by John Ahlen
Posted 7/9/2012 12:00 am
Updated 10 months ago
In the early 1980s, states began developing policy initiatives designed to replicate the job-creation engines that had emerged and been noticed in a few places around the country.
It appeared that in places like the Boston area, Silicon Valley and the Research Triangle, university-based research and development had spilled over campus boundaries and sprouted new, high growth, technology-based businesses. As the small businesses succeeded in taking innovative products and services to the marketplace, they grew, hired employees whose value was in what they knew, created wealth and spun off new companies. The vibrant business environments were also attractive to established companies that wanted access to the talent and the research facilities of the nearby universities.
Arkansas was among the states to enact such initiatives. Creation of a science and technology authority was recommended by a legislative council task force that made its report in January 1983. According to the report, only seven entities in the state had annual research budgets exceeding $1 million at that time: the Agricultural Experiment Station ($18.3 million); the University of Arkansas-Fayetteville ($10.4 million); the University of Arkansas for Medical Sciences ($3.1 million); the Arkansas Department of Pollution Control ($3.7 million); the U.S. Army Pine Bluff Arsenal ($20 million); the National Center for Toxicological Research ($25.9 million) and the VA Medical Center ($1.2 million).
These state and federal agencies and academic institutions represented the base on which to build and, with the passage of Act 859 of 1983 that created the Arkansas Science & Technology Authority, the state was prepared to “move quickly and aggressively, with a vision for the future.”
The Arkansas Science & Technology Authority began operations in fiscal year 1984, made a strategic shift as part of Governor Bill Clinton’s economic development legislative package in 1985, and began operating a new portfolio of technology-based economic development programs in 1986.
The four key points in the new strategy involved building university research capacity, transferring technology from the university and federal laboratories to existing businesses, creating university-based incubators to nurture new technology companies, and investing seed capital in such new technology companies so they would not leave the state in search of early stage financing.
During the authority’s budget hearings in late 1986, a member of the joint budget committee asked how many jobs the authority had created – it had been four years since the organization had been established, certainly jobs had been created. The answer was that there were no new jobs yet.
The committee recommended the budget request, but the exchange underscored two significant challenges faced by technology-based economic developers. The first and most obvious challenge was that the job-creation engines the states were hoping to replicate had taken decades to reach maturity and the production of jobs was a lagging indicator of their success. Job creation followed successes in numerous other areas, such as productive research in sophisticated laboratories, graduation of scientists and engineers with skills in new applications, spin-offs of new startup companies, evolution of new mechanisms to finance early-stage companies that did not have collateral for loans, and refining new products and services to make them attractive and affordable to customers.
It was only after the company began to scale up production to meet market demand that it needed to hire increasing numbers of skilled production workers.
The second challenge, and one not especially obvious at the time, was that this process of replication was being invented by practitioners as they were doing the job. There was no job description, no job manual and no jobs to count at the beginning of the undertaking.
A great deal was happening in the early 1980s and the pace was going to increase.
New technology-based economic development policies were put in place through the 1990s and built on the foundation established in 1985 at the Arkansas Science & Technology Authority. The bills addressed gaps between existing programs and exploiting new opportunities; for example new programs addressed how to take advantage of the federal Small Business Innovation Research program, speed technology development and improve math and science education.
The extension of technology-based economic development programs into a more diverse set of organizations began in 2000. The passage of Initiated Act 1 of 2000 created the five-member Arkansas Biosciences Institute as part of the Tobacco Settlement Proceeds Act. As settlement dollars were received by the state, research projects related to tobacco and health improvement were substantially expanded.
The Venture Capital Act of 2001 was enacted and authorized the Arkansas Development Finance Authority to become involved in building venture capital interest in Arkansas firms. This was followed in June 2001 with the appointment of the Task Force for the Creation of Knowledge-Based Jobs at the Arkansas Department of Economic Development (now the Economic Development Commission).
One of the most significant findings of the Task Force was how difficult it is to recruit a startup technology company from the nurturing environment in which it originally took root.
The Task Force issued its report in September 2002 and its recommendations led to a set of new programs – focused on research and development and equity investment tax credits jointly administered by the Arkansas Development Finance Authority, the Arkansas Science & Technology Authority, and the Arkansas Economic Development Commission – to assist start-up technology companies while they matured and give them a chance to put down the roots that anchor them to the place where they started.
Another set of policy initiatives was enacted at the urging of Accelerate Arkansas, a new private sector-led statewide group that evolved in part from the Task Force for the Creation of Knowledge-Based Jobs.
The group prominently included Innovate Arkansas – to coach new companies – through the Economic Development Commission; the Arkansas Research Alliance – to help recruit top research talent to the state’s research universities – through the Science & Technology Authority; and the Risk Capital Matching Fund – to invest in enterprise development – a joint administration which is led by the Development Finance Authority.
The most recent development in technology-based economic development began with the 2007 appointment of the Workforce Cabinet by Governor Mike Beebe, which brought together the workforce, educational and economic development leadership of his administration. Among its other important activities, the Workforce Cabinet is leading the science, technology, engineering and mathematics (STEM) Works initiative announced by the Governor in 2011. STEM Works is supporting the transformation of math and science education at the high school level and adjustments to the way universities are preparing the next generation of math and science teachers, all aimed at improving the state’s 21st Century STEM workforce.
Today, nearly 30 years after Arkansas took the first steps to replicate home grown job creation, there are certainly jobs to count, but it’s perhaps more important to recognize that Arkansas is well positioned for the future because it has formed a globally competitive, technology-based economic development ecosystem driven by multi-organizational investments, know-how and collaboration.
(John Ahlen is the President of Arkansas Science and Technology Authority.)