Remarks Before the Senate
Task Force on Public Higher Education

Patrick J. Larkin, Director, John Adams Innovation Institute
November 4, 2004

Introduction

Good afternoon. Let me begin by thanking the Senate Task Force on Public Higher Education for inviting me here today to give the perspective of the Massachusetts Technology Collaborative and our new division the John Adams Innovation Institute, on the role of public higher education in developing the Commonwealth’s economy and work force.

I am here on behalf of Mitchell Adams, Executive Director of Massachusetts Technology Collaborative, who shares my perspective and passion on the critical role public higher education plays in driving the state’s economy.

After weeks of study and days of testimony – I’d like to think the question on the table is not should we, but how should we improve support for public higher education, in order to expand the opportunities of our citizens and improve conditions in our economy.

My role today is to examine these issues through the eyes of the Commonwealth’s economic development agency that operates at the nexus of the academic community, business community, and public policy, to provide you some insights drawn from MTC’s 20 years of experience in this sector, bolstered by the more recent experience we have gained as we establish the John Adams Innovation Institute.

I should begin by complimenting the legislature for its leadership in establishing the John Adams Innovation Institute. As you know the Innovation Institute is responsible for management of two public investment funds: i) $15 million Regional Innovation Fund; and ii) $20 million Massachusetts Research Center Matching Fund.

In its recently approved business plan, MTC has organized the Innovation Institute as an operating division dedicated to supporting growth in the Commonwealth’s Innovation Economy. The Innovation Institute does this by undertaking analyses of critical issues facing Massachusetts, identifying needed actions and resources, promoting collaborations among key stakeholders, influencing policy decisions, and providing strategic investments for technology-based economic development.

By establishing the Innovation Institute policymakers have for the first time created an independent institutional framework for making strategic investments in the Commonwealth’s knowledge economy.

Our first example of a successful investment was our commitment to provide up to $5M to establish a Center of Excellence in Nanomanufacturing at UMASS Lowell. On September 21 st UMass Lowell received notice that their partnership with Northeastern University and UNH would receive a $12.3M grant from the National Science Foundation to establish a Nanoscale Science and Engineering Center (NSEC) for High Rate Nanomanufacturing.

This first success highlights the importance of the Massachusetts Public Higher Education as a critical member of the state’s regional economic development enterprise. The campuses of the UMass system, the Community Colleges and others, are distributed across the Commonwealth and are engaged in a broad range of activities relevant to each of the regions. In educating students, building necessary skills, retraining workforce and enhancing entrepreneurship, our community colleges prepare our future workforce and respond to specific needs. In creating new knowledge and transferring discoveries to industry, our public research institutions plant the seeds for profitable new products or services. By becoming a partner to regional economic development initiatives, our university enables growth in parts of the state that need it the most.

Higher Ed and the Innovation Economy

Let me frame the context for our discussion by giving you a preview of what MTC will be releasing later this month in its 8 th Annual Index of the Massachusetts Innovation Economy. Each year we track a series of indicators that characterize the technology and business development pipeline, the talent pipeline, and the research pipeline that help us understand the underpinnings of the Commonwealth’s system of innovation that fuels the state’s economy. We focus on nine key industry sectors that produce roughly 25% of the state’s jobs, and benchmark the performance of these industry sectors against their counter parts in six other competitors that we refer to as the Leading Technology States (LTS) – California, Colorado, Connecticut, Minnesota, New Jersey, and New York. This year’s message is clear – we continue to have strong fundamentals, but we also continue to see evidence of serious cracks in our system of innovation that may compromise future growth opportunities.

Let me cite three observations from the Index:

1. Massachusetts is stagnating in the race for talent
   • Demographics – it is no secret that absent international immigration, our population is holding steady at best, and more often shrinking. We have a mobile, well educated talent pool that pulls up stakes and seeks opportunities elsewhere in times of economic down turns. Our high cost of housing tends to impede in-migration of talent in up-turns, other factors being equal.
   • Over the last decade, we have seen little or no growth in enrollment in our private universities, negative growth in enrollment in our public universities and colleges. If we are not growing enrollments, then we are losing market share to other parts of the country – like California and Colorado. If we are losing market share, we are losing the race for talent.
   • Our universities are no longer the unique magnet for talent they once were – other states, like Pennsylvania and Florida, are coming on strong as net importers of talent.
2. Massachusetts is losing in the race for academic research funding
   • Massachusetts universities and colleges have the lowest overall growth in federally supported academic R&D funding among the LTS, 45 th out of the 50 states and District of Columbia. There is some good news in this otherwise disturbing statistic. UMass Worcester has one of the fastest growing major R&D operations at any university or college in the nation.
   • We know that academic R&D programs induce industrial R&D investments – you have only to look at the new bio-pharmaceutical laboratories in Cambridge and Boston to see this happening. However, we are seeing signs that industrial R&D conducted in Massachusetts is stagnating. When you combine that with some downward bumps in the Venture Capital funding patterns, you start to get the picture that our system of innovation in Massachusetts needs some new ideas, and those ideas typically have their origins in our universities and colleges.
3. Massachusetts is losing in the race for economic growth – the growth in employment for 7 of the 9 key industries that we track in the Index was higher in the key states with which we compete.

To connect the dots represented by this data into the context of today’s discussion, the Massachusetts Innovation Economy is facing some real challenges that relate to the role of public higher education in work force development and overall economic growth. Competing in the race for talent will require a strong public higher education system that is not only capable of educating our own, but capable of attracting the best and brightest from around the world – and helping to keep them here after they graduate. We also need to reinvigorate our competitive capacity to attract federal research dollars to our academic institutions, and enhance our capability to translate that research into products and services that compete effectively in the global marketplace, producing rewarding, high paying jobs for citizens throughout the Commonwealth.

The trends I have just described were becoming apparent when you passed the historic Economic Stimulus package and created the John Adams Innovation Institute. I’d like to share some of our early learning from the Innovation Institute, particularly as they relate to your work on public higher education. In doing so, I am going to focus more on the economic development aspects of your interests than on those related to workforce development. However, you should know that we recognize that these issues are deeply intertwined, and that most academic institutions – and many companies – look at the research conducted in an academic setting as really being as much about educating the person as it is about creating new knowledge.

My focus today is to help you think about the leverage points, and orders of magnitude that need to be considered to extract economic benefits from S&T investments in public higher education.

The statement of objectives for this hearing clearly indicates that the Task Force recognizes that there is a major shift in the paradigm that describes the role of the research university in technology development and the deployment of that technology into the economy. You recognize the increasingly collaborative nature of R&D that is necessary to achieve success in today’s economy. You also recognize that creating talent and ideas and translating them rapidly into economic outcomes requires effective collaboration between the academic research community and industry – collaboration that can be enhanced by effective public policy. You wrote that into the Economic Stimulus package when you created the University Matching Fund and the Regional Innovation Fund that the John Adams Innovation Institute is charged with implementing.

Here’s what we are seeing.

1. The old Massachusetts approach to promoting academic research was:  “We’re smart, send money”.  Unfortunately one can still find this attitude in too many of our research institutions.  The new standard – one that every leading technology state is struggling with – is how to draw economic prosperity out of these complex collaborations between academics and industry.  Your investments in the Innovation Economy should strive to expose more efficient methods of interaction between these two communities.  In the recent past we always took it on the chin in economic development circles because we were known as “Taxachusetts”.  But, as is now widely recognized, we have cast off that label.  This should give you confidence that with regard to attracting funding for academic research we can convert our reputation of “We’re smart, send money” to “We’re motivated, send us your problems.”
2. Most activity underway at this point is reactive, rather than proactive, focused on capabilities and perceived short term R&D funding opportunities, rather than credible strategic market opportunities. This is not the way that our competitors are playing the game. States like California, New York, Georgia, and Florida are making long term strategic investments that are made through a competitive process and which bring industry to the table as a true partner before any state money is placed on the table. The Centers of Excellence Program within our University Matching Fund is a step in the right direction, but lacks funding to add additional centers of any meaningful scale.
3. A true collaborative research center is a “state of mind” and a long term investment in talent, facilities, and relationships. It is not a single federal grant or funding opportunity. An effective center needs the right people to sustain and grow it; relationships that support it financially, intellectually, and as vehicles to create economic outcomes; facilities that enable it to attract federal and industrial grants, as well as faculty and students; and finally, a future vision that creates a framework for a directed, goal-oriented research agenda and an effective partnership with industry.
4. Regional collaborations, be it a center of excellence in the Pioneer Valley with Baystate or a workforce development program in the southeast, benefit from the active involvement of public higher education institutions. Such involvement harnesses the powerful resources of the academic organization to the regional economic development need.

We share these insights as a way to convey the “hard work” associated with establishing world class collaborative research centers and to convey the challenges associated with gaining the economic impacts that you aspire to as policymakers. Our message is the business of economic growth through S&T investments in public higher education is not for the feint of heart. It requires a certain rigor to ensure sustainability by the Commonwealth, if you plan to achieve the economic benefits. In terms of recommendations, we suggest you consider:

1. A commitment to long term capital funding for strategic facilities investments that complement the funding of Centers of Excellence. You could establish a large scale bond authorization to provide substantial facility support for research center’s that have competed successfully for major federal collaborative research center awards. These investments would be based upon competitive awards and would benefit both public and private universities. This bond bill would be separate and apart from existing mechanisms to fund public higher education in Massachusets. A separate bond bill focused upon global excellence in the science and technology research centers that feed growth to our innovation economy.
2. Re-capitalize the Innovation Institute’s university match fund which we deploy to support operations and economic development activities for centers of excellence and federally supported collaborative research centers. We will also use these funds to support planning grants to facilitate the development of new strategic alliances at university research centers.
3. Emphasize in the mission of the Massachusetts Public Higher Education enterprise, the importance of being a partner in the State’s Economic Development activities. Measure and provide incentives to our distributed institutions to act as a catalyst for regional growth initiatives that can be supported by the John Adams Innovation Institute Regional Funds.

The Commonwealth has turned a corner with enactment of stimulus legislation. This legislation represented an initial experiment with investing in Science and Technology on behalf of the state. What we call an experiment has long been deployed by our competitor states.

However, changing cultures, building partnerships, enhancing competitive advantage, and extracting economic benefit for the Commonwealth will require sustained investment. We have some exciting opportunities before us, but we will need to make substantial investments if we expect to realize them.

1. You are aware of the projects outlined in Mass Insight’s Technology Roadmap. We are prepared to support some of these, as well as other opportunities, through competitively awarded planning grants. In the absence of additional funding, however, it is not obvious that these plans would do more than occupy space in a bookcase.
2. We are committed to building regional tech-based economic development capacity throughout the Commonwealth. However, we all must recognize that in many cases we are building on relatively small clusters and less developed infrastructure – including research facilities at our research universities. This often means that we have to make additional up-front investments, just to get to the starting line.
3. In order to capture economic benefit, particularly outside the core technology regions of the Commonwealth, investments in research centers and centers of excellence must be complemented by additional investments in regional/cluster development, paralleling the synergy we are attempting to create between our investment in the UMass Lowell Center of Excellence in Nanomanufacturing and MTC’s Massachusetts Nanotechnology Initiative.

What’s at stake here? The Council on Competitiveness is looking critically at the global challenges and opportunities that the US innovation economy will face over the next decade. In a recent interview for Business Week, IBM’s Sam Palmisano, co-chair of the National Innovation Initiative, estimated that roughly 100 million new jobs are going to be created in interdisciplinary combinations of biology, chemistry and computational sciences, bioinformatics, hydrogen fuel cells, broadband infrastructure, and so on. In Palmisano’s words, those jobs “…are going to be created”. There’s this big void that needs to be filled. Someone will fill it. So the question is: Can we get our fair share?