Megatrend for U.S. Science, Tech Parks, and Clusters of Innovation: Diversifying Anchor Institutions, Creating Regional Partnerships and Exploring New Geographies

 

Megatrend for U.S. Science, Tech Parks, and Clusters of Innovation: Diversifying Anchor Institutions, Creating Regional Partnerships and Exploring New Geographies

IMAGINING AND SHAPING THE FUTURE

Author(s): Melissa Roberts Chapman¹, Ryan Buscaglia¹, Brian Darmody²

¹ Federation of American Scientists (United States of America)

² Association of University Research Parks (United States of America)

EXECUTIVE SUMMARY

The United States is making new place-based investments to develop globally competitive technology clusters across different regions of the country through a suite of recent federal legislative efforts. These include the EDA’s successful Build Back Better Regional Challenge and the soon-to-come NSF Regional Engines and EDA Regional Tech Hubs programs, along with many others. These initiatives will help seed new Areas of Innovation (AOI) and bolster existing ones. Science and Tech Parks (STPs) can be a critical node of the innovation ecosystems these programs are seeking to promote. 

In order to be effective partners, STPs must understand the broader context and partnerships which enable these initiatives. This paper catalogs recent investments and argues that STPs must act as cooperative partners within a broader innovation ecosystem. They can play an important convening function to lead or support coalitions in applying to these programs, but in order to be successful they must build forward looking, inclusive strategies with input from stakeholders across their community.

INTRODUCTION

The Engineering Dean at a growing research university felt anxious as he gazed out the window of his lab at the almond orchards surrounding the campus. He noticed that his students were not getting adequate exposure to industry in the semi-rural setting of the university. To tackle this issue, he came up with an innovative solution: bring industry to the university.

In 1951, Dean Turman of Stanford University made history by establishing one of the world's first intentional Science parks, the Stanford University Research Park.[1] This bold move, aided by numerous co-located U.S. military research and development (R&D) efforts, transformed the surrounding region into what would come to be known as ‘Silicon Valley,’ a hub of high-tech innovation and creativity on a global scale. Since then, countless universities would seek to replicate this model across the United States and the world. North Carolina created their Research Triangle Park, repurposing underutilized tobacco farms to connect the state's research universities. Philadelphia paved the way for urban research parks by launching the University City Science Center.

Over the years, the Science and Technology Park movement flourished, both in the U.S. and across the world. In the U.S. most of the development took place at the regional and state levels, with the federal government primarily supporting basic research and development through the National Science Foundation (NSF), National Institutes of Health (NIH), and the Department of Defense (DoD). 

However, the government did not provide support for specific place-making or regional innovation at a national level. In other parts of the world, governments have already taken more comprehensive approaches, providing support for Science and Technology Parks and Areas of Innovation as part of their national competitiveness policies. With increasing global competition across technology fields and a push to reshore critical production capabilities closer to sites of innovation, the U.S. federal government has now begun to shift its focus. Recent policies have focused on making place-based investments to help develop globally competitive technology clusters across regions of the U.S. These efforts have come through several major pieces of legislation: the American Rescue Plan (ARP), the Infrastructure Investment and Jobs Act (IIJA), the Inflation Reduction Act (IRA), and the CHIPS and Science Act. Together, these are multi-billion-dollar efforts to invest in the American economy, supercharge the transition to clean energy, and maintain America's global leadership in technology innovation. They also represent a new way for communities to imagine an economic future that centers science and technology development.

CHIPS AND NEW TECH HUBS

The CHIPS (Creating Helpful Incentives for Producing Semiconductors) and Science Act passed Congress and was signed into law by President Biden on August 9, 2022.[2] The Science portions of the Act authorizes the largest five-year investment in public R&D in the nation’s history. Motivated by concerns that the U.S. was losing its comparative global advantage in science and technology development, the act sought to invest in several parts of the American science and innovation ecosystem in order to increase national competitiveness. 

Overall, the Science portion of the CHIPS and Science Act authorizes $174 billion in spending over the next five years. Most of the authorized funding is for scientific R&D and commercialization, though a significant amount of that total has yet to be appropriated by Congress. Currently, the R&D portions of the bill face a $3 billion shortfall.[3] A key value of the bill’s authors was that funding for research, development, commercialization, and translation should impact more areas of the United States than just traditional coastal areas of innovation like California’s Silicon Valley, Boston’s Route 128 corridor and Kendall Square, and New York’s Wall Street financial district. 

The Act calls for tens of billions of dollars for development of technology hubs across the U.S., funded by the U.S. Department of Commerce (DOC), National Science Foundation (NSF) and U.S. Department of Energy (DOE). These hubs are meant to target distinct geographic clusters, leveraging the existing apparatus of research universities, national laboratories, manufacturing capabilities, and other assets. They seek to take advantage of and build upon existing human capital, labor, manufacturing, and research capabilities in each cluster. Though the process differs for each program, hubs will generally be awarded through a competitive, challenge grant system where communities compile the best possible narratives and strategies for their future vision.[4] Program managers in the federal government select awardees based on various. These programs will build on the examples of technology hubs through the American Rescue Plan’s Build Back Better Regional Challenge and will help hundreds of communities across the United States chart a path for their economic future that is innovative, inclusive, and globally competitive.[5]

The importance of place-based programs to a national strategy for economic growth is clear from a speech this year by EDA Deputy Secretary of Commerce Don Graves where he said:

“The Administration and the Commerce Department are focused on doing three things to ensure U.S. tech leadership for the next generation: First, reinvesting in our techno-industrial base and tech workforce with strategic, place-based investments in innovation ecosystems. These ecosystems are not about picking winners but enabling and jump-starting many winners across the country…. 

The goal is to see tech clusters and tech jobs in all types of regions of the country – urban and rural, coastal and heartland – so that the economic prosperity that comes with innovation is shared beyond our existing superstar cities.”[6]

These investments of time and resources in specific communities support cluster development as the dominant form of technology based economic development in the U.S.[7] In this context ‘clusters’ are similar to Areas of Innovation (AOI), though focused around specific sectors. STPs in the U.S. are not always larger research or industrial parks, but can be smaller labs, incubators, or institutions. STPs can be key nodes in innovation ecosystems, and the importance of having physical space for collaboration, testing, and management of capital-intensive physical assets cannot be overstated. STPs in the U.S. can make the most of these investments by understanding the broader trends of American investments, and by being active partners (though not always leaders) in developing coalition strategies.

MAKING SENSE OF THE CONTEXT FOR RECENT CLUSTER POLICIES IN THE U.S.

Place-based economic development is any form of intervention that endeavors to improve the economic potential of a community while taking into account the circumstances and realities of that community.[8] Place-based policies intervene in locales to boost employment and productivity. They try to make discrete geographical areas globally competitive. 

Place-based policies often aim to promote cluster development. Clustering is the co-location of firms in a given geographic area. These groups, or clusters, of companies and workers in a particular industry share equipment, space, and talent in ways that maximize regional efficiency and increase firm productivity.  This idea of agglomeration economies was first described by the noted economist Alfred Marshall in the late 19th century but reemerged in the 1980s/1990s with work by Michael Porter. “A cluster,” Porter said, “allows each member to benefit as if it had greater scale or as if it had joined with others without sacrificing its flexibility.”[9] These gains come from knowledge spillovers, development of local supply chains, and access to capital, among other factors. The fact that firms gain such massive benefits when they are located next to each other seems intuitive. What is more, there is evidence that the creation of certain innovative high tech jobs leads to a multiplier effect that creates more jobs in adjacent services and industries.[10]

Defining a tech cluster, with principles and data, is hard. Often people implicitly or explicitly cite the successes of Silicon Valley and Route 128 in pioneering both hard technology innovations and later software development, anchoring on those examples as the ideal type of clusters. In reality, clusters come in many shapes and sizes. William Kerr and Frederic Robert-Nicoud offer the following definition: 

“.. we define “tech” clusters to be locations where new products (be they goods or services) and production processes are created that affect multiple parts of the economy. That is, a tech cluster must have a frontier edge, and it must extend beyond refinements to a single industry.” [11]

If such clusters are hard to define, how can a government policy effectively intervene to promote their growth? Historically U.S. federal innovation and economic policies have not focused intentionally on building clusters. The majority of the federal government’s support for innovation came down to basic and applied research funding. Until recently, policy makers at all levels have viewed clusters in terms of trying to control or engineer the replication of specific existing clusters in new places (such as movements to create “Silicon X” in other areas across the country), an effort that has been largely ineffective.[12] Federal engagement in economic development focused largely on physical infrastructure (e.g. highways and ports), though agencies like the Economic Development Administration (EDA) at the Department of Commerce provide limited technical assistance and strategy grants to communities.[13] Despite engagement with Regional Development Organizations (RDOs) and Universities, persistent funding for regional planning at EDA has been ‘episodic,’ leading to a lack of sustainable, cyclical, and agile planning conversations that involved the entire range of community stakeholders.[14] 

Meanwhile, state and local governments’ economic development efforts center primarily around unproductive attraction and retention incentives (e.g., providing land deals for the construction of facilities). For example, 238 U.S. cities bid for the construction of Amazon’s HQ2 in 2018. Most of the bids centered around tax incentives and the provisions of cheap sites.[15] Some of these incentives rose as high as $5 billion.[16] These tactics do not drive productivity growth, spur a race to the bottom between communities, and are ineffective at achieving their stated goals. Studies have found that they have little impact on unemployment and may actually negatively correlate with job creation.[17] Rather than being coordinative or guided by a theme or long-term strategy, such policies create inefficient, unproductive, and downward-spiraling dynamics.

In contrast, cluster development today seeks to engage both universities and a host of stakeholders involved in strategizing to grow innovative, productive ecosystems that are globally competitive. This includes state and local governments, private sector firms, risk capital providers, entrepreneurs, STPs and members of the community whose voices have historically been left out of conversations about economic development. The prime examples of this are the EDA’s Tech Hubs program and the NSF’s Regional Tech Hubs program, both of which will make their first awards in 2023.[18]

Cluster development in the United States is moving beyond the coast and is likely to continue for several reasons. First, it is a bipartisan issue. Members of Congress from both parties in the U.S. appreciate the importance of supporting specific geographies and technology development.[19] Second, concerns over slowing economic growth have renewed interest in ways to increase productivity, making cluster development a key solution.[20] Third, the dispersed infrastructure of universities and national laboratories across the country provides a wealth of innovation capacity. Finally, the emergence of new critical technology disciplines and industries, such as artificial intelligence, novel semiconductor integration and packaging, and clean energy technology further drives the need for cluster development to stay ahead in the global competition.

RECENT PROGRAMS AND CHALLENGE INVESTMENTS:

Below you’ll find a chart of new and existing programs that target clusters/AOIs and regional innovation capacity.[21]

Program	Description	Amount funded	Agency
Build Back Better Regional Challenge	Grants awarded to 21 different coalition partners to develop and strengthen regional industry clusters.	$1 billion appropriated in the American Rescue Plan (ARP)	DOC: EDA
Good Jobs Challenge	Grants awarded to 32 industry- workforce training partnerships.	$500 million appropriated in the American Rescue Plan (ARP)	DOC: EDA
Build to Scale	Portfolio of national grant competitions to help regions plan and implement innovation ecosystem building strategies - 51 grants totaling $47 million already awarded.	$50 million in Regional Innovation Grants Authority in the FY23 Omnibus spending bill.	DOC: EDA
National Semiconductor Technology Center	A-whole of-government effort to establish a public-private consortium where government, industry, customers, suppliers, educational institutions, entrepreneurs, workforce representatives, and investors converge to bolster a healthy American semiconductor ecosystem.	$11 billion authorized and appropriated by the CHIPS and Science Act	DOC: NIST
Regional Technology and Innovation Hubs	Up to 20 grants to be awarded to create regional technology hubs focusing on technology development, job creation, and innovation capacity across the U.S. Awards must be made in all of the Eda’s regional areas.	$500 million appropriated in the FY 23 Omnibus spending bill. $10 billion authorized in the CHIPs and Science Act.	DOC: EDA
Recompete Pilot Program	Investments in communities with large prime age (25-54) employment gaps	$200 million appropriated in the FY23 Omnibus bill.	DOC: EDA
Regional Innovation Engines	Up to 10 years of funding for each Engine (total ~$160million per) authorized to build a regional ecosystem that conducts translatable use-inspired research and workforce development.   NSF is encouraged by Congress to coordinate with regional tech hubs program at EDA.	Overall, NSF received a 12% budget increase including $335 million in supplemental funding in the FY23 Omnibus bill to implement CHIPS and Science Act provisions.	NSF
Regional Clean Hydrogen Hubs program	Grants to establish 6-10 clean hydrogen hubs in communities across the U.S.	$7 billion provided by the Infrastructure Investment and Jobs Act	DOE
Growth Accelerator Fund	Competitive awards to Entrepreneur Support Organizations (ESOs) to increase number of R&D-focused, prospective SBIR companies, innovators, and entrepreneurs.	$10 million in the FY23 Omnibus spending bill	SBA
Regional Innovation Clusters	Grants awarded to hubs of small businesses, suppliers, and service providers concentrated in a geographic area. Now includes non-profits as coordinating partners.	$10 million in the FY23 Omnibus spending bill	SBA
Federal and State Technology Partnership program (FAST)	Provides funding for state and regional programs to increase the number of SBIR proposals from underrepresented groups.	$10 million in the FY23 Omnibus spending bill	SBA
Defense Manufacturing Community Support Program	Awards made to build up critical skills, facilities, workforce development, research and development, and small business support to strengthen the defense industrial/innovation base (largely at the state-wide level).	$30 million in the FY23 Omnibus spending bill	DOD
Rural Innovation Stronger Economy Grant Program	Grants to low-income rural areas to create jobs, develop industry clusters and small businesses, anc connect businesses to local assets and supply chains.	$2 million in the FY23 Omnibus spending bill	Agriculture
Manufacturing USA Institutes	Manufacturing USA®, a national network of 16 public-private partnerships. They collaborate in technology, supply chain, and workforce development to secure U.S. global leadership in advanced manufacturing across their specific industrial focus areas.	$51 million appropriated in FY23 Omnibus spending bill	DOD, DOC NIST, DOE EERE
Manufacturing Extension Partnership	A public-private partnership within all 50 states dedicated to serving small and medium-sized manufacturers.	$188 million appropriated in the FY23 Omnibus spending bill	DOC NIST

THE INNOVATION STAKEHOLDER MODEL, ECOSYSTEM BUILDING, AND ENVISIONING THE FUTURE:

New cluster development can help stakeholders envision futures for their community that are both realistic and ambitious. Too often, cluster selection decisions are made on the basis of “what is” and not “what might be built.” An example of this phenomenon can be found in the lagging data that informs these decisions–what relevance should location quotient or skills concentration have in the selection of a cluster when a city’s economy is among the least dynamic in the country? Should that city build a future around its existing, declining industry in an effort to shore it up against disruption and regain the glory days? Or should it venture out into industries unknown, diversifying its economy? At its heart, these are questions based on a judgment of values. This is why another hallmark trait of modern cluster development is that it focuses on transparency and inclusivity. As one recent winner of an EDA award testified to Congress, “Two things: inclusiveness and transparency were the two keys to doing this … five years ago the EDA would have received 5 different proposals from our region, and none of them would have talked to each other.”[22] The most successful clusters seek community buy-in on values-based decisions.

For governments to enact policies that create the most incentives for cooperation and inclusion, they need to focus on ecosystem level interventions. Ecosystem building is a complex adaptive systems discipline, each stakeholder represents a system in itself. One must look at the connections between six key stakeholders in innovation systems:

• Entrepreneurs
• Research institutions
• Risk capital
• Corporations
• Government
• Workforce development [23]

The current programs the U.S. government is enacting weigh in at this ecosystem level without taking on a burdensome, centralized planning role. For example, the NSF Regional Engines program is attempting to grow innovation ecosystems over a 10–12-year multi-phase approach. 

CONCLUSION:

The power of challenge grants at the ecosystem level is that investments by the federal government serve as mere starting points for the crowding in of private capital, new and existing firms, philanthropic partners, and state match programs. To be sure, the existence of federal programs and resources alone are not sufficient to support communities as they solve these problems. This suite of federal programs serves as a catalyzing force today, but other government and philanthropic entities will need to help communities meet related needs to ensure the success of these investments. Increased data and visibility into what choices peer communities are making and what different tradeoffs entail, and models for inclusive stakeholder engagement, as well as ongoing planning support and sustaining support of cluster development organizations will all be needed to ensure success. 

STPs’ can serve as a convening partner for federal opportunities that require multi-institutional responses. They can also attract science and tech assets to a community and manage central use facilities (e.g., 5G/6G test beds or biotech scale-up facilities). STPs should also play an integral role in education, via integration with workforce and entrepreneurship support systems. They should collaborate to educate people beyond formal scientific disciplines to include skills training and entrepreneur support programming. Finally, the best STPs are able to curate equitable rather than transactional relationships with stakeholders that seek to tell a story about their region or cluster that is forward looking and inclusive.

---

[1]In 1951, Dean For more about the history see: https://stanfordresearchpark.com

[2] “Fact Sheet: CHIPS and Science Act Will Lower Costs, Create Jobs, Strengthen Supply

Chains, and Counter China | The White House.” Accessed February 9, 2023. https://www.whitehouse.gov/briefing-room/statements-releases/2022/08/09/fact-sheet-chips-and-science-act-will-lower-costs-create-jobs-strengthen-supply-chains-and-counter-china/.

[3] Matt Hourihan, “The Bold Vision of the CHIPS and Science Act Isn’t Getting the Funding It Needs.” Federation of American Scientists, May 23, 2023. Accessed June 14, 2023. https://fas.org/publication/the-bold-vision-of-the-chips-and-science-act-isnt-getting-the-funding-it-needs/.

[4] For more on the initial idea of this challenge see: Daniel Correa, and Ishan Sharma.

“Creating the Make It in America Regional Challenge | Day One Project,” Day One Project, April 28, 2022. Accessed June 14, 2023. https://fas.org/publication/creating-the-make-it-in-america-regional-challenge/

[5] For details on the Build Back Better Regional Challenge Winners see: U.S. Economic Development Administration.“ $1B Build Back Better Regional Challenge Finalists,” Accessed February 9, 2023. https://www.eda.gov/funding/programs/american-rescue-plan/build-back-better/finalists. 

[6] Don Graves. “Remarks by Deputy Secretary of Commerce Don Graves at the Information Technology Industry Council,” U.S. Department of Commerce, January 31, 2023. https://www.commerce.gov/news/speeches/2023/01/remarks-deputy-secretary-commerce-don-graves-information-technology-industry.

[7] Kimberly Quach. “How Technology-Based Economic Development Could Create Jobs

Across the US,” Issues in Science and Technology (blog), September 11, 2020.

https://issues.org/the-endless-frontier-act-could-foster-technology-job-growth-across-the-unite

d-states/.

[8] Levin, Adam. “What Is Place-Based Economic Development?” Congressional Research Service, May 24, 2023. Accessed June 14, 2023 https://sgp.fas.org/crs/misc/IF12409.pdf.

[9] Michael E. Porter “Clusters and the New Economics of Competition,” Harvard Business

Review, November 1, 1998. https://hbr.org/1998/11/clusters-and-the-new-economics-of-competition.

[10] Enrico Moretti. “The Multiplier Effect of Innovation Jobs,” June 6, 2012. Accessed June 14, 2023. https://sloanreview.mit.edu/article/the-multiplier-effect-of-innovation-jobs/ 

[11] William R. Kerr, and Frederic Robert-Nicoud. “Tech Clusters,” Journal of Economic

Perspectives, 34, no. 3 (August 1, 2020), 51. https://doi.org/10.1257/jep.34.3.50.

[12] Ibid.

[13] The EDA was created 1965 with the mission to “provides grants to economically distressed

communities to generate new employment, and stimulate industrial and commercial growth,”

It’s mission has not been reauthorized by Congress in 17 years: “History - EDA@50 | United

States Economic Development Administration.” Accessed February 7, 2023. https://www.eda.gov/archives/2016/50/history/.

[14] Julie M. Lawhorn, “The Role of Regional Development Organizations (RDOs) in Economic Development,” Congressional Research Service, April 17, 2020. https://crsreports.congress.gov/product/pdf/IF/IF11511.

[15] Nathan M. Jense “Five Economic Development Takeaways from the Amazon HQ2 Bids,”

Brookings Institution (blog), March 4, 2019. https://www.brookings.edu/research/five-economic-development-takeaways-from-the-amazonhq2-

bids/

[16] Enrico Moretti. “The Effect of High-Tech Clusters on the Productivity of Top Inventors,”

Working Paper. Working Paper Series. National Bureau of Economic Research, September

2019. https://doi.org/10.3386/w26270.

[17] Brandon Brockmyer, et al, “Evidence Counts: Evaluating State Tax Incentives for Jobs and

Growth,” Pew Charitable Trust, April 2012.

https://www.pewtrusts.org/en/research-and-analysis/reports/2012/04/12/evidence-counts-evalu

Ating-state-tax-incentives-for-jobs-and-growth. 

[18]  See: https://www.eda.gov/funding/programs/regional-technology-and-innovation-hubs and https://new.nsf.gov/funding/initiatives/regional-innovation-engines/updates/nsf-selects-34-semifinalists-inaugural-nsf 

[19] For a discussion of recent hearings in the U.S. on the issue see FAS: Ryan Buscaglia and Melissa Roberts Chapman, “Cluster Development Is the New Economic Development,” Federation Of American Scientists (blog). Accessed February 9, 2023. https://fas.org/blogs/sciencepolicy/cluster-development-is-the-new-economic-development/.

[20] Moretti, “The Effect of High-Tech Clusters on the Productivity of Top Inventors,” 2019. https://www.nber.org/papers/w26270

[21] For another breakdown see: Brian Darmody, “The Geography of Technology, Science, and Innovation Under the CHIPS and Science Act,” AURP, January 4, 2023. https://aurpceo.blogspot.com/2023/01/update-on-aurp-white-paper-congress.html.

[22] “Building Regional Innovation Economies Part II: Testimony of Maureen Krauss, President

and CEO, Detroit Regional Partnership,” U.S. House of Representatives Committee on Science, Space, and Technology, December 14, 2022. https://science.house.gov/hearings?ID=9D1D6F5C-E095-46A5-B386-1290AFA5BA25.

[23] Adapted from: Phil Budden and Fiona Murray. “An MIT Approach to Innovation: Ecosystems, Capacities, & Stakeholders.” MIT Lab for Innovation Science and Policy, October 2019. https://innovation.mit.edu/assets/BuddenMurray_An-MIT-Approach-to-Innovation2.pdf.