California: America's Industrial R&D Powerhouse
SPOTLIGHT ON CALIFORNIA
The Golden State has been at the forefront of private sector innovation in the United States for many years. What factors lie behind its success?
IN 1938, Bill Hewlett and Dave Packard, two electrical engineering graduates from Stanford University, started building audio oscillators in a garage in Palo Alto, California. By 1962, their company, Hewlett-Packard (HP), was listed in Fortune magazine's top 500 US companies by revenue. In 1999, it spun off its measurement-instruments business into Agilent Technologies, which broke the record for the largest initial public offering in Silicon Valley history. HP is now one of the world's leading electronics manufacturers, with revenues of US$126 billion in 2010 and more than 320,000 employees worldwide. HP's iconic story — along with those of Apple, Intel, Yahoo and Google — has influenced nearly every fledgling Californian company hoping to repeat its success. It also highlights one of the state's defining features: its strength in industrial research and development (R&D).
" California is a key marketplace for the exchange of ideas from around the globe. "
Darlene Solomon, Agilent Technologies
According to the US National Science Foundation (NSF), California businesses invested US$64 billion in R&D in 2007 — more than Michigan, Massachusetts and New Jersey combined. Overall, California accounts for 22 percent of all R&D in the United States. A long history of high-tech breakthroughs is just one of the factors that have made the Golden State the industrial R&D powerhouse that it is today. It has a “whole ecosystem of innovation”, says Darlene Solomon, chief technology officer at Agilent Technologies, based in Santa Clara. A January 2011 study commissioned by northern Californian life science trade association BayBio and the California Healthcare Institute (CHI) expands on this further, listing the following factors as having helped the state's biomedical industry to thrive: leading-edge science; experienced venture capital; a diverse, well-educated workforce; a group of serial entrepreneurs; a culture that appreciates risk-takers and that does not penalize failure; healthy scepticism about time-honored institutions; and freedom to ignore boundaries. In addition, California's world-class public and private universities attract billions of dollars in federal research funding and produce thousands of US postdoctoral scientists and engineers each year. The state is also home to national laboratories such as Lawrence Berkeley and Lawrence Livermore. These elements and more apply across industries — from biotechnology to computer technology to renewable energy — and help drive job creation, even in tough economic times.
Clusters of innovation
California boasts a diverse range of industries spread across several major regional clusters, including the San Francisco Bay Area, Sacramento, Los Angeles and San Diego. In northern California, Silicon Valley encompasses a chain of cities south of San Francisco — including Menlo Park, Palo Alto, Sunnyvale and San Jose — but the high-tech companies whose products gave the area its name are actually spread throughout the wider San Francisco Bay Area. The semiconductor research the valley is famous for is now translating into solar energy R&D, which makes use of the silicon and thin-film manufacturing technology perfected there. The city of South San Francisco, home to Genentech, is known for its concentration of biotechnology and pharmaceutical companies.
In southern California, the San Diego area hosts several institutions that have made the city a hub for biomedical research, such as the University of California, San Diego (UCSD), the Scripps Research Institute and the Salk Institute for Biological Studies. “San Diego has grown up over the last 30 years or so as one of the premier areas for doing biotechnology,” says Paul Laikind, chief business officer of the Sanford-Burnham Medical Research Institute. Laikind, based at Sanford-Burnham's headquarters in La Jolla, north-west San Diego, says biotechnology companies in the city are concentrated in a small area. “Because of that, it's a very collaborative entrepreneurial environment,” he explains. A non-profit institute, Sanford-Burnham has taken advantage of San Diego's industrial infrastructure to help commercialise its research: since 1987 it has spun off about a dozen start-up companies. Laikind himself founded four start-up companies in San Diego, all of which went public, before joining Sanford-Burnham in 2009. He says those in the region involved in biotechnology share a desire to achieve results by working together rather than competing with each other: “Our competition is whether we can make a drug that can work or not, which means a lot of collaboration between companies and institutions like ours.”
A further geographical advantage of California is the state's west coast location, which makes it a natural crossroads for international scientists and engineers. “California is a key marketplace for the exchange of ideas from around the globe,” says Agilent's Solomon. “Especially as Asia has taken off, I think California has been positioned [in the market] very well as a point of access and a good cultural fit in terms of that emerging growth.”
Although California's domination in industrial R&D has been achieved largely through the efforts of the private sector, the state does provide generous incentives for businesses to do science. Companies that increase their R&D investment from the previous year get a tax credit equivalent to 15 percent of the difference, says Andrea Jackson, director of state and government affairs for Genentech. “[The California government is] always incentivizing companies to do more R&D,” she says. According to the California Budget Project, which carries out independent fiscal and policy analysis, 2,483 corporations claimed US$1.2 billion in R&D credits in 2008.
In return, companies in California are generous about reinvesting their earnings in R&D. Agilent dedicates around 10 percent of its roughly US$6.5 billion annual revenue to R&D globally, a proportion that Solomon says is above average among its peers. “In some of our businesses, where we're focusing on future growth, we're investing far more than that 10 percent,” she adds.
California also attracts far and away the most venture capital (VC) in the United States — US$11.6 billion in 2010, nearly five times as much as the second ranked state, Massachusetts. Furthermore, California ranks first in the country in number of jobs and revenues for venture-backed companies, according to a 2011 study by global business analysts IHS for the US National Venture Capital Association, with 60 percent of the VC investments in California going to the software, energy, and biotechnology sectors.
Industrial innovation in California is well supported by its academic institutions. Stanford University, a private institution, is based at the heart of Silicon Valley and fosters strong relationships with companies — many of which are based at the Stanford Research Park, founded in 1951 when the university leased some of its land to emerging technology firms. The research park offers several incentives to encourage industry-university interactions: businesses are able to sponsor joint research projects with Stanford faculty and students, invite faculty to join their boards or act as consultants, offer internships to students and use the university's libraries.
SRI International, a non-profit contract research institute, split off from Stanford University in 1970 and now employs more than 2,100 people. The institute has conducted research for over 90 private and non-profit businesses, and also licenses and commercializes the technology it develops with federal funds. Norman Winarsky, SRI's vice president of ventures, says its four spin-off companies that have gone public are now worth US$20 billion.
The University of California (UC) has also forged enduring partnerships and collaborations with industry. The UC system, spread across 10 campuses, is the state's flagship higher education institute and is a powerful engine for job creation, says Steve Kay, dean of the division of biological sciences at UCSD. The university has “generated the pipeline of trained scientists and technologists that has really fed into the high-tech, the biotech, and now, more recently, the clean-tech explosions,” he says. A UCSD study published in February 2011 revealed that the 156 active UCSD-related companies are directly responsible for 18,140 jobs.
The UC system also hosts four Gray Davis Institutes for Science and Innovation, each a collaboration between several campuses, that are purposed with accelerating technology transfer and increasing interactions between the state, UC and industry. They are the Center for Information Technology Research in the Interest of Society (CITRIS), the California Institute for Quantitative Biosciences (QB3), the California NanoSystems Institute (CNSI) and the California Institute for Telecommunications and Information Technology (Calit2).
California industry also provides the most support for local academic R&D in the United States. During the 2009 fiscal year, industry-financed R&D expenditures at Californian universities and colleges totalled US$506 million, according to the NSF.
Funding for higher education, however, has been harder to come by in the wake of the recent economic downturn. The UC system is facing financial challenges as a result of the state budget deficit. For the 2010 fiscal year, UC had a budget shortfall of US$1 billion, which it has tried to make up with faculty furloughs, tuition increases and programme cuts. On a more positive note, certain research avenues are just starting to grow. In 2004, voters in California passed Proposition 71, a US$3 billion bond issue to fund stem-cell research in the state. The California Institute for Regenerative Medicine, a regulatory agency, allocates the funds. In 2010, as a result of those grants, five new stem-cell research facilities were dedicated at UC Davis, UC Los Angeles (UCLA), UC Irvine, Stanford University, and the University of Southern California in Los Angeles. A sixth centre, the Sanford Consortium for Regenerative Medicine, is under construction in San Diego and due to open in 2011 for collaborative stem-cell research between the Salk Institute, Scripps Institute, UCSD and Sanford-Burnham. The hope is that the research will eventually provide new opportunities to spin out companies focused on stem-cell therapies.
California has also been hit hard with unemployment, which now exceeds 12 percent. The biomedical research industry, though, has not shed as many jobs as other high-tech sectors, according to the BayBio/CHI study. The biofuels industry is also one of the fastest growing in terms of job creation, says Gail Maderis, president and chief executive of BayBio.
Agilent's Solomon says there are jobs available, but workers need to be flexible. For new recruits, the company looks for ‘T-shaped’ people — researchers who are highly skilled in one area but who can also communicate horizontally across fields. Winarsky of SRI adds that scientists working on innovative research have good job prospects: “They are high-premium people.”
A question on many people's minds is how the state, strapped for funds, will deal with its budget crisis. Genentech's Jackson says she does not anticipate the corporate R&D tax credit being trimmed back. “So far the legislature has felt a compelling interest to keep those tax credits in place to continue to grow the industry,” she says. Pharmaceutical companies like Genentech take comfort in the fact that their products remain necessary, even in lean times. “We're in a flat growth spell right now, but the industry's pipeline is healthy,” Jackson says. “We anticipate continued job growth in the next decade.” California's history of innovation, from HP's inception to today's efforts in stem-cell research and solar technology, will provide a strong foundation for future growth.
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How a stint in Silicon Valley unleashed one researcher’s business skills
Tomasz Głowacki’s career now straddles academia and industry, thanks to his participation in a leadership programme organized by the Polish government. In 2007, when I started work as a research and teaching assistant at Poznań University of Technology in Poland (a job that straddled bioinformatics research and teaching discrete mathematics, algorithms and data structures), I thought academia would be a lifelong career. I enjoyed the intellectual freedom, chance to work on challenging problems and travel opportunities. Shortly after defending my computer-science PhD thesis in 2013, I secured a place on the Polish government’s Top 500 Innovators initiative, a nine-week programme in research commercialization and management at universities with high positions in the Academic Ranking of World Universities. It was set up because the Polish government thought a lack of cooperation between researchers and business was one of the main reasons for the country’s low position in European Innovation Scoreboard rankings. The focus at my interview was how to commercialize my research results. I was asked about factors such as potential customers, business models and pricing. Two months later, I was one of 500 scientists sent either to the University of California, Berkeley; Stanford University, California; or the University of Cambridge, UK. The goal was to learn from the very best researchers and business practitioners. While at the Walter A. Haas School of Business at Berkeley, I spent time with researchers, practitioners and entrepreneurs from Silicon Valley. What surprised me the most was the marriage between business and academic institutions in California. Lecturers shared their experiences of research commercialization, business and start-up firms. This was very different from Poland, where a scientific career does not recognize commercial activities in terms of cooperation between business and academia. In my experience, many Polish scientists see commercialization activities as a roadblock to their academic careers. During the Berkeley training, I heard how PhD students can successfully transition into business. These lectures were delivered by Peter Fiske, who is now director of the Water Energy Resilience Research Institute at Berkeley Lab, and whose career straddles both industry and academia. Fiske focused on transferable skills between academia and business, covering data analysis, resourcefulness, technological awareness, resilience, project management, problem solving, English proficiency and good written communication. Fiske is a strong advocate of the need to market yourself as a scientist. Mark Rittenberg, a business and leadership communications specialist at Haas School of Business, taught us about the power of communication and storytelling. As scientists, we focus mostly on research results. We tend to think that the content we present is enough to sell ourselves. But in business, how you present yourself, self-confidence, an interesting story and non-verbal communication are of at least the same importance. The innovators programme included one-day visits to technology companies in Silicon Valley, and the opportunity to undertake internships at some of them. I visited Google, the software companies Splunk and Autodesk, as well as NASA and biotechnology firm Genentech. These visits helped me to understand that ambitious work and challenging problems are not just the domain of universities. I did a three-week internship at PAX Water Technologies in Richmond, California, where I was one of five Polish scientists who set up an interdisciplinary team to work on reducing household water consumption. This was a long way from our research topics, and a new area for all of us. Willingness to learn new things, self-curiosity, creativeness and being open to unexplored areas helped us to drill down into the problem and to propose a solution. All of these are standard skills for a scientist. The programme helped me to understand that scientists can be effective and successful outside academia, and that the business world is full of challenging problems to work on. But the most important conclusion for me is that the applied aspect of what I do matters the most. The best fit for me seemed to be a transition into business. Between June and September 2013, after completing the innovators programme, I applied for several research and development positions in business. I prepared a long CV that covered my research achievements. No one got back to me. It was an important lesson. As scientists, we have to understand how our skills fit current job-market demands. So I connected with some old university friends who were working in business to discuss their interview experience. I decided to revamp my CV by making the description of my education shorter and focusing on my transferable skills; I included organizational skills, experience of data-analysis techniques, language skills and my structured approach to problem solving. As scientists we focus more on problems and solutions when we describe our work. But a potential business employer is more interested in how you get there. You should focus on the tools and methods you have used, knowledge of foreign languages, and how you organize and report your work. In 2013, I found a job as an analyst at BAE Systems Applied Intelligence at its new offices in Poznań, working with IT systems and insurance data to detect customer fraud. A year later, I discussed my transition with Fiske, who told me: “Now that you are on the other side, don’t lose touch with your friends in academia — seek ways to help them be more relevant to the outside world.” I wanted to give something back and to find my own way to contribute to the academic world. I am now head of product development at Analyx, an international marketing data-analytics company, and also work part-time at Poznań School of Banking as a business practitioner, teaching project management as well as systems analysis and design. I discuss the real business cases I face with my students. I also organize lectures and meetings for students with business experts, chief executives and consultants. Some of these have started long-term academic collaborations, and they provide a great opportunity for students to learn from practitioners and to land internships. I have managed to organize a master’s programme between academia and business. Students have the chance to get involved in hot industry topics supervised by business experts, and to present results and defend their theses at their universities. Teaching based on my personal experience is more satisfying for me. Leaving academia was not a failure. It helped me to explore new opportunities, to better understand my professional expectations and to find the career path that fits me best. This is an article from the Nature Careers Community, a place for Nature readers to share their professional experiences and advice. Guest posts are encouraged. You can get in touch with the editor at firstname.lastname@example.org.
Look west for resistance
With the most to lose from looming federal funding cuts, California's researchers take a stand. In December 2016, at a meeting of the American Geophysical Union, the governor of California, Jerry Brown, declared that if the new Trump administration stopped monitoring the Earth's climate with federal satellites, the Golden State would “launch its own damn satellites.” Brown's response followed earlier comments from a senior advisor to then president-elect Donald Trump proposing the elimination of funding for NASA's Earth science division. It was the first of many rumours, culminating in deep reductions to federal science spending in the president's proposed budget for 2018. The announcements have coincided with moves to restrict immigration, including a sweeping review of the visa programme used by research institutions to employ foreign scientists. “We've got scientists, we've got lawyers, and we're ready to fight,” said Brown to resounding applause from the crowd of climate scientists. But scientists in California are doing much more than cheering and clapping. Like Brown, they are using their political voice to challenge what they feel has been a gradual erosion of evidence-based policy-making. “From climate change to food scarcity to income inequality, we need people in office who can think creatively and use evidence to make decisions,” says Jess Phoenix, a geologist who studies active and extinct volcanoes across four continents. In April, she announced her decision to run for Congress to represent her home district north of Los Angeles. “We need scientists to take a stand,” she says. Cutting it close California, the most populous state in the US, has long been a science stronghold. With a weighted fractional count (WFC) of around 3,000, the research output of institutions in California in the Nature Index is nearly double that of its closest competitor, Massachusetts. For every 1,000 scientists and engineers working in the state in 2014, the United States Patent and Trademark Office granted it 45 patents — the highest in the country. Part of the state's research dominance can be explained by the large number of life, physical and social scientists employed in California — almost three times as many as in Massachusetts. In 2016, California received 15% of the total US allocation for the National Institutes of Health (NIH) and National Science Foundation (NSF), which was the largest share for any state, amounting to US$4.6 billion. But from its position at the pinnacle of research, California stands to lose more than any other state from the cuts to science funding proposed by the Trump administration. Trump's budget outline, released in May 2017, calls for slashing the spend by 18% for the NIH and by 11% for the NSF. California's losses would be likely to have far-reaching implications for the research output of the wider scientific community, given that many scientists in the state collaborate with peers across the country, and the world. In 2016, institutions in California formed more than 8,400 partnerships with counterparts in other states to co-author papers included in the index — the highest in the country. California's institutions also formed the most partnerships with institutions outside the US. Of course, a budget blueprint is just a president's wish list and an actual budget has to pass through Congress, which has largely rejected slashing funding for scientific research. The budget reconciliation for 2017 added money to federal science agencies. There is much trepidation among scientists about what cuts will pass Congress. “We are in a period of significant uncertainty,” says Randolph Hall, vice president of research at the University of Southern California (USC) in Los Angeles. Jess Phoenix leads educational non-profit, Blueprint Earth, and is running for Congress. If federal funding is cut, California researchers will be looking for more money from the state's budget, foundations and industry. Corporate funding currently makes up about 5% of research money, and private foundations 5–10%. State funding ranges from 2% or less at private institutions like USC, up to 11% at the public University of California system. “While we might hope for these funds to rise in the future, it won't ever come close to the amount from federal funding agencies,” says Hall, who is also the incoming president of the University Industry Demonstration Partnership, an organization that enables interactions between industry and academia. People politics Research also requires a reliable supply of talented people. Universities are concerned that reviews of visa policies, such as the 90-day ban on travellers from six Muslim-majority nations, and the more recent restrictions on visitors from a revised list of seven countries may affect their ability to attract and retain the world's best researchers. When Trump's travel ban first went into effect in January 2017, Giovanni Peri, an economist at the University of California, Davis, was considering a candidate from Iran, one of the countries on the banned list, for a professor position. The selection panel decided that a different candidate was better qualified, but the administration's announcement raised many concerns about whether the suspension on travel barred them from hiring an Iranian. Reforms to the H-1B visa for highly skilled foreign workers could also hinder university recruitment. Universities in California employed more than 3,000 H-1B visa workers in 2015, according to the Office of Foreign Labor Certification. H-1B visas are becoming even more important for universities because fewer US citizens and permanent residents are pursuing advanced degrees in science. In 2014, 25% of the students enrolled in graduate programmes in the US were temporary residents, compared to 21% in 2000. “Universities would be impoverished and the ability to hire scientists would be reduced if the programme changed,” says Peri. In an analysis of US metro areas between 1990 and 2010, he found a 1% increase in the number of foreigners filling scientific and technical positions increased the average income of college-educated native workers by 5–6% in that area. The H-1B visa programme does not appear to be at immediate risk. But processing times have lengthened since the Department of Homeland Security suspended fast-track processing of H1-B applications in April 2017. State-level collaboration In 2016, institutions in California formed close to 9,500 bilateral partnerships with institutions across the country to co-author papers included in the index. The top 20 states that California institutions formed research links with are ranked by the number of bilateral partnerships. Global research hub California is the most collaborative state in the United States, forming the most domestic and international bilateral institutional partnerships. The top 10 most collaborative states in the country are ranked by their total number of bilateral partnerships. Run, scientists, run The current political climate has inspired some Californian researchers to look beyond the lab. Following the 2016 election, Phoenix found herself drawn into politics. She was dismayed to learn that her congressional representative, a member of the House Science Committee, does not believe that the federal government should regulate greenhouse gas emissions. In April 2017, she decided to challenge for the seat in the upcoming 2018 midterm elections. Days later, she spoke at a March for Science rally in Los Angeles defending scientific research and informed decision-making. “I'm 35. No-one else is going to get involved politically for me,” says Phoenix, who runs an educational non-profit called Blueprint Earth and is a fellow at New York-based professional science society, The Explorers Club. “Scientists have been shocked by the incompetence at every level of elected office.” Kevork Abazajian, a physicist studying the origins of the Universe at the University of California, Irvine, is also considering a run for city council — a local office. He hopes to get the town of Irvine to take more action on climate change, for one thing. “After the November election, scientists have been shocked by the degree of incompetence at almost every level of elected office,” he says. “There is a history of scientists going into elected office in other countries, and that's what we need more of.” Abazajian is also the California coordinator for 314 Action, a non-profit group that supports science-savvy candidates and policies. Since January, the group (whose name comes from the value of the mathematical constant π) has organized two training sessions in Washington DC and California for scientists interested in running for office. Training included fundraising and crafting a message that sticks with voters. “You have to be a good messenger,” says Abazajian. 314 Action has also supported stem cell researcher, Hans Keirstead, in California, along with volcanologist Phoenix, in their bids for Congress in 2018. Adding more scientists would shake up the decision-making process: currently only one of the 535 representatives and senators is a practising scientist with a doctoral degree — physicist, Bill Foster, of Illinois. “When California leads, the world follows,” says Phoenix. “Now, more than ever, we are called to bring truly representative democracy to the fore.” Search our job roles in California