Research Parks and Economic Development

By YoungKyoo Ahn

kyooya@umich.edu

Last updated: Wednesday, Dec. 14^th, 2005

Overview

Research parks are planned to function as a seedbed for the concentrated development of innovation- and technology-oriented businesses in a region. They have diverse and different models all over the world and are also called ��science parks��, ��technopoles�� or ��technology parks��. In recent decades, building research parks has become a crucial strategy in regional economic development in many developed countries such as Japan, Western Europe, and Australia as well as in the United States. For regions faced with the decline of older manufacturing industries, research parks have been considered as alternatives to replace them. In addition, for other regions whose economies have been performing well, they work as long-term strategy for continuous prosperity of the regions. This research and development (R&D)-based economic development strategy, if successful, leads not only to employment growth and new business creation, but also to changes in the structures of occupation and wage, political cultures, and spatial patterns of development. [1]

According to International Association of Science Parks (IASP), research parks (or science parks) are defined as ��an organization managed by specialized professionals, whose main aim is to increase the wealth of its community by promoting the culture of innovation and the competitiveness of its associated businesses and knowledge-based institutions. To enable these goals to be met, a Research Park stimulates and manages the flow of knowledge and technology amongst universities, R&D institutions, companies and markets; it facilitates the creation and growth of innovation-based companies through incubation and spin-off processes; and provides other value-added services, together with high quality space and facilities��. [2] In addition, Luger and Goldstein (1991) define Research parks as ��organizational entities that sell or lease spatially contiguous land and/or buildings to businesses or other organizations whose principal activities are basic or applied research and development of new products or processes.��  These definitions exclude high-tech centers or corridors like Silicon Valley in California and Route 128 in Massachusetts, industrial parks, and office parks. [3]

This paper explores the followings: how have research parks evolved? What are the interesting statistics of research parks all over the world? Then, why have regions tried to develop research parks as an economic development strategy? Finally, through case study on two research parks, this paper examines what the factors of success and the challenges of research parks are.

A Brief History and Statistics

After World War II, the idea of concentrating industries in one location became really popular in the other developed countries as well as in the U.S.  The first research park was created in Menlo Park, California in 1948. [4] In the 50s and early 60s, the most well-known research parks were established: Stanford Industrial Park (1951) in the Silicon Valley of northern California, Research Triangle Park (1959) in North Carolina. The success of these two parks and the economic booms in Northern California��s Silicon Valley, in Boston��s Route 128, and in the Austin-San Antonio corridor in the 1970s and early 1980s led many officials and politicians in regions to emulate their successes. [5] Particularly, research parks have grown as a result of the competition among universities. As a result, park managers and developers, in 1986, established the Association of University Research Parks (AURP) for the promotion of new research parks. [6] Today, there are 195 research parks in the US: their average employees are 3,399 and average capital investment is estimated US$ 186,280,327. [7]

In Nov. 2002, IASP surveyed 94 among worldwide 400 research parks. The result of this survey indicates interesting and significant statistics. [8]

z A majority of the currently existing research parks in the world were created during the eighties (30%) and the nineties (48%); 18% of them have been commenced in the 21^st century, which confirms the parks are an increasing phenomenon.

z Research parks�� area were ranged from small size (up to 200,000 m²) of 51% through medium-small size (200,000 – 600,000 m²) of 21% to big size (+ 1,000,000 m²) of 20%.

z 89% of Research Parks all over the world had plans to grow and expand.

z 53% of research parks had less than 50 tenants, and 36 % of them had a number of tenants between 50 and 200.

z The types of tenants were services companies (51%), research activities (26%), and industrial companies (18%).

z 42% of them have employees under 300 and 21% of them have over 3000.

z

http://www.vabiotech.com/about/

44% of the existing Research Parks were located in university-owned land or university campus, showing the strong link between ��parks�� and universities. Also, 28% of them were within 5 kilometers distance.

z In addition, almost 70% of the ��parks�� shared services with their universities and hosted university researchers in their facilities. Also, half of them shared scientific infrastructures with the universities.

www.cisco.com/.../ 687/RTPaerialview-2001.jpg

z Finally, technology sectors in research parks were Information and Communication (26%), Biotechnology and Life science (20%), Electronics and Computers (19%), Agro-food (9%), Environmental (8%), new materials (6%), and Pharmaceuticals (5%). (In the US, Particularly, medical and biotechnology (45.6%) is currently the dominant technology and information technology (34.2%) follows it. [9])

Research Parks as an Economic Development Strategy

Research parks have represented an attempt to encourage regional economic development through the use of regional creativity and innovation. However, this strategy has sometimes paid many dollars and has confronted several problems such as high competitions and government funding cutbacks for research. As a result, the growth of research park has slowed in the US since the mid of 1990s. [10] Nevertheless, there are, generally, three reasons why a region develops a research park as an economic development strategy. [11]

First of all, a region may seek to create new jobs in new industries to replace jobs in declining industries. The decline would be the result of agricultural jobs or manufacturing industries. Product-cycle and trade theory suggest that as economies develop, they will have tendency to concentrate in sectors where they have advantages relative to other regions. [12] This inclination usually leads to more advanced products made in more sophisticated ways. 

The second reason is that a region wants to involve itself in high-growth industries such as computers, software, and biotechnology, which are believed to enhance a region��s economic level.  As nations and regions develop, they are likely to develop increasing discrepancies between one geographical area and another.  In particular, the newer industries are liable to develop in one core region, where they draw on agglomeration economies. The regional goal of a research park is to concentrate the high-growth industries in those regions that appear to be most in need economically.

The final reason that a region chooses this strategy is that it helps create synergies between firms and industries. In this concept, synergy can be defined as the formulation of new and valuable information through human interaction. Despite the funding problems which research parks now confront, officials still emphasize synergies as a reason that companies still consider research parks. 

The Factors of Success and the Challenges in Research Parks

Park developers and politicians build the research park in the hopes of job creation, income growth, greater income equality, expanded opportunities for special groups within the labor force, and economic restructuring of the region. [13] But, the contribution of a research park to any of these aspects of economic development is difficult to measure. Additionally, each player related with its development has his own deferent definition of success. [14]

As a result, there is no consensus of what factors determine the success of a research park. Some park promoters refer to, as the evidence of success, the employment and payroll of park businesses. However, many of the jobs located in a park may well have been generated within the region even if the park had not been created.  Additionally, the costs as well as the benefits of a research park must be observed to determine its ��success.�� Costs include direct expenditures on land acquisition and infrastructure development by government, tax reductions or exemptions, and the opportunity cost of the land for research parks. [15] Nevertheless, I investigate their factors of success and challenges through the following representative two parks: the Research Triangle Park, the Stanford research parks.

The Stanford Research Park

The Stanford Research Park in Palo Alto, California, opened by Stanford University in 1951, is the first university-related research park in the U.S., and it is widely regarded as a pioneer of research parks. [16] The creation of the Park was in response to the demand for industrial land near university resources, especially an emerging electronics industry tied closely to the School of Engineering at Stanford University, and to the need to augment university��s endowment and to increase its income. [17] The park was built on 700 acres of land donated by Leland Stanford in 1885 as part of his original endowment of 8,800 acres to create Stanford University. As a result, most park businesses located within one mile of campus; also, it is just thirty-two miles south of San Francisco and within commuting distance of San Jose and Silicon Valley. [18] Moreover, Stanford graduates and professors have founded Hewlett-Packard, Sun Microsystems, Cisco Systems, Yahoo! and other high-tech companies; and currently, 150 companies in the Park employ approximately 23,000 workers in electronics, software, biotechnology and other high-tech fields. [19]

The economic importance of the park is larger than this employment figures show. The park has contributed to a positive business climate which has served to attract to the region not only businesses, but wealthy and well-educated individuals as well. According to a research, some of out-of-park businesses�� most important reasons for locating in the Palo Alto area were the preference of CEO, business services, and trained labor; and the park has helped to form the political culture of the region by introducing a group of powerful corporate executives who have played an active role in civic and public affairs. [20] Also, the park has played important role in encouraging to the region��s well-earned reputation for generating start-up companies. In addition, businesses in the park have paid more into city government in taxes than they have cost in service provision; moreover, the park has accomplished its original objectives that generate revenue for the university, and that bring industry and university researchers come together. Finally, the success of the park, both as a real estate venture and as a means of economic development, is mainly due to the ability of university officials to be flexible, and to fortuitous timing in the park development, rather than to planning insight. [21] There was little competition by other leading research universities for these innovative businesses because the park was first established. However, the park has also encouraged to widening gaps between income groups in the region. Currently, the increased incomes have resulted in high costs of living; as a result, exorbitant housing costs have forced many employed Stanford Research Park and Silicon Valley workers to leave the area. [22]

The Research Triangle Park

The Research Triangle Park (RTP) is the largest university-related research park and is considered to be one of the most successful research parks in the world. RTP is a public and private, planned research park, created in 1959 by leaders from business, academia and industry. RTP covers 7,000 acres in the middle of a triangle formed by the University of North Carolina in Chapel Hill, Duke University in Durham, and North Carolina State University in Raleigh. RTP now has approximately 1,100 acres for development of the future. It currently accommodates more than 100 research and development facilities which employ over 38,500 workers. The combined annual salaries in RTP amount to over $1.2 billion dollars. [23]

The case of RTP serves not only as one of the earliest and largest, and park-like planned concentrations of R&D activities in the world, but as the model of one of the dramatic cases of regional economic restructuring as well. In the mid-1950s, North Carolina��s per capita income was the second lowest of any state. There were little or no R&D activities in the state except for that in the three research universities. [24] In the meantime, the first idea for RTP stemmed from Howard Odum, a UNC professor, who sought to assemble the resources of the three universities. Later, under the leadership of Governor Luther Hodges, a committee to investigate the possibility to utilize the strength of the research universities was formed and RTP finally launched out. [25]

The crucial factors of success for RTP are the strength of the combined three research universities of the region, the timing of the park, and the vision and cohesiveness, and strong support of business, state government, and university leaders in understanding the need for a park and in working for its success. In the early 1960s, also, there was much less competition among areas competing for R&D facilities than there is now. However, even if the park has a large-scale effect within the Triangle region itself, it is so far evaluated to fail to stimulate economic development in other parts of the state to the degree that it was intended. [26]

Conclusion

Research parks, similar to other economic development strategies, have been employed by regions with hopes of encouraging their economic activities. This economic development strategy is a worldwide phenomenon in developed countries. Those countries or regions adopt this strategy to seek new industries to replace declining industries, to involve themselves in high-growth industries, or to create synergies between companies and industries. On the other hand, it is difficult to measure the success or failure of research parks because there is no consensus of determinants of success. The success of Stanford Research Park is due to Stanford University��s flexible policies, the region��s entrepreneurial tradition, and close ties between university and neighboring businesses. Also, Research Triangle Park (RTP) could succeed because of the synergy of the combined three research universities, the development timing of the park, and the vision and strong support of business, state government, and university leaders.

However, even these two successful parks have confronted several problems such as high costs of living following increased incomes in Stanford, and the failure to encourage economic development in neighboring area in RTP. While a research park as economic development strategy has numerous and attractive strengths, we should be cautious in newly adopting this into a region. This is because there are already keen competitions among regions or parks so that many parks are still in their infancy and have enormous empty spaces to fill, and because few regions have Stanford��s excellence in high-tech fields and RTP��s strengths based on prior occupation.

References

[1] Luger, Michael I and Goldstein, Harvey I. (1991). Technology in the Garden. Chapel Hill, NC:  UNC Press. 

[2] International Association of Science Parks (IASP), (Dec. 12^nd . 2005 of Access). http://www.iasp.ws/information/definitions.php?ce=

[3] Luger, Michael I and Goldstein, Harvey I. (1991). Technology in the Garden. Chapel Hill, NC:  UNC Press. 

[4] Levitt, Rachelle. (1987). The University/Real Estate Connection: Research Parks and Other Ventures. Washington, D.C.:  Urban Land Institute.

[5] Miller, Roger, and Cote, Marcel. (1987). Growing the Next Silicon Valley:  A Guide for  Successful Regional Planning. Toronto:  D.C. Heath and Company.

[6] Association of University Research Parks (AURP), (Dec. 12^nd. 2005 of Access). http://www.aurp.net/about/economic.cfm

[7] Ibid

[8] United Kingdom Science Park Association (UKSPA), (Dec. 12^nd. 2005 of Access). http://www.iasp.ws/information/statistics.php?ce=

[9] Association of University Research Parks (AURP), (Dec. 12^nd. 2005 of Access). http://www.aurp.net/about/economic.cfm

[10] Duroso, Thomas. (July 8, 1996). Research Parks: Forming Strategies to Adapt to End of Building Boom. The Scientist.

[11] Castells, Manuel and Hall, Peter. (1994). Technopoles of the world: the making of twenty-first-century industrial complexes. London ; New York : Routledge.

[12] Luger, Michael I and Goldstein, Harvey I. (1991). Technology in the Garden. Chapel Hill, NC:  UNC Press. 

[13] Ibid

[14] United Kingdom Science Park Association (UKSPA), (Dec. 12^nd. 2005 of Access). http://www.iasp.ws/information/statistics.php?ce=

[15] Luger, Michael I and Goldstein, Harvey I. (1991). Technology in the Garden. Chapel Hill, NC:  UNC Press. 

[16] Ibid

[17] Stanford University, (Dec. 12^nd. 2005 of Access). http://www.stanford.edu/home/welcome/research/researchpark.html

[18] Luger, Michael I and Goldstein, Harvey I. (1991). Technology in the Garden. Chapel Hill, NC:  UNC Press. 

[19] The Stanford Management Company, (Oct. 22^nd. 2005 of Access). http://www.stanfordmanage.org/smc_srp_about.html

[20] Luger, Michael I and Goldstein, Harvey I. (1991). Technology in the Garden. Chapel Hill, NC:  UNC Press. 

[21] Ibid

[22] Ibid

[23] Research Triangle Park (RTP), (Dec. 12^nd. 2005 of Access). http://www.rtp.org/index.cfm?fuseaction=page&filename=about_us_history.html

[24] Luger, Michael I and Goldstein, Harvey I. (1991). Technology in the Garden. Chapel Hill, NC:  UNC Press. 

[25] Braun, Bradley M. (May 1992) Science Parks as Economic Development Policy:  A Case Study Approach. Economic Development Quarterly, vol. 6 (2), p.135-147.

[26] Luger, Michael I and Goldstein, Harvey I. (1991). Technology in the Garden. Chapel Hill, NC:  UNC Press.