Technology represents the most significant component in any economic development plan.  It alone can overcome other inherent weaknesses within an economic region such as location, work force and historical lack of business diversity.  The question presented is how to commercialize technology in a manner that most efficiently and effectively contributes to local economic strength.

Past efforts at technology based economic development have often resulted in less than desired success.  My past experience in working with technology businesses, in participation in development of state economic plans, and in conducting research on several technology commercialization models, has led me to draw conclusions on what will and will not work.

I recognize that my comments may be taken as harsh criticism of many economic development programs.  It is not my intent to diminish anyone’s hard work, but rather to point out certain economic realities which represent often insurmountable barriers to technology commercialization.  Through new approaches and use of different economic structures, I believe that this same effort will have much better results.

One common approach to economic development, particularly where there have been significant work force reductions, is to attempt to convert engineers into business people.  This effort fails to recognize that entrepreneurism runs contrary to engineering disciplines and that few individuals have either the natural talent or an interest in engaging in the chaotic life of an entrepreneur.  Too many programs spend too much money attempting to identify the small percentage of engineers who may start businesses, to train them, and to subsidize their start up efforts.  This is not only a low probability endeavor, but it fails to recognize the long lead time before there is any significant result.

Another common approach is to recruit companies from outside the region.  This is usually accomplished through subsidies in the form of tax waivers, low interest loans, or land deals.  Its merits are that it involves proven business activity and the impact is immediate.  The downside may take several forms.  One, the business moves away.  Two, the cost of the subsidy exceeds any economic benefits.  Three, the business does not integrate into the community, either by buying from vendors outside the community or by competing against businesses already existing within the community.  Four, local businesses fail to understand the preferential treatment, causing hard feelings between the government and business sectors.  Relocation does make sense when it serves to bring into the community a critical component within an overall industry.

A third common approach is to groom small businesses for public stock offerings.  This is not so much a conscious effort of economic development efforts, but rather a failure to focus upon alternative forms of capital funding other than venture capital.  As venture capital firms mature, they tend to move away from seed funding and start up ventures, creating the ‘valley of death syndrome’.  Economic development emphasis of venture capital financing limits economic activity to those businesses that are suitable for fund raising through public offerings.  Few businesses legitimately benefit from public offerings.

Today’s economic development efforts must take a world view.  Such efforts must also recognize their own limitations.  In the same manner that one cannot control the weather, an economic development program cannot control world markets.  It can only seek to create a competitive advantage over other economic regions by making best use of its available assets.  This means creating a business community wherein each of its members compliments the other members and the community as a whole.  This perspective is often referred to as ‘stakeholder values’ - recognizing everyone’s interests and the interconnectivity of such interests towards common objectives and goals.

Conceptually, one must first separate the activities which comprise technology commercialization from the business or businesses that will conduct such activity.  This separation allows one to better understand the evolution of the technology as it progresses from concept, to prototype, to production, to product or service.  As the technology passes through each of these stages, it represents a different level of risk of possible failure that it will never reach the marketplace. 

To optimize the commercialization path, different skills and funding are required for each stage.  Economic development programs must recognize these differences and seek to develop these different types of resources.  Programs should be dropped that treat each technology business as an unchanging commodity throughout its entire life cycle.

With regard to each activity that supports each stage of technology commercialization, one or more programs should be adopted and standardized.  This means that a repeated set of tasks or activities are performed to move each technology business to the next stage of commercialization.  Repetition will lead to improvements in efficiency, making better use of scarce resources.

As different programs are adopted, an element of choice should be retained to recognize differences among various technology businesses as to potential growth, characteristics of their particular industry, and varying degrees of risk.  Each business should not be forced into a single mold, but rather a cafeteria of standardized programs would allow each business to select that approach to commercialization that represents the highest probability of success and return on invested capital.  It makes no sense to support only those businesses that are manufacturers of hard goods.  This represents a naive lack of appreciation for service businesses and is biased against businesses that work collaboratively with others through licensing.

Picking winners is a must.  There are not and never will be enough resources to support every technology business ‘wannabe’.  Even among economically viable businesses, economic development programs should invest in those that generate the greatest payback for the entire business community. 

The private sector has a better track record of picking winners than the government or non-profits, although historically such organizations are the sovereigns in allocating economic development funding.  I assume that this is because the private sector is punished when it fails to pick winners by closure as a business enterprise.  This ever present pressure to make the right decision naturally results in better selections.  Any economic development handout should integrate private sector control over picking the recipients.

Finally, all economic development activities must be orchestrated towards the common goal.  This necessarily requires community consensus and involvement in all programs.  The stakeholder mentality is a recognition that in advancing one’s own agenda, that one must also advance the agenda of every other component of the business community upon which one is dependent to achieve one’s goals.  This importance of this mentality is enhanced in the context of staged technology commercialization.  The creator of a new idea must anticipate the needs of every subsequent participant in the commercialization path and every vendor who supplies that participant.

Karl Dakin

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