Opening Remarks

• The Honorable Jeff Bingaman

  United States Senator

  New Mexico

Testimony

• Mr. Randall Kempner

  Vice President for Regional Innovation

  Council on Competitiveness
  Read statement

  Testimony

  Mr. Randall Kempner

  Testimony of Randall T. Kempner

  Vice President, Regional Innovation

  Council on Competitiveness

  October 18^th, 2007

   

  Senate Committee on Commerce, Science and Transportation

  Subcommittee on Science, Technology and Innovation.

   

   

  Chairman Kerry, Ranking Member Ensign, Senator Pryor and Members of the Subcommittee, thank you for the opportunity to testify on science parks and their impact on U.S. competitiveness.

   

  As the Vice President for Regional Innovation, I am here on behalf of the Council on Competitiveness’ 150 corporate CEOs, university presidents and labor leaders committed to ensuring the future prosperity of all Americans through enhanced competitiveness in the global economy. The Council is a non-partisan, non-governmental organization based in Washington, D.C. that fervently believes that the best way to drive prosperity is for  America to have the world’s most productive workers and competitive firms so that we can succeed in the global market place.

   

  This hearing comes at an opportune time as science parks are becoming increasingly important to our knowledge-based economy.  As the Council’s Competitiveness Index report found, American job growth will come primarily from small and medium sized businesses, science parks will play critical role in accelerating entrepreneurship and innovation.   The Congress, through the America COMPETES ACT, has already taken an important step in ensuring America's long term competitiveness.    The Council’s private sector, university, and labor leadership was actively involved in shaping and supporting the legislation through our National Innovation Initiative and we congratulate this committee and the Senate on its passage. 

   

  The theme of my testimony this afternoon – regional competitiveness, and the role of science parks in supporting regional growth– has been a major focus of the Council for nearly a decade. Starting in the late1990s with our pioneering work with  former Council Chair and Bell South CEO Duane Ackerman and Professor Michael Porter on regional clusters of innovation and extending through our recent National Innovation Initiative effort, the Council has focused on understanding what elements contribute to US regional success in a the global knowledge economy.  Our president, Deborah Wince-Smith, served as the chair of Commerce Secretary Gutierrez’s Strengthening America’s Communities Initiative (SACI) Advisory Committee, In addition,  we have worked closely with the Economic Development Administration at the Department of Commerce, the Employment and Training Administration at the Department of Labor, and  dozens of economic and workforce development organizations across the country to catalyze and help implement programs that support, regional, innovation-based development.    

   

  As the work of the SACI Committee and the Council’s National Innovation Initiative found, science and research parks can be a highly valuable asset in promoting national and regional competitiveness.  However, parks by themselves are no guarantee of regional success.  For science parks to succeed in promoting regional economic growth, they must be fully integrated into the overall regional economic development strategy.  We believe that any federal program to support parks should incorporate criteria that promote alignment with other regional assets and development efforts.  

   

  Allow me to briefly discuss the key elements of regional innovation-based development and the role of science parks therein.   Today, in the United States, regional prosperity depends upon the ability of its people and institutions to innovate and the development of regional ecosystems that support high value economic activity.   In this country, it is increasingly difficult to compete based on low-cost commodity products or the production of standardized manufactured goods.  Instead, we compete most successfully on the commercialization of high-value products and services that command a premium on the world market.  This requires fast and effective innovation and deployment of in global markets.  To meet this challenge, regional leaders must work to create an environment that supports innovative workers and firms.  

   

  Regional innovation capacity rests on more than just scientific discovery or idea generation – it is the output of a dynamic interplay of a variety of regional factors.  There are three high-level factors that are at play within every region:   Innovation Assets, Networks, and Culture. 

   

  Assets in the innovation-based economic development model include the human, intellectual, financial, physical, and institutional capital located in a region.  The asset base incorporates many common criteria for corporate expansion decisions, such as: availability of skilled labor, the quality of transportation infrastructure, cost of doing business, proximity to customers, the tax and regulatory environment and quality of life.  Assets also include many other factors that are not as widely considered but are equally important to innovation, such as: research and development investment, risk capital firms, technology commercialization, and programs that catalyze entrepreneurship and small business growth.    Science parks and business incubators are an example of an economic asset that can support regional innovation.  However, like all assets, their value depends on how they are used.  This brings us to the second key factor: networks. 

   

  Assets must be linked to support regional innovation. All too often, however, innovative ideas and people remain unconnected because formal and informal networks do not exist.  As we found in the Council’s Regional Innovation: National Prosperity report, many ideas generated by university researchers, while valuable from a purely intellectual standpoint, do not reach their full economic potential because they are not translated into new products or services. Similarly, many promising entrepreneurs never get the chance to succeed because local capital providers are unaware of the investment opportunity.  On the other hand, regions that do support a web of linked idea generators, managers, and capital, are more likely to become, what the Council calls innovation “hot spots.”

   

  However, we find that many US regions lack a business culture that supports collaboration and other pro-innovation attitudes.   One key aspect of a regional business culture is the degree to which business leaders are willing to cooperate and share ideas even when they compete in some circumstances.  The whole concept of cluster-based economic development is that firms will thrive if they operate in an environment in which they leverage shared knowledge, while developing their own unique strategies.

   

  Regional attitudes toward risk-taking comprise another key area. If innovation and entrepreneurship is to take hold, risk-taking must be appreciated and celebrated, even if it often leads to failure.  Failure must be understood as a component of the creative process.   And those who fail for the right reasons should be embraced, not ridden out of town.

   

  A final cultural characteristic of note is appreciation of people who have diverse experiences and backgrounds.  An increasing body of scholarly work suggests that regions which are inclusive and embrace people of all sorts may be better suited for supporting innovation than those that do not.  Regions which support a wide variety of artistic expression, in music, physical arts, and the humanities are more attractive to the creative class.  Since innovators, by their very nature, often act and think outside the norm, regions where residents respect and embrace diversity may have an easier time cultivating innovators.

   

  Supporting regional innovation is a dynamic and complex endeavor.  And science parks can play a very important role in mix.    Parks can offer general support services and specialized infrastructure that is critical to the work of targeted industry clusters – like wet labs for life sciences companies or clean rooms for work in optics research.    They can provide low cost space that supports creative interaction and offer training and mentorship programs to help entrepreneurs launch their businesses.  They can serve the critical function of linking scientists, entrepreneurs, capital providers, and managers – and become a network of networks for the region.   Through awards, public events, and successful incubation of firms, they can help build an entrepreneurial culture that values risk taking and collaboration.  

   

  Successful research parks like the Delaware Technology Park that my colleague and fellow panelist Michael Bowman runs, and parks associated with our national labs at Sandia and Los Alamos, offer most of these services and have become truly integrated into the regional economies.  

   

  But parks can also be islands.  Sometimes science parks become hermetically sealed locations that that operate with an inward-focus and have little relevance to the local economy.     Like underused bridges or poorly constructed water mains, they can become a costly infrastructure project with a poor return on investment.  Science parks de-linked from other regional innovation assets are destined to underperform.

   

  The key to success for parks is to ensure they are developed in the context of an overall regional economic development strategy and connected to other regional assets.   They should be active nodes in a highly networked environment, not isolated islands.    As a recent report by the State Science and Technology Institute argues, “An incubator should be created only if a clear need, a sufficient market, and adequate resources to support the incubator have first been identified.” 

   

  Therefore, if Congress were to offer special financial support for sciences parks, it should ensure that every successful recipient has demonstrated their clear relevance to existing regional development strategies, their specific plans for linking to regional institutions – not just the university to which the park may be affiliated, and their strategy for obtaining funding that would sustain park growth after federal support is exhausted.   Rather than measuring solely the number of jobs created or firms incubated, the park should be judged on the quality, or wage levels the new jobs provide, and the actual operational success of firms that graduate from the park.

   

  As you mentioned Mr. Chairman, “science parks are often recognized as the gold standard of technology-led economic development.”   And they can be – but not without making sure they are deeply connected with all the other elements that are required for regional prosperity.

   

  Thank you again for the opportunity to present to this hearing.  I look forward to your questions.

   

   

   

• Mr. Phillip Stafford

  President

  University of Arkansas Technology Development Foundation
  Read statement

  Testimony

  Mr. Phillip Stafford

  Written Testimony

   

  provided by

   

  Phillip S. Stafford

   

  University of Arkansas

   

  Technology Development Foundation

   

   

  to

   

   Committee on Commerce, Science, and Transportation

   

  Subcommittee on Science, Technology, and Innovation

   

  United States Senate

   

  508 Dirksen Senate Office Building

   

  Washington, D.C.  20510

   

   

  Thursday, October 18, 2007

   

   

   

   

   

   

   

   

   

  Introduction

  Mr. Chairman and Members of the Committee, I am Phillip Stafford.  I am the President of the University of Arkansas Technology Development Foundation, a university-affiliated foundation charged with the duty of managing the Arkansas Research and Technology Park at the University of Arkansas in Fayetteville. Thank you for allowing me to provide my remarks before the Subcommittee on Science, Technology, and Innovation regarding the impact of research parks and the recently introduced legislation, S. 1373, sponsored by Senator Mark Pryor of Arkansas.   Thank you, Senator Pryor, for your steadfast support for the Arkansas Research and Technology Park and the University of Arkansas research programs in general.  We are extremely grateful.

   

  Background

  Mr. Chairman, the Arkansas Research and Technology Park, is located in the City of Fayetteville, only five minutes from the heart of campus of the University of Arkansas.   The Arkansas Research and Technology Park, also known as the ARTP, is currently home to the GENESIS Technology Incubator, the Innovation Center, the Engineering Research Center, the High Density Electronic Center and the National Center for Reliable Electric Power Transmission.  The collective research and development capacity of the ARTP assets stands at approximately 220,000 square feet.

   

  Since its inception, GENESIS has assisted a number of technology-based entrepreneurs in growing their firms to the point of economic viability. The incubator has an important role as the entry point to the ARTP for start-up companies that are working to develop emerging technologies in a variety of fields. Providing support to these young firms enables GENESIS to serve as a catalyst for increasing the number of knowledge-based jobs in Northwest Arkansas and for improving the economic base of the region and the state.

   

  The University of Arkansas Innovation Center, also located in the Arkansas Research and Technology Park south of the UA main campus, is adjacent to the award-winning GENESIS Technology Incubator and the Engineering Research Center, which houses 173,000 square feet of multidisciplinary laboratories and equipment, including the High Density Electronics Center. The Innovation Center provides office and laboratory space for technology-intensive private companies that want to locate at the ARTP in order to partner with the University in collaborative research, which drives innovation and enhances their competitive position. The Innovation Center has received a design award from the Arkansas Chapter of the American Institute of Architects and is recognized as the first LEED Certified building in the state of Arkansas, as designated by the U.S. Green Building Council.

   

  Since assuming management in November of 2004, the UATDF has overseen a rapid transformation of the ARTP, signifying that the research park is playing an important role in catalyzing technology-based economic development.  Over this period, public/private affiliates of the park have grown from 13 to 27 organizations paying an average annual salary of $80,000. Presently, the Technology Development Foundation has approximately 40,000 square feet under lease to its 27 public/private affiliates. At full build out, the total R&D capacity of the ARTP is expected to grow to approximately 700,000 square feet. 

  A primary goal of the ARTP is to stimulate the formation of a collaborative community of companies linked interdependently with the University of Arkansas in research and development. Accordingly, the University has already identified several areas of innovation as the primary focus for partnerships, including:

  • next-generation electronic and photonic devices,
  • biotechnology and related chemical, biological and food sciences
  • materials and advanced manufacturing,
  • database, software and telecommunications,
  • environmental and ecosystem analysis
  • transportation and logistics.

  Clustering innovative activities within these broad areas of research will afford companies the benefits derived from collaboration, labor-source pooling and supplier networks.

  The Synergy between University and City entities

   

  Mr. Chairman, science, technology and innovation have taken center stage in efforts to boost economic growth, particularly at places like research parks throughout the nation.   According to new data compiled by the Association of University Research Parks (AURP), research parks in the United States, like the Arkansas Research and Technology Park, and in Canada directly employ more than 350,000 people and contribute more than $31 billion annually to the economy in the United States and Canada.

   

  Through the development of the Arkansas Research and Technology Park, the University of Arkansas Technology Development Foundation, the City of Fayetteville, the State of Arkansas, and region are building an economic development engine focused on innovation and Northwest Arkansas entrepreneurial strength that is able to attract and retain knowledge-based workers and induce technology-based business cluster formation.  Because research parks provide the physical infrastructure and environment to encourage research and development, the ARTP is viewed as the cornerstone toward developing the building blocks essential to growing and sustaining a knowledge-based economy in Arkansas. 

   

  The City of Fayetteville, Arkansas has been an extraordinary partner in the development of the ARTP by providing the necessary resources to assist the Technology Development Foundation.  Not only has the city provided financial support for the planning and conceptual engineering for the ARTP, but it is currently designing the reconstruction of Cato Springs Road to serve as the Technology Corridor linking the ARTP and other privately held R&D companies to the University of Arkansas main campus.

   

  Why Companies locate to Science Parks

   

  True progress toward a knowledge-based economy in Arkansas and throughout the nation will require that select individuals and organizations commit to early-stage investment in emerging technology companies to enable these companies to bridge the gap between product development and commercialization.  The Technology Development Foundation has been active at the Arkansas Research and Technology Park in establishing and cultivating ties to organizations like the Arkansas Venture Forum, Accelerate Arkansas, Innovation to Return on Investment and the Fund for Arkansas’ Future to facilitate access to financial capital for its corporate partners.

   

  Aside from the physical infrastructure supporting research and development, the Technology Development Foundation is leveraging spillovers of knowledge from the University and translating this knowledge into industrial innovation in the form of new companies concentrating in the areas of nanoscience, food safety, cell biology and detection and diagnosis of various diseases.  Moreover, to assure that promising innovations find their way into the commercial mainstream, the University of Arkansas Technology Development Foundation has implemented an intellectual property support system to assess, package and license new technologies to power the innovation cycle and sustain the competitiveness of its corporate partners.

  The ARTP continues to spawn and nurture a growing entrepreneurial culture through the GENESIS Technology Incubator and the Innovation Center. Since January 2005, affiliates of GENESIS and the Innovation Center have accounted for approximately $36 million in Small Business Innovation Research grants and contracts. Not only does this federal program provide critical seed funding to ARTP companies, it serves to validate that the technologies under development are commercially important.

  Through its corporate partners, ARTP is also contributing to the development of a technologically skilled workforce. The ARTP now provides direct employment for 215 highly trained knowledge-based workers, many of whom are graduates of the University of Arkansas.  It is further estimated that another 107 jobs have been created within the region in indirect support of ARTP research and development. Moreover, it is projected that the ARTP will contribute to the creation of 2,000 jobs at build out.

  In addition, the Technology Development Foundation is developing a vital network of contacts in the entrepreneurial, finance, and professional service communities to sustain the growth of its corporate partners. In fiscal year 2008, the Technology Development Foundation will work closely with the organization selected to implement the new Innovate Arkansas initiative, designed to provide high-growth companies services to enhance their business plans and provide access to potential early stage investors. Innovate Arkansas will also provide other valuable services that can enhance the growth and development of emerging technology companies.

  It is clear that university/industry research collaboration is evolving into a highly sophisticated platform for innovation. Why is this important? First, it makes good economic sense. Through collaboration that leads to innovation, we can start and grow new firms that augment the economic ecosystem, giving rise to new technology clusters that build on the base of technological expertise in place in Northwest Arkansas. Second, it’s good policy because university/industry research provides opportunities for students to make the connection between knowledge gained in the classroom and its application in business and industry. At the ARTP, we are doing our part to lay a foundation that leads to sustained prosperity in Arkansas. More importantly, we are providing our graduates high-paying professional career opportunities to enable them to build their future-- our common future—in Arkansas.

   

  S. 1373 – Science Parks Legislation

   

  As a result of the success of the ARTP affiliate companies, both the Innovation Center and the GENESIS Technology Incubator are operating at full capacity.  Assuring continued success of the Tech Park and its affiliates will require further development of multi-tenant research facilities and associated primary and secondary infrastructure to support growth and expansion of the ARTP to meet the research and development requirements of our emerging technology companies.

   

  I am, therefore, encouraged that the legislation, S. 1373, sponsored by Senator Mark Pryor will provide grants and loan guarantees for the development and construction of science parks to promote the clustering of innovation through high technology activities. Because university-related research parks typically involve small emerging technology companies, credit enhancements are often necessary to achieve financing of project facilities. Consequently, this legislation addresses a problem that is universal to many research parks.

   

  The purposes outlined in S. 1373 are essential to support existing research parks in their activities to acquire more space and infrastructure to accommodate technology activities and encourage the inclusion of more companies to promote further economic growth.  Moreover, it is also essential to provide planning support to those areas with major research universities to conduct feasibility studies for science parks among various geographic areas. 

   

  As one who has watched on the front lines the development of the Arkansas Research and Technology Park, I fully support the objectives of this legislation because of the enormous value it will provide to our universities, our national economy and our nation.

   

   

  I would only add that the Committee may want to give consideration that a portion of these grants be directed to benefit areas and regions experiencing or threatened with substantial economic distress.  As defined by the Economic Development Administration at the Department of Commerce, distress may exist in a variety of forms, including, but not limited to, the following:

  • high levels of unemployment,
  • low income levels,
  • large concentrations of low-income families,
  • significant declines in per capita income,
  • substantial loss of population because of the lack of employment opportunities,
  • large numbers (or high rates) of business failures,
  • sudden major layoffs or plant closures,
  • trade impacts,
  • military base closures,
  • natural or other major disasters,
  • depletion of natural resources,
  • or reduced tax bases.

   

  Conclusion

   

  Mr. Chairman, the Arkansas Research and Technology Park is already having a positive impact on the economy of Arkansas and is contributing significantly to the development of the building blocks essential to growing and sustaining a knowledge-based economy.  I can only hope that more of these research parks will continue to play a significant role in the pace of innovation in our nation, accompanied by growth and expansion. 

   

  Sustaining this momentum is essential to nurture areas of collaborative activity into clusters of companies working in a common area of interest.  Doing so will result in providing tangible benefits to the nation by attracting high paying jobs, providing professional opportunities for high technology workers, and forming clusters of expertise that are important for attracting additional high technology firms.

   

  Mr. Chairman, thank you for allowing me to testify before your Committee today.  It has been an honor to participate in this hearing.  I am happy to answer any questions that you may have.  Thank you.

   

• Mr. Mike Bowman

  Chairman and President, Delaware Technology Park, Inc., and

  First Vice President Association of University Research Parks
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