Best Practices in State and Regional Innovation Initiatives Competing in the 21st Century (2013) / Chapter Skim
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4 State Strategies for Innovation
4 State Strategies for Innovation
Pages 69-84
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From page 69... ...
While some modern state economic development efforts can be traced back to the early Twentieth Century, the focus on strategies for innovation-based development has grown in recent years.1 First-generation industrial promotion programs frequently included a science or research dimension, but in most cases, placed primary emphasis on buttressing and retaining existing industrial sectors and recruiting major companies from other states.2 Today, there is a growing emphasis on the growth of local innovation ecosystems and the role they can play in revitalizing older manufacturing sectors, helping new industries arise out of the established 1 State-driven economic development efforts are traceable back to the early federal period. In 1791, the New Jersey Legislature authorized the incorporation of Alexander Hamilton's Society for Establishing Useful Manufactures as an institution for industrial development, extending to it a state tax exemption, the power to condemn property for its own use and legal control over much of the water supply of Northern New Jersey.
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From page 70... ...
4 In 1971, the New Jersey legislature incorporated Alexander Hamilton's private firm, the Society for Establishing Useful Manufactures, to promote industrial development. The society received a state tax exemption, control over much of the water supply of northern New Jersey and the power to condemn property for its own use.
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From page 71... ...
More than a decade ago, Round Rock, Texas offered Dell a 60-year package of tax refunds that eventually drew the company's headquarters out of Austin... six years after its deal with Round Rock, Dell wrangled a 40 year, $166 million package of grants and tax breaks from Nashville, Tenn… few communities or their elected officials are willing to call a company's bluff when jobs are at stake.9 While academic criticism of competition between states to attract companies through incentives is not altogether misplaced, it overlooks the fact that some state recruitment efforts have attracted innovative companies that have put down local roots, undertaken extensive local investments (including training programs and major contributions to local universities)
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From page 72... ...
was buffeted by rising energy costs, inflation, and intensifying international competition. A severe economic slowdown in the early 1980s hit traditional manufacturing industries particularly hard, and the term "rust belt" came into popular use in reference to large areas of the industrialized Midwest, Northeast, and Upper South.
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From page 73... ...
In a major reappraisal a number of states, realized they had not been engaging their universities in economic development; even fewer had thought of talent not as a mere commodity but as a discriminating vehicle for the future growth of state and regional economies …unlike the many previous chases for auto, steel, brewery, and other durable manufacturing branch facilities, this competition began a change in direction for state economic development to one involving talent, technology, and capital, not one just focused on traditional real estate issues of financing bricks and mortar.15 The 1980s saw a profusion of advanced technology programs at the state level, which featured aspects such as university-industry government R&D projects, promotion of start-ups using policy tools such as incubators and venture capital pools, and the provision of vocational and technical education and training. Cooperative research centers or "centers of excellence" were established pursuant to new state initiatives, including Ohio's Thomas Edison Program and New York's Centers for Advanced Technology programs.16 At present, all fifty U.S.
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From page 74... ...
The offer of an endowed chair position can be a compelling inducement to attract sought after researchers as well as their post-doctoral fellows, who are young people in their most productive years. "What is generally agreed upon is that endowed chairs represent an important tool in building a research hub capable of attracting big federal grants, commercializing technology, and spawning start-up companies."22 Following the lead of Virginia and Ohio, the state of Georgia launched a formal program in 1992 to attract top flight research faculty to the state with the creation of the Georgia Research Alliance, a consortium of six universities, business leaders, and government officials.23 The Alliance implemented the Eminent Scholars program, creating endowed chairs at universities in the state funded initially at about $750,000 a piece, to be matched by the host institution.
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From page 75... ...
, a state economic development corporation. At the onset of the global financial crisis in 2008, Michigan Governor Jennifer Granholm tasked MEDC with devising a strategy to diversify the state's economy beyond the auto industry.30 MEDC devoted a substantial effort to the study of industrial 24 Georgia's Technology Scholars Get a Tip of the Hat from Miller," The Atlanta JournalConstitution April 15, 1998; "Research Group Supportive of UGA Scientists," Atlanta BannerHerald September 26, 2010.
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From page 76... ...
"Advanced Battery Credits" of $1 billion refunded business taxes, paid by companies manufacturing battery cells and battery packs and engaged in advanced battery engineering. "Photovoltaic Tax Credits" gave companies investing in manufacturing plants for photovoltaic technology, systems or energy a credit equal to 25 percent of the investment.
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From page 77... ...
produces only about 1 percent of the world's lithium batteries, and until recently, it faced the prospect of "entering the age of electrified vehicle transportation without a domestic advanced battery manufacturing industry."38 The implications were particularly troubling for Michigan, whose economy is far more dependent on motor vehicle manufacturing than that of any other state.39 Underscoring the vulnerabilities of 34 In 2011, the Boston Consulting Group forecast that electrified vehicles (hybrids, plug-in hybrids, and pure electric) would account for 9-12 percent of the U.S.
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From page 78... ...
Michigan's Promotional Efforts Since 2008, Michigan has made the nation's most significant commitment to the development of electrified vehicles, offering over $1 billion in grants and tax credits to manufacturers of lithium-ion battery cells, packs, and components. Michigan also invested in research centers and worker training programs for electrified vehicles.
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From page 79... ...
In 2010, Governor Granholm noted that 16 advanced battery projects were under way and that "a whole advanced battery supply chain is taking root from the Detroit area to the shores of Lake Michigan," including companies making anodes, cathodes, separators, and electrolytes, as well as firms integrating them into 41 National Research Council, Building the U.S. Battery Industry for Electric Drive Vehicles: Progress, Challenges, and Opportunities -- Summary of a Symposium, op.
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From page 80... ...
"The whole spectrum is right here in Michigan."47 45 Ann Marie Sastry, "The University/Startup Perspective," National Research Council, Building the U.S. Battery Industry for Electric Drive Vehicles: Progress, Challenges, and Opportunities -- Summary of a Symposium, op.
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From page 81... ...
Despite recent investments in U.S.-based battery production, "many newer electric car models, such as Renault's Zoe, are still getting their batteries from Asia, where the battery industry has had many years' head start."52 U.S. battery makers have turned to Asian firms for the technology needed to enter the lithium-ion battery industry.53 A number of the leading Asian battery makers are 48 Tom Watson, "A Battery Manufacturer's Perspective," in National Research Council, Building the U.S.
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From page 82... ...
"Early battery companies couldn't get enough funding to survive against tough competition from Japanese and Korean companies." He concluded from this history that "the government does need to support research in the future, just as the Japanese government did in the 1990s with their "New Sunshine Program."54 incorporated in huge industrial conglomerates and have the financial resources necessary to withstand years of low sales levels as the electric vehicle market evolves.55 Korea's battery makers, which include LG Chem Co., Samsung SDI Co. and SK Energy, "have been supplying batteries for their affiliate companies …, which has boosted their sales."56 manufacturing process there.
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From page 83... ...
As the experience of Michigan's Battery Initiative demonstrates, even very well-endowed state innovation initiatives face daunting challenges, including demand uncertainties intrinsic to investments in industries of the future, formidable foreign competition, and gaps in U.S. industry chains.
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