A Home-Grown Strategy for Economic Growth

Commentary by Rockefeller Institute Director Thomas Gais

UAlbany's College of Nanoscale Science and Engineering is an example of successful public-private partnerships through higher education, according to Rockefeller Institute Director Thomas Gais.

ALBANY, N.Y. (June, 2011) -- Since the start of the Great Recession in late 2007, the U.S. economy has suffered a prolonged and crippling bout of unemployment -- accompanied by a tide of pessimism about our economic future and an ideologically charged debate over what to do about it.

In Washington the argument is all about fiscal and monetary policies: Should we spend more on public programs to stimulate demand? Do we need to cut the deficit to restore investor confidence? Or should we cut taxes to strengthen incentives for Americans to work and invest?

Whatever one thinks about the strength of these competing claims, it is fair to say that they all share an important weakness. None address the basic problem our nation faces: How will the U.S. succeed -- that is, how will it generate many good, sustainable jobs -- in a relentlessly globalizing economy? None show how we can find and exploit opportunities for innovation that people in other nations pass by. And none build on the concrete, known strengths of the U.S. economy and its institutions -- strengths we need to draw on if we want to maximize our nation’s competitive edge and put people back to work. It is those strengths, and not a budget agreement, that will undergird the growth and innovation needed to solve both our employment and fiscal problems in the long term.

Three of the U.S.'s greatest economic strengths are its entrepreneurial culture, its higher education institutions and its regional diversity. Research by the Rockefeller Institute over the last two years shows conclusively that these strengths can be combined to great effect. Can be -- if we take care to make the most of them.

Last year, the Institute published an in-depth look at how universities and higher education systems around the country are taking the lead in their states' economic development efforts. We called the report A New Paradigm for Economic Development, because that's what we found. The innovation economy relies for growth on things that aren’t touched by the traditional packages of tax breaks, real estate deals, site infrastructure and other incentives. Instead the priority now is to leverage new ideas, technologies, processes and skills.

If you think about it, an economic development "prospect" that relies on old ideas, old technologies and old skills isn’t really much of a prospect, because it isn't going to stay in business very long. So higher education institutions and systems are the key. They pack a double punch: they are the source of the new knowledge needed to produce high-paying jobs in the innovation economy -- and they are the key to developing a workforce prepared to take those jobs. Across the country, we found that higher ed is putting its research and educational power to work by developing new ideas, helping to deploy inventions for commercial use, educating potential entrepreneurs and helping businesses prepare workers for advanced tasks.

What about New York? To find out, the Rockefeller Institute partnered with the Regional Institute at the University at Buffalo to study the impact -- and potential -- of the whole State University of New York system. The new report we published jointly this month, How SUNY Matters, captures a promising picture.

SUNY's current economic impact in New York State is large. It returns at least $5 in economic impact for every $1 of state support -- a total of at least $19.8 billion as of 2008-09. But what matters more is the system's potential impact on the economy we hope to have for the future.

One spectacular success story, of course, is the University at Albany's College of Nanoscale Science and Engineering. What began in a basement physics lab has attracted some $6 billion in private-sector investment. Albany Nano now hosts some 2,600 scientists, researchers, engineers and technicians -- up from 72 jobs when the first of its five buildings opened only 10 short years ago. It's the linchpin of the chip-fab boom underway in Saratoga County. It has spawned spin-off research and jobs from Fishkill to Canandaigua.

Thomas Gais is director of the Rockefeller Institute of Government at UAlbany.

Yet for the State University system as a whole, Nano could be a harbinger -- a trendsetter, not an isolated case. Our research found business incubators at each of SUNY's university centers, housing dozens of startup companies; many four-year colleges had incubators as well. Other services, such as financial support for patent and copyright applications, are helping entrepreneurs from the faculty and from the business world bring their new ideas to fruition. Campuses build on their regional character and their special strengths -- such as Buffalo's prowess in engineering and bioscience, Stony Brook's leadership role in the communications industry, Binghamton's historical role in the electronics industry and the entrepreneurial focus of UAlbany's School of Business.

Our study found that opportunities for entrepreneurship emerged under many and varied circumstances on SUNY campuses. While plentiful at SUNY's comprehensive research centers, these opportunities arose throughout the system. Upstate Medical University and the College of Environmental Science and Forestry have recently joined together to create a biotech research center to house companies spun off from research at both institutions. SUNY Fredonia has a new yet already successful business incubator. Even the growth of Albany Nano came out of a basic science department (physics), and not from a "translational discipline," such as engineering or medicine, which some analysts consider to be essential to university-led economic development.

Importantly, given the fiscal conditions that a state educational system cannot ignore, many SUNY institutions have figured out how to encourage entrepreneurship without overextending their budgets and debt loads. We dubbed this approach "innovative incrementalism" -- the "strategic decision to move forward in stages, as quickly as funding and demand allowed." It was employed at Downstate Medical Center, for instance, where a public-private consortium's goal to provide space to growing biotechnology startups mushroomed into a grand plan to convert the former Brooklyn Army Terminal into a massive biotech complex called BioBAT. The plan's tipping point was the recruitment of the International Aids Vaccine Initiative as one of the first tenants, the kind of move that attracted more interest, projects -- and funders -- to the site. Such incrementalism may be an effective way of managing the many uncertainties inherent in any effort to produce big change. It also highlights one of the critical characteristics of entrepreneurs: persistence.

Our report also found that SUNY has two seemingly contradictory -- but in actuality, complementary -- advantages that grow out of its status as the nation’s largest and most comprehensive higher education system.

On the one hand, one of SUNY's strengths is its capacity for joint projects across campuses. SUNY's 64 campuses need not act alone, and many times they don't. We uncovered many instances of cooperative ventures across campuses, from the Strategic Partnership for Industrial Resurgence, which links university engineers at multiple campuses with high-tech employers; to the group of six community colleges in the mid-Hudson region and their creation of the Clean Energy Technology Training Consortium; to the new dual-degree program in medicine and nanoscale science offered by Downstate Medical and UAlbany.

But another strength of the system is the fact that campuses can act alone if they want. If one campus fails to see and act on an opportunity, another campus may do so, perhaps because the latter's specializations, educational mission and local circumstances make it more sensitive to certain economic needs or solutions. We found plenty of evidence that each SUNY campus may be primed to perceive and take advantage of different opportunities, such as Suffolk County Community College's partnership with a local hospital to address a shortage of nurses, and SUNY Plattsburgh's organization and management of a fiber optic network among health providers in the North Country. This diversity of perspective and capacity for independent initiative among SUNY campuses -- along with the ample opportunities for joint action when collaboration makes sense -- may be one of SUNY's greatest assets in promoting growth.

In brief, our study found that SUNY has an extensive and diverse base of initiatives to build on; that economic development initiatives may emerge out of a wide variety of circumstances; that incremental efforts can be pyramided into large economic impacts; and that certain characteristics of the SUNY system may be especially useful in facilitating entrepreneurialism and economic growth.

But to get the kind of large economic payoffs the state needs to increase competitiveness and generate good jobs, much more must be done. A few dozen examples and some startling successes aren’t enough.

One approach to expanding such efforts would be to swing for the fences, at least implicitly, by posing the question, "Where will New York State find the next Nano?"

But big successes are hard to predict. So here's a more practical question: Where will SUNY find, nurture, develop and unleash the next dozen or two dozen or 200 faculty entrepreneurs? What can SUNY do to create a context in which such entrepreneurial efforts are feasible and follow-ups encouraged?

It's not easy. But it's also no "pie in the sky" dream. SUNY has already facilitated entrepreneurialism in many places, particularly in the last decade. To produce even larger effects, the efforts just need to be scaled up and spread more widely. SUNY may never generate another single initiative on the scale of Albany Nano. But out of a total faculty of some 33,000, it would take only one out of every thousand faculty members, each building a success story one-tenth the size of Nano, to equal three times its impact.

Although SUNY does have special strengths, it still only comprises a small part of the nation's 4,400 degree-granting institutions, including private as well as public universities and colleges. If the potential we found in our study of SUNY and our "New Paradigm" analysis can be expanded upon, there is little doubt that the U.S. can make significant progress toward increasing the nation’s competitiveness, creating good jobs, and reviving many of its communities and regions.

Would an expansion in efforts to promote economic development distract academia from its core, indispensible mission of education? It is important to monitor any effects on teaching to stem such a change. But earlier efforts to expand the economic and social roles of universities -- such as the growth of the "Wisconsin Idea" -- were associated with enrichment of the universities' educational missions, not their diminishment. Indeed, public universities have made the intersection of innovation and social benefit a central part of their mission for well over a century. And in a new era of constrained state budgets, economic growth will be essential to supporting every field of study in higher education.

Innovativeness and entrepreneurialism can be encouraged and taught: As Holden Thorp and Buck Goldstein of the University of North Carolina note in their 2010 book, Engines of Innovation, "all kinds of people can be taught to think like entrepreneurs."

"If entrepreneurial thinking can be introduced and integrated into the dialogue of the campuses of our great universities," they went on, ". . . these institutions can emerge as true engines of innovation -- just what society expects of them."

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