A client recently asked us a basic question – “If we want to attract and increase high-pay, high-growth investment, what do we need to know?” In response, our team gathered a sample of incentive programs and strategies that some states have employed to attract higher value, technology based research and development sectors while also hoping to accelerate new company formation. While not a comprehensive search to say the least, this scan does provide some program themes of what has been put in place over the past few years to grow higher growth higher wage sectors.

1. PERSPECTIVES
Attracting High-Growth /
High-Wage Investment
A Thought Paper by
Fourth Economy Consulting
February 2011

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FOREWARD
Fourth Economy experts, collaborators and pioneers
represent diverse backgrounds and skill sets. Together,
we endeavor to share with clients and colleagues our
thinking on a variety of topics.
Fourth Economy “Perspectives” is designed to advance
dialogue and thought leadership on economic
development, urban design, innovation strategies and
new market development.

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BACKGROUND There has been a lot of talk recently about the role
of “innovation” and “technology” in strengthening our
national economic competitiveness. While some firmly
believe that innovation is the key to recovery and
future growth, others say we should focus first on
traditional manufacturing jobs. Many who advocate for
the latter submit that manufacturing jobs make more
of an economic impact in more regions of the country.
While most of us can be sympathetic to both
views, we also can’t forget that manufacturing
jobs and products were made possible first through
innovation, research, discovery and capital. All parts
of the country, small towns and big cities alike, must
determine how their location and assets can serve
the modern economic development continuum, from
the budding entrepreneur with a new idea, through to
product development, reinvention and production.
A client recently asked us a basic question – “If we
want to attract and increase high-pay, high-growth
investment, what do we need to know?” In response,
our team gathered a sample of incentive programs
and strategies that some states have employed to
attract higher value, technology based research and
development sectors while also hoping to accelerate
new company formation. While not a comprehensive
search to say the least, this scan does provide some
program themes of what has been put in place over
the past few years to grow higher growth higher wage
sectors.
First, some general observations:

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Unlike highly cost sensitive sectors, R&D operations,
PLACE-BASED FACTORS
corporate headquarters and technology-driven firms
will likely place more emphasis on place-based assets
and resources. These include community factors such
as high-quality and diverse housing options, recreational
venues, transit linkages, good airport access and
cultural venues. Operational resources such as wet-lab
space, university access, flexible capital, venture funds,
and ready-to-go class A/B flex office space are also
critical. Increasingly we are also finding an attraction
to urban infill redevelopment opportunities, Live-work-
play centers and adaptive reuse of older or historic
buildings to accommodate these sectors. Many of
these factors came together to help Google expand
in Pittsburgh and in their choice of the expensive high
profile Chelsea neighborhood in New York City.

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VC, TAX CREDITS & MICRO GRANTS
While capital is important to all sectors, high growth
high wage sectors will likely require more access to risk
capital, venture funding resources and networks. We
have also found that smaller firms to include start-ups
and spin-outs also value micro-grant programs that
offer $5,000 to $25,000 to support patent filings/
research, IP protection lab rental or graduate student
research support. Mid-sized and larger firms take
advantage of Research and Development Tax Credit
programs. Several examples of these programs are
included in the links below.

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KNOWLEDGE NETWORK MANAGEMENT
Another growing industry demand represents an
opportunity for economic development intermediaries
to position as a core service or incentive program. That
is the facilitation and management of collaborative
partnerships among high value sector firms, universities,
researchers or other resource providers. Through our
work with the Pennsylvania Keystone Innovation Zone
Program, many smaller technology-based companies
and legacy firms in search of new product development
or spin-out services, found value in a “single point
of contact;” one able to facilitate those efforts and
bring the right resources effectively to the table.
States such as Michigan and Minnesota have taken on
“networking” among high-growth high-wage sectors as a
core economic development delivery service.

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ALIGNING NEW PROGRAMS
When planning new incentives or revamping older
programs, it is important to keep in mind that the
general profile and characteristic of the modern
business and how it operates is rapidly evolving.
Modern firms are often smaller than what we may
expect, usually less than 25 employees, and will
likely stay that way for a longer period of time.
They are more comfortable than legacy industry to
rely on contract labor and sub-relationships rather
than hiring permanent in house staff. For efficiency
and security reasons, even larger firms are also
becoming more decentralized, with smaller offices and
manufacturing facilities spread across more locations.
These conditions pose challenges for traditional
incentive programs that have established eligibility
thresholds based on larger manufacturing or corporate
headquarters profiles. As a result, many legacy
workforce, loan and grant programs then are less
applicable and attractive to the smaller, more nimble
high growth high wage firms.

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The following articles talks generally about state
ARTICLES & RESOURCES
programs and rankings as they relate to higher
value industry sectors such as Biotechnology, Life
Sciences, Medical Devices and Energy. [items below are
hyperlinked]
Best Bio-Tech Places – June 2008
Best States for Tech Jobs – April 2007
Tech America Foundation – Cyberstates 2010 Executive
Summary
FierceBiTech – Top 5 Regions Targeting BioTech - 2009

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STATE REFERENCES
We have highlighted a few states that have established
incentive programs and approaches targeting research
and development activities as well as high value sector
firms generally. These states have consistently been
placed in the top 10 or 15 states in various technology
economic development (TBED) rankings. We have
included a public policy narrative under the North
Carolina section that provides third-party policy
recommendations that other regions may find of
interest. [items below are hyperlinked]
New York
New York Bioscience Incentives Guide 2010
Michigan
Michigan High Tech High Growth Tax Credit Program
Michigan Smart Zones
Michigan Life Sciences Pipeline Program
North Carolina
Incentives Evaluation and Policy Recommendations –
Duke University
North Carolina Research and Development Tax Credit
Program
Pennsylvania
Pennsylvania Tech Formation Report – Strategy
Document
Pennsylvania Research and Development Tax Credit
Program
Wisconsin
Wisconsin Tax Incentive Programs
The Value of Academic R&D - 2009
Florida
Enterprise Florida Incentives

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Any industry sector including manufacturers who cite
CONCLUSION
favorable location factors other than “cost” alone are
more likely to remain and grow in that community.
Employees that enjoy living in certain communities are
often happier and more productive, wanting to ensure
the operational success for their employer. So it is no
longer as simple as water supply and interstate access.
Technology and Place-based economic development
strategies will continue to challenge many communities
to reposition their program tools and incentives. But
the sustainable economic outcomes are worth the
effort.

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Stephen McKnight
ABOUT
Stephen McKnight serves as Vice President of
Community and Market Assessment at Fourth
Economy.
He specializes in organization and community
evaluations, market assessments and capacity building
for Fourth Economy clients. Stephen works to identify
key organizational and place-based assets, matching
those assets with new market opportunities.
Stephen brings more than 17 years of management and
economic development experience in both the public
and private sector. He has managed more than 175
business expansion projects resulting in $600 million
in total investment and $205 million in loan amounts.
Stephen has served in senior management roles for
non-profit trade associations, economic development
organizations and private industry.
He is an avid cyclist, skier and new urbanist.
Email: steve.mcknight@fourtheconomy.com
Fourth Economy
Fourth Economy Consulting is a national economic
development solutions provider specializing in market
analytics, strategic planning, community assessments
and organization building. Our team of experienced
practitioners helps businesses, communities and non-
profit organizations achieve their market potential.
The Fourth Economy Consulting team is committed to
investing in the communities where we live, work and
play.

12. Copyright ©2011
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