rochester higher education steering committee evaluating higher education institutional impacts
TRANSCRIPT
Background
• Simon J. Tripp– Principal - Impact
Economics, LP– Director of Research &
Planning and Special Consultant – Battelle Memorial Institute Technology Partnership Practice
– Co-founder of Tripp, Umbach & Associates, Inc. and Tripp Umbach Healthcare Consulting.
• Specialist in– Economic and social
impact analysis– Regional economics– Technology-based
economic development planning and strategy
– University and R&D driven economic development and commercialization
– R&D core competency assessment
Some project examples
• Economic Impact– Academic medical
centers– Colleges and
universities– Hospitals and health
systems– Development projects– Research and
development
• Economic Development– Regional development
plans– Technology-based
economic strategy• Biosciences• Advanced
Manufacturing• Information Technology
– Program development and evaluation
Current Projects• Technology-based economic development strategy (State of Ohio)• Technology-based economic development strategy (Pittsburgh)• Bioscience technology park planning and assessment (University of
Southern California)• Statewide economic impact assessment (University of Nebraska
Institute of Agriculture and Natural Resources)• Planning and R&D commercialization study (Iowa State University
College of Agriculture and Center for Crops Utilization Research)• Economic impact assessment of US-AID funded crop-development
programs for Africa and Central America• Bioscience and healthcare development strategy (South Dakota)• Civic design program evaluation (The Heinz Endowments)
Rochester Experience• Mayo Clinic/Mayo Health System economic impact• Regional economic analysis (Olmsted County)• Advisor to Tripp Umbach on Minnesota Partnership impact project
ForwardEffects
BackwardEffects
LocalSpending
Labor
Supplies
Utilities
Building
Mul
tiplie
r E
ffect
(Lo
cal R
e-sp
endi
ng)
Total Impact(Backward Linkage)
R&D
Education
Outreach& Service
Extension
Volunteerism
Consulting
Q of L Events
Image
BusinessFormation
Private returns
Social returns
BusinessGrowth/Retention
BusinessAttraction
The Basic Structure of University Impacts
ForwardEffects
BackwardEffects
LocalSpending
Labor
Supplies
Utilities
Building
Mul
tiplie
r E
ffect
(Lo
cal R
e-sp
endi
ng)
Total Impact(Backward Linkage)
R&D
Education
Outreach& Service
Extension
Volunteerism
Consulting
Q of L Events
Image
BusinessFormation
Private returns
Social returns
BusinessGrowth/Retention
BusinessAttraction
Mayo Clinic EconomicImpact Study
Minnesota Partnership forBiotechnology andMedical GenomicsImpact Projections
External research funds attracted to Ohio
OARDC Research
and Development
State of Ohio research funds
Commercial research funding from Ohio industry
Commercial research funding from external industry New
products, discoveries and solutions to problems
Licensing of intellectual property
Incubation and generation of new businesses
New crops and products for Ohio producers
Improved crops and products for Ohio producers
Environmental protection and remediation
Enhanced rural and urban quality of life
Improved production technologies
Jobs, output, income and gov’t revenue
New bio-based products/ biotechnology
Ohio-based licensees. Open new markets, generate new revenue streams, enhance competitiveness.
New Ohio business enterprises. Open new markets, generate new revenue streams, enhance competitiveness.
Enhanced income streams, product lines, productivity and income for Ohio’s agriculture/agribusiness
Enhanced income streams, product lines, productivity and income for Ohio’s agriculture/agribusiness
Enhanced income streams, product lines, productivity and income for Ohio’s agriculture/agribusiness
Enhanced position of Ohio in rapidly emerging biotechnology sector. New products, companies and associated potential.
Enhanced environment, reduced remediation costs, marketable technologies and processes
Maintain social fabric, reduce rural poverty, maintain rural quality of life and traditions
Jobs, output, income and gov’t revenue
Jobs, output, income and gov’t revenue
Jobs, output, income and gov’t revenue
Jobs, output, income and gov’t revenue
Jobs, output, income and gov’t revenue
Jobs, output, income, gov’t revenue, reduced costs
Reduced negative costs
Function Benefits ImpactsOSU - OARDCSpending and Functional Economic and Social Impacts
OSUExtension
Agriculture and NaturalResources
Emerging trends & needs
Technology education and introduction
New crops and products/diversification
Marketing and business development
Jobs, economic output, income and government revenue
Intelligence to drive applied OSU research to meet emerging Ohio ag./env. needs.
Open new markets, generate new revenue streams, enhance competitiveness.
Enhanced productivity and income streams, for Ohio’s ag./env. producers and processors
Enhanced employment opps and productivity
Improved social conditions and economics
Enhanced public health
Reduced social and economic problems
Maintain ag. and env. sector sustainability through multiple generations
Function Benefits Impacts
Community Development
Family and Consumer Sciences
4H-Youth Development
Techniques and skills education
Federal funds to OSU Extension
State of Ohio support funds
Ohio County support funds
Enhanced productivity and income streams, for Ohio’s ag./env. producers and processors
Open new markets, generate new revenue streams, enhance competitiveness.
Marketing and business development
Business retention and expansion
Job training
Leadership development/visioning
Public policy and issues assessment
Family life
Nutrition & food safety
Health & Wellness
Family budgeting
Youth-at-risk programs
Character and self-esteem building
Skills development
Future practitioners development
Attract and develop new economic development engines for communities
Maintain and enhance community economic base and economic development
Economic/community development strategy and sustainable development leadership
Analysis, solutions, advocacy to improve communities
Enhanced public health
Improved economic sustainability
Youth motivation, enhanced educational attainment and reduced social problems
Improved personal conditions and economics
Jobs, economic output, income and government revenue
Enhanced Ohio community sustainability
Enhanced Ohio community sustainability
Reduced negative costs
Jobs, economic output, income and government revenue
Directextensionspendingimpact
Indirectimpact
TotalSpending
impact
Sp
en
din
g im
pa
cts
Functionalimpacts
OSU ExtensionSpending and Functional Economic and Social Impacts
Rochester Key Impacts to Examine
• Business retention and expansion– Advanced workforce (education impacts)– Product development/R&D (R&D impacts)
• New business formation– Advanced Workforce– Licensing and entrepreneurship
• Business attraction– Advanced Workforce– R&D partnerships– Clustering
Must design not only a campus, but a system for knowledge transfer and value-added capture
High-proteinsoybeancultivar
developed at the OARDC
High-proteinsoybeancultivar
developed at the OARDC
High-proteinsoybeancultivar
developed at the OARDC
High-proteinsoybeancultivar
developed at the OARDC
High-proteinsoybeancultivar
grown onOhio farms
High-proteinsoybean
processedby Cargill in
Ohio
High-proteinsoybeancultivar
grown onOhio farms
High-proteinsoybeancultivar
grown onOhio farms
High-proteinsoybean
processedby Cargill in
Ohio
Branded soyprotein products
producedand marketed
Best result = licensingrevenues back to OSU.
Negligible employment generation
Best result = licensingrevenues back to OSU, and
farm revenues. Farmand farm supplier employment supported.
Best result = licensingrevenues back to OSU, farm revenues,
value-added processing revenues.Significant employment generated.
Best result = licensing revenues backto OSU, farm revenues, value-added
processing revenues, value-added endproduct revenues.
High levels of employment generated.
+
+
+
+
+ +
High-proteinsoybeancultivar
developed at the OARDC
High-proteinsoybeancultivar
developed at the OARDC
High-proteinsoybeancultivar
developed at the OARDC
High-proteinsoybeancultivar
developed at the OARDC
High-proteinsoybeancultivar
grown onOhio farms
High-proteinsoybean
processedby Cargill in
Ohio
High-proteinsoybeancultivar
grown onOhio farms
High-proteinsoybeancultivar
grown onOhio farms
High-proteinsoybean
processedby Cargill in
Ohio
Branded soyprotein products
producedand marketed
Best result = licensingrevenues back to OSU.
Negligible employment generation
Best result = licensingrevenues back to OSU, and
farm revenues. Farmand farm supplier employment supported.
Best result = licensingrevenues back to OSU, farm revenues,
value-added processing revenues.Significant employment generated.
Best result = licensing revenues backto OSU, farm revenues, value-added
processing revenues, value-added endproduct revenues.
High levels of employment generated.
+
+
+
+
+ +
OARDC SoybeanImprovement
Platformgenerates a high-
oil content soybean
High-oil contentsoybean produced
on Ohio farms
Soy oil extractionby an Ohio
processing plant
Ohio biorefineryproduces biodieselfrom soybean oil
and methanol
OARDC TomatoImprovement
Platformgenerates a high-lycopene content
tomato
High-lycopenecontent
tomatoes producedon Ohio farms Lycopene
extracted fromtomatoes
Lycopene extractiontechnology developed
by OSU/OARDCscientists and
engineers
Lycopene integrated asingredient in
Ohio-producedfunctional food
Lycopenemanufactured into
nutraceutical product
OARDC FoodSafety Platform
invents rapidmicrobe detection
system
Ohio producermanufacturers
microbe detectionsystem
Ohio producermanufactures
consumables usedwithin detection
system
OARDC AnimalImprovement
Platformidentifies beef
marbling geneticmarker
Ohio start-upcompany formed
to providegenetic testing
service
Ohio company spin-off created toproduce fielddiagnostic kits
Ohio producermanufactures
consumables usedwithin diagnostic
kits
OARDC SoybeanImprovement
Platformgenerates a high-
oil content soybean
High-oil contentsoybean produced
on Ohio farms
Soy oil extractionby an Ohio
processing plant
Ohio biorefineryproduces biodieselfrom soybean oil
and methanol
OARDC TomatoImprovement
Platformgenerates a high-lycopene content
tomato
High-lycopenecontent
tomatoes producedon Ohio farms Lycopene
extracted fromtomatoes
Lycopene extractiontechnology developed
by OSU/OARDCscientists and
engineers
Lycopene integrated asingredient in
Ohio-producedfunctional food
Lycopenemanufactured into
nutraceutical product
OARDC FoodSafety Platform
invents rapidmicrobe detection
system
Ohio producermanufacturers
microbe detectionsystem
Ohio producermanufactures
consumables usedwithin detection
system
OARDC AnimalImprovement
Platformidentifies beef
marbling geneticmarker
Ohio start-upcompany formed
to providegenetic testing
service
Ohio company spin-off created toproduce fielddiagnostic kits
Ohio producermanufactures
consumables usedwithin diagnostic
kits
OSU Extension provides introduction to technologies and new crop introductions, facilitates production on farms and in processing plants, assists in industrial process improvement, workforce development and in business development and marketing services
Why a research university?
• “The empirical evidence consistently supports the notion that knowledge spills over from university research laboratories and from industry R&D laboratories as well. Location and proximity clearly matter in exploiting these knowledge spillovers”
David Audretsch
The key is building from tacit or “sticky” knowledge. Specialized knowledge versus information.
Some baseline numbers to consider
• Rule of thumb in university technology transfer is that for every 100 invention disclosures, ten patents and one commercially successful product result.
• Sponsored university research is big business at $30 billion in 2000. 58% of this is Federal Government funded University-based research sponsored by industry stood at $2 billion in 2000.
• Physical sciences get 10% of the $30 billion, engineering disciplines (including computing) get just under 20%. Life sciences get the big share, with well over 50%.
• More than 70% of all industry patents cite publicly funded papers.
• AUTM (1999) reports that 82% of firms formed around university licenses operate in the same state as the university that provided the license.
• Circa 5% of venture capital backed firms are very successful, and another 30% are moderately successful.
• Most university technology transfer operations do not break even. Their licensing revenues are not sufficient to cover administrative costs and the costs of filing and maintaining patents.
• Between 40-60% of biotech companies are initially formed by academic scientists.
Top US Corporate Patent Classes• Surgical instruments• Biology of multi-cellular organisms• Surgery: light, thermal and electrical
apps• Surgery: application, storage and
collection• Prostheses• Computer and digital processing• Data processing• Special receptacle or package• Telephone communications• Communications: directive radio wave• Chemistry: molecular biology and
microbiology
The primary innovation areas in the US are a good match to the intended technological focus of the new University in Rochester.
Entrepreneurial Environment
• Entrepreneurship is distinguished by novelty and dynamism
• Innovation-driven development expands the potential output of the economy, rather than moving output from one business to another
• US competitive advantage lies in the creation and rapid exploitation of new ideas
• Public policy and governance are critical shapers of an entrepreneurial environment
The Impact of Education
• Private Returns to Education– The IRR on private investment in an undergraduate
degree is 11.8% to 13.4%– 7.2% Masters and 6.6% PhD– (gets lower as go higher because IRR’s are cost based and individuals are putting off
current income as they pursue higher degrees)
• Social (Public) Returns to Education– The rate of public return on investment in
undergraduate education is circa 11.6% to 12.1%– Expect this is very conservative because of many
non-calculated societal benefits.
• Estimates show 25-40% of national income growth is attributable to higher education – mostly through the application of knowledge/R&D.
• Quality of institution can add 10-15% to private returns
• Returns vary greatly by field of study – ranging from 20%+ for professional fields such as medicine, to negative (for clergy).
• Good discussion in – “The Economic Value of Higher Education” by Larry Leslie and Paul Brinkman, published by the American Council on Education.
The Impact of Education
$0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000
Less Than HS Diploma
High School Diploma
Some College, No Degree
Associate Degree
Bachelor's Degree
Master's Degree
Doctorate Degree
Professional Degree
After-Tax Income Taxes
$95,700
$79,400
$59,500
$49,900
$37,600
$35,700
$30,800
$21,600
Source: US Census Bureau, 2004
Median Earnings and Tax Payments by Level of Education, 2003.
0.741
1.17 1.23
1.731.98
2.65
3.36
0
0.5
1
1.5
2
2.5
3
3.5
4
Less Than HSDiploma
High SchoolDiploma
SomeCollege, No
Degree
AssociateDegree
Bachelor'sDegree
Master'sDegree
DoctorateDegree
ProfessionalDegree
Ear
ning
s R
atio
Expected Lifetime Earnings Relative to High School Graduates, by Education Level
Three elementswork together to
achieve R&D-basedbusiness and economic
development
Technology
Talent Capital
Innovators, skilled technical workforce,business development professionals,entrepreneurs
Pre-seed, seed, angel and VC
Technology and R&D infrastructure.
“In general, two factors are associated with early institutionalization of technology transfer: the presence of a medical school and the status of the university as a land grant institution.”
Maryann FeldmanAmerican Research Universities and Technology Transfer
Most commercially valuable university intellectual property arises from biomedical research.
Mowery et al, 1999Feller et al, 2002
Mechanisms of Industry/University Interaction
• Formal– Sponsored research agreements– Licensing of university intellectual property– Formation of spin-off companies
• Informal– Faculty consulting– Industry hiring of students– Knowledge trading among friendship networks
The Questions
• Will a university campus dedicated to advanced education and R&D stimulate business growth and investment in Rochester?– Yes
• What will the ROI be?– Depends on many factors (research mix,
commercialization imperative and incentives, entrepreneurial environment, skilled workforce, capital availability, etc.)
• Where will the skilled talent come from?– Major start-up packages attracting “stars”– Top student talent attracted to prestige people
and institutions– State-of-the-art facilities and equipment– Funding support and subsidies– Attracting scarce domestic students– Rochester Q of L– Multiple clustered employers– Entrepreneurial culture– Capital
• Risks of not making the investment?– Innovation economy needs innovation
engines (so risk is not participating in the part of the economy generating growth)
– Technology, talent and capital are mobile; must anchor with tacit, “sticky” knowledge. (so the risk is not attracting and retaining talent.
– Spin-off enterprises largely locate close to source of knowledge (so risk is not being the source of knowledge)
– Mayo and IBM are multi-location organizations (the risk is they grow elsewhere instead of Rochester).
• What will be the drivers of a high ROI?– Funding sufficient to attract the best R&D talent
(human capital)– Highly competitive R&D facilities– Domestic students– Favorable entrepreneurial policies and
procedures– Creation of celebratory and supportive
entrepreneurial culture– Very early stage pre-seed funding through
venture capital availability– Business spin-offs, licenses and technology
captured and transferred locally– Branding and image
Conducting your impact study
• Be conservative (the numbers will be large, keep them easily defensible)
• Present multiple scenarios
• Outline all assumptions and data sources
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