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Suggested Citation:"6 Rebuilding Ohio's Innovation Economy." National Research Council. 2013. Best Practices in State and Regional Innovation Initiatives: Competing in the 21st Century. Washington, DC: The National Academies Press. doi: 10.17226/18364.
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Chapter 6

Rebuilding Ohio’s Innovation Economy

Efforts underway in Ohio to spur an industrial and economic turnaround are increasingly attracting national attention. Backed by strong and longstanding support from the state government’s Thomas Edison and Third Frontier programs, Ohio’s growing resurgence reflects local and regional initiatives by small and large firms, universities, and philanthropic foundations. These developments may represent a new paradigm for innovation-driven economic growth that is particularly relevant for older industrial states and regions.

REVIVAL FOLLOWING A GENERATION
OF ECONOMIC DECLINE

During most of the first century after its founding, Ohio was a predominantly agrarian state, but it began to industrialize rapidly in the 1870s. Toledo, Cleveland, and Youngstown became centers of steelmaking; Akron, the home of B.F. Goodrich, Firestone, and Goodyear, became the “rubber capital of the world,” Dayton produced paper, cash registers, and refrigerators, and Cincinnati made railroad cars, boilers, and machine tools.1

The state of Ohio has a rich tradition of innovation. The Wright brothers of Dayton developed the first successful airplane.2 Michael Owens founded a glass-blowing company that fostered Owens-Corning and Owen-Illinois.3 Charles Kettering cofounded Delco Enterprises to commercialize his invention, the automatic starter for automobiles.4 William Proctor and James

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1“Made in Ohio,” The Columbus Dispatch August 17, 2003.

2“Wright Brothers: Faith to be the First to Fly,” Columbus Examiner December 16, 2010.

3Owens secured 49 patents, including a revolutionary bottle-blowing machine and machinery to make sheet glass and light bulbs, “Long String of Lucky Events Boosted Toledo’s Standing in Glass Industry,” Toledo The Blade April 3, 2007.

4“Kettering’s Self Starter Was More Than That,” Dayton Daily News September 13, 1997.

Suggested Citation:"6 Rebuilding Ohio's Innovation Economy." National Research Council. 2013. Best Practices in State and Regional Innovation Initiatives: Competing in the 21st Century. Washington, DC: The National Academies Press. doi: 10.17226/18364.
×

Gamble of Cincinnati built their company around a gentle, inexpensive floating soap they named Ivory.5 Albert Sabin developed the first oral polio vaccine in Cincinnati. In 1900, Cleveland ranked eighth out of all U.S. cities in total patents granted to residents, and fifth with respect to patents deemed by official examiners to have made significant contributions to the industrial art of the period.6

However, in the second half of the Twentieth Century, Ohio experienced a dramatic economic decline as traditional industries like steel, automotive, glass, and rubber were buffeted by foreign competition and in some cases began to move offshore. Average incomes in Ohio fell from 11 percent above the national average in the 1950s to 6 percent below by 2001.7 Ohio was “mired complacently in what has been labeled the old economy, characterized by production-line manufacturing” but was lagging the nation in knowledge-based areas such as information technology, biotechnology, and business and professional services. As David Morgenthaler, a venture capitalist with deep roots in Cleveland, has noted:

“In 1950, Cleveland was king of the world. We had world-class manufacturing facilities. … We had 50 of the Fortune 500 headquarters, and were one of the leading manufacturing centers of the world.” However, Cleveland was slow to respond when change came. The area had a powerful economic driver in the automobile, from 1900 to 1960, “and unfortunately the region rode it for another 40 years without recognizing that we had missed two new industrial revolutions, the electronics revolution and the biotech revolution.”8

The Columbus Dispatch observed in 2003 that Ohio ranked 36th in per-capita R&D expenditures at doctoral granting institutions. It concluded that “despite some notable exceptions, Ohio’s economy is stuck in the past while the world is changing—fast!”9 Lavea Brachman, Executive Director of the Greater Ohio Policy Center, commented in 2010 that the extent of Ohio’s economic decline was “unparalleled” and that the cities had “emptied out,” leaving high concentrations of poverty, with Cleveland falling from a population of 900,000 in 1950 to 400,000 in 2010 and Cincinnati dropping from 500,000 to 300,000 in

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5“In 1879, P&G Floats Idea for Soap,” Akron Beacon Journal January 6, 2003.

6Naomi, Lamoreaux, “The Decline of an Innovative Region: Cleveland, Ohio in the Twentieth Century,” Paper prepared for the 2008 Annual Meeting of the Economic History Association, September 12, 2008.

7“Legislators Badly Weaken State Colleges,” The Columbus Dispatch, November 25, 2001.

8See David Morgenthaler, “Welcome and Introduction,” in National Research Council, Building the Ohio Innovation Economy: Summary of a Symposium, C. Wessner, Rapporteur, Washington, DC: The National Academies Press, 2013.

9“State of Stagnation? Bold investment in Human Capital Can Rejuvenate Ohio’s Economy,” The Columbus Dispatch August 10, 2003.

Suggested Citation:"6 Rebuilding Ohio's Innovation Economy." National Research Council. 2013. Best Practices in State and Regional Innovation Initiatives: Competing in the 21st Century. Washington, DC: The National Academies Press. doi: 10.17226/18364.
×

the same period.10 She observed that Ohio had an unusual diversity of regional economies, with a half dozen metropolitan areas specializing in different industries—Dayton in autos, Toledo in glass, Youngstown in steel, and so on.

The state’s historical innovation culture was seen by some observers as having eroded in the latter Twentieth Century. Roy Church, President of Lorain County Community College in northeast Ohio, recalled in 2002 that a hundred years previously, Lorain County was a place where “people were starting companies in garages, second bedrooms, and basements.” That same year Stephen J. Gage, president of the Cleveland Advanced Manufacturing Program, complained that “the region lacks innovation…Ohio goes after branch plants—more of the old—rather than something new.” Gage said that he saw more innovative ideas every four months when he was in charge of a seed money fund for entrepreneurs in Indiana than he had seen in 11 years in Cleveland.11

Notwithstanding a substantial erosion of its manufacturing economy, Ohio remains a major manufacturing state. The sector continues to employ about 600,000 people, or 14 percent of that state’s workforce, and is the seventh largest U.S. exporter of manufacturing goods, selling around $34 billion in goods to other countries. The state ranks first, second, or third among U.S. manufacturers in 84 categories of manufacturing based on the North American Industry Classification system.12 State business and political leaders cite a number of challenges Ohio confronts in engineering an economic turnaround. James Griffith, CEO of northeast Ohio-based Timken Company, contends that the state is heavily taxed, ranking 46th among states in business tax environment.13 This partially reflects the profusion of governmental entities in the state—86 percent of U.S. states have fewer governmental organizations per square mile than Ohio.14 “Someone has to pay for those entities,” Griffith says, and because of the profusion of governments, it is “confusing to do business here.”15

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10“Several of Ohio’s cities have emptied as completely as medieval Europe when it was ravaged by the bubonic plague…within three years of graduation, one-third of Ohio’s university alums have left the state.” “Amid Migration, Ohio Offers Lessons for Texas,” Dallas Morning News January 2, 2011.

11“Biosciences: The Next Big Thing or One of Many?” Cleveland, The Plain Dealer February 17, 2002.

12Eric Burkland, ”The State Manufacturing Challenge,” in National Research Council, Building the Ohio Innovation Economy: Summary of a Symposium, op. cit.

13James Griffith, “Stimulating Manufacturing in Ohio: An Industry Perspective,” in National Research Council, Building the Ohio Innovation Economy: Summary of a Symposium, op. cit.

14Lavea Brachman, “Clusters and the Next Ohio Economy: What is Needed,” in National Research Council, Building the Ohio Innovation Economy: Summary of a Symposium, op. cit. Brachman points out that even if a consensus existed that mergers of some governmental units was desirable, they would not be permitted under state law.” Communities Discuss Hurdles of Regionalism: Many at Wednesday Summit Agree merged Government Worth Consideration” Dayton Daily News, June 9, 2011.

15James Griffith, “Stimulating Manufacturing in Ohio: An Industry Perspective,” op. cit.

Suggested Citation:"6 Rebuilding Ohio's Innovation Economy." National Research Council. 2013. Best Practices in State and Regional Innovation Initiatives: Competing in the 21st Century. Washington, DC: The National Academies Press. doi: 10.17226/18364.
×

Box 6-1
Edison Seed Grants

The Edison seed grants required projects to involve small or mid-sized businesses conducting research in collaboration with Ohio colleges or universities. The products developed were required to be produced in Ohio or benefit Ohio-based employment. The industrial partner was required to match state funding with in-kind or monetary contributions, appoint a liaison to interact with university researchers and provide periodic reports on research progress. An example of an Edison-supported seed project involved collaboration between the University of Dayton and Dayton-based inventor Joseph Singleton, which developed a hydraulic cleaning system to soak, wash and rinse semi-tractor trailers in a single quick stop, cutting the time required to wash a rig from 40 minutes to 10 minutes. George Roth, supervisor of experimental and applied mechanics at the University of Dayton commented that “[w]e were able to serve as the company’s engineering team. We were able to [review] the design and analyze the reliability and durability on paper, thus reducing cost and saving time.”16

STATE GOVERNMENT INITIATIVES

The Thomas Edison Program: In 1983 Ohio’s legislature created the Thomas Edison Program, a state-funded initiative to encourage universities to cooperate with businesses to link research and technology with start-up companies and other business initiatives. The Edison program supported the establishment of nine business incubators, seven technology centers, and “seed development fund projects” across the state.17

By 1990 The Columbus Dispatch was characterizing the Edison program as an “unqualified success,” citing the fact that the “Ohio corporate community has taken ownership of the Edison program.”18 The most visible manifestations of the Edison program were the thematic Edison technical centers, which fostered university-industry collaboration emphasizing applied research leading to incremental but very practical improvements in processes and products—“small improvements that over time result in big advantages”—

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16Bright Ideas—Edison Program Helps Inventors Find Their Wings,” The Cincinnati Post August 27, 1990.

17“Effort to Aid Business Draws Praise,” Akron Beacon Journal January 21, 1986.

18“Edison Program is Success—State is Seen as Beneficiary,” The Columbus Dispatch April 2, 1990.

Suggested Citation:"6 Rebuilding Ohio's Innovation Economy." National Research Council. 2013. Best Practices in State and Regional Innovation Initiatives: Competing in the 21st Century. Washington, DC: The National Academies Press. doi: 10.17226/18364.
×

in areas such as welding, metal-forming, materials, polymers, industrial systems, and biology.19

The Third Frontier Program

Ohio’s Office of Technology Investments administers the Ohio Third Frontier program, which provides funding to state-based, technology oriented companies, universities, and non-profit research organizations to create new companies, industries, products, and jobs. Third Frontier was created in 2002 and extended in 2010 through 2015 with a budget of $2.3 billion, making it the largest development initiative ever undertaken in Ohio.20 The Third Frontier is designed to support early-stage research and development efforts “from which the private sector often shies away, the payoff likely too far in the future.” 21 Amendments to the state constitution approved by Ohio voters in 2005 and 2010 lifted a longstanding constitutional ban on state investments in private business with respect to the Third Frontier program (but not other programs).22 An assessment of the program in 2012 concluded that while the Entrepreneurship Signature Program (ESP)23 had received 30 percent of Third Frontier funding, they accounted for 56 percent of the positive economic impacts.24

The Third Frontier program has been the largest contributor to the Ohio Research Scholars Program, which funds university collaborations “so they can woo researchers and their federal research grants and staff members to Ohio.”25 In 2008, the Third Frontier committed $72 million to this effort, augmented by $50 million allocated by the Ohio General Assembly from university endowment funds and $28 million from the state’s universities in the form of foregone operating money. This effort was aimed at establishing 26 new endowed faculty chairs at universities in the state.

As of mid-2007, the Third Frontier program had invested nearly half of its total grants—$300 million—in northeast Ohio institutions, organizations, and

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19“Edison Program Lights the Way—Centers Help Industry Compete With the Latest Technology,” The Columbus Dispatch, May 12, 1991.

20Akron Beacon Journal, "Snapshot of the Region—Northeast Ohio Has Inched Forward in the Knowledge economy, Now it Must Pick Up the Pace.” May 22, 2009.

21The Third Frontier also sponsors Wright projects, which underwrite capital equipment to commercialize research results that will serve entrepreneurial purposes and contribute to the education and training of the work force. Wright funding is awarded in response to proposals in the fields of alternative energy; instruments; controls and electronics; biomedical; advanced materials; and advanced propulsion. “Initiative Seeks Top Researchers: $143 Million Goes to Universities for Cutting Edge Solutions,” Cleveland, The Plain Dealer May 21, 2008.

22“JobsOhio May Run Afoul of the Constitution,” The Plain Dealer, February 2011.

23See the website of the Ohio Development Services Agency at <http://development.ohio.gov/bs_thirdfrontier/esp.htm>.

24“Basics of the Third Frontier—the Idea Wasn’t to Launch a Venture Capital Firm,” Akron Beacon Journal September 23, 2012.

25Mary Vanac, “State initiative seeks top researchers to rebuild Ohio's economy,” Ohio Plain Dealer, May 21, 2008.

Suggested Citation:"6 Rebuilding Ohio's Innovation Economy." National Research Council. 2013. Best Practices in State and Regional Innovation Initiatives: Competing in the 21st Century. Washington, DC: The National Academies Press. doi: 10.17226/18364.
×

TABLE 6-1 Ohio Third Frontier Performance Metrics—2012


As of June 30, 2012

State funds expended $907,910,178
Leveraged dollars $8,048,717,740
Leverage ratio (goal: 3:5/1) 8.9/1
Direct Jobs Created 15,945
Direct and Indirect Jobs Created 95,510
Companies created, capitalized, or relocated 882

SOURCE: Ohio Third Frontier Annual Report—2012.

companies. Of that total, 55 percent went to projects involving biomedicine and bioscience.26 Third Frontier support has been critical to the operation of the specialized nonprofit technology-oriented economic development organizations that have driven northeast Ohio’s economic turnaround.27 In 2012, the Third Frontier reported that since its inception it had expended roughly $900 million to leverage other investments of over $8 billion, had fostered the creation of nearly 100,000 direct and indirect jobs, and facilitated the creation, funding, or recruitment of 882 companies.

NEW INITIATIVES IN NORTHEAST OHIO

Luis Proenza, President and CEO of the University of Akron, observed in 2011 that a dozen years previously “northeast Ohio largely lacked entrepreneurial drive, risk tolerance, and innovation capital.”28 A 1997 survey of northeast Ohio observed that “look under the hood…and this is what you’ll see: a lot of companies that make some pretty basic stuff. Stuff like metals, paint, cement, oxygen tanks, and electric motors.”29 In 2002, three economic development experts told the Akron roundtable that “Northeast Ohio companies are good at making stuff. But they need to get better at innovating new stuff…Northeast Ohio is weak in innovations in products.”30

Proenza summarized a series of public and private initiatives since the early 2000s that led him to conclude that “today while all the pieces are not yet in place, there is little doubt that the region is moving in the right direction.” He noted as positive developments the launch of the Ohio Third Frontier Program in

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26“Granting Our Wishes: State’s Third Frontier Program Has Invested About $300 Million in NE Ohio Technology Efforts,” Cleveland, The Plain Dealer July 22, 2007.

27Ray Leach, the chief executive of JumpStart, (a northeast Ohio initiative to provide intensive assistance to entrepreneurs) commented in 2007 that “if the Third Frontier didn’t exist, JumpStart wouldn’t exist as we know it today. It would be smaller and dramatically less capable than it is today.” Ibid.

28Luis Proenza, “Keynote Address,” in National Research Council, Building the Ohio Innovation Economy: Summary of a Symposium, op. cit.

29“Manufacturing Still Drives Region’s Economy,” Akron Business Journal June 22, 1997.

30“Innovation Key to Region’s Economic Development,” Akron Beacon Journal January 18, 2002.

Suggested Citation:"6 Rebuilding Ohio's Innovation Economy." National Research Council. 2013. Best Practices in State and Regional Innovation Initiatives: Competing in the 21st Century. Washington, DC: The National Academies Press. doi: 10.17226/18364.
×

2002 and a 2010 decision to expand the program’s funding, state legislation allowing university faculty to become stakeholders in startups commercializing their research findings, and the economic development efforts of charitable foundations and nonprofit organizations in northeast Ohio.31 Today, northeast Ohio is the site of robust new clusters forming in biomedicine, advanced materials, and chemistry.32 As of mid-2011, Cleveland’s economic recovery ranked 10th among 50 U.S. metropolitan areas. Rebecca Bagley, President and CEO of NorTech, a nonprofit development organization, founded in northeast Ohio cites recent developments as evidence of a longer-term economic transformation and commented that “the fact that we have this growing innovation ecosystem has become extremely important in sustaining this momentum.”33

Upgrading Universities

Proenza became President of the University of Akron in 1999, and quickly launched a $200 million effort to remake the University, including upgrading its physical plant, doubling the amount of open space on the campus, and transforming the student base from one dominated by commuter students to one based on resident students, who were more likely to remain in school and graduate. From the inception of his tenure, Proenza emphasized how states and educational institutions could drive economic development.34 Among other things, he pointed out that polymer science at the University of Akron was the only science program in the state of Ohio ranked in the top five nationally, and that “the program can be an engine for the regional economy.”35

In 2001, the university established the University of Akron Research Foundation (UARF), a not-for-profit organization to facilitate the transfer of

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31Luis Proenza, “Keynote Address,” in National Research Council, Building the Ohio Innovation Economy: Summary of a Symposium, op. cit.

32“Can One Region Jumpstart the Entire US Economy?” The Lawson Constitution June 26, 2011.

33Rebecca Bagley, “The Role of NorTech: Promoting Economic Development,” in National Research Council, Building the Ohio Innovation Economy: Summary of a Symposium, op. cit.

34“A New Era at the University of Akron: The Proenza Plan,” Akron Beacon Journal October 10, 1999; “Ohio’s Success Linked to Schools, Proenza Says: UA President Touts Research at Roundtable,” Akron Beacon Journal December 17, 1999. Between 2000 and 2010 the University made a $500 million investment in a ‘New Landscape for Learning,’ establishing 20 new buildings, 18 major additions and renovations, 34 acres of new, green space, 30,000 trees and bushes, and walkways, plazas, and terraces. Run-down neighborhoods near the campus were revitalized as University Park, a 50-block upscale mixed residential and retail area. Summary of remarks of Luis Proenza, “Universities and Economic Development: Lessons from the ‘New’ University of Akron,” National Research Council, “Building the Hawaii Innovation Economy: Summary of a Symposium.” January 13-14, 2011; “Projects Blossom in Area Near UA,” Akron Beacon Journal April 26, 2006; “Building Blocks for 50 Blocks—The University Park Alliance Reaches a New Level,” Akron Beacon Journal October 28, 2011.

35“Angels for Akron—The Region Wants to Fulfill the Promise of Polymer? Start With Concrete Plans and a Little Money,” Akron Beacon Journal June 3, 2002.

Suggested Citation:"6 Rebuilding Ohio's Innovation Economy." National Research Council. 2013. Best Practices in State and Regional Innovation Initiatives: Competing in the 21st Century. Washington, DC: The National Academies Press. doi: 10.17226/18364.
×

research results from the university to public and commercial use. UARF became a focal point of entrepreneurial activity, creating 26 startup companies in a five year period based on university-patented technology and another 15-20 companies based on patents held by others. UARF also created research partnerships with established companies and developed a regional network of angel investors.36 Finally, UARF recruits Senior Fellows and Entrepreneur Executives, individuals from the business community who function as “guerilla entrepreneurial talent,” to identify potential partners for the university.37

When Proenza took over as President of the University of Akron in 1999, the school performed about $15 million per year in research. By 2012 the annual figure had grown to $50 million.38 In 2012 the University’s Research Foundation marked a milestone with the launch of the fiftieth startup.39 In that year, Proenza unveiled “Vision 2020,” an 8-year plan to build the institution’s annual research activity from $50 million to $200 million, increase enrollment from 29,000 to 40,000, and achieve job placement of 80 percent within six months of graduation in “dynamic careers.” The plan builds on the so-called “Akron Model”:

The university through its research foundation and other avenues is leveraging its talent for local companies and entrepreneurs, serving as something of a research arm or problem-solver in the regional economy.40

The Role of Foundations

Another key asset in the effort to turn around northeast Ohio’s economy has been the region’s extraordinary century-old philanthropic tradition, which has made it possible to undertake multiple initiatives to promote the establishment of innovative new industries. The Cleveland Foundation, the world’s first community foundation and today Ohio’s largest grant-making foundation, was launched by Cleveland banker/lawyer Frederick H. Goff in 1912 to foster the “mental, moral, and physical improvement of the inhabitants

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36Proenza, “Lessons from the ‘New’ University of Akron,” 2011, op. cit.; “Group Puts Startups on the Right Path: Archangels Network Offers Local Ventures Feedback, Assistance Finding Investors,” Akron Beacon Journal February 22, 2007.

37Proenza comments that “ten years ago we would never have thought of partnering with the hospitals because we didn’t have anything in common at the time. Now these Fellows have helped us to see ourselves as partners with the city and community in a broader sense.” Proenza, “Lessons from the ‘New’ University of Akron,” 2011, op. cit.

38“All About Talent—the University of Akron Wants to be a Leader: Its New Strategic Plan Explains How it Will Do So,” Akron Beacon Journal January 22, 2012.

39“Akron Professor Advocates Polymers for the People; Octogenarian Inventor Creates Useful Products,” Cleveland, The Plain Dealer September 6, 2012.

40All About Talent—the University of Akron Wants to be a Leader: Its New Strategic Plan Explains How it Will Do So,” Akron Beacon Journal January 22, 2012.

Suggested Citation:"6 Rebuilding Ohio's Innovation Economy." National Research Council. 2013. Best Practices in State and Regional Innovation Initiatives: Competing in the 21st Century. Washington, DC: The National Academies Press. doi: 10.17226/18364.
×

of Cleveland.”41 Other foundations were established by millionaire industrialists in Ohio’s first economic heyday in “a region where the ghosts of once-great corporations live on in charitable foundations.”42 At present, about 1780 of Ohio’s 3244 foundations are found in northeast Ohio, where the first such organizations appeared and where interest has been compounding, in some cases, for over half a century. Moreover, in present-day northeast Ohio, “there’s an expectation that today’s corporate leaders will keep alive that tradition of giving,” and “everyday folks are known as big givers too, donating twice as much to the United Way as residents of many other cities.”43

In responding to the economic crisis that overtook Ohio in the late Twentieth Century, the foundations were able “to do something the area’s patchwork of city government hasn’t always been successful at,” and their work has “proven so cutting edge that it was recently [in 2010] showcased at a global summit.” David Abhott, the executive director of the Gund Foundation, observes that “the way we are fragmented governmentally impairs our ability to compete globally,” but “[now] we’re getting into the habits of competing more effectively as a region.”44 Most importantly, in the past decade, the foundations have pooled their funds and backed roughly a half dozen small nonprofit economic development organizations with expert staffs that have functioned as catalysts for innovation-based economic revitalization. In this way, “the old money [of Ohio’s first industrial century] is starting new industries. The foundations have really turned themselves into a way of recycling old money into new products.”45

In 2003, the foundations of northeast Ohio for the first time began exploring how to work together to address the region’s economic challenges at a time when most of the foundations had limited staff, confined to making grants.46 In February 2004, a coalition of foundations and companies created the Fund for Our Economic Future with an initial funding goal of $20 million. These resources were primarily directed to a handful of the best economic development organizations out of “31 organizations that do the kind of work in

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41The Fund has assets of nearly $2 billion.” The Cleveland Foundation—Our History,” <http://www.clevelandfoundation.org/about/history>.

42The George Gund Fund, established in 1952, was established by a former president of Cleveland Trust Co. who made his fortune after selling a company that had developed on innovative processes for decaffeinating coffee known as Sanka. The Burton D. Morgan Foundation, created by the founder of Morgan Adhesives, supports entrepreneurship in the region. The Kelvin and Eleanor Smith Foundation is named for a co-founder of Lubrizal. ”Philanthropy is Our Way of Life of Greater Clevelanders,” The Plain Dealer, December 26, 2010.

43Ibid.

44Ibid.

45Hill, Edward “Ned” quoted in “Philanthropy is Our Way of Life of Greater Clevelanders,” The Plain Dealer, December 26, 2010. Hill says that “digging deep to help one’s fellow man is uniquely rooted in Cleveland’s DNA. The history of giving in Cleveland is one of our historic strengths. It is a competitive asset. Ibid.

46“Foundations to Try to Help the Economy,” The Plain Dealer, September 4, 2003.

Suggested Citation:"6 Rebuilding Ohio's Innovation Economy." National Research Council. 2013. Best Practices in State and Regional Innovation Initiatives: Competing in the 21st Century. Washington, DC: The National Academies Press. doi: 10.17226/18364.
×

Box 6-2
Ohio’s Leading Innovation Based Development Organizations47

•   NorTech, a nonprofit organization promoting technology-based economic development, was launched in 1999. NorTech promotes formation of clusters in northeast Ohio, including the creation of detailed sectoral roadmaps in collaboration with local public and private actors.48

   BioEnterprise, a nonprofit spin-off from NorTech, has the mission of growing healthcare companies and commercializing biomedical technologies.

•   JumpStart, founded in 2004, JumpStart is a nonprofit organization to provide direct funding and to arrange venture capital for promising startups.49

   Team NEO, established in 2003, Team NEO’s objective is to recruit businesses from outside the region to locate in northeast Ohio.50

   MAGNET, the Manufacturing Advocacy and Growth Network was formed in 2006 to support, defend, and educate manufacturing enterprises in northeast Ohio and help them improve their competitiveness.51

   UARF, the University of Akron Research Foundation, was established in 2001 as a boundary spanning organization connecting NE Ohio resources from industry, universities and investment communities for the purpose of wealth creation.52

which the Fund [was] interested.”53 The fund’s objective was to channel investments into a limited number of projects likely to yield a high impact and “to encourage an entrepreneurial spirit once deeply present and now more of an echo.”54 The chosen development organization have continued to have strong

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47For additional information on these organizations, see National Research Council, Building the Ohio Innovation Economy: Summary of a Symposium, op. cit.

48Rebecca Bagley, “The Role of NorTech: Promoting Economic Development,” in National Research Council, Building the Ohio Innovation Economy: Summary of a Symposium, op. cit.

49JumpStart’s original funding sources were the State of Ohio, the Fund for Our Economic Future, the Cleveland Foundation, and the Greater Cleveland Partnership.” N, E, Ohio Economy Gets a Boost—Jumpstart Helping Develop Businesses” Akron Beacon Journal, November 9, 2004.

50“Team NEO Has Work Cut Out—Momentum Needed in Economic Struggle,” Akron Beacon Journal, January 26, 2003.

51“CEO to Speak at Roundtable,” Akron Beacon Journal, July 18, 2006.

52See generally National Research Council, Building the Ohio Innovation Economy: Summary of a Symposium, op. cit.

53“Coalition Ready to Dip into Pooled funds to Boost NE Ohio Economy,” The Plain Dealer, July 27, 2004.

54“Foundation for Regional Recovery—A Compelling Voice for All of Northeast Ohio” Akron Beacon Journal, November 28, 2004. The Cleveland Plain Dealer warned in 2002 that “already

Suggested Citation:"6 Rebuilding Ohio's Innovation Economy." National Research Council. 2013. Best Practices in State and Regional Innovation Initiatives: Competing in the 21st Century. Washington, DC: The National Academies Press. doi: 10.17226/18364.
×

support from the Fund and/or from the donor foundations directly down to the present day, with positive results that have garnered national and international attention.

The Role of Intermediating Institutions

Box 6-2 provides a list of key innovation based development organizations serving northeast Ohio. These economic development organizations and their achievements have begun to win national attention, because Cleveland and the rest of Ohio are making progress in new technologies, particularly in the area of clean energy.

Impact of the Ohio Third Frontier program in Northeast Ohio

Luis Proenza underscored the importance of a statewide program, Third Frontier in the regional turnaround of northeast Ohio. Third Frontier has provided funds to the region’s universities and to nonprofits like JumpStart and Team NEO and to individual companies.55 In 2010, the Akron Beacon Journal published a survey of the effects of the Ohio Third Frontier program in the Akron area. It found that between 2002 and 2010 nearly 20 statewide or regional Third Frontier initiatives were led by Akron organizations, representing nearly $79 million in Third Frontier grants.

The Industrial Revival

During the past decade northeast Ohio companies have also implemented innovation-based turnaround strategies. Timken Company, a highly successful Canton-based manufacturer of steel bearings between 1960 and 1980, suffered from a protracted 20-year slump after 1980—its current President and CEO, James Griffith, commented in 2011 that “I’ve been there for 26 years and never knew that good time. I’ve been there for the struggling time.” Griffith says Timken’s turnaround reflected the 10-year application of a focused strategy, “grow and optimize,” based on innovation. While remaining primarily a bearing and steel company, Timken “learned to take the technology and apply it to markets where we could differentiate and expand,” diversifying beyond automotive applications to sectors such as aerospace and infrastructure manufacturing. The company has grown very aggressively in Asia and

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there are plenty of [economic development groups] with their snouts in the slop, diluting and draining focus and money.” “Why have 30 of them going around town trying to raise resources when you can have one?” asked Dennis Roche, COO of the Greater Cleveland Growth Association.” Agents of Change: An Explosion of New Organizations Promoting Economic Development and Opportunities is Igniting in Northeast Ohio,” The Plain Dealer, December 8, 2002.

55“Ohio’s Third Frontier Program Awards $14 Million in Grants to Northeast Ohio Organizations,” Crain’s Cleveland Business, December 14. 2012.

Suggested Citation:"6 Rebuilding Ohio's Innovation Economy." National Research Council. 2013. Best Practices in State and Regional Innovation Initiatives: Competing in the 21st Century. Washington, DC: The National Academies Press. doi: 10.17226/18364.
×

Box 6-3
The Akron Model of Industry-University Partnership

In 2012, the Timken Engineered Surfaces Laboratories, a collaboration between Timken and the University of Akron’s College of Engineering was launched. The 6,000 square foot facility, with $2.5 million in equipment, focuses on technology to reduce friction on metal surfaces, involving “nano surfaces on products and very, very far-out technology.”

Timken is developing its own technology at the new facility in collaboration with the university, but will allow other companies to benefit from technologies relevant to “markets that Timken isn’t interested in but others are.” The university and the company “worked out how to protect Timken’s intellectual property in a way that other manufacturers and industries can benefit.” Griffith has commented that Timken had protected the IP for applications it was interested in but the university could use Timken technology for anything other than Timken-protected uses, which “could lead to breakthrough developments in applications completely unrelated to anything Timken does.”56

The above collaboration serves as a prime example of a university adding value to industry over and beyond feeding the talent pipeline. As Luis Proenza notes, “The University of Akron is a major player in the NE Ohio ecosystem, and by taking a key technology from within Timken, and yet ensuring its protection for Timken-protected use, made it available for the broader markets, thereby impacting many facets of the ecosystem. Some of these facets are open innovation, job creation, talent attraction, moving companies to Ohio, increased supply chain movements, deal flow and many more impacts that time will tell.”57

developed high quality steel alloys for new markets, offering incentives to its personnel for new product generation—in 2010, Timken exported $35million worth of steel alloy to China, “so when you’re selling China steel that is made in Ohio, you’re doing something radically different.” Timken invested a quarter billion dollars in China and exports as much to China as it makes in China. However, Griffith observes,

We looked at our business and saw that there was a big chunk of it we couldn’t afford to fix. And the company couldn’t survive if we didn’t deal with it…we had to divest $1.5 billion worth of business we

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56“Timken, UA Launch Venture—‘Open Innovation’ Partnership Allows University Students to Develop New Applications of Core Technology,” Akron Beacon Journal October 20, 2012.

57See Luis Proenza, “Relevance, Connectivity, and Productivity: The Akron Model,” in National Research Council, Building the Ohio Innovation Economy: Summary of a Symposium, op. cit.

Suggested Citation:"6 Rebuilding Ohio's Innovation Economy." National Research Council. 2013. Best Practices in State and Regional Innovation Initiatives: Competing in the 21st Century. Washington, DC: The National Academies Press. doi: 10.17226/18364.
×

couldn’t win in, and we closed 30 manufacturing sites in northeast Ohio. That’s the hard side to innovation.58

In 2005, Timken’s Griffith told the Akron Roundtable that northeast Ohio’s manufacturers were “on the upswing, not the downswing,” citing adaptability to global competitive realities.59 The following year, the Akron Business Journal observed that in many areas of Northeast Ohio “a quiet renaissance is taking place,” reflecting the fact that the region’s small manufacturers, in particular, were “innovating, automating, adapting, and growing;”60

A local economist has observed that “most people underestimate the continued viability of this region as a manufacturer.” He said that small manufacturers operating in niche product markets had achieved competitive advantage. “You can offer small production runs and pretty quick turnaround” while not competing with low wage, high volume manufacturers in countries like China.61 While the onset of the global recession in 2008 dealt area manufacturers a setback, a number of them recovered more quickly than the economy as a whole. Timken, for example, achieved record sales and earnings in the second quarter of 2011, a performance that stood “in stark contrast to the overall economy.”62

GROWING THE CLEVELAND BIOMEDICAL CLUSTER

At the end of the 1990s Cleveland’s business and civic leaders actively discussed the prospects for a local biomedical industry, based around the region’s three leading medical research institutions, Case Western Reserve University (CWRU), the Cleveland Clinic and University Hospitals. In 2000, Cleveland’s “business, academic and government leaders” drew up a plan to raise $200 million, and “build a cluster of new research facilities and lure top scientists,” an effort that would depend on close collaboration between the three research institutions, which had never worked together on a large scale.63

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58James Griffith, “Stimulating Manufacturing in Ohio: An Industry Perspective,” in National Research Council, Building the Ohio Innovation Economy: Summary of a Symposium, op. cit.

59“N.E. Ohio on ‘Upswing’ Timken President Says—Roundtable Hears Message of Progress,” Akron Beacon Journal November 18, 2005.

60These manufactures include Akron-based Northeast Tire Mold, which had invested $600, 000 to buy state-of-the-art machining equipment, and had its sales increased by 20 percent, Metal Dynamics Co., a small Wayne County-based steel fabricating, laser cutting, and welding company that had invested in new automated machinery and has seen sales rise by 30 percent, and Solmet Technology, based in Stark County, originally a metal-testing company, which has evolved into a maker of custom tool and die parts for machinery as diverse as Disney rides and Caterpillar equipment.

61Ibid.

62“Timken Raises Outlook,” Akron Beacon Journal July 29 2011; “Timken Earnings, Sales Soar,” Akron Beacon Journal October 26, 2011.

63“$200 Million Hub for Research Urged,” Cleveland The Plain Dealer October 28, 2000.

Suggested Citation:"6 Rebuilding Ohio's Innovation Economy." National Research Council. 2013. Best Practices in State and Regional Innovation Initiatives: Competing in the 21st Century. Washington, DC: The National Academies Press. doi: 10.17226/18364.
×

Biomedicine offered a number of attractive characteristics—because of the strict U.S. regulatory environment, the sector was less susceptible to, albeit not immune from, global sourcing, and biomedicine offered the promise of knowledge-based, higher income jobs.64 Considerable skepticism greeted this initiative—the Cleveland Plain Dealer observed in 2002 that “bioscience is a $600 billion industry. Northeast Ohio’s piece wouldn’t fill a “piggybank.”65 Edward “Ned” Hill, a highly regarded local economic development expert, commented that “all I can guarantee is that if we are trying to get into an area of science and research now that some places have been investing in for 20 or 30 years, we’re too late.”66

In fact, however, public and private actors in northeast Ohio put in place a series of programs, initiatives and actions in 2000-2002—a very short timeframe—that led to the emergence of a thriving biomedical industrial cluster in the Cleveland area in less than a decade that has gained national attention. Perhaps most importantly, an “innovation network” was created, comprised of professional non-profit development organizations and revamped, professionally staffed universities technology-transfer units. Mark Coticchia, who was one of the key founders of this network in the early 2000s, commented in 2007 that “we now have 60 professionals doing high-tech economic development work in Northeast Ohio. That’s huge. That wasn’t there five years ago.”67

Third Frontier Funding

Governor Robert Taft unveiled his Third Frontier program in 2002. The biomedical sectors in northeast Ohio subsequently benefited enormously from this program, capturing over $160 million in funds from the inception of the program through mid-2007, a dynamic that enabled the region to secure substantial private sector investments.68

Legislation Affecting Faculty Innovations

In 2001, the Ohio legislature enacted legislation providing for the grant of exceptions to conflict-of-interest rules that prohibited faculty members from owning stock in companies that licensed technologies the faculty members had developed at their universities. In 2008, Ken Preston, executive director of the

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64“Area Biomedical Industry Thriving at Healthy Pace,” Akron Beacon Journal April 27, 2009.

65“Biosciences: The Next Big Thing or One of Many?” Cleveland The Plain Dealer February 17, 2002.

66Ibid.

67“Case Study in Tech Transfer,” Cleveland the Plain Dealer (May 13, 2007.

68“Ohio Coming Out Ahead in Clinical Trial Research—Most Active State in Midwest Helps Individual, Economy, Business,” Akron Beacon Journal May 29, 2007; “Granting Our Wishes: State’s Third Frontier Program Has Invested about $300 Million in NE Ohio Technology Projects,” Cleveland The Plain Dealer July 22, 2007.

Suggested Citation:"6 Rebuilding Ohio's Innovation Economy." National Research Council. 2013. Best Practices in State and Regional Innovation Initiatives: Competing in the 21st Century. Washington, DC: The National Academies Press. doi: 10.17226/18364.
×

University of Akron Research Foundation, observed that after this change in the law, “across the state, we saw an immediate jump in university start-ups.”69

BioEnterprise Corp

BioEnterprise established an incubator in a building purchased from Case Western Reserve University in 2002, secured funding from government, private and foundation sources, and began recruiting young local and out-of-state biomedical companies to the incubator.70 Less than 20 months after its establishment BioEnterprise reported that the start-up companies it had supported had raised $62 million in capital, exceeding the nonprofit’s two-year target figure of $50 million.71 By 2009, BioEnterprise had had a hand in the formation of 89 biomedical companies in northeast Ohio drawing $859 million in capital and generating 1,900 jobs.72

Upgrading University Technology Transfer

In 2000-2001 northeast Ohio’s two main sources of technology transfer, the Cleveland Clinic and Case Western Reserve University, recruited technology commercialization professionals to head their technology transfer units—Chris Coburn at the Cleveland Clinic and Mark Coticchia at CWRU.73 Each individual in turn “hired dozens of professionals to help turn inventions at their respective institutions into licensing income streams, which after lead to commercial projects.” According to 2007 comments by Baiju Shah, the CEO of BioEnterprise, Coburn’s and Coticchia’s “success has been astounding in only a few years.” CWRU led Ohio universities in licensing income, with $29.4 million in the three years ending in 2008, compared with roughly $2 million a year prior to 2001. Cleveland Clinics commercialization unit, CCF Innovations,

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69“University Startup Companies Rise in Ohio: 2001 Law Beginning to Pay Dividends for Seventh Most Active State,” Akron Beacon Journal April 2, 2008.

70“BioEnterprise Seeks Aid in Attracting Outside firms,” Cleveland The Plain Dealer February 8, 2002; “Biotech Incubator Sets High Standards: Start-ups to-Get Up-Front Screening,” Cleveland The Plain Dealer, February 17, 2002.

71The sole yardstick used by BioEnterprise to measure its performance was the amount of capital flowing into client companies. “Start-up Firm Exceeds Goal: BioEnterprise Capital Hits $62 Million,” Cleveland The Plain Dealer February 7, 2002.

72“The Man to See to Get a Biomed Business Going: Baiju Shah,” Cleveland The Plain Dealer June 28, 2009.

73Coticchia had previously headed the technology transfer office at Carnegie Mellon University, where he had co-founded Lycos, the Internet search engine. He had experience in the venture capital industry and his mindset was “always that of a venture capitalist,” thinking about “the potential for emerging companies, what the risks could be.” His hires were people with “attributes that venture capital firms value—technology backgrounds and advanced degrees; sales and marketing experience; and an understanding of how products develop and companies form.” “Getting High-Tech Ideas From Campus to Market: CWRU Vice President Helps Turn Research Into Business Success,” Cleveland The Plain Dealer November 8, 2009.

Suggested Citation:"6 Rebuilding Ohio's Innovation Economy." National Research Council. 2013. Best Practices in State and Regional Innovation Initiatives: Competing in the 21st Century. Washington, DC: The National Academies Press. doi: 10.17226/18364.
×

generated licensing income of $15.6 million in 2003-05, and recorded 409 invention disclosures and 116 patent applications.74 In 2007, the Cleveland Plain Dealer reported in 2007, that “the technology transfer office at Case … has become one of the most prolific and top-grossing offices among its peers nationwide,” having helped create 15 spinoff companies since 2001, a year in which “the office did not spin off a single company to commercialize Case technology.”75

Recruiting Academic Talent

In 2001, the state of Ohio revived a program that had lapsed in 1990 pursuant to which the state Board of Regents could make awards of about $743,000 to endow seven to 11 university chairs to assist local institutions to lure top talent. The Third Frontier Project indicated it would “earmark a significant share of the proceeds from a $500 million bond issue to endow faculty chairs and recruit researchers.”76 Between 2005 and 2007, Case Western Reserve University attracted five eminent researcher-entrepreneurs who secured $60 million in research grants during that period and started companies to commercialize the result of their research.

These individuals (Walter Baron, Mark Chance, Krzysztof Palczewski, Alvin Schmaier, and Dan Simon) brought substantial teams with them to CWRU and recruited others. Dan Simon, for example, brought 15 doctors and scientists with him from the Brigham and Women’s Hospital in Boston, and had built up a division of 59 professionals at CWRU’s University Hospitals Heart & Vascular Institute by mid-2008.77

The emergence of a biomedical cluster in northeast Ohio has become self-reinforcing, attracting new companies, large-scale federal funding, and additional public and private investments. In 2007, the National Institutes of Health announced it would award Case Western Reserve University $64 million over a five year period to streamline the process of getting new drugs and medical devices to market. Case was reportedly chosen, in part, because of a

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74“The Clinic and CWRU Leaders in Licensing,” Cleveland The Plain Dealer March 14, 2007.

75“Case Study in Tech Transfer,” Cleveland The Plain Dealer May 13, 2007. Mark Coticchia’s perspective was that translation of research results into practical applications was “part of a researcher’s duty; much of their work, after all, is supported through federal grants.” The process of “educating researchers about both the rules and logistics of commercializing research at Case requires broad efforts by an office of more than a dozen highly educated staff.” “A Tech-Transfer Success Story,” Cleveland The Plain Dealer July 28, 2006.

76“Universities Need to Court Top-tier Researchers,” Cleveland The Plain Dealer March 31, 2002.

77“The Fab Five,” Cleveland The Plain Dealer July 20, 2008; “Influx of Researchers Boosts NE Ohio Economy: Researchers Pump Millions into NE Ohio Economy,” Cleveland The Plain Dealer July 20, 2008.

Suggested Citation:"6 Rebuilding Ohio's Innovation Economy." National Research Council. 2013. Best Practices in State and Regional Innovation Initiatives: Competing in the 21st Century. Washington, DC: The National Academies Press. doi: 10.17226/18364.
×

recent track record of technology transfer and collaboration with other institutions.78

Medical Imaging

Northeast Ohio entered the last decades of the Twentieth Century with a strong legacy position in medical imaging. Picker X–Ray (subsequently Philips Medical Systems) was founded in Cleveland in 1915, and Ohio-Nuclear Inc., a maker of CT and MRI scanners, established a manufacturing presence in 1958, later becoming known as Technicare Inc.79 Alumni from the two firms established other imaging firms in the Cleveland area, including USA Instruments Inc., which became a GE subsidiary, and Hitachi Medical Systems America. “Northeast Ohio’s long experience in diagnostic imaging has created a pool of workers familiar with the industry,” said a Hitachi Medical Systems executive in 2004.80

BioEnterprise and other economic development organizations built on this foundation, assisting start-ups and attracting medical imaging companies from outside the region. By 2009, northeast Ohio had nearly 50 medical imaging companies with around 3,000 employees, and recent signs indicate that Cleveland can compete successfully with other regions for medical imaging companies.81 In 2008, “heavy-hitting investors” on the East and West coasts offered to invest $25 million in ViewRay, a promising start-up with magnetic resonance medical imaging and image-guided gamma-ray treatment technology, but only if the company moved from Gainesville, Florida to a “center of bioscience innovation.” ViewRay chose Cleveland following a sales pitch from BioEnterprise, Team NEO and BioOhio, the state bioscience developer.82

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78The NIH award was given pursuant to a consortium effort called the Clinical and Translational Science Institute that was formed to address the lack of coordination between scientists investigating diseases and doctors diagnosing and treating those diseases. “Benefits of Teamwork: A Big Grant to Speed the Development of Better Medicine Should build Momentum for Local Institution’s Cooperation,” Cleveland The Plain Dealer September 20, 2007; “Case Wins Coveted Grant for Research: NIH Money to Accelerate Medical Breakthroughs” The Plain Dealer September 19, 2007.

79Eugela Electric Co. was formed in the early 1900s to manufacture x-ray equipment. It was subsequently acquired by Westinghouse and sold to Picker. Picker was acquired by Marconi Medical Systems in the 1980s that was itself acquired by Philips Medical Systems in 2001. SRI International, Making an Impact, 2009, op. cit. p. 4.

80“Imaging is Everything in Local Medical Field,” Cleveland The Plain Dealer August 31, 2004.

81“Medical-Imaging Startup to Grow: Success Bolsters Local Industry,” Cleveland The Plain Dealer January 23, 2009.

82The basic pitch was that “Northeast Ohio is home of three of the world’s top makers of diagnostic imaging equipment; the region’s medical institutions are willing to work with innovative technology startups; and the region offers deep technical and engineering talent no medical imaging.” “Investors Tip Biotech Firm Into Cleveland,” Cleveland, The Plain Dealer February 26, 2008.

Suggested Citation:"6 Rebuilding Ohio's Innovation Economy." National Research Council. 2013. Best Practices in State and Regional Innovation Initiatives: Competing in the 21st Century. Washington, DC: The National Academies Press. doi: 10.17226/18364.
×

As a team, they were comprehensively better than anyone we talked to in the other states. They understood what we wanted to do. They were organized, thorough and incredibly supportive across the board.”

Philips Healthcare, headquartered near Cleveland, has been expanding its presence in northeast Ohio and spinoffs from Philips local medical imaging operation have created a number of local start-ups. In 2010, it announced that it would open a $38.4 million global R&D center at University Hospitals Case Medical Center where it would develop state-of-the-art medical imaging equipment.83 At the end of 2011, Philips disclosed that it was relocating the R&D center for its medical imaging business from San Jose, CA to the Cleveland area, bringing 100 new jobs to the region at an average salary of $115,000. Baiju Shah, CEO of BioEnterprise, commented that “these types of moves bringing research-and-development positions from Silicon Valley to Cleveland, sends waves through the health care industry.” Ohio Governor John Kaisch was even more effusive, declaring that “this is just a gangbuster day. This is such a giant statement by an amazing, world class company.”84

Entrants from Traditional Sectors

The emergence of a biomedical cluster in Cleveland has attracted other Ohio firms to niches in the sector. Local metal companies facing stagnant growth in aerospace and automotive applications have branched into applications in specialized medical devices.85 A 2008 survey by BioEnterprise found that so many manufacturers were entering the medical business that Ohio had the second-largest number of FDA-registered companies among Midwestern states, over half of which were located in northeast Ohio. The manufacturers turning to medical applications were “looking for ways to grow and sustain their manufacturing enterprises … in the face of competition … that has caused much

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83The state indicated that the new center would receive $5 million from the Ohio Third Frontier Program. “Medical-Imaging Manufacturer Planning Research Center at OH,” Cleveland The Plain Dealer June 4, 2010.

84“Kaisch’s Medical Corridor Lures Jobs,” The Columbus Dispatch December 21, 2011; “Philips, Steris Adding 200 Medical Jobs to Area,” Cleveland The Plain Dealer December 21, 2011.

85Electrolizing Corp., a local firm making metal coatings for the automotive and aerospace industries, developed TiMed, a color coating for titanium suitable for use in surgical implants and medical instruments, where color-coding reduced medical errors. The Cleveland operation of Precision Castparts, a maker of forged aerospace fuel nozzles, developed a product line of titanium and cobalt-chrome hip replacement implants. Swagelok Co., based near Cleveland, a maker of tube fittings, valves and other parts for fluid systems in the chemical and energy sectors, developed a computer-driven orbital welding system that produces extremely smooth tubing connections required in the biopharmaceutical sector—tight welds that do not offer harbor for organisms that could contaminate sterile, closed systems. “Metals Industry Evolves: Companies Cash in on Burgeoning Bioscience Field,” Cleveland The Plain Dealer March 8, 2005.

Suggested Citation:"6 Rebuilding Ohio's Innovation Economy." National Research Council. 2013. Best Practices in State and Regional Innovation Initiatives: Competing in the 21st Century. Washington, DC: The National Academies Press. doi: 10.17226/18364.
×

of their work to go overseas or offshore.”86 In 2010, at the request of BioEnterprise, Cleveland’s Cuyahoga Community Collage began offering classes in “computer-controlled milling to aspiring medical-device and aerospace workers (many of which had lost old-line manufacturing jobs) to supply area firms with more [skilled] workers, a curriculum supported by a $600,000 grant from the Department of Labor.87

Polymer-Based Biomaterials

In 2008, the University of Akron joined with three local hospitals and the Northeast Ohio Universities Colleges of Medicine and Pharmacy (NEOUCOM) to launch a joint R&D initiative. Based in Akron, the BioInnovation Institute would build on the city’s leadership in polymers to make the city a world leader in biomaterials, including replacement parts for aging bodies and treatments for skeletal and joint ailments.88 Of the initial $80 million initial investment, $20 million was provided by the John S. and James L. Knight Foundation, originally based in Akron, which praised the “impressive level of collaboration of hospitals, universities, philanthropic organizations, local governments working together to attract research dollars and build on the area's strengths in polymer sciences and orthopedics.”89 The new organization was named the Austen BioInnovation Institute after the foundation’s chairman, Akron native Dr. W. Gerald Austen.90 In 2009, Dr. Frank L. Douglas, founder of MIT’s Center of Biomedical Innovation, was named President and CEO of the new Institute.91 Douglas, who had not planned to leave MIT, visited Akron in response to a recruiting pitch and over the course of three days, met 65 scientists, doctors, nurses and administrators. He recalls:

That’s what got my attention—the vision had permeated a couple of levels down from the presidents and CEOs. The people who have to

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86“Small Manufacturers Try a New Line: Medical Devices a Growing Market,” Cleveland The Plain Dealer March 11, 2008; “Manufacturers Shift Gears Into Growing Biomedical: Ailing Autos, Construction Push Companies Down New Path,” Cleveland The Plain Dealer June 14, 2009.

87“To Get Jobs, Areas Develop Industry Hubs in Emerging Fields,” USA Today June 6, 2011.

88“Partnership in Health—3 Hospitals, VA and Med School Create BioInnovation Institute in Akron, a Multi-Million Dollar Medical Research Program,” Akron Beacon Journal (October 17, 2008)

89“Ready for a Steep Climb—The BioInnovation Institute Goes for Talent,” Akron Beacon Journal August 30, 2009. Other sources of funds included in-kind contributions by the partners ($20 million), state grants ($8 million), federal grants ($4 million) and $10 million for First Energy for energy-efficiency initiatives. “Institute Seeks Additional Revenue,” Akron Beacon Journal June 17, 2012.

90“Economic Engine Built on Bioresearch Revs Up Akron—14 Researchers Recruited, Veteran Director and Board, Seed Funding Counting for BioInnovation Rejects,” Akron Beacon Journal September 14, 2009.

91“Dr. Frank L. Douglas,” Akron Beacon Journal January 26, 2010.

Suggested Citation:"6 Rebuilding Ohio's Innovation Economy." National Research Council. 2013. Best Practices in State and Regional Innovation Initiatives: Competing in the 21st Century. Washington, DC: The National Academies Press. doi: 10.17226/18364.
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make it happen had come on board and were motivated to do something.92

The Austen Institute established an internal structure to evaluate ideas generated at its affiliated hospitals and educational institutions and provided doctors and researchers with “tools to turn their good ideas into new products.” As recently as 2008, Akron’s hospital systems had less than five inventions under evaluation for potential patents; by the beginning of 2012 they had over 100 medical inventions in the pipeline—numbers that the Institute’s leaders regard as “evidence of success.”93

Stem Cell Research

In 2003, the Center for Stem Cell and regenerative Medicine was founded at Case Western Reserve University with a $19.4 million state grant, involving research collaboration by CWRU, University Hospitals, the Cleveland Clinic and Ohio State University, as well as local stem cell companies. The Center raised over $234 million in venture capital between 2003 and 2009 and spun off four for-profit firms in the Cleveland area. Cleveland scientists conducted the country’s first four adult stem cell clinical trials in 2003, and “researchers and investors familiar with the adult stem cell industry recognize Cleveland as a national player.”94

Investment Levels

In 2012, Greater Cleveland attracted $226 million in investment for 43 local innovative medical and health care companies—nearly doubling the prior year’s volume and exceeding Chicago, Minneapolis and the rest of the Midwest in investment levels. Prior to 2012, med-tech savvy Minneapolis led in investment levels. The President of BioEnterprise, a promoter of health care businesses in northeast Ohio, commented in January 2013 “It’s exciting. Minneapolis has been the benchmark for years. We’re playing with the big boys now.”95

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92“Akron Institute’s Leader Brings a World of Talent: Innovator Will Try to Combine City’s Medical, Polymer Strengths,” Cleveland the Plain Dealer February 28, 2010.

93“Patented Approach to Ideas: Medical Devices Develop Success,” Akron Beacon Journal January 15, 2012.

94“Cleveland Becoming Leader in Adult Stem Cell Industry,” Cleveland The Plain Dealer August 14, 2009.

95“Health Venture Here Lead Midwest Even With Money Tight, NE Ohio Saw Growth,” Cleveland The Plain Dealer January 10, 2013; “Infusion of Venture Capital Fires Up NE Ohio’s Innovation Economy: Study Shows Exponential Growth in Investment and New Companies,” Cleveland The Plain Dealer September 16, 2012.

Suggested Citation:"6 Rebuilding Ohio's Innovation Economy." National Research Council. 2013. Best Practices in State and Regional Innovation Initiatives: Competing in the 21st Century. Washington, DC: The National Academies Press. doi: 10.17226/18364.
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GROWING A CLUSTER IN FLEXIBLE ELECTRONICS

Akron is a center of advanced knowledge critical to the emerging field of flexible electronics, which involves the printing of electronic devices on flexible materials such as plastics, paper, fabrics and bendable glass. The area’s expertise in this technology is anchored in two of its leading universities.

A pioneer in the development of liquid crystal displays (LCD), Kent State University’s Liquid Crystal Institute, established in 1965, spun off a company that created an LCD display for the world’s first digital wristwatch, “one of the top inventions of the last century in leading our new IT industry.” Professor John West of Kent State’s Chemistry Department says that “we are the MIT, we are the Stanford of this industry.” 96

The University of Akron is the site of the largest and broadest polymer science and engineering program in the world and a very strong graduate chemistry program.97 The University collaborates with Ohio State University, the University of Dayton and 85 companies to operate the National Polymer Innovation Center, which is developing roll-to-roll (R2R) manufacturing technology that will be critical to the commercialization of flexible electronics products. The University’s key contribution is workforce development from the technician to the PhD level—“flexible electronics companies are going to use fully automated machines that will be operated by people with advanced degrees.”98

In 2006, NorTech and Kent State developed the FlexMatters Accelerator initiative, an effort to establish a flexible electronics industry in northeast Ohio that was broadened to include the University of Akron, the

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96Presentation by John West, “The Genesis of a New Cluster,” National Research Council, “Building the Ohio Innovation Economy: Summary of a Symposium,” April 25-26, 2011. Glenn Brown, then head of the Chemistry Department at Kent State, established the Liquid Crystal Institute (LCI) at the University in 1965. James Ferguson joined LCI in 1966 and was one of the inventors of the twisted nematic liquid crystal display, a technology that proved crucial to the development of the commercial flat panel display industry. Numerous LCI technologies were licensed to foreign companies and the display industry moved outside the U.S. In 1989, LCI combined with the University of Akron and Case Western Reserve University to establish the Center for Advanced Liquid Crystalline Optical Materials (ALCOM) with financial support from the National Science Foundation. This effort received about $60 million in federal and state funding through 2002, including $25 million from NSF and additional funding from DARPA. SRI International, Making an Impact, 2009, op. cit. p. 45.

97“College Expertise Can Turn Research Into Jobs,” Akron Beacon Journal March 11, 2002. The University of Akron, then known as Buchtel College, was the site of the world’s first academic rubber laboratory, serving local companies like Goodyear and BF Goodrich. During World War II the U.S. government contracted with the University to help develop synthetic rubber. At present, the University’s College of Polymer Science and Polymer Engineering and the associated research institute comprise the broadest and largest polymer program in the U.S. SRI International, Making an Impact, 2009, op. cit. p. 46.

98Presentation my Miko Cakmak, Distinguished Professor of Polymer Engineering, University of Akron, “Role of Regional Academic Institutions in Flexible Electronics Development,” National Research Council, Building the Ohio Innovation Economy: Summary of a Symposium, op. cit.

Suggested Citation:"6 Rebuilding Ohio's Innovation Economy." National Research Council. 2013. Best Practices in State and Regional Innovation Initiatives: Competing in the 21st Century. Washington, DC: The National Academies Press. doi: 10.17226/18364.
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TABLE 6-2 Core Competencies in the Flex Matters Cluster


Core Competency

Description


R&D pipeline

– Electro-optic materials

– Semiconductor materials

– Materials science and design

– Device physics

– Novel processes

Technology and innovation

– Particle processing

– Coatings processing

– R2R and wide web equipment/tools

– Polymer film processing

Talent and intellectual capital

– Highly skilled faculty

– Masters and PhDs

– Engineers and scientists

Intellectual property

– Seminal patents

– Know-how

– Trade secrets

Commercialized and near-commercialized products and components

– Electro-optic materials and films for curved product designs

– Silver conductive inks and pastes for electrodes

– Robust, low sheet resistance ITO conductive films

– Nanotechnology based coatings for screen protection

– Solar devices/components

– Lighting components

– Thermal heat dissipation components


SOURCE: NorTech, FlexMatters Strategic Roadmap, 2010, p. 26.

Center for Multifunctional Polymer Nanomaterials and Devices (a Wright program technology center) and local companies.99 FlexMatters received a $900,000 grant from the Ohio third Frontier program in 2007 and chose a site in a new research park being established by Kent State, Centennial Research Park.100 In 2010, NorTech released a detailed roadmap for the development of a

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99“KSU Dedicates New Research Park,” Akron Beacon Journal June 9, 2007; “6 Projects Get NorTech Money,” Cleveland The Plain Dealer November 15, 2006.

100“KSU Dedicates New Research Park,” Akron Beacon Journal June 9, 2007.

Suggested Citation:"6 Rebuilding Ohio's Innovation Economy." National Research Council. 2013. Best Practices in State and Regional Innovation Initiatives: Competing in the 21st Century. Washington, DC: The National Academies Press. doi: 10.17226/18364.
×

flexible electronics industry in northeast Ohio.101 The ultimate goal of the effort was stated for FlexMatters to create 1,500 jobs, $75 million in payroll and $100 million in capital for the northeastern Ohio economy within seven years. The Roadmap identified “core competencies” that already existed in the FlexMatters cluster and indicated that “to the best of our knowledge, this portfolio of competencies is not duplicated in any other existing centers or clusters.” (See Table 6-2.)

The FlexMatters cluster is comprised of a number of university research organizations and private companies. In addition to Kent State’s LCIs the University of Akron’s College and Institute for polymer science and engineering, and the Center for Multifunctional Polymer Nanomaterials and Devices at Ohio State,102 the cluster includes the Center for Photochemical Science at Bowling Green State University103 and the Center for Layered Polymeric Systems (CLIPS) at the Case Western Reserve School of Engineering.104 Participating companies like Kent Displays and Alpha Micron have started to make a commercial impact.105

YOUNGSTOWN—
SOFTWARE AND ADDITIVE MANUFACTURING

Heavily oriented toward steel manufacturing, Youngstown and its surrounding Mahoning Valley region were hard hit by the contraction of that industry in Ohio. Youngstown’s population of 82,000 in 2007 was roughly half of what it was 40 year previously and between 2000 and 2012, the Youngstown area lost 40,500 jobs. Thirty-one plants in or near the city shut down between 2001 and 2006. In 2012, a Cleveland-based economist estimated it would take 52 years for the area to return to the employment levels of 2000.106 A 2012 manufacturing workforce summit at Youngstown State University sponsored by the Mahoning Valley Manufacturers Coalition concluded that a shortage of

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101NorTech, FlexMatters Strategic Roadmap: Accelerating Growth in Northeast Ohio’s Flexible electronics Cluster November 2010; “Banking on Flexible Plastic: Nonprofit Aims to Provide Support for Promising New Industry in Northeast Ohio,” Akron Beacon Journal November 10, 2010.

102The Center develops protocols for manufacturing and nanostructures for polymer photonic components. It received a 22 million grant from the Ohio Third Frontier program in 2005. SRI International, Making an Impact (2009) op. cit. p. 47; “Nanotechnology Could Give Ohio the Edge in Global Economy—Emerging Field May Spur Job Growth,” Dayton Daily News August 7, 2005.

103The Center studies the interaction of light with biological, physical and chemical systems. SRI International, Making a Difference, 2009, op. cit. p. 47.

104CLIPS was launched by an NSF award of $19 million in 2007, and headed by CWRU professor Anne Hiltner, who specializes in the development of layers of plastics with practical applications. “Case Pioneer to Lead Center of Research,” Cleveland The Plain Dealer February 11, 2007.

105“Designing the Future Kent Firm Incorporates Liquid Crystals in Fashion Line,” Cleveland The Plain Dealer December 29, 2007.

106“Mahoning Valley Expert: Region’s Recovery Will Take Decades,” Youngstown Vindicator September 23, 2012.

Suggested Citation:"6 Rebuilding Ohio's Innovation Economy." National Research Council. 2013. Best Practices in State and Regional Innovation Initiatives: Competing in the 21st Century. Washington, DC: The National Academies Press. doi: 10.17226/18364.
×

skilled manufacturing workers in the region was “the most significant challenge” confronting local businesses and could slow the region’s economic recovery.107

Despite daunting economic challenges, however, Youngstown has attracted national notice for its approach to turnaround. The mayor, Jay Williams, said in 2007 that city planners had decided to accept the fact that Youngstown was and would remain a smaller city than it had been and that it should “accept being smaller and clear away the clutter,” demolishing vacant buildings, opening up green space, and making the city more livable.108

Youngstown’s novel approach to urban renewal was paralleled by a sustained effort to develop local technology-oriented industry. The Youngstown Business Incubator (YBI) was formed in 1995 to support local entrepreneurs with the support of Ohio’s Thomas Edison Program’s Incubator initiative.109 In 1998, under the leadership of a new director, Jim Cossler, the YBI chose to focus narrowly on the promotion of business-to-business software enterprises. Specialization allowed it to provide increased value for its tenants, and YBI invested in high-speed fiber optic connections, a software-testing lab, and specialized trade show materials, which would not have been cost-effective for individual small companies. Its first tenant was a power equipment dealer seeking to commercialize a sales development program it had developed, and other tenants followed.110 One of the new tenants, Turning Technologies LLC, a provider of audience response technology, was drawn by the incubator’s “most significant recruitment tool: deeply discounted rent, free furniture, bandwidth, electricity and other utilities.”111 By 2007, Turning reported revenues of $20.6 million, a three year growth rate of 3,909.9 percent, and was named the fastest growing privately held software company in the United States and the 18th fastest growing privately-held company overall.112

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107A spokesperson for seamless pipe producer V&M Star, which is locating a new facility in Youngstown, said that it received over 16, 000 job applications for 350 openings at its new facility and that it was “hard to find a 10 percent pool of applicants that is qualified, particularly those with millwright or maintenance skills.” “Many Valley Workers Lack Skills for Manufacturing Jobs,” Youngstown Vindicator April 13, 2012.

108“Less is More—Faced With Job Cuts and Factory Closings, Youngstown Tries Shrinking Back to Health,” The Cincinnati Post June 28, 2007.

109As of 2006, YBI was receiving $225, 000 of its $400,000 operating budget from the state of Ohio. “Hatching a Revival: Youngstown Business Incubator Using High-Tech Approach to Bring New Life to Regions,” Cleveland: The Plain Dealer March 26, 2006.

110PolicyLink, To Be Strong Again: Renewing the Promise in Smaller Individual Cities, 2008, p. 43.

111“Hatching a Revival: Youngstown Business Incubator Using High-Tech Approach to Bring New Life to Region,” Cleveland The Plain Dealer March 26, 2006. Turning’s CEO, Michael Broderick, called the abatement of operating costs at YBI “invaluable.” He recalled in 2010 that “we didn’t have venture funding, we didn’t have capital. We started this company with credit cards.” “Youngstown Makes Strides Toward Being Technical Hub,” Cleveland The Plain Dealer January 31, 2010.

112The recognition was from Inc. Magazine. Turnings Customers included Fortune 500 businesses, consulting and training firms, universities and K-12 classrooms. “Turning Technologies Rated Fastest-Growing,” Youngstown Vindicator August 24, 2007.

Suggested Citation:"6 Rebuilding Ohio's Innovation Economy." National Research Council. 2013. Best Practices in State and Regional Innovation Initiatives: Competing in the 21st Century. Washington, DC: The National Academies Press. doi: 10.17226/18364.
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YBI has added space to accommodate its burgeoning stable of growing software companies. When Turning outgrew its space in the incubator, YBI raised $6 million in federal and state grant funds to build an adjacent 30,000 sq. ft. building next door, the Taft Technology Center, which was entirely leased by Turning. Another 18,000 sq. ft. of space was secured nearby, the so-called Tech Block, whose first tenant, Revere Data, a maker of software for analyzing financial data, was characterized by Cossler as perhaps “the first company ever to move operations from San Francisco to Youngstown—but it won’t be the last.”113 These developments helped to propel Youngstown into national and international attention as an example of how a small industrial city turned its self around.114

In August 2012, President Obama announced that Youngstown would be the site of the National Additive Manufacturing Innovation Institute (NAMII), a research organization specializing in a potentially revolutionary manufacturing technique based on 3-D printing. The federal government will provide $30 million in funding to be matched by a similar amount from manufacturing firms, nonprofits, and universities and colleges.115 The National Center for Defense Manufacturing and Machining, which is sponsoring the project, estimates that it will eventually create 7,200 regional jobs. President Obama cited NAMII in his 2013 State of the Union message:

A once-shuttered warehouse is now a state-of-the-art lab where new workers are mastering the 3D printing that has the potential to revolutionize the way we make almost everything.116

THE TOLEDO PHOTOVOLTAIC (PV) CLUSTER

In 1970, Toledo, Ohio ranked in the top ten U.S. cities for per capita income. Nicknamed “Glass City,” Toledo spawned glassmaking companies like Libby Glass and Owens Corning, and was also a center for the manufacture of

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113“Youngstown Makes Strides Toward Being Technical Hub,” Cleveland The Plain Dealer January 31, 2010. Revere Data’s locational decision was reportedly based on cost comparisons, but also because one of its senior executives was a native of northeast Ohio. Rent in Youngstown was reportedly four percent of what the company would have paid in San Francisco. “Youngstown Ohio: A Young Town Again,” The Economist October 8, 2009; “Research Company to Open Office in Downtown Tech Block,” Youngstown Vindicator January 12, 2010.

114“National Study Applauds Youngstown’s Progress,” Youngstown Vindicator July 22, 2008; “Youngstown, Ohio: A Young Town Again,” The Economist October 8, 2009.

115“Obama Push for 3D Hub to turn ‘Rust Belt’ City Into “Tech City,” Columbus Examiner August 17, 2012. Additive manufacturing utilizes 3-D software that creates a blueprint that is sent to a machine that utilizes various materials, including resins, metal and plastic to “print” a product in layers, with little or no loss of materials in the process. “Obama Names Youngstown as Model for New Tech,” Youngstown Vindicator February 13, 2013. In fact, the Ohio partners have raised $40 million in matching funds.

116“Obama Names Youngstown as Model for the New Tech,” Youngstown Vindicator February 13, 2015.

Suggested Citation:"6 Rebuilding Ohio's Innovation Economy." National Research Council. 2013. Best Practices in State and Regional Innovation Initiatives: Competing in the 21st Century. Washington, DC: The National Academies Press. doi: 10.17226/18364.
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auto parts and furniture. These industries began a long decline in the 1980s, and by 2000 Toledo had plummeted from its top ten ranking in per capita income to the country’s bottom ten. In the decade following 2000, Toledo lost roughly 50,000 jobs, or about 14 percent of total employment, with the automotive sector being the hardest hit.117

The Legacy of Glass Manufacturing

In a four-month period between December 2000 and April 2001, unemployment in Toledo jumped from 3.6 percent to 12.1 percent, prompting the formation of a group of business, academic, and government leaders that came to be known as “the partners.” The partners agreed that the only way to revive the local economy was to “bring its major institutions together to think boldly and share responsibility for creating jobs.”118 An advantage Toledo enjoyed in attempting a turnaround was its legacy of innovation in all areas of the glass industry, and as the traditional glass business had stagnated in the 1980s and 1990s, local scientists with glass expertise began to explore alternative uses for glass technology.119 Norman Johnson, a former executive at various Toledo glass companies, and founder of Solar Fields LLC, a developer of thin film solar manufacturing technology, observed in 2007 that “I started in glass and now I’m back in glass.” The same year, at a meeting of civic leaders tracing the evolution of Toledo’s photovoltaic industry, one of them commented, “How would we be in this business in the first place if it weren’t for glass?”120

The genesis of Toledo’s photovoltaic industry was the work of a local inventor and entrepreneur, Harold McMaster, holder of over 100 patents and characterized as “the glass genius” by Fortune Magazine.121 In 1984, McMaster and a group of colleagues formed Glasstech Solar, and invested in basic and applied research in solar arrays at the University of Toledo and other institutions. When Glasstech Solar failed to develop a viable technology based on amorphous silicon, McMaster founded a new company, Solar Cells, Inc., to pursue a technological alternative based on cadmium telluride in 1990. By the end of the 1990s, Solar Cells was the industry leader in thin-film photovoltaic technology. According to McMaster’s 2003 obituary, “some believe he will be remembered as the father of commercial scale solar energy, having practically

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117USA Today,”Toledo Reinvents Itself as a Solar-Power Innovator,” June 152010; Toledo Free Press, “Sun Burn 1: Area Courted Solar Energy with Research,” July 19, 2012.

118“Toledo Reinvents Itself as a Solar-Power Innovator,” USA Today, June 15, 2010.

119“Toledo Finds the Energy to Reinvent Itself,” Wall Street Journal, December 18, 2007.

120Ibid.

121McMaster graduated from The Ohio State University with a combined Masters’ degree in Physics, Mathematics, and Astronomy, and in 1939, became the first research physicist ever employed by Libby Owens Ford glass in Toledo. He pioneered in the development of curved tempered glass for ore in automotive and consumer markets. The Toledo Blade, ”Harold McMaster, 1916-2003." “Inventor Became Philanthropist,” August 26, 2003.

Suggested Citation:"6 Rebuilding Ohio's Innovation Economy." National Research Council. 2013. Best Practices in State and Regional Innovation Initiatives: Competing in the 21st Century. Washington, DC: The National Academies Press. doi: 10.17226/18364.
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handed the needed technology to society in the 1990s.”122 In 1990, McMaster sold Solar Cells to TrueNorth Partners LLC, who renamed it First Solar. The company began manufacturing operations in Perrysburg, Ohio, 11 miles from Toledo, in 2004. By 2009, First Solar had become the largest producer of photovoltaic modules in the world, though this position has since been yielded to a Chinese supplier.123

University of Toledo Leadership

The University of Toledo (UT) played a leading role in the development of a major photovoltaic industry cluster in and around the city. McMaster’s research collaboration with the university, funded by grants, was the foundation for the formation of additional photovoltaic manufacturers. The university recruited renowned solar researchers.124 It established: the Wright Center for Photovoltaics Innovation and Commercialization, a university-industry-government collaboration for cost reduction, technology development, and technology transfer from laboratories to factories; the University Clean Energy Alliance of Ohio, which coordinates research collaborations by the state’s universities in the field of clean energy; a Clean and Alternative Energy Incubator, which assists green energy startups; and a School of Solar and Advanced Renewable Energy, which trains students in the field of renewable energy.125 UT’s President, Lloyd Jacobs, said in 2011 that in photovoltaics, “we have more scientific knowledge than almost anywhere in the world. We have more scientists doing more complex scientific work than anywhere else in the world.”126

UT’s support facilitated the advent and subsequent development of a number of start-ups in Toledo’s photovoltaic sector, including Glass Tech Solar, Solar Fields LLS, and Xunlight. In 2005, UT established the Clean and Alternative Energy Incubator, a facility providing support for spinoffs and startup alternative energy companies, including business assistance, competitive rents and help in identifying federal, state, and local funding and other support.127

_________________________

122Ibid.

123“Sun Burn 1: Area Courted Solar Energy with Research,” The Free Press. July 19, 2012.

124USA Today, “Toledo Reinvents Itself as a Solar-Power Innovator” June 15, 2010.

125University of Toledo, ”UT Creates School of Solar and Advanced Renewable Energy,” Press Release, April 15, 2009.

126The Blade, “Solar Incubator Spreads Wings, UT Program Adds Firms, Broadens its Research.” July 3, 2011.

127SRI International, Making an Impact, 2009, op. cit. p. 33.

Suggested Citation:"6 Rebuilding Ohio's Innovation Economy." National Research Council. 2013. Best Practices in State and Regional Innovation Initiatives: Competing in the 21st Century. Washington, DC: The National Academies Press. doi: 10.17226/18364.
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Support from the State

In addition to the support from a leading-edge public research university, Toledo’s solar firms benefitted from a number of local, state, regional, and federal initiatives. Ohio Advanced Energy, a business association representing the state’s renewable industries, worked with state officials to develop the Ohio Advanced Energy Portfolio Standard, which mandates that at least 25 percent of Ohio’s electricity be generated from clean and renewable sources by 2025. U.S. Congresswoman Marcy Kaptur helped secure $6.4 million in federal funds for two solar demonstration projects in Ohio, at the 180th Fighter Wing at Toledo Airport and Camp Perry, a National Guard training facility.128

Between 2003 and 2008, the Ohio Third Frontier program invested over $39 million on the state’s photovoltaic research base and in individual companies commercializing solar cell products and processes, including a $2 million Wright Project grant to UT to establish the Center for Photovoltaic Electricity and Hydrogen, which involved research collaboration with local PV firms, and an $18.6 million grant to UT in 2007 to help it launch the Center for Photovoltaics Innovation and Commercialization that absorbed the Center for Photovoltaic Electricity and Hydrogen. The Third Frontier has also invested over $15 million in Rocket Ventures, a program of the Toledo Regional Growth Partnership providing financial support for entrepreneurial commercialization in northwest Ohio.129

Initial Rapid Growth

By 2009, the area of northwestern Ohio around Toledo had more cadmium-telluride and glass expertise than any other region in the world.130 The area’s burgeoning photovoltaic industry also increased demand for output from local glass producers, who could offset declining sales in traditional glass markets with sales of thin films to solar manufacturers.131 By 2011, Ohio ranked second in the U.S. in solar panel output.132

Dan Johnson, a former UT professor who now serves as the University’s Director of Global Initiatives commented in 2012 that leadership in

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128Norman Johnston, “The Toledo, Ohio Solar Cluster” in National Research Council, The Future of Photovoltaics Manufacturing in the United States: Summary of Two Symposia, C. Wessner, Rapporteur, Washington, DC: The National Academies Press, 2011, p. 95; Toledo Free Press, ”Ohio National Guard Expands Solar Energy Field.” January 1, 2010.

129SRI International, Making an Impact, 2009, op. cit., p. 33.

130Norman Johnston. “The Toledo, Ohio Solar Cluster” in National Research Council, The Future of Photovoltaics Manufacturing in the United States: Summary of Two Symposia, p. 97.

131Wall Street Journal,” Toledo Finds the Energy to Reinvent Itself,” December 18, 2007.

132The Blade. “Ohio Ranked 2nd in the U.S. in Solar-Panel Output,” July 19, 2007.

Suggested Citation:"6 Rebuilding Ohio's Innovation Economy." National Research Council. 2013. Best Practices in State and Regional Innovation Initiatives: Competing in the 21st Century. Washington, DC: The National Academies Press. doi: 10.17226/18364.
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photovoltaic science and UT combined with the local presence of the glass industry make the Toledo region the perfect site for solar development:

We had a head start on the industry in many ways,” Johnson said. “Toledo had the key players involved early on. The University of Toledo researchers—a very active and respected team of researchers—were early leaders of the solar industry in the region. We also had the active participation of our local economic development organizations and professionals. They played their roles and, in my view, played them quite well despite major changes in their own organizations and leadership. Local government officials did what they could, largely adding their moral support and talking up Toledo’s budding solar industry. Add to that the significant infusions of venture capital, grants and loans. And, finally, there were the individual entrepreneurs and investors. All the ingredients were in place.133

The Global Photovoltaic Slump

Despite promising beginnings and a strong technology position, Toledo’s photovoltaic cluster faces an uncertain future. Global demand for solar modules has declined, reflecting decisions by a number of European governments to curtail subsidies for solar power production.134 At the same time, global production capacity has grown dramatically, particularly in China and Korea. According to a 2011report by the Swiss Bank Sarasin, in that year, global production capacity for solar modules “soared to 50 gigawatts, but the industry only managed to sell 21 gigawatts of that photovoltaic potential.135 U.S. companies “complained that solar prices have been negatively affected by China’s flooding the world market with solar panels priced below production costs.”136

By 2012, a global shakeout of the solar industry was underway. Eight of Korea’s nine photovoltaic cell manufacturers collapsed or were sold.137 First Solar indicated in April 2012 that it would cut its global work force by 30 percent, although its Toledo area operations were largely spared.138 However, some Toledo area photovoltaics firms were reportedly struggling financially. In November 2012, it was reported that the state of Ohio might not be able to recover the full amount of loans totaling $10.3 million to Willard & Kelsey

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133Toledo Free Press,” Sun Burn IV: UT, RGP, Port Leads Toledo into Solar’s Future,” August 23, 2012.

134Spiegel Online, “Twilight of an Industry: Bankruptcies Have German Solar on the Ropes,” April 3, 2012.

135Spiegel Online, “Setting Sun: Eastern Germany Hit Hard by Decline of Solar,” April 27, 2012.

136Toledo Free Press, “Sun Burn 2: Global Changes Slow Solar Growth.” July 26, 2012.

137JoongAng Daily Online, “Lights Go Out for Most PV Cell Makers.” June 12, 2012.

138The Blade, “First Solar to Ax Global Work Force by 30%.” April 12, 2012.

Suggested Citation:"6 Rebuilding Ohio's Innovation Economy." National Research Council. 2013. Best Practices in State and Regional Innovation Initiatives: Competing in the 21st Century. Washington, DC: The National Academies Press. doi: 10.17226/18364.
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Solar Group, which was facing mounting “bills, legal challenges, and financial troubles.”139 Xunlight Corporation was reportedly making interest-only payments on state loans that were supposed to include principal repayments. The shakeout was not confined to Ohio; in May 2013, the largest Chinese producer of photovoltaics went bankrupt unable to serve a burden of debt.140 The impact of China’s policies to encourage the production of solar panels can have major consequences in the viability of Ohio-based firm half a world away.141

OHIO’S CHALLENGE AHEAD

While there are many notable initiatives underway in Ohio, the state’s economic transformation will not happen overnight, warned participants at the National Academies’ symposium on Building the Ohio Innovation Economy.142 Dan Berglund of the Columbus, Ohio based State Science and Technology Institute noted that raising state income levels requires a long-term commitment and effort by all involved. Research Triangle Park has made significant contributions to North Carolina’s economy, he said, but it took thirty years of sustained commitment to accomplish this goal.143 Reflecting on his own firm’s experience with renewal, James Griffith noted that Timken’s transformation “came after 10 years of hard work, including a strong focus on innovating and the need to rip out the infrastructure and habits that inhibited innovation within a 100-year-old company.” The key lesson from the northeast Ohio experience, he said, is to restructure existing assets to take advantage of regional strengths and

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139The Blade, “Local Solar Firm Awash in Debts,” November 11, 2012.

140“Chinese solar panel maker Suntech flames out,” The Washington Post May 3, 2013.

141“Meanwhile, in late 2011, a group of U.S. solar panel manufacturers filed an anti-dumping case and won tariffs against Chinese firms. U.S. statistics indicate a sharp drop in imports from China, though some Chinese-made panels might be coming through third countries.”Ibid. A spokesman for a rival U.S.-based firm argued that “We believe Suntech suffers from the same unsustainable, distortive industry factors that confront everyone: China’s dumped pricing and massive overbuilding… Chinese companies can sell below their costs for only so long before they either go out of business or the Chinese government props them up, extending the anti-competitive problem.” Ibid. In 2012, the U.S. imposed antidumping duties ranging from 24 percent to over 250 percent ad valorem, based on the particular company, on imports of solar panels from China. In May 2013, the European Union imposed provisional antidumping duties on imports of solar panels from China, averaging about 47 percent ad valorem. “U.S. Sets Antidumping Duties on China Solar Imports,” Bloomberg October 10, 2012; “China Sun Panels Face EU Levies,” Financial Times May 6, 2013. In March 2013, Suntech, a Chinese firm which is the largest producer of solar panels in the world, defaulted on a $541 million bond payment. The company had reportedly been relying on the city of Wuxi to remain solvent. “Chinese Solar Firm Suntech Defaults on Bond Payment,” Houston Examiner March 19, 2013.

142National Research Council, Building the Ohio Innovation Economy: Summary of a Symposium,op. cit.

143For a history of Research Triangle Park, See Albert N. Link, A Generosity of Spirit: The Early History of the Research Triangle Park, Research Triangle Park: Research Triangle Foundation of North Carolina, 1995. See also Albert N. Link, From Seed to Harvest: The Growth of the Research Triangle Park, Research Triangle Park: Research Triangle Foundation of North Carolina, 2002.

Suggested Citation:"6 Rebuilding Ohio's Innovation Economy." National Research Council. 2013. Best Practices in State and Regional Innovation Initiatives: Competing in the 21st Century. Washington, DC: The National Academies Press. doi: 10.17226/18364.
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new opportunities, to reinvest in the skills and technologies of the future, to create the right incentives for innovation and entrepreneurship, and to stay the course.

LESSONS LEARNED

Ohio’s ongoing industrial turnaround effort employs many policy tools observable in other states and regions, but the effort itself is arguably sui generis:

•   The state has made major and sustained resources available to promote innovation, most notably through the Third Frontier program, but has not engaged in significant central direction, allowing developmental decisions to devolve onto regional parapublic organizations like NorTech which provide mentoring, networking, and early stage funding.

•   The engagement of foundations, which have fostered the emergence of innovation intermediaries, has facilitated the sidestepping of bureaucratic gridlock that could have resulted from Ohio’s large number of governmental subunits.

•   Innovation initiatives have been highly focused on certain sectors (over half of the Third frontier’s investments involve biomedicine and bioscience.

•   Ohio’s innovation initiatives take an expansive view of the role of universities in the local economy, which work closely with industry in new ways to foster local economic development.

•   Civic entrepreneurship, a pervasive philanthropic tradition, and leadership by key industry figures have played an important role in Ohio’s industrial revival effort.

Suggested Citation:"6 Rebuilding Ohio's Innovation Economy." National Research Council. 2013. Best Practices in State and Regional Innovation Initiatives: Competing in the 21st Century. Washington, DC: The National Academies Press. doi: 10.17226/18364.
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Most of the policy discussion about stimulating innovation has focused on the federal level. This study focuses on the significant activity at the state level, with the goal of improving the public's understanding of key policy strategies and exemplary practices. Based on a series of workshops and conferences that brought together policymakers along with leaders of industry and academia in a select number of states, the study highlights a rich variety of policy initiatives underway at the state and regional level to foster knowledge based growth and employment. Perhaps what distinguishes this effort at the state level is most of all the high degree of pragmatism. Operating out of necessity, innovation policies at the state level often involve taking advantage of existing resources and recombining them in new ways, forging innovative partnerships among universities, industry and government organizations, growing the skill base, and investing in the infrastructure to develop new technologies and new industries. Many of these initiatives are being guided by leaders from the private sector and universities.

The objective of Best Practices in State and Regional Innovation Initiatives: Competing in the 21st Century is not to do an empirical review of the inputs and outputs of various state programs. Nor is it to evaluate which programs are superior. Indeed, some of the notable successes, such as the Albany nanotechnology cluster, represent a leap of leadership, investment, and sustained commitment that has had remarkable results in an industry that is actively pursued by many countries. The study's goal is to illustrate the approaches taken by a variety of highly diverse states as they confront the increasing challenges of global competition for the industries and jobs of today and tomorrow.

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