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Catalyzing Innovation in the Commonwealth of Virginia

Catalyzing Innovation in the Commonwealth of Virginia. Prepared for the Virginia Economic Development Partnership. June 2008. Project Process: Logical Analytical Tasks. Virginia Industry Cluster Analysis. Like most states, Virginia’s economy is dominated by service industries:

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Catalyzing Innovation in the Commonwealth of Virginia

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  1. Catalyzing Innovation in the Commonwealth of Virginia Prepared for the Virginia Economic Development Partnership June 2008

  2. Project Process: Logical Analytical Tasks

  3. Virginia Industry Cluster Analysis • Like most states, Virginia’s economy is dominated by service industries: • Education & Government • Retail Trade • Construction & Real Estate • Tourism • General & Business Services. • Several technology and knowledge-based sectors stand out for their high levels of employment: • Life Sciences & Medicine (336,535 workers) • Research & Engineering Services (161,633 workers) • IT Services (140,016 workers)

  4. Virginia Industry Cluster Analysis • Several technology and knowledge-based sectors also have high levels of employment concentration in Virginia (compared to the national average): • IT Services (2.69) • Research & Engineering Services (1.96) • Aerospace, Defense, & National Security (1.76) • Telecommunications (1.32) • Clusters that have experienced high employment growth rates in recent years (2003-2005) include: • Research & Engineering Services (26.6%) • Construction & Real Estate (12.4%) • Transportation & Logistics (8.1%) • Tourism (6.7%) • Business Services (6.5%)

  5. Employment By Cluster State-Level Analysis • The largest employer clusters are the labor-heavy service sectors, such as Education & Government, Retail Trade, Tourism, and Construction & Real Estate. • Virginia has high levels of employment (>100,000 workers) in several key technology sectors, including Life Sciences & Medicine, Research & Engineering, and IT Services. • The top 6 clusters account for over 60% of Virginia’s total employment in 2005. # of Employees in 2005

  6. Employment Concentration Ratio By Cluster State-Level Analysis • Several technology clusters are highly concentrated in Virginia, including IT Services, Research & Engineering, Aerospace-Defense-National Security, and Telecommunications. • A few traditional industries are also concentrated in Virginia, although their overall employment levels are quite low: Wood & Furniture, Auto. & Transport. Mfg., and Textiles & Apparel. Employment Concentration Ratio in 2005 U.S. Average The Employment Concentration Ratio is the industry cluster’s share of total employment in the state versus its share in the country. Clusters with a ratio greater than 1.0 are more concentrated in Virginia than in the United States.

  7. U.S. Average Annual Pay By Cluster State-Level Analysis • Wages in technology and knowledge-based clusters far exceed the average annual pay for the nation and for Virginia. • Not surprisingly, less skilled jobs in the service sectors have pay levels that are below the national average. VA Average $40,513 U.S. Average Annual Pay in 2005 US Average $39,004

  8. 0.68 0.64 0.86 0.51 0.30 Northern VA Valley Central VA Southwestern VA Southside VA Hampton Roads Virginia Industry Cluster Analysis Industry cluster data and trends were analyzed across six regions in Virginia.

  9. Regional Cluster Analysis Common employment trends across all regions: • Retail Trade, Tourism, and Construction & Real Estate are major employment-generating sectors across every region. (typical throughout the U.S.). • Life Sciences & Medicine also dominates in employment, ranking in the top 3 clusters for every region except Northern Virginia. This is driven by its service component (the Health & Medical Services sub-cluster). • Business Services and General Services rank in the top tier of clusters for employment across every region, but do not have especially high employment concentrations.

  10. Regional Cluster Analysis Significant variations across state’s regions: • Northern Virginia and Hampton Roads: Technology and knowledge-based clusters – Research & Engineering, IT Services, Aerospace/Defense/National Security. • Southwestern/Southside: Natural resource-based clusters such as Materials & Chemicals and Energy & Environment. • Rural Regions: Traditional industries such as Wood & Furniture (Southwestern, Southside, Valley), Paper (Southside, Valley), and Textiles & Apparel (Southwestern, Southside, Valley). But overall employment is relatively low. • Central region: Financial Services (strong in both employment and employment concentration).

  11. Benchmarking Virginia’s Innovation Foundations Summary Results Small business loans ($) STTR awards ($) VC investment ($) SBIR awards ($) NAEP Science & Math Scores Advanced S&E degrees S&E degrees Labor force growth Federal R&D performance ($) Academic R&D expenditures ($) Patents Academic R&D productivity Industrial R&D expenditures ($) Tech Fast 500 companies Business Start-Ups R&D to GSP ($ ratio) Real GSP growth Entrepreneurs Exports ($)

  12. Innovation Resources Patents per Capita • VA ranked last among the benchmark states for per capita patents awarded in 2006.

  13. Innovation Economy Outcomes Entrepreneurs Per Capita • Compared to other benchmark states, VA had the 2nd lowest level of entrepreneurs per capita in 2005.

  14. Innovation Economy Outcomes R&D Share of GSP • In 2004, VA ranked 6th among benchmark states for R&D as a share of GSP, slightly below the national average.

  15. High Growth Potential Technologies for VA Resources for R&D and technology development are limited. Determining where scarce resources should be deployed is a critically important task. Screening Criteria:

  16. Technology Industry Selection

  17. High Growth Potential Technologies

  18. Biomedical Sciences and Health Care

  19. Information Technology Asset Map

  20. Materials and Chemicals Asset Map

  21. Energy and Environment Asset Map

  22. Transportation and Logistics Asset Map

  23. Case Studies • Enhancing Research Excellence at Universities • Georgia Research Alliance • University of Texas Eminent Scholars Program • Ohio Third Frontier (Wright Mega-Centers) • Enhancing Collaboration Across Sectors/Disciplines • NY Centers for Advanced Technology • MD Industrial Partnerships Program • CA Industry-University Coop. Research Program • NC Research Triangle • Enhancing Entrepreneurship and Access to Capital • MD Venture Fund • GA Advanced Technology Development Fund • PA Ben Franklin Technology Partners

  24. Lessons Learned • Highlight collaboration as a central component of all programs. • Utilize industry and technology experts as key players in decision-making. • Seek to leverage multiple sources of funding. • Incorporate key economic development objectives and milestones. • Introduce and maintain strong systems of accountability. • Include flexibility to allow for corrections and to support longevity. • Measure innovation progress.

  25. Summary Assessment

  26. Strategic Focuses for Virginia

  27. Recommended Approach for Virginia • Overall Strategic Goal: Virginia will become a Model Innovation Economy • Crafted and directed by business, government and university communities • Implementation Mechanism: Virginia Innovation Alliance (VIA) • Public/Private Partnership • A structure to power collaboration • Catalyzes Virginia’s assets, addresses liabilities • Introduces a seamless innovation value chain

  28. VIA Governance and Funding • Governance: • Governing board (15-20) with a majority industry leaders. • Membership from government, universities, research labs, etc. • Advisory committees for technology platforms. • Small management unit. • Budget: Source & level to be decided • Stable and sustained multi-year funding. • Initial core funding from the Commonwealth, with major support from industry. • To be successful it will require matching funds.

  29. Monitoring Innovation Progress • Overall Progress in the Commonwealth: • Scorecard or index to measure performance of Virginia’s innovation enterprise. • Research outputs (patents, citations, outside funding, etc.). • Economic results (startups, VC funding, spinoffs, employment concentration, sector growth, etc). • Performance of specific VIA programs: • Metrics to monitor program performance. • R&D and economic outcomes. • Participants will be required to report on progress.

  30. Next Steps Outline Action Plan Private Sector Review Administration Review Stakeholder Review • Review with Stakeholders: • Economic Developers • Universities • Legislators • Target: September 2008 • Action Plan: • Develop program • structure, governance, • and participants • Identify prototype market • for public/private • collaboration • Target: TBD • Reviewed with: • Secretary of Commerce • Secretary of Finance • Secretary of Technology • Secretary of Education • Governor • 11 CEOs • Presented Overview • CEOs were supportive In Progress Completed Completed In Progress

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