Research  Development Study Group

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Research Development Study Group

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1. 1 Research & Development Study Group

2. 2 R&D Study Team

3. 3 Question: “What research & innovation is occurring in Montana that is cutting edge?” Where is Montana truly at the verge? What’s really exciting? What is the tangible impact of research on economic development? What potential does research have to be an economic driver for Montana? What impact does University research have on the local economy?

4. 4 Where is Montana truly on the verge? What is really exciting? Certain areas around the state appear to be specializing or clustering in key research areas: Missoula – health related research, environmental imaging and software Butte – aerospace (advanced computing), materials, mineral processing, environmental remediation, engineered products Bozeman – computer sciences, lasers, crystals, recreational products, bio-sciences, fuel cells, ag science (camellia & beef) Billings – health related research & agricultural sciences Sidney, Chester, Malta, Havre – agricultural sciences, bio-fuels, bio-lubricants

5. 5 Have we set up the collaborative network to foster this research? Montana Board of Research and Commercialization Technology MonTEC – Montana Technology Enterprise Center Tech Link Center Tech Ranch Montana Agricultural Experiment Stations Montana Bureau of Mines and Geology Montana BioScience Alliance Montana University System and many companies Montana Manufacturing Extension Center Montana Engineering and Environmental Consortium Center for Advanced Mineral Processing (CAMP) Montana Aerospace Development Association (MADA)

6. 6 Where does our R&D funding come from? Only 0.1% of Federal R&D Flows to Montana Federal Labs, Industry, Non-Profits, State/Local Governments

7. 7 Where does our R&D funding come from? Federally Performed - Montana Ranks 10th University Performed – Montana Ranks 6th Industry Performed – Montana Ranks 46th State Funded Montana has limited industry R&D compared to other states, so let’s focus on University research and see how we compare

8. 8 University Research Outcomes

9. 9 Non-Quantitative Impacts of University Research University research also has impacts in areas other than economic stimulus: Increases the diffusion of new knowledge and technology Creates a wide range of new products and new companies Helps build better quality of life with significant gains in health care, environmental quality, gains in the arts, culture, physical fitness, and recreation Creates a better trained workforce through educated students, faculty, and citizens

10. 10 How does Montana rank on human resource measures? 9th - % Bachelors degrees Granted 5th - Life and Physical scientists per 10,000 workers 1st - % Science & Engineering B.S. Degrees Granted 21st - % Science and Engineering Graduate Students 41st – Engineers Employed per 10,000 workers (Source – The Dynamics of Technology Based Economic Development, 4th Edition)

11. 11 What is the tangible impact of research on the local economy? Trying to measure the tangible impact in Montana is tough because of limited data Missoula – Approximately $60,000,000 – Roughly 1,400 primary jobs (per Tony Rudbach) Butte – Approximately $2,500,000 - The impact of research in the community is estimated at approximately 100 primary jobs (Montana Tech 47 faculty and student jobs, per Joe Figuera) Bozeman – $100 million per year running through the University – Correlates to approximately 2,333 Primary Jobs (estimated) Billings – Approximately $8.5 million per year – Correlates to approximately 198 primary jobs (estimated) Sidney – Approximately 50 good paying jobs (estimated) – “Big for Sidney”

12. 12 What potential does research have of being an economic driver for Montana? As evidenced in other areas research can have a significant impact on economic development; from the initial benefits of the funded research and business resulting from the technology transfer. Board of Research & Commercialization awarded $2.6 million in 2006 for technology transfer projects for: Biomimetic Floating Islands Revitalize Degraded Fisheries, Wildlife Habitats, Human Water Resources (Livingston/Billings) Phillips Environmental Products (WAG) (Belgrade) produces an innovative compact dry toilet system called WAG (Waste Alleviation Gel) Amazing Grains Cooperative (Ronan) formed to grow and process Indian Rice Grass (Montina) seed as a source of gluten free flour. Let’s look at some examples and issues

13. 13 Florida In Florida, researchers for the Council for Education Policy, Research and Improvement conducted a study to measure the contribution of the 512 Research Centers and Institutes funded by the State of Florida One year $88.8 million, of funding resulted in: 6,955 jobs $274 million in higher Florida Gross regional Product ($2.17 for every dollar of State support) $245 million in wages and salaries (disposable income increase of $1.96 for every dollar of State support) $18 million in tax revenues 217% return on investment (ROI) 2.17 final benefit to cost ratio

14. 14 California In a study conducted by ICF Consulting, March 2003 to determine the dynamic impact of UC research expenditures on the state, the researchers found that ten years of University research resulted in: $5.2 billion in economic productivity gains 1.3% of all California GNP growth attributable to UC research activity gains 104,000 jobs created from UC research 160 new companies founded on the basis of UC research Other benefits A total of $3.89 of federal and private funding for each dollar of state funded R&D 2,600 UC inventions from 1999 to 2001

15. 15 Closer to Home - Red River Valley , ND Research Corridor

16. 16 R&D Impact on Montana’s Economy Direct impact is measurable – count the funding and count the jobs – that’s what we did The real question - Is Montana seeing the follow on impact? “It is difficult to make any direct assessment of the extent of these activities or directly quantify economic impacts. Many of the economic benefits of university research are not in the form of licensing agreements, or direct assistance, or cooperation between campuses and private business, but informal relationships that develop over time.” Source - Legislative Auditors report page 57, November 2006

17. 17 Economic Impact of Research Others have found ways to measure follow on economic impact from University R&D Macro Information from licensing surveys published by the Association of University Technology Managers (AUTM) and used by (Payne & Siow, A. 2003) to estimate commercial related application of University Research for fiscal year 2000 222 universities in US and Canada from 1995 to 2002 Increase in $20,000,000,000 in economic activity (from $23 billion to $43 billion) Increase in 169,802 jobs (from 197,605 to 367,407)

18. 18 Other Outcome Measures

19. 19 Impact Measures Based on these it would appear that there are indeed ways to measure economic impact

20. 20 UM, MSU, and Montana Tech Research Expenditures

21. 21 National Trends in Technology Transfer Activity FY1991 to FY2004

22. 22 What should we expect? Given that funded research in the State rose, license fees and royalties for Universities rose nationally, one would expect to see a similar rise in licensing fees and royalties at the Montana Universities

23. 23 Where does Montana stand? 2004 MSU and UM sponsored research & license income MSU – license income $76,262 – sponsored research $88,000,000 (0.09%) UM – license income $0 – sponsored research $55,638,870 (0%) To compare what is possible: MIT (2004) – license income $25,781,923 – sponsored research $1,027,000,000 (2.6%) University of California System (2004) – license income $74,275,000 – sponsored research $2,791,777,000 (2.5%) Source - AUTM Licensing Survey: Selected Facts and Figures for FY2004

24. 24 Conclusions Economic development benefits from research in Montana must come from University research because that is what we have to work with We have made progress in this area but we have a ways to go Montana needs to make a conscious choice to use University R&D as an economic driver,align actions with goals and measure performance Montana appears to be benefiting from the collaborative aspects of R&D such as well trained graduates, knowledge creation and diffusion, and collaboration Montana appears to be competitive and benefiting from the direct funding of R&D Montana does not appear to be leveraging University R&D as efficiently as others for follow-on economic development Montana has the potential to gain significant additional economic benefits from University R&D

25. 25 Decide Montana has the intellectual capacity Montana has some areas of research that are truly at the cutting edge We are competitive and benefit from the direct funded research - yet the metrics indicate we are not taking full advantage of all phases of the opportunities A key action - Do we want to use University R&D as an economic tool?

26. 26 Recommendations If we choose to use University R&D as an economic tool – align behaviors with goals If we do indeed make that choice what could be some issues we may want to look at for possible improvements R&D focus - market pull versus market push Incentives Tech transfer knowledge base/capability State funding – are we seeding R&D properly? Venture capital – do we have any?

27. 27 R&D Focus According to the legislative auditors survey of faculty members currently assigned as principal investigators (performance Audit, Appendix C), only 18% of survey respondents thought that the “majority” of their research had commercial potential Recommendation - Perhaps the University System could put more focus on research with emphasis on markets which have commercial potential – compare core competencies with market potential

28. 28 Incentives The Montana University System has in place a process to allow the developer to retain 50% of net royalties Third when viewed against peer institutions (average 45%) Monetary incentives seem OK Develop additional non-monetary incentives to assist the researcher Recommendation - Support spin out activities beyond simply licensing 40% of researchers questioned did not believe appropriate consideration was given to research as it pertained to tenure decisions and promotion decisions – (Source, page 53, Montana University System R&D, Performance audit) Recommendation – allow more of a role for research when evaluating tenure and promotion

29. 29 Technology Transfer Presently the word is not sufficiently getting out on technology transfer opportunities Recommendation – Better advertise, promote, train for the technology transfer program, benefits, and incentives The performance audit concluded (Page 47) “Resources directed towards technology transfer in Montana’s Universities have not been consistent with the strategic significance of these activities” Recommendation – Provide more resources and focus those resources to support technology transfer activities

30. 30 Technology Transfer Current UM Policy #704 “It is the policy of the UM to work with governmental and private sector groups for the purpose of encouraging, fostering, and contributing to economic development in Montana.” 1. Promote research that results in products, processes or services that are transferred for commercialization to the benefit of Montana. 2. Offering first options and more favorable terms to Montana based companies as recipients of University transferred technology. 3. Make available the personnel and resources of the University to assist in the development and expansion of business enterprises in Montana. Recommendation - More emphasis on licensing fees and royalties regardless of where they come from – Montana will benefit in the long run – “Let Go”

31. 31 State Funding Board Of Research & Commercialization Technology: The mission of the Montana Board of Commercialization Technology is to support the development of research and technology that has commercial potential within Montana by providing leadership and funding resources for those activities.” Annual funding $3.65 million Support projects which support agriculture production capability, value added opportunity, enhance the state’s research infrastructure, and show a clear path to commercialization Recommendation – the mechanism and infrastructure is in place – focus in the proper areas of research to enhance economic development and fund sufficiently

32. 32 Venture Capital Many have discussed the lack of Venture Capital in Montana – Capital follows opportunity – Perhaps it is the nature of the available opportunities Montana Ranks 47th out of the states with the amount of venture capital invested in 2002 “The industries and individual companies that venture capitalist choose to invest in reflect their opinions as to the sources of future wealth creation. Companies that attract venture capital investment are perceived to be working at the cutting edge of technology in their respective industries and are deemed to have a high chance for success” (Source, The Dynamics of Technology Based Economic Development, Fourth Edition, page 2-44) Recommendation – align research with commercial potential

33. 33 “Possible Action Steps” Decide to use University R&D as an economic driver Standardize technology transfer process across University units Focus more resources on tech transfer and awareness Promote benefits of research and spin-out to researchers Allow research to play more of a role in tenure Increase State funding of research – matching dollars will return more federal and private research dollars Focus R&D on core competencies aligned with commercial viability Develop measurement and performance metrics to consistently gauge performance across all university units

34. 34 References Montana University System Research and Development, Performance Audit, November 2006 The Link Between Clusters of SME’s and Public and University Research in Italy – Rodriguez-Pose and Cristina Refolo, London School of Economics, 40th European Congress, Barcelona 2000 Research Corridor Impact Report – no date Literature Review of Economic and Social Impact of Higher Education Research Funding – Leadership Board for Applied Research and Public Service, Lynch & Aydin, 2004 AUTM Licensing Survey: Selected Facts and Figures for FY2004 The Dynamics of Technology Based Economic Development – Office of Technology Policy, State Science and Technology Indicators – Fourth Edition

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