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Notes from Innovation Policyworks
One of the most difficult challenges in my business is when you have to tell a client that their baby is ugly. By that I mean, some clients get an idea in their head, and start telling people about it, and before you know it, the idea has a lot of traction and emotional support. But, the client hasn't really done their homework, and the fatal flaws haven't been dealt with. By the time we get there, the idea has a lot of momentum, and it's very difficult to fix.
 
The worst examples of these types of ideas emerge when someone gives a municipality or community an old building to use. Next thing you know, everyone has decided that an incubator or innovation center or co-working center is the right use for the building. This type of idea seems great because everyone loves ribbon cuttings and similar photo ops, and funding agencies seem to think new construction projects are better than giving out operating funds.  
 
Remember, no one launches a consumer product without a lot of customer testing beforehand. It's time to adopt these practices in economic development. READ MORE

Cathy
Angel Tax Credits Reviewed
A recent review of Maryland's financing and incentive programs for the Maryland Economic Development Commission and the Maryland Department of Commerce conducted by the Center for Regional Economic Competitiveness (CREC), included an look at Maryland's Biotechnology(BIITC) and Cybersecurity Investment Incentive Tax Credits (CIITC) conducted by senior fellow Dr. Catherine Renault.
 
Currently, 26 states have 38 programs that are some version of angel or venture capital investment tax credits. Only Arizona has a biotechnology-only program like Maryland's, although it has reached its statutory cap and has not been extended. Across the 26 states, the tax credits allowed are generally 25-35 percent, except one state at 45 percent (Minnesota) and four states at 50 percent: Kansas, Kentucky, Maine and Maryland.
 
Our review found that the Maryland angel tax credit focused exclusively on biotechnology companies is quite generous, while the CIITC is a unique tax credit, both because of the sector involved, and because the credit goes to the company, not the investor.
 
Do angel tax credits really make a difference? The few studies of angel tax credits suggest that there is a positive correlation with entrepreneurial activity, and that the decisions of individual investors are influenced by the availability of the credits.  However, design decisions made in the legislature and by program managers can dramatically impact the effectiveness of these credits. 

US Venture Capital Has Peaked
US Venture capital financings peaked in 2014, and have since fallen, according to the 2015 Annual US Venture Industry by PitchBook. However, the plateau in 2015 still produced $77.3 Billion in investments in around 8000 deals. There was a very large drop in the third and fourth quarters of 2015 in angel and seed investments, suggesting that valuations were getting out of hand. So, some are calling this a "correction," a scary word indeed. This change in the market was driven to some extent by a major drop in VC-based IPOs with only 73 in 2015 after a high of 122 in 2014. Acquisitions remain key, with 679 acquisitions of venture-backed companies in 2015 but are still down from a high of 746 deals in 2014.  To learn more, read HERE.
Big Trends
I though you would be interested in this list of important trends from the Pew Research Center. Use these facts to entertain your friends!
  1. Just 19% of Americans say they can trust the federal government always or most of the time.
  2. The American middle class is shrinking, at only 51% of households.
  3. More immigrants from Mexico are leaving the US than coming into the country.
  4. Almost 60 percent of Americans say changes are needed to give blacks equal rights to whites.
  5. Millennials surpassed Baby Boomers in sheer numbers - there are 75.3 million Americans ages 18-34 compared with 74.9 million Baby Boomers.
  6. Islam will grow faster than any other major religion in the world over the next forty years.
  7. The number of US adults who do not identify with any organized religion is growing, now up to 22.8% of the population.
  8. Scientists and the American public are often far apart when it comes to views about science-related issues. For instance, 87% of scientists believe climate change is mostly due to human activity, while only 50% of US adults agree (and a much smaller percentage of Republicans).  
  9. Multiracial Americans account for 6.9% of adults and growing 3x faster than the population as a whole.
  10. A record 14% of the US population is foreign born, compared with just 5 percent in 1965. Among immigrants who have arrived since 1965, nearly half are from Latin American and one-quarter are from Asia.
Check out the reports behind these stats HERE.

Moore's Law Confirmed
  • The average microprocessor in 2013 was 1.5 million times faster than the average microprocessor in 1971.
  • Information technology, powered by Moore's Law, provided nearly all the productivity growth of the last 40 years and promises to transform industries such as health care and education.
  • Shrinking silicon transistors is getting more difficult as we approach fundamental atomic limits, but varied innovations in materials, devices, state variables, and parallel architectures will likely combine to deliver continued exponential growth in computation, data storage, sensing, and communications.

    Source: Bret Swanson, "Moore's Law at 50: The Performance and Prospects of the Exponential Economy," American Enterprise Institute, November 10, 2015. Read it HERE.

Small Cities Rule!
To those of us who live in small town USA, this should not come as a big surprise, but small cities are the hearts of their respective counties, as well as hubs of employment, retail, health care and education. A new report from the Federal Reserve Bank of Atlanta shows that many small cities are growing and attracting new investments. They have compiled a Small City Economic Dynamism Index to help us look at the data. Some familiar names among the most dynamic cities are Charlottesville, VA, Tuscaloosa, AL and Fargo, ND, all with major universities. Read more HERE.

Wind Facts
Here in Maine it's become fashionable to denigrate wind power, but here are the facts.
  • In the past six years, the cost of wind power has dropped by two-thirds, and is still decreasing.
  • American wind power now supplies more than 18 million homes. Iowa, South Dakota and Kansas now get more than 20% of their electricity from wind, with nine other states over 10%.
  • Today, 73,000 jobs are generated by the US wind industry, and projected to grow to 380,000 by the US Dept of Energy.
 
Source: AWEA

Teams, Creativity and Innovation
A meta-analysis of research about creativity and innovation yields several key lessons.
 
A compelling vision: Teams are more innovative when members have a common understanding of team objectives and are committed. Clear objectives can create meaning and motivation for team members.
 
Goal interdependence: The extent to which team members can meet their goals by having the other team members achieve theirs. Achieve this interdependence by setting objectives than must be achieved collectively.
 
Support for innovation from the top: Teams are more innovative when managers expect and approve of innovation, support members when attempts are not successful, and rewards new ideas and implementation. This means encouraging risk and expecting failures.
 
Read more HERE.

In This Issue - February 2016

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Quote of the Month 
 
"The way to get
good ideas is
to get lots of ideas and throw
the bad ones away." 

Linus Pauling

Zappos and Teal

So maybe you've heard about the experiment in corporate structure going on at Zappos, called "Teal." Simply put managers are no longer valued at this online shoe and clothing store. Based on the book Reinventing Organizations by Frederic Laloux, Zappos CEO Tony Hsieh's new experiment with corporate culture is designed to eliminate people managers by April 2015. As a result of the change, 14 percent of the company, 210 people, took the CEO's offer to leave. Of these, 20 of them were managers. Read THIS fascinating account of the transition, and see what you think. Inc. Magazine is far less charitable.
State Ethics and Integrity

While we'd all like to think our state government is organized to protect corruption and expose it when it occurs, the reality of state transparency and accountability initiatives is not very encouraging. A State Integrity Investigation by the Center for Public Integrity found that in 2015, only three states scored higher than D+ and eleven flunked (including Maine!). The Center for Public Integrity was founded in 1989 and is one of the country's oldest and largest nonpartisan, nonprofit investigative news organizations. Their mission: To serve democracy by revealing abuses of power, corruption and betrayal of public trust by powerful public and private institutions, using the tools of investigative journalism.  Check out your state HERE.

In Growing Economies, Some People Are Left Behind
If you want one explanation why so many people seem to be very, very angry this election season, look no further than this report from Brookings. When assessing overall economic growth and prosperity, Brookings also looked at whether standards of living have improved for all people within metro areas. Looking at the top 100 metros in the country, Brookings found that relatively few areas experienced growth in economic inclusion, although most experienced growth and prosperity overall. In general, it appears that middle-class economic gains don't necessarily translate into better outcomes for those in the bottom tier of income. Check out your city HERE

Envisioning Maine
This book of essays by Maine's leaders shows the way forward. Buy your own copy at www.envisionmaine.org. 

Dr. Renault's essay talks about the importance of an innovation culture to support economic growth. 
 
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135 Maine Street, Suite A-183 Brunswick, ME 04011 207.522.9028

Innovation Policyworks enables economic development officials at state, regional and local levels make better, data-driven decisions by providing expert research, analysis and recommendations. Our clients see innovation and entrepreneurship as critical elements of their economic development strategy, and are developing new programs or policies, and/or evaluating existing ones. 


Dr. Catherine S. Renault has been delivering innovation-based economic development results in rural states for 25 years, most recently as science advisor and Director of the Office of Innovation for the State of Maine. Cathy is starting new projects with Missouri Enterprise and Maine-based Midcoast Magnet.
For a list of selected projects, see www.innovationpolicyworks.com/projects.