Declining Higher Ed R&D Expenditures: A Crisis or an Opportunity?

131220-University-RD-BudgetA recent National Science Foundation (NSF) report revealed that R&D expenditures among U.S. higher education institutions remained flat in FY2012 compared to FY2011, and, when adjusted for inflation, declined by 1.1 percent. “This represents the first constant-dollar decline since 1974 and ends a period of modest growth during FYs 2009–11, when R&D expenditures increased an average of 5% each year.”

While this statistic is newsworthy, it may not be as much of a crisis as it first seems. Continue reading “Declining Higher Ed R&D Expenditures: A Crisis or an Opportunity?”

Numbers Behind the News: $100 Billion


Facebook has moved forward with an IPO that could be among the largest in the U.S. and at the least will dwarf Google’s 2004 IPO.  Facebook was launched only six months before Google’s August 2004 IPO.  The pessimistic outlook suggests that Facebook would hit a market value of $75 billion, which would make it the 35th largest company, but if it breaches the $100 billion barrier it could move ahead of Merck for the 25th spot.  Some analysts expected to see revenues around $4.3 billion and were disappointed in the  $3.71 billion sales figures released in the IPO.

Some other notable numbers from the IPO:

  • $1 billion profit (fails make the top 50)
  • 845 million users worldwide (would be the world’s 3rd largest if it were a nation)
  • 250 million photos are shared per day (a printed stack of these photos would more than 27 miles high)
  • $114 million spent on R&D (would be the 123rd largest research university in the U.S.)


Attracting High-Growth / High-Wage Investment

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There has been a lot of talk recently about the role of “innovation” and “technology” in strengthening our national economic competitiveness. While some firmly believe that innovation is the key to recovery and future growth, others say we should focus first on traditional manufacturing jobs. Many who advocate for the latter submit that manufacturing jobs make more of an economic impact in more regions of the country.

While most of us can be sympathetic to both views, we also can’t forget that manufacturing jobs and products were made possible first through innovation, research, discovery and capital. All parts of the country, small towns and big cities alike, must determine how their location and assets can serve the modern economic development continuum, from the budding entrepreneur with a new idea, through to product development, reinvention and production.

A client recently asked us a basic question – “If we want to attract and increase high-pay, high-growth investment, what do we need to know?” In response, our team gathered a sample of incentive programs and strategies that some states have employed to attract higher value, technology-based research and development sectors while also hoping to accelerate new company formation. While not a comprehensive search to say the least, this scan does provide some program themes of what has been put in place over the past few years to grow higher growth, higher wage sectors. First some general observations:

Place-Based Factors

Unlike highly cost sensitive sectors, R&D operations, corporate headquarters and technology-driven firms will likely place more emphasis on place-based assets and resources. These include community factors such as high-quality and diverse housing options, recreational venues, transit linkages, good airport access and cultural venues. Operational resources such as wet-lab space, university access, flexible capital, venture funds and ready-to-go class A/B flex office space are also critical. Increasingly, we are also finding an attraction to urban infill redevelopment opportunities, live-work-play centers and adaptive reuse of older or historic buildings to accommodate these sectors. Many of these factors came together to help Google expand in Pittsburgh and in their choice of the expensive high profile Chelsea neighborhood in New York City.

Venture Capital, Tax Credits and Micro Grants

While capital is important to all sectors, high growth high wage sectors will likely require more access to risk capital, venture funding resources and networks. We have also found that smaller firms to include start-ups and spin-outs also value micro-grant programs that offer $5,000 to $25,000 to support patent filings/research, IP protection lab rental or graduate student research support. Mid-sized and larger firms take advantage of Research and Development Tax Credit programs. Several examples of these programs are included in the links below.

Knowledge Network Management

Another growing industry demand represents an opportunity for economic development intermediaries to position as a core service or incentive program. That is the facilitation and management of collaborative partnerships among high value sector firms, universities, researchers or other resource providers. Through our work with the Pennsylvania Keystone Innovation Zone Program, many smaller technology-based companies and legacy firms in search of new product development or spin-out services, found value in a “single point of contact;” one able to facilitate those efforts and bring the right resources effectively to the table. States such as Michigan and Minnesota have taken on “networking” among high-growth high-wage sectors as a core economic development delivery service.

Aligning New Programs

When planning new incentives or revamping older programs, it is important to keep in mind that the general profile and characteristic of the modern business and how it operates is rapidly evolving. Modern firms are often smaller than what we may expect, usually less than 25 employees, and will likely stay that way for a longer period of time. They are more comfortable than legacy industry to rely on contract labor and sub-relationships rather than hiring permanent in house staff. For efficiency and security reasons, even larger firms are also becoming more decentralized, with smaller offices and manufacturing facilities spread across more locations. These conditions pose challenges for traditional incentive programs that have established eligibility thresholds based on larger manufacturing or corporate headquarters profiles. As a result, many legacy workforce, loan and grant programs then are less applicable and attractive to the smaller, more nimble high growth high wage firms.

Articles and Resources

The following articles talks generally about state programs and rankings as they relate to higher value industry sectors such as Biotechnology, Life Sciences, Medical Devices and Energy.

Best Bio-Tech Places – June 2008
Best States for Tech Jobs – April 2007
Tech America Foundation – Cyberstates 2010 Executive Summary
FierceBiTech – Top 5 Regions Targeting BioTech – 2009

State References

We have highlighted a few states that have established incentive programs and approaches targeting research and development activities as well as high value sector firms generally. These states have consistently been placed in the top 10 or 15 states in various technology economic development (TBED) rankings. We have included a public policy narrative under the North Carolina section that provides third-party policy recommendations that other regions may find of interest.

New York

New York Bioscience Incentives Guide 2010


Michigan High Tech High Growth Tax Credit Program
Michigan Smart Zones
Michigan Life Sciences Pipeline Program

North Carolina

Incentives Evaluation and Policy Recommendations – Duke University
North Carolina Research and Development Tax Credit Program


Pennsylvania Tech Formation Report – Strategy Document
Pennsylvania Research and Development Tax Credit Program


Wisconsin Tax Incentive Programs
The Value of Academic R&D – 2009


Enterprise Florida Incentives

Any industry sector including manufacturers who cite favorable location factors other than “cost” alone are more likely to remain and grow in that community. Employees that enjoy living in certain communities are often happier and more productive, wanting to ensure the operational success for their employer. So it is no longer as simple as water supply and interstate access. Technology and Place-based economic development strategies will continue to challenge many communities to reposition their program tools and incentives. But the sustainable economic outcomes are worth the effort.