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National and Regional Economic Impacts of Engineering Research Centers: A Pilot Study
Final Report November 2008
SRI Project P16906
Submitted to the Engineering Education and Centers Division, National Science Foundation, under Govt. Prime Contract No. GS10F0554N/SIN 874-1, Contract No. D050513
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Table of Contents
TABLE OF CONTENTS ................................................................................................................................. I
ACKNOWLEDGEMENTS ........................................................................................................................... III
DISCLAIMER ............................................................................................................................................ III
I. INTRODUCTION AND BACKGROUND ..................................................................................................... 1
REGIONAL ECONOMIC IMPACT OF THE MICROSYSTEMS PACKAGING RESEARCH CENTER: STUDY SUMMARY ...................... 2 Initial Plan for the Pilot Study................................................................................................................ 6
II. ANALYTICAL FRAMEWORK FOR IDENTIFYING REGIONAL AND NATIONAL ECONOMIC IMPACTS .......... 9
BACKGROUND – THE ECONOMIC RATIONALE FOR ERCS ......................................................................................... 9 Objective of Pilot Study Economic Impact Assessment ....................................................................... 11 Review of Relevant Impact Assessment Literature ............................................................................. 11 Initial Framework for Analyzing the Economic Impact of ERCs ........................................................... 15 Categories of Impacts and Initial Approach to Estimation.................................................................. 16 Impacts of Center Spending Attributable to Financial Inputs from Out-of-Region Sources ................ 18
III. INITIAL DATA COLLECTION EFFORTS AND SUBSEQUENT REVISION OF STUDY DESIGN .................... 19
DATA COLLECTION EFFORTS IN 2006 ............................................................................................................... 19 Revised Strategy for Data Collection ................................................................................................... 21 Changes in Conceptual Structure and Data Collection Emphasis Resulting from BPEC, PERC, and CNSE Experiences ......................................................................................................................................... 22 CNSE Industry Interview Protocol: Short Version ................................................................................ 24
DATA COLLECTION EXPERIENCE, 2007: MICHIGAN’S WIRELESS INTEGRATED MICROSYSTEMS CENTER AND VIRGINIA TECH’S
CENTER FOR POWER ELECTRONIC SYSTEMS ........................................................................................................ 24 CPES and WIMS Industry Interview Protocol: Short Version ............................................................... 25
EXTENSION OF STUDY TO INCLUDE TWO ADDITIONAL CASES ................................................................................. 26
IV. CASE STUDY RESULTS ........................................................................................................................ 28
CALTECH’S CENTER FOR NEUROMORPHIC SYSTEMS ENGINEERING .......................................................................... 28 Introduction to the Center for Neuromorphic Systems Engineering (CNSE) ....................................... 28 Types of Economic Impact Data Available from the CNSE .................................................................. 30 Regional Economic Impacts of the CNSE ............................................................................................. 34 The CNSE’s Indirect and Induced (Secondary) Economic Impacts on California .................................. 41 National Economic Impacts of the CNSE ............................................................................................. 44 The CNSE’s Total Direct Economic Impact on the United States ......................................................... 49 The CNSE’s Indirect and Induced (Secondary) Economic Impacts on the United States ..................... 50 Other Impacts of the CNSE .................................................................................................................. 52 Conclusions and Observations ............................................................................................................ 53
VIRGINIA TECH’S CENTER FOR POWER ELECTRONICS SYSTEMS ............................................................................... 55 Introduction to the Center for Power Electronics Systems (CPES) ....................................................... 55 Types of Economic Impact Data Available from CPES ......................................................................... 59 Regional Economic Impacts of CPES ................................................................................................... 61 CPES’ Total Direct Regional Economic Impact .................................................................................... 67 CPES’ Indirect and Induced (Secondary) Economic Impacts on Partner States .................................. 67 National Economic Impacts of CPES .................................................................................................... 70 CPES’ Total Direct Economic Impact on the United States ................................................................. 74
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CPES’ Indirect and Induced (Secondary) Economic Impacts on the United States ............................. 74 Other Impacts of CPES......................................................................................................................... 76 Conclusions and Observations ............................................................................................................ 81
UNIVERSITY OF MICHIGAN’S CENTER FOR WIRELESS INTEGRATED MICROSYSTEMS .................................................... 83 Introduction to the Center for Wireless Integrated Microsystems (WIMS) ......................................... 83 Types of Economic Impact Data Available from WIMS ....................................................................... 86 Regional Economic Impacts of WIMS .................................................................................................. 87 WIMS’ Total Direct Economic Impact on Michigan ............................................................................. 95 WIMS’ Indirect and Induced (Secondary) Economic Impacts on Michigan ........................................ 96 National Economic Impacts of WIMS .................................................................................................. 99 WIMS’ Total Direct Economic Impact on the United States .............................................................. 103 WIMS’ Indirect and Induced (Secondary) Economic Impacts on the United States ......................... 104 Other Impacts of WIMS ..................................................................................................................... 106 Conclusions and Observations .......................................................................................................... 108
JOHNS HOPKINS CENTER FOR COMPUTER-INTEGRATED SURGICAL SYSTEMS AND TECHNOLOGY (CISST) ...................... 110 Introduction to the Center ................................................................................................................. 110 Types of Economic Impact Data Available from CISST ...................................................................... 113 Regional Economic Impacts of CISST ................................................................................................. 114 CISST’s Total Direct Regional Economic Impact ................................................................................ 119 CISST’s Indirect and Induced (Secondary) Economic Impacts on Partner States .............................. 119 National Economic Impacts of CISST ................................................................................................. 122 CISST’s Total Direct Economic Impact on the United States ............................................................. 124 CISST’s Indirect and Induced (Secondary) Economic Impacts on the United States ......................... 125 Other Impacts of CISST ...................................................................................................................... 126 Conclusions and Observations .......................................................................................................... 132
GEORGIA TECH/EMORY CENTER FOR THE ENGINEERING OF LIVING TISSUE ............................................................. 134 Introduction to the Center ................................................................................................................. 134 Types of Economic Impact Data Available from GTEC ...................................................................... 136 Economic Impacts of GTEC on Georgia ............................................................................................. 138 GTEC’s Total Direct Regional Economic Impact ................................................................................ 143 GTEC’s Indirect and Induced (Secondary) Economic Impacts on Georgia ........................................ 143 National Economic Impacts of GTEC ................................................................................................. 146 GTEC’s Total Direct Economic Impact on the United States ............................................................. 149 GTEC’s Indirect and Induced (Secondary) Economic Impacts on the United States ......................... 149 Other Impacts of GTEC ...................................................................................................................... 152 Conclusions and Observations .......................................................................................................... 158
V. SUMMARY AND IMPLICATIONS ....................................................................................................... 160
QUANTIFIABLE REGIONAL AND NATIONAL ECONOMIC IMPACTS OF ERCS .............................................................. 160 OTHER ECONOMICALLY SIGNIFICANT IMPACTS OF ERCS ..................................................................................... 164 LESSONS LEARNED: IDENTIFYING AND MEASURING THE ECONOMIC IMPACTS OF ERCS ............................................. 166
APPENDIX A: DATA REQUIREMENTS AND DATA SOURCE TABLES SENT TO TARGET ERC DIRECTORS AND STAFF ................................................................................................................................................... 170
Data Needs and Sources for ERC Economic Impact Study................................................................. 170 Univ. of Florida PERC: Preliminary Estimates .................................................................................... 171
APPENDIX B: INTERVIEW PROTOCOL FOR INDUSTRY MANAGERS DEVELOPED FOR CNSE CASE ........... 173
Start-up companies ........................................................................................................................... 173 Established Companies ..................................................................................................................... 173
APPENDIX C: INTERVIEW PROTOCOL FOR INDUSTRY MANAGERS DEVELOPED FOR CPES AND WIMS CASES ................................................................................................................................................... 175
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Acknowledgements Many thoughtful and busy people have contributed to this study, and we wish to thank all of them and acknowledge their contributions. Foremost among them are our NSF colleagues and clients, Lynn Preston and Linda Parker, whose foresight led to the initiation of the project, and whose flexibility, understanding, and unflagging support in the face of unexpected difficulties are greatly appreciated. Second, we acknowledge with deep gratitude the cooperation, openness, hospitality, and substantial assistance we have received from the many ERC faculty and staff whom we contacted and worked with to develop the data for the study. It has been a pleasure to meet such dedicated, accomplished, and delightful people, from whom we have learned much . Third, we wish to thank the many people in industry and academia we interviewed for the study. Their candor, willingness to talk with us, and commitment of their valuable time to help us are very much appreciated. Finally, thanks to the talented SRI staff who contributed their time, expertise, and understanding to this long and complex project: Quindi Franco, Sushanta Mohapatra, Jennifer Ozawa, Lynne Manrique, Jongwon Park, Kamau Bobb, Robin Auger, and Erika Sellers. David Roessner Principal Investigator
Disclaimer
Any opinions, findings, and conclusions expressed in this report are those of the project team and do not necessarily express those of the National Science Foundation.
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I. INTRODUCTION AND BACKGROUND
The NSF’s Engineering Research Centers (ERC) Program was initiated in
1985 as a government-university-industry partnership with advancing U.S.
industrial competitiveness as one of its objectives. In a limited effort to
exemplify one aspect of the program’s merit, in 2004, SRI International
conducted a study of the regional economic impact of the Microsystems
Packaging Research Center at the Georgia Institute of Technology (Georgia
Tech), an NSF Engineering Research Center in its tenth year of NSF support.
The study, supported by the Georgia Research Alliance, was the first and
only quantitative economic impact study of any single ERC or of the ERC
program as a whole. The results of this study, when used to calculate a
―return on investment‖ figure, suggested that Georgia received a 10 to 1
return on its investment through economic impacts at the state level.1 These
results suggested to NSF the potential value of conducting additional impact
studies--not just of the regional economic impact of selected ERCs but of
their national impact as well. Consequently, NSF requested that SRI apply an
appropriately modified version of the approach used for the Georgia Tech
study to cover the national and regional (state) economic impacts for three
other centers in the ERC class of 1994-5. This was to be a pilot study to
explore the feasibility of obtaining economic impact estimates from ERCs that
were at or near their transition from NSF ERC Program support, with the
hope that the results of the study would clearly illustrate the Program’s
economic benefits.
This document is the final report of a pilot study of national and regional
economic impacts of five selected ERCs. The report is organized as follows.
The remainder of this chapter provides pertinent background information: a
summary of the predecessor study of the Microsystems Packaging Research
Center and a discussion of the initial plan for the ongoing pilot study. Chapter
II describes the underlying analytical framework for identifying regional and
national economic impacts, including a review of relevant economic impact
assessment literature and the initial approach to ERC economic impact
estimation. Chapter III describes the initial data collection efforts and the
subsequent revision of the pilot study design. Chapter IV reports results in
the form of case analyses of the five ERCs studied:
1 There are numerous qualifications and caveats that apply to a ―return on investment‖ interpretation of the
Georgia study results. Despite these limitations, the Georgia client asked for such an estimate and SRI agreed to calculate the ROI despite our reservations about using results of input-output modeling for this purpose. Generally, such models are designed to estimate the anticipated payoff from targeted investment attraction efforts and traditional economic development projects. In general, ROI is an inappropriate approach for estimating the economic impact of long-term investments in research and education programs.
2
The Center for Neuromorphic Systems Engineering at CalTech
The Center for Power Electronic Systems at Virginia Tech
The Wireless Integrated MicroSystems ERC at the University of
Michigan
The Center for Integrated Surgical Systems and Technology at Johns
Hopkins University
The Georgia Tech/Emory Center for the Engineering of Living Tissue.
Finally, Chapter V summarizes the results of the pilot study and discusses the
study’s implications for future evaluations of ERC-like centers.
Regional Economic Impact of the Microsystems Packaging Research Center: Study Summary2
The Microsystems Packaging Research Center (PRC) of the Georgia Institute
of Technology represents a major example of a state’s investment in its
science and technology infrastructure.3 Between 1995 and 2004, Georgia
invested $32.5 million in the PRC through Georgia Tech and the Georgia
Research Alliance. As a National Science Foundation Engineering Research
Center, the PRC’s base award funding ceased in 2005, creating a need to
look systematically at both the PRC’s past performance and its future outlook.
Georgia’s investment in the PRC required an enlightened and long-term view
of the kinds of investments that are required to produce long-term,
sustainable economic growth. Accordingly, SRI International, under contract
from the Georgia Research Alliance, was asked to conduct an assessment of
the economic impact on Georgia of the existence of the PRC. The purpose
of the study was, in effect, to answer the question: what has been the payoff
to the taxpayers of Georgia from their decade of investment in the PRC? As
outlined below, the study results indicated that there was a substantial,
quantifiable economic impact on the state.
The direct economic impact on the state of Georgia from the existence of the
PRC was calculated by looking at both external support to the PRC and at
the economic impacts of PRC activities and expenditures. First, the technical
and human resources embodied in the PRC attracted large amounts of cash
and in-kind support from external sources (those outside Georgia). Second,
the PRC’s expenditures on research, education, and related activities led, in
turn to a variety of other direct economic impacts on the state, including
2 This section is based on SRI’s final report to the Georgia Research Alliance, The Economic Impact on Georgia of Georgia
Tech’s Packaging Research Center, Arlington, VA: SRI International, October 2004. 3 Another example of ―a state’s investment in its science and technology infrastructure‖ would be the four California state
initiatives based at UC campuses – see http://www.ucop.edu/california-institutes/about/about.htm
3
creating numerous benefits to Georgia firms that have interacted with the
PRC, and cost savings and other benefits to Georgia firms that have hired
PRC graduates. SRI’s analysis of these impacts showed a total, quantifiable
direct impact on Georgia of nearly $172 million over the PRC’s ten-year
history. The variety of sources of external support for the PRC and the types
of impacts the PRC has had on Georgia are depicted in Figure 1.1. SRI’s
analysis of these impacts showed a total, quantifiable direct impact on
Georgia of nearly $192 million over its ten-year history. Figure 1.2 shows
breakdowns of the sources and amounts of external support to the PRC;
Figure 1.3 shows a similar breakdown of the sources of direct impact on
Georgia economy of the PRC’s outputs: jobs created, value of pro bono
consulting by PRC staff to Georgia companies, and the value to Georgia
firms attending the PRC’s industry workshops.
Figure 1.1
External Support to the PRC and Sources of Economic Impact on Georgia
NSF
support
to PRC
PRC
member
support
Sponsored
research
support to
PRC
Cost savings to
GA firms hiring
PRC grads
Jobs created by
PRC spin-in
companies Value of PRC
workshops and
short courses to
GA firms
Pro bono
assistance to GA
companies
Jobs created by
PRC start-up
companies
Other benefits
to GA PRC
member firms
Consulting
income to PRC
faculty/staff
Direct Impact of PRC on
Georgia’s Economy
License fees
and royalty
income from
PRC inventions
NSF
support
to PRC
NSF
support
to PRC
PRC
member
support
PRC
member
support
Sponsored
research
support to
PRC
Sponsored
research
support to
PRC
Cost savings to
GA firms hiring
PRC grads
Jobs created by
PRC spin-in
companies Value of PRC
workshops and
short courses to
GA firms
Pro bono
assistance to GA
companies
Jobs created by
PRC start-up
companies
Other benefits
to GA PRC
member firms
Consulting
income to PRC
faculty/staff
Consulting
income to PRC
faculty/staff
Direct Impact of PRC on
Georgia’s Economy
License fees
and royalty
income from
PRC inventions
4
Figure 1.2
External Support to the PRC
Figure 1.3
Other Sources of the PRC’s Direct Economic Impact
Increased Employment$18,192,723
Technical Workforce$2,410,000
Other benefits$675,000
NSF$34,609,099Sponsored
Research$55,284,763
Membership Fees$7,474,795
In-kind$52,680,910
IP$15,000
Workshop spending$389,980
5
The more than $170 million in PRC direct impacts over its ten-year history
produced ―ripple‖ effects that continue to impact Georgia’s economy. These
ripple effects include indirect impacts--purchases of goods and services from
other firms that directly benefit from PRC-related activities-- and induced
impacts--purchases of goods and services (food, housing, etc.) by employees
whose earnings are derived from PRC-related activities. These ripple effects
are substantial, typically doubling the value of most direct economic impacts.
Because of the short time available for SRI’s analysis and the lack of directly
applicable previous studies, SRI used the Bureau of Economic Analysis’
Regional Input-Output Modeling System (RIMS II)4 to estimate secondary
impacts. In addition to being readily available and affordable, RIMS II has
been shown to produce estimates that are similar to the estimates based on
relatively expensive original surveys and models.5 Because of its affordability
and ease of use, RIMS II is most likely the source of many of the multipliers
used in university and research center impact studies. In the case of the
PRC, SRI estimated that indirect and induced impacts of the PRC amount to
$134 million, so that the total quantifiable impact of the PRC’s existence was
conservatively estimated to be $306 million over ten years (Figure 1.4).
Figure 1.4
Breakdown of Total Economic Impact of the PRC on Georgia’s Economy
An alternative approach to considering the PRC’s economic impacts is to
take into consideration the number of jobs its activities have created and
supported. The PRC directly employed research faculty, support staff, and
4 See: U.S. Department of Commerce, Bureau of Economic Analysis), Regional Multipliers: A User Handbook for the Regional
Input-Output Modeling System (RIMS II). Washington, DC: US Government Printing Office, 1997. 5 See: Sharon, Hastings and Latham, ―The Variation of Estimated Impacts from Five Regional Input-Output Models‖,
International Regional Science Review 13: 119-39, 1990; and Lynch, Tim, ―Analyzing the economic Impact of Transportation Projects Using RIMS II, IMPLAN and REMI‖ Report for U.S. Department of Transportation, Florida State University, 2000.
External Income
$150,454,54749%
Increased Employment$18,192,723
6%Workforce$2,410,000
1%
Other Direct$675,000
0%
Indirect & Induced from
External Income
$126,021,24141%
Indirect & Induced from Employment$8,259,496
3%
6
students. It was also a key influence in the attraction of several companies to
Georgia (new ventures or relocations by existing companies partly
attributable to the PRC), and its research helped create several start-up
companies that located in Georgia. The value of these ―direct‖ jobs,
amounting to more than $18 million (396 jobs over ten years, or 3960 person-
years of employment), was accounted for as a direct economic impact (see
Figure 1.3). But these jobs and the day-to-day operations of the PRC further
support other jobs in Georgia that supply goods and services directly or
indirectly to the PRC and its employees. The approach outlined above for the
calculation of secondary impacts showed that the PRC’s activities supported
an additional 343 jobs annually in Georgia over the PRC’s ten-year history.
Initial Plan for the Pilot Study
In developing the plan for the pilot study of both national and regional
economic impacts of the ERCs, NSF and SRI agreed that several criteria
were important in selecting which centers to study:
Selected centers should be in the class of 1994-95 so that the
impacts of the full eleven years of NSF support would be included;
The centers should have no out-of-state partner institutions, which
would complicate data collection and the regional impact analysis;
and
A range of types of centers should be included to reflect a variety
of technical fields, relative start-up activity, and incremental vs.
transformational stage of technology development.
Using these criteria, the three centers initially selected for study were the
Biotechnology Process Engineering Center at MIT (BPEC, second funding
award only), the Center for Neuromorphic Systems Engineering at Cal Tech
(CNSE), and the Particle Engineering Research Center at the University of
Florida (PERC).
Furthermore, the data collection strategy would follow that used in the
Georgia Tech study, which relied upon the extensive support, activity, and
output data reported annually to NSF and contained in center annual reports;
center records; interviews with center staff, especially the Director, Depurty
Director, Industrial Liaison Officer, and Education Director; interviews with
representatives of start-up companies; and interviews with companies whose
interactions with the center had resulted in significant, already realized
economic impacts (i.e., in NSF parlance, a subset of technology transfer
―nuggets‖). The last category of data would provide the primary basis for the
national economic impact analysis.
7
Based on the extensive knowledge of ERC outputs and impacts that has
been gained over nearly two decades of experience, we knew that research-
related center outputs (ideas, research results, models, proof-of-concept,
prototypes, test results, algorithms) generally have not realized their full
economic potential--they require substantial additional time and investment
by industry. Like a portfolio of venture investments, the proportion of ERC
outputs that have realized significant, measurable economic impacts even
after ten years is quite small, perhaps two or three per center. Thus, the
study’s estimate of national industry impact takes advantage of the fact that
the distribution of the value of outputs from programs that support risky
ventures (e.g., research, entrepreneurship, venture investments) is highly
skewed. Only a fraction of the unit outputs are highly valued, whatever
measure of value is used, with the great majority of unit outputs generating a
small proportion of the program’s total impact. If the value of only the most
successful outputs can be measured carefully and validated, the result would
capture a large proportion of the value of the total output.6 Thus, our plan for
the pilot study assumed that a careful selection from each ERC of the 2-3
nuggets that indicate the highest economic impact will permit us to capture
the bulk of that ERC’s measurable economic impact on industry. (A more
complete presentation of the analytical framework used in this pilot study
appears in the following chapter.)
In addition, we knew that data on ERC impacts on firms, including student
hires, intellectual property, cost savings, increased profits, etc., if available,
would have to be broken down by location of the impacted firm (in-state/out-
of-state U.S./foreign), information obtainable only from ERC administrative
records and center staff. Further, we also knew that the profile of national
impacts would look quite different from that of the regional impacts, as the
very large proportion of regional impacts generated from what amount to
pass-through expenditures by the ERC of financial support from NSF, other
federal agencies, and industry would not be reflected in the national impact
profile. Rather, as suggested above, the bulk of national impacts would be
derived primarily from the economic impact of ERC outputs rather than
expenditures. Thus the national impact study would devote considerable
attention to developing data on the centers’ impact via start-ups and via the
measurable economic impact of research outputs, students, and related
activities on member firms and their markets.
The initial plan called for detailed development of the conceptual model for
measuring and analyzing national impacts by late 2005, collection of data
6 Recently Scherer and Harhoff (―Technology Policy for a World of Skew-distributed Outcomes,‖ Research Policy, 29 (2000):
559-566) studied the size distribution of financial returns from eight sets of data on inventions and innovations attributable to private sector firms and universities. They found that the distributions were all highly skewed, with the top 10% of sample members capturing from 48 to 93 percent of the total sample returns.
8
from the three selected ERCs during 2006, and data analysis and reporting
during the first half of 2007. As we will report in Chapter III, however, this
plan could not be implemented as originally conceived. The following chapter
describes the analytical framework for estimating the national and regional
economic impacts of ERCs we devised initially, including a discussion of the
expected advantages and shortcomings of this approach as well as
alternatives. In Chapter III we also discuss modifications to the framework
that reflected our experience with the initial site visits.
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II. ANALYTICAL FRAMEWORK FOR IDENTIFYING REGIONAL AND NATIONAL ECONOMIC IMPACTS
Background – The Economic Rationale for ERCs
As much as two thirds of economic growth in U.S. metropolitan regions in the
1990s was concentrated in high technology industries.7 Meanwhile,
technological and other innovations in the information technology sector
accounted for almost one-third of total real economic growth between 1996
and 2003, and nearly three-quarters of the growth in labor productivity
between 1996 and 2001.8 Economists see innovation broadly as the most
important way to raise standards of living over the long term. Because of
innovation market failures,9 innovation’s economic importance, and the
broader social benefits derived from new products and processes,
governments have supported innovation in a variety of ways.
One of the most visible public supports to innovation in the U.S. has been
direct government funding of research and development (R&D), often carried
out in universities. The basic impact logic is that publicly funded R&D leads to
economic impacts by generating new knowledge and technologies that are
commercialized by industry. Ultimate social impacts are generated when
new products are used in the market, creating consumer value (or lowering
prices). Mansfield estimated that some 10 percent of industrial innovation
would not have occurred without academic research.10
Within this framework, policymakers have recognized the importance of
enhancing the flow of industry-oriented academic research from academia to
industry. This recognition has led to federal and state government support of
university-industry research centers with provisions to conduct industry-
relevant research and encourage university-based start-ups and
entrepreneurs.11
7 DeVol, R. C., America’s High Tech Economy: Growth, Development, and Risk for Metropolitan Areas. Santa Monica, CA,
Milken Institute, 1999. 8 Council of Economic Advisers, Economic Report of the President, 2005: 136. Department of Commerce, Digital Economy
2003, 2003. 9 Economists generally agree there are several market failures surrounding innovation that make social returns from innovation
higher than the private returns. Because of this divergence, without public interventions, there would be underinvestment in R&D. First are appropriability problems, namely that one firm’s investment in innovation leads to benefits (―spillovers‖) that accrue to other firms or primarily to consumers. If investing firms cannot appropriate these benefits, they have a weak incentive to undertake R&D. Second are information problems in the market for innovations. Here, consumers and firms have to make purchasing decisions for products that are, by definition, new and untested. Because of the difficulty of accurately and convincingly communicating the quality of innovations, markets will inadequately fund research and commercialization activities. 10
Mansfield, E. ―Academic Research and Industrial Innovation,‖ Research Policy 20, 1 (1991): 1-13. 11
See, for example, L.G. Tornatzky, P.G. Waugaman, and D.O. Gray, Innovation U.—New University Roles in a Knowledge Economy. Research Triangle, NC: Southern Growth Policies Board, 2002; H. Brooks and L. P.
Randazzese, ―University-Industry Relations: The Next Four Years and Beyond‖ and C. M. Coburn and D. M. Brown, ―State Governments: Partners in Innovation,‖ in L. M. Branscomb and J. H. Keller, eds., Investing in
10
The NSF ERC Program, initiated in 1985, represented an ambitious effort to
stimulate the formation of university-based industrial consortia while at the
same time seeking to change the culture of engineering research and
education. Although one of the key initial political rationales for the creation
of ERCs, increased U.S. industrial competitiveness, currently is of lesser
concern, other ERC objectives remain salient: promote interdisciplinary
research and teaching, promote a team approach to research, and introduce
students to industry needs and perspectives. To encourage the conduct of
longer-term, high-risk research and the formation of an enduring change in
the institutional setting of engineering research and education, NSF supports
each ERC for ten years (subject to intensive reviews every three years) at a
level averaging $2.5 million annually for each center. ERCs are supported by
a combination of NSF core support, other federal agency research grants and
contracts, state and/or university money, and industry membership fees,
contracts, and in-kind contributions.
Though research is an important aspect of ERC activities, ERCs were
organized to have impacts above and beyond those embodied in their
research outputs. In particular, they can have an economic impact by
improving the country’s high-tech businesses operating environment by
supporting:
Research – Conducting high-risk, long-term research, increasing the
flow of new ideas, knowledge and techniques to key industry sectors.
Education & Training – Improving the national engineering workforce
through better learning environments (interdisciplinary, team-based,
industry-oriented). Students involved with ERCs could be expected to
be better prepared to contribute to company objectives, and to
contribute sooner than new hires lacking the center experience.
ERCs also provide continuing education services, helping scientists
and engineers already in the workforce stay up-to-date on the latest
developments.
Infrastructure & Other Services – ERCs are more than just professors,
classes, and research projects. ERCs purchase sophisticated
equipment and assemble that equipment into laboratories and digital
networks that can be valuable resources to industry. ERC staff often
serve as consultants (formal or informal) to industry and area start-up
or spin-off companies. Furthermore, ERCs create and support
venues for strengthening business and academic networks that help
in information and knowledge sharing (social capital). One additional
Innovation. Cambridge, MA: MIT Press, 1998; S. Slaughter and L L. Leslie, Academic Capitalism. Baltimore: The Johns Hopkins University Press, 1997.
11
area is ―testbeds.‖ In many ERCs, it is a physical initiated only
because of ERC funding. Otherwise most academic centers would
not consider building a testbed.
ERCs can be expected to have an economic impact on the regions where
they operate through these mechanisms, and ultimately have economic and
other impacts on the larger society.
Objective of Pilot Study Economic Impact Assessment
The original objective of this pilot study was to estimate the national and state
economic impacts of three specific ERCs over their award period, 1994-95 to
the present. As noted in the preceding chapter, three ERCs were initially
planned for study: the Biotechnology Process Engineering Center at MIT
(second funding award only), the Center for Neuromorphic Systems
Engineering at Caltech, and the Particle Science and Technology Center at
the University of Florida. The assessment was to be retrospective, i.e.,
documenting and analyzing the already realized economic impacts of the
ERCs’ activities, and so would not estimate the potential future economic
impact of ERC activities and outputs to date.
The study’s initial emphasis was on developing quantitative estimates of
economic impact. Recent SRI studies of the impact of ERCs on industry, as
well as related literature on the economic impact of academic research
activities, suggest that often the value of long-term, less tangible benefits to
firms may exceed the value of more easily quantifiable economic benefits.
However, it has proven difficult and expensive to obtain reliable, quantitative
estimates of these less tangible benefits, so the initial study design focused
on quantifiable, economic impacts, recognizing that by doing so we would
almost certainly underestimate the actual economic impacts of ERCs. We
sought estimates of both regional and national economic impacts of each
ERC studied.
Review of Relevant Impact Assessment Literature
While analysts have worked for decades to better assess and understand the
impacts of government research programs, projects, and activities, there are
currently no standardized frameworks, methodologies, or even measures of
impact.12 Indeed, government-funded R&D programs raise new issues in
performance measurement and evaluation.13 This is especially true of
programs such as the NSF ERC Program, which can be expected to have
12
Tassey, Gregory, ―Methods for Assessing the Economic Impacts of Government R&D‖, NIST Planning Report 03-1, 2003. 13
Georghiou, L. & D. Roessner, ―Evaluating Technology Programs: Tools and Methods‖ Research Policy; 29,(4-5), 2000:657-678.
12
many different types of impacts because the centers conduct fundamental,
long term R&D while simultaneously serving related educational and
industrial service roles. As ERCs broadly share characteristics of R&D
programs more broadly (research), universities (education), and industry
extension programs (infrastructure, start-up, and consulting services), it is
useful to review approaches in the literature to estimating the economic
impact of these kinds of organizations and programs. These are summarized
below and in Table 1 on the following pages.
University Impact Studies – University impact studies are normally
undertaken by individual universities to quantify their economic impact
on the communities in which they operate. Most of these use an
expenditure-based impact framework that closely follows that
developed by the American Council on Education.14 Included are
salary expenditures by the institution, non-salary purchases by the
institution, spending by students, and spending by visitors. A smaller
group of these studies also attempts to calculate the value of
universities in terms of improving a region’s labor force15 and their role
in fostering start-up companies.
Research Center/Program Impact Studies – There are two broad
categories of research center/program impact studies. One, like
university impact studies, seeks to determine the specific local
economic impact of having a research center in a given community. In
other words, these studies estimate the economic impact of a center’s
activities (researcher salaries, equipment purchases, etc.), not the
impact of the outputs of those activities (new knowledge, education,
etc.). These studies tend to use an expenditure-based framework
consisting of three broad expenditure categories: salaries, other
institutional spending, and visitor expenditures (particularly for medical
centers).
While many of these studies do document the number of start-ups
and intellectual property being generated by the research centers, few
assign an economic impact to them. A second set of research impact
studies, often called net social benefits analyses, attempts to estimate
the impact of research outputs (innovations, new knowledge, etc.)
rather than inputs or activities. One approach used in these types of
studies is to estimate producer and consumer surplus in order to
14
Caffrey, John and Herbert Isaacs, ―Estimating the Impact of a College or University on the Local Economy‖ American Council on Education (ACE), 1971. 15
See, for example, Robert Carr and David Roessner, Economic Impact of Michigan’s State Universities. Final report to the Michigan Economic Development Corporation, Arlington, VA: SRI International, May 2002.
13
measure the social and private returns to investments in innovation.16
Another approach has been to construct a ―counterfactual‖ model to
determine the returns to public investments.17 Both methods rely on
firm-level reporting of private investments and cost savings, detailed
knowledge of the supply-demand conditions in each industry and, in
the counterfactual approach, an estimate of what costs (benefits)
would have been in absence of the publicly funded technology.
Industrial Extension Programs – Industrial extension programs,
offering training, consulting, information sharing and other services,
have been established to enhance the competitiveness of targeted
firms (usually smaller firms) in order to increase economic
competitiveness and raise standards of living. Impact assessments of
these programs are most often based on micro, firm-level surveys that
collect data on participating firm outcomes (profits, value-added,
energy use, employment, etc.). These outcome measures for
participating firms can then be compared with those of a control group
of non-client firms.18
In summary, analysts have developed and applied a number of approaches
to estimating the economic impact of a variety of programs to answer a
variety of questions. As ERC activities span all of these program types, an
appropriate approach will include elements of each of these approaches.
16
See: Griliches, Z., ―Research costs and social returns: hybrid corn and related innovations.‖ Journal of Political Economy, 1958; Mansfield, et al , ―Social and private rates of return from industrial innovations.‖ Quarterly Journal of Economics, 91 (2), 1977: 221-240. 17
See: Link and Scott (Public Accountability: Evaluating Technology-Based Institutions. Boston, MA: Kluwer, 1998.) and Tassey (2003), which reviews NIST’s experience with this approach. 18
See Georghiou and Roessner (2000), Section 5, for a brief review of these studies. Several extension program impact studies have been conducted since that time, generally following the same approach.
14
Table 2.1
Summary Of Selected Impact Studies
Study Impact Area Approach Used Impact
University Impact Studies*
Georgia Center for Continuing Education (1996)
10 GA counties
Modification of ACE expenditure framework.
Total economic impact of $20.2 million on direct effects of $10.5 million.
Economic Impact of Michigan’s State Universities (2002)
State (MI) Combined impacts of expenditures, value of education-premium, and technology licensing and start-ups.
Every $1 of state support generated $26 of impacts, for total net impacts of $39 billion.
Emory University (2000)
Atlanta Metro area
Expenditure framework (ACE) with I-O multipliers from RIMS. Aggregate output multiplier of 2.24.
In 1999, Emory had a direct economic impact of $1.5 billion and $3.4 billion total.
Research Center/Program Impact Studies**
Centers for Disease Control (2002)
State (GA) Expenditure based framework, multipliers from RIMS. Aggregate multiplier of approx. 2 used.
CDC’s 1.3 billion spending in GA resulted in $2.5 billion in increased output.
New York Centers for Advanced Technology (1992)
State Benefit-cost framework of direct impacts – secondary impacts not examined.
State investment of $61 million generated benefits of $190 (low estimate) to $360 million (high estimate).
University of Kentucky Research and External Funding (2004)
State Expenditure based framework with I-O multipliers from IMPLAN model. “Research multiplier” of 1.8.
State funding of research of $49 million helped generate additional $189 in external funding for research, which had a total impact of $311 million.
ATP Photonics Cluster (2005)
National Case-study based cost-benefit analysis of industry technology users and general public.
Net present value of ATP investment of $272-$345 million and public IRR of 48-51 percent.
ATP 2mm Project (2004)
National Case-study interviews and hedonic-pricing model to estimate micro-impacts; macroeconomic modeling of national impacts.
Created 1,400 jobs, added around $190 million to GDP.
Industrial Extension Program Impact Studies***
Georgia Manufacturing Extension Alliance (1998)
Georgia Survey of clients and “control” group.
Net public and private benefits of $10-26 million in GMEA’s first year; ROI of 1.2-2.7.
Pennsylvania Industrial Resource Centers (1999)
Pennsylvania Quasi-experimental design to compare clients with non-client control group and account for other outside factors.
Increased labor productivity 3.6-5 % over control group, additional $2 billion in Gross State Product.
* Georgia Center for Continuing Education, Economic Impacts of the Georgia Center on Surrounding
Communities. Athens, GA: Department of Marketing Services, Georgia Center for Continuing Education, The University of Georgia, 1996. Available at: www.gactr.uga.edu/gcq/gcqfall96/economic.html; Robert Carr and David Roessner, Economic Impact of Michigan’s State Universities. Final report to the Michigan Economic Development Corporation, Arlington, VA: SRI International, May 2002; Emory University, ―Economic Impact in Atlanta.‖ Atlanta, GA: Emory University, 2004. Available at: www.empory.edu/WELCOM/EconomicImpact/totalimpact.html.
15
** KPMG, Centers for Disease Control and Prevention and Agency for Toxic Substances and Disease Registry: Assessment of Annual Financial Activities Within the State of Georgia. September, 2002; SRI International, New York State Centers for Advanced Technology Program: Evaluating Past Performance and Preparing for the Future. Report prepared for the New York State Science and Technology Foundation. Menlo Park, CA: SRI International, 1992; University of Kentucky, Economic Impact from Research and Total External Funding at the University of Kentucky Fiscal Years 1989-2000. Lexington, KY: Center for Business and Economic Research, University of Kentucky, September 2000; University of Kentucky, ―Research Impact.‖ Lexington, KY: Office of Research and Economic Development, University of Kentucky, 2004. Available at: www.rgs.uky.edu/impact.html; Pelsoci, Thomas, Photonics Technologies: Applications in Petroleum Refining, Building Controls, Emergency Medicine, and Industrial Materials Analysis. NISTGCR-05-879.
Gaithersburg, MD: Advanced Technology Program, NIST, 2005; Polenske, Karen R., Nicolas O. Rockler, and Other Members of the Research Team, Closing the Competitive Gap: A Retrospective Analysis of the ATP 2mm Project. NIST GCR 03–856. Gaithersburg, MD: Advanced Technology Program, NIST, 2004.
*** Shapira, Philip, and Jan Youtie, ―Evaluating Industrial Modernization: Methods, Results and Insights from the Georgia Manufacturing Extension Alliance.‖ Journal of Technology Transfer23 (1), 1998: 17-27; Nexus Associates, The Pennsylvania Industrial Resource Centers: Assessing the Record and Charting the Future. Belmont, MA: Nexus Associates, October 1999.
Initial Framework for Analyzing the Economic Impact of ERCs
Figure 2.5, below, illustrates the general logic flow of how ERCs use funding
from a variety of sources to carry out their research and development,
educational, and services activities, which ultimately impact the local and
national economies. Benefits experienced by private firms, society in
general, and by the increased spending in the economy that the ERCs enable
include:
Benefits to Industry – Private firms benefit from ERC activities through
the reduced mentoring costs that result from hiring ERC graduates,
having access to ERC intellectual resources and skills, new
production techniques, etc. As ERCs were founded to conduct
industry-relevant activities and research, we would expect the majority
of the direct economic impacts to be of this type. Moreover, firms are
a central unit of analysis, as industry is a primary conduit by which the
technological embodiment of new knowledge generated by the ERCs
and flows to consumers and society at large.
Benefits to Society – ERCs both generate the basis for fundamentally
new products and educate new generations of engineers. These
activities produce benefits that go beyond those accruing to individual
firms, which are captured above. For example, the benefit of a health-
related innovation may accrue mostly to patients who use that
innovation, or to hospitals that enjoy cost savings from the innovation,
rather than exclusively to the company(ies) that produce it.
Induced and Indirect Benefits – ERCs, as international centers of
excellence, attract funding that pays for research, education, and
operations (staff salaries, capital investments, etc.) to augment NSF
funds. Spending on activities is not generally considered to be an
impact. However, ERCs often attract resources from outside the
16
region (state or nation), and these are clearly new resources flowing
into the region that may not have occurred without 0the ERC. The
activities that this out-of-region funding supports themselves have
impacts as salaries are spent on other goods and services, and as the
ERCs purchase inputs and capital goods.
Figure 2.5
The right side of the diagram represents the total impacts or benefits
of ERC activities, which we planned to estimate using a variety of
techniques.
Categories of Impacts and Initial Approach to Estimation
Industry Impacts: Sources
R&D
Licensing fees, royalties – From within-region19 firms with primary
operations and/or sales within the region, these represent the implicit
lower-bound value that firms place on ERC intellectual property.
ERC impact “nuggets” – As discussed in the previous chapter,
ERCs report ―nuggets‖ to NSF annually. A small number of selected,
high-impact nuggets will need to be further assessed and their
19
―Within-region‖ means within the state when estimating state impacts, and within the U.S. when estimating national impacts.
Induced and
Indirect Effects
ERC Impact Framework
Impacts on Nation and
State
ERC Activities Funding Sources
NSF
Other US Gov’t
State Government
Industry - • In - State • Out - of - State U.S.
Foreign Sources • Industry • Other (?)
R&D
Services • Infrastructure (lab equipment) • Consulting • Social capital enhancement • Etc.
Education • Workshops • Courses • Etc.
• Salaries • Capital Investment • Goods and services
Society • Impact of new products
and technologies
Firms • Cost savings from ERC hiring • Cost savings or new profits
from ERC innovations • Etc.
17
economic impact estimated. This category of nuggets (industry
impact) includes only the impacts appropriated by the firms involved,
usually ERC members and spin-offs.
Education
Cost savings to within-region firms hiring ERC graduates and
students. Estimated by multiplying the number of hires by estimates
of annual savings in mentoring time, which varies by graduate/student
degree level.
Value of ERC short courses, conferences and workshops to in-region
firms. Estimated by the costs incurred by in-region firms to send
employees to the courses, conferences, and workshops.
Services – ERCs provide many services to within-region firms, most of
which are difficult to value. Generally, the amounts that firms pay for
these services can be used as a proxy of the value of benefits they
receive on the assumption that private firms will only invest in activities
where the benefits outweigh the costs.
Sponsored research support to the ERC from within-region firms
Consulting income to ERC researchers from within region. If our
experience with the PRC is the case for other ERCs, we will not be
able to obtain estimates of the number of person-days of consulting
provided.
Value of benefits from technical assistance and consultation provided
at no cost to within-region firms. Estimated by number of person-days
of pro bono consulting times an average consulting daily rate.
Value of the experience and access gained by visiting researchers
from within-region firms working in ERC labs. Estimated by the
number of visiting researcher-days times their average daily
compensation.
Social Impacts: Sources
Spillover value of ERC innovations – Estimate of the economic
impact of high-value nuggets (see Industry – R&D above) whose
impacts occur beyond the individual firm that interacted with the ERC.
These are the spillover benefits that could not be, or were not,
appropriated by the firm.
Dynamic impacts of the ERC – that make the region a more
attractive place to do business, increase investment, and create jobs.
This would be mostly qualitative, but some quantitative estimates from
18
relocations or new ventures and start-ups, and consumer surplus
approaches may be possible for certain nuggets selected for further
assessment. Ideally, we would be able to measure the increased
economic activity attributable to the ERC (increased jobs, investment
dollars, etc. at existing and new companies). These are benefits to
society above and beyond the profits and cost-savings accounted for
in the industry impact category above. However, because of the
difficulty of measuring and attributing these impacts to the ERC, we
expected to rely primarily on:
Value of relocations, companies attracted to the region because of the
existence of the ERC. Estimated by investment flows, or the average
value of employee compensation times the number of employees,
adjusted by a factor that accounts for the degree to which the location
decision can be attributed to the ERC’s existence.
Value of within-region start-ups based in ERC research. Estimated by
revenues or investments, or average value of employee
compensation times the number of new employees.
Education and services (value of more productive workforce, etc).
One possibility for estimating the value of educational services is the
increase in salaries commanded by ERC students and graduates
relative to their counterparts that lack the ERC experience, if such
data were available.
Impacts of Center Spending Attributable to Financial Inputs from Out-of-Region Sources
Lastly, we plan to identify and quantify the impacts of center spending from
out-or-region sources, including industry, government, and other
organizations via mechanisms such as:
Licensing fees
Membership fees
Sponsored research
Value of in-kind support
Consulting income
Visitor spending (for short courses, workshops, etc.)
19
III. INITIAL DATA COLLECTION EFFORTS AND SUBSEQUENT REVISION OF STUDY DESIGN
Data Collection Efforts in 2006
In late February 2006 we sent e-mails to the Particle Engineering Research
Center at the University of Florida and the Biotechnology Process
Engineering Center at MIT, providing details of our data needs and collection
plans. (Copies of the data requirements and data source tables are attached
to this report as Appendix A.) Our e-mails were preceded by e-mails from
NSF/EEC to center directors and senior staff of the three initial target ERCs,
explaining the purpose of the study and requesting their cooperation.
Although Directors and their staff at both the Florida and MIT centers
expressed willingness to cooperate with our study, a number of issues
emerged that ultimately led to a joint decision by SRI and NSF to omit these
centers from study and substitute other ERCs. Without going into great
detail, it soon became clear that, for somewhat different reasons, neither
ERC was in a position to provide the data we needed to conduct the impact
analysis. In 2006, both PERC and BPEC were completing and submitting
their final report to NSF, signaling the end of ERC Program support. At
PERC, a new Industrial Liaison Officer and Administrative Director had
recently been hired and were unfamiliar with the substance and location of
much of the data we needed. With NSF support ending, it was apparently
extremely difficult to divert staff resources to assisting us with our data needs.
The PERC final report with complete data was not available to us until July
2006. At BPEC, it quickly became evident that center staff had dispersed
and many records sent to archives or discarded, with no one available having
knowledge of the necessary documents. The BPEC Director was willing to
cooperate but had no resources at her disposal to help with our needs. In
addition, in e-mail exchanges and telephone discussions with SRI, she made
a number of important points about the nature of BPEC’s impact that
questioned the utility and feasibility of seeking hard data on the realized
economic impacts of the MIT center and, potentially, many other ERCs as
well:
Unfortunately the NSF parlance and metrics do not quite capture the kind of impact BPEC has (as we point out in the report). The NSF parlance is better at capturing the product engineering type work, rather than knowledge generation...in biotech, it takes a very long time for something to move through development into reality. Also, many of the ICAB member companies sponsor research at MIT (as detailed in the [final] report) and hire people from MIT labs. But these do not fall nicely into the metrics.
20
A fundamental problem for mapping BPEC onto the metrics for your report is that the major impact we have had is to create the new discipline of Biological Engineering (MIT's first new department in 39 years), in all of its manifestations, rather than focus on somewhat narrowly-defined applications and immediate products. Much of the value has been to create engineers who can go out and think about biological processes in a completely different way.....and that does not map so well onto your metrics.
While these developments were unfolding, we made similar contacts with
Caltech’s Center for Neuromorphic Systems Engineering (CNSE) beginning
in July 2006. We received excellent and timely responses from ERC staff at
CNSE, enabling us to quickly prepare detailed data tables that drew upon
annual reports, phone discussions, e-mail exchanges, and the ERCWeb
monitoring system. The remaining data could only be obtained on site, and a
successful site visit to CNSE took place in September 2006. Discussions
with CNSE staff, coupled with information about the major impacts of the
center after eleven years of operation, reflected many of the same points
made by MIT’s Center Director. The major impacts of the center have been:
the production of new knowledge,
the creation of new areas of academic research (neuromorphic
engineering),
the education of a new generation of interdisciplinary engineers, and
knowledge transfer via ten new start-up companies that embody
ideas, concepts, and technology based in CNSE research.
Despite eleven years of CNSE operation, most of these start-ups are still
small and operating on venture financing, and impacts on member
companies are to be found in the transfer of ideas, new ways of thinking, and
in the students hired. Nonetheless, one start-up (DigitalPersona) and one
member company (IRIS International) had experienced substantial economic
benefits clearly and directly attributable to CNSE, and these two ―nuggets‖
provided sufficient evidence to test the feasibility of estimating both regional
and national economic impact estimates of CNSE. (The results are
presented in Chapter IV.) We also discovered, however, that start-ups are
reluctant, at best, to provide any data on employment, sales (if any), or
venture financing obtained, mainly because such information is considered
highly proprietary and, if publicly disseminated, would provide valuable
intelligence to competitors. Likewise, established firms (especially privately-
held firms) are unlikely to provide much, if any, of the market size or cost
savings data necessary to estimate the national economic impact of the
innovations they develop and market.
Center staff pointed out that CNSE was very much an ―upstream,‖
transformational ERC whose primary impacts are relatively intangible and
21
long-term, difficult to capture in traditional economic terms, especially after
such a short period of operation. Focusing on the economic impacts of
ERCs, they argued, overlooked the much higher value of new knowledge,
new ways of thinking, and uniquely trained human capital. Moreover, they
expressed concern that, given the very wide variety of ERCs with respect to
technical focus, industry relationships, and output profiles, comparisons
among ERCs using only or primarily economic impact estimates would be
highly misleading and potentially damaging to long-term public investments in
center-based research and education.
Revised Strategy for Data Collection
The results of these data collection efforts can be summarized as follows:
The difficulty in obtaining the necessary data for both regional and
national economic impacts at MIT and University of Florida (UFL) is best
explained by the fact that these centers have basically shut down, at least
as ERCs; staff familiar with records have left; and records in many cases
are unavailable. Center Directors and ILOs were very helpful in informing
us about difficulties involved with providing the data we seek, but going
beyond explanation of the difficulties proved frustrating and ultimately
infeasible.
The emphasis on realized, national economic impacts, even if the
necessary data could be obtained, will vastly underestimate the actual
impact of ERCs, for at least three reasons. First, even in mature and
incremental centers, there are very few center technologies that have
been commercialized to the extent that significant sales or cost savings
have occurred, either in start-ups or member firms. Second, for most
ERCs, the primary output is new knowledge, often embodied in
graduating students, and there is no feasible way to estimate the
economic impact of either this knowledge or the economic value of the
social capital generated. Third, ERC staff tell us that it is very difficult to
untangle the role that NSF/ERC activity has played, relative to other
sources of support, in those ideas or technologies that have actually
generated economic impact in industry. Each case is unique and would
require extensive consideration by those intimately acquainted with the
case, and we are finding that such people often are no longer involved in
the centers and/or unresponsive to requests for interviews.
The reasonably successful site visit to Caltech in September, as well as
careful reading of numerous ERC annual reports, confirmed our
expectations about the number of high-impact ―nuggets‖ that would need
to be pursued to obtain a reasonable estimate of the total economic
22
impact of an ERC. But the CNSE case also revealed how difficult it is to
obtain the necessary information from either start-ups or member firms to
meet the requirements of our simple models for estimating the economic
impact of ERC-based innovations.
These findings led to consideration of three options for proceeding
with the project:
1. Continue the project as planned, doing the best we could to document
national economic impacts and also determine, in qualitative terms, what the
centers consider to be their major impact. Our Caltech visit shows that this
could be done, but the result would greatly underestimate the centers’ impact,
and it is unlikely that we would be able to obtain much of the sales and cost
savings information we need from either start-ups or member firms.
Obtaining data from MIT appeared to be a dead end, and pursuing data
collection at UFL would continue to be frustrating and burdensome.
2. Choose ERCs other than those at MIT or UFL to study, ones that have not
been shut down and that are relatively more likely to have realized and
documented economic savings in industry. One problem with this alternative
is that these may not be typical ERCs (if, indeed, there is a ―typical‖ ERC),
and so it is unclear what conclusions might be drawn about the national
economic impact of ERCs in general.
3. Rethink the project so that it can better serve NSF’s needs for ERC impact
data and analysis.
SRI met with NSF/EEC staff in December 2006 to consider these and other
options. The discussion led to mutual agreement to replace the case studies
at MIT and UFL with studies of ERCs at Virginia Tech (Center for Power
Electronic Systems, or CPES) and the University of Michigan (Wireless
Integrated Microsystems, or WIMS). Both of these centers are still active (in
their 8th and 6th years, respectively, as of 2006), have strong and close
industry ties, and their technical foci are of interest primarily to relatively well-
established industries.
Changes in Conceptual Structure and Data Collection Emphasis Resulting from BPEC, PERC, and CNSE Experiences
Experience with data collection efforts in 2006, especially the lessons learned
during the Caltech site visit and interviews, led us to reconsider the emphasis
placed on collecting data for the regional vs. national impact estimates.
Specifically, as it became apparent that the great bulk of national economic
impacts would be generated via spillovers from the innovating firm to the
23
markets realizing benefits (e.g., cost savings) from the innovation, we
focused greater attention on the literature on social returns to innovation and
the data requirements for using net social benefit models.
The two sources that guided our Caltech data collection for the national part
of the impact were Edwin Mansfield's use of consumer surplus calculations,
as described in Ruegg and Feller, A Toolkit for Evaluating Public R&D
Investment, NIST GCR 03-857, pp. 104 ff., and the Australian evaluation
study, Economic Impacts of Cooperative Research Centers in Australia by
the Allen Consulting Group, 2005, pp. 20 ff. Basically, the consumer surplus
approach defines the social benefits of innovation as the sum of the profits to
the innovator and the benefits to consumers who purchase it (i.e., spillover
benefits). This approach works well for single products rather than for a
portfolio of projects. It captures market spillovers, but not knowledge or
network spillovers. Mansfield used years of historical data for his case
studies. The approach applies to product innovations that reduce the costs of
industries using it.
The consumer surplus approach used by Mansfield requires, under ideal
circumstances, an estimate of the profits to the innovating firm (resource
savings = profits to innovator), an estimate of costs savings to the market
relative to previous technology, and the supply/demand (P/Q) curves for both
the previous technology and the new technology. The Allen Consulting
Group used a counterfactual conceptual model focusing on "foregone
benefits." The data needs are similar to the consumer surplus approach:
estimates of the net cost savings to the industry; the gross revenue
increases, less costs incurred to generate those revenues (e.g., net profits);
and the income from sale or licensing IP to foreign companies. In the
simplest terms, total social benefits (returns to innovation) equal the sum of
profits to the innovating firm plus the cost savings to users. The social
benefits model can be illustrated in simple form as follows
Figure 3.6
Private and Social Returns to R&D: Pure Market Spillover
24
For our Caltech industry interviews we used this model to prepare an
interview protocol, with different questions for established firms and for ERC
start-ups. The full protocol appears as Appendix B; a short form follows here.
CNSE Industry Interview Protocol: Short Version
1. [For ERC start-ups] What have been the total spending (for wages and
supplies) and capital investment made in the company?
2. What is the total number of person-years of employment generated?
3. What have been total unit sales, domestic and international
separately, of [product(s) based in ERC technology/ideas]?
4. What have been the net profits generated by these sales?
5. What were the unit cost savings (relative to alternative
technologies) to purchasers of [the company’s] products?
6. Finally, could you estimate roughly the proportion of these economic
impacts that you would attribute to the ERC's existence?
Data Collection Experience, 2007: Michigan’s Wireless Integrated Microsystems Center and Virginia Tech’s Center for Power Electronic Systems
Careful reviews of the most recent annual reports of the Michigan and
Virginia Tech ERCs, especially the technology transfer sections, showed that
there was reasonable likelihood of identifying a few cases of already-realized,
significant economic impacts on companies that could be followed up for
validation and details. At the same time, it was also clear that the VT center
was considerably further downstream and closer to industry than WIMS, and
that technology transfer via start-ups was much more important at WIMS than
at CPES. In both centers, however, intellectual property evidently did not
play a significant role in technology transfer or industry impact, a situation
common to nearly all ERCs. Even in advance of our data collection efforts,
there was evidence that at WIMS, at least, some of the same issues that
concerned BPEC and CNSE were also pertinent. The WIMS annual report
for 2005 contained the following comment from an IAB member on the
measurement of success in technology transfer:
I think they [NSF] are measuring the wrong attribute here for established companies. This makes perfect sense for spin-offs, and start-ups, and these [licenses, patents] should be a metric of success. Regarding larger companies, I believe the value is one of understanding new technology paths and the relevance and potential impact they could have on the company’s business and strategic plans. [Knowing] What works and what doesn’t is very beneficial to a company or national lab to minimize investment loss and maximize dollars on paths more likely to achieve product goals—how do you
25
measure this? The fact that some companies remain invested in the . . . Center even though they are not licensing its technology is a clear indication that some other value is being achieved. And this value is not likely to be shared openly by companies.
SRI conducted very successful, two-day site visits at CPES and WIMS during
July 2007. In both cases ERC staff, including Center Directors and Associate
Directors, were extraordinarily helpful and cooperative and generous with
their time in providing the detailed data we asked them to provide, and in both
cases we obtained contact information necessary for follow-up telephone
interviews with start-ups and with companies experiencing (in the centers’
view) substantial economic benefits from their interactions with the center.
Extensive discussions with Center Directors, Associate Directors, and ILOs
further underscored the points made above: that the most significant impacts
on industry that center activities generate arise from ideas, new knowledge,
and student hires, not from new technologies or intellectual property. In
particular, staff at CPES made it clear that companies they interacted with
benefited greatly from hiring students, and to omit that impact would greatly
distort and underestimate the center’s actual impact nationally. We therefore
made a point of revising our industry interview protocol to include the benefits
derived from student hires, new knowledge and ideas, and new technology—
even though we knew that valid, quantifiable information of the economic
value of these benefits would be difficult or impossible to obtain.
The interview guide used in telephone interviews with industry contacts
provided by CPES and WIMS follows (the full version is attached as
Appendix C):
CPES and WIMS Industry Interview Protocol: Short Version
In the case of your company’s involvement with (ERC),
1. What has been the impact of (ERC)-based ideas on your company and
industry, including cost savings, new products and processes, profits or
growth, and new markets?
2. What has been the impact of (ERC)-based technology on your company
and industry growth/markets, especially the cost savings to industry
customers attributable to new products or processes based on (ERC)
technology that replaced an existing product or process?
3. What has been the impact of (ERC) students you’ve hired on your
company and on industry growth/markets?
4. What do you think would have happened to (a) your company and (b) the
industry in the absence of (ERC)?
26
The follow-up interviews for CPES and WIMS were extremely rich and
revealing, with some surprises (see details in the following chapter).
Obtaining responses from industry contacts was still difficult in some
instances, even when introductory e-mails from the center ILO were sent in
advance of our calls. Not surprisingly, detailed estimates of company-specific
profits and cost savings to the relevant industry from new products at least
partly attributable to ERCs were not provided. However, qualitative
information about the impact that student hires have had on companies were
rich and detailed, sometimes accompanied by rough estimates of the
changes in market size that resulted from ERC ideas, knowledge, and
systems thinking embodied in student hires. While these interviews rarely
provided the detailed quantitative date necessary to apply the net social
benefits model to estimating the national impacts of ERCs, they did provide a
much broader and more accurate picture of the total impact on the nation of
ERC outputs. The next chapter details these results.
Extension of Study to Include Two Additional Cases
Following completion of the analyses for the three ERCs for which data
collection actually took place, SRI’s discussions with NSF EEC staff
concluded with the recommendation that the pilot study be extended to
include an additional two centers: the Johns Hopkins Center for Integrated
Surgical Systems and Technology (CISST) and the Georgia Tech/Emory
Center for the Engineering of Living Tissue (GTEC). These centers were
chosen because they represented a different category of research focus—
biotechnology and bioengineering—and because additional centers offered
an opportunity to further expand the range of impacts for which systematic, if
not quantitative, estimates of centers might be obtained. Case studies of
these two centers, both in their ninth year of NSF support, were planned and
conducted successfully during the first half of 2008.
Thus, for the last two case studies in the ERC economic impact project we
cast the net of ―economic impacts‖ even more widely than in the previous
three cases. In particular, we wished to see what kinds of impacts with
economic implications, broadly defined, could be included and for which
reliable data could be obtained. We wanted to explore categories of impact
that might have indirect or quite long-term economic implications, including
impacts on the academic community (in particular, on the careers of
graduated ERC students who chose academic careers, and on the
universities that hired them), and on the center’s host institution.
In light of this broader treatment of economic impacts, in these last two cases
we asked selected industry representatives to discuss with us the impact that
27
center outputs have had on their companies and the related industry. As in
previous cases, these representatives were identified by center staff as
representing companies that have experienced significant impacts as a result
of their interactions with the ERC. We asked for their views on the impact of
broad categories of ERC outputs including new knowledge, technology, ideas
or ways of thinking, and student preparation. We also interviewed selected
Ph.D. graduates, post-docs, and center faculty, identified by center managers
as outstanding contributors to research and academia. Finally, we
interviewed non-center faculty and administrators at Georgia Tech and JHU
to obtain details of significant institutional impacts the ERC may have had.
The next chapter presents the results of the five case studies in the order in
which they were conducted.
28
IV. CASE STUDY RESULTS
Caltech’s Center for Neuromorphic Systems Engineering
Introduction to the Center for Neuromorphic Systems Engineering (CNSE)
Vision and History
The Center for Neuromorphic Systems Engineering (CNSE) at the California
Institute of Technology (Caltech) began operations as an ERC in 1995 with a
vision of conducting research and developing technologies that would lead to
creation of machines that ―sense, interact with, learn from, and adapt to their
environment with the same ease as living creatures do. This generation of
smarter machines will greatly improve consumer products, healthcare,
security, manufacturing, entertainment, and telecommunications.‖20 Taking
its inspiration from biology, engineering and physics, the CNSE traces its
history to the 1970s and 1980s, when Caltech professors’ interests across
neurobiology, computers, the physics of computation, analog VLSI (very large
scale integration), and network models led to the 1986 establishment of the
Computation and Neural Systems (CNS) Ph.D. program.
In turn, ―the new CNS program encouraged engineers and neurobiologists to
jointly research how the brain works and how to design computers that could
mimic its properties‖21 and, as new developments such as
microelectromechanical systems (MEMS), functional magnetic resonance
imaging (FMRI), and psychophysics emerged, the CNSE continued to
promote scientific research and practical applications in this new field of
interdisciplinary research – neuromorphic engineering. From its pursuit of
this over-arching research framework, the CNSE counts numerous scientific
achievements, including: analog VLSI; optical implementation of neural
networks; the theory of hints in machine learning; the design and fabrication
of flexible smart skins; polymer-based artificial noses; and many others.
Strategic Plan Overview
From its inception, the CNSE’s activities have been organized around four
interdependent areas: controls/systems, biology, learning and sensing
algorithms, and hardware. In the following three-plane chart (Figure 4.1),
these four areas are depicted on the two lower levels. As indicated in the
20
Center for Neuromorphic Systems Engineering, Final Report to the National Science Foundation, p. 6, May 17, 2006. 21
Center for Neuromorphic Systems Engineering, Final Report to the National Science Foundation, pp. 8-9, May 17, 2006.
29
chart, the CNSE works at all research stages, from basic science through
application.
Figure 4.1
Partners and Industry Membership
From 1994 to 2005, NSF invested $24,682,355 in the CNSE, supplemented
by $288,500 in industry membership fees and $2,147,734 from Caltech.
Over the course of its existence, the CNSE enjoyed support from 24 member
companies and spawned the creation of 10 startups.
The CNSE’s strategy for partnering with industry and other stakeholders is
based on two principles – (i) developing new ideas in areas that industry is
not achieving or cannot achieve similar results and (ii) developing useful
ideas, meaning that ―CNSE-generated ideas should benefit the economy and
society and improve human life.‖22 The CNSE’s strategy for supporting the
growth of a neuromorphic systems engineering industry involves four key
elements:
22
Center for Neuromorphic Systems Engineering, Final Report to the National Science Foundation, p. 55, May 17, 2006.
Source: Center for Neuromorphic Systems Engineering, Final Report to the N ational Science Foundation, p. 16 , May 17, 2006
30
1. Workforce Development: through development of a neuromorphic
systems engineering academic program, CNSE endeavored to help
supply talented, technologically advanced alumni to companies in this
emerging industry and to supply professors to other universities and
thereby reach yet additional students.
2. Support for Startups: CNSE founders believed that startups would be
an effective way to commercialize new neuromorphic systems
technology based on the Center’s research.
3. R&D related to General-purpose Sensory Systems: the CNSE aimed
to develop systems that could be applied to many industries for many
products and thereby to encourage the widespread integration and
adoption of neuromorphic systems.
4. Education for Established Companies: Because neuromorphic
systems is a new, emerging field, knowledge of the field would be
limited at most existing companies; CNSE sought to remedy this gap
through educational events.
Education and Outreach
Reflecting the ERC goal of transforming how engineering research and
education are conducted, the CNSE emphasizes that one of its major
accomplishments is the creation of the new, interdisciplinary research area of
neuromorphic systems engineering, which brings together biology and
engineering to design sensory and sensory-motor systems that are inspired
by observing and analyzing their biological counterparts. From 1995 to 2005,
the CNSE launched a total of 18 new courses in neuromorphic systems. The
CNSE also has produced more than 100 graduate students who have gone
on to careers in academia and industry, as well as introduced 261
undergraduates to research opportunities.
In addition, the CNSE has conducted other outreach efforts in the field of
neuromorphic systems engineering, including: initiation of what is now an
annual symposium on neural computation involving numerous academic and
research institutions; founding of the three-week Telluride Neuromorphic
Engineering Workshop (which convenes young and established academic
researchers with their counterparts in industry and national laboratories);
development of a kindergarten through high school program to interest young
students in science and technology; and many other one-time and ongoing
events to introduce neuromorphic engineering research concepts to
audiences ranging from researcher to the public at large.
Types of Economic Impact Data Available from the CNSE
31
To assess the economic impact on California of state and NSF investment in
the CNSE, SRI employed the approach used in its predecessor study of the
economic impact of state investment in Georgia Tech’s PRC.23
The approach identifies the external (to California) support that the CNSE
generated; the direct and indirect economic impact of spending by the CNSE
and its faculty, students, and visitors; cost savings and other benefits to
CNSE industrial collaborators; the impact of university licensing of CNSE
technology; the value of CNSE-generated employment; the value of CNSE
graduates hired by California companies; and the value to companies (in
terms of improved technical skills of workers) of the CNSE’s industry
workshops.
(See Figure 4.2, below, for a visual representation of these impacts.) The
economic impact is the sum of the total direct and indirect impacts of these
outputs and expenditures on California’s economy for the period 1994-2005.
The approach uses elements of input-output analysis (through the use of
multipliers for certain expenditures) in addition to algebraic calculations.
Figure 4.2
23
David Roessner, Sushanta Mohapatra, and Quindi Franco, The Economic Impact on Georgia of Georgia Tech’s Packaging Research Center, Arlington, VA: SRI International, October 2004.
32
Each category of potential impact is framed in terms of additional money and
other resources coming into California that otherwise would not have
occurred, and/or additional value to the state that otherwise would not have
occurred, in the absence of the CNSE. The following table lists the
categories of impact that SRI sought to measure or estimate, including
indirect and induced effects, to calculate the economic impacts on the state of
California. As will be discussed later in the report (in ―Other Impacts of the
CNSE‖), not all impacts related to the CNSE can be readily quantified.
Accordingly, the following table lists only those categories of impact which,
based on SRI’s experience conducting the assessment of Georgia’s PRC,
were anticipated to be readily available quantitatively.
Value of
CNSE
Workshops
to CA firms
NSF support
to CNSE
Licensing and
royalty fees from
CNSE inventions
Sponsored
research support
to CNSE
In-kind support
to CNSE
CNSE member
support
Jobs created
by CNSE
startups
Cost savings
to CA firms
hiring CNSE
grads
Direct Impact of CNSE
on California’s Economy
Value of
CNSE
Workshops
to CA firms
NSF support
to CNSE
Licensing and
royalty fees from
CNSE inventions
Sponsored
research support
to CNSE
In-kind support
to CNSE
CNSE member
support
Jobs created
by CNSE
startups
Cost savings
to CA firms
hiring CNSE
grads
Direct Impact of CNSE
on California’s Economy
33
Table 4.1
In an extension and adaptation of the methodology used to estimate the
state-level economic impacts on the ERCs, for this study SRI also has
estimated the quantitative impact of the CNSE on the United States as a
whole. As with the estimates for state-level economic impact, impacts at the
national level are framed in terms of additional economic impacts generated
in the United States that otherwise would not have occurred, and/or additional
value to the country that otherwise would not have occurred, in the absence
of the CNSE.
For national economic impacts, SRI expanded the above methodology for
regional impact to incorporate consumer surplus calculations, an approach
that has been described or used in several key impact assessments of public
investments in R&D. As noted earlier in this report, the consumer surplus
approach equates the social benefits of innovation to the sum of the
innovator’s profits from sale of the innovation plus consumers’ benefit from
use of the innovation. In line with this framework, SRI endeavored to quantify
the net profits to the innovating companies and the net cost savings of
adopting product innovations to the appropriate industries as a whole.
The following table lists the categories of impact that SRI sought to measure
or estimate, including indirect and induced effects, to quantify the CNSE’s
economic impacts on the nation.
Categories of Economic Impacts on California from Investment in the Center for Neuromorphic Engineering Research
NSF support for the CNSE.
Industry support from all out-of-state industrial members of the CNSE since its inception.
Sponsored research support from outside the state attributable to existence of the CNSE.
Licensing fees and royalties for intellectual property generated by CNSE research from non-California sources.
Spending by non-California attendees at CNSE workshops in California.
Value of CNSE workshops to participating California firms.
Economic impact of start-ups based on CNSE research that have located in California.
Cost savings to firms in California that have hired CNSE students and graduates.
Indirect and induced (secondary) effects: additional economic activity generated by direct increase in in-state expenditures attributable to existence of the CNSE.
34
Table 4.2
Categories of Economic Impacts on the United States from Investment in the Center for Neuromorphic Systems Engineering
Industry support from all non-US industrial members of the CNSE since its inception.
Sponsored research support from outside the US attributable to existence of the CNSE.
Licensing fees and royalties for intellectual property generated by CNSE research from non-US sources.
Spending by attendees at CNSE workshops from non-US companies.
Value of CNSE workshops to participating firms.
Economic impact of start-ups based on CNSE research that have located in the US.
Cost savings to firms in the US that have hired CNSE students and graduates.
Indirect and induced (secondary) effects: additional economic activity generated by direct increase in in-state expenditures attributable to existence of the CNSE.
Net cost savings to US industry as a result of technologies developed by the CNSE.
Net profits or expenditures of start-up companies based in the US and based on CNSE research.
Regional Economic Impacts of the CNSE
This section documents and analyzes the data collected in order to quantify
the CNSE’s direct economic impact on California. Direct economic impacts
include both quantifiable and non-quantifiable impacts that accrued to
California because of the activities carried out by the researchers, staff, and
students of the CNSE. However, because it is not possible to measure all
types of direct impact, only quantitative impacts are presented and examined
in this section, while other important but less measurable impacts (such as
the increased competitiveness of California firms collaborating with the
CNSE, access to new ideas, among others) are discussed in a later section,
―Other Impacts of the CNSE.‖
For measurements of quantifiable impact on California, SRI drew on the
CNSE’s annual reports to NSF, other financial records, and information
gathered through interviews with CNSE staff, other Caltech officials, and
several industry partners. When needed, SRI used standard economic data
such as the Economic Census published by the U.S. Census Bureau in our
estimation of quantifiable impacts.
NSF requires that cash, in-kind support, equipment donations, and fees for
access to facilities provided to ERCs from external sources be reported
annually to NSF. Therefore, the CNSE’s final report, submitted May 17, 2006,
formed a central basis for our estimate of the Center’s quantifiable direct
impacts. SRI worked with CNSE staff to understand and organize these data
into an appropriate analytical framework. We took special care to exclude
cash and in-kind support received from California firms from the final
estimates of direct impact on the state of California of the CNSE, under the
premise that funds received by the CNSE from in-state sources should be
35
considered as resources circulated within the state, rather than as additional
resources flowing into California due to the CNSE’s existence. The following
categories of impacts were quantifiable and captured much, but by no means
all, of the CNSE’s direct impact on California’s economy.
NSF support for the CNSE since its inception
The CNSE has attracted nearly $25 million to California in the form of NSF
support (Table 4.3).24 These funds include the CNSE’s base award as an
Engineering Research Center as well as NSF special purpose program
funds.
Table 4.3
NSF Cash Support to the CNSE
Type of Cash Support Total Cumulative Support
1994-2005
NSF ERC Base Award $24,422,355
NSF ERC Program Special Purpose $260,000
Total NSF Support to the CNSE $24,682,355
Sponsored research support from outside the state attributable to the existence of the CNSE
Most ERCs attract a significant volume of sponsored research, i.e., research
conducted by center faculty and funded by companies, other U.S.
government agencies, or foreign government entities. The Packaging
Research Center at Georgia Tech, for example, drew sponsored research
support amounting to more than $74 million during the first ten years of its
existence. It is likely that the CNSE also received substantial interest and
investment from research funding organizations during its years as an NSF-
funded ERC. However, because of the way Caltech records sponsored
research support, it was not possible to distinguish the sponsored research
funding generated by CNSE from support generated by other units within the
Institute and, as a result, SRI is not able to provide values for this type of
direct quantitative impact.
Member support to the CNSE
24
For this and subsequent tables, unless noted otherwise, data sources are a combination of CNSE’s final report, CNSE annual reports, CNSE records, and CNSE staff.
36
A core element of all ERCs’ missions is to engage interested firms and other
related organizations in its research activities through partnerships and
alliances. In keeping with this mission, the CNSE invites firms from all over
the world to be members of the center on an annual basis. Membership
costs each firm between $2,500 and $25,000 per year depending on the level
of engagement.
The CNSE partnered with 24 companies over its 11 years as an ERC, with
members participating at varying levels and spans of time. Of these, three
companies are multinationals with headquarters located outside the United
States; these foreign firms contributed $65,000 in membership fees. The
CSNE received $233,000 in membership fees from U.S. member firms, many
of which were located in California. To distinguish those funds that were
attracted from outside California because of the CNSE’s existence, SRI
obtained (from the center’s annual reports) the membership fees paid by
each company and aggregated only those fees paid by companies
headquartered outside the state.
The total amount of the CNSE’s membership income from non-California
members amounted to $157,500 (Table 4.4).
Table 4.4
Industry Support to the CNSE through Membership Fees
Source of Cash Support Total Cumulative Support
1994-2005
U.S. Industry Membership excluding CA Firms $92,000
Foreign Industry Membership $65,500
Total Non-CA Member Support to the CNSE $157,500
In-kind support to the CNSE from external sources
In addition to the cash support received from federal government agencies
and national and international industry partners, the CNSE also received in-
kind support from researchers hosted by the center. These visiting
researchers, while on the payroll of their sponsoring companies, contributed
significantly to the CNSE’s research through their direct participation on
research teams. Cumulative data on the value of in-kind support were not
available; instead, data only for the years 2001, 2002 and 2003 were reported
by the CNSE. Accordingly, the figure in Table 4.5 (below) probably
37
underestimates the value of in-kind support contributed by visiting
researchers from outside California.25
Table 4.5
In-kind Support to the CNSE
Type of In-kind Support Support during 2001,
2002, and 2003*
Value of Personnel Visiting from US Industry $500,000
Total In-kind Support to the CNSE $500,000
* Cumulative data regarding in-kind support by visiting personnel was not available.
Licensing fees and royalties for intellectual property generated by CNSE research from non-California sources
Typically, universities collect records of all income derived through intellectual
property (e.g., licensing fees and royalties) generated by university research.
CNSE records show that center researchers filed 46 invention disclosures
and applied for 53 patents, 11 of which were awarded. Twelve licenses were
issued, producing a total income to Caltech during the period 1994-2005 of
$5,642. Since all of this income was from California firms, the net direct
economic impact on the state is zero.
Spending in California by out-of-state attendees at workshops
The CNSE organizes a number of workshops and conferences each year to
foster the free exchange of cutting edge research results and to impart
technical knowledge to industry and other users. The conferences draw
attendees from across the nation and the world. These out-of-state visitors
spend money on lodging, meals, entertainment, transportation, etc.,
resources that would not have come to California without the CNSE.
To estimate the impact of out-of-state visitor spending at CNSE workshops
and conferences, the SRI study team first obtained information from CNSE
regarding the number of workshops held in California over the course of its
funding as an ERC. We then obtained attendance figures for a sample of the
workshops and conferences and, from this information, calculated average
attendance figures for in-state and out-of-state attendees. We then applied
these ratios and attendance data to estimate the total number of non-
California attendees at workshops and conferences.
25
The 2001, 2002, and 2003 data for the value of personnel visiting from U.S. industry are for the entire United States, not simply those researchers visiting from outside California. Accordingly, the 2001, 2002, and 2003 data likely overestimate the economic impact to California, but due to the lack to data for this category for the years 1994 to 2000, 2004, and 2005, the overall figure is likely an underestimate.
38
Assuming an average two-day stay per visitor per event, and federal
government per-diem rates of spending per visitor-day,26 we estimated that
non-California attendees spent approximately $275,000 while in California
attending CNSE conferences and workshops (Table 4.6).
Table 4.6
Estimated Spending by Non-California Attendees at CNSE Workshops and Conferences held in California
Number of Workshops in California 45
Average # of Attendees per Workshop 63
Average % of non-CA Attendees 32%
Total # of non-CA Attendees 908
Total non-CA Attendee Days in CA 1,816
Spending per Visitor Night $151
Estimated Total Spending $274,216
Impact of start-ups from CNSE research that have located in California
As of 2006, 10 new companies had been formed on the basis of CNSE
research: Digital Persona, Ondax, Cyrano Sciences (now called Smiths
Detection), Holoplex Technologies, Evolution Robotics, Foveon, EndActive,
Real Moves, United MicroMachines, and one other company that the CNSE
could not name in its final report because it is in ―stealth mode.‖27 All of the
firms are located in California.
A typical approach to estimating the impact on the local economy of start-ups
from university-based research is to multiply the number of employees by the
sum of the average salary and benefits of technical employees in small, high-
tech firms. CNSE’s final report documents that, over the course of their
existence through 2005, eight of the 10 start-ups28 have generated 294
employee-years in the scientific research and technical services fields.
In order to quantify the economic impact of this employment, we used 2002
Economic Census data published by the U.S. Census Bureau. CNSE start-
ups fit the ―Professional, Scientific, and Technical Services‖ category of the
North American Industrial Classification System (NAICS) used by the Census
Bureau. Salaries for employees in this category in the Los-Angeles-Long
26
The two-day estimate was provided by CNSE staff. For spending, we used a rate of $151, the federal government per-diem rate for Los Angeles, Orange, and Ventura Counties, in FY 2005, the final year of CNSE funding. Caltech is located in Pasadena, within Los Angeles County. 27
Center for Neuromorphic Systems Engineering, Final Report to the National Science Foundation, p. 57, May 17, 2006. 28
Employment information at two of the startups was not available; thus, the figures reported here underestimate total employment impacts on California.
39
Beach-Santa Ana metropolitan statistical area averaged $42,434 per year.
Using this statistic29, we estimate the total value of employment generated by
CNSE start-ups to be $12,475,596.
Value of cost savings to firms in California that have hired CNSE graduates
CNSE graduates bring advanced technical knowledge and specialized
research and development experience to the firms that hire them upon their
graduation. Such skills and experience are highly valued in industry, as they
significantly reduce the time required for technical training and also reduce
the burden on managers of mentoring and supervision. Reduction of training
and mentoring translates to cost savings for the hiring firms, with the level of
cost savings varying with the new employee’s education and research
experience.
Over the last ten years, industry hired a total of 68 CNSE graduates,
including two undergraduates (earning Bachelor of Science degrees), nine
students at the M.S. level, and 57 students at the Ph.D. level. The location of
these hiring firms is not provided in CNSE’s final report. SRI estimates that
firms hiring CNSE graduates benefited through one-time cost savings of
$50,000 per B.S. graduate, $70,000 per M.S. graduate, and $100,000 per
Ph.D. These estimates were based primarily on informal discussions
between SRI staff and with several ERC industrial liaison officers, interviews
with representatives of companies that have hired ERC graduates, and
company surveys.30 Our discussions suggested that a newly-hired ERC
Ph.D. graduate requires approximately one year’s less mentoring time by a
company staff member than a comparable, non-ERC graduate.
Based on the above assumptions, the total value of cost savings to California
firms hiring CNSE graduates is estimated to be $6,430,000. However,
because CNSE does not describe the locations of firms hiring its students,
and it is possible that some of the hiring firms are outside California, SRI’s
calculations may somewhat overestimate the impact on California of cost
savings achieved through CNSE hiring.
Value of workshops to participating California firms
29
This calculation is based on estimates of pre-tax direct salaries. In other words, it does not include other employer paid benefits such as health care and social security contributions. This was done to simplify calculations that otherwise would include estimates of employer-paid fringe benefits minus certain deferred compensations (employer paid benefits such as social security and retirement account contributions do not have a direct or immediate impact on the state economy and so are usually not included in impact analyses). In addition to simplifying the calculation of employment impacts, this also results in a more conservative overall estimate. 30
The cost savings to the hiring firm were estimated to be approximately $100,000 per Ph.D., using the mentor's annual full compensation as the basis for this estimate. We extrapolated from this to estimate cost savings of $70,000 per ERC M.S. hire and $50,000 per B.S. hire. These estimates are supported by results of surveys conducted by the Semiconductor Research Corporation (SRC). Companies that hire students supported by SRC contracts estimate cost savings of at least $100,000 per student. See http://www.src.org/member/students/mem_benefits.asp
40
Through sponsorship of workshops for industry, CNSE serves to improve the
overall quality of the technical workforce in California. In order to estimate
the impact on the state and, in particular to the California firms that sent
participants to CNSE workshops, SRI drew from CNSE data regarding
numbers of participants and participant-days at CNSE workshops and from
U.S. Census Bureau data for ―Professional, Scientific, and Technical
Services‖ category of the North American Industrial Classification System
(NAICS) in the Los-Angeles-Long Beach-Santa Ana metropolitan statistical
area.
Using the latter information, SRI calculated an estimated daily rate for
participants and adjusted the daily rate upwards by 50% to account for fringe
benefits.
The following table, Table 4.7, provides the results of these estimations,
which demonstrate almost $475,000 in value to firms and the state via
improved workforce skills.
Table 4.7
The CNSE’s Total Direct Economic Impact on California
In summary, the existence of the CNSE has led to the inflow of substantial
amounts of research funding to California from NSF, has created employment
in the state, resulted in cost savings to California firms via hiring of CNSE
graduates, and generated value for firms participating in CNSE workshops.
As Table 4.8 shows, the total direct quantifiable economic impact of the
CNSE on California is estimated to be almost $45 million.
Estimated Value of CNSE Workshops to California Firms sending Participants
Number of Workshop Attendees from California firms 1,942
Estimated # of Days at Workshops 1,942
Estimated Salary per Day $244.50
Estimated Value of Workshops to California Firms $474,819
41
Table 4.8
The CNSE’s Total Direct Quantifiable Economic Impact on California
External Income to California Cumulative 1995-2005
Support to CNSE from the National Science Foundation $24,682,355 CNSE membership fees from non-California member firms $157,500 In-kind support from non-California firms $200,000 Spending by non-California attendees at CNSE workshops in California $274,216 Licensing income from non-CA and foreign firms 0 Total External Income to California $25,314,071
Value of Increased Employment in California Value of employment created by CNSE start-up companies located in California $12,475,596 Total value of increased employment in California $12,475,596
Improved Quality of Technical Workforce in California Value of CNSE graduates hired by California firms $6,430,000 Value of workshops to participating California firms $474,819 Total value of improved quality of technical workforce in California $6,904,819
Total Direct Quantifiable Economic Impact $44,694,486
The CNSE’s Indirect and Induced (Secondary) Economic Impacts on California
In addition to the direct economic impacts described above, the CNSE also
generates a variety of indirect and induced (secondary) economic impacts.
This section briefly outlines the background, assumptions, and methodology
SRI uses to estimate the indirect and induced impacts and then presents the
results of these secondary impact calculations in combination with the direct
quantifiable impacts to produce an estimate of the total economic impact the
CNSE has had on California.
The immediate impacts attributable to the CNSE (described above) further
affect the California economy as firms and employees spend or invest their
new earnings (or cost savings) within the state. This ripple effect, as new
spending is filtered throughout the economy in subsequent rounds of
economic activity, is made up of two components:
Indirect impacts – Purchases of goods and services from other firms by
the businesses that directly benefit from CNSE-related activities.
Induced impacts – Purchases of goods and services (food, housing,
transportation, recreation, etc.) by employees whose earnings are derived
from CNSE-related activities.
In this way, the impact of original spending is amplified as it is re-spent by
firms and consumers throughout the economy. To estimate the magnitude
of the indirect and induced impacts, SRI purchased RIMS II multipliers from
42
the Bureau of Economic Analysis and identified appropriate detailed industry
sector multipliers for each relevant direct impact segment. The multipliers are
listed in Table 4.9 (below). For those impact segments that represent
resources flowing through the CNSE (external income from the National
Science Foundation, industry membership fees, etc.), the multiplier for the
"scientific research and development services" industry (RIMS Industry
number 541700) was used. Implied in this choice is the assumption that the
CNSE and its employees share a similar spending profile to other scientific
research and development services companies in California on which the
RIMS II model is based.
For those segments that are income estimates, the multiplier for the
household sector was used. This applies to the value of in-kind visitor
researcher support (which is essentially visitor salaries for the time they are
visiting in California) and the value of employment in California. For spending
in California by non-California attendees at CNSE workshops, a blended
multiplier was created that represents the breakdown of the typical business
visitor’s spending – 55 percent on accommodations, 25 percent on meals
(food services and drinking places), 10 percent on local retail, 5 percent on
recreation and entertainment, and 5 percent on ground passenger
transportation.
Table 4.9
Multipliers Used To Estimate Secondary Impacts
Direct Impact Category Total Output
Multiplier
EXTERNAL INCOME TO CALIFORNIA
Support to CNSE from the National Science Foundation 2.406
Sponsored research support from outside California to CNSE researchers 2.406
CNSE membership fees from non-California firms 2.406
In-kind visiting researcher support from non-California firms 1.599
Spending by non-California attendees to CNSE workshops in California 2.273
Licensing income from non-CA and foreign firms 2.406
VALUE OF INCREASED EMPLOYMENT IN CALIFORNIA
Value of employment created by CNSE start-up companies located in California
1.599
Given relevant final output multipliers from RIMS II and direct impact
estimates, estimating indirect and induced impacts was a straightforward
calculation involving multiplication of direct impacts by their corresponding
segment multipliers. Total direct impacts of the CNSE’s activities amounted
to nearly $45 million over ten years. These direct impacts generated
secondary impacts of nearly $43 million, for an implied aggregate multiplier of
43
1.96.31 For comparison, the implied aggregate multipliers found in the
literature range from 1.5 to 2.3.
The total quantifiable economic impacts of the CNSE’s activities on California
are the direct impacts plus indirect and induced impacts. The CNSE has had
a direct impact on the California economy of $44,694,486, with secondary
impacts of $42,862,835, for a total economic impact of $87,557,321 over ten
years (see Table 4.10).
Table 4.10
Total Quantifiable Economic Impacts of the CNSE on California
Direct Impacts
Indirect & Induced Impacts Total
EXTERNAL INCOME TO CALIFORNIA Support to CNSE from the National Science Foundation $24,682,355 $34,695,986 $59,378,341 CNSE membership fees from non-California member firms $157,500 $221,398 $378,898 In-kind support from non-California firms $200,000 $119,860 $319,860 Spending by non-California attendees at CNSE workshops in California $274,216 $348,966 $623,182 VALUE OF INCREASED EMPLOYMENT IN CALIFORNIA Value of employment created by CNSE start-up companies located in California $12,475,596 $7,476,625 $19,952,221 IMPROVED QUALITY OF TECHNICAL WORKFORCE IN CALIFORNIA Value of CNSE graduates hired by California firms $6,430,000 n/a $6,430,000 Value of workshops to participating California firms $474,819 n/a $474,819
TOTAL QUANTIFIABLE IMPACT ON CALIFORNIA $44,694,486 $42,862,835 $87,557,321
As indicated in Figure 4.3, the majority of the direct impacts are from the
external support that the CNSE has attracted from sources outside California;
these direct impacts from external support account for 29 percent of the total
quantifiable impacts; indirect and induced impacts derived through this
external support comprise 40 percent of the total (direct and indirect)
quantifiable impacts of the CNSE on California.
Direct and indirect workforce and employment effects together comprise the
remaining 31 percent of economic impacts on California.
31
Multipliers are generally specific to certain types of expenditures in the economy. This ―aggregate‖ multiplier refers to total secondary impacts over all direct impacts and is a useful way to compare the importance of secondary impacts across projects or studies.
44
Figure 4.3
National Economic Impacts of the CNSE
This section presents and examines the data collected in order to quantify the
CNSE’s direct quantifiable economic impacts on the United States as a
whole. As with direct impacts on California, the quantifiable impacts
presented here underestimate the total direct impacts on the nation because
some types of direct impact are infeasible to measure. The latter types of
direct CNSE impacts on the nation are described in ―Other Impacts of the
CNSE.‖
In compiling data regarding the direct quantifiable impacts of the CNSE on
the United States, SRI drew on similar sources as for state-level impacts,
such as CNSE’s annual reports and other financial records and information
gathered through interviews. Interviews with selected industry partners,
initiated during the SRI team’s site visit to CNSE and in several cases
augmented via subsequent telephone and email communications, proved
Indirect and Induced
from Increased
Employment,
$7,476,625
Value of Increased
Employment,
$12,475,596
Indirect and Induced
from External Income,
$35,386,210
Total External Income to
California, $25,314,071
Value of Improved
Technical Workforce,
$6,904,819
Total Quantifiable Economic Impact of CNSE on California: $87,557,321
Direct + Indirect and Induced Economic Impact
of CNSE on California
45
particularly important for estimating data regarding cost savings to U.S.
industry resulting from CNSE-derived products and for net profits to firms
incorporating CNSE research into new products. Whenever required, SRI
also used standard economic data such as the Economic Census published
by the U.S. Census Bureau in our estimation of quantifiable impacts.
CNSE membership fees from non-US member companies
As mentioned in the analysis of regional economic impacts, all ERCs aim to
attract involvement, including financial commitments, from companies and
related organizations with shared research interests. Membership in an ERC
is the tangible expression of interest that is documented by ERCs, including
the CNSE. From 1994 to 2005, the CNSE attracted 24 member companies,
of which three companies are multinationals headquartered outside of the
United States. As indicated in Table 4.11, these non-US firms contributed
$65,000 in membership fees, representing the direct economic effect of
member income from outside the United States.
Table 4.11
Non-US Industry Support to the CNSE through Membership Fees
Source of Cash Support Total Cumulative Support
1994-2005
Foreign Industry Membership Fees $65,500
Total Non-US Member Support to the CNSE $65,500
Spending by non-US attendees at CNSE workshops in California
The CNSE, like most ERCs, aims to disseminate information about its
research efforts and technological developments to a broad audience,
particularly to industry and other potential R&D users. Because these
conferences and workshops would not take place in the absence of the
CNSE, the spending associated with their implementation is a direct impact of
the center’s existence. At the national level, only the expenditures of non-US
firms during their attendance at these workshops would contribute to the
center’s economic impact. Since there was essentially no participation by
foreign firms in these workshops, the national impact is zero.
Value of CNSE workshops to participating firms
By sharing its research activities and ideas in workshops and conferences
targeted at industry, CNSE helps to strengthen the knowledge and technical
46
capacity of the country’s workers. Accordingly, SRI sought to value what
participating firms received via the improved skills of workers attending CNSE
workshops. As described earlier in the discussion of regional economic
impacts, this value can be estimated by calculating the cost to the firm of the
participants’ time spent at the CNSE workshop or conference.
SRI calculated this figure by multiplying the number of participants and
participant-days at CNSE workshops by a burdened daily rate for the average
professional, scientific and technical services worker in the Los Angeles
metropolitan area.32 Based on CNSE staff input, SRI assumed that, on
average, in-state participants attended one-day workshops and out-of-state
participants attended two-day workshops, yielding a total of 3,758
participants-days at CNSE workshops. Table 4.12, below, provides the
results of these estimations, which demonstrate over $900,000 in value to
firms and the nation via improved workforce skills.
Table 4.12
Estimated Value of CNSE Workshops to Firms sending Participants
Number of Workshop Attendees (CA and non-CA firms) 2,850
Estimated # of Days at Workshops 3,758
Estimated Salary per Day $244.50
Estimated Value of Workshops to Participating Firms $918,831
Value of employment created by CNSE startup companies
As mentioned in the regional impacts discussion, CNSE has been central to
the launch of 10 new companies, all located in California. Accordingly, the
employment generated by these new companies results in expanded
employment for the nation as a whole, and the value of this employment can
be quantified by multiplying the number of person-years of employment at the
startups by an average salary for the type of worker likely to be found at a
technology-based company. The CNSE startups reported employment
totaling 294 person-years, and the average annual salary for a professional,
scientific and technical worker in the Los Angeles metropolitan area is
$42,434, resulting in an estimated economic impact on the nation of
$12,475,596.
32
To calculate a burdened daily rate, SRI obtained the average daily salary for the ―Professional, Scientific, and Technical Services‖ category of the North American Industrial Classification System (NAICS) in the Los-Angeles-Long Beach-Santa Ana metropolitan statistical area and multiplied the average daily salary by 1.5 to account for estimated fringe benefits provided by the firm to the worker.
47
Value of CNSE graduates hired by US firms
As described in the previous section on regional economic impacts, CNSE
graduates possess unique R&D experience and technical knowledge that
reduce the training and mentoring costs expended by the companies that hire
them. This cost savings represents a substantial value to the hiring firms.
From previous studies and SRI’s discussions with several ERC industrial
liaison officers, SRI estimates that one-time cost savings to firms of hiring
CNSE graduates totals $50,000 per B.S. graduate, $70,000 per M.S.
graduate, and $100,000 per Ph.D.
Since CNSE’s inception, private companies have hired 68 CNSE graduates,
including two undergraduates (earning Bachelor of Science degrees), nine
students at the M.S. level, and 57 students at the Ph.D. level. Based on
these figures and the cost savings estimates by graduate level, the total value
of cost savings to firms hiring CNSE graduates is estimated to be $6,430,000.
However, because CNSE did not report the location of the firms hiring the 68
CNSE graduates, and because some of these firms may be located outside
the United States, the $6,430,000 figure may slightly overestimate the value
to the United States of cost savings achieved by firms hiring CNSE
graduates.
Net cost savings to U.S. industry from products incorporating CNSE research
As described in Chapter III, SRI’s framework for estimating national benefits
of investment in ERCs is based on the concept that societal benefits (i.e.,
returns to innovation) equal the sum of profits to the innovating firm and the
cost savings to users (whether individuals or companies). Since many
companies incorporating CNSE research or technology are privately held and
often reluctant to divulge information that might be useful to competitors, SRI
experienced difficulties in estimating or obtaining either type of figure,
particularly profit estimates. As a result, our focus in this aspect of estimating
the CNSE’s economic impact has been on documenting and analyzing
realized cost savings to users from products introduced to the market by
CNSE member companies or startups. Within the latter category, our focus
amongst CNSE startups has been on those companies advanced enough to
have products in the market. As discussed in Chapter III, the cost savings
presented here are, in NSF terminology, the already realized ―nuggets‖ of
ERC investment, rather than a comprehensive quantification of all cost
savings achieved to date or a projection of the savings expected in the future.
SRI’s review of CNSE annual reports, other NSF materials, and site visit to
Caltech revealed two key ―nuggets‖ related to cost savings resulting from
48
applications of CNSE research. These nuggets include the cost savings
achieved through commercialization of CNSE technology by one CNSE
member company, IRIS, and one CNSE startup, DigitalPersona. The
technology used or incorporated by each company and the process for
estimating cost savings associated with IRIS and DigitalPersona products are
described below.
Use of CNSE’s Technology by IRIS
Faced with intensifying competition from a Japanese manufacturer, IRIS, the
world leader in urinalysis systems, sponsored a CSNE research project to
develop an instrument that would automatically identify urine particles as well
as automatically highlight specimens with particular characteristics (defined
by the user) for further review by a technician. Through the project, IRIS
aimed to develop an instrument that ―employ[ed] a more robust optical
pattern technology‖33 and thereby decreased the time spent by technicians on
visual identification and analysis of images.
In fact, the new IRIS urinalysis instrument results in a four-minute reduction in
review time, which implies substantial cost savings for hospitals (and other
health facilities). Assuming that a technician at a typical large hospital
reviews an average of 50 urine specimens each day, the hospital saves 200
minutes per day of technician time. Further assuming an hourly cost of $30
per hour for a skilled technician, the new IRIS instrument saves the hospital
$100 per day or, with 300 working days per year, $30,000 per year. The
following figures, in Table 4.14, summarize the total cost savings to the
United States of the CNSE technology used in the new IRIS product, 357 of
which were introduced into use in the United States from 2002 to 2005.
Incorporation of CNSE Technology in DigitalPersona Innovations
DigitalPersona is a startup established by two CNSE undergraduates who
created the technology during a CNSE class project. Subsequently,
DigitalPersona’s fingerprint recognition technology has been incorporated into
various Microsoft products to assist in password management as well as to
improve privacy and security. Approximately one million users employ
DigitalPersona technology for password management, of which SRI
estimates 500,000 are in the United States. The Gardner Group estimates
that it costs approximately $150 per user per year to maintain passwords,
while the DigitalPersona product costs $180 on a one-time basis. Assuming
a usable life of three years for the DigitalPersona product, SRI calculates a
33
National Science Foundation, ―Engineering Research Center Innovations: ERC-Generated Commercialized Products, Processes, and Startups,‖ February 2007, p. 24.
49
total cost savings to the United States of $135,000,000 from the CNSE
technology represented in DigitalPersona’s product, as detailed in Table 4.13.
Table 4.13
Estimated Value of Cost Savings of CNSE Technology to the United States
Cost Savings from IRIS Instrument Number of instruments in-use in the United States (as of the first quarter of 2006) 357
Benefit per instrument per day $100
Estimated days of use per year 300
Subtotal Cost Savings From IRIS Instrument $10,710,000
Cost Savings from DigitalPersona Innovations
Cost savings per user over usable life $450
Cost per user over usable life $180
Net cost savings per user over usable life $270
Number of users in the United States 500,000
Subtotal Cost Savings from DigitalPersona Innovations $135,000,000
Estimated Yearly Cost Savings to the United States $145,710,000
Net profits to U.S. firms using CNSE research in new products
In addition to the cost savings information described above, DigitalPersona
also provided figures enabling estimation of net profits for the most recent
year of operations. According to the company’s chief technology officer, the
firm has been profitable for approximately one and a half years and earns
profits of between 15 and 20 percent of revenues. However, the company
was not willing to release revenue data because it was deemed proprietary.
The CNSE’s Total Direct Economic Impact on the United States
In summary, the existence of the CNSE has created employment in the
nation, resulted in cost savings to U.S. firms, and generated value for firms
participating in CNSE workshops. As Table 4.14 shows, the total direct
quantifiable economic impact of the CNSE on the United States is estimated
to be nearly $166 million.
50
Table 4.14
The CNSE’s Total Direct Quantifiable Economic Impact on the United States
External Income to the United States Cumulative 1995-2005
CNSE membership fees from non-US member firms $65,500 Spending by attendees at CNSE workshops in California $0 Total External Income to United States $65,500
Value of Increased Employment in the United States Value of employment created by CNSE start-up companies $12,475,596 Total value of increased employment in the United States $12,475,596
Improved Quality of Technical Workforce in the United States Value of CNSE graduates hired by US firms $6,430,000 Value of workshops to participating firms $918,831 Total value of improved quality of technical workforce in the United States $7,348,831
Net Cost Savings and Profits for U.S. Companies Net cost savings to industry $145,710,000 Net profits n/a Total net cost savings and profits $145,710,000
Total Direct Quantifiable Economic Impact on the United States $165,599,927
The CNSE’s Indirect and Induced (Secondary) Economic Impacts on the United States
As mentioned in the section detailing impacts on the region, the CNSE’s
direct economic impacts generate a variety of indirect and induced
(secondary) economic impacts. In estimating the indirect and induced
impacts, SRI uses the same background, assumptions, and methodology for
national-level impacts as for state-level impacts. The multipliers used to
calculate indirect and induced impacts at the national level are noted in Table
4.15, and the total quantifiable impacts (direct and indirect/induced) are
summarized in Table 4.16.
Table 4.15
The total quantifiable economic impacts of the CNSE’s activities on the
United States are the direct impacts plus indirect and induced impacts. The
CNSE has had a direct impact on the U.S. economy of $165,599,927, with
Multipliers Used To Estimate Secondary Impacts on the United States
Direct Impact Category Total Output
Multiplier
EXTERNAL INCOME TO THE UNITED STATES
CNSE membership fees from non-US firms 2.406
Spending by attendees at CNSE workshops 2.273
VALUE OF INCREASED EMPLOYMENT IN THE UNITED STATES
Value of employment created by CNSE start-up companies located in California
1.599
51
secondary impacts of $7,568,698, for a total economic impact of
$173,168,625 over ten years (see Table 4.16. As implied, the vast majority of
impacts on the United States are direct impacts – of which net cost savings
comprises 82 percent of the total quantifiable impact; indirect and induced
impacts comprising less than one-half of one percent of the total quantifiable
impacts (Figure 4.4).
Table 4.16
Total Quantifiable Economic Impacts of the CNSE on the United States
Direct Impacts
Indirect & Induced Impacts Total
EXTERNAL INCOME TO THE UNITED STATES CNSE membership fees from non-US member firms $65,500 $92,073 $157,573 VALUE OF INCREASED EMPLOYMENT IN THE UNITED STATES Value of employment created by CNSE start-up companies $12,475,596 $7,476,625 $19,952,221 IMPROVED QUALITY OF TECHNICAL WORKFORCE IN THE UNITED STATES Value of CNSE graduates hired by US firms $6,430,000 n/a $6,430,000 Value of workshops to participating firms $918,831 n/a $918,831 NET COST SAVINGS AND PROFITS IN THE UNITED STATES Net cost savings to industry $145,710,000 n/a $145,710,000 Net profits n/a n/a n/a
TOTAL QUANTIFIABLE IMPACT ON THE UNITED STATES $165,599,927 $7,568,698 $173,168,625
52
Figure 4.4
Other Impacts of the CNSE
SRI’s previous studies for the NSF of the impact on industry of member
participation in ERCs and other university-based industrial consortia indicate
clearly that the less tangible, longer-term, and difficult-to-quantify benefits of
membership are substantial, typically exceeding the costs of membership.34
As described in Chapter III, the site visit to CNSE, as well as communications
with BPEC and PERC staff, reinforced that it is important in an impact study
such as this to describe the magnitude and variety of non-quantifiable
impacts on California. Examples of non-quantifiable impacts include effects
of the center on the broad impact on competitiveness at both the firm and
national economic levels, as well as a wide range of specific benefits that
have positive economic implications for firms, including access to new ideas
and know-how, access to facilities, improved information for suppliers and
34
J. David Roessner, David W. Cheney, and H. R. Coward, Impact on Industry of Interactions with Engineering Research Centers – Repeat Study. Arlington, VA: SRI International. Final Report to the National Science Foundation, Engineering Education and Centers Division, 2004; David Roessner, Outcomes and Impacts of the State/Industry University Cooperative Research Centers (S/IUCRC) Program. Arlington, VA: SRI International, October 2000. Final Report to the National Science Foundation Engineering Education and Centers Division; Catherine P. Ailes, J. David Roessner, and Irwin Feller. The Impact on Industry of Interaction with Engineering Research Centers. Arlington, VA: SRI International, January 1997. Final Report prepared for the National Science Foundation, Engineering Education and Centers Division.
External Income to the U.S., $65,500
Indirect and Induced from
External Income, $92,073
Value of Increased Employment, $12,475,596
Indirect and Induced from
Increased Employment, $7,476,625
Value of Improved Technical
Workforce, $7,348,831
Net cost savings to industry,
$145,710,000
Total Quantifiable Economic Impact of CNSE on California: $173,168,625
Direct + Indirect and Induced Economic Impact of CNSE on the U.S.
53
customers, product and process improvements, and information that
influences the firm’s R&D agenda.
In the case of CNSE, several of these types of non-quantifiable impacts were
emphasized by member firms, CNSE startups, and center staff. For
example, one CNSE startup (that later became a member firm) noted the
significant influence of the center’s ideas and people on development of the
company’s direction and product focus. For this company, Evolution
Robotics, the CNSE’s importance is manifested in access to the center’s
ideas, which the company gained an ongoing basis as a member of the
CNSE’s scientific advisory board. The importance of CNSE’s existence to
the company is further embodied in its people, who created the core software
used at the company and who, through the company’s hiring of three M.S.
degree graduates, were responsible for the firm’s technical development.
With regard to the latter – hiring of CNSE graduates – a significant but difficult
to quantify impact may be the reduction in time from concept to
commercialization in the company’s products, due to the advanced
knowledge and R&D techniques derived from center research and
experience.
CNSE staff likewise commented on the importance of human capacity
building efforts at the center, noting that over one-third of the Ph.D. graduates
from CNSE went on to become faculty members at other universities, thereby
extending the center’s multidisciplinary approach in this new field to additional
students and in different academic environments.
More broadly, CNSE staff emphasized that, with NSF support, the center has
succeeded in establishing an entirely new field – neuromorphic systems
engineering – that has implications and applications for many industries and
products. In this sense, CNSE’s R&D supports the overall competitiveness
and leadership of California and the United States in the science and
technology arena and, in particular, in this emerging field.
Conclusions and Observations
The process of documenting and analyzing the CNSE’s quantifiable impacts
at the state and national levels leads to two key conclusions and
observations. First, the investment of NSF funding in the CNSE has led to
substantial returns at both the state and national levels, especially when one
considers these returns in light of the conservative assumptions that we used
54
to measure realized impacts and the lack of data for some types of direct
impact.35
The second major observation from the CNSE case relates to the timeframe
in which impacts can realistically be expected and, correspondingly, hints at
the magnitude of the not-yet-realized impacts of ERC investments. The
CNSE, though in operation as an ERC for a full 11 years, focuses on
upstream or transformational ideas and technologies and, thus, might be
expected to have a long time horizon before yielding widespread applications
of its R&D and for tangible indications of impact. Given this focus, it is
somewhat surprising that, at the national level, SRI was able to document
nearly $146 million in cost savings from one application of CNSE-derived
ideas (i.e., the DigitalPersona fingerprint technology). The sizeable economic
impact of these ―nuggets‖ provides a suggestion of the potential scale of the
still incompletely realized and unknown impacts that may be generated by
additional CNSE outputs as well as from other ERCs conducting
transformational research.
35
As discussed in the regional impacts section data for categories such as sponsored research, in-kind support, licensing fees and royalties, and employment in startups were not available and thus contribute to an underestimation of total direct impact.
55
Virginia Tech’s Center for Power Electronics Systems
Introduction to the Center for Power Electronics Systems (CPES)
Vision and History
The Center for Power Electronics Systems was established as an NSF ERC
in 1998 at Virginia Polytechnic Institute and State University (VT). With VT as
the lead university, the Center consists of a consortium that includes four
other institutions: the University of Wisconsin-Madison (UW), Rensselaer
Polytechnic Institute (RPI), North Carolina A&T University (NCAT), and the
University of Puerto Rico-Mayaguez (UPRM). The Center’s mission is ―to
develop advanced electronic power conversion technologies for efficient
electric energy utilization through multidisciplinary engineering research and
education in the field of power electronics.‖ Its research vision is ―to enable
dramatic improvements in the performance, reliability, and cost-effectiveness
of electric energy processing systems by developing an integrated system
approach via integrated power electronics modules (IPEM). The envisioned
IPEM solution is based on the integration of [a] new generation of devices,
innovative circuits, and functions in the form of building blocks with standard
functionalities and interfaces to facilitate the integration of these building
blocks into application-specific system solutions.‖ As of April 2007, the
Center’s research team consisted of 32 faculty and 5 research staff, 55 PhD
students, 43 MS students, and 35 undergraduate students. Over 80
companies were members of the Center’s industry consortium.36
Strategic Plan Overview
Prior to 2006, the CPES research structure was organized into seven
research thrusts that favored development of the fundamental knowledge
―essential for the realization of [the] IPEM-based integrated system approach,
with the enabling technology thrust focusing on module technologies and the
engineered systems thrust focusing on system-level integration and
demonstration.‖ NSF funding supported much of the fundamental work
pursued during this period. Applied research was limited to three test bed
projects: integrated power supplies, integrated modular motor drives in the
electro-magneto-thermo-mechanical integration technology (EMTMIT)
enabling technology thrust, and the electronic distribution system in the
IPEM-PCS (power conversion system) thrust at the system level. Additional
support from industry and other federal agencies complemented these
applied research projects. The strategic structure of the Center’s work prior
to 2006 is depicted in Figure 4.5 below.
36
Center for Power Electronics Systems, Center Overview and Highlights, April 2007, p. 1.
56
Figure 4.5
CPES Research Program Structure and Thrust Leaders before 2006 (Year 9)
Recently, preparing for its ―graduation‖ from NSF support, the Center
expanded its vision, calling for ―leadership through global collaborative
research and education for creating electronic power processing systems of
the highest value to society.‖ The challenge for the future is to realize the
IPEM concept in a wide range of next-generation energy efficient and
environmentally friendly applications. To accomplish this vision, a new, four-
thrust research structure was implemented, depicted in Figure 4.6.
57
Figure 4.6
CPES Research Program Structure and Thrust Leaders after 2006
The goals for these four new thrusts are as follows:
IPEM-based Power Conversion Systems (IPCS): ―to develop an
integrated system approach to the design of electric energy
processing systems based on IPEMs, and to explore the broader
impact of the CPES-development technologies on the electrical
energy usage in our society.‖
Integrated Motor Drive Systems (IMDS): ―to develop the necessary
technology so that adjustable-speed drive capabilities can be
economically embedded inside future electric motors with minimal
impact on their size, weight, and environmental robustness.‖
Power Electronics Information Technology (PEIT): ―to continue
developing materials, structures, and integration technologies that
promote pervasive use of power electronics in energy management.‖
Semi-conductor Power Devices and Integrated Circuits (SPDIC): to
―serve as a basic driving force for power electronics circuits and
systems and [serve as] a critical enabling building block in IPEM
technologies.‖
58
Partners and Industry Membership
Industrial collaboration and technology transfer activities at CPES are
centered in the industrial consortium.37 The Center’s industry partnership
program, like most ERCs, has a tiered membership structure. Prospective
members may choose among four levels of participation: Principal Member
Plus, Principal Member, Associate Member, and Affiliate Member. Through
the years, CPES has enjoyed strong and increasing industrial support from
the consortium, from $400K in Year 1 to more than $1.3 million in Year 9.
CPES faculty have stepped up their recruiting efforts in the last two years to
recruit additional Principal Members Plus to strengthen industrial support in
anticipation of the post-NSF support period. In the 2007 reporting year,
CPES industry members totaled 76, with 16 Principal Members Plus, 6
Principal Members, 12 Associated Members, and 42 Affiliate Members.
CPES maintains collaborative partnerships with other academic institutions
and research centers worldwide. Since Year 1, CPES researchers have
interacted with 114 academic and research institutions from 25 countries.
These activities included joint research and outreach efforts, collaborative
authorships, technical information exchanges with industry, as well as visiting
scholars and professors.
Since the Center’s inception, CPES has generated 232 technology transfer
activities expected to result in direct impact on industry. During the past nine
years, CPES researchers have filed 125 invention disclosures and have been
awarded 43 patents, with 16 patents pending. Since CPES implemented the
Intellectual Property Protection Fund (IPPF) in 2002, 213 licenses have been
granted.38
37
Information in this section draws upon the 2007 CPES Annual Report, March 2007, Volume I. 38
To provide IP advantages to Principal-grade members, CPES offers the IPPF (Intellectual Property Protection Fund) at no additional cost to Principal Plus Members, and at a cost of $5,000 per year for Principal Members. IPPF members are invited to join quarterly teleconferences to review CPES IP with inventors and jointly decide on patent protection, with patenting costs covered by the IPPF. IPPF members are then granted royalty-free, non-exclusive, nontransferable licenses to use the technology. Since the implementation of IPPF in November 2002, the IPPF Council has voted to patent 30 inventions.
59
Education and Outreach
Like other ERCs, CPES seeks to develop education and outreach programs
that provide multi-disciplinary, team-driven, and systems-oriented educational
opportunities for pre-college and university students as well as for practicing
engineers. The Center initiated cooperative agreements for distance learning
and exchange of graduate students among its partner institutions in 2000. As
part of this agreement, more than 85 power electronics and related courses
were made available at CPES partner campuses, including 27 courses
offered for distance learning. In addition, undergraduate power electronics
concentrations were established at VT, RPI, and UPRM; an undergraduate
certificate in power electronics was established at UW; and a power
electronics track was established at NCAT. Several pre-college programs
have been established, including high school summer camps at RPI and
NCAT, a power electronics component for the pre-college engineering
summer program at UPRM, and an after-school program at VT designed to
engage elementary and middle school students and teachers in southwestern
Virginia in Center-sponsored activities. Regarding outreach to industry, short
courses in power electronics are offered annually at VT and UW, and a
certificate program in Semiconductor Power Device Technology was created
at RPI.39 Overall, In Years 1-9, outreach activities also included more than
700 students in pre-college outreach programs and more than 500
participants in educational outreach programs for industry.
Types of Economic Impact Data Available from CPES
CPES has partner institutions in states other than Virginia. In principle, this
greatly complicates the calculation of the regional economic impact of CPES
because, strictly speaking, we would have to treat each partner institution’s
economically relevant inputs and outputs separately and calculate the
impacts on each state separately. It was immediately obvious that this was
not feasible given our project resources and the burden it would have placed
on CPES staff, nor was it necessary for the primary purposes of this study.
We asked CPES staff to break the data we required for our regional
economic analysis into three locational categories: sources/impacts within the
five partner states (VA, NY, WI, PR, NC), within the U.S., and foreign. This
was not greatly burdensome for most of our support and impact categories,
since CPES industry workshops were held at VT; visiting researchers came
to VT; and the location of members of the CPES industrial consortium, the
39
CPES, Center Overview and Highlights, April 2007, pp. 17-18.
60
location of sources of sponsored research support for CPES, the location of
companies that had hired CPES students, and the location of start-up
companies all were known. See Figure 4.7, below, for a visual representation
of these impacts on Virginia; similar charts would apply to the other partner
states.
Figure 4.7
Each category of potential impact is framed in terms of additional money and
other resources coming into partner states that otherwise would not have
occurred, and/or additional value to the states that otherwise would not have
occurred, in the absence of CPES. The following table lists the categories of
impact that SRI sought to measure or estimate, including indirect and induced
effects, to calculate the aggregate economic impacts on CPES partner states.
As will be discussed later in this chapter (in ―Other Impacts of CPES‖), many
impacts associated with CPES having economic significance can be readily
quantified. Accordingly, the following table (Table 4.17) lists only those
categories of impact which, based on SRI’s experience conducting the
assessment of Georgia’s PRC, were anticipated to be readily available
quantitatively.
Value of CPES
Workshops to VA firms
NSF support
to CPES
Licensing and royalty fees from
CPES inventions
In-kind support
to CPES
CPES member
support
Jobs created by CPES
startups in VA
Direct Impact of CPES on Virginia’s Economy
Spending by non-VA firms at
CPES workshops
Venture capital from outside VA
invested in VA firms
Cost savings to VA firms hiring CPES
grads
Sponsored research support
to CPES
61
Table 4.17 Categories of Economic Impacts on Virginia
from Investment in the Center for Power Electronics Systems
NSF support for CPES.
Industry support from all out-of-state industrial members of CPES since its inception.
Sponsored research support from outside partner states attributable to existence of CPES.
Licensing fees and royalties for intellectual property generated by CPES research.
Spending by non-partner state attendees at CPES workshops in Virginia.
Value of CPES workshops to participating partner state firms.
Value of investments in CPES start-ups by non-partner state venture capital firms.
Economic impact of start-ups based on CPES research that have located in partner states.
Cost savings to firms in partner states that have hired CPES students and graduates.
Indirect and induced (secondary) effects: additional economic activity generated by direct increase in in-state expenditures attributable to existence of CPES.
For national economic impacts, SRI expanded the above methodology for
regional impact by incorporating the conceptual framework described earlier
based on consumer surplus calculations. The following table (Table 4.18) lists
the categories of impact that SRI sought to measure or estimate, including
indirect and induced effects, to quantify CPES’ economic impacts on the
United States.
Table 4.18 Categories of Economic Impacts on the United States
from Investment in the Center for Power Electronics Systems
Industry support from all non-U.S. industrial members of CPES since its inception.
Sponsored research support from outside the U.S. attributable to existence of CPES.
Licensing fees and royalties for intellectual property generated by CPES research.
Spending by attendees at CPES workshops.
Value of CPES workshops to participating firms.
Economic impact of start-ups based on CPES research that have located in the U.S.
Cost savings to firms in the U.S. that have hired CPES students and graduates.
Indirect and induced (secondary) effects: additional economic activity generated by direct increase in in-state expenditures attributable to existence of CPES.
Net cost savings to U.S. industry as a result of technologies developed by CPES.
Net profits or expenditures of start-up companies based in the U.S. and based on CPES research.
Regional Economic Impacts of CPES
This section describes and analyzes the data collected in order to quantify
CPES’ direct, aggregate economic impact on the five CPES partner states.
CPES’ annual reports for the years 2000 to 2007 formed a central basis for
our estimate of the Center’s quantifiable direct impacts. SRI worked with
CPES staff to understand and organize these data into an appropriate
analytical framework. We took special care to exclude cash and in-kind
support received from partner state firms from the final estimates of CPES’
total regional impact, under the premise that funds received by CPES from
62
partner-state sources should be considered as resources circulated within the
region, rather than as additional resources flowing into the region due to
CPES’ existence. The following categories of impacts were quantifiable and
capture some, but by no means all, of CPES’ direct impact on the regional
economy.
NSF support for CPES since its inception
CPES has attracted more than $28 million to the five partner states in the
form of NSF support (Table 4.19).40 These funds include CPES’ base award
as an Engineering Research Center as well as NSF special purpose program
funds and other NSF support.
Table 4.19 NSF Cash Support to CPES
Type of Cash Support Cumulative Support 1999-2007
NSF ERC Base Award 27,027,298 NSF ERC Program Special Purpose 1,462,287
Total Cash Support $28,489,585
Sponsored research support from outside the state attributable to the existence of CPES
ERCs tend to serve as focal points for sponsored research, i.e., research
conducted by center faculty and students but funded by companies, other
U.S. government agencies, or foreign government entities. As indicated in
the following table (Table 4.20), CPES’ experience in this regard is similar, in
that the center attracted more than $17 million during its first nine years as an
ERC, about $7 million from federal government agencies other than NSF and
$9 million from industry. Nearly all of this sponsored research support, more
than $16 million, came from sources outside the five partner states.
40
For this and subsequent tables, unless noted otherwise, data sources are a combination of CPES annual reports, CPES and Virginia Tech records, and CPES staff.
63
Table 4.20 Sponsored Research Support to CPES
Source of Cash Support Cumulative Support 1999-2007
Industry Support
From within Five Partner States $918,338
From outside Five Partner States (within US) $6,097,947
From outside US $2,927,688 Federal Government Agencies (non-NSF)
$6,902,725
Other Sources of Sponsored Research
From within Five Partner States $319,456
From outside Five Partner States (within US) $263,408
From outside US $32,125
Total Sponsored Research Support $17,461,687
Member support to CPES
Members of the CPES industrial consortium outside of the five partner states
(including foreign industry members) have provided over $3 million in
membership fees to CPES during the center’s 9 years of existence (Table
4.21).
Table 4.21 Industry Support to CPES through Membership Fees (unrestricted)
Source of Cash Support
Cumulative Support Year 1-9
US Industry Support Membership (Five Partner States firms) $895,025 Membership (non-Five Partner States firms) $1,541,056
Foreign Industry Membership $1,711,690
Total Cash Support $4,147,771
In-kind support to CPES from external sources
In addition to cash support, CEPS has received substantial in-kind support
from federal government agencies and from U.S. and international industry
partners. As indicated in Table 4.22, about $3.5 million in equipment has
been donated to CPES by corporations based outside the five partner states.
Another $3.5 million worth of other, non-equipment assets has been donated
to the Center, so that altogether in-kind support over nine years from sources
outside the partner states amounts to just over $7 million.
64
Table 4.22 In-kind Support to CPES
Type of In-kind Support
Cumulative Support Y1-9
In-kind Equipment Donations to CPES US Industry - Five Partner States Firms $489,160 US Industry - non-Five Partner States Firms $3,527,153 Other Sources (non-US industry) $23,664
Value of New Facilities in Existing Buildings Foreign Industry 15,000
Value of Other Assets Donated U.S. Industry - non-Five Partner States Firms 3,449,166
Total In-kind Support $7,504,143
Other cash support to CPES
As indicated in Table 4.23, CPES has also attracted nearly $14 million in
additional cash support, mostly from the host universities, but also a
significant $3 million directly from the partner states. However, since these
sources are all inside the five-state region, none except the relatively small
amount from non-NSF federal agencies contributes to regional economic
impact.
Table 4.23 Other Cash Support to CPES (unrestricted)
Source of Cash Support Cumulative Support Y1-9
University Support U.S. University Support (within Five Member States) $10,916,433
State Government Support $2,920,216
Other U.S. Government (non-NSF) $29,479
Total Cash Support $13,866,128
Licensing fees and royalties for intellectual property generated by CPES research
Since the Center’s inception, CPES researchers have generated 125
invention disclosures and received 43 patents, with 16 additional patents
pending. The third patent issued to CPES, dated 2000, was licensed to a
member company and subsequently has generated $10,000 in licensing
income. This is the only CPES patent licensed thus far.
Spending in partner states by out-of-state attendees at workshops
65
Over the course of its nine years of ERC operations, CPES has conducted 54
workshops and conferences that attracted industry representatives. About
three-fourths of the approximately 700 attendees at these workshops were
from companies in non-partner states. These out-of-state visitors spend
money on lodging, meals, entertainment, transportation, etc., that represent
resources that the region (basically Virginia) received because of CPES.
CPES staff also provided us with information regarding the typical length of
the workshops, enabling us to calculate the total number of days attendees
spent in Virginia. Using federal government per-diem rates of spending per
visitor-day, we estimate that non-partner state attendees spent approximately
$265,000 while in Virginia attending CPES industry workshops and
conferences (Table 4.24).
Table 4.24 Estimated Spending by Non-Five Partner States Attendees
at CPES Workshops and Conferences Held in Five Partner States
Number of Workshops in Five Partner States 54 Average # of Attendees per Workshop 12.5 Average % of non-Five Partner States Attendees 75% Total # of non-Five Partner States Attendees 506.25 Total non-Five Partner States Attendee Days in Five Member States 2,025
Spending per Visitor Night (GSA per diem, Blacksburg, VA) $131
Estimated Total Spending $265,275
Venture capital attracted to CPES startups
CPES has spawned two start-ups, one located in Blacksburg and founded by
a CPES faculty member (NBE Technologies, LLC), and one that is located in
Maryland (Athena Energy, LLC). Neither firm has attracted significant
venture capital.
66
Employment impact of start-ups from CPES research that have located in partner states
NBE Technologies, in Blacksburg, is a one-person operation and has been
so for three years41. It has therefore created 3 person-years of employment
impact on Virginia, which amounts to $181,770 (3 X $60,590, the national
average salary for NAICS 54).
Value of cost savings to firms in partner states that have hired CPES graduates
SRI estimates that firms hiring ERC graduates benefit through one-time cost
savings of $50,000 per B.S. graduate, $70,000 per M.S. graduate, and
$100,000 per Ph.D. These estimates were based primarily on informal
discussions between SRI staff and with several ERC industrial liaison
officers, interviews with representatives of companies that have hired ERC
graduates, and company surveys.42 Our discussions suggested that a newly-
hired ERC Ph.D. graduate requires approximately one year’s less mentoring
time by a company staff member than a comparable, non-ERC graduate.
Over the last nine years, industry hired a total of 217 CPES graduates,
including 22 students earning B.S. degrees, 107 M.S. graduates, and 88
Ph.D.s. Of these graduates, companies located in the five partner states
hired a total of 56 students – 9 B.S., 25 M.S., and 22 Ph.D. graduates.
Based on the cost savings estimates for each education level discussed
above, the total value of cost savings to firms located in partner states hiring
CPES graduates is approximately $4.4 million.
Value of workshops to participating firms located in partner states
As mentioned above, CPES staff provided SRI with data regarding the
number of industry participants and participant-days from companies located
in partner states. Using the average daily rate for NAICS workers and
multiplying this by the number of workshop days yielded an estimated total
value of over $56,000 to firms in CPES partner states (Table 4.25).
41
Information on the number of employees of the other CPES start-up, Athena Energy LLC, has not been obtained yet and thus not incorporated in this estimate. It will be incorporated once the information becomes available. 42
The cost savings to the hiring firm were estimated to be approximately $100,000 per Ph.D., using the mentor's annual full compensation as the basis for this estimate. We extrapolated from this to estimate cost savings of $70,000 per ERC M.S. hire and $50,000 per B.S. hire. These estimates are supported by results of Semiconductor Research Corporation (SRC) surveys which cite savings of at least $100,000 per student for companies that hire students supported by SRC contracts (www.src.org/member/students/mem_benefits.asp).
67
Table 4.25 Value of Workshops to Five Partner States Firms Sending Attendees
Number of Workshop Attendees from Five Partner States firms
40.5
Estimated # of Days at Workshops 162
Estimated Salary per Day (average daily rate for NAICS 54)
$349.50
Estimated Value of Workshops to Participating Firms $56,619
CPES’ Total Direct Regional Economic Impact
CPES has had substantial direct effects on partner states in many areas,
mostly by attracting new money to the regions involved from outside sources.
As Table 4.26 shows, the total direct quantifiable economic impact of CPES
on the five partner states is estimated to be nearly $63 million.
Table 4.26 CPES' Total Direct Quantifiable Economic Impact on Five Partner States
External Income to Five Partner States
Cumulative 2000-2007
Support to CPES from the National Science Foundation $28,489,585 Sponsored research support from outside five partner state for CPES researchers $19,183,706 CPES membership fees from non-five partner state member firms $3,252,746 In-kind support from non-five partner states firms/organizations $7,014,983 Intellectual property income from non-five partner state firms for CPES inventions $10,000 Spending by non-Five Member States attendees at CPES workshops in five partner states
$265,275
Value of venture capital from non-five partner states sources invested in CPES start-ups
$0
Total External Income to Five Partner States $58,216,295 Value of Increased Employment in five partner states
Value of employment created by CPES start-up companies located in five partner states
$181,770
Total Value of Increased Employment in Five Partner States $181,770 Improved Quality of Technical Workforce in Five Partner States
Value of CPES graduates hired by five member state firms $4,400,000 Value of CPES workshops to participating five partner state firms $56,619 Total Value of Improved Quality of Technical Workforce in Five Partner States $4,456,619
Total Quantifiable Direct Economic Impact $62,854,684
CPES’ Indirect and Induced (Secondary) Economic Impacts on Partner States
In addition to the direct economic impacts described above, CPES activities
result in several categories of indirect and induced (secondary) economic
impacts. To estimate the magnitude of the indirect and induced impacts, SRI
purchased RIMS II multipliers from the Bureau of Economic Analysis and
identified appropriate detailed industry sector multipliers for each relevant
direct impact segment. The multipliers are listed in Table 4.27 (below). For
those impact segments that represent resources flowing through CPES (e.g.,
external income from the National Science Foundation, industry membership
fees, etc.), the multiplier for the "scientific research and development
68
services" industry (RIMS industry number 541700) was used. Implied in this
choice is the assumption that CPES and its employees share a similar
spending profile to other scientific research and development services
companies in Virginia on which the RIMS II model is based.
For those segments that are income estimates, the multiplier for household
spending was used. This applies to the value of in-kind visitor researcher
support (which is essentially visitor salaries for the time they are visiting in
Virginia) and the value of employment in Virginia. For spending in Virginia by
non-partner state attendees at CPES workshops, a blended multiplier was
created that represents the breakdown of the typical business visitor’s
spending – 55 percent on accommodations, 25 percent on meals (food
services and drinking places), 10 percent on local retail, 5 percent on
recreation and entertainment, and 5 percent on ground passenger
transportation.
Table 4.27 Multipliers Used to Estimate Secondary Impacts
Direct Impact Category
Total Output
Multiplier EXTERNAL INCOME TO FIVE PARTNER STATES
Support to CPES from the National Science Foundation 2.0812
Sponsored research support from outside five partner states to CPES researchers 2.0812
CPES membership fees from non-five partner states firms 2.0812
In-kind support from non-five partner states firms/organizations 1.3611
Intellectual property income from non-five partner states firms for CPES inventions 2.0812
Spending by non-five partner states attendees to CPES workshops in five partner states
2.0233
VALUE OF INCREASED EMPLOYMENT IN FIVE PARTNER STATES
Value of employment created by CPES start-up companies located in five partner states
1.3611
With these final output multipliers from RIMS II and the direct impact
estimates, calculating indirect and induced impacts involves a straightforward
multiplication of direct impacts by their corresponding segment multipliers.
Total direct impacts of CPES activities to date have amounted to nearly $63
million. These direct impacts have generated secondary impacts of $58
million, for an implied aggregate multiplier of 1.65.43 For comparison, the
implied aggregate multipliers found in the literature range from 1.5 to 2.3.
The total quantifiable economic impacts of CPES’ activities on the five partner
states are the direct impacts plus indirect and induced impacts. CPES has
had a direct impact on member states of $62,911,303, with secondary
43
Multipliers are generally specific to certain types of expenditures in the economy. This ―aggregate‖ multiplier refers to total secondary impacts over all direct impacts and is a useful way to compare the importance of secondary impacts across projects or studies.
69
impacts of $57,942,247, for a total economic impact of $120,853,550 over
nine years (see Table 4.28). As indicated in Figure 4.8, the majority of the
direct impacts are from the external support that CPES has received from
external sources. These direct impacts from external support account for 48
percent of the total quantifiable impacts, and indirect and induced impacts
derived through this external support comprise 48 percent of the total (direct
and indirect) quantifiable impacts of CPES on partner states. Direct and
indirect workforce and employment effects together comprise the remaining 4
percent of economic impacts on the region.
Table 4.28 CPES' Total Quantifiable Economic Impact on Five Partner States
Direct
Impacts Indirect & Induced
Impacts
Total
Multiplier
EXTERNAL INCOME TO FIVE PARTNER STATES
Support to CPES from the National Science Foundation
$28,489,585 2.0812 $30,802,939 $59,292,524
Sponsored research support from outside five partner states for CPES researchers
$19,183,706 2.0812 $20,741,423 $39,925,129
CPES membership fees from non-five partner states member firms
$3,252,746 2.0812 $3,516,869 $6,769,615
In-kind support from non-five partner states firms/organizations
$7,014,983 1.3611 $2,533,110 $9,548,093
Intellectual property income from non-five partner states firms for CPES inventions
$10,000 2.0812 $10,812 $20,812
Spending by non-five partner states attendees at CPES workshops in five partner states
$265,275 2.0233 $271,456 $536,731
Value of venture capital from non-five partner states sources invested in CPES start-ups
$0 n/a $0 $0
Total External Income to five partner states $58,216,295 $57,876,609 $116,092,904
VALUE OF INCREASED EMPLOYMENT IN FIVE PARTNER STATES
Value of employment created by CPES start-up companies located in five partner states
$181,770 1.3611 $65,637 $247,407
Total Value of Increased Employment in Five Partner States
$181,770 $65,637 $247,407
IMPROVED QUALITY OF TECHNICAL WORKFORCE IN FIVE PARTNER STATES
Value of CPES graduates hired by five partner states firms
$4,456,619 n/a $0 $4,456,619
Value of workshops to participating five partner states firms
$56,619 n/a $0 $56,619
Total Value of Improved Quality of Technical Workforce in Five Partner States
$4,513,238 $0 $4,513,238
TOTAL QUANTIFIABLE IMPACT ON FIVE PARTNER STATES
$62,911,303 $57,942,247 $120,853,550
70
Figure 4.8
National Economic Impacts of CPES
This section describes CPES’ direct quantifiable economic impacts on the
United States as a whole. Similar to the discussion of direct impacts on
partner states, the quantifiable impacts presented here underestimate the
total direct impacts on the nation because some types of direct impact are
infeasible to measure. The latter types of direct CPES impacts on the nation
are described in ―Other Impacts of CPES.‖
CPES membership fees from non-U.S. member companies
An important demonstration of industry support for ERCs is embodied in the
membership fees companies are willing to pay. In its first nine years of
operation, CPES has enjoyed the support of several companies
headquartered outside the United States, and the membership fees of these
foreign companies is considerable, totaling more than $1.7 million. (See
Table 4.29), representing the direct economic effect of member income from
outside the United States.
Value of Improved
Technical Workforce,
$4,513,238
Indirect and Induced
Impact from Increased
Employment, $65,637
Value of Increased
Employment, $181,770
Indirect and Induced
Impact from External
Income, $57,876,609
Total External Income to
Five Partner States,
$58,216,295
Direct + Indirect and Induced Economic Impact
of CPES on Five Partner States
Total Quantifiable Economic Impact of CPES on Five Partner States: $120,853,550
71
Table 4.29
Non-U.S. Industry Support to CPES through Membership Fees
Source of Cash Support
Cumulative 1999-2007
Foreign Industry Membership Fees $1,711,690
Total Non-U.S. Member Support to CPES $1,711,690
In-kind support to CPES from external sources
In addition to providing support for CPES through membership fees, foreign
companies have donated equipment to the center. The value of these
equipment donations totals more than $38,000 (Table 4.30).
Table 4.30
In-kind Support to CPES by non-U.S. Companies
Type of In-kind Support Cumulative Support
1999-2007 Value of Equipment Donations from non-U.S. Industry
$38,664
Total In-kind Support to CPES $38,664
Licensing fees and royalties for intellectual property generated by CPES research
The $10,000 in IP revenue from licensing a CPES technology was earned
from a non-U.S. firm. Accordingly, this amount is included in SRI’s national
impact estimates.
Spending by attendees at CPES workshops in Virginia
As mentioned in the regional impacts section, CPES has conducted more
than 50 workshops and conferences in order to disseminate widely the
results of its research and to engage a broad audience. SRI’s calculations for
these impacts were derived from information about the number of workshops
and conferences held, the number of participants at each event, and the
length of each event. As an estimate of the amount spent by participants
from outside the United States, we employed the full federal government per-
diem rate (i.e., including both accommodations and M&IE). With these
assumptions, we estimate that non-U.S. attendees at CPES workshops and
conferences spent approximately $68,000 while in Virginia (Table 4.31).
72
Table 4.31 Estimated Spending
at CPES Workshops and Conferences Held in Five Member States
Total # of non-US Attendees 129.6
Total non-US Attendee Days in five member states 518.4 Spending per Visitor Night $131
Estimated Total Spending $67,910
Value of CPES workshops to participating firms
Through their industry-oriented workshops and conferences, ERCs play a
role in helping companies expose their employees to new ideas and
contribute to the overall ―lifelong learning‖ of the nation’s workforce. To
quantify the improvement in technical workforce skills imparted to firms by
their employees’ participation in CPES’ industry events, SRI developed an
estimate of the value of the time spent by workers at CPES industry-oriented
workshops and conferences.
The calculation involves multiplying the number of participant-days at CPES
industry workshops by a burdened daily rate for the national average
professional, scientific and technical services worker for NAICS 54.44 Using
CPES records of participant attendance and the number of days per event
resulted in an estimate of 2,187 participant-days by employees of U.S.
companies. At the estimated salary per day of $349.50, the total value of
CPES workshops to U.S.-based companies is slightly more than $0.75 million
(see Table 4.32).
Table 4.32 Value of Workshops to U.S. Firms Sending Attendees
Number of Workshop Attendees (all U.S. firms) 547
Estimated # of Days at Workshops 2,187
Estimated Salary per Day $349.50
Estimated Value of Workshops to Firms $764,357
Value of employment created by CPES startup companies
Over the course of the center’s first seven years, two start-ups have been
launched as a result of CPES. We were not able to obtain data regarding the
number of employees at each startup and thus at this time are not able to
place a value on this employment.
44
As in the previous calculation of the employment effects of CPES start-ups, SRI obtained the average daily salary for the ―Professional, Scientific, and Technical Services‖ category of the North American Industrial Classification System (NAICS) code 54 and multiplied the average national daily salary by 1.5 to account for estimated fringe benefits provided by the firm to the worker.
73
Value of CPES graduates hired by U.S. firms
Over the last nine years, industry hired a total of 217 CPES graduates,
including 22 students earning B.S. degrees, 107 M.S. graduates, and 88
Ph.D.s. Just ten of these students were hired by foreign firms, so nearly all
the value to companies gained by hiring CPES graduates accrued to U.S.
firms. Using the estimates for the value of reduced mentoring time for ERC
graduate hires, we calculate that U.S. companies gained $16,510,000 worth
of productive time from CPES graduates.
Net cost savings to industry and additional profits to innovating U.S. firms from products incorporating CPES research
The national societal benefit of investment in efforts such as NSF’s ERC
program is equal to the sum of profits to the innovating firm and the cost
savings to users (whether individuals or companies). Accordingly, to quantify
impact at the national level, SRI sought to estimate both profits and cost
savings. Obtaining data for either element of societal impact has proven
difficult, and in the case of CPES it was especially difficult. Although our
interviews with a number of companies that have been members of, and/or
hired graduates of, CPES (including Intel, General Electric, International
Rectifier, DRS Power and Control Technologies, and Monolithic Power
Systems), our interviewees were unable to provide us with verifiable
estimates of additional profits or the total cost savings to their company or to
industry attributable to CPES technology. Nevertheless, our industry
interviews did yield some impressive, general estimates of the economic
impact that CPES research and technology has had on the power electronics
industry (details from these interviews will be presented in the section, ―Other
Impacts of CPES‖).
Our interviews with two members of General Electric’s Electronic and
Photonic Systems group at the Global Technology Center in New York
pointed out that their products are big systems such as X-ray machines, and
these systems are enabled by power electronics. One interviewee stated that
―performance of power electronics is important, but I don’t know how to
quantify it. Impact to us is more on enabling better performance, making us
more competitive.‖ Further, both agreed that ―if it weren’t for CPES, our
products [in medical equipment, aviation, locomotive, and renewable
technology] would be bigger, heavier, not perform as well, or even be
possible sometimes.‖ They estimated that the aggregate impact of CPES
technology for GE in these areas is about $1.5 billion. These impacts ―are
clearly attributable to ideas generated by CPES.‖45
45
Interview with Richard Zhang and Vlatko Vlatkovic, GE Global Technology Center, July 27, 2007.
74
Other industry interviews did not yield this kind of estimated impact
information, but instead focused primarily on the nature of the benefits to the
firm from CPES ideas and technology and the value to the firm of hiring
CPES students. Details appear in the ―Other Impacts‖ section.
CPES’ Total Direct Economic Impact on the United States
In summary, CPES has had direct impact on the nation in terms of increased
employment and improved workforce skills. The total direct quantifiable
economic impact of CPES on the United States is estimated to be over $19
million (see Table 4.33).
Table 4.33 CPES' Total Quantifiable Direct Economic Impact on the National Level
Cumulative 2000-2007
CPES membership fees from non-US member firms $1,711,690 In-kind support from non-US firms $38,664 Intellectual property income from non-US firms for CPES inventions
$10,000
Spending by non-U.S. attendees at CPES workshops in Five Member States
$67,910
Value of workshops to all U.S. participating firms $764,357 Value of employment created by CPES start-up companies $181,770 Value of CPES graduates hired by US firms $16,510,000 Net cost savings to industry $0
TOTAL QUANTIFIABLE DIRECT NATIONAL-LEVEL IMPACT $19,284,391
CPES’ Indirect and Induced (Secondary) Economic Impacts on the United States
As mentioned in previous sections of this report, an ERC’s direct economic
impacts generate a variety of indirect and induced (secondary) economic
impacts. In estimating the indirect and induced impacts, SRI uses the same
background, assumptions, and methodology for national-level impacts as for
state-level impacts. The multipliers used to calculate indirect and induced
impacts at the national level are noted in Table 4.34, and the total quantifiable
impacts (direct and indirect/induced) are summarized in Table 4.35.
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Table 4.34
Multipliers Used To Estimate Secondary Impacts on the United States
Direct Impact Category Total Output
Multiplier
EXTERNAL INCOME TO THE UNITED STATES
CPES membership fees from non-U.S. member firms 2.081
In-kind support from non-U.S. firms 1.316
Intellectual property income from non-U.S. firms for CPES inventions 2.081
Spending by non-U.S. attendees at CPES workshops 2.023 VALUE OF INCREASED EMPLOYMENT IN THE UNITED STATES
Value of employment created by CPES start-up companies 1.316
CPES’ total quantifiable economic impacts on the United States are defined
as direct impacts plus indirect and induced impacts. To date, CPES has had
a direct impact on the U.S. economy of $19,284,391, with secondary impacts
of $2,010,583, for a total economic impact of $21,294,974 over nine years
(see Table 4.35). As implied, the vast majority of impacts on the United
States are direct impacts, in CPES’s case almost all of which are comprised
of employment and workforce effects. These workforce effects, which do
not generate indirect or induced effects, account for more than 80 percent of
CPES’ total quantifiable national impact (Figure 4.9).
Table 4.35 CPES' Total Quantifiable Economic Impact on the United States
Direct
Impacts
Indirect & Induced Impacts
Total
Multiplier CPES membership fees from non-US member firms
$1,711,690 2.0812 $1,850,679 $3,562,369
In-kind support from non-US firms $38,664 1.3611 $13,962 $52,626 Intellectual property income from non-US firms for CPES inventions
$10,000 2.0812 $10,812 $20,812
Spending by non-U.S. attendees at CPES workshops in five partner states
$67,910 2.0233 $69,493 $137,403
Value of workshops to all U.S. participating firms
$764,357 n/a $0 $764,357
Value of employment created by CPES start-up companies
$181,770 1.3611 $65,637 $247,407
Value of CPES graduates hired by US firms $16,510,000 n/a $0 $16,510,000 Net cost savings to industry $0 n/a $0 $0
TOTAL QUANTIFIABLE IMPACT ON THE UNITED STATES
$19,284,391 $2,010,583 $21,294,974
Figure 4.9
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Other Impacts of CPES
The CPES case is the first example of the first revised design for this study of
the regional and national economic impact of ERCs. The primary change in
the design was to broaden considerably the range of impacts to be examined
to include impacts that have obvious economic value to industry and
academia, but that cannot easily be quantified or expressed in monetary
terms. The implications of this change are to focus more extensively on
documenting the broader impacts on industry (where economic value of
ERCs is more directly realized than, say, in academia) of ERC ideas,
technology, and graduates. This entailed efforts to obtain from the first set of
new target ERCs (CPES and WIMS) examples of the most significant
impacts on industry of center outputs, regardless of whether the impacts
could be expressed in quantifiable economic terms. Thus, at CPES and
WIMS, we asked center staff to identify for us companies that had hired
significant numbers of center graduates, that had realized significant benefits
from one or a small number of graduates, and/or that had (as in the previous
design) benefited economically from center ideas and technology. We
continued to ask firms whether they could estimate the cost savings to
industry from ERC-based technology embodied in the firm’s products. The
box below shows the interview guide SRI used in conducting industry
interviews in the CPES and WIMS cases.
Total External Income , $1,828,264
Indirect and Induced Impact from External Income, $1,944,946
Value of Increased Employment, $181,770
Indirect and Induced Impact from Increased Employment, $65,637
Value of Improved Technical Workforce,
$17,274,357
Direct + Indirect and Induced National Impact of CPES
Total Quantifiable National Impact of CPES: $21,294,974
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As mentioned earlier in this chapter, the less tangible and longer-term effects
of industry membership in ERCs and other university-based industrial
consortia have been shown to be significant, though not easily measurable.46
The types of non-quantifiable impacts range from the broad – e.g., enhanced
competitiveness in national or international markets – to the firm-specific,
such as introduction of new ideas or practices, access to highly-skilled
workers (namely ERC graduates), and facilitation of networks that link
companies to suppliers, customers, and investors. In the case of CPES,
several types of important but non-quantifiable effects became readily
apparent through SRI’s interviews with member companies, especially
access to specially-trained students and new ideas or ways of thinking.
46
See, for example: J. David Roessner, David W. Cheney, and H. R. Coward, Impact on Industry of Interactions with Engineering Research Centers – Repeat Study. Arlington, VA: SRI International. Final Report to the National Science Foundation, Engineering Education and Centers Division, 2004; David Roessner, Outcomes and Impacts of the State/Industry University Cooperative Research Centers (S/IUCRC) Program. Arlington, VA: SRI International, October 2000. Final Report to the National Science Foundation Engineering Education and Centers Division; Catherine P. Ailes, J. David Roessner, and Irwin Feller. The Impact on Industry of Interaction with Engineering Research Centers. Arlington, VA: SRI International, January 1997. Final Report prepared for the National Science Foundation, Engineering Education and Centers Division.
Industry interview guide for expanded range of impacts
Our project for NSF is a pilot study intended to determine the feasibility of estimating the economic impact of Engineering Research Centers on both the nation and on the state(s) where the centers are located. The three centers we’re studying are Caltech’s Center for Neuromorphic Systems Engineering, Virginia Tech’s Center for Power Electronic Systems, and the University of Michigan’s Center for Wireless Integrated MicroSystems. NSF is especially interested in the measurable economic impacts of ERCs, but we realize that many, perhaps most, of these impacts are very long-term and difficult or impossible to measure in strictly economic terms. So, we’re asking companies who have benefited from working with ERCs to estimate (roughly) for us the impact that Center ―outputs‖--ideas, technology, and student hires--have had on (a) the company and (b) the industry. We realize that precise information is likely to be proprietary, too difficult to develop, or both, so rough estimates are perfectly adequate for our purposes. In the case of your company’s involvement with (ERC),
1. What has been the impact of (ERC)-based ideas on your company and industry, including cost savings, new products and processes, profits or growth, and new markets? 2. What has been the impact of (ERC)-based technology on your company and industry growth/markets, especially the cost savings to industry customers attributable to new products or processes based on (ERC) technology that replaced an existing product or process? 3. What has been the impact of (ERC) students you’ve hired on your company and on industry growth/markets? 4. What do you think would have happened to (a) your company and (b) the industry in the absence of (ERC)?
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While our industry interviewees generally did not provide quantitative
estimates of the economic impact of CPES technology or ideas, they spoke
enthusiastically about the importance that CPES training and new hires had
for company growth, and in a general way about the impact that CPES ideas
and technology had on their company and on the relevant industries.
New Ideas and Technology
Fred Lee, CPES Director, explained to us the basic technological contribution
that, in his view, the center has made to industry. He said that in 1997, just
before CPES was initiated, he was approached by Intel when the Pentium II
had just been introduced. Existing power supplies no longer worked. The
precursor to CPES, the Virginia Power Electronic Center at VT, developed a
―quick fix‖ for Intel, but it was clear that this would not work for future
generations of processors. Dr. Lee said that many companies wanted help
with this problem and asked for the same work. This led to formation of a six-
company mini-consortium. ―We make the technology available to all
consortium members. There is no alternative technology now for this so I
don’t know how to calculate cost savings.‖ Dr. Lee said that because power
electronics is not a fast-moving industry, it takes a long time for impacts to be
realized. ―What I did 20 years ago is making a huge impact now.‖
Ed Stanford, an MTO Power Delivery Technologist with Intel, told us that the
impact of CPES technology has been in several different areas. ―I was
having a discussion with Fred and some students about how to fix the optimal
inductor size in a voltage regulator (VR), and nine months later CPES came
up with the concept of critical inductance. This has been adopted by the VR
guys and industry as a direct result of me having a conversation with Fred. ...
If I had to guess, savings to a single company doing this work themselves
would have been at least 6 months of research involving a team with 1-2
engineers experienced in the field. Whether they would have shared this with
other companies is hard to say.‖
Wei Chen, the Vice President/Engineering for Monolithic Power Systems (a
leading fabless manufacturer of high performance analog and mixed signal
semiconductors), received his M.S. in 1995 and Ph.D in 1998 from Fred
Lee’s group. When asked what would have happened to his company and to
the industry in the absence of CPES, he said: ―CPES, besides developing
the people, generated awareness in the industry of the importance of
efficiency issues. CPES started early on high efficiency. The industry grew
much faster as a result of reduced size, cost, and increased efficiency.
These advances opened industry’s eyes, and ten years later we finally see
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application. Process technology and CPES’s work on integration brings a
flavor from the early days. It provided both a pull and a push.‖
General Electric’s Richard Zhang and Vlatko Vlatkovic, in the interview cited
earlier in this chapter, responded this way when asked about the impact of
CPES technology on GE and on the industry: ―We are different from other
guys in this industry. It’s hard for me to say. Many of CPES’s technologies
flowed into the industry via power supplies, including Intel. The voltage
modulator module that powers the Pentium CPU would be a good example.‖
Mike Briere, Vice President for R&D at International Rectifier, told us that
CPES’s primary contribution to the company was through students, not
technology. ―Usually the work that’s being done at CPES is either not directly
commercializable because it’s impractical economically, or not
manufacturable, or doesn’t allow for tolerance, or the prototype’s materials
are impractical. So from what I’ve seen, they’re good engineering concepts,
a vehicle, and the project team can work through a lot of issues so the
students are exposed to practices and principles that are useful in industry,
but the actual products are behind what the industry does. . . . It’s a good
thing that there’s an academic institution that can look beyond, work through
some concepts, do some legwork—but nobody is taking those prototypes and
taking them to market.‖ ―If CPES didn’t exist, the industry would be in trouble,
not because of the products but because there would be less trained
personnel in the industry. The question I’d ask is, how many CPES students
go to work in U.S. industry, and what percentage of the industry workforce is
that?‖
An engineer with DRS Power and Control Technologies, Rob Cuzner, is the
company representative on CPES’s Industrial Advisory Board. When asked
what benefits DRS gets from being a member of CPES, he said, ―They
involve seeing what they’re doing and comparing that against what we’re
doing. We developed our own power module project, which finally led to our
winning a big contract. CPES work indirectly influenced our winning that job.
We took the concept that I picked up by interacting with students, reading
papers, seeing what they’re doing, and published some stuff we’ve done on
power typology, all of which led to this modular design; out of this we won a
$200M contract.‖
Access to Specialized Talent
Speaking about CPES students and their impact on industry, Dr. Lee
mentioned that technology transfer is much easier to talk about, but there are
other impacts, ―really the people we trained. How do you put dollars on the
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value of what’s in their heads? The Global Technology Leader in GE
corporate is our [former] student. So is the general manager of Shanghai
Intel. Former students are CTOs of several pretty large companies. But they
are our early graduates. It will take another 10-15 years for our graduates to
impact industry.‖
Dushan Boroyevich, Deputy Director of CPES, asked rhetorically, ―Why does
TI (Texas Instruments) like CPES graduates? Because of their general
knowledge of the technology, specific ideas, ways of thinking (integration of
passive components), basic strategy, system aspects—how we deal with the
power supply as a system, or how subsystems work together and with the
outside environment. Students get training in that. That’s what makes the
students valuable for TI.‖
GE’s Global Technology Center has hired at least ten CPES graduates. Our
GE interviewees said, ―One of the unique skills that they come with is that
they are very practical, which is not usual for people coming out of the school.
They are also trained in broad areas and can think at the system level.‖
―Their capability to link people in multiple disciplines together is very
important. They lead a large number of multidisciplinary technical efforts.
They have a broader knowledge base [compared to other students hired] and
are very good at dealing with systems. It is not typical for new graduates to
be able to have a system perspective.‖
International Rectifier’s Mike Briere was quite specific about the high impact
that CPES graduate had on the company and the industry. ―When we
support work at CPES, it’s to support the students and a generator of talent. I
would say if CPES generated twice as many students, we would hire twice as
many. Not only are there more of them [CPES graduates], but the quality is
better than other centers. Part of it is because they work on practical
concepts and prototypes in power electronics. The activities that generate
those prototypes lead them to be well prepared to work on product
development in industry. . . . Very few places educate people in power
electronics/semiconductors, and without them there would be a tremendous
negative impact to our industry, tens of millions of dollars a year. Research
centers like CPES don’t need to generate ideas worth $10M, because
producing a good graduate can generate $100M. They are making people
who make the money flow.‖47
47
Mike Briere was one of several of our interviewees who estimated the savings to their company of hiring an ERC graduate. He said, ―Someone typical that you bring in as a new hire (a Ph.D.) takes up half the time of an experienced full time staff person over a period of 2-3 years. So over two years, I’d say a student trained like CPES does saves a company about $150K over a two-year mentoring period.‖
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Conclusions and Observations
The context of an ERC’s research activity—the stage of development of its
technical focus, the dynamism of the industry or industries with which it is
associated—greatly influence the profile of its output and the time frame of its
directly realized impacts on education and industry. As a ―incremental‖ ERC
(that is, one relatively downstream in the innovation process), one might
expect CPES’ outputs and impacts to reflect a strong technological focus and
relatively ―hard‖ examples of technology transfer evidenced via licenses to
industry. Yet even in this context, casting a broader view of the center’s
impact on industry shows that ideas and students, not technology per se, are
cited by industry as the areas in which both individual firms and the industry
benefit most from the center’s existence.
In its regional economic impacts, CPES follows a pattern shown by such
disparate ERCs as Georgia Tech’s Packaging Research Center and
Caltech’s CNSE—sizeable direct and indirect economic impacts, of the
magnitude of hundreds of millions of dollars—deriving substantially from the
Center’s ability to attract large amounts of financial support from external
sources, primarily federal funding agencies and industry. The quantifiable
national impact profiles of CNSE and CPES are strikingly different, in some
perhaps unexpected ways. CNSE, a transformational center far upstream in
the innovation process and potentially relevant to a wide range of industries,
nonetheless shows substantial direct, quantifiable economic effects on the
national from just two examples of technology transfer to industry: one in the
form of a highly successful start-up company that generated both
considerable internal profits as well as cost savings to its customers, and the
other in the form of a member company that incorporated CNSE research
results in a new product line that also resulted in substantial savings to its
customers. CPES’ quantifiable national impact is quite modest by
comparison, but our interviews indicated that the actual impact of its central
concept, modular integrated power systems for a variety of applications,
almost certainly has amounted to multi-billion dollar benefits for the national
economy. It is equally clear that CPES students have had very substantial
economic impacts on the companies they work for, especially companies that
have hired more than just a few of them. Those impacts, again according to
our interviews, are attributable to the unique training they received at CPES,
notably involving systems thinking, multidisciplinary perspectives, and
sensitivity to the industry context.
This is not to say that CPES outputs will not generate significant, quantifiable
national economic impacts in the future. In the power electronics industry,
the time from new ideas to new products is relatively long—10 to 20 years.
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For CPES, the path to these future impacts is not through licensed
technology or Center-based start-ups, but rather through informal Center-
industry interactions and, especially, through Center graduates who bring
new ideas and new ways of thinking to the companies that hire them. It
seems highly likely that we are now seeing just the early manifestations of
CPES’ national economic impact, the bulk of which will likely be realized well
after CPES ceases to receive NSF support.
83
University of Michigan’s Center for Wireless Integrated Microsystems
Introduction to the Center for Wireless Integrated Microsystems (WIMS)
Vision and History
Established as an NSF Engineering Research Center in 2000, the Center for
Wireless Integrated Microsystems (WIMS) at the University of Michigan
conducts research merging the fields of micro-power electronics, wireless
communications, micro-electromechanical systems (MEMS), and advanced
packaging.48 The research undertaken at WIMS ―demand[s] innovation in all
parts of the microsystem, from the embedded processor (hardware and
software) and the wireless interface to the power source and the selection of
sensors and self-test strategies.‖49 During the coming decades, devices
integrating these elements are expected to become widely used in everyday
life and society. ―A central focus of this Center is to show that a common
platform/architecture can be used for most, if not all, microsystems
applications, with customization occurring through sensor selection and
software. This approach should allow even low-volume applications to be
addressed rapidly at low cost.‖50
Strategic Plan Overview
WIMS’ research plan revolves around two test-beds microsystems – a set of
implantable medical devices and an environmental monitor – supported by
five research thrusts, namely, micropower circuits, wireless interfaces,
biomedical sensors and systems, environmental sensors and systems, and
advanced materials, processes, and packaging. The relationships among the
two test-beds and the five research thrusts are depicted in the following
figure. Because the application context of the two-test beds is very different,
together the two ―represent the requirements for a very broad set of
microsystems,‖51 thus contributing to the center’s goal of developing a
generic platform for microsystems architecture and interfaces.
48
The University of Michigan’s partners for WIMS include Michigan State University (Michigan State) and Michigan Technological University (Michigan Tech). 49
Center for Wireless Integrated Microsystems, Seventh-Year Annual Report, April 10, 2007, p. i. 50
Center for Wireless Integrated Microsystems, Seventh-Year Annual Report, April 10, 2007, p. 1. 51
Center for Wireless Integrated Microsystems, Seventh-Year Annual Report, April 10, 2007, p. 12.
84
Source: Center for Wireless Integrated Microsystems, Seventh-Year Annual Report, April 10, 2007,
p. 11.
Partners and Industry Membership
WIMS industry partners represent a range of small and large companies in
the microelectronics, medical, transportation, and chemical industries,
including both users and manufacturers of MEMS devices. Over the course
of its seven years as an ERC, WIMS has engaged a total of 36 companies,
with an average of 15 members annually. ―Industrial involvement is centered
in the Industrial Advisory Board (IAB) … [whose] semi-annual meetings …
[provide] a formal structure for coordinating program policy and [serve] as a
forum by which industry can provide input in setting the directions and goals
of the ERC.‖52
In keeping with the belief that technology transfer is best achieved through
students, WIMS supports several mechanisms for connecting students and
member companies. For example, the center’s student leadership council
plays a role in arranging internships with member companies, and IAB
meetings are structured to allow poster sessions and other opportunities for
interaction between students and industry representatives.
52
Center for Wireless Integrated Microsystems, Seventh-Year Annual Report, April 10, 2007, p. 95.
85
WIMS also facilitates technology transfer through organizational activities and
memberships. For example, WIMS is a charter member of the Michigan
Small Tech Association, which encourages nano- and micro-technology
development in the state, and the center participates in international networks
such as the Global Emerging Technology Initiative and the MEMS Industry
Forum. In addition, WIMS works closely with the Lurie Institute for
Entrepreneurial Studies (also at the University of Michigan) to link the
business and technical sides of microsystems development.
Education and Outreach
WIMS aims to have an educational impact not only on the three universities
that form the center’s consortium but also on potential and current
generations of engineers and scientists. Accordingly, WIMS’ educational and
outreach efforts target three groups – pre-college, university, and
professional – as depicted in the following figure. At the university level, five
new MEMS and microsystems core courses have been introduced, and the
University of Michigan has developed a new Master of Engineering degree in
Integrated Microsystems (among other accomplishments). To reach
professionals and society as a whole, WIMS has developed a repertoire of
distance education mechanisms, including streaming videos and online
lecture notes and handouts, and WIMS-developed courses have been
disseminated and taught at numerous universities in the United States and
abroad. Almost 1,000 pre-college students have participated in WIMS’
summer programs to attract young people to science, engineering, and
mathematics, and WIMS staff disseminates information about the center’s K-
12 educational programs through attendance at professional conferences for
educators.
86
Figure 4.10
Source: Center for Wireless Integrated Microsystems, Seventh-Year
Annual Report, April 10, 2007, p. 79.
Types of Economic Impact Data Available from WIMS
Following the pattern used in the two previous case studies, each category of
potential impact is framed in terms of additional money and other resources
coming into Michigan that otherwise would not have occurred, and/or
additional value to the state that otherwise would not have occurred, in the
absence of WIMS. The following table lists the categories of impact that SRI
sought to measure or estimate, including indirect and induced effects, to
calculate the economic impacts on the state of Michigan. As will be
discussed later in this chapter (in ―Other Impacts of WIMS‖), many impacts
having economic significance associated with WIMS can be readily
quantified. Accordingly, the following table lists only those categories of
impact which, based on SRI’s experience conducting the assessment of
Georgia’s PRC, were anticipated to be readily available quantitatively.
Table 4.36 Categories of Economic Impacts on Michigan
from Investment in the Center for Wireless Integrated Microsystems
NSF support for WIMS.
Industry support from all out-of-state industrial members of WIMS since its inception.
Sponsored research support from outside the state attributable to existence of WIMS.
Licensing fees and royalties for intellectual property generated by WIMS research.
Spending by non-Michigan attendees at WIMS workshops in Michigan.
Value of WIMS workshops to participating Michigan firms.
Value of investments in WIMS start-ups by non-Michigan venture capital firms.
Economic impact of start-ups based on WIMS research that have located in Michigan.
Cost savings to firms in Michigan that have hired WIMS students and graduates.
Indirect and induced (secondary) effects: additional economic activity generated by direct increase in in-state expenditures attributable to existence of WIMS.
87
The following table lists the categories of impact that SRI sought to measure
or estimate, including indirect and induced effects, to quantify WIMS’
economic impacts on the United States.
Table 4.37 Categories of Economic Impacts on the United States
from Investment in the Center for Wireless Integrated Microsystems
Industry support from all non-U.S. industrial members of WIMS since its inception.
Sponsored research support from outside the U.S. attributable to existence of WIMS.
Licensing fees and royalties for intellectual property generated by WIMS research.
Spending by attendees at WIMS workshops.
Value of WIMS workshops to participating firms.
Economic impact of start-ups based on WIMS research that have located in the U.S.
Cost savings to firms in the U.S. that have hired WIMS students and graduates.
Indirect and induced (secondary) effects: additional economic activity generated by direct increase in in-state expenditures attributable to existence of WIMS.
Net cost savings to U.S. industry as a result of technologies developed by WIMS.
Net profits or expenditures of start-up companies based in the U.S. and based on WIMS research.
Regional Economic Impacts of WIMS
This section documents and analyzes the data collected in order to quantify
WIMS’ direct economic impact on Michigan. The following categories of
impacts were quantifiable and capture much, but by no means all, of WIMS’
direct impact on Michigan’s economy.
NSF support for WIMS since its inception
WIMS has attracted more than $25 million to Michigan in the form of NSF
support (Table 4.38).53 These funds include WIMS’ base award as an
Engineering Research Center as well as NSF special purpose program funds
and other NSF support.
Table 4.38
NSF Cash Support to WIMS
Type of Cash Support Cumulative Support
2000-2007
NSF ERC Base Award $25,040,401
NSF ERC Program Special Purpose $361,000
NSF non-ERC Support $280,000
Total NSF Support to WIMS $25,681,401
53
For this and subsequent tables, unless noted otherwise, data sources are a combination of WIMS annual reports, WIMS and University of Michigan records, and WIMS staff.
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Sponsored research support from outside the state attributable to the existence of WIMS
ERCs tend to serve as focal points for sponsored research, i.e., research
conducted by center faculty and students but funded by companies, other
U.S. government agencies, or foreign government entities. As indicated in
the following table (Table 4.39), WIMS’ experience in this regard is similar, in
that the center attracted nearly $40 million during its first seven years as an
ERC, mostly from federal government agencies other than NSF.
In addition to funds generated from outside the state, WIMS also received
$3.6 million in research funding from industry and other research sponsors
within Michigan; however, this amount is excluded from the regional impacts
analysis in keeping with our analytical framework.
Table 4.39
Member support to WIMS
Over the course of its seven years as an ERC, WIMS has engaged between
14 and 18 corporate members annually, and it had 16 members in 2007, the
most recent year of operation. WIMS members include a diverse set of small
and large companies that are both manufacturers and users of MEMS-based
products. As indicated in the following table (Table 4.40), industry partners
outside of Michigan have provided over $2.5 million in membership fees to
WIMS during the center’s seven years of existence.
Table 4.40
Industry Support to WIMS through Membership Fees
Source of Cash Support Cumulative Support
2000-2007
U.S. Industry Membership excluding Michigan Firms $2,230,000
Foreign Industry Membership $289,982
Total Non-Michigan Member Support to WIMS $2,519,982
Sponsored Research Support for WIMS
Type of Cash Support Cumulative Support
2000-2007
Industry Support (non-Michigan) $914,979
Federal Government Agencies (non-NSF) $38,000,279
Other Sources of Sponsored Research (non-Michigan) $457,815
Total NSF Support to WIMS $39,373,073
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In-kind support to WIMS from external sources
In addition to cash support, WIMS has received substantial in-kind support
from federal government agencies and from U.S. and international industry
partners. As indicated in Table 4.41, almost $1.5 million in equipment has
been donated to WIMS by corporations based outside Michigan. WIMS also
has benefited from the ―donation‖ of Sandia National Laboratories personnel,
who have served as system integrators for WIMS’ two test beds. These two
individuals remained on Sandia’s payroll but worked full-time, onsite at
WIMS.
The value of Sandia’s visiting personnel to WIMS totals almost $600,000. To
date, total in-kind contributions from sources outside Michigan amount to
more than $2 million.
It should be noted that, in addition to the system integrators from Sandia,
another system integrator's salary was sponsored by an industry partner. The
value of the corporate-sponsored system integrator is not included in the
following table or in the calculation of direct impacts on Michigan, because
the sponsoring company is headquartered in Michigan; thus, the value of the
company-sponsored system integrator's salary does not represent external
funds attracted to Michigan. However, in qualitative terms, the willingness of
the company to donate significant staff time to WIMS speaks to the high
value of the center’s research for these companies and other industry
members.
Table 4.41
In-kind Support to WIMS
Type of In-kind Support Cumulative Support
2000-2007
Value of Equipment Donations from Industry (non-Michigan) $1,448,928 Value of Personnel Visiting from Federal Government Agencies (non-NSF and non-Michigan) $564,296
Total In-kind Support to WIMS $2,013,224
Other cash support to WIMS
As indicated in Table 4.42, WIMS has attracted $15 million in cash support
from a private donor. This contributor, the Ann and Robert H. Lurie
Foundation (of Chicago), provided the donation as a part of the University of
Michigan’s 100th anniversary campaign for the College of Engineering, which
aims to raise money in three areas, one of which is integrated microsystems.
The Lurie Foundation provided its support in order to upgrade the university’s
90
micro- and nano-fabrication facilities. When completed in early 2008, the
facility will offer a 5,000 square foot clean room, silicon processing to 6 inch
wafers, improved clean room safety systems, and new clean room space and
equipment for nanotechnology and organic devices. To date, $40 million has
been raised for the new clean room. In our regional impact estimates,
however, SRI has included only the original $15 million gift from the Lurie
Foundation, because it is not known if the sources for the remaining $25
million are from outside or within Michigan.
Table 4.42
Licensing fees and royalties for intellectual property generated by WIMS research
University research often generates income through licensing fees and
royalties for intellectual property (IP). As indicated in the following tables
(Table 4.43 and Table 4.44), WIMS is the sole or contributing source of fairly
substantial IP revenue: income from inventions wholly attributable to WIMS
totals nearly three-quarters of a million dollars, though income from
inventions that can be partially credited to WIMS is lower (approximately
$140,000). However, because the regional impacts focus on revenue
brought into the state because of WIMS, the value of IP included in our
impact estimates totals just $12,400, which is the licensing income received
from companies located outside Michigan for inventions directly attributable
to WIMS research.54
54
As noted in Table 4.9, an additional $8,000 in licensing income was received from a non-Michigan company for an invention partially attributable to WIMS research. Because of the difficulty in determining the degree of attribution that should be accorded to WIMS for this IP income, we excluded this amount in its entirety from the estimation of direct impacts on the state.
Other Cash Support to WIMS
Type of Cash Support Cumulative Support
2000-2007
Private Donation (non-Michigan) $15,000,000
Total Other Cash Support $15,000,000
91
Table 4.43
Income from Inventions Directly Attributable to WIMS Research
No. Invention Patent
Number Year Licensee and
Location Licensed? (Yes/No)
Licensing Income
Received *
1 MEM-based computer systems, clock generation and oscillator circuits and LC-tank apparatus for use therein
6,972,635 2003 Mobius Microsystems (Michigan)
yes $102,540
2 Separation microcolumn assembly for a microgas chromatograph and the like
6,838,640 2005 Sionex (U.S., non-Michigan)
option terminated
$9,400
3 Micromechanical resonator device and method of making a micromechanical device
6,985,051 and
7,119,636
2006 Discera (Michigan)
licensed $659,540
5 Micromechanical resonator device and method of making a micromechanical device
6,985,051 and
7,119,636
2003 Motorola (outside U.S.)
option terminated
$3,000
6 Micromechanical resonator device and method of making a micromechanical device
6,985,051 and
7,119,636
2003 Discera (Michigan)
option terminated
$2,000
7 Software for the synthesis of MEMS Devices
software 2003 Mobius Microsystems (Michigan)
license terminated
$2,000
Total Income from Inventions Directly Attributed to WIMS Research $778,480
* Licensing income received includes patent reimbursement costs and royalties.
92
Table 4.44
Income from Inventions Partially Attributable to WIMS Research
No. Invention Patent
Number Year Licensee
and Location Licensed? (Yes/No)
Licensing Income
Received *
1 Solid state chemical micro-reservoirs
5262127 and
5,385,709
2000 MEMS Technology (Michigan)
license terminated
$30,000
2 Filter-based gyroscope
6,742,389 2000 Matshushita (outside U.S.)
option terminated
$8,000
3 Solid state ion sensor with polyimide membrane
5,417,835 2000 Sensicore (Michigan)
licensed $72,000
4 Monolithic fully integrated vacuum sealed BiMCOS pressure sensor
6,713,828 2001 ISSYS (Michigan)
licensed $6,500
Total Income from Inventions Partially Attributed to WIMS Research $136,500
* Licensing income received includes patent reimbursement costs and royalties.
Spending in Michigan by out-of-state attendees at workshops
A key element of WIMS’ outreach, educational, and collaboration goals is
organization of workshops and conferences that bring together students,
faculty, researchers, and industry representatives from across the country to
discuss developments in WIMS research activities. Over the course of its
seven years of ERC operations, WIMS has conducted 119 workshops and
conferences, as well as hundreds of colloquia and seminars and 19 internet-
based courses. Of these many opportunities for interaction, 13 workshops
and conferences have been focused solely on industry and have attracted
more than 3,300 participants, including many out-of-state visitors. These out-
of-state visitors spend money on lodging, meals, entertainment,
transportation, etc., that represent resources that Michigan received because
of WIMS.
To estimate the impact of out-of-state visitor spending at WIMS industry
workshops and conferences, the SRI study team obtained information from
WIMS regarding the number of workshops held in Michigan over the course
of its funding as an ERC and the actual attendance figures from in-state and
out-of-state participants. WIMS staff also provided us with information
regarding the length of the workshop or conference, enabling us to calculate
the total number of days attendees spent in the state. Using federal
government per-diem rates of spending per visitor-day,55 we estimate that
55
For spending, we used a rate of $130, the federal government per-diem rate for Ann Arbor, Michigan in FY 2007.
93
non-Michigan attendees spent approximately $255,000 while in Michigan
attending WIMS conferences and workshops (Table 4.45).
Table 4.45
Estimated Spending by Non-Michigan Attendees at WIMS Workshops and Conferences held in Michigan
Number of Workshops in Michigan 16
Total Number of non-Michigan Attendees 660
Total non-Michigan Attendee Days in Michigan 1,965
Spending per Visitor Day $130
Estimated Total Spending $255,450
Venture capital attracted to WIMS startups
As of 2007, eight startups have been founded based on WIMS research or by
WIMS faculty or students. Of these eight startups, two – Discera and
Sensicore – have attracted significant amounts of venture capital investment.
For SRI’s estimation of the impact on Michigan of this investment, the
University of Michigan’s Office of Technology Transfer provided us with
information regarding the total venture capital invested in Discera and
Sensicore as well as the names of venture capital firms participating in each
round of financing. SRI then researched the headquarters of the venture
capital firms to determine which funding sources represent external income
drawn to Michigan because of the startups’ existence. Of $60,700,000 in
total venture capital funding attracted to Discera and Sensicore since their
establishment, SRI estimates that $42,280,000 was invested by venture
capital firms located outside Michigan.56
Employment impact of start-ups from WIMS research that have located in Michigan
Table 4.46 (below) lists the eight new WIMS-related companies that have
been established in Michigan since the center began ERC operations in
2000. As indicated, these eight startups – Sensicore, Handylab, Discera,
Mobius Microsystems, PicoCal, Neural Probe Technologies, NeuroNexus
(formerly Neural Probe Technologies), and NanoBrick – have created 94 new
jobs representing 428 person-years of employment over this seven year
period.
56
Although the names of the partners that participated in each round of funding for Discera and Sensicore are available and were provided by the University of Michigan’s Office of Technology Transfer, the exact amounts invested by each venture capital firm in each round are not available. In estimating the external venture capital attracted to Michigan by Discera and Sensicore, SRI assumed for simplicity that in each round, each partner invested equal amounts of capital. That is, for a funding round totaling $12 million and involving the participation of five venture capital firms, SRI estimated that each partner invested $2.4 million.
94
To calculate the value of this employment to the state of Michigan, we used a
typical approach: multiplying the number of employee-years by the sum of
the average salary and benefits of technical employees in small, high-tech
firms. For the average salary, we used the rate provided for the
―Professional, Scientific, and Technical Services‖ category of the North
American Industrial Classification System (NAICS) in the 2002 Economic
Census (published by the U.S. Census Bureau). Salaries for employees in
this category in Ann Arbor, Michigan averaged $61,362 per year. Using this
figure,57 we estimate the total value of employment generated by WIMS start-
ups to be $26,262,969.
Table 4.46 WIMS Start-Up Companies: Estimated Number of Employees in Michigan, 2000-2007
Name of Start-Up 2000 2001 2002 2003 2004 2005 2006 2007 Employee
Years
Sensicore 0 7 15 25 30 40 40 30 187
Handylab 0 5 0 0 0 0 0 0 5
Discera 0 0 8 12 15 20 25 30 110
Mobius Microsystems 0 0 3 6 12 15 20 20 76
PicoCal 0 0 0 0 2 2 2 2 8
Neural Probe Technologies 0 0 0 0 7 0 0 0 7
NeuroNexus (formerly Neural Probe Technologies) 0 0 0 0 7 8 8 9 32
NanoBrick 0 0 0 0 0 0 0 3 3
Total 0 12 26 43 73 85 95 94 428
Value of cost savings to firms in Michigan that have hired WIMS graduates
Over the last seven years, industry hired a total of 119 WIMS graduates,
including 28 students earning B.S. degrees, 29 M.S. graduates, and 62
Ph.D.s. Of these graduates, companies located in Michigan hired a total of
18 students – three B.S., four M.S., and 11 Ph.D. graduates. Based on the
cost savings estimates for each education level discussed above, the total
value of cost savings to Michigan firms hiring WIMS graduates is
approximately $1,530,000.
Value of workshops to participating Michigan firms
57
This calculation is based on estimates of pre-tax direct salaries. In other words, it does not include other employer paid benefits such as health care and social security contributions. This was done to simplify calculations that otherwise would include estimates of employer-paid fringe benefits minus certain deferred compensations (employer paid benefits such as social security and retirement account contributions do not have a direct or immediate impact on the state economy and so are usually not included in impact analyses). In addition to simplifying the calculation of employment impacts, this also results in a more conservative overall estimate.
95
As mentioned above, WIMS staff provided SRI with data regarding the
number of industry participants and participant-days from Michigan
companies. SRI also accessed the average yearly salary for Ann Arbor,
Michigan workers in the ―Professional, Scientific, and Technical Services‖
category of the North American Industrial Classification System (NAICS) and
calculated a daily salary rate; to better reflect the actual cost to companies of
sending workers to WIMS workshops, SRI adjusted the daily rate upwards by
50% to account for fringe benefits. As indicated in Table 4.47, the estimated
value of WIMS workshops to Michigan firms totals more than a quarter of a
million dollars.
Table 4.47
Estimated Value of WIMS Workshops to Michigan Firms sending Participants
Number of Workshop Attendees from Michigan firms 500
Number of Days at Workshops 782
Estimated Salary per Day $354
Estimated Value of Workshops to Michigan Firms $276,828
WIMS’ Total Direct Economic Impact on Michigan
WIMS has had substantial direct effects on Michigan in many areas,
particularly via research funding attracted to the state (from both NSF and
other research sponsors), venture capital investments, and employment by
new firms. As Table 4.48 shows, the total direct quantifiable economic
impact of WIMS on Michigan is estimated to be over $155 million.
Table 4.48
WIMS’ Total Direct Quantifiable Economic Impact on Michigan
External Income to Michigan Cumulative 2000-2007
Support to WIMS from the National Science Foundation $25,681,401 Sponsored research support from outside Michigan for WIMS researchers $39,373,073 WIMS membership fees from non-Michigan member firms $2,519,982 In-kind support from non-Michigan firms/organizations $2,013,224 Other cash support from non-Michigan firms/organizations $15,000,000 Intellectual property income from non-Michigan firms for WIMS inventions $12,400 Spending by non-Michigan attendees at WIMS workshops in Michigan $255,450 Value of venture capital from non-Michigan sources invested in WIMS start-ups $42,280,000 Total External Income to Michigan $127,135,530
Value of Increased Employment in Michigan Value of employment created by WIMS start-up companies located in Michigan $26,262,969 Total value of increased employment in Michigan $26,262,969
Improved Quality of Technical Workforce in Michigan Value of WIMS graduates hired by Michigan firms $1,530,000 Value of workshops to participating Michigan firms $276,828 Total value of improved quality of technical workforce in Michigan $1,806,828
Total Direct Quantifiable Economic Impact $155,205,327
96
WIMS’ Indirect and Induced (Secondary) Economic Impacts on Michigan
In addition to the direct economic impacts described above, WIMS’ activities
result in several categories of indirect and induced (secondary) economic
impacts. To estimate the magnitude of the indirect and induced impacts, SRI
purchased RIMS II multipliers from the Bureau of Economic Analysis and
identified appropriate detailed industry sector multipliers for each relevant
direct impact segment. The multipliers are listed in Table 4.49 (below). For
those impact segments that represent resources flowing through WIMS (e.g.,
external income from the National Science Foundation, industry membership
fees, etc.), the multiplier for the "scientific research and development
services" industry (RIMS industry number 541700) was used. Implied in this
choice is the assumption that WIMS and its employees share a similar
spending profile to other scientific research and development services
companies in Michigan on which the RIMS II model is based.
For those segments that are income estimates, the multiplier for household
spending was used. This applies to the value of in-kind visitor researcher
support (which is essentially visitor salaries for the time they are visiting in
Michigan) and the value of employment in Michigan. For spending in
Michigan by non-Michigan attendees at WIMS workshops, a blended
multiplier was created that represents the breakdown of the typical business
visitor’s spending – 55 percent on accommodations, 25 percent on meals
(food services and drinking places), 10 percent on local retail, 5 percent on
recreation and entertainment, and 5 percent on ground passenger
transportation.
Table 4.49
Multipliers Used To Estimate Secondary Impacts
Direct Impact Category Total Output
Multiplier
EXTERNAL INCOME TO MICHIGAN
Support to WIMS from the National Science Foundation 2.115
Sponsored research support from outside Michigan to WIMS researchers 2.115
WIMS membership fees from non-Michigan firms 2.115
In-kind support from non-Michigan firms/organizations 1.316
Other cash support from non-Michigan firms/organizations 2.115
Intellectual property income from non-Michigan firms for WIMS inventions 2.115
Spending by non-Michigan attendees to WIMS workshops in Michigan 1.990
VALUE OF INCREASED EMPLOYMENT IN MICHIGAN
Value of employment created by WIMS start-up companies located in Michigan
1.316
97
With these final output multipliers from RIMS II and the direct impact
estimates, calculating indirect and induced impacts involves a straightforward
multiplication of direct impacts by their corresponding segment multipliers.
Total direct impacts of WIMS’ activities to date have amounted to over $155
million. These direct impacts have generated secondary impacts of more
than $101 million, for an implied aggregate multiplier of 1.65.58 For
comparison, the implied aggregate multipliers found in the literature range
from 1.5 to 2.3.
The total quantifiable economic impacts of WIMS’ activities on Michigan are
the direct impacts plus indirect and induced impacts. WIMS has had a direct
impact on the Michigan economy of $155,205,327, with secondary impacts of
$101,239,787, for a total economic impact of $256,445,115 over seven years
(see Table 4.50). As indicated in Figure 4.11, the majority of the direct
impacts are from the external support that WIMS has received from non-
Michigan sources. These direct impacts from external support account for 50
percent of the total quantifiable impacts, and indirect and induced impacts
derived through this external support comprise 36 percent of the total (direct
and indirect) quantifiable impacts of WIMS on Michigan. Direct and indirect
workforce and employment effects together comprise the remaining 14
percent of economic impacts on Michigan.
58
Multipliers are generally specific to certain types of expenditures in the economy. This ―aggregate‖ multiplier refers to total secondary impacts over all direct impacts and is a useful way to compare the importance of secondary impacts across projects or studies.
98
Table 4.50
Total Quantifiable Economic Impacts of WIMS on Michigan
Direct Impacts
Indirect & Induced Impacts
Total 2000-2007
EXTERNAL INCOME TO MICHIGAN Support to WIMS from the National Science Foundation $25,681,401 $28,624,490 $54,305,891 Sponsored research support from outside Michigan for WIMS researchers $39,373,073 $43,885,227 $83,258,300 WIMS membership fees from non-Michigan member firms $2,519,982 $2,808,772 $5,328,754 In-kind support from non-Michigan firms/organizations $2,013,224 $635,776 $2,649,000 Other cash support from non-Michigan firms/organizations $15,000,000 $16,725,000 $31,725,000 Intellectual property income from non-Michigan firms for WIMS inventions $12,400 $13,821 $26,221 Spending by non-Michigan attendees at WIMS workshops in Michigan $255,450 $252,856 $508,306 Value of venture capital from non-Michigan sources invested in WIMS start-ups $42,280,000 n/a $42,280,000
VALUE OF INCREASED EMPLOYMENT IN MICHIGAN Value of employment created by WIMS start-up companies located in Michigan $26,262,969 $8,293,846 $34,556,815
IMPROVED QUALITY OF TECHNICAL WORKFORCE IN MICHIGAN Value of WIMS graduates hired by Michigan firms $1,530,000 n/a $1,530,000 Value of workshops to participating Michigan firms $276,828 n/a $276,828
TOTAL QUANTIFIABLE IMPACT ON MICHIGAN $155,205,327 $101,239,787 $256,445,115
99
Figure 4.11
National Economic Impacts of WIMS
This section documents WIMS’ direct quantifiable economic impacts on the
United States as a whole. Similar to the discussion of direct impacts on
Michigan, the quantifiable impacts presented here underestimate the total
direct impacts on the nation because some types of direct impact are
infeasible to measure. The latter types of direct WIMS impacts on the nation
are described in ―Other Impacts of WIMS.‖
WIMS membership fees from non-U.S. member companies
In its first seven years of WIMS’ operation, 36 different companies have been
members of the center, with an average of 16 members paying fees each
year. WIMS has enjoyed the support of five companies headquartered
outside the United States, and the membership fees of these foreign
companies totals nearly $300,000 (see Table 4.51), representing the direct
economic effect of member income from outside the United States.
Value of Improved
Technical Workforce,
$1,806,828
Indirect and Induced
from Increased
Employment,
$8,293,846
Value of Increased
Employment,
$26,262,969
Indirect and Induced
from External Income,
$92,945,942
Total External Income
to Michigan,
$127,135,530
Direct + Indirect and Induced Economic Impact
of WIMS on Michigan
Total Quantifiable Economic Impact of WIMS on Michigan: $256,445,115
100
Table 4.51
Non-U.S. Industry Support to WIMS through Membership Fees
Source of Cash Support
Cumulative 2000-2007
Foreign Industry Membership Fees $289,982
Total Non-U.S. Member Support to WIMS $289,982
In-kind support to WIMS from external sources
In addition to providing support for WIMS through membership fees, foreign
companies have donated equipment to the center. The value of these
equipment donations totals just under $500,000.
Table 4.52
In-kind Support to WIMS by non-U.S. Companies
Type of In-kind Support Cumulative Support
2000-2007
Value of Equipment Donations from non-U.S. Industry $489,000
Total In-kind Support to WIMS $489,000
Licensing fees and royalties for intellectual property generated by WIMS research
Table 4.43 and Table 4.44 (provided in the section on regional impact)
document the intellectual property (IP) revenue for which WIMS is directly or
partially responsible. As indicated in Table 4.43, $3,000 in IP revenue was
earned from a non-U.S. firm that
licensed WIMS technologies. Accordingly, this amount is included in SRI’s
national impact estimates.
Spending by attendees at WIMS workshops in Michigan
As mentioned in the regional impacts section, WIMS has conducted more
than 100 workshops and conferences in order to disseminate widely the
results of its research and to engage a broad audience. SRI’s calculations for
these impacts were derived from information about the number of workshops
and conferences held at WIMS, the number of participants at each event, and
the length of each event. As an estimate of the amount spent by participants
from outside the United States, we employed the full federal government per-
diem rate (i.e., including both accommodations and M&IE). With these
assumptions, we estimate that non-U.S. attendees at WIMS workshops and
conferences spent approximately $66,170 while in Michigan.
101
Table 4.53
Estimated Spending by non-U.S. Participants at WIMS Workshops and Conferences Held in Michigan
Number of non-U.S. Attendees 113
Total non-U.S. Attendee Days in Michigan 509
Spending per Visitor Night $130
Estimated Total Spending $66,170
Value of WIMS workshops to participating firms
Using WIMS’ records of participant attendance and the number of days per
event resulted in an estimate of 4,610 participant-days by employees of U.S.
companies. At the estimated salary per day of $354, the total value of WIMS
workshops vis-à-vis improvement of workforce skills is just under $1 million
(see Table 4.154).
Table 4.54
Estimated Value of WIMS Workshops to U.S. Firms sending Participants
Number of Workshop Attendees (Michigan and other U.S. firms) 1,047
Estimated Number of Days at Workshops 2,747
Estimated Salary per Day $354
Estimated Value of Workshops to U.S. Firms $972,438
Value of employment created by WIMS startup companies
Over the course of the center’s first seven years, eight start-ups have been
launched as a result of WIMS. As mentioned in the regional impacts
discussion, these startups employ 94 individuals and have accounted for 428
person-years of employment in the United States. Using the average annual
salary for a professional, scientific and technical worker in the Ann Arbor,
Michigan metropolitan area (i.e., $61,362), we calculate that the estimated
quantitative impact on the United States from employment at WIMS startup is
over $26 million.
Value of WIMS graduates hired by U.S. firms
Since WIMS’ inception in 2000, private companies have hired 119 WIMS
graduates, including 28 undergraduates (earning Bachelor of Science
degrees), 29 students at the M.S. level, and 62 students at the Ph.D. level.
Of these graduates going to industry, the vast majority – 110 of 119 – were
hired by U.S. firms, including all but five earning B.S. degrees, all but three
102
earning M.S. degrees, and all but one Ph.D. Based on the cost savings
estimates by graduate level mentioned in the regional impacts section, the
total value of cost savings to U.S. firms hiring WIMS graduates is estimated
to be $9,070,000.
Net cost savings to U.S. industry from products incorporating WIMS research
The national societal benefit of investment in efforts such as NSF’s ERC
program is equal to the sum of profits to the innovating firm and the cost
savings to users (whether individuals or companies). Accordingly, to quantify
impact at the national level, SRI sought to estimate both profits and cost
savings. Obtaining data for either element of societal impact has proven
difficult, since the startups incorporating WIMS research or technology are in
the early stages (and often not yet making or selling products) and are
privately held (the data that they are willing to divulge publicly are extremely
limited).
Through interviews, however, SRI was able to obtain estimates of cost
savings to users from one WIMS startup, Discera, which at the time of the
interview was in the initial stage of producing and selling an alternative to the
quartz crystal oscillator, namely Discera’s PureSilicon™ resonator (based on
CMOS MEMS resonator technology). Discera is linked to WIMS through a
variety of mechanisms, starting with the company’s chief technology officer,
Wan-Thai Hsu, who is a WIMS graduate and who worked on MEMS-based
resonator technology while a student at WIMS. Following graduation, Mr.
Hsu founded Discera with his WIMS advisor, met one of the company’s major
investors through WIMS events, and used WIMS clean room facilities to
develop the company’s technology.
Table 4.55, below, summarizes the estimated cost savings to the United
States realized in 2007 through introduction of Discera’s PureSilicon™
resonator. As indicated in the table, the per-unit price of a quartz crystal
oscillator is 66 cents, while the sales price of the silicon resonator is 40 cents
per unit. The production cost for a quartz crystal oscillator is 40 cents per
unit, so makers of this type of oscillator are not able to sell below 40 cents per
unit profitably. By contrast, the manufacturing cost of Discera’s silicon
resonator is less than 40 cents, so the company can sell the PureSilicon™
resonator at 40 cents per unit, make a profit, and introduce industry-wide cost
savings of 26 cents per unit. Discera estimated that it will sell 1.1 million units
during 2007 (most during the latter half of the year, when production ramped
up). Accordingly, the 2007 cost savings to the nation from this product’s use
is $286,000.
103
Table 4.55
Estimated Value of Cost Savings of WIMS Technology to the United States
Sales Price of Quartz Crystal Oscillator $0.66
Sales Price of Discera's PureSilicon™ Resonator $0.40
Cost savings $0.26 Estimated Number of PureSilicon™ Units Sold (January-December 2007) 1,100,000
Estimated Cost Savings to the United States (January to December 2007)
$286,000
Because almost every electronic system requires an oscillator, the market for
such products (and innovations like the PureSilicon™ resonator) is enormous
– totaling some $3.5 billion per year. At a unit price of 66 cents,
approximately 5.3 billion oscillators are purchased each year. As a result, the
potential cost savings to industry that could be accrued through widespread
adoption of this WIMS technology, even at 26 cents per unit savings, is also
very large.
Discera’s 2007 market penetration (at 1,100,000 units sold) represents 0.02%
of the total market. If, for example, Discera’s PureSilicon™ resonator were to
take 1% of the market, the cost savings would be $13.8 million.
Net profits to U.S. firms using WIMS research in new products
Like most privately-held, early-stage companies, the WIMS startups that SRI
interviewed were not willing to release information enabling estimations for
net profits. Nonetheless, as illustrated in the cost savings description above,
it is clear that, at 40 cents per unit, Discera realizes a profit on sales of its
PureSilicon™ product. Without access to the company’s production and
other costs, it is not possible for SRI to estimate net profits.
Thus, the quantifiable impact on the nation of WIMS technology presented
below represent an underestimation.
WIMS’ Total Direct Economic Impact on the United States
In summary, WIMS has had direct impact on the nation in terms of increased
employment and improved workforce skills, and we are beginning to see the
104
early effects of its technology on broader societal benefits like industry cost
savings.
The total direct quantifiable economic impact of WIMS on the United States is
estimated to be over $37 million (see Table 4.56).
Table 4.56
WIMS’ Total Direct Quantifiable Economic Impact on the United States
External Income to the United States Cumulative 2000-2007
WIMS membership fees from non-U.S. member firms $289,982 In-kind support from non-U.S. firms $489,000 Intellectual property income from non-U.S. firms for WIMS inventions $3,000 Spending by non-U.S. attendees at WIMS workshops in Michigan $66,170 Total External Income to United States $848,152
Value of Increased Employment in the United States Value of employment created by WIMS start-up companies $26,262,969 Total value of increased employment in the United States $26,262,969
Improved Quality of Technical Workforce in the United States Value of WIMS graduates hired by U.S. firms $9,070,000 Value of workshops to participating U.S. firms $972,438 Total value of improved quality of technical workforce in the United States $10,042,438
Net Cost Savings for U.S. Companies Net cost savings to industry $286,000 Total net cost savings and profits $286,000
Total Direct Quantifiable Economic Impact on the United States $37,439,559
WIMS’ Indirect and Induced (Secondary) Economic Impacts on the United States
In estimating the indirect and induced impacts, SRI uses the same
background, assumptions, and methodology for national-level impacts as for
state-level impacts. The multipliers used to calculate indirect and induced
impacts at the national level are noted in Table 4.57, and the total quantifiable
impacts (direct and indirect/induced) are summarized in Table 4.58.
Table 4.57
Multipliers Used To Estimate Secondary Impacts on the United States
Direct Impact Category Total Output
Multiplier
EXTERNAL INCOME TO THE UNITED STATES
WIMS membership fees from non-U.S. member firms 2.115
In-kind support from non-U.S. firms 1.316
Intellectual property income from non-U.S. firms for WIMS inventions 2.115
Spending by non-U.S. attendees at WIMS workshops in Michigan 1.990 VALUE OF INCREASED EMPLOYMENT IN THE UNITED STATES
Value of employment created by WIMS start-up companies 1.316
WIMS’ total quantifiable economic impacts on the United States are defined
as direct impacts plus indirect and induced impacts. To date, WIMS has had
105
a direct impact on the U.S. economy of $37,439,559, with secondary impacts
of $8,840,328, for a total economic impact of $46,279,887 over seven years
(see Table 4.58) As implied, the vast majority of impacts on the United States
are direct impacts, of which employment and workforce effects comprise 78
percent of the total quantifiable impact. Indirect and induced impacts, on the
other hand, account for less than one-fifth (19 percent) of the total
quantifiable impacts (Figure 4.12).
Table 4.58
Total Quantifiable Economic Impacts of WIMS on the United States
Direct Impacts
Indirect & Induced Impacts Total
EXTERNAL INCOME TO THE UNITED STATES WIMS membership fees from non-U.S. member firms $289,982 $323,214 $613,196 In-kind support from non-U.S. firms $489,000 $154,426 $643,426 Intellectual property income from non-U.S. firms for WIMS inventions $3,000 $3,344 $6,344 Spending by non-U.S. attendees at WIMS workshops in Michigan $66,170 $65,498 $131,668 VALUE OF INCREASED EMPLOYMENT IN THE UNITED STATES Value of employment created by WIMS start-up companies $26,262,969 $8,293,846 $34,556,815 IMPROVED QUALITY OF TECHNICAL WORKFORCE IN THE UNITED STATES Value of WIMS graduates hired by U.S. firms $9,070,000 n/a $9,070,000 Value of workshops to participating U.S. firms $972,438 n/a $972,438 NET COST SAVINGS AND PROFITS IN THE UNITED STATES Net cost savings to U.S. industry $286,000 n/a $286,000
TOTAL QUANTIFIABLE IMPACT ON THE UNITED STATES $37,439,559 $8,840,328 $46,279,887
106
Figure 4.12
Other Impacts of WIMS
In the case of WIMS, several types of important but non-quantifiable effects
became readily apparent through SRI’s interviews with member companies,
including:
Access to specialized talent (i.e., WIMS students);
Facilitation of networks;
Availability of facilities; and
Introduction of ideas.
Access to Specialized Talent
In interviews with SRI, WIMS member companies repeatedly emphasized the
positive qualitative differences that WIMS students bring to their companies
as new hires. From the perspectives of member companies, WIMS
graduates possess not only outstanding research skills (which would be
expected of all Ph.D. graduates) but also many attributes that differentiate
WIMS graduates from other hires, such as:
Teamwork skills;
Experience resolving implementation issues;
External Income to the U.S., $848,152
Indirect and Induced from
External Income, $546,482
Value of Increased
Employment, $26,262,969
Indirect and Induced from
Increased Employment, $8,293,846
Value of Improved Technical
Workforce, $10,042,438
Net Cost Savings to Industry, $286,000
Total Quantifiable National Economic Impact of WIMS: $46,279,887
Direct + Indirect and Induced Economic Impact of WIMS on the U.S.
107
Focus on directing research toward a commercially-feasible product;
Ability to contribute beyond the narrow range of expertise typically held by
a new Ph.D. hire; and
Understanding or awareness of both business and technical issues.
Several companies indicated that WIMS graduates had been and continue to
be pivotal elements of the companies’ success. For example, Integrated
Sensing Systems (Issys), currently has two main product lines, one of which
was launched by a WIMS graduate and which continues to account for half of
the company’s revenues. In addition to noting the lower training
requirements for WIMS graduates, Issys representatives also highlighted the
importance of another staff member with deep experience at WIMS: the
company employs one of the WIMS systems integrators funded by Sandia
National Laboratories and notes that her knowledge and contributions to the
company, though great, cannot be quantified.
A representative of Schlumberger, another company that had hired multiple
WIMS graduates (and expects to hire more), commented that WIMS
graduates’ contributions to R&D had exceeded his expectations and had
surpassed the contributions of Ph.D. hires from other universities. Moreover,
WIMS students had helped the company to achieve certain landmarks in its
R&D plan more quickly than expected as well as to extend and broaden the
original research program goals. The chief technology officer (CTO) of
Discera summarized the impact of WIMS students on this startup by noting
that the idea on which the company is based was generated by a WIMS
group project, the company was started by a WIMS graduate and his faculty
advisor, and the company hired two additional WIMS graduates who had
participated in the group project. These three companies – one a startup,
one a small business, and one a large corporation – illustrate the strong
human resources impacts already produced by WIMS graduates.
Facilitation of Networks
According to SRI’s interviews, WIMS brings together companies that would
not otherwise interact, and this convening role facilitates companies’
identification of potential new customers, suppliers, partnerships, and
investors. WIMS’ role in helping to force linkages between small and large
companies was described as particularly significant. The mixture of
researchers, industry, financiers (especially venture capitalists), faculty
members, and students that characterizes WIMS events also was mentioned
as providing fertile ground for idea sharing, identifying new technologies, and
learning from peers. Likewise, investment partnerships, both actual and
potential, are perceived as a benefit of the WIMS network: Discera’s CTO
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was introduced to the startup’s first investor at a WIMS meeting, and Issys’
executive vice president notes the prospects of leveraging small companies’
ideas and larger companies’ deeper pockets and experience (e.g., with
government approval processes) through WIMS interactions.
Access to Facilities
For smaller companies, access to WIMS facilities serves as a key factor in
company strategy and development. Dexter Research’s director of R&D, for
example, stated that use of WIMS’ dry etch tool – which the company could
not have afforded on its own – has moved Dexter Research into a more
competitive position, reducing labor time spent on certain functions, providing
health benefits for production workers, and lowering other costs. Likewise,
Discera’s CTO estimates that access to WIMS’ clean room has saved the
company $1 million to $2 million and approximately one year’s development
time; in addition, using WIMS’ facilities in the development stages provides
Discera the freedom to manufacture its final products anywhere, resulting in
more competitive pricing of its silicon resonators.
Introduction of Ideas
Several companies mentioned the important effects that WIMS has had on
shaping the ideas underpinning their strategies. For instance, Issys initially
had focused on cardiac devices but, through the market knowledge gathered
via WIMS, changed strategy to concentrate first on cranial devices, which
enjoyed greater customer demand. Ardesta reports that by serving as a focal
point WIMS helps to make innovative ideas more accessible to investors,
thereby facilitating creation of companies based on these ideas.
Conclusions and Observations
Three central conclusions and observations emerge from this case study of
WIMS’ regional and national economic impacts. First, it is clear that NSF
investment in WIMS has resulted in significant economic impact on the state
of Michigan. As summarized in Table 4.15, NSF’s investment of $25.7 million
has translated into direct and indirect impacts on Michigan of $256 million,
meaning that every dollar of NSF funding had an impact of almost $10 on the
state economy.
The impact of NSF funding at the national level is, to date, less dramatic than
the regional impact (with a total national direct and indirect impact of $46
million generated from NSF’s investment of $25.7 million). However, the
question of what represents a realistic timeframe for observing measurable
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national impacts from the leading edge research conducted at ERCs is raised
through the WIMS case. In its seventh year as an ERC, WIMS has
generated seven startups, which in turn have operated for as many as seven
years and as few as one year. Despite the startups’ relatively short periods
of existence, one company – Discera – has already introduced to the market
a product (based on center technology) that has resulted in industry cost
savings of $286,000 and has the potential to save industry millions of dollars.
In light of this example of emerging impact from ERC inventions, the potential
for significant future effects appears great.
The third major conclusion or observation related to WIMS concerns the
importance of qualitative as well as quantitative impacts. The qualitative
effects that WIMS’ industry partners report receiving from interaction with
WIMS are, in the view of the company representatives, as important as
quantitative results. Though the precise value is not amenable to estimation,
companies place great emphasis on the access WIMS provides to students,
new ideas and technologies, sophisticated facilities, and networks of faculty,
peers, and potential customers, suppliers and investors. Accordingly,
although adequate measures of qualitative effects are not currently available,
such effects cannot be ignored or excluded from overall assessments of ERC
impact.
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Johns Hopkins Center for Computer-Integrated Surgical Systems and Technology (CISST)
Introduction to the Center
Vision and History
The Center for Computer-Integrated Surgical Systems and Technology
(CISST) at Johns Hopkins University (JHU) is a member of the ERC ―class‖
of 1998. The Center, based in the JHU Whiting School of Engineering,
partners with MIT (Artificial Intelligence Lab), Boston’s Brigham and Women’s
Hospital (Surgical Planning Lab), Carnegie Mellon University (Center for
Medical Robotics and Computer Assisted Surgery), and Shadyside Hospital
(Center for Orthopaedic Research) in Pittsburgh. The Center’s mission is ―is
to develop computer-integrated surgical (CIS) systems that will significantly
change the way surgical procedures are carried out. Specifically, we will
develop a family of systems that will combine innovative algorithms, robotic
devices, imaging systems, sensors, and human-machine interfaces to work
cooperatively with surgeons in the planning and execution of surgical
procedures. Our goal is to produce systems that will greatly reduce costs,
improve clinical outcomes, and increase the efficiency of health care delivery.
By improving therapeutic precision and consistency, these systems will
reduce therapeutic risks and enable the development of new treatment
options.‖59
In summary form, the Center’s vision is to couple information technology to
surgical actions to significantly change surgery. In greater detail, the Center’s
vision addresses the ―growing demand for complex and minimally invasive
surgical interventions [that] is driving the search for ways to use computer-
based information technology as a link between the preoperative plan and the
tools utilized by the surgeon. At the core is a computer or network of
computers performing modeling and analysis tasks such as image
processing, surgical planning, monitoring and control of surgical processes.
A variety of interface devices permit the computers to obtain images and
other information about the patient, to assist physically in the surgical
intervention, and to communicate with the surgeon and operating room
personnel. The computers have access to anatomical atlases and statistical
databases that can be used to assist in surgical planning, execution, and
follow-up.‖
59
http://www.cisst.org/systems-vision
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―Images and other information about a patient are combined with statistical
atlases of anatomy to create a patient-specific model for use in surgical
planning. In the operating room, imaging and other sensing is used to register
the preoperative model to current reality and to update the model and plan.
Once this is done, the surgeon may supervise a robot that carries out a
specific treatment step, such as inserting a needle or machining bone. In
other cases, the CIS system will provide information to assist the surgeon’s
manual execution of a task, for example through the use of computer graphic
overlays on the surgeon’s field of view. In yet other cases, these modes will
be combined. Post-operatively, the same imaging, modeling, and analysis
capabilities can be used to facilitate patient follow-up and longer-term
assessment of the effectiveness of treatment plans.‖
―We refer to this paradigm of patient-specific modeling and planning, coupled
with computer-assisted surgical execution and follow-up, as Surgical
CAD/CAM, emphasizing the analogy with computer-integrated design and
manufacturing systems. We refer to these CIS systems that work interactively
with surgeons to extend human capabilities in carrying out surgical tasks as
Surgical Assistants. These characterizations are complementary and not
mutually exclusive. They draw upon common technologies, and real systems
often have both CAD/CAM and Assistant traits. Nevertheless, the terms are
useful as a means of structuring our vision of CISST.‖
As of May 2007, the research team at JHU consisted of 13 engineering
faculty and 52 students. Teams at the three core partner institutions totaled 6
faculty and 8 students, and 8 faculty participated from other collaborating
institutions. In addition, over 35 clinicians collaborated with the ERC. Over
all years, the Center has graduated 32 PhDs, 37 MS students, and 57 BS
students. Faculty researchers are drawn from computer science, electrical
and computer engineering, mechanical engineering, and biomedical
engineering. Clinicians involved in research are from general surgery,
neurosurgery, oncology, ophthalmology, orthopedic surgery, radiology, and
urology. Most of the undergraduate and graduate students participating in
the Center’s research are engineering majors, but medical students and
residents are also involved. In 2007, eight companies were (fee-paying)
Affiliates of the Center; four companies were listed as contributing
organizations.60
60
CISST Annual Report, Year 9, May 2007. Contributing organizations participated in joint research projects or proposals, donated equipment, and/or hired students.
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Strategic Plan Overview
The usual ERC three-tiered strategic planning structure for CISST is
presented below. As in most ERCs, the research plan has evolved over time.
Initially, the CIS systems that were the focus of research had a narrow,
clinical focus in three areas: Microsurgical Assistant, Minimally Invasive
Surgery, and Percutaneous (through the skin) Therapy. After three years,
this had evolved to a broader focus on two ―families‖ of systems: surgical
assistants and surgical CAD/CAM systems. The overlap between these two
is considerable, and future configurations of a CIS system are expected to be
based on concepts common to both types.
Source: CISST 9
th Annual Report, May 2007.
Future plans for CISST’s core organization involve a transition from the
current engineering school locus with ties to the JHU Medical Institutions
(JHMI), to a partnership with the JHMI in a multi-divisional and multi-
institutional initiative, with JHMI as the lead partner. The new initiative is
called I4M, Integration of Imaging, Intervention, and Informatics in Medicine.
I4M ―expands the original vision of the ERC to include a significantly
expanded informatics and process control component, while retaining the
ERC’s strengths in technology and systems for interventional medicine.‖
Industry Membership and Partners
The annual fee structure for Center Affiliates is based on company
employment: $5,000 for companies with fewer than 100 employees, $10,000
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for 100 to 1,000, and $15,000 with more than 1,000. In 2007 the Center
reported in the NSF-required ―Output‖ table that it had 8 Affiliates (7 Members
using the NSF definition) and 2 contributing organizations (apparently using a
somewhat stricter criterion than applied to the information in the previous
section). The Center is negotiating with two companies for licensing ERC
inventions. Since the Center’s initiation, it has been awarded five patents and
has signed eight licensing agreements with six companies. There has been
one start-up.
Education and Outreach
The Center’s educational outreach programs are organized into five
categories: K-12, Community Colleges, Undergraduate, Graduate, and
Practitioners. The following is just a sampling of some of the wide variety of
education and outreach activities in which the Center is engaged. In the K-12
category, CISST has attracted more than 300 teachers to the Research
Experience for Teachers program at JHU and partner labs in other locations.
In pre-college outreach, the Center has run a Robotics Summer Camp for
middle-school students and a Robotics System Challenge for teams of high
school and middle school students. The Center offers a one-credit
introductory course on computer-integrated surgery for pre- and early college
students. A minor in computer-aided surgery is also offered. It is interesting
to note that the Center developed and offers a course titled Engineering for
Surgeons, available to post-docs, faculty, and physicians.
Types of Economic Impact Data Available from CISST
As with the previous cases described in this report, to assess the regional
economic impact of CISST SRI employed the basic approach used in its
predecessor study of the economic impact of state investment in Georgia
Tech’s PRC. The approach identifies the external (to the ERC host state)
support that the ERC generated; the direct and indirect economic impact of
spending by the ERC and its faculty, students, and visitors; cost savings and
other benefits to ERC industrial collaborators; the impact of university
licensing of ERC technology; the value of ERC-generated employment; the
value of ERC graduates hired by companies located in the ERC host state;
and the value to companies (in terms of improved technical skills of workers)
of ERC industry workshops.
CISST has partner institutions in Massachusetts and Pennsylvania. We
asked CISST staff to break the data we required for our regional economic
analysis into three locational categories: sources/impacts within the three
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partner states (MD, MA, and PA), within the U.S., and foreign. This was not
greatly burdensome for most of our support and impact categories, since
CISST industry workshops were held at JHU; visiting researchers came to
JHU; and the location of members of CISST industrial Affiliates and
contributors, the location of sources of sponsored research support for
CISST, and the location of companies that had hired CISST students all were
known.
Regional Economic Impacts of CISST
This section describes and analyzes the data collected in order to quantify
CISST’s direct, aggregate economic impact on the three CISST partner
states. The following categories of impacts were quantifiable and capture
some, but by no means all, of CISST’s direct impact on regional economies.
NSF support for CISST since its inception
CISST has attracted more than $29 million to the three partner states (mostly
to Maryland) in the form of NSF support (Table 4.59).61 These funds include
the CISST base award as an Engineering Research Center as well as NSF
special purpose program funds and other NSF support.
Table 4.59
NSF Cash Support to CISST
Type of Cash Support
Cumulative Support 1999-2007
NSF ERC Base Award $25,100,122
NSF ERC Program Special Purpose $444,937
NSF non-ERC Support $4,016,589
Total Cash Support $29,561,648
Sponsored research support from outside partner states attributable to the existence of CISST
ERCs tend to serve as focal points for sponsored research, i.e., research
conducted by center faculty and students but funded by companies, other
U.S. government agencies, or foreign government entities. As indicated in
the following table (Table 4.60), CISST attracted a relatively modest $2.8
million during its first nine years as an ERC, most of it from federal
61
For this and subsequent tables, unless noted otherwise, data sources are a combination of CISST annual reports, CISST and JHU records, and CISST staff.
115
government agencies other than NSF. CISST reported no sponsored
research from industry sources. All of this sponsored research support came
from federal agency sources outside the three partner states.
Table 4.60
Sponsored Research Support to CISST
Source of Cash Support
Cumulative Support 1999-2007
Industry Support
From within MD, MA, and PA $0
From outside MD, MA, and PA (within US) $0
Federal Government Agencies (non-NSF) $2,432,754
NSF (non-ERC) $352,955
Other Sources of Sponsored Research
From within MD, MA, and PA $0
From outside MD, MA, and PA (within US) $0
Industry Support
Total Sponsored Research Support $2,785,709
Member support to CISST
Members of the CISST industrial consortium outside of the three partner
states have provided just over $2 million in membership fees to the Center
during its 9 years of existence (Table 4.61). A small additional amount came
from members located in one of the three partner states.
Table 4.61
Industry Support to CISST through Membership Fees (unrestricted)
Source of Cash Support
Cumulative Support Years 1-9
US Industry Support
Membership (MD, MA, and PA firms) $173,734
Membership (non-MD, MA, and PA firms) $2,001,913
Foreign Industry Membership $0
Total Cash Support $2,175,647
Other support to CISST from external sources
CISST has received substantial additional cash and in-kind support from
external sources. As indicated in Table 4.62, the three host universities have
provided $11.5 million in such support. Federal agencies other than NSF
provided an additional $5.6 million. Total support of this kind amounts to
about $17.5 million.
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Table 4.62 Other Cash Support to CISST
Source of Support
Cumulative Support Y1-9
University Support
US Universities - MD, MA, and PA $11,458,829
US Universities - non-MD, MA, and PA $0
Foreign Universities $0
Other Support
US Government (non-NSF) $5,590,045
Other - MD, MA, and PA $88,97362
Other - non-MD, MA, and PA $297,867
Total In-kind Support $17,435,714
CISST received in-kind support, mostly equipment donations, from industry.
Total value of in-kind support amounted to $1.7 million (Table 4.63), most of
which came from firms outside the three partner states.
Table 4.63
In-kind Support to CISST
Type of In-kind Support
Cumulative Support 1999-
2007
In-kind Equipment Donations to CISST
US Industry - MD, MA, & PA Firms $343,85063
US Industry - non-MD, -MA, & -PA Firms $1,151,150
Foreign Industry $88,185
Value of New Facilities in Existing Buildings
US Industry -MD, MA, & PA Firms $18,514
US Industry - non-MD, -MA, & -PA Firms $61,980
Total In-kind Support $1,663,679
Licensing fees and royalties for intellectual property generated by CISST research
CISST lists nine licenses granted to three companies based on Center
research; the companies are Diagnosoft, Sentinelle Medical, and Siemens
AG Medical Solutions. Information regarding income generated by these
licenses has not yet been obtained by SRI.
62
Data for in-state and out-of-state support for this category were not available from CISST. These estimates were based on the proportion of support from each location for other categories of cash support. 63
As in the previous table, the proportions of in-state and out-of-state support are estimates based on similar categories of support for which we had data.
117
Spending in partner states by out-of-state attendees at workshops
Over the course of its nine years of ERC operations, CISST has conducted 3
workshops that attracted industry representatives.64 Thirty-eight of the 47
attendees at these workshops were from companies in non-partner states.
These out-of-state visitors spent money on lodging, meals, entertainment,
transportation, etc., that represent resources that Maryland received because
of CISST.
CISST staff also provided us with information regarding the typical length of
the workshops, enabling us to calculate the total number of days attendees
spent in Maryland. Using federal government per-diem rates of spending per
visitor-day, we estimate that non-partner state attendees spent approximately
$7,900 while in Baltimore attending CISST industry workshops and
conferences (Table 4.64).
Table 4.64
Estimated Spending by Non-Partner State Attendees at CISST Workshops and Conferences Held in Maryland
Number of Workshops in MD 3 Number of non-MD, MA, and PA attendees 38 Total non-MD, MA, and PA attendee days in MD 38 Spending per Visitor Night (GSA per diem, Baltimore, MD) $207
Estimated Total Spending $7,866
Venture capital attracted to CISST start-ups
To date CISST has spawned a single start-up company, Image Guide, which
employed 5 people for just one year (2003-4). No data were available on
whether the company attracted venture capital.
Employment impact of CISST start-up on partner states
The employment impact of CISST’s startup was estimated by multiplying the
number of employee-years (5) by the average salary for NAICS 54 in
Baltimore city (2002 census): $57, 236. The result is $286,180.
Value of cost savings to firms in partner states that have hired CISST graduates
SRI estimates that firms hiring ERC graduates benefit through one-time cost
savings of $50,000 per B.S. graduate, $70,000 per M.S. graduate, and
64
Complete records for industry workshops were available only for the later years of CISST’s operations. Accordingly, the figures presented in this report regarding the economic impact of industry workshops likely represent an underestimate.
118
$100,000 per Ph.D. These estimates were based primarily on informal
discussions between SRI staff and with several ERC industrial liaison
officers, interviews with representatives of companies that have hired ERC
graduates, and company surveys.65 Our discussions suggested that a newly-
hired ERC Ph.D. graduate requires approximately one year’s less mentoring
time by a company staff member than a comparable, non-ERC graduate.
Over the last nine years, industry hired a total of 37 CISST graduates,
including 8 students earning B.S. degrees, 13 M.S. graduates, and 16
Ph.D.s. Of these graduates, companies located in the three partner states
hired a total of 7 students – 1 B.S., 3 M.S., and 3 Ph.D. graduates. Based on
the cost savings estimates for each education level discussed above, the
total value of cost savings to the 7 firms located in partner states hiring
CISST graduates is approximately $510,000.
Value of workshops to participating firms located in partner states
In addition to contributing to the education of students at the three CISST
host institutions, the Center also plays a role in furthering the continuing
education of partner states’ technical workforce by conducting workshops and
conferences that target industry. The estimated value that companies place
on this type of training – and therefore the estimated value that accrues to
partner states in the form of better trained, up-to-date technical workers – can
be calculated via the number of participant-days spent at CISST workshops
multiplied by an estimated daily salary of participants.
As mentioned above, CISST staff provided SRI with data regarding the
number of industry participants and participant-days from companies located
in partner states. Using the average daily rate for NAICS workers and
multiplying this by the number of workshop days yielded an estimated total
value of about $3000 to firms in CISST partner states (Table 4.65).
Table 4.65 Value of Workshops to MD, MA, and PA Firms Sending Attendees
Number of Workshop Attendees from MD, MA, and PA firms 9
Number of Days at Workshops 9
Estimated Salary per Day $330.2166
Estimated Value of Workshops to MD, MA, and PA Firms $2,972
65
The cost savings to the hiring firm were estimated to be approximately $100,000 per Ph.D., using the mentor's annual full compensation as the basis for this estimate. We extrapolated from this to estimate cost savings of $70,000 per ERC M.S. hire and $50,000 per B.S. hire. These estimates are supported by results of Semiconductor Research Corporation (SRC) surveys which cite savings of at least $100,000 per student for companies that hire students supported by SRC contracts (www.src.org/member/students/mem_benefits.asp). 66
Daily rate for employees of NAICS 54 companies in Baltimore (%57,236/260) with 50% added to account for benefits.
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CISST’s Total Direct Regional Economic Impact
CISST has had substantial direct effects on partner states in several areas,
mostly by attracting new money to the regions involved from outside sources.
As Table 4.66 shows, the total direct quantifiable economic impact of CISST
on the three partner states is estimated to be more than $43 million. As with
other ERCs with partners in multiple states, the great bulk of regional
economic impact of the Center is on the state in which the host university is
located, in this case Maryland.
Table 4.66
CISST’s Indirect and Induced (Secondary) Economic Impacts on Partner States
To estimate the magnitude of the indirect and induced impacts on CISST
partner states, SRI purchased RIMS II multipliers from the Bureau of
Economic Analysis and identified appropriate detailed industry sector
multipliers for each relevant direct impact segment. The multipliers are listed
in Table 4.67 (below). For those segments that are income estimates, the
multiplier for household spending was used. This applies to the value of in-
kind visitor researcher support (which is essentially visitor salaries for the
time they are visiting in Maryland) and the value of employment in Maryland.
For spending in Maryland by non-partner state attendees at CISST
workshops, a blended multiplier was created that represents the breakdown
of the typical business visitor’s spending – 55 percent on accommodations,
25 percent on meals (food services and drinking places), 10 percent on local
CISST’s Total Direct Quantifiable Economic Impact on Partner States
External Income to Partner States
Cumulative 1999-2007
Support to CISST from the National Science Foundation $29,561,648
Sponsored research support from outside MD, MA, and PA for CISST researchers $2,785,709
CISST membership fees from non-MD, MA, and PA member firms $2,001,913
Other support from non-MD, MA, and PA organizations $5,887,912
Intellectual property income from non-MD, MA, and PA firms for CISST inventions $0
Spending by non-MD, MA, and PA attendees at CISST workshops in MD $7866 Total External Income to MD, MA, and PA $39,939,315
Value of Increased Employment in MD, MA, and PA
Value of employment created by CISST start-up companies located in MD, MA, and PA $286,180
Total Value of Increased Employment in MD, MA, and PA $286,180
Improved Quality of Technical Workforce in MD, MA, and PA
Value of CISST graduates hired by MD, MA, and PA firms $2,910,000
Value of CISST workshops to participating MD, MA, and PA firms $2,972
Total Value of Improved Quality of Technical Workforce in MD, MA, and PA $2,912,972
Total Quantifiable Direct Economic Impact $43,444,200
120
retail, 5 percent on recreation and entertainment, and 5 percent on ground
passenger transportation.
Table 4.67
Multipliers Used to Estimate Secondary Impacts
Direct Impact Category
Total Output
Multiplier EXTERNAL INCOME TO MD, MA, and PA
Support to CISST from the National Science Foundation 2.0854
Sponsored research support from outside partner states to CISST researchers 2.0854
CISST membership fees from non-partner state firms 2.0854
Other cash support from non-partner state firms/organizations 2.0854
Intellectual property income from non-partner states firms for CISST inventions 2.0854
Spending by non-partner state attendees to CISST workshops in partner states 1.9460
VALUE OF INCREASED EMPLOYMENT IN PARTNER STATES
Value of employment created by CISST start-up companies located in partner states 1.3527
With these final output multipliers from RIMS II and the direct impact
estimates, calculating indirect and induced impacts involves a straightforward
multiplication of direct impacts by their corresponding segment multipliers.
Total direct impacts of CISST activities to date have amounted to about $43
million. These direct impacts have generated secondary impacts of nearly
$44 million, for an implied aggregate multiplier of 2.01.67 For comparison, the
implied aggregate multipliers found in the literature range from 1.5 to 2.3.
The total quantifiable economic impacts of CISST’s activities on the three
partner states are the direct impacts plus indirect and induced impacts.
CISST has had a direct impact on member states of $43,444,200, with
secondary impacts of $43,781,814, for a total economic impact of
$87,226,014 over nine years (see Table 4.68). As indicated in Figure 4.13,
the majority of the direct impacts are from the external support that CISST
has received from external sources. These direct impacts from external
support account for 46 percent of the total quantifiable impacts, and indirect
and induced impacts derived through this external support comprise half of
the total (direct and indirect) quantifiable impacts of CISST on partner states.
Direct and indirect workforce and employment effects together comprise the
remaining 4 percent of economic impacts on the region.
67
Multipliers are generally specific to certain types of expenditures in the economy. This ―aggregate‖ multiplier refers to total secondary impacts over all direct impacts and is a useful way to compare the importance of secondary impacts across projects or studies.
121
Table 4.68
CISST's Total Quantifiable Economic Impact on MD, MA, and PA
Direct
Impacts
Indirect & Induced Impacts Total
Multiplier
EXTERNAL INCOME TO MD, MA, and PA Support to CISST from the National Science Foundation $29,561,648 2.085 $32,086,213 $61,647,861 Sponsored research support from outside MD, MA, and PA for CISST researchers $2,785,709 2.085 $3,023,609 $5,809,318 CISST membership fees from non-MD, MA, and PA member firms $2,001,913 2.085 $2,172,876 $4,174,789 Other support from non-MD, MA, and PA organizations $5,887,912 2.085 $6,390,740 $12,278,652 Intellectual property income from non-MD, MA, and PA firms for CISST inventions $0 2.085 $0 $0 Spending by non-MD, MA, and PA attendees at CISST workshops in MD $7,866 1.946 $7,441 $15,307
Total External Income to MD, MA, and PA $40,245,048 $43,680,878 $83,925,926 VALUE OF INCREASED EMPLOYMENT IN MD, MA, and PA
Value of employment created by CISST start-up companies located in MD $286,180 1.353 $100,936 $387,116 Total Value of Increased Employment in MD, MA, and PA $286,180 $100,936 $387,116 IMPROVED QUALITY OF TECHNICAL WORKFORCE IN MD, MA, and PA
Value of CISST graduates hired by MD, MA, and PA firms $2,910,000 n/a $0 $2,910,000 Value of workshops to participating MD, MA, and PA firms $2,972 n/a $0 $2,972 Total Value of Improved Quality of Technical Workforce in MD, MA, and PA $2,912,972 $0 $2,912,972
TOTAL QUANTIFIABLE IMPACT ON MD, MA, and PA $43,444,200 $43,781,814 $87,226,014
122
Figure 4.13
National Economic Impacts of CISST
This section describes CISST’s direct quantifiable economic impacts on the
United States as a whole. Similar to the discussion of direct impacts on
partner states, the quantifiable impacts presented here underestimate the
total direct impacts on the nation because some types of direct impact are
infeasible to measure. The latter types of direct Center impacts on the nation
are described below in ―Other Impacts of CISST.‖
CISST membership fees and other support from non-U.S. member companies
CISST has had no foreign Affiliates, so no membership fees originated
abroad. Similarly, the Center has received no other financial support from
non-U.S. organizations. To date, SRI has not been able to obtain any data
on licensing income to CISST, if any. Spending by non-U.S. attendees at
CISST workshops in Maryland amounted to $828.
Total External Income to MD, MA, and PA,
$40,245,048
Indirect and Induced from External Income,
$43,680,878
Value of Increased Employment,
$286,180
Indirect and Induced from Increased Employment,
$100,936
Value of Improved Technical Workforce,
$2,912,972
Direct + Indirect and Induced Economic
Total Quantifiable Economic Impact of CISST on MD,
123
Value of CISST workshops to participating firms
Through their industry-oriented workshops and conferences, ERCs play a
role in helping companies expose their employees to new ideas and
contribute to the overall ―lifelong learning‖ of the nation’s workforce. To
quantify the improvement in technical workforce skills imparted to firms by
their employees’ participation in CISST’s industry events, SRI developed an
estimate of the value of the time spent by workers at CISST industry-oriented
workshops and conferences.
The calculation involves multiplying the number of participant-days at CISST
industry workshops by a burdened daily rate for the national average
professional, scientific and technical services worker for NAICS 54.68 Using
CISST records of participant attendance and the number of days per event
(1) resulted in an estimate of 47 participant-days by employees of U.S.
companies. At the estimated salary per day of $330.21, the total value of
CISST workshops to U.S.-based companies is slightly more than $15,500
(see Table 4.69).
Table 4.69
Value of Workshops to U.S. Firms Sending Attendees
Number of Workshop Attendees (all U.S. firms) 47
Estimated number of Attendee-Days at Workshops 47
Estimated Salary per Day $330.21
Estimated Value of Workshops to Firms $15,520
Value of employment created by CISST startup companies
This figure was calculated as part of our regional impact estimate and
amounted to $286,180.
Value of CPES graduates hired by U.S. firms
Over the last nine years, industry hired a total of 37 CISST graduates, none
of whom was hired by foreign firms, so all the value to companies gained by
hiring CISST graduates accrued to U.S. firms. Using the estimates for the
value of reduced mentoring time for ERC graduate hires, we calculate that
U.S. companies gained $2,910,000 worth of productive time from CISST
graduates.
68
As in the previous calculation of the employment effects of the CISST start-up, SRI obtained the average daily salary for the ―Professional, Scientific, and Technical Services‖ category of the North American Industrial Classification System (NAICS) code 54 and multiplied the average national daily salary by 1.5 to account for estimated fringe benefits provided by the firm to the worker.
124
Net cost savings to industry and additional profits to innovating U.S. firms from products incorporating CISST research
The national societal benefit of investment in efforts such as NSF’s ERC
program is equal to the sum of profits to the innovating firm and the cost
savings to users (whether individuals or companies). Accordingly, to quantify
impact at the national level, SRI sought to estimate both profits and cost
savings. Obtaining data for either element of societal impact has proven
difficult, and CISST was not an exception. Although we spoke with
representatives of companies that have been affiliates of, and/or hired
graduates of, CISST (Hologic, Inc.; Acoustic MedSystems), our interviewees
were unable to provide us with verifiable estimates of additional profits or the
total cost savings to their company or to industry attributable to CISST
technology. Nevertheless, our industry interviews did yield some impressive,
general estimates of the economic impact that CISST research and
technology has had on the robotics part of the medical devices industry (see
details from these interviews, ―Other Impacts of CISST‖). In a nutshell, there
is reliable evidence from the interviews that CISST has been instrumental in
the growth and health of the robotics part of the medical devices industry, and
more pointedly, in preventing its core to shift from the U.S. to Europe over the
past decade.
CISST’s Total Direct Economic Impact on the United States
In summary, the total direct quantifiable economic impact of CISST on the
United States is estimated to be over $3 million, primarily from increased
employment and improved workforce skills (see Table 4.70).
Table 4.70
Total Quantifiable Direct Economic Impact of CISST on the United States
Direct Impacts
CISST membership fees from non-US member firms $0 Other support from non-US organizations $0 Intellectual property income from non-US organizations $0 Spending by attendees at CISST workshops in MD $828 Total External Income to the United States $828 Value of employment created by CISST start-up companies $286,180 Total Value of Increased Employment in the United States $286,180 Value of CISST graduates hired by US firms $2,910,000 Value of workshops to participating firms $11,227 Total Value of Improved Quality of Technical Workforce in the United States
$2,921,227
TOTAL DIRECT QUANTIFIABLE IMPACT ON THE UNITED STATES $3,208,235
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CISST’s Indirect and Induced (Secondary) Economic Impacts on the United States
As mentioned in previous sections of this report, an ERC’s direct economic
impacts generate a variety of indirect and induced (secondary) economic
impacts. In estimating the indirect and induced impacts, SRI uses the same
background, assumptions, and methodology for national-level impacts as for
state-level impacts. CISST’s total quantifiable economic impacts on the
United States are defined as direct impacts plus indirect and induced
impacts. To date, CISST has had a direct impact on the U.S. economy of
$3,208,235, with secondary impacts of $101,719 for a total economic impact
of $3,309,954 over nine years (see Table 4.71). As with most of our other
cases, for which ―hard‖ estimates of the societal impact of new product
innovation were not available, the vast majority of impacts on the United
States are direct impacts, in CISST’s case almost all of which are comprised
of employment and workforce effects. These workforce effects, which do
not generate indirect or induced effects, account for 88 percent of CISST’s
total quantifiable national impact (Figure 4.14).
Table 4.71
CISST's Total Quantifable Economic Impact on the United States
Direct Impacts
Indirect & Induced Impacts
Total
Multiplier CISST membership fees from non-US member firms
$0 2.085 $0 $0
Other support from non-US organizations
$0 2.085 $0 $0
Intellectual property income from non-US organizations
$0 2.085 $0 $0
Spending by attendees at CISST workshops in MD
$828 1.946 $783 $1,611
Total External Income to the United States
$828 $783 $1,611
Value of employment created by CISST start-up companies
$286,180 1.353 $100,936 $387,116
Total Value of Increased Employment in the United States
$286,180 $100,936 $387,116
Value of CISST graduates hired by US firms
$2,910,000 n/a $0 $2,910,000
Value of workshops to participating firms $11,227 n/a $0 $11,227 Total Value of Improved Quality of Technical Workforce in the United States
$2,921,227 $2,921,227
TOTAL QUANTIFIABLE IMPACT ON THE UNITED STATES
$3,208,235 $101,719 $3,309,954
126
Figure 4.14
Other Impacts of CISST
For the last two case studies in the ERC economic impact project, CISST and
the Georgia Tech/Emory Center for the Engineering of Living Tissue, we cast
the net of ―economic impacts‖ even more widely than in the previous cases.
In particular, we wished to see what kinds of impacts with economic
implications, broadly defined, could be included and for which reliable data
could be obtained. We wanted to explore categories of impact that might
have indirect or quite long-term economic implications, including impacts on
the academic community (in particular, on the careers of graduated CISST
students who chose academic careers, and on the universities that hired
them), and on the center’s host, Johns Hopkins University.
For these last two cases, we therefore asked industry representatives
(identified by center staff as representing companies that have experienced
the most significant impacts from their interactions with the ERC) to discuss
with us the impact that center outputs—new knowledge, technology, ideas or
ways of thinking, students—have had on the company and the related
industry. We also interviewed selected Ph.D. graduates, post-docs, and
center faculty, identified by center managers as outstanding contributors to
research and academia. And finally, we interviewed non-center faculty and
administrators at Georgia Tech and JHU to obtain details of significant
institutional impacts the ERC may have had. The following sections present
information on impacts in these categories for CISST.
Total External Income , $828 Indirect and Induced
Impact from External Income, $783
Value of Increased Employment,
$286,180
Indirect and Induced Impact from
Increased Employment,
$100,936
Value of Improved Technical Workforce,
$2,921,227
Direct + Indirect and Induced National Impactof CISST
Total Quantificable National Impact of CISST: $3,309,954
127
New Ideas and Technology
Our extensive interview with Russ Taylor, CISST Director, provided a wealth
of detailed information about the Center’s activities, collaborations, and
contributions in all categories of impact within our span of interest. In his
view, one of the Center’s major contributions was to ―validate the field of
medical robotics. This was not just robots doing interventions, not just
surgical navigation, but a computer-integrated process. We demonstrate at a
systems level how to put the pieces together.‖ CISST ILO Lani Hummel
added that ―Russ has provided the intellectual base for industry—the Center
has helped to grow an industry.‖ Several CISST staff observed that the
Center’s existence was a major factor in retaining the medical robotics
industry in the U.S. rather than seeing it shift to Europe. This view was
supported by our interviews with representatives of Center Affiliates, one of
whom said ―Johns Hopkins University had a lot to do with the creation of an
industry that for the most part didn’t exist ten years ago. The medical
robotics industry is now much more mature than when the ERC started. The
Center has had a huge impact, especially in keeping the core of the industry
in the U.S.‖
Hologic, Inc, has been an Affiliate of the Center for three years. According to
Kevin Wilson, Director of Science/Osteoporosis Assessment, the company
joined the center because, although the company had an idea for a new
product, ―we knew we couldn’t accomplish it in-house. So the reason we
signed up as an Affiliate was to do this product. The Center did indeed have
technology we needed, and so we embodied it in a product that went in for
FDA approval. The product is a 3D digital imaging device that would be used
to diagnose weaknesses in the femur.‖
Clif Burdette, President of Acoustic MedSystems, told us that ―the ERC
provided a good framework for us to establish collaborations that have led or
are leading to products in two areas: acoustic ablation and prostate
brachytherapy. The robotics system developed at CISST was integrated with
our prostate radiation implant system and allowed us to place the implant at
the right spots in the prostate. The ERC helped us to develop the prototype,
then we took it back to the Johns Hopkins clinic as a testbed.‖ When asked
about the economic impact of the Center on his company, Dr. Burdette
replied, ―It’s hard to quantify, but I would estimate the total economic impact
our collaboration with the ERC in terms of overall business generated
(research funding, products) probably at about 8 to 10 million dollars.‖
Other Benefits to Industry from Center Collaborations
128
Center affiliation has also brought benefits indirectly related to new ideas and
technology to member companies. Among those mentioned in our interviews
were learning of new markets, wider ranges of application for existing
technology, and ―how to solve problems associated with serving those
markets.‖ Attendance at Center meetings and reviews of research may not
necessarily advance the business, but ―part of the value of these meetings is
interaction with other companies; we had an opportunity to buy out someone,
which didn’t work out, but it still is a good place to talk with industry
representatives.‖
Russ Taylor observed that companies are interested in interacting with the
Center because of the rare combination of an engineering school with close
ties to a medical school. ―Through us, they can get in touch with clinicians.
We’re not unique, but we are very effective in showing how to do it.‖ The
small Affiliates program does not bring in much money, but ―the real benefit is
the joint project—fund a student, write a joint proposal—this is my strategy.‖
He also noted that a key benefit of joint projects with industry is knowledge
transfer: ―I am very project oriented—this is the most fruitful way to transfer
knowledge and people.‖
Access to Specialized Talent
Hologic has hired one CISST graduate in the skeletal health systems area,
had another student as an intern, and is considering hiring students in other
areas. CISST students have been ―highly qualified‖ and have training in the
area the company needs. Kevin Wilson says that ―CISST competes well with
the best. I can’t say that CISST students have advantages over other hires
based on the center experience itself. Russ has good knowledge of industry,
but that’s difficult to impart to students.‖ Acoustic MedSystems is planning to
hire one of the current Center students, and Clif Burdette has served on
several Ph.D. committees of Center students.
Impact on Academia and the Research Community
In this category of impact we do not repeat the extensive evidence provided
in ERC annual reports on the impact that the research output of the center
has had on relevant research fields, list the awards and honors that center
faculty have earned, or provide details on the quantity and of publications
produced. All ERCs have impressive records in these areas and the results
are well-documented. Instead, we wish to go beyond the standard impacts to
see what might be learned about the Center’s impact on academia and
129
research through interviews with former students who have taken academic
positions, postdocs, and their mentors at the Center.
Alison Okamura was an ERC faculty hire in 2000 and leads the Surgical
Assistance research thrust. We talked with her about her perspectives on the
impact the Center has had on education, the institution, and on students.
She has had three Ph.D. students graduate and all three have gone on to
faculty positions. She feels the Center had a huge impact on their ability to
get faculty positions—they had courses on writing a grant proposal, they
learned how to mentor through the REU program, and graduated ―very savvy
about the academic enterprise.‖ She feels that her three Ph.D. students
probably got their positions because of their sophistication—they did not need
to do post-docs.
Following her graduation from Stanford in 2006, Katherine Kuchenbecker
held a post-doc position with Alison Okamura. She is now Assistant
Professor of Mechanical Engineering at the University of Pennsylvania.
Although offered a tenure track position at Penn, she was able to negotiate
delaying her arrival at Penn so she could spend a year at Hopkins working
with Alison and her group on robotics with medical applications. She noted
that she now teaches a class based directly on the Haptics69 for Medical
Applications class that Alison taught and she sat in on. She also said that the
course Russ Taylor teaches on robotics for surgical advancement ―is
indicative of the kind of curricular changes that are occurring beyond Hopkins
because of the close connection between medicine and engineering at
Hopkins. A lot of people in the field know that if you’ve come from CISST
then you have a special aptitude for robotics with medical applications.‖ She
mentioned that Alison’s three students, referred to in the previous paragraph,
are beginning to incorporate some of the same kinds of interdisciplinary
classes and research.
Institutional Impact: Interdisciplinarity and the CISST Legacy
SRI’s interviews with CISST managers made it clear that, in their view, the
ERC has been responsible for substantial changes in the culture of research
at JHU. Russ Taylor: ―We’ve created a culture. Our system focus
distinguished us from the competition. You can build a trans-disciplinary
organization in this kind of environment. We showed that faculty from
multiple departments can get together and create a new discipline. We’re the
most transdisciplinary group on campus, at least in engineering. We created
69
Haptics is the science of applying tactile sensation and control to interaction with computer applications. Haptic technology is used for devices that provide feedback to humans.
130
a culture shift.‖ Lani Hummel shares this view. She said that the Center was
the first truly transdisciplinary activity on campus, and that this led to the first
transdisciplinary building on campus. ―Three centers are now in it, all housed
in one place. The premier one was the ERC.‖ Alison Okamura told us that
the Center allowed her to find and make contact with clinical collaborators
and to work closely with other engineers. She feels that Hopkins is better at
collaborative activities than other schools she is familiar with, and that the
ERC ―brings collaboration to another level.‖ It created much stronger links
between medicine and engineering than was the case pre-center.
To obtain other perspectives and details on the impact the Center has had on
JHU, SRI interviewed three key faculty members and administrators:
Jonathan Lewin, Professor and Chair, Department of Radiology and
Radiological Science at the School of Medicine; Marc Donohue, Vice Dean
for Research, School of Engineering; and Michael Marohn, Associate
Professor of Surgery at the School of Medicine. There is strong agreement
among the three that CISST has been instrumental in helping to change the
culture of research at JHU. According to Dean Donohue, at the time the ERC
began operations, Hopkins was ―a collection of individual faculty. Nobody
was doing collaborative research.‖ Now, collaboratively funded research at
Hopkins (three or more investigators) has grown in ten years from ―practically
nothing to more than half of the funded research. The ERC was the model
that allowed the faculty to see that it would work. The ERC was at the
forefront of causing a sea change in the way faculty viewed collaborative
research.‖
Dr. Lewin said that even though CISST is formally ending, it is not going to
die out. The ―legacy‖ of the ERC is a culture of innovation and collaboration,
which should be kept going. It ―will have lasting changes in the culture. The
whole idea of closed loop medicine is the biggest idea that is left from CISST
on medicine (take data from an intervention, analyze it, and create a better
plan/intervention in the future).‖ He also said that while he has not observed
a major impact on medical students, CISST has had a major impact on
engineering students. ―They have a more interdisciplinary approach and are
more aware of commercialization and the requirements for productization.‖
Marc Donohue chairs a committee of about 40 faculty members orchestrating
an engineering-led initiative that is the top priority of the medical school. In
addition to Donohue, Lewin, Marohn, and Russ Taylor are members of the
I4M Executive Committee. The I4M initiative—Integrating Imaging,
Intervention, and Informatics in Medicine—will employ computer-integrated
interventional systems (CIIS) to enable clinicians to fundamentally improve
patient care by exploiting the technology to ―transcend human limitations in
131
treating patients.‖70 In Dr. Donohue’s view, I4M was ―the graduation plan for
the ERC.‖ From Dr. Lewin’s perspective, the I4M was ―catalyzed by Russ
Taylor and faculty of CISST. Planning it has been a transformative process,
bringing together faculty from engineering, the Applied Physics Lab, and the
med school, to look at ways to leverage the CISST going forward.‖ Dr.
Marohn suggested that while I4M may not be a direct result of the ERC, the
leadership took advantage of the existence of the existing ERC-medical
school relationship. ―It would have been hard for this initiative to move
forward without the existence of the ERC.‖ He feels that ―leveraging I4M with
the ERC is making Hopkins assume its appropriate role, not only in silo
research, but in terms of future research that is beyond the silos.‖
According to Marc Donohue, the ERC will continue as part of the Laboratory
for Computational Sensing and Robotics (LCSR), which will be more than
medical robotics. I4M is expected to be a much larger organization than
either the LCSR or the ERC. The ERC was ―engineering-centric‖ and used
faculty from the school of medicine as consultants, and now the idea is to ―flip
the structure‖ so that I4M is medicine-centric and the engineers are the
consultants. The medical school embraced the idea.
Institutional Impact: Diversity and Outreach
All ERCs are required to promote diversity in research and education and
engage in outreach to educators, students, and other groups. CISST’s efforts
in this area have resulted in substantial institutional impacts that warrant
inclusion in this impact assessment. CISST has complied with the mandate
from NSF and put forth special efforts to recruit and enroll qualified
underrepresented minority students and women for participation at the
undergraduate, masters, and doctoral levels of the Center. Members of
CISST formed the Education, Outreach and Diversity Committee to
undertake these efforts. The special results of the diversity efforts at CISST
are that in addition to increasing the enrollment of these students, they have
led to formal institutional changes at Johns Hopkins regarding diversity. The
standout impacts that are directly attributable to CISST’s outreach and
diversity efforts are:
Considerable increase in minorities and women participating in CISST
and as a result, improved diversity in the John Whiting School of
Engineering
70
I4M vision statement and plan, Whiting School of Engineering and Johns Hopkins School of
Medicine, Johns Hopkins University, no date.
132
Inclusion of a ―Diversity and Climate‖ criterion on the annual faculty
performance evaluation in the Whiting School of Engineering
Establishment of the Johns Hopkins Center for Education Outreach.
Johns Hopkins does not have an institutional mandate to focus on diversity.
Diversity efforts are ―grass roots‖ and reside at the individual schools. Using
the demonstrated success at diversity efforts in CISST, members of the
CISST oversight board developed a formal Whiting School of Engineering
Center for Educational Outreach (CEO). The focus of this center is to take
lessons learned from the practices of the Education, Outreach and Diversity
Committee of the ERC and focus recruitment efforts at the community of
minority K-12 students around Johns Hopkins. The CEO is an important first
step in formalizing diversity efforts within the school of engineering.
The objectives of the Center for Educational Outreach are complemented by
the formal addition of a ―Diversity and Climate‖ criterion on annual faculty
performance evaluations. This criterion is in the form of a question asking
faculty what specific things they have done to promote diversity or the climate
thereof within their laboratories or in the broader school. This addition is
highly significant in that it is the beginning of an incentive structure for faculty
members to participate in diversity efforts. In many instances faculty work
towards diversity is not formally recognized in the promotion and tenure
process and therefore there is little incentive other than personal convictions
to engage in such efforts. The beginning of a formal policy structure that not
only recognizes the significance of diversity, but measures the quality of
faculty against their efforts to that end, is a profound impact of the ERC’s
diversity work on Johns Hopkins.
Conclusions and Observations
Both the magnitude and profile of CISST’s quantifiable economic impacts,
especially on the national level, reflect two key characteristics of the Center’s
research: its goals are relevant to an emerging industry, one that barely
existed when the Center was formed, and it focuses on medical technology,
which requires FDA approval before market introduction can occur. The
CISST case seems to be a good example of modest quantifiable economic
impacts but major less-readily-quantified economic as well as other impacts
that significant but not quantifiable. The Center was a key influence on the
growth of the medical robotics industry and the retention of its core in the
U.S. Although the evidence is indirect, our interviews made it clear that
company affiliates of the Center benefited considerably in multiple ways from
their collaborations. In several instances, small and medium-sized
companies appear to owe their very survival to the Center.
133
The nature of the regulated market that is the target for commercializing
Center ideas and technology and the nascent stage of development of the
medical robotics industry combine to greatly restrict the likelihood that the
Center could spawn successful start-ups or generate commercially
successful products, even after ten years of existence. Even if private firms
had been able to commercialize new products attributable largely to Center
ideas or technology, the consumer surplus approach could not be used to
estimate the economic benefits to society because in most cases we learned
about, innovations did not result in cost savings but rather enabled new
things to be done that could not have been done before. Until a model is
developed that can be used to estimate the public benefits of innovations that
are entirely new to the economy rather than substitutes for existing products
and processes, the value of a large proportion of ERC outputs cannot be
quantified.
As graduates and post-docs who studied and conducted research at the
Center moved on to other academic posts, they took with them the systems
perspective that shaped much of the medical robotics work at the Center.
The value of engineering-medical school collaboration in the form of
interdisciplinary project teams is diffusing widely and is becoming more
institutionalized at Hopkins. One important part of the legacy of CISST
appears to be a case of the (relatively) tiny engineering school having an
enormous impact on the huge Hopkins medical school (the JHU Department
of Radiology and Radiological Science alone has more than 1,000
employees). I4M, now the top priority of the Medical School, probably would
not exist in the absence of CISST.
Finally, the institutionalization of center diversity and outreach initiatives,
while not an ―economic‖ impact, deserves inclusion as an appropriate
outcome category in any ERC impact study. The Whiting Engineering
School’s Center for Educational Outreach takes lessons learned from the
practices of CISST’s Education, Outreach and Diversity Committee and
seeks to implement them department-wide. Similarly, adding a Diversity and
Climate criterion to the performance evaluation criteria for engineering faculty
represents an important first step in formalizing diversity incentives in the
School of Engineering. Although these categories of impacts apply to all
ERCs, we documented them because they will survive the termination of NSF
support.
134
Georgia Tech/Emory Center for the Engineering of Living Tissue
Introduction to the Center
Vision and History
The Georgia Tech/Emory Center for the Engineering of Living Tissue (GTEC)
was first funded as an ERC in 1998. It is now in its last year of NSF program
support. The Morehouse College School of Medicine became an institutional
partner of the Center in 2005. The Center’s goal is to ―be the academic-
industry, engineering-biology interface for the industrial development of tissue
engineering and to train the leadership and manpower required not only for
tissue engineering, but for the biology-based industries of the 21st century.‖
The GTEC vision has remained constant over the years, and is ―to develop
tissue engineering technologies through an integrated systems approach,
harnessing discoveries from the biological revolution to significantly improve
clinical therapies.‖ As of late 2007, the Center’s research team consisted of
45 faculty and 166 graduate students. GTEC has 17 industrial partners and
four affiliated industry partners.71
Strategic Plan Overview
The overall goal of the Center is to develop the core technologies needed to
enable the engineering of tissue repair and/or replacement. To achieve this,
GTEC pursues four basic strategic goals:
Build and support a multidisciplinary, diverse, integrated team of faculty,
staff, and students who, working with industry, can ensure the
achievement of GTEC’s mission, incorporate the latest developments in
biology, and provide for the long term stability of its programs;
Develop the core enabling technologies critical to implement tissue
engineering solutions on a clinically relevant scale and, as appropriate, so
as to be available off-the-shelf;
Partner with industry to serve the varied needs of the emerging tissue
engineering industry and to implement GTEC’s core enabling
technologies through effective technology transfer;
Develop and deliver innovative educational initiatives that generate
scientists and engineers to provide leadership in the emerging biology-
based industries.
The three-plane diagram showing the general structure of the plan is shown
below in Figure 4.15.
71
Annual Report-Year Nine, September 1, 2006-August 31, 2007.
135
Figure 4.15 : Three-Plane Diagram of GTEC Strategic Plan
The GTEC strategy organizes the three core, enabling technologies needed
to achieve the Center’s goals into three categories—cell technology,
construct technology, and integration into living systems. Each of these
categories is, in turn, driven by the four research thrust areas into which the
Center’s research is organized:
Cardiovascular Substitutes Metabolic, Secretory Organs Neural Tissue Engineering Orthopedic Tissue Engineering
Partners and Industry Membership
The Center’s industry partnership program, like most ERCs, has a tiered
membership structure. Partners currently include 17 full members, 4 Affiliate
Organizations, and 48 Contributing Organizations. Member financial support
to GTEC has totaled over $1.5 million. GTEC reports a total of 114
inventions disclosed, 22 patents awarded, and 17 licenses issued. Five start-
up companies have been founded based on GTEC technology, although two
of these folded in 2006. Another company, Biosequent, was being formed as
the most recent annual report was being prepared.
136
Education and Outreach
GTEC has initiated a wide variety of educational initiatives and outreach
programs to pre-college students, undergraduates, graduate students, and
researchers in industry and other organizations. A number of new courses
incorporating tissue engineering concepts and methods have been
introduced that undoubtedly would not exist without the Center. K-12
outreach initiatives include one-day events, demonstrations, and open
houses, and sustained programs such as a middle school summer camp that
hosted 22 students in 2006. Early in its history, GTEC established a 12-
month Undergraduate Research Scholars program open to any student in the
Atlanta area. The program has expanded to include all of bioengineering and
the biosciences, and recently augmented the Atlanta University Center (AUC)
initiative, which will be described in some detail in a later section, ―Other
Impacts of GTEC.‖ GTEC runs a summer REU program as well; 92 have
participated in this since its initiation.
For other audiences, notably industry and other researchers, GTEC has
conducted a number of workshops and short courses. Foremost among
these is the Hilton Head Workshop, an annual meeting that attracts
researchers worldwide, scientists and engineers from industry, and
government agency representatives, including staff from FDA. The primary
purpose of these workshops is to ―provide opportunities for the GTEC
community of faculty and students, as well as industrial representatives, to
hear leading authorities and renowned speakers within the field and learn of
cutting edge discoveries.‖
Types of Economic Impact Data Available from GTEC
Since the principal partners in GTEC, Georgia Tech and Emory University,
are both located in Atlanta, we did not have to address the issue of how to
deal with the regional impact of ERCs with partner institutions in more than
one state. The regional economic impact of GTEC is thus the sum of the
total direct and indirect impacts of GTEC activities and expenditures on
Georgia’s economy for the period 1998-2007.
Each category of potential impact is framed in terms of additional money and
other resources coming into Georgia that otherwise would not have occurred,
and/or additional value to the state that otherwise would not have occurred, in
the absence of GTEC. The following table lists the categories of impact that
SRI sought to measure or estimate, including indirect and induced effects, to
calculate the aggregate economic impacts of GTEC on Georgia. As will be
137
discussed later in this chapter (in ―Other Impacts of GTEC‖), only some
impacts associated with the Center having economic significance can be
readily quantified. Accordingly, based on SRI’s experience conducting
assessment of Georgia’s PRC, the following table lists only those categories
of impact for which reasonably reliable quantitative estimates of impact were
expected to be available.
Table 4.72 Categories of Economic Impacts on Georgia
from Investment in GTEC
NSF support for GTEC.
Industry support from all out-of-state industrial members of GTEC since its inception.
Sponsored research support from outside Georgia attributable to existence of GTEC.
Licensing fees and royalties for intellectual property generated by GTEC research.
Spending by out-of-state attendees at GTEC workshops in Georgia.
Value of GTEC workshops to participating partner firms in Georgia.
Value of investments in GTEC start-ups by out-of-state venture capital firms.
Economic impact of start-ups based on GTEC research that have located in Georgia states.
Cost savings to firms in Georgia that have hired GTEC students and graduates.
Indirect and induced (secondary) effects: additional economic activity generated by direct increase in in-state expenditures attributable to existence of GTEC.
The following table lists the categories of impact that SRI sought to measure
or estimate, including indirect and induced effects, to quantify GTEC’s
economic impacts on the United States.
Table 4.73
Categories of Economic Impacts on the United States from Investment in GTEC
Industry support from all non-U.S. industrial members of GTEC since its inception.
Sponsored research support from outside the U.S. attributable to existence of GTEC.
Licensing fees and royalties from non-U.S. companies for intellectual property generated by GTEC research.
Spending by non-U.S. attendees at GTEC workshops.
Value of GTEC workshops to participating U.S. firms.
Economic impact of start-ups based on GTEC research that have located in the U.S.
Cost savings to firms in the U.S. that have hired GTEC students and graduates.
Indirect and induced (secondary) effects: additional economic activity generated by direct increase in in-state expenditures attributable to existence of GTEC.
Net cost savings to U.S. industry as a result of technologies developed by GTEC.
Net profits or expenditures of start-up companies based in the U.S. and based on GTEC research.
138
Economic Impacts of GTEC on Georgia
This section describes and analyzes the data collected to quantify GTEC’s
direct, aggregate economic impact on Georgia.
NSF support for GTEC since its inception
GTEC has attracted more than $26 million to Georgia in the form of NSF
support (Table 4.74).72 These funds include GTEC’s base award as an
Engineering Research Center as well as NSF special purpose program funds
and other NSF support.
Table 4.74
NSF Cash Support to GTEC
Type of Cash Support Cumulative Support
1999 - 2007
NSF ERC Base Award $25,319,210
NSF ERC Program Special Purpose $1,179,338
Total Cash Support $26,498,548
Sponsored research support from outside the state attributable to the existence of GTEC
ERCs tend to serve as focal points for sponsored research, i.e., research
conducted by center faculty and students but funded by companies, other
U.S. government agencies, or foreign government entities. As indicated in
the following table (Table 4.75), GTEC’s experience in this regard is typical,
in that the center attracted more than $40 million during its first nine years as
an ERC, about $38 million from federal government agencies other than NSF
and $1.3 million from industry. Nearly all of this sponsored research support,
more than $42 million, came from sources outside of GA.
72
For this and subsequent tables, unless noted otherwise, data sources are a combination of GTEC annual reports, GTEC records, and GTEC staff.
139
Table 4.75
Sponsored Research Support to GTEC
Source of Cash Support Cumulative
Support 1999-2007
Industry Support
From within GA $181,250
From outside GA (within US) $1,018,663
From outside US $120,000
Federal Government Agencies (non-NSF) $37,598,673
Other Sources of Sponsored Research
From within GA $0
From outside GA (within US) $4,983,376
From outside US $0
Total Sponsored Research Support $43,901,962
Member support to GTEC
Members of the GTEC industrial consortium outside of GA (including foreign
industry members) have provided over $1 million in membership fees to
GTEC during the center’s 9 years of existence (Table 4.76).
Table 4.76
Industry Support to GTEC through Membership Fees
Source of Cash Support Cumulative Support
year 1-9
US Industry Support
Membership (GA firms) $181,250
Membership (non-GA firms) $1,018,663
Foreign Industry Membership $120,000
Total Cash Support $1,319,912
In-kind support to GTEC from external sources
In addition to cash support, GTEC has received in-kind support from federal
government agencies as well as from U.S. industry partners. As indicated in
Table 4.77, about $17,000 in the form of equipment has been donated to
GTEC by corporations based outside Georgia. Another $225,000 in the form
of on-loan personnel from federal laboratories has been donated to the
Center. Altogether, in-kind support over nine years from sources outside of
Georgia amounts to approximately $242,000.
140
Table 4.77
In-Kind Support to GTEC
GTEC: Type of In-kind Support Cumulative Support 99 - 07
In-kind Equipment Donations to GTEC
US Industry $16,562
Non-US Industry $0
Value of Visiting Personnel to GTEC
US Industry $0
Foreign Industry $0
Other (e.g., US government agencies) $225,000
Total External In-kind Support $241,562
Other cash support to GTEC
As indicated in Table 4.78, GTEC has also attracted more than $25 million in
additional cash support, with significant contributions from other universities
within Georgia as well as from the state government--$14 million and $11
million respectively. The Center has also received approximately $75,000
from non-NSF federal agencies. While these levels of cash support are
evidence of the caliber of work being conducted at the Center, they are all
coming from inside Georgia with the exception of the relatively small
contribution from non-NSF agencies. Funding coming from within Georgia
does not contribute to the economic impact on the state.
Table 4.78
Other Cash Support to GTEC (unrestricted)
Source of Cash Support Cumulative Support
99 - 07
University Support
U.S. University Support (within GA) $14,097,524
State Government Support $11,000,000
Other U.S. Government (non-NSF) $74,916
Total Cash Support $25,172,440
Licensing fees and royalties for intellectual property generated by GTEC research
Since the inception of GTEC, researchers associated with the Center have
generated 114 invention disclosures, received 22 patents and have issued 17
licenses. In addition, there have been 5 start-up companies associated with
GTEC. To date, no royalties have been earned from the intellectual
property generated from GTEC research.
141
Spending in Georgia by out-of-state attendees at workshops
Over the course of its nine years of ERC operations, GTEC has conducted 19
formal workshops and conferences that attracted industry representatives.
About 85% of the approximately 2,400 attendees at these workshops were
from companies in non-partner states. These out-of-state visitors spend
money on lodging, meals, entertainment, transportation, etc., that represent
income that Georgia received due to the presence of the GTEC.
GTEC staff also provided us with information regarding the typical length of
the workshops, enabling us to calculate the total number of days attendees
spent in Georgia. Using federal government per diem rates of spending per
visitor-day, we estimate that non-Georgia attendees spent approximately
$421,000 while in Georgia attending GTEC industry workshops and
conferences (Table 4.79).
Table 4.79
Estimated Spending by Non-Georgia Attendees at GTEC Workshops and Conferences Held in Georgia
Number of Workshops in Georgia 19
Average # of Attendees per Workshop 38
Average % of non-Georgia Attendees 84%
Total # of non-Georgia Attendees 608
Total non-Georgia Attendee Days in Georgia 2,432
Spending per Visitor Night $173
Estimated Total Spending $420,736
Venture capital attracted to GTEC startups
Since the inception of GTEC, there have been six start-up companies based
on GTEC technologies. To date there has been no venture capital
investment in any of those companies.
Employment impact of start-ups from GTEC research that have located in Georgia
Over the course of the Center’s nine years there have been six startup
companies launched as a result of technologies developed at GTEC. The
data concerning the starting dates for each of the firms was unavailable at the
time of SRI’s data collection activity. Among the six firms, however, there are
currently 33 employees. If we assume that each company has been in
operation for at least one calendar year, that represents a minimum of 33
person-years of employment impact on Georgia directly attributable to GTEC.
Thus a conservative estimate of the economic impact of start-ups is
142
$1,859,220 (33 x $56,340, the average salary for NAICS 54 Professional,
Scientific and Technical Services in Atlanta, GA.).
Value of cost savings to firms in Georgia that have hired GTEC graduates
SRI estimates that firms hiring ERC graduates benefit through one-time cost
savings of $50,000 per B.S. graduate, $70,000 per M.S. graduate, and
$100,000 per Ph.D. These estimates were based primarily on informal
discussions between SRI staff and with several ERC industrial liaison
officers, interviews with representatives of companies that have hired ERC
graduates, and company surveys.73 Our discussions suggested that a newly-
hired ERC Ph.D. graduate requires approximately one year’s less mentoring
time by a company staff member than a comparable, non-ERC graduate.
The nature of the Center’s work is such that the vast majority of the nearly
150 graduates have gone into academia. Over the nine years of the Center’s
lifespan 40 graduates opted for industry positions upon graduation. Of those
40, only 4 took jobs with firms that were located in Georgia – 1 M.S. and 3
Ph.D.’s. Based on the cost savings estimates for each education level
discussed above, the total value of cost savings to firms located in Georgia
that hired graduates of GTEC is approximately $370,000.
Value of workshops to participating firms located in Georgia
In addition to contributing to the education of students participating Georgia
educational institutions, the Center also plays a role in furthering the
continuing education of Georgia’s technical workforce by conducting
workshops and conferences that target industry. The estimated value that
companies place on this type of training – and therefore the estimated value
that accrues to Georgia in the form of better trained, up-to-date technical
workers – can be estimated via the number of participant-days spent at
GTEC workshops multiplied by an average daily salary figure for participants.
As mentioned above, GTEC staff provided SRI with data regarding the
number of industry workshop participants and participant-days from
companies located in Georgia. Using the average daily rate for NAICS
workers and multiplying this by the number of workshop days yielded an
estimated total value of over $42,000 to firms in Georgia (Table 4.80).
73
The cost savings to the hiring firm were estimated to be approximately $100,000 per Ph.D., using the mentor's annual full compensation as the basis for this estimate. We extrapolated from this to estimate cost savings of $70,000 per ERC M.S. hire and $50,000 per B.S. hire. These estimates are supported by results of Semiconductor Research Corporation (SRC) surveys which cite savings of at least $100,000 per student for companies that hire students supported by SRC contracts (www.src.org/member/students/mem_benefits.asp).
143
Table 4.80
Value of Workshops to Georgia Firms Sending Attendees
Number of Workshop Attendees from Georgia firms 43.6
Estimated # of Days at Workshops 131
Estimated Salary per Day $325
Estimated Value of Workshops to GA Firms $42,535
GTEC’s Total Direct Regional Economic Impact
GTEC has had substantial direct effects on Georgia in many areas, mostly by
attracting new money to the state from outside sources. As Table 4.81
shows, the total direct quantifiable economic impact of GTEC on Georgia is
estimated to be approximately $78 million.
Table 4.81
GTEC’s Total Direct Quantifiable Impacts on Georgia
External Income to Georgia Cumulative 2000-
2007
Support to GTEC from the National Science Foundation $26,498,548
Sponsored research support from outside Georgia for GTEC researchers $44,855,886
GTEC membership fees from non-Georgia member firms $1,018,663
In-kind support from non-Georgia firms/organizations $241,562
Intellectual property income from non-Georgia firms for GTEC inventions $0
Spending by non-Georgia attendees at GTEC workshops in Georgia $420,736
Value of venture capital from non-Georgia sources invested in GTEC start-ups $0
Total External Income to Georgia $73,035,395
Value of Increased Employment in Georgia
Value of employment created by GTEC start-up companies located in Georgia $1,859,220
Total Value of Increased Employment in Georgia $1,859,220
Improved Quality of Technical Workforce in Georgia
Value of GTEC graduates hired by Georgia firms $3,530,000
Value of GTEC workshops to participating Georgia firms $42,535
Total Value of Improved Quality of Technical Workforce in Georgia States $3,572,535
Total Quantifiable Direct Economic Impact $78,467,149
GTEC’s Indirect and Induced (Secondary) Economic Impacts on Georgia
In addition to the direct economic impacts described above, GTEC activities
result in several categories of indirect and induced (secondary) economic
impacts. To estimate the magnitude of the indirect and induced impacts, SRI
purchased RIMS II multipliers from the Bureau of Economic Analysis and
identified appropriate detailed industry sector multipliers for each relevant
direct impact segment. The multipliers are listed in Table 4.82 (below).
144
Table 4.82
Multipliers Used to Estimate Secondary Impacts
Direct Impact Category Total
Output Multiplier
Support to GTEC from NSF 2.3396 Sponsored research support from outside state to GTEC researchers
2.3396
GTEC membership fees from non-GA member firms 2.3396
In-kind visiting researcher support from non-GA firms 1.5768
Intellectual property income from non-GA firms for GTEC inventions
2.3396
Spending by non-GA attendees at GTEC workshops in GA 2.2280
Value of employment created by GTEC start-up companies located in GA
1.5768
With these final output multipliers from RIMS II and the direct impact
estimates, calculating indirect and induced impacts involves a straightforward
multiplication of direct impacts by their corresponding segment multipliers.
Total direct impacts of GTEC activities to date have amounted to
approximately $78 million. These direct impacts have generated secondary
impacts of $98 million, for an implied aggregate multiplier of 1.26.74 For
comparison, the implied aggregate multipliers found in the literature range
from 1.5 to 2.3.
The total quantifiable economic impacts of GTEC’s activities on Georgia are
the direct impacts plus indirect and induced impacts. GTEC has had a direct
impact on Georgia of $78,467,149 with secondary impacts of $98,679,414,
for a total economic impact of $177,146,563 over nine years (see Table
4.83). As indicated in Figure 4.16, the majority of the direct impacts are from
the external support that GTEC has received from external sources. These
direct impacts from external support account for 41 percent of the total
quantifiable impacts, and indirect and induced impacts derived through this
external support comprise 55 percent of the total (direct and indirect)
quantifiable impacts of GTEC on partner states. Direct and indirect workforce
and employment effects together comprise the remaining 4 percent of
economic impacts on the region.
74
Multipliers are generally specific to certain types of expenditures in the economy. This ―aggregate‖ multiplier refers to total secondary impacts over all direct impacts and is a useful way to compare the importance of secondary impacts across projects or studies.
145
Table 4.83
GTEC's Total Quantifiable Economic Impact on Georgia
Direct
Impacts Indirect & Induced Impacts Total
Multiplier
EXTERNAL INCOME TO GA Support to GTEC from the National Science Foundation $26,498,548 2.340 $35,497,455 $61,996,003 Sponsored research support from outside GA to GTEC researchers $44,855,886 2.340 $60,088,945 $104,944,831 GTEC membership fees from non-GA member firms $1,018,663 2.340 $1,364,600 $2,383,263
Other support from non-GA organizations $241,562 1.577 $139,333 $380,895 Intellectual property income from non-GA firms for GTEC inventions $0 2.340 $0 $0 Spending by non-GA attendees at GTEC workshops in GA $420,736 2.228 $516,683 $937,419
Total External Income to GA $73,035,395 $97,607,016 $170,642,411
VALUE OF INCREASED EMPLOYMENT IN GA
Value of employment created by GTEC start-up companies located in GA $1,859,220 1.577 $1,072,398 $2,931,618
Total Value of Increased Employment in GA $1,859,220 $1,072,398 $2,931,618
IMPROVED QUALITY OF TECHNICAL WORKFORCE IN GA
Value of GTEC graduates hired by GA firms $3,530,000 n/a $0 $3,530,000
Value of workshops to participating GA firms $42,535 n/a $0 $42,535
Total Value of Improved Quality of Technical Workforce in GA $3,572,535 $0 $3,572,535
TOTAL QUANTIFIABLE IMPACT ON GA $78,467,149 $98,679,414 $177,146,563
146
Figure 4.16
National Economic Impacts of GTEC
GTEC membership fees from non-U.S. member companies
An important demonstration of industry support for ERCs is embodied in the
membership fees companies are willing to pay. GTEC enjoyed strong
membership support from several companies within the United States during
its first nine years of operation. While evidence of international industry
support was demonstrated clearly in workshop attendance and research
collaboration, only one non-U.S. firm contributed membership fees. Those
fees, totaling $120,000, represent the direct economic effect of member
income from outside the United States that is attributable to the presence of
GTEC.
GTEC membership fees from non-U.S. member companies
In keeping with the limited industrial membership from foreign firms, GTEC
did not receive in-kind contributions from non-U.S. firms during the course of
its nine year tenure.
Direct + Indirect and Induced Impacts of GTEC on
Georgia
Total External
Income to GA,
$73,035,395
Value of
Increased
Employment in
GA, $1,859,220
Value of
Improved
Technical
Workforce,
$3,572,535
Indirect and
Induced Impact
from Increased
Employment,
$1,072,398Indirect and
Induced Impact
from External
Income,
$97,607,016
Total Quantifiable Impacts of GTEC on GA: $177,146,563
147
Licensing fees and royalties for intellectual property generated by GTEC research
Despite the number of licenses issued and patents filed, GTEC has not yet
earned any income from their intellectual property.
Spending by non-U.S. attendees at GTEC workshops in the United States
As mentioned in the regional impacts section, GTEC has conducted several
workshops and conferences in order to disseminate widely the results of its
research and to engage a broad audience. SRI’s calculations for these
impacts were derived from information about the number of workshops and
conferences held, the number of participants at each event, and the length of
each event. As an estimate of the amount spent by participants from outside
the United States, we employed the full federal government per-diem rate
(i.e., including both accommodations and M&IE). With these assumptions,
we estimate that non-U.S. attendees at GTEC workshops and conferences
spent approximately $90,000 while in the U.S. (Table 4.84). In the case of
GTEC, several of their most heavily attended meetings and those with
significant numbers of non-U.S. guests took place in South Carolina. As
such, estimating the impact on the United States requires spending estimates
based not only on Georgia, but on South Carolina as well.
Table 4.84
Estimated Spending by Non-US Attendees at GTEC Workshops
Total # of non-U.S. Attendees, Hilton Head, SC Workshops 12
Estimated # of Attendee Days at SC Workshops 48
Spending per visitor night, Hilton Head, SC $174
Total # of non-U.S. Attendees, Georgia workshops 126
Estimated # of Attendee Days at GA Workshops 470
Spending per visitor night, Atlanta, GA $173
Estimated Total Spending $89,662
Value of GTEC workshops to participating firms
To quantify the improvement in technical workforce skills imparted to firms by
their employees’ participation in GTEC’s industry events, SRI developed an
estimate of the value of the time spent by workers at GTEC industry-oriented
workshops and conferences. The calculation involves multiplying the number
of participant-days at GTEC industry workshops by a burdened daily rate for
the national average professional, scientific and technical services worker for
148
NAICS 54.75 Using GTEC records of participant attendance and the number
of days per event resulted in an estimate of 1,048 participant-days by
employees of U.S. companies. At the estimated salary per day of $325.04,
the total value of GTEC workshops to U.S.-based companies is slightly more
than $340 million (see Table 4.85).
Table 4.85
Value of Workshops to US Firms Sending Attendees
Number of Workshop Attendees 495
Estimated # of Attendees Days at Workshops 1,048
Estimated Salary per Day $325
Estimated Value of Workshops to US Firms $340,642
Value of employment created by GTEC startup companies
The six startup firms that were launched as a result of GTEC research have
introduced 33 new employment opportunities in the United States that are
directly attributable to the presence of GTEC. The direct economic impact of
those positions, as described above, is $1,859,200. When the induced
impacts of those employees are considered along with their direct impacts,
the total amounts to $2,931,618 of quantifiable economic impact on the
United States.
Value of GTEC graduates hired by U.S. firms
Over the last nine years, industry hired a total of 40 GTEC graduates, none
of which were hired by foreign firms. Using the estimates for the value of
reduced mentoring time for ERC graduate hires discussed earlier - $50,000,
$70,000 and $100,000 per year for B.S., M.S. and Ph.D. respectively – we
calculate that U.S. firms gained $3.5 million worth of productive time from
GTEC graduates.
Net cost savings to industry and additional profits to innovating U.S. firms from products incorporating GTEC research
SRI was unable to identify any companies that had licensed GTEC
technology, developed new products that produced net profits to the
innovating firm, and could or would estimate the cost savings to customers.
Thus the national societal benefit model, based in consumer surplus theory,
75
As in the previous calculation of the employment effects of GTEC start-ups, SRI obtained the average daily salary for the ―Professional, Scientific, and Technical Services‖ category of the North American Industrial Classification System (NAICS) code 54 and multiplied the average national daily salary by 1.5 to account for estimated fringe benefits provided by the firm to the worker.
149
could not be used to develop quantitative estimates of the national economic
benefits from one or more GTEC technologies.
GTEC’s Total Direct Economic Impact on the United States
In summary, GTEC has had direct impact on the nation in terms of increased
employment and improved workforce skills. The total direct quantifiable
economic impact of GTEC on the United States is estimated to be over $4.7
million (see Table 4.86).
Table 4.86
GTEC's Total Quantifiable Direct Economic Impact on the National Level
Types of Impacts Cumulative 1999-2007
GTEC membership fees from non-U.S. member firms $120,000
Other support from non-U.S. organizations $645,000 Intellectual property income from non-U.S. firms for GTEC inventions $0
Spending by non-U.S. attendees at GTEC workshops in Georgia $89,662
Total External Income $854,662
Value of employment created by GTEC start-up companies $0
Total Employment $0
Value of GTEC graduates hired by U.S. firms $3,530,000
Value of workshops to participating U.S. firms $340,642
Total Value of Technical Workforce $3,870,642
TOTAL QUANTIFIABLE DIRECT NATIONAL-LEVEL IMPACT $4,725,304
GTEC’s Indirect and Induced (Secondary) Economic Impacts on the United States
As mentioned in previous sections of this report, an ERC’s direct economic
impacts generate a variety of indirect and induced (secondary) economic
impacts. In estimating the indirect and induced impacts, SRI uses the same
background, assumptions, and methodology for national-level impacts as for
state-level impacts. The multipliers used to calculate indirect and induced
impacts at the national level are noted in Table 4.87, and the total quantifiable
impacts (direct and indirect/induced) are summarized in Table 4.88.
150
Table 4.87
GTEC’s total quantifiable economic impacts on the United States are defined
as direct impacts plus indirect and induced impacts. To date, GTEC has had
a direct impact on the U.S. economy of $6,584,524, with secondary impacts
of $2,207,301, for a total economic impact of $8,791,825 over nine years (see
Table 4.88). As implied, the vast majority of impacts on the United States are
direct impacts. In GTEC’s case the relatively high proportion of graduates
who opted for academic posts rather than industrial positions limits both the
direct and indirect impact on the value of employment created by GTEC
graduates. The employment and workforce value estimates do not capture
the direct impact of Center graduates in academic settings. The proportion
of direct plus indirect and induced effects on the United States is presented in
Figure 4.17.
Multipliers Used to Estimate Secondary Impacts on the United States
Direct Impact Category Total
Output Multiplier
Sponsored research support from non-US sources to GTEC researchers
2.3396
GTEC membership fees from non-US member firms 2.3396
Intellectual property income from non-US companies for GTEC inventions
2.3396
Spending by attendees at GTEC workshops 2.2280
Value of employment created by GTEC start-up companies located in GA
1.5768
151
Table 4.88
GTEC's Total Quantifiable Economic Impact on the United States
Direct
Impacts
Indirect & Induced Impacts Total
Multiplier GTEC membership fees from non-US member firms $120,000 2.340 $160,752 $280,752 Other support from non-US organizations $645,000 2.340 $864,042 $1,509,042 Spending by attendees at GTEC workshops in GA $89,662 2.228 $110,109 $199,771
Total External Income to the United States $854,662 $1,134,903 $1,989,565
Value of employment created by GTEC start-up companies $1,859,220 1.577 $1,072,398 $2,931,618
Total Value of Increased Employment in the United States $1,859,220 $1,072,398 $2,931,618
Value of GTEC graduates hired by US firms $3,530,000 n/a $0 $3,530,000 Value of workshops to participating firms $340,642 n/a $0 $340,642
Total Value of Improved Quality of Technical Workforce in the United States $3,870,642 $3,870,642
TOTAL QUANTIFIABLE IMPACT ON THE UNITED STATES $6,584,524 $2,207,301 $8,791,825
Figure 4.17
Direct + Indirect and Induced Impacts of GTEC on
United States
Value of
Increased
Employment in
United States,
$1,859,220
Total External
Income to
United States,
$854,662
Indirect and
Induced Impact
from Increased
Employment,
$1,072,398 Indirect and
Induced Impact
from External
Income,
$1,134,903
Value of
Improved
Technical
Workforce,
$3,870,642
Total Quantifiable Impacts of GTEC on the United States: $8,791,825
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Other Impacts of GTEC
For the last two case studies in the ERC economic impact project, GTEC and
the Computer Integrated Surgical Systems and Technology (CISST) at Johns
Hopkins University, we cast the net of ―economic impacts‖ even more widely
than in the previous cases. In particular, we wished to see what kinds of
impacts with economic implications, broadly defined, could be included and
for which reliable data could be obtained. We wanted to explore categories
of impact that might have indirect or quite long-term economic implications,
including impacts on the academic community (in particular, on the careers of
graduated GTEC students who chose academic careers, and on the
universities that hired them), and on the center’s host, Georgia Institute of
Technology.
In light of this broader treatment of economic impacts, in these last two cases
we asked selected industry representatives to discuss with us the impact that
center outputs have had on their companies and the related industry. These
representatives were identified by center staff as representing companies that
have experienced significant impacts as a result of their interactions with the
ERC. We asked for their views on the impact of broad categories of ERC
outputs including new knowledge, technology, ideas or ways of thinking, and
student preparation. We also interviewed selected Ph.D. graduates, post-
docs, and center faculty, identified by center managers as outstanding
contributors to research and academia. Finally, we interviewed non-center
faculty and administrators at Georgia Tech and JHU to obtain details of
significant institutional impacts the ERC may have had. The following
sections present information on impacts in these categories for GTEC.
New Ideas and Technology
Our extensive interview with Bob Nerem, GTEC Director, provided a wealth
of detailed information about the Center’s activities, collaborations, and
contributions in all categories of impact within our span of interest. In his
view, GTEC has been instrumental in closing the gap not only between
biological sciences and engineering at Georgia Tech, but more broadly
between the academic research community in tissue engineering and the
biotech industry. Institutionally, GTEC has also played a critical role in
fostering closer collaborations among researchers at Emory Medical School,
the Morehouse School of Medicine, and Georgia Tech. According to Dr.
Nerem, as a function of that increased research capacity and true institutional
interdisciplinarity, ―the impact on the research community has been one of
GTEC’s major contributions.‖ In his view, the evolution of the research
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capacity in tissue and bioengineering at GTEC has had a significant influence
on the maturity of the tissue engineering industry.
The tissue engineering industry has grown dramatically over the course of the
last twenty years. Dr. Nerem cited a study conducted by Michael Lysaght et.
al., ―Great Expectations: Private Sector Activity in Tissue Engineering,
Regenerative Medicine and Stem Cell Therapeutics76‖ which identified the
1990’s as heavy investment years, where venture capital funding was flowing
into the industry. Due in part to a lack of direction and a sound research
base, industry growth had flattened by the early 2000’s, with several
companies facing financial crisis. In 2003, however, the tissue engineering
industry was estimated as being close to a $500 million global industry. In
2007 it was estimated as being a $2.4 billion industry. The industry consists
of about 160 firms, 50 of which are selling products commercially and the
remaining 110 are in the development stage.77
One of the ways GTEC helped facilitate a closer relationship between the
academic research community and industry was through their Hilton Head
Workshops. These workshops are similar in style to the Gordon Research
Conferences and have served as a platform where industry members come
and are ―comfortable‖ talking about their work. Evidently GTEC has had a
significant impact on the development of new ideas and technologies by
creating a space wherein ideas can take shape in the broader tissue
engineering community.
A component of the Johnson & Johnson Company’s relationship with GTEC
is evidence of the confidence industry has in the Center’s work and as a
source of new ideas and technology. Johnson & Johnson established a
―focused giving‖ program with Georgia Tech whereby they provide $150,000
every two years for researchers at GTEC to pursue their research interests.
According to Alonzo Cook of the Technical Assessment team at J&J, ―it is a
no-strings attached grant.‖ The intention is for GTEC researchers to simply,
―think highly of us‖ when they develop technologies with commercial
potential.
New industrial directions are also emerging directly from within GTEC.
According to Neural Tissue Engineering Research Thrust Director and in-
coming Associate Director of GTEC Ravi Bellamkonda, the Center’s
willingness to fund highly risky research has resulted in several new
technological directions. He is currently launching a company based on
76
Michael J. Lysaght, Ana Jaklenec, Elizabeth Deweerd. Tissue Engineering Part A. February 1, 2008, 14(2): 305-315. 77
Data courtesy of GTEC.
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technologies developed in GTEC. His work occurs at the interface of
regenerative tissue and biomechanical engineering.
Other Benefits to Industry from Center Collaborations
Affiliation with the Center has brought indirect benefits to member companies
related to new ideas, technologies, and modes of thinking. The benefits are
difficult to quantify, but according to those interviewed, ―the Center [has been]
instrumental in changing the way of thinking,‖ which has long term benefits to
industry. According to Blaise Porter, an alumnus of GTEC and Director of
Product Development at Tissue Growth Technologies, his training resulted in
his being ―60% engineer and 40% biologist.‖ That resulted in a better
appreciation of the relationship between cells, materials, and mechanical
forces. ―I must say that this completely changed the way we design our
products.‖
As mentioned earlier, the Hilton Head Workshops have had a significant
impact on the kind of collaboration that takes place not only between industry
and the academic research community, but among members of the industry
community. GTEC also hosts the Smith and Nephew Tissue Engineering
Symposium. This industrial meeting, hosted by GTEC, is another
demonstration of the unexpected benefits to industry that have grown out of
the Center. The Smith and Nephew symposia draw hundreds of industry and
university technicians and researchers together to discuss pioneering
technologies in tissue engineering. According to Katharine Montgomery, the
Industrial Liaison Officer for GTEC, Smith and Nephew’s decision to host
their symposia at GTEC was based squarely on the prominence of GTEC’s
work in tissue engineering. This is another benefit that GTEC has had on
industry--it has become one of the leading international centers for industry
collaboration concerning tissue engineering.
Access to Specialized Talent
The special research relationships between biology and engineering in GTEC
have clearly impacted the caliber of students graduating from the Center. Not
only are GTEC graduates armed with a special transdisciplinary lens, they
are also imbued with an entrepreneurial self-sufficiency that is also promoted
at GTEC. According to Ravi Bellamkonda, ―being an Assistant Professor is
like running a small business.‖ Faculty must have an entrepreneurial
capacity in GTEC because of the value placed on and funding offered for
high risk research. That environment has resulted in students who are
similarly inclined. According to Vern Liebmann, Vice President of Operations
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at Aderans Research Institute, ―I like the fact that for everyone we’ve hired
from GTEC, within 3 months we don’t need to nursemaid them. Particularly
in start-up companies like ours, this is critical.‖ As is the case in other ERC’s,
GTEC students are recognized for the quality of their training and the
immediate value they bring to the workplace.
Impact on Academia and the Industrial Community
In this category of impact we do not repeat the extensive evidence provided
in ERC annual reports on the impact that the research output of the center
has had on relevant research fields, list the awards and honors that center
faculty have earned, or provide details on the quantity and of publications
produced. All ERCs have impressive records in these areas and the results
are well-documented. Instead, we wish to go beyond the standard impacts to
see what might be learned about the Center’s impact on academia and
research through interviews with former students who have taken academic
positions, postdocs, and their mentors at the Center.
One of the consequences of the Center having such a close relationship with
industry is that its graduates bring a broad research and technological outlook
to both academic and industrial pursuits. Cindy Cheng, a graduate of GTEC,
suggested that the exposure to industrial and commercial interests coupled
with the interdisciplinarity of research within the Center helped her develop a
view of tissue engineering that is particularly useful in her current work. She
works at a law firm engaged in patent law and, because of her training, ―[she]
quickly understands the technical challenges associated with tissue
engineering applications and the implications of patenting.‖ Her appreciation
for industrial needs regarding tissue engineering technologies is in some way
having an effect on the assessment of new technologies and their novelty
and relevance.
Thanassis Sambanis is the Metabolic Secretory Organs Thrust Leader. He
pointed out that in many areas of the Center’s research graduates have made
singularly important contributions to the direction of research in their specific
communities. He highlighted the work of a graduate from his laboratory,
Cheryl Stabler, who is currently at the Universiry of Miami in the Department
of Biomedical Engineering. She is doing ground breaking work in islet
implants and helping to change the landscape for that critical medical
application, which has the potential to improve the treatment of people
suffering with Type I diabetes.
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Institutional Impact: Interdisciplinarity and the GTEC Legacy
SRI’s interviews with GTEC managers made it clear that, in their view, the
ERC has been responsible for substantial changes in the culture of research
at Georgia Tech. According the Bob Nerem, the physical location of GTEC is
evidence of the impact on interdisciplinarity at Georgia Tech. The Center is
housed in the Parker H. Petit Institute for Bioengineering and Bioscience
(IBB). ―The kind of interdisciplinary work that takes place in IBB would not
have happened without the presence of GTEC. It is one of the few true
interdisciplinary locations on Tech’s campus.‖ Interdisciplinarity in this case
is more than faculty of different departments talking to each other. ―We bring
together biology, bio-chemistry, bio-engineering, and formal institutional
connections to the Emory School of Medicine.‖ Barbara Boyan, the out-going
Associate Director for Research of GTEC, confirms this interdisciplinary view.
She is a ―pure biologist‖ and asserts that her own position in the governance
of the GTEC is evidence of its interdisciplinary function. She pointed out that
the ―Engineering Research Center is governed, in part, by a biologist.‖
Another important impact of GTEC on the function of research at Georgia
Tech is demonstrated in the allocation of space. In GTEC, research space is
allocated based on the research work itself, rather than on its disciplinary
classification. Space, always an influential commodity on university
campuses, is used in GTEC to foster physical and intellectual collaboration.
Bob Guldberg is the Associate Director of IBB. He pointed out that prior to
GTEC, faculty who were conducting research that warranted animal
experimentation had to go to Emory for facilities. In collaboration with Dr.
Nerem, they developed facilities that were based on the interests of those
within GTEC. As a result, Georgia Tech has animal experimentation facilities
that enable streams of research and collaboration that are new to Georgia
Tech.
One of the important indicators of the effects on interdisciplinarity at Georgia
Tech is reflected in the plans for the Center after its period of funding from
NSF has expired. According to Bob Nerem, negotiations are taking place
with Emory to recast GTEC as a more equal partnership with Emory School
of Medicine. It is another indication of the effect the Center has had on
bringing engineering research closer to biotech applications that have
foundations in medical research.
Institutional Impact: Diversity and Outreach
All ERCs are required to promote diversity in research and education and
engage in outreach to educators, students, and other groups. GTEC’s efforts
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in this area have resulted in substantial institutional impacts that warrant
inclusion in this assessment. GTEC has complied with the mandate from
NSF and put forth special efforts to recruit and enroll qualified
underrepresented minority students and women for participation at the
undergraduate, masters, and doctoral levels of the Center. GTEC’s Center
Director on Georgia Tech’s campus, Felicia Benton Johnson, developed the
GTEC-Atlanta University Center (AUC) Partnership in 2004 to fulfill NSF’s
objectives and those of Georgia Tech. The two major thrusts of the GTEC-
AUC Partnership were to:
Increase the number of underrepresented minority students participating in the GTEC ERC through formal recruitment practices and considered student faculty pairings
Develop a collaborative research network between faculty members at Georgia Tech and the Atlanta University Center to provide a platform for continuous student research opportunities.
The GTEC-AUC Partnership takes advantage of the specific circumstances
of Georgia Tech and its surrounding colleges and universities. The Atlanta
University Center consists of the Historically Black Colleges and Universities
– Clark Atlanta University, Morehouse College, Morehouse School of
Medicine and Spellman College. Georgia Tech and the AUC have a long
standing relationship which offers dual degrees for students.
Georgia Tech is already one of the premiere universities in the United States
with respect to the matriculation of minority students in STEM fields. The
function of the partnership is to leverage the research and multidisciplinary
opportunities of GTEC to improve the system of recruitment and retention
within the ERC and at Georgia Tech. In addition to student recruitment a
component of the partnership was focused on faculty collaboration. The
novelty of the GTEC-AUC Partnership is that it is specifically designed
around promoting the research opportunities available through GTEC. The
GTEC-AUC partnership was headed by a Program Director who spent 50%
time on the AUC campus and 50% time on Georgia Tech’s campus. Through
that unique allocation of time, the Program Director was able to match
specific AUC student interests with available faculty and research
opportunities at Georgia Tech. In addition, the Program Director was able to
facilitate collaborative research opportunities between faculty at both
institutions. According to the Program Director, ―that kind of Tech presence
and extension of welcome at the AUC was brand new.‖ This collaboration is
another institutional partnership that is attributable to the presence of GTEC.
The combination of specific emphasis on student recruitment and faculty
collaboration with Georgia Tech’s partner institutions was the unique
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contribution of the GTEC-AUC Partnership. The Dean and Associate Dean
of the College of Engineering recognized the value in this model and have
implemented it formally for the College of Engineering. The Program Director
of the GTEC-AUC Partnership moved to direct and coordinate all of the
diversity efforts for the College of Engineering. The current framework for the
College’s diversity efforts have therefore been significantly influenced by the
initial work and planning in GTEC. The College level effort resembles the
GTEC framework in its core thrusts of recruitment and collaboration. In the
case of GTEC, the specific mandate of diversity in research and education
has led to formal structural change in the College of Engineering at Georgia
Tech.
Conclusions and Observations
The magnitude and profile of GTEC’s quantifiable economic impacts reflect
the relevance of the Center’s research to an industry that matured in parallel
with the Center’s evolution. The limited magnitude of directly quantifiable
impacts in the form of license fees and profitable start-up companies is
probably a consequence of the early stage of development of the industry.
Several start-ups are in their nascent stages and their full economic impact
will likely be realized over the next few years. One of the Center’s major but
less readily quantified impacts has been its service as a platform for industry
discussion and collaboration in tissue engineering. The quality of the work
conducted at Georgia Tech and the determined effort of the Center directors
to close the gap between academic research and industry applications has
been a lasting impact of the center. The combination of industry meetings
hosted at GTEC and industry participation through membership has placed
GTEC at the nexus of industry-university collaboration in tissue engineering
in the United States.
As with CISST, GTEC is linked to an emerging segment of a regulated
industry. The clinical trials process introduces substantial, though necessary,
hurdles for commercializing new technology. The likelihood that ERCs such
as GTEC will spawn successful start-ups or generate successful commercial
applications during its ten-year existence is not high, and such fully realized
impacts would be quite rare.
As the graduates and post-docs who studied and conducted research at the
Center moved on to academic and industry posts, they took with them the
fusion of bioscience and engineering that has opened a new line of thinking in
tissue engineering. The value of that mode of thinking is reflected in the
number of companies seeking membership in GTEC as well as the number of
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universities that seek not only collaboration, but placement of GTEC grads
into their tissue engineering and bioengineering departments.
Another important feature of GTEC, reflected in other ERCs as well, is the
strength of its Director. Several members of the faculty as well as current
and former students alluded to the personal conviction of Bob Nerem as
being instrumental in specific factors accounting for the Center’s success.
Among those is the articulated plan to develop young talent. At GTEC,
several faculty members associated with the Center were recruited in part
because they were relatively young, highly talented, and demonstrated an
appreciation for and willingness to conduct collaborative work in a highly fluid
and interdisciplinary environment. Indeed, the tremendous impact of the
diversity efforts were born of the determination of the Center Director to raise
those efforts to a level where they could not be treated trivially within the
Center. That legitimacy and backing likely played a role in the institutional
impacts that were eventually realized. Through the several interviews SRI
conducted with people affiliated with GTEC, it is clear that the scope of the
Center’s impact is enormously influenced by the vision and personal
conviction of its Director.
Finally, the institutionalization of center diversity and outreach initiatives,
while not an ―economic‖ impact, deserves inclusion as an appropriate
outcome category in any ERC impact study. The College of Engineering at
Georgia Tech takes lessons learned from the practices of GTEC’s diversity
initiatives and seeks to implement them college-wide. This is another
indication of the substantial institutional impact the Center has had on the
broader institution.
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V. SUMMARY AND IMPLICATIONS
Quantifiable Regional and National Economic Impacts of ERCs
Reading across the results of our efforts to identify and quantify the regional
and national economic impacts of five ERCs shows how strikingly different
the impacts are if a narrowly conceived notion of economic impacts is used—
and the data collection limitations associated with that conception are kept in
mind. Moreover, the estimated quantifiable impacts do not vary in ways that
are readily explained by the obvious characteristics of the ERCs involved
such as size, technical field, level of industrial support, dynamism of
associated industries, incremental or transformational stage of technological
focus. Digging below the surface of the data we collected, it becomes clear
that only some of the differences can be explained by the characteristics of
these ERCs. Rather, most differences in measurable economic impact are
primarily the result of the vagaries of the data that could be obtained from the
centers involved and the companies they work with, not the result of the
center’s characteristics or the degree to which they have achieved their
intended goals.78
Figures 5.1 through 5.4 summarize the available quantifiable data. Let us
begin with a discussion of the regional impact data, Figures 5.1 and 5.2.
Quantifiable regional impacts vary widely, from about $90 million to just over
$250 million. Almost all of this variation is attributable to differing amounts of
external income to the centers and the indirect and induced effects of that
income. External income itself varies from about $25 million to $125 million
across the five ERCs, so ignoring the indirect and induced effects makes the
disparities a bit less drastic. In the case of CNSE, the considerable income to
the center from sponsored research, which typically amounts to at least as
much as the amount of NSF Program support, could not be included because
CalTech’s accounting system does not distinguish ERC-related sponsored
research projects from projects attracted by other units of the Institute. In
addition, although CNSE emphasizes start-ups as the most effective way of
transferring knowledge and technology, and has been quite successful in this,
data on the amount of venture capital generated by the center’s nine start-
ups—which was obtained for WIMS’ eight start-ups and was sizeable
($42M)—was not available. To complicate comparison further, even if
78
Obviously we have made no effort in this study to assess the performance or productivity of ERCs with respect to either their own specific objectives or NSF’s mandated program goals. Nonperforming ERCs are quickly identified at an early stage in their history and either terminated or reorganized so that, by the end of their period of NSF support, it can be assumed that all ERCs are performing at a high level and achieving their research, education, and knowledge transfer goals.
161
venture capital figures for CNSE had been available, they would probably not
have ―counted‖ in the calculations of regional impact because presumably
most of the funding would have been invested by California venture capital
firms, and thus would not represent external funding entering the state. Note,
too, that only WIMS and CNSE have spawned start-ups with significant
employment impacts on the region. CPES presumably has not had the
opportunity to do this given the mature industry that it serves, nor has CISST
or GTEC, both of which serve small, emerging industries that have very long
commercialization time frames due to FDA approval requirements for new
medical products.
Figure 5.1
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$250,000,000
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CNSE CPES WIMS CISST GTEC
Total Amount and Composition of Quantifiable Regional Economic Impact for Five ERCs
Indirect and Induced
Increased Employment
Improved Technical Workforce
External Income
162
Figure 5.2
Figures 5.3 and 5.4, below, show the total quantifiable national economic
impact of the five ERCs and the composition of the impact for each center.
Disparities in both total impact and composition are much greater than was
the case for regional impacts. Because two companies associated with
CalTech, one a start-up and one a center industrial member, were willing and
able to share estimates of the profits and cost savings to their customers for
products attributable to CNSE technology, the total national impact of CNSE
dwarfs that of the other four ERCs studied. But as we know from the
interview data, this probably underestimates the economic impact of CNSE
on industry. Further, there is a very strong possibility that the other ERCs
studied had this much or more national economic impact, which could not be
estimated reliably using the consumer surplus approach to measuring the
impact of industrial innovation. Some examples are the multi-billion dollar
impact that CPES’ concept of modular integrated power systems appears to
have had on the national economy, the impact of CISST technology on the
survival of numerous SME’s in the medical devices business, and the
influence that GTEC knowledge and technology has had on moving what was
a barely extant industry in 1997 to a $2.4 billion industry worldwide today,
with about 55 percent of it in the U.S.
The composition of individual ERC national impacts shows very large
variations apart from the magnitude of impact. Nearly all of the national
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
CNSE CPES WIMS CISST GTEC
Indirect and Induced
Increased Employment
Improved Technical Workforce
External Income
Composition of Quantifiable Regional Economic Impact for Five ERCS
163
economic impact of CPES and CISST are due to workforce improvement in
industry—a combination of the value of center graduates to firms hiring them
and the value to firms sending representatives to center workshops. In both
of these centers, nearly all the technical workforce value is due to the value of
students hires--$16.5 million for CPES, and $2.9 million for the much smaller
CISST. For WIMS, the greatest contribution to national impact is from job
creation—over $26 million due to the success of the center’s eight startups.
Although the total amounts were not large, CPES and GTEC enjoyed
relatively large contributions from foreign sources—but very different in
character. For CPES, the contributions from foreign sources took the form of
membership fees from non-U.S. members; for GTEC, it took the form of
sponsored research from non-U.S. companies.
Figure 5.3
$0
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CNSE CPES WIMS CISST GTEC
Indirect and Induced
Industrial Innovation Cost Savings/Profits
Increased Employment
Improved Technical Workforce
External Income
Total Amount and Composition of Quantifiable National Economic Impact for Five ERCs
164
Figure 5.4
Other Economically Significant Impacts of ERCs
Following the CNSE site visit, we broadened our data collection efforts
substantially to include the economic impacts—quantifiable or not—of ERC
ideas, technology, and graduates on both individual companies and their
related industries. CPES has enjoyed very strong financial support from
industry through its nine years of existence. Yet despite generating a number
of patents (42), the center, like most ERCs, issued few licenses (just one in
this case) and took in very little licensing income. It required a number of
interviews with CPES member companies and companies that had hired
CPES graduates to discover that CPES’ contributions to industry were related
substantially to a idea or concept, the modular integrated power system, that
found widespread application in not only the computer industry, but also in
companies such as GE that make a wide range of products that require
efficient, high performance power supplies. The concept did not generate
intellectual property, and indeed CPES has deliberately moved toward an IP
policy favoring non-exclusive, royalty-free licensing to member companies.
And, the interviews clearly showed the very strong impact that CPES
students have had on individual companies (e.g., as in the case of GE,
leading new product development groups) and on their related industries—
impacts that clearly had very high economic value but could not be reliably
0%
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20%
30%
40%
50%
60%
70%
80%
90%
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CNSE CPES WIMS CISST GTEC
Indirect and Induced
Industrial Innovation Cost Savings/Profits
Increased Employment
Improved Technical Workforce
External Income
Composition of Quantifiable National Economic Impact for Five ERCS
165
measured. Rough estimates, however, from several companies would put
the national economic impact of CPES in the range of billions of dollars.
WIMS’ regional impact was nicely augmented by the large amount of venture
capital its start-ups attracted, data that were not available for other ERCs
studied. Like CPES, however, our industry interviews showed that WIMS
graduates have very substantial (but not readily quantifiable) economic
impact on individual companies, impacts that were not experienced in the
case of other hires. In addition, companies mentioned the value of WIMS
ideas, access to facilities (e.g., a dry etch tool), and contacts among
companies that facilitated identification of new customers, suppliers,
partnerships, and investors. In all cases, no dollar figures could be attached
to these impacts, but there was no doubt in the interviewees’ minds that they
were substantial.
The CPES, CISST, and GTEC cases represent relatively modest quantifiable
national impact but substantial economic impact estimates obtained from
industry sources. The CPES situation is summarized above: a combination
of a new concept that yielded performance improvements and reduced
energy consumption in power supplies for computers and a wide variety of
other applications. CISST and GTEC, both transformational centers focusing
on newly emerging industries or industry segments, evidently played major
roles in the growth of their associated industries, including the survival of
several firms (CISST and GTEC) and the retention of the core industry in the
U.S. (again, CISST and GTEC). Specific impact estimates were not
available, but clearly the economic value of both centers for the nation has
been substantial.
The last two cases, CISST and GTEC, with a wider web of impact categories
cast, also illustrates what can be lost if a narrowly-conceived, quantitative
conception of ―economic‖ impact is used in evaluation studies. How does
one estimate the impact on innovation in the medical devices industry of an
institutionalized collaboration between the Johns Hopkins School of Medicine
and the Whiting School of Engineering, an example closely watched by other
major universities? Similarly, the collaboration between the Emory Medical
School and Georgia Tech, institutionalized in GTEC, has shown the value of
transdisciplinary collaborations in fostering breakthroughs in research and
new ways of thinking. At both Hopkins and Georgia Tech, ERC efforts at
increasing diversity in science and engineering human capital were highly
successful, so much so that institutionalization of their programs took root.
Again, how does one estimate the value to the U.S. science and engineering
enterprise of increased numbers of talented, diverse graduates into the
technical workforce?
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Lessons Learned: Identifying and Measuring the Economic Impact of ERCs
Although a pilot effort, this study has already resulted in a number of
important ―lessons learned‖ that are pertinent to future efforts to identify and
estimate the economic impacts of ERCs—or, for that matter, similar
university-based centers with multiple goals that span research, education,
and technology transfer. First, despite the apparent value of waiting as long
as possible in the history of an ERC before attempting to measure its
economic impact, it is clear that such efforts should be made well before
termination of NSF ERC Program support. The staff resources and records
necessary to develop impact data, certainly of the quantifiable economic sort,
are unlikely to exist following a center’s graduation.
Second, there probably is no optimum time to attempt to measure ERC
impacts. Each choice has its shortcomings. Given the long time for ERC
economic impacts to be realized in industry, even at the ten-year milestone
comprehensive impact studies are premature. This is especially the case for
ERCs engaged in research on medical technology such as CISST and
GTEC. More feasible and meaningful would be to measure the impact that
center graduates and ideas have had in industry, seeking data that are in
principle verifiable but in most instances will not be quantifiable. As we
demonstrated in the latter phases of this study, it is feasible to document the
impact that center graduates have had on both academia and industry.
.
Third, the economic (and probably other) impacts of ERCs should not be
compared across ERCs or against ―standard‖ performance measures. Not
only do ERCs differ from one another in formal, readily identifiable ways (e.g.,
size, technical focus, industry support, type of industry involvement, industry
dynamism), they also differ widely in the timing and composition of the
outputs that generate impact. Even the most conscientious and costly data
collection efforts would be unlikely to yield comparable data across centers,
because the accessibility of key data, especially proprietary data, will differ
unpredictably from center to center.
Fourth, centers whose technologies target nascent segments of regulated
markets such as medical robotics and tissue engineering are unlikely to
spawn successful start-ups or generate commercially successful products,
even after ten years of existence. The time to market is very long and the
risks confronting start-ups are very high. The CISST and GTEC cases also
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suggest that, because many emerging innovations do not result in cost
savings but rather enabled new things to be done that could not have been
done before, the value of a large proportion of ERC outputs cannot be
quantified—at least by applying the consumer surplus model.
And finally, in ERC impact studies, focusing on narrowly-conceived,
quantifiable economic impact data alone should be avoided. To do so
distorts the amount and character of actual impacts, many of which—perhaps
most of which--cannot feasibly be converted to economic terms. The results
of this pilot study suggest that such a narrow focus will greatly underestimate
the impact of ERC-like centers, masking the much broader and, based on our
findings, larger and more significant impacts on society.
Implications for Economic Impact Studies Generally
Although the methods available for capturing accurately the quantitative
national economic impact of ERCs are limited, this is not to say that the
impact measurement tool kit is nearly empty. The problem is that available
methods have stringent requirements for data and context. In principle,
consumer surplus approaches are appropriate for capturing quantitatively the
economic impact of ERC-based innovations that offer cost savings to
purchasers. It would be very expensive, very difficult, and very invasive--but
not impossible--to obtain much of the necessary data from the innovating
firms whose products were derived from ERC licenses or technology. Also,
as far as we are aware, existing methods cannot capture quantitatively the
economic impact of innovations that enable things to be done that could not
be done before--and often do not have obvious cost savings associated with
them. To the extent that many ERC-based innovations are of this type, then
their quantitative impact is probably beyond existing methods. And of course,
focusing narrowly on relatively short-term (less than ten years, say)
quantitative economic impacts will miss perhaps the most significant ERC
economic impacts.
If one wanted to justify the public investments in ERCs using a benefit-cost
(B/C) framework and required that the analysis be limited to quantifiable
economic benefits, then using the "nuggets" approach to capture the top, say,
10% of ERC-based innovations that have generated new product sales with
cost savings associated with them would be an appropriate and credible
approach. We have no doubts that the results would show a highly positive
outcome. Of course, getting the data would be expensive, invasive, and
almost certainly yield incomplete results, but in principle the method is
appropriate. But even so this would greatly understate the actual B/C ratio
for reasons illustrated throughout this report.
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Following good program evaluation practice, mixed and varied methods and
measures are best equipped to best capture valid estimates of the full range
of ERC impacts, economic and beyond. Broadening the evaluation scope to
include less quantifiable impacts with economic implications, as well as
estimates of impact, is certainly appropriate and, basically, what we did in this
pilot study. We showed that there ways to estimate the economic impact of
ERCs, as well as ways that substantially underestimate and, indeed, distort
the amount and profile of these impacts. We also showed that the time limits
on an ERC’s existence as an NSF-supported organization--ten years--make
it very difficult (but not necessarily impossible) to identify longer term but
sizable impacts 15-20 years after an ERC is initiated and attribute a portion of
those impacts to the ERC.
In sum, there are methodologies available to reveal very useful data and
information related to the economic impact of ERCs and similar programs, if
such methodologies are used appropriately and with necessary caveats.
APPENDICES
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Appendix A: Data Requirements and Data Source Tables sent to target ERC Directors and Staff
Data Needs and Sources for ERC Economic Impact Study
Data Category Detailed Data Breakdown Data Source(s)
Licensing fees and royalties for IP attributable to ERC research
Total amounts by: Payee location (in-state, US out-of-state,
foreign), and Payee status (ERC member/non-
member)
ERC annual reports, records and/or university’s Office of Technology Licensing
Cash and in-kind support to ERC, including value of in-kind support
Unrestricted cash support (including membership fees) by:
Source type (NSF, other federal agency, state agency, university, industry), and
Source location (in-state, US out-of-state, foreign) and membership status
ERC annual reports and/or ERC records
Restricted cash support (sponsored research) by: Source type (NSF, other federal agency,
state agency, university, industry), and Source location (in-state, US out-of-
state, foreign) and membership status
In-kind support (including visiting personnel) by: Type (visiting personnel, equipment,
facilities, other) Source (federal agency, state agency,
university, industry) Source location ((in-state, US out-of-
state, foreign) and membership status
Value to firms of ERC student/graduate hires
Number of hires by degree level (BS, MS, PhD), hiring firm location (in-state, US out-of-state, foreign), and firm membership status
ERC annual reports and ERC records
Average salary differential between ERC graduates and non-ERC graduates, by degree level
University’s Office of Graduate Education and/or ERC records/estimates
Value of ERC courses, conferences, and workshops for industry
Length and location of events (in-state, US out-of-state, foreign)
ERC records or staff estimates
Number of attendees by event by location of attendee’s employing firm and firm membership status.
Consulting income from industry to ERC researchers and staff attributable to their ERC affiliation
Person-days of consulting by location of payee (in-state, US out-of-state, foreign) and by membership status
ERC staff estimates
Value of pro bono consulting to industry by ERC researchers and staff
Person-days of pro bono consulting by location of payee (in-state, US out-of-state, foreign) and by membership status
ERC staff estimates
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Data Category Detailed Data Breakdown Data Source(s)
Descriptions of 3-4 high-impact ―nuggets,‖ economic benefits to firms and to their customers attributable to interaction with ERC
Depending on category of firm realizing economic benefits (ERC start-up, no profits; ERC start-up making profits; established member company): total spending and capital investments since start-up; person-years of employment generated since start-up; total sales, domestic/international, attributable to ERC; net profits generated by those sales; unit cost savings to these customers, relative to alternative technologies.
ERC annual reports, ERC staff estimates, interviews with member company representative to ERC, or start-up CTO or CEO
Industry spin-ins (ventures) attributable in part or whole to presence of ERC
Total number of person-years of spin-in firm employment attributable to ERC presence (in-state, and in-country location of venture)
ERC annual reports and ERC staff estimates
Industry spin-offs attributable in part or whole to presence of ERC
Total number of employee-years of spin-off firms attributable to ERC presence, by firm location (in-state and in-country)
ERC annual reports and ERC staff estimates
In addition to the above generic data needs table, we also sent each ERC
a more detailed table showing what data we had been able to obtain from
annual reports, center web sites, and the NSF ERCWeb monitoring
system, to which we were kindly granted access. An example of this
table, prepared for the Florida PERC, follows. This was intended to
illustrate exactly what we had obtained from publicly available sources
and what would have to be collected from ERC records and interviews
with ERC staff.
Univ. of Florida PERC: Preliminary Estimates
(additional needs highlighted in yellow)
Data Category Preliminary Numbers & Questions Estimate Source(s)
Licensing fees and royalties for IP attributable to ERC research
8 patents awarded and 7 licenses issued Receipts from licenses & patents by payee
location & status? Attributability to ERC?
Final Report Data Tables, Table 1
Cash and in-kind support to ERC, including value of in-kind support
Unrestricted cash support (including membership fees) by: NSF - $28,687k Other USG - $3k State - $778k U.S. University - $93k U.S. Industry - $3,275k For. Industry - $43.8k For. Gov - $10k Industry source location and membership status?
Final Report Data Tables, Table 9 & 1
Restricted cash support (sponsored research): U.S. Industry – $296k State - $16,015k U.S. University – $10,147k NSF - $895k + 532 Other US Gov. – $1,415k Source location and membership status?
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Data Category Preliminary Numbers & Questions Estimate Source(s)
In-kind support (including visiting personnel) by: U.S. Industry – $437k + $379 (“other assets”) Member firm personnel working at ERC – 1 Total value of visiting personnel from U.S.
industry - $1,233k U.S. University – $800k For. University – $575k Source location and membership status?
Value to firms of ERC student/graduate hires
# Graduates: BA – 303; MA – 65; PhD – 99 ERC Grads Hired by: ERC Members – 29; Other
U.S. firms – 92; For. Firms – 3; Gov.- 7; Academia – 32; Other – 15 (235 undecided/unknown/still looking)
Hires by employer location and membership status?
Final Report Data Tables, Table 1
Average salary differential between ERC graduates and non-ERC graduates, by degree level?
Value of ERC courses, conferences, and workshops for industry
Workshops, Industry – 27, Other – 8; Seminars – 787 (?)
Length and location of events? Number of attendees by event by location of
attendee’s employing firm and firm membership status?
Final Report Data Tables, Table 1
Consulting income from industry to ERC researchers and staff attributable to their ERC affiliation
Person-days of consulting by location of payee (in-state, US out-of-state, foreign) and by membership status?
Value of pro bono consulting to industry by ERC researchers and staff
Person-days of pro bono consulting by location of payee (in-state, US out-of-state, foreign) and by membership status?
Descriptions of 2-3 high-impact “nuggets,” payoffs to firms and society (spillover benefits) attributable to interaction with ERC
Description of large, verifiable benefits to individual firms and economy and society in general due to ERC resources (ideas/technology/student hires/other) by firm location and membership status?
Industry spin-ins (ventures) attributable in part or whole to presence of ERC
Total number of person-years of spin-in firm employment attributable to ERC presence (in-state, and in-country location of venture)?
Industry spin-offs attributable in part or whole to presence of ERC
5 spin-off companies & 11 spin-off employees Location of spin-off employment? Timeline of employment at companies?
Final Report Data Tables, Table 1
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Appendix B: Interview Protocol for Industry Managers Developed for CNSE Case
Questions for managers (e.g., CTOs, CEOs) of companies using ERC
technologies or ideas:
Start-up companies
Start-ups, or companies with products/services that have not been market
tested yet, cannot be evaluated based on the impact of their products.
This is not to say that start-ups are not an important economic impact of
an ERC. Start-ups create local (and national) impacts through the
investment capital they are able to attract and then spend (on wages,
supplies, equipment). For these companies, we therefore attempt to
gauge the amount of spending of related start-up companies. [NOTE:
Our underlying assumption here is therefore that these start-ups would
not have happened in absence of the ERC. In other words, the relevant
entrepreneurial professor or student would have ended up at an out-of-
state/country institution and started their company there, that they would
never have had their entrepreneurial idea in the first place, or that they
would have had their idea but wouldn’t have gotten the requisite support
without the ERC.]
1. Spending (wages, supplies, etc.) and capital investment made by
the firm through its life (in the absence of data on total funding
received)
2. Jobs generated in person-years through the life of the start-up.
3. Funds received from all sources, including venture capital, private
capital, and government grants through the life of the start-up.
Established Companies
For technologies that are market tested (that are sold and traded in
competitive markets), the market is the best evaluator of the costs and
benefits of ERC ―outputs.‖ Here, we will attempt to measure the benefits
to producers (firms using the technology to lower costs and/or to produce
new products), or ―producer surplus.‖ At the same time, technologies may
also have significant impacts on those that purchase or consume the
advancement either through reduced costs or improved qualities.
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For these established technologies, we will ask firms a series of questions
for both (a) the firm specifically and (b) the industry overall.: For these, all
we ultimately need is the total to date for each item. However, it may be
easier for companies to provide per-unit or annual data, in which case
also need to know number of units sold, and yearly breakdowns.
1. Quantity of new products sold and total revenues generated by
the new product(s) and technologies ( preferably annually)
2. Net profits generated through the sale of the new products and
technologies (annually or total to date)
3. If the firm licensed ERC technologies, what would an alternative
technology have cost the firm?
4. If ERC technology improved the firm’s production process, what
was the level of cost savings generated by the technology? (per
unit of product; annually; total?)
5. What were the impacts of this technology/process on consumers
purchasing the products? (cost savings over prior technology,
benefits from using technology, etc.) (again, annually, per unit, or
total)
In both cases
1. What portion of the firm’s venture capital, or revenues and profits
coming from a product or technology, may be attributed to ERC
research? (The NSF definition of an ERC start-up implies that the
company would not exist in the absence of the ERC’s research,
staff, students, or technology, but it may be useful to ask this
question anyway.)
2. If use of ERC technology led to industry cost savings, what portion
of the savings may be attributed to ERC?
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Appendix C: Interview Protocol for Industry Managers Developed for CPES and WIMS Cases
Our project for NSF is a pilot study intended to determine the feasibility of
estimating the economic impact of Engineering Research Centers on both
the nation and on the state(s) where the centers are located. The three
centers we’re studying are Caltech’s Center for Neuromorphic Systems
Engineering, Virginia Tech’s Center for Power Electronic Systems, and
the University of Michigan’s Center for Wireless Integrated MicroSystems.
NSF is especially interested in the measurable economic impacts of
ERCs, but we realize that many, perhaps most, of these impacts are very
long-term and difficult or impossible to measure in strictly economic
terms. So, we’re asking companies who have benefited from working
with ERCs to estimate (roughly) for us the impact that Center ―outputs‖--
ideas, technology, and student hires--have had on (a) the company
and (b) the industry. We realize that precise information is likely to be
proprietary, too difficult to develop, or both, so rough estimates are
perfectly adequate for our purposes.
In the case of your company’s involvement with CPES,
1. What has been the impact of CPES-based ideas on your company
and industry, including cost savings, new products and processes,
profits or growth, and new markets?
2. What has been the impact of CPES-based technology on your
company and industry growth/markets, especially the cost savings to
industry customers attributable to new products or processes based
on CPES technology that replaced an existing product or process?
3. What has been the impact of CPES students you’ve hired on your
company and on industry growth/markets?
4. What do you think would have happened to (a) your company and (b)
the industry in the absence of CPES?
