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Pa. lags behind peers in funding its 'innovation economy,' Brookings report says

By Michelle Caffrey  – Reporter, Philadelphia Business Journal

Aug 13, 2019


This article was originally posted in the Philadelphia Business Journal

Ben Franklin Technology Partners of Southeastern Pennsylvania's logo seen at its Navy Yard office.

Pennsylvania has the infrastructure and resources to fuel a vibrant innovation economy, but the state’s lack of investment is holding it back at a crucial time. 


That’s the main message of a new report out Tuesday from the Brookings Institution's Metropolitan Policy Program, which analyzed Pennsylvania’s current state of innovation funding and highlighted 20 state initiatives across the country to put that funding, or lack thereof, in context. 


"Pennsylvania’s innovation economy has gone flat at the wrong time," the report's introduction states.


Commissioned by the Pittsburgh-based Hillman Foundation, the report looked at the entirety of Pennsylvania and found, unsurprisingly, both Pittsburgh and Philadelphia were well above the rest of the state when it comes to the main metrics used to assess innovation, like research and development activity, patent applications and venture capital funding. 


The main question posed to the Philadelphia area, the report’s authors said, is whether or not the region can continue the growth its seen in its innovation world on its own, or does it need the state to increase its support from a policy perspective? 


“We believe that it does,” said Mark Muro, a senior fellow at Brookings’ Metropolitan Policy Program who co-authored the report with Robert Maxim, a senior research analyst. 


“[In Philadelphia,] you have momentum, you have tremendous assets. There’s real progress and excitement, so the counterfactual is, might you be farther along in moving toward that ‘superstar’ status?” Muro said, referring to the race among cities and states to best leverage innovation for economic growth. “Clearly the [Ben Franklin Technology Partners network is] there, and you have some of this programming, but what if it were expanded and invigorated?”


The report details policies implemented across the country both in markets comparable to Philadelphia and in places with more mature innovation ecosystems, like Massachusetts and the Bay Area. A common denominator among those locations is strong state support, Muro said. The Brookings report focused heavily on Pennsylvania’s main innovation funding mechanism, the Ben Franklin Technology Development Authority and its Ben Franklin Technology Partners (BFTP) network. 


The nonprofit operates as both a seed fund and an economic development organization through four regionally focused operations across the state.


When it was first introduced in 1982, BFTP and related policy initiatives established new economic development best practices that drew attention and influenced other states, Maxim said.


“For a long time, the [BFTP organizations] were kind of a gold standard in the U.S.,” he said, adding other organizations, like Maryland’s Technology Development Corp. (TEDCO) and the Maryland Venture Fund, were influenced by BFTP.


Despite the fact that Maryland's economy is roughly half the size of Pennsylvania’s, the report states, TEDCO is funded with $18.5 million in state general funds, and the Maryland Venture Fund has an operating budget of $7.3 million a year. BFTP, in contrast, has seen its state support cut from $28 million to $14 million since 2008, and remain flat.


“We’re an under-funded model, but we still remain a model,” said RoseAnn Rosenthal, CEO of BFTP’s Southeastern Pennsylvania arm. For her, the main question for the organization isn’t whether it remains a model or not.


“It’s about, are you creating the opportunities for people to have jobs, and grow companies that produce wealth for the commonwealth?" she said. "And are those companies addressing issues that are important to the commonwealth?”


She agrees with Brookings’ takeaways, including that, among other initiatives, the state needs to invest in creating an evidence-backed, innovation strategy and invest in existing infrastructure like BFTP to fuel economic growth. If it doesn’t, she said, the state’s progress will only continue to flatline. 


“The demand we’re seeing from Philadelphia is huge, so there’s an opportunity cost to not having sufficient dollars to get more and more companies going,” she said. “The underinvestment will show.” 


The state government agency charged with overseeing economic development funding, the Department of Community and Economic Development (DCED) reviewed the report’s findings as it’s “always exploring opportunities to support and grow this important industry in Pennsylvania,” spokesman Michael Gerber said in an email to the Philadelphia Business Journal. 


He noted Gov. Tom Wolf’s defense of BFTP’s funding during difficult budget years and the PA Business One-Stop Shop, which he said helps removes barriers to entry for entrepreneurs. Gerber also cited the administration's focus on STEM education funding, “which will help supply a pipeline of talent to the tech sector” in the future.


“The Wolf Administration looks forward to working with the legislature and stakeholders to continue to grow Pennsylvania’s technology and innovation sectors in the years ahead,” he said.

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