Phillip Singerman is president and executive director of Maryland Technology Development Corp. (TEDCO), a quasi-public organization that promotes promotes economic development in the state through the commercialization, development and deployment of technology. Singerman is a former head of the Economic Development Administration, an arm of the U.S. Commerce Department. He also served as president and chief executive of the Ben Franklin Technology Center of Southern Pennsylvania.<\/p>\n
He spoke to washingtonpost.com’s Kyle Balluck about the challenges the state faces as it seeks to grow its already strong technology sector. An edited transcript follows:<\/p>\n
Tedco’s mission is to facilitate the creation of businesses and foster their growth throughout all regions of the state through the development and transfer of technology. We’re not focused solely on what people think of as the technology-rich areas of the state – Montgomery County, Prince George’s and Howard County and the city of Baltimore — but also Western Maryland and the Eastern Shore and Southern Maryland and underserved communities and populations such as women and minority entrepreneurs. We have a broad social mission that is related to and supports our economic development goals.<\/p>\n
Maryland companies, universities and federal research labs receive from the federal government between $9 billion and $10 billion annually for R&D. It’s pre-9\/11 data, but Maryland ranks second only to California in total amount of R&D activity, and California’s population is six times Maryland’s. And on a per capita basis, Maryland receives more federal R&D funding than any other state in the nation by several orders of magnitude.<\/p>\n
Maryland is a very R&D-intensive state. Along the Northeast and the Eastern Seaboard, only Massachusetts, which is the acknowledged national leader, exceeds Maryland, and not by much. If you look at Virginia and Maryland and the District of Columbia, collectively, they receive about $15 billion annually in federal R&D funding for universities, companies and labs, which exceeds California’s, although the combined population of the three jurisdictions is about a third of California’s.<\/p>\n
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Although we rank first in federally funded R&D, we rank very low in terms of industry-funded R&D at universities and industry-performed R&D. If you look at the data for New Jersey, billions of dollars of R&D is performed by the pharmaceutical industry there. Pennsylvania also has a lot of industry-performed R&D, but also very significant amounts of industry-funded R&D at the universities, which contrasts sharply with Maryland and, I would say, to Virginia as well, which has a similar, although shallower, R&D profile than Maryland.<\/p>\n
In terms of our R&D assets, we look like Massachusetts. In terms of our performance, we look like Missouri. We’re about to release our 2003 Innovation and Technology Index. It’s the third one that we’ve published, which compares Maryland to surrounding states and Massachusetts. And what it clearly shows is that in terms of our assets, we rank like Massachusetts. In many cases we’re above them. But in terms of the transfer of that technology into the marketplace, we really rank in the middle.<\/p>\n
I’m going to compare Maryland to Pennsylvania, which has made enormous investments in technology They went through an economic crisis in the late ’70s and early ’80s with, basically, the disappearance of the steel industry in Southwestern Pennsylvania. So there was an urgency to begin to address that and in the early 1980s they, in a sense, stumbled upon technological innovation through transfer technology from the universities. They stumbled upon those as a source of economic developing, looking upon what had happened in Silicon Valley and Research Triangle Park. So they were driven to make very significant investments in their technology development activities — research parks, business incubators, seed venture funds, programs like that.<\/p>\n
Maryland hasn’t had that kind of economic crisis. Indeed, over the past 20 years the economy of Montgomery County and Howard County has grown significantly because of the growth of the federal government and the growth of NIH and the growth of other R&D assets in the state. And we have one of the highest per capita incomes of any state in the nation and one of the lowest poverty levels, which is really a function of our geography. We’re located near the capital of the country. We have all these labs and activities that have historically started here. I think the fact that we’ve done so well has really meant that Maryland’s economic development initiatives have been very modest.<\/p>\n
Now there’s a danger, however, in our current situation, which is those who live by the sword die by the sword. We are overly dependent on federal funding for R&D activities. These funding decisions are not divinely ordained. Our congressional delegation, particularly our senators, works very hard to maintain these resources. But they will not be in their positions forever. CLICK TO HEAR MORE<\/p>\n
We’re kind of blinded by the fact that money has flowed in, whereas, I think, our competitive position is weakening. States such as Pennsylvania and Michigan and Ohio and North Carolina, even in these fiscal crises, continue to invest significant amounts of money in technology. Michigan pledged a billion dollars from its tobacco settlement for over 20 years for biotechnology research and development. Other states are outspending us by orders of magnitude. So that, to me, is the danger that lurks before us.<\/p>\n
I don’t want to be the person who cries wolf, but we proclaimed that we have the third-largest cluster of biotechnology companies after Califorina and Massachusetts. Other states are nipping at our heels. It’s not inconceivable that in the next two to three years, we could be overtaken by North Carolina, Pennsylvania or Seattle.<\/p>\n
What would it mean to us if Maryland began to slip in the rankings as a biotechnology state? We’d still have lots of companies, but I think that would be a very dramatic blow to our visibility and reputation as a home for biotechnology. That’s really incalculable for the strength of our biotechnology cluster. We need to diversify into a more commercially oriented R&D structure than we have.<\/p>\n
So what could be done? The models for what can be done have been worked out over the past 25 years by other states. There are no secrets. A technology-based economy needs four factors of production: technology, capital, facilities and human capital. We have lots of technology, but our problem is that the mechanisms for getting that technology into the marketplace are weak and severely underfunded. They’re weak because the federal labs do not have tech transfer as a significant-enough priority. There are all sorts of blockages.<\/p>\n
We don’t have to, like many other states, create our research infrastructure to be competitive. What we need to do is fund our technology transfer infrastructure. We need to have funding to support companies that work with universities and federal labs, have more support of policies and regulations by the universities and federal government so we can access the technology.<\/p>\n
In terms of capital, we have seed fund programs. They need to be expanded. The big missing piece is the failure of the pension funds to invest in venture capital. I testified on this issue before the General Assembly. People, say, “Well, it’s risky.” I don’t think it’s any more risky than the investments that they made which led the state to have one of the poorest-performing pension funds over the past few years. In fact, if they had invested in these very high-growth opportunities, they would have more effectively diversified their portfolio as part of their fiduciary responsibilities. We really need to open up the pension funds to allow them to invest up to two percent of their total assets.<\/p>\n
In terms of facilities, we have a very extensive incubator network, but we’re lacking in terms of research park development. Companies need a place to go, to grow. The state has a very extensive incubator, probably more than any other state. We’re probably the only state, that I’m aware of, that has created an award program to give the incubator companies a lot of visibility and help them connect to private capital. The missing piece in facilities is research parks.<\/p>\n
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If you look at, historically, what accounts for changes in the state’s economy over time, it’s really the birth and expansion of existing firms rather than relocation. You get your growth from creating businesses. Maryland’s strength is creating technology businesses. Maryland’s strength is not in attracting a Honda plant. We’re not going to compete with Alabama, and we shouldn’t compete with Alabama.<\/p>\n
If you look at the biotechnology industry in Maryland, we have a study that details the origins of the industry — where the founders were when they started their companies. They were all here. They were all working at Hopkins, or NIH or the University of Maryland. MedImmune was a start-up. So was Human Genome Sciences. So was Celera.<\/p>\n
This was not a priority for the former governor – Governor Glendening. He had other priorities – smart growth, universities. But economic development and technology transfer were not a priority of his. The new governor is more interested in this issue. He’s appointed a commission, the Pappas Commission, which we all have very high hopes for. They’re going to have a major influence over setting a strategic vision for the state in terms of technology. There’s no conflict on the issues. If you got people in the same room and talked for a few hours they would agree on what needs to be done. We need the leadership from the public sector.<\/p>\n
Maryland is a technology-savvy state. People understand this issue. That’s why the Legislature created Tedco, because they felt that not enough was being done to take advantage of these resources that existed in the state. There’s receptivity to this issue. You don’t have to educate people about it. What we’ve been able to do is identify some very specific activities that could really move things forward.<\/p>\n
People for years have been saying, “We have all these federal labs, what can we do?” Well, we’ve put together a program of very successful technology showcases with the labs. We have provided some funding – very modest funding – to the labs on behalf of particular companies. We have funded companies to work with the labs. We’ve entered into special agreements with the labs to facilitate tech transfer. We negotiated a memorandum of understanding with the National Security Agency to facilitate tech transfer. I don’t think they’ve done that with any other state. We just announced a partnership agreement with the Navy Warfare Center at Indian Head. It’s the first such agreement that the Navy has signed with anyone and only the sixth that the Department of Defense has signed with anyone. So we have really broken new ground in the programs that we have developed.<\/p>\n
More R&D money has come into the state after 9\/11 than before because of the focus on biotech, security and general R&D. These are all areas where Maryland has a unique competitive advantage in relationship to other states. So the early stage money has been available. The kind of push from the labs and from the institutions in terms of technology and the growth of the technology capacity of the state has continued and increased.<\/p>\n
What the economic downturn has resulted in through the decline in the state budget is a reduction of technology transfer funding. So our program has been going down instead of going up. The state’s early-stage funding program has been cut way back. Hopefully, when the economy turns around and the budget goes up, the state will be able to fund the program at the appropriate levels.<\/p>\n
Reported By TechNews.com, http:\/\/www.TechNews.com<\/p>\n
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