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How Do Ideas Get Into the Air?

Governance and the Construction of Place-specific

Innovative Advantage

Maryann Feldman & Nichola Lowe

University of North Carolina, Chapel Hill

Introduction

Policy makers and planners seek place-specific advantage to capture the benefits of

innovative industries. The conventional wisdom argues that a favorable business climate is

needed to secure future economic prosperity. However, often a favorable business climate is

construed as low taxes, a docile labor force, and lax regulation. The results from this strategy

have often been disappointing as when places compete on these dimensions they continue to try

to outbid one another, leading to a reduced tax base, declining wages, deteriorating work

conditions, and environmental degradation -- a race to the bottom rather than an economic

development strategy Moreover, this is counterproductive as technology-intensive industries

rely on amenities, and an engaged, skilled and creative workforce and high quality of life. Yet,

there is little work that considers the effect of regulation or the larger issue of how to create the

conditions conducive to establishing an appropriate business climate that provides guarantees for

citizens.

In this Chapter we draw on prior work (Feldman and Lowe, 2008 and 2011; Lowe and

Feldman, 2008), which examines the role of governance in creating place-specific advantages.

We define governance as the interactive process of building consensus to solve a collective

problem. Thus, governance creates social norms and institutions that may responsibly advance

place-specific advantage. Through this process, conditions are created that generate interest and

expertise around a local industry, putting the ‘secrets’ of the industry into the air of public

conversation.

While most innovation is incremental, the most interesting type of innovation, which

holds the greatest promise for the development of new industries, is breakthrough innovation that

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creates something new, previously unrealized and risky. When new technologies are first

discovered, it is not clear whether they even have any potential to reach commercial value, much

less become a platform for the development of a new industry. Only a few people – insiders

familiar with the technology, who realize the limitations of an existing technology – may

recognize the importance of a new idea. Taking innovation forward requires a process of

building consensus about the technology’s potential, how it may be used, and how to move from

simply having an idea to realizing the idea’s potential as a new industry. Moreover these

activities are not the purview of the lone inventor but require the involvement of larger

communities and the building of institutions that come together to overlap, intersect and interact

as an enabling ecosystem. These elements are the essence of governance.

Conventional wisdom advocates that scientific resources and know-how matter for place-

specific industrial development and that innovative activities in a region are self-organizing and

that ecosystems create the conditions for innovation. We argue that ecosystems are themselves

the result of a temporal governance process that reflects the social dynamics within a place.

Rather than purely being a technological issue, innovation is socially defined and constructed.

This implies that innovation may not only shape a place but rather is shaped by the conversations

within a place. To be successfully anchored in a location requires building a community of

practice around the idea, agreement on the use of critical resources and institutions that enable

collective problem solving. Vibrant regional economies are not simply the result of luck or

randomness: our thesis is that regional advantage is socially constructed via public conversation

and adaptive governance processes over time.

In this chapter we draw on our prior work to synthesize the role of local improvisation

and governance. The first case we examine is the Cambridge biosafety ordinance (Feldman and

Lowe 2008). The active debate and strong public engagement created a conversational space

that was important to increasing local understanding of the industry. This example is a good

contrast to other biosafety ordinances adopted in other places in the U.S., including the city of

Berkeley (Lowe and Feldman 2008). The evidence suggests that simply adopting an ordinance,

as in the case of Berkeley, is not sufficient to assist industrial development; municipalities that

engage the public, including critics, during the policy development process are more likely to

succeed in passing a locally supported and well-understood policy. Our final case examines

organizational design and considers the implementation of two initiatives adopted in the same

Comment [MF1]: Who says so? We do!

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place at roughly the same time. This case considers how organizational design and policy

implementation affect the ability of organizations to effectively guide long-term economic

development plans (Feldman and Lowe, 2011).

Cambridge Case: An Unlikely Advantage for the Biotech Industry

Cambridge, Massachusetts has the largest concentration of biotechnology firms in the

world. This is rather ironic since during the late 1970s there was great community resistance to

the biotechnology industry. While private firms reap the rewards of new and emerging

technologies in the biotechnology field, the local communities where experimental research

activities occur are exposed to various risks associated with such research. In an effort to ensure

public safety, Cambridge instituted the earliest - and one of the most onerous - biosafety

ordinances. One could easily assume the Cambridge ordinance was planned and easily

implemented. Yet, as detailed in Feldman and Lowe (2008), and retold here, the ordinance was

instead the result of a heated and contentious public debate that balanced concerns over public

safety with the need for scientific progress.

Background of Controversy over Recombinant DNA Research

The modern commercial biotechnology or life sciences industry emerged when scientific

discoveries were made in “recombinant DNA” (rDNA), which was also referred to as “genetic

engineering”. These early terms that described what is now known as biotechnology, conjured up

a sinister and technical image that further provoked the public’s concern about the safety of those

living near scientific laboratories conducting such research. The early geographic epicenter of

research and commercial activity was near the San Francisco Bay area (Feldman and Yoon

2012). However, Cambridge and the larger Boston area was one of the first places where the

research diffused geographically (Feldman et al. 2015 ).

As genetic engineering research became more prevalent in the early 1970s, scientists and

the public grew concerned about the potential health and safety risks of these new, unproven

technologies. In particular, there was concern about the repercussions of accidental release of, or

exposure to, rDNA. Professor Paul Berg and graduate student Janet Mertz, both from Stanford

University, were at the forefront of genetic engineering research. Presentations on their research

caused scientists in the field to become concerned about the risk of such research since they

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believed this was radically different from existing technologies. In response to these concerns,

Berg organized two conferences (the “Asilomar conferences” in 1973 and 1975) which provided

a space to discuss the concerns about, and risks of, this biomedical research. Additionally, Berg

submitted a public statement (referred to as “the Berg letter”) to the National Academy of

Sciences which was later published in the journals Nature (July 19, 1974) and Science (July 26,

1974). The statement asked scientists to defer on specific types of biomedical experiments until

the potential hazards were better understood (Berg, et al., 1974). During the second conference a

panel of expert scientists advised the National Institutes of Health (NIH) as they worked to

develop federal guidelines for rDNA research. These guidelines were issued in June of 1976 and

covered activities of all research laboratories funded by NIH (Frederickson, 1976).

Developing the First Municipal-level Biosafety Ordinance

In 1976, Harvard University wanted to retrofit a laboratory to meet biosafety level 3

standards in order to support rDNA research. The lab was located in the city of Cambridge,

which had jurisdiction over approval of building permits. This rather mundane administrative

function created the opportunity for local government to initiate a conversational space for public

debate. The local community held a common interest in this laboratory and the research

conducted within it since any adverse outcomes had the potential to negatively impact those

within close geographic proximity.

When the new facility was announced at an internal meeting on 14 April 1976, Harvard

biologists raised several concerns and criticisms. These responses caused Harvard’s Committee

on Research Policy to hold a university-wide meeting on 28 May 1976. Harvard faculty member,

Ruth Hubbard Wald, expanded the discussion to people of diverse backgrounds, most notably

Cambridge City councilperson Barbara Ackerman. Reporters also attended the meeting and later

published an article in the Boston Phoenix titled, “Biohazards at Harvard: Scientists will create

new life forms – but how safe will they be?” which helped attract additional public attention to

the issue, including the attention of Cambridge Mayor Al Vellucci. It is also worth noting that at

the time of this building permit application, the thriller film Andromeda Strain was popular and

further sparked the community’s concern about the potential adverse effects of genetic

engineering and cloning.

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At the insistence of Mayor Vellucci, the Cambridge City Council voted unanimously to

hold several public hearings to gather citizens’ opinions on the laboratory and research, and to

provide an opportunity for the local community to better understand Harvard’s research plans.

There were serious concerns about potential environmental and health issues, particularly

because of the recent attention to this issue at the national-level as the NIH worked to develop

federal guidelines for such research. This was the first instance of concern about a local facility.

Scientists at the university, as residents of the city of Cambridge, were equally concerned as they

too did not want to be exposed to health or safety risks.

After two public hearings in which the university presented its research plans, the city

council passed a resolution to establish the Cambridge Experimentation Review Board (CERB),

which was charged with providing recommendation to the city council . The CERB was

comprised of nine members who were Cambridge residents intentionally selected to represent

diverse interests in the community and who did not have backgrounds related to biotechnology.

The board approved by the city council consisted of a nun, a nurse, a community activist, an

engineer, a physician, two former city councilors, and a professor of environmental policy and

planning. Through over 100 hours of meetings and review members of the board learned about

the technology, both its scientific potential as well as the need for high quality laboratory

procedures and public safeguards.

Before the CERB’s first meeting, Cambridge held a public science fair in Harvard Yard

in the summer of 1976 to improve citizens’ understanding of molecular biology. Similar to the

well-known model of a high school science fair, researchers had posters and props. They

presented their research and discussed their work with citizens. Though critics initially mocked

the event as reducing Cambridge scientists to “peddlers selling their wares in the street trying to

get people to buy their project – DNA” (Vellucci, 1977), participating scientists themselves

enjoyed this unique opportunity to speak openly with the public about their work.

One of the CERB’s first actions was to request a 3-month moratorium on rDNA research

to deliberate the issue, though they later requested an additional 3 months extension to the

moratorium. As a result, all rDNA research in Cambridge was stopped for a total 6 months – a

period that created great anxiety for Harvard faculty members worried about their standing in the

research community. During the review period, CERB actively spent over 100 hours meeting

and interviewing research faculty members – both opponent and proponent of this emerging

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technology. They also solicited advice from scientists at the National Institutes of Health and

engaged in developing rDNA safety guidelines.

An open public scientific debate by CERB was held in November 1976 that involved two

Nobel Prize winners in biology who presented opposing views on this topic. This five-hour long

debate carried out “a type of mock courtroom affair” with advocates from both sides of the

controversy arguing their views against one another (CERB 1976/1977, pp. 10-11). CERB

members were able to hear responses to some of the most important questions on biotechnology

from expert scientists on both side of the issue.

On 5 January 1977, CERB presented the final recommendations to the city council.

Based on the CERB’s recommendations, the Cambridge City Council agreed on enacting the

nation’s first municipal-level biosafety ordinance on 7 February 1977. In spite of the fact that the

ordinance still banned biosafety level 4, any rDNA research at or below biosafety level 3 was

permitted after the passage of the ordinance. In addition to this, any research carried out within

the Cambridge city limit would be under local regulatory oversight. To do research involving

rDNA, the ordinance required scientists to follow guidelines, including: scientists’ submission of

an application for external review to five members of the Cambridge Biohazards Committee

(CBC); participation in a public hearing; agreeing to regular site inspections conducted by local

public health officials; and, if necessary, finishing a pre-approved biosafety training course.

Failure to comply with these guidelines could result in the loss of permission for carrying out

rDNA research. In some cases, a laboratory could be shut down.

Some Harvard faculty initially regarded the proposed ordinance as a potential barrier to

their research . However, once it was well established it became a positive signal to many

research scientists, entrepreneurs and investors who wished to conduct or support rDNA research

and commercialization. Biogen, the first biotechnology company to locate in Cambridge, cited

the ordinance as a reasons Cambridge was their first choice for their research center (Biogen,

1980). Since Cambridge had already addressed the citizens’ concern about biosafety and reached

a solution that appeased those on both sides of the issue, companies like Biogen believed the

ordinance could play a role in mitigating social conflicts among citizens and scientists, and in

reducing any potential risks from research. The city’s ordinance clearly outlined a biosafety

research regulatory process that demonstrated its “more mature understanding of the field”

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(Lipson, 2003) which appealed to Biogen’s financiers who were greatly interested in avoiding

negative publicity in response to this new field of biotechnology.

Through the open and transparent process of enacting the ordinance, citizens gained a

better understanding of and appreciation for rDNA research. In turn, this increased public

knowledge may have helped make it easier to induce citizens to engage in activities related to

rDNA research, such as pretesting of new products or capability-building for research and

innovation. As research was actively conducted, and entrepreneurs were engaged in finding a

new source of communalization, the city could become more innovative. Innovation can occur

anywhere, but it is these social processes that play a key role in helping a community take

advantage of and anchor innovative activities.

While CERB was disbanded after the two year process, it continued to shape policy

implementation as members were invited to join national level discussions around biosafety

initiated by the National Institutes of Health. Equally, the CERB model of citizen engagement

informed the permitting process in Cambridge which required bioscience firms to have at least

one non-scientific Cambridge resident on their internal biosafety review board.

How Ideas Get Into the Air: Conversations about New Technologies

In the nascent stage, technology is often uncertain, so there is considerable risk in terms

of whether the technology will create new business opportunities. Of course, entrepreneurs can

play a critical role in discovering technology and contributing to building regional capabilities

(Feldman, 2001). However, our argument is that as more individuals - including entrepreneurs,

social agents, government, and everyday citizens - understand technology and become involved

in the process of building capabilities, there will be greater potential for success in the

community. Through a vibrant participatory process, a common language can be developed, so

that the technology and its applications can be better described and better understood. In

addition, based on shared technology terminology, the diverse actors can reinterpret existing

information and more easily explain tacit knowledge (Gertler, 2004; Sabel 2001). In addition,

through public discussion, individuals in the community will be able to find opportunities for

employment and potential investments. A conversational space can be a starting point for

building consensus and community capability around a technology and innovation (Lester and

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Piore, 2004). By creating shared conversational space, research becomes discussed more widely

– creating a type of Marshallian buzz as “the secrets of the industry were in the air.”

It may be easily assumed that shared conversational space occurs among people who are

within the scientific or engineering profession. However, shared conversational space may be

open to anyone in the community. Non-technologists can learn more about the technology if they

find that there is a gap they can help fill, or if they realize the technology could be useful for

their business. Political actors or NGOs can step in the conversation as either technology

advocates or opponents. By participating in the conversation, these people will become a part of

a shared community, closely linking with one another because of common interests and, in turn,

playing a pivotal role in the community and industrial development.

It is important to note, however, that participation in this conversation is not a magical

solution for eliminating all social conflict, in particular in the case of technology related to

environmental or public safety issues. While new technology can offer a great opportunity for

industrial development and innovation in a given region, it can also create safety and security

issues. To mitigate these potential adverse outcomes, government often uses regulation, which is

typically believed to cause unfavorable business climates. Rather than creating a barrier to

potential business owners, however, our argument is that an effective regulatory process actually

induces more people to participate in the conversational space. A participatory process can help

increase understanding about the technology - including its benefits and economic potential - as

well as provide greater belief in the community’s risk mitigation.

New technologies often cause environmental, health, and safety issues that can

immediately affect the communities where the research is conducted. These risks attract public

attention and create pressure for regulation. Traditional views presume that local regulation

negatively affects regional industrial development, arguing that business-friendly climates can be

created through minimal regulation, limited public oversight and low taxes. Unlike the traditional

view, however, our alternative view is that local regulation can in fact bring about outcomes that

are socially and economically desirable for a local community by: allowing for publically open

debate and discussion, sharing information among networks of involved individuals, and thus

promoting understanding of the significance of a new technology. Jurisdictions that compromise

public safety, or public preferences more generally, in response to immediate pressure to create

jobs lose the opportunity for public discussion and debate that educates the public, provides an

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opportunity for compromise and create democratic consensus. Moreover, local regulation may

help establish industry standards, reducing risks and thus making the location attractive to

potential investors, entrepreneurs and venture capitalists.

During the process of public discussion on regulating local industry, citizens and local

officials are made aware of what is required to build the capabilities that support that industry.

Thus, the process of regulating industry may create conversations that have the unintended

consequence of increasing understanding about how to foster a favorable business climate for

these technologies. Rather than deterring entrepreneurs and venture capitalists from establishing

their firms and investing in the location, the public conversation provides an opportunity to share

community identity that enables the location to take off through cluster development.

The Upside of Regulation

The conventional wisdom is that regulations tend to restrict the behavior of economic actors

(North, 1984). For instance, environmental standards, workplace safety rules and medical testing

requirements can be widely regarded as distortions that ‘limit the operation of markets’

(Macgregor et al., 2000, 2). Therefore, regulations should be limited so that market distortions

may be mitigated. On the other hand, some institutional economists have challenged the

traditional view, arguing that all regulation does not seem unfavorable. For instance, the

assignment of property rights facilitates market transactions and bolsters economies (Chang and

Evans, 2005; de Soto, 2000; Hodgson, 2005).

In a nascent stage where technology development is uncertain and thus risky, regulation can

improve legal clarity about liability for adverse events. For instance, interventionist regulations

such as medical testing, research protocol and environmental and safety standards can mitigate

consumer fears and concerns in terms of products and public safety issues around the area, thus

boosting market expansion. Regulations can also catch the attention of entrepreneurs, potentially

providing new business opportunities.

When companies decide to develop new technologies, one of their overriding concerns is

about legitimacy issues as well as investment returns. Since local and state regulators tend to lack

expertise in science and engine engineering, it is not always easy to effectively deal with

companies’ concerns. For this reason, many scholars have advocated national self-regulation

based on peer-review processes (Miller and Conko, 2000; Wright, 2001). However, the view of

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national self-regulation may not clearly handle conflicts between scientific experts and a

community. To be specific, this view ignores the importance of mediating steps that may be

essential to satisfying the needs of technologists and increasing scientific accountability, which a

community strongly demands. Furthermore, residents within a community may not have enough

of a chance to become involved in the technology development process, and are thus little aware

of the potential for innovation; as a result, a top-down approach may increase conflict. In other

words, the community may have a great opportunity for strengthening technological innovation

and regional development once the gap of conflicts between scientific experts and the local

community is bridged.

Legal scholars have focused on the relationship between economic actors and regulation.

They are especially interested in ‘law-in-action’ and in particular ‘extralegal social processes

(that) continuously construct and reconstitute the meaning and impact of legal norms’ (Suchman

and Edelman, 1997, 907) while many scholars have found regulations as one of the means of

restricting behavior of economic actors. Unlike the traditional view of regulation, the socio-legal

approach is focused on the social and political processes that greatly influence agents’ response

to formal legal rules and structures (Suchman and Edelman, 1996). In this regard the primary

thing is not the strength and enforceability of regulatory rules but the degree to which extralegal

social processes draw community consensus (Rodríguez-Pose and Storper, 2006). Therefore

community consensus and responses to regulations greatly depend on how these processes move

forward at a given location and time.

Regulations can also play a critical role in building trust and setting up moral order

within current or emerging markets in a community. Public and private entities are likely to

arrive at consensus regulations when actively engaged in expressing their interests and concerns.

In addition, this process enables the remediation of social tension and conflict due to businesses’

self-regulation, in turn inducing non-market actors to become involved in technological

development and innovation. This simple participatory democracy, with all of its transparency

and accountability, enables society to make good decisions.

It’s Not Simply Regulation: Process towards Consensus Matters

The wrong lesson to take from this case is that local regulation, in and of itself,

facilitates industrial development. Local industry and start-ups may benefit if regulations turn

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uncertainty stemming from emerging technology into calculable risk by providing industry

standards. Yet, it is the process of debating and designing regulation that enables a better

understanding of the potential of the technology. From these conversations, new opportunities

for employment, investments, or new-startups emerge that can play a critical role in regional

development. In this way, the activities of the industry can become more generally discussed

and understood by local citizens, rather than only being understood by a small group of highly-

involved experts.

In 1976, city councilors in Cambridge, MA, and Berkeley, CA, both faced citizens’

concerns about the environmental and health risks of rDNA research. City Council members in

Berkeley, CA, quickly adopted Cambridge’s lead and enacted identical ordinances in late 1977.

However, the act of simply copying the regulation did not yield the expected result. It became

clear that what was most important to the success of the regulation was the process of

community engagement during the establishment of the regulation, and not just the regulation

itself.

Like Cambridge, Berkeley also had great potential for biotechnology innovation and new

firm formation. Berkeley had a top-notch research university, and qualified scientists, and

moreover had ready geographic proximity to Silicon Valley venture capital. But local

government failed to change engage the public and change perception when adopting the

biosafety regulation. In 1982, Leon Wofsy, an immunologist at the University of California at

Berkeley, noted in a public lecture, ‘there has been a striking lack of discussion on the Berkeley

campus about the new world in which biology finds itself” (Wade, 1984, 20). While many

startups and existing firms in Cambridge had embraced the city’s ordinance and used it to justify

their location decisions, the lack of start-up activity in Berkeley suggests that entrepreneurs were

discouraged by the regulation. Cetus Corporation, founded in Berkeley in1971 by Ronald E.

Cape, Peter Farley, and Nobel Laureate Donald A. Glaser, relocated its production facilities to

nearby Emeryville, which did not have an ordinance. Other biotechnology firms located

scattershot throughout the region, without a specific jurisdictional concentration (Feldman and

Yoon 2012).

One could easily assume that these distinct differences in reactions to the regulation may

have stemmed from differing levels of industrial support, or resources, such as financing,

technological know-how and/or qualified labor. By the mid-1970s, however, the universities in

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both Berkeley and Cambridge shared similar biotechnology related research strengths, and also

provided crucial sources of local talent to contribute to the biotechnology industry’s pioneers

(Jong, 2006; Vettel, 2006). Additionally, University of California, Berkeley provided high

quality labor. Well-established venture capital markets were near both Cambridge and Berkeley

and eager to support research and any biotechnology startups (Own-Smith and Powell, 2006).

Given this evidence, Berkeley was also a very attractive location for biotechnology research.

Lowe and Feldman (2008) propose three key differences between Cambridge and

Berkeley. First, institutionalizing a set of procedures and regulation with diverse participants

may need time. Cambridge benefitted from a 4-year lag time between the implementation of the

rDNA research ordinance in 1977 and the local establishment of Biogen, the city’s first biotech

firm, which relocated from Europe. Berkeley, however, did not benefit from such a grace period.

When Biogen was searching for a commercial research site in the USA in 1980, they found

Cambridge. They noted that Cambridge was the first choice because of the proximity to Harvard

and MIT. They also cited the City’s ordinance as a reason for selecting Cambridge over

neighboring municipalities, stating “We are also attracted by the fact that the City (of

Cambridge), as a result of the initial work of the Cambridge Biohazards Committee, has made

the political and scientific decision to permit the use of rDNA techniques within the framework

of the City’s Ordinance and the NIH Guidelines; the City, through the Committee, has had

approximately four years of experience in monitoring such activities; and the City appears

receptive to Biogen Inc.” (Biogen, 1980). When Biogen asked to establish an rDNA research and

development facilities in the City of Cambridge in December 1980, the City reconvened the

CERB to advise them in response to Biogen’s request. According to the recommendation of the

CERB, the city council approved the extension of the original biosafety ordinance to permit

large-scale production processes and commercial uses of rDNA (Lipson, 2001).

Unlike the Cambridge case, Cetus (a medical diagnostics firm originally based in

Berkeley) began taking steps to diversify into biotechnology before the City of Berkeley had

started discussions to develop a local biosafety regulation. In fact, it was Cetus’ initial request to

establish an rDNA laboratory facility in 1977 in the City of Berkeley that first caused city

officials to begin to think about adopting a policy to regulate biotechnology research (Krimsky et

al., 1982). This uncertainty about what the policy would look like and how it would be

implemented may have contributed to Cetus’ negative response.

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Second, the governance difference from legal lines of authority that have long patterned

town-gown relations may have played a critical role. The University of California, Berkeley, as a

public university, remains exempt from most locally enforced zoning and environmental laws.

This pattern, in which public universities are accountable to state agencies and a state-appointed

board of regents, removes them from local oversight. Ironically these laws may contribute to

town-gown conflicts as universities are able to bypass local government, and are not required to

engage with local communities on issues that may require local regulation for non-public entities.

In Cambridge, however, Harvard and MIT - as private institutions - had to deal directly with

local authorities and obtain their permission for all of the following: proposed research activities,

workplace practices, and laboratory siting. This governance required local officials, faculties

with rDNA, and even citizens to engage in - and maintain - an ongoing dialogue about biosafety.

This dialogue, in turn, encouraged most participants (including both university researchers and

local citizens) to better understand the importance of the ordinance and the impact of the

ordinance on university research and the city. Additionally, citizens became better educated

about the biotechnology research and better understood the perspectives and needs of the

scientists. In other words, these events contributed to a “shared conversational space” that helped

people from different backgrounds - citizens, scientists, existing firms, and startups - overcome

initial conflicts of the regulation (Lester and Piore, 2004, 51).

Finally, during this process in Cambridge, conversational coordination by those enforcing

the regulation helped mitigate conflicts. A significantly important difference between Berkeley

and Cambridge is the fact that the City of Cambridge hired biosafety officers to help uphold this

regulation and act as technology translators between the scientists and the public. These officers

were not, however, only acting in the capacity of technology translators. During the process of

technology translation, officers both educated the citizens about the complex emerging

technologies, and communicated the concerns of citizens back to the university scientists in a

clear yet professional manner. This coordination further contributed to the transparency of

university research, and provided a mechanism for public concerns to be effectively relayed back

to university scientists.

In 1977, Harvard and MIT were the first universities in the U.S. to hire biosafety officers.

In addition to the responsibilities described above, the officers were responsible for educating

bench scientists on federal and local biosafety procedures. Also, the officers represented Harvard

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and MIT at monthly meetings of the CBC and answered questions about university safety and

reporting procedures. MIT’s first biosafety officer helped bioscience faculty write and edit

research grants to make sure there was ‘no hidden bio hazardous components in the project’

(Minutes of the CBC, 26 September 1977). Ultimately his work focused on eliminating potential

conflicts with the local regulatory processes and rising scientific awareness of public safety and

concerns.

Interestingly, the City of Berkeley and the University of California, Berkeley, had a

similar mediation process in the early days of the biotech industry. In 1978, the City of Berkeley

hired environmental scientist to help biological research firms and inspect private rDNA

facilities. Due to budgetary constraints, the position was subsequently eliminated. Even though

the individual was subsequently hired by the University of California, Berkeley to continue work

in biosafety and to assist with implementation of federal-level biosafety guidelines, there was no

formal requirement to engage with either city officials or local industry. Thus university officers

were unable to maintain a technology governance conversation.

It is important to note that scientists and local entrepreneurs viewed these government

interventions in dramatically different ways in Berkeley and Cambridge. While the East Bay

biotechnology community perceived adoption of the ordinance as proof of the city’s ‘technology

ignorance’ and ‘political arrogance’, local entities in Cambridge recognized that the ordinance

would play a key role in reducing environmental risks and uncertainty, and ultimately as a source

of regional development that could help bring about innovation in the community. Early support

for the regulation in Cambridge by the first biotechnology start-up, Biogen, had a great and

positive effect on the location decision of local entities. As a result, a sizeable number of

biotechnology firms were established by the mid-1980s, and Cambridge became one of the

Unites States’ most vibrant and innovative life sciences regions. Today the City of Cambridge

has earned a reputation as the home to many biotechnology firms including industry giants

Biogen, Genzyme and Vertex.

The outcomes in Berkeley unfortunately were very different from those in Cambridge.

Cetus Cooperation (one of the first biotechnology firms, originally located in Berkeley), chose to

relocate its rDNA facilities to Emeryville (just outside the purview of the Berkeley ordinance) in

response to the City of Berkeley’s Biosafety regulation. This decision greatly influenced the

perceptions of other biotechnology firms, which opted to locate their research facilities to less

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regulated nearby municipalities. To our knowledge, no other biotechnology firms have ever

located in the City of Berkeley.

As these two cases illustrate, the ways in which existing firms and startups (that can play

key roles in regional development and, in turn, innovation) embrace government intervention can

make a huge difference. In other words, local governments should strongly consider how to shift

any negative perceptions of proposed regulation during the process of establishing and adopting

that regulation. It is important for local businesses to begin to understand the potential benefits of

proposed regulations to their businesses and, more broadly, to their industry within the local

community. If local governments are unsuccessful in shifting cynical views of regulation through

publically open debates, they may lose not only potential startups and existing firms (to

relocation), but also the potential for innovation in their community and the resulting advantages

of such innovation to their local economy.

Organizational Design Matters

A frequent industrial development strategy is to establish a dedicated organization as a

vehicle for technology-based economic development. Often with colorful names like

Pennsylvania’ Ben Franklin Technology Partners, Ohio’s Third Frontier or Connecticut

Innovations these organizations have a specific mission of developing technology clusters

(Feldman and Lowe 2008). These organizations are frequently quasi-public entities, which are a

hybrid organizational type that maintains some of the functions of government, yet have greater

flexibility than state agencies. These organizations focus on some specific targeted activities

such as helping startups or developing a new industry in a region. One advantage is that these

public organizations are less likely to be affected by the vagaries of political election cycles, so

they may be better suited for adapting policies over a longer time horizon. This characteristic of

public organizations is especially important since rapidly changing technology areas may require

greater policy patience and improvisation. From our perspective these organizations can

perpetuate and maintain a shared conversational space. But towards this end, it is not enough to

simply have a dedicated industrial development organization – the design and incentives matter

greatly.

This section derives from the case study of two of the earliest quasi-public organizations:

the North Carolina Biotechnology Center and Microelectronics Center of North Carolina

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(Feldman and Lowe 2012). These organizations were established by the same legislative

mandate, in the same jurisdiction, at the same time, but with radically divergent results. While

the NC Biotechnology Center flourished and continues to provide effective support of

biotechnology research and partnering in the state, the Microelectronics Center of North Carolina

(MCNC), despite many important outcomes, was disbanded, creating a void in representation of

this industry in the state of North Carolina.

Establishing these two entities had a theoretical grounding in balanced growth theory,

which claimed economic development was the outcome of simultaneous investments into more

than one economic sector, in this case both microelectronics and biotechnology. The North

Carolina State Governor of the time, Jim Hunt, was interested in developing policy to support

innovation in science and technology. Hunt believed such research and innovation could improve

economic development in the state. In pursuit of these goals, Hunt elevated the pre-existing

North Carolina Board of Science and Technology (established by legislative act in 1963) from a

committee within the Department of Commerce to a cabinet-level function. Hunt also hired

Quentin Lindsey (a trusted advisor to, and former professor of, Hunt) to help: design new

science-based economic development policies, and direct the North Carolina Board of Science

and Technology.

A 1980 report by the Board, known as the “Lindsay Report”, 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 (North Carolina Board of Science and Technology, 1980: 16-19).” The goal of this

work was to create a vehicle that supported the development and deepening of scientific

infrastructure in the state with the ultimate objective being high wage employment opportunities

for the state’s residents.

In the early 1980s, microelectronics was an established and fast-growing technology

industry while the prospects for biotechnology were less certain. Microelectronics firms were

expanding and seeking new locations; there was very strong national support for this field due, in

part, to concerns about increasing competition in the technology field from Japan. There was

strong support for microelectronics research creating opportunities for entrepreneurs;

additionally, these microelectronic firms were able to provide high-wage jobs. As stated by one

17

technology expert, microelectronics were perceived as the “highest of high technology because

the underlying technology is changing more rapidly than in other high-technology industries”

(Rodgers, 1986). For these reasons, microelectronics seemed to be a fairly strong and secure

field in which to invest, while pursing technology-based economic development.

In contrast, there were only a handful of dedicated biotechnology establishments in the

United States (e.g., Genentech, Biogen, Amgen, Cetus). These were small companies that were

not in a position to move away from their university-anchored research bases in Northern

California and Cambridge, Massachusetts. In 1980, only one firm, Burroughs Wellcome, was

conducting biotechnology research in the state of North Carolina. Additionally, the local

universities did not have faculty working on these topics.

The Feldman and Lowe (2012) case study reveals that organizations should:

institutionalize deliberative and reflective processes that help easily guide ongoing modifications

in technology development, and identify effective problem solving tactics during challenging

circumstances. The process for establishing the Microelectronics Center of North Carolina

(MCNC), was expedited (taking only 18 months) because of interest from General Electric (GE)

in setting up a $100 million semiconductor research and development facility in the state, which

was expected to create approximately 500 high-paying jobs within its first five years. When

negotiating with Governor Hunt, GE asked that NC leaders support silicon-related research at the

state’s universities so as to attract additional highly qualified engineers and technicians.

Governor Hunt emphatically believed in the economic growth potential of establishing the

Center, stating, “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

microelectronics is our chance, perhaps the only chance that will come along in our lifetime . .

.We must seize the moment,” (Governor’s Office, 1980). As a result, MCNC received $24.4

million of public funding and opened with considerable fanfare and media coverage. There were

great expectations for what it would be able to accomplish with the significant resources

provided.

The NC Biotechnology Center was more controversial and faced greater resistance and

greater public scrutiny, and received only $843,000 (a mere 3.5% of that received by MCNC) of

start-up money from the state. Yet the unexpected outcome was that this greater scrutiny created

a need to engage in public conversations and to create consensus about the organizations’

18

objectives. This engagement with the public and consensus building greatly contributed to the

later success of the NC Biotechnology Center. The Center’s mission was “creating economic

development through the support of biotechnology research”. Their catalytic role was clear from

the start. They engaged in a process of building goodwill with all the stakeholders: the public, the

legislature, and the local universities. This process was slow-moving and deliberate, such that the

NC Biotechnology Center did not open until three years after MCNC (despite their both being

initiated at the same time). This lag time allowed the NC Biotechnology Center to observe the

beginnings of MCNC and learn from some of the challenges MCNC faced.

The differences between the board memberships of the two organizations suggest that a

larger board with active board members who have diverse backgrounds and express diverse

opinions, while more difficult to manage and coordinate, is important to a successful and

effective conversational space and creating consensus. In other words, banal details like the

composition of an organizational board could be a key factor for success in supporting

technology development that contributes to a strong innovation infrastructure and helps generate

regional wealth. By contrast, MCNC had a small board of 16 members with 11 voting members.

Moreover, the governor appointed 7 of the 11 voting members. The other four members served

as chancellors, representing both public and private universities in the state. A problem was that

the governor’s appointments lacked diversity of expertise and interest while the choice of

chancellors did not generate active board members who had adequate time and expertise in

microelectronics. The result was an organizational board that looked great on paper but was

merely window dressing, with little active engagement and little controversy.

On the other hand, the NC Biotechnology Center started with 32 members and ultimately

grew to 36 members, with every industrial sector, geographic region and constituency

represented. While this move might, at first, seem to make the board more difficult to manage,

the composition of this board (from a range of industries, including animal husbandry, plant

agriculture, the marines trade, pharmaceuticals, medicine, and the local universities) guaranteed

broad representation and diverse opinions. Unlike the MCNC board, the authority to appoint

members to the NC Biotechnology Center’s board was equally shared among the state governor,

the lieutenant governor and the speaker of the state house of representatives. As a result of this

diverse composition, board meetings were vibrant. Topics were debated and decisions were

postponed until a clear consensus had been reached.

19

The two organizations also had very different strategies for engaging the general public.

Executives from the NC Biotechnology Center maintained a strong commitment to citizen

engagement and outreach, with the goals of both being transparent, and making the technology

accessible and easy to understand by the general public. The NC Biotechnology Center’s third

paid employee was an educational expert who held a liberal arts degree. His primary

responsibility was to translate biotechnology into accessible language for non-experts. Because

of this focus on transparency, annual reports and public communications from the Center were

broadly accessible and very informative.

By contrast, communications from the more insular and academic MCNC provided dense

descriptions of microelectronics research activities that were incomprehensible to all but the

most informed experts. MCNC’s annual reports were not designed to educate the public or to be

used to build broad-based public support. Rather, they tended to feature the scientific research

activities and publication record of affiliated MCNC scientists. This outcome is perhaps best

captured by a quote from a state legislator at a public hearing: “I understand wood chips,” a

direct reference to the NC Biotechnology Center’s discussion of applying technology to the

state’s forestry industry. “But I don’t get microchips.” (Anderson interview, 2010 and Burke

interview, 2010)

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. The NC Biotechnology Center better weathered challenges, with the quick

identification of potential sources of conflict and adaptive responses. Deliberative and reflective

processes had become institutionalized and resulted in effective problem solving and resilience.

The NC Biotechnology Center built up considerable good will and was able to call on numerous

allies representing broad segments of society to defend their continued existence and on-going

state support. By contrast, executives at MCNC tended to ignore or dismiss signs of crisis, and

continued to alienate important institutional allies. Ultimately MCNC failed to make their

substantial technology contribution clear and well understood by the general public, particularly

the elected state representatives.

The lack of public understanding about MCNC was perhaps more problematic given the

large investment of $24.4 million that the state provided at the outset of the Center, and the large

annual operating budget that became an easy target for adversaries. It is not surprising then, that

20

with a deepening financial and organizational crisis 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 staff. 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. As a shadow of its former self, MCNC is now a privately funded non-

profit that specializes in rural broadband. MCNC now has limited economic and industrial

influence in North Carolina, and functions as little more than a specialized utility.

Reflective Conclusions: Regional Conversation Space and Improvisation

It is commonly accepted that regional innovative activities are self-organizing and

develop through the actions of institutions and entrepreneurs. The role of government, as a

vehicle for collective action, or governance as a process for collective action is less examined.

There is no shortage of advice for policy makers about how to engage in technology-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. Perhaps the lesson from these examples, and the best advice for policy

makers, is to become educated about the industry, while following a process that is inclusive,

transparent and open to criticism and debate. Additionally, it is important to allow for continuous

adaptation and appreciation of local context.

In the case studies of Cambridge (Feldman and Lowe, 2008) and its comparison to

Berkeley (Lowe and Feldman, 2008), it is clear that the success of a local regulation does not

solely depend on the regulation, in and of itself. The process of developing a policy is far more

important and should, as in the successful case of Cambridge, include: educating the public,

selecting decision makers with diverse backgrounds and opinions, and ultimately building

consensus in the local community. As exemplified by the case of Berkeley, the adoption of this

same biosafety ordinance had a strikingly different result, due to the lack of transparency and

community engagement.

In the third case, Feldman and Lowe (2011) document how the state of North Carolina

was able to create a quasi-public entity that was able to catalyze a biotech industry cluster. The

21

state currently has a large concentration of bioscience companies although it started with no

discernable advantage and was not a likely location for the industry. Building up slowly and

studying the biotech industry provided an opportunity to achieve public consensus about the

potential of the developing industry. The full story requires more time to tell but our claim is

that good organizational design allowed for this success. The main point of this case study is

that good ideas require good implementation. Though starting from the same analysis and set of

recommendations and implemented in the same state, the Microelectronics Center of North

Carolina (MCNC) and the Biotechnology Center of North Carolina evolved along different

trajectories. While the concept of dedicated sector-specified technology development agencies

was appropriate, this case study reveals several lessons about: organizational design; the

importance of both understanding and adapting to local context; and the need for transparency,

community building efforts and inclusiveness. The NC Biotechnology Center has continued to

expand and flourish, and ensures life sciences remains a strong industry in the region (Lowe,

2014; Feldman and Lowe, 2014). While it would be difficult to pronounce that MCNC was a

complete failure - because its many investments have in fact proven important to the state and

helped establish North Carolina as a site for the industry - we are left to speculate about how the

microelectronics and information and telecommunications sectors might have progressed with

stronger, continuous state advocacy and shared resources. The 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. The 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.

22

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