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COMMERCE DEPARTMENT PROGRAMS TO

SUPPORT JOB CREATION AND INNOVATION AT

SMALL- AND MEDIUM-SIZED MANUFACTURERS

HEARING

BEFORE THE

SUBCOMMITTEE ON TECHNOLOGY AND INNOVATION 

COMMITTEE ON SCIENCE AND 

TECHNOLOGY 

HOUSE OF REPRESENTATIVES

ONE HUNDRED ELEVENTH CONGRESS

SECOND SESSION

JANUARY 21, 2010

Serial No. 111–71

Printed for the use of the Committee on Science and Technology

(

Available via the World Wide Web: http://www.science.house.gov 

(II)

COMMITTEE ON SCIENCE AND TECHNOLOGY 

HON. BART GORDON, Tennessee, Chair 

JERRY F. COSTELLO, Illinois 

EDDIE BERNICE JOHNSON, Texas 

LYNN C. WOOLSEY, California 

DAVID WU, Oregon 

BRIAN BAIRD, Washington 

BRAD MILLER, North Carolina 

DANIEL LIPINSKI, Illinois 

GABRIELLE GIFFORDS, Arizona 

DONNA F. EDWARDS, Maryland 

MARCIA L. FUDGE, Ohio 

BEN R. LUJA ́ N, New Mexico 

PAUL D. TONKO, New York 

JOHN GARAMENDI, California 

STEVEN R. ROTHMAN, New Jersey 

JIM MATHESON, Utah 

LINCOLN DAVIS, Tennessee 

BEN CHANDLER, Kentucky 

RUSS CARNAHAN, Missouri 

BARON P. HILL, Indiana 

HARRY E. MITCHELL, Arizona 

CHARLES A. WILSON, Ohio 

KATHLEEN DAHLKEMPER, Pennsylvania 

ALAN GRAYSON, Florida 

SUZANNE M. KOSMAS, Florida 

GARY C. PETERS, Michigan 

VACANCY 

RALPH M. HALL, Texas 

F. JAMES SENSENBRENNER JR., 

Wisconsin 

LAMAR S. SMITH, Texas 

DANA ROHRABACHER, California 

ROSCOE G. BARTLETT, Maryland 

VERNON J. EHLERS, Michigan 

FRANK D. LUCAS, Oklahoma 

JUDY BIGGERT, Illinois 

W. TODD AKIN, Missouri 

RANDY NEUGEBAUER, Texas 

BOB INGLIS, South Carolina 

MICHAEL T. MCCAUL, Texas 

MARIO DIAZ-BALART, Florida 

BRIAN P. BILBRAY, California 

ADRIAN SMITH, Nebraska 

PAUL C. BROUN, Georgia 

PETE OLSON, Texas 

SUBCOMMITTEE ON TECHNOLOGY AND INNOVATION

HON. DAVID WU, Oregon, Chair 

DONNA F. EDWARDS, Maryland 

BEN R. LUJA ́ N, New Mexico 

PAUL D. TONKO, New York 

HARRY E. MITCHELL, Arizona 

GARY C. PETERS, Michigan 

JOHN GARAMENDI, California 

BART GORDON, Tennessee 

ADRIAN SMITH, Nebraska 

JUDY BIGGERT, Illinois 

W. TODD AKIN, Missouri 

PAUL C. BROUN, Georgia 

RALPH M. HALL, Texas 

MIKE QUEAR Subcommittee Staff Director 

MEGHAN HOUSEWRIGHT Democratic Professional Staff Member 

TRAVIS HITE Democratic Professional Staff Member 

HOLLY LOGUE Democratic Professional Staff Member 

MELE WILLIAMS Republican Professional Staff Member 

VICTORIA JOHNSTON Research Assistant 

(III)

C O N T E N T S 

January 21, 2010

Page 

Hearing Charter ...................................................................................................... 2

Opening Statements

Statement by Representative David Wu, Chairman, Subcommittee on Technology and Innovation, Committee on Science and Technology, U.S. House 

of Representatives ................................................................................................ 6

Written Statement ............................................................................................ 6

Statement by Representative Adrian Smith, Ranking Minority Member, Subcommittee on Technology and Innovation, Committee on Science and Technology, U.S. House of Representatives ............................................................... 7

Written Statement ............................................................................................ 7

Witnesses:

Hon. Dennis F. Hightower, Deputy Secretary of Commerce, U.S. Department 

of Commerce 

Oral Statement ................................................................................................. 9

Written Statement ............................................................................................ 10

Biography .......................................................................................................... 14

Ms. Jennifer Owens, Vice President, Business Development at Ann Arbor 

Spark 

Oral Statement ................................................................................................. 14

Written Statement ............................................................................................ 16

Biography .......................................................................................................... 17

Ms. Roseann B. Rosenthal, President and CEO, Ben Franklin Technology 

Partners of Southeastern Pennsylvania 

Oral Statement ................................................................................................. 18

Written Statement ............................................................................................ 19

Biography .......................................................................................................... 24

Mr. Michael Coast, President, Michigan Manufacturing Technology Center 

(MMTC) 

Oral Statement ................................................................................................. 25

Written Statement ............................................................................................ 27

Biography .......................................................................................................... 62

Appendix: Answers to Post-Hearing Questions

Hon. Dennis F. Hightower, Deputy Secretary of Commerce, U.S. Department 

of Commerce ......................................................................................................... 84

Ms. Jennifer Owens, Vice President, Business Development at Ann Arbor 

Spark ..................................................................................................................... 85

Mr. Michael Coast, President, Michigan Manufacturing Technology Center 

(MMTC) ................................................................................................................. 86

(1)

COMMERCE DEPARTMENT PROGRAMS TO 

SUPPORT JOB CREATION AND INNOVATION 

AT SMALL- AND MEDIUM-SIZED MANUFACTURERS 

THURSDAY, JANUARY 21, 2010

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON TECHNOLOGY AND INNOVATION, 

COMMITTEE ON SCIENCE AND TECHNOLOGY, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 10:14 a.m., in Room 

2318 of the Rayburn House Office Building, Hon. David Wu [Chairman of the Subcommittee] presiding.

2

1The Facts About Modern Manufacturing, 8th Edition (Manufacturing Institute, 2009).

2 Next Generation Manufacturing Study Overview and Findings (American Small Manufacturers Coalition, 2009).

HEARING CHARTER

SUBCOMMITTEE ON TECHNOLOGY AND 

INNOVATION

COMMITTEE ON SCIENCE AND TECHNOLOGY

U.S. HOUSE OF REPRESENTATIVES 

Commerce Department Programs to 

Support Job Creation

and Innovation at Small- and MediumSized Manufacturers 

THURSDAY, JANUARY 21, 2010

10:00 A.M.–12:00 P.M. 2318 RAYBURN HOUSE OFFICE BUILDING

I. Purpose 

Small- and medium-sized manufacturers employ millions of 

Americans and are an important contributor to economic growth. 

The Department of Commerce (DOC) has new and existing initiatives intended to strengthen these businesses and help them create 

more jobs. The purpose of this hearing is to learn about the challenges faced by small- and medium-sized manufactures, as well as 

entrepreneurs marketing new technology. The purpose is also to 

learn about DOC initiatives to address these challenges and examine how those programs can be made most effective for these enterprises.

II. Witnesses

• The Honorable Dennis F. Hightower, Deputy Secretary 

of Commerce, U.S. Department of Commerce

• Ms. Jennifer Owens, Vice President, Ann Arbor Spark

• Ms. RoseAnn B. Rosenthal, President & CEO, Ben Franklin Technology Partners of Southeastern Pennsylvania

• Mr. Michael Coast, President, Michigan Manufacturing 

Technology Center

III. Brief Overview 

Manufacturing in the U.S. Economy 

Employing 11.8 1 to 13 million people,2 the manufacturing sector 

plays a critical role in the U.S. economy. The Manufacturing Institute estimates that the $1.637 trillion worth of goods created by 

U.S. manufacturers in 2008 would position the sector as the eighth 

largest economy in the world. Manufacturing also accounts for 

3

3The Facts About Modern Manufacturing, 8th Edition.

4The Facts About Modern Manufacturing, 8th Edition.

5 Next Generation Manufacturing Study Overview and Findings

6 Next Generation Manufacturing Study Overview and Findings

more than half of U.S. exports. And, in addition to the workers directly employed in manufacturing, the industry also supports 6.8 

million jobs in areas from transportation to insurance. Within this 

sector, small- and medium sized firms vastly out-number their 

larger counterparts. Of the 286,039 manufacturers in the U.S., 

fewer than 3,000 employ more than 500 workers.3

Even prior to the 2008 economic crisis, U.S. firms faced increasing competition from foreign manufacturers. Between 2000 and 

2007, U.S. global market share of manufactured exports fell from 

19 percent to 14 percent. During that same period, the Chinese 

share of these global exports rose from 7 percent to 17 percent.4 An 

array of factors have contributed to the decline in U.S. manufacturing. However, making progress in a number of areas could help 

U.S. manufacturers become more competitive and grow. These 

areas include: 

• Workforce. The National Science Foundation’s Science and 

Engineering Indicators show that only 5 percent of U.S. college graduates major in engineering, compared with 20 percent in Asia. The Manufacturing Institute reports that many 

U.S. manufacturers have difficulty finding the qualified engineers they need. It also reports that many manufacturers 

cannot find enough workers with the requisite math and 

science skills necessary for modern manufacturing.

• Engaging in Global Commerce. In 2008, U.S. imports of 

manufactured goods from China were seven times greater 

than U.S. exports to China. The U.S. total share of Chinese 

imports of manufactured goods is only 8.2 percent, behind 

Japan’s share at 17.7 percent. Increased trade with foreign 

markets is beneficial for American manufacturers. According 

to the Manufacturing Institute, U.S. manufacturers in the 

most trade-intensive industries paid their employees on average 47 percent more than the average compensation for 

workers in the least trade-intensive industries. However, in 

a 2009 study of 2,500 small- and medium-sized manufactures by the American Small Manufacturers Coalition only 

28 percent of respondents found ‘‘global engagement’’ to be 

‘‘highly important.’’ 5

• Green Manufacturing. In the study of small- and mediumsized manufacturers by the American Small Manufacturers 

Coalition, only 16 percent reported that environmental concerns were ‘‘highly important.’’ The report notes that increasingly, major companies are requiring robust environmental 

standards from their suppliers and that adopting environmentally sustainable manufacturing practices are important 

to competitiveness.6

4

Commerce Department Programs

CommerceConnect 

The CommerceConnect program will set up a website and physical centers to provide a ‘‘one-stop-shop,’’ where DOC staff can 

counsel businesses on DOC programs that may benefit their operations and assist them in applying for these programs. Potential 

services include guidance on exporting, assistance applying for 

grants or patents, and help using government census data to do 

business planning. In addition to guiding small- and medium-sized 

businesses toward available resources, the DOC hopes 

CommerceConnect will integrate currently stove-piped programs 

and reduce the challenge of navigating federal bureaucracy. In October 2009, the DOC opened a pilot CommerceConnect facility in 

Plymouth, Michigan. 

The objective of the pilot is to better understand the needs of 

businesses and to develop more effective methods of matching them 

with the relevant DOC programs and services.

The Office of Innovation and Entrepreneurship 

To support the Administration’s efforts to encourage innovative 

entrepreneurship, the DOC created the Office of Innovation and 

Entrepreneurship. The Office, which reports directly to Commerce 

Secretary Locke, will focus on a range of issues, including:

• Cultivating entrepreneurship;

• Improving access to governmental data, research, and technical resources for entrepreneurs;

• Accelerating technology commercialization of federal R&D;

• Increasing access to capital for seed and early-stage innovation-based companies; and

• Strengthening interagency collaboration and coordination.

The Office is also establishing a National Advisory Council on Innovation and Entrepreneurship to advise the Secretary. The council 

will include successful entrepreneurs, innovators, angel investors, 

venture capitalists, and others.

The Sustainable Manufacturing Initiative 

The Manufacturing and Services Division within the DOC’s 

International Trade Administration includes a website 

(www.manufacturing.gov) that offers market information from different industrial sectors, as well as updates from the Manufacturing Council, and other information. One of the focuses of the 

Manufacturing Portal under the Obama Administration will be the 

Sustainable Manufacturing Initiative, originally begun in 2007. A 

major goal of this initiative is to help American manufacturers increase their competitiveness by reducing waste and gaining market 

share for more environmentally sustainable products and processes. As part of this initiative, the DOC has:

• Established an Interagency Task Force on Sustainable Manufacturing, as a subgroup of the Interagency Working Group 

5

7http://www.mep.nist.gov/documents/pdf/about-mep/impacts/

Finall2009lMakinglalDifference%208.5lXl11.pdf.

on Manufacturing Competitiveness. The subgroup includes 

representatives from 15 federal agencies.

• Launched (in October of 2009) a central online clearinghouse 

of U.S. Government programs and resources that support 

sustainable business, which includes information on 300 federal programs.

• Organized Sustainable Manufacturing Showcases where 

manufacturers tour other manufacturing facilities across the 

U.S. which have successfully adopted environmentally 

friendly manufacturing practices.

• Supported an Organization of Economic Cooperation and Development (OECD) study to create metrics for sustainable 

manufacturing. Phase II of this study, to be released later 

this year, will be a tool-kit to help businesses assess the costeffectiveness of adopting more sustainable manufacturing 

methods.

Manufacturing Extension Partnership (MEP) Program 

The MEP program, run through the National Institute of Standards and Technology (NIST) at the DOC, is a network of 59 centers 

located in every State and Puerto Rico, providing a range of services to small- and medium-sized manufacturers. The MEP centers 

advise these businesses in a variety of areas, including Lean Manufacturing, increasing environmental sustainability, and information 

technology. The MEP centers are non-profit, university or statebased organizations which receive one-third of their operational 

funding from NIST with the matching two-thirds supplied by state 

funds, other regional partners, and revenue from fees paid by manufacturers for the services they receive. Since the early 1990s, MEP 

centers have completed nearly 400,000 contracts with small- and 

medium-sized manufacturers. NIST reports that assistance from 

the MEP program has helped create or retain more than 57,000 

jobs and created or retained $10.5 billion in sales in 2007 alone.7

IV. Issues and Concerns

Through this hearing, the Subcommittee will explore the following issues:

• What are the problems facing small- and medium-sized manufacturers and entrepreneurs?

• How will these Commerce Department programs benefit 

small- and medium-sized manufacturers?

• Suggestions to improve the programs to best support smalland medium-sized manufacturers and entrepreneurs.

6

Chairman WU. This hearing will come to order. 

Good morning, everyone. I would like to thank everyone, especially our witnesses, for coming to this morning’s very important 

hearing on Department of Commerce programs to support job creation and innovation. The purpose of this hearing is to understand 

the challenges facing small- and medium-sized manufacturers, and 

to learn about the initiatives of the Commerce Department which 

were launched to help these businesses. 

The health of the manufacturing sector is crucial to the health 

of the economy as a whole. It is responsible for creating over $1.6 

trillion worth of goods in fiscal 2008. This sector employs between 

11 and 13 million Americans, and accounts for over half of this Nation’s exports. Small- and medium-sized manufacturers play a particularly important role in American manufacturing, representing 

the vast majority of the 286,000 manufacturing firms in America. 

Even before the economic crisis of 2008, these manufacturers had 

to weather difficult economic circumstances, particularly because of 

foreign competition. The current economic situation has made it 

difficult for these businesses to access credit. Many have had to adjust to the slowdown in the businesses of their large customers, 

like the smaller firms which supply the auto industry. These are 

on top of the existing challenges small- and medium-sized manufacturers already face, such as finding skilled workers, successfully exporting to foreign and many times protected markets, and keeping 

pace with rapid changes in technology. In the face of increasing foreign competition, capitalizing on our strengths in R&D is absolutely crucial. Firms that transition and manufacture new technology, produce new services and new products will be crucial to 

growing the U.S. economy. 

I am glad to have the opportunity today to learn about the pressing problems of small- and medium-sized manufacturers from individuals who are closely connected with these firms. Programs like 

the NIST Manufacturing Extension Partnership have a proven 

track record of helping small- and medium-sized manufacturing 

firms become more competitive and retain and create jobs. I visited 

many of these manufacturers and the MEP, the OMEP programs 

which help them in my home State of Oregon, and they are indeed 

doing heroic work. Manufacturing jobs are good jobs, and I hope 

the success of MEP can be replicated in other Commerce Department initiatives. 

Chairman WU. I now recognize the Ranking Member, Mr. Smith 

from Nebraska, for his opening statement. 

[The prepared statement of Chairman Wu follows:]

PREPARED STATEMENT OF CHAIRMAN DAVID WU

Good morning, I would like to thank everyone, and especially our witnesses, for 

coming to this morning’s hearing on Department of Commerce programs to support 

job creation and innovation. The purpose of this hearing is to understand the challenges facing small- and medium-sized manufacturers, and to learn about the initiatives the Commerce Department has launched to help these businesses. 

The health of the manufacturing sector is critically important to the health of the 

economy as a whole, responsible for the creation of over $1.637 trillion worth of 

goods in 2008. This sector employs between 11 and 13 million Americans, and accounts for over half of the Nation’s exports. Small- and medium-sized manufacturers 

play a particularly important role in American manufacturing, representing the vast 

majority of the 286,000 manufacturing firms in the U.S. 

7

Even before the economic crisis of 2008, these manufacturers have had to weather 

difficult economic circumstances, particularly from foreign competition. The current 

economic situation has made it difficult for these businesses to access credit. Many 

have had to adjust to the slowdown of their large customers, like the small firms 

that supply the auto industry. These are on top of the existing challenges smalland medium-sized manufacturers already face, such as finding skilled workers, exporting to foreign markets, and keeping pace with rapid changes in technology. 

In the face of increasing foreign competition, capitalizing on our R&D is crucial. 

Firms that transition and manufacture new technology will be critical to growing 

U.S. manufacturing. 

I am glad to have the opportunity today to learn about the pressing problems of 

small- and medium-sized manufacturers from individuals who are closely connected 

with these firms. Programs like the NIST Manufacturing Extension Partnership 

have a proven track record of helping small- and medium-sized manufacturing firms 

become more competitive and retain and create jobs. Manufacturing jobs are good 

jobs and I hope the success of MEP can be replicated in other Commerce Department initiatives. 

Mr. SMITH. Thank you, Mr. Chairman, and thank you to the witnesses for joining us here today. Supporting job creation and innovation at our small- and medium-sized manufacturers is key to 

American competitiveness, and I look forward to working with you 

toward reauthorizing the America COMPETES legislation, Mr. 

Chairman. 

At yesterday’s hearing, we benefited from the birds-eye perspective of our Nation’s business leaders, and I am particularly interested to hear from our panelists today on the details. 

I would like to extend a welcome again to all of you for taking 

the time and sharing your expertise. I know that you all are very 

busy. In this time of economic uncertainty and with unemployment 

at 10 percent, there is much this Congress can do to spur manufacturing: increasing access to foreign markets by approving trade 

agreements with Columbia, Panama and South Korea; providing 

long-term certainty in the tax code by setting stable low rates and 

making the R&D tax credit permanent; ensuring continued access 

to private capital for businesses; and taking advantage of opportunities to develop our available energy resources including wind, 

hydro, solar and hydrocarbons. 

Within the purview of this Committee, we must work to keep the 

United States a world leader in developing new technologies by ensuring our manufacturers have access to the resources necessary to 

spur innovation. This includes developing talent through strong 

STEM education programs, providing necessary infrastructure and 

leadership through NIST, the National Science Foundation and the 

Department of Commerce, and ensuring government research catalyzes private investment rather than displacing it. 

I look forward to hearing from our witnesses today and to learning not only about the very real issues facing small- and mediumsized U.S. manufacturers but also ways in which this Committee 

can assist, whether by ensuring access to necessary resources or 

getting out of their way. Thank you. 

[The prepared statement of Mr. Smith follows:]

PREPARED STATEMENT OF REPRESENTATIVE ADRIAN SMITH

Thank you, Mr. Chairman, for calling this subcommittee hearing today to examine 

manufacturing innovation programs within the Department of Commerce. Supporting job creation and innovation at our small- and medium-sized manufacturers 

is key to American competitiveness, and I look forward to working with you toward 

reauthorizing the America COMPETES legislation. 

8

At yesterday’s hearing, we benefited from the bird’s eye perspective of our Nation’s business leaders, and I am particularly interested to hear from our panelists 

today on some of the details. I would like to extend a welcome to all of you and 

thank you for taking the time and effort to share your expertise with us today. 

In this time of economic uncertainty, with the unemployment at 10 percent, there 

is much this Congress can do to spur manufacturing—increasing access to foreign 

markets by approving trade agreements with Columbia, Panama, and South Korea; 

providing long-term certainty in the tax code by setting stable, low rates and making the R&D tax credit permanent; ensuring continued access to private capital for 

businesses; and taking advantage of opportunities to develop our available energy 

resources—including wind, hydro, solar, and hydrocarbon. 

Within the purview of this Committee, we must work to keep the United States 

the world leader in developing new technologies by ensuring our manufacturers 

have access to the resources necessary to spur innovation. This includes developing 

talent through strong STEM education programs, providing necessary infrastructure 

and leadership through NIST, the National Science Foundation, and the Department of Commerce, and ensuring government research catalyzes private investment 

rather than displacing it. 

I look forward to hearing from our witnesses today and to learning not only about 

the very real issues facing small- and medium U.S. manufacturers, but also to the 

ways in which this Committee can assist, whether by ensuring access to necessary 

resources or merely getting out of the way.

Chairman WU. If there are other Members who wish to submit 

additional opening statements, your statements will be included in 

the record at this point. 

It is now my pleasure to introduce our witnesses. First, the Honorable Dennis F. Hightower, Deputy Secretary of Commerce at the 

U.S. Department of Commerce. Ms. Jennifer Owens is the Vice 

President of Ann Arbor Spark. And now I would like to recognize 

the gentlelady from Pennsylvania, Ms. Dahlkemper, to introduce 

our next witness. 

Ms. DAHLKEMPER. Thank you, Chairman Wu, and thank you for 

inviting me to your subcommittee to have the honor to introduce 

a fellow Pennsylvanian. RoseAnn Rosenthal is President and CEO 

of the Ben Franklin Technology Partners (BFTP) of Southeastern 

Pennsylvania, and she has been so since 1996. In this capacity, she 

has earned an international reputation with her development of innovative partnerships and initiatives. With a current portfolio of 

over 120 technology companies, BFTP continues to build upon its 

proven track record of supporting hundreds of southeastern Pennsylvania technology companies. Through her leadership, BFTP 

partnered successfully with two of the region’s major universities, 

the University of Pennsylvania and Drexel University, to create the 

Nanotechnology Institute. Furthermore, BFTP’s efforts in 

nanotechnology have become a model for similar approaches in energy, and Ms. Rosenthal has led her staff in the creation of new 

technology commercialization models. She serves on several public 

and private boards and committees. She has been active as an advisor in state and regional nanotechnology initiatives. She has 

served on several national task forces including the U.S. Department of Housing and Urban Development and the U.S. Economic 

Development Administration. It is my pleasure to introduce my fellow Pennsylvanian, RoseAnn Rosenthal. 

Chairman WU. Now I would like to recognize the gentleman from 

Michigan, Mr. Peters, to introduce our final witness. 

Mr. PETERS. Thank you, Mr. Chairman. It is a pleasure to introduce Mike Coast, who is the president and CEO of the Michigan 

Manufacturing Technology Center (MMTC), and I have had an opVerDate 0ct 09 2002 14:34 Jun 22, 2010 Jkt 055836 PO 00000 Frm 00012 Fmt 6633 Sfmt 6601 Z:\DOCS\54451.TXT SCIENCE1 PsN: COMSCI
9

portunity to work with Mr. Coast on numerous occasions as we 

work with helping small manufacturers throughout our state. He 

has been a critical part of the MEP affiliate in Michigan for the 

last 14 years and has been a great asset to the business community 

and manufacturers operating in our state. He is responsible for the 

partnership between the Technology Center and the Michigan Economic Development Corporation, a partnership that has allowed 

the MMTC to play a leading role in coordinating technology-related 

services and helping our businesses in our state diversify. Under 

his very astute leadership, he was awarded the Not For Profit of 

the Year Award from Automation Alley in 2007. He comes to us 

with more than eight years of technology development experience 

and 16 years of manufacturing experience in addition to his work 

at the technology center, so I am thrilled to have him here with 

us representing us and it is really great, I may add, to have two 

individuals from the great State of Michigan representing our great 

state, and certainly when it comes to small manufacturing, we face 

very tough challenges in our state but also some tremendous opportunities, so thank you, Mr. Chairman. 

Chairman WU. Thank you, Mr. Peters, and I am sure that with 

your leadership and Mr. Coast’s leadership that Michigan is well 

on its way back. 

Now to the witnesses, you will each have five minutes for your 

spoken testimony. Your written testimony will be introduced into 

the record in their entirety, and when all of you complete your testimony, we will begin with questions and each Member will have 

five minutes to question the panel in each round 

Mr. Hightower, please proceed. 

STATEMENT OF HON. DENNIS F. HIGHTOWER, DEPUTY SECRETARY OF COMMERCE, U.S. DEPARTMENT OF COMMERCE 

Mr. HIGHTOWER. Thank you. Good morning, Chairman Wu, 

Ranking Member Smith, Members of the Subcommittee. I am 

pleased to be here this morning to discuss the steps this Administration and the Department of Commerce in particular are taking 

to spur job creation and innovation, particularly among small- and 

medium-sized businesses, manufacturers and entrepreneurs. I have 

submitted my written testimony for the record but would like to 

spend my five minutes highlighting some of the key initiatives. 

As you know, one of the first things that President Obama did 

upon entering office was to sign the Recovery Act to stimulate an 

economy that was in free fall. One year later, although we still face 

troubling and unacceptable economic difficulties, there is agreement among economists across the political spectrum that the Recovery Act helped to stabilize the economy and to create jobs. And 

with the naming of Ron Bloom as his senior counsel for manufacturing policy, President Obama signaled that the revitalization of 

the U.S. manufacturing sector would be a key component of the Administration’s economic recovery efforts. 

The Department of Commerce, we believe, is uniquely positioned 

to complement and build upon the Administration’s job creation 

initiatives. While the Department’s portfolio is diverse, our overriding mission is to improve the competitiveness of American businesses at home and abroad, and to this end Secretary Locke has 

10

identified four key departmental initiatives and priorities that will 

guide our activities going forward, and they are first to boost our 

country’s innovative capacity, to unlock the tremendous potential 

in promising new green and blue industries, to expanding exports 

through trade promotion efforts, and finally, transforming the 

Commerce Department into an integrated, efficient and effective 

service provider. 

I would like to briefly discuss a number of programs and initiatives that support these priorities. First, Secretary Locke has established an Office of Innovation and Entrepreneurship to foster the 

creation and success of high-growth and innovation-driven businesses and to accelerate commercialization of federal research and 

development programs. This office will also manage the National 

Advisory Council on Innovation and Entrepreneurship, which will 

include entrepreneurs, innovators, investors and university and 

nonprofit leaders. 

The Department of Commerce is also putting more resources into 

programs that will jump-start American manufacturing. The Manufacturing Extension Program, as you know, is an important part 

of the National Institute of Standards and Technology, and MEP 

provides manufacturers with technical assistance, training and 

long-term strategic planning. The MEP program received an increase of $14.7 million in fiscal year 2010 and President Obama 

has indicated his support for ultimately doubling the MEP funding 

over the next several years. 

We are also in the process of reconstructing the manufacturing.gov portal to provide smaller companies information not only 

on sustainable manufacturing practices but also a full range of 

manufacturing issues, and we are working closely with the Manufacturing Council on issues of concern specifically to the manufacturing sector. Last fall, Secretary Locke opened a pilot 

CommerceConnect office just outside of Detroit. The purpose is to 

provide Main Street businesses a single point of contact, a one-stop 

shop, if you will, for services that are offered by the Department. 

Experience gained from this pilot, which I visited three times in 

the last three months, will be evaluated as a part of our commitment to make the Department of Commerce more useful to the everyday operation of American companies. 

These are but a few of our initiatives, and I hope you will carefully look at my written testimony to see the full scope of our activities. 

Mr. Chairman, we certainly appreciate your support and the support of the Members of this Subcommittee, and we certainly look 

forward to working with you on ongoing job creation, innovation 

and manufacturing efforts. Thank you. 

[The prepared statement of Mr. Hightower follows:]

PREPARED STATEMENT OF HON. DENNIS F. HIGHTOWER

Chairman Wu and members of the Subcommittee on Science and Technology, I 

thank you for the opportunity to appear before you today to provide you with an 

overview of how this Administration and the Commerce Department plan to support 

the U.S. manufacturing sector. In particular, I will provide an update on the actions 

that 

Secretary Locke and I are taking to focus the capabilities of the Department of 

Commerce on supporting job creation and innovation, particularly among small- and 

medium-sized manufacturers and entrepreneurs.

11

1Since the recession began, manufacturing employment has fallen by 2.1 million. 

An Administration Focused on Recovery of the Manufacturing Sector 

From the day he took office, President Obama has made exceptional efforts to provide immediate help to the small- and medium-sized businesses that are the source 

of a significant number of new jobs in America. And with the naming of Ron Bloom 

as Senior Counselor for Manufacturing Policy and the recent release of a White 

House manufacturing strategy, he signaled that the revitalization of the U.S. manufacturing sector would be the key to the revitalization of the American economy. 

As you are aware, it all began with the Recovery Act which was essentially divided into three parts. 

One third of Recovery Act funding is going directly to tax relief for families and 

small businesses. Another third of the money is being directed to emergency relief 

like additional Medicaid and unemployment insurance funding for those who have 

borne the brunt of this recession. The last third of the Recovery Act funding is for 

investments to put people back to work and lay a new foundation for long-term 

prosperity. These investments include vital infrastructure improvements like upgrading our roads and our bridges; and renovating schools and hospitals, as well as 

investments in things like renewable energy and broadband expansion. Already, upwards of $140 million has been awarded to communities through the Department’s 

Broadband Technology Opportunities Program (BTOP), which continues to fund 

broadband infrastructure, public computer centers, sustainable broadband adoption, 

and broadband mapping projects around the country. Thanks to the Recovery Act, $100 billion in funding and loan guarantees was set 

aside to encourage and support manufacturing in America—much of which will assist smaller enterprises. With overall unemployment remaining at very high levels 

(10 percent) and manufacturing employment continuing to fall,1 I understand and 

share the frustration that the economy is not getting better quicker. But we should 

remember what the economy looked like at the beginning of 2009 when this Administration took office. Every day seemed to bring worse news. A severe recession had 

begun, and it was at great risk of turning into something even worse. 

The Recovery Act—along with our other economic initiatives—has begun to stabilize economic conditions and help those harmed by the economic crisis. But the 

true measure of the Recovery Act and of President Obama’s entire agenda will not 

be determined in just a few months. To put our economy on a sustainable path, we 

must make fundamental changes like we have not seen in America for decades. 

One company I met during my travels retooled equipment designed to manufacture hulls for yachts to build wind turbine blades and take part in the burgeoning 

green economy. It is our hope and intention to replicate this kind of success with 

our manufacturing programs.

Focusing the Commerce Department to Better Support Manufacturing 

While the Commerce Department’s portfolio is diverse—from protecting America’s 

oceans and intellectual property to improving companies’ efficiency and opening up 

markets—our overriding mission is to improve the overall competitiveness of American business at home and abroad. The Department’s diversity uniquely positions 

it to support businesses and entrepreneurs through every step of their lifecycle: 

from the birth of an idea, to the creation of a business, to global expansion—and 

at each step, the Commerce Department contributes to job creation and economic 

prosperity. 

Innovation: At the innovation stage, Commerce brings tremendous value for the 

U.S. economy—whether in creating a business climate that supports the development of new inventions through the Patent and Trademark Office, spurring innovation in manufacturing through the Technology Innovation Program at the National 

Institute of Standards and Technology (NIST), or harnessing the vast economic potential of the digital economy at the National Telecommunications and Information 

Administration—Commerce is a critical player in supporting the creation of tomorrow’s firms, industries, and jobs. 

Commercialization: U.S. businesses and entrepreneurs rely upon innovations 

developed through the process of technology commercialization to develop new ideas 

into new products and services, which lead to economic growth and job creation. 

Commerce has a host of resources to drive this process—by exploring policies and 

initiatives to foster high-growth entrepreneurship through the Office of Innovation 

and Entrepreneurship, supporting regional innovation clusters through the Economic Development Administration, helping drive productivity through NIST’s Manufacturing Extension Partnership, and helping minority-owned businesses capitalize 

on their market potential at the Minority Business Development Agency. 

12

Global Competitiveness: Once businesses have become established, the next 

stage is growth. With traditional engines of growth like consumer spending flagging, 

accessing foreign markets becomes increasingly important. The International Trade 

Administration, through its Manufacturing and Services unit, interfaces with manufacturers to understand impediments to the global competitiveness of U.S. businesses, such as market access barriers, while its Commercial Service unit assists 

businesses to expand their exports. In addition, our Bureau of Industry and Security 

enables export growth in a manner consistent with national security. 

Environmental Stewardship: The National Oceanic and Atmospheric Administration ensures that business and economic activity is environmentally sustainable—and also ensures that businesses across the lifecycle have the benefit of its 

world-class research to guide and shape investments, particularly in the massive 

market potential in green and blue commercial sectors. 

Statistical Infrastructure: Commerce also includes two of the premier statistical agencies in the U.S. Government within the Economics and Statistics Administration. The Bureau of Economic Analysis and Bureau of the Census track changes 

in the economy, which can be critical to helping businesses of all sizes and sectors 

understand their current and future markets.

Departmental Priorities 

Given the diverse range of issues we confront and activities in which Commerce 

is involved, Secretary Locke has prioritized his emphasis on key areas with a focus 

on job creation and economic growth in the years ahead. In each in of these areas, 

support for small- and medium-sized manufacturers is a key component.

- The first priority area is in boosting our country’s innovative capacity, with 

a particular emphasis on intellectual property and entrepreneurship to create 

a business environment that cultivates and rewards new ideas, technologies, 

products, and services.

- Second, Secretary Locke is committed to unlock the vast economic potential 

of the green and blue markets by helping to grow businesses that are based 

on clean energy and environmental conservation.

- Third, we are fundamentally focused on leveraging Commerce resources to 

generate growth by expanding exports through trade promotion efforts.

- Last, Secretary Locke and I are focused on transforming the Commerce Department into an integrated, efficient and effective service provider in supporting business competitiveness and job creation.

At this point I would like to highlight a few specific initiatives that illustrate how 

the Department will better serve small- and medium-sized manufacturers and entrepreneurs under these Departmental priorities. 

Office of Innovation and Entrepreneurship: Under our ‘‘innovation’’ priority, 

we recently established the Office of Innovation and Entrepreneurship. In his Strategy for American Innovation, President Obama articulated his vision for innovation, 

growth, and jobs: ‘‘the greatest job and value creators of the future will be activities, 

jobs, and even industries that don’t exist yet today . . .. It is imperative to create 

a national environment ripe for entrepreneurship and risk taking.’’ New businesses 

are the primary engine of job growth in the United States, with entrepreneurs creating approximately three million jobs a year. Firms less than five years old accounted for nearly all net new jobs in the private sector from 1980 to 2005. 

Consistent with the President’s vision, the goal of the Office of Innovation and Entrepreneurship is to unleash the economic potential of new ideas by removing barriers to entrepreneurship and the development of high-growth and innovation-based 

businesses. 

The Office will work closely with the White House and other federal agencies to:

• Encourage Entrepreneurs through Education, Training, and Mentoring

• Accelerate Technology Commercialization of Federal R&D

• Broaden Access to Capital for Entrepreneurs

• Improve Access to Government Resources for Entrepreneurs

• Explore Policy Incentives to Support Innovators, Entrepreneurs, and Investors

• Strengthen Interagency Collaboration and Coordination

The Office will also manage the National Advisory Council on Innovation and Entrepreneurship, which will advise Secretary Locke on key issues relating to innovation and entrepreneurship. It will include a range of stakeholders, such as successVerDate 0ct 09 2002 14:34 Jun 22, 2010 Jkt 055836 PO 00000 Frm 00016 Fmt 6633 Sfmt 6621 Z:\DOCS\54451.TXT SCIENCE1 PsN: COMSCI
13

ful entrepreneurs, innovators, angel investors, venture capitalists, non-profit leaders, and other experts on these issues. 

Hollings Manufacturing Extension Partnership (MEP): MEP is a national 

network with hundreds of specialists who understand the needs of manufacturers. 

For the past 20 years, they have worked with thousands of manufacturers delivering $1.4 billion in cost savings annually and $9.1 billion in increased or retained 

sales in one year. 

MEP provides companies with services and access to public and private resources 

that enhance growth, improve productivity, and expand capacity. We work with 

companies willing to invest in their future, to make improvements in the short term, 

and position themselves to be stronger long-term competitors both domestically and 

internationally. In his 2010 budget, the President proposed to double MEP funding 

over seven years, so its centers can expand their efforts to bolster the competitiveness of U.S. manufacturers. 

Sustainable Manufacturing Initiative (SMI) and manufacturing.gov: Commerce is increasing efforts to encourage sustainable manufacturing and increase access to information on sustainable practices that can help companies reduce operating costs and help sustain or create jobs. We are expanding the 

www.manufacturing.gov website to provide the most comprehensive, and current information on issues surrounding the competitiveness of American manufacturers 

and service industries. Through manufacturing.gov, companies can access the Sustainable Business Clearinghouse of all major federal programs that support sustainable practices. Additionally, we are organizing and leading tours of U.S. companies 

that showcase sustainable practices that can be used by small- and medium-sized 

enterprises. 

CommerceConnect: CommerceConnect is a signature initiative to realize our 

‘‘more efficient and effective service provider’’ priority. We are transforming the way 

we engage with businesses and entrepreneurs, allowing them to engage with a single Department of Commerce, rather than twelve separate bureaus with their own 

myriad of programs. Here is what this will mean in practice:

- If a business is involved in a cutting-edge field like nanotechnology or developing solutions to fight climate change, our CommerceConnect staff will connect it with our world-class laboratories developing the standards, measurements and basic R&D for products and services that allow new industries to 

flourish.

- If a business has manufacturing facilities, we will link it with our Manufacturing Extension Partnership, which has experts who can come onto your 

shop floor and provide ideas to make your production line more efficient.

- If a business wants to start selling its products abroad, we will connect it with 

industry specialists from the International Trade Administration, including 

Commercial Service officers in any of 77 countries around the world who will 

tap their local contacts to find you new customers.

Three months ago, Secretary Locke kicked off a pilot CommerceConnect office just 

outside of Detroit, Michigan, to develop best practices in how to connect with businesses both directly—through on-the-ground experts that interact with business, assessing their needs and connecting them with the most relevant services—and virtually through a web presence and eventually an online tool that can be used by 

businesses. 

In this short three-month period, we have worked with 25 businesses, successfully 

connecting them to a wide range of Commerce programs. For example, Commerce 

referred, Machine Tool & Gear, Inc. (MTG) of Corunna, Michigan, to the Michigan 

Export Assistance Center. MTG was assisted with their application to join a trade 

mission to help. automotive suppliers seeking to develop business opportunities in 

Italy. MTG’s application was accepted and their company representatives were able 

to participate in an automotive trade mission to Turin, Italy, last month and will 

be following up on opportunities that were discussed. Also, CommerceConnect has 

helped connect Vogel Industries, located in Marine City, Michigan, to several Commerce programs, as well as local programs and other federal agency programs that 

have assisted them in registering for defense contracts, matching them with an opportunity that has helped them start engagements with peer suppliers involved in 

relevant joint ventures, and participating in an alternative materials workshop to 

find areas of opportunity for Vogel to diversify. 

CommerceConnect has also made connections with businesses through the Patent 

and Trademark Office, the National Institute of Standards and Technology, the Minority Business Development Agency, and other Commerce bureaus’ programs and 

services. We have also reached out to include local Michigan economic development 

14

services as well as other federal agencies programs and services from the Small 

Business Administration and the Departments of Agriculture and Labor. 

In the next three months, we will continue to refine the CommerceConnect approach and offer recommendations on the operational construct, procedures, processes and systems for maximum efficiency and effectiveness. 

This concludes my statement. I will be pleased to answer any questions you may 

have.

BIOGRAPHY FOR HON. DENNIS F. HIGHTOWER

Dennis F. Hightower is a seasoned business executive with extensive global general management experience. His distinguished career spans the private and public 

sectors, including more than 30 years of experience in global marketing, strategic 

planning, operations and international general management. 

Most recently, Mr. Hightower was chief executive officer of Europe Online Networks S.A., a privately held broadband interactive entertainment company based in 

Luxembourg. From 1987 to 1996, Mr. Hightower was a senior executive of The Walt 

Disney Company, where he led multi-billion dollar enterprises as president of Walt 

Disney Television & Telecommunications and president of Consumer Products, Europe/Middle East and Africa. 

Hightower has made a continuing commitment to training future business leaders 

as a former professor of management at Harvard Business School, where he focused 

on leadership, building emerging markets and global general management. He has 

also been a guest lecturer at business schools throughout the world including IMD 

in Switzerland, INSEAD in France and the London Business School; and at the U.S. 

Military Academy (Bicentennial) and the USMA Preparatory School. 

Hightower most recently served on the Boards of Directors of Accenture, Domino’s 

Pizza, Lightfleet (a start-up high technology company), and privately-held Brown 

Capital Management. He has formerly served as a board member of The Gillette 

Company, Northwest Airlines, PanAmSat Corporation, Phillip-Van Heusen Corporation, The TJX Companies, Inc., and as a member of the Price Waterhouse Chairman’s Advisory Council. 

Previously, Mr. Hightower has demonstrated a willingness to serve his country as 

a decorated Vietnam veteran and as a member of the Defense Business Board. 

Hightower was a Regular Army officer for eight years, rising to the rank of Major 

by age 27. While on active duty he was awarded numerous decorations for meritorious achievement and valor. 

Mr. Hightower holds an M.B.A. degree from the Harvard Business School and a 

B.S. degree and honorary doctorate from Howard University. He received the Alumni Achievement Award in Business from Howard University in 1986, the Alumni 

Achievement Award from Harvard Business School in 1992, and the U.S. Department of Commerce Pioneer Award in 1996.

Chairman WU. Thank you, Mr. Hightower. 

Ms. Owens, my apologies for not greeting you personally earlier. 

You are so young, I didn’t realize you were a witness. Please proceed. 

STATEMENT OF MS. JENNIFER OWENS, VICE PRESIDENT, 

BUSINESS DEVELOPMENT AT ANN ARBOR SPARK 

Ms. OWENS. I will take that as a compliment. 

Good morning, Chairman and distinguished Members of Congress. In particular I would like to commend Congressman Peters 

and Congressman Ehlers for their leadership in Michigan and their 

work on behalf of our residents. My name is Jennifer Owens and 

I am the vice president for business development at Ann Arbor 

Spark, and I sincerely appreciate the opportunity to testify here 

today. 

The Ann Arbor region that I represent is uniquely positioned 

with an array of assets. Our community is home to a world-class 

university, the University of Michigan, hundreds of emerging hightech entrepreneurial ventures and established technology leaders 

like Toyota, Google, Terumo Cardiovascular Systems, the Crawley 

15

Company and Thomas Reuters. Ann Arbor was recently deemed by 

a PBS segment as the life preserver of Michigan, and even with 

Michigan’s massive economic struggles, our region has still remained relatively strong. Yet one of our greatest strengths is very 

much at risk, our manufacturing base. These firms are critical to 

the success of our innovation-based startups that need a partner to 

turn their ideas into reality. Our manufacturers can produce a new 

prosthetic limb, sonar device or medical sensor that our entrepreneurs design. Over the past three years, we have seen roughly 

4,000 manufacturing jobs lost in our county alone. The remaining 

manufacturers are some of the strongest and smartest in the world. 

These businesses are at their absolute leanest with only critical 

employees remaining. 

I visited with hundreds of these companies over the past two 

years in my jobs at both the Michigan Economic Development Corporation and Ann Arbor Spark, and the theme is all too common. 

Banks are often unwilling to extend credit. The remaining employees are taking on the responsibility of three full-time positions, and 

they are all living paycheck to paycheck, and this is why programs 

like CommerceConnect are so critical. Manufacturers in crisis mode 

don’t have the time or capacity to seek out federal opportunities. 

They desperately need someone to hold their hand through the 

process, open doors for them and to essentially be an additional resource or employee. CommerceConnect offers that support, and I 

commend the Department for quickly recognizing the need and developing the program. 

However, I implore the Department of Commerce to utilize the 

network of economic developers throughout the country to take 

their message to manufacturers. They should not create a new 

team of outreach professionals, rather educate the local economic 

developers, provide them with funding to grow their ranks and 

allow them to use their existing manufacturing relationships to 

take those programs directly to manufacturers. Ideally, 

CommerceConnect should be integrated into Michigan’s development tool kit, which regional economic development organizations 

deploy for the retention and growth of companies. 

The current programs offered by Commerce are very helpful for 

manufacturers. Firms that use Manufacturing Extension Partnership or the Michigan Manufacturing Technology Center in our 

state have seen dramatic results. Our MEP center has been a critical partner in helping manufacturers throughout the state, landing roughly $300 million in new contract work. 

However, Commerce cannot ignore what these firms need most 

is missing: access to capital. Michigan manufacturers throughout 

the state are being tossed aside by their banks and being forced 

into loans with double-digit interest rates just to keep their business afloat. Unless new programs are designed to address the access to capital crisis, our manufacturing base will likely be dramatically reduced. 

The time to act is now. Commerce and Congress cannot study 

and research new operations. CommerceConnect as well as new 

manufacturing capital programs must be put into place in early 

2010. Commerce must partner with economic development organizations like Ann Arbor Spark to develop new programs and take 

16

their existing tools directly to manufacturers. Only through a true 

partnership with federal, state and local agencies can our manufacturing base be saved. 

Thank you for the opportunity to address you today, and I appreciate your consideration. 

[The prepared statement of Ms. Owens follows:]

PREPARED STATEMENT OF JENNIFER OWENS

Good afternoon Mr. Chairman and distinguished Members of Congress. My name 

is Jennifer and I am the Vice President for Business Development at Ann Arbor 

Spark. I sincerely appreciate the opportunity to testify today on this very important 

subject. 

The Ann Arbor region, that I represent, is uniquely positioned with an array of 

assets. Our community is home to a world class university—the University of Michigan, hundreds of emerging high-tech entrepreneurial ventures and established technology leaders like Toyota, Google, Terumo Cardiovascular and Thomson Reuters. 

Ann Arbor was recently deemed by a PBS segment as ‘‘the life preserver of Michigan.’’ Even with Michigan’s massive economic struggles, our region has still remained relatively strong. 

Yet, one of our greatest strengths is still very much at risk—our manufacturing 

base. These firms are critical to the success of innovation-based start-ups that need 

an established partner to turn their ideas into reality. Our manufacturers can 

produce the new prosthetic limb, sonar device or medical sensor that our entrepreneurs design. Over the past three years, we have seen roughly 4,000 automotive 

manufacturing jobs lost in our region. The remaining manufacturers are some of the 

strongest and smartest in the world. These businesses are at their absolute leanest 

with only critical employees remaining. 

I have visited with hundreds of these companies over the past two years in my 

economic development role with the State of Michigan and Ann Arbor SPARK. The 

theme is all too common. Banks are often unwilling to extend credit. The remaining 

employees are taking on the responsibility of three full time positions. They all are 

living paycheck to paycheck. 

This is why programs like Commerce Connect are so critical. Manufacturers in 

crisis mode do not have the time or capacity to seek out federal opportunities. They 

desperately need someone to hold their hand through the process, open doors for 

them and to essentially be an additional resource. Commerce Connect offers some 

of that support. I commend the department for quickly recognizing the need and developing the program. 

However, I implore the Department of Commerce to utilize the network of economic developers throughout the country to take their message to manufacturers. 

They should not create a new team of outreach professionals. Rather, educate the 

local economic developers, provide them with funding to grow their ranks and allow 

them to use their existing relationships to take the programs directly to manufacturers. Ideally, Commerce Connect should be integrated into the economic development ‘‘tool kit’’ which each regional economic development organization deploys for 

the retention and growth of companies. 

The current programs offered by Commerce are very helpful for manufacturers. 

Firms that use Manufacturing Extension Partnership or the Michigan Manufacturing Technology Center in our state have seen dramatic results. Our MEP center 

has been a critical partner in helping manufacturers throughout the state in landing 

roughly $300 million in new contract work. 

However, Commerce cannot ignore that what these firms need most is missing—

access to capital. Michigan manufacturers, throughout the state, are being tossed 

aside by their existing banks and being forced into loans with double digit interest 

rates to keep their business afloat Unless new programs are designed to address the 

access to capital crisis, our manufacturing base will likely be dramatically reduced. 

The time to act is now. Commerce and Congress cannot study and research new 

options. Commerce Connect as well as new manufacturing capital programs must 

be put in place early in 2010. Commerce must partner with economic development 

organizations, like Ann Arbor SPARK, to develop new programs and take their existing tools directly to the manufacturing community. Only through a true partnership among the federal, state and local agencies can our manufacturing base be 

saved. 

Again, thank you for the opportunity to address you today and for your consideration.

17

BIOGRAPHY FOR JENNIFER OWENS


54451a.eps
18

Chairman WU. Thank you, Ms. Owens. You may take back to 

Ann Arbor that as our last President was fond of saying, help is 

on the way. This Congress and this Administration are working 

mightily to improve small business programs so that both loans 

and grants become more available for capital purposes, and this 

Committee and I have been striving mightily for two Congresses to 

update the SBIR (Small Business Innovation Research ) program 

and enhance the loans, perhaps up to $2 million—I am sorry, the 

grants-so that they be more meaningful. 

Ms. Rosenthal, please proceed. 

STATEMENT OF MS. ROSEANN B. ROSENTHAL, PRESIDENT 

AND CEO, BEN FRANKLIN TECHNOLOGY PARTNERS OF 

SOUTHEASTERN PENNSYLVANIA 

Ms. ROSENTHAL. Mr. Chairman and Members of the Committee, 

thank you for affording me the opportunity address you today. I am 

RoseAnn Rosenthal, President and Chief Executive Office of the 

Ben Franklin Technology Partners of Southeastern Pennsylvania, 

one of four regional private nonprofit organizations created through 

Pennsylvania legislative action in 1982. Ben Franklin is the Commonwealth of Pennsylvania’s partner in innovation, technology and 

entrepreneurship, created at an earlier time of economic recession 

and job loss in our Nation. The Ben Franklin partnership mission 

was and is to catalyze efforts that rebuild Pennsylvania’s economy 

through science and technology. Our mission is consistent with that 

of the Department of Commerce’s Office of Innovation and Entrepreneurship. This office, given the appropriate resources, presents 

an ideal opportunity for implementing new policies. 

The CEOs of the Ben Franklin Technology Partners had an opportunity to meet with the staff from the Office of the Secretary 

shortly after the announcement was made. Since then we have exchanged ideas around this office’s emerging priorities, which are 

fundamental in their support of high-growth innovative enterprises. We are pleased to understand that the work of this office 

will be informed by a national advisory council that will bring the 

experience, insight and ideas of individuals representing state and 

local laboratories of democracy, as David Osborne described such 

efforts including ours back in 1988. 

Mr. Chairman, my associates and I applaud the Committee’s 

leadership for holding this hearing and hope that the message you 

and your colleagues take away is that we in the nonprofit world at 

the state and local levels have been commercializing technology 

and seeding enterprises for many years very effectively. We can 

offer concrete, practical suggestions for redirecting existing federal 

dollars to update programs in order to maximize federal investment and generate increased job creation. I recommend the following elements be considered as part of a framework for retooling. 

One, goals that are few, clear and nonconflicting and that keep the 

ultimate objective, economic growth through entrepreneurial innovation, at the forefront; two, an approach that is less prescriptive 

and more receptive to new models and allows program design to be 

driven by the specific challenges and opportunities at regional, 

state and local levels; three, flexibility in implementation enabling 

timely response as conditions change; four, programs that focus on 

19

reducing the barriers to collaboration and innovation; and five, designs that catalyze institutional and private involvement and investment over time. The goals: increasing access to early-stage 

growth capital and creating effective pathways to commercialization. 

In some states like ours, funding for high-growth enterprises and 

commercialization has come through state-backed technology development programs. However, with state revenues severely constrained, support nationwide has been cut, further depleting capital 

available for innovative enterprises and initiatives and straining 

local infrastructures for innovation created over recent years. Combined with the decrease in investment activity from among private 

angel investors and early-stage venture funds, companies we seed 

have nowhere to grow. The oft-described valley of death, a gap that 

stretches from the need to demonstrate proof of concept through to 

early revenue generation or sales, invites creative new approaches 

and a retooling of existing federal programs. My full written testimony offers some recommendations. 

Finally, the new Office of Innovation and Entrepreneurship could 

be funded to launch broader comprehensive regional models. It 

could be the impetus for a national innovation network with funded 

public-private partnerships able to develop the integrated strategies and programs necessary to drive innovation through the 

growth companies that create high-wage jobs and to encourage 

multi-state partnerships able to stimulate the growth of natural 

clusters. The Ben Franklin Technology Partnership was launched 

in similar fashion with a state challenge to regions across Pennsylvania. 

Thank you again, Mr. Chairman, for holding this important hearing and for the opportunity to share Ben Franklin Technology Partners’ experience in stimulating innovation, enterprise formation 

and job creation. My colleagues and I stand ready to assist the 

Committee and the Administration in every way possible to advance these important goals. 

[The prepared statement of Ms. Rosenthal follows:]

PREPARED STATEMENT OF ROSEANN B. ROSENTHAL

Mr. Chairman and members of the Committee, thank you for affording me the 

opportunity to address you today. 

I am RoseAnn B. Rosenthal, President and Chief Executive Officer of the Ben 

Franklin Technology Partners of Southeastern Pennsylvania, one of four Ben Franklin Technology Partners created through Pennsylvania legislative action in 1982. 

Ben Franklin is the Commonwealth of Pennsylvania’s partner in innovation, technology and entrepreneurship, created at an earlier time of economic recession and 

job loss in our nation. The Ben Franklin Partnership mission was, and is, to catalyze efforts to rebuild Pennsylvania’s economy through science and technology. 

Our mission is consistent with the mission of the Department of Commerce’s new 

Office of Innovation and Entrepreneurship. The newly-created Office, given the appropriate resources, presents an ideal opportunity for implementing new policies. 

We applaud its mission to ‘‘. . . unleash and maximize the economic potential of 

new ideas by removing barriers to entrepreneurship and the development of highgrowth and innovation-based businesses.’’

The CEOs of the Ben Franklin Technology Partners had an opportunity to meet 

with Esther C. Lee, Senior Policy Advisor to the Office of the Secretary, and members of her team, shortly after the announcement was made. Since then, we have, 

exchanged ideas around this Office’s emerging priorities, which are fundamental in 

their support of high growth, innovative enterprises. We are encouraged that the Office will bring together representatives from the multiple agencies whose programs 

20

1 25,371 jobs created (1989–2008)

24,736 jobs retained (1994–2008)

2,113 jobs created (2008)

1,221 jobs retained (2008)

impact this important, national objective. We are also pleased to understand that 

the work of this Office will be informed by a national Advisory Council on Innovation and Entrepreneurship that will bring to the table the experience, insight and 

ideas of individuals representing national ‘‘Laboratories of Democracy’’ as David 

Osborne described such efforts, including ours, back in 1988. 

Mr. Chairman, my partners and I applaud the Committee’s leadership for holding 

this hearing and hope that the message you and your colleagues take away from 

today is that we, in the non-profit world, at the state and local levels, have been 

commercializing technology for many years, very effectively. We can offer concrete, 

practical, suggestions for redirecting existing federal dollars to update programs to 

maximize federal investment and generate increased job creation. 

The Ben Franklin Technology Partners operate as private, independent, non-profit 

organizations, strategically located in four regions of our state. We represent a diversity of cultures, span geographies from urban to rural, and are in close proximity 

to Pennsylvania’s respected research universities. 

For over 25 years, the Ben Franklin Technology Partners, working both in our regions and as a statewide network, have assembled public/private partnerships and 

developed models that have supported the formation and growth of technology enterprises—from their earliest, idea stage, through proof of concept, growth, maturity 

and reinvention. Our model has helped Pennsylvania enterprises create over 

25,000 1 high wage jobs in the years 1989 through 2008 . . . over 2,100 of those in 

2008; and we have worked to retain tens of thousands more. But, beyond the number, our model has helped to create and strengthen the culture for innovation and 

entrepreneurship in Pennsylvania.

The Pennsylvania Economy League, a nonpartisan research organization, conducted an independent, objective evaluation of the economic impact of Pennsylvania’s Ben Franklin Technology Partners from 2002 through 2006. It found that the 

Network boosted Pennsylvania’s economy by more than $17 billion. Its report documented that:

Over its history, Ben Franklin has been widely praised and modeled by other 

states and countries. The network was acknowledged by the U.S. Department of 

Commerce in 2008, our 25th Anniversary, with the Technology-Led Economic Development Award. In 2009, the International Economic Development Council named 

the statewide Ben Franklin program as the winner of its Excellence in TechnologyBased Economic Development award. 

Important to Ben Franklin’s ability to effectively serve our constituents has been 

the flexibility of our enabling legislation that allows us to anticipate and respond 

to market changes and to evolve as the needs of our communities change. Often, 

government-funded programs are overly prescriptive, with multiple, conflicting goals 

that confuse their purpose and cloud implementation. The Ben Franklin model 

charges each region to develop comprehensive strategies for the implementation of 

state resources based on the needs and opportunities of our region. We develop approaches that attract other investment to match the state funding, and then we assume responsibility for results, under the direction of our private boards of directors. 

Today, Ben Franklin pursues its mission of growth through technology-based entrepreneurship and innovation by:

• Seeding emerging technology enterprises that have gone on to become leading 

technology employers and partnering to create private investment pools for 

seed and early-stage investment;


54451b.eps
21

• Providing the facilities, business and technical advice, mentoring, coaching 

and the networks that help emerging and growing enterprises thrive;

• Developing new pathways to accelerate intellectual property discovered in 

universities and federal laboratories to the marketplace;

• Helping existing manufacturers and research development companies to 

source and fund the specific technical and business assistance they need to 

move a concept to the marketplace quickly, leveraging their existing capacity 

to generate new revenues;

• Working with leading technology corporations to identify open innovation 

partners and approaches that can help fill their new product pipeline; and,

• Collaborating with institutions and diverse constituencies in our areas to develop regional core competencies into robust economic development strategies 

that leverage our strengths to address regional challenges to future growth 

and prosperity.

The three part philosophy that drives our actions in Southeastern Pennsylvania 

is one that starts, first, with a focus on the entrepreneur as the agent of change 

and economic growth. Everything that we do is structured to assist the formation 

and growth of technology entrepreneurs across all sectors. Our strategy links Capital, Knowledge and Networks into a comprehensive framework for regional 

growth. 

Second, we work at the margins. With limited resources, we seek to deploy just 

enough capital and support to stimulate the flow of other public and private investment to help insure sustainability; then we exit. 

And, third, we operate through partnerships as a way to engage the community 

in the business of innovation, thereby strengthening the regional infrastructure for 

innovation. 

The observations I share, today, are those of an economic development practitioner who has worked for just over 40 years to leverage and integrate public and 

private resources into coherent, effective, regional growth strategies, and who is 

gratified to see attention to science, technology development and innovative, growth 

enterprises move closer into the mainstream of policy and economic development 

agendas. 

There are many federal economic development programs, tools, and structures 

that seek to spur growth. However, some, designed to address needs identified 40, 

50, or more, years ago, warrant a fresh look and some retooling to accommodate the 

challenges we face, today, in assembling the assets required for sustained innovation. 

The formation and growth of technology enterprises requires access to patient capital at the very earliest stages . . . for translational research, for pre-seed and seed 

capital for enterprises, for the business and technical assistance needed by both 

emerging and reemerging companies, and for the work of planning and network 

building that is critical to insure returns on the public’s investment. Yet, that capital is in short supply . . . or in forms that do not quite fit the bill. 

Federally-funded research at universities is vital to technology breakthroughs and 

advancement. The goal of this work, however, is not the development or commercialization of a new product . . . or the establishment of a new enterprise. The 

‘‘product’’ of that work is the knowledge generated. The process of transforming new 

discoveries into technology that has commercial application . . . the translational 

process . . . is not adequately encouraged or supported through federal funding, nor 

does federal research funding support partnerships with economic development organizations or private entities able to advance this work. The result is that many 

discoveries remain undeveloped . . . and economic opportunities are lost. With the 

right level and form of federal support, organizations like ours could bridge the gap 

between federally-funded university research and high-tech job creation in order to 

generate a greater return on the federal investment. 

The work of identifying technologies worthy of further development, exploring the 

best application of any technology, and mitigating some of the early risks in order 

to attract private technology developers, are pre-competitive, technology development activities that could be accelerated through support of public/private partnerships incorporating market input at appropriate stages of development and enabling 

organizations such as ours, and others, to partner with large with small institutions 

in support of commercialization objectives. 

The Nanotechnology Institute (NTI) is one such partnership. The NTI is a joint 

effort of Drexel University, the University of Pennsylvania and the Ben Franklin 

Technology Partners of Southeastern Pennsylvania, funded by the Commonwealth 

of Pennsylvania, with the participation of ten additional universities and research 

22

2 NTI: 18 months 2008–2009: IP assets: 380; Licenses: 23; Spin-off companies: 11; federal le- verage: $25M. 

institutions. It has put in place systems to accelerate the evaluation and further development of federally-funded research by reducing barriers to collaboration and 

partnering with private enterprises, both large and small. 

A key accomplishment of the NTI is the establishment of its innovative legal and 

programmatic structure within which regional universities collaborate at all levels 

to promote nanotechnology research with potential payoff in economic development. 

The NTI model incorporates commercialization objectives through the expertise of 

BFTP/SEP. By breaking down barriers between institutions and disciplines, and focusing on technology transfer and commercial outcomes, the NTI brings the best talent to bear on specific technology areas, yielding a tangible increase in IP creation 

and commercial development. The NTT’s efforts in increasing the research enterprise, linking research institutions, creating new intellectual property, fostering a 

vibrant environment for new ventures, and marketing the region nationally and 

internationally have been highly successful. These activities are generating steadily, 

accelerating, outcomes as measured by their ability to leverage federal research and 

development funding to generate new intellectual property, technology licenses, and 

new company spinoffs.2 The accomplishments of the NTI became the impetus for the 

Commonwealth of Pennsylvania to support the creation of the Energy Commercialization Institute (ECI), managed by our organization, and based upon similar 

principles and practices. 

The NTI and ECI operate at the earliest phase of the pre-enterprise formation 

capital gap. That gap extends as new companies are formed and seek investment 

capital to launch their enterprises . . . the oft-described ‘‘Valley of Death.’’

Capital for these emerging technology innovators has come primarily from the individual entrepreneurs themselves, often in the form of sweat equity, and from private investors. However, particularly over the past year to 18 months, we have seen 

angel investments decline as individual investors adjust to losses in their own financial portfolios. Several states have instituted favorable tax treatment designed to encourage the flow of such capital into emerging, growth enterprises. Consideration of 

such incentives at a national level could stimulate the flow of private, risk capital. 

Venture capital is vital to many high-growth technology enterprises. However, the 

pace of investment from venture funds has also slowed and the number of venture 

funds making seed and early-stage investments has decreased. These funds are critical sources of follow-on capital . . . but, today, there are fewer of them. In recent 

years, successful repeat funds grew in size and moved further downstream, needing 

to deploy larger sums of capital into later-stage opportunities. Smaller, and firsttime, early-stage funds find it difficult to attract private capital in today’s market. 

Even when institutional investors were very active, they sought opportunities to 

place larger sums than could be effectively invested by small, early-stage funds. 

And, the funds that do exist are reserving more of their committed capital for follow-on investments in their current portfolio companies, understandably, and undertaking new investments selectively. 

So, while venture funds remain an important source of follow-on investment once 

companies reach a certain scale and achieve critical milestones, by and large, they 

are not a source of investment capital at the earliest stages of company formation 

and development that are characterized by the triple threats of technology, market 

and management risk. 

In some states, like Pennsylvania, pre-seed and seed capital has come from statesupported technology development programs. Over our 25+ years, the four Ben 

Franklin Technology Partners have seeded and invested in more start up and early 

stage technology ventures than any other similar organization in the nation . . . 

with investments in over 3,000 companies and technical support and service to thousands more. The Ben Franklin Technology Partners co-invests with individual investors and, as our companies mature, with private venture funds. In 2008, companies 

funded by Ben Franklin attracted $872 million of follow-on investment. 

However, with state revenues severely constrained, support for state technologybased economic development nationwide has suffered cuts, further depleting the 

capital available for innovative enterprises and initiatives, and straining infrastructures for innovation created over recent years. Combined with the decrease in angel 

investing and the reduction in venture activity . . . companies we seed have no 

where to grow. 

This Valley of Death, a gap that stretches from the need to demonstrate proof 

of concept through to early revenue generation or sales, invites creative new approaches and a retooling of some existing federal programs. I recommend the following elements as part of a framework for retooling:

23

1) Goals that are few, clear and non-conflicting and that keep the ultimate objective . . . economic growth through entrepreneurial innovation . . . at the 

forefront;

2) An approach that is less prescriptive and more receptive to new models, and 

allows program design to be driven by the specific challenges and opportunities 

at regional, state and local levels;

3) Flexibility in implementation, enabling timely response as conditions change;

4) Programs that focus on reducing the barriers to collaboration and innovation; 

and,

5) Designs that catalyze institutional and private involvement and investment 

over time.

The core areas: 1) Access to capital and 2) Creating effective pathways to commercialization.

Some examples: 

1) The Department of Commerce Economic Development Administration (EDA) 

has revamped many of its programs over the years to support innovation . . . funding incubators and technology partnerships. However, the resources available to it 

for regional strategic planning and high-growth innovation are insufficient, may not 

be available on a consistent basis, and are encumbered by regulations that limit 

local creativity and ultimate effectiveness. I encourage EDA to reach out to regional 

and local organizations as part of its process of continuous reinvention. 

EDA’s University Center Economic Development Program could be modified 

and boosted to enable the formation of ‘‘Commercialization Partnership Centers.’’ These partnerships could bring together multiple universities and research 

institutions, with regional technology development organizations and/or private commercialization entities to drive technology to commercialization. Unlike traditional 

university centers of excellence, the Commercialization Partnership Centers would 

not require up front research funding, but be structured to leverage university expertise and resources by funding, on a cost-share basis, commercialization engagements that produce defined outcomes. Federal support could co-fund the engagement activity and the related technical and business assistance. 

We have found that this form of direct, targeted, assistance is as beneficial to mature, established enterprises, who may not be comfortable or have a history of working with universities, as it is of benefit to emerging firms. In addition, it offers ways 

to extract the often, specialized, core competencies of small educational and research 

universities and partner them with other institutions to form larger, more robust 

commercialization centers. 

EDA has capitalized Revolving Loan Funds for over 30 years. While they were 

innovative and effective tools designed back then, to provide debt financing to existing businesses in distressed areas, they are not a fit for today’s equity-based investments in pre-revenue, technology enterprises, that have no hard assets, and whose 

choice of location is often determined by cost and access to needed technical resources. I recommend consideration of a pilot version that updates and retools this 

program as a viable source of co-investment capital, managed by qualified, experienced, technology organizations. 

2) The SBIR and STTR research-support programs are useful to advance technology development; however, they have a limited focus on commercialization. Many 

recommendations have been offered regarding these programs. I would urge action 

on measures that: a) increase funding, particularly for later, commercialization 

phases; b) enable companies to enter the process at any phase; c) recognize the role 

of private capital to the growth of enterprises that require significant capital, such 

as in the life sciences and energy sectors; and d) insure consistency of administration to address non-significant, yet real barriers such as the form and source of 

other capital investment in enterprises. 

3) The Small Business Administration’s New Markets Fund offers a template for 

the creation of a New Markets Innovation Fund. Investments in innovative, 

growth opportunities could be its driving principal, and it could offer organizers the 

operational assistance funds needed to support the outreach, coaching and portfolio 

management functions that are time and cost intensive at the seed stage. 

4) The National Science Foundation’s Partnership for Innovation Program is a 

creative, yet sorely underfunded and lately, dormant, tool that provides incentives 

for innovative, effective public/private partnerships. It should be brought back and 

updated to enable. technology-based organizations to lead collaborative, multi-institutional, commercialization focused efforts. 

5) NIST’s Technology Innovation Program that funds ‘‘high risk’’ research and solutions that address areas of critical national need and societal challenges and that 

24

encourages collaborative industry/university approaches is an example of a successful program reinvention . . . but it is sorely underfunded. It could implement measures to encourage partnerships with state technology development organizations 

who can aid the partnering between large and emerging enterprises. 

6) Our nation’s federal laboratories have a wealth of discoveries that can be the 

basis for commercial growth; however, there is no mechanism to help absorb the 

local cost of transforming those possibilities into economic opportunities. 

7) And, finally, the new Department of Commerce Office of Innovation and Entrepreneurship. It could be funded to launch even broader, comprehensive, regional 

models, in partnership with states. It could be the impetus for a National Innovation Network, with funded public/private partnerships able to develop the integrated strategies and programs necessary to drive innovation through growth companies that create high-wage jobs. Special incentives could be provided to encourage 

multi-state partnerships that can stimulate the growth of natural clusters. In our 

region, the EDA funded the planning effort for the Mid Atlantic Nanotechnology Alliance, one such multi-state partnership, and efforts are underway to create Power 

Valley, bringing together the region’s substantial energy assets. 

The Ben Franklin Technology Partnership was launched in similar fashion . . . 

with a state Challenge Grant to the regions across Pennsylvania, to organize and 

compete for the Ben Franklin designation and to match the Commonwealth’s investment. 

Thank you, again, Mr. Chairman, for holding this important hearing and for the 

opportunity to share Ben Franklin Technology Partners’ experience in stimulating 

innovation, enterprise formation and job creation. My colleagues and I stand ready 

to assist the Committee and the Administration in every way possible to advance 

these important goals.

BIOGRAPHY FOR ROSEANN B. ROSENTHAL

RoseAnn B. Rosenthal, President, CEO and member of the Board of Directors of 

Ben Franklin Technology Partners of Southeastern Pennsylvania (BFTP) since 1996, 

has forty years of experience in business investment, regional planning, and economic development. Praised by regional leaders as an invaluable resource for the 

tri-state area, she has earned a strong international reputation with her development of innovative partnerships and extraordinary initiatives. 

Since assuming her CEO position, Rosenthal has significantly enhanced Ben 

Franklin’s investment, technology commercialization, and business service initiatives, creating initiatives that have brought the organization national and international recognition. With a current portfolio of over 120 technology companies, 

BFTP continues to build upon its proven track record of seeding hundreds of southeastern Pennsylvania’s technology leaders in biotechnology, information technologies, communications, advanced materials, nanotechnology and now, energy. 

Rosenthal’s leadership and alliance-building attributes proved invaluable in 2000 

as BFTP/SEP partnered successfully with two of this region’s major universities—

the University of Pennsylvania and Drexel University—to create the 

Nanotechnology InstituteTM. Funded with $17.8 million from the Commonwealth of 

Pennsylvania, the NTI has attracted funding and support from the National Science 

Foundation (NSF), the U.S. Department of Education and has leveraged more than 

$110 million in federal research grants and corporate support. Moreover, the NTI 

has attracted national recognition for its multi-disciplinary, multi-institutional, research to commercialization model. 

Rosenthal serves on the NTI’s three-person Oversight Committee and co-chairs a 

regional team that developed the Mid-Atlantic Nanotechnology Alliance (MANA®

that encompasses eastern Pennsylvania, Delaware and New Jersey to strengthen 

and promote the region’s competitive position in nanotechnology. Founded in 2004, 

MANA® is the nation’s first tri-state nano collaboration. She also serves on the External Advisory Board for the Nano-Bio Interface Center (a National Science Foundation-funded Nanoscale Science and Engineering Center) at the University of 

Pennsylvania. 

BFTPs efforts in nanotechnology have become a model for similar approaches in 

energy, and Rosenthal is leading her staff in the creation of new technology commercialization models and programs in conjunction with the state’s $40 million Alternative Energy Development Program. BFTP/SEP is a founding partner of the Energy Commercialization Institute where Ms. Rosenthal serves as a member of its 

three-member Oversight Committee. 

Rosenthal has led and supported initiatives to stimulate angel investments in 

early stage technology companies, including efforts focused on women- and minorityowned technology enterprises. Most recently, she led efforts to create the Emerald 

25

Stage2 Venture Fund, a private fund focused on investments in early stage IT companies across the Greater Philadelphia tri-state region. In 2007, she partnered 

BFTP to develop the Building 100 Innovation Center at the Philadelphia Navy 

Yard, a catalyst for the formation of new enterprises and commercialization partnerships, particularly in the energy sector. 

Rosenthal garnered 18 years of her economic development experience at the Philadelphia Industrial Development Corporation (PIDC). As Senior Vice President for 

Strategic Development at PIDC, she launched and implemented several regional initiatives, including the Southeast Pennsylvania Export Consortium, now the World 

Trade Center of Greater Philadelphia. As a key member of the City of Philadelphia’s 

Defense Adjustment Team, she authored the City’s $50-million Defense Conversion 

Fund. She was responsible for shaping, growing and managing PIDC’s direct-lending capability from an initial resource of $3 million, to over $200 million of direct 

loans to commercial and industrial clients, leveraging federal and foundation funds 

for industrial and community development. While at PIDC, Rosenthal served as Acting Executive Director of the Delaware Valley Industrial Resource Center, the region’s NIST Manufacturing Extension Partnership center. Earlier in her career, 

Mrs. Rosenthal staffed efforts in support of manufacturing competitiveness, waterfront development and historic district renewal. 

Rosenthal serves on several public and private boards and committees. She has 

been active as an advisor on state and regional nanotechnology initiatives through 

the National Nanotechnology Initiative and the National Science Foundation for 

Small Business Innovation Research (SBIR) and Partnership for Innovation programs. She has served on several national task forces including the U.S. Department of Housing and Urban Development, and the U.S. Economic Development Administration. 

Rosenthal is on the Boards of the Fox Chase Bank, the World Trade Center of 

Greater Philadelphia, the America Israel Chamber of Commerce, the Mayor’s Sustainability Advisory Board in Philadelphia, and the Greater Philadelphia Life 

Sciences Congress. She is on the Advisory Committee of Emerald Stage2 Venture 

Fund, and numerous, regional committees focused on technology-based economic 

growth and entrepreneurship, including the Philadelphia Chapter of the national 

Network for Teaching Entrepreneurship. She is active at the national level with the 

National Association of Seed Venture Funds was a Board member of the National 

Council for Urban Economic Development, now the International Economic Development Council, where she helped to develop the curriculum for its Technology-led 

Economic Development Course 

Rosenthal has presented and consulted on various economic development initiatives around the country and has served on mayoral and gubernatorial transition 

teams through the years. Most recently, she was a delegate to the November 2008 

Small Business Financing Forum. 

She has a B.A. From Temple University and in 2007 was awarded an Honorary 

Ph.D. in Humane Letters from Philadelphia University. She was presented the 

Early Stage East Founders Award in 2008 and the Blair Thompson Lifetime Venture Award from the MAC Alliance in 2009. She was awarded 2009 Champion of 

Small Business Award by the National Capital Coalition in July, 2009 and will be 

honored with Philadelphia University’s Lifetime Innovation Award in May, 2010. 

Chairman WU. Thank you, Ms. Rosenthal. We look forward to 

asking you further about your suggestions. 

Mr. Coast, please proceed. 

STATEMENT OF MR. MICHAEL COAST, PRESIDENT, MICHIGAN 

MANUFACTURING TECHNOLOGY CENTER (MMTC) 

Mr. COAST. Chairman Wu, Ranking Member Smith and Members 

of the Subcommittee, thank you for this opportunity to offer brief 

testimony on the impacts of two federal programs that aim, among 

other objectives, to create and retain jobs in small to mid-sized 

manufacturers. For more than 18 years, the MMTC has helped 

Michigan manufacturers improve quality, reduce cost, launch new 

products and diversity their customer base. Nationally, the roughly 

7,600 manufacturers served by the 59 NIST MEP centers credited 

the work of those centers with more than $9 billion in sales, 50,000 

jobs and $1.4 billion in cost savings. The Federal Government will 

26

spend less than $125 million on MEP in fiscal year 2010. These 

numbers suggest that it has been a good investment and one that 

should be scaled up to have even larger impacts on the critical and 

struggling U.S. manufacturer sector. In that regard, I appreciate 

the long-time support of this Committee and most recently by Congressman Peters and Congressman Ehlers to reduce the matching 

requirement for MEP’s federal funding at a time when many cashstrapped states have been forced to reduce their investments in 

their states’ MEP centers. 

MEP is the only program specifically designed to assist small to 

mid-sized manufacturers and we look forward to working with Congress and the Administration to implement the President’s campaign promise to double funding for the program by 2015. 

Last year, in response to the crisis facing two of the three U.S.-

based auto makers, Commerce Secretary Locke paid multiple visits 

to Michigan, meeting with dozens of our manufacturers, seeing how 

difficult they found it to access help from federal programs even 

within Commerce. The Secretary proposed piloting an effort to 

make those programs more accessible and more responsive to businesses starting with the manufacturers. We began by identifying 

61 programs within Commerce and services related to manufacturers. Next we convened a dozen Michigan manufacturers and representatives of a dozen federal and state program offices within the 

state. At that meeting we conducted two exercises. In the first we 

had the manufacturers develop a list of and then rank their most 

critical needs. In the second, we had the federal program representatives rate how well each of those needs was being addressed by 

their program services. 

The results made clear the manufacturers’ lack of knowledge of 

many of the programs and that they do not know how to access 

their services, that programs are not focused on the priority concerns of manufacturers and that the programs are often not aware 

of each others’ services. 

Based on those findings, a pilot came to be called 

CommerceConnect was established. So far, CommerceConnect has 

worked with 25 companies. It has been fewer than four months 

since the pilot was launched, so my remarks today certainly do not 

represent a full evaluation based on hard data. However, I believe 

that we can begin to draw at least four lessons that should inform 

decisions about whether to launch CommerceConnect programs in 

other states, and just as important, how to design the post-pilot 

phase in a way that delivers the most impact at the least cost. 

First, we have learned that navigating the federal program requires a good deal to know about what the programs actually do. 

CommerceConnect needs to have permanent staff that can invest 

in learning the programs. 

Second, we have learned that doing case management well requires more than just making referrals. There is a great deal of follow-up that is needed. CommerceConnect case managers sometimes 

share the frustrations of the manufacturers they serve not being 

able to find personnel able to deal with the client’s request. This 

too has a clear implication. Each program needs to have a designated point of contact that is knowledgeable about its services 

27

and explicitly tasked with addressing CommerceConnect clients’ requests in a timely manner. 

Third, we have learned that the manufacturers do not respect 

agency or program boundaries. A given company may need loan 

support from an SBA (Small Business Administration) program, IP 

protection and legal aid from an ITA (International Trade Administration) program, and help with lean manufacturing methods from 

NIST MEP program. The clear implication: staff need to understand the full range of business assistance programs. 

Fourth, we have confirmed that there is a vital role for a handson navigation function like CommerceConnect. Thus, I would recommend that the effort continue in Michigan at approximately its 

current scale. It probably makes good sense to charter at least a 

few more pilots in other parts of the country that are less automotive, less manufacturing intensive than Michigan to get a sense 

of how to make federal agencies responsive to distribution in service businesses as well as to manufacturers. It would, though, be 

premature to move from a pilot to a full-scale program. Much work 

remains to be done to arrive at a design that is both effective and 

efficient. 

Thank you for the opportunity to speak today. 

[The prepared statement of Mr. Coast follows:]

PREPARED STATEMENT OF MICHAEL COAST

Chairman Wu, Members of the Subcommittee—Thank you for this opportunity to 

offer brief testimony on the impacts of two federal programs that aim, among their 

other objectives, to create and retain jobs in small- and medium-sized manufacturers. 

I am Mike Coast, president of the Michigan Manufacturing Technology Center (or 

‘‘MMTC’’), my state’s affiliate of the NIST Manufacturing Extension Partnership (or 

‘‘MEP’’). For more than 18 years, the MMTC has helped Michigan manufacturers 

improve quality, reduce costs, launch new products, and diversify their customer 

base. In the past year, our Michigan manufacturer-clients credit us with $430 million in new or retained sales and more than 2,000 jobs created or retained, plus 

nearly $50 million in cost savings. Nationally, the roughly 7,600 manufacturers 

served by the 59 NIST MEP centers credited the work of those centers with more 

than $9 billion in sales, 50,000 jobs, and $1.4 billion in cost savings. The federal 

government will spend less than $125 million on MEP in FY10; these numbers suggest that it has been a good investment and one that should be scaled up to have 

even larger impacts on the critical and struggling US manufacturing sector. In that 

regard, I appreciate the long-time support of MEP by this Committee, most recently 

Congressman Peters’ efforts, along with Congressman Ehlers, to reduce the matching requirement for MEP’s federal funding at a time when many cash-strapped 

states have been forced to reduce their investment in their states’ MEP centers. 

MEP is the only program specifically designated to assist small- and medium 

manufacturers, and we look forward to working with Congress and the Administration to implement the President’s campaign promise to double funding for the program, by 2015. As much as I enjoy bringing the news of MEP’s good works to the 

Congress, my remarks today focus instead on a new initiative, one that holds potential to make the federal government’s investment go further in helping American 

businesses. 

Last year, in response to the crisis facing two of the three US-based automakers, 

Commerce Secretary Locke paid multiple visits to Michigan, meeting with dozens 

of our manufacturers. Seeing how difficult they found it to access help from federal 

programs, even within Commerce, the Secretary proposed piloting an effort to make 

those programs more accessible and more responsive to business, starting with manufacturers. Secretary Locke asked NIST MEP’s director, Roger Kilmer, to oversee 

the pilot, and Mr. Kilmer turned to us at the MMTC to help. He also detailed one 

of his senior program managers to oversee the Michigan pilot on a day-today basis. 

The Commerce Department gave MMTC $185,000 of unobligated funds to execute 

the pilot program, so we did not have to pull funding away from our ongoing, effecVerDate 0ct 09 2002 14:34 Jun 22, 2010 Jkt 055836 PO 00000 Frm 00031 Fmt 6633 Sfmt 6621 Z:\DOCS\54451.TXT SCIENCE1 PsN: COMSCI
28

tive programs. Further funding for CommerceConnect should be separate from and 

in addition to future increases in MEP funding. 

Working with Mr. Kilmer, we began by identifying the 61 programs within Commerce with services related to manufacturers. Next, we convened a dozen Michigan 

manufacturers and representatives of a dozen federal and state programs with offices in the state. (We included the Small Business Development Center, for example, because it is the Michigan window for SBA’s loan funds, as well as offering 

other services for manufacturers.) At that meeting, we conducted two exercises. In 

the first, we had the manufacturers develop a list of, and then rank, their most critical needs. In the second, we had the federal programs’ representatives rate how 

well each of those needs was being addressed by their programs’ services. I attach 

the prioritized list of needs as voted on by the manufacturers. (We convened a second group of manufacturers in November during a session with Commerce Assistant 

Secretary Hightower, and the list and the rankings remained essentially the same.) 

The results made clear that manufacturers lack knowledge of many programs and 

do not know how to access their services; that many programs are not focused on 

the priority concerns of manufacturers; and that the programs are often not aware 

of each other’s services. 

Based on those findings, a pilot that came to be called ‘‘CommerceConnect’’ was 

established. I stress that this pilot, while housed at the MMTC; is not (and logically 

cannot be) an MMTC program. It is an independent effort to help Michigan manufacturers navigate among the many relevant programs in Commerce and beyond. So 

far, CommerceConnect has worked with 25 companies. I understand that Deputy 

Secretary Hightower’s testimony describes the experiences of some of those 25 companies. 

Again, it has been fewer than four months since the pilot was launched, so my 

remarks today certainly do not represent a full evaluation based on hard data. However, I believe that we can begin to draw at least four lessons that should inform 

decisions about whether to launch CommerceConnect programs in other states and, 

just as important, how to design the post-pilot phase in a way that delivers the most 

impact at the least cost. 

First, we have learned that navigating federal programs requires knowing a good 

deal about what those programs actually do. Their websites help, but are not 

enough. Only now, after nearly four months, is the current six-person 

CommerceConnect staff beginning to understand the services of just the dozen or 

so programs with the most manufacturer-relevant services. This has a clear implication: CommerceConnect needs to have permanent staff that can invest in learning the 

programs. That staff will be even more effective if it has good general business 

knowledge. Our pilot benefited greatly by having three individuals; including NIST 

MEP’s Phillip Wadsworth, with substantial manufacturing and business backgrounds. 

Second, after servicing the initial 25 clients, we have learned that doing ‘‘case 

management’’ well requires more than just making referrals. A great deal of followup has been needed to make sure that clients actually got relevant assistance from 

the programs to which they were referred. CommerceConnect case managers have 

sometimes shared the frustrations of the manufacturers they serve, not being able 

to find personnel able to deal with the client’s request. This too has a clear implication: each program needs to have a designated point-of-contact that is knowledgeable 

about its services and explicitly tasked with addressing CommerceConnect clients’ requests in a timely manner.

Third, we have learned that manufacturers’ needs do not respect agency or program boundaries. A given company may need loan support from an SBA program, 

IP protection advice and legal aid from an ITA program, and help with lean manufacturing methods from NIST’s MEP program. The clear implication: staff need to 

understand the full range of business assistance programs, though over time they 

may reach the useful conclusion that a subset of the programs are more effective 

and responsive than the others. 

Fourth, we have confirmed that there is indeed a vital role for a hands-on navigation function like CommerceConnect. Thus I would recommend that the effort continue in Michigan at approximately its current scale. It probably makes good sense 

to charter at least a few more pilots in other parts of the country that are less 

automotive- and less manufacturing-intensive than Michigan to get a sense of how 

to make federal agencies responsive to distribution and service businesses as well 

as to manufacturers. It would, though, be premature to move from a pilot to a fullscale program. Much work remains to be done to arrive at a design that is both effective and efficient. 

Thank you for the opportunity to testify. I stand ready to answer your questions.

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Needs and Services Overview 

Need Total company rating Total provider rating 

Increasing productivity 88 50

Acquiring reduced-cost financing 81 36

Reducing state and/or local tax burden 76 14

Training/coaching company leaders and managers 73 49

Winning government contracts 70 39

Training the hourly workforce 70 33

Reining in healthcare costs 70 14

Developing business and/or strategic plans 65 52

Streamlining process of bidding on government contracts 65 30

Improving skilled worker pipeline 65 27

Acquiring new technologies and/or intellectual property 63 30

Winning defense contracts (as prime or sub-prime) 62 33

Addressing unfair trade policies 62 17

Identifying prospective non-automotive customers 57 52

Improving quality: reducing scrap, rework, and rejects 54 27

Translating R and D into volume production 52 33

Protecting intellectual property 52 17

Determining the causes of defective products 52 14

Increasing exports 47 26

Launching new enterprises 45 44

Improving health and/or safety 45 9

Diversifying into alternative energy 39 39

Reducing energy usage 38 25

Finding people with strong electronics skills 36 25

Instituting emergency preparedness plans 36 17

Retraining displaced employees 31 27

Certifying compliance to quality system standards 31, 25

Responding to trade-related dislocation 28 20

Imposing Buy American requirements 27 14

Modifying codes and standards to permit and reward innovation 25 9

Achieving LEED (green) certification 19 15

Reducing company’s carbon footprint 14 20

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Needs and Services Overview—Continued

Need Total company rating Total provider rating 

Winning more orders for minority businesses 11 26

Selecting, assembling, and/or remediating industrial sites 3 20 


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BIOGRAPHY FOR MICHAEL COAST

Chairman WU. Thank you very much. 

At this point it is in order to open our first round of questions, 

and the Chair recognizes himself for five minutes. 

I would like to ask each member of our witness panel about your 

knowledge of, impressions of how well MEP programs work with 

community colleges in general and how well MEP works with especially with community colleges in helping community colleges train 

for locally available jobs. My understanding is that there was a 

MEP study in 2005 which found that roughly 55 percent of community colleges actually have data on what the real training or job 

needs are of the local economy and adjust their programs accordingly. Whoever wants to go first to address that set of questions? 

Mr. Hightower. 

Mr. HIGHTOWER. Let me start off by, one, prior to assuming my 

role last August, I had run businesses for the last 35 years, mostly 

outside of the United States, manufacturing operations, service operations and the like across a broad spectrum of industries includVerDate 0ct 09 2002 14:34 Jun 22, 2010 Jkt 055836 PO 00000 Frm 00066 Fmt 6633 Sfmt 6601 Z:\DOCS\54451.TXT SCIENCE1 PsN: COMSCI

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ing being a management consultant at McKenzie and Company for 

a number of years as well. I have lived in Asia twice, Latin America twice, Europe twice, and I have visited probably 90 countries 

over that period of time, so I am bringing the perspective of actually having worked on the ground. I have created companies. I 

have run—I have been in the valley of death twice myself, have 

been on the boards of startup companies that have gone through 

and made that entry and exit from the valley including one as we 

talked about this morning right in the state of Oregon called Light 

Fleet. 

And when I think about the linkage, and I talked with Mike a 

lot about this as I made a number of trips out to Detroit to begin 

evaluating CommerceConnect is that there are a couple of models 

that I think are instructive. One I was aware of a number of years 

ago and it is very close to us here in the greater Washington area. 

It is right at the University of Maryland, Baltimore campus, Freeman Rabowski, who is the president of that institution, was I think 

one of the forefront—at the forefront and very much a pioneer in 

incubator companies, how he used the research capacity and capability at the University of Maryland to invite some 30 or 40 entrepreneurs, startup companies where they are currently on campus. 

They are moving from basic research to applied research to a level 

of commercialization where many of the students involved in that 

research, many of the professors involved in that research have actually been part of the startup of these companies and have subsequently in many cases joined these companies through their commercialization and their market access. Right in Detroit as we were 

working with Mike in the early startup phases last summer and 

last fall had the pleasure of visiting Tech Town, another institution 

where you look at Wayne State University, the fact that they actually have physically moved many of their research and development and business capability into that facility to be an on-theground like so that again ideas can find their way to commercialization. As we are looking at the construction today, I mean 

only yesterday I was reviewing the final submissions for the members of this National Advisory Council on Innovation and Entrepreneurship and you will be interested to know, I think, that as that 

list comes to its final stage after the appropriate vetting, there are 

a number of universities that are steeped in research but not only 

just research for the sake of research but research with commercialization as its goal, which again will find its way into the MEP 

programs and other programs that will begin to help this revitalization of the manufacturing sector. 

And I can say one other thing, then I will turn it over to my 

panel colleagues, is that the thing that concerns me the most, as 

I said, I spend a lot of my time with technology-based companies, 

with basic manufacturing companies, and I have spent a lot of time 

in India over the last couple of years, and when you go to Bangalore and you go through the technology and the innovation centers there, and of course all the usual suspects there, whether it 

is Siemens, Phillips, Oracle, you name it, and they are there. What 

is amazing and frightening at the same time is that as you go 

through and you look at what is being done, you look at who is 

doing the work, these are mostly young people who are under 30 

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years old with Ph.D.’s in esoteric areas that you need a dictionary 

to sort of spell what it is they are actually doing. That is the scary 

part because they have reinvested in their technology. They are reinvesting in innovation at a level that outpaces what we are doing, 

quite frankly. 

I mean, with the Chinese—we talked about the STEM (Science, 

Technology, Engineering, and Math) programs. I want to mention 

STEM. You know, The Chinese produce 600,000 engineers a year. 

India produces 350,000 engineers a year. We produce 70,000 engineers a year. That is telling in terms of what we say but where we 

put our emphasis, where we put our resource, so we are looking at 

many of the ideas that the other panelists have promoted already 

in terms of how we get a better linkage so that we don’t have to 

depend on DARPA (Defense Advanced Research Projects Agency), 

you know, for, you know, GPS commercialization. We don’t have to 

depend on NASA (National Aeronautics and Space Administration) 

for, you know, how do you determine which mattress position or 

what level of firmness you want in your mattress. But how can we 

do that amongst the resource where we have the talent, we have 

the educational capability, we have people who know how to do 

these things but need the facilitation that government and agencies 

such as those who are here on the panel can bring to fruition. 

Mr. COAST. Mr. Chairman, in Michigan we work quite well with 

community colleges, just to mention two, Macomb on the east side 

of the state and Grand Rapids Community College on the west. 

What typically happens is, those community colleges go out and 

provide services to the local communities and the MEP offsets another level of expertise to go work with those small companies. 

Those types of relationships are in place around the country. If you 

look at the MEP system nationally, there is about 301 of those relationships around the country right now, and 113 of those are in 

community colleges and there is 188 of them with universities and 

colleges. So when you look at Manufacturing Extension Partnership, that becomes—you know, partnership becomes that one word 

in that relationship that we go out and we leverage the precious 

dollars that we get from the Federal Government to go out and 

maintain those relationships so that we maximize our effectiveness. 

Ms. ROSENTHAL. Mr. Chairman, let me first say that the community college system is critically important. I would not be here but 

for my start in higher education through a community college, the 

Community College of Philadelphia. So I understand the importance of community college systems. In our area, the manufacturing extension partner and Ben Franklin and others have come 

together to form a STEM compact among the deans of engineering 

from colleges and universities across the tri-state area, and 

through that effort there are programs that link the community 

colleges into these 4-year institutions so that there are effective articulation agreements. At Ben Franklin years ago, we supported 

the effort of the Community College of Philadelphia at that time 

with the Wistar Institute to develop a model program for training 

biomedical technicians that started with training at the community 

college and then went on to practicans through the Wistar Institute 

and through the Nanotechnology Institute. Years ago we also had 

a program. I worked with Penn State and worked with others to 

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reach into the community colleges again and connect them up into 

the 4-year institutions as their education developed. So a lot of efforts across our region, both through the MEP but also through 

other economic development organizations in the region. 

Ms. OWENS. Mr. Chairman, I think you are very correct that that 

connection very much needs to take place and I think Mike and his 

team have done a very great job connecting with their community 

colleges. In Michigan, where that connection has happened is a 

complementary effort where the training program that community 

college may not be the most effective in providing, for instance, 

lean manufacturing, Mike and his team will come in and provide 

that innovation. 

The challenges we have in Michigan in terms of opportunities or 

job opportunities in manufacturing is, currently there are not a lot 

of opportunities in our manufacturing environment, so what we are 

facing is kind of a wealth of very skilled talent that need to be retrained and refocused in terms of their efforts, so we have developed a program called Shifting Gears, which takes manufacturing 

talent, skilled talent, and connects them with our entrepreneurs 

and provides a partnership between those groups. So it is essentially an internship for displaced manufacturing talent who can try 

out the entrepreneurial climate and pair their assets together. So 

I think that is something that is very important is looking at retraining, you know, our displaced workers in the manufacturing environment we have and connecting them with the innovation that 

is taking place. 

Mr. HIGHTOWER. If I can make one final comment to piggyback 

Ms. Owens and also Mr. Coast’s comments, particularly as it relates to this retraining and sort of retooling of the human capital 

that we are talking about, there is a real story in the State of 

Washington in conjunction with our own economic development, 

the people who are actually funding grants at the community level 

and working in conjunction with some of the MEP capability there 

as well. There was a company that specialized in making fiberglass 

hulls for recreational yachts. Well, in this environment, there 

aren’t too many people buying recreational yachts. This company 

was teetering on the cusp of going out of business. In working with 

them through EDA (Economic Development Administration) in this 

case and MEP, we had them look at what were the other applications of that technology. They are now one of the leading providers 

of wind turbines, so they are now—they have taken that technology 

that was sort of the old application and reapplied those skills into 

a growth industry, a green industry where their current product 

has been assessed by NIST as having better capacity, stronger, 20 

percent more life to it, and instead of laying off and perhaps as a 

second- or third-generation company going out of business, they are 

stabilizing and are beginning to move in a different direction. So 

we have got to find more of those kinds of ways to not only retool 

but to reskill and apply those skills. 

And to Mike’s earlier point about looking at areas, other areas 

of opportunity, we have one model that we are evaluating in Plymouth, greater Detroit area, but as we think about it and we are 

doing that analysis now of other areas that may have very different 

demographics or maybe there are regions where we can have a cenVerDate 0ct 09 2002 14:34 Jun 22, 2010 Jkt 055836 PO 00000 Frm 00069 Fmt 6633 Sfmt 6601 Z:\DOCS\54451.TXT SCIENCE1 PsN: COMSCI
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ter that can be pulled together to provide the kind of activity that 

is being provided by CommerceConnect in Detroit. This is where I 

think directionally we are going to be heading. 

Chairman WU. Thank you very much, Mr. Hightower, and I 

thank the entire panel for your very through answers to that question. 

Mr. Hightower, you point out something very, very important 

about transitioning and adaptation. One of my law-school professors was fond of talking about a major Wall Street bank, I believe 

it is Chase, which started out as a small water company 200 years 

ago in Manhattan, and I once heard a talk by a Stanford Business 

School professor on how few companies transition well. There is 

only one survivor from the original Dow Jones 12 in the current 

Dow Jones Index, and I suggested to him that he ought to study 

the Vatican and how it has survived over a significant period of 

time, and he may be taking that suggestion under advisement. 

Mr. Smith, please proceed. 

Mr. SMITH. Thank you, Mr. Chairman, and again thank you to 

the panel for your time and sharing of your expertise. 

Ms. Rosenthal, thank you. I appreciate the work that you do. 

Can you tell me once the investments have been made in new technologies and they are ready for the marketplace and, you know, the 

ball is rolling, how do you ensure that jobs will stay either in Pennsylvania or the entire country? 

Ms. ROSENTHAL. What we do with our investments is, there is a 

provision in the agreement that requires the company to have a 

significant presence in the area or in Pennsylvania, either our specific region, or if not in our region, in the state for at least five 

years once the company gets rolling. Beyond that, we can’t restrict 

the company. If they have to move, then we need to negotiate a settlement with them for a clawback of the investment that was 

made. 

Mr. SMITH. And that is for Pennsylvania as a state or the entire 

country? 

Ms. ROSENTHAL. Pennsylvania, because our funding is from the 

Commonwealth of Pennsylvania so our goal is to keep companies 

growing in Pennsylvania. 

Mr. SMITH. When you say significant presence, is there a pretty 

decisive definition of that? 

Ms. ROSENTHAL. It is going to depend on the company. You have 

to understand that some of our—most of our companies are out of 

the box, one person, two people, three people, so significant for 

three people means two. Significant for 100 means something else. 

So we don’t have numbers because we will take a look at what is 

the company doing, where are they, what kind of value are they 

creating for the state, what kind of downstream purchases are involved, do they have a relationship with a local manufacturer. So 

we take the whole into consideration when we make that decision. 

Mr. SMITH. Would it be conceivable that your R&D might be in 

Pennsylvania and your manufacturing might be elsewhere? 

Ms. ROSENTHAL. It is conceivable. It is conceivable. That is right. 

Mr. SMITH. Okay. Thank you. 

Mr. Secretary, thank you. I appreciate your time and certainly 

your impressive resume with us here today. I hear a lot from manVerDate 0ct 09 2002 14:34 Jun 22, 2010 Jkt 055836 PO 00000 Frm 00070 Fmt 6633 Sfmt 6601 Z:\DOCS\54451.TXT SCIENCE1 PsN: COMSCI
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ufacturers in my district, small- and medium size. I hear a lot from 

ag producers, which in many cases are manufacturers as well in a 

little different way or take the processing of various things and 

they are very concerned about various issues, and I know that the 

Administration’s priorities, whether it is cap and trade, health care 

and the commensurate taxes included, the Employee Free Choice 

Act. Can you elaborate on how those would help small- and medium-sized manufacturers? 

Mr. HIGHTOWER. Thank you, sir. I think in sort of the larger setting, it is—I think the objective as an umbrella would be innovation-driven scale of operation, which then leads to sustainability, 

and I think it is my experience in being in all phases of that spectrum of whatever lifecycle your company might be in, if we are able 

to bring programs that intersect at that particular need whether 

you are a farmer company, whether you are a farmer, whether you 

are in medical devices, whether you are in a product or service, it 

is bringing those resources to bear whether we either get leverage 

and/or collaborative effort, realizing that Commerce can’t do it all, 

Treasury can’t do it all, the Department of Agriculture can’t do it 

all but in more of an interagency level of cooperation, and that is 

what we are beginning to see and what we are beginning to actually find that is taking hold, and as we go through, for example, 

with the CommerceConnect activity, 62 different elements within 

Commerce are there but we are also working with SBA (Small 

Business Administration) on the capital issue, we are also working 

with the Department of Labor, who have these 3,200 training centers around the country, where do you get the pipeline, which gets 

to the sustainability issue, and how does EDA, for example, work 

with you on figuring out what the right strategic plan is, and a 

part of that strategic plan is the scalability of the operation for 

long-term stability. 

Mr. SMITH. So do I tell these constituents of mine that these are 

really good programs for them even though they are opposed to 

those programs? 

Mr. HIGHTOWER. Well, here is what I found. I have found as I 

have gone around companies that national pride trumps whatever 

their particular local political persuasion might be, and I say that 

gingerly and with great respect because it doesn’t really matter 

when you are working 100 hours a week or you have a payroll to 

meet and the bank has changed the coverage ratios on you, it really doesn’t matter. What you are concerned about is whether you 

can finance your inventories, whether you can feed your family, 

whether you don’t have to put a second mortgage on the house, and 

many of the young entrepreneurs that I have been talking to as I 

go out into where sort of the rubber meets the road, that is what 

they are concerned about, and the extent to which we can bring 

these kinds of services and resources to bear will help, I think, that 

issue, and I think that is where we have got to find the right intersections and programs that work that when we say it is going to 

be delivered, it is delivered and we are there to follow through for 

the sustainability because it doesn’t make any sense to put all of 

the effort in to something that in three months from now or six 

months from now they are either worse off than they were before 

or maybe not in business. 

68

And what I found too is that many of these companies that I 

speak with are second, third, fourth generation owners. They are 

really committed, and it is one thing that whenever I have lived 

outside of the United States, it was very difficult getting foreigners 

to understand that the United States is a collection of small towns 

and communities. It is not Boston, New York, Chicago, D.C., Philadelphia, L.A. It is small communities where you are a part of that 

community, a part of the fabric of that community, and that is 

where we have to get these programs down to the man or woman, 

the family business on Main Street that provide 95 percent of the 

jobs in this country. It is not the Fortune 1000. It is these 95 percent that really we have got to find the best ways and the most 

effective ways to touch. 

Mr. SMITH. When you speak of individual workers then, can you 

elaborate maybe on how the Employee Free Choice Act would help 

enhance opportunities and competitiveness for small- and mediumsized manufacturers? 

Mr. HIGHTOWER. Actually, I am not prepared to talk about that 

today but I do have some points of view on that which I would be 

happy to talk with you but I am not prepared in terms of formal 

testimony to talk about that today. 

Mr. SMITH. But are you working and advocating for the Employee Free Choice Act? 

Mr. HIGHTOWER. Yes. 

Mr. SMITH. You mentioned generational transfer of businesses 

and so forth, and I appreciate that because that is a reality— 

Chairman WU. Mr. Smith, perhaps you could save your next inquiry for the next round of questions, unless they relate to your 

current set of questions. 

Mr. SMITH. I was following up on some remarks of generational— 

Chairman WU. Please proceed. 

Mr. SMITH. Thank you. 

It is very concerning to me on generational transfer when it 

comes to the death tax, and can you tell us—I know that we are 

in a bit of limbo with death tax and its amounts and the transition 

here. Can you tell me what the Administration is doing in terms 

of advocating for a rate or a compromise or something to that effect? 

Mr. HIGHTOWER. My direct answer is, no, I can’t, but I can tell 

you as the son of an entrepreneur who died nine years ago, there 

are issues that, you know, strike one personally as opposed to the 

academic approach to this and, again, but that’s not again in my 

area of expertise at all. 

Mr. SMITH. Okay. I think I will save questions for another round. 

Thank you. 

Chairman WU. Thank you, Mr. Hightower. Thank you, Mr. 

Smith. 

Mr. Hightower, you are obviously someone who has operated a 

business and know business very, very well. Let me take a crack 

at answering some of Mr. Smith’s questions, since what we do 

around this institution is politics but try to bring this back to a policy discussion somewhat. The interesting thing about green energy 

and clean energy is that it is a straight transfer payment from one 

sector of the economy to another and one that results not only in 

69

bringing externalities in but it also makes us more competitive 

internationally. I came to this conclusion in visiting a business in 

my own community which makes fume hoods, and they are antiregulation, they are anti-tax, they are anti-government, but it is 

also the case that their entire business is predicated on EPA (Environmental Protection Agency) regulation, and without that EPA 

regulation they would have no business, and their revenues are derived from payments made by other American businesses and they 

also export their products. That industry is created by EPA regulation. It makes our environment cleaner and it creates jobs in my 

home State of Oregon, and yes, it does cost a manufacturer somewhere else. It forces Burger King to clean up its exhaust fumes. 

Number two, health care. No one thinks of health care as related 

to the American economy. David Kennedy, a historian at Stanford 

University, argues very persuasively that the programs of the 

Franklin Roosevelt Administration are responsible for the postWorld War II prosperity of America in the following way. Without 

Social Security, without unemployment insurance and without access to housing, individuals would be much more risk-averse because they have no safety net. By empowering individuals to take 

risks, by empowering individuals to move from place to place in 

America, we created a more efficient economy in addition to a more 

humane society. The Employee Free Choice Act is a realignment of 

power between employees and employers. Under the prior Administration, rapacious capitalism became prevalent rather than a working market economy. It is time. There have been generations during which employees have been denied their rights of association 

by very skilled consultants and employers who are not as publicly 

spirited as Mr. Hightower. No matter what one’s views are on the 

individual requirements of the Employee Free Choice Act are, it is 

a realignment which is probably helpful. 

And finally, let me address the inheritance tax, which was first 

created by Abraham Lincoln, endorsed by Theodore Roosevelt, and 

which prevents the creation of a permanent economic plutocracy in 

our society. I work with small businesses. I help create small businesses. I try to get folks like Mr. Hightower to be my clients. The 

most important factor in generational transfer of businesses is not 

the inheritance tax, it is having a next generation in the family 

which is willing and capable of taking over the business. 

Mr. Peters, five minutes. 

Mr. PETERS. Thank you, Mr. Chairman. I thank you for the panelists as well. There has been a very interesting discussion here related to manufacturers. 

Mr. Coast, I want to get back to the MEP, and as you know, the 

full Science and Technology Committee is working on the America 

COMPETES Act, which there will be reauthorization of MEP as 

well in that process. I want to get a sense from you, one, some of 

the challenges that you see for the MEP program in the coming 

years. I know you mentioned the financial ones, and perhaps you 

could flesh out a little bit some of the challenges that we have, particularly in Michigan but in other states that are also seeing a 

state match, which is why Mr. Ehlers and I have sponsored a bill 

dealing with that. If you could talk about the ramifications of that 

bill with the MEP program and some of the challenges that you 

70

will have going forward and any suggestions that you may have as 

to how we can make the program even better. 

Mr. COAST. Thank you very much. When you look at—I was surprised last week. We went to a national meeting in Utah with all 

of the center directors, and as this Committee knows, there are 59 

centers around the country, and I was surprised when we sat down 

and talked to all of the centers, we found out that about ten of 

those centers, their state funding at this point had stopped. That 

means that 49 obviously of the other centers are in trouble. And 

when you take a look at that, the services that we go out and provide the small to mid-sized manufacturers are going to be in trouble because centers are going to start to cut staff because they 

won’t have some of those precious dollars. 

And so with the bill that you are going to put into place is going 

to allow us to go out and reduce the match and it goes from 33 percent to 50 percent. That will allow the MEP centers to continue to 

go out and provide those services to the manufacturers. There are 

states that are around the country right now that have literally 

none. I mean, Illinois does not have any state match, California 

doesn’t, New Jersey doesn’t. We can certainly provide you a list of 

those, a more comprehensive list, but it is fairly typical, but as 

states go through this type of budgetary issues right now, that 

those numbers are going down, ten percent cuts, 50 percent cuts. 

And so the system is fragile, in my humble opinion, right now and 

it needs that federal investment to go out and continue to help 

those manufacturers. As Deputy Secretary Hightower said, the vast 

majority of manufacturers you there are the small companies. You 

know, there is 330,000 small to mid-sized manufacturers, you 

know, in America. Eighty-five percent of all the manufacturing is 

out there in those small companies. And so when you are looking 

at what the MEP system does, that is what we do. We go out and 

we provide that kind of assistance to help them pick themselves up 

by the bootstraps and stay in the game and employ people. 

Mr. PETERS. Thank you. 

Mr. Hightower, maybe you can comment on some of that as well, 

that you have got those states in the case of Michigan, for example, 

where the services of MEP and other support for manufacturers is 

most critical. In fact, as you know, most of the manufacturing jobs 

that have been lost in this country and hundreds of thousands but 

the vast majority of them have been in one state or concentrated 

in a group of states. What is the sense of the Commerce Department to help out those states that are being hit the hardest and 

yet their small manufacturers are in the greatest need? 

Mr. HIGHTOWER. Thank you, sir. I think what is often missed 

when we think about the tremendous impact that Michigan has felt 

is that we have to also look at it from the supply chain aspect. You 

look in the old days when I was doing work in the auto industry, 

every one job meant maybe 10 to 12 additional jobs. Well, that is 

probably double now in terms of the supply chain implications. So 

it is not just concentrated, as you certainly know, in Michigan. You 

still have Ohio, you have Pennsylvania, you have as far out as 

California, you have Texas, you have South Carolina, North Carolina where other elements of that supply chain have expanded. So 

I think one of the things that we have been thinking about and we 

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have certainly talked, you know, to Mike about this and are going 

to continue is that as we think about these regional programs such 

as the one Ms. Owens has with Spark—I was in Detroit about a 

month ago talking with one of the southwest regional councils 

there about how one of the other agencies, the Economic Development Agency, has been working with them to help them with their 

strategic planning process of how that region or that subset of the 

southwestern extension of Detroit, how will they come about and 

come around. There are other centers that we are looking at 

through EDA particularly in conjunction with CommerceConnect to 

figure out where, one, that effort should be, and what the nature 

of that service or resource, where are the opportunities for publicprivate partnerships and other strategic alliances, where as the Innovation and Entrepreneurship Advisor Council gets underway, 

how do we get those former small company startup entrepreneurs 

who are now successful, how do they reach back and sort of climb 

to go back into those communities to help figure out what the right 

plan is, how to get that capital, how to get you kick started if you 

have already gotten to the point of commercialization, then is there 

an export opportunity. It is bringing again that full range of services to bear, and we are actively looking at other areas that those 

kinds of services can be provided to begin to look at the effect of 

that one particular industry called auto and the supply chain impact that it has had in areas that heretofore had not been really 

fully appreciated. 

Chairman WU. Thank you very much, Mr. Peters. 

We are going to recognize all the Members of the Subcommittee 

first and the we will proceed to non-Subcommittee Members. Mr. 

Garamendi, five minutes, please. 

Mr. GARAMENDI. Thank you very much, Mr. Chairman, and 

thank you for your comments. 

Years ago, back in the early 1980s, California was faced with 

heavy-duty competition, and I was then chairman of the joint 

science and technology committee in the legislature. We undertook 

a study and we came out with six things that needed to be done 

to maintain the competitiveness of then the California economy. 

First was education, much of what was discussed yesterday by the 

full Committee, and I note that the witnesses which represented 

the major manufacturers of this Nation were unwilling to really 

put their money where their mouth was, that is, to invest heavily 

in education. All the talk in the world about STEM, all the talk 

about the need for scientists, engineers and the like is of no value 

unless we are willing to pay for that crucial investment. I appreciate the testimony of Mr. Hightower this morning, once again 

pointing out that need. But again, it takes money to do this and 

apparently America is not willing to spend its vast resources in 

this critical way. The second thing we talked about was research, 

which will undoubtedly be a subject that we will pick up in later 

hearings. The third was manufacturing. The fourth was infrastructure and then the fifth was international and finally ending with 

the critical word called change. We have to be willing to change. 

Let us focus on the manufacturing here for a while. Bottom line, 

it takes money. There are wonderful networks out there. That issue 

of coordination of all of those networks, some of which were disVerDate 0ct 09 2002 14:34 Jun 22, 2010 Jkt 055836 PO 00000 Frm 00075 Fmt 6633 Sfmt 6601 Z:\DOCS\54451.TXT SCIENCE1 PsN: COMSCI
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cussed by our witnesses today and even more are critical and I 

would recommend that we spend some time really looking at the 

issue of coordinating all of the resource, state and federal, private, 

on the interrelationship and the necessity of coordinating those. 

But my issue here really goes to money once again. There is a lot 

of talk around these buildings about making money available. 

Some of it is called direct lending by the Federal Government. 

What I would like to focus on is the indirect lending, that is, loan 

guarantees, the Small Business Administration and other loan 

guarantee mechanisms. So my question goes to Mr. Hightower and 

then to the other witnesses. Let us talk about loan guarantees, otherwise known as leveraging the federal dollar, using the existing 

private sectors. What do we need to do to really maximize the 

availability of money to entrepreneurs, manufacturers so that they 

can once again have money to carry on their businesses? Mr. Hightower? 

Mr. HIGHTOWER. Thank you. My view on this comes from again 

speaking with those companies as we travel throughout the United 

States who are suffering from the relative inability to access what 

has been granted. Part of it I think is a function of the will to put 

the money at the local levels, the small banks, and not change the 

ground rules. If I have heard it once, I have heard it at least 50 

to 80 times, that is as many companies that I have spoken with 

a cross-section across the United States, and that is, they know 

what has been granted, what has been authorized, whether it is 

from SBA or other funding sources. They know that the banks are 

getting it but they are saying it is not getting to us. To the extent 

that it gets to us, the rules keep changing on us in a setting where 

revenues are down, operating margins are low to nonexistent, profit margins are negative, why do the banks, my local bank, why do 

they impose a different coverage ratio on me than I had in the good 

times? So it is a double whammy. It is almost a triple whammy. 

So unless we can figure out how to enforce the grant-making process, because I am more of a grant maker than a direct—I don’t 

think that is the government’s role. But the granting and the loan 

guarantees and the applauding of moving those guarantees from 75 

to 90 percent is fine but it is not—it doesn’t mean anything if the 

money doesn’t actually get down to the areas where it is needed. 

Mr. GARAMENDI. If I might just hone in on that or drill down, 

which is the current word, I talked yesterday to the former president of the National Bankers Association about this issue and he 

was saying that there are two problems. One, he is in a bind. He 

continues to be a banker in Georgia. And he said I’m in a bind, I 

want to make the loans but the oversight agencies keep coming 

down on me about the requirements, part of what you talked about 

here. It seems to me that the loan guarantee program should give 

those federal regulators, bank regulators, a high level of assurance 

that that loan is going to be paid off if not by the company, then 

by the Federal Government. So we have a problem here with the 

regulators and the bankers. He mentioned the other problem being 

the SBA is almost impossible to deal with. Their mechanisms for 

giving a loan or for—not giving but underwriting a loan is obtuse, 

complex, constantly changing, and if streamlined, he would be in 

much better shape to make loans that are guaranteed by the FedVerDate 0ct 09 2002 14:34 Jun 22, 2010 Jkt 055836 PO 00000 Frm 00076 Fmt 6633 Sfmt 6601 Z:\DOCS\54451.TXT SCIENCE1 PsN: COMSCI
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eral Government, 90 percent or whatever. I would recommend 90 

percent. The remaining 10 percent, he can put on his books and be 

responsible for and the federal regulator would then say oh, okay, 

let us move forward. We have to make the money available. Otherwise this is just a lot of talk. 

Ms. OWENS. I agree with you completely and I think the money 

has to be available. The issue with our manufacturing base is they 

aren’t bankable so, you know, they are continually losing profits. 

Their assets, their equipment is valued at a quarter of what their 

loans are. So banks are in some cases making a smart decision because it is not a good risk for them. So if these manufacturers want 

to move forward, we have to look at other options outside of the 

banking community or provide some type of way to allow banks to 

be able to take that extreme risk, because it is an extreme risk. 

Mr. GARAMENDI. That is what the loan guarantee is all about, 

isn’t it? 

Ms. OWENS. But I still have—I have companies who look at SBA 

loan guarantees and cannot find a banking partner who is willing 

to do that even with the program right now. It is intended to do 

that but I still find very much in Michigan financial institutions 

are not trusting in our automotive sectors or any manufacturers at 

this point. 

Mr. GARAMENDI. I think that comes back to the issue of the regulators on the back of the banks and setting down regulations that 

do not take into account the loan guarantee, picking up 90 percent 

of the risk. 

Ms. OWENS. Right, and I actually have a small business that was 

started because of an SBA loan guarantee about four or five years 

ago so I think the program can work, but I think the automotive 

sector is so different right now that the loan guarantee program 

just, either the banks aren’t educated or they are not willing to 

take that risk for our manufacturers. 

Mr. GARAMENDI. I notice my time has long since expired so I will 

pass it off, but with one final comment. It seems to me that if we 

are going to deal with manufacturing in the small- and medium 

sector, it is all about money. They have to have access to money, 

and there is something terribly wrong here. The loan guarantee 

seems to me to be the best way to proceed and then to couple that 

with administration modifications at the regulatory system to take 

into account the significant reduction in risk to the bank or to the 

lender and the process that is necessary even to go through all the 

paperwork. I think we have to hone in on that. The rest of it is 

just a lot of talk. Thank you, Mr. Chairman. 

Chairman WU. Thank you, Mr. Garamendi. 

The gentleman from New York, Mr. Tonko. 

Mr. TONKO. Thank you, Mr. Chair. 

Ms. Owens, you deal with a number of companies and we have 

had a very difficult economic period over the last several years, and 

I am certain there are success and failure stories that are part of 

the networking that you have done. Can you tell us, are there any 

bits of information you can share concerning those success stories, 

why they have endured, how they have made it through a tough 

cycle and is there anything we can learn from them as an example? 

74

Ms. OWENS. I think the manufacturers in particular who are 

willing to recreate themselves to learn, to discover new industries 

and opportunities, to take amazing risks have been successful in 

Michigan. We have an array of small manufacturers in Washtenaw 

County in particular who are 100 percent automotive and have now 

transitioned fully to other industries or 20 percent into automotive 

but how they have done that is, they have taken tremendous risk. 

They mortgaged their homes, they mortgaged all their assets, they 

have taken in Mike Coast and the MEP center and welcomed them 

with open arms, all the opportunities that are available. They have 

used the procurement technical assistance centers, which are a 

wonderful resource, so they are willing to take that risk and take 

the education. 

Secondly, I think for manufacturers today, a lot of them in the 

auto industry have lost the ability to sell and market their products and so they have been essentially order takers who just kind 

of waited for the orders to roll in. The manufacturers have invested 

in sales and marketing and can recreate themselves for the other 

industries. Marketing the auto industry is very different than marketing to the medical device industry. Those are the ones that have 

been successful. There are many manufacturers who kind of dug 

their heels in, have seen the auto industry go up and down and are 

just waiting for the phone to start ringing again. Those are the 

businesses that have closed. The ones who have taken extreme 

risk, offered all the help and assistance provided by the state and 

the local government are the ones that have been successful and 

have been able to diversify. 

Mr. TONKO. Have any concentrated on export opportunities? Secretary Hightower. 

Mr. HIGHTOWER. Yes, in fact in Michigan there is a company by 

the name of Vogel Industries, a precision machining supplier which 

at one point was about $140 million company with 425 employees, 

which in the last couple of years is now a $6 million company with 

35 employees. When they came to Mike’s operation and we worked 

with them in coordination with the CommerceConnect pilot, we introduced them to the export assistance center to find opportunities 

for export, and we also introduced them to the Department of Energy to apply for a grant which will now help them to develop an 

alternative-energy product so again it is that transition issue and 

providing the way that if they get this, which we think there is a 

fair chance they will get the alternative-energy grant, this will actually mean reemploying 250 workers. So the more and more we 

find those kinds of companies and work with them on that transition process, this is where I think we are going to get the payoff 

for these kinds of programs. 

Mr. TONKO. Are there—Mr. Coast. I am sorry. 

Mr. COAST. If I might follow up on that, I have got two examples 

of companies that we have worked with. One is a screw machine 

company. They used to make parts that went into the Chevy Roadster. If you know anything about the Chevy Roadster, you know 

that it is now obsolete. And they had 25 employees. We helped take 

that company, that particular company from making parts for that 

roadster. They now make parts that go into a prosthetic leg. And 

the good news is, there are still 25 employees there. So they still 

75

have those folks. Another one happens to be in Congressman Peters’ district, which is non-automotive, and the company is called 

Total Door, and they have made a complete transformation. So 

when you start to look at this particular company, they moved from 

one facility. They used to have 12 × 12 wood beams in it, completely transformed themselves and went into another building and 

they have product flow that is in place now and they are competitive. And when you take a look at what they have done with technology, they have also used some of the current technology, off-ofthe-shelf technology that is out there. They used to paint doors. 

And so now what they have is a way—and when you paint doors, 

in the old days you had a lot of fumes, VOCs (Volatile Organic 

Compounds), that kind of thing. Well, now they paint the doors and 

they cure them with ultraviolet light, and so when you start talking about green technologies and off-the-shelf technologies, that is 

another example of those opportunities that are out there for these 

companies so they can go do this kind of work. 

And back to a point Jennifer made is that the companies—I can 

give you dozens of examples of companies that will show up to a 

bank with an order in hand, an order in hand for $10 million but 

they can’t get a loan from the bank to go buy the materials to make 

the product. You know, I am not sure—I am an old manufacturing 

guy, okay? And so I am not sure about all the intricacies of how 

to move that money down the supply chain. TARP (Troubled Asset 

Relief Program) money might be a possibility. I don’t know. But I 

know it is not getting down to the small guys, and they have—once 

again, they have orders in hand. You want to bring people back off 

unemployment? Give that guy, a stamper in Detroit, access to that 

capital and he will bring 30 people off of unemployment tomorrow. 

Mr. TONKO. Creatively speaking, what would be the best option 

to provide for that economic need, for that cash flow, that 

businessperson needs? 

Mr. COAST. Well, the SBA in Michigan, I don’t know about the 

other states but we work real well with the one in Michigan, and 

they are somewhat constrained sometimes because they are backing up—the company has to go to the bank and then the SBA will 

back up the loan, and that seems to be a bottleneck. So we have 

had good experience with the SBA in our state. It is just a matter 

of trying to figure out banks that will go out and lend to companies, and the automotive guys. That is another huge issue because 

you have automotive—we do a lot of market diversification with 

companies and so they are automotive and so you want to move 

from automotive into aerospace, wind turbine, you know, defense 

but they want to make the transition. They go to the bank and say 

you are automotive, red-lined. 

Mr. TONKO. Ms. Rosenthal, you were going to respond to that? 

Ms. ROSENTHAL. Yes, please. In Pennsylvania, the companies 

that we work with are both startups for which, back on the issue 

of debt or guarantees, has no bearing. It is just totally irrelevant. 

In terms of companies that are reinventing themselves through the 

commercialization of a new technology, what we will do is provide 

them capital on a joint basis so they can take those steps that are 

highly risky. We wouldn’t expect a bank to lend against those kinds 

of needs. We can help capitalize the company to move that product, 

76

that technology into the marketplace in a very—in an equity-like—

with an equity-like vehicle. We don’t want it to look like debt. We 

don’t want to burden the company with that debt but we are taking 

the risk with the company and hope to get the reward downstream. 

So sometimes I have worked with debt programs and guarantees 

in my career. They are not necessarily appropriate for a company 

that is taking a high-tech risk and so we have to find other ways 

of creating vehicles that are more equity like than debt like. 

Mr. TONKO. Thank you. 

Mr. Chair, I think I have gone well beyond my time so I appreciate your tolerance. 

Chairman WU. We have a soft gavel in this Subcommittee. 

Mr. TONKO. Dr. Ehlers, five minutes. 

Mr. EHLERS. Mr. Chairman, I am assuming the soft gavel because I have been sitting here watching all the minutes accumulating elsewhere. But in any event, first I want to commend Mr. 

Garamendi for his comments and say we have faced exactly the 

same problem in Michigan. We have the highest unemployment in 

the country. We are probably-California is in a race with Michigan 

to see who can reach the bottom first, but we face the same problem, and the loans, it is a problem. It is right. The federal regulators come into the banks and say you need more assets on hand 

to meet your responsibilities and so they don’t have the money to 

loan. 

Mr. Coast, I had the identical situation with one of my manufacturers. He needed a $750,000 loan just to buy the equipment for—

pardon me—to buy the parts and so forth that he needed to manufacture the machine and could not get a loan anywhere, even 

though he had the firm orders in hand from reliable companies. 

Loan guarantees may be a good approach for that particular part 

of it. 

But let me get back off that a bit and get to the broader question, 

which involves the Congress as well as the Administration, and Mr. 

Hightower, or Mr. Secretary, I certainly commend you for the comments that you have made and the experience that you have. I 

don’t want to irritate Mr. Smith, who represents highly agricultural areas, and I am not trying to denigrate agriculture in any 

way. Most of my relatives are farmers. But I find it striking, we 

go back to 1880, 80 percent of the workforce in this nation was in 

agriculture and we had an agriculture department, a very important department. Today, roughly 2 percent of the workforce is in 

agriculture and we still have the same agriculture department. Cooperative Extension Service has been marvelous throughout the 

country. It really established agriculture and helped them, and I 

certainly don’t denigrate that. I think it is wonderful. But today we 

need a Manufacturing Extension Partnership, and I have fought 

hard for MEP and for its funding every year, and I think it is nonsense that the Congress and the Administration over the years has 

maintained $400 million a year for the Cooperative Extension Service in agriculture, and that is fine. They need it. It is well worth 

it. But at the same time, manufacturing has 15 percent of their 

employees in the country and I had to fight like mad just to keep 

the funding constant for MEP. Every year was a battle, and I appreciate Mr. Peters offering this bill. That is going to help, if we 

77

can get it passed. But when Joe Nolenburg was here, the predecessor for Mr. Peters, he was on the Appropriations Committee and 

he and I worked very hard every year. About the best we could do 

is just maintain the level of MEP, not even keeping up with inflation. We have to change our attitude in the Administration and in 

the Congress about programs such as MEP. We know it works. 

Why don’t we fund it appropriately for the number of workers in 

that field? 

I do want to add another factor, and, Mr. Hightower, that is why 

I appreciate what you are doing. But more needs to done in the Department of Commerce. Again, I fought for a number of years to 

have a deputy secretary for manufacturing within the Department 

of Commerce. We should have it. We have an entire department in 

agriculture and I couldn’t even get one position for manufacturing 

in the Department of Commerce. What I did get was the creation 

of the council that Mr. Fred Keller from my district has so ably 

chaired, and they have done marvelous work. But we need greater 

infrastructure within the Department of Commerce to deal with 

manufacturing. You don’t have the time with all of your responsibilities to devote full time to manufacturing. There should be 

someone in roughly your position that deals entirely with manufacturing. And so I hope that the Congress and the Administration 

can work together to put more emphasis on manufacturing. I don’t 

put it in your hands, Mr. Secretary, because you have got enough 

to do, but the Congress working with the Administration should 

create an infrastructure within the Department of Commerce that 

recognizes the importance of manufacturers and manufacturing 

and does provide the funding and the administrative ability, the 

sufficiency that they can really tackle the problems of manufacturing in this country. They do it in other countries. That is why 

they are beginning to beat us hollow. 

I have the bad habit of falling into a preaching mode because my 

dad was a preacher, but this is one area I feel very strongly about 

and I will be happy to preach to anyone about the importance of 

manufacturing and what we should be doing. The MEP should be 

at least close to the $400 million a year we spend on the agricultural Cooperative Extension. I could easily argue it should be double or triple that. And I don’t mean to lower agriculture’s. It is 

beautiful. It works. Why not transfer that model fully over to manufacturing and the Department of Commerce and make it a higher 

priority? 

Mr. HIGHTOWER. Yes, sir. Thank you for your comments. We 

have made a little bit more progress since your last awareness that 

we do now have an assistant secretary who does focus only on manufacturing and services—she just had her hearing just before 

Christmas—and again, working now very closely with Ron Bloom 

from the White House on these issues. I think it just sort of gets 

to your point of the focus and putting the resources behind it. So 

yes, there is a lot more to be done but at least we do have someone 

at a level from a policy standpoint and with background in that 

area. She happens to come from Detroit, so she does understand 

the issues and I think will make a tremendous contribution once 

she is confirmed. 

78

Mr. EHLERS. Well, we will see if this all results in more manpower and more money for the project. I commend you for what you 

are doing. I am just saying you have got support here in the Congress. 

Mr. HIGHTOWER. Thank you very much. 

Mr. EHLERS. We have to work together on it so that we are trying to achieve the same objective. I notice Mr. Garamendi has 

moved on here so apparently he is going to join the Republican 

Party. Thank you very much. 

Mr. Coast, you had a comment? 

Mr. COAST. I do, and at the risk, if you will, of sounding self-serving, if you want to make an impact, get those precious dollars you 

are talking about out into the MEPs and to the centers and the results will be feet on the street, create jobs, work with the companies, they hire people. So I know it sounds self-serving. But you 

have a shovel-ready program in place now. 

Mr. EHLERS. Well, but— 

Mr. COAST. We just need more engineers and more manufacturing specialists out there. 

Mr. EHLERS. Let me just say that don’t worry about being selfserving. That is the only way you will get anywhere in this city. 

We expect you to be self-serving. 

Also on the issue of loans, you mentioned TARP. It is very frustrating, and I have tried to work with the Administration on this 

too. It is very frustrating that we bailed out the banks, the big 

banks, and none of that money is coming down to the small manufacturers, the local communities, and loan guarantees are wonderful, that would be great, but I would like to see the TARP reimbursements allocated as they come in, allocate them to this particular field. Manufacturers desperately need to be able to borrow 

the money. 

With that, I will yield back, Mr. Chairman. 

Chairman WU. Thank you very much, Dr. Ehlers. 

Mr. Garamendi, please let me know if this is a permanent move 

for you. 

And Mr. Smith and I are in full accord that we support getting 

a person in place as soon as possible but not a czar. An assistant 

secretary will be just fine. In fact, one czar at a time would be just 

hunky-dory. 

Mr. Hightower, I understand that you need to leave by noon or 

a little bit more. We will accommodate that schedule. There is also 

a Floor vote which is scheduled to occur sometime or be called 

sometime in the next 15 minutes but let us go on for as long as 

we can. 

For the outside witnesses, I would like you to comment on 

whether Department of Commerce folks have sought your input in 

developing their initiatives like CommerceConnect and the Office of 

Innovation and Entrepreneurship. Do you feel consulted? Were you 

consulted? And was your input acted upon? 

Ms. ROSENTHAL. I would be happy to lead that one off. We have 

been consulted, as I mentioned in my comments, both long and 

short. We have had good dialog in terms of what can be done, 

where we see in the field the gaps. Again, to pick up the recommendation to be self-serving, there is a need for capital to flow 

79

to the very youngest companies so that they can some day grow up 

to the manufacturers of the Nation. So that is our sweet spot in 

terms of looking at that. Also, flexible capital, that will help companies reinvent themselves, connect with universities, move forward 

with new technology-based products. Those are not needs that are 

adequately addressed by current programs. We can retool those 

programs. It doesn’t necessarily mean new money but it means a 

restructuring of existing programs. You have the manufacturing 

base that can take a look at and be supported by more traditional 

financing. You have the new company base and the company 

transitioning that needs flexible equity-type capital. 

Ms. OWENS. Previous to this career, I was with Michigan Economic Development Corporation and we worked very closely with 

Mike and the Department of Commerce and the CommerceConnect 

program. My organization, Ann Arbor Spark, was not consulted so 

this is a new thing, and that is kind of what I brought to the organization was an education for them. The Office of Entrepreneurship, we have not met with that group and actually are looking forward to later today to meet with them and learn about that. I 

know that they have worked with the University of Michigan and 

have kind of met with the university to ask about their insight and 

input. Our organization manages a venture capital fund and three 

incubators that have turned out roughly 300 high-tech startups, so 

we are very excited about collaboration and opportunities that can 

take place between Ann Arbor Spark and this new office. 

Chairman WU. Thank you very much. 

Mr. Coast. 

Mr. COAST. I can say from a CommerceConnect perspective that 

we have worked hand in hand with the folks at the Department 

of Commerce. The way that it is structured, I think some of it was 

in my testimony. The written testimony is, we actually have four 

people from the Department of Commerce collocated in my building, and one of my staff that is also a manufacturing person, so we 

have gotten the good people that they have brought, and they have 

been very energetic and very open to this process. But that is also 

one-half of the pilot. The second half of the pilot is trying to figure 

out how to reach inside the Department of Commerce and find 

those programs and have them become customer friendly, if you 

will. But that process is well on its way. That is the second half 

of the pilot that you are looking at. And one of the things that I 

would offer up, and when we work with a small company we go in 

and we talk to them about improving their processes before you 

automate them, and so there are many steps down the road that 

I think need to be taken that can put into place a good, sustainable 

system that is going to allow for us, and one other point that Jennifer mentioned was one of the critical parts of that is to use the 

economic development folks that have feet on the street already 

that know some of these things and so you leverage those, and that 

is also part of the mix but it has been—they have listened and we 

are in the process of getting through that final design so that the 

end product will be something that works. 

Chairman WU. Thank you very much, Mr. Coast. And offline we 

will take your and Mr. Hightower’s comments on when 

CommerceConnect will expand beyond Michigan and what the time 

80

frame for that expansion will be. In connection with the Commerce 

Department’s emerging innovation programs, I would just like to 

add that I have followed the Brookings and ITIF (Information 

Technology and Innovation Foundation) recommendations on systematizing and creating some structure for the study of innovation 

and the promotion of innovation. Other countries have systematic 

ways of promoting innovation. We have had a very innovative society. We have been good at invention. It has been a byproduct of 

a very strong science and R&D enterprise. We do not have a systematic way of promoting innovation whether it be in finance, regulatory hurdles, the best and fastest way of transferring intellectual 

property, et cetera. I used to do university technology transfer and 

it is akin to Boswell’s comments about a dog walking on its hind 

legs. It is not done well but one is amazed that it is done at all. 

We have led the world in innovation. People do come here to look 

at our innovative companies but they no longer come here to look 

at the systematic promotion of innovation. That activity is really 

being led by the Europeans, Japanese and some other folks. 

So looking at the potential for an innovation institute or innovation foundation or locating that office at NIST or Commerce or 

OSTP (Office of Science and Technology Policy) or NSF (National 

Science Foundation), that is something that I think this Subcommittee and the Full Committee would like to explore. Perhaps 

creating such an entity will not take quite as long as the creation 

of the National Science Foundation after World War II but I think 

that we should approach it in a careful and systematic way because 

the goal is to promote innovation in an appropriate federal way, to 

study it, to understand it, to promote it in the private sector, to 

promote it in state and local government and also Federal Government policies. The goal is very much to avoid injecting bureaucratic 

process in what is an inherently vibrant and bubbling activity. 

Mr. Smith, five minutes. 

Mr. SMITH. Thank you, Mr. Chairman, and again thank you for 

your time with the panel. 

I take very seriously my charge as an elected representative of 

the 3rd District of Nebraska, one that is quite diverse but certainly 

agriculturally based, and my prior questions are only a result of 

the hearing charter stated as the purpose of this hearing is to learn 

about the challenges faced by small- and medium-sized manufacturers. Again, I take that very seriously, and I am simply conveying the concerns that I hear from my constituents, and while I 

am a product of a community college, proudly so, I know that we 

need community colleges. I know that Nebraska has literally thousands of automotive-based manufacturing jobs. What I am saying 

is, we are in this together. Nebraska enjoys a far lower unemployment rate than does Michigan, but acknowledging that, please 

know that we are all in this together. And while we do need to support community colleges, we do need to support various programs 

of extension and otherwise, there are many and numerous other 

concerns out there facing manufacturers, and that is simply why 

I bring up the issues that I have today. And I guess I would only 

wish that we could have a Treasury Department representative 

here today given the fact that we have talked about lending and 

how the shortage of lending is causing problems for all businesses, 

81

small and large, and I struggle to think that creating new regulations on financial institutions who are now bad actors, have not 

been bad actors, would increase lending, and I guess I am in the 

preaching mode too, Mr. Ehlers. But I also struggle to think that 

the creation of new regulations because it would require job creation following those regulations is a good reason for creating new 

regulations. That is not sustainable economically. And I hope that 

we can get to the bottom of some of these things. I look at the trade 

issues and how important those are across the board, though. For 

example, I have in my district the largest natural wool yarn manufacturer in America, a whopping 45 employees. Now, I am kind of 

proud of the fact that they not only are in my district but right 

down the road from where I live, even though I don’t really use 

their product, but they get my attention when they say that the estate tax would devastate their business. Those are their words. I 

am prompted by any question that I had when I visited their facility. And I look forward to working together. 

I admire each and every one of you for working in the trenches 

and it is not about improving your own lot, it is about improving 

many, many others, and so that is why I am grateful for not only 

my opportunity but I am grateful that you would share your expertise as well. So please know that I just want to share information 

and convey a message of concern for my constituents. 

Now with a question. Sorry. Uncertainty. The marketplace is uncertain enough on its own but the marketplace in terms of ancillary 

concerns appreciates certainty. What would you like to see the government do or the Federal Government, the Science Committee, 

the Innovation and Technology Subcommittee perhaps, do to ensure more certainty? Is it the CommerceConnect? Where would 

that be, and if any of you would choose to answer, maybe starting 

with the Secretary if you would choose to answer. 

Mr. HIGHTOWER. I think, one, it is important to say that we have 

enjoyed a tremendous amount of support and openness and accessibility for the Subcommittee and your support of NIST as one of the 

major elements of the Department of Commerce. As we move forward, I would want to be sure that this would be an opening or 

beginning, if you will, to the opportunity to continue to bring these 

ideas forth because there are going to be a number of new and innovative and untried and untested approaches, and we all know 

from a business perspective that when you start laying out new 

ideas and new programs, those that have a track record will always 

win against those that have no track record where the idea is at 

its early stage of coming into being. So we would ask for sort of 

your forbearance and your understanding that every time we want 

to do something new and different, it may not have the legs that 

a program that has been around for 15 or 20 years might have. 

And it goes back to something I learned in my first general management job under Jack Welch from 30 years ago, and that is that 

if you know 60 percent of everything you want to know before you 

make a decision, you are lucky. What you get paid for is the other 

40 percent which is your judgment. So hopefully you will accept our 

judgment when we come to you having talked to our stakeholders, 

talked to the clients, if you will, the users of the intended services, 

and we will bring as much of that to bear as we can and discuss 

82

the merits and the pros and the cons and hopefully come out of 

that with your support for some of these very risky, quote-on-quote, 

new ventures that we think are important to help get back this 

economy back on its feet again. 

And with that, I do respectfully request that I can leave now because my next meeting is on trade. 

Chairman WU. I understand. I got a note that the White House 

is looking for you, and perhaps you could share with them Mr. 

Smith’s concerns, and for me to ask them to, counter to what the 

President said yesterday, let us get health care done quickly so 

that we can reduce risk for individuals so that they can assume 

risks elsewhere and truly engage in entrepreneurial activity. 

Mr. Smith, I completely respect your efforts to represent your 

constituents and your constituents’ concerns. We all take these concerns very, very seriously, and our oath of office and Constitutional 

duties. I carry a copy of the Constitution in my hip pocket. It is 

the authoritative Cato Institute version. There are many things on 

which we will continue to work together, and in that bipartisan 

spirit, Mr. Ehlers and I have worked mightily to preserve as much 

of the MEP program and the ATP (Advanced Technology Program) 

program, now the TIP (Technology Innovation Program) program, 

because there are important and legitimate public interventions in 

the private sector to compensate for externalities, market defects 

and underinvestment in things like science and research. I just 

want to note that we spend more on fishing tackle and potato 

chips, not combined but individually, than we do on the space program or on NIH (National Institutes of Health). 

Are there any further—Mr. Ehlers? Oh, Mr. Hightower, please— 

Mr. HIGHTOWER. Thank you very much, and really, I thank you 

and the Committee for the opportunity to appear before you today 

and hopefully, again, this will be the beginning of a mutual exchange where we can really move this forward and get people back 

to work in this country. Thank you very much. I look forward to 

it. 

Chairman WU. Thank you, Mr. Hightower. 

Dr. Ehlers, any further— 

Mr. EHLERS. I think I pretty well concluded my sermon. It would 

probably help if we had a few amens from the chair. 

Chairman WU. Amen. 

Mr. EHLERS. Thank you. Let us go do it. 

Chairman WU. Mr. Smith? 

I want to thank the witnesses for being here today, and please 

pass on my good wishes to Assistant Secretary Hightower. This 

hearing is now adjourned, and comments and questions will be submitted to the witnesses in writing. Thank you very much for being 

here today. 

[Whereupon, at 12:01 p.m., the Subcommittee was adjourned.] 

(83)

Appendix: 

ANSWERS TO POST-HEARING QUESTIONS

84

ANSWERS TO POST-HEARING QUESTIONS

Responses by Hon. Dennis F. Hightower, Deputy Secretary of Commerce, U.S. Department of Commerce

Questions submitted by Chairman David Wu

Q1. What criteria do you use to judge the success of innovation services/programs 

provided for small- and medium-sized manufacturers?

A1. The Manufacturing Extension Partnership (MEP) uses a client impact survey 

to collect impacts from clients receiving MEP services. Specific measures that capture the impact of innovation services include new and retained sales along with 

new and retained jobs. Recognizing that innovation-type services may generate 

longer-term measurable impacts that would not be captured in a survey administered six months after project completion, MEP has modified its data collection process to collect these impacts over time. As MEP expands the innovation and growth 

services offerings for U.S. manufacturers, the program will continue to explore 

measure and options to collect the impact of these services. 

For more information on the MEP Client Impact Survey and the latest results, 

refer to: U.S. Department of Commerce, National Institute of Standards and Technology Manufacturing Extension Partnership Delivering Measurable Results to Its 

Clients, Fiscal Year 2008 Results, January 2010 http://www.mep.nist.gov/documents/pdf/about-mep/impacts/fy2008ldmrlfinal.pdf.

Q2. In her testimony, RoseAnn Rosenthal made several suggestions for retooling existing federal programs to increase their impact on innovation and job creation. 

For example, she suggested modifying the Economic Development Program to 

create Commercialization Partnership Centers. Could you please give us your 

views on the recommendations in her testimony?

A2. In her testimony, Ms. Rosenthal suggested two core areas to retool: 1) Access 

to capital and 2) Creating effective pathways to commercialization. These issues are 

of paramount importance to the Obama Administration and the Department of 

Commerce (Commerce). 

The Economic Development Administration (EDA) at Commerce strongly supports 

university-led economic development and technology commercialization as a strategy 

to support collaborative regional innovation to create sustainable growth in American regions. EDA’s University Center program is a diverse and flexible tool that 

supports a broad range of economic development activities from technical and financial support to businesses and entrepreneurs, to helping communities grow innovation clusters, to support for university-led technology commercialization partnerships. EDA recognizes the great benefits that such partnerships afford and will look 

for ways to continue to prioritize and support such activities in the future. 

Additionally, Commerce’s Office of Innovation and Entrepreneurship is working 

closely with the Small Business Administration, the National Science Foundation, 

and other federal agencies to address other programs that can be more focused on 

innovation and commercialization, including the SBIR and STTR programs.

Q3. All of the witnesses stated that access to capital is the top priority for manufacturers. What specific programs or mechanisms does CommerceConnect have in 

place to help connect manufacturers with available funding through the Small 

Business Administration?

A3. As you know, the first pilot office of CommerceConnect is located in Plymouth, 

Michigan. The CommerceConnect case managers have a base knowledge of the federal, Michigan state and local loan and grants programs. They also have developed 

working relationships with local Small Business Administration (SBA) representatives to help connect local companies with information on various SBA loan programs. SBA representatives have introduced local lending institutions to 

CommerceConnect case managers to help them better understand the specific business requirements needed before referring their clients to apply for SBA loans directly to local lenders. CommerceConnect case managers also follow up with their 

clients after the meetings with SBA and lenders to determine if they need to search 

for additional suggestions for alternative financing.

85

ANSWERS TO POST-HEARING QUESTIONS

Responses by Jennifer Owens, Vice President, Business Development at Ann Arbor 

Spark

Questions submitted by Chairman David Wu

Q1. What criteria do you use to judge the success of innovation services/programs 

provided for small- and medium-sized manufacturers?

A1. The success of programs are usually determined by the business served staying 

in business and investing in their facilities. Success should not be judge by the creation of job as most manufacturers who are adding new equipment, implementing 

lean practices and increasing innovation will often maintain status quo employment 

levels or even reduce employment as they become more efficient. Investment in facilities be it through research or machinery and equipment by manufacturers served 

is often the best sign that a company is headed toward success.

86

ANSWERS TO POST-HEARING QUESTIONS

Responses by Michael Coast, President, Michigan Manufacturing Technology Center 

(MMTC)

Questions submitted by Chairman David Wu

Q1. What criteria do you use to judge the success of innovation services/programs 

provided for small- and medium-sized manufacturers?

A1. Judging the success of a ‘‘new Program’’ is always interesting. Innovation falls 

into that category. We—the MMTC and MEP from a national perspective have been 

looking for the next best ‘‘Innovation Tool’’ to put into our tool box. The best measure over the years has been the ability of the small- and medium-sized manufacturers (SMM) to purchase the ‘‘services’’. With the thought that if they find value in 

the services they will but it. Which then follows that if they buy it and then use 

it there will be a return on investment (ROI). In this case the ROI would come in 

the form of increased sales. One way NIST measures this is with the NIST/Turner 

system—which is a post project survey of the companies. Unfortunately they do not 

break it out by product line—Quality, Lean manufacturing, market diversification, 

growth services, product development, etc. So the main criteria is increased sales—

or in some cases increased RFP’s which lead to sales. The national system numbers 

as reported by Turner/MEP HQ is:

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