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Thread: Biotechnology and economic development

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    Cyburbian hilldweller's avatar
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    Biotechnology and economic development

    Culmulatively state and local governments commit billions to lure Biotechnology firms with the promise of lots of new jobs. Florida has probably spent more than any other state in an attempt at being known as a research mecca. Palm Beach county has basically sold the farm to get Scripps, with lots of aid from the state. St. Lucie appears to be next in line. Within a few years over a billion taxpayer dollars will be spent to pay for land and infrastructure in the South Florida region alone. The biotech frenzy has affected local politicians deeply, leading city and county commissioners to proclaim a new generation of economic prosperity. The truth is we know very little of the impact of biotech on economic development, and the huge taxpayer subsidy appears to be a leap of faith. I'm curious as to what those in the economic development field think of biotech: is it the real deal in its ability to provide jobs? Will it provide jobs for joe six-pack?

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    Cyburbian Cardinal's avatar
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    I have worked with biotech firms. There are several components to the industry. To simplify, there is research, testing, and production. Research operations are typically located near existing premier medical facilities and educational institutions. A person with a bachelor's degree may get a job there, but a master's is more likely. Joe Sixpack? No. Clinical testing facilities are not common, and are mostly found in Atlanta (the CDC is a draw) and Boston. There are some more opportunities for people with an associate's degree, but again, nothing that will produce huge numbers of jobs. Joe Sixpack loses out again. Lastly there is manufacturing. One firm I worked with was typical. They needed a facility to produce a recently approved drug. All but a handful of the manufacturing jobs they would create would be filled by people with a bachelor's degree or higher - biology and chemistry majors. These jobs payed well - but Joe Sixpack would never get one. There is another kind of legal drug manufacturing which is not technical. Those jobs are in Puerto Rico.

    I think you are right in suggesting that biotech is pursued because it is glizy and cutting edge. These are jobs that are perceived as "clean" and "high tech" and "good," which makes it politically popular economic development. In reality, there are not more than a half-dozen truly viable locations for biotech in the country, despite the hundreds of economic development programs pursuing the industry. Arguably, some otherwise non-competitive places could make an impact with very focused programs, such as ag-bio. Most programs are not sophisticated enough to realize their niche, though.

    Meanwhile, states and cities spend millions pursuing industries they can never attract while ignoring real opportunities. I have pointed out that 70% of the hydraulics industry in the United States is located within 100 miles of Milwaukee. Does Wisconsin know this? Do they attempt to build on this strength?

    I wonder if economic developers sometimes spend too much time listening to futurists and other economic developers, and not to the businesses in their own jurisdiction. We might learn a lot from them.
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    Cyburbian Luca's avatar
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    Quote Originally posted by Cardinal
    I wonder if economic developers sometimes spend too much time listening to futurists and other economic developers, and not to the businesses in their own jurisdiction. We might learn a lot from them.
    Not to come over all Jaws-like, but I think this kind of issue shows the limits of public planning/intervention.

    I agree with you that if an area already has pre-eminence in an industry, there are positive network externalities to be captured. Do they encourage local schools to provide skilled labor for this industry? Does the local engineering university have a good program/concentration for hydraulics? maybe getting one or two 'star' names in the field? And as you say, is there anything cheap/unobstrusive the state cna do to remove some niggling problem for the hydrualics industry?
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  4. #4
    Quote Originally posted by Luca
    Not to come over all Jaws-like, but I think this kind of issue shows the limits of public planning/intervention.
    In order to come over all Jaws-like, I'd like to point out that Canada has a shortage of blue-collar labor because of the boom in, of all things, natural resources! It just goes to show you that betting on the latest fad is usually a waste of money that taxpayers could have invested better themselves.

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    Cyburbian Plan-it's avatar
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    As a counter point, you can look at the prosperity that was seen in Silicon Valley, Austin, Texas, and Boston Mass. at the height of the original technology boom. These areas prospered in the technological arena because of their efforts to try and use innovation to drive their economy.

    The difference here is that California, Texas, and Mass. used an educated workforce, research grants, and education to market technological transfer assistance to help drive technological innovation where as Florida is just giving away the farm. In order for Florida (or any other jurisdiction for that matter) to compete in Biotechnology they will need to vastly improve the education of their 25 - 55 labor force and help researchers take their ideas to market if they wish to compete with the more educated economies in the North and West.
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    Cyburbian hilldweller's avatar
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    Quote Originally posted by Plan-it
    The difference here is that California, Texas, and Mass. used an educated workforce, research grants, and education to market technological transfer assistance to help drive technological innovation where as Florida is just giving away the farm. In order for Florida (or any other jurisdiction for that matter) to compete in Biotechnology they will need to vastly improve the education of their 25 - 55 labor force and help researchers take their ideas to market if they wish to compete with the more educated economies in the North and West.
    Build it and they will come- likely from overseas. There is no such thing as a homegrown economy any more.

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    Forums Administrator & Gallery Moderator NHPlanner's avatar
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    I agree with Cardinal and Plan-it....you have to market to the demographic strengths of your area, and in biotech, it's going to be those areas with access to the educational and medical institutions. IMO, Florida is spending money wastefully on trying to attract biotech for what it will get in return in terms of jobs and development.
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    Cyburbian Plan-it's avatar
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    Quote Originally posted by NHPlanner
    I agree with Cardinal and Plan-it....you have to market to the demographic strengths of your area, and in biotech, it's going to be those areas with access to the educational and medical institutions. IMO, Florida is spending money wastefully on trying to attract biotech for what it will get in return in terms of jobs and development.
    In all liklihood, if Florida will not get substantial benefits from their spending on Biotech ED. They will gain employment in the processing and manufacturing of products created through the research and development that has been finalized in other areas. This will increase jobs but it will cost a bundle from the incentives that will be given away. Much like foreign auto manufacturing in the southern states, it is unlikly that Florida will see a major economic benefit from it because it will take 20 - 30 years for the jobs to pay for themselves (income tax) in tax breaks that will be given away. Who knows if those jobs will be there then or if they will be off-shored to a lower cost labor force by then. The metro areas that specialize in the research and development are the ones that make out in this scenario because it costs less money from the state to get R&D jobs (most of the tax credits for this comes from the federal government) and those firms stay in the area and create other innovations and generate other spin-offs that helps to run the creative economy.


    Quote Originally posted by hilldweller
    Build it and they will come- likely from overseas. There is no such thing as a homegrown economy any more.

    You are correct there is no homegrown economy due to globalization of the economy. But Florda does not have the educated laborforce, major research institutions, or top ten medical institutions that drive the biotechnology economy. Thus, they will be manufacuring. So, is it worth it to shell out millions of $ for some moderate waged jobs in an economic sector that is in decline and moving off-shore?
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    Cyburbian Luca's avatar
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    Some will disagree, but one of the things a community/government can do to help its economy prosper is to encourage/fund education/training that will either fortify its advantage in a given industry or attract/increase a fledgling one.

    Obviously, companies can train their own people and do. However, since people are not indentured servants, it’s expensive and potentially a poor return for companies to invest too much in non-company-specific training: they get trained and go work elsewhere. For the kind of transportable foundation/academic knowledge, public subsidy makes sense.

    All told, however, there are major limits to how much the public sector can do efficiently (i.e. without spending more than it is worth). There is a great deal of accidentality to it. Also, just as people can move between companies, they can move around the country and even across countries.

    Just to cite my industry (wholesale finance), the French and Italian (and Indian, and…) university systems churn out lots of people with the right academic background for the interest rates side of banking. The industry is and remains in London, and those people just move there in droves. Fracne/Italy pay, Britain gains. Why London? Originally tax/capital flows reasons but now mostly ‘first entrant’/industrial district benefits and laxer labor laws.

    I understand that in the health care sector this is becoming problematic as Britain is sucking in trained professionals from all over the English-speaking worlds (well, not the US, obviously)
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    Cyburbian hilldweller's avatar
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    Quote Originally posted by Plan-it
    You are correct there is no homegrown economy due to globalization of the economy. But Florda does not have the educated laborforce, major research institutions, or top ten medical institutions that drive the biotechnology economy. Thus, they will be manufacuring. So, is it worth it to shell out millions of $ for some moderate waged jobs in an economic sector that is in decline and moving off-shore?
    Believe it or not, Florida will be a major biotech hub within the next 10-15 years. Scripps, the country's number one biotech research firm, is coming to Palm Beach County and others will follow. I know the age-old caricature of Florida as a poor, underachieving haven for retirees persists in those "elite" locales of the northeast and west coast but it is simply no longer true. Florida is forever changing. New residents come from all over the country and the world, not just snowbirds from the northeast. Economically the state it is doing much better than the nation as a whole with one of the lowest unemployment rates. Huge state investments in higher education are starting to pay dividends. Florida will have both manufacturing and research.

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    Cyburbian Plan-it's avatar
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    Quote Originally posted by hilldweller
    Believe it or not, Florida will be a major biotech hub within the next 10-15 years. Scripps, the country's number one biotech research firm, is coming to Palm Beach County and others will follow. I know the age-old caricature of Florida as a poor, underachieving haven for retirees persists in those "elite" locales of the northeast and west coast but it is simply no longer true. Florida is forever changing. New residents come from all over the country and the world, not just snowbirds from the northeast. Economically the state it is doing much better than the nation as a whole with one of the lowest unemployment rates. Huge state investments in higher education are starting to pay dividends. Florida will have both manufacturing and research.
    You should not call people who question public use of funds elitist. I live in a southern state and do not have a bias. The problem for Florida is that you do not have a "Research Triangle" like North Carolina, Route 128 in Mass, or a Silicon Valley like California, and you are not Austin, TX. The making of the biotechnology economy was already underway 10 years ago. That is when public investment in R&D started paying off. To come into the game this late is to end up with the leftovers. You can look at the history of technological innovation dealing with the silicon economy that occurred in the late 80's and 90's. This trend did show that Florida can be similar to a Boise, Idaho who benefited from innovation occurring in other areas by generating investment for production and manufacturing of products. This is not a slight on Florida. It is a reality of where major research is being done and which areas gain the largest amount of investment capital for R&D.

    I am not trying to be elitist; I just studied this topic a great deal in that my thesis was in Biotechnology investment. I studied what states were investing to further innovation of this technology, where federal research dollars were flowing, and the types, number, and salary of the jobs that were created by these investments. Unfortunately, Florida was not even in the top 10. I am sorry if I am being a realist and bringing an academic argument that counters the marketing that is being performed by the ED Division of Florida.
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    Cyburbian hilldweller's avatar
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    Quote Originally posted by Plan-it
    You should not call people who question public use of funds elitist. I live in a southern state and do not have a bias. The problem for Florida is that you do not have a "Research Triangle" like North Carolina, Route 128 in Mass, or a Silicon Valley like California, and you are not Austin, TX. The making of the biotechnology economy was already underway 10 years ago. That is when public investment in R&D started paying off. To come into the game this late is to end up with the leftovers. You can look at the history of technological innovation dealing with the silicon economy that occurred in the late 80's and 90's. This trend did show that Florida can be similar to a Boise, Idaho who benefited from innovation occurring in other areas by generating investment for production and manufacturing of products. This is not a slight on Florida. It is a reality of where major research is being done and which areas gain the largest amount of investment capital for R&D.

    I am not trying to be elitist; I just studied this topic a great deal in that my thesis was in Biotechnology investment. I studied what states were investing to further innovation of this technology, where federal research dollars were flowing, and the types, number, and salary of the jobs that were created by these investments. Unfortunately, Florida was not even in the top 10. I am sorry if I am being a realist and bringing an academic argument that counters the marketing that is being performed by the ED Division of Florida.
    Well, my post did come across as boosterism and that wasn't my intent. No, I don't work for the Florida ED Division (do you know if they're hiring? )I haven't studied the topic of biotech in much depth but what I wanted to reveal was my suspicion of traditional indicators of economic development as applied to biotech. Though i believe this criticism has some merit it appears you have considerable knowledge of the topic (btw I appreciate your feedback which was the orignal intent of my OP).

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    Cyburbian Plan-it's avatar
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    Quote Originally posted by hilldweller
    Well, my post did come across as boosterism and that wasn't my intent. No, I don't work for the Florida ED Division (do you know if they're hiring? )I haven't studied the topic of biotech in much depth but what I wanted to reveal was my suspicion of traditional indicators of economic development as applied to biotech. Though i believe this criticism has some merit it appears you have considerable knowledge of the topic (btw I appreciate your feedback which was the orignal intent of my OP).
    If Florida is getting a mojor R&D facility that is great news for your economy. Hopefully, Jeb can convince his brother to send some additional R&D money your way.
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  14. #14
    Quote Originally posted by Plan-it
    As a counter point, you can look at the prosperity that was seen in Silicon Valley, Austin, Texas, and Boston Mass. at the height of the original technology boom. These areas prospered in the technological arena because of their efforts to try and use innovation to drive their economy.
    But that doesn't mean it's a good idea to target industries with privileges because it's the "industry of the future" or something of the sort. Firstly nobody knew how important technology would be when Silicon Valley got started. It's only after it got big that others started hopping aboard the bandwagon, and pushed the industry to an excessive size. In the process they hurt perfectly good homegrown industries who had to pay comparatively higher tax rates, thus they hurt their region more than they helped it. Around here the government loves to create special subsidized geographical areas. We have the "Multimedia City" where a bunch of videogame companies have moved, and they followed with a "eCommerce City" that was a total catastrophe and is still a vacant lot aside from two office towers. They claim it worked because companies moved there, but there's no way to prove these companies wouldn't exist without the special privileges.

    You never know what the next big thing is going to be. If you did, you could be the richest man alive. Canada's economy is being turbocharged by the boom in natural resources. Guys with no education can go to Fort McMurray and make 100,000$C a year. That's real wealth-building and the government never saw it coming. Very few people did.

    You know what's most likely to be foundation of America's future wealth? Agriculture. Two and a half billion Asians aren't going to be content eating rice every meal for much longer. Add to that growing land demand for biofuels and there's a bright future out there for a guy who knows how to work the land efficiently. America has the most arable land of any country in the world. If you were smart you would start training people with biology degrees.

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    Cyburbian Plan-it's avatar
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    There are some great graphics in this article I found in the Boston Globe today. The story is OK but there are a number of graphics that accompany it including:

    Investment Capital by Region (Amount and number of venture capital deals by US Region)
    Largest Deals (10 largest R&D deals in the Country/Biotechnology & Technology)

    http://www.boston.com/business/artic...entrepreneurs/

    These charts help to break down what I was talking about earlier. The item to notice in the Largest Deals chart is how technology and biotechnology compete for limited private R&D dollars.


    Jaws...R&D is supported by both the private and public sectors. America supports these industries because we do not have the natural resource wealth of Canada. The federal government has a large role on the macroeconomic make-up of the economy. Right now, oil/gas/coal companies are making a killing (pun intended) because the federal government is subsidizing the industries through policy changes, tax breaks, and a give-away. The problem with this is that these industries are finite because of a fixed amount of resources. The only way to expand upon the type of resources we harvest is to invest in R&D so that new processes/devises can be generated and marketed to the mass market (i.e. affordable). Therefore, advancement in technological innovation provides new areas of science, biology, etc.; thus new market segments. As you noted, no one could have suspected the explosion of the silicon economy, well everyone except the U.S. Department of Defense that helped fund the basic processes that led to microcomputing. After the basics of the technology were realized, the private sector took over and brought that innovation to market.
    Last edited by Plan-it; 06 Feb 2006 at 1:03 PM.
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