NASULGC National Association of State Universities and Land-Grant Colleges

COLLABORATION TO STRENGTHEN INNOVATION CAPACITY IN

ECONOMICALLY UNDERPERFORMING REGIONS:
Expanding Our National Innovation Capacity by Leveraging University Assets to Create
Regional Innovation and Talent Hubs (RITH)

National Association of State Universities and Land-Grant Colleges

Commission on Innovation, Competitiveness, and Economic Prosperity
Council on Engagement and Outreach

The Challenge: Economic growth and opportunity are distributed unequally. Many small
industrial cities, rural communities, and certain areas within metropolitan regions are being left
behind. Underperforming urban and rural regions suffer from stagnant job creation, lower
paying jobs, eroding community assets, and the outmigration of their best talent. At the heart of
the regional opportunity imbalance are significant disparities in the infrastructure assets required
for innovation. Small and medium-sized employers, which are an economic mainstay, need
greater local access to innovation technologies and talent to remain competitive. Communities
need locally embedded, nationally and internationally engaged, institutional partners and
facilities to anchor redevelopment and be magnets for innovation and growth.

The Solution: Expand the national innovation capacity by leveraging university research and
development assets to create science, technology, engineering and mathematics (STEM) oriented
Regionally-Based Innovation and Talent Hubs (RITH). Universities are drivers of economic
growth because they are creators and disseminators of knowledge, which can favorably impact
regional economic conditions. Universities connected to the local economies can be catalytic,
driving research and innovation, and drawing talent to their geographic regions. We propose
deploying innovative funding vehicles to develop and advance alliances among the private
sector, local governments and research universities in economically underperforming regions to
establish economic anchors that lead to the creation of greater numbers of well-paying jobs,
higher levels of educational and workforce preparation, and innovative, fast growing companies.
Retaining talent and innovation in a region requires partnerships among universities, localities,
and emergent industry sectors as evidenced by the early public strategies that supported private
growth trajectories in Research Triangle, Silicon Valley, San Diego, Austin, Boston, and many
other areas.

RITHs build on the expertise and capacity in higher education institutions by driving innovation
capabilities beyond the campus into economically underperforming regions. RITHs will provide
contract research and development services to regionally-based small and medium-sized
companies; spin out new companies; anchor cluster development through applied, place-based
research; and integrate student experiences in business and industry into undergraduate and
graduate educational programs. RITH research and development activities will be conducted by
university-affiliated researchers, technicians, and graduate students who collectively will
constitute STEM talent hubs in the regions. By leveraging leading universities’ research

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programs, RITH communities will build innovation strategies from a base of institutional
credibility and capacity. RITH programs will develop, attract and retain human capital, support
job creation through the expansion of industries and local firms attracted by cost, knowledge
infrastructure and human resource advantages, and expand community development efforts
leading to improved quality of life in the region.

The Vehicle: Create RITHs through a cooperative funding model which leverages state and
regional investments against federal funds to develop a physical and intellectual innovation
center core in underperforming regions. Direct the federal dollars into targeted regions, to be
invested by regional partnerships, as an incentive for university leadership to expand the national
innovation capacity. In this funding model, regions will contribute facilities, states will
contribute salary dollars for research personnel, and the federal government will contribute funds
for up-fitting laboratories, procuring specialized equipment, and sustaining projects that create
long-term institutional relationships between regions, local business and industry, and
universities.

Funding would be contingent on the region establishing a partnership with a research university
to develop an innovation, research and development center that focuses on one or more targeted
economic sectors that the region strategically develops to advance its competitiveness. Research
and development activities at these regional centers would be applied, translational and built
upon partnerships with local employers to strengthen economic clusters. Key sectors of
innovation activity would include national priorities such as: clean energy, sustainable buildings
and food systems, advanced and sustainable manufacturing, information technology, national
security, transportation, space science, health, biotechnology, and nanotechnology.

Recommended Policy Measures for Implementation:

1. Create Innovative Places - Commit $400M for a minimum of 50 research equipment
and capacity building grants of up to $8M each. Grants would be used to establish
RITHs linked to strategic local industry sectors in qualifying regions and would match
federal funds against state and local contributions.
2. Leverage Credible R & D Partners to Build Place-Based Applied Research
Capacity – Direct $250M annually to partnerships in underperforming regions to
develop applied and translational research and development projects that support
sustainable institutional relationships between local business and industry, qualified
regional innovation centers and universities. These grants will be spent within the
qualified region to support research conducted by RITH personnel and university-based
faculty. This research will be focused in sectors identified by the regional political and
industrial leadership as areas of opportunity, aligned with national innovation priorities,
from which to build stronger business clusters.
3. Attract Human Capital and Connect STEM Talent to Business and Industry -
Provide $50M annually for STEM talent attraction grants in qualifying regions to
initiate sustainable relationships between small and medium-sized employers and
university students. Grants would include matching funds from employers and could be
used to establish internship and service-learning programs for undergraduates,
assistantships for graduate students, and entry-level researcher appointments for
postdoctoral students.

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 4. Develop and Grow Innovative Businesses and Industries - Provide $100M annually
in innovation grants to small and medium sized enterprises to procure university
research and development services through qualified regional innovation centers. Fund
grants up to $50K per company in first round, up to $100K in 2nd round, and $250K in
3rd round.
5. Strengthen Innovation Networks in Underperforming Regions - Add an economic
impact requirement to new science and technology innovation funding (i.e. America
Competes Act, Clean Energy, DOD, etc.) which particularly encourages university
grantees to partner with economically challenged regions to grow new or strengthen
existing industry clusters. Consider modeling this requirement after the National
Science Foundation “broader impacts” criterion.

Qualifying Regions: Qualifying regions would meet the criteria for underperforming
economic areas set by the Office of Management and Budget (OMB) – or other
appropriate Federal agency - as determined by published standards applied to Census
Bureau data. The criteria for qualifying regions would include micropolitan statistical
areas (to be defined) and underperforming parts of metropolitan regions.

Funding Model: Federal program funding for RITHs will provide incentives for partnerships
and development of networks to link innovation centers with research university campuses,
federal laboratories, and private research and development facilities in more established centers
of innovation. The cooperative funding model links a federal funding stream to state and local
jurisdiction funding as well as to private sector matching contributions.

Alignment: The National Association of State Universities and Land-Grant Colleges’

Commission on Innovation, Competitiveness, and Economic Prosperity (CICEP) and Council on
Engagement and Outreach (CEO) believe that this “Collaboration to Strengthen Innovation
Capacity in Economically Underperforming Regions” proposal aligns with key initiatives
supported by CICEP and CEO, including: the Innovation Competitiveness and Economic
Prosperity Toolkit, the Science and Math Teacher Imperative, and the Transformative Regional
Engagement Roundtable.

In addition, CICEP and CEO believe that this “Collaboration to Strengthen Innovation Capacity
in Economically Underperforming Regions” policy proposal is consistent with many strategic
policy directions put forward by President-Elect Obama, including:
1. Supporting Regional Innovation Clusters in Metropolitan Regions
2. Creating a National Network of Public-Private Business Incubators
3. Investing in the Manufacturing Sector and Creating Five Million New Green Jobs
4. Doubling the Research Budgets of Key Science Agencies
5. Actively Encouraging Multidisciplinary Research and Education
6. Inspiring Americans to Excel in, and Embrace, Science and Engineering
7. Leveraging National Efforts and Encouraging State Collaboration to Improve
Implementation
8. Expanding and Improving STEM Education in Community Colleges
9. Expanding America’s Research Workforce
10. Doubling Funding for the Manufacturing Extension Partnership

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 11. Projects to Harness Science and Technology to Address 21st Century Challenges in (1)
Clean Energy, (2) Health, (3) National and Homeland Security, (4) Manufacturing, (5)
Information Technology, (6) Transportation, (7) Space Science, and (8) Agricultural
Productivity.

Distinctive from and Complementary to the Manufacturing Extension Program: The

Manufacturing Extension Program supports manufacturers through nearly 1600 specialists who
provide direct assistance to customers through 59 centers in the US. MEP provides
manufacturing customers with fundamental services in business and process improvements.
These programs cover topics such as lean manufacturing, energy and environmental services,
information technology, and others. Complementing the MEPs, RITHs will provide place based
economic development capacity focused on building talent stickiness and innovation assets in
support of regional cluster development for underperforming economies. RITHs will leverage
the substantial research and innovation capacity of the nation’s research universities along with
existing and new federal investments in science, health, and energy. RITHs extend and build
upon the significant role that research universities play in innovation supply chains and
entrepreneurial networks. MEP programs will complement the RITH program by supporting
manufacturers with direct assistance in services that build from the talent and innovation hubs
created by the RITHs.

Benefits of Policy Approach: This policy will leverage existing investments in universities to
create regional hubs for talent, business and industry, and entrepreneurs. It will help
communities attract and retain talent vital to their economic futures. It will provide innovation
infrastructure from which communities can build global economic competitiveness. It will
create incentives for connecting regions to global networks of innovation interests. It will
provide a focal point for regional cluster development. The targeted regions will benefit from:
• Spillover for new firm starts, talent and technology
• Place-based expertise (faculty, researchers, engineers, and graduate students)
• Outsourced research and development capacity for small and medium enterprises
• Technology transfer (patents into local firms)
• University educated STEM talent in region
– Talent to attract companies
– Future entrepreneurs
– Talent stickiness (place-based talent attracts and retains additional talent)
• Creative climate attractive to high value jobs and workers
• Economic development strategy to strengthen region’s primary economy
• Traffic from gazelles and talent into regions
• Connections to national and global value networks
• Brand prestige of partners (university, federal, and private R & D)
• Part of a “compelling story” about community progress, civic atmosphere, and vision
• Image as a progressive place to work and live

Case Examples of Success: In addition to the well known examples noted above, universities
have successfully partnered with small and medium-sized businesses as well as with regions to
support and drive economic competitiveness. However, since few policy mechanisms currently
exist to incentivize such relationships, the examples and success stories are limited. A notable

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exception was the U.S. Department of Labor Workforce Innovation in Regional Economic
Development (WIRED) initiative, which encouraged the development of regional approaches to
economic development and in several cases included university partners. Beyond WIRED,
universities have experimented with regional partnerships focused on economic development
when sufficient human and financial resources were available. Several of the WIRED grantees
and university leaders associated with regional partnerships gathered with local and national
public leaders for a University Roundtable on Transformative Regional Engagement at Penn
State University in October 2008 to share their experiences and discuss the systemization of
economically-focused university-regional partnerships. These examples are available upon
request.

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