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Center for Innovation and Growth Blog


Wednesday, April 19, 2006


Gas Prices Should Be Spur to Innovation

Having just filled up the gas tank in both my and my wife's cars, I am painfully aware of the dramatic rise in gasoline prices. Rather than stay depressed about the state of my bank account, however, I'll try to focus on the bright side - the real possibility that we will finally develop new energy sources or more efficient vehicles and machinery in response to the price cues from the marketplace.

The main reason that alternative fuels and energy efficiency strategies have not grown as quickly as would have hoped is that the cost of development and distribution of the new technologies is higher than the cost of maintaining the status quo. Policymakers have tried to deal with this problem by offering subsidies in the form of research grants and tax incentives to try and level the playing field, but these subsidies never reached a level where, in the aggregate, they could successfully change the marketplace. And, for every dollar that governments at all levels have spent to promote new enery sources and energy efficient technologies, the political process provided several dollars in subsidies to the traditional energy companies to encourage them to explore and produce more oil.

One public policy that both conservative and liberal economists agreed would have changed behaviors in the marketplace is the imposition of a tax that permanently raised the price of a gallon of gas to a level that would create incentives to look for alternatives. Some policymakers also proposed using the proceeeds of this tax to fund the research and develop of alternative energy sources. But this policy is simply too radical for the political process, and it has never had a chance of being adopted at the state or federal level.

Now the marketplace has imposed that tax. While the benefits of the price increase will go to the oil companies and not to the government, the effect on the development of new technologies should be the same. Unfortunately, it will take a little while to see the effect, as investors will surely wait to see if this price increase is a long-term phenomenon, as many analyst suggest (usually citing the growing demand from China and the instability in the Middle East as the factors that are contributing to a major shift in the supply and demand for oil), or whether it is a short-term spike in prices that will soon recede. If investors see signs that this is indeed a long-term rise in the price of oil, they will be encouraged to take risks on a wide range of companies moving forward in the field of energy alternatives and efficiencies.

What does this mean for NE Ohio? Good news, if we stay focused. Here's just a few examples:

* We already have a base of researchers and companies working on fuel cell technology. This should be supported and accelerated in any way we can.

* General Motors, which is major employers in NE Ohio and desperately needs a breakout product to regain its long-term health, has invested heavily in ethanol based engines known as E85 (engines that run on a mix of 85% ethanol and 15% gasoline). The same point applies, I assume, to the other domestic auto companies (particularly Ford) that have a major presence in our area. Again, we should see what can be done to partner with these important economic players.

* NASA Glenn has an expertise in energy alternatives, resulting from its research into ways to power spacecraft. While the federal government has been cutting NASA research dollars, it is imperative that the State of Ohio and Cuyahoga County not let the research capacity at the Glenn Center be lost.

Finally, the rise in gas prices should serve as a broader reminder that low-cost, low-polluting energy sources and efficient energy utilization are a cornerstone of a world-class economy. Again, a few thoughts on the broader picture:

* AEP is planning to build a new, state-of-the art electricity generating plant to serve its customer base in central Ohio. NE Ohio must find a way to replace the high-cost, high-polluting plants that continue to be a major part of First Energy's production capacity.

* Every new building project in NE Ohio, including commercial and residential construction, should be "green". Let's make NE Ohio the best region in the world for sustainable construction practices.

* A manufacturing facility that is not state-of-the-art is falling behind in the global marketplace, and will ultimately fail. This is true even if the plant is profitable today. Productivity and energy efficiency are both positive outcomes that result from the installation of new equipment and manufacturing technologies. NE Ohio should rate the age of all its private maufacturing facilities and work, perhaps through MAGNET (formerly CAMP), to constantly lower the average age of the facilties and equipment that make up our manufacturing economy.

The momentous changes caused by rising energy prices have been building for some time. Whether this gasoline price spike is a sign that the change has begun to acclerate or not, our only real hope to sustain a manufacturing economy and rising living standard in the coming decades is to be a leader in energy production and utilization. Let's all think about this as we fill our gas tanks this summer.

Wednesday, April 12, 2006


NASA Glenn an Indispensable Partner In the Future of NE Ohio

Today's front page story in the Plain Dealer on the current state of NASA Glenn is not suprising to those who have been following this issue for some time, but is still quite disturbing. Here's the core of the article:
NASA is now focusing almost exclusively on space exploration and has cut money it spends on research. Including Glenn, four of NASA's 10 federal labs concentrate on research. But about 95 percent of NASA's budget goes for spaceflight missions.

NASA Administrator Michael Griffin has called the agency's research centers underused. "We are not, any longer, a technology agency to any significant extent. Wishing otherwise is nice, but irrelevant," he wrote in a NASA e-mail obtained by The Plain Dealer.
Baldwin-Wallace has many existing partnerships with NASA Glenn, and is working on developing others. But this issue goes well beyond our institutional self-interest. As the Plain Dealer article correctly notes:
Unless Glenn quickly wins more of the space program work it's fighting for, scores of the region's most talented scientists and engineers risk being tossed out of jobs that can't be readily replaced.
If this prediction comes true, then we will lose much of this talent from our region. The cost will not be measured just in terms of their lost salaries, but also in terms of the lost potential for spurring innovation in existing companies and creating new companies.

When I was in Congress, back in 1993-94, I had the chance to serve on the Science, Space and Technology Committee, the committee that, at that time, had oversight over NASA. Most of the members of the committee were loooking out for the interests of the NASA facility in their home regions. Through this experience, I became aware of the extensive support that other states give to their NASA facilities, e.g., Alabama spends huge amounts of money supporting the NASA center in Huntsville, Florida does the same supporting the Kennedy Space Center, and Texas does the same supporting the Johnson Space Center. These states understand that their support is critical to helping the centers gain additional federal support or withstand federal cutbacks.

Ohio has never come close to matching the efforts of other states. After I was back in the State Senate, we set up a commission to be responsible for promoting NASA Glenn and the Wright-Patman Air Force Base in the Dayton area, but I have seen few results from that commission.

It is not too late. "Underused" research space and scientific talent is better than no talent at all. NE Ohio cannot afford to let this asset permanently atrophy. The state and region must step up to help.

We at the B-W Center for Innovation and Growth will do our part. I will keep the public updated on our efforts through this blog.

Eric Fingerhut

Monday, April 10, 2006


Lots of Competition for NE Ohio in Biotech

I am attending the Bio 2006 conference in Chicago today and tomorrow. Bio 2006 is the annual trade conference of the Biotechnology Industry Organization (Bio). Like most conferences of this type, there are a series of breakout sessions on individual topics, large plenary sessions, an exhibition floor, and receptions.

Ohio's bioscience industry is well represented here through Omeris, the state organization charged with promoting the bioscience industry in Ohio. Omeris has an Ohio "pavilion" in the exhibitor hall, was a co-sponsor of the opening reception last night, and will host an Ohio party tonight, at which Governor Taft will be in attendance. I will be saying a few words as well. I also bumped into Baiju Shah, who runs BioEnterprise, NE Ohio's organization to promote biotech development (and his counterpart from Cincinnati"s BioStart, Jean Frankenstein).

Not to denigrate Ohio's efforts, but the overwhelming impression you get from attending this conference is how broad and tough the competition is for biotech funding and investment. Virtually every state in the nation and dozens of countries are represented here, many with a presence much more visible than Ohio's. Cleveland's own Forest City Enterprises is a significant force here, through its Forest City Science + Technology Group subsidiary, which is developing major bioscience parks all over the country, including one here in the Chicago area. It is hard not to leave here chastened by the realities of what it will take to build a biotech industry in NE Ohio that is truly a driver of economic growth for our region.

One last point. If you haven't visited Chicago lately, it is well worth the trip. I went to Northwestern University almost thirty years ago (ouch!), and have been visiting regularly since then because my sister and her family live in Wilmette, just north of the city. I have watched Chicago literally explode with growth over the last decade. While we have argued over convention centers and the lakefront and other potential public investments in NE Ohio, Chicago has done it all. And the private sector has responded, building entirely new neighborhoods of residential and mix-used buildings, attracting businesses and young people in droves. Trust me - if you want to see what innovation and growth can do to reinvigorate a great American city, come to Chicago.

Eric Fingerhut

Friday, April 07, 2006


NE Ohio Must Be Pro-Immigration

I have blogged about the immigration debate in Congress over on my Ohio Senate website (www.makingohiogreatagain.com), but I have grown increasingly frustrated that the debate about this issue seems to be confined to political circles. I could care less who "wins" or "loses" in 2006 0r 2008 because of their position on this issue. What I care about is that the United States establish a policy and send a message that welcomes immigrants and appreciates the role they play in our economy and culture.

I don't need to recite the role of immigrants in building NE Ohio. Nor do I need to remind anyone involved in the technology arena what a central role immigrants have played in the development of the largest new companies over the last quarter century. But we do need to remind ourselves that all our great plans and dreams for this region will be in vain if we are not a magnet for the skilled workers who will help build great companies and unless we are welcoming to workers who arrive with less training but an eagerness to work hard and learn.

I am not involved enough in the legislative process in Washington to comment on the details of the bills, but it is clear that the Senate Judiciary Committee has been working diligently to come up with a bill that would give the United States a pro-immigration policy with a welcoming face to the world. (I have greatly admired the role Ohio Senator Mike DeWine, a member of that committee, has played in this process, even in the face of great political pressure to the contrary.) The House of Representatives, in contrast, has passed a bill that would take a more punitive approach.

I hope that everyone in the economic development world who has access to the media or elected officials will use their access to help make clear that NE Ohio is pro-immigration.

Eric Fingerhut

Wednesday, April 05, 2006


Looking for a "Brain Gain"

We all agree that keeping and attracting talent to this area is the key to growing the economy of NE Ohio. That's why I was pleased to see an article in the Plain Dealer describing an innovative effort by the University of Akron to attract top students from out of state by reducing or even eliminating the premium that public universities generally charge to out-of-state students. Here's the key paragraph:

This fall, Akron will debut what may be the most aggressive reduced-rate program
in the state, available to students nationwide plus U.S. protectorates. Nonresidents with lackluster grades still will pay the full cost. But the university will cut the out-of-state surcharge by 60 percent for good students. It will eliminate the surcharge entirely for the best students who meet stringent qualifying criteria, like being in the top 10 percent of their high school class. Last fall, Akron started a smaller version of the program for students from 11 states with GPAs of 3.0 or better.
Enrollment from those states grew to 82 in fall 2005 from 43 in fall 2004.

As a "defensive" measure, this policy is already being emulated by Youngstown State and Cleveland State.

I'm sure the University of Akron's effort will be criticized by some who see it as unfair to in-state students. But the fact is that many of these top students who come from other states will stay in Ohio, starting businesses, creating jobs, paying taxes, and generally expanding the pool of opportunities available to us all.

Ohio was built by talented, entrepreneurial people who came from every corner of the world to build their lives and families here. We will not succeed in the future unless we continue to be that type of magnet. Thanks to the University of Akron for leading the way.

Eric Fingerhut


Innovation and the Cleveland Municipal School District

One of the things we believe in strongly at the B-W Center for Innovation and Growth is that the need for innovation is as great in the public and non-profit sectors as it is in the private sector. That is why we have devoted so much time and effort to supporting the southeastern Cuyahoga County communities who are considering the merits of combining efforts on fire and emergency services.

No public sector service is as desperately in need of innovation as our public school systems, but no public sector service faces as many difficulties in trying to be innovative. Public school systems are hemmed in on all sides - the state tells them what they have to teach, how many days and hours they have to teach it, what precise geography they can serve, who they can hire and fire, how much they have to pay their workers, how they can raise money, etc.

With this in mind, I have been watching the selection process for the new CEO of the Cleveland Municipal School District with great interest, trying to read the tea leaves and guess whether we can look forward to innovative leadership that is willing to try new approaches or whether we are headed for a period in which we keep doing things the way we are currently doing them - only try to do it better.

I have to admit that my initial reaction was not positive. This is the first selection process undertaken by an appointed school board under the new school governance plan adopted by the state legislature and then later confirmed by the voters. (The first selection process under this new law - the one that produced former CEO Barbara Byrd-Bennett - was conducted by the mayor, not the school board. The law provided that subsequent searches would be conducted by the board with the concurrence of the mayor.) The process was inherently difficult. The previous CEO announced her resignation during a hotly contested mayoral race which ultimately produced the defeat of the incumbent mayor. The new mayor had called for the board to resign so he could appoint replacements, but the board refused, and the new mayor backed down. All of this produced a cautious search led by a board that was occasionally shaky in exercising its authority. The pool of applicants and the ultimate list of finalists was disappointing, particularly given some of the out-of-the-box choices of superintendents that have been made in other cities.

However, the selection of Eugene Sanders, most recently the superintendent of schools in Toledo, does offer some hope that we may be about to see an innovative period in school leadership. First, my personal experience in the Ohio Senate and as a candidate for statewide office gave me a chance to get to know school leaders from around the state. While I do not know Mr. Sanders (at least to the best of my recollection), I do have a very positive impression of the Toledo schools, and a sense that they have tried some innovative initiatives, particularly in the area of teacher quality. Working closely with the Toledo Federation of Teachers, Toledo schools have been a leader in mentoring new teachers, a critical element in teacher quality. (Research is clear that new teachers who get good support in their first years are much more successful than those who do not. Ask any new teacher how hard their first years were, and they'll confirm the importance of mentoring to their success.) Toledo has also been a leader in weeding out teachers who are simply not making it, and helping them see that their careers would be better served moving in a different direction.

But the most promising clue came in a recent article in the Cleveland Plain Dealer which included the seemingly negative information that Mr. Sanders had lost the support of some newly elected Toledo school board members. The reason one member cited for opposing Mr. Sanders was his support of district chartered "community schools" (more commonly known as "charter schools"). The school board member quoted by the Plain Dealer was opposed to community schools of all kinds, including those chartered by the school district itself.

Community schools are public schools that operate outside of the public school bureaucracy. They are commonly run by non-profit or for-profit organizations, though there is nothing that prevents them from being run by public entities. They are open to all students, are non-sectarian, and they operate on the funds that follow the student from the public school district in which the student lives. Community schools have been very controversial in Ohio because of the relatively lax oversight that has allowed a lot of such schools to be chartered by bodies that provided little effective monitoring. They have been much more successful in other states that have taken a more careful apporoach to approving new schools and monitoring their progress.

Despite the flaws in Ohio, community schools, properly run, represent a key source of innovation in public education. Many Clevelanders are familiar with the new Entrepreneurship Preparatory School, founded by John Zitzner of E-City. E-Prep is a community school chartered by the Cleveland Municipal School District (under the leadership of Barbara Byrd Bennet). It has mobilized the support of thousands of donors and volunteers who believe in its unique mission to give students the inspiration and skills to be successful entrepreneurs.

Mr. Sanders' willingness to support district-sponsored community schools, including at the risk of losing his job, is a positive sign, and one that makes me hopeful that he may be the leader we need for the Cleveland schools.

Eric Fingerhut

Tuesday, April 04, 2006


I'm Back

I apologize for not posting over the last week. We had a crazy week in the Ohio Senate last week, and it has taken me a bit to catch up (including posting the political stuff over at my Ohio Senate blog - MakingOhioGreatAgain.com). In fact, I still have a few more items to get up over there.

Fortunately, we are now adjourned in Columbus for the whole month of April, so I plan to dig into the innovation issues that are so critical to our future here in NE Ohio.

Thanks for understanding.

Eric Fingerhut
Director of Economic Development Education and Entrepreneurship

Sunday, March 26, 2006


The Kamm Lecture

Thursday night, Baldwin-Wallace formally launched the Center for Innovation and Growth at a program that inlcuded the annual Kamm Lecture, delivered by famed venture capitalist, David Morgenthaler. For regional economic development junkies, it was a fascinating lecture, chock-full of sound bites that we should be discussing for a long time. We got the full text of Mr. Morgenthaler's speech late Friday, and Ann Conrad will post it on the CIG website this week (we'll let everyone know when the full text is posted).

In the meantime, I thought I would share his conclusions (though the process of getting to the conclusions was in some ways more interesting than the conclusions themselves):

In 1957 Austin, Texas put together a plan for growth. Today, they
have become a dynamic center for new industry, several times the size they were
then. The Research Triangle in North Carolina did the same, and a strong
growth followed.

Northern Ohio is belatedly getting its act together. Many are
beginning to realize we cannot keep riding on the past. No one knows
for sure what will be the high growth industries of the future, but it seems
clear that technology will drive most of them."

We must support and strengthen our research universities, and also
demand they keep improving on technology transfer. They cannot afford to
think like dreamy ivy covered colleges out in the woods – they must get into the
21st century as economic drivers, like M.I.T. and Stanford.

We must improve our schools and demand our children study and behave
better. The public schools I went to 75 years ago would not have tolerated
today’s behavior for a minute. This is a major problem for parents as well
as teachers, and the school system cannot do it all. Our society must
demand its children behave and perform better – or the Asiatics will beat us in
high technology as well as low- cost manufacturing.

We must think regionally – not municipality against municipality.
We must realize the enemy is not the next suburb or Akron, but rather is Boston,
San Francisco, Baltimore and the newer cities, and we must unite to fight them
for the research dollars that come out of Washington.

We must quit fragmenting into so many small organizations that never
get to critical mass, and unite into larger effectively run organizations.
The Cleveland area is known for its many small firms – that is partly good, but
some things require larger mass. The consolidation of organizations into
the Greater Cleveland Partnership is long overdue and gives me hope.
Nortech is the first step I have seen toward a technology plan for the region,
and it must be supported. JumpStart is the most promising incubator we
have seen in the region.

What action steps do I recommend? A lot is starting to happen – carry
it out. Make sure the following is accomplished:

· A regional organization is in place charged with preparing a Regional Economic Development Plan – Is NEO or GCP it? Quit competing locally – the outside globe is the challenge. Unite.

· A Technology Development Plan is prepared. Nortech is a start. Who is responsible for a plan?

· Everybody is responsible for thinking regionally. There is no such thing as only leaking in your end of the boat. Foundations (thank God) are now paying major attention to economic development.

· Strengthen education at all levels – and be dead serious about it.

· Make sure the research universities feel a duty to innovate, and have strong technology transfer functions. Then support them.

· Do what we can to hold existing businesses and attract new ones – and realize this is limited. Businesses will do what they must do to survive in a competitive global market.

· Promote health care services and medical products. This is where we have a relative advantage. Follow up on nanotechnology, MEMS, fuel cells, alternative energy and any other new technologies as they emerge and try to develop a comparative advantage.

· Most growth in the future will be technology driven because that is where innovation will come from. The key to industrial growth is innovation – real innovation – not climate and not just amenities. If we can produce really exciting new technology or concepts, venture capital will be there. I repeat – a misconception is that venture capital causes innovation – it doesn’t, it follows it – anywhere and everywhere.

What about science? It teaches us to understand how the universe works. It
enables technology – which is the application of science to provide something
mankind wants. Then innovation is the process of thinking up something NEW
mankind wants, or will want and can pay for when he sees it. Innovation
may be technology based, or it may not, but in the future increasing amounts
will come from technology. The wheel, the paper clip, the tin can, the
mold board plow, the ballpoint pen, and the many other simpler innovations you
use everyday have already been invented, and most of the new things we are
buying come from – or are enabled by-technology. So, we’d better all
pay more attention to science and technology – it’s our hope to maintain our
leadership in living standards, and China and India have started to train a
frightening number of engineers and scientists.

I recognize that Mr. Morgethaler's "to-do" list for the region isn't dramatically different from what others might suggest right now. That's a good thing - it means we have started to converge around solutions, an important step past just lamenting problems. It also means that we have been listening to people like David Morgenthaler, and trying to take action. But a quick glance at the list shows how daunting it really is to accomplish.

Like David Morgenthaler, we at B-W are encouraged by the steps that have been taken across the region to address the economic decline we have experienced. The Center for Innovation and Growth is one way we hope to contribute to accomplishing some of the items on Mr. Morgenthaler's to-do list. As Peter Rea, the Chair of the Business Division at B-W said when he closed the program Thursday night, the Center is "open for business"!

Eric Fingerhut efingerh@bw.edu