TCS Daily

Lab's Labors Lost?

By Charles Matthew Rousseaux - April 19, 2004 12:00 AM

It could be that the seductive possibilities of the lab-coat-cross-eyed look combination have been consistently underrated. It might be that the uncertain scents scientists are steeped in at the laboratory contain pheromones of phenomenal potency. Whatever the reason, the lonely lab rats who regularly mumble pickup lines to empty bars can take comfort in the fact that a large number of bodies want -- nay are desperate for -- their lifetime companionship.

Admittedly, those bodies don't have the best curves -- some of them are hundreds of miles wide at the waist. But even though they are sometimes stumbling suitors, states are ardently courting scientific and engineering talent. State leaders have realized -- and the recently released Milken Institute State Technology and Science Index for 2004 confirms -- that the well being of states in the new economy depends to a large degree on their ability to transform new information and new innovations into usable products, ultimately bolstering their tax base and raising the living standards of their residents.

The Index gives a comparative measure of how well states turn technical and entrepreneurial talent into commercial products. Seventy-five separate factors were assessed, grouped into five categories: Research and development; risk capital and entrepreneurial infrastructure; human capital investment; technology and science work force; and technology concentration and dynamism.

The most wonderful wooer of scientific talent and all that it means was Massachusetts, followed by California, Colorado, Maryland and Virginia. The most woeful wooers were Mississippi, Arkansas, Kentucky, South Dakota and West Virginia.

Anyone who considers Cupid to be not simply cross-eyed but actually a crook will not be surprised that Milken researchers found that money was one of the most powerful attractants. However, it was not dollars per se that dictated a state's place on the Index, but rather access to human and venture capital. In one form or another, four of the five broad categories measured the technical acuity and innovativeness of state populations. As the study pointed out, "Most of the value of the intangible economy is anchored to a firm's stock of human capital and to the locations in which they reside."

The factors tend to be interconnected -- states with greater human capital tend to attract more venture capital. "Back to the Future's" George McFly would be happy to learn there's a bit of destiny in density since high concentrations of scientists tend to attract additional scientists, and researchers in unrelated fields can sometimes spark one another's breakthroughs. Proximity (especially of the watering-hole sort) aids that communication. Geography also plays a role -- some states are simply more attractive places to live in, and members of the information class have the mobility to move there. It's more difficult to find decent skiing in Iowa than Colorado; good surfing is a bit more certain in California than Kentucky.

Yet states in flyover country are finding innovative ways to attract scientific talent. Science and engineering students who promise to stay in Michigan after they graduate will receive zero-percent student loans if Gov. Jennifer Granholm has her way. To better couple biotechnology with clinical breakthroughs, the University of Minnesota, and the Mayo Clinic announced plans to construct a large collaborative research space, backed by $20 million in state bonds. In 2002, Ohio Gov. Bob Taft launched the Third Frontier Project, which allocates $1.1 billion in state funds over the next decade for information-economy initiatives.

Regardless of their position on the Index, most states appear to be trying something. In February, North Carolina's Biotech Center recommended almost $400 million in new spending through 2009, on everything from developing new of research centers to continuing education programs at community colleges. Gov. Mike Easley is likely to follow many of them -- shortly after receiving the recommendations he remarked that the state's 150 biotech companies employ about 18,500 people and generate about $3 billion in revenue annually. Maryland Gov. Robert Ehrlich has constructed an innovative roadmap for information-economy economic development, which is supported by the state's Technology Development Corporation (TEDCO).

Sometimes a state's courting of scientific talent goes awry. For instance, Colorado recently ended its $200 million investment in a certified capital company (CAPCO), which the state had established to encourage the venturing of investment capital on innovative companies.

CAPCOs are profiled by Christopher Swope in this month's issue of Governing magazine. Their funding typically comes from insurance companies, who pony up tens to hundreds of millions of investment dollars in exchange for tax credits of the same value. While subject to a few strictures, such as mandates to invest in in-state startups, the CAPCO's most important metric is how much money they shell out. Yet the amount ventured on innovative companies is usually far smaller than the sum of the tax credits. Parent companies expect that the cash will eventually come back to their coffers, causing CAPCOs to place safe bets with the capital. In addition, CAPCOs can -- and sometimes do -- make substantial investments in their parent companies and charge significant fees.

In its three years of existence, Colorado's CAPCO spent almost half a million dollars on lobbying. Lawmakers concurred with Gov. Bill Owens complaint that its costs were "excessive." Last month, they sent Mr. Owens a bill terminating the CAPCO and allocating $50 million of the remaining funds into the Colorado Venture Capital Authority, which the state plans to invest in small innovative startups.

Filthy lucre might not offer scientists much salve for personal loneliness, but states are wise to try to attract scientific talent -- especially since technical leaders fear that the state of U.S. innovation is not up to its former art. The Milken Index shows that states pay a significant cost for lab's labors lost.

Charles Rousseaux is a frequent TCS contributor and an editorial writer for The Washington Times. He recently wrote for TCS about being Edgy About Innovation.


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