminum factory in
Jones Mill, Arkansas, which was leased to Alcoa.
107
SPP members include utilities, cooperatives, state and municipal agencies, and bulk power
marketers.
108
Nordex USA, a subsidiary of Nordex SE, a German manufacturer of wind turbines and a pioneer
in the development of wind-driven power generation.
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OVERVIEW 37
decision to establish a presence in the state.109 In 2010, the wind industry
supported 1-2,000 direct and indirect jobs in the state.
In his conference remarks Joe Brenner cited the strong support for his
company by state and local leaders and a positive environment for innovation.
In 2008, Nordex USA selected Jonesboro, Arkansas as the site for a
manufacturing facility for 2.5 megawatt wind turbines. The plant, which
became operational in 2010-11, is one of the most technologically sophisticated
facilities in its kind in North America. Nordex chose the Arkansas site because
of the commitment of state and local leaders to economic development, the
availability of a trainable work force, the nearby presence of Arkansas State
University as a site for training programs, and Arkansas' central location in
North America.110
U.S. Department of Energy Initiatives
The federal government is committing substantial resources to the
promotion of energy efficiency and renewable energy (EERE). Dr. Gilbert
Sperling of the U.S. Department of Energy (DOE) Office of Energy Efficiency
and Renewable Energy noted that the American Recovery and Reinvestment Act
(ARRA) had temporarily augmented his office's budget, normally around $2
billion, to $16.8 billion. Of this amount, $11.5 billion was returned to the states
to stimulate building weatherization and other efficiency-enhancing measures.111
DOE's EERE initiatives, he said, seek to increase the market share of renewable
energy power generation from the current one percent to 30, 40, or 50 percent.
This effort requires convincing the American people why EERE investments
109
See the summary of the presentation by Joe Brenner in the Proceedings chapter in this volume.
The sheer size and weight of large wind turbines make transportation costs a factor in locational
decisions. The turbines manufactured in Jonesboro will be as tall as a football field is long, and each
turbine blade will be a comparable length. See the summary of the presentation by Nick Brown in
the Proceedings chapter in this volume; "Arkansas Wins $100 Million Wind Turbine Nacelle Plant,"
Energy Overviews (May 11, 2011); Interview with Joe Brenner, Mitsubishi Power Systems America,
in Wind Systems (January 2011).
110
The University worked with Nordex and Beckmann Volmer, a supplier to Nordex of turbine
mainframes and other components, to create classes and degrees to meet the unique need of the wind
power industry. The University now offers training in "mechatronics," a combination of electrical
and mechanical skills specific to the manufacture of wind turbines. "Beckmann Volmer Breaks
Ground on Osceola Plant," Paragould Daily Press (September 14, 2011); Interview with Joe
Brenner, Vice President of Nordex USA, in Wind Systems (January 2011).
111
Arkansas received over $117 million in grant money for energy efficiency and renewables
projects. Another $34 million went to the state in the form of tax incentives for wind power
generation, electric vehicles, batteries, and other renewable and energy efficiency technologies. See
the summary of the presentation by Gilbert Sperling in the Proceedings chapter in this volume.
Nordex USA received $22 million from ARRA in the form of tax credits to support its
manufacturing facility in Jonesboro, Arkansas. "Firm Building Jonesboro Plant to Get $22 Million
Stimulus," NWA Online (January 11, 2010).
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38 BUILDING THE ARKANSAS INNOVATION ECONOMY
are warranted, securing private capital investment in renewables, and the
removal of incentives for utilities to make more money by selling more energy.
Specific initiatives by EERE include an effort to have one million plug-in hybrid
electric vehicles on the road by 2015; an improvement of the federal
government's energy efficiency; "recover through retrofit" (RTR) initiative to
promote home energy efficiency; the concentration of developmental block
grants for residential and commercial energy efficiency retrofits; and the
development of technologies for concentrated solar power, geothermal energy
wind power, biofuels, and hydropower.112
AEDC Wind Study
Arkansas' own wind power generation capability is still
underdeveloped.113 As Joe Brenner noted in his conference presentation, "There
were challenges to finding the right locations in some parts of the state," but
"siting specialists are quite sure that Arkansas can provide wind energy."114 In
2011, AEDC's Arkansas Energy Office commissioned a "tall tower" study of
wind velocity at various points in the state to generate data to afford wind power
developers at better sense of the availability of wind resources in the state. The
Energy Office is providing a grant to fund a wind resource monitoring network
comprised of sensors on existing communications towers at the 80-foot level,
the hub height of standard industry wind turbines.115
Nanotechnology
Speaking at the conference, Dr. Salamo, a Distinguished Professor of
Physics at the University of Arkansas, Fayetteville, defined nanoscience as "the
effort to understand and design structures at the nano scale and to seek their
application."116 The Arkansas effort in nanoscience, he said, is a collaborative
undertaking among partner institutions throughout the state university system.
Materials Research Science and Engineering Center
The National Science Foundation has funded the establishment of a
network of Materials Research Science and Engineering Centers (MRSEC) at
academic institutions across the United States to undertake materials research,
develop human resources, and collaborate with industry in materials science. A
112
See the summary of the presentation by Sperling in the Proceedings chapter in this volume.
113
At the end of 2010, the state had 10 megawatts (MW) of wind power generating capacity online
with another 210 MW in planned projects. According to an estimate by the National Renewable
Energy Laboratory, Arkansas has sufficient wind resources to provide 58.3 percent of the state's
current electricity needs. "Arkansas is a National Leader in Wind Energy Manufacturing," American
Wind Energy Association (August 2011).
114
See the summary of the presentation by Joe Brenner in the Proceedings chapter in this volume.
115
"A Wind Study the Size of Arkansas," Wind Power News (April 1, 2011).
116
See the summary of Professor Salamo's presentation in the Proceedings chapter of this volume.
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OVERVIEW 39
MRSEC has been established jointly at the University of Arkansas and the
University of Oklahoma to support an interdisciplinary research program on
semiconductor nanostructure science and applications. The Arkansas/Oklahoma
MRSEC is pursuing nanotechnology research with applications in energy
efficiency, conversion of waste to electricity, solar power generation,
semiconductor technology, medical diagnostics, and cancer treatment. The
MRSEC has resulted in six spin-off companies. Dr. Salamo noted that the
University of Arkansas System's schools lead the U.S. in the supply of
nanomaterials to research organizations across the United States.
National Center for Toxicological Research
Arkansas' potential for developing nanotechnology appears to be
particularly promising in the area of life sciences. As Watt Gregory noted at the
conference, the U.S. Food and Drug Administration (FDA) operates the
National Center for Toxicological Research (NCTR) near Pine Bluff, Arkansas.
This facility employs 500 people, nearly half of whom are Ph.D. level
researchers and scientists. NCTR research themes include food contaminants,
detection of terrorist threats, and evaluation of drugs for medical use.
The effort to develop a regional cluster in nanoscience has advanced in
recent years. In July 2011, Governor Beebe signed a memorandum of
understanding with the U.S. Food and Drug Administration to establish a
nanotechnology research collaboration between the National Center for
Toxicological Research (NCTR) and five Arkansas universities. The MOU
provides for creation of a virtual Center of Excellence in Regulatory Science
that will include toxicological research associated with nanotechnology and a
regulatory science curriculum at the University of Arkansas for Medical
Sciences. It also establishes a working group appointed by the Governor and co-
chaired by the Director of NCTR and a gubernatorial appointee to coordinate the
Center's activities and assist in commercializing its research results.117 Local
business leaders believe NCTR can do for Arkansas what Oak Ridge National
Laboratory has done for Tennessee that is, generate products for
commercialization that generate high-knowledge, highly paying jobs.118
117
"Beebe, FDA Sign First of its Kind Agreement at NCTR," Arkansas Business (August 12, 2011).
118
In 2001, the Department of Defense deeded 1,500 acres of arsenal land adjacent to the NCTR
facility to the Economic Development Alliance of Jefferson County. Envisioning a regional research
park, local leaders created the Bioplex on the land, using $200,000 in federal grant money to clear
land, and to build roads and utilities. The state has pledges to support the project with tax credits,
revenue lands and other incentives. See Arkansas Business, "NCTR Has Potential to Create High-
Paying Jobs," July 4, 2011.
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40 BUILDING THE ARKANSAS INNOVATION ECONOMY
Arkansas Nano-medicine Center
In January 2012, the University of Arkansas for Medical Sciences
opened the Arkansas Nanomedicine Center, which will coordinate statewide
nanomedicine research efforts.
Food Processing
As noted earlier, Arkansas is one of the leading agricultural states in the
U.S., with about 200 food processing facilities located in the state.119 Food
processing is Arkansas' largest source of manufacturing jobs, accounting for 25
percent of the state's 199,915 total in 2011.120 The Milken study found that
Arkansas enjoyed a "definite comparative advantage" in food processing that,
while not in itself a high technology industry, does feature many areas for
increased technology and science applications.121 As Carole Cramer noted in
her remarks, Arkansas is promoting research through multi-institutional, cross-
disciplinary clusters to promote in-state innovation in agriculture:
· The Arkansas Division of Agriculture supports a cluster that has
developed a world class reputation in rice and poultry science, and is
now focusing on bioengineering.
· The Arkansas Biosciences Institute leads a cluster of institutions with
the NSF EPSCOR P3 Center (Plant-Powered Production) featuring
research programs in plant biomass and yield, plant protection,
medicine and feed production.
Cramer noted that biotechnology rather than traditional approaches to crop
improvement is needed to promote innovation in agriculture within the state.
She foresaw innovation in value-added and specialty crops and products,
agriculture, green materials devised from crops and livestock and veterinary
products. She credited Wal-Mart's emphasis on "green" techniques with a
major impact on attitudes in the state, and noted that the recent Battelle study
identified market opportunities for Arkansas in new food processing and
119
Arkansas is the number one producer of rice in the US and is second in broilers, third in cotton,
cottonseed and catfish, fourth in turkeys, fifth in grain sorghum, eighth in chicken eggs and ninth in
soybeans. Food processors in the state include Tyson Foods, Frito-Lay, Butterball, Wal-Mart,
Riceland, Post and Nestle. See the summary of the presentation by Carole Cramer in the
Proceedings chapter of this volume.
120
Industrial Jobs in Arkansas Declined 1.5 percent Over Last Year," Manufacturers' News (October
31, 2011), citing the Arkansas Manufacturers' Register.
121
US consumers have highly sophisticated and increasing demand for healthy and fresh foods.
"Speed-to-market, logistics networks, quality control, and the accurate matching of supply and
demand: represent areas for the application of science and technology, potentially giving the state "a
competitive advantage in the nation." De Vol, et al., (2004) op. cit., p. 150.
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OVERVIEW 41
preservation technologies, advanced food packing, and food safety biosensors
and rapid food-borne pathogen detection.122
Information Technology
In his conference presentation, Jeff Johnson of ClearPointe noted that
the overall environment for IT companies, and especially start-ups, is changing,
along with the broader IT environment. IT is no longer delivered only by
internal resources and on-site staff. Instead, necessary data may as likely come
from the Internet or a hosted solution from an application vendor as from
internal IT.
This has caused a shift in the IT landscape, he said. The day of the
traditional IT provider of software, hardware, and break-fix services is coming
to an end. Today's IT companies are more focused on services and how those
services are delivered. "We will be more concerned about how data arrives at
the desktop or virtual PC than we ever have in the past," said Mr. Johnson. "This
shift from on-site IT services to remote delivery has created a host of
opportunities for startup companies."
Arkansas had already begun to experience some successes from IT-
based startups, he said, including Windstream and Allied Wireless. HP was also
bringing a new support center to Conway, Arkansas. "All of these help to build
the underlying foundation on which a knowledge-based economy is built," he
said.
The Battelle study identified "enterprise systems computing "as one of
Arkansas' nine strategic focus areas, pointing out that industries in the state
related to enterprise systems employed over 35,000 people in 1,700
establishments. Job growth in this field is expected to grow by more than twice
the rate as the average for all Arkansas jobs, and to grow at a faster rate than the
national average for computer-related jobs. The University of Arkansas
campuses at Little Rock, Fayetteville and Pine Bluff possess core competencies
in informatics, sensing and senor networks, and use of information systems to
manage supply chain logistics.123 The University of Arkansas at Little Rock has
a unique program in Information Quality that is drawing students from around
the world.
122
See the summary of the presentation by Carole Cramer in the Proceedings chapter in this volume.
123
Battelle study (2009) op. cit., pp. 18-20, ix.
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42 BUILDING THE ARKANSAS INNOVATION ECONOMY
Optics and Photonics
Describing the Battelle study at the conference, Jerry Adams of the
Arkansas Research Alliance noted that it identified optics and photonics as one
of its nine recommended strategic focus areas. At Arkansas State University,
the Arkansas Center for Laser Applications and Science (ArCLAS) operates the
largest collection of lasers and support equipment in the United States mid-south
region. At the University of Arkansas, Fayetteville, optics research is a key
aspect of its physics department and its microelectronics/photonics program.
Researchers at the University of Arkansas at Little Rock are focusing on optics
in the university's applied science Ph.D. programs in physics. The principal
focus of optics research at these university sites is the use of lasers for materials
development, processing and manufacturing. Several Arkansas companies are
engaged in optics and photonics research and at last four have received federal
SBIR or STTR grants.124
LEARNING FROM OTHER STATES
Arkansas' leaders often draw on the experience of other U.S. states and
localities in developing policies to promote the growth of knowledge-intensive
industries. Success of particular policies and programs in other states may not
be directly replicable, but some of the principles underlying state innovation
policies could be adapted to the Arkansas context. For example, the Arkansas
Research Alliance Scholars program is modeled on Georgia's highly successful
Georgia Eminent Scholars program, which has been luring "top notch scientists
to Georgia's research institutions since 1990."125 The Arkansas Economic
Development Commission "carefully studied the organization and structures,
service delivery methods and funding mechanisms of a dozen states to identify
best profiles" in the area of workforce development and training.126 Analysis by
the National Governors' Association regarding specific state government and
metropolitan development strategies has also been consulted.127 Speakers at the
conference highlighted the recent experience of Arizona, California, and
Oklahoma in growing knowledge-based economies.
124
Battelle Study (2009) pp. ix, 23. Invotek, based in Alma, Arkansas, is currently marketing an
eye-safe laser pointer.
125
"Scholars Program Copies Georgia's Model," Innovate Arkansas (August 22, 2011).
126
Governor Mike Beebe's Strategic Plan (2009) op. cit. p. 26.
127
A 2006 study prepared for Accelerate Arkansas at the University of Arkansas at Little Rock
contained an extensive survey of state and metropolitan strategies for success in the new economy.
Gregory L. Hamilton and Teresa A. McLendon, Closing the Gap: Ann Examination and Analysis of
Per Capita Personal Income in Arkansas (August 2006) pp. 32-44.
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OVERVIEW 43
Arizona
At the Conference Dr. William Harris, President and CEO of Science
Foundation Arizona, described some of Arizona's state-level initiatives to
support research. Dr. Harris noted that he had previously served as founding
director general of Science Foundation Ireland (SFI), a $1 billion program for
strategic R&D investments in that country, and had served with the European
Commission to develop the European Research Council. This European
experience, he said, has informed his work on developing Arizona's innovation
strategy. On the basis of his European work, he identified five key best
practices:
· Invest strategically at the state level in university-industry partnerships.
· Operate with speed and flexibility, and work opportunistically.
· Strive for world-class standards for STEM K-12
performance/education.
· Build partnerships with industry.
· Listen to R&D-driven business entities to support the protection of
intellectual property.
California
Although California leads the world in many areas of science and
technology, Susan Hackwood, Executive Director of the California Council on
Science and Technology (CCST) warned that global changes threaten to erode
the state's science, technology and educational infrastructure.128 Dr. Hackwood
cited in her conference remarks a number of "erosion factors" that are
destabilizing the so-called "closed-business model" traditionally employed in
California -- in which targeted R&D leads to targeted product/process
development in a discrete organization. The erosion factors are the increased
mobility of trained workers, the growth in the research capacity of universities
around the world, the diminished U.S. hegemony in markets, and a proliferation
of venture capital globally. As a result, "your main competition could be anyone
128
Chartered by the state legislature, CCST is comprised of over 200 of the state's leading science
and technology experts. Designed to bridge the gap between "those who know science and
technology and those who create and enforce the state's laws and policy," CCST produces reports on
the state's scientific and technological activities and supports scientific activity and education. Its
sustaining institutions are six state universities, and six national laboratories are sustaining members.
Recent analytic work includes studies of California's energy future; use of information technology to
integrate genetic/genomic test results to promote personalized healthcare; preparation of elementary
school teachers to teach science; nanotechnology in California; and reform of California's STEM
education structure. See the summary of the presentation by Susan Hackwood in the Proceedings
chapter in this volume.
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44 BUILDING THE ARKANSAS INNOVATION ECONOMY
on the planet and your main market is everywhere on the planet. Your
inefficiencies are discreetly outsourced." She noted several specific trends:
· Development of new pharmaceutical products has stagnated during the
past decade because "corporate pharma is not conducive to innovation,"
which often arises from small and more nimble companies.
· The state's workforce retention and workforce competitiveness are
being challenged by the competition by other countries and regions for
skilled workers.
· State and federal policies, such as United States export controls on
technology, tort and labor laws, and over-regulation of industries, can
unwittingly retard innovation.
· The quality of California's K-12 education is "very poor," state funding
of the university system is declining, and the numbers of science and
engineering degrees has leveled off.129
Arizona used Ireland's model to create Science Foundation Arizona
(SFAz), a public-private partnership jointly funded on a 50-50 basis by the state
and industry. SFAz had a mandate to diversify and strengthen the state's
economy to enable it to compete on a global basis. Its $100.9 million in funds
were committed to support R&D in sectors deemed to be state priorities wind
and solar energy, sustainable mining, personalized medicine, new materials and
software supporting the semiconductor industry, and aerospace.130 In mid-2009,
after about two years of SFAz activities, the Battelle group evaluated its return
on investment and concluded that it had resulted in 11 spin-off companies, 757
jobs created or retained, 50 patents filed or issued, and 292 scientific
publications, and that $2.18 in value had been leveraged for each $1 awarded by
SFAz in university grants.131
Oklahoma
In his conference presentation, David Thomison of Oklahoma's
Innovation to Enterprise (i2E) program said that his organization provides
businesses in the state with advice, commercialization services and capital, and
129
See the summary of the presentation by Susan Hackwood in the Proceedings chapter in this
volume.
130
Fifty-six percent of the funds were committed to "strategic research" and another 17 percent to
graduate-level research fellowships. See the summary of the presentation by William Harris in the
Proceedings chapter in this volume.
131
Examples of new R&D partnerships generated by SFAz included initiatives in concentrated solar
energy and energy storage, mining, pharmaceuticals and the development of jet fuel from algae. See
the summary of the presentation by William Harris in the Proceedings chapter in this volume.
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OVERVIEW 45
serves as a portal to public and private resources.132 The goal of i2E is to create
new, home-grown companies in the state of Oklahoma. "What we want to do,"
said Mr. Thomison, "is to build from within." Referring to the "three-legged
stool" described by Mr. Bendis, he said that i2E focuses on just one of the legs:
growing companies within the state. "We are in Oklahoma to help people there,"
he said, "and we want to leverage our in-state resources to the maximum
degree."
To increase the number of successful small firms, Mr. Thomison said,
his organization collaborates with universities to provide commercialization
services, including assistance in marketing, finance, and competitive strategies.
The goal was to teach young businesses how to gain access to capital, good
management, and networking.
Mr. Thomison said that his organization also helps Oklahoma firms
recruit talent needed to grow their company. In most technology-based start-up
companies, he said, the leader and founder is the technician or scientist. "These
leaders know the technology and the product, and that's extremely important,"
he said. "But it takes a team to pull off a commercialization." The Oklahoma
Center for the Advancement of Science and Technology (OCAST) has found
that it must begin by recruiting a CEO and a vice-president of marketing. As the
company approaches commercialization, it must also hire a chief financial
officer to position the firm to seek venture capital. This positioning includes
demonstrating credible resources and creating a capital plan.
To date, OCAST had helped create 433 client companies. Of those, 140
had raised $359 million in equity funding 66 percent of it from outside the
state and 44 had received $38 million in grants. For 2009, the impacts on the
state included $43.4 million in payroll, $115.6 million in reported revenues, and
251 new jobs. The combined companies had developed 336 new products.
IN CLOSING
As documented in the proceedings of this National Academies
symposium, Arkansas' political, academic, and business leaders are seeking to
foster greater awareness of the challenges facing the state and are taking a
number of steps to foster the development of a knowledge-based economy.
132
I2E website, http://www.i2E.org/about Created in 1987, OCAST is a state government agency
responsible for technology-based economic development. As of late 2011 OCAST had helped create
433 client companies, 140 of which had raised $359 million in equity funding (66 percent from
outside Oklahoma). The combined companies have developed 336 new products. One OCAST
innovation was to hire a "CFO in residence," in effect a CFO capable of serving a number of start-
ups simultaneously on a part-time basis in their efforts to secure venture capital. See the summary of
the presentation by David Thomison in the Proceedings chapter in this volume
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46 BUILDING THE ARKANSAS INNOVATION ECONOMY
Many of these efforts have been based on commissioned studies that offer frank
assessments of the challenges the state faces, inter alia, in primary education,
financing the formation of new businesses, and securing federal research
funding.
The symposium presented a number of initiatives that are under way to
address these challenges. These include initiatives in areas such as
nanotechnology research and the manufacture of wind power generation
equipment. Arkansas' ability to address these challenges by improving its
education, investment and research infrastructure, and by leveraging existing
areas of strength to create new knowledge-based companies and jobs will
determine the future standard of living and long run economic well-being of its
citizens. The proceedings, found in the next chapter, provide detailed summaries
of the presentations by the state's business, political, and academic leaders,
along with those of senior U.S. government officials and national experts. They
highlight the challenges, accomplishments, and opportunities facing Arkansas
today.
