Report: Michigan Lags Neighboring States in Funding for Innovation and Entrepreneurship

Citizens Research Council of Michigan has released novel research showing that Michigan is trailing many of its neighbors in state funding for innovation and entrepreneurship (I&E) programs, despite I&E’s many proven economic and societal benefits, including higher incomes and living standards.

The new report, State Entrepreneurial Ecosystems: How Public Policy Can Drive Economic Innovation , explores the scope of state I&E programs in Michigan and five neighboring states: Illinois, Indiana, Ohio, Pennsylvania, and New York.

“Ohio, Indiana, and Pennsylvania all have systems that lean heavily on coordination from long serving and well-funded entrepreneurial service providers,” says Bob Schneider, senior Research Council associate for state affairs. “Ohio has five regional non-profit service providers that receive annual contract funding of nearly $33 million to cover all the bases in the state’s I&E programs. That is more than double the amount of Michigan’s total I&E budget.”

Economists agree economic innovation is critical to sustained economic growth and rising living standards. Governments, recognizing this, implement and administer programs at all levels to foster more innovation in their economies.

I&E programs play a crucial role at the state level, providing essential financing and technical assistance to startups and promoting the commercialization of new products and technologies from state research institutions.

The report analyzed economic research and clearly shows the importance of public policy in helping to realize greater economic innovation. Public support can help overcome unique market challenges to financing R&D and bringing new technologies to market.

“Without public policy interventions, Michigan will have less than optimal levels of R&D in the economy,” says Schneider. “Empirical research shows that those public policy interventions have worked.  Whether it’s direct federal support for R&D, tax credits, or publicly funded venture capital and business support programs, the evidence suggests these programs help improve R&D and business formation outcomes.”

The report, supported by a grant from the William Davidson Foundation, provides a “fiscal roadmap” for policymakers. It outlines potential funding options to increase Michigan’s public investment in I&E programs. These include one-time revenue sources and options for permanent increases in Michigan’s I&E appropriation.

“Michigan’s economic fortunes are tied to the new technologies and products that many young startup companies bring to the marketplace,” says Eric Lupher, president of the Research Council. “Michigan has world-class research universities, but the data suggests the state isn’t getting as much ‘bang for the buck’ from that research as it should be. A boost in funding and focus on these I&E programs can help improve that situation.”

Founded in 1916, the Citizens Research Council of Michigan works to improve government in Michigan. The organization provides factual, unbiased, independent information concerning significant issues of state and local government organization, policy, and finance.

By delivery of this information to policymakers and citizens, the Research Council aims to ensure sound and rational public policy formation in Michigan.

For more information, visit www.crcmich.org .

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