Over the past two decades, as companies continue to seek talent and cities look to grow, they have partnered with universities in their local area to form innovation hubs creating unique opportunities for R&D, specialized talent, and economic growth.

Given the growth of Silicon Valley since the turn of the 21st century, other cities have sought to replicate their model to produce lasting research, create local jobs, and grow their economic base. Some of the early adopters have been the Cortex district in St. Louis, MO with Washington University, St. Louis University, and University of Missouri-St Louis (agtech); and the research triangle park in Raleigh-Durham led by University of North Carolina at Chapel Hill, North Carolina State University, and Duke University (biotech). When these innovation districts form, they tend to specialize in a sector unique to the city such as agtech, advanced manufacturing, aerospace/defense, biotech, water, etc. As companies look to hire specialized skillsets and expand their operations, they are able to pinpoint regions where accessing that talent may represent a higher return on investment for their overall operations.

The federal government and corporations have recognized this retooling of the labor force as the country evolves; and, in union with state and local governments, have given universities the ability to fund these specialized programs. Over the past decade, higher education R&D expenditures have grown by 3.5% per year (National Science Foundation) leading to new innovation.

Source: National Science Foundation.

To promote this steady growth, as part of the American Rescue Plan, the Economic Development Administration was given $1B for the Build Back Better regional challenge. It is a program “aiming to boost economic recovery from the pandemic and rebuild American communities, including those grappling with decades of disinvestment” (EDA). The EDA will award 20 to 30 regional coalitions anywhere from $25M to $100M to progress research and development in these specialized sectors throughout the country. As outlined in the map below, these communities are geographically diverse enabling implementation of their differentiated strategic initiatives to better serve the countries workforce and its future problems. Although the winners have not been announced, the federal government has trimmed the list from 500+ organizations who submitted a bid to the EDA to 60 finalists.

Source: AURP.

In addition to the Build Back Better program, Congress is pushing to enact the COMPETES or Innovation and Competition Act; both of which have bipartisan priorities. These bills sit in the House and Senate and are planning to distribute $10B to the Department of Commerce to fund regional technology hubs throughout the country. These funds will “invest in supply chains for critical technologies such as semiconductors and supports production in the U.S. from start to finish, beginning with cutting-edge research through to domestic manufacturing. By increasing investment, creating jobs, and spurring innovation, the COMPETES Act would improve America’s competitive edge internationally” (Senate).

Overall, the federal government, its local entities, companies, and universities have continued to accelerate collaboration and transition the country to a new age of research and development to make the country more competitive, produce valuable talent, and spur productivity.

The views expressed herein are presented for informational purposes only and are not intended as a recommendation to invest in any particular asset class or security or as a promise of future performance. The information, opinions, and views contained herein are current only as of the date hereof and are subject to change at any time without prior notice.

Sources:

Ken Kilpatrick, CFA

Vice President, Senior Research Analyst
Boyd Watterson Asset Management, LLC

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