New Jersey Gives Innovation a Zone of Its Own

Tara Nurin | July 8, 2013 | More Issues, Planning
Innovation zones make it easy for high-tech companies and academe to collaborate, generous incentives make it easier to attract companies in the first place

innovation splash
As New Jersey looks for new ways to attract and retain high-paying jobs in a climate where seemingly every state competes for the same or similar companies, legislators and pro-business forces are heavily promoting collaboration between academia and industry as a way to attract investment and cut the time it takes to get a product or process out of the lab.

Increasingly, the state is offering tax credits and other incentives to encourage businesses to locate near universities. The result is an “innovation zone,” where institutions of higher education lend research, facilities, and talent to neighboring companies, with the goal of reducing time to market — and time to profit.

“One benefit of locating near a university is cross-collaboration on research. Two is the incentives [the state offers], and three is the talent pool,” said Kathleen Coviello, Director of Technology and Life Sciences for the New Jersey Economic Development Authority (EDA)

Still, despite real advantages — including the state’s proximity to major metropolitan centers, numerous colleges and universities, and highly educated workforce — innovation zones are off to a sluggish start. Some critics suggest that New Jersey doesn’t offer competitive enough incentives, when compared with surrounding states. Further, the state is late in realizing how important it can be to foster a culture of collaboration.

Critics and advocates alike are concerned that colleges and universities are out of synch with the needs of high-tech companies. Protected by private funding, universities have not had to concentrate on R&D with timely commercial applications. The government is getting involved here, by way of a new industry task force that brings together stakeholders from business and academia and hopes to move both sectors much closer together.

Creating a Home for Innovation

The state has already designated three zones — in Camden, New Brunswick, and Newark. The EDA oversees these zones and operates business incubators near the Rutgers University campuses in New Brunswick and Camden, where it leases space to high-tech labs and companies.

Local governments and private developers have also created innovation districts by marketing projects like the “Einstein’s Alley” initiative, which intends to lure development to the Route 1 corridor by boasting its proximity to Princeton University, Rutgers, and other high-tech outfits.

The Economic Opportunity Act of 2013, while not mentioning innovation districts by name, does create one that encompasses the aviation-heavy tech area around the Atlantic City Airport and includes Stockton College. The act is garnering support from the business and real estate communities for the significant employee-based tax breaks for companies that locate in the aviation zone and in “qualified incubator facilities,” which are commercial buildings that lease at least 75 percent of their usable space to tech startups. Additional bonuses are awarded to companies working within specified industries like life sciences.

At the end of the General Assembly’s last session, two different versions of the bill passed both chambers, requiring another Senate vote to bring the two versions closer.

Working in the Zone

Whether it’s the formal business-development and networking programs some incubators and innovation zones offer, the ability to swap professors and bring in experts, or even just the casual cup of coffee between scientists and businesspeople who share a building or town square can lead to productive exchanges that benefit all parties.

“Even in the tech community, the entrepreneurs are still needing that face-to-face meeting,” Coviello said. “Even the very technical folks come to social meetups and say, ‘We need to come out of our offices or basements where we’re coding.’ And there’s still a lot of work done in labs, where to test your hypotheses you really need more than one person.”

New Jersey must rapidly gather momentum, insist those who work to lure knowledge-economy jobs to the state. While it has spent decades relying on its past glory as a center for innovation and manufacturing, other regions rich in academic institutions — such as Silicon Valley, Cambridge, MA, and North Carolina’s Golden Triangle — have been aggressively marketing tax incentives, as well as their reputations as intellectual and scientific hubs. In fact, New Brunswick-based Johnson & Johnson is, according to its external communications office, establishing four regional innovation centers in “major life sciences communities.” None are in New Jersey.

Yet the state’s boosters insist New Jersey makes for a more-than-ideal home for life sciences and tech firms. Not only is it located within a day’s drive of 40 percent of the American population, but also it boasts a strong public transportation system (including nearby airports), lies between New York and Philadelphia, and is situated in a time zone that allows daytime transactions with both London and San Francisco.

Most important, however, are New Jersey’s 52 colleges and universities, a highly educated workforce, and more scientists and engineers per square mile than anywhere else in the world.

Boosting Biotech

The state is specifically seeking to capitalize on its large concentration of biotech clusters by leveraging its business and education networks, which extend to 1,700 life-sciences businesses, including 15 of the world’s top 20 biopharmaceutical companies and eight of the world’s top 11 medical technology firms.

Boosters point to two main developments that can further raise the profile of the state’s biotech sector. First, there’s the merger of Rutgers and the University of Medicine and Dentistry of New Jersey (UMDNJ), which expands Rutgers’ reach into the medical research and clinical world. Second, there’s the recent announcement that Texas’s world-renowned MD Anderson Cancer Center will jointly operate the Cooper Cancer Institute, set to open in Camden in October.

“New Jersey is unique in its appropriateness for life sciences,” said Debbie Hart, president and CEO of BioNJ, an organization devoted to advancing biotech-related industries in New Jersey. “It’s in and of itself a cluster. We’re geographically small, we have tremendous research happening . . . . we have a large pharmaceutical industry, lots of incentives, and a great culture and way of life.”

New Jersey’s Five Challenges

And yet, outside companies don’t necessarily seem to view it that way.

In a report released in March, the employment-policy group New Jersey Policy Research Organization (NJPRO) Foundation and the Innovation NJ coalition named five “overarching challenges” that inhibit vertical integration between academia and industry in New Jersey.

The challenges consist of administrative burdens associated with partnering with an academic institution; coordination of academic, industry, and state R&D efforts and resources; clashing cultural differences between academia and industry; lack of awareness throughout the business community of the state’s available higher-education R&D assets; and the economic difficulties facing higher education, industry, and the state in securing increased R&D funding, especially from federal sources, even when they all work together.

The groups co-authored the report after conducting extensive focus groups with stakeholders from business and education. According to Melanie Willoughby, co-chair of Innovation NJ and senior vice president of the New Jersey Business & Industry Association (NJBIA), “ [Focus group participants are] all saying the same thing. And they’re all frustrated.”

The most intractable obstacle may be that of clashing cultures, says Donald Sebastian, senior vice president for research and development at New Jersey Institute of Technology and a chief architect of the Newark Innovation Zone. Once privately funded corporate researchers started focusing less on innovation and more on technical fixes, they left a void that government and big business expected academia to fill.

But because there had always been so many major corporations in New Jersey that could afford to fund their own research, they didn’t need to partner with universities to help develop the products, technologies and processes they needed to advance in the marketplace. So academic researchers, Sebastian says, were left alone to focus on their areas of interest without feeling pressure to make discoveries that directly benefited the corporate world. With federal funding available to support them, they often closeted themselves away from capital forces, requesting and receiving public funding for research.

But corporate interest in research has waned and funding sources have diminished so now, Sebastian says, it’s up to government to bring the two silos together to foster the exchange of ideas, expectations, and ways to recalibrate funding mechanisms.

“We’re now creating a different [role)] for the government,” Sebastian said. “It had been to regulate industry and fund basic science research,” but business advocates now expect the state to play a more active role in fostering these new relationships. “This idea of the government creating a public commons has multiple benefits: you’re drawing academics to these interchanges with entrepreneurs to give them an opportunity to hear what the marketplace needs so they can begin researching what’s necessary.”

By most accounts, the state is heeding the call. In response to the NJPRO/Innovation NJ report, Lt. Gov. Kim Guadagno convened the first meeting of a new innovation task force earlier this spring.. The New Jersey Council on Innovation, as it’s called, comprises representatives from many facets of academia, government, and industry.

Members will meet to determine how to implement the 15 recommendations issued by the report, including the implementation of master agreements to streamline the collaborative process; identification of subject-based Centers of Excellence within the higher education system; shift of tenure-track positions to ones that incentivize corporate research; creation of a comprehensive directory of resources and a marketing plan to promote its contents; and appointment of university administrators to act as liaisons with the private sector.

Meanwhile, on July 1, the EDA was scheduled to begin collecting applications for the new Angel Investor Tax Credit program, which rewards private investors for supporting in-state tech firms. Coviello believes many investors will choose from companies operating in incubators or those located near the investors’ alma maters.

Ted Zangari, a real estate attorney specializing in relocation and incentives and a board member of PlanSmartNJ, which released two of its own reports on innovation clusters and districts in the past year, is exuberant about the Economic Opportunity Act and the state’s new focus on collaboration.

“We come at it in grand style,” he said about the likely passage of some form of the act and the robust incentive packages it offers, “We’re a little late to the process but we’re going to leapfrog all the states with which we’re competing.”