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Science-Based Economic Development edited by Susan Raymond
John J. Desmond
University ofSouth Florida
Department of Industrial Management and Systems Engineering
Florida
Science and Engineering Profile
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Actual | 50-State Rank |
|---|---|---|
| General | ||
| Population, 1994 | 13,953,000 | 4 |
| Civilian Labor Force, 1994 | 6,824,000 | 4 |
| Personal income per capita | $21,677 | 21 |
| Gross state product, 1992 (billions) | $268.6 | 5 |
| Science and Engineering | ||
| Doctoral scientists, 1993 | 11,809 | 13 |
| Doctoral engineers, 1993 | 2,339 | 12 |
| S&E doctorates awarded, 1993 | 614 | 13 |
| S&E post-doctorates, 1993 | 599 | 19 |
| S&E graduate students, 1993 | 16,789 | 9 |
| Federal Spending | ||
| Total Expenditures, 1994 (millions) | $71,092 | 4 |
| R&D obligations, 1993 (millions) | $2,775 | 6 |
| Total R&D performance, 1993 (millions) | $3,525 | 12 |
| Industry R&D, 1993 (millions) | $2,425 | 12 |
| Academic R&D, 1993 (millions) | $489 | 12 |
| of which, in life sciences | 51% |
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| of which, in physical sciences | 14% |
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| of which, in engineering | 13% |
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Higher education current-fund expenditures, 1993 (millions) |
$4,690 | 10 |
| Number of SBIR awards, 1990-93 | 299 | 13 |
| Patents issued to state residents, 1994 | 1,887 | 10 |
Changes in economic drivers, both internal and external, have fueled rapid development and growth in Florida during the past several decades. The 1970 population of 6.8 million increased to 9.7 million in 1980 and then to 12.9 million in 1990, reaching fourth rank in the nation. The trend is expected to continue, with an official projection of 19.7 million in the year 2010. During the decade from 1980 to 1990 the state's civilian labor force increased from 4.2 million to 6.4 million. It is evident that Florida's rate of economic growth must be managed aggressively to support its population growth.
Leaders in the state government and in industry recognized in the mid-1980s that the defense-based high-technology manufacturing sector would not continue to grow as it had during the previous decades but rather that it would decline because of reductions in the federal defense budget. Through their joint efforts a technology development policy was adopted in 1986 to slow the downward trend by directing capabilities of the defense-based industry toward the general economy. The resources available to implement the transition lay within the industry's wide range of skills, production capabilities, and management expertise; with hospitable state and local administrations; and in a university system soundly based in science and technology
Significant progress has been made in achieving the goals of that policy since 1986 when the state legislature established the Applied Research Grants Program to be operated by the Florida High-Technology and Industry Council. Florida has demonstrated that such a policy fostering cooperative effort among responsible agencies can ameliorate the effects of economic downturn and promote innovation on which new economic strength can be built.
Background
Florida's early history is one of Spanish discovery, conflict between the Spanish and English, attempts at settlement by French Huguenots and struggle for the land with the native Seminoles. Spain's exploration and acquisition of territory in the early years led to colonial development in the northern sector between the Atlantic and Gulf coasts while the less hospitable peninsula was bypassed. Forestry, and in the later years cotton and corn, became the basis for commerce as settlement increased.
Spain's cession of Florida to the United States by treaty in 1819 led to statehood in 1845. This was followed shortly by the Seminole Indian Wars, the Civil War and the period of Reconstruction. Population grew from 35,000 in 1830 to more than 180,000 by 1868, when civil rule was established and the state constitution was adopted. The constitution established the Board of Commissioners to administer the government and set the procedures for electing public officials. It also created a Board of Education, and public schools were funded through the sale of dedicated public lands. The educational institution from which Florida State University evolved was founded in 1857, marking the beginning of the state's higher education system.
The economy of the stare was based on agriculture and forestry during the remainder of the nineteenth century and the early part of the twentieth century. After 1880 railroads became important in economic growth, permitting lands further south along the Florida peninsula to be opened up for trade in winter crops. By 1910 the number of farms reached 50,000, producing cotton, corn, tobacco, and other crops of lesser total economic value. Overcutting of timber caused a drop in forestry products in 1916 but the industry recovered and paper and pulp are now important products. The introduction of citrus and stock-raising increased the agricultural contribution to the state economy. The 1920s saw the beginning of the population movement from the northern states into Florida, setting the pattern for economic growth which continued until World War II.
A changed pattern had emerged by the 1950s as the economy responded to demands of the increased population. Services, trade, transportation and communication, infrastructure, and commercial and residential building all showed new growth. Mining- principally the export of phosphate rock for fertilizer manufacture; sand, lime rock, and cement for construction; and transportation of these products- were among the few heavy industries in the economy by the 1950s. Other than some smaller local enterprises there were no large manufacturing centers, and high-technology was not yet a significant economic factor.
Florida's low land costs, low taxes, and low wage scales, as well as the quality of life in its mild climate, attracted expanding defense industries which were seeking new sites in the 1950s. NASA was one of the first to introduce high-technology and was a magnet for the movement of other companies into the state. These new establishments widened the scope of high-technology manufacturing employment but there was a negative aspect. Most defense-related research and development originated in national laboratories elsewhere in the country, leaving production as Florida's portion. Rather than being sought locally, many professional and skilled production personnel were brought in from outside the state. This, unfortunately, is a characteristic of defense-based contracting. The effect was also felt by the many entrepreneurial sub-contractors who supply the prime contractors. NASAs activities also extended beyond its own direct interests in technology in its active sponsorship and support of STAC, Southern Technology Applications Center.
The potential for defense-based research and development in the state university system was also diminished. Its institutions were involved in diverse types of internally sponsored basic research ranging from materials to agriculture and medicine. They were graduating many capable engineers and scientists whose interests had grown in basic science and a random range of specialties. But although interchange between the universities and industry existed there was no central coordination or driving force to build on the potential resources of these institutions. Florida was being excluded from participating in research and development, a very important sector of the fast-growing high-technology industry.
Table 1. Annual Growth Rates
| 15-Year Interval | Employment %growth |
Personal Income %growth |
Population %growth |
Per Capita Income %growth |
|---|---|---|---|---|
| 1930-1945 | 4.4 | 8.5 | 3.6 | 4.7 |
| 1946-1960 | 5.9 | 5.1 | 4.7 | 0.4 |
| 1961-1975 | 5.0 | 7.0 | 3.6 | 3.2 |
| 1976-1990 | 4.6 | 5.0 | 2.8 | 2.1 |
| 1991-2005 | 2.3 | 3.1 | 1.8 | 1.3 |
The Policy Trigger
Florida's overall growth was impressive between 1970 and 1990: Gross State Product increased from $69.7 billion to $240 billion and the labor force grew from 2.7 million to 6.4 million. Manufacturing employment was 306,000 in 1970 and 40,000 in 1990. Although employment levels were high, the predominance of low paying jobs in the service sector, the largest employer, depressed average state income. The state government was therefore concerned that employment and research opportunities in the higher-paying manufacturing industries, especially in high-technology, were not being developed satisfactorily.
High-value-product enterprises were needed not only for employment but to contribute to the cost of the infrastructure demanded by the surging population. Roads, water supply, schools, and other public facilities provided by the state, counties, and municipalities were being overwhelmed. Florida's 34% increase in population between 1980 and 1990, advancing from seventh rank to fourth rank nationally was not matched by growth in manufacturing and high-technology employment: The state moved only from fifteenth to fourteenth in manufacturing employment and remained nearly static at tenth in high-technology employment with merely a 3.4% increase.
Florida's growth rate was forecasted to face a slowdown in the fifteen-year period 1990-2005 when measured by the four most commonly used indicators: employment, real personal income, population, and real per capita income. These forecasts are the lowest since 1930. The Florida Long Term Economic Forecast, prepared by the University of Florida College of Business Administration, illustrates the expected trends. These facts made it imperative that the state government fashion a high-technology development policy based on the capability of industry, the state university system and the state government's own resources.
The Objective
The objective of the policy was to establish a joint effort between industry and the government to fund commercially competitive research to ensure the development, application, and transfer of technology for Florida's emerging technology-based economy.
The Policy Process
The state government sponsored a cooperative effort in the mid-1980s among its own agencies, the major high-technology industries, local entrepreneurs serving them, and the state university system to assist in formulating the policy needed to overcome the problems in developing high-technology industry. The primary actors were the Governor's Office and the Department of Commerce, Division of Economic Development. Representatives of the state university system, national research and development agencies, representatives of industry, and local business development councils were consulted and participated in developing the policy and in making the plan of action which would put it into effect. These agencies had been informally communicating before 1986 but centrally coordinated and supported activity among them was lacking.
In the absence of a policy oriented toward economic development, the activities of the universities centered on basic research in their own areas of interest rather than on applied research specifically related to state manufacturing industry needs. Meanwhile the research laboratories of manufacturers were devoted primarily to production problems rather than to product development research. Similarly, sub contractors were constrained by military specifications and a narrow range of products, leaving them few opportunities for flexibility or research. In general, little high- technology was being developed or transferred and Florida's industry was poorly prepared for the innovation which would later be called for.
A successful policy would have to address several conditions implicit in a coordinated research and development effort:
Uniform procedures for selection and assignment of projects to research laboratories were essential. An advantage was the existence of informal communication channels between universities and many companies near them. These associations would prove to be invaluable in developing focal centers for mutually interesting areas of applied research. Most important in making the policy successful would be the commonality of purpose among all the players.
The result of the state's organizing effort was the authorization by the legislature of the Applied Research Grants Program (Florida Statutes, Chapter 240.539).
Table 2: Applied Research Grants Program Proposal and Funding
Distributed By Technology Area, 1986-1992
| Area | Number of Proposals Submited | Funding requested | Number of proposals Funded | Funding Allocated | %of Funds Requested |
|---|---|---|---|---|---|
| Biomedical Devices | 23 | 13,804,022 | 85 (50 new) |
4,203,397 | 30.5% |
| Biotechnology | 183 | 9,565,880 | 88 (41 new) |
3,453,694 | 36.1% |
| CIM (Robotics) | 212 | 13,208,575 | 57 (29 new) |
3,581,471 | 27.1% |
| Electro-optics | 153 | 15,271,993 | 69 (33 new) |
5,126,553 | 33.6% |
| Microelect. & Marl. Sci. |
241 | 16,730,745 | 87 (41 new) |
4,518,154 | 27% |
| Simulation & Training |
157 | 10,587,562 | 67 (39 new) |
3,261,788 | 30.8% |
| Software& Comp. Sci. |
258 | 11,811,221 | 92 (54 new) |
3,050,614 | 25.8% |
| Misc. & Unknown |
12 | 384,231 | 0 | 0 | 0% |
| Total | 1,449 | 91,364,229 | 545 (287 new) |
27,195,570 | 29.8% |
The Substance of the Initiative
The Applied Research Grants Program (ARGP) is the vehicle under which public and private entities in Florida jointly sponsor applied research projects directly supporting industries within the state. The program is operated by the Florida High Technology and Industry Council, an agency established by the statute. The council coordinates commercially competitive research which it will consider for funding approval through a peer and industry review procedure. Review criteria require that the research will enhance the development, application, and transfer of technology needed by Florida's industry. Of special importance is the potential for new and innovative industrial opportunities.
The council, a partnership between the state and industry, generates funding for approved projects from both public and private sources. Between 1986, when the program was initiated, and 1992 the state appropriated more than $27 million for council projects. This money leveraged more than $47 million in additional contributions from private sources. The strength of the private participation in the council is the membership of one hundred twenty-six companies, twenty-five of which are among the Fortune 500 as principals or as divisions operating in the state. In addition to cash grants there is cooperation through research partnerships, student scholarships, access to and support of research laboratories, and donations of equipment.
There are some locations in the state where industry and universities share research and development interests. An example is the predominance of laser or light-based research at the University of Central Florida in Gainesville and the large number of local companies whose manufacturing specialization is in the same field Similarly, Miami is the center for biomedical research and manufacturing. Table 3 gives examples of the geographic distribution of projects among research centers. At each of these centers the council can help companies and research units gain access to numerous federally sponsored coordinating organizations.
Table 3. Applied Research Grant Program Proposal and Funding
Distributed by University. 1986-1992
| University | Number of proposals submitted | Funding requested | Number of proposals funded | Funding allocated | %of funds requested |
|---|---|---|---|---|---|
| Embry-Riddle | 17 | 596,751 | 5 | 50,000 | 26.1% |
| FloridaA&M | 16 | 625,050 | 2.5 | 70,000 | 11.7% |
| Fl Atlantic | 106 | 6,007,277 | 29 | 1,307,920 | 21.7% |
| Fl. Inst. Tech. | 63 | 2,455,218 | 16 | 488,535 | 19. 9% |
| Fl. Internat'l | 104 | 4,336,182 | 31 | 1,344.331 | 31% |
| Fl. State | 75 | 3,127,695 | 15.5 | 458,603 | 1 4.5% |
| Nova Univ. | 2 | 40,000 | 0 | 0 | 0% |
| U. Central Fl. | 238 | 20,203,939 | 114 | 6,916,766 | 34.2% |
| U. Florida | 375 | 28,455,553 | 143 | 8,111,806 | 28.5% |
| U. Miami | 215 | 11,433,621 | 94 | 3,977,012 | 34.8% |
| U. North Fl. | 2 | 180,750 | 0 | 0 | 0% |
| U. South Fl. | 222 | 13,407,334 | 91 | 4,232,861 | 3 1.6% |
| U West Fl. | 10 | 374,987 | 4 | 131,958 | 35.2% |
| Others | 4 | 119,872 | 0 | 0 | 0% |
| Total | 1,449 | 91,364,229 | 545 | 27,195,570 | 29.8% |
Adapted from Gregory, Applied Research Grants Program, Florida High Technology Council, Oct 1992
Organizational Structure
The Florida High Technology and Industry Council, composed of both state and industry members, is the operator of the Applied Research Grants Program. The council brings companies and university research teams together to develop project proposals which will be reviewed for competitive merit in advancing technology in the state. Proposals which meet the funding award criteria must be well defined for content and purpose and must be organized in a manner that permits control by sponsors. In this way the projects will be in conformity with budgeting procedures and methods which the program has prescribed.
There are other aspects in the successful commercial application of newly developed technology which are promoted through the council. These relate to small business. If entrepreneurs are to succeed in bringing worthy projects to market they must have skills in business as well as technological expertise; they must have access to financing and marketing and must be able to sustain their enterprise through the difficult first years of operation until efficiency and profitability are achieved. There are a number of organizations which function in these business areas as part of the overall state program. The following listing of organizations is not intended to be comprehensive but it is illustrative of the types of assistance, both technological and in business administration, to which participants have access.
STAC has recently joined forced with the Tennessee Center for Research and Development, a private not-for-profit organization founded in 1986 by Martin- Marietta Energy Systems, the Tennessee Valley Authority, and the University of Tennessee, Knoxville, to increase the size of the network through which private industry can enter on neutral ground to form partnerships and joint projects for research and development and for transfer of technology in the Tennessee Valley region. This is an example of organizational innovation which has broadened the avenues for commercializing technology in a regional economy. Florida enterprises have access to this venture through STAC.
Another example of innovation which is aiding industry in Florida is FEEDS, the Florida Engineering Education Distribution System, centered at the University of South Florida in Tampa. FEEDS is a product of the state university system colleges and private industries throughout the state. The University of South Florida has reached engineers and managers in more than fifty companies at their work locations and on campuses by delivering graduate degree courses in engineering and business administration in two ways. The most commonly employed medium is interactive television broadcasting with live audio return links. Locations which do not have access to live video transmissions are served by taped "Tutored Video Instruction." The flexibility of this system is such that one student who was called to active shipboard duty clearing mines after the Persian Gulf conflict was able to complete his course work through regular delivery of tapes to his ship.
Courses available through FEEDS cover engineering, engineering management, and business administration-subjects creditable toward degrees by both the College of Engineering and the College of Business Administration at the University of South Florida. Since the system was initiated in 1983 more than three hundred master's degrees have been awarded to participants. This innovative and successful program is another method of transferring the expertise needed in the successful development and management of technology. An indication of the network which has grown in Florida's industrial and business community is the presence of twenty members of the Florida High Technology Council in the list of companies which have sponsored employee participation in the FEEDS program. Executives of many of these companies contribute their direct knowledge of business and engineering by appearing in the televised sessions.
These examples of organizations which aid in technological development illustrate the innovative cooperation which has developed through a soundly formulated policy-and-action program. It is most important that the program had a specific target: the increase in local research and development for products which could be commercialized for the benefit of the industrial economy in the state. The program also wisely included supportive aspects which were necessary for commercialization, business management, financing, marketing, and training of personnel.
Outputs and Impacts
Direct grants for research projects made through the Applied Research Grants Program from 1986 through 1992 numbered 545 out of 1449 submitted. This reflects on the selectivity in the approval procedure. The total amount appropriated from program funds was $27.2 million, private sources contributed $26.3 million and federal grants were $22.3 million for a grand total of $75.8 million. This amount does not include approximately $50 million funded annually for defense research at the state universities. ARGP is supplementing that research to find commercial applications.
The program has also invested in several technical centers which will continue to be foci for future developments:
Several notable commercializations have come from work started under ARGP auspices. In the biomedical and biotechnology fields, in which 2,500 firms now employ 58,000 workers, several important projects are supported by program funds and funds attracted from external sources. The economic impact of health industry production is measured by the level of exports, $1.5 billion in 1991. Examples of successful commercialization sponsored by ARGP are:
These are but a few examples of the intended results of research initiated under program grants. It is obvious that research directed towards commercialization will attract financing when there is a good potential for profit; this is the objective of the state's policy.
Postscript
The policy adopted by the state and industry in 1986 has produced a number of successful commercializations. It is not possible to establish the total effect of sponsored projects on the full scope of the state economy because there is no procedure for follow-up reporting after a project becomes independent, but individual successes are obvious. A valuable by-product is the knowledge that a partnership formed to target commercial high-technology production can succeed. This knowledge- how to succeed commercially- is essential if technological research and development are to be productive in the economy.
It has not been possible to reverse the trend away from high-technology manufacturing that has accompanied the reduction in defense work, but the centers of technology are now better prepared to attract new enterprise. It is necessary now to find more commercial support for the university laboratories because state budgets, as well as federal budgets, are being cut. The successful projects are compensating modestly for the reduction in defense-related research and form a stronger base from which to compete nationally for future work. The new brand of high-technology innovation within Florida is successfully narrowing the gap which was targeted as the objective of the state's policy.
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