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DAY 1 Welcome and Introduction Chad Mirkin Northwestern University Chad Mirkin, George B. Rathmann Professor of Chemistry at Northwestern and director of the International institute for Nanotechnology (IIN), welcomed participants on behalf of the National Academies and the IIN to the conference “Building the Illinois Innovation Economy.” He noted that the conference had been developed quickly, requiring a “heroic contribution from many,” including Morton Shapiro, Northwestern University President, who ensured the availability of the spacious facility at the James L. Allen Center for the conference. Dr. Mirkin noted also the particular relevance of the topic for the state of Illinois because of its many efforts to raise the effectiveness of innovation- based economic development. Among the attendees, he said, were many of those responsible for ongoing projects, from the governor who worked hard for support of innovation to scientific researchers who had translated their discoveries into successful small businesses. He welcomed those in attendance from the National Cancer Institute, Department of Energy, National Science Foundation, Department of Defense, Air Force Office of Scientific Research, Army Research Office, and Office of Naval Research, as well as many NGOs and state organizations, and Argonne National Laboratory, all of whom would bring a range of critical perspectives to the conference. He also welcomed the large number of researchers, administrators, and students from Northwestern University, the University of Illinois at Urbana-Champaign, the University of Chicago, and Illinois Institute of Technology. Finally, he welcomed the many representatives from companies both large and small, who would share their experience in launching new technologies developed in academic laboratories into the marketplace. 23

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24 BUILDING THE ILLINOIS INNOVATION ECONOMY Among the goals of the conference, he said, were the following:  To convene local and national leaders to highlight accomplishments of the broad innovation ecosystem in Illinois, while also identifying needs, challenges, and opportunities;  To document the contributions of many sectors, including academia and government laboratories, in generating research and attracting talent to the state ecosystem;  To engage Illinois businesses and political leaders with high-level government officials to better understand what is needed to drive innovation, business formation, and growth;  To highlight the most successful innovation activities as models. “Illinois can’t do everything,” he said, “so we should be looking at our strengths and how focus them, as opposed to spreading our efforts like peanut butter so thinly that they have no impact.” He noted that the timing of the meeting was good, because the President’s Council of Advisors on Science and Technology (PCAST), of which he was a member, had recently performed a similar exercise at the national level. One of its outcomes had been the Advanced Manufacturing Partnership, led by him and co-chairs Andrew Liveris of Dow Chemical and Susan Hockfield, president of MIT. Its goals were to survey what is available around the country, and to understand what different regions were doing well or not doing well; engage key stakeholders; and identify and invest in emerging technologies that have the potential to create high-quality manufacturing. The Committee’s work resulted in a report to the President entitled, Capturing Domestic Competitive Advantage in Advanced Manufacturing, which included recommendations for (1) enabling innovation, (2) securing the talent pipeline, and (3) improving the business climate. He pointed out that the conference today had a parallel goal of reviewing the available innovation resources at the state level, and determining how they might be strengthened by federal programs. There would be some similarities and also some differences between policy at the national level and the state levels, he said, and these needed to be identified and used to enhance the competitiveness of the United States. He also anticipated that “a lot of national levers” would be moved to try to achieve innovation goals. Illinois should strive to take advantage of federal initiatives; especially those that help establish and strengthen innovation hubs. He called for participants to examine the features needed to fortify such hubs in Illinois to make the region more competitive. This would include forming alliances with innovative companies able to make use of new technologies and advancing existing technologies through partnerships with academia, government, and private sources of capital.

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PROCEEDINGS 25 He looked back over the 21 years he had been at Northwestern, reviewing some major changes. When he arrived, he said, the university was very strong in research, focused on scientific excellence. That focus had broadened beyond science to include technological excellence. “I would point out,” he said, “that early on, because we didn’t look at the technological part, we lost a lot of opportunities. A lot of schools did, not just Northwestern.” He recalled the work of a colleague, Robert Letsinger, as “a great example of this.” Dr. Letsinger “invented a lot of the chemistry for DNA synthesis that is the basis for modern-day gene machines” and the backbone of much of the biotech industry. But at the time the research was done, he said, the culture was not in place to protect the intellectual property, to create spinoff companies, and to expand the companies rapidly and attract venture capital. Some of Letsinger’s students, he said, did develop those concepts, which have become an important part of the U.S. technology venture, but this development did not happen in Illinois. “We want to avoid having that happen in the future,” he said. The new Northwestern model, he said, includes not just scientific excellence, but also technological excellence. Administrators have recognized the importance of expanding science in the direction of technology, and of aggressively protecting IP, establishing a favorable culture, and developing an infrastructure that promotes the success of technology-based companies. He offered the example of Northwestern’s International Institute of Nanotechnology (IIN), which he directs—an “admittedly Mirkin-centered example,” he said. The IIN began 11 years ago, amid widespread excitement about the potential of nanotechnology. The Clinton administration led the way with half a billion dollars’ worth of investment, and the IIN was designed to weld together not only science but also engineering, medicine, and industry. The Kellogg School of Management, which traditionally had not focused on high- tech activities, became actively involved, and desired outcomes were quick in coming, including inventions, products, and the first public company (Nanosphere) to be generated by Northwestern research—a success that was followed by 19 more. This attracted investment capital, which has reached $600 million and continues to grow. He emphasized that the IIN was generating not only new technologies, but also economic opportunities and the jobs that come with them. Among the companies he mentioned were Nanosphere, which had just won FDA-clearance for a diagnostic test for bloodstream infections; NanoInk, a lithography company in the Research Park that commercialized Dip Pen Nanolithography; AuraSense, a new therapeutics company; the blockbuster drug Lyrica, used to ease seizures, which had been licensed directly to Pfizer; and Nano Integra, a materials-based company developing materials for both electronics and displays. He said that the surge in technological innovation flowed not only out of Northwestern, but also from Argonne National Laboratory (Advanced Diamond Technologies), the University of Illinois at Urbana-Champaign (Mosaic), the University of Chicago (Chromatin), and the University of Illinois

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26 BUILDING THE ILLINOIS INNOVATION ECONOMY at Chicago (Avanti Biosciences). “A critical mass is being established,” he said, “and we’re beginning to see real change. Now we need to look at what we do right and what we do wrong so that we can create a blueprint for moving forward.” An important topic, he said, was the extent to which government should be involved in the innovation process. Some, including many economists, argue that public funding should not be required, in the assumption that the free market provides both the necessary resources and the stimuli for technological innovation. The view of scientists, he said, is that the public does have essential roles, especially in sustaining a broad portfolio of basic research. This research generates the ideas that form the basis for innovations that can be translated into start-up companies or technologies that existing companies can develop. He said he would try to present this argument in terms that are meaningful to the economist. What a scientist does, he said, could be described in terms of the basic physical laws of kinetics and thermodynamics. Kinetics, he said, is the study of rates of reactions, while thermodynamics “is the study of the natural preference of a particular reaction to go forward or not.” The “free market analysis,” he said, if described in terms of a chemical reaction, is that a favorable reaction will eventually go forward if given enough time. That is, the best ideas will be sorted, identified, and developed by natural market mechanisms; the free market will find them, invest in them, and, if they are sound, transform them into “the next Googles and Microsofts.” That argument, he said, is faulty, for several reasons. One is that the necessary “energy” to power the chemical reaction—in this case, the funding of venture capital firms—is often not available or appropriate. Venture capital firms prefer to invest in innovations that are already well-developed and even profitable, and they prefer to invest in their own regions. Another reason is that good ideas, by themselves, may languish indefinitely on the laboratory shelf. This is especially true for ideas that may seem to have little apparent value at first. In chemical terms, a diamond, exposed to the ordinary air of Evanston, Illinois, will eventually “burn or be converted to carbon dioxide” according to the laws of chemical behavior; that is, it will be oxidized at room temperature by natural processes into carbon dioxide—given an infinite amount of time. Despite this potential, a diamond remains a diamond—languishes on the laboratory shelf—because of the enormous kinetic barriers that must be overcome. The challenge, he said, is to create an “innovation ecosystem” that has enough “collisions” to expose all good ideas to the free market so that entrepreneurs can identify which ones are likely to be winners and make the investments that lead to success. He suggested several keys to a successful ecosystem. The first is a “coalition of the willing.” This is not a trivial notion, he said, because progress depends largely on the local culture and expectations. Twenty or 30 years ago, he said, scientists had no interest in innovation. “Their view was that technology was a bad word, and business was an even worse word.” Innovation requires willing participants, great talent, innovation hubs

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PROCEEDINGS 27 consisting of great universities and government labs, and a population of students, postdocs, faculty, and business leaders. In forming innovation hubs, he said, a region needs not only an entrepreneurial culture, but a state-of-the-art infrastructure. The infrastructure, which is required to do the initial basic research, requires funding at a level that is seldom available locally. This is where the role of government is essential, applied in the form of federal and sometimes state grants to provide the physical innovation environment, from broadband to land to highways. Such investments are beyond the reach or interest of the private sector, including the capital community, and depend on close partnerships with public agencies to lay the groundwork for innovation. He concluded with the observation that the innovation environment was finally changing in Illinois. The region had learned to make convincing arguments to develop its innovation hubs. It was becoming proactive in promoting technology transfer, helping scientists to secure intellectual property and establish relationships with companies and startup organizations. “These elements,” he said, “not only help facilitate the translation of technology out of the laboratories, but they also help create relationships among all the people who make innovation possible.” Joseph T. Walsh Northwestern University Dr. Walsh welcomed the participants on behalf of Northwestern University president Morton Shapiro and provost Daniel Linzer, and thanked the organizers. He noted that humans had always been an innovating species, reminding his audience that the clothes they wore, the tablets they wrote on, and the chairs they sat on all had a “technological basis.” Innovation was especially strong in the United States, he continued, in Illinois, and at research universities such Northwestern. The major corporate institutions of the state, including Baxter, Abbott Laboratories, ADM, Aon, Kraft, and Caterpillar, had generated more than $10 billion in revenues during the past year. The state had a broader and more impressive ecosystem than many people realized, he said, partly because of Midwesterners’ reticence to talk about their accomplishments. Universities such as Northwestern, he said, represented much of the innovative power of the United States. Northwestern was founded in 1851, 10 years before Abraham Lincoln signed the first Morrill Act. That act, he said, and several that followed, were “probably one of most significant things Congress has ever done.” It provided land for the states which they could sell in order to create “what have become the great state research universities that drive innovation.” A century later the major federal agencies promoting innovation were created, including the National Science Foundation and National Institutes

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28 BUILDING THE ILLINOIS INNOVATION ECONOMY of Health, and in the early 1980s the Bayh-Dole Act was passed to allow universities to own the intellectual property developed with federal support.1 “This encouraged and one might even say forced the universities to take that which they learned and bring it out of the labs for societal use,” he said. “From a university point of view, this is what drives the economies of many parts of this country—the translation of basic science to its applications. It is encouraged by the universities and by the government. For those who are economists and believe in the free market, there is a government role here. This chain of innovation that begins in the lab and has societal impact has several essential inputs, including both public and private capital.” He closed by welcoming visitors to the university and to the conference, which had been designed to bring together the sectors required to build an innovation hub. 1 A recent report of the National Academies observed that “patenting and licensing of IP by universities is more closely regulated by national policies emanating from the dominant role of the federal government in funding academic research. Thirty years ago federal policy underwent a major change through the Bayh-Dole Act of 1980 (P.L. 96-517, the Patent and Trademark Act Amendments of 1980), which fostered greater uniformity in the way research agencies treat inventions arising from the work they sponsor, allowing universities to take title in most circumstances, and as a result accelerating patenting and licensing activity.” National Research Council, Managing University Intellectual Property in the Public Interest, Stephen A. Merrill and Anne-Marie Mazza, eds., Washington, DC: The National Academies Press, 2010.