Group suggests start-up incentives; Accelerate Arkansas to propose R&D initiatives

Arkansas Business, Feb 19, 2007 by James Gordon

ACCELERATE ARKANSAS, AN AFFILIATE of Arkansas Capital Corp. Group, intends to propose legislation this week to coordinate and fund university research and development projects and the incubation of start-up companies in the state.

Jerry Adams, the chair of Accelerate Arkansas, said funding gaps exist in the state's new business commercialization continuum and that most of the proposed legislation addresses the "basic blocking and tackling" the state government could do on behalf of new companies. Adams is also Acxiom's Corp.'s economic and community development leader.

In total, Accelerate Arkansas is proposing about $70 million in new appropriations, some of which would fully fund already defined programs.

Entrepreneur James Hendren of Little Rock, also a member of Accelerate Arkansas, said the probability of those appropriations being made depends on the Legislature's other budget obligations, like the court-ordered funding for public school infrastructure.

Accelerate Arkansas is a statewide group of volunteers working with the Arkansas Economic Acceleration Foundation, a nonprofit organization under the Arkansas Capital Corp. Group umbrella. Accelerate Arkansas' stated mission is to raise the average wage of Arkansans to the national average by 2020 and, in doing so, increase the state's annual tax revenues by about $2.4 billion.

Its proposals for the 86th General Assembly include establishing a nonprofit organization, called Innovate Arkansas, which would be contracted by the state government to assist fast-growing technology or knowledge-based start-ups. The proposed organization, modeled on Oklahoma's i2E Inc. (Innovation to Enterprise), could help budding business tackle development issues such as market analysis, intellectual property rights and corporate management.

To finance those new companies, Accelerate Arkansas also wants $20 million a year for two years appropriated to establish a risk capital management fund through the Department of Finance & Administration. And Accelerate Arkansas wants an additional $10 million a year for two years funneled into the Seed Capital Investment Program, which provides up to $500,000 for initial capitalization or expansion of technology-based companies in Arkansas.

SCIP is run by the Arkansas Science & Technology Authority, headed by John Ahlen, who is also a member of Accelerate Arkansas.

Since new business commercialization often starts with research and development, Accelerate Arkansas is also proposing the creation of an Arkansas Research Alliance. This not-for-profit, public/private partnership would identify areas of job-creating scientific research, recommend state investments in research infrastructure, encourage university collaboration and advise universities of the research needs of Arkansas businesses.

Adams said the alliance is modeled on Georgia's research alliance. Chancellors from Arkansas' research universities would sit on the board of the alliance, along with senior executives of major state companies and gubernatorial appointees.

"It's an effort for the state to really align its priorities with the research efforts that are done within the state schools," Adams said.

Accelerate Arkansas also wants $16.5 million a year for two years to fully fund research grants and projects managed by ASTA and already defined by previous legislation. Hendren said some of this would be matched by federal funding.

To prepare Arkansans for jobs in the high-tech industries, Accelerate Arkansas also proposes to appropriate $20 million a year for two years to establish STEM (science, technology, engineering and math) supplemental income grants that would increase the state's ability to retain and hire teachers in those disciplines. The grants would be administered by the Arkansas Department of Economic Development, and the identification and selection of teachers would be coordinated with the state Department of Education.

Adams said all the initiatives could be proposed through as many as three bills filed this week. Accelerate Arkansas has a lead sponsor for the legislation, but neither Adams nor Hendren would disclose his or her identity.

Morris Jenkins, research and planning section leader for ADED, said Accelerate Arkansas' legislative package is "fairly aggressive" but important.

"We need to do a better job of capturing our output from the educational institutions, particularly the high-end jobs, the scientists and engineers that often have to leave the state for lack of employment here," Jenkins said.

More Incentives

Accelerate Arkansas is also recommending amendments to the Consolidated Incentive Act of 2001.

One change would create stronger incentives for companies outside Arkansas to move their research and development operations within the state borders by allowing a 20 percent income tax credit for the first three years of their move to Arkansas and then a 20 percent credit on increased expenditures beyond that.

"Typically, when you bring R&D to a location, you also bring higher-paying jobs and you anchor that organization in that location in a stronger way," Adams said.