On Biotech and Business Sense

Posted on April 20, 2005
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As state governments get into the biotech race, how likely is it to pay off?

As of 2001, 80 percent of responding cities and states identified the bioscience industry as one of their top two development targets. So Arizona's foray into the field is not as cutting edge as some would have you believe.

Yet, it's politically appealing to get on board the publicly funded "high-tech" gravy train, so it's not hard to convince policymakers to do so. Which is not to say the field does not hold promise, but as a whole, it has yet to provide a net payoff for investors (public and private).

California upped the ante by committing $3 billion for stem-cell research. As a result, one local researcher cited this move as requiring that Arizona also ante up, saying "It must make business sense for California to have done this."

Hardly. As economists familiar with this field will tell you, qualified researchers are in relatively static supply. So in the short term, states are put into something of a free agent bidding war, pushing up the prices for a limited amount of talent. Like free agents, this intellectual capital is free to move on when a better offer comes along, which is likely, given how popular this field is with politicians.

In the long run, cities and states that gave invested in facilities will not be in much of a position to decide what and who occupies them, not wanting these facilities to sit empty.

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