Thursday, August 4, 2011

So how’s that targeting working out for you? (Part 2)

By Matthew Tarleton, Project Manager.
A few weeks ago I shared some statistics on the concentration of scientific research and development employment growth in a handful of large metropolitan areas. If you haven’t read that entry, I encourage you to give that a quick read before going any further.

Alright, so you’re done reading that entry, right?

Last chance….

Where were we? In short, employment in the scientific research and development sector (where R&D is the primary revenue-generating activity) is highly concentrated in a few large metropolitan areas, and half of all growth between 1990 and 2010 was concentrated in just eight metropolitan areas. Only 62 metropolitan areas added more than 100 jobs in the sector over this twenty-year period.

Now, this is not intended to imply that communities should not target scientific research and development in areas like medical technology, clean energy, plant science, etc. Rather, it is intended to provide the necessary context so communities can smart decisions about how they invest their limited resources, and how they should measure their return on investment appropriately. Of those 300+ metropolitan areas that created fewer than 100 jobs – or lost jobs – in scientific research and development sector between 1990 and 2010, how many invested countless thousands of dollars (and in some cases, millions) in marketing their region, developing skill sets, supporting startups, and commercializing research that ultimately produced little or no gains in terms of employment?

The reality is that many of the associated employment gains are captured in other sectors, outside of scientific research and development. When establishments primarily focused on research and development make a valuable discovery and produce commercially-viable innovations, the employment growth that is born from this discovery will often be captured by a new startup firm or an established firm that has licensed or acquired the new discovery and is appropriately classified within a manufacturing sector. As many communities know, the biggest challenge is often the retention of this new innovation. That is to say, the biggest challenge is keeping that innovation – whether a licensable technology or a new startup company – from being licensed by a company outside the region (and exporting the associated employment gains) or in the case of a new startup, from moving to a location with more readily-available capital. We see this happen in communities large and small.

St. Louis is a perfect example. The region struggled to retain new innovations and startups, often seeing new companies that grew within their world-class incubators flee to California or Massachusetts in pursuit of – and often at the request of – venture capitalists. They have responded by establishing a Capital Alliance, focused entirely on the development of homegrown angel and venture financing. And while they have had their challenges, St. Louis is also a great success story. The region has successfully grown into the plant science capital of United States. It is undoubtedly the hotbed for innovation in this area, and is applying this knowledge to new and related disciplines from clean energy to nutraceuticals. The assets embedded in corporate giants such as Monsanto and leading research institutions like Washington University in St. Louis have given birth to facilities like the Donald Danforth Plant Science Center, an environment that will nurture new innovations for decades to come.

So what do we learn from all of this? There are two primary takeways:
  1. Make sure you are measuring the right things. If you are targeting research and development in clean energy, medical technology, plant science, etc. make sure you are adequately measuring the returns in multiple ways. You cannot simply measure employment growth in the scientific research and development sector. This is one important measure, but there are many others including but not limited to: growth in the manufacturing sectors where the ideas are translated into product; capital received by small businesses; licensed technologies; the location of licensing firms; academic research and development expenditures; incubation outcomes, and; revenues generated by establishments engaged in R&D, to name a few.
  2. Don’t just focus on creating the innovation; make sure you retain the innovation.Communities cannot afford to invest thousands upon thousands of dollars in the development of new innovations and startup companies, only to see them leave for greener pastures once they become commercially viable and enter the “gazelle” or high-growth stage. Develop homegrown capital. Connect small businesses and entrepreneurs with established firms in your region that may be interested in their technologies. Help them find appropriate space, whether within an incubator, a technology park, or a building in need of repair. Connect them with any available incentives at the state and local level that will help keep them in your region. And most importantly, talk to them. Find out what you can do to help and make sure they know that they are a valued and important part of their community’s future.