What state and local leaders need to know about the federal government’s regional Tech Hubs competition

Intel semiconductor wafer fab manufacturing plant Photo: Shutterstock

Last week, the Economic Development Administration (EDA) posted a Notice of Funding Opportunity (NOFO) for the Regional Technology and Innovation Hubs (Tech Hubs) program. In doing so, the EDA has invited regional consortia across the country to apply for federal funding awards to accelerate the scale-up of their advanced industries as part of a new wave of place-based economic development.

The NOFO is the first of two for the Tech Hubs program, and launches the $500 million competition as a down payment on an authorized—but not yet fully funded—$10 billion initiative to transform the nation’s industrial geography.

Envisioned by Brookings Metro and the Information Technology and Innovation Foundation in 2019 and structured by last year’s CHIPS and Science Act, the Tech Hubs program represents a key part of the nation’s new push to build global economic leadership by unlocking development in new places. It shows that, at last, the nation is urgently investing in the creation of good jobs in more places.

Yet while the opportunity is critical for the nation as a whole, it is equally momentous for regions and their leaders.

For one, the new program—if fully funded in the coming years—stands out as a centerpiece of the nation’s emerging suite of place-based industrial programs that target particular locations in their efforts to encourage growth.

Beyond that, the competition matters for regional leaders because its success revolves around regional initiative, regional design, and regional execution to generate regional economic takeoff. In that sense, the program’s energy and implementation will be heavily “bottom-up,” reflecting its strong focus on regional industry ecosystems and local growth factors. As such, the Phase 1 NOFO seeks to award multiple grants to support regions’ planning as well as a number of immediate “Tech Hub Designations” that signal places’ present readiness to receive implementation funding. Strategy grants of $400,000 to $500,000 will allow places to prepare and coordinate for a potential Designation proposal in the Phase 2 competition later this year; Tech Hub Designations awarded in Phase 1 will come with no money for now but represent a strong signal of regions’ readiness for a Phase 2 award.

Along with the competition’s specific requirements and criteria, the long-awaited NOFO conveys an array of perspectives about how place-based economic development will likely work best. Here are a few initial takeaways:

The Tech Hubs program differs from other regional awards in its focus on large-scale transformation and global leadership

The first way the Tech Hubs program stands apart from the federal government’s other recent place-based development competitions is in its economic ambition. Local proposal designers should look closely at the program’s unique priorities and its high bar.

In some ways, the program shares basic features with other place-oriented development challenges. For example, the NOFO lays out a “bottom-up” competition to secure economic development grants for boosting growth; in that sense, the Tech Hubs don’t look entirely different from other new programs, such as the EDA’s Build Back Better Regional Challenge (BBBRC); the National Science Foundation’s Regional Innovation Engines program; and the National Institute for Standards and Technology’s CHIPS Incentives Program. The last of these in particular supports “cluster-based economic development” in the semiconductor sector—not unlike the kind of dedicated ecosystem-building the Tech Hubs NOFO calls for.

Yet in other ways, the Tech Hubs program differs sharply from most of the rest of the Biden administration’s place-based programs. For one, prospective hubs will not be mainly focused on ameliorating long-term economic distress, as the BBBRC and Distressed Area Recompete Pilot Program concentrate on.

Table 1. Objectives and features of selected place-based industrial policy programs from the 117th Congress.

Nor does the program aim to launch or merely strengthen promising industry clusters the way the BBBRC does. “Nascent or less resourced technology areas” are not the Tech Hubs’ target, declares the NOFO.

Instead, the NOFO challenges regional planners to play in the big leagues. The EDA suggests that applicants start with strong local sectors and shoot for globally significant scale-up. The hubs’ remit is nothing short of global competitiveness, in this respect. Prospective Tech Hub locations are asked to show they possess “the assets, resources, capacity, and potential” to become “globally competitive, within approximately 10 years, in the technologies and industries of the future.” In this sense, applicants need to ask themselves a tough question: Can they truly align their region’s assets, potential, and strategy with a realistic path to making their place a global leader in a particular technology area?

Applicants need to align with key focus areas

But the Tech Hubs bar rises even higher. Not only must applicant regions describe a clear path to global leadership in a chosen domain, but that leadership must be projected in one or more Key Technology Focus Areas (KTFAs) set out by the CHIPS and Science Act and named in the NOFO.

These 10 focus areas—including artificial intelligence, advanced computing and semiconductors, quantum computing, and biotechnology—are some of the most demanding topics in modern science and technology.

Table 2. Technical and social priorities set out in the CHIPS and Science Act

Leadership in these KTFAs is required because preeminence in them “will enhance the competitive advantage and leadership of the United States in the global economy,” as the CHIPS and Science Act states. This ensures that the Tech Hubs competition is not just a helpful offer of economic development for regions, but a directed, rigorously structured framework for advancing serious industrial policy in a global context.

Nor does that framework defer entirely to regions on how they should shape their proposals.  Instead, the NOFO lays out seven “designation factors” that suggest a clear view of what makes a region ready for top-flight industrial development, and are the basis on which applicants can earn a maximum of 51 points in the competition. On the technology side of the ledger, these factors include:

  • The overall technology potential of the region. Technology leadership is central to the Tech Hubs vision. Therefore, the EDA says applicants should clearly describe the nature and magnitude of the region’s “market-relevant scientific capacity” and the associated growth opportunity, including via “reasonable, data-based” forecasts of the future global market. In this regard, the program is not looking to invest in new research and development; rather, it wants places to leverage existing strengths for compelling economic development purposes. Of the 51 points available, technology potential accounts for up to 15 points in the designation review.
  • The role of the private sector. The EDA clearly believes active business engagement is necessary to enable a truly self-sustaining economic takeoff. Therefore, the NOFO requires strong private sector participation, including from at least two firms engaged in the effort’s core technology. This can yield 6 points.
  • “Lab-to-market” approaches. The EDA names tech transfer and commercialization as a critical part of its model for transformation. Therefore, the agency says it is looking for proposals that “identify new and/or scaled-up proven models” for translating science into market opportunities. This can yield 6 points.

In sum, the Tech Hubs NOFO reflects a solid general framework and clear priorities for advancing technology-based regional economic development. As such, the EDA’s framework will be useful to regions of all sorts—not just Tech Hubs aspirants—that want to promote self-sustaining technology-based growth.

Equity and workforce are important considerations

The Tech Hubs NOFO goes beyond stipulations on technological innovation—it includes both equity and workforce development among the seven criteria by which applications will be judged, assigning them a combined 12 points out of 51 total.

Equity, which accounts for 6 points, can be tricky to define, but pervades the EDA’s broader vision of innovation. The NOFO’s description highlights “inclusive community engagement” and “ensuring that the economic benefits of the project will be shared by all communities in the project area, including any underserved areas.” Meeting this goal could include an array of interventions, so it’s useful to look at the examples the NOFO provides: supporting affordable housing, building the capacity of small and minority-owned businesses in the supplier network, and several workforce initiatives. Applicants will need to carefully consider their region’s needs and circumstances in determining how to weave equity into their strategies.

Equity will also influence the geography of where Tech Hubs will be designated. The NOFO follows the underlying statute to embrace “geographic diversity and representation” in future awards, strategy grants, and hub designations. This geographical equity acknowledges that larger and more populous metro areas tend to already have well-established innovation ecosystems. Therefore, at least one-third of Tech Hub grants and designations must “significantly benefit a small and rural community.” At the same time, at least two hubs must engage and benefit “underserved communities in and near metropolitan areas.”

The NOFO also signals the importance of workforce development by assigning it 6 points at review and requiring that consortia applying for funds include labor and workforce training organizations—groups that are not among the usual suspects in the innovation space. On this front, the NOFO asks applicants to describe how they will grow the STEM workforce to be inclusive of a wide range of skill and experience levels—spotlighting registered apprenticeships, career and technical education, community colleges, and labor management training programs. The NOFO also encourages employer practices for widening the recruitment pool, such as using skills-based hiring instead of relying on degrees as the sole proxy for skill.

Lastly, the NOFO underscores that workers can collaborate directly in the design, deployment, production, and delivery of new technologies. This obviously requires skilled workers, and the goal in this case is to strengthen the innovation process. While innovation proceeds in stages, it is not linear, and instead has feedback loops of design and application—which means that innovations are often tied to the manufacturing process itself.

The EDA has specific requirements for how regions construct cross-sector institutional consortia that can be effective long-term Tech Hub stewards

Organization and governance are also surfaced in the Tech Hubs designation factors. And rightly so: No single institution typically has the knowledge and capacity to execute transformative regional economy strategies on its own. Because of tech-based economic development’s reliance on university-based research and talent, entrepreneurship ecosystems, industry partnerships, and government funding and coordination, it is uniquely dependent on networks of institutions working seamlessly across a unified vision. The EDA is acknowledging the need for this networked approach through the development of regional consortia, and the agency has provided uniquely specific guidance on how these consortia should be structured and led.

Different than prior challenge grants, the Tech Hubs program mandates that each consortium includes at least one institution in each of the following categories: 1) institutions of higher education, with specific reference to minority-serving institutions; 2) state, territorial, local, or tribal governments; 3) industry groups or firms in relevant technology, innovation, or manufacturing sectors; 4) economic development organizations or similar intermediaries focused on technological innovation; and 5) labor or workforce training organizations. Beyond those mandates, the EDA outlines 13 additional types of institutions—from National Laboratories to community development financial institutions to K-12 education systems—that could be relevant consortia members. Many of these entities tend to have long-standing trust and ties with historically excluded communities, and will be critical to communicating how consortia-building is intentionally addressing the NOFO’s emphasis on equity and diversity. In our view, it is the clearest articulation from the federal government of the diverse range of institutions that bear responsibility for regional economies and the outcomes they produce. Of the 51 points in the competition, “regional coordination and partnerships” accounts for 6.

Ultimately, these institutions are tasked with working with and through the private sector to bolster competitiveness in key technology areas in ways that deliver regionwide inclusive prosperity. Thus, the EDA strongly encourages that consortia include at least two private sector companies working in those technology areas. Consortia commitment can be demonstrated by their formal membership, capital commitments, and active engagement. This allows the EDA to both test the relevance of local research and development activities for private sector commercialization and ensure that coalitions have the private sector buy-in necessary to sustain Tech Hubs beyond political cycles or turnover at key supporting institutions. Of the 51 points in the competition, “the role of the private sector” accounts for 6.

Pulling together consortia at this scale comes with challenges of governance. In response, the EDA asks applicants to list a “lead consortia member” and a “Regional Innovation Officer” to recruit, organize, and drive these institutional networks toward a shared strategy. The NOFO repeatedly emphasizes “quality over quantity” in how these consortia are formed, and suggests that “any history of [the consortia] working together in the past and achieving concrete successes will be relevant.” Applications with fewer partners that have made clear and significant commitments to working together in service of a Tech Hub will be received better than vague letters of support from hundreds of regional organizations. That said, the EDA’s desire to spark coalitions that can deliver economic progress for historically excluded groups means that Tech Hubs consortia cannot simply include the standard tech-based economic development institutions (e.g., research universities, business intermediaries, etc.).

Which brings us to a last key point on consortia design: the role of projects. As with the BBBRC, the EDA asks Tech Hubs applicants to outline “3-8 tightly aligned projects that aim to collectively address the region’s key inhibitors of global competitiveness.” In the BBBRC, projects have become the key unit for implementation, as EDA funding and outcome tracking occur at the project level. Our early insights on BBBRC implementation suggest that how those project ideas are surfaced and which institutions lead them will be a critical determinant in how and whether the consortium is representative of the entire region.

Regions need to link regional assets and scale-up to national missions

In the end, the Tech Hubs NOFO is an important watershed in that it assumes the globally significant potential of U.S. regions. Not an operation to repair damaged places, the new NOFO—unlike other opportunities this year—declares a mission to unlock critical value in promising places for the nation’s economic competitiveness and security. That’s the significance of the KTFAs, which steer regions’ efforts toward nationally strategic technologies.  And that’s the point of the last of the seven designation criteria, which assigns 6 points to proposals’ “impact on the economic and national security of the entire United States.”

In sum, the Tech Hubs NOFO makes plainer than ever that the problem-solving of regions is intertwined with the nation’s problem-solving on issues such as accelerating the pace of innovation, improving supply chain resiliency, promoting economic inclusion, and responding to climate change. Tech Hubs can and should help to solve the nation’s—and the world’s—grand challenges. And through this program, U.S. regions are challenged as never before to mobilize their many strengths and transform themselves—both for their own benefit as well as that of the nation.