Technology in the Garden: Research Parks and Regional Economic Development

Technology in the Garden

Technology in the Garden

Research Parks and Regional Economic Development

Michael I. Luger & Harvey A. Goldstein

The University of North Carolina Press Chapel Hill & London

Chapel Hill & London

© 1991

The University of North Carolina Press

All rights reserved

Library of Congress

Cataloging-in-Publication Data

Luger, Michael I. (Michael Ian)

   Technology in the garden : research parks and regional economic development / by Michael I. Luger and Harvey A. Goldstein.

      p.  cm.

   Includes bibliographical references and index.

   ISBN 0-8078-2000-8 (alk. paper).—

   ISBN 0-8078-4345-8 (pbk. : alk. paper)

   1. Research parks—United States—Case studies. I. Goldstein, Harvey, 1947–.

II. Title.

HC110.R4L84     1991

607′. 2—dc20              91–50255

                                        CIP

The paper in this book meets the guidelines for permanence and durability of the Committee on Production Guidelines for Book Longevity of the Council on Library Resources.

95  94  93  92  91

5  4  3  2  1

For

Laura and Meredith

Contents

Preface

Acknowledgments

Chapter 1 Introduction

An Overview of the Population of Research Parks

Definition of Research Parks

Principal Study Methods

Chapter 2 Research Parks and Regional Economic Development: Theoretical Expectations

Regional Development Theories

Research Parks and Expected Regional Development Outcomes

The Role of Research Parks in Regional Development and Policy

Conclusion

Chapter 3 Defining Success and Failure in the Context of Research Park Development

Goals and Investment Strategies

Stages of Park Development

Measuring Success

Conditions for Research Park Feasibility

Chapter 4 Determinants of Success and Failure: Cross-Sectional Analysis

Characteristics, Location, and Operating Policies of U.S. Research Parks

The Impact of Research Parks on Regional Employment: Evidence

A Focus on Park Failures

Summing Up the Evidence

Chapter 5 The Research Triangle Park

Historical Background

Local Conditions and Resources

The Operations and Policies of the Park

Characteristics of R&D Organizations in the Park

Impacts of the Park on Regional Economic Development

Conclusion

Chapter 6 The University of Utah Research Park

Historical Background

Local Conditions and Resources

The Operations and Policies of the Park

Characteristics of R&D Organizations in the Park

Impacts of the Park on Regional Economic Development

Conclusion

Chapter 7 The Stanford Research Park

Historical Background

Local Conditions and Resources

The Operations and Policies of the Park

Characteristics of R&D Organizations in the Park

Impacts of the Park on Regional Economic Development

Conclusion

Chapter 8 Knowledge for Profit: The University–Research Park Connection

Universities and Research Parks: The New Institutional Stance

Universities as Research Park Owners and Operators

Universities as an Ingredient of Park Success

Research Parks as an Ingredient of University Success

Research Parks as a University Strategy

Chapter 9 Conclusion

Can the United States Support Additional Growth in the Research Park Population?

Are All Regions Suitable for Research Parks?

Do the Benefits of Research Park Development Exceed the Costs?

Are the Benefits of Research Park Development Distributed Equally?

Research Parks and Alternative Economic Development Strategies

Unanswered Questions and Policy Lessons

Appendixes

A.             Research Park Directory

B.             Questionnaire for Developers or Managers of Research Parks in the United States

C.             R&D Organizations in the Research Triangle Park

D.             R&D Organizations in the University of Utah Research Park

E.             R&D Organizations in the Stanford Research Park

Notes

Bibliography

Index

Tables and Figures

Tables

1-1. High-Technology Industry Sectors

2-1. Potential Primary Impacts of Research Parks on Regional Economic Development

3-1. Park Managers’/Directors’ Perceptions of Research Park Objectives

3-2. Services Provided by Park Management

4-1. Distribution of Parks by Size

4-2. The Use of Deed Restrictions in Research Parks

4-3. Favored Organizations in Park Marketing

4-4. Direct and Indirect Impacts of Research Parks on Regional Economic Development to Date

4-5. Research Park Success Indicators

4-6. Ranking of Parks by Success Indicators

4-7. Park Success and Selected Characteristics

4-8. Ordinary Least Squares Regression Results

4-9. Logit Model Results

4-10. Hazards/Survival Model Results

4-11. Hazards/Survival Model with Covariates

4-12. Park Characteristics, by Size and Vintage

5-1. Reasons for Locating in the Research Triangle Region

5-2. Importance of Research Universities to RTP Organizations

6-1. Original Objectives for the University of Utah Research Park

6-2. Reasons for Locating in the Salt Lake City Region

7-1. Source of Nonlabor Inputs of Businesses in the Stanford Research Park

7-2. Reasons of Park Organizations for Locating in the Palo Alto Area

7-3. Reasons for Locating in the Stanford Research Park

7-4. Importance of Stanford University to Park Organizations

7-5. Reasons of Out-of-Park Businesses for Locating in the Palo Alto Area

7-6. Perceived Benefits of the Stanford Research Park to Out-of-Park Businesses

7-7. Unemployment Rates for Women and Minorities in the Two-County Region versus California and the United States

8-1. University-Sponsored Technology Development Activities

8-2. Potential Impacts of Universities

8-3. Faculty Perceptions of Research Parks’ Benefits for Universities

8-4. Faculty Perceptions, by Discipline

8-5. Faculty Perceptions, by University/Region

Figures

1-1. Age Distribution of Research Parks

1-2. Geographic Distribution of Research Parks

1-3. Size Distribution of Research Parks

2-1. Types and Dimensions of Potential Park Impacts on Regional Economic Development

4-1. Employment Growth in Research Parks

4-2. Status of Land Use in Research Parks

4-3. Ownership of Land prior to Creation of Research Parks

4-4. Organizational Status of Research Parks

4-5. Current Land Ownership in Research Parks

5-1. Functional Specialization in the Research Triangle Park

5-2. Occupational Mix in the Research Triangle Park

5-3. Reasons for Locating in the Research Triangle Park

5-4. If RTP Did Not Exist, Would You Have Located in the Region?

5-5. If RTP Did Not Exist, Where Would You Be?

5-6. GINI Coefficients of Income Inequality in the Research Triangle Region

5-7. Sources of Professional Workforce in the Research Triangle Park

5-8. Sources of Nonprofessional Workforce in the Research Triangle Park

6-1. Functional Specialization in the Utah Research Park

6-2. Occupational Mix in the Utah Research Park

6-3. Reasons for Locating in the Utah Research Park

6-4. Benefits of the University to Utah Research Park Businesses

6-5. If the Utah Research Park Did Not Exist, Where Would You Be?

6-6. Per Capita Personal Income in the Salt Lake City Region

6-7. GINI Coefficients of Income Inequality in the Salt Lake City Region

6-8. Sources of Professional Workforce in the Utah Research Park

6-9. Sources of Nonprofessional Workforce in the Utah Research Park

6-10. Proportion of Jobs Held by Women and Minorities in the Utah Research Park

7-1. Functional Specialization in the Stanford Research Park

7-2. Occupational Mix in the Stanford Research Park

7-3. Sources of Professional Workforce in the Stanford Research Park

7-4. Sources of Nonprofessional Workforce in the Stanford Research Park

7-5. Sources of Professional Workforce for Regional Businesses outside the Stanford Research Park

7-6. Sources of Nonprofessional Workforce for Regional Businesses outside the Stanford Research Park

7-7. GINI Coefficients of Income Inequality in the Stanford Research Park Region

7-8. Ratio of County-to-U.S. Income Inequality in the Stanford Research Park Region

8-1. Mean Annual Employment Growth Rate, by County, 1977–1987

Preface

Research parks have become a prominent element in state and regional development strategies in the United States, as well as in Western Europe and Japan, Australia, and many other developed countries. Also referred to as science parks and technology parks, they generally are intended to serve as a seedbed or catalyst for the development of a concentration of innovation- and technology-oriented business enterprises in a region or a state. In that sense, research parks are closely related in function to science cities, or technopoles, which are also becoming popular in some countries.

The widely accepted premise underlying the research park strategy is that a region's long-term economic viability will depend on its ability to generate and sustain a concentration of businesses capable of developing new products (or processes) that can penetrate international markets. For regions faced with a high concentration of older, declining manufacturing sectors, research parks have been viewed as a tool for facilitating economic restructuring. For other regions whose economies have been performing well, investments in research parks may represent a long-term insurance policy. In either case, the R&D-led economic development strategy, when successful, almost always leads to more than just employment growth and new business formation. It brings with it concomitant changes in occupational mix, wage, and salary structure; political culture; and spatial patterns of development. While many of these changes represent net benefits to the community and region, some of these can cause stress, particularly for older residents and members of the labor force who are employed in the traditional sectors. More generally, the benefits and costs of the induced economic development tend not to be shared equally among population groups.

Unlike Japan, France, and the Netherlands, for example, where central governments have played major roles in the creation and coordination of research parks and technopoles, the federal government in the United States has been involved only peripherally in research park development. The role of the federal government in subnational economic development policy-making in general has waned since the early 1980s. State and local governments have had to fill the void in policy-making responsibility. But they also have had to bear a much larger portion of the fiscal responsibility for economic development initiatives. As a result, many states have had to adopt an entrepreneurial and strategic approach to economic development, unlike the federal grants-based approach of the 1960s and 1970s. Research parks represent both symbolic and substantive means of attempting to increase a region's creativity and innovative capacity. These factors together help explain the wide popularity of research parks and the fact that the large majority of research parks now in existence have been created since 1982.

As is often the case with economic development initiatives, however, especially those originating at the state and local levels, the implementation of research parks has preceded careful evaluation. The motivations for this study come from both academic research and public policy perspectives.

As researchers in the field of regional development in a university that is closely tied to the Research Triangle Park (RTP), one of the most famous and successful parks in the world, we were frequently called by policy officials visiting the park to answer such questions as What are the real impacts of the Research Triangle Park? and Can RTP be replicated back in __________? While there existed many interesting anecdotal accounts of the history of RTP, its value to the region, and some of the reasons for its success, we could find no systematic evaluation of the economic development impacts of RTP or any other research park.¹ Nor did an adequate empirical base exist for conducting such a study. To be able to answer the questions posed to us with a modicum of validity, we were compelled to conduct our own study. We also became aware of the large differences among research parks in the dimensions described above and wondered which (if any) of those factors or conditions could explain the variation in the success of research parks as stimulants for technology-led regional economic development. In short, we sought to explain the critical success factors behind research parks.

The success of the Research Triangle and Stanford research parks and the economic booms in the San Jose–San Francisco area, Route 128 in Massachusetts, the Research Triangle, and the Austin–San Antonio corridor in the 1970s and early 1980s led many officials in regions whose economies were disproportionately concentrated in slow-growth or declining industries and hard hit by back-to-back recessions to attempt to emulate their success. Research parks also have proliferated as a result of the competition among branches of state universities. Legislative politics often make it easier to spread state government investments in research parks among several campuses. Finally, park managers and developers have become organized in the promotion of new research parks with the creation of the Association of University-Related Research Parks (AURRP) in 1985.

The result of these forces has been an explosion of research park development. The 116 parks that currently exist, and that we include in our analysis, represent a small proportion of all parks that have been started, and dozens more are now in the predevelopment stage. The title of a popular journal article, Growing the Next Silicon Valley,² symbolizes this wave of imitation and the search for the holy grail of the next Apple Computer Company.

For us, this seemingly hasty adoption of the research park idea raised some troubling questions. In general, we became concerned about the huge amount of investment by state and municipal governments in the building of research parks. We wondered whether the expectations of economic development officials and others were realistic or whether they were falling into a high-tech trap. More specifically, we saw several potential problems with the proliferation of research parks: (1) the supply of research parks seemed to be outpacing the demand for them, (2) conditions in many regions did not seem conducive to the location and growth of R&D activity, (3) the opportunity costs of research park development seemed high since other, more cost-effective strategies for restructuring a region's faltering economy could be pursued, and (4) there seemed to be a false perception that all population and economic groups shared in the net economic benefits that R&D-based development generates in a region (or a rising tide lifts all ships). We undertook this project to address these problems and, consequently, to shed some light on the efficiency, effectiveness, and equity of public investments in research parks. In that regard, we were motivated by John Friedmann, who said: Planners who would interfere in regional development must understand the process by which it is generated.³

When conceived, this study had the following two major research objectives:

1. To assess the impact of research parks on regional economic development, including job creation, new business formation, and average wage and salary levels.

2. To assess how the benefits of such parks are distributed among population groups, particularly among minorities and women.

Parks on the scale of the Research Triangle Park in North Carolina, Stanford Research Park in California, and a few other parks in North America might be expected to have major impacts in their regions that extend beyond the economic development consequences defined above. Strong cases can be made that these parks have led to changes in the social fabric, political culture, governance, and land use patterns in their respective regions. There is also little doubt that parks such as these have significant economic development and other impacts outside their immediate regions. As noted above, the perceived success of early parks, notably the Stanford and Research Triangle parks, have contributed to the explosion of research park development in the United States as well as in Western Europe and the Far East.

By limiting our study of research parks’ impacts to regional economic development, we are not saying that these other consequences are not important. Rather, our desire to conduct a comprehensive evaluation of research parks had to be tempered by the limits of our resources and by our assessment of where we could make a significant contribution to the policy literature.

This book is organized into nine chapters. Chapter 1 provides an overview of the population of research parks in the United States and describes the scope of the study and the methodology used for estimating economic development impacts. Chapter 2 discusses the expected economic development outcomes of research parks based on a review of the relevant regional development literature. In Chapter 3 we introduce a model of the stages of development of research parks and discuss the concepts of success and failure in terms of those stages. Chapter 4 presents the results of a cross-sectional analysis of a large sample of research parks. We focus on the systematic factors or conditions that help to explain the relative success or failure of research parks and that provide a basis to generalize the results. Chapters 5-7 contain case studies of three of the most successful research parks in the United States—the Research Triangle Park, the University of Utah Research Park, and the Stanford Research Park. In those chapters we attempt to identify the contextual and situation-specific factors of success that highly detailed data from multiple sources allow. Chapter 8 explores the two-way relationship between research parks and their associated universities. First, we review evidence about the importance of universities for the success of research parks; then, we look at the effect research parks have on universities. Finally, in Chapter 9 we discuss the implications of our findings for the design of regional economic development and technology policies.

Acknowledgments

While conducting this study, we were fortunate to receive invaluable assistance from many sources. First, we acknowledge the two organizations that provided financial assistance to us, the Ford Foundation and the Forum for College Financing Alternatives (a unit of the National Center for Postsecondary Governance and Finance). In particular, we wish to thank David Arnold of the foundation and Richard Anderson of the forum for their support of this project. We also must acknowledge the Association of University-Related Research Parks and its executive director, Chris Boettcher, for making membership information available to us, helping us make contact with the park directors, and endorsing our mail survey.

Individuals at the three case study parks and associated universities were generous with their time and knowledge. Robert Leak and John T. Caldwell, former executive director and interim executive director, respectively, of the Research Triangle Foundation, and Elizabeth Aycock, the longtime secretary of the foundation, submitted to lengthy interviews. William F. Little, University Distinguished Professor of Chemistry at the University of North Carolina and an architect of the Research Triangle Park, clearly appreciated the importance of our task and provided us with rich accounts of the park's history and detailed comments on early chapter drafts.

At the University of Utah, we received warm hospitality, general assistance, and detailed information on the park's history from Charles Evans, the research park director. James T. Brophy, the university's vice-president for research, and Anthony W. Morgan, the vice-president for budget and planning, provided valuable comments and insights about the university's relationship with the research park. Jan Crispin, from the University of Utah's Bureau of Business and Economic Research, served ably as our local contact in Salt Lake City.

Zera Murphy and Kirt Pruyn of Stanford University's Department of Lands Management were most hospitable during our field visit. They provided information and office support. George Naugles, a Stanford engineering graduate, served well as our local contact. Henry Lowood, the history of science librarian in Stanford's Department of Physics and a noted chronicler of the park himself, identified pertinent bibliographic information and provided helpful comments on the chapter draft. We are particularly grateful to Alf Brandin, one of the founding fathers of the Stanford Research Park and former vice-president of the university, for submitting to approximately four hours of questions in his home and by telephone.

During our field visits we also interviewed dozens of business representatives, university officials, and appointed and elected officials. We thank them for their candor and good humor. We also thank the seventy-six park managers and hundreds of business executives who responded to our mail questionnaires and telephone calls.

A long list of colleagues helped by offering advice and reading draft chapters. Ken Erickson, Ron Ferguson, Helen Ladd, Rick McGahey, Ed Malecki, Ann Markusen, Barry Moriarty, and John Rees served on an external advisory board for the project that met in Chapel Hill in June 1988 to review our study design and early progress. Ed Bergman, David Dill, and Emil Malizia, all faculty members at the University of North Carolina, took an active interest in the project and were available for suggestions and ideas when we needed some fresh thoughts. Colleagues at the Vienna University of Economics, especially Professor Walter Stöhr, also provided helpful comments on earlier drafts of the manuscript. We both visited Vienna during the past two years and made presentations on the work in progress.

Many students in the Department of City and Regional Planning at the University of North Carolina served ably as research assistants. Judith Barnet, Dawn Donaldson, Sara Flaks, Rosalind Kotz, Marge Victor, and Suk-Chan Ko all contributed to different parts of the study by collecting, organizing, or analyzing the voluminous data that have been used.

Finally, we wish to thank our editor, Paul Betz, for making the publication phase of the project relatively painless for us.

Despite all this help, we may well have erred by omitting key facts and events, or by drawing incorrect inferences from our data. We alone are to blame for these shortcomings. We also assume sole responsibility for the views that are expressed in this book; those views do not necessarily reflect the position of the Ford Foundation or any of the other organizations that assisted us.

Technology in the Garden

1 Introduction

This chapter provides an overview of the population of U.S. research parks, offers an operational definition of research parks, and describes the principal methods that were used in the analysis that follows. Those methods include the procedure used to select case study sites, the strategy employed to collect primary data, the design of the cross-sectional analysis in Chapter 4, and the procedures used to estimate the regional economic impacts reported in Chapters 5–7.

An Overview of the Population of Research Parks

The earliest research parks in the United States were created in the 1950s. Today, only four of the 1950s-vintage parks remain in existence. Though we do not know the exact number of parks created between 1950 and 1989, the period covered by this study, we do know that research park formation has been cyclical and, since the late 1970s, has increased at an exponential rate.

Research parks are like Schliemann's Troy: each additional vintage is layered on top of the surviving parks of earlier vintages. We see today some 116 research parks, albeit in different stages of development and maturity (see Appendix A for an enumeration). The population of research parks is highly fluid, not only because of their high birth and mortality rates, but also because the very definition of the term research park is somewhat arbitrary. In the context of research parks, mortality refers to a park either that has failed as a real estate or business venture and ceases to exist at all, or that has changed from a research park to an office, industrial, or mixed-use park. Franco and others have reported that about one-half of all announced research parks never achieve viability and one-half of those that do are forced to diversify from research to other types of functions.¹ Figure 1-1 shows the vintage distribution of the population of parks that exists today. Not surprisingly, there was an explosion of research parks in the 1980s, particularly