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Meeting the Economic Imperative to Advance Technology Development in West Virginia
Meeting the Economic Imperative
to Advance Technology Development
in West Virginia
An Assessment and Development Plan for the
West Virginia Education, Research and
Technology Park
Prepared by: Battelle Technology Partnership Practice
in collaboration with CH2M Hill
Prepared for: The West Virginia Higher Education
Policy Commission
November 17, 2010
Battelle does not engage in research for advertising, sales promotion, or endorsement of our clients’ interests including raising
investment capital or recommending investments decisions, or other publicity purposes, or for any use in litigation.
Battelle endeavors at all times to produce work of the highest quality, consistent with our contract commitments. However,
because of the research and/or experimental nature of this work the client undertakes the sole responsibility for the consequence
of any use or misuse of, or inability to use, any information, apparatus, process or result obtained from Battelle, and Battelle, its
employees, officers, or Trustees have no legal liability for the accuracy, adequacy, or efficacy thereof.
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Meeting the Economic Imperative to Advance Technology Development in West Virginia
Creating a 21st Century Signature Center for Commercialization and
Applied Research in Energy, Chemicals and Materials Technologies
for West Virginia
On December 15, 2010, the West Virginia Education, Research and Technology Park begins formal
operation under the auspices of the Higher Education Policy Commission. This is an unprecedented
opportunity for advancing technology development and the creation of high paying, high quality jobs
in West Virginia.
From day one, the West Virginia Education Research and Technology Park will pay critical dividends for
economic development in the state. The state’s actions preserved 550 high paying, high quality jobs in
West Virginia, which pay an average of $81,900 in salaries and wages. The economic multipliers of this
retention are substantial, as detailed in this report—contributing an additional 1,096 jobs and
generating a total of over $15 million in tax revenues for West Virginia.
Still, it is the long-term potential for creating an
innovation and technology development driver for
A recent update to the highly influential
2005 report by the National Academies
West Virginia that stands to offer the highest
of Science, Rising Above the Gathering
economic development pay-offs for the state. In the
Storm, makes clear: “…the great United
past, the Dow South Charleston Technology Center
States corporate research laboratories
and its predecessor Union Carbide R&D Center was a
of the past are increasingly becoming a
key site in which industry research and development
thing of the past.”
took place that fostered the rise of West Virginia’s
leading industry clusters in energy, chemicals and
materials. But the world has changed, and the days of the large corporate laboratories have passed.
To grow our economy, we need a new engine that promotes a broader culture of R&D collaborations
across industry, universities and federal laboratories, and a focused program to promote commercialization
of new products and the start-up of new companies.
Otherwise, the global competitiveness of our state’s energy, chemicals and materials industries in the
years ahead is at risk. Today, the broad energy, chemical and materials industry complex in West
Virginia, together with related engineering, commercial R&D and testing, comprises over 49,000 jobs
or 8.6 percent of private employment in West Virginia, and pays an average salary of $69,481
compared to $35,189 for all private sector jobs in the state.
By advancing the West Virginia Education Research and Technology Park as part of the Higher Education
Policy Commission’s statewide system of higher education facilities, there is a renewed opportunity to
promote innovation and commercialization for West Virginia’s energy, chemicals and materials industries.
To realize the full potential of the West Virginia Education Research and Technology Park, the Higher
Education Policy Commission recognized that it needed an objective assessment and game plan, which
have been developed with the support of the US Department of Commerce’s Economic Development
Administration. Part of a larger body of work, this report by Battelle and CH2M Hill offers a welldocumented and strategic approach to moving forward, which the Commission will be utilizing in the
years ahead.
Respectfully,
Brian Noland, PhD
Chancellor, Higher Education Policy Commission
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Meeting the Economic Imperative to Advance Technology Development in West Virginia
Key Recommendations
The vision for the West Virginia Education Research and Technology Park (WVERT) is to
become a signature innovation and commercialization center for traditional and bio-based
energy, chemicals and materials in the global economy. Its success in supporting the energy,
chemical and materials sector will reach beyond the borders of the park itself to advance the
commercialization of products in West Virginia, generate needed talent to sustain West
Virginia’s competitiveness and establish new sources for innovation in West Virginia and
beyond. In doing so, WVERT will catalyze and enable West Virginia to be among the national
leaders on the global stage of commercialization and growing companies in these areas.
Program Development Recommendations for WVERT
Battelle is recommending four specific program initiatives for WVERT, which together can
enable WVERT to achieve its potential as a catalyst and resource for technology
development and innovation. It will also advance the overall value-chain of technologybased economic development driving industry cluster development in energy, chemicals and
related materials and engineering and testing services.
i
One key element of the WVERT program needs to be focused on filling a critical gap in the
commercialization process for pilot production. This is a specialized operation, and one that
is tied to the technical expertise of a proven operator—and will likely include contract
manufacturing (often referred to as “tolling” by industry), process and technical
development as well as market development activities with a range of users, most of whom
will likely be emerging growth companies for whom the park provides a preferred
development path.
A pro-active focus on recruitment of innovative, emerging growth companies in niche
areas of energy, chemicals/related materials and engineering and testing services is also
needed with a support infrastructure for entrepreneurial development. To fulfill this
recruitment mission, WVERT should have a certain amount of available multi-tenant space
ready for opportunities to capture and accommodate growth. Given the Park’s position in
the regional and state technology development and real estate landscape, this multi-tenant
space should include a mix of chemistry and bioscience lab space tied to the target niches as
well as associated office space. In addition to the provision of physical amenities that
promote discovery and applied R&D, a set of business growth and financing services should
also be provided.
Advancing talent generation of hands-on skill training from technician to engineering to
scientist levels in processing technologies. With the establishment of the campus of
Kanawha Valley Technical and Community College and the Advantage Valley Technology
Training Center in the Park, WVERT has the opportunity to serve as a focal point for meeting
the training and talent development needs of key industries in the state and beyond.
Establishing a world class chemical engineering research institute to deepen the capacity of
West Virginia to be an innovation leader and grow their own in the industry clusters of
energy, chemicals and engineering/R&D/testing labs. The role of the Park is to serve as a
pilot and convener, who sets a course, catalyzes, assembles teams and implements focused
activities that address strategic energy, chemicals and materials opportunities for West
Virginia.
Funding Mechanism
There is a need for a predictable and sustained source of funding to enable WVERT’s
program activities to be put in place. Among the funding needs over the next 5 to 10 years to
establish WVERT as a catalyst and resource for advancing West Virginia’s energy, chemicals
and materials industries are:
Rehabilitation of the pilot plant facilities
Ensuring the availability of multi-tenant laboratory space
Core staffing for the research park
Pilot production equipment and working capital fund
Outreach marketing program
Business services program
Workforce development
Establishment of a world class applied research center in energy,
chemicals and materials technologies
ii
Battelle is recommending specific state authorization to be enacted to ensure the needed
funding for WVERT. There are a variety of options for providing this funding mechanism. A
traditional approach is to provide annual bond and general appropriations to the authority.
Another traditional approach is to dedicate specific existing taxes or fees generated by the
energy, chemicals and materials sector to this authority. A more novel approach is to
advance a tax increment financing approach based on the additional total state revenues
generated by the energy, chemicals and materials sector in support of the Authority. This
novel approach is currently being used by Kansas for its Biosciences Authority.
Operations/Management Recommendations
Based upon the best practices in the Park community and the opportunities and programmatic
requirements of developing a Park as a statewide, signature development for the future,
Battelle is recommending that one entity be established to “steer” and provide funding for
the WVERT programs and another entity be responsible to “row” and conduct the day-to-day
activities of WVERT Park and carry out its pro-active business development efforts. More
specifically, the activities for each entity would be as follows:
Statewide Funding Mechanism Entity would be responsible for:
The WVERT Park Corporation would be responsible for:
Developing and overseeing the implementation of
statewide strategy for ECM cluster advancement
Conducting its affairs “at the speed of business”
Promoting the engagement and collaboration among
industry, federal labs and higher education (community
colleges, 4 year and research universities)
Grants making with a focus on accountability and due
diligence
Managing the property and campus wide services,
supports tenants
Managing the delivery of commercialization services
Recruiting and selling the Park to attracts and grow
tech based businesses

Funding pilot plant rehab and multi-tenant space

Marketing and developing customers for pilot plants in
concert with operator and other organizations
Funding program activities of WVERT Park
Corporation beyond direct tenant services
Developing new facilities and structures financing

Undertaking the RFP process to competitively
select an operator for the shared use pilot plant
facility to work collaboratively with WVERT Park
Corporation

Awarding pilot production equipment and
working capital loans
Undertaking strategic initiatives in collaboration with
others to build and support applied research institutes
in the Park as well as linkages beyond
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Meeting the Economic Imperative to Advance Technology Development in West Virginia
Governance and Staffing Options
The WVERT Park Corporation should be established as a 501 (c)( 3) entity under the auspices
of the Higher Education Policy Commission. This can be accomplished by amending the
existing language under Article 12 of Chapter 18B of the Laws of West Virginia pertaining to
“Research and Development Agreements for State Institutions of Higher Education,” which
allow for such research park corporations to be formed.
The Board of the WVERT Park Corporation should include both state level and Charleston
regional representatives. An initial view towards the Board might be:
Representative from HEPC
Representative from West Virginia Department of Commerce
Representatives from WVU, Marshall and NETL
Charleston region economic development representation
Corporate level industry leaders from across the state
For establishing the Funding Mechanism Entity, Battelle sees several options. It could be a
new authorization for the HEPC and so require no new organizational entity. Alternatively it
could be a separate statewide authority with representation from HEPC, state economic
development, industry and higher education institutions. A third option might be a
subsidiary organization to HEPC with shared responsibility with the West Virginia Secretary
of Commerce.
iii
On staffing, to the extent feasible, it is recommended that the Funding Mechanism Entity
and the WVERT Park Corporation have a shared staff. Of particular importance is having a
shared CEO. It is recommended that Boards of the WVERT Park Corporation and the State
Authority act in concert, in consultation with the HEPC to recruit and select from among
qualified candidates for the chief executive officer. The CEO will in turn be responsible for
hiring staff for each of the organizations, seeking to maximize efficiencies by having dual
responsibilities in key functions that will be overlapping for the park and the statewide
authority such as accounting and financial management. This is an approach that is similar to
that by the Virginia Biotechnology Park, an independent 501 (c) (3) organization, and its
supportive statewide Virginia Biotechnology Research Park Authority.
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Meeting the Economic Imperative to Advance Technology Development in West Virginia
CONTENTS
Introduction ..............................................................................................................................1
The Importance of West Virginia Energy and Chemicals Industry Clusters to the State’s
Technology Base .......................................................................................................................7
Assessing the Targeted Development Opportunities for WVERT ..........................................13
Development Program for WVERT .........................................................................................27
Recommended Governance, Funding, and Operating Approaches for WVERT ....................45
Appendix A: Case Studies .......................................................................................................58
Appendix B: Economic Impact Analysis ..................................................................................87
LIST OF FIGURES
Figure 1:
Figure 2:
Figure 3:
Figure 4:
Research Park Concept .......................................................................................... 4
Two-Phase Approach for WVERT Development.................................................... 5
Share of Tenants by Type of Organization—North American Research Parks.... 13
Establishments with Five or More Employees in Engineering, Commercial
R&D, and Testing Services Across the Charleston Region ................................... 19
Figure 5: Technology-Based Economic Development Chain .............................................. 28
Figure 6: Illinois Medical District and Chicago Technology Park ........................................ 58
LIST OF TABLES
Table 1:
Table 2:
Table 3:
Table 4:
Table 5:
Table 6:
Table 7:
Table 8:
Table 9:
Table 10:
Table 11:
Table 12:
Table 13:
Table 14:
Table 15:
Advanced and Specialty Materials Employment Metrics, West Virginia and
United States, 2008 ............................................................................................... 8
Key Location Factors Needed to Attract Data Centers ........................................ 21
University Research Funding in Selected Fields, 2004–2008 .............................. 23
Forecast of Annual Job Openings From West Virginia, 2006–2016 .................... 24
Commercial Real Estate Market Profile for the Charleston Region .................... 25
Technology Segmentation Uses for WVERT Pilot Production Facilities .............. 31
Benchmark Case Study Profiles ........................................................................... 47
Governance Models and Powers of the Benchmark Set ..................................... 49
Funding Mechanisms and Financial Models and Principles of the
Benchmark Set..................................................................................................... 50
Management and Operations of the Benchmark Set.......................................... 52
Responsibilities of Funding Mechanism Entity and WVERT Park Corporation ... 56
Virginia BioTechnology Research Park Facilities ................................................. 67
Companies Retained at the Former Dow South Charleston Technical Center ... 87
Annual Economic Impact of the 550 Jobs Retained at the WVERT Park ............. 89
Breakout of Annual State and Local Taxes .......................................................... 90
2
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Meeting the Economic Imperative to Advance Technology Development in West Virginia
INTRODUCTION
The Economic Imperative for Advancing Technology
Development in West Virginia
Even before the outset of the economic recession in 2008, warning signs indicated the
potential decline in West Virginia’s economic competitiveness. During the economic
expansion years of 2001 to 2007, the average annual growth rate in economic output in
West Virginia reached only half of the national average, a mere 1.3 percent compared with
the nation’s 2.6 percent. During that same period, overall job growth in West Virginia was
also lower by 25 percent than the United States. Particularly troubling was the steep
18 percent decline in high-quality manufacturing jobs, which have been a key component of
West Virginia’s economy.
The ultimate economic development challenge facing West Virginia in the years ahead is
how to spur a more competitive, high-growth economy able to generate high-quality jobs.
This is no longer as simple as waiting for the national recovery to take hold and expecting
good-paying manufacturing jobs to return. In today’s global economy, the performance bar
has been raised. The foreign competition in lower-cost manufacturing that the United States
faced in the 1980s and 1990s is being intensified by a far more serious threat—competition
for skilled workers and technology know-how reaching nearly every industry and business
function.
1
West Virginia must embrace innovation and technology development in order to reverse
recent trends and grow its base of high-quality jobs. The National Center on Education and
the Economy explains this in straightforward terms in its
influential 2007 report, Tough Choices or Tough Times:
The economic imperative for West
“Those countries that produce the most important new
Virginia is clear: West Virginia must
foster and advance technology-based
products and services can capture a premium in world
development in order to generate highmarkets that will enable them to pay high wages to their
quality jobs and raise its capabilities to
citizens. In many industries, producing the most important
remain competitive in an increasingly
global, knowledge-based economy
new products and services depends on maintaining the
worldwide technological lead, year in and year out, in that
industry and in the new industries that new technologies
generate.”1
Indeed, innovation and technology development have been cornerstones of growing
economies for decades. Various economic studies over the years reveal that half or more of
the economic growth in the United States has been attributable to progress in technological
1
National Center on Education and the Economy, Tough Choices or Tough Times, 2007, page 6.
innovation, including work that led to the Nobel Prize for economist Robert Solow.2 More
recently, a study by the Milken Institute, a private, nonprofit research organization, in
evaluating the economic growth across 315 regions in the United States over 1975 to 1998
found that the growth and presence of high-technology industries accounted for 65 percent
of the difference in economic success for regions.3
High-Value Physical Environments Matter in Driving
Globally Competitive Industries
In an interesting paradox, the more global and integrated the U.S. economy becomes, the
more local research and development (R&D) know-how, entrepreneurial culture, workforce
skills, and manufacturing competencies matter for economic success. In the emerging 21st
century global competition, a region’s competitiveness for technology-based growth
depends on its local asset base, including the presence of high value-added physical
environments that facilitate interactions between industry and research institutions.
A 2009 Harvard Business Review article by Harvard professors Gary Pisano and Willy Shih on
“Restoring American Competitiveness” suggests that geographic proximity is in fact critical to
the competitiveness of industries:
What about the popular notion that distance and location no longer matter, or, as
Thomas Friedman put it, “The world is flat”? … the evidence suggests that when it
comes to knowledge, distance does matter … An engineer in Silicon Valley, for
instance, is more likely to exchange ideas with other engineers in Silicon Valley than
with engineers in Boston. When you think about it, this is not surprising, given that
much technical knowledge, even in hard sciences, is highly tacit and therefore far
more effectively transmitted face-to-face. Other studies show that the main way
knowledge spreads from company to company is when people switch jobs. And even
in America’s relatively mobile society, it turns out that the vast majority of job
hopping is local.4
2
What is critical to restoring American competitiveness, according to Pisano and Shih, is
geographically based “industrial commons.” As they explain: “Once an industrial commons
has taken root in a region, a powerful virtuous cycle feeds its growth. Experts flock there
2
M.J. Boskin and L.J. Lau, “Capital, Technology and Economic Growth,” in Technology and the Wealth of Nations,
N. Rosenberg, R. Landau, and D.C. Mowery, eds. Stanford University Press, 1992; and R.M. Solow, “Technical
Change and the Aggregate Production Function,” Review of Economics and Statistics, 39:312–320, 1957.
3
4
Milken Institute, America's High-Tech Economy: Growth, Development and Risks for Metropolitan Areas, 1999.
Gary P. Pisano and Willy C. Shih, “Restoring American Competitiveness,” Harvard Business Review, July 2009, page 3 of
reprint.
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Meeting the Economic Imperative to Advance Technology Development in West Virginia
because that’s where the jobs and knowledge networks are. Firms do the same to tap the
talent pool, stay abreast of advances, and be near suppliers and potential partners.”5
To create the vibrant industrial commons needed for economic development, regions across
the nation and the world are advancing research parks and other technology-oriented
development complexes as key components in creating the physical environments that can
generate, attract, and retain technology companies and talent. According the National
Research Council, in its study of research park best practices:
Research parks are seen increasingly around the world as a means to create dynamic
clusters that accelerate economic growth and international competitiveness. They are
widely considered to be a proven tool to encourage the formation of innovative high
technology companies. They are also seen as an effective means to generate
employment and to make existing companies more competitive.6
The value of research parks goes beyond their physical facilities to the role they can play as a
catalyst for development, bringing together the assets of a region’s industries, talent, and
research institutions. Research parks can create an environment that fosters collaboration
and innovation and promotes the development, transfer, and commercialization of
technology by providing a location in which companies, entrepreneurs, and research
institutions and their high-skilled talent base operate in close proximity.
The National Research Council found that research parks were particularly well suited to
advancing economic development by doing the following:
Facilitating the cooperation that generates higher returns on existing
investments in R&D
Meeting the special needs of high-tech industries for infrastructure and
associated services
Achieving critical mass in terms of co-located research facilities and staff.
Figure 1 depicts the value that research parks can bring. Research parks are seen as enablers
of idea flow between the technology generators (universities, public and private research
laboratories) and the companies located in the research park and in the surrounding region.
In addition, the innovations, technology, and knowledge generated by the companies and
research institutions lead to attracting research units of established companies and newly
emerging high-growth technology companies.
5
6
Ibid.
National Research Council, Understanding Research, Science and Technology Parks: Global Best Practices, 2009.
3
Figure 1: Research Park Concept
Job Resources
Research Park
Tenants
Sources of Innovation
- Universities
- Private R&D
- Federal Labs
Job Resources
Business Incubator
Growth
Adapted from: “Positioning Research Parks for Success,” Guy T. Mascari. Economic
Development Commentary, Vol. 23, No. 4, Winter 2000, page 38.
A West Virginia Opportunity to Spur Innovation
and Technology Development
At the site of the former Dow (Union Carbide) South Charleston Technical Center, West
Virginia has an opportunity to establish a signature center for advancing energy and chemical
technologies that are instrumental for the future growth and success of the state’s longstanding chemicals and energy industry clusters, along with creating a significant new
economic development initiative for the Charleston region.
4
The fact that the West Virginia state government took the initiative to own this former Dow
Center, under the management of the West Virginia Higher Education Policy Commission,
already has paid critical dividends for economic development for the state. More than
550 high-paying, high-quality jobs have been retained in West Virginia, with substantial
economic multipliers for the state of more than 1,096 additional jobs. Today, as the park
property transitions to the commission, the state has been able to retain these high-paying
jobs, which average $81,900 in salaries and wages. This represents a total direct payroll of
$45 million with estimated direct and indirect and induced output impacts of more than
$626 million annually. This activity translates into over $15 million in state and local taxes
collected each year. 7 Few recent state economic development deals have offered as high a
return on investment.
But, it is the long-term potential for creating an innovation and technology development
driver for reinvigorating the global competitiveness of the state’s long-standing chemicals
and energy sectors which could offer the highest economic development payoffs for the
state.
7
Appendix B: Economic Impact Analysis presents more detailed findings of these impacts which are generated by
the IMPLAN economic model.
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Meeting the Economic Imperative to Advance Technology Development in West Virginia
Study Objectives and Approach
To help West Virginia realize the long-term potential of what is now known as the West
Virginia Education, Research and Technology (WVERT) Park, the West Virginia Higher
Education Policy Commission retained the services of Battelle’s Technology Partnership
Practice (TPP) and CH2M Hill.
Battelle TPP is the economic development consulting arm of the world’s largest
independent, nonprofit R&D organization with more than $6.2 billion in annual revenues and
more than 22,000 employees. Battelle TPP is the national leader in advanced, technologybased and cluster-driven economic development practice with an established track record in
developing and advising research park development, including an extensive understanding of
leading technology parks and best practices from its 2007 comprehensive benchmarking and
impact assessment study of North American research parks for the Association of UniversityRelated Research Parks.
CH2M Hill is an industry-leading program management, construction management, and
design firm, as ranked by Engineering News-Record (2009), with $6.3 billion in annual
revenue and 23,500 employees worldwide. CH2M Hill brings a strong expertise and proven
track record in facility assessment and reuse planning including projects with the University
of Pittsburgh, Carrier Corporation, Lockheed Martin, Ohio State University, and Pacific
Northwest National Laboratories.
5
The objective of this effort is to assess the opportunities for targeting growth at WVERT,
while at the same time creating a broader commercialization engine that can foster the
industry–university–national lab partnerships critical for advancing new product
development and new company formation for spurring the next generation of West
Virginia’s long-standing chemicals and energy sectors.
The Battelle–CH2M Hill team developed a rigorous twophased approach to help guide the development of
WVERT (Figure 2). In the first phase, the focus was on
conducting the detailed analysis to assess both the
development targets of opportunity for WVERT along
with the quality of its facilities. This first phase involved the
following:
Figure 2: Two-Phase Approach for
WVERT Development
Phase I:
Assessment
Assessing
Economic
Development
Targets of
Opportunity
Program
Development
Building
Re-use
Planning
Analyzing industry performance at both the
state and Charleston regional levels
Examining research and innovation activities
Phase II:
Development
Planning
Assessing
Buildings
and
Labs
Undertaking an independent assessment of
the value of the mix of facilities at WVERT for
commercializing new energy and chemical products
Governance
Budgeting
Operations
Planning
Conducting more than 50 interviews with industry executives of existing tenants
at WVERT, statewide chemical and energy companies, other regional technology
companies, and national companies needing pilot production facilities
Reviewing facility plans and reviewing on-site the condition of each of the
facilities at WVERT.
The Phase II effort focused on the development planning for WVERT. The Battelle–CH2M Hill
team has formulated recommended approaches for program development and
organizational structures for governance, funding mechanisms, and operations for WVERT
and its associated Eastern Energy Commercialization Center. This planning effort was
informed and guided by a benchmarking analysis of best practices and consultations with
subcommittees drawn from the WVERT Transition Steering Committee. Based on these
recommended program efforts, CH2M Hill is developing a separate facility re-use analysis for
WVERT.
6
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Meeting the Economic Imperative to Advance Technology Development in West Virginia
THE IMPORTANCE OF WEST VIRGINIA ENERGY
AND CHEMICALS INDUSTRY CLUSTERS TO THE
STATE’S TECHNOLOGY BASE
Industry clusters have become a mainstay for state economic development efforts across the
nation because it is increasingly recognized that individual industries do not stand alone
within state and regional economies, but compete and grow as part of a broader complex of
interrelated industries. Many state industry clusters share a common market that they serve,
while others such as the biosciences or information technology (IT) are based more on
shared “know-how.” As the National Governors Association explains, it is critical that each
state identify and focus on its specific industry clusters that can drive its broader economic
growth in the global economy: “U.S. economic strength depends on the ability of each state
to “compete” successfully in the world marketplace. Each state must exploit the unique
advantages it has relative to other states and build on the strengths found in its local
“clusters of innovation”—distinct groups of competing and cooperating companies,
suppliers, service providers and research institutions.”8
The presence of the energy industry cluster and the chemicals and materials industry cluster
stand out as West Virginia’s most developed technology-based industry clusters and a
leading source of high-wage, high-quality jobs in the state. Each cluster demonstrates a very
high level of competitive advantage in West Virginia by being significantly more
concentrated in the state in terms of industry jobs than found across the nation. The
chemicals and materials industry cluster in West Virginia stands slightly over 3 times as
concentrated in employment as the nation, and the energy industry cluster is over 8 times as
concentrated. This high level of relative concentration demonstrates how specialized these
two industry clusters are in West Virginia.9
Closely associated with both the energy and chemicals industries is the presence of a
growing engineering, commercial R&D and testing lab industry cluster. The presence of this
cluster provides the know-how and expertise to advance new technologies into product
ideas, prototype them, and test them in the field. While not yet a specialization in West
8
9
National Governors Association, “A Governor’s Guide to Trade and Global Competitiveness,” 2002.
The specific measurement of relative concentration is known as a location quotient (LQ). An LQ is the share of a
local area’s private employment found in a particular industry cluster divided by the share of total industry
employment in that industry cluster for the nation. An LQ greater than 1.0 indicates a higher relative
concentration, whereas an LQ of less than 1.0 signifies a relative underrepresentation. An LQ greater than or
equal to 1.20 denotes employment concentration significantly above the national average, and so considered
“specialized.”
7
Virginia, this cluster is growing faster in West Virginia than across the nation and so over
time will become more specialized relative to the nation.
The broad industry complex of energy/chemicals and materials/engineering, commercial
R&D, and testing found in West Virginia altogether stands at 49,297 jobs in 2008, or
8.6 percent of private employment (Table 1). Combined, these three interrelated industry
clusters grew in employment in West Virginia by 5.2 percent from 2001 to 2007 and by an
additional 5.0 percent from 2007 to 2008. In addition, many of the individual industries in
these three industry clusters fall into the category of high technology due to the level of
high-skilled professions, and the high-technology industries found in these three clusters
combined make up more than 55 percent of total technology industry employment in West
Virginia.
Table 1: Advanced and Specialty Materials Employment Metrics, West Virginia and United States, 2008
Industry Sector
2001
2007
2008
Employment Employment Employment
% Change
2001–07
% Change
2007–08
Location
Quotient
2008
Avg. Wage
2008
West Virginia
8
Chemicals & Materials
13,110
10,978
10,531
-16.3%
-4.1%
3.04
$
70,400
Energy
Engineering, R&D, and
Testing Services
Total Cluster
25,916
29,249
31,690
12.9%
8.3%
8.17
$
72,992
5,591
6,718
7,076
20.2%
5.3%
0.69
$
52,392
44,617
46,945
49,297
5.2%
5.0%
2.80
$
69,481
Chemicals & Materials
852,030
698,147
685,583
-18.1%
-1.8%
1.00
$
78,642
Energy
Engineering, R&D, and
Testing Services
Total Cluster
757,090
738,801
768,030
-2.4%
4.0%
1.00
$ 100,672
1,674,770
1,981,040
2,025,300
18.3%
2.2%
1.00
$
80,165
3,283,890
3,417,988
3,478,913
4.1%
1.8%
1.00
$
84,392
United States
Sources: Battelle analysis of Bureau of Labor Statistics, Quarterly Census of Employment and Wages (QCEW) data from IMPLAN.
This complex of industry clusters including the three leading and interrelated sectors is a
critical source of high-paying, high-quality jobs in West Virginia. Each industry cluster offers
an average wage well above the state’s overall private-sector wage levels. For all privatesector industries in West Virginia, the average wage stands at $35,189. By comparison, the
average annual wage in the chemicals and materials industry stands at $70,400; in the
energy industry at $72,992; and in engineering, commercial R&D, and testing at $52,392. The
total cluster average wage is $69,481.
The energy and chemicals industry clusters, however, do not simply represent the past
economic strengths of West Virginia’s economy; in fact, they are deeply rooted core
technology competency areas that represent forward-looking technology platforms on which
West Virginia can build its competitiveness for future, global economic growth. The concept
of core competencies is now widely heralded by industry to advance competitive advantage.
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Gary Hamel and C.K. Prahalad in their landmark study, Competing for the Future, explain how
a focus on core competencies can improve competitiveness:
To successfully compete for the future a company must be capable of enlarging its
opportunity horizon. This requires top management to conceive of the company as a
portfolio of core competencies rather than a portfolio of individual business
units…Core competencies are the gateways to future opportunities. Leadership in a
core competence represents a potentiality that is released when imaginative new
ways of exploiting that core competence are envisioned.10
From an economic development perspective, it is from core competencies present in
industry, universities, or federal labs that a state can gain a position in existing and emerging
industries.
A detailed core competency assessment by Battelle for TechConnectWV in its 2007 West
Virginia Gap Analysis and Identification of Strategic Technology Platforms 11 identified both
the energy and chemicals areas as robust technology platforms for advancing technologybased economic growth. As technology platforms, both the energy and chemicals areas
serve as a bridge between research core competencies and their use in commercial
applications and products. As such, these platforms are highly translational—working to
move ideas and innovations from basic science discoveries to applied technologies and
practices.
9
The energy and chemicals areas in West Virginia share the following common traits:
They provide an opportunity to build on existing industry strengths with an
established base of commercial activity.
They have cross linkages and strong, reinforcing core technology competencies as
measured by patent activities, competitive research grants, and peer-reviewed
publications.
They are engaged in significant product markets that can be exploited to grow jobs
and companies in West Virginia.
Industry clusters are dynamic, and many advance in ways that break from past trends. One
way to gain a more “forward-looking” assessment of how well positioned an industry cluster
is for future growth is to also consider the level of “know-how” or core competencies within
different industry clusters across industry, university, and national laboratories resident in
the state.
10
11
G. Hamel and C.K. Prahalad, Competing for the Future, Harvard Business Press, 1994, pages 90 and 217.
Gap Analysis and Identification of Strategic Technology Platform, a report by the West Virginia Coalition for
Technology Based Economic Development, with consultation and assistance from Battelle TPP, 2007.
The forward-looking approach of scanning core technology competencies or know-how in
the state involves identifying where a “critical mass” of activities exists across research and
innovation measures related to the primary industry clusters in the state.
OVERVIEW OF THE ADVANCED ENERGY TECHNOLOGY PLATFORM
In Battelle’s 2007 Gap Analysis and Identification of Strategic Technology Platforms prepared
for TechConnectWV,12 the advanced energy and energy-related technology was identified as
a significant and near-term technology platform for leading technology industry
development in West Virginia. In particular, the alignment of West Virginia fossil fuel
resources, with advanced energy R&D in the state and growing domestic and global demand
for energy provides West Virginia with an opportunity to stand out from other states in being
well positioned to increase the value-added economic activity based on energy resources—
developing high-value liquid fuels from carbon products, carbon-based chemicals, and
advanced technologies for high-efficiency combustion, fuel conversion, pollution control,
and energy transmission.
10
West Virginia is well positioned to play a significant part in advancing energy development.
For generations, the nation’s demand for energy has benefited West Virginia. Extraction of
the state’s fossil energy resources (most notably coal and natural gas) forms a basic industry
that drives a major component of West Virginia’s economy. The coal industry alone
generates more than $3.5 billion annually in West Virginia’s gross state product (GSP),
directly accounts for more than 40,000 jobs, and has a $2 billion annual payroll. Within West
Virginia, coal drives a vertically integrated energy industry, with 99 percent of West Virginia’s
electricity generated by coal-fired generating facilities. Taxes paid by this integrated coalbased energy sector account for two-thirds of business taxes paid in the state. Currently, the
state produces far more coal than needed for in-state uses; it ranks as the leading state in
the nation in terms of coal exports, with more than 50 million tons shipped to 23 countries
annually. West Virginia oil and natural gas reserves are also significant. The state is the only
net exporter of natural gas east of the Mississippi and, according to the West Virginia
Geological and Economic Survey,13 the state contains approximately 40,500 natural gas wells
producing 191.6 billion cubic feet of gas annually and 7,500 oil wells producing 1.9 million
barrels of crude.
Against this background of fossil fuel extraction and utilization, it is not surprising that West
Virginia is also home to a substantial base of energy R&D activity. The state’s research
universities, especially West Virginia University (WVU), have major R&D programs focused
on the energy sector in terms of engineering, basic physical sciences, earth science, and
business and economic analysis. West Virginia is also home to a major U.S. Department of
Energy (DOE) laboratory dedicated to fossil fuel R&D—the National Energy Technology
Laboratory (NETL). Together, the NETL and university R&D base provides West Virginia with
12
13
Ibid.
West Virginia Geological and Economic Survey, available at http://www.wvgs.wvnet.edu/.
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the basic and applied R&D expertise required to drive the development of the next
generation of fossil fuel extraction, processing, utilization, transmission, and pollution
control technologies. These R&D organizations are, however, also looking beyond fossil fuels
into other advanced energy systems, such as fuel cells and renewable energy applications,
and are focused on the development of engines, combustion systems, and other
technologies for maximized efficiency in converting energy resources to power.
Assessing West Virginia’s energy and related technology R&D demonstrates that the
advanced energy platform presents development opportunities along multiple technology
paths, including the following:
Power Generation/Combustion Technology—Developing advanced combustion
systems, generators, engines, and related technologies.
Energy-Use Efficiency Technology—Producing technology that increases the fuel-use
efficiency of energy conversion and power generation equipment, engines, and
related devices (such as transmissions).
Carbon Materials and By-Product Materials—Advancing technology to convert fossil
carbon resources into value-added carbon products, chemicals, liquid fuels, and
gases.
Energy Pollution Prevention and Mitigation—Developing advanced technologies for
reducing or eliminating polluting emissions from energy production and
consumption activities.
Alternative Energy and Fuels—Producing advanced and alternative fuel and energy
generation technologies such as fuel cells.
Energy Recovery and Distribution Technology—Advancing R&D to enhance the
recovery of valuable fossil resources from reserves and tailings and technologies for
improving energy distribution efficiency, reliability, and security.
These categories represent key areas of opportunity for technology development from this
larger platform. It should be noted, however, that the R&D expertise contained within the
federal laboratory/university R&D complex in West Virginia is so broad that additional
opportunities for technology development will no doubt present themselves. The NETL has
deep expertise in computational modeling and simulation that may well lead to technology
development with high potential for commercialization. Likewise, WVU maintains programs
dedicated to servicing the research, training, and certification needs of industry in energy
and transportation that may be leveraged for further development gain.
11
OVERVIEW OF ADVANCED CHEMICALS AND
MATERIALS TECHNOLOGY PLATFORM
The advanced chemicals technology platform represents the largest focus area of industry
R&D in West Virginia. Chemicals represented 55 percent of industrial R&D in West Virginia in
2006, according to a survey of industry by the National Science Foundation (NSF). Moreover,
the top patent classes in West Virginia from 2000 to 2006 were found in synthetic resins or
natural rubbers, catalysts, and organic compounds, which together represented more than
one in five patents issued to inventors from West Virginia.
West Virginia has a strong track record in developing and producing chemicals and related
materials. The Kanawha Valley has been home to intensive chemicals industry operations for
more than a century, and the Ohio Valley in and around Parkersburg has a similar track
record in the chemicals sector. In materials, West Virginia has also enjoyed a strong presence
in primary metals production and manufacturing operations, notably in the steel sector, but
also in other metals and materials. Wood, a renewable biomaterial, also represents a
significant economic resource for the state.
12
Within the R&D sector in West Virginia, interviews identified multiple areas of strengths in
advanced chemicals and related materials technologies. R&D focus areas identified in the
state show that there is considerable attention being paid to advancing work in high-value
materials such as the following:
Electronics, semiconductor, and sensor materials
Advanced composite materials
Advanced polymers
Catalysts and catalytic materials
Products from West Virginia carbon, including carbon foams, anodes, and metalcasting materials
Value-added wood products
Nano and nanobio materials.
It is clear that the combination of West Virginia’s existing industry base in materials and
chemicals, with significant R&D expertise relevant to the next generation of advanced
chemicals and materials, provides the state with an opportunity for further development
through an advanced chemicals and materials technology platform.
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ASSESSING THE TARGETED DEVELOPMENT
OPPORTUNITIES FOR WVERT
The assessment of targeted development opportunities needs to identify the market-driven
and institution-led drivers for the park. This analysis is critical for understanding the advance
of a realistic development program as well as the pace of absorption in the park. While the
long-term focus of WVERT is on identifying opportunities for advancing the state’s energy
and chemicals industries, the experience of other “targeted” parks in the biosciences—which
are very typical across the United States—is that research parks attract a variety of
technology-based tenants. In other words, it is the focus on technology that attracts tenants,
even when specialized commercialization and shared-use facilities target a specific area of
technology development.
A detailed benchmarking study14 by Battelle for the Association of University Research Parks
(AURP) involving survey responses from 134 of the 174 research parks in North America
revealed the diversity of research park tenants. Across research parks in the United States,
the overwhelming majority of tenants and jobs are found among private-sector firms, with
nearly half from IT, drugs and pharmaceuticals, and scientific and engineering services firms
(Figure 3). But, a significant portion of the tenants at research parks involve more
institutional research drivers, including 14 percent of tenants from university-related
operations and another 5.4 percent representing government facilities. In fact, the small
percentage of tenants from university and government activities, often specific research
centers or testing facilities, is deceiving. Often, these institutional tenants from universities
and government serve as anchors in the early stages of research park development and so
are critical to creating the momentum to move research parks forward.
Figure 3: Share of Tenants by Type of Organization—North American Research Parks
1.1%
3.0%
4.5%
5.4%
Private-sector corporate
University
14.2%
Government (state or federal)
Retail or service amenities
Park operations
Other
71.8%
Source: 2007 AURP Study
14
st
“Characteristics and Trends in North American Research Parks: 21 Century Directions,” prepared by Battelle
TPP for the Association of University Research Parks, October 2007.
13
Potential Key Drivers for WVERT
To provide a broad and extensive assessment of likely drivers of development for WVERT,
Battelle examined the potential of the following:
Statewide chemicals industry cluster
Statewide energy industry cluster
Statewide engineering, commercial R&D, and testing labs industry cluster
(testing should include state agencies)
Existing tenants and other technology industries in the Charleston metropolitan area
(address data centers)
University and national lab research activities
Workforce development.
It is also important to consider the commercial real estate dynamics of the Charleston region
since regional real estate conditions directly impact the opportunities and development
pace. It is also important to consider possible comparable developments underway to
understand the competitive landscape among potential tenants.
STATEWIDE CHEMICALS INDUSTRY CLUSTER
14
The chemicals industry cluster has been hard hit in recent years, particularly in West Virginia.
From 2001 to 2007, employment in the chemicals industry cluster declined in the nation by
14 percent, but West Virginia more than doubled that rate of national decline, falling by
nearly 30 percent. The Charleston region comprises roughly 15 percent of the industry
employment, and it also recorded a significant decline of 22 percent from 2001 to 2007.
Examining more recent market forecasts for the chemicals sector, it is clear that the overall
chemicals industry will be a slow growth market in the United States. The U.S. chemicals
market is expected to reach $742 billion in 2013 with a 5-year compound annual growth rate
(CAGR) of only 1.4 percent. Many U.S. establishments have reduced operations or
permanently removed capacity, and few new major plants are being planned. The Middle
East and Asia are expected to emerge as U.S. competitors as the global economy recovers,
and employment is not expected to reach pre-recession levels.
Significant niche growth markets, however, do exist in chemicals. Despite increasing
overseas competition and slow economic recovery projections, the growth-oriented niches
in the chemicals sector include the following:
Specialty chemicals, which are projected to reach $892.1 billion by 2014 with a
CAGR of 6.9 percent, with cosmetic chemicals, food additives, and industrial cleaners
showing the most resilience during the global economic downturn
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Fertilizers and agricultural chemicals, which are expected to grow at a CAGR of
9.9 percent globally from 2009–2014 and reach $204 billion, with fertilizers
dominating the market
Renewable chemicals, which will grow from $45 billion in 2009 to nearly $60 billion
in 2014. Within this sector, the alcohols segment is the largest, but will show the
least growth. Platform chemicals, polymers, and catalyst technologies will show high
growth, with CAGRs of 12.6 percent, 11 percent, and 10.2 percent, respectively.
Recent trends show that West Virginia is making the shift away from more commodity-based
chemical production toward these more innovative, high-growth niches, but the pace is too
slow. In West Virginia, many of the traditional chemicals industries, such as the following, are
declining:
Plastics and resins: 4,216 jobs in 2001, fell to 2,605 jobs in 2008
Basic organic chemical manufacturing: 1,892 jobs in 2001, fell to 832 jobs in 2008
Basic inorganic chemical manufacturing: 1,188 jobs in 2001, fell to 512 jobs in 2008
Industrial gas manufacturing: 728 jobs in 2001, fell to 380 jobs in 2008
Petrochemical manufacturing: 814 jobs in 2001, fell to 546 jobs in 2008.
15
Meanwhile, emerging niche areas in the chemicals industry cluster are on the rise:
Pesticide and other agricultural chemical manufacturing: 629 jobs in 2008, up from
only 18 jobs in 2001
Photographic film, paper, plate, and chemical manufacturing: 250 jobs in 2008, up
from 34 jobs in 2001
Custom compounding of resins: 112 jobs in 2008, up from 55 jobs in 2001.
So, the question is how WVERT can play a role in spurring the transition from the lowgrowth, traditional base of West Virginia’s chemicals industry cluster to the more highgrowth, innovative chemicals niches. The answer seems to fit with the legacy of WVERT
when it served first as a research and product development center for Union Carbide and
most recently for Dow Chemical—focusing on pilot plant activities to advance product
development and market introduction.
Pilot production is an often overlooked phase in commercialization and also is often a key
stumbling block. Key scientific discoveries often fail to make it to the marketplace because
demonstrated scale-up to make them commercially feasible is lacking. While large chemicals
companies have their own internal pilot production capabilities, emerging chemicals
companies targeting these high-growth niche areas often lack the resources and expertise to
construct their own pilot plant facilities. Therefore, the so-called valley of death applied to
the chemicals industry is largely an absence of pilot plant shared facilities. Unlike the
biotechnology industry in which an extensive contract research industry of biological scaleup facilities has taken root, there is no equivalent for inorganic industrial chemicals. Given
the preceding structure and capital intensity of the chemicals business, such pilot plant
resources have tended to be internal to larger corporations, with the exception of contract
or toll manufacturing. However, as business strategies and sources of innovation have
changed, even larger firms are looking, on a selective basis, to external partners and sources
of new technologies. To test this trend, Battelle contacted emerging companies that might
be interested in accessing pilot facilities. More than 40 emerging technology companies
needing access to processing were identified from awardees of Phase II of the federal Small
Business Innovation Research Program, which supports product development for innovative
technologies that demonstrate a path to market. Battelle interviewed industry executives at
10 of these companies and learned that there was significant interest in having access to a
shared-use pilot plant facility. In particular, the interviews of these executives from emerging
chemical-related technology companies highlighted the following:
16
Companies based on the East Coast have significant interest.
The need for a pilot facility is often intertwined with the search for a
commercialization partner.
While efficiency in setup time and availability of a pilot scale-up building are
important, the real cost will be in the equipment, with a strong need to customize
for specific projects.
The physical and operational segregation to protect intellectual property (IP) is an
issue that will need to be managed.
In addition, through outreach to the existing chemicals industry in West Virginia, Battelle
identified two firms who expressed an interest in pilot plants—either for market/product
development and specialized tolling or contract manufacturing—where they have more
remote sources and/or limited on-site capacity.
Finally, MATRIC, one of the growing existing tenants at WVERT, expressed a strong interest
in making use of a pilot plant facility in its contract R&D work and perhaps serving as the
operator for a shared-use facility in collaboration with WVERT.
To further assess the value of the existing pilot production facilities at WVERT, Battelle
retained an expert consultant, Dr. Randall Powell. Dr. Powell, a former industry executive of
Eastman Chemical Company, possesses a chemical engineering Ph.D. and significant handson experience in chemicals production and product development. His independent
assessment suggests that WVERT may be able to carve out a unique value proposition in
advancing niche chemical product development. To quote Dr. Powell: “In combination, the
assets represent an exceptional, if not unique, opportunity to provide domestic process
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technology development and implementation across the full range of process scale (bench
top to small commercial production) at a single location.”15
STATEWIDE ENERGY INDUSTRY CLUSTER
The energy industries in West Virginia have been faring well in recent years. As noted earlier,
these energy industries grew a robust 12.9 percent over the most recent national growth
period of 2001 to 2007, and a hefty 8.3 percent in the first year of the recent recession from
2007 to 2008.
The largest energy industry in West Virginia is, of course, coal mining. Coal mining grew from
16,534 jobs in 2001 to 20,454 in 2008. Support activities associated with coal mining also
made strong gains, from 563 jobs in 2001 to 1,862 jobs in 2008.
Another fast-growing energy industry in West Virginia has been crude petroleum and natural
gas extraction. That industry grew from 1,618 jobs in 2001 to 2,428 jobs in 2008, an
impressive 62 percent growth rate for West Virginia compared with 30 percent for the
nation. This industry continued to grow during the first year of the recession, adding
193 jobs.
The other industries comprising West Virginia’s energy industry cluster fared less well since
2001. All have declined slightly from their 2001 employment levels, including fossil-fuel
electric-power generation, the second-largest energy industry behind coal mining, as well as
pipeline transportation of natural gas and electric distribution power distribution.
The direct employment opportunities for WVERT in the energy industries are limited because
power plants and extraction activities need to be tied to dedicated sites and so cannot be colocated at WVERT. What do stand out are the opportunities to advance engineering,
commercial R&D, and testing services in support of West Virginia’s thriving energy industries.
STATEWIDE ENGINEERING, COMMERCIAL R&D, AND
TESTING LABS INDUSTRY CLUSTER
A top-quality engineering, commercial R&D, and testing lab industry cluster will enable West
Virginia to reverse the fortunes of its chemicals and materials industries and to move its
energy industries into higher value-added activities and address looming threats from
climate change concerns.
The evidence suggests that this is taking place and that Charleston is a key hub of activity for
West Virginia. Employment in the engineering, commercial R&D, and testing services cluster
rose in West Virginia from 5,591 jobs in 2001 to 7,076 jobs in 2008, a gain of 27 percent. This
15
Randall Powell, Ph.D., “West Virginia Education, Research and Technology Park Assessment of Assets,”
unpublished report to Battelle, July 6, 2010, page 2.
17
growth has outpaced the national rate of 21 percent, which is quite impressive since this is
one of the nation’s fastest-growing technology industry sectors.
Both engineering services and testing services have grown strongly, recording gains from
2001 to 2008 of 21.4 percent and 15.2 percent, respectively, with each making gains during
the 2001–2007 national economic expansion and the first year of the recession. Particularly
rapid growth has been experienced in the more niche industries involving geophysical
surveying and mapping services, which rose from 81 jobs in 2001 to 302 in 2008, and other
scientific and technical consulting services, which rose from 76 jobs in 2001 to 483 jobs in
2008.
The commercial R&D industries in West Virginia are also becoming sizable, but their longerterm growth rates are unknown because these industries have only recently been defined.
Commercial R&D in physical, engineering, and non-biotech life sciences stood at 761 in 2008,
a gain of 79 jobs from 2007, while commercial R&D in biotechnology stood at 410 jobs in
2007 and remained constant in 2008.
The Charleston region is an important and growing hub of activity in engineering,
commercial R&D, and testing services. Slightly more than 27 percent of the statewide
employment in this sector is found in the Charleston region, including 39 percent of the
state’s engineering services.
18
Figure 4, a map of establishments with five or more employees in engineering, commercial
R&D, and testing services across the Charleston region, suggests that this industry cluster is
already highly concentrated around the WVERT site. Thus, targeting the growth of WVERT to
offer a high-value location for engineering, commercial R&D, and testing services is a natural
fit and can greatly benefit West Virginia.
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Figure 4: Establishments With Five or More Employees in Engineering, Commercial R&D,
and Testing Services Across the Charleston Region
WV
Source: D&B Selectory Database
Not as easily measured are the range of state activities that fall within \ engineering, R&D,
and testing services in the Charleston region as the home of West Virginia’s state
government. Many of these state activities require high-quality facilities and a supportive
business environment to ensure that they can be done cost effectively. Among these types
of state activities are forensics laboratories, food safety testing, environmental testing, and
public health testing. Other research parks around the nation have become homes to such
state and federal laboratories and testing facilities. For instance, the Virginia Biotechnology
Research Park in Richmond is home to that state’s forensics laboratory, while Research
Triangle Park is home to the federal Environmental Protection Agency (EPA) research
laboratories.
EXISTING TENANTS AND OTHER TECHNOLOGY INDUSTRIES
IN THE CHARLESTON METROPOLITAN AREA
The establishment of WVERT is, in part, the next generation of a well-established center of
technology-based industry activities in West Virginia, dating back to when Union Carbide
created the facility and continuing through to Dow Chemical’s ownership. Today, WVERT
houses the operations for 13 companies and organizations, including two operations groups
of Dow Chemical; Bayer MaterialScience; Mid-Atlantic Technology, Research and Innovation
Center (MATRIC); HP Data Center; Progenesis; Fiberworx Office; and the Chemical Alliance
Zone and its incubator. Altogether, the employment at WVERT equals 550 jobs.
19
Battelle interviewed the current tenants of WVERT. The overall growth outlook for space is
generally flat, with the notable exception of MATRIC and the opportunity for continued
incubator growth. In addition, MATRIC is spinning out companies based upon its R&D
activity, and while most of these are currently licensing plays, there is potential for additional
growth as one or more of these ventures reaches critical mass and takes root in the park.
Battelle’s assessment is that among existing tenants there is a potential demand for 10,000
to 15,000 square feet per year over the next 5 years.
There is also some interest among existing tenants for use of pilot facilities. Several tenants
currently make use of their own dedicated pilot plants, notably Bayer MaterialScience, Dow
Chemical’s Polyolefins Process R&D (PPR&D) plant, and Univation, which is a Dow joint
venture with ExxonMobil. MATRIC, in particular, is seeking to expand its own contract R&D
services to include more scaled-up pilot production that would call for use of one of the
existing shared-use pilot facilities. In addition, one of the incubator companies, Progenesis, is
moving toward pilot production that would require a more specialized biotechnology-related
scale-up laboratory.
Beyond the existing tenants, there are broader opportunities for WVERT to serve the
Charleston region as a high value-added site for expanding technology-based industry
activities. The most likely would be in engineering, commercial R&D, and testing
laboratories, as discussed above.
20
Two other technology-based industry clusters found in the Charleston region also stand out:
digital services and business management and services. The digital services cluster includes
data processing, computer programming and applications development, and
telecommunications services. In 2008, the digital services industry cluster stood at 2,073 jobs
and is among the largest technology-based industries in the Charleston region. Despite its
current size, this industry cluster declined significantly, from 3,111 jobs in 2001, in the
Charleston region. The largest declines have been in telecommunications services. A closer
look reveals that there were computer-related industries that grew in the Charleston region
over the last economic expansion from 2001 to 2007, including computer systems design
services and data processing, hosting, and related services.
Business management and services, another major technology-based industry cluster in the
Charleston region, includes headquarters and administrative corporate offices, and business
consulting services. This industry cluster stood at 1,972 jobs in 2008, up from 1,800 jobs in
2001. The largest and fastest-growing industry in this cluster is corporate, subsidiary, and
regional managing offices, which has grown from 472 jobs in 2001 to 1,392 jobs in 2008.
Marketing consulting services and logistics consulting services have also been making small
gains, in the handful of employees. But, there have been significant losses in administrative
management and general management consulting services, from 467 jobs in 2001 down to
305 jobs in 2008.
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The digital services and business management and services industry clusters share a demand
for data centers and continued integration of fast-moving, Internet-based IT. With the rise of
the Internet, the use of data centers for storage, data processing, and applications support is
becoming essential for business activities. In 2009, demand for data center space was three
times as great as the supply. It has been reported that more than a third of large corporate
data center users plan to increase their footprint in 2010. Looking to the future, a key driver
for data centers is expected to be cloud computing, which is provision of on-demand
network access services and software as service offerings. Gartner, Inc. estimates that
worldwide cloud services revenue will reach $68.3 billion in 2010 and could reach $148.8
billion in 2014.16 Other drivers are demands from digital medical records, continued growth
of Internet-related offerings, and outsourcing of in-house IT services. Of special importance
among data centers is the growing demand for “green data centers,” which are expected to
grow from $3.8 billion in 2010 to $13.8 billion in 2015.17
Already WVERT is home to one data center—the HP Data Center that is primarily supporting
data center needs for the U.S. Department of Housing and Urban Development. Adding one
or two data centers may be possible because the WVERT site addresses many key location
factors needed to attract data centers, including low-cost, reliable/redundant electricity,
high-bandwidth fiber-optics with multiple service providers, and a low risk of natural or manmade disasters (Table 2). The State of West Virginia also has an incentive package directed
toward data center development. WVERT is limited by its lack of land, which may restrict the
number of additional data centers, along with limited workforce and air passenger service.
Table 2: Key Location Factors Needed to Attract Data Centers
Key Location Requirements for Data Centers
Fit With WVERT
Primary Location Factors
Low-cost and reliable/redundant electricity
Good fit
High-bandwidth fiber-optics
Good fit
Availability of multiple service providers
Good fit
Low risk of natural or man-made disasters
Good fit
Sites with sufficient, inexpensive land
Somewhat limited
Availability of skilled workforce
Somewhat limited
16
17
Gartner, Inc. “Forecast: Public Cloud Services, Worldwide and Regions, Industry Sectors, 2009–2014,” June 2010.
Fast Company, “Green Data Center Market to More than Triple Over Next Five Years,” August 2010.
21
Table 2: Key Location Factors Needed to Attract Data Centers (continued)
Key Location Requirements for Data Centers
Fit With WVERT
Secondary Location Factors
On-site water service
Available
Incentives
Available
Passenger air service
Limited
UNIVERSITY AND NATIONAL LAB RESEARCH ACTIVITIES
Closely linked to the opportunity for WVERT to enhance and continue to advance the
development of West Virginia’s industry clusters in energy/chemicals and
materials/engineering, commercial R&D, and testing services is the potential to advance
innovative research activities at its universities and federal laboratories. In this regard,
WVERT would be an important site to bridge the worlds of science and business and not
duplicate the more academic and federal laboratory campuses found across West Virginia.
22
One important research driver in West Virginia focused on the energy sector is the National
Technology Energy Laboratory, the only DOE national lab dedicated to fossil energy,
including coal research, clean coal/FutureGen, and oil and gas research. The focus of
research at NETL ranges from fundamental science through technology demonstration.
Among NETL’s core technology specializations are computational basic sciences, energy
system dynamics, geological and environmental systems, materials science, coals to liquids,
and carbon sequestration.
Unfortunately, fossil energy R&D is not a growth area of the DOE’s research program.
Beyond the one-time stimulus funding of $3.4 billion in fiscal year (FY) 2009, NETL is facing
continued cuts in its budget. In the normal federal budget, NETL actually declined in funding
from $863 million in FY 2009 to $672 million in FY 2010; based upon current budget
requests, it will fall to $587 million in FY 2011.
Meanwhile, across the universities in West Virginia, pockets of excellent research faculty and
projects exist. Battelle’s earlier 2007 core competency assessment for TechConnectWV
found university research strengths in the following:
Fossil fuels, especially coal (plus natural gas and petroleum)
Alternative fuels, non-petroleum–based liquid fuels
Pollution control
Advanced oil and gas recovery
Vehicle power plant efficiency and integrated vehicle power systems
Testing, validation, certification, and training
Energy efficiency for industry.
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In addition, a more recent review of major grant awards from federal agencies found
significant efforts in computational chemistry, composite materials, catalysts, nano-related
developments, and anaerobic digestion of waste streams into energy.
But, the fact is that West Virginia universities stand well behind in research activities
associated with energy, chemicals, and materials. Battelle analysis of the recent university
research expenditures across West Virginia in key fields associated with chemicals, energy,
and materials science found funding to be small and declining, even as these fields gained in
funding across the nation. Altogether, in the fields of chemical engineering, chemistry, and
metallurgical and materials engineering, funding in West Virginia declined slightly from
$12.7 million in 2004 to $12.1 million in 2008 (Table 3). Meanwhile, across the United States,
funding for these three fields rose from $2.375 billion to $2.787 billion, a gain of 17.3 percent.
Not only is West Virginia not growing in these key fields while the nation is, but it represents
not even one-half of 1 percent of total U.S. academic funding.
Table 3: University Research Funding in Selected Fields Related to Chemical Engineering, Chemistry,
and Metallurgical and Materials Engineering for West Virginia and the United States, 2004–2008
West Virgina and US Academic R&D Expenditures, FY 2004–08 ($ Thousands)
Chemical Engineering
Year
WV
Chemistry
US
WV
Metallurgical & Materials Engineering
2004
$4,977
WV Share
of US
$493,353
1.01%
US
$2,366
WV Share
of US
$1,316,897
0.18%
WV
US
$5,379
WV Share
of US
$564,968
0.95%
2005
$4,381
$503,191
0.87%
$3,541
$1,363,691
0.26%
$8,072
$611,108
1.32%
2006
$4,109
$547,426
0.75%
$3,367
$1,424,307
0.24%
$5,082
$643,662
0.79%
2007
$4,112
$601,926
0.68%
$3,087
$1,447,351
0.21%
$5,235
$638,270
0.82%
2008
$3,961
$657,886
0.60%
$1,690
$1,485,567
0.11%
$6,400
$642,511
1.00%
Source: National Science Foundation (NSF) Survey of Research and Development Expenditures at Universities and Colleges,
2004–2008.
So, due to spending cuts at the federal level for NETL and a small and declining university
research base in chemical engineering, chemistry, and materials science, there is no strong
likelihood for more basic research-related institutions locating at WVERT to bridge the
worlds of science and business. Battelle held extended discussions with leaders from NETL,
WVU, and Marshall University and found that all have individual and collective interests in
making the park successful and agree to continue to look for opportunities and programs
that might fit in the scheme for the park. However, these institutions also agreed that there
are no viable projects at this time that might be candidates for moving into the park.
The opportunity for WVERT is to become a partner with NETL, WVU, and Marshall in
identifying and pursuing research programs that bring high value for West Virginia in its
efforts to expand and pursue new innovations in energy, chemicals, and materials and that
complement its existing industry clusters in these areas, including engineering, commercial
R&D, and testing services. From Battelle’s discussions with NETL, WVU, and Marshall, this
opportunity to establish a research driver component is at minimum a 2-year process and
should be viewed as a long-term priority.
WORKFORCE DEVELOPMENT
23
An immediate role that WVERT can play in collaboration with the colleges, universities and
research organizations in West Virginia is in addressing workforce needs found across the
industry clusters in energy/chemicals and materials/engineering, commercial R&D, and
testing services.
Battelle’s interviews with the key tenants at WVERT and among other leading companies in
the Charleston region pointed to a significant and immediate need for chemical and process
technicians to replace retiring workers. Battelle identified a demand for approximately 90
new chemical and process technicians needed per year for the next 4 to 5 years to replace
retirees among only the three largest chemical firms in the Kanawha Valley: Dow, DuPont,
and Bayer (MaterialScience and CropScience).
A more detailed look at the forecast of job openings of the West Virginia’s labor market
information office suggests little in new job growth, but much demand for replacement
workers (Table 4). This includes a significant level of openings for installation, maintenance
and repair workers; metal and plastic workers; and engineers.
24
WVERT can provide the hands-on skill training in process technologies that is in demand by
industry through the use of its pilot plants. Battelle, in discussions with industry, found a
significant need for replacement hires for chemical process technicians, positions that
require an associate’s degree. A stronger linkage with hands-on pilot plant operations
afforded by WVERT would increase the employability of the graduates of such programs.
Having Kanawha Valley Community and Technical College and the Advantage Valley
Technology Training Center co-located at WVERT provides an important educational
presence and asset. Beyond what the community college system can provide directly, firms
expressed other continuing education needs for postgraduate education and management
training.
Table 4: Forecast of Annual Job Openings From West Virginia, 2006–2016
Occupations
WV Total Annual Openings
(2006–2016)
WV Annual Replacement
Openings (2006–2016)
Engineers
155
112
Physical Scientists
56
42
Chemical Plant and System Operators
31
31
Metal Workers and Plastic Workers
253
226
Manufacturing.-Related Installation,
Maintenance and Repair
393
284
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The Uniqueness of WVERT: A Commercial Real Estate
Perspective
The market-driven opportunities for WVERT are substantial. One key question in assessing
the feasibility of WVERT is whether alternative sites in the Charleston region can easily
support the potential industry and institutional drivers.
Overall, the Charleston region’s commercial real estate market is small and not growing
significantly. The combination of being small and stagnant results in an overall vacancy rate
that is low, but with leasing rates that are quite reasonable, particularly compared with
larger metropolitan statistical areas (MSAs) such as Pittsburgh or Washington, D.C. (Table 5).
Table 5: Commercial Real Estate Market Profile for the Charleston Region
Classification
Total Space in MSA
(Rentable Built Area)
Vacancy
Rate
(Q2 2010)
Annual Absorption
(Q4 2007–Q2 2010)
Leasing
Rate
Quoted
Comments
Class A Office
742 ksf (thousand sf)
3.2%
+3,082 sf
$19.09/sf
8 bldgs; no
deliveries
Class B Office
8,981 ksf
6.3%
+50,381 sf
$14.93/sf
551 bldgs;
28,766 sf new
Industrial Flex
428 ksf
6.4%
- 4,755 sf
$6.32/sf
55 bldgs; no
deliveries
Industrial
12,968 ksf
3.9%
- 39,068 sf
$4.95/sf
421 bldgs; no
deliveries
Source: CoStar.
Battelle held discussions with several experienced and well-regarded commercial real estate
brokers and developers in the Charleston region. They all viewed WVERT as a unique
development for the region, with no comparable development providing an “integrated
research and development environment” found in region.
The closest development is the NorthGate Business Park, which is more of an office complex.
It does include tenants involved in engineering, data and computer services, and business
and financial services, along with associations. Currently, NorthGate Business Park has 13
office buildings encompassing 280,923 square feet with 11 Class B office buildings and only
one Class A and one Class C building. Its quoted leasing rates are approximately $21 per
square foot, which is slightly higher than other comparable buildings across the region. In
keeping with the limited availability of commercial real estate in the Charleston region,
96.4 percent of the space at the existing NorthGate Business Park office buildings is leased.
The NorthGate Business Park also offers the amenities of a Marriott Residence Inn and a
fitness center. An assisted living and skilled nursing facility is also located at the site.
There are also a number of industry-targeted parks across the Charleston region, but they
are relatively small in size and not comparable in offering an integrated R&D environment.
25
These include Peerless Industrial Park with 40 acres, Forks-Of-Coal Industrial Park with
90 acres, the South Charleston Technology Park with 110 acres, and the Washington Heights
Business Park with 175 acres.
The implications of this commercial real estate situation is that WVERT can stand apart from
other business locations in offering a more tailored setting for those businesses seeking
laboratory and pilot production sites. With the region’s low vacancy rates, the fact that
WVERT will have available multitenant facilities that can offer office space may also do well
in attracting a number of more digital services and IT-intensive back-office operations.
Summary of Targets of Opportunity for WVERT
26
This assessment of likely development targets for WVERT suggests that a focused approach
on the industry clusters of energy/chemicals and materials/engineering, commercial R&D,
and testing is a good fit for the market and institutional drivers in the Charleston region and
for West Virginia. While the chemicals and materials industry is in decline and the energy
industry is growing in more dedicated sites for production and extraction, WVERT is well
poised to be a critical site for tenants in the growing engineering, commercial R&D, and
testing services industry cluster. Through its unique pilot production facilities, WVERT can
also play a critical role in reversing the fortunes of West Virginia’s chemicals and materials
industry cluster by creating a commercialization bridge to entering high-growth niches and
offering a site for the research, engineering, and piloting of advanced energy solutions
related to coal.
WVERT may also help in supporting the continued presence of digital services and business
management and services in the Charleston region, particularly by offering a site that can
support data centers.
Of immediate importance is leveraging the assets of WVERT to address workforce issues.
WVERT can provide a unique setting for the much-sought-after hands-on skill training in
process technologies to serve the needs of energy, chemicals, and materials companies and
related engineering, commercial R&D, and testing services.
Longer term, WVERT’s potential is to be a part of West Virginia’s approach to raising its
broader research capabilities in the key fields related to advanced chemicals, materials, and
energy. With corporate R&D in decline, it is essential that West Virginia raise its institutional
capacities to be at the innovation edge of its mature industries in energy, chemicals, and
materials.
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DEVELOPMENT PROGRAM FOR WVERT
Based on the analysis of potential drivers for WVERT, there is great potential for WVERT to
be a signature center to spur innovation and technology development in West Virginia’s
industry cluster complex of energy/chemicals and materials/engineering, commercial R&D,
and testing labs as well as to serve as a much-needed site for advancing broader technology
and related talent development in the hard-hit Charleston region.
To realize this potential, WVERT needs to have an integrated and comprehensive program
that is balanced across its missions in education, research, and technology development.
Driving this programmatic effort is a vision of how WVERT can best be a catalyst and
resource in technology-based economic development.
Vision of WVERT
The West Virginia Education, Research and Technology Park will become a signature center
enabling West Virginia to be among the national leaders on the global stage of
commercialization and growing companies in innovative areas of traditional and biobased
energy, chemicals, and materials.
This development must be advanced not only to create the high-quality facilities that will
attract and retain companies involved in advanced energy technologies, but also to provide
targeted technology commercialization program efforts that address key market gaps as well
as fostering longer-term industry–university–national lab partnerships and, in doing so,
advance product development and new company formation as demand drivers across these
leading industry clusters in West Virginia.
The measure of success of WVERT is the global competitiveness of these three leading and
interrelated industry clusters that are critical to West Virginia’s economy. For WVERT to
serve as a national and global technology development and innovation driver for these more
mature industry clusters that are important to the state, it will require close attention to the
entire interconnected sequence of positive factors, or value-added chain, that connects and
strengthens the technology, talent, and innovation drivers of industry cluster development
across the expansion of existing businesses and the attraction and start-up of new
businesses. If any link in the value chain is inadequately addressed, then the competitiveness
and ability of a technology-based industry cluster to generate quality jobs will be hampered.
While this value chain forms naturally over time in some communities (such as Silicon
Valley), many communities have achieved success in promoting targeted industry clusters by
advancing economic development programs and initiatives to address this value chain.
Examples include Research Triangle Park in the biopharmaceutical industry cluster, Georgia
in logistics, and Wichita in aerospace.
27
Figure 5: Technology-Based Economic Development Chain
Technology-Based
Economic Development
Integration of existing
businesses into the cluster,
and support for additional
business growth from
Commitment to
these enterprises
targeted recruitment
Facilitation and
(domestic and international)
coordination of
of cluster businesses
networking and
and supporting
cluster support
businesses
activities
Requires Attention to Every Link in the
Development Chain
State and private
sector commitment to
building robust
base of high-quality
science and technology
R&D and supporting
infrastructure
Investment in infrastructure
and personnel for
application testing, technology
piloting and scale-up activities
Presence of
entrepreneurs
and skilled human
capital for business
start-ups
Business
Attraction
Existing
Industry
Basic
Science
Strong academic
research community
able to attract
competitive
external grant
funding
Applied
R&D
Piloting &
Demonstration
Academic research
community and key
partners committed to
translating discovery
into application and moving
it towards commercialization
Technology
Transfer
Financial and
personnel commitment
to intellectual property
protection, technology
transfer and in-state
commercialization
New Enterprise
Development
Public and private
sector risk capital for
pre-seed, seed and
venture funding
rounds
Business
Expansion
Infrastructure and
facilities to house
science and
technology-based
new and expanding
business enterprise
Technology
Business Cluster
Education and
workforce
development to
support cluster
personnel needs
Generation of positive
government, regulatory
and business climate to
meet competitive
cluster needs
Long-term, sustained commitment to development of the cluster by all parties
RECOMMENDED PROGRAM DEVELOPMENT EFFORTS FOR WVERT
28
Battelle is recommending four specific program initiatives for WVERT, which together can
position WVERT as a catalyst and resource for technology development and innovation,
while also focusing on the overall value chain of technology-based economic development
driving industry cluster advancement in energy, chemicals and related materials, and
engineering and testing services (Figure 5).
Filling a critical gap in the commercialization process for pilot production. This is a
specialized operation, and one that is tied to the technical expertise of a proven operator—
and will likely include contract manufacturing (often referred to as “tolling” by the industry)
as well as market development activities with a range of users, most of whom will likely be
emerging growth companies for whom the park provides a preferred development path.
Proactively focusing on the recruitment of innovative, emerging growth companies in
niche areas of energy, chemicals and related materials, and engineering and testing
services. This focus is also needed, with a support infrastructure for entrepreneurial
development. To fulfill this recruitment mission, WVERT should have a certain amount of
multitenant space available for opportunities to capture and accommodate growth. Given
the park’s position in the regional and state technology development and real estate
landscape, this multitenant space should include a mix of chemistry and bioscience lab space
tied to the target niches, as well as associated office space. In addition to the provision of
physical amenities that promote discovery and applied R&D, a set of business growth and
financing services should also be provided.
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Advancing talent generation through hands-on skill training in processing technologies.
With the establishment of the campus of Kanawha Valley Community and Technical College
in the park, along with the new industry-oriented Advantage Valley Technology Training
Center training and meeting facility, WVERT has the opportunity to serve as a focal point for
meeting the training and talent development needs of key industries in the state and beyond
for technicians, engineers, and scientists.
Establishing a world-class chemical engineering research institute. This collaborative,
strategically focused institute would deepen the capacity of West Virginia to be an
innovation leader and grow its own in the industry clusters of energy, chemicals, and
engineering/R&D/testing labs. The role of the park is to serve as a focal point that catalyzes,
forms teams, and implements focused activities that address strategic energy, chemicals,
and materials opportunities for West Virginia as well as national and global challenges.
The next more detailed subsections concerning each of these four program activities of
WVERT address the following:
The rationale for the program activity
Best practice examples
The program design setting out specific actions to be taken
The resources required to support the program activity on an annual basis.
29
Filling a Critical Gap in the Commercialization
Process of Pilot Production for Advanced Energy
and Chemicals and Related Materials
Rationale
Pilot production is a key step in addressing the commercial viability of a novel new energy,
chemical, or related material product by allowing customers to evaluate and qualify a new
product, as well as address initial product introduction into the market.
But, pilot production requirements for new energy, chemical, and related material products
are very specialized, calling for process engineering and development during what is broadly
termed “market development.” This involves optimizing a sequence of individual processes
to efficiently convert a raw material into a finished product. These processes can comprise
physical, chemical, or biological changes in the raw material as it becomes a product. Of
particular importance is the need to allow for separation processes, often under specific
conditions, and to isolate components. This separation process can involve a variety of
techniques from distillation through the use of different boiling points or column
chromatography that separates materials based on differences between stationary and
mobile phases, or crystallization based on differences in solubility or cell fractionation based
on differences in mass.
It is particularly important for pilot production facilities to allow these process configurations
to be undertaken at increasing scales, from bench top to pilot scale with limited production
to eventually full-scale commercial production. Along with test data, pilot plants can provide
small production batches for analysis, test markets, or specialty markets. By offering these
different levels of magnitude, WVERT can be positioned to offer firms a critical resource in
demonstrating and advancing new products, through at the commercial development of a
new chemical or related material. Armed with data and proven economics obtained through
the park’s pilot plants, such firms will be in a stronger position to attract partners and capital
to go to full-scale production and achieve market growth. By partnering with WVERT, such
firms could strengthen their value before approaching larger firms, whom they might
otherwise have to approach earlier in order to access corporate or “captive” pilot plants.
As the Battelle team learned from its outreach efforts to existing and emerging companies
involved in processing for energy, chemical, and related material products, there is a clear
demand for and yet lack of available shared-use facilities. More typically, pilot production
facilities are “captured” within larger existing companies.
30
More importantly, the infrastructure found at WVERT, because it had been a “captive” pilot
production facility for Dow and previously Union Carbide, is well positioned to play this pilot
production role through repurposing. Based on the analysis of an expert chemical engineer
with extensive industry experience, Dr. Randall Powell, Battelle learned that WVERT has two
buildings that offer fully serviced, configurable infrastructure for process piloting, scale-up,
and small-scale manufacturing. Both facilities, according to Dr. Powell, incorporate multiple
reinforced-concrete production cells suitable for energetic processes, which also afford
physical separation of processing areas for multitenant use. The existing infrastructure and
ease of configuration of these facilities allow capital to be focused on process-specific
equipment installation and significantly shorten timelines to process start-up. These facilities
would typically allow scale-up in the range of one or two orders of magnitude (10x to 100x)
from benchtop R&D. The high bay cells are particularly well suited for scale-up of liquid
chemical processing such as distillation, reactive distillation, continuous packed column, and
plugged-flow or countercurrent reactions where vertical height within a process
containment cell is required. The high bay cells also lend themselves to processes where
vertical gravity feed is desirable for sequential unit operations. Solid product handling is also
possible in these cells.
Dr. Powell also determined that these facilities could offer a cost-effective alternative to
greenfield sites for permanent or long-duration, small-scale commercial manufacturing of
lower-volume products, especially for high-value, low-volume niche market products;
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products with very low growth rates or extended market penetration timelines; and
products produced in multiple locations.18
The WVERT pilot plants are best suited for the following specific technology uses:
Reactive chemistry processing and liquid handling
Biochemical processing and liquid handling
Purification technology liquid handling.
Table 6 presents a detailed evaluation of the processes that best fit pilot plant capabilities.
Table 6: Technology Segmentation Uses for WVERT Pilot Production Capabilities
Technology
Batch/Continuous
Processing
Liquid Handling
Solids Handling
Other Asset
Issues
Feedstock
Synergies
Reactive
chemistries
HA. Segregated cells
suited for custom fitout; B-707 vertical
design provides
installation efficiency
HA. Facilities
well-suited for
liquid material
handling and
processing
N. B-707 cell
footprint may
limit solids
equipment
installation
A. Cells designed
for energetic
reactions, but not
desirable for
multi-clients
N. Local coproduct streams
could be
feedstocks
Biochemical
processes
HA. Segregated cells
suited for fermenter
installation; B-707
vertical design &
utilities well suited
HA. Aqueous
processing; B-707
vertical design &
utilities well
suited
N. May require
solid/liquid
separations and
solid product
handling
A. Process
isolation provided
by cells, which
may require
enclosure
A. Proximity to
woody biomass
feedstocks as
sugar source
Thermochemical
processes
A. Cells suitable for
small gasifiers and
continuous reactor
installation; utilities
well-suited
A. Liquid
products; some
requiring
purification
N. Mostly solids
feedstocks;
material
handling
appropriate for
facilities size
A. Vertical cells
allow fixed bed
reactors and
distillation of
product mixtures
A. Proximity to
coal and
lignocellulosic
biomass as
gasification
feedstocks
A. Cells suitable for
both batch and
continuous purification
equipment installation
HA. Facilities
well-suited for
liquid material
handling and
processing
N. May require
solid/liquid
separations and
solid product
handling
A. B-707 cell
design advantaged
for liquids;
footprint may limit
solids equipment
installation
A. Lignocellulosic
feedstocks for
fractionation; local
co-product
streams for
purification
D. Continuous
processing equipment
can be bulky
N. Mostly solids
processing
D. Solids
handling for
industrial
processing could
be limited by cell
footprint
D. Facilities not
well-suited for
clean rooms or
controlled
environment
processing
N. None apparent
N = Neutral
D = Disadvantaged
Purification
technologies
Physical
processing
KEY: HA = Highly Advantaged A = Advantaged
18
Dr. Randall Powell, Ph.D., in Assessment Memo of Pilot Production Facilities at WVERT, July and September
2010.
31
Best Practice Models
An example of a state initiative that advanced pilot production facilities in process
engineering as a commercialization resource is the Michigan Biotechnology Institute (MBI).
Originally formed in 1980s, MBI targeted technology commercialization in the areas of
agricultural and industrial biotechnology, which utilizes bioprocessing scale-up
manufacturing. Among its focus areas have been green chemicals, biobased materials,
animal feeds, specialty enzymes, and bioactive compounds.
MBI invested in a fully equipped, 25,000-square-foot technology development and scale-up
center, which integrates activities in microbiology, molecular biology, chemistry,
fermentation, and bioprocess engineering. The facility includes bench-scale laboratories, a
three-story, multibay fermentation and recovery pilot plant, as well as a state-of-the-art,
computer-controlled utilities system for air, steam, waste, and water handling. In addition to
the laboratories and pilot plant, support services, computer systems, collaborative software
and administrative services are integrated into the facility to efficiently manage project
development. Office and networking facilities are available for extended-stay on-site
collaborators. In addition, the chemistry laboratories contain a broad range of contemporary
analytical instrumentation to fully support pilot plant and research activities in microbiology,
molecular biology, chemistry, and materials science.
To fulfill its commercialization mission, MBI has focused on activities such as the following:
32
Establishing a for-profit subsidiary, Grand River Technologies Inc., to commercialize
MBI technologies by creating new businesses, securing joint ventures, or outlicensing technologies. Through Grand River Technologies, MBI developed expertise
in business plan development, management of emerging companies, and accessing
seed and venture capital. Altogether, 10 companies were launched by MBI through
the early 2000s, including Auxein Corporation that provides compounds for plant
growth, Synthon Corporation that provides high-value chiral intermediates to the
pharmaceutical industry, Natura involved in natural food flavoring, and BioPlastics,
Inc. focused on biodegradable films from agricultural waste and by-products.
Forming the BioBusiness Incubator of Michigan (operating out of the MBI
International building in Lansing), a nonprofit organization providing incubator
tenant services to MBI-sponsored and other biotechnology companies.
More recently, MBI is focused more on collaborations with industry addressing process
development and scale-up needs to determine commercial viability. It terms these activities
“de-risking” by focusing on the transformation of an early-stage discovery into a validated,
robust technology package at a meaningful pilot scale. MBI also consolidates the IP position
during this de-risking process. The result is a technology package that meets performance,
cost, and quality criteria. Among its recent clients have been DuPont (biobased material),
Cargill (biopolymer), and Gene-TRAK (RNA probe).
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Program Design
To advance WVERT’s role in pilot production for advanced energy, chemicals, and related
materials, it will be critical to update the existing pilot plant facilities and to identify an
operator to work with it in offering shared-use services to existing and emerging companies
requiring chemical-related biological scale-up and pilot production facilities.
Battelle is recommending pursuing a relationship with an operator given the significant
technical expertise required to carry out the operations of a shared-use facility. In
discussions with emerging companies needing process pilot production from across the
nation, the Battelle team found that they viewed having an experienced operator who can
add value and offer process improvement guidance as a key feature for making the pilot
plant facilities of interest and value to them.
Battelle is proposing that WVERT enter into a relationship with an operator based on the
following parameters:
WVERT would finance the renovation of the physical plant and initial equipment
costs for basic operations and measurement.
The operator would lease the facility from WVERT and be responsible for costs of
staffing. The leasing period is open for negotiation but should allow for milestones to
be reached. It should not bind WVERT for too long a period of time without clear
performance being met.
Marketing of the facility would be done jointly by the operator and WVERT.
The selection of users would involve collaboration between the operator and
WVERT. The operator would be responsible for all the terms and conditions in line
with its profit and loss responsibilities in managing the pilot production plants.
WVERT would reserve the right to approve or disapprove a user before a final
agreement is reached.
WVERT would seek to negotiate a profit-sharing relationship with the operator over
time.
At the end of the lease period, the facility would remain under WVERT ownership
and lease renewals could be negotiated.
It is suggested that a competitive request for proposal (RFP) process be undertaken to select
and formalize a relationship with an operator. This competitive RFP process will ensure
transparency and accountability. Battelle recognizes that there may be qualified local
organizations interested in serving as the operator, and these local organizations should be
encouraged to apply. Under this approach, the specific terms and conditions can be
addressed in the competitive bid process guided by the general parameters set out above.
33
Resources
Renovations and basic equipping of the pilot plant facilities are expected to be one-time
costs over the next 5 years. These costs can possibly be phased in between the two
recommended pilot plant facilities to be renovated at WVERT, starting with Building 707 and
then proceeding to Building 706 as demand warrants.19
Proactively Focusing on Recruitment of Innovative,
Emerging Growth Companies in Niche Areas of
Energy, Chemicals and Related Materials, and
Engineering and Testing Services
Rationale
34
Critical for the success of WVERT will be a proactive marketing outreach program. This
program should help generate significant demand for expansion space in R&D, product
development, engineering, or testing from the existing companies in the energy and
chemicals and related materials industry clusters or companies servicing those industry
clusters and increase the level of start-ups from the research drivers in West Virginia.
Moreover, it should help increase the demand from existing tenants at WVERT for additional
space.
By establishing this proactive marketing outreach program, WVERT can provide a targeted
business development function for the state, which can work collaboratively with the state’s
Department of Commerce to identify and qualify prospects. WVERT can add high value to
packaging deals for innovative emerging growth companies by providing access to its pilot
production facilities. Additional development tools and incentives will be needed to move
this forward.
Of particular importance is having speculative, high-quality multitenant space for R&D of all
types—including chemistry, biological, and dry labs able to manage air handling
requirements, weight loads, and height needs. The availability of this space at all times is
crucial for realizing the results of an aggressive outreach marketing program. Without such
available multitenant space, WVERT’s recruitment efforts would be compromised,
particularly given the lack of excess inventory and low quality of much of the commercial real
estate found in the Charleston metropolitan area.
19
A detailed approach to making basic infrastructure and cosmetic improvements for the pilot plants
has been developed separately by Dr. Randall Powell, “WVERT Park Prioritization of Infrastructure
Improvements: Buildings 707 and 706,” October 2010.
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Best Practice Models
An excellent example of a research park, driven by state initiative, which established a
proactive marketing strategy that emphasized innovative, emerging companies, is the
Massachusetts Biotechnology Research Park. Today, it stands as a mature, million-squarefoot research park on 105 acres that has carved out an identity for Central Massachusetts as
a low-cost alternative in the biosciences to Cambridge and the inner Boston suburbs.
The park traces its history from the efforts of then-Governor Michael Dukakis who
campaigned in 1982 on a platform of “bring back the cities.” Worcester, the state’s secondlargest city situated about 40 miles west of Boston, suffered a period of alarmingly rapid
industrial disinvestment in the 1970s. Strong community leadership to advance new
economic drivers for Worcester, combined with the Governor’s commitment, led to the
state conveying the grounds of the former Worcester State Hospital for the development of
a research park by the Worcester Business Development Corporation (WBDC), a nonprofit
development company that handled city economic-development business and was closely
affiliated with the Worcester Chamber of Commerce.
After a false start trying to sell land to end-users, and a turnkey arrangement with Hines
Industrial Properties, WBDC began speculative development of its first building “not knowing
what was going to happen,”20 but backed by the financial resources of the Worcester
Chamber and its leading member companies. For the first building, WBDC borrowed from a
consortium of local banks and, for subsequent projects, was able to cross-collateralize by
pledging equity on the earlier buildings. In one case, it used a Community Development
Block Grant (CDBG) guarantee to leverage long-term financing from the AFL-CIO Building
Investment Trust. At the outset, three major multitenant buildings were built in rapid
succession, followed by recruitment of BASF, which had been looking for laboratory space in
the Boston suburbs and was directed to Worcester by the state government in the late
1980s. Thirty-two more acres were acquired, and three additional multitenant units
constructed have been sold to Alexandria Real Estate Investment Trust, a publicly traded
REIT that specializes in laboratory space. While there has been considerable tenant turnover
since the start, the mix remains robust: some university space, some start-ups, and some
branch operations of larger entities.
The Massachusetts Biotechnology Research Park could probably not have thrived in its early
years without the parallel effort of the state-supported Massachusetts Biotechnology
Research Institute (MBRI) to develop entrepreneurial companies, based on proactive
identification and funding for technologies found at research institutions in Massachusetts,
particularly at Massachusetts Institute of Technology (MIT) and Harvard. MBRI maintained a
below-market incubator inside the park and also put together Commonwealth BioVentures,
a $5 million investment fund capitalized by local sources, which provided initial funding for
20
Marc Goldberg, as quoted in: Kim Ciottone, “Buying into Biomed,” Worcester Business Journal, February 26,
2002. Available online at http://www.massbiomed.org/news_mbi/?action=view&id=54.
35
the proof-of-concept, formation, and development of management teams for promising
university research discoveries.
Another more recent example is the effort underway at The Philadelphia Navy Yard, which
involves a consortium team with Penn State, a technology development and
commercialization driver (Ben Franklin Technology Partners of Southeastern Pennsylvania),
and a business development organization (Philadelphia Industrial Development Corporation
[PIDC]). Penn State is the lead research driver, establishing a new applied research,
education, and demonstration campus 200 miles from its main campus in State College.
Other partners include the regional manufacturing extension center, the Wharton Small
Business Development Center, a regional workforce and talent development consortium of
educational institutions as well as industry partners. The Collegiate Consortium for
Workforce and Economic Development, located at The Navy Yard, assists businesses with
customized workforce training, retraining, retention, and skill development programs.
The Philadelphia Navy Yard includes an 81-acre “Clean Energy Campus,” which is the new
home of a DOE-designated and -funded Innovation Hub for Energy Efficient Building
Systems.21 This Greater Philadelphia Innovation Cluster (GPIC) is a first-of-its-kind national
energy hub devoted to increasing the energy efficiency of buildings through research,
commercialization, and manufacturing technologies. GPIC will stimulate private investment
and quality job creation, bringing momentum to the Mid-Atlantic energy hub.
36
Designated as one of the state’s Keystone Innovation Zone program sites, The Navy Yard KIZ
promotes collaborative technology innovation among academic institutions, economic
developers, and private industry that supports the growth of technology companies focused
on power and energy, advanced manufacturing, communications and IT, nanotechnology,
homeland security, and life sciences.
This new campus provides the following:
Commercial, industrial, and institutional buildings that can be utilized as key
research elements in developing and validating models, materials, processes, and
designs—both new and retrofit construction
Location of existing Penn State’s energy and research centers
DOE’s Mid-Atlantic Clean Energy Application Center
DOE’s Mid-Atlantic Solar Resource and Training Center
DOE’s Smart Grid Workforce Development Program
21
Earlier this year, the region celebrated the award of nearly $130 million in federal funds, including $122 million
from DOE to create the Greater Philadelphia Innovation Cluster (GPIC) for Energy-Efficient Buildings (EEB) at The
Navy Yard.
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A new research building to be built with PIDC funds specifically for the EnergyEfficient Building Systems Hub.22
Program Design
The proactive marketing outreach effort requires facilities, capital, marketing program, and
business services to accomplish its aims.
For facilities, WVERT can create different types of multitenant space for R&D purposes by
collaborating with anchor tenants, who can provide needed occupancy to make multitenant
buildings feasible. One important anchor tenant in place is the Kanawha Valley Community
and Technical College, which will allow one of the larger buildings at WVERT to be
operational and provide additional space for other tenants. Other potential anchor tenants
that are in discussions with WVERT include the consolidation into updated facilities at
WVERT for state government testing operations, for the Department of Agriculture in food
safety testing and the State Police for forensics analysis. State government played a similar
anchor role for the first multitenant building at the Virginia BioTechnology Research Park in
Richmond, Virginia.
There may be opportunities to help some of the existing WVERT tenants expand and also
serve as anchor tenants in multitenant facilities at WVERT. For capital, in order to provide a
meaningful recruitment tool for emerging national and international companies with
processing needs, there is a need for a pilot production equipment and working capital
financing program. From Battelle’s interviews with prospective users of the pilot plant
facility, simply having an experienced, expert operator may not be sufficient to ensure the
success of the pilot production activities and engage these companies to co-locate business
operations at WVERT or other locations in West Virginia. In particular, there are significant
needs for customized equipment, often specialized to the specific product being advanced.
For many companies, particularly more emerging ones, the cost of this equipment can be
prohibitive. It is recommended that a pilot production equipment and working capital
financing program be developed and operated by WVERT.
This pilot production equipment and working capital financing program could be contingent
upon negotiation of co-location of business operations in West Virginia. It also could be
structured as a debt equity instrument in which WVERT would take a security interest in the
equipment financed and have warrants issued so there is an upside if the product
development efforts succeed. It might also be useful to have the working capital portion of
the loan be converted to a grant upon reaching certain milestones related to the relocation
of business operations of the out-of-state company to West Virginia.
22
Funded for an initial 5 year period at $122 million, the new DOE Energy Innovation Hub’s mission is to research,
develop, and demonstrate highly efficient building components, systems, and models that are applicable to both
retrofit and new construction. The Hub team will pursue a research, development, and demonstration (RD&D)
program targeting technologies for single buildings and district-wide systems.
37
For marketing activities, WVERT should hire a lead marketing staff person responsible for
developing strategies focused on proactive outreach marketing and collaborating with
existing industry, economic development, and higher education representatives in
identifying potential industry targets and serving as ambassadors for recruitment. The
WVERT lead marketing staff person would be responsible for generating leads based on
specific monthly actions focused on targeted business attraction and recruitment focused on
targeted domestic and international opportunities where the state and the park have a
strong value proposition. This WVERT lead marketing staff person would also be charged
with staying abreast of emerging business issues impacting the industry clusters of energy,
chemicals and related materials, and engineering and testing, such as federal regulatory
changes, legislative issues, international trade issues and opportunities, etc. Initially, an
administrative assistant would support this lead staff person in proactive marketing. A
marketing outreach budget for travel, direct mail, attendance at selected trade shows, and
earned media of $200,000 in year one and $150,000 annually thereafter should be allocated.
For business services, WVERT should consider ways to create a business environment
attuned to the needs of emerging energy, chemicals and related materials, and engineering
and testing services companies. This should include access to professional services,
mentoring services, connecting with higher education resources and expertise, and accessing
capital sources. To staff this function, a business services coordinator should be put in place
and up to $50,000 of funding be made available for services.
38
Resources
Several key costs will drive this program activity:
Multitenant Space: In addition to covering the cost of speculative, multitenant R&D
space, WVERT should have a tenant improvement allowance of up to $100 per
square foot to help in fitting out the labs to meet the needs of tenants. This tenant
improvement allowance should be recaptured over the life of the leases, if possible.
Pilot Production Equipment and Working Capital Financing Program: A revolving loan
fund should be capitalized at $5 million. In addition, recurring annual costs for due
diligence analysis and legal costs are required, estimated at $10,000 per transaction
or about $100,000 each year.
Marketing Services: A recurring annual cost involving dedicated marketing staff
capacity at WVERT should include at least $200,000 for the salaries and benefits of
the lead marketing staff and an administrative assistant, along with $150,000 for
marketing activities.
Business Services: A recurring annual cost involved in the business services staff
capacity should include $100,000 for salaries and benefits and $50,000 for program
activities.
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Advancing Talent Generation Through Hands-On
Skill Training in Processing Technologies
Rationale
Ensuring a pool of talent in processing technologies from technician to engineering to
scientist levels is essential for the long-term future of West Virginia in its energy, chemicals
and related materials, and engineering and testing services industry clusters. In today’s
knowledge-based economy, businesses go where the talent resides.
From interviews with existing companies involved in processing technology, Battelle learned
of a strong need for technicians given the expected retirement of an aging workforce in the
chemicals, materials, and energy industries in West Virginia.
While academic programs are the starting point, a strong hands-on skill training and
experiential learning component is also necessary. Knowing theory and facts is simply not
sufficient for industry; students need to be able to work with the equipment and problem
solve in a real-world context.
According to the National Governors Association Cluster Strategies report,23 advancing
targeted skill centers for specific industry clusters can offer a resource to industry that can
understand a cluster’s particular needs and interests, solve problems, ensure a continued
flow of qualified workers, and serve as a source of skill upgrading for the incumbent
workforce. It also allows students access to better and deeper programs (“know what”),
better employment information and more rungs on career ladders (“know who”), deeper
understanding of industry context (“know why”), and more informal learning opportunities
(“know how”). Community colleges are often the site for such industry-driven technology
and workforce development centers, but 4-year colleges and universities can also be key
sites or partners. Examples include Indian Hills Community College in Iowa focusing on
fermentation pilot facilities for the bioscience-based agriculture industry; the Lamar Institute
of Technology in Texas focused on process technologies for the chemicals industry; or
Catawba Valley Community College in North Carolina focused on the testing, design, and
technology used in the hosiery industry.
Best Practice Models
Innovation Park at Penn State is a 118-acre university-led business and research park and
home to the Penn State Nanofabrication Laboratory, part of the National Nanotechnology
Infrastructure Network that allows companies access to high-end nanotechnology
equipment to develop new concepts, prototypes, and production processes. Incorporated
into the Penn State Nanofabrication Laboratory is one the nation’s first and foremost
programs for nanotechnology manufacturing technician training, which has led Penn State to
23
National Governors Association, Cluster-Based Strategies for Growing State Economies, 2007.
39
support the efforts of Pennsylvania community colleges to offer an associate’s degree in
nanofabrication.
Penn State’s efforts in nanotechnology education date back to 1998. In that year, the
Pennsylvania Department of Community and Economic Development established the
Nanofabrication Manufacturing Technology (NMT) Partnership, headquartered at Penn State
to meet Pennsylvania industry needs for skilled micro- and nanofabrication workers. Rather
than simply focusing on Penn State students, this partnership effort includes the
Pennsylvania Commission for Community Colleges, the Pennsylvania State System of Higher
Education, the Pennsylvania College of Technology, other postsecondary and secondary
schools, private industry, and others. The nation’s first associate’s degrees in nanofabrication
were awarded in Pennsylvania through this partnership. A 2007 survey of 508 students who
completed the center’s capstone semester in nanofabrication at Penn State, most of whom
while students at community college, found that 75 percent were working in industry and
the other 25 percent were full-time students seeking higher degrees. Graduates from the
NMT training program now work in 75 Pennsylvania companies at all levels from technicians
to engineers to scientists.
40
The NMT was designed to use the Penn State Fabrication Laboratory facilities to offer a onesemester, six-course, 18-credit academic capstone.24 These courses, which focus on safe
materials handling and an introduction to basic fabrication operations, are integrated by
partnering institutions into a newly created associate’s degree in fabrication or used to
satisfy requirements for a fabrication concentration or minor within existing baccalaureate
programs in chemistry, physics, or biology. There is also a noncredit certificate offered to
continuing education students by the Penn State School of Engineering.
These activities have also been recognized by the NSF, which awarded Penn State a Regional
Advanced Technology Education Center from 2001 to 2008. In 2009, that center became a
national advanced technology education center, receiving $5 million over 4 years from the
NSF for establishing and running a National Center for Nanotechnology Applications and
Career Knowledge (NACK).
A more recent example is at the new research park within Oak Ridge National Lab, where
Roane State Community College is starting up a new advanced materials technician-level
training program. This effort was recently awarded a Community-Based Job Training Grant
from the U.S. Department of Labor providing $2.86 million over the next 3 years. Among the
industry partners seeking access to these new advanced materials technician graduates were
Babcock & Wilcox, Toho Tenax America, CoorsTek, Protomet, USEC, Confluence Solar, and
the Oak Ridge National Lab. These partners identified the need to train and hire more than
1,200 new advanced materials technicians during the next 3 years. The grant includes funds
for tuition and other costs for more than 600 unemployed individuals to complete their
24
For the course list, see http://www.cneu.psu.edu/edAcademicCap.html.
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training. A new Advanced Materials Training and Education Center will be housed at the
research park in Oak Ridge National Lab and will offer a 4-month curriculum focused on
carbon fiber and solar energy.
Program Design
WVERT has a unique opportunity to facilitate experiential learning for chemical process
technicians and engineers through the use of pilot plant operations, where there is already a
documented need for technician training to address retention and growth needs for the
state’s base of chemicals firms.
It is proposed that the state fund at WVERT an industry consortium for chemical process
capstone projects in a manner similar to the establishment of the NMT Partnership at Penn
State for nanotechnology fabrication by the Pennsylvania Department of Community and
Economic Development. This will require funding for development of curriculum, staffing,
and outreach activities.
It is also proposed that a strong outreach to the K-12 system be considered. This effort could
involve teacher training and perhaps the development of a chemical process bus, similar to
what many states have done in the biotech arena that can travel around the state and offer a
hands-on experience to K-12 students.
It is recommended that federal agency funding from NSF, the Department of Labor, or DOE
be strongly pursued for the industry training consortium and the K-12 teacher training and
student engagement.
An additional step for connecting more advanced engineering students with employers
would be to establish and promote internships with industry in chemical process engineering
and technology development. This could be advanced through tax credits to employers,
waiving of payroll taxes on interns, or direct matching funds for internships.
Resources
It is recommended that $1 million for the start-up of the chemical process training program
be funded and that ongoing costs be provided by industry and students.
Establishing a World-Class Chemical Engineering
Research Institute in West Virginia
Rationale
Despite the historical presence of energy and chemicals and materials industries in West
Virginia, with strong requirements for chemical engineering competencies, the university
research base in West Virginia is not among the nation’s leaders in chemical engineering in
size and scope. The NETL clearly has many chemical engineering competencies, but its R&D
41
funding is declining and much of it goes for extramural activities at universities and other
research organizations, including WVU, Marshall, and MATRIC.
In the past, much of the chemical engineering R&D taking place in West Virginia was industry
driven. But, there has been a critical shift in industry thinking about internal R&D activities.
As the recent report of the National Academies, Rising Above the Gathering Storm, Revisited,
points out: “…the great United States corporate research laboratories of the past are
increasingly becoming a thing of the past.”25 Henry Chesbrough, a noted business professor
who tracks the shift of R&D activities and helped coin the phrase Open Innovation, explains:
Not long ago, internal R&D was viewed as a strategic asset and even a barrier to
competitive entry in many industries…Rivals who sought to unseat these firms had to
ante up their own resources and create their own labs, if they were to have any
chance against these leaders. These days, the former industrial enterprises are
finding remarkably strong competition from many newer companies. These
newcomers—Intel, Microsoft, Sun, Oracle, Cisco, Genentech, Amgen, Genzyme—
conduct little or no basic research on their own. Although they have been very
innovative, these companies have innovated with the research discoveries of
others.26
42
West Virginia has been a victim of this shift away from relying on corporate internal R&D
labs, as the state’s takeover of the Dow/Union Carbide research center demonstrates. But,
this does not mean that R&D is any less important for advancing West Virginia’s energy and
chemicals and materials industries. It simply means that the state and its research
universities must help in filling the void, or West Virginia risks falling behind fast-moving
global competitor nations that are making these investments in R&D.
Best Practice Models
There are best practice models on collaboration across universities through the use of an
“institute” model. One of the most successful institutes associated with a research park is
the Research Triangle Institute (RTI). The goal of RTI was to bring to Research Triangle Park in
North Carolina a world-class innovation driver that would help shape the research park’s
image as a technology center, even though it was miles away from any university center. RTI
is governed with the active involvement of the University of North Carolina System and Duke
University. It has grown from a handful of scientists hired in 1959 to a staff of more than
2,800. Today, RTI is well known as one of the world’s leading independent, nonprofit R&D
organizations.
25
National Academy of Sciences, National Academy of Engineering, and Institute of Medicine of the National
Academies, Rising Above the Gathering Storm, Revisited, 2010, page 45.
26
Henry Chesbrough, Open Innovation, Harvard University Press, 2003.
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Another best practice institute model is that of the Fraunhofer Centers in the United States,
operated through Fraunhofer USA, the American subsidiary of a German applied research
organization. In the United States, the Fraunhofer Centers partner with major research
universities in focused areas of technology development. These major research universities
include the University of Maryland, Boston University, University of Michigan, Michigan State
University, MIT, and the University of Delaware. The Fraunhofer Center at the University of
Delaware is located at the Delaware Technology Park.
The focus of these partnerships is to serve as a bridge between academic research and
industry needs. The technology focus areas include sustainable energy, molecular
biotechnology, coatings and laser applications, manufacturing innovation, software
engineering, and digital media. The basis of these Fraunhofer Centers is to conduct contract
research in the United States with government and industry, as well as advance technology
commercialization with tailored efforts in each center based on the industry and technology
opportunities.
What is common between the RTI and the Fraunhofer Centers in the United States is that
they are viewed as world-class applied research institutes that are connected to the strength
of universities and that raise the profile of those universities and their associated research
parks.
Program Design
WVERT needs to advance a center of research excellence in chemical engineering that
connects the strengths of the state’s universities and national labs to addressing significant
challenges facing the energy and chemicals and materials industries in chemical process
technologies.
The starting point for this program activity should be a 12-month planning study for a West
Virginia Center of Excellence in Chemical Engineering to identify the focus, required facilities,
partners, and programs, along with likely research leaders. Such a Center should be designed
to focus on areas of strategic importance to the state, while building upon and
supplementing the current capabilities of the existing organizations. In addition, this Institute
should have an explicit focus on applied research with strong linkages and co-investment by
industry and others on both firm specific and industry-wide needs and opportunities. The
following are among the key questions to be addressed in the planning study:
What are the major technological challenges facing the energy and chemicals and
materials industries, informed by active outreach to industry chief technology
officers?
What would be the design of a research center to address these needs and position
West Virginia for the next generation of innovation leadership in chemical process
engineering and technology development?
43
Who will West Virginia work with as likely research leaders and partner
organizations?
However, for this planning effort to be taken seriously, a major endowment should be
created at the West Virginia Higher Education Policy Commission at the outset of the
planning process to demonstrate the state’s seriousness in this effort.
Resources
An allocation of $300,000 to $500,000 should be made for the planning study to be
conducted by a top-tier R&D consulting organization.
Bonding of up to $10 million toward the initial endowment for the West Virginia Center of
Excellence should be made, with a commitment of $10 million annually for the next 10 years,
drawing as much as possible from a combination of state, federal, and private resources in a
predictable and sustained fashion.
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RECOMMENDED GOVERNANCE, FUNDING, AND OPERATING
APPROACHES FOR WVERT
Introduction
A critical component of the success of WVERT is to put in place the organizational structures
and leadership that can allow it to carry out its program development with quality and
timeliness. It also needs stakeholder engagement to ensure that it can play a catalytic role in
fulfilling the WVERT vision. These are key ingredients for WVERT to become a signature
center that enables West Virginia to be a national leader on the global stage of
commercialization and growing companies in innovative areas of traditional and biobased
energy, chemicals, and materials.
Having WVERT under the auspices of the West Virginia Higher Education Policy Commission
was an important first step. The commission has experience in overseeing large campus
developments, is a key driver of innovation and talent policies for West Virginia, and has a
broad-based board that represents and understands the needs of West Virginia. But, the
commission is a policy organization, not an operations organization. So, it is essential that
new organizational structures be put in place for the day-to-day governance, funding, and
operations of WVERT. This is no different than any of the institutions under the commission’s
jurisdiction—each has its own organizational structure.
To better inform the governance, funding, and operating and management plan for WVERT,
Battelle undertook a benchmarking analysis focused on the following issues:
Governance plan for WVERT and its associated Eastern Energy Commercialization
Center (E2C2) involving how best to engage the state, universities, NETL, industry,
and others
Development structures needed to ensure the financing to support the growth of
the park, including how to ensure that facilities can be modernized and constructed
Management approach for WVERT, touching on who will be responsible for the
property and facility management as well as for business development, including
operation of the pilot plants.
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Benchmark Analysis
Benchmarking, which is commonly undertaken in the corporate and financial communities as
a way of improving efficiency and calibrating performance, is just as important in planning
for technology-led economic development. Benchmarking allows one to identify, analyze,
and draw useful lessons from the practices and experience of regions and institutions that
are generally comparable along relevant strategic dimensions. Benchmarking can help in the
following:
Isolating the strategic issues. To design a strategy for technology-led economic
development, any region or institution must understand what its key choices are and
how various potential uses of resources trade against each other. Examining how
competing entities have positioned themselves can give insight into what strategic
choices must be made in view of the home region’s/institution’s strengths and
weaknesses, and the opportunities and threats posed by the broader marketplace
for business engagement.
Figuring out what works. There is no point in reinventing the wheel. Strategies and
initiatives that have worked in other regions/organizations facing similar challenges
can often be adapted to local conditions, avoiding the risks of investing in entirely
untried approaches unless the situation explicitly requires that.
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SELECTION OF THE BENCHMARKING CASES
In selecting benchmarks among successful research parks across the United States, Battelle
focused on those that have one or more of the following characteristics:
Involve some form of special authority, powers, and or support provided by state
government
Have been a single-user site transitioning to multitenant functionality
Have a site located away from major research institutions or university drivers
Have a signature status and strategic role in transitioning a region or state to a
new economy
Involve commercialization and/or pilot plant and scale-up services.
Using these criteria, the following five research park cases were selected for the benchmark
set:
The Illinois Medical District Commission and Chicago Technology Park in Chicago,
Illinois
Centennial Campus of North Carolina State in Raleigh, North Carolina
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Virginia BioTechnology Research Park and Virginia BioTechnology Research Park
Authority in Richmond, Virginia
Delaware Technology Park in Newark, Delaware
University of Arizona Science and Technology Park in Tucson, Arizona.
Table 7 summarizes the selected benchmarks along the strategic dimensions identified
above.
Table 7: Benchmark Case Study Profiles
Research
Park—Program
Entity(s)
Illinois Medical
District
Commission
and Chicago
Technology
Park
Centennial
Campus at
North Carolina
State
Virginia
BioTechnology
Research Park
and Virginia
BioTechnology
Research Park
Authority
Delaware
Technology
Park
University of
Arizona
Science and
Technology
Park
Special
Authority,
Powers,
and/or Support
Provided by
State
Government
State funding
provided for
initial land
purchase
Preceding Use and
Property Profile
Proximity of
Site to Major
Research
University
Drivers
Regional
Setting;
State Capital
Commercialization
and/or Pilot Plant
and Scale-Up
Services
Urban
redevelopment area
within 560-acre
medical district with
100-acre core; CTP
consists of 600 ksf
of wet-lab and
office space
NA—new
development
Hospital
complex and
University of
Chicago
linkages
Major metro
Yes—enterprise
centers have
successful track
record, with 25+
graduates,
including Amgen
New campus
Mid-sized
metro
Being further
developed
NA—new
development
Limited R&D
base nearby
Small metro;
state capital
Extensive linkage
with partners,
university and
statewide program
NA—40 acres under
long-term lease
from the University
of Delaware
Adjacent to
University of
Delaware
campus
Small metro
within major
metro
Commercialization
program linked to
regional and
university
resources, as well
as Delaware
Biotechnology
Institute and
Fraunhofer Center
Yes—1,345 acres of
land transferred
from IBM to the
university, with IBM
continuing to stay
on as anchor tenant
as well as managing
property, including
a central steam
loop.
Direct link to
University of
Arizona but
not adjacent
Mid-sized
metro
Incubation
program and
facility
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Two linked
entities;
statewide
program
authority and
park
development
organization
No special
powers per se,
but the park
effort;
501(c)(3)
corporation
originated
from
Governor’s
Task Force
Arizona Board
of Regents
involved in
negotiations
and issuance of
bonds for
acquiring the
property
LESSONS LEARNED AND IMPLICATIONS FOR WVERT
The relevant, crosscutting implications and lessons learned were drawn to inform WVERT
approaches and requirements, specific to the opportunities and development context
identified through the preceding analysis.
In particular, the following critical functions were examined and analyzed for the purpose of
designing the best approach and potential options for WVERT:
Governance models and powers
Funding mechanisms and financial models and principles
Management and operations.
Other areas examined, but with less immediate implications for recommendations regarding
the organizational design and resources, were the following:
Early anchors and state government tenancy
Business development and commercialization services
Regional linkages
Fiscal impact for state and local government.
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These latter findings can and should be incorporated into the management approaches and
planning for the park.
Governance Models and Powers
A number of examples in the appendix include two interrelated levels of organization:
In general, there is a broader, mission-driven, and programmatic entity that reaches
beyond the confines of the research park, either into a larger district or
programmatically and financially on a statewide basis. In some cases, including
Virginia and Chicago/Illinois, the linkages extend to overlapping board members and
shared staffing and support.
As a complement to this broader entity, there is a focused corporation, sometimes a
501(c) (3) corporation, a limited liability corporation (LLC) or other form, which is
specifically focused on the successful staging and development of a research park
with defined physical assets, a developing competitive position, and value
proposition for a mix of government, university, and industry tenants, based on its
geographic context.
Also, as exhibited by the interplay between the Virginia BioTechnology Research Park
Authority and the Virginia BioTechnology Research Park, there is a need to provide robust
financing powers and tools to sustain the development of a park, particularly in the early
phases of development. Table 8 summarizes the governance models and powers of the
benchmark set.
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Table 8: Governance Models and Powers of the Benchmark Set
Research Park—Program
Entity(s)
Mission and Role of
Organizations
Composition of Board(s)
Illinois Medical District
Commission and Chicago
Technology Park
IMDC’s state charter
enables it to serve as land
acquisition, management,
and development
organization for special
development district in city
of Chicago
Development of industryoriented research park
within larger campus to
advance mission of the
university through a
“campus of the future”
Authority has state industry
cluster mandate; park is
both signature site and
regional driver-joint
initiative of Virginia
Commonwealth University,
state, and city
Development of 40-acre
park adjacent to main
campus of University of
Delaware
Park corp. is being
dissolved and functions
absorbed by IMDC with
board of seven
Centennial Campus at
North Carolina State
Virginia BioTechnology
Research Park and Virginia
BioTechnology Research
Park Authority
Delaware Technology Park
University of Arizona
Science and Technology
Park
Following initial support
through IBM financing and
land transfer, focus on job
creation and economic
impact for region while
advancing industry
collaboration with
university
Co-terminus with
university board
Different roles for boards,
but shared staff; three
common ex officio’s on
both boards
Ex officio seats for State
Director of Development
and University President;
Governor appoints six
directors from the private
sector
Park corp. has 3- to 15member board with
strong links to University
of Arizona
Appointing
Authority and
Accountability
Four state
appointees; two city
and one county
appointee with
staggered 5-year
terms
No separate
governance in this
case—park
integrated with
larger campus and
university functions
Authority has 9–15
members for
Authority with three
ex officio; balance
governor appointed;
park board selfrenewing
Blend of ex officio
and Governorappointed slots
University
controlled with
further staffing by
university
Funding Mechanisms and Financial Models and Principles
The ability to finance facilities and infrastructure is critical to the successful development of a
research park. It is particularly difficult to get multitenant and shared-use facilities financed
without a structured funding mechanism in place. Also, unique developments such as
WVERT are considered risky, simply because there is no comparable development locally.
Revenue bonds are often a primary funding mechanism, as the various tenant entities can
support the lease payments, which may also need to be subsidized or creatively financed
until the market is proven. State appropriations when available have been used to support
land acquisition, as well as to support special initiatives and programs, including business
incubation and pilot plant operations, which are often “loss leaders.” Table 9 presents the
funding mechanisms and financial models and principles of the benchmark set.
49
Table 9: Funding Mechanisms and Financial Models and Principles of the Benchmark Set
Research Park—
Program Entity(s)
Illinois Medical District
Commission and
Chicago Technology
Park
Financial Models
Centennial Campus at
North Carolina State
Originally by the
university itself,
starting with academic
and multifunction
buildings, and recently
moving to single-use
commercial buildings
(either wet-lab or
office space)
Created a specialized
state financing
authority as a political
subdivision of the
state; park corp. is a
501(c)(3) corporation
Part of an
integrated campus
development
Delaware Technology
Park
University of Arizona
Science and
Technology Park
Virginia BioTechnology
Research Park and
Virginia BioTechnology
Research Park
Authority
50
Financing Powers
and Sources
Development
now principally
done at the
individual
institution and
project level
Not separate
from the
university
Other Special
Powers
Targeted to the
development of the
park(s); board and
staff of the
authority manage
daily operations of
the park annual
operating budget of
$3 million to
$3.7 million
Finances the
development and
construction of
buildings through
bonding and
other debt
instruments
Buildings are generally
financed as individual
LLCs with private
investors
All operating costs
are supported by
lease and rental
income
Although park
development entity is
a 501(c)(3), it is
indirectly supported
by the university
Except for
subsidized
incubator,
operating costs are
supported by lease
and rental income
University City
Science Center
(Philadelphia
partner)
guaranteed early
developments
until track record
established
Cash flow from
anchor tenant
(IBM) bond
payments
generate cash
flow to support
additional
operations
Ability to
receive
resources from
all levels of
government
including land;
assembles and
sells land with
the park;
partnerships
with adjacent
counties
–
Revenue bonds
supported by tenants’
organization income;
recent use of general
obligation bonds
Operational Scope
and Budget Range
Apart from capital
expenditures,
annual operating
budget is $200,000
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Management and Operations
While park management needs to be focused on the successful, phased development of the
park, lean organizations often outsource certain functions, particularly in the property
management and leasing areas, while maintaining executive leadership to ensure the overall
performance and accountability to the governing board and plan. In cases where there is a
related program entity, there can be opportunities to share staffing, as in the cases of
Chicago and Richmond.
In Richmond, the Virginia BioTechnology Research Park Authority shares the same staff as
the Virginia BioTechnology Research Park Corporation. So, the executive director of the
authority is the president and CEO of the research park corporation. Similarly, the treasurer
is the same for both organizations. This combined staff is responsible as developer and
manager of the park, including land acquisition, site improvements, building or contracting
construction of the facilities, day-to-day incubator and park operations, marketing, and
space leasing. Table 10 shows the management and operations of the benchmark set.
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Table 10: Management and Operations of the Benchmark Set
Research Park—
Program Entity(s)
Mission and Role of
Organizations
Composition of
Board(s)
Illinois Medical District
Commission and
Chicago Technology
Park
IMDC’s state charter
enables it to serve as
land acquisition,
management, and
development
organization for
special development
district in city of
Chicago
Development of
industry-oriented
research park within
larger campus to
advance mission of
the university through
a “campus of the
future”
Authority has state
industry cluster
mandate; park is both
signature site and
regional driver-joint
initiative of Virginia
Commonwealth
University, state, and
city
Development of
40-acre park adjacent
to main campus of
University of
Delaware
Park corp. is
being dissolved
and functions
absorbed by
IMDC with board
of seven
Centennial Campus at
North Carolina State
Virginia BioTechnology
Research Park and
Virginia BioTechnology
Research Park
Authority
52
Delaware Technology
Park
University of Arizona
Science and
Technology Park
Following initial
support through IBM
financing and land
transfer, focus on job
creation and
economic impact for
region while
advancing industry
collaboration with
university
Appointing
Authority and
Accountability
Four state
appointees; two
city and one county
appointee with
staggered 5-year
terms
Organizational
Links and
Subsidiaries
CTP originally
subsidiary to IMDC,
now a “brand”
Co-terminus with
university board
No separate
governance in this
case—park
integrated with
larger campus and
university functions
NA
Different roles for
boards, but
shared staff;
three common ex
officio’s on both
boards
Authority has 9–15
members with
three ex officio;
balance Governor
appointed; park
board self-renewing
Park corp. has
strong city,
multicounty, and
university links
Ex officio seats
for State Director
of Development,
and University
President;
Governor
appoints six
directors from
the private sector
Park corp. has 3to 15-member
board with strong
links to University
of Arizona
Blend of ex officio
and Governorappointed slots
NA—501(c)(3)
corp., but with
strong partnering
relationships
University
controlled with
further staffing by
university
Campus research
corp.—a 501(c)(3)—
is essentially a
subsidiary of the
University of
Arizona’s Research
Parks and Economic
Development Office
with links to the
foundation
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Recommendations
FUNDING MECHANISM
Sustained funding is required for WVERT to become a signature center. This will enable West
Virginia to be among the national leaders on the global stage of commercialization and
growing companies in innovative areas of traditional and biobased energy, chemicals, and
materials. The success of WVERT in supporting the energy and chemicals and materials
sectors will reach beyond the borders of the park itself to advance the commercialization of
products in West Virginia, generate needed talent to sustain West Virginia’s
competitiveness, and establish new sources for innovation in West Virginia.
To establish WVERT as a catalyst and resource for advancing West Virginia’s energy and
chemicals and materials industries over the next 5 to 10 years, the funding needs identified
in the proposed program activities are as follows:
Rehabilitation of the pilot plant facilities
Ensuring the availability of multitenant laboratory space
Core staffing for the research park
53
Pilot production equipment and working capital fund
Outreach marketing program
Business services program
Workforce development
Establishment of a world-class applied research center in energy and chemicals and
materials technologies.
Battelle is recommending specific state authorization be enacted to ensure the needed
funding for WVERT. There are a variety of options for providing this funding mechanism. A
traditional approach is to provide annual bond and general appropriations to the authority.
Another traditional approach is to dedicate specific existing taxes or fees generated by the
energy and chemicals and materials sectors to this authority. A more novel approach is to
advance a tax increment financing approach based on the additional total state revenues
generated by the energy and chemicals and materials sectors in support of the authority.
This novel approach is currently being used by Kansas for the Kansas Bioscience Authority.
Example of the Kansas Bioscience Authority
Based upon a review of a range of state-related technology development programs and
initiatives with linkages to research park development and industry cluster advancement, the
best example of such a structure and program is the Kansas Bioscience Authority. This
authority was created in 2004 by legislation that was designed to see in advance the
emerging bioscience cluster in the state of Kansas through a structure that tied the growth of
the sector to increased state revenues from that sector, which were in turn reinvested in the
authority for the accomplishment of its mission.
In 2004, the Kansas Economic Growth Act led to the creation of the Kansas Bioscience
Authority, a statewide bioscience initiative that guides the state’s investment in the
biosciences. The act provided an innovative funding mechanism for the KBA based on the
growth of state income-tax withholdings from employees of bioscience-related companies.
State taxes that exceed the base-year measurement accrue to the authority for investment
in additional bioscience growth. Funding is estimated to reach more than $580 million over
15 years. The funding formula is based on the increase in state payroll tax withholding for
employees in specific bioscience industries, defined by certain North American Industry
Classification System (NAICS) codes in the legislation.
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An independent entity of the state, the KBA is governed by an 11-person board of directors
composed of local and national leaders in industry and academia. By law, one member of the
board is an agricultural expert recognized for outstanding knowledge and leadership in the
field of bioscience. Eight members of the board are representatives of the public who are
recognized for outstanding knowledge and leadership in the fields of finance, business,
bioscience research, plant biotechnology, basic research, healthcare, legal affairs, bioscience
manufacturing or product commercialization, education, or government. Two members of
the board are nonvoting members with research expertise representing state universities.
KBA board appointments are made by the Governor, the Senate president and minority
leader, the House speaker and minority leader, and the Kansas Technology Enterprise
Corporation. The two nonvoting directors are appointed by the Kansas Board of Regents.
In September 2007, the KBA board of directors adopted the following vision and strategies
for the authority:
Kansas is the preeminent bioscience center, serving healthcare, energy, agricultural,
animal health, biomaterial, and national security needs throughout the nation and
around the world by virtue of its excellent research, education, and vibrant industry
clusters.
The KBA is focused on expanding Kansas’ research and industry strengths to:
o
Increase the quantity of high-quality research that has commercial relevance
for Kansas;
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o
o
o
o
Expand the availability of investment capital needed to form and grow new
companies;
Grow and nurture an increasingly experienced pool of entrepreneurial
management talent supported by organized systems of services and
networking;
Expand the availability of capital and assistance to support product
innovation in established companies; and
Facilitate bioscience corporate expansion and attract new-to-Kansas
bioscience corporate activity that grows and strengthens specific clusters of
excellence.
Through the KBA and related initiatives, Kansas offers comprehensive support for world-class
research, commercialization, and business expansion to accelerate company growth and job
creation in the state.
OPERATIONS AND MANAGEMENT APPROACH
Based upon the best practices in the U.S. research park community and the opportunities and
programmatic requirements of developing a park as a statewide, signature development for
the future, Battelle is recommending two different entities. These entities will need to
collaborate on advancing the WVERT and its statewide focus on the energy and chemicals
and materials industries. One entity would be established to “steer” and provide funding for
the WVERT programs, while the other entity would “row” and conduct the day-to-day
activities of WVERT and carry out its proactive business development efforts.
The statewide Funding Mechanism Entity will advance the development and transition of the
advanced energy and chemicals and materials industries, which will have a statewide and
programmatic focus. The WVERT Park Corporation, meanwhile, will be responsible for the
growth and development of the WVERT Park in a manner that advances the long-term,
strategic economic development and diversification of the West Virginia and Charleston
regional economy and is consistent with statewide interests and priorities. To avoid
confusion, the Funding Mechanism Entity should abstain from operating programs directly,
but be charged with strategic investments and support for the advancement of the industry
cluster and WVERT. Table 11 lists the specific activities for each entity.
55
Table 11: Responsibilities of Funding Mechanism Entity and WVERT Park Corporation
Statewide Funding Mechanism Entity would be
responsible for:
Developing and overseeing the implementation of
statewide strategy for energy and chemicals and
materials cluster advancement
Promoting the engagement and collaboration
among industry, federal labs, and higher
education (community colleges, 4-year and
research universities)
Grants with a focus on accountability and due
diligence:
–
Funding pilot plant rehab and multitenant
space
–
Funding program activities of WVERT Park
Corporation beyond direct tenant services
–
Undertaking the RFP process to select
operator for the shared-use pilot plant
facility to work collaboratively with WVERT
Park Corporation
–
Awarding pilot production equipment and
working capital loans
The WVERT Park Corporation would be responsible
for:
Conducting its affairs “at the speed of
business”
Managing the property and campus-wide
services that support tenants
Managing the delivery of commercialization
services
Recruiting and selling the park to attract and
grow tech-based businesses
Marketing and developing customers for
pilot plants in concert with operator and
other organizations
Developing new facilities and structures
financing
Undertaking strategic initiatives in
collaboration with others to build and
support applied research institutes in the
park as well as linkages beyond
GOVERNANCE AND STAFFING APPROACH
56
The WVERT Park Corporation should be established as a 501(c)(3) entity under the auspices
of the West Virginia Higher Education Policy Commission. This can be accomplished by
amending the existing language under Article 12 of Chapter 18B of the Laws of West Virginia
pertaining to “Research and Development Agreements for State Institutions of Higher
Education,” which allow for such research park corporations to be formed.
Given the set of challenges and opportunities that WVERT will face, it is also recommended
that a corporate-level set of executive leaders with key skills in marketing, technology
development, and finance serve on the board and enable park management to leverage
these critical areas of expertise for the long-term growth of the park and its mission.
This board of the WVERT Park Corporation should include both state-level and Charleston
regional representatives. Suggested composition of the board might be as follows:
Representative from the West Virginia Higher Education Policy Commission
Representative from the West Virginia Department of Commerce
Representatives from WVU, Marshall, and NETL
Representatives from Charleston regional economic development organizations
Top-level industry executives from the energy and chemicals and materials industries
and other key technology sectors found in the Charleston region
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For establishing the Funding Mechanism Entity, Battelle sees several possible options. It
could be a new authorization for the West Virginia Higher Education Policy Commission and
so require no new organizational entity. Alternatively, it could be a separate statewide
authority with representatives from the commission, state economic development
organizations, industry, and higher education institutions. A third option might be a
subsidiary organization to the commission with shared responsibility with the West Virginia
Secretary of Commerce. Even if the commission serves as the funding entity, it will require
special authorization for funding so as not to compete with its other responsibilities.
To ensure that WVERT is managed with a view toward its broader responsibilities for
advancing West Virginia, it is recommended that, to the extent feasible, staffing be done in a
joint and shared manner. In this way, economies of scale could be achieved through
common administrative and financial management staff.
One option could extend to the hiring of a joint chief executive officer for both the WVERT
Park Corporation and the Statewide Funding Mechanism Entity. This is similar to the
approach used by the Virginia BioTechnology Research Park and its closely related Virginia
BioTechnology Research Park Authority. Under this option, it is recommended that boards of
the WVERT Park Corporation and the statewide authority act in concert to hire the CEO upon
consultation with the commission. The CEO will in turn be responsible for developing and
growing the park, consistent with its focus and mission in the larger statewide economic
development context. This CEO will hire staff for each of the organizations, seeking to
maximize efficiencies by having dual responsibilities in key functions that will be overlapping
for the park and the statewide authority such as accounting and financial management.
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Appendix A: Case STUDIES
Illinois Medical District Commission and
Chicago Technology Park, Chicago, IL
OVERVIEW
The 560-acre Illinois Medical District (IMD) is on the city’s Near West Side, about 2½ miles
west of the Loop along Eisenhower Expressway. It is the nation’s largest hospital district, and
three of its four current medical centers27 can trace their or their antecedents’ history on the
site to decades following the Great Chicago Fire of 1871.
58
IMD encompasses a large institutional core, and a 100-acre District Development area
that is slowly being cleared for commercial
development and which does not necessarily Figure 6: Illinois Medical District & Chicago
require close connection to the
Technology Park
research and clinical buildings. Within the
District, the Chicago Technology Park (CTP)
was created in 1984 at a time when there was
great interest on the part of public officials
and economic developers in seeing new
companies developed from local research.
The mission of the CTP, to assist in the growth
of companies, is accomplished by supplying
fully equipped infrastructure, university
resources, internship programs and custom
designed business development services.
The Chicago Technology Park today consists
of more than 600,000 square feet of lab and
office space, designed to help technology
companies in early development as well as
providing expansion facilities for companies
growing their operations. Park tenants and graduates cover fields ranging from drug
discovery and delivery, pharmaceutical production, medical devices and testing,
biotechnology, genomics, bioinformatics and nanotechnology, to others who collaborate
with the IMD’s premier medical institutions.
27
Cook County Medical Center, Rush-Presbyterian-St. Luke’s Medical Center, University of Illinois at Chicago
Medical Center, and the Jesse Brown VA Medical Center.
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The Chicago Technology Park offers a wide range of facilities, including laboratory spaces,
office suites and labs in graduate facilities and even build-to-suit opportunities for larger
facility needs.
In 1985, the Illinois Medical District Commission established the Research Center, a 56,000
square foot state-run incubator facility. It is currently home to approximately 30 successful
biotech firms, which have their origins in the IMD’s major medical centers and regional
institutions of higher education. For more than two decades the CTP Research Center has
been home to spinouts from the University of Chicago, Northwestern University, University
of Illinois, Argonne National Labs, and other major research institutions.
Firms located in the CTP Research Center have taken advantage of the infrastructure and
custom-designed business support services provided to them in an effort to help them grow
and further develop into successful stand-alone businesses. In addition, the Research Center
also creates a collaborative environment to help start-up firms to apply for government
funding and attract venture capitalists to support their business development.
More than 150 people work for companies in the incubator and another 125 work for
companies that have moved to other locations within the CTP. The CTP has successfully
graduated more than 25 firms, including biotechnology giant Amgen.
For many years, the Chicago Technology Park carried the burden of being the only wet-lab
incubation and post-incubation space serving the complex of research institutions of greater
Chicago region. More recently, there has been recent private investment in a research park
at a former Pfizer campus in suburban Skokie, and on the Chicago South Side, the Illinois
Institute of Technology is developing its own research park.
The research park itself, while an important asset for the development and attraction of
companies to the IMD, has undergone several transformations as the focus of policy
attention has shifted. Currently, it is viewed as ancillary to the main mission of the IMDC,
which by its charter is oriented toward land ownership and development financing to
support the provision of healthcare and medical-related services, as well as to spur
redevelopment of a once-deteriorating area of Chicago.
GOVERNANCE AND MANAGEMENT
Fundamentally, the Illinois Medical District Commission (IMDC) operates as a land
acquisition, development and management entity.
By 1917 the state began acquiring land in this area for what became the University of Illinois
at Chicago. Since 1941 the IMD—then known as the Illinois Medical Center—has been a
special development district in the City of Chicago, governed by a state-chartered
Commission with explicit legal powers to acquire land (including by eminent domain), to
bank it as long as necessary, and then to finance and develop or otherwise convey it.
59
In 1995 the organization’s name was changed from the Illinois Medical Center—which
referred mainly to the UIC School of Medicine—to the Illinois Medical District, which
recognized its connection to several other institutions both inside and outside IMD
boundaries.
Under its state charter the IMD is governed by a Commission or board of seven members:
four state appointees, two city appointees and one county appointee. Appointments are
staggered 5-year terms. The balance of power among the varying interests is cited as one of
the organization’s principal strengths in maintaining its vision and commitment to its mission
over the long-term.
Land in the IMD is variously owned by the IMDC itself, or by the individual tenant
institutions, or by those to whom the IMDC has sold or conveyed property.
The Chicago Technology Park’s land was purchased through funding initially provided by the
State legislature and was owned by the IMDC. However, governance of the park itself was by
a separate nonprofit board, which was reorganized in 1991 to give IMDC full responsibility
for managing the Park. The reorganization removed representatives of the medical
institutions, which owned none of the land in the CTP and provided no support for its
operation. The CTP board was then comprised five of the IMD Commissioners.
60
In recent years, it was determined that as the CTP had no assets of its own (the IMD owned
its land and the University of Illinois owned its principal building) and was required to follow
the same procurement guidelines and the IMDC, there was little justification for keeping the
CTP corporate entity separate for the parent Illinois Medical District Commission.
Accordingly, in 2009 steps were initiated to dissolve the Chicago Technology Park which was
a 501 (c) 3 corporation as a separate operated entity and to revert to direct management of
the Park’s land development and marketing functions by the Illinois Medical District.
FINANCING FACILITIES AND OPERATIONS
The IMDC is able to finance facilities and infrastructure on behalf of all the tenant entities in
the District. Revenue bonds are the primary financing mechanism, as the various tenant
entities can support the lease payments to the IMDC to retire bonds. The IMD Commission
uses state appropriations when available to support land acquisition but otherwise lives
within an operating appropriation of less than $200,000 supplemented by self-financing
most activities. Apart from capital projects, the typical annual operating budget for
operations is less than $250,000
The IMDC has incentives that can be used to attract new companies / development,
including Federal Empowerment Zone designation (helps to get low interest bonds) and
State Enterprise Zone status (allows forgiveness of sales tax on constructions, can reduce
cost by 10 percent). The IMDC also has the ability to do TIF financing, to apply for a County
government freeze on taxes, and other incentives.
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The original strategy of IMDC was to give away land it had banked, in order to encourage its
use by research institutions or private developers. Reversionary deeds were often used,
although when it came time to reclaim property that was being inappropriately used or not
developed, the IMD Commission found that it had to offer fair-market value in any case.
More recently, the development strategy has re-oriented to long-term (60 to 90-year) land
leasing, which is intended to generate cash flow necessary for further growth.
During the 1980s and through the 1990s, the IMDC served as real estate financing vehicle for
the goals and objectives of the University of Illinois Chicago Medical Center’s technology
commercialization interests. The Chicago Technology Park was one result and experienced
rapid growth in its first three years, with the founding of Amgen and the initial facilities taking
place there with support of an $8.6 million line item grant from the State. The IMDC originally
financed the Research Center in 1985 and recently gifted it to the University of Illinois.
The IMDC also financed and operates Enterprise Center I, which consists of 20,000 square
feet of combined laboratory, CGMP manufacturing, and office space, and Enterprise Center II
which has 15,000-square-feet. Enterprise Center II opened in 2003, was built as part of the
Illinois Venture TECH program at a cost of $3.3 million. Both facilities are fully leased at this
time. In 1987 IMDC facilitated the financing of a 70,000 sq. ft. research building that now is
owned by the University of Illinois and houses both university and private industry tenants.
After some years of stagnation in the Park’s development, the IMDC floated a $40 million
General Obligation bond issue in 2008 through the Illinois Finance Corporation that would
allow it to invest speculatively in ways that revenue bonding would not support. This is
described as the largest general obligation bond issue authorized by the governor to any
entity other than the state government itself. It allows IMD to reclaim and redevelop
properties currently underutilized or in inappropriate use.
The IMDC’s original intent had been to continue build out of the Technology Park, with plans
to develop a new specialized facility devoted to plant sciences and drug development as well
as expansion space for Research Center graduates. The intended project was thwarted by a
local political conflict over land use within the District, and the project has been shelved.
Instead, the funding will be used to develop a Medical Mart project and a Verti-port (medical
heliport) as well as ancillary retail functions.
As a result, the IMDC’s current philosophy is to remain as a steward to the land within the
Technology Park, to provide the supporting environment, but to look for private investment
(from developers or companies) to initiate future real estate projects within the Park.
The IMDC’s CEO notes that the Commission was never intended to be the sustaining
management entity for the Technology Park—only to jumpstart it 20 years ago. The IMDC
currently looks to the University of Illinois Chicago as the primary force in directing the
Technology Park’s commercialization mission, noting that the IMDC’s core mission since 1941 has
been real estate management for the major district entities. It does not operate with an
61
economic development focus, nor has it taken on the mission of growing the Life Science
industry for the State. The Commission is unlikely to make further investments in the park except
for shared facilities, such as parking. However, as owner of the land remaining in the Technology
Park, the IMDC continues to encourage the attraction of new tenants and the growth of existing
tenants, and all of its real estate development incentives are available to companies wishing to
locate within the park or to developers wishing to construct facilities there.
While no longer a legal entity, the Chicago Technology Park brand and location still exist. 28
However, organizationally, the Park does not have any dedicated staff separately from the
staff of the Illinois Medical District Commission. The IMD staff are focused principally on the
organization’s core real estate financing, development and management functions for the
district as a whole.
An IMD District Security Group combines the public-safety operations of the several institutions.
BUSINESS DEVELOPMENT & COMMERCIALIZATION SERVICES
62
Initially, the IMDC financed construction of the 56,000 square foot Research Center
incubator building for the University of Illinois Chicago Medical Center (1985), and operated
it from a real estate standpoint until a year ago. The University allowed tenant companies
access to University research and services, including animal testing and the library. However,
the IMDC incurred ongoing losses in a range of $300,000 to $500,000 per year and could not
sustain this, so has turned the building ownership over to the University.
The University of Chicago Illinois now serves as the main source for commercialization
expertise and capabilities within the Chicago Technology Park. Since 2004 the University of
Illinois has restructured its approach to managing all of its research parks and
commercialization activities under the System, creating a Vice President for Economic
Development to whom the Vice Presidents of Research at the various campuses report.
During the 1990s the IMDC became fiscal agent for ITEC-Chicago, one of a network of statesupported Illinois Technology Enterprise Commercialization Centers. ITEC is life-science
focused and is intended to support creation of spin-offs from UIC and other resident
institutions in the district.
ITEC-Chicago is managed in partnership with University of Illinois Ventures, a commercialization
company wholly owned by the University of Illinois system. The ITECs are generally equipped
with limited budgets to make pre-seed investments in university spin-offs. The ITEC will also
provide commercialization support to startups other than spin-offs.
University of Illinois Ventures also acts as managing general partner of a privately financed
pre-seed investment fund with this same purpose.
28
See: http://www.techpark.com/about
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Virginia Biotechnology Park, Richmond, VA
OVERVIEW
The Virginia Biotechnology Research Park is located in downtown Richmond on 34 acres,
adjacent to the Virginia Commonwealth University Medical Center. The research park was
incorporated in May 1992 as a joint initiative of Virginia Commonwealth University (VCU),
the City of Richmond and the Commonwealth of Virginia. The genesis of the research park
was to anchor a broader biomedical development strategy for Richmond based on the
presence of the Medical College of Virginia in downtown Richmond and involving a highly
active public/private partnership.
The Research Park was developed largely on surface parking lots to the northwest of the VCU
Medical Center. The initial land to start the Research Park was provided by the City and VCU,
but interestingly, a substantial amount of land within the established Research Park area is
still in private ownership—and the state has been assisting in funding the acquisition of land
as needed.
This site is also close to the major financial, utility and other institutions which remain
downtown. The Medical College of Virginia Medical Center is vertical and compact and
located at the north east edge of the Downtown. Hospital construction has continued in the
Medical Center, but the tendency has been for it to remain very concentrated. Because of
the compact nature, the key buildings of the research park remain a convenient walk from
the key research and clinical buildings in the Medical center.
With more than 1.1 million square feet of space in nine buildings, the companies in the Park
now employ more than 2,000 scientists, researchers, engineers and technicians,
representing a capital investment of more than $525 million. Ultimately, the Park will
contain more than 1.5 million square feet of space and will be an employment center for
more than 3,000 life science professionals. Currently, the Park is home to more than 57 life
science organizations, including research institutes of VCU, state and federal laboratories,
more than a dozen early and mid-stage ventures, and multinational companies including a
number of international bioscience companies from the U.K., France, Germany, Scandinavia
and Israel. The Park offers educational programs, scientific speaker series, social events and
community outreach initiatives to bring companies together, promote innovation and create
an exciting and collaborative work environment.
The Park also has two bioscience business centers designed to support life science
companies at various stages of their development. The Virginia Biosciences Development
Center works with start-up and early-stage companies and has worked with more than 63
biotechnology start-ups since inception. The Virginia Biosciences Commercialization Center
can assist companies with market entry of their products and services.
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GOVERNANCE AND MANAGEMENT
Richmond’s biomedical strategy brought together a number of public and private entities
who remain involved in the governance of the research park. 29
The key partners included:
Virginia Commonwealth University’s Medical College of Virginia—VCU/MCV has provided
land, financial and staff resources. The University made possible the development of a
100,000 square foot spec building by signing a master lease guaranteeing occupancy. This
master lease provided the Authority with the needed security for the sale of the bonds. The
University currently occupies 30,000 square feet in that building. VCU/MCV also provides
access to its numerous medical and scientific faculty as a resource and potential tenant pool
for the incubator.
City of Richmond—The City of Richmond has provided land for the park, designated the land
upon which the park resides as an Enterprise Zone and offers tax abatements and tax credits.
The City also constructed the Park’s main parking garage.
State of Virginia—Perhaps the single most important input of the State of Virginia was the
creation of the Virginia Bio-Technology Research Park Authority. The State has also played
the key role of authorizing the issuance of bonds as well as providing a R&D tax credit.
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Richmond Renaissance—This private business leadership group played an active role in
bringing together the key institutions and ensuring broad political support for the initiative.
Richmond Renaissance was a key funder of much of the early operating expenses, sharing
that responsibility with the suburban counties. Perhaps and even more important role of the
business leadership was the leverage they exerted on the state administration and the state
legislature to create the research park building authority and include the biotechnology
center in the state bond issue
Surrounding Suburban Counties—The surrounding counties embraced the project in its
early stages and were another key funding source for early operating expenses, even though
they would receive no direct tax revenue from development in the park. There have been a
number of biomedical company locations and expansions in the counties related to the park
effort.
29
Supporting documents to obtain where available and applicable:
Articles of Organization/Incorporation showing powers and authorities
Bylaws show how the Board is organized, and officer roles
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Greater Richmond Partnership—A business marketing and recruiting organization led by a
public-private partnership of business leaders and local government that is involved in
business attraction for the Richmond region. They are the outreach marketing and incentive
packaging guys, with a large budget and a close working relationship with the Virginia
Economic Partnership, their state counterpart.
The result of these key organizations coming together was the creation of two ongoing
development entities for supporting the development of the Research Park and biomedical
industry in Richmond.
Virginia Bio-Technology Research Park Authority. The Authority is a political sub-division of
the State and is responsible for the issuance bonds for the purchase of land and building
construction, the acquisition of real estate and the development of real estate including
building speculative space. Under statute, the Board of Directors consists of not less than
nine or more than 15 members of which three are the President of VCU, the Mayor of the
City of Richmond and the Secretary of Commerce and Trade for Virginia. The Governor is
responsible for appointing the remaining members of the Board of Directors.
Virginia Bio-Technology Research Park Corporation. A 501(c) 3 corporation organized and
operated exclusively for scientific, educational, and charitable purposes. Its Board includes
county administrators of surrounding jurisdictions, business leaders from the Richmond
region and bioscience representatives.
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There are common members of both Boards including the President of VCU, the Secretary of
Commerce and Trade for Virginia and the Mayor of the City of Richmond. Currently, the
President of VCU serves as Chairman of both Boards.
The Authority shares the same staff as the Virginia Bio-Technology Research Park
Corporation. So, the Executive Director of the Authority is the President and CEO of the
Research Park Corporation. Similarly, the Treasurer is the same for both organizations.
This combined staff then is responsible as developer and manager of the Park including:
acquisition of land, site improvements, building or contracting construction of the facilities,
day-to-day incubator and park operations, marketing, and leasing the space.
FINANCING FACILITIES AND OPERATIONS30
The Virginia BioTechnology Research Partnership Authority (Authority), which began
operations effective July 1, 1993, provides a mechanism for financing construction of the
BioTechnology Research Park through bond issuances and other approved means. Virginia
Bio-Technology Research Park Authority has issued bonds for construction of each of the
Parks buildings including $5,000,000 to build Biotech Center with the incubator, conference
facility and park offices, $15,000,000 to build the 100,000 square foot Biotech One and $34
million to develop Biotech Two, a 137,000 square foot facility built to house the State
Division of Forensic Science and Office of the Chief Medical Examiner on a long-term lease
with the Park.
The University has provided approximately $13 million to $15 million in development
funding and land donation support. The University also secured the development the Virginia
Bio-Technology Research Park Corporation first building of 100,000 square foot spec with a
University master lease which enabled the Authority to raise the bond financing.
Early operational funding support came from the surrounding counties and the Richmond
Renaissance, who together committed to covering up to $300,000 a year in operating
expenses.
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The City of Richmond’s funding support has included land donation and Enterprise Zone
benefits and construction of parking structure.
From the most recently available audited financial statements of the combined activities of
the Authority and the Corporation, the Virginia BioTechnology Research Park and its
Authority have earned sizable net operating incomes in both 2007 and 2008 of $958,521 and
$1,033,025, respectively. The operating expenses were $2.6 million in 2007 and $2.7 million
in 2008.
PERFORMANCE METRICS
Following its incorporation in 1992, the Park officially opened in December 1995 with the
opening of its first building, the Virginia Biotechnology Center, which was the state’s first
incubator dedicated exclusively to bioscience companies.
Today the Park is home to more than 55 bioscience organizations, including several with
international ties; employment exceeds 2,000 scientists, engineers and technicians in the
Park’s organizations.
30
Supporting documents to obtain where available and applicable: 990 Returns; annual reports
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Investments in the Park’s facilities exceed $525 Million in a nine facilities totaling 1.1 MSF,
listed below. At full build out, 1.5MSF are projected with 3,000 employees.
Table 12: Virginia BioTechnology Research Park Facilities
Facility
Virginia BioTechnology
Center
Size and Functions
27,000 sf incubator and administrative facility
Occupancy
Space Available—Wet Lab
Suites and Offices
BioTech One
100,000 sf multi-tenant wet lab and office
facility
Space Available—Wet Lab
Suites and Offices
BioTech Two
131,000 sf facility for Commonwealth of VA
Fully Occupied
BioTech Three
35,200 sf office facility for VCU Health Systems
Fully Occupied
BioTech Five
13,500 sf research and office facility
Fully Occupied
BioTech Six
191,000 sf facility for Commonwealth of VA
Fully Occupied
BioTech Seven
80,000 sf office facility and data center for UNOS
Fully Occupied
BioTech Eight
76,000 sf multi tenant wet lab and office facility
Fully Occupied
BioTech Nine
450,000 sf research center
Fully Occupied
BUSINESS DEVELOPMENT AND COMMERCIALIZATION SERVICES
The Virginia Biotechnology Research Park has formed two bioscience centers for the specific
purpose of helping companies navigate these business challenges, from the earliest stages of
formation through JVs, mergers and acquisition or even IPO. Recognized for their capabilities
and innovative approach, the VBDC and VBCC are designed to complement the Park’s
facilities and strong scientific community.
These two bioscience business centers support life science companies at different stages of
their development.
The Virginia Biosciences Development Center works with start-up and early-stage
companies and has worked with more than 63 biotechnology start-ups since inception. The
Park’s business incubation program, the VBDC, was designed to assist start-up and earlystage companies located in its 27,000 square foot incubator facility. Since late 1995 when it
opened, 63 companies have started at the Park, including three publicly traded graduates:
Allos Therapeutics, Commonwealth Biotechnologies and Insmed Pharmaceuticals.
Functioning as a business accelerator within the Park’s incubator, the VBDC offers bioscience
startups access to a range of services, including: discounted professional services, tailored
business mentoring boards, and entrepreneurial education programs, one-on-one consulting
services, networking opportunities, support services and access to Executive MBA teams
from Virginia Commonwealth University (VCU) and area business schools are also available
and designed to significantly reduce risks for new companies. Companies apply for space in
the incubator, and if accepted, participate in a formal incubation program. The Center uses a
web portal to solicit and screen applicants for its programs.
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The Virginia Biosciences Commercialization Center assists companies with market entry of
their products and services. Incubation is a crucial step in growing a successful bioscience
company; however, after incubation companies still require assistance to continue reaching
critical milestones. The VBCC, created to satisfy this need, provides considerable
commercialization expertise in bringing later-stage companies through commercialization to
joint venture, M&A or IPO exits. The VBCC staff can develop a tailored business and
commercialization strategy including reimbursements, market validation through national
clinical leadership, clinical product launch, and strategic partnerships with industry leaders.
Bioscience companies working with the Commercialization Center benefit from the local
scientific and clinical community and pro-active Fortune 500 business partners who have
significant market access and penetration in U.S. and global healthcare products and
services.
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On a regional basis, the programs and impact of the Park are designed to extend beyond the
confines of the Park. This is accomplished through formal agreements and nearby
Chesterfield County and Henrico County for the joint development and marketing of
alternative sites to the main campus located next to the VCU Medical Center. The satellite
parks give bioscience companies a suburban site option while maintaining affiliations with
the Biotech Park and Virginia Commonwealth University. In addition, the Virginia
Biotechnology Research Park works with the Greater Richmond Partnership and its regional
partners, including the city of Richmond and the counties of Chesterfield, Hanover and
Henrico, to attract life science companies to the region and promote greater Richmond as
“the New East Coast Center for Biosciences.”
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Centennial Campus of North Carolina State University,
Raleigh, NC
OVERVIEW
The Centennial Campus of North Carolina State University31 is a green field development less
than 2 miles from downtown Raleigh. It is sited on the grounds of a former state mentalhealth campus (comprising a hospital and therapeutic farm) centered on Lake Raleigh, quite
close to the main campus of NCSU. Assembled in phases with an additional purchase of land
owned by the Diocese of Raleigh, Centennial now totals 1,334 acres including a separate,
non-contiguous parcel of 214 acres at the veterinary school campus being developed as
“Centennial Biomedical.” NC State has no medical school.
The development of Centennial Campus dates to 1984, when Gov. Hunt conveyed 355 acres
of the former Dorothea Dix Hospital to the UNC system. The second 450 acres was added by
Gov. Martin in 1985. In addition, the NCSU Foundation bought 200 additional acres from the
Diocese of Raleigh. In 2002, 214 non-contiguous acres already owned by the UNC system on
behalf of the NC State College of Veterinary Medicine were renamed “Centennial
Biomedical” and integrated into the Centennial project.
Centennial was envisioned from its earliest days as a master-planned, live-work environment
that would embrace a “campus of the future” concept that co-locates both university
facilities and corporate “partners.” Therefore, from the beginning, the campus development
framework has been strongly aligned with the university’s mission and goals. Centennial
Campus—as its name suggests—is much more a mixed use setting designed to integrate
private partnerships with the University versus standing as a narrowly focused research park
enterprise.
NCSU has always insisted that non-university tenants at Centennial—whether in universityowned or privately developed structures—identify ways in which they will partner with the
university, such as by sponsoring research, hiring students or faculty, commercialization
university IP, or sharing laboratory facilities.
NC State’s strategic research initiatives fall into four main areas: Health & Well-Being; Energy
& Environment; Educational Innovation; and Safety & Security. While partner companies and
organizations on the Centennial Campus run the gamut of scientific and technological
diversity, several areas of research and development stand out, including green energy and
smart grid technology, biotechnology and biomedical research, nanotechnology and
advanced materials, environmental health, smart systems and IT and innovative education.
31
See http://centennial.ncsu.edu.
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The campus currently includes 32 buildings totaling approximately 3 million square feet of
constructed space. Of this, approximately 2 million square feet are directly occupied by
university functions and 1 million are home to external entities (businesses, government,
non-profit organizations). The latter set of buildings that comprise the 1 million square feet
can further be divided into approximately 350,000–375,000 square feet that are directly
controlled by the university with the balance being controlled by private developers.
Together, these facilities house some 60 corporate, government or non-profit partners and
more than 75 NC State research centers, institutes, laboratories and departmental units. The
entire College of Engineering will be eventually located at Centennial. The Centennial
campus currently includes 2,470 employees of corporate and institutional partners; 1,350
university faculty, staff and post-docs, 3,400 university students.
The campus also includes recreational, retail, and residential components, as well as a public
middle school, transit infrastructure and an 18-hole golf course. Other facilities currently
under construction include the James B. Hunt, Jr. Library, a 200,000Library to support
multidisciplinary research and teaching activities on Centennial Campus in the areas such as
science, engineering, information and communication technologies, textiles, advanced
materials and biotechnology. Also an executive conference center and hotel is planned as a
privately developed complex that will sit across from the Lonnie Poole Golf Course and
adjacent to Lake Raleigh.
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GOVERNANCE AND MANAGEMENT
The original vision and conception for the Campus has been as an extension of the University
environment, designed to strengthen its interface with the business sector and with the
surrounding community. Centennial is also fully integrated with the University through its
governance structure and approach to management and operations.
The entire site is on land now owned by the state on behalf of the University of North
Carolina System, and designated for special use as the Centennial Campus by state law,
which also authorizes issuance of revenue bonds to finance development costs. Therefore all
governance is by NC State University itself through its Board of Trustees, subject to oversight
by the UNC System Board of Governors.
Following from the Governance powers and mechanisms that are imbedded within the
University itself, the day-to-day operations of Centennial Campus likewise are directly
administered by the University. In contrast to most research parks, there is no unified “park
management” or “park CEO”. Rather, Centennial is operated under a bi-furcated structure
that consists of:
A Centennial Campus Partnership Office reporting to the Vice Chancellor for
Research and Graduate Studies; and
A Centennial Campus Development Office reporting to the Vice Chancellor for
Finance and Business.
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These two parallel operations have been described by university personnel as being similar
to a “stereo” versus “monaural” audio system: the Partnership Office handles all corporate
partnering, faculty research, marketing, and communications inquiries; while the
Development Office handles all private development, leasing, construction, real estate,
building maintenance, and architectural functions, as well as community event inquiries. This
university-driven corporate structure would not be well-suited for traditional research parks
operated under a narrower and more focused economic development agenda, Nonetheless,
through effective internal coordination of missions—NC State has used this approach
successfully to propel the development of the Campus to its present time—with notable
achievements including the attraction of major national and international companies to the
establish partnership operations at Centennial.
FACILITIES FINANCING AND OPERATIONS
A special purpose 501 (c) (3) corporation has been created named “NC State University
Partnership Corp.” This entity serves as a holding company for five or six special purpose
LLC’s that were established over the years for specific development projects that stand apart
from the main missions of the Campus or which are located at satellite properties that are
owned by the non-profit entity. These include for example the golf course development, the
conference center hotel and the new Chancellor’s residence.
In one instance, the University foundation purchased an additional 70 acres that are held in
separate ownership from the Centennial Campus. These are considered “private” lands that
can be developed outside the requirements of State procurement rules, and that also can
allow construction projects to be permitted under a municipal permitting process that is
more efficient and user-friendly.
While the Partnership Corporation entity is not utilized frequently or for the bulk of the
Centennial Campus development, it has also served as a mechanism for parcels to be
swapped between the main 1000+ acre Centennial Campus land holdings and the 70 acre
land holdings—thereby allowing the privately developed conference center hotel to be
developed on a lakefront site that originally stood within the State’s land holdings.
Relative to the central thrust of the Centennial Campus, development and financing
mechanisms have varied widely by class of building constructed:
State Funding through Appropriations or State General Obligation Bonds 32
Academic buildings designed for the relocation or expansion of NC State colleges
Infrastructure
32
Voters approved a $3.1 billion bond in 2000 for improvements throughout the UNC system.
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Certain state agencies and other miscellaneous public uses
University Funding through Revenue Bonding capacity
Research Buildings I-IV designed to house both rent-paying institutes and centers and some
non-profit or government tenants, to avoid breaking private-use restrictions.
Partners I and II designed to house rent-paying private-sector partners. These buildings were
segregated by use—laboratories in I and offices in II.
One of the two single-tenant “corporate” buildings was developed by the University for
certain North American Operations of ABB, a partner of the engineering school
Privately financed by developers on 99-year land leases
Venture Buildings I-IV and Venture Center, a cluster of five office buildings developed by
Craig Davis Properties33 and subsequently sold to GE Pension Trust
A wet-lab analogue being developed by Keystone.
A second single-tenant building was developed for Lucent but is now occupied by Red Hat,
also a partner of the engineering school
Housing—market rate condos by private developers.
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Other
One major facility, a biotechnology manufacturing training and education center, is being
funded by a grant from Golden Leaf Foundation, the state’s fund to assist communities
adjusting away from dependence on tobacco.
Aside from the state authority for revenue bonding, Centennial in its current model is highly
dependent on the flow of state resources for academic and government-agency buildings
that serve as anchors for commercial tenancy, and all state appropriations must compete
with other potential uses, particularly the rehabilitation of older buildings on the main
campus.
BUSINESS DEVELOPMENT AND COMMERCIALIZATION SERVICES
Centennial Campus is home to the NCSU Technology Incubator, operated through the
University’s Industrial Extension Service. Its stated goals are to focus on economic
development for the state of North Carolina by supporting and stimulating entrepreneurship
and new technologies. Tenants are presented with opportunities for give-and-take among
private sector, students, and faculty and research centers with industry and government
counterparts. They receive services and benefits such as the following:
33
See http://www.pearyhs.org/text/cdavis.htm.
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NC State University Affiliate status and privileges, including
Access to campus-wide conference room facilities, teleconferencing rooms,
and TV studios
Access to gymnasium, libraries and campus mass transit services
Publicity in campus publications
Access to University researchers, students, and staff
Access to business planning and financial advice
Access to resident corporate and patent attorneys
Relationship with NC State Industrial Extension Service
Technical, engineering and management resources
Access to resources of NC State University
Technology development and commercialization support
Management counseling
Funding recommendations
Assistance with publicity.
The 14,000 square foot Incubator is housed in the Corporate Research I Building on the
Centennial Campus (its second home since the Campus was developed). Its facilities include
18 individual Class A offices plus 10 wet chemistry laboratories and the following features:
Office rents between $400–$1100
Laboratory spaces range between $1470–$2210
Rent includes:
Shared administrative services
High speed internet connection, local phone service
Water, electricity, heat, A/C
Shared conference rooms & business center
Shared lounge area with kitchen facilities and coffee service
Additional fees are charged for services such as fax (confidential incoming faxes);
copiers; additional administrative/meeting planning services and parking.
Additionally a business incubator for student entrepreneurs called “The Garage” has opened
on Centennial Campus. Outfitted by Red Hat and run by the Entrepreneur Initiative, the
former office space in the Research II building is designed to help students live, breath and
think new ideas. The location is designed to be open 24/7.
While this incubator model has been in operation for years—working in tandem with the
University’s Office of Technology Transfer—the University Chancellor recently launched an
initiative designed by 2012 to double the number of startup companies launched each year,
thereby also creating much-needed jobs for workers statewide.
NC State’s new innovation “hub,” called the Springboard Innovation Partnership Portal, will
play a key role in achieving this goal by facilitating business partnerships and speeding up the
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pipeline through which research becomes reality. Springboard is co-located in the Research I
building along with the Technology Incubator, and where it is forming an integrated services
delivery capability with the Incubator and the Office of Technology Transfer along with other
university units, such as the Entrepreneurship Initiative, Industrial Extension Service, Center
for Innovation Management Studies, and others.
In its web site, the University openly acknowledges that current silos and fragmentation of
service delivery are holding the university back from meeting its full potential for
commercialization, and an obstacle they are seeking to overcome through this initiative. The
intent is to increase the impact of these programs and services through increased
coordination.
The aim of the Springboard portal is to create a “one-stop shop” for researchers who want to
find collaborators or market their inventions, businesses looking for creative solutions, and
faculty, staff, and students who want entrepreneurial training.
In addition to the goal for doubling the number of startup companies launched by 2012, the
University also is seeking to increase its sponsored research by 50 percent by 2015, and to
transform the ‘innovation experience’ at NC State. As a further way to enhance innovation
and speed the pipeline, the Chancellor has pledged $2.5 million over 5 years in a special
Chancellor’s Innovation Fund designed to help researchers bridge the monetary gap that
may prevent them from getting their ideas to market.
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Additional details on the Springboard initiative taken from the program’s web site follow
below.
Springboard
Springboard is a network and engagement center that will:
Provide a single, comprehensive point-of-entry for internal and external engagement
and collaboration—in support of this goal, manage the Concierge Office to increase
access and facilitate relationship management.
Serve as a strategic, structured framework for innovation and entrepreneurship
services, training, and facilities for existing firms and new ventures.
Catalyze full integration, collaboration, and cross-linking of innovation and
entrepreneurship components.
Streamline processes and points of contact to allow successful and efficient
completion of research and innovation objectives and create repeat business.
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It is also an academy that will:
Develop entrepreneurship boot camps for areas aligned with
NCSU strategic research areas.
Develop “pitch review” teams to prep student/faculty pitches.
Manage the Innovation Training and Outreach Office to advance
innovation and entrepreneurial skills of the driving force behind
innovation—our faculty, postdoctoral fellows, and graduate students.
And an innovation resource center that will:
Develop funding model to seed student ventures.
Develop funding model to seed faculty ventures.
Administer the Chancellor's Innovation Fund: established in September 2010,
this recurring fund provides proof-of-concept and early seed funding to bring
discoveries to the disclosure, licensing, and/or start-up company stage. First call for
submissions will occur in spring 2011.
And a Concierge Service provides help with…
Subject matter experts
Research sponsorship opportunities
Access to our IP portfolio
Executive education and training
Innovation events and networking
Patentability of IP
Business plan development support
Prototyping and scale-up
Startup company support
Venture capital opportunities
Seed funding
Recruiting grad students
Student opportunities
Innovation partners on Centennial Campus
Research center information.
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Delaware Technology Park, Newark, DE
OVERVIEW
Delaware Technology Park (DTP) is recognized as a model for a self-sustaining research park
that has achieved research excellence, contributed significantly to the regional economy and
attained global attention despite its relatively small size of 40 acres and without benefit of a
“big bang” investment. In 2005, DTP was awarded the Research Park of the Year for North
America by the Association of University Research Parks.
Adjacent to the University of Delaware on former farmland owned by the University of
Delaware, the Delaware Technology Park is part of Delaware’s commitment to attracting
both established and promising high-tech companies. Its combination of government,
academic and industry partners provides a showcase for the area’s commitment to fostering
new and emerging business. Through the clustering these businesses, Park management can
more readily provide shared services and resources while taking advantage of the benefits of
a nearby academic community.
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The major categories of focus for DTP are in life sciences, IT, advanced materials and
energy/environment. These are built upon the historical strengths of the regional industry
and academic institutions. Technology based businesses fit well with Delaware’s desire for
controlled growth, high income jobs and a sustaining quality of life for a small state.
DTP is supported by State and Congressional government representatives who provide
critical continuity by taking a long-term view of economic development. Likewise, DTP’s
approach to technology-led economic development has consistently linked the public,
private and academic sectors. This stable environment and collaborative approach has
permitted Delaware to develop new technology opportunities, while assisting technology
businesses to transition from incubation to mature growth stages. As the only research park
in Delaware, DTP has evolved as the “hub” for technology related issues for all the State—
education, research, policy discussion, economic development and networking.
DTP is the preferred choice for the location of spinout companies from the University of
Delaware or the private sector (such as DuPont) due to its proximity to transportation
infrastructure, investment capital and access to 80 percent of the U.S. pharmaceutical and
biotechnology industry. DTP has been particularly attractive to companies with international
ties.
Financial investment in, and recruitment of research excellence by the State, the private
sector and the University of Delaware have added a high growth, knowledge intensive
dimension to the Delaware economy. Mature ‘smoke-stack’, oil based industries such as
polymers, fibers, chemical processing are being gradually supplanted. The new, knowledgebased businesses in Delaware are focused on the understanding, cure and prevention of
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disease, improved pharmaceutical services, enhanced agriculture opportunities, biomaterials
and biofuels, intelligent decision software and renewable energy initiatives.
One of the premier features in DTP is the University of Delaware’s Delaware Biotechnology
Institute (DBI). It is situated close enough for faculty to have dual roles as teaching professors
on campus and while also performing interdisciplinary collaborative research all within DBI.
At the core of DTP’s success is a cadre of well-trained, creative and productive scientists and
business managers, who excel in an interdisciplinary environment of stimulating colleagues,
high quality facilities, and a pro-business government infrastructure. Such an environment
helps produce an entrepreneurial culture: success is evident in federal funding, generation of
valuable IP and product commercialization. These results encourage partnerships with more
established companies.
Since the founding of DTP, starting with the Task Force in 1986 and its first building in 1993,
DTP/DBI has enabled about 16,000 new jobs in the park and surrounding community with 54
companies as tenants in DTP and 20 companies spun out. More than $275 million has been
invested in five buildings and equipment in DTP and a sixth is in the planning stage. More
than $310 million of federal/state grants have been won by DTP companies and DBI.
GOVERNANCE AND MANAGEMENT
The Delaware Technology Park grew out of a High-Technology Task Force created by the
administration of then-Gov. Michael N. Castle in 1986. The Delaware Technology Park, Inc., a
501 (c) 3 corporation, was established as the singular vehicle for governing, directing and
managing all aspects of the park’s operations.
The organization represents a strong partnership between the State Government, the State’s
flagship university, and the private sector. Bylaws call for regular seats to be held by the
head of the Delaware Department of Development; the University (currently the University
President) and the Chairman / CEO. Additionally, the Governor appoints six representatives
from the private sector, based on recommendations by the Chairman.
The Board meets quarterly to address high-level policy and major transactional issues.
However, the Board delegates considerable authority to the Chairman/CEO—who runs park
operations with assistance from a small staff and outside contractors.
The park entity works closely with the State and University on individual issues ranging from
business recruitment and financing of facilities, to establishment of academic research
relationships and commercialization opportunities.
The Technology Park Corporation manages all functions of the research park. This includes all
aspects of the land development process, management of infrastructure and facilities,
business development and marketing, and the various technology commercialization
activities that take place at the park (see below).
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The Delaware Technology Park has embraced a wide range of partnerships with universities,
companies and technology-based economic development organizations across the region.
The park’s management strongly embraces a regional view of its assets and opportunities in
representing the park nationally and internationally for business recruitment. The park is
directly tied to the State’s economic development efforts through the Director of the
Delaware Economic Development Office serving ex officio on the Park’s Board of Directors.
The Technology Park’s CEO attributes much of the park’s success to the care taken to screen
companies and organizations that are prospective tenants, a process that he personally
leads. Criteria noted in the vetting process include the caliber of the science, the outlook and
strengths of the management, and the intent of prospective tenants to work with the
University and with companies in the park or in the region.34
FACILITIES FINANCING AND OPERATIONS
Following the report by Governor Castle’s 1986 task force, the University of Delaware set
aside 40 acres of property it owned on the eastern edge of its Newark campus for the
creation of the park. The University entered into a long-term land lease with the Delaware
Technology Park, Inc., in exchange for ground rent.
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The Park Corporation structures financing for development using a variety of mechanisms
that have varied with the circumstances for each facility. It has leveraged its land holdings
effectively, such that overall financing since the park’s inception is described as roughly
25 percent based on the value of the land and internal investments (state or university); and
75 percent from borrowed funds. However, neither the State nor the University holds any
debt—all financing has been structured through the 501(c)(3) entity.
The Park has not used outside developers for any of its facilities, instead self-developing and
owning each of its buildings. After 50 years the buildings will revert to the University, unless
an exception is created (as has been done for the Fraunhofer Institute, a private research
organization that has located in the park—see below). Five buildings have been developed to
date, and the park is close to full occupancy. A sixth building is planned that will add
additional incubation capacity and also will provide expansion space for the Fraunhofer
Institute for vaccine production.
Once the park was established, the state contributed $6.5 million for construction of its first
building, a 48,000 square foot facility that opened in 1993 and was leased to the
34
The current Chairman & CEO of the Delaware Technology Park, Michael Bowman, was at the time the unit
leader of the DuPont tenant. DuPont, under Bowman’s leadership, later spun the business out in an IPO joint
venture with another multi-national corporation and eventually ceased operations at the park. Bowman had also
asked by the Governor to become Chairman of the 501 (c) (3) corporation board of directors, and in 1998 he
assumed the CEO role in as well. In this regard Mr. Bowman has an exceptional institutional knowledge of the
park’s early development, as well as close ties to the regional industry base and hands-on knowledge of many of
the technologies that have been the park’s focus. In addition to his corporate experience he also had experience
with start-ups, having established two on his own after the IPO of his former DuPont business.
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DuPont Co.’s Advanced Materials business unit. Cash-flow from this transaction has
propelled the financing process since that time and the park entity currently maintains a
reserve fund of $2.5 to 3 million.
Because the next buildings were designed for multi-tenant occupancy they posed greater
challenges in securing financing, which led to an unusual and creative partnership with the
nearby University City Science Center in Philadelphia.35 Lenders were seeking a guarantee for
the loans, which neither the State of Delaware nor the University was legally able to provide.
The Science Center organization, already well-established and with a substantial existing real
estate portfolio, was willing to provide the needed loan guarantee in return for taking an
equity position in the transactions.
Following a model applied successfully at the University City Science Center, three special
purpose LLCs have been established in conjunction with each of the next buildings built in
the park. The LLCs are joint investment/equity plays, with the loans to build guaranteed by
the Science Center. (Recently the LLCs refinanced those loans.) The buildings produce
revenue appropriated according to the established equity split. The original cash equity
position for the Science Center was supported by an interest-only loan from DTP to the
Science Center. The loan was backed by cash flow from DTP’s first wholly-owned building
and is being repaid to DTP over 10 years.
In addition to providing the key to financing these facilities, the partnership underscores the
strong regional orientation of the Delaware Technology Park, which is committed to
capitalizing on the full range of scientific and technology assets of the bi-state area of
Southeastern Pennsylvania and Northern Delaware and not functioning in isolation as a
captive of a single university or locale.
A fifth major facility (and programmatic anchor) resulted from the establishment of the
Delaware Biotechnology Institute (DBI)—a joint venture of the University, the State and
several private corporations. The $15 million, 72,000 square foot building focuses on science
in the areas of Agriculture, Human Health, Environment and Biology, and includes core
facilities that can be shared by faculty or used by outside companies that enter into research
relationships with the University.
To finance the DBI facility, revenue bonds were issued by the Technology Park, backed by a
24-year lease/buy-back agreement with the University. In turn, the University pays rent to
the Technology Park.
Additionally, the University, state and private industry raised $60 million to underwrite the
Institute programmatically, with which they established 4 endowed chairs. To date, faculty
associated with the Institute have brought in some $275 million in federal grants and they
35
The University of Delaware is in fact one of 28 “shareholder” institutions that have invested in the University
City Science Center, which is itself a 510 c 3 corporation.
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continue to pursue new grants. Through this mechanism faculty users are able to pay for fitout of individual laboratories and to pay rent, as well as purchase equipment.
Under terms of the bond financing, 20 percent of the building can be used for for-profit
activities; this portion of the space is used for incubating new companies that are spun out of
the university or that come from the nearby region. The incubator operations have been
highly successful and the space is fully occupied.
In recent years, the Technology Park recruited the Fraunhofer Institute, an international R&D
organization based in Germany. Fraunhofer initially occupied space in the Delaware
Biotechnology Institute as they developed their operations. Subsequently Fraunhofer bought
one of the buildings developed through the LLC entity (joint with University City Science
Center). It currently houses some 110 researchers and staff.
All operating costs of the Delaware Technology Park Inc. are paid for out of internally
generated revenues from leases and rents. Overhead costs are kept to a minimum, as the
formal staff of the 501 (c)(3) entity includes only the Chairman/CEO, supported by an
administrative assistant who is a University employee. A total staff complement of eight FTEs
is provided through independent contractors, plus outside consultants or service providers
as needed. Recent annual operating expenses for the Park are in the range of $1.8 million to
$2 million, including 450,000 for general management and the balance for program and
facility related services.
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The Park leverages additional technical support or loaned staff assistance on a case-by-case
basis, e.g., PR assistance from the University for the development of marketing tools. The
Park is also able to leverage its relationships with key tenants that have been attracted to the
park over the years, such as the Delaware BioSciences Association, which has collaborated
with the Park on co-branding.
BUSINESS DEVELOPMENT AND COMMERCIALIZATION SERVICES
Facilities within the Park are able to accommodate companies in need of wet labs, dry labs,
clean rooms and light manufacturing, in addition to the park-wide fiber optic network and
office space. Delaware Technology Park is also able to accommodate early stage, start-up
companies in need of incubation.
The Delaware Biotechnology Institute acts as a link between academic and private interests
bringing together in one location faculty, graduate students, interns and private
entrepreneurs. Located across the street from the University campus, it promotes close
contact with University faculty for collaboration, encouraging faculty access to basic research
underway at the Institute and to the Institute’s specialized equipment and core facilities. At
the same time, faculty conducting work within DBI promotes a focus on commercialization
and entrepreneurship.
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Within the Institute’s 72,000 square foot facility some 20,000 square feet of space has been
reserved as incubation facilities for companies that may spring from the University or from
within the Institute. The park’s first building, originally leased to a unit of the DuPont
Company, now also functions as an incubator facility; other buildings provide multi-tenant
space in a range of suite sizes.
The University of Delaware’s Office of Economic Innovation and Partnerships (OEIP) enables
outside entities to access the University’s knowledge-based assets and provides UD
personnel support to form partnerships outside the University. OEIP's goal is to establish the
University as a recognized center of invention, innovation, entrepreneurship, partnering and
economic development. It acts as a gateway to the University’s knowledge-based assets in
several areas:
Innovation and Entrepreneurship
OEIP stimulates entrepreneurial thinking among students, faculty and staff across campus.
OEIP supports innovation and entrepreneurship through initiatives such as the Entrepreneur
in Residence program and a lecture series that features nationally and internationally
recognized entrepreneurs and business leaders. OEIP provides University entrepreneurs with
business, marketing, financial & legal expertise to enable commercialization of University
inventions.
Partnerships
OEIP develops a network of partnerships that creates value for the University and results in
economic development in the state and region. Current partnerships include the U.S. Army
and units at Aberdeen Proving Ground, Strategic Diagnostics Inc. and Christiana Care Health
System's Helen F. Graham Cancer Center, the National Science Foundation through its
Experimental Program to Stimulate Competitive Research (EPSCoR) program, the National
Institutes of strategic planning group, and the Coalition of INBRE (IDeA Network of
Biomedical Research Excellence) States, among others.
Intellectual Property and Asset Development
OEIP develops, leverages and markets the university's portfolio of IP to efficiently capture
value from the IP through new start-up businesses, license agreements, and equity positions.
The Intellectual Property Center within OEIP provides advice and counsel to UD faculty, staff
and students regarding the disclosure of innovations, patents, copyrights, trademarks,
contracts, and other research-related agreements. The Intellectual Property Asset
Development Group is responsible for the commercialization of all IP developed at the
University of Delaware.
Small Business Development Center
OEIP is home to the Delaware Small Business Development Center, which provides readily
available, broad-based resources to the small business and entrepreneur.
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On-site support to the Park’s start-ups is provided through Inflection Point Ventures, which
provides venture capital and business support for early-stage telecommunications, IT, and
electronic commerce companies with the potential to generate rapid growth in revenue,
profitability, and shareholder value. Inflection Point focuses on companies in the
Northeastern and Mid-Atlantic United States that are seeking their first round of equity
financing.
The Delaware Technology Park also is partnered with the commercialization resources of
First State Innovation (FSI). Launched in 2006, FSI is a privately led initiative that focuses on
increasing Delaware's entrepreneurial capacity. FSI has accomplished this by helping
technology-based and early stage businesses find traditional seed capital, alternative
funding, skilled human capital, commercialization assistance, intellectual capital, and other
entrepreneurial resources.
The Park takes an active stance toward involving other State educational and workforce
development institutions in its initiatives, for example, in grant proposals. The relationships
include notably the Delaware State University and the Delaware Technical and Community
College.
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University of Arizona Science and Technology Park, Tucson, AZ
OVERVIEW
The University of Arizona Science and Technology Park sits on 1,345 acres in Southeast
Tucson, Arizona. Almost 2 million square feet of space has been developed featuring high
tech office, R&D and laboratory facilities on 345 acres.
Home to several high technology companies, the Park houses 4 Fortune 500 companies: IBM,
Raytheon, Canon USA and Citigroup, as well as several emerging technology companies
including NP Photonics, and DILAS Diode Laser. The Arizona Center for Innovation,
a technology business incubator, and the UA South, a branch campus of The University of
Arizona, are also located at the Park.
The UA Tech Park contributes nearly $3 billion annually to Pima County's economy and is one
of the region's largest employment centers.
The Park was purchased from IBM in 1994 and has grown from 2 tenants and 1,200
employees to 40 companies and business organizations with more than 7,000 employees.
GOVERNANCE AND MANAGEMENT
The mission of The University of Arizona Office of University Research Parks is to create
environments that support and promote research and education, technology innovation and
commercialization and high technology business development and attraction.
The Office of University Research Parks (OURP) has responsibility for the management and
operation of the UA Science and Technology Park (Tech Park), Arizona Bioscience Park (Bio
Park) and the Arizona Center for Innovation (AzCI).
While there is overall management by a University office that has responsibility for multiple
parks, this park is actually operated by the Campus Research Corporation, a 501(c) (3)
corporation with links to the University of Arizona Foundation. The corporation is governed
by a board of, but is essentially controlled by the University and its Foundation.
Associate Vice President for University Research Parks
The University’s Associate VP for University Research Parks serves as the CEO of the UA
Science and Technology Park (Tech Park) and Arizona Bioscience Park (Bio Park) and
president of the Arizona Center for Innovation (AzCI). He is also president of the Campus
Research Corporation (CRC), which assists the University of Arizona in the development,
operation, marketing and leasing of the Tech Park and Bio Park.
The Director of the UA Science and Technology Park also serves as the chief financial officer
of the Campus Research Corporation. He oversees daily operations, tenant services, lease
negotiations, risk management and compliance activities.
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Other staff positions include program, IT financial and administrative positions, which are
generally supported by park revenues; with the exception of the business incubator, which
receives a state subsidy.
FACILITIES FINANCING AND OPERATIONS
The Park contains a sophisticated infrastructure system that includes: steam, de-ionized
water, chilled water and compressed air. The Park also features its own water treatment
plant and a central utility plant that distributes all utilities to tenants on-site. Other services
include on-site emergency management and fire and rescue services, 24/7 security, a fullservice cafeteria and catering, Starbucks and an outdoor recreational center. The transfer
and subsequent management of an infrastructure system from a prior user—which at the
time was already 15-20 years old—has presented both financial and management challenges
for the park corporation over the past 15 years
The initial mechanism for the acquisition of the 1,345 acre property from IBM was a two
phased $98 Million transaction, in which the U of A Foundation issued bonds which were
underwritten by a 30 year stream of lease payments from IBM. With this revenue stream
and the land, the Park then proceeded to develop additional facilities over time.
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Subsequent facilities have been developed using traditional development and debt financing
mechanisms, which were challenging in the early stages, until a market could be
demonstrated and established to the satisfaction of area banks and other lenders.
BUSINESS DEVELOPMENT AND COMMERCIALIZATION SERVICES
The Arizona Center for Innovation (AzCI) is a business incubator designed to meet the needs
of developing technology companies, particularly in the areas of: aerospace, advanced
composites and materials, IT, environmental technology, life sciences and optics/photonics.
The AzCI’s incubation model is intended to provide companies with practical, hands-on
assistance early in the innovation process, beginning in the research phase, and continuing
through product development to commercialization. This structured approach helps
companies to bridge the many gaps between discovery and commercialization, and to meet
the primary goal of AzCI, which is to increase the likelihood of success for a start-up
company, and achieve it in a shorter amount of time.
AzCI provides a structured program of business development that includes access to firstclass facilities plus coaching, networking and other services. Each company receives
assistance in preparing a business plan, developing products and services, securing financing,
and executing a marketing program. AzCI also has an extensive mentor program available for
active support.
Findings in the report, “Economic Impacts of the University of Arizona Science and
Technology Park Calendar Year 2008,” include the following.
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UA Tech Park tenants paid $593.3 million in direct wages to their employees. The
average wage for a park worker was $85,500 in 2008, more than twice the Pima
County average of $39,900.
Employment at the park has steadily increased since 1997. On average, the UA Tech
Park has added 250 new jobs every year over the past 11 years.
Most of the park's annual growth is the result of additional high-wage jobs for skilled
workers. UA Tech Park employment growth has outperformed the Tucson metro
region, the state of Arizona and the United States.
The park has significantly contributed to the tax revenue base. Ongoing operation
park tenants generated $14.3 million in tax revenue. The park was responsible for an
additional $63.5 million of induced tax revenue. An additional $67,600 in tax revenue
was generated from construction and visitor-related activities. In total, an estimated
$77.9 million in tax revenue from the UA Tech Park tenant and related activities was
distributed to state, county and city governments.
The park is a major regional employment center with approximately 7,000 employees. The
employee base is drawn from the entire metropolitan region, including the towns of Marana and
Sahuarita, with a high concentration in the southeastern region of Tucson. The park is also part of
the Tucson Tech Corridor, which is home to more than 70 businesses including Raytheon, IBM,
Citi, Target.com, Offshore, Arizona Canning Company and Global Solar.
The UA Tech Park is almost fully occupied with 40 businesses and educational tenants. The
park is 98 percent leased and outperformed the Tucson metropolitan market during fiscal
year 2007–2008.The report states, “Facing the current economic recession, vacancy rates of
Tucson Metro and the United States had increased rapidly since the second half of 2007;
however, the vacancy rate at the UA Tech Park had been stabilized in the 2–3 percent range.”
Beyond the measurable economic impacts, the UA Tech Park works as a center for innovation
and technology commercialization, workforce development and community engagement.
The UA Tech Park is moving forward with several new developments identified in its recently
adopted 10 year business and financial plan. The park’s next big ideas include: the
development of a 200-acre Solar Zone to bring aspects of the solar industry together in a
supportive environment for generation, manufacturing/assembly, R&D, education, and
public demonstration, and the development of a hotel and conference center.
The UA Tech Park contributes nearly $3 billion annually to Pima County’s economy and is
one of the region's largest employment centers.
For 15 years, the park has contributed to regional economic development by advancing the
UA’s research mission and its efforts at technology development and technology
commercialization. The park is also home to the Arizona Center for Innovation, a high
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technology business incubator, and three educational institutions UA South, Pima
Community College and Vail High School.
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Appendix B: Economic Impact Analysis
Measuring the Economic Impact of the State of West Virginia
Acting to Retain Ongoing Industry Activities at the Former Dow
(Union Carbide) South Charleston Technical Center
On December 15, 2010, the State of West Virginia will take ownership of the former Dow
(Union Carbide) South Charleston Technical Center and transform it into the West Virginia
Education Research and Technology (WVERT) Park, under the management of the West
Virginia Higher Education Policy Commission. In the long term this initiative by the State of
West Virginia provides an opportunity to establish a signature center for advancing the
state’s long-standing energy, chemicals and materials industries, along with creating a
significant new economic development initiative for the Charleston region.
But from day one, the state’s actions will pay critical dividends for economic development
for the state by retaining 550 high paying jobs, which are located on the site and required
the state ownership in order to keep the site’s highly specialized facilities in operation. These
550 jobs pay an average of $81,900 in wages along with benefits, or a total of $45 million in
wages. Among the industry operations that were retained in the Park by the State of West
Virginia were those of Dow Chemical, Bayer MaterialScience, MATRIC, the HP Data Center
and other tenants (see Table 13 below).
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Table 13: Companies Retained at the Former Dow South Charleston Technical Center
Company
Univation
Dow PPR&D
Bayer MaterialScience
Employees in
Park (FTE)
10
90
35
Line of Business
Dow - Site, Tech Support
188
Specialty polyethylene components sold to end producing customers
Poleolefins Process R&D
Polyurethane product development for memory foam (sold to customers
who make products for furniture and automotive applications)
Chemical production, engineering R&D support and licensing
Mid-Atlantic Technology
Research and Innovation
Center (MATRIC)
WV State University
Chemical Alliance Zone WV
Progenesis Technology LLC
100
Contract R&D, spinoffs (in chemicals, energy, environment & life sciences)
Gas Analytic Services
Kaiser Optical
INNO VA
Fiberworx Office LLC
HP Data Center
Total
2
1
0
5
110
550
Source: HEPC and Charleston Area Alliance
5
1
3
University bioscience lab
Industry Association w/ business incubator (4 tenants listed below)
Providing natural, biodegradable polymers for industrial and medical
applications through genetic engineering of bacteria
Analytic services
Supplier of scientific instruments
TBED organization - satellite office
Computer networking & services
Single customer data center (HUD)
METHODOLOGY FOR MEASURING THE ECONOMIC IMPACT OF RETAINING
JOBS AT WVERT
The 550 jobs that have been retained at the new WVERT Park have broader economic
impacts or multiplier effects on West Virginia’s economy and the generation of state taxes.
Multipliers measure the effects on an economy from a source of economic activity—in this
case, the jobs from the companies able to continue operating at the WVERT Park. The
economic activity generated in the state is greater than the total of direct workers employed
and wages paid by the companies retained at the WVERT Park because of the successive
cycles of spending, earning, and re-spending associated with these jobs.
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Battelle measured the economic impact of retaining the 550 jobs at the WVERT Park using
the IMPLAN model. IMPLAN is one of the most widely used models in the nation to analyze
the impacts of companies, projects, or entire industries. The IMPLAN model uses inputoutput analysis to measure the impact of money spent on a specific economic activity on the
economy through its linkages to other industries. Input-output analysis measures the flow of
commodities to industries from producers and institutional consumers for any given state or
region. The data also show consumption activities by workers, owners of capital, and imports
from outside the state or region. These trade flows built into the model permit estimating
the impacts of one sector on all other sectors with which it interacts. So, for instance, a
portion of contract research activity of MATRIC goes toward purchasing supplies from other
companies, services from patent and contract lawyers, cleaning services, etc.
Each IMPLAN model uses detailed sector- and region-specific information to estimate
outcomes and gauge potential impacts. The model incorporates detail of more than 420
individual industry sectors that cover the entire regional, state, or national economy.
RESULTS FROM THE ECONOMIC IMPACT ANALYSIS
The IMPLAN model generates several measures of economic impact:
Employment includes both direct employment at the WVERT Park and the jobs
within the economy supported by WVERT Park-related business volume (indirect
employment).
Income is the total amount of income received by labor in the economy because of
the presence and operations of the companies at the WVERT Park, both direct and
induced through the multiplier effect within the economy.
Economic Output is the total value of goods and services produced in an economy,
and represents the typical measure expressed as “economic impact” in a standard
economic impact study.
State and Local Taxes, based on the full multipliers from successive rounds cycles of
spending, earning, and re-spending associated with the jobs retained at the WVERT
Park.
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These impacts consist of four types:
Direct Effects. The changes in economic activity being analyzed—in this case, the
jobs, wages and companies activities at the WVERT Park;
Indirect Effects. The changes in inter-industry purchases, e.g., the purchase of raw
materials by a WVERT-based company, in response to the change in demand from
the directly affected industries.
Induced Effects. The changes in spending from households as income and
population increase because of changes in production.
Total Effects. The combined total of direct, indirect, and induced effects.
The aggregate of the direct, indirect, and induced impacts from the 550 jobs retained at
the WVERT Park generate an annual total of 1,646 jobs, $627 million in total economic
activity and $15.6 million in state and local taxes (see Table 14 below).
Of the $15.6 million in annual state and local taxes generated from the retention of the 550
jobs, $13 million are state taxes, including personal income taxes, corporate profits tax, payroll
taxes, and sales taxes (see Table 15 below). 36
Table 14: Annual Economic Impact of the 550 Jobs Retained at the WVERT Park ($Millions)
Impact
Employment
Output
State/Local Tax
Revenue
Direct Effect
550
$426.6 m
$6.5 m
Indirect Impacts
477
$135.7 m
$4.5 m
Induced Impacts
619
$64.3 m
$4.6 m
Total Impact
1,646
$626.6 m
$15.6 m
Source: WVERT employment data provided in consultation with HEPC and Charleston Area Alliance and Battelle calculations
using West Virginia IMPLAN I/O tables.
36
These impacts are generated by IMPLAN’s input-output model, which is structured to capture
interrelationships of different sectors in the state’s economy.
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Table 15: Breakout of Annual State and Local Taxes as Part of Total Economic Impact of 550 Jobs
Retained at the WVERT Park
Taxes
State
Sales Tax
$5.495 m
Personal Income Tax
$2.160 m
Dividends
$0.460 m
Payroll Tax
$0.114 m
Corporate Profits Tax
$1.378 m
Other Business Taxes
$2.929 m
Property Taxes from Business and Households
90
$2.627 m
Other Personal Taxes and Fees
$0.430 m
Total Impact
$12.966 m
Source: IMPLAN Model
Local
$2.627 m