Becoming an Economic Center of Excellence

Replicating Research Triangle Park in New York’s Capital District

April 11. 2012 12:24PM


Growing up in Camden, New Jersey and later serving as a City Councilman there, I experienced how the process of disinvestment can lead communities to despair. Years later, when I taught Urban Economics at Eastern University in St. Davids, Pennsylvania, I became intrigued by the factors that drive business investment decisions.

I was fortunate that I was able to spend time observing and implementing economic development strategies, first as one of Mayor Ed Rendell’s volunteer business ambassadors for Philadelphia and subsequently as New Jersey’s Secretary of Commerce. During and after my tour of duty with New Jersey, I visited many jurisdictions that are economic centers of excellence and many that aspire to be.

After years of toiling in the vineyards and exchanging views and experiences with economic development professionals and business executives throughout the world, I believe that I may have begun to understand the factors and strategies that can help propel a region to economic success.

To some extent, economic development is as much about economic determinants as it is about creating a mythology of excellence. If a jurisdiction establishes a positive business climate trend-line, it can create a reputation about itself that is greater than the reality. To quote Niccolo Machiavelli, “Never underestimate a Prince that overestimates Himself.” Such prominence can jump start a virtuous cycle of investment.

Through a well-run, efficient government, tax policy reform, a responsive economic development team, thoughtful job creation incentives, regulatory reform, public/private partnerships and marketing, a jurisdiction can begin the process of becoming an economic center of excellence. No jurisdiction will ever achieve a perfect policy environment but we should not allow perfection to get in the way of progress. And to be excellent, a jurisdiction has to go beyond gradually creating a positive business environment. It has to align all critical institutions towards a common vision. One of the most storied examples of such an alignment of vision is the Research Triangle in North Carolina.

The Triangle is formed by the geographic nexus of three research universities — Duke University, North Carolina State University, and the University of North Carolina at Chapel Hill. The region is anchored by the cities of Raleigh, Cary, Durham and Chapel Hill.

Like most economic advances, RTP was born of necessity. After World War II, the North Carolina economy was experiencing multiple challenges. The state’s economic base consisted of three major industry clusters: furniture, textiles, and tobacco. The furniture industry was leaving the state and expanding into the northeastern United States and elsewhere; the textile industry was experiencing growing competition from Asia; and tobacco manufacturing employment was on the decline, in part because of automation and in part because of decreasing demand.

In early 1954, at the urging of private sector and academic leaders, Governor Luther Hodges commissioned a report on the idea of establishing a “research park” in the triangle area. In April 1955, having solicited the support of Gordon Gray, president of the University of North Carolina, and Hollis Edens, president of Duke University, Governor Hodges organized the Research Triangle Development Council with Robert Hanes, the president of Wachovia Bank and Trust Company, as chairman.

The Council and its various subcommittees agreed that the Research Triangle project should be maintained as a private effort and that the universities, “by the research atmosphere that their very existence creates,” would act as a magnet to attract industry “by providing a wellspring of knowledge and talents for the stimulation and guidance of research by industrial firms.”

While RTP experienced a slow start, new tenants continued to arrive in the ensuing decades. In 1974, a campus of approximately 120 acres was created within RTP for the purpose of housing organizations that could bring faculty from the three universities together with Park scientists to work collaboratively. The “park within a park” was called the Triangle Universities Center for Advanced Studies, Inc. (TUCASI). TUCASI made Research Triangle Park unique and attracted many new investments and research organizations into the area.

These, I believe, are the core elements of the RTP model that have proven so successful and have been effectively replicated in many parts of the world. Combining the RTP model with my observations above, I believe that several strategies emerge that could help regions become economic centers of excellence:

1.      A concerted and focused initiative of the private, the non-governmental/non-profit, and the academic sectors with significant public sector support and involvement;

2.      The initiative is maintained as largely a non-governmental effort;

3.      Research universities act as magnets to attract industry “by providing a wellspring of knowledge and talents for the stimulation and guidance of research by industrial firms”;

4.      The effort is buttressed by a favorable business climate with rational tax, fiscal, incentive and regulatory policy;

5.      The project is constantly subjected to re-evaluation and re-invention; and,

6.      It is supported by a robust marketing campaign that will communicate the region’s commitments and achievements to interested parties.

 

 

A major impediment to the RTP concept was the American aversion to “Industrial Policy.” Industrial policy consists of government-sponsored economic programs in which the public and private sectors coordinate their efforts to develop new technologies and industries. In the mid-1950s, it was felt that Route 128 around Boston and Stanford Research Park were not planned but simply happened, so there was no play book to follow. And, it was thought, that if government were to seek to develop such a play book the process would lead to unwonted outcomes.

Two distinctions are important here: 1.) RTP was a troika, not a government-led initiative. If anything, the academic sector led the way; and, 2.) Together, the partners in this alliance did find a successful path forward.

THE RTP CONCEPT

Can New Jersey replicate the RTP concept? I believe so. We need look no further than what was accomplished by a neighboring state in the New York Capital district.

At one time, the Capital Region enjoyed a robust manufacturing base that included iconic companies such as General Electric and IBM. Beginning in the sixties, the capital region saw its manufacturing base reduced as companies sought to contain costs by moving operations to lower cost regions within the United States and overseas; e.g., in the mid-1970s IBM established a 600,000-square-foot research facility on 400 acres in RTP. In the early 1990s, in the wake of corporate closures, population decreases and manufacturing relocations, leaders across government, academia, and the private sector recognized that the upstate economy needed a paradigm shift towards leading-edge, high-value technology industries that would transform and drive the economic resurgence of upstate New York for decades to come.

Governor George Pataki played an integral role in helping New York and the Capital Region’s “Tech Valley” emerge to prominence in the world's technology community. Concerned that major employers like IBM and GE were not creating jobs in the state, he and his economic development team engaged in discussions with executives of these and other companies. The conversation extended to the leading educational institutions and economic development professionals throughout the state. The goal was to identify actions New York could take to stem the job loss.

From this discourse a bold strategy emerged. The common vision forged by all key stakeholders was to propel New York State to a leadership position in technology and economic development. Four key drivers comprised the strategy: 1.) Selecting an overarching focus (nanotechnology); 2.) Investing in state-of-the-art infrastructure; 3.) Providing world-class, hands-on education and training which encompassed the entire supply chain; and, 3.) Leveraging public-private partnerships.

Nanotechnology is the engineering of functional systems at the molecular scale. It is a branch of science that deals with quantum particles 1-100 nanometers in size. It seeks to build devices one-thousandth the width of a human hair.

In the mid-to-late 1990s, New Jersey was better positioned than New York to become a leader in Nano-scale science because of the infrastructure and intellectual capital of Bell Laboratories. Because of the bold vision of leaders in government, private industry and academia, New York State advanced ahead of other jurisdictions in the world that at the time were in a lead position in Nanotechnology.

In 2001, the College of Nanoscale Science and Engineering (CNSE) was established at the Albany NanoTech complex founded by the state, SUNY and IBM. CNSE is the first college in the world dedicated to research, development, education, and deployment in the disciplines of nano-science, nano-engineering, nano-bioscience, and nano-economics. Also in 2001, the state and IBM launched the Center of Excellence in Nanoelectronics and Nanotechnology (CENN) with $150 million in funding, $100 million from IBM and $50 million from New York State.

In 2002, International SEMATECH--a consortium of the twelve major computer chip manufacturers in the world--announced that it was creating a $405 million International North Center in Albany. Also in 2002, Tokyo Electron Ltd. announced the establishment of its $300 million Technology Center America at the CENN.

In July 2009, GlobalFoundries broke ground on a $4.2 billion chip plant in Malta.

Then In 2011, New York State entered into agreements providing for investments valued at $4.4 billion over the next five years from five leading international companies to create the next generation of computer chip technology. The five companies involved are Intel, IBM, GLOBALFOUNDRIES, TSMC and Samsung.

To support the project, New York State agreed to invest $400 million in the CNSE over a five year period. The state’s investment will be directed entirely to CNSE: All tools and equipment acquired through the investment will be owned by the college; but utilized by the five companies involved in the initiative, resulting in significant savings to all five chip makers.

By investing in research centers, the state expects to generate matching investments from the chip makers as they seek to move the entire chip manufacturing industry from 300mm to 450mm wafers. The state also believes that IBM and GlobalFoundries will continue to manufacture chips in New York, and will convince TSMC, Samsung, and Intel to consider investing in new fabrication facilities in the State.

Recently Mayor Michael Bloomberg helped forge a partnership between Cornell University and the Israel Institute of Technology (Technion) to create a world-class applied science and engineering campus in New York City. The Tech Campus on Roosevelt Island will combine the excellent academic legacies of these institutions, with Cornell's entrepreneurial culture and deep connection to the city's emerging tech sector and Technion's global leadership in commercialization and technology transfer. The goal of this partnership is to help transform New York City into a world hub of innovation and technology commercialization.

New Jersey could also attract a world class university (like Stanford) along with Asian counterparts such as Peking University and the Indian Institute of Technology to create a dynamic center of excellence in our state. Such a campus would bring intellectual intensity and technology transfer opportunities to New Jersey and create a vibrant entrepreneurial community. This initiative, if managed properly, could help foment a more robust collaboration among all of our universities and the private sector.

While there are many potential locations for such a campus, a location in close proximity to New York City would enable us to leverage the region’s mass transit infrastructure and allow us to be connected to the Roosevelt Island Tech Campus. A Hudson waterfront location would also be more attractive to the best faculty and students in the world because of its proximity to the intellectual, cultural and financial effervesce of New York City.

An important point that we should not overlook is the extent to which New Jersey’s and New York City’s economies are intertwined. New York is one of the few major cities in the United States with a larger population today than it had fifty years ago. And in absolute terms, the New York metropolitan economy, of which Northern New Jersey is an integral part, stands at $1.13 trillion, second only to Tokyo’s metropolitan economy (GDP of $1.19 trillion). There are only 14 countries in the world with bigger economies than the New York metropolitan economy.

What the Puerto Rican poet, Lola Rodríguez de Tió, wrote about Cuba and Puerto Rico, applies equally to New York and New Jersey

Cuba and Puerto Rico are
two wings of a single dove,
they receive flowers and bullets
in a shared and single heart.

It is natural to view New Jersey in opposition to New York State when we are engaged in competition for employment and investments in the region. While we may compete on some levels, we should embrace opportunities for collaboration and coordination.

In terms of our business climate, New Jersey has done a great deal in two years to engage in a vigorous process of improvement. New York State and New York City are also making strides to improve their business climate.

What New Jersey needs now is a grand vision: Like the one that created RTP. Like the one that has attracted billions of dollars and thousands of jobs to Tech Valley. And New Jersey will start on its journey with many more assets than RTP and Tech Valley started with.

If we could create a corresponding investment to the Roosevelt Island Tech Campus on our side of the Hudson River and coordinate our investment with New York City’s, we would help create a vibrant technology corridor that would rival Silicon Alley: We would have established “Research Triangle Park on the Hudson”.

To quote the great Brazilian writer, Paulo Coelho, “When we least expect it, life sets us a challenge to test our courage and willingness to change; at such a moment, there is no point in pretending that nothing has happened or in saying that we are not ready. The challenge will not wait. Life does not look back. A week is more than enough time for us to decide whether or not to accept our destiny.”

 


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