Multi-phase place-based economic policies can enhance the nation’s development capacity

Large competitive federal funding opportunities—including the $80 billion in what Brookings Metro has labeled “place-based industrial programs”—offer large-scale rewards but relatively low probabilities of success for individual coalitions vying for funding. Understanding this dynamic, architects of place-based programs have created multi-stage competitions that involve both planning grants and implementation grants—arguing that the planning phase allows regions to build capabilities that make their strategies more attractive to other investors should they ultimately lose out on federal funding.

This hypothesis—that an accelerated planning phase sets regions up for long-term success even if they are not selected for an implementation award—is largely untested. But the recent announcement of the 16 finalists for the National Science Foundation’s (NSF) Regional Innovation Engines program provides early evidence that investing in planning can pay off.

The Regional Innovation Engines program represents a $6.5 billion investment in regional innovation ecosystems. Specifically, it will provide implementation grants of up to $160 million each to foster research and commercialization in a region’s innovation ecosystem. In this way, it is highly complementary to another major place-based economic program: the Economic Development Administration’s (EDA) Build Back Better Regional Challenge (BBBRC), which in 2021 provided $500,000 planning grants to 60 regions (of which 21 were awarded implementation grants) to develop cluster-based economic development strategies.

While the NSF and EDA had separate review processes, of the 16 organizations leading NSF finalist coalitions, eight also participated in the BBBRC’s planning phase. This significant overlap between BBBRC applicants and NSF finalists is partly due to the underlying quality of the applicants’ strategies, regardless of their participation in the BBBRC process. Yet the comparative success rate among BBBRC participants who reused elements of their strategic portfolios for the NSF program suggests that coalitions participating in both programs found that the former helped prepare them for the latter.

One example is New Mexico’s Space Valley Coalition, a public-private partnership formed in response to the BBBRC with the goal of closing the “valley of death” between innovation and commercialization in the region’s space industry. While Space Valley did not ultimately win a BBBRC implementation grant, coalition leaders said that the “planning sprints” component of the BBBRC application process—in which coalitions were given guidance on honing their high-level visions into more comprehensive strategic portfolios—was critical in helping them prepare for their Regional Innovation Engines application. Because New Mexico’s commercial space industry is still relatively nascent, feedback from the EDA helped Space Valley leverage the region’s high density of public sector space assets to develop “consistency in their strategy,” which they believe is a top priority for federal agencies seeking to identify credible proposals. So, like a startup accelerator, the EDA and its technical assistance partners provided BBBRC applicants with actionable information to improve their strategies.

This type of strategic development helped the Space Valley Coalition build on their BBBRC proposal, which focused on driving later-stage space technology commercialization through physical infrastructure investments and regional coalition-building. Feedback from BBBRC reviewers directed coalition efforts to focus more on this regional cooperation at the programmatic level. This required an intensive exploration of complicated networks of organizations and what it would take to build a governance structure that would allow the region’s partnering organizations to thrive at what they are good at, but under the umbrella of a dynamic regional strategy for which they also felt a sense of ownership. This turned out to be critical in addressing two core functions for the Regional Innovation Engines program: “use-inspired R&D” and the “translation of innovation to practice.”

Space Valley’s representation in both programs has implications for regions and federal officials. For regions, the lesson is that designing innovation-based economic development strategies that generate economic opportunity for more people and communities takes significant capacity and effort. Indeed, we found that the BBBRC process strained the capacity of most regional applicants. But the case of Space Valley also illustrates that planning efforts need not occur in vain; they can enhance a region’s attractiveness for future investment, in this case from other federal agencies such as the NSF. But those exercises work best when regional planners solicit feedback directly from potential investors and experts, and then use that feedback to iterate and improve.

For federal leaders, four lessons are clear. First, the multi-stage application process is emerging as a best practice because it ensures that federal programs are investing in regions’ planning capacity, even if there are not enough resources to provide an implementation grant to every applicant. The EDA is also using this two-stage process in its Regional Technology and Innovation Hubs and Recompete Pilot programs.

Second, planning phases should include technical assistance, strategic development, and other resources so that coalitions can effectively leverage their experiences. Using their strategic development grant, the Space Valley Coalition has been able to respond to the EDA’s recommendations for improving their strategic portfolio by completing a full gap analysis of New Mexico’s commercial space industry. Empowering coalitions to take advantage of this feedback can also provide some assurances to federal agencies that coalitions who have been through the application process for multiple programs are proposing strong, credible strategies.

Third, federal agencies should work together to identify where their regional economic development objectives align, and synchronize their program application requirements accordingly. It is notable that the EDA and NSF have independently arrived at many of the same program design elements and application requirements for place-based programs. While these programs differ in notable ways (and applications should reflect that), there are elements of federal challenge grants that likely can be handled in a “common application” that standardizes information commonly requested from regional applicants. This could reduce the administrative burden and ensure that programs are accessible. Notably, the NSF and EDA announced their plans to officially coordinate on projects, programs, and facilities between the Regional Innovation Engines and Regional Technology and Innovation Hubs programs—indicating that backend standardization is also possible.

Fourth, the EDA should increase the size of its ongoing strategy development funding, building on a recommendation from our colleagues in a prior report on EDA reauthorization. Over the past two years, the EDA’s resources have strengthened the capacity of regional intermediaries to design more transformational strategies. With consistent resources, that can become the norm.

In sum, recent experiences from place-based programs emphasize the significance of strategic planning and collaboration between federal agencies in promoting regional economic development. By following these lessons, both regions and federal leaders can work together to create more vibrant and inclusive regional economies across the nation.