The Idaho Science and Technology Advisory Council

Executive Summary

In November 1999, Governor Dirk Kempthorne signed an Executive Order creating the Idaho
Science and Technology Advisory Council. The Governor asked the Council, which is composed
of business entrepreneurs, engineers, technology experts, and representatives of the
state’s academic institutions and major technology companies, to develop a state strategic plan
for science and technology.

Over the course of the past year, the Advisory Council completed
a strategic planning process that included an assessment of Idaho’s current competitive position
and an analysis of how Idaho ranks in terms of those factors needed to support and grow a
technology-based economy. These include a well-educated and highly skilled workforce,
world-class research and development, sophisticated technology infrastructure and a thriving
entrepreneurial climate.

This report presents the Council’s findings and proposes strategies
and actions designed to foster the growth of new companies and industries and to help keep
the state’s traditional resource-based industries globally competitive.

IDAHO’S COMPETITIVE POSITION

The Council documented that Idaho has significant
technology assets. They include the following:

• A strong research and development base, including the
presence of the Idaho Engineering and Environmental
Laboratory (INEEL), upon which to build;

• A well-educated population;

• Research laboratories, universities and private companies
that are generating a significant level of new
knowledge; and

• A quality of life that is very attractive to technology companies and their workers.

In addition, Idaho has a rapidly growing base of technology
companies with specializations in semiconductors and electronic
computers and engineering services. High technology companies employ one-tenth of
Idaho’s workforce and account for close to one-sixth of the state’s private sector payroll.

These technology jobs contribute greatly to the economy as the state’s high technology industries
pay significantly higher wages than do other sectors of the economy. In 1998, Idaho’s
average high-technology wage was 78 percent above the average for the entire private sector.
Idaho is experiencing a high rate of new company formation and is home to a large number of
new, rapidly growing firms. In 1998, Idaho ranked seventeenth among the fifty states in firm
births and tenth in the nation in terms of the number of new rapidly growing firms, often
referred to as “gazelles.”

Idaho Strengths

• Existing R&D and technology
base

• Quality of the workforce

• Increasing base of technologyoriented
companies

• Competitive business costs

• Growing number of start-up
companies

• High quality university system

• Positive university/business
relationships

• High quality public education
system

• High quality of living

• Low cost of living

• Affordability of housing

• Recreational amenities

While Idaho is well positioned to continue to grow its technology
base, the Council also identified a number of factors
that could inhibit economic growth if they are not addressed.
While Idaho ranks highly in terms of R&D conducted by
industry, only a small percentage of university R&D is
industry sponsored.

The council concluded that universityindustry
partnerships need to be strengthened in Idaho. A
high quality public education system is a prerequisite for
growing a technology-based economy, yet Idaho ranks 47th
in terms of per capita spending on education among the fifty
states.1 Idaho’s educational institutions are not producing a
sufficient supply of engineers and other skilled technical
workers to meet local industry needs.

While Idaho is experiencing
a high rate of new company formations, resources to
support and nurture new start-up companies are limited. Very
little venture capital is being invested in Idaho companies. Lastly, although Idaho’s businesses,
universities and laboratories are generating new knowledge, Idaho’s infrastructure for technology
transfer and commercialization is underdeveloped.

Idaho is well positioned to become a leader in today’s New Economy. But to do so will require
investments by the State of Idaho, its citizens, and businesses.

VISION

The Science and Technology Advisory Council has developed the following vision for Idaho:

Idaho will have, and be recognized as having, a vibrant technology-based
economy that provides employment opportunities and high wage jobs for Idaho
citizens. Increased emphasis on the application and use of science and technology
in Idaho will continue to spawn new companies and industries, while
contributing to the global competitiveness of its traditional industries.

STRATEGIES AND ACTIONS

To achieve the above vision, the Council recommends that the following strategies be adopted
and implemented:

• Build, attract and retain a highly skilled technical workforce.

• Invest in creating R&D excellence and promoting industry-university collaboration.

• Facilitate commercialization of technology developed in Idaho.

• Build an entrepreneurial culture that supports and nurtures new firm formation.

• Invest in the infrastructure needed to support a technology-based economy.

• Establish a national and international image for Idaho as a leading technology center.

1. State Profiles of Public Education. Washington, DC: National Center for Education Studies.

Factors That Could Inhibit Growth

• Lack of technically skilled
workers, especially engineers

• Insufficient investment in
education at K-12 and higher
education levels

• Low level of industrially financed
R&D at universities

• Poorly developed infrastructure
for technology transfer and
commercialization

• Lack of seed and early-stage
capital

• No community of entrepreneurs

• State lacks image as a high technology center

STRATEGY 1: BUILD, ATTRACT AND RETAIN A HIGHLY SKILLED, TECHNICAL
WORKFORCE.

There is perhaps no more critical issue for technology companies than their need for well-educated,
technical workers. In addition to providing a sufficient number of highly skilled scientists
and engineers, it is important to ensure that students receive high quality math and
science education at the K-12 level and that opportunities to continually upgrade and improve
technical skills are available for existing workers.

To address workforce development issues
and build a stronger knowledge-based economy, Idaho should:

• Provide adequate funding for education at all levels and improve science and math education
at the K-12 level. Options that should be considered include developing programs and
initiatives at the middle school level designed to interest students and parents in math and
science; instituting a differential pay scale that allows science and math teachers to be
more highly compensated; using distance education technology to bring high quality math
and science instruction to students in all parts of Idaho; and increasing math and science
requirements for high school graduation over time.

• Establish the Idaho Science and Engineering Education Initiative, a series of actions
designed to double the number of science and engineering graduates over the next five
years. An Idaho Technology Scholarship should be created and support should be provided
to the state’s institutions of higher education to enable them to accommodate larger
numbers of science and engineering students.

• Create mechanisms to provide greater interaction between industry and academia in order
to ensure that higher education curricula meet the needs of emerging industries. Specifically,
colleges and universities should involve industry in curriculum development and
internship and cooperative programs should be encouraged.

• Undertake a campaign to attract Idaho Natives to return to Idaho. In the short-term Idaho
companies will continue to recruit skilled technical workers to locate in Idaho. Idaho
should consider a strategic campaign to attract Idaho natives working in technical fields to
return to Idaho by making them aware of the employment opportunities available in the
state.

STRATEGY 2: INVEST IN R&D AND PROMOTE UNIVERSITY-INDUSTRY
COLLABORATION.

A common feature of regions having a strong base of technology-intensive companies is the
presence of major research institutions. While it is critical that Idaho invest in strengthening
the state’s university R&D capacity, it is also important to invest in areas that support the
state’s existing industrial base and emerging technology sectors. The following actions are
proposed to strengthen the state’s research base and promote greater industry-university
collaboration.

• Undertake a Research Excellence Initiative. It is proposed that a Research Excellence
Initiative be established to provide funding for faculty recruitment and infrastructure to
develop research excellence in areas identified as key to Idaho’s future economic growth.

• Establish an R&D Voucher Tax Credit Program. The Council recommends establishing an
R&D Voucher Tax Credit Program to encourage higher education-industry partnerships.
This program would provide up to a fifty percent “refundable” tax credit on the total funds
provided by a private company to an Idaho higher education institution in order to undertake
research and development.

• Develop a strategy to attract federal R&D funding in areas of core competencies and
emerging technology areas. Idaho should use the Research Excellence Initiative to leverage
federal funding for centers and institutes in key technology areas. Over the long-term,
Idaho could consider creating a Strategic Technology Fund to provide matching funds for
federal investments.

STRATEGY 3: FACILITATE COMMERCIALIZATION OF TECHNOLOGY
DEVELOPED IN IDAHO.

Idaho has a strong base of research and development activities on which to build its technology
economy. But having strong research institutions doesn’t necessarily translate into new
products and companies. Idaho’s research institutions, including INEEL, need to work closely
with the business community and actively support commercialization.

Actions that should be
undertaken include:

• Strengthen university and INEEL technology transfer operations. Idaho’s research universities
should articulate that collaboration with Idaho industry and contributions to regional
economic development are part of the university’s mission and commit resources for technology
transfer and commercialization activities. INEEL should continue to place a high
priority on technology transfer and commercialization and establish policies that reward
researchers for interacting with companies.

• Review Board of Education intellectual property policy and practices. It is proposed that
the state’s IP policy be reviewed and changes made if necessary to provide flexibility in
working out IP arrangements with private companies. In addition, a task force should be
convened to develop a consistent model to guide university-industry interactions at Idaho’s
universities.

• Provide new product development assistance to manufacturers and other traditional
industries. Idaho has a strong and growing manufacturing base, much of which is concentrated
in high technology sectors. The state should continue to support its Tech Help
program, which helps small and medium size manufacturers to become more competitive.
Tech Help should target services to emerging industry clusters and focus on product
development as well as process improvement assistance.

STRATEGY 4: BUILD AN ENTREPRENEURIAL CULTURE THAT SUPPORTS AND
NURTURES NEW FIRM FORMATION.

States and regions that have been successful in technology-based economic development have
generally had in place a thriving entrepreneurial culture. To build a climate supportive of
entrepreneurship, Idaho should:

• Develop and implement an entrepreneurship strategy. The State of Idaho is one of ten
states that have been selected to participate in an eighteen-month policy academy to help
state officials develop strategies to support entrepreneurs and new start-up companies. The
Idaho team that is participating in the policy academy should identify the needs of Idaho’s
technology entrepreneurs, assess the adequacy and availability of the state’s existing entrepreneurial
support system, and develop a comprehensive set of policies and programs to
address any gaps identified

• Initiate one or more angel investor networks. Angel investments, investments made by
high net worth individuals, are often the first source of external capital for a new start-up
company, and so are extremely important to emerging technology firms. The Idaho
Department of Commerce should work with the Department of Finance’s Securities
Bureau to develop policies that help Idaho businesses access angel investments while at
the same time protecting the public interest. The Idaho Science and Technology Corporation
proposed in the implementation section of this report should be tasked to develop and
facilitate angel investor networks in Idaho.

• Increase the availability of venture capital by offering personal tax credits to encourage
individuals to invest in Idaho-based venture capital companies and/or emerging technology
companies. The council recommends that Idaho offer tax credits as a means of
increasing the availability of early-stage seed and venture capital in Idaho. This tax incentive,
available to Idaho’s individual investors as a personal income tax credit, would benefit
early-stage technology companies who are seeking seed funding.

• Utilize state pension funds to encourage venture capital investment in Idaho. To increase
the availability of venture capital in Idaho, the Council recommends that a small proportion
of the State’s pension funds be invested in venture capital. Two approaches should be
considered. First, the pension funds could invest a small percentage of total assets in
venture capital. Second, the pension funds might create an intermediary vehicle, a privately-
managed trust, or a fund of funds that co-invests with other profit-motivated
investors in diversified, professional pools of venture capital.

STRATEGY 5: INVEST IN THE INFRASTRUCTURE NEEDED TO SUPPORT A
TECHNOLOGY-BASED ECONOMY.

To compete for technology-based growth, a state must provide the infrastructure demanded by
technology companies. This means high quality schools, excellent transportation access, good
municipal services, fully equipped “smart buildings,” office space in attractive settings, “smart
highways,” and state-of-the-art telecommunications services. The infrastructure areas identified
as being most critical to Idaho’s continued economic growth are telecommunications and
transportation.

Idaho should:

• Implement the telecommunications recommendations of the Rural Development Task
Force. The Council recognizes the importance of providing high speed, broadband
connectivity to both businesses and citizens in all areas of Idaho and endorses the Rural
Development Task Force’s recommendation to “explore options and implement actions to
promote broadband telecommunication to rural areas.”

• Investigate options for creating an Idaho Educational Intranet. The State of Idaho has
actively promoted the use of technology in its schools over the last decade. The Council
recommends that the State Board of Education explore the possibility of creating a statewide
network that would link all of the state’s educational institutions, community
facilities, and state and local governments.

• Pursue transportation improvements that will allow easier and more cost-effective travel
between the state’s major population centers. There is currently no direct air service from
Moscow to Boise or Moscow to Idaho Falls and Pocatello. As the University of Idaho
builds relationships with businesses and other research institutions throughout Idaho,
including ISU, BSU, and INEEL, demand for air service within Idaho will increase. State
government should seek to engage air carriers to determine ways to meet the demand for
air service fromMoscow to other parts of Idaho. The Department of Transportation should
be encouraged to accelerate improvements to highways linking Moscow and Boise.
Efforts also should be made to encourage cost competitive air service from all areas of
Idaho.

STRATEGY 6: ESTABLISH A NATIONAL AND INTERNATIONAL IMAGE FOR
IDAHO AS A LEADING TECHNOLOGY CENTER

In interviews with business, education, and community leaders, a large number of people indicated
that they felt Idaho needed to change its image. The majority of those interviewed suggested
that the state is not thought of as a center of technology and technology businesses. The
following actions should be undertaken to improve Idaho’s image as a high technology center:

• Existing Idaho technology companies should take a leadership role in promoting Idaho as
a high technology center. A statewide technology council should be created to provide
private sector leadership and to assist state government in implementing this strategy.

• Idaho should undertake an educational and marketing campaign to increase Idahoans’
knowledge and understanding of science and technology, the role it plays in their lives,
and the opportunities it provides them. Specific activities could include public service
announcements, sponsoring special documentaries, highlighting the successes of
entrepreneurs, companies, and university partnerships.

• The state should market Idaho as a prime location for technology-based companies. A
marketing strategy should be developed to increase understanding of Idaho’s hightechnology
capabilities. The strategy should emphasize the state’s quality of life, focusing
on those factors that appeal to high technology firms and workers, including presence of a
technically skilled workforce, quality education, and recreational opportunities.

IMPLEMENTATION

If the vision laid out in this strategy is achieved, Idaho will
have an economy that provides high-skilled career opportunities
for Idaho citizens, an enhanced quality of life, and a high
standard of living. Idaho will be a leader in selected areas of
science and technology critical to sustainable development
and economic competitiveness.

Realizing the vision of a vibrant technology-based economy
will require:

• Committed leadership;

• Collaborative partnerships between business, government, and academia;

• Investment of financial resources; and

• Commitment to measuring performance.

IDAHO SCIENCE AND TECHNOLOGY CORPORATION

For this ambitious effort to succeed, one entity must be designated and empowered to be
responsible for implementing the strategy. It is proposed that a private nonprofit entity, governed
by a public-private board of directors, be created to oversee implementation of
Idaho’s science and technology strategic plan and to administer programs created as a
result of adopting the strategy. While state government should provide initial funding for the
corporation, over time the corporation should seek to develop a base of private and other
public funding.

This new corporation initially should be tasked with designing an Idaho Technology Scholarship
Program, establishing a process to identify key technology areas for the proposed
Research Excellence Initiative, and developing a proposal for a venture capital tax credit
program. The corporation could also facilitate networking among technology entrepreneurs
and CEO’s of start-up companies and the establishment of an angel investor network.

Lastly,
the corporation should be given responsibility for monitoring progress taken in implementing
each action identified in this strategy and tracking progress in achieving measurable
objectives.

CONCLUSION

Idaho is well positioned to build on its research base, continue to grow its technology economy,
and improve the competitive position of its agricultural, fisheries, and forestry industries
through the application of science and technology. The state’s semiconductor and microelectronics
and physical research and engineering services industries provide strong high value
anchors on which to build. The state’s high quality of life and productive workforce make it an
attractive location for technology companies and workers.

Priority Actions

• Create the Idaho Science and
Technology Corporation

• Develop a Science and
Engineering Education Initiative

• Establish a Research Excellence
Initiative

• Initiate a proposal for a Venture
Capital Tax Credit

Capitalizing on these opportunities, however, will require making the investments needed to
build a world-class research base and an outstanding education system. Implementing the
strategies and actions proposed in this report will propel Idaho into a leadership position in the
knowledge-based economy and help to ensure a high standard of living and excellent quality
of life for all Idaho citizens.