Maryann P. Feldman and Nichola J. Lowe
Restructuring for Resilience
Economic crisis is compounded when structural change is amplified by cyclical
downturns. Many governments respond to this situation by focusing policy initia-
tives on technology and innovation as a way to generate economic growth. Diese
initiatives often result in new organizations for managing technology-based eco-
nomic development that function outside the mission of traditional government
agencies. Organized as a nonprofit, these entities attempt to bridge the public and
private sector by offering a clear focus, flexibility, and an opportunity to accom-
plish a public goal without enlarging government agencies. In contrast to tradi-
tional economic development, which tends to focus narrowly on attracting busi-
ness, these new initiatives emphasize longer-term capacity-building as a way to
promote and anchor innovative activities and establishments. Without the tradi-
tional strictures associated with being part of state government, these organiza-
tions are often in a strong position to mediate and manage relationships between
private interests and public institutions.
The last major U.S. recession in the late 1970s witnessed widespread applica-
tion of this new organizational form to technology-based economic development.
Well-known examples are the North Carolina Biotechnology Center, Connecticut
Innovations, and Pennsylvania’s Ben Franklin Program. To date, 42 states have
experimented with quasi-public economic development organizations, with vary-
ing outcomes and ability to influence economic growth. Despite the importance of
these efforts, we have limited understanding of how to design enduring organiza-
tions that act as catalysts for regional economic change.
The purpose of this article is to examine North Carolina’s experience with the
design of two dedicated industrial development organizations. The two organiza-
tions were proposed by the same state strategic plan, yet one succeeded and con-
tinues to thrive, while the other has been divested of many of its assets and core
economic development functions. Initiated by the same state government in close
procession, these two organizations arguably provide an example of how organi-
Maryann Feldman is the S.K. Heninger Distinguished Chair in Public Policy at the
University of North Carolina, Chapel Hill.
Nichola Lowe is an Assistant Professor and Director of Undergraduate and Dual
Degree Programs in the Department of City and Regional Planning, Universität
North Carolina, Chapel Hill.
© 2011 Maryann P. Feldman and Nichola J. Lowe
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Maryann P. Feldman and Nichola J. Lowe
zational design affects the ability of technology-oriented nonprofits to influence
and guide long-term economic development planning.
Our purpose is not to evaluate the outcomes or lasting technology legacies of
these two organizations, although both have arguably had a significant impact on
the state economy. Eher, our objective is to offer some considerations for policy-
makers contemplating the creation of this type of organization. This paper offers
an interpretive case study that considers the context in which the two organiza-
tions were started and emphasizes differences in organizational governance, imple-
mentation, and subsequent ability to respond to crisis.
NORTH CAROLINA CIRCA 1980
In the midst of the last major U.S. recession in the early 1980s, North Carolina suf-
fered from the loss of its three major industries: tobacco processing, Textilien, Und
furniture. The state’s economy was especially vulnerable, due to increased compe-
tition from lower-wage countries that threatened its core manufacturing indus-
versucht. At the time, the state ranked low in per capita income (40th out of 50 Staaten).
This was a time in U.S. history that was aptly captured in President Carter’s
“malaise” speech: Americans told pollsters they were not optimistic about the
future, and there was a general crisis of confidence nationwide.1 American indus-
try was losing its international competitiveness, and the unusual combination of
inflation and unemployment created a poor economic outlook.
Against this backdrop, Jim Hunt’s first term as governor of North Carolina
emphasized technology-based economic development. Faced with an economic
crisis, there was debate about how the state could best position itself. Some in the
state legislature argued that North Carolina should intensify its efforts to attract
the branch plants of large manufacturing companies, which would create lower
paying jobs for the state’s less educated workforce. One of the South’s more pro-
gressive governors, Hunt favored policies that would create broad-based wealth
and prosperity. He felt that the best strategy was to build capacity for high-wage,
sustainable employment in technologically intensive industries. While his vision
for development still involved the recruitment of outside firms, his approach dif-
fered considerably from traditional models of southern industrialization. Eher
than “sell” the state on the basis of low wages and “docile” non-union labor, Hunt’s
goal was to create and support strong research and educational institutions that
would help make North Carolina a preferred destination for technology-intensive
establishments.2
At the time, North Carolina was already home to the Research Triangle Park
(RTP), which is often hailed as an example of a successful state technology-based
economic development initiative. RTP was initiated during the administration of
Governor Luther Hodges (1954-1961) and supported by Governor Terry Sanford
(1961-1965). Officially started in 1959, RTP had grown to include 38 firms by
1978. These were predominantly large companies, such as IBM and Burroughs
Wellcome. The vibrant entrepreneurial economy that now exists contiguous to the
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Restructuring for Resilience
park was in its early stage and included just a few “home-grown” firms, most
notably SAS and Troxler Electronics.
Foundation,
Building on the success of RTP, Hunt sought to elevate science and technolo-
gy policy and create a second set of initiatives to advance economic development
to the next level. Key to his strategy was the North Carolina Board of Science and
Technologie, which deserves
some mention. The Board of
Science and Technology was
created by legislative act in
1963 under the administration
of Hunt’s predecessor and
mentor,
Sanford.
Terry
Patterned after the National
Die
Wissenschaft
Zu
agency’s mission was
“encourage, promote and sup-
port the scientific, engineer-
ing, and industrial research
applications in North Carolina
to the end that the State will
benefit from, and contribute to
economic and technical devel-
opments
aus
advances in the space and
related sciences.”3 The gover-
nor chaired the board, and its
director reported directly to the governor—a choice administrative position. Der
board successfully funded $1 million in projects, until funding sources were cut in 1969. In 1973, under Governor Holshouser, the board was demoted to a commit- tee within the Department of Commerce. This mirrored President Nixon’s deci- sion to dissolve the Office of the Science Advisor in 1971. In the midst of the last major U.S. recession in the early 1980s, North Carolina suffered from the loss of its three major industries: tobacco processing, Textilien, and furniture. The state’s economy was especially vulnerable, due to increased competition from lower-wage countries that threatened its core manufacturing industries. resulting In 1977, Governor Hunt re-elevated the Board of Science and Technology to a cabinet-level function. Most significantly, Hunt appointed his former professor and trusted advisor Quentin Lindsey to direct the board and design new science- based economic development policies. Der 1980 “Lindsey Report” of the Board of Science and Technology advocated for the establishment of “two major efforts . . . on those ‘frontiers’ of science that show promise of high technology industrial application.”4 The report gave equal attention to microelectronics and recombi- nant DNA, as the early biotechnology industry was known. Wichtig, this policy recommendation had a theoretical grounding in bal- anced growth theory, which claimed that economic development was the outcome of simultaneous investments involving multiple economic sectors. This perspec- tive reflected Quentin Lindsey’s role as an economic development economist and an earlier mentor of Jim Hunt on an economic development project in Nepal, Innovationen / Volumen 6, number 1 131 Von http heruntergeladen://direct.mit.edu/itgg/article-pdf/6/1/129/1626160/inov_a_00063.pdf by guest on 08 September 2023 Maryann P. Feldman and Nichola J. Lowe which was funded by the Ford Foundation. Lindsey was an advocate of large gov- ernment capital investments to mobilize industrial development. His 1980 report therefore advocated for concurrent sector-specific policies, recognizing that these initiatives should be calibrated and coordinated: “A major component of ‘Balanced Growth Policy’ in North Carolina is the provision of more and better jobs through . . . high technology industry requiring highly skilled workers and paying high wages.”5 The ultimate goal was high-wage employment for North Carolina’s resi- dents and a vehicle to support the development and deepening of scientific infra- Struktur. Building on this initial momentum, the board formed two technical commit- tees, one for recombinant DNA and another for microelectronics. University researchers with technology expertise staffed both committees. The board assigned each committee the task of conducting in-depth research on North Carolina’s technology assets and opportunities in their respective technology area. Despite drawing on distinct groups of technology experts, the reports generated by the two committees were complementary and closely aligned. Both reports recommended the formation of state-funded, not-for-profit centers to promote technology devel- opment. Both recommended that these centers not prioritize in-house research capabilities and instead establish themselves as intermediary organizations that would bolster existing research institutions and activities in the state. Especially important was increased support for North Carolina’s research universities. Both reports envisioned that these nonprofit organizations would focus on integrating and coordinating diverse research activities throughout the state, thus helping to amass and disperse government and industry resources. Despite encouragement by the Board of Science and Technology to move on both technologies simultaneously, the Microelectronics Center of North Carolina (MCNC) was the first to incorporate in the state, on July 17, 1980. By all accounts, microelectronics was a safer technology-based economic development bet at the time and thus became an easier political sell for the governor. By the early 1980s, microelectronics was already a well-established technology-intensive industry in the United States, with a significant presence in North Carolina. Außerdem, this was a time when microelectronics firms were actively seeking out multiple new U.S. locations and thus providing large numbers of well-paying jobs for the states that were able to attract them. There also was strong national support for micro- electronics research, fueled in part by concerns about increased technology com- petition from Japan; as one technology expert put it, in the early 1980s, microelec- tronics was perceived as the “highest of high technology because the underlying technology is changing more rapidly than in other high-technology industries.”6 In contrast, opportunities to create jobs in recombinant DNA, or what we now call biotechnology, were less obvious. Tatsächlich, In 1980 there were only a handful of dedicated biotechnology establishments in the United States (z.B., Genentech, Biogen, Amgen, and Cetus). Most of these were small companies that were not in a position to move away from their university-anchored research bases in 132 Innovationen / Data Democracy Downloaded from http://direct.mit.edu/itgg/article-pdf/6/1/129/1626160/inov_a_00063.pdf by guest on 08 September 2023 Restructuring for Resilience Northern California and Cambridge, Massachusetts.7 Only one firm in North Carolina, Burroughs Wellcome, was conducting biotechnology research in 1980. Microelectronics: Big and Bold In the spring of 1980, anticipated economic development opportunities in micro- electronics were confirmed when executives from General Electric (GE) announced their intention to establish a $100 million semiconductor research and
development facility. This was a major economic development prize that was
expected to create close to 500 high-paying jobs within its first five years. Norden
Carolina was considered a top candidate. Trotzdem, GE executives expressed initial con-
cerns about North Carolina’s limited silicon research capabilities. In negotiations
with Governor James Hunt, GE executives asked that North Carolinian leaders
strengthen the state’s silicon-related research infrastructure. Genauer, Sie
wanted a commitment that North Carolina’s state government would support
microelectronics research at North Carolina universities, and in the process help
attract qualified technicians and engineers to the state. The promise of immediate
job creation by General Electric was especially helpful in garnering support from
more traditionalist state legislators.
The response to GE’s interest in North Carolina was immediate. Der
Microelectronics Center of North Carolina, as it was named, was officially incor-
porated as nonprofit on July 16, 1980.8 Later that month, Governor Hunt secured
$1 million from a state contingency fund to finance the center.9 Governor Hunt and his science adviser Quentin Lindsey also formed an interim board of directors. George Herbert, then president of the Research Triangle Institute (RTI), would chair the board, which was appropriate, given RTI’s strong research reputation in compound semiconductors with space and defense applications.10 Other early board members included Hugh McCall, then president of North Carolina National Bank and later, Bank of America; Sherwood Smith, president of Carolina Power and Light Company; and four university chancellors representing UNC-Chapel Hill, Duke University, North Carolina State University, and North Carolina A&T University.11 GE announced its decision in August 1980 and broke ground on a state-of-the- art research and development facility in Research Triangle Park on December 2, 1980. In a press release announcing the event, the governor’s office stated that “General Electric’s decision to locate its center in North Carolina resulted directly from the establishment of a Microelectronics Center of North Carolina.”12 In a related statement, the governor said that “General Electric’s decision to build here . . . puts North Carolina ‘on the leading edge of what can be a second Industrial Revolution—the Information and Communications Revolution.’”13 In early 1981, Hunt requested and received an additional $24.4 million from
the state legislature to further develop MCNC, including financing the construc-
tion of a permanent facility that would be located in Research Triangle Park. In late
1981, after initial attempts to recruit an academic director, Don Bielman, then a
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Maryann P. Feldman and Nichola J. Lowe
vice president of General Electric who was instrumental in the company’s decision
to locate its R&D facility in North Carolina, was selected as MCNC’s first presi-
dent.
Propelled by the successful recruitment of General Electric and the expectation
that other firms would soon follow, the launch of MCNC was expedited.
Completed in less than 18 months, the planning process was decisive and bold. Der
Microelectronics Center of North Carolina opened with considerable fanfare and
media coverage. Governor Hunt went on record saying that “the microelectronics
industry may be North Carolina’s only chance to make a dramatic improvement in
the state’s wage and income rankings in the nation . . . I believe that microelectron-
ics is our chance, perhaps the only chance that will come along in our lifetime . . .
We must seize the moment.”14
Biotechnology: Slower Moving, yet Quick to Learn
The high-impact, quick-paced implementation process that led to the formation
of MCNC stands in contrast to the slower moving planning efforts that eventual-
ly led to the incorporation of the North Carolina Biotechnology Center in
Dezember 1984. The three-year lag time resulted in distinctly different organiza-
tional forms and strategies—and ultimately differences in organizational tenure
and the ability of each organization to accomplish its articulated economic devel-
opment goals.
In 1981, as the Microelectronic Center burst onto the national scene with an
ambitious economic development mission and millions of dollars in state funding,
a more modest and smaller-scale biotechnology program was percolating under
the direction of the Board of Science and Technology. The governor’s office pro-
vided an initial budget of a few thousand dollars to launch the board’s biotechnol-
ogy program and cover the initial costs associated with cataloging recombinant
DNA research at North Carolina universities, as well as studying emergent biotech-
nology centers in Northern California and Cambridge, Massachusetts. Der
biotechnology program budget increased to $150,000 in 1982-1983—enough to cover the salaries of two dedicated staff members.15 With less attention from the governor’s office and far fewer state dollars to spend, one could easily imagine that this nascent biotechnology initiative would simply wither away in the shadows of microelectronics, essentially its bigger, bold- er, and more popular technology sibling. Compounding this organizational chal- lenge was the protracted national economic recession in the early 1980s, which greatly strained North Carolina’s state budget, and with it the commitment to pur- sue a second technology sector. Außerdem, unlike microelectronics, which at the time had a viable and highly visible industrial presence, biotechnology’s econom- ic development potential was less certain. It is not surprising then that the gover- nor’s office remained somewhat ambivalent about biotech’s future in the state. Despite initial inertia, an unexpected pathway opened that helped to reinvigo- rate early efforts to establish an independent nonprofit biotechnology center. In 134 Innovationen / Data Democracy Downloaded from http://direct.mit.edu/itgg/article-pdf/6/1/129/1626160/inov_a_00063.pdf by guest on 08 September 2023 Restructuring for Resilience 1983, after two years of incubating as a concept within the Board of Science and Technology, the idea of forming an independent biotechnology entity was cham- pioned by Gerry Hancock, a freshman state senator. Hancock, an attorney trained at Duke University, received a detailed letter from an informed constituent telling him about the importance of biotechnology for the state’s economic transforma- tion. This motivated him to learn more about the emergent technology. Convinced of its economic development potential, Hancock approached Governor Hunt’s office with a proposal to conduct legislative research on biotech- nology. With Governor Hunt’s blessing and with the support of the state’s senate and house leadership, a 19-member legislative study commission was established. Its membership included two of the state’s more powerful legislators at the time: Robert Jordon, who would go on to become the state’s lieutenant governor in 1985, and Kenneth Royall, an influential state senator from Durham, also the location of Duke University. UNS. Congressman Robert Etheridge, who at the time was a prominent member of the North Carolina house representing Harnett County, agreed to cochair the study commission with Hancock. The members also includ- ed seven other state legislators; two university representatives from North Carolina State University and East Carolina University; several industry representatives from banking, tobacco processing, and agriculture; the executive director of the Government, Universität, Industry Research Roundtable of the National Academy of Sciences; and one staff member from the Board of Science and Technology.16 Hancock requested and received $30,000 from the state legislature to facilitate the
review process—a sizeable budget for legislative research.17
The first year of meetings focused on educating commission members about
biotechnology. This was especially important, given the diverse backgrounds of the
state legislators, few of whom had formal scientific training. Tatsächlich, with the excep-
tion of one university biology professor and one biotechnology expert represent-
ing the Board of Science and Technology, the study commission was made up
almost entirely of individuals who were initially unfamiliar with the technology.
To address this knowledge gap, the commission met with a wide range of sci-
entific experts and conducted extensive interviews during a 20-month period that
spanned two legislative sessions. They heard hours of testimony from scientists
and national opinion leaders, including representatives from the National
Institutes of Health, the federal agency responsible for both regulating and financ-
ing biotechnology research activities in the United States. Gerry Hancock
explained the process:
For most people, certainly including legislators, . . . it is important who
they hear things from. Sie [the legislators] can’t become scientists. Sie
are going to have to trust somebody. You [as a state legislator] tend to try
and find people in whom you have confidence. You ask their advice and
rely upon it. We tried to bring in people who would be as persuasive, als
interesting, and as authoritative as possible.18
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The effort to educate state leaders was reflected in expert testimony. Zum Beispiel,
a North Carolina–based scientist informed commission members that genetic
engineering was already common practice in the state’s agricultural industry. Als
evidence, he presented a tall pile of notebooks that documented traditional plant-
breeding techniques that were being used to produce frost-resistant tomatoes. Er
emphasized that this work reflected hundreds if not thousands of years of plant-
breeding knowledge and experimentation. The expert then dramatically produced
a single thin notebook that detailed the use of biotechnology to isolate the specif-
ic genes responsible for frost-resistant tomatoes. He went on to argue that applica-
tions of biotechnology would help to speed up the process of crop development
and would produce improved varieties within years, rather than centuries. Das
argument was salient, due to the economic importance of agriculture to the state.
These sessions ultimately helped establish a shared commitment among the
non-technologists in the state legislature to the development of this complex and,
zu der Zeit, controversial technology. Equally important, these sessions created
metaphors that contributed to a common language for conversing with other non-
expert constituents and colleagues about the relevance and significance of biotech-
nology for the state. Referring to this process, Hancock explained that “efforts like
this are partly substance, in that you are trying to help everyone understand the
subject matter and what the potential for it is. The other dynamic going on in a
meeting like this is building champions for whatever you ultimately recommend.”19
SECOND-MOVER ADVANTAGES
The three-year time lag not only provided time to build consensus around state
support for the biotechnology industry, it also gave legislators an opportunity to
observe and learn from the Microelectronics Center experience. What initially
appeared to be a slow start provided second-mover advantages that allowed the
North Carolina Biotechnology Center to understand and thus avoid the institu-
tional conflicts that emerged during the early operations of MCNC. These con-
flicts centered on the relationship between MCNC and the state’s universities.
A Perceived Research Competitor
As indicated earlier, the Board of Science and Technology originally envisioned
these technology-based nonprofit organizations as mediating or coordinating
bodies—that is, independent centers that would supplement, support, and con-
nect, rather than duplicate, university research efforts. Der 1980 MCNC Plan
report was most explicit on this point, emphasizing that a state-funded microelec-
tronics center should “not conduct in-house research itself ” but should instead be
designed to support “microelectronic education and research at the participating
institutions (d.h., state universities and established research centers), provide coor-
dination and stimulus for research in microelectronics at these institutions and
serve as a linkage and information channel between the institutions and interest-
ed industry.”20 To achieve this goal, the original MCNC Plan proposed the creation
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of two separate microelectronics facilities. The first would concentrate on micro-
electronics research and would be located at North Carolina State University; Die
zweite, to be sited 20 miles away at Research Triangle Park, would focus on com-
plementary, downstream activities pertaining to semiconductor design and fabri-
cation. Jedoch, the expedited planning process resulted in a dramatically differ-
ent organizational structure—one that would ultimately be perceived as a threat to
some of the state’s universities.
In early 1981, MCNC board members—and especially the board’s chairman,
George Herbert—proposed an alternative model that would instead fold all micro-
electronics functions, from research to fabrication, into one off-campus facility
located in Research Triangle Park. This recommendation reflected board members’
concerns that building and staffing two separate facilities was neither cost effective
nor a good model for supporting innovation activities. Speziell, several MCNC
board members shared the belief that consolidating the research and fabrication
functions into one location would expedite the translation into working proto-
types and thus lead to more rapid advances in semiconductor development—
which was viewed as essential, given increased competition between U.S. Und
Japanese semiconductor interests.21 Moreover, MCNC board members were con-
cerned that concentrating research activities at only one university campus could
alienate other universities in the state and undermine later efforts to engage a
wider university constituency. A letter to Governor Hunt from MCNC board
chairman George Herbert outlined many of these concerns. He explained that
“some of the earlier decisions were based on flawed concepts. A new set of deci-
sions is necessary if we are to move forward.”22
The revised model presented by the MCNC board included a single, large-scale
facility to support a variety of semiconductor research, Design, and production-
related projects. The center, to be located in Research Triangle Park, wäre
available for use by university faculty and students throughout the state. In ADDI-
tion, the goal was to help forge deep connections between university researchers
and private-sector actors by encouraging industry participation.
Despite the strong justification for this change, tensions arose among univer-
sity faculty and administrators who had been excluded from this discussion and
the decision-making process. Failure to resolve this initial tension soon led to a
perceived lack of transparency and openness on the part of MCNC. Interviews
with stakeholders reflect a high level of distrust in the early years of MCNC. Viele
faculty members admitted being suspicious of MCNC executives throughout the
1980S, viewing them as more interested in supporting industrial recruitment than
enhancing research. Other university researchers expressed concern that MCNC—
in needing to build and maintain a high-profile, expensive in-house research pro-
gram—siphoned off scarce public resources that would have otherwise gone to
support university development. As one computer science professor explained it,
“MCNC staff just took the research outputs without consulting university
researchers.”23
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While there is evidence to suggest that MCNC’s presence actually helped to
elevate the national status of university microelectronics research in North
Carolina, MCNC leaders’ unwillingness to resolve early sources of conflict set the
tone for tense university-MCNC relations throughout the 1980s and early 1990s.
Eventually this tension would affect relationships with the state legislature, welche
closely aligned itself with university interests. In fact, when faced with growing
criticism from state legislators in the late 1980s, MCNC president Don Bielman
turned to an established policy insider for advice. The response he received: “Well,
you know, Herr. Bielman, in North Carolina you’d better not mess with the univer-
sities.”24 Unfortunately, by the time this message was internalized by MCNC man-
agement, little could be done to mend these broken institutional ties.
A Conduit for Research
The significance of mounting tensions between MCNC and the universities was
apparent during the biotechnology legislative review in 1983-1984, and it greatly
influenced the structure and strategy of the Biotech Center. It became clear to the
study commission that “there were many university people that were not comfort-
able with [the microelectronics] model.”25 Top-ranking university officials helped
to reinforce the message that they wanted a very different kind of model for
biotechnology. Gerry Hancock recalled:
I remember in one of our study commission sessions that [UNC system
president] DR. Bill Friday put it squarely on the table. Er sagte, “Gerry this
all sounds very promising. I think I understand where you are headed
Hier, but I just want to make sure I am clear about something. Do I cor-
rectly understand that this will not be a research institution?” And
because there had been preliminary discussions about this, I was fortu-
nately ready for his question and I said, “Yes sir, absolutely. One of the
things that distinguishes or differentiates this from other models is that
this is not a laboratory. This is not a research institution. It will not be a
place where we hire scientists for research.”
Ich sagte, “You might see the odd PhD wandering around because the cen-
ter will need people that understand science. But this will not be a
research institution. Stattdessen, it will be a leadership and catalytic institu-
tion. It will work with universities and it will fund research at the univer-
sities. It will work with businesses. It will work with financial institutions
and entrepreneurs and it will try and cause things to happen.”
And I also said this: “It is the view of this committee that improving uni-
versity-based research in biotechnology is critically important. That will
be the foundation of our economic success.”26
During these deliberations, it became clear that the best strategy for the North
Carolina Biotech Center was to follow the Board of Science and Technology’s rec-
ommendation and act as a conduit between academic research and the private sec-
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Restructuring for Resilience
tor. The state had strong expertise in chemistry and medicine; Jedoch, molecular
biology and DNA capabilities needed to be augmented. As a result, the Biotech
Center’s early initiatives included a grants program for university research activi-
ties and one of the country’s first eminent scholars recruitment programs, welche
provided matching funds for new faculty hires at multiple North Carolina univer-
sities. One of the early recruits supported by the Biotech Center was Oliver
Smithies, Die 2007 Nobel laureate in medicine. Early on, the Biotech Center also
provided financial and institutional assistance to develop university technology-
transfer programs.
Organizational Governance
Partly influenced by MCNC’s troubles, the legislative commission also designed
the Biotech Center’s board to be broadly representative. In contrast to the 11-
member governing board of MCNC, Die 1984 Biotech Center’s Articles of
Incorporation specified having 23 board members, with representation detailed to
a specific sector and appointment authority broadly shared. Zum Beispiel, Die
board reserved nine seats for three representatives from animal husbandry, plant
agriculture (at least one from forestry), and the marine trades. Zusätzlich, zwei
representatives were to be appointed from the state’s pharmaceutical industry or
medical establishments, with the dean of the medical school of Wake Forest
University also listed. The board also included five university leaders who repre-
sented the UNC system, UNC-Chapel Hill, North Carolina State, East Carolina
Universität, and Duke University. In contrast to MCNC, the Biotech Center’s
authority to appoint board members was shared equally among the governor, Die
lieutenant governor, and the speaker of the state house of representatives.
While the sheer size of the Biotech Center board reflected its original need to
build consensus, it also served to increase transparency and guaranteed a diversity
of opinions to enhance decision-making. Gerry Hancock explained:
Board design 101 typically means you don’t want any group to dominate.
You want everyone to feel fully and fairly engaged in the mission. Wir
needed the long-term support of the universities, the business communi-
ty, the scientific community, the legislature, the governor, and the people
of North Carolina. We needed that support initially and longterm, Und
that thinking was embedded in the design of the board of directors. ICH
believe it still is.27
The Biotech Center board eventually increased to 36 members, including represen-
tatives from other interested constituencies.
MCNC’s organizational structure, by contract, resulted in a concentration of
power. MCNC had ten external board members, including five university chancel-
lors and presidents and the chairman of the Research Triangle Institute. Der
remaining four seats were filled by North Carolina “citizens” appointed by the gov-
ernor. Noch, unlike the Biotech Center, there was no explicit requirement for sector,
geographic, or topic representation. Most of the governor’s appointees were exec-
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Maryann P. Feldman and Nichola J. Lowe
utives from banks, utilities, and real estate companies—parties potentially more
concerned with immediate economic growth than with enhancing long-term tech-
nology capacity.
MCNC did form several advisory committees to help formulate a strategy. Der
most influential was the Industry Executive Committee, made up almost entirely
of executives from microelectronics-related companies in the state. Trotzdem, eher
than helping to diversify strategies, their strong influence acted to reinforce
MCNC’s industrial orientation. One example of this is a former MCNC executive
who acknowledged that in order to encourage more companies to partner with
MCNC, “we had to portray ourselves as different from the universities.”28 This
meant that university researchers were often unaware of MCNC’s industry-orient-
ed research program. As one electrical engineering professor involved in early
microelectronics planning efforts recalled, once MCNC’s research program was
under way, “campus faculty never heard the details of their science.”29
Advisory channels to the Biotech Center were vastly different and reflected the
deliberation and consensus-building that birthed the Biotech Center in 1984. In
helping to establish the Biotech Center, legislative study commission members—
some of whom would go on to become board members of the center—strongly
encouraged developing a strategy through committee or task force review. Viel
like the legislative study commission, the goal was to bring various outside per-
spectives to the table for consideration when developing strategies and priorities.
This practice of committee review continues today. One staff member from the
Biotech Center recently described the steps taken to launch a new initiative involv-
ing applied agricultural biotechnology. As she put it, “We did what we always do
when considering a new issue; we first created a task force to study the issue.”
Communication Strategy
The two organizations also related differently to the general public. Building on the
legislative study commission, executives from the Biotech Center maintained a
strong commitment to citizen engagement and outreach. Dabei, the ultimate
goal was to make the technology accessible to and easily understood by the citizen-
ry of North Carolina. An illustration of this commitment to public outreach was
that the Biotech Center’s third employee was an educational expert with a liberal
arts degree, whose primary responsibility was to translate biotechnology into
accessible language for non-experts. One example of his early work is captured in
the cover image from the 1986 Biotech Center annual report. This image portrays
a group of scientists looking out onto a forest and a herd of pigs—a symbolic
image meant to illustrate the application of biotechnology to forestry and pig
farming, two important industries in North Carolina in the 1980s. The editors
might have easily chosen a science-oriented cover with the then-popular double
helix or a large representation of a molecule. The message they conveyed with their
chosen image was clear: that the biotech industry was important to North Carolina
and a resource for upgrading traditional industry. Related to this is that the writ-
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ten contents of early annual reports were designed to be broadly accessible and
informative.
Im Gegensatz, the cover of the Microelectronics Center’s annual report from the
same year—which depicted a large and looming institutional building—is repre-
sentative of the report’s written content. The text was a dense description of micro-
electronics research activities that was incomprehensible to all but the most
informed expert. MCNC’s annual reports were not designed to educate the public
or to build broad-based public support. Eher, they tended to feature the scientif-
ic research activities and publication record of affiliated MCNC scientists. This dif-
ference is perhaps best captured by a quote from a state legislator at a public hear-
ing: “I understand wood chips,” a direct reference to the Biotech Center’s discus-
sion of applying technology to the state’s forestry industry, “but I don’t get
microchips.”30
ORGANIZATIONAL DESIGN DICTATES ADAPTABILITY
Putting this history together, we begin to see the influence of organizational design
on each organization’s problem-solving abilities. Both centers would face a series
of organizational crises and challenges during the 1980s and 1990s. For MCNC,
this included a 1988 budget audit by the state legislature and a protracted lawsuit
involving a major North Carolina newspaper over the Microelectronics Center’s
failure to publicly disclose budget information. For the Biotech Center, it included
the threat of deep budget cuts that reflected a shift in state politics in the mid-
1980S, when the organization was in its formative years, as well as a prolonged
leadership crisis in the mid-to-late 1980s that threatened the center’s survival.
The Biotech Center weathered these and later challenges better than MCNC.
Most notably, its organizational design facilitated the quick identification of
potential conflicts and encouraged adaptive solutions. The center institutionalized
deliberative and reflective processes that resulted in effective problem-solving and
Widerstandsfähigkeit. It also had established goodwill with the public, the legislature, und das
universities. Once in trouble, Biotech Center leaders were able to call on numerous
allies representing broad segments of society to defend the center’s continued exis-
tence and ongoing state support. In the late 1980s, the center also brought in new
leadership that reinforced its commitment to community engagement and con-
sensus-building and provided the strong management needed to advance their
economic development mission and impact.
Im Gegensatz, executives at MCNC tended to ignore or dismiss signs of deepen-
ing crisis, continued to alienate important institutional allies that could have
helped them salvage their reputation, and ultimately failed to make their technol-
ogy contribution clear and well understood by the general public—especially those
elected to state government. The lack of public understanding about MCNC was
perhaps more problematic, due to the state’s initial investment of $24.4 Million
and the large annual operating budget that became an easy target for adversaries.
It is not surprising, Dann, that with a deepening financial and organizational crisis
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Maryann P. Feldman and Nichola J. Lowe
at hand, the state government decided in 1995 to end its financial commitment to
MCNC. Unable to sustain itself, MCNC was forced to sell off most of its assets,
including its research facilities and equipment, and significantly trim down its
Personal. While the hollowing out of MCNC in the mid-1990s did ultimately benefit
the state by releasing top-quality researchers into the local labor market—a talent
pool that was quickly absorbed by industry and by universities in North
Carolina—it still represented a major policy loss for the state. A shadow of its for-
mer self, MCNC, now a privately funded nonprofit that specializes in rural broad-
band, has limited economic and industrial influence in North Carolina. Today it
functions as little more than a specialized utility.
In comparison, the North Carolina Biotechnology Center is considered one of
the most influential state-funded technology centers in the United States today.
The Biotech Center’s continued support of recombinant DNA research and devel-
opment activities has helped catapult North Carolina to third place nationally for
biotechnology establishments, behind Massachusetts and California, by-passing
significant competitors along the way, including Maryland.31 Additionally, its
strong policy influence and ability to represent various needs and interests has
ensured that the benefits of this technology development continue to be broadly
dispersed. One important example is that the Biotech Center has played a central
role in building the state’s biomanufacturing industry by helping to nurture and
recruit over 40 large-scale biopharmaceutical manufacturers to the state. As part of
this effort, it has also partnered with the state’s community college system to devel-
op and continuously update vocational training programs. Dabei, the Biotech
Center and its institutional partners have helped to lower the biotechnology career
ladder to less educated job seekers in the state, especially those displaced from tra-
ditional manufacturing industries, and in the process the center has taken a
national lead in promoting a more socially inclusive knowledge economy.32
DEVIL IN THE DETAILS
Many places consider forming quasi-public organizations as a vehicle for technol-
ogy-based economic development. More flexible than state agencies, quasi-public
organizations have the ability to focus on specific targeted activities, such as assist-
ing start-up companies or developing a specific technology area or specialization.
Quasi-public entities are also buffered from the vagaries of political election cycles
and thus may be better suited for adapting policies over a longer time horizon.
This is especially important for new, rapidly changing technology areas that may
require greater policy patience and “improvisation.”
The experience of two sector-specific, technology-based economic develop-
ment organizations being initiated in the same state at about the same time offers
insights into the importance of organizational design. Tisch 1 provides a summa-
ry of key design elements. The differences in the mission statements are subtle yet
profound: while both mention economic development as a top priority, MCNC
sought to “foster advanced programs in microelectronics and supercomputing in
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Tisch 1. Summary of key design elements
support of economic development,” whereas the Biotechnology Center had a more
direct statement about “creating economic development through the support of
biotechnology research”—its catalytic role being clear from the start.
Some individuals with a close working knowledge of these two organizations
have attributed the demise of MCNC to poor technology choices—in other words,
by initially prioritizing semiconductor research rather than other aspects of micro-
electronics and by investing heavily in a soon-to-be outdated supercomputer, Die
Microelectronics Center essentially bet on the wrong technologies. Locking in to a
specific technology is risky and private companies do make wrong technology
choices, but this explanation has its limits and ignores the influential role that
organizational design can play in guiding ongoing modifications in technology
development and targeting. After all, numerous organizations were created at this
time that initially prioritized semiconductor research, including well-known
examples like Sematech and Micron Technologies. They proved capable of moving
beyond their initial narrow technology focus and remained key players in micro-
electronics industry development. MCNC, by investing heavily in its own in-house
technology development, took on much greater organizational risk than the
Biotech Center and also required much larger infusions of capital to maintain and
modify those technology investments.
The size and composition of the two organizations’ governing boards was per-
haps a key factor in their outcomes. MCNC had a small board of 16 members, 11
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Maryann P. Feldman and Nichola J. Lowe
of them voting members. The governor appointed 7 out of the 11 voting mem-
bers—that is, the majority. The other four members served as a result of their posi-
tions as chancellors in the state, representing both public and private universities.
The choice of chancellors, while certainly prestigious, did not produce active board
members who had adequate time and expertise in microelectronics. Im Gegensatz,
the Biotech Center started with 32 members and grew to 36. The composition of
this board not only allocated political oversight but also guaranteed broad repre-
sentation and diverse opinions. Board meetings were lively and engaged; topics
were debated and decisions were postponed until a clear consensus was achieved.
While MCNC benefited from significant initial funding, an outcome most
organizations would favor, the Biotech Center took a slower, more incremental
Weg. In essence, the large-scale activities undertaken by MCNC required a much
more flexible organizational model that would have allowed those technology
choices and any subsequent changes to be accessible, widely understood, and more
broadly supported. By functioning instead as a monolithic and opaque technolo-
gy fortress, MCNC contributed not just to it’s own technology obsolescence but,
more importantly, to it’s organizational demise.
REFLECTIVE CONCLUSIONS: REGIONAL IMPROVISATION
It is commonly accepted that regional innovative activities are self-organizing and
that ecosystems develop through the actions of institutions and entrepreneurs.
Government’s role in helping create clusters is more controversial, as many public
investments have not yielded the desired results. Yet the ability to create new
opportunities and leverage existing resources is certainly the intention of many
state economic development efforts, which have only intensified with the current
emphasis on cluster initiatives as a growth strategy and the need for new growth
opportunities in this recent economic downturn.
In this case study, we observe that the state of North Carolina created a quasi-
public entity that was able to catalyze a local industry cluster, in this case biotech-
nology. Although it started with no discernable advantage and was not a likely
location for the industry, the state currently has a large concentration of biotech
Firmen. Building up slowly and studying the potential of the new early stage
technology provided an opportunity to achieve public consensus about the poten-
tial and needs of the developing industry. Telling the full story of the development
of the industry would require more time, but our claim is that good organization-
al design allowed for this successful implementation and achievement of the eco-
nomic development goal.
Though they started from the same analysis and set of recommendations and
were implemented in the same state, the Microelectronics Center of North
Carolina and the Biotechnology Center of North Carolina evolved along different
trajectories. While the concept of dedicated, sector-specified technology develop-
ment agencies was appropriate, this case study reveals several lessons about orga-
nizational design, the importance of both understanding and adapting to local
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Restructuring for Resilience
contexts, and the need for transparency, community-building efforts, and inclu-
siveness. The Biotech Center has continued to expand and flourish, and the life sci-
ences industry is strong in the region. While it would be difficult to pronounce
MCNC a failure, in that its many investments have proven important to the state
and it helped to establish North Carolina as a site for the industry, we are left to
speculate how the microelectronics and information and telecommunications sec-
tor might have progressed with stronger state advocacy and shared resources. Der
fact that MCNC’s facilities and assets were sold, the research group dismantled,
and its mission changed to the provision of statewide broadband access suggests
that the original vision of technology leadership has been compromised. Der
counter-factual example of how well the state’s microelectronics industry would be
doing if MCNC had continued to be strong and to advocate for innovation and
entrepreneurship is an open topic.
When a local economic development crisis occurs, the tendency is to act quick-
ly and decisively. A quasi-governmental entity provides a means for a quick
response that is desirable because it can experiment and be evaluated on its accom-
plishments. The first step in the formation of a quasi-public economic develop-
ment entity is often to build a new facility—a visible commitment to the new enti-
ty and its mission. This is unfortunate, as it ties up resources that might be used
more constructively on other investments. A physical structure not only raises
expectations about what the agency can accomplish, it also creates a sense that the
activity takes place there rather than in the community. The ribbon-cutting excite-
ment of a new building, while certainly a notable event, can ultimately distract
from an agency’s core mission.
There is no shortage of advice for policy-makers about how to engage in tech-
nology-based economic development. Most of this advice is at odds with the
premise of self-organization and adaptability that underlies cluster development.
Economic developers are told to undertake big, decisive investments, but perhaps
the lesson from this example and the best advice for policy-makers is to follow a
strategy of regional improvisation, continuous adaptation, and appreciation of
Kontext. From this limited example, the best economic development strategy may
be to become educated about an industry by following a process that is inclusive,
transparent, and open to criticism and debate. In this way, the Biotechnology
Center of North Carolina demonstrates that it is possible to build consensus
around a vision for an industry, and to implement that vision.
Danksagungen
We wish to thank Andrew Guinn for valuable research assistance. We also thank
participants of the UNC Global Research Institute working group for their insight-
ful comments. We are especially grateful to the public officials, practitioners, Und
scholars who shared their histories and experiences with us for this project. Der
National Science Foundation supported this research under Project SciSIP
0947814. The authors are listed alphabetically.
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Maryann P. Feldman and Nichola J. Lowe
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