For more than a decade, one of the hottest trends in economic development has been pursuing biotechnology. Cities and states around the nation have made considerable investments in biotech research, ranging from California’s voter-approved $3 billion research program, to smaller efforts in cities around the country, including Indianapolis, St. Louis, and Phoenix.
One of the states that made the biggest bets on biotech was Florida, which in 2003 committed state funds to luring the Scripps Research Institute to building a new campus in Palm Beach County. The Scripps deal served as a template for subsidies to other life sciences research institutions opening similar research labs in other Florida cities. The total cost of the program is estimated to reach more than $800 million.
In a new article, Reuters has questioned whether Florida has gotten its money’s worth for the investments it has made in biotechnology. The biotech investments were originally sold based on the promise that they would lead to a flourishing new industry employing more than 44,000 people. But a decade later, there’s little evidence of progress.
We’ve long followed the biotechnology industry. In 2002, my colleague Heike Mayer and I undertook an extensive study of the clustering of the US biotech industry, published by the Brookings Institution–Signs of LIfe–which showed that the industry’s economic impact was tightly concentrated in just a few leading centers around the nation. While life sciences research was becoming slightly more widespread as more cities competed for National Institutes of Health (NIH) funding, all of the measures of commercialization–new firm startups, venture capital investment, and privately funded research and development partnerships– were becoming more concentrated in a few leading cities. Our analysis showed that three biotech leaders (Boston, San Francisco, and San Diego) had decisive competitive advantages in starting and growing new biotech firms that other cities would find difficult, if not impossible, to overcome.
The succeeding decade has confirmed our original analysis. The three leading centers are even more dominant today that they were a decade ago. In 2000-01, Boston, San Francisco, and San Diego accounted for about 54 percent of venture capital invested in biotechnology. In 2010-12, the three metros accounted for 60 percent of biotech venture capital. Data on venture capital flows come from the PriceWaterhouseCoopers Moneytree survey.
There’s probably no better indicator of the growth of biotechnology commercialization than the flow of venture capital funds to new startup companies. By this measure, the state of Florida’s position is essentially no different than it was a decade ago. While venture capital funding fluctuates from quarter to quarter, Florida’s share of national biotechnology venture capital funding is still less than 1 percent–in the same range that it was before its subsidies to Scripps and other research laboratories.
As it turns out, doing biomedical research doesn’t automatically lead to new companies and job creation. The hard and costly work of turning promising research ideas into marketable products happens in only a few places. The challenge in growing a commercial biotechnology hub is in overcoming the overwhelming competitive advantages that established clusters have in being places that have the financial, human, and institutional resources to succeed in this complicated and risky business. Despite the time and expense that Florida and other states have invested in biotech research, there’s almost no evidence that anyone has made anything more than marginal changes to the landscape of the U.S. biotech industry.