Science in the Triangle

Representatives of businesses and research organizations in the Triangle met Friday April 16 at Research Triangle Foundation Headquarters to explore the role of government in spurring homegrown global innovation. The meeting was the first of a handful planned by the National Foreign Trade Council, a Washington DC-based organization that advocates for both domestic and foreign trade policies favorable to its member businesses.

“We’re here today to learn from you so that we can go back to Washington and do what we do,” said NFTC president Bill Reinsch in his opening remarks. “We want to build relationships with companies and open a conversation with them to develop stronger links.” Reinsch said that his group was traveling to technology-innovation clusters like RTP and Silicon Valley to find out first-hand from companies what sort of policies were encumbering them from doing business globally, which were helping, and what sort of ideas they had for the future.

How to create and sustain jobs and businesses is a question that both federal and local governments have wrestled with sharply and frequently since the economic downturn. Research Triangle Park, NC has long been a technology-hub and economic engine for the state, noted RTP CEO Rick Weddle, and the area has excelled in life sciences, information technology, and biotech markets, but capturing emerging markets like gaming and clean energy technologies will be vital to RTP maintaining its vitality in the future. But how can science parks like RTP, and the states they’re rooted in, cultivate homegrown small businesses (and they jobs and economic resilience they generate) in emerging and established markets, especially when the banks are slow to lend — if they lend at all — and cash is plain hard to come by?

NC State Treasurer Janet Cowell presented one state-level contribution to the problem: a still-forming program called the Innovation Fund that will invest $230 million in N.C. businesses over the next three to five years from the state’s $67 billion pension fund. “Our pension fund is bigger than General Motors,” Cowell said. “Other states have used this approach for distressed parts of their states, but we’re applying this method with a market-based approach which makes me confident we can expect a return on our investment.” In other words, the state may be coughing up cash from the pension fund in the short-term, but they expect the money to generate more cash over time. The state plans to allocate about 10 to 25 percent of the $230 million as venture capital, 5 to 15 percent will be growth equity, 40 to 60 percent will be used for buyouts, and 5 to 35 percent for special situations. They will sprinkle their investments across established and emerging market sectors including: agriculture, life sciences, clean technology, green technology and renewable energy. The Innovation Fund is managed by Credit Suisse which has 1,050 employees in N.C. out of 47,000 global employees, and Cowell said the state chose them because of their performance record managing similar funds. (For more information, visit www.ncinnovationfund.com.)

But cash is only one prong of the multi-pronged solution to stimulating local scientific and business innovations with global potential. Access to a well-educated and prepared talent pool is a second prong; policies inducive to global trade are a third. These aspects were hashed out at length by two panels focused on the role of state and federal policies.

Sandy Merber, a specialist in international trade regulation and sourcing for General Electric, cited a study that found 84 percent of U.S. businesses said they’d lost business opportunities with China in 2008 because of visa problems in getting their Chinese business partners to the U.S. “It took me one day to get an emergency business visa to get into China, while the average is four days,” Merber said. “Guess what the average is for a Chinese businessman to come here? 31 days. That holds up deals, and that’s got to be expedited.”

Jennie Hunter-Cervera, executive vice-president of RTI, shared that a big challenge her company faces is the labyrinthine international laws that businesses must navigate to get business licenses to work in other countries. RTI works in 40 countries and holds 40 different business licenses in these countries, but she said the process of obtaining a license often slows down the companies ability to grow. She also noted that collaboration is difficult in some foreign countries because they don’t honor the same gene patent laws. RTI wants to take its research “from the bench to the bank” she said, meaning that the group seeks a return on dollars sunk into basic research and development. But it’s far easier to get government-funded grants for basic research than for research demonstrating proof of concept – data that may be necessary to convince a bank or venture capital group to invest in translating a project into a marketable product. “Proof of concept grants are not well-represented in the federal grants mix,” she said.

Heather Osborne Clark, director of trade and policy for Merck & Co., said that her company earns 50 percent of its income outside the U.S. in about 140 different emerging markets, and she reiterated that streamlining foreign visa processes would be helpful to Merck’s growth. She also noted that the resources allotted to foreign government agencies tied to trade and commerce are proportionally larger (in comparison to gross domestic product) than what the US allots to our agencies. “We need to better fund our agencies so that we can be more competitive,” she said.

Most of the business people attending seemed to agree that one area they would like to see the federal government help them abroad was in protecting intellectual property rights in foreign countries. While their rights were well-protected in the U.S., they noted serious infringements could occur in other countries with little in the way of laws or hegemony to help them.

… Part II of this post explores NC-centric issues discussed at the Global Innovation Forum, such as green energy markets, gaming, and characteristics of a globally-innovative business.