Contents

Introduction. 1

Tech Hubs Characteristics 2

Tech Hubs Program Design. 4

Models for Program Design. 4

Funding and Support 5

Tech Hubs Program Administration. 6

Endnotes 8

Introduction

As the think tank that first proposed the policy idea of a federal regional technology hub program, the Information Technology and Innovation Foundation (ITIF) fully supports the effective implementation of the program and to that end is pleased to offer comments to the Department of Commerce.[1]

ITIF is an independent, nonprofit, nonpartisan research and educational institute that has been recognized repeatedly as the world’s leading think tank for science and technology policy. ITIF’s mission is to formulate and promote policy solutions that accelerate innovation and boost productivity to spur growth, opportunity, and progress.

Tech Hubs Characteristics

1. What are the indicia of a successful future Tech Hub?

The major indicator of a successful hub is that within five to ten years after initial designation the hub transitions into a globally competitive and self-sustaining regional innovation hub, no longer dependent on targeted federal support. There are a number of analogies that can be used to describe this goal. One is that a region develops enough internal innovation strengths that it acts like “black hole” and attracts and generates innovation resources to keep it strong going forward. Another is that the program should be about identifying “AAA” regions (regions that have existing technology strengths but are not yet world-class) and helping graduate them to the major leagues of innovation.

a. What are the defining features of a region that indicate that a Tech Hub will take hold, and how will EDA know if Tech Hubs succeed?

The reality is that most places cannot be successful, self-sustaining tech hubs (or innovation “growth poles”). Places that have a chance of transforming into a sustainable tech hub are those that already have at least moderate tech capabilities: pool of skilled STEM workers, existing tech companies, at least one capable research university, a reasonable airport with enough flights, and at least 1 million people in the metro area to provide urbanization economies.

At the same time there may be regions that have moderate to even large tech assets, but as a share of their overall region’s economy, these assets are not all that significant. In the field of regional economics there is a long tradition of metro typologies. One type are metros that are large, corporate headquarters hubs, such as New York City, Atlanta, Denver, and Dallas. These places already have strong economic engines, and don’t need federal support to attain more balanced national growth. Moreover, because they are so large and because their dominant economic engines are not based on technology it will likely be more difficult to transition them into sustainable tech hubs. In contrast, places that are already more specialized in technology industries will likely have an easier time, politically and institutionally, in transition to the “major league.”

A final factor is the geographic definition of a hub. Again, referring to regional economics, agglomeration economies are key to successful tech hubs, and these are very place-based. Some metros, under federal government definitions, are relatively large geographically, especially compared to their populations (e.g., Pittsburgh, Nashville, St. Louis). Just as it is important for the Hub program to not adopt the “peanut butter” approach and spend money shallowly but broadly, it is important that selected Hubs focus within the region on the areas that are more tech-focused and can benefit most from agglomeration economies.

b. What existing assets and resources that generate, support, and enable technology innovation, demonstration, and deployment should Tech Hubs have? How does a Tech Hub leverage those assets and resources collaboratively?

Tech hubs should ideally have above-average shares of their value-added output (and employment) in technology industries. They should have at least one strong tier 1 research university with strong research capabilities in the technology area the region proposes to specialize in.

In addition, successful hubs should be able to demonstrate high levels of “community capital:” the ability of a region to engage public, private, and non-profit (including higher ed) leaders to work together and energetically to support the hub. This means more than relying on pro-forma letters signed by this or that business organization saying they support the application. Selected Hubs need to be those with firm, deep and energetic commitment, from elected leaders of all the jurisdictions involved, from the top corporate leadership of the region, from leading entrepreneurs, and from key non-profits.

c. When designating Tech Hubs, what additional geographic, demographic, or other place-specific factors or data should EDA consider?

A successful Tech Hub requires robust airline service. It will be hard for a region to move to the “major league” without good air services (reasonable flight costs and at least frequent non-stop flights to major airline hubs). In addition, in order to support the goal of ensuring broader geographic opportunity around the nation, ideally tech hubs would not be located close to already existing successful hubs. For example, it takes about an hour to drive from Greensboro, NC to the successful tech hub of Research Triangle Park. Given scarce resources it would be best to select Hubs that are geographically farther way from either existing strong tech hubs or other metros that have other strong growth engines (e.g., corporate headquarters).

d. Are there specific metrics that EDA should consider for designating Tech Hubs?

The ITIF report proposing the Tech Hub program listed a number of potential metrics in Appendix B.[2]

e. What are the technological considerations that EDA should consider?

At minimum EDA should seek to align the tech hub program with the ten critical NSF TIP Directorate is focused on. However, these are too broad, especially when considering how to ensure the United States leads China in the techno-economic competition. Some areas like “disaster prevention” and cybersecurity have little to do with building up advanced industries that can successfully globally compete. Others, like AI, are areas where the U.S. is already strong in and where existing tech hubs, like Silicon Valley, are strong in. Rather, ideally the program should select hubs that are seeking to specialized in areas of advanced manufacturing, particularly those related to dual-use technologies, as identified by DOD’s Office of Industrial Policy 2020 Report to Congress. In addition, in terms of technology maturity levels, the United States has historically been strong in early-stage innovation (R&D and prototype production), but often these capabilities end up being produced overseas. The United States must end this trend and the Hubs program is a way to do that by focusing on Hubs that seek to at least some level of advanced production.

Overall, the goal of the Hub program should not be just to help some regions thrive. It should be to do that while serving key national goals of becoming more competitive in critical key technologies, especially dual-use ones.

2. How might EDA determine how the size and timing of investments will best accelerate a future Tech Hub's evolution into a global leader in an industry of the future that strengthens its region and our economic and national security? What data and information are important to that determination?

The reality is that if EDA is to move the needle and not just spread out federal resources to a number of places, it will need to make focus the key factor. This means first and foremost not selecting too many hubs, and to the extent legislation ties EDA’s hands, then at least focusing on 5 or so places to receive outsized awards. Second, for this program to be effective coordinating and aligning with other EDA programs and NSF’s new regional innovation program will be critical. The fact that this does not seem to be the case bodes poorly for future success.

As such, it will be critical for other federal agencies to also play a supporting role. It is troubling that NSF’s Regional Innovation Engines program does not seem to be structured or operated in a way that complements the Tech Hub program. Changing that will be critical for the success of Tech Hubs. The original proposal by ITIF, and in earlier versions of legislation envisioned much more funding than what appropriators provided. As such, even with a focus on a smaller number of Hubs (e.g., 4 to 6), absent other federal agencies and programs playing a supportive role, the overall program will likely fail to achieve its mission. This means rejecting the idea that some agencies have that their job is to invest in other places because the Tech Hubs have already received money. Moving “AAA” regions to the major league will require many other agencies to play their part.

3. What are historical and existing examples of successful regional hub programs and what can be learned from these examples?

The federal government has not really done this before in an explicit way. Key federal funding of Route 128, Silicon Valley, RTP, and Austin certainly played important roles in these regions’ success.

Tech Hubs Program Design

Models for Program Design

6. Are there specific workforce and labor development, business and entrepreneurial development, technology development and maturation, or infrastructure activities that EDA should emphasize through the program?

Besides ensuring that the major areas of technology focus align with key national strategic priorities, EDA should let the regions decide how to structure their programs. Regions that submit proposals that suggest the highest likelihood of success should be funded.

7. How should EDA consider worker and community input in Tech Hub design?

As long as the regions focus on the creation of good jobs (e.g., with the significant majority above the median wage in the region) there is little need for worker and community input on the overall design of Hubs. However, worker input, especially from organized labor, can be valuable in ensuring the effective worker training programs.

8. What are some of the most innovative approaches to commercialization at research institutions (e.g., universities, national labs) and what evidence exists on the effectiveness of these approaches?

There is a significant literature on this issue (see for example the report “Innovation U, 2.0”). The key here is simple: is a region willing to pressure its research universities to design and operate research programs aligned with the regional tech hub needs and is the university a willing and enthusiastic partner to contribute to innovation and commercialization in the region. If they are not, the region should not receive funding.

9. What are some of the most innovative approaches to ensuring the growth of globally competitive industries occurs in an inclusive and equitable manner? Where possible, please provide examples of evidence-based and/or evidence-informed investments, interventions, or policies that drive inclusive and equitable outcomes.

As research has shown, the growth of tech regions benefits workers at all levels of the income scale. Winning regions should demonstrate a commitment to ensure that non-college educated workers are provided support to contribute effectively to tech hubs. But the focus should not be principally on inclusivity and equity. The focus should be on winning the global tech race with China.

Funding and Support

11. How should EDA evaluate the extent to which certain technology and innovation sectors are critical to national and economic security? How should EDA take into account whether a consortium would help promote increased geographic diversity of innovation?

As noted above, the list of dual-use technologies from DOD’s Office of Industrial Policy is a good place to start. In addition, the focus should be more on hardware (and “molecules”) than on “bits.” And it should be on technologies/industries that have moderate to high-barriers to entry (low barrier industries are ones the United States could easily get back into if we needed to). Of course, this question would not even have to be asked if the federal government had a coherent and comprehensive national industrial strategy.

12. How can Federal designations and Federal grants be structured to maximize the desired impacts of the Tech Hubs program?

The limited funding can go only so far. One of the factors in success will be the federal designation of places as Hubs. That can give assurances to the private sector that these places are “safe” to invest in. As such, Commerce, and indeed the White House, should make a big deal of the winners: perhaps inviting the lead Mayor and private sector leader from each of the major Hubs supported to a White House event.

Grants should be awarded for at least five years to give all actors involved the certainty of sustained support.

13. What other existing Federal programs can complement Tech Hubs?

As noted above, the program will be less than a full success unless other federal agencies chip in. Most important is NSF’s Regional Innovation Engines program which needs to make complementary grants to winning Hub metros. There can be a natural division of labor between NSF and EDA, with NSF supporting university research capacity upgrades, and EDA supporting investments in the broader tech ecosystem.

To the extent any Hub specializes in clean energy technology, DOE’s Regional Clean Energy Innovation Program should also be complementary. In addition, other federal programs that make grants or loans should be focused on how they can also support the designated Tech Hubs.

14. In addition to existing Federal programs, what types of benefits or support could be helpful for “designated” regional Tech Hubs?

To the extent allowed by statute, other federal programs should incorporate preferences for growth centers or companies and institutions located in growth center metros. For example, in awarding SBIR grants, agencies could use location in a growth center as one factor in decision making. DOL workforce development awards could also be structured to provide some leg up for growth centers. Similarly, the wide variety of federal capital programs (equity and debt) could also be structured to give some preference for companies in Tech Hubs. The General Services Administration could assess all federal land and building assets in designated Tech Hubs, and release surpluses to local governments where they could spur the local innovation economy.

15. What should EDA consider in designing the program for its current appropriation of $500 million given the $10 billion vision in the program's statutory authorization? How should those considerations affect EDA's design of the program now and potentially into future years?

Given the limited funding of the program it will be important to leverage state government support. Applications from states where the state government commits more direct funding than other applications should receive some priority. After all, a successful Tech Hub will growth the state’s economy. The same is true for local governments. Putting their money on the table will be key to success.

17. What criteria should EDA use to shift investments within or between Tech Hubs to maximize the impact of the program?

EDA should be careful to not micromanage the program, especially “within” Tech Hubs. Regions often know best how to drive their own development. Any process of shifting investments within a Hub should be collaborative between EDA and the region. To that point the overall Tech Hub program and the oversight of individual Hubs should be at the Washington, DC level, not the EDA Regional Office level. National programs must meet regional as well as national goals. Only EDA headquarters can do that effectively.

18. What else should EDA consider when building this program, including but not limited to alignment with other Federal programs?

One key to success will be the ability of the winning Hubs to rapidly learn from each other. Many Hubs will face similar challenges, and cross-hub collaboration will be critical. As such, EDA should only designate Hubs where the regional participants are willing to work collaboratively going forward.

Tech Hubs Program Administration

19. How should EDA measure whether the Tech Hubs program has been successful in achieving these outcomes, and how might EDA capture those data?

a. What are the indicia of successful investments under the Tech Hubs program? What, if any, earlier-in-time proxies are predictive of those indicia?

The single most important indicator will be change in value-added in advanced industry output in the metropolitan region compared to the national average. A successful tech hub should see above average growth, at least 5 percent yearly greater growth than the U.S. average. Jobs should not be the indicator because that penalizes regions that focus on more capital-intensive technology sectors. All other indicators are inputs (e.g., new startups, venture capital, R&D spend, etc.).

b. What is a realistic time horizon over which to evaluate the economic development, national security, and global competitiveness impacts of Tech Hubs? Which measures are meaningful over which time horizons (e.g., five, ten, fifteen years)?

The earliest time by which to evaluate success is five years. Ten years is a more realistic time frame. Transitioning to a successful, self-sustaining tech hub takes time.

20. What desirable organizational and institutional changes within and among tech hubs' participants, beneficiaries, and other stakeholders could the Tech Hubs program competition incentivize? How could those changes be incentivized, and how could those changes be measured?

Federal money buys two things. Actual investments on the ground and institutional change and innovation. The latter can be even more important than the former. For the latter, the most important change to incentivize is to get relevant state, county, and local governments to put innovation first. The likelihood of Hub success will be much less unless the lion’s share of institutions in the region “walk the walk” of innovation. This means steps like fundamental and innovative education reform (not more of the same, like increased school funding); embracing smart cities; eschewing anti-innovation regulations; innovative and path-breaking approaches to university STEM education, research and technology transfer (such as tying tenure to commercialization; aligning academic departments to regional technology needs, common, easy-to-implement technology licenses, etc.); and streamlined regulatory approvals for construction. Places that see the Tech Hub program as primarily a source of cash to build some things or hire some people are not likely to gain success. In other words, the most important design aspect of the Tech Hubs program is to make funding contingent on regional institutional innovation. All too often the forces of inertia in organizations and places trump the needs for innovation, even in places that acknoledge the need for innovation. Wanting to win a Tech Hub designation and the funding that accompanies this can be a powerful accelerant for this kind of needed institutional innovation.

21. How can EDA ensure input from, and engagement with, community members in the administration of the Tech Hubs program, particularly for underserved community members?

Again, the principal goal of this program is to support the transition of already existing, but not top-notch technology hubs to world class, sustainable status, especially to help face the China techno-economic challenge. There are a host of other programs, including in other agencies, that are better designed to address underserved community members. The Tech Hubs programs will certainly have some benefits for underserved community members, but EDA should keep the focus on the former goal of competing with China.

22. What are unique challenges faced by Established Program to Stimulate Competitive Research (EPSCoR) state-based consortia or rural consortia that EDA should be aware of and account for in program administration?

EPSCoR has never really succeeded in transitioning mid- and lower-tier research universities to top-tier. Rather, it is a program of regional redistribution. The Tech Hubs program goal should be different: transitioning metro regions (and their key universities) to top tier status and then ending dedicated federal support.

Thank you for your consideration.

Endnotes