Public Policy Forum Blog

Financing Milwaukee's innovation pipeline

The announcement that the University of Wisconsin-Milwaukee Research Foundation inked a potentially lucrative licensing deal with a local drug manufacturer is a prime example of the important role that public dollars play in spurring innovation and economic growth in the Milwaukee region. In this case, the initial public investment came in the form of a $1.2 million 5-year federal grant from the National Institutes of Health (NIH) to fund research by UWM Professor James Cook. The investment paid off in the discovery of a new drug compound to treat alcoholism.

This breakthrough is welcome news not only for its potential health benefit, but also for the economy of the Milwaukee region and the state of Wisconsin, which has historically done a poor job in translating NIH grants to economic gains. A national study released this week confirms an above-average level of NIH dollars flowing into Wisconsin but a below-average return on those dollars in the form of new business activity.

Universities aren't alone in their use of public dollars to spur innovation. Local governments are beginning to delve into the innovation investment game. One recent example is the City of Milwaukee's approval of a $225,000 forgivable loan to C&D Technologies to develop a new line of lightweight lithium-ion batteries. These city funds would mix with federal dollars to finance the development of this new product line for military use.

Other cities are also creating funds that directly invest in innovative private companies. New York City and its partners have created the $2 million NYC Seed fund which will invest up to $200,000 in nascent NYC-based tech companies to aid them in the development of new ideas and products. Click here for information on other cities that have created similar funds to boost innovation and entrepreneurship.

In the past, the public sector's role in economic development has largely been to set the stage for growth (solid infrastructure, educated workforce) and then get the heck out of the way (streamlined regulation). This mindset is slowly changing. Today, public dollars are used directly to fuel innovation and economic development.

As with any investment, there is risk. However, with adequate due diligence and strategic focus, the investment of public dollars into research and development projects can be a calculated risk with a potentially large payoff to metropolitan economies.