Topic: Miller College of Business

October 11, 2010

 Indiana's efforts to bolster science and technology industries through its 21st century Research and Technology Fund have succeeded during the last decade, creating about 11,000 high-paying jobs and boosting the state's gross domestic product by $427 million, says a new report from Ball State University.

Analysis by Ball State's Center for Business and Economic Research (CBER) found that since the fund was created in 1999 by the Indiana General Assembly, about $238 million has been invested in 188 projects designed to encourage investment, harness the potential of science and technology developed within Indiana, nurture technology transfers and enhance the power of scientific creativity.

"Indiana's long-term prosperity depends greatly upon the successful transfer of technological innovation into the markets for the production of goods and services," said Michael Hicks, CBER director and co-author of the report with Srikant Devaraj, CBER's senior research associate and project manager. 

"Indiana is transitioning from a manufacturing-based economy to one that is more technologically centered," Hicks added. "The study found the state has done a good job in investing in several industries that focus heavily on research and development (R&D), including advanced manufacturing and engineering, information technology and software development, and life sciences and health care."

Hicks said the fund is not intended to perform as a traditional economic development tool. The fund's size relative to the state's economy and the focus on commercialization of R&D make it unable, in the short- to medium-term, to affect the industrial mix of employment, incomes or establishments. 

However, CBER researchers estimated the fund's impact on short-term job creation in Indiana at a cost of about $14,000 per position, which is slightly higher than the most effective job creation incentives.

"Real disposable income grew by $315 million since 1999, and the state's population grew by about 3,000 people as a result of highly skilled employees migrating to the state as well as talented Hoosiers staying put to take advantage of new jobs in these technology centered fields," Hicks said. "Compared to direct economic development incentives, this program ranks as moderately effective, a strong achievement given that is not its goal."

The study also found:

·       The fund appears to be operating on best practices with respect to its narrow industry focus and peer review. These practices offer considerable benefit in terms of improving commercialization infrastructure in Indiana.
·       The adjustment of the fund towards more probable commercialization activities between 2003 and 2005 also represents a significant adjustment in line with the best practices in the field for this time period.
·       Best practice models in today's entrepreneurial environment involve venture development organizations leveraging regional resources, angel outreach programs, centers of excellence and local sources of capital and talent. The fund appears to adjust quickly to best practices.
·       Indiana's review process is state-of-the-art as compared to its peers.

Hicks said CBER's analysis was providing extremely conservative numbers of the fund's economic impact because research into state venture capital funds needs several decades to evaluate real return on investment (ROI).

"More importantly, the fund has played a pivotal role in attracting private and institutional investors, creating a leverage ratio of 1:3 to 1:4. By leveraging these investments, which total about $1 billion dollars, the fund has created an entrepreneurial ecosystem that is flourishing," concluded Hicks.

The study is available online at https://www.bsu.edu/Academics/CentersandInstitutes/BBR/CurrentStudiesandPublications.aspx.

By Marc Ransford, Senior Communications Strategist