Sustaining America’s new industrial policy

What Brookings Metro calls the “sustainability problem” of regional economic development work has come sharply to the fore as local implementors absorb the implications of the 2024 election. 

Billions of dollars of pending economic development awards—as well as the support of friendly federal administrators—have been thrown into uncertainty. At a minimum, the likelihood of further large federal investments in place-based industrial development appears reduced. As such, the mood of excitement and possibility that previously spread among implementors from Birmingham, Ala. to Bozeman, Mont. may well be constrained in the coming months. 

And yet, the moment is not entirely new. Open-ended federal largesse to support scores of place-based regional initiatives for years has in fact never been on the table. Therefore, local consortia that received sizable federal awards in recent years will now confront their latest adaptive leadership challenge: ensuring that catalytic public investments result in self-sustaining market viability for key technologies and industries to enable true economic transformation, which will likely require securing and deploying additional sources of capital. 

At this time of significant uncertainty, then, this report describes key features of the current sustainability challenge and approaches to address it. Along these lines, the report will describe the challenge in its current form; review the funding options that can resolve it; survey how several U.S. regions are considering the issue; and offer counsel for leaders seeking to sustain their initiatives. 

Ultimately, several core findings emerge from the review and regional experiences: 

1. Federal place-based industrial policy awards have already succeeded in spurring and seeding growth in new places, while also supporting and accelerating progress for existing regional development efforts. 
2. While large federal awards have been catalytic, they cannot by themselves serve as fully formed and sustainable drivers for regional cluster development. 
3. Advancing sustainable regional cluster growth strategies, regardless of past or future awards, will continue to require tough work for both emerging and existing regional system hub organizations. 
4. Successful sustainability strategies will need to draw from a mix of public and private regional sources in the capital stack, including states, local and national philanthropy, universities and community colleges, and private businesses—with some funders likely (or required) to come to the table earlier than others.  

The sustainability challenge is endemic to economic development, and now urgent for regions 

The sustainability challenge is endemic to regional economic development—and almost all policy pursuits. Almost always, the adequacy and duration of available funding for critical, well-designed development projects are inadequate to the task, ensuring a universal unease among implementors. 

This reality of routinely insufficient funding was a key motivation for the relatively large size of several of the major place-based industrial strategy programs of the 117th Congress, such as the Regional Technology and Innovation Hubs program (as informed by work at Brookings). As such, Congress’ authorization of over $80 billion in place-based programs to catalyze transformative industrial development in regions was very much intended as a moment to “go big” and move beyond the usual “small ball” economic development. 

Yet, while such awards have been generational in scope, the programs’ nature and limits ensure that the sustainability challenge is now taking precedence. The latest Brookings inquiry shows that as of September 2024, just over $40 billion in place-based funding authorizations has been allocated or awarded to specific places, with nearly 95% going toward company-level incentives that often require supportive regional ecosystem-building and economic development work. That sounds like a lot. 

Yet for all that ambition, the Biden-era programs remain time-restricted and financially limited. Significant shortfalls in congressional appropriations mean fewer regions have received large-scale funding. Moreover, even if the federal programs were fully funded, they would be insufficient for delivering true regional transformation given the scale of capital needed for developing truly self-sustaining, globally competitive technology clusters. To put that in context, a Brookings assessment of the history of North Carolina’s Research Triangle region suggested that true transformation could require upward of $700 million annually for 10 years in places with similar starting points. 

And then there is the fact that Congress never intended federal awards to fully fund such transformation. Through their emphasis on collaboration among local, regional, corporate, university, and philanthropic stakeholders, most of the programs were designed to reflect the assumption that other funders besides the federal government will be required to sustain success. In that sense, the new programs were designed to serve more as flexible seed funds rather than long-term investment sources. In other words, federal awards can and should function as catalytic down payments to unlock other funding flows and market-driven growth in key strategic sectors. 

The potential capital stack for sustaining place-based development projects offers multiple useful options 

Addressing the sustainability problem for almost any kind of place-based strategy is likely to draw on a variety of funding tools. This array of tools and options amounts to the “capital stack” for sustaining place-based initiatives during a time of waning federal grants. A previous Brookings report on sustaining these initiatives delineated six specific capital sources:    

• Follow-on federal funding. Appropriations of further resources for place-based industrial development appear to be off the table for the remainder of the current Congress. However, continued bipartisan urgency about technology development—especially regarding artificial intelligence—suggests that opportunities for more place-based challenge grants could surface in the next Congress (especially relating to “reindustrialization” or competition with China). What’s more, continued project-specific investment opportunities remain, whether through the Infrastructure Investment and Jobs Act (IIJA) or the Department of Defense and Department of Energy. Local coalitions should remain alert to such opportunities. 
• State and other public investments. State funding will always be a critical avenue for supplying additional resources and incentivizing and validating other funders’ participation, especially philanthropic foundations and companies. Recent federal place-based designations and awards have usually gone to multicounty regions within states or across them, rather than specific cities or universities—making them more politically compelling for state support. What’s more, regional award recipients frequently seek to build programs with significant workforce, infrastructure, and entrepreneurial components, which may align well with state priorities, even if state budgets tighten in coming years. 
• Philanthropic support. In many communities, private foundations and family-office philanthropies with regionally focused missions already play a significant role in funding the kinds of investments in people, projects, and places that the federal place-based programs were designed to advance. Philanthropic dollars can be critical for building capacity, piloting models, and mitigating risks. And in select cases, national foundations may also have an interest in supporting regional efforts in clean energy, biotechnology, environmental sustainability, and other national priorities. Given that, philanthropic support in regions where it is present at scale may prove to be among the most promising sources of additional capital. 
• University support. Universities—especially, large, regionally oriented research institutions—can be a crucial source of funds to build out place-based economic development initiatives. Research universities routinely maintain substantial research budgets and often—especially for state land grant universities—have special state-charter requirements to engage in the development of their home-state economies. Joining regional partners in providing support for advancing highly competitive federal place-based awards would bring further prestige to participating universities. It can also spark opportunities for additional funding for their own work. To that end, universities may find it especially productive to work with other regional leaders to develop new federal funding proposals around shared priorities such as translational research, technology commercialization, and entrepreneurship support.  
• Corporate investments. Securing corporate or investor buy-in—or “market validation”—is a core requirement for many of the kinds of projects that recent federal awards have launched. However, converting business leader endorsements or letters of support into follow-on corporate investment remains challenging. But there are a few potentially productive avenues. First, many companies—especially larger or publicly traded ones—maintain in-house foundations that provide meaningful cash support for projects and programs in the communities they serve, frequently focused around “pillar priorities” such as workforce and quality of place. Second, federal industrial policy programs’ attention toward talent and inclusive workforce development promotes a shared priority where companies can advance their own growth by investing in relevant regional interventions. Finally, companies in these regions whose businesses lie within designated opportunity sectors have an obvious self-interest in seeing these sector-scaling investments succeed, including in (but also beyond) workforce development. As such, regional collaborations should identify and engage those companies that may view particular projects as especially promising for advancing their own business opportunities.  
• Sponsored growth capital investments. A final subset of support that can come from many, if not most, of the sources listed above is “growth capital investment” by public, private, or philanthropic institutions to spur startup opportunities in key innovation sectors. These investments can take the form of seed or growth-stage venture capital investments from state-sponsored innovation funds; social impact and purpose-driven investing from philanthropic foundations; or business development investments from innovation-driven companies looking to partner with or acquire promising early-stage companies and technologies. Though the requirements for these investments are both variable and highly donor-specific, regional programs seeking to create such capital platforms are frequently able to combine these kinds of investment funds from multiple sources. In fact, such funding may be more readily provided from one investor if others are already present. 

In sum, regional implementors have a compelling and varied set of capital sources at their disposal as they seek to build beyond their initial awards. 

However, despite these multiple possibilities for strategy expansion and extension, the capital stack remains highly contingent, with each finance type subject to a variety of conditions or limitations that shape its availability and use. Multiple basic conditions usually need to be satisfied to get a funder (whether the state, a philanthropy, or a commercial actor) to say “yes” to funding any particular opportunity, strategy, or project. Among other factors, regional leaders of place-based development strategies will need to consider both the availability of accessible capital and the alignment between an initiative and a possible funder’s interests (see Table 1). 

Three case studies that depict aspects of the sustainability problem and attempts to address it 

To elaborate on how regions can leverage the capital stack in ways consistent with the requisite dealmaking conditions, three real-world case studies drawn from regions with different starting points and varying sustainability challenges may prove instructive.   

The case studies focus on:  

• Tulsa, Okla., where Tulsa Innovation Labs (TIL) faces challenges and opportunities in braiding and blending a Build Back Better Regional Challenge (BBBRC) grant and a Regional Technology and Innovation Hubs (Tech Hubs) award in an emerging innovation ecosystem.  
• Pittsburgh, where the Southwestern Pennsylvania New Economy Collaborative faces challenges and opportunities in optimizing and sustaining a significant BBBRC grant in a mature and diversely populated innovation ecosystem. 
• Minneapolis-Saint Paul, where GREATER MSP faces challenges and opportunities after developing several investable strategies as a finalist for both BBBRC and Tech Hubs, without ultimately receiving implementation awards. 

Starting point: Growing efforts to align corporate and philanthropic assets to evolve Tulsa’s energy and aerospace industries 

The 10-county Greater Tulsa region (population 1.2 million) is mostly rural, with Tulsa as the main metropolitan hub. The region’s economy has historically been dominated by the energy industry, but it now finds itself at the brink of two major transitions. First, the region is looking to stimulate new job growth by leading in the energy transition. Second, the region seeks to leverage its existing aerospace sector to jump-start an advanced aerial mobility (AAM) cluster to further diversify its economy. While the region currently hosts no major corporate headquarters in aerospace, it boasts more than 1,100 aerospace companies and the world’s largest aerospace maintenance, repair, and overhaul (MRO) facility. 

A strong regional philanthropic base supports this strategic sector development work, reflecting generational wealth. Tulsa is home to the George Kaiser Family Foundation (GKFF), a $5 billion place-based philanthropy. GKFF is a supporting organization of the Tulsa Community Foundation, which administers more than 1,500 funds, each with their own identity and philanthropic purpose, including the Charles and Lynn Schusterman Family Philanthropies, a $1 billion fund. In 2020, GKFF launched Tulsa Innovation Labs (TIL) with a mandate “to catalyze Tulsa’s leadership in industries of the future,” according to TIL Managing Director Jennifer Hankins. 

The region boasts several educational institutions that contribute to its economic development potential, including the University of Oklahoma Polytechnic Institute, the University of Tulsa, Tulsa Tech, Tulsa Community College, and several other four-year institutions. Oklahoma State University, an R1 institution with a campus in Stillwater, adds to the region’s academic assets, but is 65 miles from downtown Tulsa. These institutions, alongside the state’s emerging focus on fostering innovation and technology-based development, present significant opportunities to not only increase resources but also better align them to build strategic sector clusters as a more concise regional strategy takes shape. 

Progress to date: $90 million in federal awards for TIL-driven cluster development, with growing state and commercial capital support 

With its strong philanthropic support and mandate, TIL effectively seized the federal investment moment. It quickly developed a compelling strategy and led collaborative efforts to secure over $90 million in federal awards for the Greater Tulsa region’s AAM cluster, informed by extensive research and industry analyses. TIL was successful in discouraging efforts to prioritize other nationally attractive clusters such as biotechnology, where Tulsa had relatively fewer nationally competitive assets. It instead coalesced the regional coalition around—and, importantly, aligned and channeled the region’s resources toward—the high-potential AAM opportunity, which built on the region’s existing assets and was strongly aligned with the national security and technology goals that motivated these federal grant opportunities. 

The two federal grants are designed to build on the region’s assets in energy and aerospace. The $38.2 million BBBRC grant seeks to transform Tulsa into a research, testing, and manufacturing center for electric land and air vehicles powered by AAM technologies. The $51 million Tech Hubs award for the Tulsa Hub for Equitable and Trustworthy Autonomy (THETA) extends AAM beyond transportation and toward applications in areas such as agriculture and utility infrastructure. The grants fund separate yet coordinated projects around university research and startup commercialization, industry adoption and development, testing and simulation (with a focus on cybersecurity and data management), technology extension to rural communities, and workforce development. TIL has overall management and grant administration responsibilities for all programs. 

These federal awards have not only provided “lift” capital for the greater Tulsa region’s AAM cluster, as Hankins told Brookings, but have also bolstered TIL’s credibility and validated the region’s collective decision to prioritize growing an AAM cluster. Accordingly, TIL has recently undergone a major organizational restructuring effort aimed at bolstering the underlying governance infrastructure to support the cluster strategy. As TIL Head of Strategy and Initiatives John McDonald noted: “We have empowered relationship managers to drive engagements with each of the major constituency groups: policymakers, local community, higher education, local and national business partnerships. This enables our team to more holistically explore opportunities for horizontal, cross-cutting initiatives based on our region’s assets in place and infrastructure, capital and entrepreneurship, and talent and workforce.” In other words, TIL is moving beyond siloed efforts within industry sector verticals to harness synergies across sectors and build a more robust strategy. 

To advance this reorganization, TIL is drawing on the promising results of one of its early initiatives, venture studio Rose Rock Bridge (RRB). RRB initially grew out of conversations on challenges facing the region’s energy industry, including a major industrial transformation and limited exposure and access to early-stage technologies and innovation. Historically, energy companies had shown limited engagement in strategic regional initiatives due to modest returns. However, TIL transformed this dynamic by leveraging established relationships and identifying a dedicated “corporate champion.” Collaborating closely with this champion, TIL successfully rallied additional industry support around a homegrown strategy to spark innovation. 

Thus, TIL brought together four regional energy companies to capitalize RRB, allowing it to recruit promising energy startups from across the country and facilitate opportunities for further investments and partnerships. RRB has succeeded in raising nearly $50 million in corporate and philanthropic support and sponsorships in just 18 months ($36 million from energy companies, including $4 million in dedicated funding for overhead and governance, plus $13 million from GKFF), and has led to the creation of five new companies and the adoption of 14 new technologies, with growing additional investment offers. RRB is poised for further growth in the energy sector as well as potential extension into other industry sectors. 

Ways forward: Emerging ideas and strategies for sustainability  

More than $90 million in federal grants provides an impressive starting point, but TIL leadership acknowledge that it is far from enough to realize true regional economic transformation. 

Going forward, TIL is pursuing three related strategies. First is the drive to gain substantial additional corporate investment by extending its proven RRB model into the AAM sector. The challenge for TIL will be that the region’s aerospace sector is not only sparser than the energy sector (there are no major headquarters in the region), but also that it is far more manufacturing- and service-oriented, and less drawn toward the types of R&D that would motivate investments in startups. As a result, both demand for the RRB model and the supply of commercial capital may be more limited in AAM than in the energy sector. Still, TIL is optimistic that the back-office, marketing, communications, and workforce resources that have already been developed for RRB can be leveraged to activate a successful platform around AAM and attract aerospace companies to the region over the longer term. 

Second, TIL will continue diversifying its philanthropic investment base. Notably, TIL has continued its intentional philanthropic engagement, constantly refining and evolving funding proposals and—in addition to GKFF’s generous support—proactively seeking co-investors across its programs and initiatives. Moreover, both regional and national funders have begun approaching TIL about potential funding opportunities, given its alignment on important objectives such as the clean energy transition and inclusive tribal engagement (the region is home to four federally recognized Native American tribes: Cherokee Nation, Muscogee [Creek] Nation, Osage Nation, and Pawnee Nation).  

The coalition that TIL has built with key private and philanthropic partners, including GKFF, underscores the region’s capacity for collaboration and innovation. With GKFF’s support to diversify funding sources, TIL is well positioned to attract additional donors and expand its base of support. This growing network of partners will strengthen the region’s ability to leverage federal investments and ensure they translate into lasting growth and shared prosperity. 

Finally, TIL is aiming to activate state investment in the growth and sustainability of the AAM cluster. In their last legislative session, while TIL was pursuing the Tech Hubs award, state lawmakers committed $15 million to support THETA. Now that TIL has secured the award and is in the early stages of implementation, it will need to return to the state with more specific requests during the upcoming legislative session to build the state’s capabilities for supporting regional strategic sector-based economic development. 

In short, TIL’s vision for Tulsa’s transformation hinges on its ability to supplement initial federal investment with corporate and philanthropic funding while fostering collaborative innovation across key industries. By leveraging foundational assets in energy and aerospace, TIL is positioning Tulsa as a competitive player in AAM and other future-focused sectors. The strategic alignment of corporate champions, educational institutions, and diverse funding sources under TIL’s guidance has laid the groundwork for sustainable growth and technological advancement. Moving forward, TIL’s focus on securing further corporate and state support, along with expanding its philanthropic coalition, will be critical to fully realizing a regional economic shift that not only bolsters Tulsa’s industry but also serves as a model for inclusive, sustainable economic development.

Starting point: A dense industrial and development ecosystem with strong innovation assets, but still requiring greater focus and alignment for commercial translation 

Southwestern Pennsylvania, anchored by the city of Pittsburgh, is a mature industrial economy governed by complex networks of public, private, and community organizations working with a wide range of objectives. Within it, the long-standing Allegheny Conference on Community Development exists as the region’s primary economic development entity.  

Southwestern Pennsylvania is home to internationally competitive R&D assets in robotics and artificial intelligence (AI). At the frontier of this work stands Carnegie Mellon University (CMU), where faculty research has made the Pittsburgh region into a destination for academic colleagues and industry leaders from around the country and the globe. Complementing CMU’s research strengths in digital technologies, the University of Pittsburgh is a national leader in biotechnology and health-care-related fields, with a school of medicine that is one of the top-funded National Institutes of Health research institutions in the country.  

Attracted by CMU, several of the world’s largest tech companies, including Meta and Apple, have set up small, Pittsburgh-based offices to gain regular access to the university and research community, and determine likely directions and optimal uses for these emerging, disruptive technologies. Nvidia recently announced the launch of its first-ever “AI Tech Communities” in Pittsburgh through the establishment of joint centers for AI and related technologies at CMU and the University of Pittsburgh. However, these tech companies’ focus remains almost exclusively on building specific university-based relationships, with minimal interest in broader business or economic development impact across the region.  

All in all, Pittsburgh’s preeminence in R&D has failed to generate substantial job creation across the broader region. Technology-driven business activity will need to accelerate significantly for Southwestern Pennsylvania to translate its technology strengths into real opportunities for regional prosperity. 

Progress to date: Experimentation with sustainability financing for the robotics cluster  

Led by a board of directors co-chaired by the Allegheny Conference and CMU, the Southwestern Pennsylvania New Economy Collaborative (NEC) received a $62.7 million BBBRC grant to translate the promise of Pittsburgh’s world-class AI and robotics research assets into inclusive growth across an 11-county region traditionally dependent upon coal mining and agriculture. Grant funds were allocated across five projects designed to advance de-risking robotics and technology adoption in the marketplace; talent development and up-skilling; and promoting innovation and commercialization to spur economic growth. 

Each of the five projects has now gained genuine traction with its target constituencies, with some already exceeding program expectations and starting to exhaust awarded budgets. The NEC’s Regional Economic Competitiveness Officer (the BBBRC coalition’s lead coordinator) has been highly attentive to the resource needs of the various project components from the start, and has worked with each project lead to develop both a sustainability strategy and access to needed additional resources, usually through philanthropic foundation support. Yet despite considerable progress, NEC is still seeking to establish and fund a more focused and unified approach to regional transformation that can be even greater than the sum of the individual BBBRC project components for effecting real change. 

Philanthropic support may prove to be a productive starting point for this next-phase effort. During the BBBRC proposal development phase, NEC received a collective matching funds commitment of $20 million from six of the region’s leading philanthropic foundations—a commitment that proved to not be needed to secure the original BBBRC grant. That means those funds can still be called upon, as NEC has received confirmation that the collective philanthropic funds remain available. However, in each case, participating foundations have emphasized that requests for further NEC funding must fit specifically within each foundation’s mission and stated priorities, which can vary significantly across these foundations and would be considerably strengthened by co-investments from the state. 

To access this philanthropic funding, NEC will need to craft specific, tailored grant requests to each foundation—making the logistics of developing a unified program for philanthropic support considerably more challenging. State support and business participation remain other potential avenues of support for a broader NEC effort. Unlike most other BBBRC coalitions, NEC did not receive upfront match or other funding and engagement commitments from either the commonwealth of Pennsylvania or from most of the estimated 120 AI and robotics companies that are active in the region.  

Ways forward: Emerging ideas and strategies for sustainability 

As coalition members continue project implementation, NEC leadership’s core focus is now to activate and sustain additional state, philanthropic, corporate, and other stakeholders to broaden NEC, including by providing access to capital for entrepreneurship and startup growth. Through visioning sessions with scientists, investors, and corporate leaders, the coalition has set an ambitious target to make Pittsburgh a top-three region for Fortune 500 robotics companies within the next 10 years. To realize that ambitious yet achievable vision, those focus groups developed consensus around two main recommendations.  

First, the focus groups called for seizing the growth capital investment opportunity. To that end, NEC’s initial step, with support from a national consulting firm specializing in regional capital interventions, is to organize a dedicated early- and growth-stage venture capital fund-of-funds of up to $200 million for startup and growth companies in the AI and robotics sectors. Such a fund-of-funds would attract investments into a common fund administered by an expert investor and fiduciary, which would in turn invest in a range of participating venture capital funds that would then make investments in promising startups and growth-stage companies. (The fund-of-funds structure, while slightly more expensive to administer, offers the advantage of mitigating the risks of more direct venture capital investments through the work of a seasoned investor-manager.) This effort is intended to draw support from the state government and philanthropic community, though neither the commonwealth of Pennsylvania nor any of the several Pittsburgh-area foundations (mainly the Richard King Mellon Foundation) that make growth-capital investments have traditionally done so through this kind of third-party, pooled-fund structure. Still, if realized, such a unified fund-of-funds strategy for AI and robotics would likely provide a new and appropriate “forcing mechanism” for identifying and advancing genuine opportunities—driven, importantly, by market signals and demonstrated demand.  

Second, NEC aims to leverage state investment to advance placemaking priorities in support of building out a robust cluster strategy. The focus groups elevated the need to improve regional quality of life as a core priority. Accordingly, NEC plans to engage regional economic development organizations and tap resources from the state’s $500 million Strategic Investments to Enhance Sites (PA SITES) Program to improve the region’s infrastructure. 

Such a regional capital strategy, leveraged with ongoing NEC efforts to advance each of the five BBBRC project components, is designed to extend and expand the impact of the BBBRC grant to support a growing robotics and AI cluster for the benefit of the entire region.

Starting point: A diverse regional economy with scattered state and philanthropic investment 

While many regions competing for major federal awards have either long faced economic distress or been affected by deindustrialization in ​​recent decades, the Minneapolis-Saint Paul region has maintained a relatively prosperous economic record, characterized by a highly diversified regional economy. A “headquarters economy,” the region is home to one of the country’s highest concentrations of Fortune 500 companies, as well as over 15,000 health care organizations. Among the region’s major clusters are agriculture, food and water, health and medicine, financial services, and advanced manufacturing. 

In this vein, the region’s economic development vision has been developed and driven principally by the investors in the Minneapolis Saint Paul Regional Economic Development Partnership (GREATER MSP). Founded in 2011, GREATER MSP brings together businesses, universities, foundations, and public sector partners to serve as a regional hub for advancing the growth of the region’s major industry clusters. The region’s universities (which include the University of Minnesota, an R1 institution, and ​​​​the 33 institutional members of the Minnesota State colleges and universities system) also play substantial roles in regional economic development and work closely with GREATER MSP. Meanwhile, the state has historically focused investments in transportation, infrastructure, and housing as opposed to traditional economic development strategies. 

Progress to date: In absence of federal award wins, the region is activating state, commercial, and other diverse sources of capital 

Led by ​​GREATER MSP, the Minneapolis-Saint Paul region was awarded finalist designations in both the BBBRC and Tech Hubs competitions, but did not receive an implementation award for either. Still, these federal competitions have catalyzed GREATER MSP and its partners’ creation of enduring sector strategies powered by local investment. The region’s $57 million BBBRC application proposed the development of a Bold North BioInnovation Cluster, leveraging the region’s assets in food and health to accelerate the deployment and industry adoption of biology-based technologies. The Tech Hubs proposal aimed to develop a globally competitive Smart MedTech cluster in the region, accelerating the use and deployment of AI and machine learning in medical technology to improve patient access, experiences, and outcomes. While the region did not receive implementation funding, it did receive a total of $1 million in strategy development and planning grants, which validated the region’s assets and early work to develop aligned regional strategies for cluster growth. 

These experiences have informed and shaped the region’s approach to securing alternative sources of funding to sustain cluster development efforts, beginning with the state. During the BBBRC process, GREATER MSP received relatively little support from the state of Minnesota. But after receiving feedback from the Economic Development Administration (EDA) that one of their coalition’s weaknesses was the absence of meaningful state support, GREATER MSP elevated to state leaders the need and timeliness of large-scale capital to remain competitive for federal funding. In 2023, state leaders established the Minnesota Forward Fund, a $400 million state fund ​​for securing future federal investment, and invested $45 million in Minnesota’s first green bank. Because of the way the state legislature designed the Minnesota Forward Fund, its usage is largely confined to securing federal semiconductor and clean energy incentives; GREATER MSP was unable to access the funds to support the region’s Tech Hubs strategy. 

Beyond BBBRC and Tech Hubs, the region has realized wins from other federal industrial policy programs. The region secured a $525 million investment in Polar Semiconductor, including $120 million in federal CHIPS and Science Act incentives and a $75 million state investment through the Minnesota Forward Fund, with additional potential awards under consideration. In support of these awards, GREATER MSP helped launch the Minnesota CHIPS Coalition, a partnership of companies and other organizations working to develop shared strategies around major priorities, including workforce.  

In addition, the region has emergent strategic sector initiatives beginning to gain momentum. GREATER MSP has been able to build durable partnerships around portions of its BBBRC portfolio, including strategies that are critical for the future of the food industry, by braiding commercial and philanthropic capital. For example, regional firms and institutions such as General Mills, Cargill, Target, and the University of Minnesota collectively pool more than $300,000 annually to power the backbone governance operations of the ​​MBOLD coalition, a cross-sector coalition working to advance sustainable food strategies, including sustainable films and packaging. Similarly, a $600,000 annual grant from a national philanthropic funder is supporting the development of a sustainable plant and animal protein cluster. As Matt Lewis, vice president of strategic initiatives at GREATER MSP noted, “We probably wouldn’t have had partners around the table seeing the opportunity there if not for Build Back Better, because they had to work and look at the map of…their real opportunity for Minnesota’s assets.” The federal planning grant provided important startup capital to de-risk the pursuit of these emergent initiatives; corporations are now building on the initial momentum, with complementary support from philanthropies interested in improving environmental sustainability. 

Beyond the BBBRC portfolio, the region is leveraging corporate support to develop a sustainable aviation fuels (SAF) hub. The development of this cluster has been primarily driven by airline companies, which view SAF as critical for the future of the industry. GREATER MSP has secured roughly $1 million in private sector funding for strategic planning and regional hub development. This initiative has been complemented by a 2023 state tax credit for the SAF industry. Moving forward, the region is exploring both private sector and federal funding opportunities to bolster its SAF cluster.  

Ways forward: Emerging ideas and strategies for sustainability  

The Minneapolis-Saint Paul model centers on understanding market-driven demand within regional sectors of strength and building “hub” capabilities to drive actions: convening key actors, aligning interests, and otherwise developing an adaptable cluster strategy, while activating other capital to support cluster development. GREATER MSP’s deep network of investors—including private sector companies, financial institutions, philanthropy, and local governments—allows it to maintain financial independence and self-sustainability. This gives it the flexibility to think in the medium and long term to support strategy development, and quickly restructure and redeploy internal resources for industry-focused sprints around critical deadlines.  

Matt Lewis at GREATER MSP noted that having corporate champions is critical. When industry leaders see an industry-focused hub initiative working, it can garner industry engagement and support for new initiatives. As an example of this “show, don’t tell” approach, Delta and other airlines now involved in the Minnesota SAF Hub engaged with GREATER MSP because they saw the work it was doing in the region’s agriculture cluster. In other words, the perceived value did not come from GREATER MSP or state government trying to sell themselves as hubs, but rather from companies seeing value being created for private sector partners and the region. 

In addition, GREATER MSP also hopes to begin attracting more federal funding for industrial policy development. State incentives are attracting semiconductor investments, and private sector capital in SAF may attract future investment from the Department of Energy and Department of Agriculture. Rather than letting federal funding dictate the direction of cluster development, the region is instead seeking opportunistic federal resources to support cluster development already underway based on private sector and regional priorities. To that end, the Minneapolis-Saint Paul region’s experience underscores the need for a robust, flexible, and self-sustaining hub organization that can maintain the pulse of industry and pivot quickly to capitalize and scale commercial, state, and philanthropic investment. 

The three case studies yield four suggestions pertinent to the sustainability challenge 

The case studies from Tulsa, Pittsburgh, and Minneapolis-Saint Paul dramatize key aspects of the sustainability challenge as the federal investment moment wanes. Above all, they highlight both the renewed urgency of extending finance beyond the runtime of early awards and the multilayered challenges in achieving that extension. The import is therefore clear: Whether regions ended up receiving one, two, or zero federal awards, the likely absence of further federal funding—at least in the near term—means that regional leaders must now explore, source, and stack other sources of capital to build out or extend their vision and plan. In that process, they must likely also sharpen their governance structures and stakeholder value propositions to advance their best chances for competitive success in building industries of the future. 

To develop their effectiveness in these ways, regional leaders must overcome or circumvent other locally based hurdles to longer-term viability. They may struggle to convince local philanthropies that their needs fully align with where and how donors prefer to give. They may be challenged to secure hometown corporate cash given that more and more companies (and banks) are nationally or even globally owned and focused. And regions may lack proximate universities, philanthropic or family foundations, or even state governments with a well-established history of engagement in—and dedicated resources for—place-based economic development. Moreover, for those that have received one or more of the federal industrial policy awards, regional leaders will now also need to find sources of sustainability for these federal grants that complement rather than compete with the resources that already support their own organizations. Overall, they must meet the conditions that come with elements of the capital stack. 

And yet, even though the coming financial challenges may be significant and will vary from region to region, the case studies explored here demonstrate how agile and determined regional leaders can chart successful paths toward sustainability and growth. Here are some takeaways, based on the experiences highlighted above: 

1. Federal place-based industrial policy awards have already succeeded in seeding growth in new places while generating momentum for existing regional development efforts. 

Even though federal appropriations levels have frequently fallen short of initial program goals, winning one or more of these awards has sharpened and energized the work of regional leaders in determining their best shots for advancing technology-based growth. These benefits are quite clear in the cases of Tulsa and Pittsburgh. And in the case of GREATER MSP, just the focusing process of pulling coalitions together to compete for federal grants provided an impetus for economic development in the region, regardless of the competition’s outcome. 

2. While large federal awards have been catalytic, they cannot by themselves serve as fully formed and sustainable drivers for regional cluster development. 

In a highly disruptive climate for federal policy, it is more important than ever for state and local leaders to realize the promise of recent federal and other programs by effectively integrating them into the strongest local opportunities for regional development.  

In this respect, the case studies exemplify regional leaders’ early awareness that even so-called “transformational” federal grants may represent only a starting point for genuine long-term transformation. In Tulsa, TIL has received a combined total of $90 million through its BBBRC and Tech Hubs awards to begin the pursuit of a major industrial opportunity around advanced air mobility. Nevertheless, TIL’s leaders readily acknowledge that the region will need far more than $90 million to build this still-evolving cluster into something that can make the Tulsa region’s air mobility sector “globally competitive…over the next decade”—as was the challenge envisioned by the Notice of Funding Opportunity for the Tech Hubs program. And such additional funds will likely need to come at scale from multiple sources.  

In Pittsburgh, NEC has worked smartly and effectively with its federal BBBRC grant project leaders to launch promising programs for advancing technology adoption, talent development, and entrepreneurship and commercialization efforts around robotics and AI. But with less than two years of federal grant funds remaining, each of these projects is certain to require more resources to realize their full potential. Meanwhile, NEC is still seeking to build a suitable platform to bring these projects together and establish the region as a national AI and robotics destination. The costs of developing and deploying such a signature platform will be substantial—and again, will require regional support. 

3. Advancing sustainable regional cluster growth strategies, regardless of past or future awards, will continue to require tough work for both emerging and existing regional system hub organizations.

In places that have utilized the federal place-based grant process to bring together broad coalitions of regional leaders for the first time, regional governance structures must now quickly evolve. Specifically, they must take the critical next step from short-term coalitions and project portfolios designed to win funding competitions toward becoming the kind of longer-term, diverse stakeholder collaborations that are already working as regional system hubs in other places to build, sustain, and realize transformational ambitions.  

As is clear from each of the three case studies, regional system hub organizations can play an outsized role in defining and iteratively refining an effective governance and sustainability process. In cases such as Pittsburgh, existing coalitions such as the Allegheny Conference and InnovatePGH are proving to be essential in helping grant designees such as NEC translate the promise of a major federal award into a regional priority for inclusive growth. In Tulsa, the leading regional hub (TIL) has taken on responsibility not only for advancing two separate, federally awarded programs, but also charting its own growth and sustainability strategy to assure long-term success for the entire region. And in Minneapolis-Saint Paul, GREATER MSP is emerging from the federal funding period with latitude to act outside the confines of any particular grant program, all while needing to maintain the region’s best and most promising opportunities for economic growth—with or without federal support.  

In all cases, regional system hubs now enjoy expanded roles and compelling new responsibilities that are likely to only broaden in the post-grant period. Going forward, they will be uniquely well positioned to move governance and the development process into even larger iterative engagements with key community and regional stakeholders to enable long-term success. 

4. Successful sustainability strategies will need to draw from a mix of public and private regional sources in the capital stack, with some funders likely (or required) to come to the table earlier than others. 

States are essential to help grow and sustain regional capital strategies from the outset by providing both financial resources (e.g., grants, tax credits, incentives) and programmatic resources (e.g., research/commercialization, workforce, startup development, infrastructure). Given the rigorous national competition required to win even a preliminary designation (let alone funding) for one of these major federal awards, there is simply no excuse for state policymakers to overlook the highly competitive assets and aligned stakeholders that can advance their region’s best prospects for economic growth. 

Coalition leaders in each case study seized on the “validation” these federal designations provide to drive that message home with state funders. As a result, all have captured state attention for their sector-building efforts around these awards. NEC, for example, has opened productive discussions with the Pennsylvania governor’s office to explore prospects for innovation funding to advance unique regional AI and robotics capabilities that resonate with the commonwealth’s broader economic development priorities. TIL has secured an unprecedented appropriation of $15 million from the Oklahoma legislature to advance its Tech Hubs award. And GREATER MSP has worked with state government to develop the Minnesota Forward Fund, which has already provided $75 million in state funding to incentivize a $125 million CHIPS and Science Act investment for a Minnesota-based semiconductor company.  

In addition, regional leaders have heard loud and clear from their local stakeholders that significant state funding will be especially important for validating and encouraging their own investments in these technology sector opportunities. States now need to get much more involved. 

Philanthropic institutions and family foundations (when present in a region) can also play an early and uniquely important role in enabling “big bets” and making foundational investments to help build underlying governance structures for driving regional success. Such investments are essential because strategic sector growth, by definition, requires building clusters around emerging technologies that are either still rapidly evolving or may not yet even fully exist. Pittsburgh is a prime example of this: The region’s university research drivers for AI and robotics development are arguably some of the best in the world, but the most effective and inclusive applications of those technologies to move a regional economy remain to be seen. Meanwhile, NEC’s BBBRC grant seeks to translate such research promise into a growth strategy for all citizens of an 11-county region, where a substantial network of traditionally engaged philanthropic foundations is perfectly positioned to help in testing and taking the next essential steps. Likewise, in Tulsa, the Kaiser Family Foundation is prepared to fund a regional hub intermediary such as TIL to “de-risk” and take the big swings to help the region secure the industries of the future. There, philanthropic funds first helped define the federal grant opportunities around advanced air mobility, and now are working to support an expert professional team in realizing them. Their largesse will now only grow in importance for regions. 

Universities and community colleges have been essential partners in winning and implementing federal place-based grants, and also represent longer-term prospects for financial support of regional cluster-building efforts. In the case of both Pittsburgh and Tulsa, regional universities and community colleges were core participants in the coalitions that secured federal awards. Furthermore, in each case, several of these higher education partners are now directly participating in program implementation through designated awards and sub-awards of grant funds. Relatedly, in Pittsburgh, Carnegie Mellon University’s president serves as co-chair of NEC’s board of directors.  

However, neither region has yet turned to its higher education stakeholders as possible sources of—or prospective partners for securing—additional funding to sustain the regional strategies federal awards enabled. Such participation, if it comes, will likely be later in the development process, as regions clarify programmatic deliverables for further support or begin to explore opportunities with other federal agencies and philanthropic funders for additional grant funds. 

Long-term sustainability will require market validation for success, with full corporate buy-in likely to demand more time. A substantial portion of federal dollars deployed in new industrial policy programs such as the BBBRC and Tech Hubs is designed to build capacity for technology growth and adoption by establishing new centers and programs, along with new and inclusive workforce development efforts. As such, these initial federal dollars seek to activate the “supply side” of emerging technology opportunities by expanding a region’s readiness to capture these opportunities and put them to work. 

Missing from many of these programs, however, is the “demand side”: literally, the business growth and the work itself. The demand side is truly where the business and commercial sector will assure success. Workforce programs need to result in job placements with regional companies. Promising university-based discoveries need to find commercial development pathways for translation. And innovative startup companies will need to secure further funding—and even substantial corporate investment and sponsorships—to forge pathways through the expensive and challenging landscape for survival. 

Corporate participation in regional sustainability strategies thus becomes something that is not only desirable, but essential. Business must be at the governing table of any sustainability coalition (and in many cases, it’s already there). But determining how and where business will invest in that coalition’s programs will be the best early indicator of the prospects for the growth strategy’s ultimate validation. Securing corporate investment at scale will likely take both more time and more work, as regional hubs seek to develop investable deliverables around workforce and market initiatives that can point toward genuine opportunities for company participants to realize a return on those investments. 

Finally, promising indications of business engagement can still come early on through strategies that succeed in sparking growth capital investments from companies and other sponsors. Each of the regional hubs featured in these case studies has intentionally sought to attract business development growth capital as an early priority. In Pittsburgh, it was NEC convening a group of regional AI and robotics companies which led to both a clear vision for success (Pittsburgh aiming to be among the top three U.S. regions for AI and robotics companies by 2035) and an investment plan to get there (a $200 million venture capital fund-of-funds for AI and robotics startups, to be sourced by public, philanthropic, and business growth capital investors). In Tulsa, it has been TIL standing up Rose Rock Bridge to bring energy companies’ business development investments into the region to attract and advance promising energy startups from around the country as part of a $50 million program. For TIL, the next step is to take that same corporate growth capital playbook and extend it to comparable opportunities in advanced air mobility. And in Minneapolis-Saint Paul, it has been GREATER MSP convening corporate investors for a range of business development investments around sustainable packaging, plant- and animal-based protein development, and sustainable aviation fuels.  

Importantly, and in each case, the regional hubs have started with “the end in mind” of the desired business investment, and then begun the work from there to build capacity and make the promise of that investment more compelling and productive. 

Conclusion 

In a real sense, the U.S. has witnessed an unprecedented push for regional renewal through the federal industrial policy programs of the past four years. By catalyzing the development of sustained, “bottom-up” execution across a range of regions and localities, the new place-based challenge grants (and federal hub designations, even in the absence of funding) are catalyzing new approaches to inclusive economic growth. 

Fortunately, and especially at this moment of federal policy transition, the current federal strategy of critical economic asset definition and advancement also reflects (and indeed, has frequently further supported) the same kinds of strategic approaches that already drive the country’s best regional economic development leaders and their organizations every day. And where these federal awards have gone to regions that were not yet organized around system hub coalitions, that organizational process is now well underway in many places. 

The promise is that no matter what happens at the federal level in the near term, these kinds of asset-based, inclusive regional growth strategies—and the institutional coalitions that must drive them—are gaining traction, and they’re here to stay. Yet with further federal support uncertain, these regional system leaders will need to turn to the funding sources closer to home that make up each region’s “capital stack” of public, business, university, and philanthropic stakeholders and investors. 

Efforts to deploy a range of regional capital sources for further growth will not be easy—indeed, they never are. But with the right kinds of strategic definition, effective leadership, and appropriately engaged stakeholders, the regional opportunities that have been unlocked through federal industrial policy competitions can and will proceed toward truly shared regional prosperity. This result will provide the firmest foundation possible for assuring continued American economic growth.