Penn State

How can Pa. fight ‘chronic underinvestment’ in innovation? Universities like Penn State, report says

Happy Valley LaunchBox, on South Allen Street in State College, supports startups through funding, training and technical assistance.
Happy Valley LaunchBox, on South Allen Street in State College, supports startups through funding, training and technical assistance. adrey@centredaily.com

A Brookings Institute report found that “chronic underinvestment” in research and development in Pennsylvania has slowed innovation — but state funding and partnerships between government, universities and companies could turn that around.

Increasingly, said the report, Pennsylvania is dealing with a divergence between large metropolitan areas and the rest of the state, similar to what’s happening across the country. More than 98% of the state’s higher education R&D is concentrated in three metro areas: Philadelphia, Pittsburgh and State College, said the report.

The Philadelphia and Pittsburgh metro areas account for more than two-thirds of the state’s advanced industries employment and almost 70% of its utility patents, said the report.

Centre County is largely defying the trends of job and industry loss seen in places that are demographically similar to it due to the presence of Penn State, said Robert Maxim, one of the study’s co-authors. But that doesn’t mean Centre County is immune from the state’s disinvestment and lack of consensus on the importance of innovation, he said.

Centre County, when adjusted for population, outpaced both Pittsburgh and Philadelphia in number of patents produced, with 44.8 patents per 100,000 people, he said. It also has strong employment, seeing a 4.6% positive change in total employment from 2008-2017, well ahead of the state average, Maxim said. Other small metropolitan areas, comparable to Centre County, have seen a 2.5% loss in total employment over that same period, he said.

But since 2001, Centre County has lost advanced industries jobs. From 2010-2017, the area’s advanced industries jobs declined 9.1%, said Maxim.

Penn State President Eric Barron has expressed support in growing innovation in Pennsylvania through the opening of several university-backed LaunchBoxes — including one in Centre County — that act as startup incubators. As the chair of the Commission on Economic and Community Engagement for the Association of Public and Land-grant Universities, he’s also written on the importance of federally funded university research to expand entrepreneurship and economic growth.

Once a leader in research and development, Pennsylvania now lags behind its peer states in competitiveness and economic performance, the report contends. Some factors in its innovation decline are a lack of a unified strategy for promoting entrepreneurship and technology-based economic development and scaled back investments in innovation inputs like R&D and commercialization, the report said.

Since 2009, spending on R&D, technology transfer and commercialization in Pennsylvania has decreased by 65%, according to the State Science and Technology Institute.

In Centre County in 2017, there was over $850 million in university-based R&D conducted, which is behind only the Philadelphia and Pittsburgh metro areas, Maxim said. Yet the county’s share of overall state university R&D has declined 3.5 percentage points since 2011, due to university R&D growth in Philadelphia.

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Project Vive, a company that makes speech generation devices for people with disabilities, grew out of Happy Valley LaunchBox from Penn State. Centre Daily Times, file

University-based R&D continues to be strong because of university investment combined with industry support, rising by 64% since 2011, said the report. But industry-backed R&D at universities in Pennsylvania makes up a small portion of the overall R&D paid for a performed by businesses in the state.

“While it is encouraging that universities have been stepping up when it comes to supporting industry R&D, it hasn’t been enough to compensate for the broader trend of stagnating industry R&D in the state,” wrote the report’s authors.

Universities like Penn State that have the ability to create a skilled workforce, jobs and new industries, said Maxim, should be leveraged to maximize that output, retain existing industry and help grow local and regional economies.

The Brookings report looks at other states that support R&D in its early stages using a combination of funding and creation of new partnerships, like Colorado, California, Washington, Massachusetts and Maryland.

One successful example, said Maxim, is Maryland’s Technology Development Corporation (TEDCO), which fully funds early stage financing programs for technology and life sciences companies, funds business incubators, offers gap investment funds for startups and provides funding and assistance to bolster rural businesses.

Other states have tax credit programs to entice angel investors, seed and advanced industries accelerator programs, programs that focus on closing regional divergence in innovation, broadband expansion programs and industry and cluster grant programs.

For Pennsylvania, Maxim said, the state should be looking at increasing its innovation funding and leveraging public universities — including Penn State and its branch campuses — to promote new areas of research and development of industries. Those efforts should focus on pairing innovation investments with local and state workforce investments so that local and regional workers can benefit, he said.

“The way we talk about (innovation), creation of new products, industries, jobs ... it’s really synonymous with economic growth and new employment and opportunities for raised living standards,” he said. “Investment in innovation policy really does create new industries, which can in turn create new jobs and sustain and enhance the well being of people.”

To read the full report, visit www.brookings.edu/research/ideas-for-pennsylvania-innovation-examining-efforts-by-competitor-states-and-national-leaders/

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