Rhode Island innovates: A competitive strategy for the Ocean State In the fall and winter

January 19th, 2015 #innovateRI Rhode Island Innovates Metropolitan Policy Program

Slater Mill 1793 The Beginning of the Industrial Revolution

Blurring Distinction Between Manufacturing and Services Relentless Pace of Technological Change “Digitization of Everything” 2016

R&D-intensive industries that concentrate the nation’s science, technology, engineering, and mathematics (STEM) workforce. A M E R I C W H A T W H E R E W H Y B R O O K I N G S A D V A N C E D I N D U S T R I E S P R O J E C T W H A T W H E R E W H Y B R O O K I N G S A D V A N C E D I N D U S T R I E S W H A T W H E R E W H Y B R O O K I N G S A D V A N C E D I N D U S T R I E S P R O J E C T W H A T W H E R E W H Y B R O O K I N G S A D V A N C E D I N D U S T R I E S P R O J E C T Advanced Industries

Pharmaceuticals Medical EquipmentMotor Vehicles & Parts Shipbuilding Manufacturing 35 Software Computer Systems Design Telecommunications R&D Consulting Services Services 12 Oil & Gas Extraction Electricity Generation Energy 3 Advanced Industries

60.0% 8.7% 90.0% 81.2% 17.7% 80.0% U.S. 
 GDP ExportsU.S. Workers Private Sector R&D PatentsEngineers / Architects Concentrate the Assets of the Innovative Economy Advanced Industries

$160 $120 $80 $40 $0 AverageWage(thousands) Associate’s Degree Some College Secondary Diploma No Secondary Diploma $153 $117 $130 $89 $115 $69 $89 $56 $60 $38 $54 $32 $44 $28 $33 $20 Offer a Significant Wage Premium at Every Level of Education Doctoral Degree Professional Degree Master’s Degree Bachelor’s Degree 50 percent of advanced industry jobs require less than a bachelor’s degree Advanced Industries

Drive Productivity in Other Industries Stimulate Local Economies Support Long Supply Chains Develop Technology that Transforms Lives Advanced Industries
9. Rhode Island’s Position 1 2 3 1 2 3

Rhode Island’s Position 1 2 3 1 2 3

Rhode Island rests at the center of a 33 million person megalopolis with $2.1 trillion in output.

The state’s labor market has tracked the United States in recent decades … Employment rate Unemployment rate Source: Bureau of Labor Statistics Average wages 50% 80% 0% 20% 50k 25k 0 Rhode Island United States

However, the state’s growth capacity deteriorated through the recession. Real Output Growth (2000-2014) Source: Bureau of Economic Analysis New Hampshire Massachusetts Rhode Island Connecticut Maine 100 110 120 2000 2006 2009 2014

A core problem: The advanced industry base has shrunk. US AI Employment Rhode Island AI Employment 100 110 120 1980 2000 20131990 US Employment RI Employment Advanced Industry Employment, 1980-2013 Source: Bureau of Economic Analysis

Median income still hasn’t recovered from the recession. Source: St. Louis Fed FRED Database Real Median Income 2014 U.S. Dollars $49,000 $54,250 $59,500 $64,750 $70,000 1999 2001 2003 2005 2007 2009 2011 2013 Rhode Island $58,633

Rhode Island lacks sizable high-value growth engines. ✓ Erosion of the state’s advanced industry base and the failure to nurture new advanced industries has left the state adrift ✓ Rhode Island needs to build more resilient, future- oriented industry specializations to secure the next generation of prosperity

Industry opportunities 1 2 31 2 3

Assessment of Line-of- Sight to Significant Markets Recommended Target Growth Areas Industry Clusters Identification Core Competency Identification

Advanced 5 Biomedical Innovation IT, Cyber, and Data Analytics Defense Shipbuilding and Maritime Design, Food, and Custom Manufacturing Advanced Business Services Opportunity 2 Arts, Education, Hospitality & Tourism Transport, Distribution, and Logistics Growth Areas

Biomedical Innovation: Position and Opportunities 31,548 1.8% 2.9% size of primary industry total employment (2013) projected job growth (2013-2022) projected output growth (2013-2022) Opportunity Industry-university partnerships at URI, Brown, with Brown Operational Plan for Excellence calling for major new facilities, such as a shared, translational neuroscience research lab. Rhode Island Performance in Primary Industry

. IT, Cyber, and Data Analytics: Position and Opportunities Opportunity • Major expansion expected at NUWC • Projected development at URI • Brown ranks #5 in applied math and 20th in computer sciences among research universities • New Brown Data Sciences Institute 12,528 2.4% 4.9% size of primary industries total employment (2013) projected job growth software services, (2013-2022) projected output growth software services, (2013-2022) Rhode Island Performance in Primary Industry Chuck Hagel Former Secretary, Department of Defense “Rhode Island is the Silicon Valley of underwater technology”

Defense, Shipbuilding, and Maritime: Position and Opportunities Rhode Island Performance in Primary Industry Opportunity • Rhode Island is the most specialized and fastest growing state in New England in Marine, Defense Ship Building, Materials and Machinery. • Electric Boat’s Quonset Point hull manufacturing complex is the only site capable of such work in the U.S. 19,107 -0.6% 2.1% size of primary industries total employment (2013) projected job growth (2013-2022) projected output growth (2013-2022)

Advanced Business Services: Position and Opportunities Opportunity Advanced Business Services growth in Rhode Island well outpacing Massachusetts and Connecticut. 35,232 1.0% 3.6% size of primary industries total employment (2013) projected job growth finance and insurance, (2013-2022) projected output growth finance and insurance, (2013-2022) Rhode Island Performance in Primary Industry

Design, Food, and Custom Manufacturing: Position and Opportunities Rhode Island Performance in Primary Industry Opportunity Rhode Island has more than 2 times the national concentration of Design and Consumer Products industries. 31,548 1.8% 2.9% size of primary industries total employment (2013) projected job growth (2013-2022) projected output growth (2013-2022)

Transport, Distribution, and Logistics: Position and Opportunities Rhode Island Performance in Primary Industry Opportunity Warehousing and Freight Transportation, while small, are each growing by double- digits since the economic recovery. 21,322 0.9% 3.6% size of primary industries total employment (2013) projected job growth (2013-2022) projected output growth (2013-2022)

Arts, Education, Hospitality & Tourism: Position and Opportunities Opportunity Rhode Island is 38% more concentrated in jobs and generates 13% higher value-added per worker than the nation as a whole. Rhode Island Performance in Primary Industry 42,801 1.2% 2.3% size of primary industries total employment (2013) projected job growth (2013-2022) projected output growth (2013-2022)

Takeaway: There is no silver bullet. ✓ Rhode Island lacks massive anchors to make strategy simple. ✓ The state’s task must be to expand multiple intriguing, but small clusters.

Rhode Island Innovates 1 2 31 2 3

✓ A proliferation of individually very small industries argues against narrow targeting. ✓ However, the interrelatedness of the state’s small industries and clusters recommends “platform strategies” that broadly address the fundamentals of industry growth and key growth areas. The industry analysis suggests the needed strategy. Brookings/Battelle Network Analysis of Patent Citations in Rhode Island

Execution Business Climate Innovation TalentPlace

Business environment problems Shaky core competitiveness drivers Splintered business-civic leadership Problems

Rhode Island Competes Rhode Island Innovates Rhode Island Acts Responses

Rhode Island Competes Rhode Island Innovates Rhode Island Acts

Licenses, patents and startups per $10 million of university research expenditures Rhode Island and U.S. average, 2013 0.0 0.2 0.4 0.6 0.8 1.0 1.2 United States Rhode Island Licenses Patents Startups Recruit and support the work of commercially-oriented impact faculty. Sponsor a Rhode Island Global Innovation Challenge to accelerate early- stage startups. Launch a Rhode Island Entrepreneurs in Residence program. Responses

Licenses, patents and startups per $10 million of university research expenditures Rhode Island and U.S. average, 2013 0.0 0.2 0.4 0.6 0.8 1.0 1.2 United States Rhode Island Licenses Patents Startups Responses Create industry-university-laboratory tech collaboration centers focused on AI. – Cleveland’s Global Cardiovascular Innovation Center

State Bachelor’s degree Rank ME 38% 1 PA 32% 2 VT 31% 3 OR 31% 4 MN 30% 5 MA 30% 6 DE 29% 7 NH 27% 8 CT 27% 9 RI 25% 10 Share of All Degrees Granted in STEM Establish state as national leader in STEAM education and training. Expand the Wavemaker Fellowship to encourage graduates to stay and work in Rhode Island. Responses

State Bachelor’s degree Rank ME 38% 1 PA 32% 2 VT 31% 3 OR 31% 4 MN 30% 5 MA 30% 6 DE 29% 7 NH 27% 8 CT 27% 9 RI 25% 10 Share of All Degrees Granted in STEM Responses Launch RI Codes, a statewide coding initiative to prepare more Rhode Islanders for careers in tech. – General Assembly New York City

Rhode Island Competes Rhode Island Innovates Rhode Island Acts

Fix underperforming R&D tax credit by raising the cap on deductions and making the credit refundable. Assemble and prepare more large pad- ready commercial/industrial sites. Responses 45th CNBC 2015 Top States for Business Rankings Tax Foundation’s 2016 State Business Tax Rankings 48th 46th Forbes 2015 Business Climate Rankings Rhode Island lags its competitors on numerous assessments of business environment Reform unemployment insurance by reducing its incidence on young and growing firms.

Pursue a regulatory streamlining campaign to signal that the state is sophisticated, forward-thinking, and entrepreneurial. Responses 45th CNBC 2015 Top States for Business Rankings Tax Foundation’s 2016 State Business Tax Rankings 48th 46th Forbes 2015 Business Climate Rankings Rhode Island lags its competitors on numerous assessments of business environment – Chicago’s Small Business Center Web Portal

Commuter Rail Service Between Major Northeastern Cities Trains Daily Average Rush Hour Travel Time Providence and Boston 37 1:15 Stamford and Manhattan 204 0:50 Wilmington and Philadelphia 37 0:48 Baltimore and Washington 76 0:57 Begin development of new express commuter rail service between Providence and Boston and expanded intercity rail service. Responses Spearhead the development of a new app-based Rhody Pass ticket option that reduces fares.

Rhode Island Competes Rhode Island Innovates Rhode Island Acts

Rhode Island lacks a high-level business-civic organization that can deliver decisively on transformative initiatives. Partnership for RI Response

January 19th, 2015 #innovateRI Rhode Island Innovates Metropolitan Policy Program