Rochester Higher Education Steering Committee Evaluating Higher Education Institutional Impacts

Rochester Higher Education Steering Committee

Evaluating Higher Education Institutional Impacts

Background

• Simon J. Tripp– Principal - Impact

Economics, LP– Director of Research &

Planning and Special Consultant – Battelle Memorial Institute Technology Partnership Practice

– Co-founder of Tripp, Umbach & Associates, Inc. and Tripp Umbach Healthcare Consulting.

• Specialist in– Economic and social

impact analysis– Regional economics– Technology-based

economic development planning and strategy

– University and R&D driven economic development and commercialization

– R&D core competency assessment

Some project examples

• Economic Impact– Academic medical

centers– Colleges and

universities– Hospitals and health

systems– Development projects– Research and

development

• Economic Development– Regional development

plans– Technology-based

economic strategy• Biosciences• Advanced

Manufacturing• Information Technology

– Program development and evaluation

Current Projects• Technology-based economic development strategy (State of Ohio)• Technology-based economic development strategy (Pittsburgh)• Bioscience technology park planning and assessment (University of

Southern California)• Statewide economic impact assessment (University of Nebraska

Institute of Agriculture and Natural Resources)• Planning and R&D commercialization study (Iowa State University

College of Agriculture and Center for Crops Utilization Research)• Economic impact assessment of US-AID funded crop-development

programs for Africa and Central America• Bioscience and healthcare development strategy (South Dakota)• Civic design program evaluation (The Heinz Endowments)

Rochester Experience• Mayo Clinic/Mayo Health System economic impact• Regional economic analysis (Olmsted County)• Advisor to Tripp Umbach on Minnesota Partnership impact project

Economic Impact Analysis

ForwardEffects

BackwardEffects

LocalSpending

Labor

Supplies

Utilities

Building

Mul

tiplie

r E

ffect

(Lo

cal R

e-sp

endi

ng)

Total Impact(Backward Linkage)

R&D

Education

Outreach& Service

Extension

Volunteerism

Consulting

Q of L Events

Image

BusinessFormation

Private returns

Social returns

BusinessGrowth/Retention

BusinessAttraction

The Basic Structure of University Impacts

http://www.umn.edu/

ForwardEffects

BackwardEffects

LocalSpending

Labor

Supplies

Utilities

Building

Mul

tiplie

r E

ffect

(Lo

cal R

e-sp

endi

ng)

Total Impact(Backward Linkage)

R&D

Education

Outreach& Service

Extension

Volunteerism

Consulting

Q of L Events

Image

BusinessFormation

Private returns

Social returns

BusinessGrowth/Retention

BusinessAttraction

Mayo Clinic EconomicImpact Study

Minnesota Partnership forBiotechnology andMedical GenomicsImpact Projections

External research funds attracted to Ohio

OARDC Research

and Development

State of Ohio research funds

Commercial research funding from Ohio industry

Commercial research funding from external industry New

products, discoveries and solutions to problems

Licensing of intellectual property

Incubation and generation of new businesses

New crops and products for Ohio producers

Improved crops and products for Ohio producers

Environmental protection and remediation

Enhanced rural and urban quality of life

Improved production technologies

Jobs, output, income and gov’t revenue

New bio-based products/ biotechnology

Ohio-based licensees. Open new markets, generate new revenue streams, enhance competitiveness.

New Ohio business enterprises. Open new markets, generate new revenue streams, enhance competitiveness.

Enhanced income streams, product lines, productivity and income for Ohio’s agriculture/agribusiness



Enhanced position of Ohio in rapidly emerging biotechnology sector. New products, companies and associated potential.

Enhanced environment, reduced remediation costs, marketable technologies and processes

Maintain social fabric, reduce rural poverty, maintain rural quality of life and traditions






Jobs, output, income, gov’t revenue, reduced costs

Reduced negative costs

Function Benefits ImpactsOSU - OARDCSpending and Functional Economic and Social Impacts

OSUExtension

Agriculture and NaturalResources

Emerging trends & needs

Technology education and introduction

New crops and products/diversification

Marketing and business development

Jobs, economic output, income and government revenue

Intelligence to drive applied OSU research to meet emerging Ohio ag./env. needs.

Open new markets, generate new revenue streams, enhance competitiveness.

Enhanced productivity and income streams, for Ohio’s ag./env. producers and processors

Enhanced employment opps and productivity

Improved social conditions and economics

Enhanced public health

Reduced social and economic problems

Maintain ag. and env. sector sustainability through multiple generations

Function Benefits Impacts

Community Development

Family and Consumer Sciences

4H-Youth Development

Techniques and skills education

Federal funds to OSU Extension

State of Ohio support funds

Ohio County support funds

Enhanced productivity and income streams, for Ohio’s ag./env. producers and processors

Open new markets, generate new revenue streams, enhance competitiveness.

Marketing and business development

Business retention and expansion

Job training

Leadership development/visioning

Public policy and issues assessment

Family life

Nutrition & food safety

Health & Wellness

Family budgeting

Youth-at-risk programs

Character and self-esteem building

Skills development

Future practitioners development

Attract and develop new economic development engines for communities

Maintain and enhance community economic base and economic development

Economic/community development strategy and sustainable development leadership

Analysis, solutions, advocacy to improve communities

Enhanced public health

Improved economic sustainability

Youth motivation, enhanced educational attainment and reduced social problems

Improved personal conditions and economics


Enhanced Ohio community sustainability

Enhanced Ohio community sustainability

Reduced negative costs


Directextensionspendingimpact

Indirectimpact

TotalSpending

impact

Sp

en

din

g im

pa

cts

Functionalimpacts

OSU ExtensionSpending and Functional Economic and Social Impacts

The Impact on Business Growthand the Economy

Rochester Key Impacts to Examine

• Business retention and expansion– Advanced workforce (education impacts)– Product development/R&D (R&D impacts)

• New business formation– Advanced Workforce– Licensing and entrepreneurship

• Business attraction– Advanced Workforce– R&D partnerships– Clustering

Must design not only a campus, but a system for knowledge transfer and value-added capture

High-proteinsoybeancultivar

developed at the OARDC








grown onOhio farms

High-proteinsoybean

processedby Cargill in

Ohio


grown onOhio farms


grown onOhio farms

High-proteinsoybean


Ohio

Branded soyprotein products

producedand marketed

Best result = licensingrevenues back to OSU.

Negligible employment generation

Best result = licensingrevenues back to OSU, and

farm revenues. Farmand farm supplier employment supported.

Best result = licensingrevenues back to OSU, farm revenues,

value-added processing revenues.Significant employment generated.

Best result = licensing revenues backto OSU, farm revenues, value-added

processing revenues, value-added endproduct revenues.

High levels of employment generated.

+

+

+

+

+ +










grown onOhio farms

High-proteinsoybean


Ohio


grown onOhio farms


grown onOhio farms

High-proteinsoybean


Ohio

Branded soyprotein products

producedand marketed

Best result = licensingrevenues back to OSU.

Negligible employment generation

Best result = licensingrevenues back to OSU, and

farm revenues. Farmand farm supplier employment supported.

Best result = licensingrevenues back to OSU, farm revenues,

value-added processing revenues.Significant employment generated.

Best result = licensing revenues backto OSU, farm revenues, value-added

processing revenues, value-added endproduct revenues.

High levels of employment generated.

+

+

+

+

+ +

OARDC SoybeanImprovement

Platformgenerates a high-

oil content soybean

High-oil contentsoybean produced

on Ohio farms

Soy oil extractionby an Ohio

processing plant

Ohio biorefineryproduces biodieselfrom soybean oil

and methanol

OARDC TomatoImprovement

Platformgenerates a high-lycopene content

tomato

High-lycopenecontent

tomatoes producedon Ohio farms Lycopene

extracted fromtomatoes

Lycopene extractiontechnology developed

by OSU/OARDCscientists and

engineers

Lycopene integrated asingredient in

Ohio-producedfunctional food

Lycopenemanufactured into

nutraceutical product

OARDC FoodSafety Platform

invents rapidmicrobe detection

system

Ohio producermanufacturers

microbe detectionsystem

Ohio producermanufactures

consumables usedwithin detection

system

OARDC AnimalImprovement

Platformidentifies beef

marbling geneticmarker

Ohio start-upcompany formed

to providegenetic testing

service

Ohio company spin-off created toproduce fielddiagnostic kits


consumables usedwithin diagnostic

kits

OARDC SoybeanImprovement

Platformgenerates a high-

oil content soybean

High-oil contentsoybean produced

on Ohio farms

Soy oil extractionby an Ohio

processing plant

Ohio biorefineryproduces biodieselfrom soybean oil

and methanol

OARDC TomatoImprovement

Platformgenerates a high-lycopene content

tomato

High-lycopenecontent

tomatoes producedon Ohio farms Lycopene

extracted fromtomatoes

Lycopene extractiontechnology developed

by OSU/OARDCscientists and

engineers

Lycopene integrated asingredient in

Ohio-producedfunctional food

Lycopenemanufactured into

nutraceutical product

OARDC FoodSafety Platform

invents rapidmicrobe detection

system

Ohio producermanufacturers

microbe detectionsystem


consumables usedwithin detection

system

OARDC AnimalImprovement

Platformidentifies beef

marbling geneticmarker

Ohio start-upcompany formed

to providegenetic testing

service

Ohio company spin-off created toproduce fielddiagnostic kits


consumables usedwithin diagnostic

kits

OSU Extension provides introduction to technologies and new crop introductions, facilitates production on farms and in processing plants, assists in industrial process improvement, workforce development and in business development and marketing services

Why a research university?

• “The empirical evidence consistently supports the notion that knowledge spills over from university research laboratories and from industry R&D laboratories as well. Location and proximity clearly matter in exploiting these knowledge spillovers”

David Audretsch

The key is building from tacit or “sticky” knowledge. Specialized knowledge versus information.

Some baseline numbers to consider

• Rule of thumb in university technology transfer is that for every 100 invention disclosures, ten patents and one commercially successful product result.

• Sponsored university research is big business at $30 billion in 2000. 58% of this is Federal Government funded University-based research sponsored by industry stood at $2 billion in 2000.

• Physical sciences get 10% of the $30 billion, engineering disciplines (including computing) get just under 20%. Life sciences get the big share, with well over 50%.

• More than 70% of all industry patents cite publicly funded papers.

• AUTM (1999) reports that 82% of firms formed around university licenses operate in the same state as the university that provided the license.

• Circa 5% of venture capital backed firms are very successful, and another 30% are moderately successful.

• Most university technology transfer operations do not break even. Their licensing revenues are not sufficient to cover administrative costs and the costs of filing and maintaining patents.

• Between 40-60% of biotech companies are initially formed by academic scientists.

Top US Corporate Patent Classes• Surgical instruments• Biology of multi-cellular organisms• Surgery: light, thermal and electrical

apps• Surgery: application, storage and

collection• Prostheses• Computer and digital processing• Data processing• Special receptacle or package• Telephone communications• Communications: directive radio wave• Chemistry: molecular biology and

microbiology

The primary innovation areas in the US are a good match to the intended technological focus of the new University in Rochester.

Entrepreneurial Environment

• Entrepreneurship is distinguished by novelty and dynamism

• Innovation-driven development expands the potential output of the economy, rather than moving output from one business to another

• US competitive advantage lies in the creation and rapid exploitation of new ideas

• Public policy and governance are critical shapers of an entrepreneurial environment

The Impact of Education


• Private Returns to Education– The IRR on private investment in an undergraduate

degree is 11.8% to 13.4%– 7.2% Masters and 6.6% PhD– (gets lower as go higher because IRR’s are cost based and individuals are putting off

current income as they pursue higher degrees)

• Social (Public) Returns to Education– The rate of public return on investment in

undergraduate education is circa 11.6% to 12.1%– Expect this is very conservative because of many

non-calculated societal benefits.

• Estimates show 25-40% of national income growth is attributable to higher education – mostly through the application of knowledge/R&D.

• Quality of institution can add 10-15% to private returns

• Returns vary greatly by field of study – ranging from 20%+ for professional fields such as medicine, to negative (for clergy).

• Good discussion in – “The Economic Value of Higher Education” by Larry Leslie and Paul Brinkman, published by the American Council on Education.


$0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000

Less Than HS Diploma

High School Diploma

Some College, No Degree

Associate Degree

Bachelor's Degree

Master's Degree

Doctorate Degree

Professional Degree

After-Tax Income Taxes

$95,700

$79,400

$59,500

$49,900

$37,600

$35,700

$30,800

$21,600

Source: US Census Bureau, 2004

Median Earnings and Tax Payments by Level of Education, 2003.

0.741

1.17 1.23

1.731.98

2.65

3.36

0

0.5

1

1.5

2

2.5

3

3.5

4

Less Than HSDiploma

High SchoolDiploma

SomeCollege, No

Degree

AssociateDegree

Bachelor'sDegree

Master'sDegree

DoctorateDegree

ProfessionalDegree

Ear

ning

s R

atio

Expected Lifetime Earnings Relative to High School Graduates, by Education Level

What it takes to realize university-driven technology-based economic

development

Three elementswork together to

achieve R&D-basedbusiness and economic

development

Technology

Talent Capital

Innovators, skilled technical workforce,business development professionals,entrepreneurs

Pre-seed, seed, angel and VC

Technology and R&D infrastructure.

“In general, two factors are associated with early institutionalization of technology transfer: the presence of a medical school and the status of the university as a land grant institution.”

Maryann FeldmanAmerican Research Universities and Technology Transfer

Most commercially valuable university intellectual property arises from biomedical research.

Mowery et al, 1999Feller et al, 2002

Mechanisms of Industry/University Interaction

• Formal– Sponsored research agreements– Licensing of university intellectual property– Formation of spin-off companies

• Informal– Faculty consulting– Industry hiring of students– Knowledge trading among friendship networks

The Questions

• Will a university campus dedicated to advanced education and R&D stimulate business growth and investment in Rochester?– Yes

• What will the ROI be?– Depends on many factors (research mix,

commercialization imperative and incentives, entrepreneurial environment, skilled workforce, capital availability, etc.)

• Where will the skilled talent come from?– Major start-up packages attracting “stars”– Top student talent attracted to prestige people

and institutions– State-of-the-art facilities and equipment– Funding support and subsidies– Attracting scarce domestic students– Rochester Q of L– Multiple clustered employers– Entrepreneurial culture– Capital

• Risks of not making the investment?– Innovation economy needs innovation

engines (so risk is not participating in the part of the economy generating growth)

– Technology, talent and capital are mobile; must anchor with tacit, “sticky” knowledge. (so the risk is not attracting and retaining talent.

– Spin-off enterprises largely locate close to source of knowledge (so risk is not being the source of knowledge)

– Mayo and IBM are multi-location organizations (the risk is they grow elsewhere instead of Rochester).

• What will be the drivers of a high ROI?– Funding sufficient to attract the best R&D talent

(human capital)– Highly competitive R&D facilities– Domestic students– Favorable entrepreneurial policies and

procedures– Creation of celebratory and supportive

entrepreneurial culture– Very early stage pre-seed funding through

venture capital availability– Business spin-offs, licenses and technology

captured and transferred locally– Branding and image

Conducting your impact study

• Be conservative (the numbers will be large, keep them easily defensible)

• Present multiple scenarios

• Outline all assumptions and data sources

6 Jaycee DrivePittsburgh, Pennsylvania 15243

Telephone: 412-276-1986Fax: 412-276-1934

www.impacteconomics.comE-mail: [email protected]

Documents

Rochester Higher Education Steering Committee Evaluating Higher Education Institutional Impacts