Abstract
US technology-based initiatives at the state level continue to emphasize regional economic development and job growth. Many are now also focused on green technologies. This paper describes one such green program, the North Carolina Green Business Fund. Based on an analysis of 24 funded R&D projects in 2008 and 2009, we find that 59 new full-time equivalent jobs were created in the short run through this program. We also find that those organizations that can attract greater additional financial support for their research generate more jobs. Lastly, we find that university involvement in these projects tempers job losses among projects discontinued early as well as job growth among those that commercialized their technologies. We cautiously offer, because of limited data, recommendations to states with similar programs to create structures to advise technology-based research organizations about sources of additional financial resources.
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Notes
For a discussion of the economics of science and research parks, see Link and Scott (2007).
As stated in the General Statute 143B-437.4: “The NC Green Business Fund is established as a special revenue fund in the Department of Commerce. ... The Department of Commerce shall make grants from the Fund to private businesses with less than 100 employees, nonprofit organizations, local governments, and state agencies to encourage the expansion of small- to medium- size businesses with less than 100 employees to help grow a green economy in the state. Moneys in the NC Green Business Fund shall be used for projects that will focus on the following three priority areas ... [t]o encourage the development of the biofuels industry ... [t]o encourage the development of the green building industry ... [and to] attract and leverage private-sector investments and entrepreneurial growth in environmentally conscious clean technology and renewable energy products and businesses”.
According to Hardin, the primary debate in the General Assembly about the Fund was whether it should be a grants program or a loan program. Although the US economy entered into the so-called Great Recession in late 2007, there is no legislative evidence that the Fund was established in anticipation of the state’s pending economic downturn.
To the best of our knowledge, no other states have conducted an assessment of their programs. That said, Yi (2013) provides empirical evidence at the metropolitan level of job creation from suitability incentive programs.
Detailed information about these other programs is available from the authors on request.
In FY 2010 and FY 2011, allocations came from the American Recovery and Reinvestment Act (ARRA) of 2009. After 2011, the state did not have the financial resources to continue the Fund.
A description of each organization that received an award is available in Hall (2014).
Leyden and Link (2015) refer to such a program as an example of public sector entrepreneurship.
The General Assembly in North Carolina periodically and systematically reviews agencies, divisions, and programs financed by state government. This Continuation Review Program is intended to assist the General Assembly in determining whether to continue, reduce, or eliminate funding. As part of that review, the state’s Office of Science and Technology systematically collected survey information from the organizations funded in FY 2008 and FY 2009 (Hardin 2012).
These results are available from the authors on request. The lack of sufficient degrees of freedom in the data set did not allow for a more systematic analysis of response bias.
The survey question read: “How many jobs did your organization create with the NC Green Business Fund Grant? You may record fractions of full-time equivalent effort”.
We have insufficient observations in our dataset to control for all four status categories.
Hayter (2013) found that the commercial success, and thus possibly employment growth, of university spin-offs is greater if the spin-off has received additional investments from venture capitalists. Relatedly, to the extent that additional investments in company projects leverage the company’s ability to generate scale economies or to increase capital intensity, or both, Audretsch (1995) has shown that these impacts will affect growth and thus presumably new job creation.
Regarding the university variable, Rappert et al. (1999) and Johansson et al. (2005) find that in the case of faculty entrepreneurs, those who continued to maintain strong ties to universities benefit through access to university expertise, use of equipment and instruments, and by keeping abreast of university research. Further, Westhead and Storey (1994, 1997) find that small firms located in science parks that have relationships with universities have a higher survival rate than those firms without such a relationship.
The inclusion of this variable complements Lendel’s (2010) argument that one regional growth augmenting product of a university is the transfer of existing know-how through university–industry partnerships.
As noted in footnote 3, the Fund was established “[t]o encourage the development of the biofuels industry ... [t]o encourage the development of the green building industry ... [and to] attract and leverage private-sector investments and entrepreneurial growth in environmentally conscious clean technology and renewable energy products and businesses.” However, based on descriptions of the funded projects there was significant overlap of these activities within a given organization’s R&D project, and thus, segmentation of the organizations into so-called technology areas as independent variables was not possible.
Related more specifically to the academic literature, Åstebro (2003, p. 237) argued that small, entrepreneurial companies face difficulties in attracting external research support because of “information asymmetries, moral hazard and coordination problems.” One might reasonably conclude that by the time that a company is able to attract additional investments, two hurdles have been cleared. The first hurdle is that the outside investor had already allocated time and resources to scrutinize the project under question, and the second hurdle is that the funded project had been chosen from among all those scrutinized. Following this logic, one might reasonably expect that causation runs from the receipt of additional investments to an increase in the probability of commercialization to employment growth. Link and Ruhm (2009) confirmed this hypothesis using SBIR data. However, our data are insufficient to pinpoint when the organization received the additional investments relative to when its project was commercialized. It should be noted that the correlation between AddInvest and Comm in Table 3 is positive, but it is not significant.
The survey asked organizations to report the number of new jobs attributable to the Fund as the number of full-time equivalent employees, thus when Employ \(>\) 0 it can be considered as a continuous variable rather than a count variable.
Because some values of AddInvest equal 0—see Table 4—the logarithm of AddInvest, lnAddInvest, is undefined. We arbitrarily set lnAddInvest to 0, and we accordingly included in this model a control variable, Control, equal to 1 for those instances when lnAddInvest was set to 0, and 0 otherwise.
In other specifications, AddInvest and AddInvest \(^{2}\) were considered as regressors, but the quadratic term was not significant. These results are available from the authors on request.
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Hall, M.J., Link, A.N. Technology-based state growth policies: the case of North Carolina’s Green Business Fund. Ann Reg Sci 54, 437–449 (2015). https://doi.org/10.1007/s00168-015-0661-5
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DOI: https://doi.org/10.1007/s00168-015-0661-5