Innovation and Technology in Hawaii: an Economic and Workforce Profile

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Innovation and Technology in Hawaii: An Economic and Workforce Profile

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Citation for published version (APA): Poole, K., White, M., & Feser, E. (2008). Innovation and Technology in Hawaii: An Economic and Workforce Profile. Center for Regional Economic Competitiveness.

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Download date:05. Oct. 2021 Innovation and Technology in Hawaii: An Economic and Workforce Profile

www.HISciTech.org Project Sponsors and Partners

The Hawaii Science & Technology Institute (HISciTech Institute) is a tax-exempt 501(c)3 charitable organization whose mission is to support science and technology in Hawaii through research, education and workforce programs and lifelong learning. The Institute works in close partnership with its sister organization, the Hawaii Science & Technology Council.

The Hawaii Science & Technology Council (HISciTech) is a tax-exempt 501(c) 6 industry association which seeks to connect, unify and strengthen Hawaii’s science and technology communities to accelerate the growth and success of innovation in Hawaii.

The Center for Regional Economic Competitiveness (CREC) is an independent 501c(3) non-pro t aliated with George Mason University and the Council for Community and Economic Research (C2ER). Created in January 2000, the Center is organized to support the development of innovative approaches to creating jobs in the knowledge economy with better information and strategies.

The State of Hawaii Department of Business Economic Development and Tourism (DBEDT) is Hawaii ‘s resource center for economic and statistical data, business development opportunities, energy and conservation information, and foreign trade advantages.

Project Funders

The State of Hawaii Legislature 2006 The State of Hawaii Department of Business Economic Development and Tourism The Atherton Family Foundation The University of Hawaii System The Research Corporation of the University of Hawaii The Hawaii Science & Technology Council Workforce Development Council, Department of Labor and Industrial Relations Council for Biotechnology Information Experimental Program to Stimulate Competitive Research (EPSCoR) Hagadone Printing Hawaii Business Magazine Innovation and Technology in Hawaii: An Economic and Workforce Profile

Prepared for: The Hawaii Science & Technology Institute

Prepared by: The Center for Regional Economic Competitiveness

October 2008 Acknowledgements

The Hawaii Science & Technology Steering Committee: We would also like to express Institute would like to thank the partners appreciation to those stakeholders that Michael Hamnett, Ph.D., Executive in this project and the many others participated in interviews, discussion Director, RCUH and Research Co-Chair who gave their time and input during sessions, and other activities associated and Director, Hawaii Science & an extensive set of interviews. These with this project. Participation included Technology Institute partners contributed a tremendous a number of industry, research, and amount of support: the State of Hawaii’s Mark McGuffie, Executive Director, Hawaii economic development groups Department of Business, Economic Island Economic Development Board identified in Appendix 1. Development and Tourism (DBEDT), and Research Co-Chair and Director, the Center for Regional Economic Hawaii Science & Technology Institute Competitiveness, and the Department of Mike Rota, Associate Vice President for Urban and Regional Planning, University Academic Affairs, Community College of Illinois at Urbana-Champaign. System, University of Hawaii, Research We also wish to thank the steering Co-Chair and Director, Hawaii Science committee, whose guidance has been & Technology Institute invaluable; the Research Corporation of the University of Hawaii (RCUH), the Lisa Gibson, President, Hawaii Science University of Hawaii, the Hawaii Island & Technology Institute and President, Economic Development Board, the Maui Hawaii Science & Technology Council Economic Development Board, the Kauai Pearl Imada Iboshi, Ph.D., State Economic Development Board, and Economist, Administrator, Research and Enterprise Honolulu. The Institute would Economic Analysis Division, DBEDT also like to thank the project funders: • The State of Hawaii Legislature 2006 Robert Shore, Economist, Research and • The State of Hawaii Department of Economic Analysis Division, DBEDT Business, Economic Development and Kathy McKenzie, Project Manager, Tourism (DBEDT) Hawaii Science & Technology Institute • The Atherton Family Foundation • The University of Hawaii System Advisory Committee: • The Research Corporation of the University of Hawaii Leslie Wilkins, Maui Economic Development Board • Hawaii Science & Technology Council Cover photos: and its members Mattie Yoshioka, Kauai Economic Circuit board / BigStockPhoto.com © • Workforce Development Council, Development Board G. Barskaya, Adaptive optics / courtesy of DBEDT, Honolulu cityscape / Department of Labor and Industrial Mark Ritchie, John Strom, Enterprise Relations BigStockPhoto.com © B Wong, Robotics girl Honolulu / courtesy of DBEDT • The Council for Biotechnology Information Consultants: • Experimental Program to Stimulate Competitive Research (EPSCOR) Ken Poole, Ph.D., CEO, Center for Regional Economic Competitiveness © 2008 Hawaii Science & Technology • Hagadone Printing Co. Inc. Institute. Use, duplication, or distribution • Hawaii Business Magazine Mark White, Ph.D., Center for Regional of this document or any part thereof is Economic Competitiveness prohibited unless written permission is obtained from the Hawaii Science & Edward Feser, Ph.D., Professor and Interim Technology Institute. Unauthorized use Chair, Urban and Regional Planning, may violate the copyright laws and result in University of Illinois at Urbana- civil and/or criminal penalties. Champaign

2 Table of Contents

5 Message from U.S. Sen. Daniel K. Inouye 6 Message from Gov. Linda Lingle

7 Executive Summary 7 Introduction 7 Methodology and Scope 7 Size and Scope of Science and Technology Activities in Hawaii 9 Market Segments Driving Hawaii’s Technology and Innovation 11 Island Highlights 12 Hawaii’s Science and Technology Workforce

School of Ocean and Earth Science and 13 Recommendations Technology, University of Hawaii at Manoa (courtesy of DBEDT). 15 Introduction 15 Innovation and Hawaii’s Technology Sector 16 Hawaii’s Technology Sector Talent Pool

17 Overview of Hawaii’s “Technology Sector” 18 Defining Technology Industries 19 Private-Sector Technology Industries 19 Public-Sector Technology Employment

23 Markets Driving Hawaii’s Technology Sector 25 Information and Communications Technology 25 Defense/Aerospace 26 Engineering/Professional Services 27 Environmental Technologies 28 Life Sciences, Excluding Agricultural Biotech 28 Agricultural Biotech 30 Ocean Sciences 30 Renewable Energy 31 Digital Media 32 Astronomy 32 Overall Trends in the Commercial Market Segments

37 Island Highlights—Strengths and Opportunities 37 Kauai County 38 Hawaii County 40 Maui County 42 Island of Oahu / City and County of Honolulu 43 Island Opportunities

3 44 Labor Market Trends in Technology Clusters 45 STEM Occupation Trends 46 The Largest Technology Industry Occupations 47 Management Analysts 47 Computer-Related Occupations 49 Engineers and Architects 50 Technology Sales and Service Representatives 50 General Business and Office Personnel 51 Education Programs Most Relevant to Hawaii’s Tech Industry 52 Business and Office Management Maui High Performance Computing Center 52 Computing and Information Technologies (courtesy of DBEDT). 53 Architecture and Engineering 53 Life Sciences 54 Physical Sciences 54 Gaps and Opportunities

56 Implications for Policy 56 Key Findings 56 What Is Unique about Tech Sectors in Hawaii? 56 What Does the Technology Sector Do for the State? 57 What Impedes the Sector’s Growth? 58 How Do the Neighbor Islands Participate in the Technology Economy? 58 What Kinds of Jobs Are Being Created in the Technology Economy?

59 Recommendations

63 References

64 Appendix 1: Stakeholder Participants Online Technical Appendices: • Appendix 2: Defining Hawaii’s Technology and Innovation Industry Sectors • Appendix 3: Industry Composition of Commercial Market Segments • Appendix 4: Monitoring Technology and Innovation Progress • Appendix 5: Value Chains

Available at http://www.HISciTech.org/Information

4 Message from Sen. Daniel K. Inouye

5 Message from Gov. Linda Lingle

6 Executive Summary Executive Summary

Introduction While there remains no doubt that the sun, the sea, and the land are key economic drivers in Hawaii’s future, leaders have come to recognize the increasing importance of developing another critical asset: the knowledge and talent of the state’s people. Innovation and technology, in particular, represent the foundation on which Hawaii is achieving productivity growth and competitive advantage. As Hawaii’s people want better jobs for themselves and their children, industries must transform or emerge to provide those opportunities.

Methodology and Scope This report will offer a baseline analysis of Hawaii’s technology sector in order to better understand how innovation contributes to the state’s economic present and future. We use the most Researcher at the College of Tropical Agriculture and Human Resources, University of Hawaii at Manoa recently available data from 2007 (courtesy of DBEDT). (unless otherwise specified), with trends from 2002 to 2007, which workers through these industries. The The report’s findings and we will assume for the sake of this study further provides an overview of recommendations are highlighted. report as current. The project team the companies and people working in relied on long-standing national the state’s emerging technology sector. and state databases, with significant It also examines how the Neighbor Size and Scope of Science and qualitative input from numerous Islands are participating in this growth Technology Activities in Hawaii industry representatives. The definition and development. A key assumption of technology was adopted from in preparing this study is that Hawaii’s Hawaii’s private technology sector the Bureau of Labor Statistics (BLS), technology sector will need to prepare contributed about $3 billion to the with conservative modifications to workers to fill emerging new jobs as state’s economy in 2007—a figure improve its relevance for Hawaii.1 well as those jobs being vacated as that represented 5 percent of the 2 The report defines what constitutes baby-boomers begin retiring or as state’s total $61 billion economy. workers leave their jobs in Hawaii for the technology sector, identifies the 2. Source: U.S. Bureau of Economic Analysis, specific industries that are currently opportunities elsewhere. Thus, an (BEA). Estimates for Hawaii’s science and or are likely to contribute most to its assessment of the workforce needs technology industry sectors are derived using is provided as a companion to an a ratio of total earnings to GDP applied to growth, examines linkages with other technology sector earnings to generate an parts of the economy, and assesses the analysis of the emerging industries in estimate of GDP. This same method is used by quality of the jobs available to Hawaii the state’s technology sector. BEA in calculating GDP by metro. 1. Please see Technical Appendix 2: Defining Hawaii’s Technology and Innovation Industry Sectors for a full discussion, available at http:// www.HISciTech.org//Information.

7 Executive Summary

• Private sector tech companies • Employment in Hawaii’s public • Workers in Hawaii’s private generated an additional $2 billion technology activities grew at a technology sector earned an annual through purchases from suppliers more modest 1.8 percent per average of $63,623—38 percent and goods and services consumed year between 2002 and 2007, more than the average worker in by tech company employees representing 601 net new jobs Hawaii. Tech workers earned about $1,500 more per month in total • The state’s science and technology • Employment projections suggest earnings than the average worker. sector’s direct impact of $3 billion that the private technology sector dollars combined with the $2 billion is likely to grow at about 2.1 percent • When public sector workers are in indirect impacts represented annually during the coming decade included, the average earnings were about 8% of the state’s economy in – 61 percent faster than the rest of $68,935 — 50 percent higher than 2007. Hawaii’s economy. the statewide average. Last year, Hawaii’s science and Workers in technology sectors • However, the state’s technology technology companies and accounted for 3.6 percent of total workers earned less than their government entities generated employment in 2007, but they counterparts on the mainland. a total of approximately 31,106 generated 5.4 percent of Hawaii’s Hawaii’s workers across the whole jobs, or 3.6 percent of the state’s total worker earnings 3 ($2.1 billion). economy earned about 94 percent employment. the US average for all workers • 23,985 technology-related jobs—77 3. Data are provided by EMSI based on US BEA data. According to the BEA, earnings represent percent of the total—were found in the combined income earned from wages and private tech sector companies. salaries as well as fringe benefits and proprietors’ income. For all industries, non-wage earnings • 7,121 technology-related jobs were tend to be about 25 percent of total personal in the public sector, either through income, but the proportion can vary significantly by sector. the state university, state agencies or nearly 50 different federal agencies and offices. ES Figure 1: Annual Earnings by Commercial Market Segment, 2007 • The Department of Defense (DoD) Market Segment Growth rate Average Earnings (2002-2007 emp.) (2007) and the University of Hawaii employed the most public sector Agricultural Biotech 6.4% $53,866

technology workers. Astronomy 3.6% $70,951 • Technology companies in Hawaii Biotech/Life Sciences 2.3% $54,532 represented a smaller proportion of Defense/Aerospace 4.1% $76,697 total employment (3.6 percent), than Energy 8.4% $58,498 do technology companies in the Environmental 4.0% $66,971 overall US economy (4.6 percent) Film/Digital Media 0.2% $73,335 Between 2002 and 2007, ICT 2.5% $75,056 employment within Hawaii’s private sector technology companies grew Ocean Sciences 5.2% $53,959 at an annual average rate of 3.3 Engineering 3.8% $80,799 percent—and added 3,557 net new Overall Tech 3.3% $63,623 private sector jobs. Overall HI Economy 2.5% $45,963

• Hawaii outpaced the US annual Note: Earnings reflect the combined value of wage and salary income as well as other non-wage employment growth rate of 1.8 earnings including retirement pay and fringe benefits. percent for the private sector technology industries between 2002 and 2007.

8 Executive Summary

ES Figure 2: Sector Employment by Island • Agricultural Biotechnologies: This market segment represents County Pri vate Public Combined All Jobs % of Total Sector Sector Tech Employment part of the broader life sciences Employment market segment (as defined by the Honolulu 19,160 6,728 25,888 621,569 4.2% Biotechnology Industry Organization). Maui 1,847 39 1,886 100,971 1.9% Agricultural biotechnologies in Hawaii 1,681 215 1,896 95,831 2.0% Hawaii focus on food hybridization and marine sciences research. Due in Kauai 933 69 1,002 43,235 2.3% large part to the seed industry’s rapid State of 23,985 7,121 3 1,106 861,608 3.6% growth, this market segment grew Hawaii 6.4 percent annually over the past five years. Average annual earnings • The disparity was even greater in categorizing them according to the were $53,866 in 2007. Hawaii’s private technology sector. markets they target for their products • Astronomy: While astronomy is These workers earned about 72 and services. These segments employ the smallest of the state’s market percent of the US average for workers in the public as well as the segments, it is the most prominent workers in those same private sector private sector, but they also include science and technology activity on industries. overlapping industries. As a result, the Islands of Hawaii and Maui. The they reflect the multi-disciplinary There were 1,964 science and state’s mountains offer the finest nature of many technologies and technology companies and viewing locations on the planet, and the convergence of many market organizations (including public Mauna Kea currently has the largest opportunities. This research identified and private sector organizations) observatories in the world. The ten commercial market segments. in the State of Hawaii in 2007. segment grew 3.6 percent annually Their characteristics in Hawaii are These companies represented during the past five years, and described below: approximately 5 percent of all workers earned an average of $70,951 establishments. per year in 2007. • The private sector accounted for 96 percent of these establishments. • Science and technology companies tended to employ fewer workers. The average tech company had 15.8 workers—about two-thirds the size of the average Hawaii company.

Market Segments Driving Hawaii’s Technology and Innovation Hawaii’s science and technology industries can be categorized into one or more commercial market segments. These segments were determined by interviewing and surveying Hawaii companies, and

Sample 3D digital ahupua‘a created at Hyperspective Studios in Honolulu, one of Hawaii’s digital media companies. (courtesy of Hyperspective Studios, Inc.)

9 Executive Summary

• Biotechnology/Life Sciences: The biotechnology/life sciences market rake

segment—a segment distinct from © M. B com the agricultural biotechnology—is .

largely driven by significant hoto biomedical and bioinformatics P tock research activities. In addition to S ig research-related activities, this B market segment also includes significant data management and analysis activities. The segment grew 2.3 percent annually between 2002 and 2007 and offered average annual earnings of $54,532. • Defense/Aerospace: This is the second largest commercial market segment. Over the past five years, it grew 4.1 percent annually due mainly to recent increases in U.S. defense spending. DOD agencies in The ocean sciences market segment is growing at an annual rate of 5.2%, and converges with defense, information technologies, engineering, life sciences, and energy. Hawaii have a sizable employment base in science and technology industries with some research and Consequently, it is difficult to occupations. Within the private testing activities supporting those specify the exact number of people sector, defense-related technology efforts. working in the industry. Based on activities focus heavily in areas such an estimate of the key involved as computer design, information • Environmental: Environmental industries, Digital Media added new technology, communications remediation and consulting employment relatively slowly— and sensors. Successful dual- services, including environmental about 0.2 percent—annually use strategies may be critical management and prevention over the past five years. Last year, for continued growth among activities, overlaps significantly Average earnings were $73,335 per companies in this commercial with the technical and engineering year. market segment. Average earnings services segment. Many companies were $76,697 per year in 2007. operating in the environmental • Information and market segment do so as part of Communications Technology • Renewable Energy: Employment a larger set of business activities, (ICT): ICT is the state’s largest in the renewable energy industries including defense-funded projects. technology-related commercial grew 8.4 percent annually during This segment grew 4.0 percent market segment (based on the past five years and workers annually between 2002 and 2007 employment) and is closely tied earned an average of $58,498 and offered average earnings of to the defense sector. Growing 2.5 per year. Historically, government $66,971 per year. percent annually since 2002, the policies drive renewable energy segment includes activities related demands in most markets. The • Digital Media: Digital media is the to custom computer programming state’s Renewable Portfolio Standard technology-intensive component and design services as well as requires that 20 percent of energy of the state’s much larger film or computer facilities management. be derived from renewable sources ‘Creative Arts’ industry. It is relatively Last year, average earnings were by 2020. Currently, much of the small and exists at the convergence $75,056 per year. sector’s activity is in the consulting between film/music production and management services and information technology to • Ocean Sciences: The ocean support commercial production as sciences market segment well as computer entertainment.

10 Executive Summary

converges with defense, information related employment and is the segment on the Island - a figure 58 technologies, engineering, island’s 3rd largest employer. percent higher than the average life sciences, and energy. Not earnings for all tech-related jobs on • Kauai remains an important site surprisingly, companies and the Island of Hawaii. for several of the state’s major seed researchers in this field fall into other producers. • The Island of Hawaii is producing categories as well. Research activities the highest level (estimated at 37 being undertaken by the Navy, Astronomy is prominent on the percent) of renewable energy in NOAA, and the University of Hawaii Island of Hawaii, as the observatories the State of Hawaii with the added (UH) drive much of this market on Mauna Kea represent the world’s advantage of geothermal sources. segment’s growth. Between 2002 finest viewing platforms and the and 2007, this growth occurred at an largest observatories in the world. Maui’s largest commercial annual rate of 5.2 percent. Workers market segments are in defense/ earned an average of $53,959 • The Island has 13 astronomical aerospace and information and annually in 2007. facilities, including two 10-Meter communications technology (ICT). telescopes at the W.M. Keck • Engineering/Professional These activities are driven partly by Observatories. Combined, these Services: Engineering and the activities occurring at the Maui facilities represent more than $1 Professional Technical Services High Performance Computing Center billion of infrastructure. A proposed represent a cross-section of (MHPCC) and the Haleakala High new extra large telescope, Thirty industries largely involved in Altitude Observatory Site. Meter Telescope (TMT) is being engineering (excluding civil considered for Mauna Kea that • Maui and Molokai also represent engineering) and architectural could result in another $1 billion in important sites for the state’s design. The market segment grew new investment and 430 more jobs. burgeoning seed industry. 3.8 percent annually between 2002 and 2007 and offered workers • Companies in astronomy on the • Maui’s energy needs are increasingly average earnings of $80,799 per year. Island of Hawaii offer workers the being met by a variety of alternative highest average earnings at $81,748 energy activities (including wind, per year of any technology market solar, and bio-fuels). Island Highlights 4,784 technology-related jobs were located on the neighbor islands in 2007. This represented 17 percent of total technology sector employment. • Maui and the Island of Hawaii each had almost 1,900 technology-related jobs, while Kauai had approximately 1,000.

In 2007, Kauai had the smallest science and technology workforce. However, it grew 6.3 percent annually between 2002 and 2007, thereby making it the fastest growing technology sector of any island. • The Pacific Missile Range Facility (PMRF) generated the majority of On Kauai, the defense/aerospace market segment is driven almost entirely by activity at the Pacific Kauai’s science and technology Missile Range Facility (PMRF) also generating $3 million in tourism activity for each launch. (Courtesy of KEDB)

The Maui Digital Bus, a mobile laboratory designed to cultivate student interest in becoming scientists and engineers, is operated and equipped by Akimeka, LLC, with digital cameras and microscopes, water-testing equipment, Global Positioning System devices and laptop computers, (courtesy of The Maui Digital Bus-Alaka’ina Foundation).

In 2007, Oahu accounted for • The University of Hawaii in • STEM occupations are expected to 72 percent of the state’s total Manoa contributes to the high demand about 1,650 new workers employment, but 83 percent of concentration of research in areas per year (to fill vacant positions as the state’s science and technology such as life sciences and ocean well as newly created jobs). employment. sciences on Oahu. • About 77 percent of those jobs will • 94.5 percent of all public sector • Major seed producers also have a require postsecondary education science and technology workers significant presence on Oahu. and about 17 percent more will were located on Oahu. require at least one year of on-the- job training and work experience. • Last year, science and technology Hawaii’s Science and workers represented 4.2 percent of Technology Workforce Hawaii’s community colleges and Oahu’s total employment. Workers in a variety of industries fill universities offer a wide array of the Last year, a majority of Oahu’s science, technology, engineering and STEM programs needed to grow science and technology employment mathematics (STEM) occupations, the state’s science and technology were found within the defense/ but they are particularly critical to industries. However, business aerospace and the ICT commercial the state’s technology industries. and management programs are market segments. • STEM occupations accounted for also important for growing small and entrepreneurial science and • The large federal and military about 58,442 jobs in Hawaii in 2007; technology businesses. presence drives much of the science a large share was employed by and technology employment on tech companies, but many were UH graduated a combined 88 new Oahu. employed in Hawaii’s traditional engineers (from its baccalaureate industries. and advanced degree programs) in 2006.

• All of the state’s companies and • An available, globally competitive 5. Design a comprehensive government entities (including talent pool with appropriate science technology workforce retention those outside the technology technology, engineering and math strategy to reduce turnover and sector) annually need about 100 skills, and keep talent in Hawaii. electrical engineers to fill projected • An appreciation for the state’s 6. Monitor the contribution of the existing and newly created jobs. heritage and the need to balance state’s technology sector to the • Companies will also need a wide the role of technology within the overall economy, and especially range of mechanical, industrial, and state’s unique culture the state’s growth opportunities in related engineers, totaling about 35 global technology value chains. With these factors in mind and taking to 50 more annually to fill their new into consideration the input from 7. Assess how well the state’s entire and existing job vacancies each all partners and stakeholders, the business incentive portfolio has year. consultants offered the following policy fostered private sector investment • If no graduates leave Hawaii, Hawaii recommendations: in technology, innovation, and companies will have to import related value chains. 1. In collaboration with private and about 60 to 70 new engineers public sector stakeholders, develop 8. Enhance the workforce programs annually to meet their overall and implement a strategic plan, designed to both increase engineering workforce needs. and then monitor progress in internships with technology achieving greater development of companies and provide Recommendations technology and innovation in the information about STEM careers. state. These findings reveal several key factors 9. Systematically examine how for success: 2. Diversify the state’s technology two-year and four-year degree base by encouraging private programs at UH and the private A vision and plan for promoting private investment in non-defense universities can better meet and public investment in Hawaii’s activities and by increasing local industry needs, either through the innovation and technology sectors commercialization of technology expansion of existing programs or • Information about the factors that developed with Defense the development of new programs. influence growth, as well as the Department funding. 10. Develop a community consensus most efficient ways to encourage 3. Support existing professional and building process that establishes technology-based economic trade group efforts to develop greater understanding between development (TBED) cluster networks that support the technology advocates and • A deeper and more diverse key technology market segments. the state’s traditional business technology base to take advantage leadership. 4. Assist the formation of risk capital of emerging opportunities for all stages of research and • Increased networking across commercialization and continued industry sectors private sector investment in technology and innovation. • The availability of risk capital for all stages of research and commercialization

13 Introduction ong DBEDT of

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14 Introduction Introduction

Hawaii’s leaders recognize the technology sector. It then analyzes of opportunities emerging from importance of diversifying the state’s the interrelated technology-oriented businesses, colleges and universities, economic base in order to create new markets that are served by the state’s and public and private research and better jobs for the state’s residents. existing mix of technology companies. laboratories. This can and should be Traditional sources of growth include done through the public-sector’s Hawaii’s leaders understand the government and military activities, central role in education and importance of innovation as a as well as Mainland and foreign workforce development, infrastructure mechanism for creating a more companies moving to or investing provision, taxation and regulation, productive and prosperous economy. in the state. However, sustained land management and planning, and high-quality job creation requires a economic development. However, flourishing entrepreneurial sector as Private-sector innovation thrives in crafting effective and broad-based well. The state’s economic success also places where knowledge creation, economic development strategies entrepreneurship, and risk-taking requires Hawaii’s existing companies requires an in-depth understanding are valued, and where a creative to continuously reshape and enhance and talented workforce is available. of the role of innovation in their international competitive Hawaii’s economy. Identifying and positions. documenting that role is the purpose Indeed, Senator Daniel K. Inouye of this report. Innovation increasingly drives business and the congressional delegation, competitiveness and creates new Governor Linda Lingle, the Hawaii state market opportunities in advanced Legislature, and many other key leaders Innovation and Hawaii’s industrialized nations where the in Hawaii have identified innovation Technology Sector cost of doing business is relatively as essential to the state’s economic Businesses innovate in three basic high and companies have access to future. Many in Hawaii also believe ways: through the creation of comparatively advanced infrastructure that innovation is a critical element new products or services (most and workers with high levels of in addressing priority social issues often through the use of existing education. Innovation is at the heart challenging the state. These issues and emerging knowledge and of productivity growth that, in turn, include the relative lack of sufficient technologies that meet new market can help to increase wages and free affordable housing, the rapidly rising demands); through the deployment of resources for investment in new cost of living in general, the increasing new techniques and technologies to product areas or industries. This new socioeconomic disparity (the widening produce goods or services in uniquely investment can, in turn, generate new gap between the “haves” and “have efficient ways; and through the growth in new industries capable nots”), the availability and affordability more effective organization of work. of offsetting declines in traditional of healthcare, the need to develop Innovation can occur in any economic ones. Innovation-based economies renewable energy sources, challenges sector, from the state’s most traditional are more likely to sustain themselves in the provision of quality education, industries to its high-technology and become more prosperous and demands for more efficient and businesses and most state-of-the-art by regenerating into higher value responsive government. research facilities. Spillovers between activities. innovating sectors are also critical to Private-sector innovation thrives in the process. Thus, innovation is not This report begins by identifying places where knowledge creation, simply relevant to technology-oriented technology-oriented industries and entrepreneurship, and risk-taking businesses or to technology workers. businesses. These are the businesses are valued, and where a creative Innovation creates more and better that are most likely to be either and talented workforce is available. jobs not only for scientists, engineers, engaging in innovation in the Islands However, the public-sector also and high-level managers, but also for or tapping innovations developed plays an important role in nurturing workers in a wide variety of support elsewhere. These businesses are an environment that encourages and linked roles, as well as workers in described as comprising Hawaii’s innovation and takes advantage

15 Introduction

the region’s traditional industries.4 Due to the high degree of interdependence in the economy, innovation touches all kinds of industries, from the “low tech” to the “high tech.” This report attempts to provide a baseline measure of the size and scope of the state’s technology sector.

Hawaii’s Technology Sector Talent Pool The growth of the state’s technology sector is contingent on an available talent pool. If existing residents are not prepared for emerging employment opportunities, the jobs will go to workers attracted from the Mainland or abroad or, barring a sufficient rate of in-migration, the growth of the Kauai Economic Development Board Aloha Ike program an example of outreach education for math and science (courtesy of Pioneer Hi-Bred). industries will be constrained by labor shortages. Ensuring that technology- oriented growth produces widely team also interviewed numerous for its economic future. Moreover, the shared prosperity, and not a worsening representatives from technology state’s location has long made it an in the distribution of incomes in the companies, institutions, and workers important strategic military post for the state, requires an appropriate and pro- located on the islands of Kauai, Hawaii, U.S. However, as military technology, active workforce development strategy Maui, and Oahu. From these interviews strategies, and priorities change, and in conjunction with a technology- Hawaii’s residents demand better oriented economic development As the state’s costs continue to rise, opportunities for themselves and strategy. This report also seeks to new jobs that offer higher-than- their children, it will be increasingly provide a foundation for identifying average wages will be increasingly important for the state to find new education and training needs as well important to sustain and enhance economic opportunities to supplement as key educational assets that will help economic prosperity. its traditional advantages in tourism to prepare a new generation of Hawaii and defense. As the state’s costs residents for the relatively high-paying and focus groups, the research team continue to rise, new jobs that offer jobs in Hawaii’s technology sector. derived input on important business higher-than-average wages will be challenges and issues, efforts to build increasingly important to sustain and The research in this report relies heavily networks and partnerships, and enhance economic prosperity. In the on quantitative statistics derived insights on the growth potential of the following pages, this report examines primarily from published data sources. technology sector in Hawaii. the nature and scope of the state’s To supplement that data, the research technology sector, and its capacity to The research makes clear that Hawaii create economic opportunities for the 4. Atkinson, R. and Wial. “Boosting Productivity, will always remain unique. Hawaii’s residents of Hawaii. Innovation, and Growth Through a National distinctive assets and location will Innovation Foundation,” Brookings Metropolitan Policy Program, April 2008, p. 4. undoubtedly remain important drivers

16 Overview of Hawaii’s “TechnologyOverview Sector” of Hawaii’s “Technology Sector”

In the context of the state’s overall represented more than 17 percent of Between 2002 and 2007, the state economy, the technology sector (which the state’s $61.5 billion economy. The benefited from growth in both tourism is comprised of a number of individual accommodations industry represented and defense. Hawaii’s accommodations industry sectors) is certainly important, the single largest segment of the state’s industry increased at a rate of about but, taken as a whole, the technology tourism industry, alone accounting 4.2 percent annually (as compared sector is not nearly as big as the state’s for about 5.6 percent of state gross with 3.9 percent for the nation) and its current largest employing industries. domestic product (GDP).5 Federal military expenditures grew 2.7 percent For generations, tourism, the military, civilian and military expenditures annually while spending nationally and agriculture dominated Hawaii’s accounted for another 11.5 percent grew at 1.4 percent annually. These economic landscape. It is important to of the state’s GDP. Nationally, these trends represented a turnaround for describe their relative impact as a way two economic sectors combined Hawaii, as prior to 2002 growth in both to establish the technology sector’s to comprise only 5.4 percent of the sectors lagged behind the rest of the relative importance. Agriculture has U.S. gross domestic product (GDP), nation. However, increased fuel prices, waned as a major economic driver, but so they were over three times more rising airline ticket prices, and reduced tourism and the military remain vital concentrated in terms of relative airline carrying capacity suggest that parts of the economy. economic output in Hawaii as they the state’s tourism economy will face were in the U.S. as a whole. significant challenges in the months In 2007, the U.S. Bureau of Economic and years ahead. Likewise, changes in Analysis reported that economic output 5. All percentages of GDP in this report are defense policy priorities and continued related to tourism-reliant services, the estimated using U.S. Bureau of Economic strains on the U.S. budget point to a federal defense sector, and agriculture Analysis (BEA) methodology, with the ratio of tech-sector earnings to GDP.

Figure 1: Industry Employment in the Hawaii Economy, 2007

Accommodations & food services 100,863 State & local government 90,827 Retail trade 87,520 Federal government 83,560 Healthcare & social assistance 70,345 Administrative & waste services 57,575 Construction 49,541 Other services, except public admin 46,358 Real estate & rental & leasing 45,484 Professional & technical services 44,528 Transportation & warehousing 36,341 Finance & insurance 26,081 Private tech sector 23,985 Wholesale trade 22,576 Arts, entertainment, & recreation 21,540 Educational services 20,976 Manufacturing 18,535 Agriculture, forestry, fishing & hunting 14,762 Information 12,703

Management of companies & enterprises 7,819 Complete employment, Utilities 3,094 2007

0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000 110,000

17 Overview of Hawaii’s “Technology Sector”

future in which military spending in While the state’s economy remains Last year, the private-sector Hawaii could either stagnate or even relatively healthy, the significant component of Hawaii’s technology decline. difference between the earnings of sector was nearly the size of Hawaii’s federal personnel as compared with Not surprisingly, the tourism-related financial sector. food and accommodations workers and federal civilian/military sectors illustrates the tremendous divide were also among the state’s largest support science and technology, (e.g., among Hawaii residents in their employing sectors in 2007. The state’s testing labs, data processing capacity, ability to afford a high quality of life in accommodations and food services education, etc.). With this broader their home state. As Hawaii seeks to industry provided more than 100,000 identification of the technology sector, diversify its economic base, the state’s jobs, representing 11.7 percent of the pockets or clusters of opportunity and technology sector could represent an state’s nearly 870,000 jobs (See Figure potential can more easily be identified important “third leg” in supporting the 1).6 About 84,000, or 10 percent of for special attention. Hawaii economy and providing quality the state’s workers, were employed in jobs for middle-class Hawaii residents. Using nationally recognized definitions federal military or civilian agency jobs. adapted to Hawaii’s unique economy, Average income for the two sectors was the team identified a set of economic Defining Technology Industries significantly different, however. Average sectors (or components of those income earned for federal workers was Defining the industries that comprise a sectors) to be included in the definition $85,081 while the average income for singular “technology sector” has always of Hawaii’s technology sector used for accommodations industry workers was posed a challenge for the economic this report.8 Overall, Hawaii’s public and 7 $43,978. Figure 1 also compares total development community. Numerous private technology sectors employed employment in private technology- organizations have developed their 31,106 people in a total of 1,964 related industries (to be defined below). own approach and no single standard establishments in 2007. Last year, the private-sector component exists. The real objective is not the of Hawaii’s technology sector was nearly precise definition of the sector, but The great majority of Hawaii’s the size of Hawaii’s financial sector. how Hawaii can better position itself technology workers are employed to develop and benefit from products largely in the private-sector. In and services emerging from scientific 2007 there were 23,985 technology 6. Data are provided by EMSI based on U.S. BEA workers employed by private-sector data. According to the BEA, earnings represent research and development. From this the combined income earned from wages and perspective, the best overall definition establishments, and an estimated 7,121 salaries as well as fringe benefits and proprietors’ identifies and measures activities workers by public-sector entities. As income. For all industries, non-wage earnings Figure 2 illustrates, overall technology- tend to be about 25 percent of total personal throughout the entire spectrum of income, but the proportion can vary significantly the technology process—from basic sector employment grew at an annual by sector. For instance, average wages in federal scientific research all the way to the rate of 2.9 percent from 2002 to 2007, agencies are about 62 percent of average earnings for federal workers in Hawaii due to the technology-related end products 8. The specific industries included in the current benefits offered to federal employees, and services produced. Due to their definition, and their rationale for inclusion, including cost of living allowance, healthcare importance, this definition should can be found in Technical Appendix 2: and retirement contributions, as well as pensions Defining Hawaii’s Technology and Innovation paid (including the amount paid to retirees no also incorporate the key activities that Industry Sectors at http://www.HISciTech.org/ longer in the workforce). Information.

7. Data are provided by EMSI based on U.S. BEA Figure 2: Hawaii’s Technology Employment in the Private- and Public-Sector data. According to the BEA, earnings represent the combined income earned from wages and salaries as well as fringe benefits and proprietors’ Technology 2002 Jobs 2007 Jobs Change Annual % Earnings Employment Change Per Worker, income. For all industries, non-wage earnings Hawaii tend to be about 25 percent of total personal income, but the proportion can vary significantly Private-sector 20,428 23,985 3,557 3.3% $63,623 by sector. For instance, average wages in federal Public-sector 6,520 7,121 601 1.8% $86,937 agencies are about 62 percent of average earnings for federal workers in Hawaii due to the All Hawaii Tech 26,948 31,106 4,158 2.9% $68,935 current benefits offered to federal employees, Employment including cost of living allowance, healthcare and retirement contributions, as well as pensions paid (including the amount paid to retirees no longer in the workforce). 18 Overview of Hawaii’s “Technology Sector”

faster than the 2.5 percent for the rest Figure 3: Hawaii Private-Sector Science & their financial performance. Induced of the economy (despite the slow Technology Impacts impacts are the result of employees of increase in the number of public-sector Employment Multiplier Indirect science and technology companies also technology workers). In Hawaii, the (Pvt Sector) Jobs spending their money in the state—to private tech sector grew at 3.3 percent 23,985 0.84 20,147 buy groceries, housing, utilities, and a annually between 2002 and 2007—a number of other consumer services. pace faster than the state’s public- The direct economic benefits to Hawaii Combined, these indirect and induced tech sector, which grew at 1.8 percent from private-sector technology-related effects are referred to as “multipliers”— annually during the same period. Growth jobs are also “multiplied” into other the money earned by the science and in the state’s public- and private-tech parts of the economy. Our analysis of technology companies that is in turn sectors is projected to slow to a pace the impact of such multiplier effects re-spent in the economy. of 1.9 percent annually over the next suggests that last year the state’s private Looking at just the next five years, decade. However, at a projected 2.1 technology sector was associated with (as compared with the next decade percent annual growth rate, the state’s another 20,147 jobs in “indirect” and above), the annual employment technology sector is expected to grow “induced” jobs outside the technology growth rate is projected to slow to 61 percent faster than the overall Hawaii and innovation sector itself.11 Indirect 1.6 percent for all industries in Hawaii, economy. On average, public- and impacts occur when companies outside but these private-sector technology private-sector technology workers the technology sector benefit from the industries are expected to continue earned $68,935 in 2007. That was more money spent by science and technology growing at a relatively healthy 2.5 than 50 percent greater than the average companies in the state. percent annual rate.13 earnings for jobholders in Hawaii. These impacts represent linkages between industries in which technology Public-Sector Technology Private-Sector Technology companies are buying from and selling Employment Industries 12 to other companies. This local spending Employment in public-sector agencies Last year, Hawaii’s 23,985 workers may include purchases of office supplies, will not likely match the growth in employed by private-sector tech hotel room nights for business visitors, the private-sector. Yet, many federal, companies represented 5.0 percent as well as legal and accounting services state, and university centers conduct of the state’s 1,895 private-sector that help technology businesses monitor extensive research and development at establishments and 2.8 percent of the by industry to each industry defined as part of the their facilities throughout Hawaii. These state’s total employment. Nationally, “technology sector.” public-sector enterprises account for 11. This ripple effect from direct science and 23 percent of the state’s technology- Hawaii’s private technology sector technology employment was determined based related activity and employment. By employment grew 3.3 % annually on a model constructed from data generated comparison, federal, state, and local between 2002 and 2007, outpacing through business surveys conducted every five government comprise 20 percent of the state’s overall 2.5% economic years by the Census Bureau and then analyzed by economists at the U.S. Bureau of Economic total employment in Hawaii. growth for the same period. Analysis. These economists as well as economists at private companies (including the model used in In 2007, 48 federal agencies employed this analysis constructed by Economic Modeling private-sector industries accounted for Specialists Inc.—www.economicmodeling.com) 3,304 workers in occupations related 4.5 percent of all U.S. jobs.9 Combined, have developed estimates that suggest how to science, technology, engineering, Hawaii’s private-sector companies much each industry within each state spends and mathematics (STEM) disciplines, 14 and how that is likely to affect the local economy. contributed an estimated $2.4 billion to These estimates were used in determining the including 2,817 in 39 U.S. Department multiplier effect of technology industries within Hawaii’s economy, representing about 13. Unless otherwise noted, industry and 10 Hawaii. 3.9 percent of the state’s GDP. occupation projections for private-sector agencies 12. For a more detailed discussion of how value are provided by Economic Modeling Specialists Inc. 9. Estimates of the number of US establishment chain analysis—particularly as it related to R&D (EMSI), based on data available as of April 2008. data for 2007 is not readily available so services and custom computing industries— 14. For the purposes of this analysis, federal comparisons were not made to the share of US can be used to identify supplier and market agencies’ STEM occupations defined by the establishments in technology industries or in the opportunities for companies both in and out of U.S. Bureau of Labor Statistics include only average US establishment size. the state, please see Technical Appendix 3: Value those occupations categorized as scientists, Chains available at http://www.HISciTech.org/ technologists or technicians, engineers, and Information. 10. This estimate was developed by applying a mathematicians or statisticians. ratio of 2007 earnings to gross domestic product 19 Overview of Hawaii’s “Technology Sector”

UH data, an estimated 2,332 workers In total, federal, state, and university Examples of public-sector technology employers include the in this group participate directly in activities in Hawaii accounted for an National Oceanic and Atmospheric research programs in the physical estimated 7,121 technology workers Administration (NOAA), the U.S. sciences, engineering, or life sciences. in 2007. Based on historical data Fish & Wildlife Service, the state Key programs at the Manoa campus available for certain years, the research Department of Land and Natural include the College of Natural Sciences, team estimated that employment Resources division of Aquatic the College of Tropical Agriculture in these agencies and organizations Resources, and the University of and Human Resources, the College of grew at a rate of about 1.8 percent Hawaii system. Engineering, the School of Medicine, annually during the past five years. This the School of Ocean and Earth Science represents an increase of 601 workers of Defense agencies and 487 at the & Technology, and the Cancer Research since 2002, nearly half of which were National Oceanic and Atmospheric Center. The UH Hilo campus also makes employed by DOD agencies (especially Administration (NOAA) and the National significant contributions to the state’s the U.S. Navy). Future projections Institute of Science and Technology research base with faculty serving in suggest that this growth rate will likely at the Department of Commerce; the the Natural Sciences Division of the slow to 0.3 percent annual growth due Agricultural Research Service, Forest College of Arts & Sciences as well as the to tightening federal and state budgets Service, Natural Resources Conservation College of Agriculture and the College as well as changing policy priorities.18 Service, National Agricultural Statistics of Pharmacy. Service, and the Office of the Chief Public-sector technology agencies pay Information Officer at the USDA; The Research Corporation of the relatively well when compared with and the Geological Survey and the University of Hawaii (RCUH) separately all other jobs, and even with private- U.S. Fish & Wildlife Service at the U.S. employs researchers and support sector technology-related jobs. The Department of Interior. 15 personnel under sponsored grants and average earnings for public-sector related program activities. In addition employees in STEM occupations were At the state level, the Department to personnel working alongside regular $92,519 in 2007 (including salary, all of Land and Natural Resources UH employees in the college of Natural fringe benefits, and retirement pay). divisions of Fisheries and Recreational Sciences, the College of Engineering, From among this group of public- Enhancement, Forestry, Aquatic the School of Ocean and Earth Science sector technology workers, average Resources, Natural and Water Resources, and Technology, as well as the School earnings for federal employees were Natural Area Reserves, and Natural and of Medicine and the Cancer Research $114,494. Physical Environment employed 210 Center, RCUH also employs workers technology workers in 2008, primarily in It should be noted that the average for a variety of research centers such environmental management and ocean earnings data reported for federal as the Institute for Marine Biology, sciences-related activities.16 workers may overstate the immediate Geophysics and Planetology in Manoa, benefits to workers in Hawaii because The University of Hawaii has a number the Natural Energy Institute, the Joint generous benefits and pension of faculty members teaching and Institute for Marine and Atmospheric contributions and payments increase conducting research in science and Research, the Institute for Astronomy, the per-person average earnings. The technology-related fields. The research the Pacific Biomedical Research Center, impact of pension annuities on total and teaching centers employ a total of and the Water Research for Hawaii and wage bills, and the proportion of 2,700 employees. According to 2008 the Pacific. These RCUH employees— workers who are full-time employees, counted separately from regular UH makes it challenging to compare public- 15. Projections for employment in Federal and faculty—total 1,377 researchers and state agencies as well as the University of Hawaii sector earnings and employment with support personnel involved in research were not readily available. Estimates for future the private-sector. For instance, federal employment changes were developed based on in these program areas. Adjusted for earnings appear to be relatively high changes in past employment between 2002 and 2007, the combined university and 2007 for individual agencies, and then projecting compared with the private-sector, but that data forward to 2017. RCUH employment in these programs is estimated at 3,607.17 interpolation based on data made available for 16. Source: Employment estimates based on the this report. full-time equivalent personnel authorized for the 17. The data provided by the university was agency in the Hawaii FY 2008 budget. for 2008 and by RCUH was for 2005 and 2008. 18. Source: EMSI The authors estimated 2007 data based on an

20 Overview of Hawaii’s “Technology Sector”

Figure 4: Employment Trends in the Hawaii Technology Sector

40,000 37,500 35,000

Public Te ch Sector 31,106 8,111 32,500 8,037 7,975

Private Te ch Sector 7,914 7,853 7,791

30,000 7,669 7,541 7,412

27,500 7,281 7,121 7,031

25,000 6,881 6,704 6,707

22,500 6,520 20,000

tal Employment 17,500 To 15,000 29,430 29,000 28,595 12,500 28,149 27,674 27,152 26,780 26,212 25,584

10,000 24,848 23,985 23,564 22,617 21,350

7,500 20,670 20,428

5,000 2,500 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year this may be due to retirement pay going Furthermore, an analysis of Hawaii support personnel was $48,417 in 2007. to federal retirees living in Hawaii. Department of Land and Natural It is notable that the RCUH data also Resources budget data suggest that includes graduate or undergraduate A closer inspection of wages and the average wages paid to all state assistants and other part-time salaries, as reported by the U.S. Office workers in the agency’s technology- personnel supported by grants to the of Personnel Management (OPM), related divisions was estimated at university. It is likely, due to the nature revealed that the average federal $65,510. Unlike the federal employment of the funding for these personnel, that worker living in Hawaii and working numbers report, this group includes RCUH employs many more temporary in a technology occupation was paid administrative support personnel workers and research assistants than $70,249 in wage and salary income as well as technology occupations. the rest of the university and certainly in 2007. Presumably, the remaining While comparable data for UH were more than the technology-oriented $44,245 per worker in earnings is not readily available, RCUH reports federal and state agencies. attributable to fringe benefits provided that the average annual wage paid to current and past federal employees to grant-sponsored researchers and living in Hawaii.

21 Markets Driving Hawaii’s Technology Sector uentes © A. P com . hoto P tock S ig B

22 Markets Driving Hawaii’s TechnologyMarkets Driving Sector Hawaii’s Technology Sector

In order to understand Hawaii’s of industry market information for this technology markets, the research team study. To supplement that information, built upon data accessed from long- economic development experts standing national and state databases. familiar with the state’s technology The methodology is outlined here companies reviewed a list of the largest to help clarify our understanding of technology firms that do not appear in

Hawaii’s tech sector markets. the database and helped to complete © N. Edmund BigStockPhoto.com the information about the commercial To start the process, the Hawaii Science markets. As can been seen from the & Technology Institute developed a Industry Directory, it is quite common comprehensive database of technology for companies to serve a variety of companies and research organizations commercial markets. in Hawaii. This Industry Directory (available at www.HISciTech.org/ That information was then used to The largest of the state’s science and technology market segments is information Directory) offers an online “catalog” estimate the total employment in and communications technology (ICT), of Hawaii’s products and services in 2006 for the coded companies in each followed closely by defense/aerospace. science and technology. To date, more commercial market segment. That than 900 organizations are listed, resulted in data by market segment for employment figures in each market with more added on a continuing several of the largest NAICS 20 industries segment double count employees from basis. From on-going interaction with identified as part of the technology other market segments, due to the economic development professionals sector. This process made it possible overlap. Figure 5 shows the industries and technology firms in the state, the to estimate the number of workers in that comprise each of these commercial Institute identified 10 “commercial each commercial market segment for market segments.22 markets” that reflect how Hawaii science the key technology industries including and technology companies tend to research and development, custom These commercial market segments define themselves. computer programming, engineering, are discussed in greater detail below. architectural services, environmental Information was gathered about these consulting, medical labs, and several market segments during the course others. To recognize the overlapping of interviews with representative nature of the commercial market companies as well as a review of segments, industries that had at least relevant research reports. As noted For this study, the definition of 10 percent of their employment serving earlier, companies are frequently technology was adopted from the a commercial market segment were involved in a variety of commercial Bureau of Labor Statistics (BLS), with said to be integral to that segment. activities so it is quite common for conservative modifications to improve Consequently, the research team executives to classify their company in its relevance for Hawaii.19 During the assigned the total employment of that multiple commercial market segments. process of determining which industries industry to each commercial market Because of the convergence between (i.e., groups of companies) to include segment in which it was found to the market segments, the total number in this study’s definition of the state’s be a substantial part. In this manner, of employees will be counted for each technology sector, the research team many industries were assigned to more segment in which the company does also conducted extensive analysis than one market segment.21 Thus the business. As a result the employment designed to assign these industries for certain industries may be counted to commercial market segments. The 20. NAICS stands for the North American Industry state’s technology companies registered Classification System. 22. More detailed wage and employment data for the industries that comprise these with the Hawaii Science & Technology 21. Once an industry was assigned to a commercial market through this research, the commercial market segments can be found in Industry Directory also provided sources researchers further assumed that the industry Technical Appendix 4: Industry Composition of and the market segment were linked in Commercial Market Segments at http://www. 19. Please see Technical Appendix 2: Defining examining historical trends as well as projected HISciTech.org/Information. Hawaii’s Technology and Innovation Industry market-segment opportunities. Sectors available at http://www.HISciTech.org/ Information for a full discussion.

23 Figure 5: Technology Sector Industries by Commercial Market Segment HAWAII SCIENCE AND TECHNOLOGY INDUSTRIES

MarketsNAICS CODE DEDrivingSCRIPTION Hawaii’s Technology Sector COMMERCIAL MARKET SEGMENTS Li fe g. Di rof. rof. P A ero & Bi otech

l g g ng./ CT A m y As trono Bi otech/ E nv i ron. Fi D ef/ Sc i O cean E nergy E Med i a s Svc 01 01 02 03 04 04 05 06 07 08 09 I 10

325211 Plastics material and resin mfg . X X 325320 Pesticide and other ag. chemical mfg. X X 325411 Medicinal and botanical mfg . X X X 325412 Pharmaceutical preparation mfg . X 325414 Other biological product mfg . X X X 333314 Optical instrument and lens mfg. 334510 Electro-med/therapeutic apparatus mfg . X 334516 Analytical laboratory instrument mfg. X 339113 Surgical appliance and supplies mfg . X 339115 Ophthalmic goods mfg . X 339116 Dental laboratories X 423420 Office equipment merchant wholesalers X 423430 Computer and software merchant wholesalers X X 423450 Medical equipment merchant wholesalers X 511210 Software publishers X X X 516110 Internet publishing and broadcasting X X 517510 Cable and other program distribution 517910 Other telecommunications X 518111 Internet service providers X 518112 Web search portals X 518210 Data processing and related services X X X 541310 Architectural services X X X 541320 Landscape architectural services X X 541332 Engineering Services (excEPT Civil engineering) X X X 541360 Geophysical surveying and mapping services X X X 541380 Testing laboratories X X 541511 Custom computer programming services X X X 541512 Computer systems design services X X 541513 Computer facilities management services X X 541519 Other computer-related services X 541611 Administrative Mgt consulting services X X X X X X X 541614 Process and logistics consulting services X X X 541620 Environmental consulting services X X X X 541690 Other technical consulting services X X X X 541711 R&D (Biotech, excEPT Ag. Biotech) X

541711 R&D (Ag. Biotech inc. corn farming) X X

541712 R&D-Physical, Engineering — Astronomy X

541712 R&D-Physical, Engineering — Other X X X X

541720 Social science and humanities research X X X

61131x Colleges, universities (UH)-ag. biotech X

61131x Colleges, universities (UH/RCUH)-Energy X

61131x Colleges, universities (UH/RCUH)-Life Sci X

61131x Colleges, universities (RCUH)-Ocean Sci X X X

61131x Colleges, universities (UH)-Ocean Sci X

61131x Colleges, universities (UH/RCUH)-Astronomy X

61131x Colleges, universities (RCUH)-Other tech X X X

61131x Colleges, universities (UH)—Other tech X X

61131x Colleges, universities (UH)—engineering X

61131x Colleges, universities (UH)—environmental X

621511 Medical laboratories X

621512 Diagnostic imaging centers X

911001 Federal USDA (STEM occupations only) X X

911002 Federal DOC (STEM occupations only) X X X X

911003 Federal DOI (STEM occupations only) X X X

911004 Federal U.S. DOD (STEM occupations only) X X X

920211 State Conservation (Fish AND Aquatic) X X X

920212 State Conservation (Natural Resources) X X

24 Markets Driving Hawaii’s Technology Sector

more than once. Another way of services. For instance, the Maui High industry depends on the large military counting the number of workers would Performance Computing Center and Department of Defense presence have been to allocate the employees represents an example of how defense/ on all of the islands. It is also the result across the segments, prorating the aerospace and astronomy needs of Hawaii’s success in attracting key numbers, but we opted to illustrate the are tied to information technology federal investments—most prominently ability of the companies to adapt across solutions provided by enterprises through the aid of Senator Daniel K. the market segments. Therefore the located in Hawaii. Inouye. Many high-profile defense market segments are not summed up, contractors have a relatively small Looking to the future, the industries because of the double counting. presence in the state, but maintain the serving this high-wage commercial ability to reach back to their extensive market segment are expected to add networks on the Mainland to provide most of their jobs in activities related unique expertise and capacity. to custom computing and computer Driven by recent increases in U.S. design as well as architectural design and environmental systems. While Defense/aerospace job creation there are a few large companies in the in the future will likely come from Information and state, in 2007 the average size for the Communications Technology industries that form a nexus with state’s ICT firms was 12.9 employees. By ICT and other market segments— In 2007, the largest of the state’s science comparison, the average size of other custom computing and computer and technology market segments Hawaii companies was 22.8 workers. design, architectural design, and was information and communications environmental systems. technology (ICT) with 17,355 workers (about 13,900 of which were in the private-sector). ICT includes activities Department of Defense spending, under the NAICS-defined “information” this growth is expected to continue sector as well as related manufacturing, through the next several years, but at a slightly less rapid pace. In the future, wholesaling, and programming activities. Defense/Aerospace The Information sector comprises only job creation for this segment will likely Another large market segment is establishments engaged in (a) producing come from industries that form a defense/aerospace, which had 15,516 and distributing information and cultural nexus with the ICT market segment— workers (with about 12,329 in the products, (b) providing the means to custom computing, computer design, private-sector) in 2007. This market transmit or distribute these products as architectural design, and environmental segment also included more than well as data or communications, and (c) systems. While there are a few large one-half of the state’s total technology processing data. companies in the state, the average size employment as a result of its significant of the state’s defense/aerospace firms overlap with ICT. Certainly the size and was 12.4 employees in 2007. Federal, state, and university tech activities in Hawaii accounted for an nature of the state’s defense/aerospace estimated 7,121 technology workers in 2007. Figure 6: Information and Communications Technologies Market Segment Information and Communications Technology The ICT market segment incorporated (ICT) Market Segment Hawaii US more than one-half of the state’s total Emp 2007 (all ICT jobs) 17,355 n/a technology employment because its Emp 2007 (private-sector ICT jobs) 13,901 4,432,865 industries significantly overlap with other % of all private-sector emp 2.0% 2.5% market segments, thereby providing an important infrastructure to every Annual private-sector emp growth rate (’02–’07) 2.7% 2.4% industry. ICT is particularly dependent on Avg earnings 2007 $75,056 n/a the state’s defense/aerospace activities, Avg earnings 2007—private-sector only $66,485 $85,726 but it also provides services to a broad Establishments 2007 1343 n/a array of other professional and business

Numerous large, mainland-based Figure 7: Defense/Aerospace Market Segment companies are located in Hawaii. Frequently, they seek locally-owned Defense/Aerospace Market Segment Hawaii US firms to partner with as they compete for federal contracts (especially from Emp 2007 (all def/aero jobs) 15,516 n/a DOD) to be performed in Hawaii. Emp 2007 (private-sector def/aero jobs) 12,329 4,205,396 However, the limited availability of % of all private-sector emp 1.8% 2.4% skilled talent to meet the industry’s Annual private-sector emp growth rate (’02–’07) 4.7% 3.3% needs poses a common challenge. Some smaller locally-owned Avg earnings 2007 $76,697 n/a companies express reluctance to grow Avg earnings 2007—private-sector only $68,069 $84,894 substantially. This reluctance is often Establishments 2007 1,254 n/a driven by a desire to keep the firm small and manageable, as it takes a very different corporate infrastructure to energy considerations, in terms of support a company of 100 than it does In the months and years ahead, developing successful dual- efficiency and alternative energy a company of 12 people—the average use strategies may be critical technologies, are expected to play an size for these firms. Companies in the to continued growth among important role as DOD considers future defense/aerospace market segment companies in the defense/aerospace acquisitions. In the months and years face further challenges, including commercial-market segment. ahead, developing successful dual use the cost of living, and the limited strategies may be critical to continued infrastructure capacity with regards to become much more competitive with growth among companies in the areas such as electricity, port facilities, fewer dollars available for defense- defense/aerospace commercial market and telecom (with one company related contracts. Companies seeking segment. owning most of the network). to diversify their markets are examining “dual uses”—or finding commercial Hawaii-based companies attracted more than $2 billion in applications and markets for defense defense contracting in 2007. products. Particular opportunities may exist for defense companies in the energy 23 and homeland security areas. That said, a number of local Hawaii- The dual use strategy has worked based companies have successfully Engineering/Professional for many companies and industries, established themselves. Overall the Services especially those that offer products state attracted more than $2 billion in Engineering and professional services or services that are uniquely defense contracting, and over 1,100 represent the next largest commercial- designed for the military. Successful companies each generated more than market segment. Last year, engineering dual use efforts more often focus $50,000 in business from the Defense and professional services employed as much on re-deploying talent Department in 2007. Of those, 42 about 12,019 workers (nearly 8,500 of and developing similar, but new, had contracts totaling more than $10 whom work in the private-sector). 24 products for commercial markets million and another 217 had contracts This commercial segment is also closely as they do on finding new markets totaling between $1 million and $10 related to environmental consulting. for existing products previously million. Many of these companies have About 7,700 workers were employed purchased by DOD. Additionally, come to realize that they may be too in private-sector environmental 23. LMI Government Consulting, “Transforming dependent on one single customer. 24. Civil engineering is tied predominantly to the Way DOD Looks at Energy: An Approach to the construction industry and is therefore not Establishing an Energy Strategy,” Report FT602T1, With likely changes in public policy included in these figures. priorities as well as ever tightening April 2007. budgets, the Federal marketplace may

Figure 8: Engineering and Professional Services Market Segment

Engineering/Professional Services Market Segment Hawaii US Emp 2007 (all eng/prof svcs jobs) 12,019 n/a Emp 2007 (private-sector eng/prof svcs jobs) 8,080 1,879,094 Environmental Technologies % of all private-sector emp 1.2% 1.1% Firms in the environmental technologies commercial market employ about Annual private-sector emp growth rate (’02–’07) 4.9% 5.7% 8,600 workers (of which more than Avg earnings 2007 $80,799 n/a 7,700 were employed in the private- Avg earnings 2007—private-sector only $68,424 $76,920 sector).26 Most workers are employed Establishments 2007 755 n/a in industries related to environmental consulting, specialized engineering, and architectural design—industries consulting, specialized engineering, Significant opportunities exist for these in which the companies tend to and architectural design companies firms to partner on projects. Smaller consider themselves related directly to that frequently classify themselves in firms often need larger firms to access environmental engineering. In 2007, the both engineering and environmental larger contract opportunities that state’s average size for environmental services-related industries. The state’s would otherwise be unfeasible, as well companies was 11.6 employees, average size for professional technical as higher risk overseas contracts. Larger about half the size of a “typical” Hawaii and engineering companies was 15.9 firms will look to partner with smaller company. workers in 2007. boutique firms because they seek unique skills or knowledge. They may Generally speaking, there are two kinds Many tech market segments also need to partner with smaller firms of engineering firms in Hawaii. One address specific Hawaii problems; for competitive reasons. For instance, however, opportunities exist to kind includes the large engineering Department of Defense contracts market Hawaii’s expertise globally. firms like Earth Tech Inc. or CH2M Hill or often require the participation of small- Weston Solutions, 25 which serve global business enterprises. Also, the smaller markets and have the ability to “reach firms may have a lower cost structure 26. Much like the engineering and professional back” for additional expertise through services commercial market segment, civil that can help make a fee proposal engineering is tied predominantly to the their Mainland and international offices. more viable. construction industry and is therefore not included The other group of firms represents in these figures. smaller, boutique firms that are almost always locally based and focused on Figure 9: Environmental Technologies Market Segment local markets. While many professional technical and engineering services are Environmental Market Segment involved in environmental areas, these Hawaii US firms are also found in a miscellaneous Emp 2007 (all environmental jobs) 8,593 n/a array of management, applied research, Emp 2007 (private-sector environmental jobs) 7,685 2,156,438 and consulting areas. % of all private-sector emp 1.1% 1.2% 25. Examples of companies which do a variety of Annual private-sector emp growth rate (’02–’07) 4.0% 3.5% engineering work (aside from civil engineering) are included as an important part of the tech Avg earnings 2007 $66,971 n/a industry. Avg earnings 2007—private-sector only $65,314 $76,534 Establishments 2007 739 n/a

Market factors, including increased people of different ethnic backgrounds consumer demand for green might respond to similar medical technologies and products, as well as treatments during clinical trials. For increased redevelopment activities, instance, researchers report that will generate additional demand in Hawaii’s large Japanese population this market. However more stringently Life Sciences, excluding allows them to test treatments for regulated development will remain Agricultural Biotech the Japanese population without a challenge for both the engineering The next largest commercial market having to go through the bureaucracy and environmental services fields. segment is in the life sciences. Last of the Japanese Food and Drug Management consulting, environmental year, about 7,970 workers were involved Administration. This diversity and consulting, and related engineering in the “non-ag” life sciences, including proximity to the Pacific Basin can be an services are the industries that are about 1,020 workers conducting asset for both U.S.- and Japan-based expected to have the most growth. research and related consulting firms. There is an opportunity to form assignments that were classified a center of excellence for tropical Environmental remediation needs, in both the life sciences and the medicine along with pandemic disease combined with the ongoing demand agricultural biotech segments because research and control in Hawaii. An for sustainable, “greener” development their work contributed to both. example of this is Hawaii Biotech, a and building techniques (e.g., LEED leader in vaccine development for certification—Leadership in Energy When describing the life sciences and tropical diseases including dengue and Environmental Design), energy biotechnology activities in Hawaii fever and West Nile virus. conservation, and renewable energy that are not focused on agricultural development, represent key drivers activities, the discussion tends to focus in these commercial markets. on the discovery of pharmaceuticals Environmental experts often partner as well as the exploration of medical with civil engineering and architectural applications of tropical plants and firms to offer more environmentally marine organisms. Two research sensitive methods. Honolulu is a hub for facilities contributing to this industry environmental work in Asia, including are the Cancer Research Center and Agricultural Biotech Japan and Korea. There is a positive the John A. Burns School of Medicine In 2007, agricultural biotechnology connection to tourism as well, as sound in Kakaako. The new UH Hilo College employed 4,833 workers, of which environmental practices support the of Pharmacy will create another state about 1,020 were involved in natural environment that makes Hawaii asset that could support research in conducting research and related an attractive destination. this sector. consulting assignments that cannot be easily classified as agricultural or other Environmental services firms not The diversity of the state’s population life sciences. Recent growth is largely involved in engineering tend to makes it particularly valuable to the result of two factors—increases in focus on testing and environmental researchers seeking to examine how landscaping services, as well as applied research related to ocean sciences Figure 10: Biotech/Life Sciences Market Segment to solve environmental challenges. Many of these initiatives are aimed at Biotechnology/Life Sciences Market Segment addressing specific problems for Hawaii, Hawaii US but nonetheless offer opportunities Emp 2007 (all bio/life jobs) 7,970 n/a for product or process technologies Emp 2007 (private-sector bio/life jobs) 6,441 2,357,208 that might be licensed for use in other parts of the world. For instance, through % of all private-sector emp 0.9% 1.3% their relationship with the Department Annual pvt sector emp growth rate (’02–’07) 2.3% 1.4% of Defense, some firms have gained Avg earnings 2007 $54,532 n/a contracts elsewhere in the Pacific, in Avg earnings 2007—private-sector only $52,468 $91,933 places such as the island of Guam.

Figure 11: Agricultural Biotechnology Market Segment BASF, Dow AgroSciences, Monsanto, Pioneer Hi-Bred International, and Agricultural Biotechnology Market Segment Syngenta Seeds—employ more Hawaii US than 1,000 people in Hawaii. Their Emp 2007 (all ag. biotech jobs) 4,833 n/a activities are primarily focused on Emp 2007 (private-sector ag. biotech jobs) 4,138 1,228,922 seed corn. Hawaii’s climate gives a % of all private-sector emp 0.6% 0.7% unique advantage in that agricultural scientists in Hawaii can plant three Annual private-sector emp growth rate (’02–’07) 7.3% 5.7% times a year rather than just once as in Avg earnings 2007 $53,866 n/a similar Mainland facilities. Significant Avg earnings 2007—private-sector only $51,293 $80,375 growth is anticipated by many of these Establishments 2007 274 n/a companies in coming years. management and technical consulting, use as food, to help replenish wild and the growth of the state’s seed-corn populations, for aquarium hobbyists, farming activities. Like medical research, and potentially for renewable energy. the state has unique competitive Challenges in the agricultural biotech advantages for doing research related sector include attracting and retaining to agricultural biotech. These unique sufficiently skilled employees, especially Ocean Sciences advantages are mainly derived from at the middle technical and lower skill The ocean sciences market Hawaii’s climate and relative isolation levels. Availability and cost of land is segment converges with many from other agricultural and aquacultural another key obstacle, along with access other market segments, including regions. The state has established to water, and significant regulatory defense, information technologies, significant expertise in seed research engineering, environment, life and development. These activities Unlike traditional farming sciences/biotechnology, and involve developing a variety of hybrid operations, workers in seed research energy. One company—Oceanic plants for the purpose of utilizing those operations are more likely to be Imaging Consultants—is a spin-off seeds elsewhere for seed production Ph.D. and master’s level of the Office of Naval Research at on a commercial scale. The state’s corn research scientists. the University of Hawaii. Oceanic research industry has developed into Imaging Consultants designs seafloor a significant exporter of seeds to the hurdles. Challenges in aquaculture mapping software, as well as provides Mainland and Asia. Unlike traditional include recruiting and especially consulting and analytical services. The farming operations, workers in these retaining employees, as well as the company provides services for federal operations are more likely to be Ph.D. lack of transparency in the permitting agencies, including the Navy and the and master’s level research scientists process. To insure continued sustainable National Oceanic and Atmospheric rather than unskilled laborers. activities in this sector, land, workforce, Administration, and also has customers Similarly, aquaculture operations and permitting issues need to be in Europe and Asia. benefit from the tropical climate addressed. Other ocean sciences companies have and isolation beneficial to build Hawaii is uniquely positioned to sought to find ways to use the cold pathogen-free broodstock. Hawaii capture these activities due to its temperatures at deep-ocean depths research organizations such as the favorable climate. The seed industry for use in applications such as energy Oceanic Institute are global leaders is not only one of the state’s fastest generation and refrigeration. For in developing new technologies. growing biotechnology industries, but instance, Makai Ocean Engineering These advancements include rearing one of its fastest growing technology conducts research applied to real shrimp and saltwater fish (as well as industries overall. Five global life projects in the areas of sea water related feedstocks such as algae) for companies with operations in Hawaii— air conditioning (SWAC) and ocean thermal energy conversion (OTEC).

Figure 12: Ocean Sciences Market Segment opportunity for the state’s energy sector to develop a wide array of Ocean Sciences Market Segment methods for increasing renewable Hawaii US energy generation. Emp 2007 (all ocean science jobs) 5,288 n/a Hawaii is unique in that it has potential Emp 2007 (private-sector ocean science jobs) 4,115 1,217,942 for generating energy from almost % of all private-sector emp 0.6% 0.7% every renewable resource (e.g., solar, Annual private-sector emp growth rate (’02–’07) 6.4% 6.2% wind, geothermal, wave, biofuel, Avg earnings 2007 $53,959 n/a etc.), while other states must rely on one or two primary sources to meet Avg earnings 2007—private-sector only $47,439 $72,870 their demand for alternative energy Establishments 2007 309 n/a sources. While this potential exists for the state, it also faces some very The company has also become a requirements to increase the use unique challenges. For instance, each world leader in deep-water pipeline of renewable energy sources, state island currently must produce its design and deployment. In addition, legislation requires electric power own energy, as the power grid is not significant marine research is underway suppliers to provide at least 20 percent interconnected across the Islands. This at the UH Joint Institute for Marine of their energy generation from means that the raw material (e.g., fossil and Atmospheric Research and the UH renewable sources by 2020. As of 2003, fuels and renewable sources) required Institute for Marine Biology. 8.2 percent of net electricity sales were to generate electric power must be Core research and development generated on the island where it will activities accounted for about 22 Renewable Energy is the fastest be used. It is often simply too costly growing tech market segment in percent of the nearly 5,300 total to ship the material from one island to Hawaii, with an annual employment another. in 2007. Much of the remaining growth rate of 8.7 percent in the employment is found in environmental private-sector, compared with 5.8 This commercial market segment and technical services companies, percent nationally. is focused on conducting research especially marine sciences consulting. and testing new applications for Employment growth can be attributed derived from renewable sources. The numerous renewable resources, rather primarily to these consulting activities goal is to achieve 10 percent by 2010 than scaling up for mass production. as employment in research has been and 15 percent by 2015. Given the need Renewable resources under current relatively stable since 2002. Future to generate more energy—and more use and development include biofuels, employment in these R&D activities is energy locally—there is considerable wind energy, solar collection and expected to decline slightly while the consulting activities continue growing. Figure 13: Renewable Energy Market Segment

Renewable Energy Market Segment Hawaii US Emp 2007 (all energy jobs) 3,587 n/a Emp 2007 (private-sector energy jobs) 3,509 1,028,543 Renewable Energy % of all private-sector emp 0.5% 0.6% Another commercial market segment Annual pvt sector emp growth rate (’02–’07) 8.7% 5.8% identified as significant among the Avg earnings 2007 $58,498 n/a state’s technology and innovation firms is that involved in developing Avg earnings 2007—private-sector only $58,370 $82,968 and producing energy alternatives Establishments 2007 295 n/a to fossil fuels. Driven by regulatory

storage, geothermal, ocean wave, directly harnesses solar energy in companies involved in this commercial and the deployment of photovoltaic Hawaii. The company specializes in the market segment appear to be technologies for off-grid and on-grid development, design, manufacturing, emphasizing game design and the power generation. and distribution of concentrated solar technical support of films, particularly power (CSP) products to the distributed short films. While major motion Puna Geothermal Ventures on Hawaii generation market. This proprietary pictures and television programs (such Island provides one example of a design uses mirrors and optics to focus as the television series, Lost) may be successful enterprise. Puna Geothermal and intensify the power of the sun higher profile, they are also important harnesses geothermal energy to help to create steam for use in electricity because they bring in much-needed meet Hawaii’s renewable energy generation and air conditioning. investments in facilities and equipment. portfolio standards. Many energy Another Hawaii company—Hoku Yet, short-film commercials are probably experts in Hawaii suggest geothermal Scientific—develops clean energy a more significant and stable part of as a promising opportunity to meet technologies used in fuel cells and the economic activity in this market the needs of the island of Hawaii, and photovoltaic (PV) products. segment, because the large projects also provide a surplus of energy. As involve greater risks for investors and with any energy source, the challenge sustaining business operations during lies in storage and transmission. nonproduction periods can be costly. Other promising areas of energy Hawaii’s high cost structure adds to the development in Hawaii include challenge, when compared to lower- biodiesel, ethanol, and cellulosic cost global options. biomass from crops such as sugar cane and algae. Hawaii has a long Digital Media Film industry representatives liken history of sugar-cane production and the industry to construction in that The digital media industry represents technological development, as well as companies require continuous work an important technology-intensive research and development in a wide in order to build scale and capacity. portion of the state’s larger film and variety of tropical and subtropical As a result, it is expected that short digital media industry. It is relatively crop improvement and cultivation. commercials will remain quite small, but growth is occurring from Algae, for instance, can be cultivated important to the industry’s long-term the convergence of the information rapidly in Hawaii to produce biodiesel, development. These companies have technology and film/music/ ethanol, and bio-jet fuel. Additionally, tremendous export potential and entertainment industries. Unfortunately, the byproducts can be used for can meet the demand to develop digital media is particularly difficult animal feed and carbon sequestration the technological capacity needed to to detect because it is masked within (the removal of carbon dioxide succeed in digital media. other, larger industry segments. from coal or other fossil fuel plant Furthermore, digital media exhaust gases). Several companies in Hawaii are showing promise in energy development, including HR Figure 14: Digital Media Market Segment Biopetroleum, which recently received Digital Media Market Segment two years of funding from Shell Dutch Hawaii US Oil. Emp 2007 (all dig. media jobs) 2,270 n/a Solar energy offers another promising Emp 2007 (private-sector dig. media jobs) 2,270 1,293,874 area of energy development in % of all private-sector emp 0.3% 0.7% Hawaii. Sopogy Inc. has developed and commercialized technology that Annual private-sector emp growth rate (’02–’07) 0.2% 2.3% Avg earnings 2007 $73,335 n/a Avg earnings 2007—private-sector only $73,335 $93,207 Establishments 2007 359 n/a

31 Markets Driving Hawaii’s Technology Sector ough © N. G com . hoto Astronomy P tock

The astronomy commercial market S ig segment is dominated by a concentration B of telescopes located at observatories on Mauna Kea, Mauna Loa, and Haleakala, as well as research activities at the University of Hawaii campuses at Manoa and Hilo, and the Maui High Performance Computing Center. The smallest of the market segments, in 2007 it employed about 885 people in companies related to astronomy, of which about 342 were in the private- The state’s mountains offer the finest viewing locations on the planet, and Mauna Kea currently has the largest observatories in the world. sector and 543 were in the public- sector. The astronomy market segment monitor the equipment used in the of governments and government tends to be concentrated in a very observatories. Other major astronomy consortia worldwide. Maui-based small number of firms and relies on enterprises include Subaru, AURA- observatory activities tend to be contracts with an international network Gemini, the Institute for Astronomy in more related to market applications, of governments doing basic research Hilo, and UH Manoa. including defense and satellite on space, as well as conducting observation activities. Maui also offers The islands of Hawaii and Maui were atmospheric and defense-related one of the world’s premier locations able to attract the observatories research. for solar astronomy. Plans for larger because of the relative height of their telescopes at locations around the Most private-sector firms involved in mountaintops, the relative location world could place pressure on Hawaii’s astronomy are located on Hawaii Island. on the planet, and the islands’ relative observatories to make significant For instance, W.M. Keck Observatory and isolation from large population investments to increase the size of their Canada France are in Waimea. Most of centers. Activity on Hawaii Island is equipment. their employees are not astronomers, almost exclusively related to basic but engineers and technicians who research sponsored by a number Overall Trends in the Figure 15: Astronomy Market Segment Commercial Market Segments Last year, in all of the commercial Astronomy Market Segment Hawaii US market segments, 31,106 people were employed, of which nearly 24,000 Emp 2007 (all astronomy jobs) 885 n/a worked in the private-sector and Emp 2007 (private-sector astronomy jobs) 342 222,685 about 7,100 worked for government % of all private-sector emp 0.0% 1% Annual private-sector emp growth rate (’02–’07) 7.3% 1.2% Overall, growth in Hawaii’s technology sector is more rapid than Avg earnings 2007 $70,951 n/a in the rest of the economy. Avg earnings 2007—private-sector only $83,654 $106,567 Establishments 2007 28 n/a agencies (including the University of Hawaii). Figure 16 shows the private- and public-sector employment in each of the commercial market segments.

Figure 16: Hawaii Tech Employment by Commercial Market Segment, Estimated, 2007

Te ch Sectors 23,985 7,121

ICT 13,901 3,453

Def/Aero 12,329 3,188

Eng/Prof Svcs 8,080 3,940

Environ. 7,685 908 Private Public

Bio/Life Sci. 6,441 1,529

Ocean Sci. 4,115 1,173

Ag Biotech 4,138 694

Energy 3,509 78

Dig. Media 2,270 0

543 Astronomy 342 2,500 5,000 7,500 10,000 12,500 15,000 17,500 20,000 22,500 25,000 27,500 30,000 32,500 Employment in Hawaii Tech Sectors (and Related Commercial Market Segments)

Since certain industries are included was 2.5 percent annually while the in multiple sectors, the employment The technology sector pay tech industries grew at 2.9 percent totals in each segment do not add up differential translates into roughly annually, during the past five years. to the total overall technology sector $1,500 per month in added benefits This means the tech sector added employment. and wages above the earnings of the jobs at a rate of 16 percent faster average Hawaii worker. than the rest of the state, but private- Overall, growth in Hawaii’s technology sector tech companies’ employment economy is more rapid than in the rest grew at a rate 32 percent faster of the economy—and it is expected to from 1992 to 2004, smaller businesses than the rest of the state. Figure 17 continue to grow faster in the future. were likely to grow at a faster rate than shows that employment in most of This growth is due in no small part to larger ones and almost all of the net the technology commercial market the prevalence of small companies in new-job creation occurred among segments (combined public and the technology sector. Large numbers 27 companies with 250 employees or less. private tech sectors) grew at an annual of small companies can indicate rate that was faster than the economy strength. According to a longitudinal Between 2002 and 2007, the growth overall. The fastest growth occurred study of small businesses in the U.S. rate for the entire Hawaii economy in several segments—such as energy, 27. Neumark, D., Wall, B. and Zhang J. “Do Small Businesses Create More Jobs? New Evidence from the National Establishment Time Series,” NBER Working Paper No. 13818, Cambridge, Massachusetts, 2008.

Figure 17: Annual Growth Rates for Employment by Commercial Market Segment (2002–2007)

Energy 8.4%

Ag. Biotech 6.4%

Ocean Sci. 5.2%

Def/Aero 4.1%

Environ. 4.0%

Eng/Prof Svcs. 3.8%

Astronomy 3.6%

Private Te ch Sector 3.3%

All Te ch Sectors 2.9%

Commercial Market Segment ICT 2.5%

Bio/Life Sci. 2.3%

Dig. Media 0.2%

Whole Economy 2.5%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% Annual Growth Rate (’02–’07)

agricultural biotechnology and ocean economy will grow at a quite modest every commercial market segment. sciences—that are small relative to 1.3 percent annually, while the tech Professional technical and engineering other market segments. Nevertheless, industries are expected to grow at services offers the highest earnings, defense/aerospace is one of the largest about 1.9 percent annually. The private- followed closely by defense/aerospace segments and was also one of the sector portion of the tech industries and information and communications fastest growing. are expected to grow 2.1 percent technologies industries. annually. During the next decade, Figure 18 shows the projected the tech sector is expected to grow employment growth in each of the During the next decade, the tech at a rate that is 46 percent faster than sector is expected to grow at a rate commercial market segments over the the rest of the economy, and private- that is 46 percent faster than the rest next decade. While the annual growth sector companies in tech industries of the economy, and private-sector rates are projected to slow somewhat, are expected to grow at a rate that is companies in tech industries are most commercial market segments are 61 percent faster. Figure 18 also shows expected to grow at a rate that is 61 nevertheless projected to grow faster that wages in the technology sector percent faster. than the economy overall. Projections are higher than the state average for for 2007–2017 suggest that the entire

Figure 18: Annual Earnings for Economic Industries Compared with Technology Commercial Market Segment, 2007

Description 2007 Earnings Projected Annual Per Worker, Hawaii Growth Rates, 2007-17 Utilities $105,974 1.0% Management of companies and enterprises $82,424 1.4% Engineering/professional services $80,799 1.5% Defense/aerospace* $76,697 2.3% Information and communications tech* $75,056 1.9% Digital media* $73,335 2.2% Astronomy* $70,951 1.3% Government $69,652 -0.8% All Technology Industries $68,935 1.9% Environmental* $66,971 1.7% Construction $64,704 1.7% Mining $59,763 2.4% Information $59,033 1.2% Renewable energy* $58,498 2.8% Manufacturing $54,891 0.3% Bio/life sciences, except ag. biotech* $54,532 0.9% Finance and insurance $54,029 1.5% Professional and technical services $54,023 0.7% Ocean sciences* $53,959 2.6% Ag. biotech* $53,866 3.2% Wholesale trade $53,566 1.0% Transportation and warehousing $49,042 3.6% ALL INDUSTRIES $45,963 1.3% Healthcare and social assistance $45,846 1.8% Real estate and rental and leasing $37,346 3.0% Educational services $31,499 1.7% Accommodations and food services $29,680 1.0% Administrative and waste services $29,134 2.4% Retail trade $28,983 1.1% Other services, except public administra- $23,969 0.9% tion Agriculture, forestry, fishing, and hunting $21,331 -0.6% Arts, entertainment, and recreation $20,968 1.9%

Note: Earnings reflect the combined value of wage and salary income as well as other non-wage earnings including retirement pay and fringe benefits. *Commercial Market Segments of Hawaii’s Science & Tech Industries Source: Economic Modeling Specialists Inc.

35 Markets Driving Hawaii’s Technology Sector locum © D. S © D. com . P hoto tock S ig B

Photos courtesy of DBEDT and Pioneer Hi-Bred.

36 Island Highlights—StrengthsIsland and Highlights—Strengths Opportunities and Opportunities

Just as Oahu accounts for the Figure 19: Private-sector Employment by Island majority of the state’s population and County Private Public Combined All Jobs % of Total employment, so, too, does it contribute Sector Sector Tech Employment the bulk of the state’s technology Employment business, research, and employment. Honolulu 19,160 6,728 25,888 621,569 4.2% Nevertheless, each of the islands makes Maui 1,847 39 1,886 100,971 1.9% contributions—often quite unique—to Hawaii 1,681 215 1,896 95,831 2.0% the state’s technology sector. Figure Kauai 933 69 1,002 43,235 2.3% Nearly 25,888 tech sector jobs State of Hawaii 23,985 7,121 31,106 861,608 3.6% were located on Oahu in 2007, and another 4,784 of those jobs were on the neighbor islands. island with the smallest tech sector, island. Last year, the average Kauai tech Kauai enjoys the fastest growing company employed 19 workers, while 19 shows the number of private- and technology sector. Between 2002 the average Kauai firm employed 18. public-sector technology-related jobs and 2007, Kauai’s tech sector grew By comparison, the average Hawaii found on each of the islands.28 Nearly at an annual rate of 6.0 percent. By tech company provided work for 16 25,888 tech-sector jobs were located comparison, overall employment on employees and the average Hawaii firm on Oahu in 2007, and another 4,784 Kauai grew 3.2 percent annually during employed nearly 23. were on the Neighbor Islands. Last the same period. The commercial market segments that year, Maui and the island of Hawaii employ the largest number of workers each had almost 1,900 tech sector Although Kauai is the island are defense/aerospace and agricultural jobs, while Kauai had about 1,000. This with the smallest tech sector, it biotech. The defense/aerospace market section describes the size and scope enjoys the fastest growth, at 6.0 segment is driven almost entirely by of technology activities on each island, percent annually. activity at the Pacific Missile Range as well as their unique assets and Facility. The PMRF is a premier location for strengths. Private-sector technology companies testing air, space, surface, and subsurface on Kauai generated approximately missiles. PMRF is the island’s third-largest $52.8 million in earnings, which employer (behind the county and represented almost 3.3 percent of the Wilcox Memorial Hospital). It employs island’s total earnings.29 The average approximately 1,000 people, with 600 technology worker on Kauai earned to 700 of those being private-sector $52,723 annually, about 42 percent workers. It should be noted however, more than the average worker on that not all of these 1,000 people are the island. In addition to the earnings Kauai County considered technology workers. In absolute numbers, Kauai has the generated, the tech sector also state’s smallest technology sector. In indirectly supported another 842 jobs in Many of the civilian workers at PMRF 2007 it had 1,002 jobs, of which 933 sectors providing goods and services to are actually private-sector workers— were in the private-sector. These jobs technology enterprises or workers. employed by military contractors such as General Dynamics, Raytheon, or accounted for 2.3 percent of Kauai’s In 2007, approximately 52 companies Northrop Grumman. These employees total employment. Although it is the comprised Kauai’s private tech sector. do sophisticated work that requires This represented 2 percent of all Kauai 28. To generate data on the commercial market a high level of skill. For instance, Trex establishments. Unlike the other islands, segments for each county, the team generated Advanced Materials30 develops and employment estimates at the industry level tech companies on Kauai are relatively by county for each six-digit NAICS code and manufactures advanced ceramic then allocated individual industries to each larger than other companies on the commercial market segment in a similar fashion 30. Trex Advanced Materials is the Kauai affiliate 29. Source: U.S. Bureau of Economic Analysis, to what was done for the state as a whole. of the San Diego-based Trex Enterprises. Trex (BEA). Estimates are derived using a ratio of total Enterprises reports that it employs 65 people on earnings to GDP applied to technology-sector Maui, Kauai, and Oahu. earnings to generate an estimate of the GDP.

37 Island Highlights—Strengths and Opportunities

Figure 20: Kauai Tech Employment by Commercial Market Segment, Estimated 2007

All Te ch Sectors 1,002

Private Te ch Sector 933

Ag. Biotech 445

Def/Aero 389

Eng/Prof Svcs. 382

ICT 356

Environ. 258

Energy 187

Bio/Life Sci. 185

Ocean Sci. 168

Dig. Media 79

Astronomy 0

200 400 600 800 1,000

Kauai Tech Sectors and Tech Commercial Market Segments, Complete Employment materials for semiconductors, ballistics, Kauai has also seen considerable and optics. While most of Trex Advanced growth in its agricultural biotech Materials’ activities have military market. This growth is primarily the applications, perhaps 5 percent to 10 product of statewide growth in the percent of their contracts are non-DOD seed corn industry. For instance, related. Pioneer Hi-bred International, In addition to defense contractors, Monsanto, and Syngenta are PMRF also attracts researchers from located on Kauai. Pioneer employs universities like MIT, Georgia Tech, and approximately 120 people on the Hawaii County island, including many at a research Johns Hopkins University, who are Hawaii Island’s technology and center in Waimea. That facility employs involved in the research and testing innovation sector in 2007 consisted of eight Ph.D.-degree holders and 10 activities that occur at the facility. It roughly 1,681 jobs in the private-sector master’s-degree holders. While these should also be noted that PMRF attracts and another 215 in the public-sector, agricultural activities are related to 300 to 400 “technology tourists” to the the latter largely driven by federal seed genomics, there are other Kauai- facility for each missile launch. These and university employment. These based agricultural activities related people work as contractors, researchers, jobs comprised 2 percent of all jobs on to the development of biofuels. For and DOD civilian or military personnel. Hawaii Island. Private-sector technology- instance, an ethanol plant to use These technology tourists are an related jobs on Hawaii grew at a pace sugar cane as a source for fuel is being important source of revenue for Kauai, of 3.2 percent annually between 2002 built on the Gay and Robinson Sugar and generate an estimated $3 million and 2007. As a result, the tech sector Plantation. per launch in additional dollars to the on the island of Hawaii kept pace with local economy. the overall employment growth rate on

the island during the same period (3.2 activities. Mauna Kea represents the In 2007, companies in astronomy percent). It also exceeded the overall offered workers the highest average best viewing location in the world, annual employment growth rate of the earnings, $81,748/year, of any and has 13 distinct astronomical state (2.5 percent). commercial market segment on the facilities, representing more than $1 billion in infrastructure. A number Hawaii Island’s private technology island of Hawaii. of prominent companies own and sector directly contributed an operate the telescopes, including estimated $97.8 million in earnings to There were approximately 162 tech- Canada France and the W.M. Keck the economy, or almost 2.7 percent related establishments on Hawaii Island Observatory, both located in Waimea. of the island’s total earnings. Last in 2007, and they accounted for 3.1 The W.M. Keck Observatory is one year, the average tech worker in the percent of the island’s total number of of the largest and alone employs private-sector on the island of Hawaii establishments. These tech companies almost 140 people. Other prominent made $51,585 annually—almost 34 on Hawaii Island are smaller than the astronomy organizations are located percent more than the average worker. state as a whole, as the average firm in Hilo, including Subaru, Gemini, and Combined, public- and private-sector employed 12 workers as opposed to the University of Hawaii’s Institute technology-related jobs were also 16 for the state. Much like the other for Astronomy at UH-Hilo. Unlike responsible for creating another 1,593 Neighbor Islands, defense/aerospace the telescopes on Maui’s Haleakala, jobs in a variety of non-technology- and ICT have the greatest number the work occurring atop Mauna related sectors that provide supplies of establishments, although many of Kea predominantly involves basic and services to the companies and the island’s unique strengths are in scientific research. The telescopes are workers employed in the technology astronomy, energy, and life sciences. much larger and more powerful as sector. Astronomy is one of Hawaii Island’s well. Furthermore, TMT Observatory most prominent technology

Figure 21: Island of Hawaii Tech Employment by Commercial Market Segment, Estimated 2007

1,896 All Te ch Sectors Private Te ch Sector 1,681

ICT 671

Bio/Life Sci. 669

Eng./Prof. Svcs. 647

Ag. Biotech 629

Def/Aero 628

Ocean Sci. 567

Environ. 559

Energy 407

Astronomy 241

Dig. Media 132

500 1,000 1,500 2,000 Big Island Tech Sectors and Tech Commercial Market Segments, Complete Employment

Corporation has selected Mauna Kea energy. For instance, Puna Geothermal as one of two potential sites (the other Ventures produces 30 megawatts being Cerro Armazones in Chile) for a and alone can provide 20 percent of proposed new extra-large, 30-meter the energy needs on the island. It has telescope. At an estimated cost of $1 contracted with Hawaii Electric Light billion, TMT would employ an average Company (HELCO) to expand its output of 300 people during the eight- to another 8 MW, and has the capacity to nine-year construction phase, and the expand up to 200 MW, the island’s total Maui County telescope would create approximately electricity needs. Among the Neighbor Islands, Maui 130 new permanent operations jobs, While wind, photovoltaic, hydro, and County (including Maui, Lanai, and increasing the size of the island’s geothermal activities are in place, there Molokai Islands) has the most private- astronomy sector substantially. are also a number of energy-related sector technology-related jobs. The advent of the Thirty-Meter activities that are more exploratory in Overall, the tech sector represented 1.8 Telescope (TMT) presents a significant nature. For instance a number of other percent of Maui’s total employment in opportunity for collaboration alternative energy activities underway 2007. Between 2002 and 2007, Maui’s between cultural, environmental, and at National Energy Laboratory of technology sector employment grew astronomical resources.31 Hawaii Authority (NELHA). At NELHA, 3.7 percent annually, about the same Much like Tucson, Arizona, where some research activities focus on using rate as the rest of the state’s tech optics is an important economic driver, deep-ocean water for cooling, and economy but faster than the statewide Hawaii Island’s astronomy advocates finding ways to make Ocean Thermal annual average of 2.5 percent. see this market segment as a potential Energy Conversion (OTEC—a process economic engine that makes the island that uses the temperature differences Among the Neighbor Islands, truly unique in the global marketplace. between deep and shallow water to Maui has the most private-sector The industry not only brings in power heat engines) more viable. technology-related jobs. numerous visitors and researchers to Life sciences are another notable the island, but also creates a substantial technology-related activity with Last year, the private tech sector number of high-paying, highly skilled potential for Hawaii Island. For instance, contributed an estimated $106.4 jobs. In 2007, companies in astronomy there are several companies involved million to the Maui economy—about offered workers the highest average in developing pharmaceuticals and 2.7 percent of Maui’s total earnings. On earnings, at $81,748/year, of any nutraceuticals. Two NELHA tenants— average, a private-sector tech worker’s commercial market segment on the Cyanotech and Enzamin USA—are annual earnings were $56,443 in 2007, island of Hawaii. This was 58 percent involved in this market area. Cyanotech a figure 47 percent greater than the higher than the average earnings for all is NELHA’s anchor tenant and is creating average Maui worker’s earnings. These tech-related jobs on the island. microalgae-based products for use technology activities also helped to In addition to astronomy, the island of in human nutrition as well as in the support another 1,584 jobs in supplier Hawaii also has perhaps the greatest aquaculture industry. The new Pacific companies or service providers potential for alternative energy Basin Agricultural Research Center operating in non-technology sectors. generation. The island has significant (PBARC) is to be the largest facility Maui had an estimated 163 technology capacity for wind power, and efforts concentrating on tissue culture and companies in 2007. These companies are underway to find sites for more transgenic research and to house the represented about 3 percent of Maui’s wind farms. The island also has Hawaii’s largest seed repository in the Pacific total establishments. Most of the greatest capacity for geothermal Basin. The PBARC, coupled with the new companies were in ICT and defense/ UH-Hilo College of Pharmacy, is set to aerospace. An average-sized Maui 31. For more information on TMT, please see take advantage of these Island assets. Additional Economic Development Information: tech company had 12 workers, which Preliminary TMT Impact at http://www.HISciTech. was the same average size as tech org/Information. companies statewide, but they are still

smaller than the state average for all Site facility, directly connecting it to The MHPCC has a highly skilled companies, which was 16 workers. This workforce, 15 percent with the island’s astronomy market segment was also smaller than the average Maui- advanced degrees (master’s or as well. The center has a highly skilled based companies across all industries, Ph.D.), 30 percent to 40 percent workforce, 15 percent with advanced which had an average of 19 workers. with bachelor’s degrees, and the degrees (master’s or Ph.D.), 30 percent rest with associate degrees. to 40 percent with bachelor’s degrees, Among private-sector technology and the rest with associate degrees. workers in 2007, the largest concentration was in the ICT and Perhaps the highest profile defense and On Haleakala, the astronomy sector is defense/aerospace markets, which IT activity on Maui is taking place at the also highly visible. The Air Force owns, employ 993 and 864 people, Maui High Performance Computing and Boeing manages, a telescope respectively. Many of these activities Center (MHPCC). The MHPCC is an Air that is used for space situational are overlapping and interrelated. For Force Research Center managed by the awareness. Boeing employs about instance, Akimeka is a Maui-based IT University of Hawaii. It provides a facility 125 people, many on the island. company whose business is focused on to do complex computing, which is Most of the Haleakala operations and the federal market, serving the Defense used predominantly by the Defense maintenance workforce are non- Department in particular. Partnered Department and other government degreed workers, but their engineering with other large defense contractors users. For instance, the MHPCC helps to staff includes seven with Ph.D.s and 14 like ITT and Raytheon, Akimeka now meet some of the computation needs with master’s degrees while the rest employs 130 people nationwide, with of the Pacific Missile Range Facility on have baccalaureate degrees. Another 60 workers on Maui—42 of whom were Kauai. MHPCC also serves the needs of telescope on Haleakala is operated by hired during the past year. the Haleakala High Altitude Observatory the UH Institute for Astronomy. The

Figure 22: Maui Tech Employment by Commercial Market Segment, Estimated 2007

Private Te ch Sector 1,847

ICT 993

Def/Aero 864

Eng./Prof. Svcs. 705

Environ. 656

Ag. Biotech 603

Ocean Sci. 401

Energy 337

Bio/Life Sci. 204

Dig. Media 114

Astronomy 47

500 1,000 1,500 2,000 Maui Tech Sectors and Tech Commercial Market Segments, Complete Employment

Haleakala telescopes also represent one of the world’s best sites for solar rusta astronomy. Unlike the telescopes on © R. I com Hawaii Island’s Mauna Kea, the research . on Maui tends to be more applied hoto in nature. Astronomy and ICT also P tock represent the best paying of the island’s S ig commercial market segments. B Other notable market areas with growth potential include agricultural biotech and renewable energy. Maui and Molokai have become important sites for Hawaii’s burgeoning seed industry as companies continue to add jobs. It is also an area with a growing number of alternative energy activities. The island of Hawaii is producing the highest level of renewable energy in the state, with wind, photovoltaic, hydro, and geothermal. For instance, Maui’s wind farm on the spine of the West Maui Mountains is billion to Oahu’s economy. This figure now contributing 10 percent to Maui represented 5.7 percent of Oahu’s total Electric’s power generation and more earnings. The jobs being created by windmills have been approved for the private-sector are relatively high installation on the Haleakala slopes. paying. The average worker in Oahu’s Proposed wind farms on Lanai may further add to Maui County’s wind Oahu has the most highly concentrated tech sector, energy generation. Maui also has Island of Oahu/City and County the state’s second best potential for of Honolulu contributing 83 percent of the state’s tech-sector employment, compared geothermal energy, after the island of The most highly concentrated tech Hawaii. Maui’s sugar-cane crops are with 72 percent of the state’s overall sector is located on Oahu. Whereas employment in 2007. now being used as a biofuel, thereby Oahu accounted for 72 percent of further contributing to the state’s the state’s employment in 2007, it power-generation needs. Solar is a contributed 83 percent of the state’s private tech sector had annual earnings smaller segment of Maui’s energy tech-sector employment. Oahu’s of $66,185, or almost 35 percent more market; however, one company—Hnu technology workers accounted than the average worker on Oahu. Photonics—has created three patents for roughly 4.2 percent of its total The three highest paying tech-related for solar-related technology. Hnu employment. These activities generated commercial market segments on Photonics illustrates that emerging an additional 21,746 jobs on Oahu Oahu were digital media, professional, technology companies often operate in non-technology-related sectors. engineering/professional services, in multiple commercial markets—as Employment growth in tech-related and defense/aerospace. Last year, the company is also involved in medical activities has also been occurring at a there were roughly 1,490 tech-related instrumentation, optical sensors, faster rate than employment growth establishments on Oahu, or 76 percent spectrometer design, laser beam overall. Between 2002 and 2007, the of all tech companies in Hawaii. These control and projection, and microscope combined private and public tech firms represented 6 percent of all Oahu design and construction. The company sector grew 2.6 percent annually. By establishments. Tech companies on is an entrepreneurial spin-off, as the comparison, overall employment on Oahu were larger on average than founder once worked at the Haleakala Oahu grew 2.2 percent annually. tech companies in the rest of the state. High Altitude Observatory site before Oahu companies had an average of 17.4 establishing the business. In 2007, Oahu’s private tech sector employees, just above the state average directly contributed an estimated $1.7 of 15.8.

The commercial market segments Areas of concern for all islands relate and development. Further state with the largest number of both to the sustainability of development, investments in UH Hilo and NELHA, establishments and employees are and the effect that technological and state regulatory policy (especially the defense/aerospace and ICT market achievements have on the spirit and regarding the environment and segments. This is not surprising given place that is Hawaii. As developments renewable energy) have also been Oahu’s considerable military presence, generate new potential for growth, critical to the success of technology and specifically the large naval these changes will need to development on the Neighbor Islands. presence. While there are numerous acknowledge and integrate into the The private-sector across the state major defense contractors located on unique cultural perspective of Hawaii. has long taken advantage of DOD Oahu to meet the needs of the military, contracting opportunities, and recently there are also a large number of smaller Island Opportunities more entrepreneurial spin-off activities firms who support the military, either have emerged. The development Oahu remains the primary driver of directly or indirectly as subcontractors of newly incubated companies is the state’s technology sector, but to the major defense contractors. becoming increasingly important as a niche opportunities exist for the source of private-sector employers. Other technology activities are also Neighbor Islands. The unique climate growing. Much of the seed research and geology of the Neighbor Islands The next section examines the needs taking place in Hawaii occurs on make them particularly important for of these growing sectors and the Oahu. The presence of the University certain research and development efforts underway to address those of Hawaii at Manoa also means that activities. Public investments—in the needs. a great deal of research-intensive form of major DOD installations at activities occurs on the island. Most of PMRF, MHPCC, and the observatories— the employment in the digital media have served as the nucleus for much market segment also occurs on Oahu. of the Neighbor Islands’ research

Figure 23: Honolulu County (Oahu) Tech Employment by Commercial Market Segment, Estimated 2007

Private Te ch 19,160 Sector

ICT 15,132

Def/Aero 13,526

Eng./Prof. Svcs. 10,337

Environ. 7,110

Bio/Life Sci. 6,785

Ocean Sci. 4,123

Ag. Biotech 3,119

Energy 2,648

Dig. Media 1,922

5,000 10,000 15,000 20,000 25,000 30,000 Oahu Tech Sectors and Tech Commercial Market Segments, Complete Employment

43 Labor Market Market Trends Trends in Technology in Technology Clusters Clusters

Many policy makers involved that this same person could work for in innovation-driven economic A recent national study of the a bank or a distributor—not included development are particularly technology industry found that as technology companies. After the concerned about the availability 56 percent of the technology discussion of STEM industries, the report of talented workers. Skilled talent industry’s current job mix requires turns to an assessment of occupational at least two years of college represents the most important asset needs of companies in the technology education expected to increase to for most technology companies, so 77 percent during the next decade. sector, describing employment there is great emphasis on having growth patterns, wage trends, and key direct access to both the technical educational requirements of the largest expertise and the entrepreneurial At the foundation of success in occupations demanded by technology talent to help companies innovate. technology are the knowledge, skills, industries. Wherever the data are These workers are needed, not only and abilities that individuals with available, the analysis also provides an for the new jobs being rapidly created adequate educational background estimate of the proportion of workers in the technology sector, but also to have in the STEM disciplines. Rightly in individual occupations that are replace those workers who are leaving so, much attention has been targeted employed by technology companies. the state’s workforce due to retirement, on the careers that are related to the As noted earlier, 31,106 workers were emigration to the Mainland, or other STEM disciplines, but an assessment employed in the state’s technology factors that spur workers to change of the workforce needs of technology industries in 2007. By comparison, careers. In the report we refer to these industries cannot be limited just to an estimated 37,106 workers were as “new” and “vacant” jobs. STEM knowledge, skills, and abilities. employed in all STEM occupations in This assessment must also explore the same year, many of which are not Anecdotally, company executives and the many other occupations that are included in the technology sector. It education experts all agree that there also vital to the success of technology would require an additional research is a significant shortage of talented companies. The technology sector study of all 700 occupational categories workers available in Hawaii to meet offers many well-paying jobs in to determine precisely the number of demand. Whether those jobs are in both STEM and non-STEM-related STEM workers employed by technology highly skilled occupations related to occupations, many of which do not industry companies, but companies science technology engineering and require a four-year degree. Figure in the technology industries employ math (STEM) 32 or in vital support jobs, 24 demonstrates how technology about 41 percent of the workers in many of these careers require post- industry jobs include a wide variety of the largest STEM-related occupations secondary education. A recent national occupations, including many that are analyzed later in this section. study of the technology industry (as not necessarily STEM-related. It also defined by the U.S. Bureau of Labor illustrates how many STEM occupations Statistics) found that 56 percent of the can be found in companies that are STEM Occupation Trends industry’s current job mix requires at not defined as being part of the tech Before examining the largest least two years of college education. sector for the purposes of this report. Furthermore, 77 percent of the new technology occupations, it is first jobs that the technology industry will This section first examines the important to explore those occupations create during the next 10 years will also full array of occupations that are related to the science, technology, require at least two years of college.33 critically important to the state’s engineering, and math disciplines. STEM workforce, including those that Certainly, STEM-related occupations may not be employed in technology are not exclusive to the technology 32. STEM includes about 130 occupations sector, but tech companies rely on identified by the U.S. Bureau of Labor Statistics industries. It is not always easy to tell as requiring science, technology, engineering, or whether a worker employed in a STEM having access to an adequate supply math skills. Those occupations are identified at occupation will actually work for a of workers with skills in the STEM http://online.onetcenter.org. technology company. For instance, it disciplines. Consequently, it is vital that 33. Kenneth E. Poole, “Preparing Working Poor may be quite possible for a network STEM-related occupations (including Families for the Jobs of Tomorrow: A Policy Brief,” those jobs that are filled by companies prepared for the Working Poor Families Project, administrator to work for an information forthcoming 2008. Data is based on employment technology company—a technology both within and outside the technology by occupation as developed from Economic industry—but it may be just as likely sector) have adequate support from Modeling Specialists Inc. (EMSI).

44 Labor Market Trends in Technology Clusters

Figure 24: The Intersection of Technology Industries and STEM Occupations These occupations are each assigned to at least one of the STEM disciplines. In many cases, occupations are assigned to multiple disciplines, reflecting the overlap and convergence of many STEM-related activities. According to data from EMSI, the U.S. economy had about 15 million STEM- related jobs in 2006, representing nearly 8.6 percent of all employment. By 2017, that number is expected to grow to 18 million, or 8.8 percent of total employment. That represents a projected 1.7 percent annual growth rate. In all Hawaii industries, about 58,442 jobs in 2006 were STEM related. 34 By 2017, the state is expected to have 63,666 jobs in these disciplines (see Figure 25), which represents a 0.8 percent annual growth rate. Average annual earnings for these jobs were about $48,000 per year. Based on Hawaii’s postsecondary education STEM academic disciplines expose current projections for the next decade, system. This support must come in the their students to relevant principles so Hawaii companies (in all industries) form of established degree programs, that they can be effective employees an adequate supply of enrolled in a workplace—no matter the Based on current projections for the students, and, most importantly, a industry—that increasingly assumes next decade, Hawaii companies (in sufficient number of quality graduates a basic understanding of science and all industries) must find 16,500 more from those programs. Furthermore, as technology. workers that have knowledge, skills, will be noted later, it is also important and abilities in science, technology, The U.S. Bureau of Labor Statistics has to technology companies that non- engineering, and math. identified a specific set of occupations closely tied to STEM disciplines. These The U.S. Bureau of Labor Statistics must find 16,500 more workers, occupations are tied to science (in the has identified a specific set of representing about 1,650 workers form of scientists and technicians), occupations closely tied to STEM annually, that have knowledge, skills, technology (primarily in the form disciplines: and abilities in science, technology, of computing-related occupations), engineering, and math disciplines. To • Science (in the form of engineering (engineering and scientists and technicians); be successful in obtaining jobs in these drafting occupations of all kinds), and growing occupations, about 77 percent • Technology (primarily in the mathematical sciences (including of these workers will need some kind of form of computing-related statisticians and accountants). The U.S. occupations); post-secondary education and another Department of Labor’s Employment 17 percent will require at least a year of • Engineering (engineering and Training Administration-sponsored experience and on-the-job training. As and drafting occupations of O*Net data system reveals nearly all kinds); and a result, understanding the supply of 100 specific occupations related to new workers coming from the state’s • Mathematics (including seven STEM disciplines— computer educational system becomes critical. statisticians and science, engineering, environmental accountants) science, geosciences, life sciences, mathematics, and physics/astronomy. 34. Source: EMSI Occupational Estimates for all STEM disciplines. 45 Labor Market Trends in Technology Clusters

Figure 25: 20 Largest STEM Occupations in Hawaii

Occupation STEM Disciplines 2006 Jobs 2017 Jobs New Annual Replace- Avg An- Median Jobs Growth ment Annual nual Annual Rate Jobs Total Jobs Jobs Earnings Available (including New & Vacant Jobs) Accountants and auditors Computer Science 7,957 8,297 340 0.4% 1,652 1,992 181 $42,015 First-line supervisors/managers of food preparation and serving workers Life Sciences 5,055 5,526 471 0.8% 1,323 1,794 163 $30,552 Automotive service technicians and mechanics Engineering 3,867 4,223 356 0.8% 1,132 1,488 135 $32,926 Farmers and ranchers Life Sciences 2,518 2,444 (74) -0.3% 565 491 45 $16,828 Computer systems analysts Computer Science 2,419 2,939 520 1.8% 301 821 75 $66,578 Civil engineers Engineering 2,335 2,431 96 0.4% 409 505 46 $62,281 Construction managers Engineering 2,224 2,374 150 0.6% 443 593 54 $71,473 Computer support specialists Computer Science 2,110 2,441 331 1.3% 286 617 56 $34,993 Computer programmers Computer Science 1,690 1,615 (75) -0.4% 439 364 33 $49,839 Cooks, institution and cafeteria Life Sciences 1,609 1,693 84 0.5% 548 632 57 $28,215 Computer security specialists Computer Science 1,289 1,678 389 2.4% 157 546 50 $54,979 Computer and information systems managers Computer Science 1,232 1,459 227 1.6% 246 473 43 $80,170 Network systems and data communications analysts Computer Science 1,191 1,668 477 3.1% 154 631 57 $51,059 Environmental compliance inspectors Life Sciences 1,118 1,168 50 0.4% 289 339 31 $46,298 Architects, except landscape and naval Engineering 1,114 1,072 (42) -0.3% 140 98 9 $51,379 Cost estimators Engineering 1,078 1,176 98 0.8% 266 364 33 $53,869 Computer software engineers, systems software Computer Science, Engineering 1,004 1,279 275 2.2% 109 384 35 $72,791 Farm, ranch, and other agricultural managers Life Sciences 910 933 23 0.2% 172 195 18 $34,343 Computer software engineers, applications Computer Science, Engineering 842 1,133 291 2.7% 91 382 35 $60,654 Chemistry, Computer Science, Engineering managers Engineering, Geosciences, Life 826 876 50 0.5% 181 231 21 $98,022 Sciences, Physics/Astronomy All other STEM occupations 16,053 17,241 1,190 0.7% 4,042 5,232 476 $52,565 Total 58,442 63,666 5,227 0.8% 12,946 18,173 1,652 $47,996

Source: Economic Modeling Specialists Inc. • 4/07

The Largest Technology 12,400 workers) of technology sector $23,442 per year for office clerk jobs Industry Occupations workers are employed in the largest to $85,800 per year for computer and Not all of the largest technology occupations (see Figure 26).35 The state’s information managers. tech companies and organizations are industry occupations, however, are In the following section, we will expected to add another 1,800 jobs in STEM-related. By and large, technology examine several key occupational the largest occupations during the next companies require workers with groups that represent the top five years, a rate of 2.8 percent (nearly relatively higher-than-average occupations in the technology sector. twice the anticipated growth rate for educational attainment and skills. In Many of those jobs—like management all state employment during that same fact, most technology industry workers analysts, general business and office period). The average earnings that are employed in occupations that personnel, and technology sales and workers can expect from these jobs are require at least some postsecondary service representatives—are not about $56,060 per year, ranging from education and often four or more years defined as STEM-related occupations, of college. Even so, a few occupations while many others—including offer opportunities for those who 35. Source for occupation and earnings data: EMSI. Occupation estimates were developed a number of computer-related have attained a high school degree. based on industry-by-industry national staffing occupations, engineers, and architects, Combined, 40 percent (or nearly patterns as reported in the Current Employment Survey and then estimated for Hawaii. as well as financial management 46 Labor Market Trends in Technology Clusters

Figure 26: Largest Occupations for Tech Industries created about 430 new management analyst positions during the past five SOC Code Description 2007 Jobs Projected Change Annual % 2012 Jobs Change years. Over the next decade, the state’s 13-1111 Management analysts 1,692 1,944 252 2.8% technology companies are expected to create another 46 (of the projected 118 25-1099 Postsecondary teachers 1,327 1,487 160 2.3% positions statewide) new management 15-1021 Computer programmers 872 937 65 1.4% analyst positions annually. Workers 43-9061 Office clerks, general 648 740 92 2.7% seeking management analyst positions 17-1011 Architects, except landscape and naval 599 606 7 0.2% typically must have a postsecondary 15-1041 Computer support specialists 529 603 4 2.7% degree in business and related fields 11-1021 General and operations managers 508 560 52 2.0% as well as work experience. In addition, knowledge of specific science and 15-1051 Computer systems analysts 541 653 112 3.8% technology disciplines is becoming 43-4051 Customer service representatives 561 731 170 5.4% increasingly necessary for these 11-9199 Managers, all other 462 511 49 2.0% management roles, particularly for 15-1032 Computer software engineers, systems 424 509 85 3.7% the available jobs in the tech sector. software Starting pay averages about $26,560 15-1099 Computer specialists, all other 397 456 59 2.8% per year and median annual earnings 15-1081 Network systems and data communications 389 481 92 4.3% are $45,340. analysts 15-1031 Computer software engineers, applications 386 477 91 4.3% Computer-Related Occupations 11-1011 Chief executives 369 406 37 1.9% Ten of the largest occupations in 43-3031 Bookkeeping, accounting, anf auditing clerks 356 408 52 2.8% the technology sector are related to programming, managing, and 43-6011 Executive secretaries and admin assistants 352 400 48 2.6% supporting computer software and 43-6014 Secretaries, except legal, medical, and executive 322 346 24 1.4% hardware. Last year, nearly 5,000 43-1011 First-line supervisors/mgrs of office and admin 328 365 37 2.2% Hawaii workers were employed 41-3099 Sales representatives, services, all other 350 438 88 4.6% by the technology industry in 17-2071 Electrical engineers 319 346 27 1.6% computer-related occupations such 11-3021 Computer and information systems managers 319 372 53 3.1% as programming, support specialists, systems analysts, software systems 15-1071 Network and computer systems administrators 311 383 72 4.3% and applications engineers, network Source: EMSI Complete Employment - March 2008 analysts, systems managers and administrators, and repairers. workers—are included in the definition Technology companies employed The field offers jobs that have a wide for STEM occupations. The purpose of the nearly 1,700 management analysts range of degree and skill requirements. following discussion is to provide a more in 2007, representing 45 percent of Figure 27 provides employment and detailed analysis about the opportunities all management analysts employed wage data for the 10 largest of these and challenges related to the technology in the entire state. So, the tech sector computer-related occupations, as industry’s efforts to attract and keep is particularly important as a source well as the minimum educational talent in its largest occupations. of employment for this particular occupation. In their jobs, management requirements for each occupation. The Management Analysts analysts are asked to evaluate how figure also illustrates that most jobs in For companies in the technology-related work is done and how to improve it. these occupations are actually found industries, the single largest occupation They are responsible for documenting outside the technology sector. Only is management analyst. It is important and communicating operations and in a few occupations (e.g., computer to place this into context. Even though it procedures in a company and also assist systems and applications engineers), is the largest occupation, management in managing operations efficiently. are the majority of workers employed analysts still account for just 7 percent of in technology industries. Meanwhile, all jobs in the state’s technology sector. The state’s technology companies other computer-related jobs such as

Figure 27: Ten Largest Computer-Related Occupations within Hawaii’s Technology Industries

Description 2002 2007 2012 % of the Projected Avg Annual Entry Median Minimum Education Jobs Jobs Jobs Occupation’s Annual New Total Jobs Avail- Level Annual Level Jobs in the Tech Jobs able (including Annual Earnings Tech Sector, New and Vacant Earnings 2007 Jobs)

Computer-related Occupations Computer programmers 779 872 937 51% 5 39 $29,973 $57,200 Bachelor’s degree Computer support specialists 448 553 536 3 30% 8 80 $24,835 $39,686 Associate’s degree

Computer systems analysts 436 529 603 36% 21 72 $40,518 $63,315 Bachelor’s degree Computer software engineers, 341 419 442 63% 15 25 $47,445 $75,982 Bachelor’s degree systems software Computer specialists, all other 335 397 456 32% 9 48 $48,464 $73,757 Associate’s degree Network systems and data 311 389 481 37% 17 57 $36,171 $56,846 Bachelor’s degree communications analysts Computer software engineers, 302 386 477 61% 16 30 $44,366 $69,888 Bachelor’s degree applications Computer and information 266 319 346 32% 8 34 $55,619 $85,800 Degree plus work experience systems managers Network and computer 243 311 383 29% 13 54 $37,482 $57,096 Bachelor’s degree systems administrators Computer, automated teller, 210 255 287 29% 1 6 $20,114 $33,114 Postsecondary vocational and office machine repairers award Total Top 10 computer-related 3,671 4,430 4,948 38% 113 445 $37,505 $54,385 occupations

Source: Economic Modeling Specialists, Inc. • 4/07 those related to network administration, example, the largest of these computer support specialists worked employ the majority of their workers occupations is computer programmers. in the tech sector last year. Throughout in industries that are not defined as Technology-sector businesses employ the economy in Hawaii, 105 new jobs technology-related. nearly 900 programmers, representing were created in this occupation during more than half of all programmers the past five years, with about 30 In just the handful of computer-related employed in the state. These companies percent of all such positions in the tech occupations identified in Figure 27, the are adding about five jobs per year, sector. During the coming decade, tech state’s technology sector employed but constant turnover in all industries companies are expected to create eight 4,430 of the state’s 11,561 workers in is driving the demand to fill about 39 new support specialist jobs annually, 2007. During the coming decade, the computer programming vacancies but 80 job vacancies are likely to come tech sector is expected to create 1,130 annually across the state. up each year during the next decade in new computer-related jobs in these all industries. Assuming that this is only occupations, representing about 113 The second-largest computer-related 30 percent of the state’s total demand per year. Furthermore, Hawaii tech occupation—computer support (from the tech sector), then companies companies are expected to need about specialist—typically requires an in the state will create a total of 27 new 445 computer-related professionals associate’s degree as a minimum jobs each year and need approximately per year during the coming decade educational requirement. About 550 267 specialists to fill both new and to fill new and existing job vacancies. vacant computer support jobs each year. Average annual earnings for the Top Hawaii tech companies are 10 computer-related occupations were expected to need about 4,450 About 530 computer systems analyst $54,385 in 2007. computer-related professionals positions also existed within the technology sector in 2007. These Several specific computer-related during the coming decade to fill new workers analyze user requirements and occupations merit mention. For and existing job vacancies. business problems to determine the

computer needs of workers. In some architectural occupations are included electronics, health and safety, and cases, they even supervise computer in Figure 28. Of the engineering environmental engineers per year programmers, so they require project occupations, electrical engineering is during the coming decade. In addition, management and quality control skills. the largest by far, with 319 electrical tech companies are also expected to About 93 new analyst jobs were created engineers employed by tech-sector need many of the 16 new jobs created in the technology sector between businesses in 2007. Tech companies for engineering technicians annually. 2002 and 2007. About 36 percent of employ about 43 percent of the state’s Other technology-related jobs include the state’s computer systems analysts electrical engineers, and the tech architects and their support personnel. work in the tech sector. Looking to sector has added 52 new electrical Architects lead the creative process in the future, technology companies engineer jobs since 2002. Hawaii tech planning and designing a wide array can expect to create about 21 new companies expect to add about five of structures. Architect jobs frequently positions annually, but all companies new electrical engineers (requiring a require knowledge in engineering and will likely hire about 72 computer bachelor’s degree) annually during the technology as well as an understanding systems analysts each year to fill new next decade. Hawaii companies will of design and the construction and existing job vacancies in just this seek to fill about 30 vacancies each process. Nearly 600 architects worked one occupation. Overall, that means year resulting from the combination of in the technology industry in 2007, the state will need 56 new computer new jobs being created and the need representing about 70 percent of systems analysts, and a total of 200 to fill to replace existing personnel who are all architects in the state. These both new and vacant jobs combined. During the next decade the tech technology-intensive industries added Engineers and Architects sector is expected to need nearly about 75 new jobs between 2002 and The state’s technology and innovation 1,200 engineers (not including 2007, a result of a building boom in the businesses employ approximately 3,635 software or civil engineers). state. But future job growth is expected engineers (excluding civil engineers).36 to slow dramatically. Based on current projections, only about 23 architect jobs During the next five years, total demand likely to leave the field or move from per year are likely to become available for new engineering-related jobs (not Hawaii. Overall, this means that the in tech-industry companies, including counting civil engineers) is expected to state as a whole will add 12 net new those vacancies created by persons be about 72 per year. The demand for electrical engineering jobs each year, leaving their existing jobs. new and replacement engineers, jobs and all companies in the state will and vacancies combined, is expected to need 70 electrical engineers in total to Technology Sales and Service be nearly 120 per year. fill new jobs and vacancies combined. Representatives Employment and wage data for only Other engineering professions will Sales personnel represent one area of the state’s largest engineering and require new employees as well, but the technology-intensive industries their requirements are more modest that is often overlooked, but remains 36. Civil engineers were excluded from the than for electrical engineers. In vital to the lifeblood of tech companies. definition of Hawaii’s technology sector for the total, tech companies are expected Technical or scientific knowledge (of purposes of this report. As noted earlier, civil engineers were considered to be more closely to demand many of the 43 new disciplines such as biology, engineering, related to the state’s construction industry than jobs related to marine, mechanical, chemistry, and electronics) is often to its technology sector. Figure 28: Selected Large Engineer and Architect Occupations within Hawaii’s Technology Industries

Description 2002 Jobs 2007 Jobs 2012 Jobs % of the Projected Avg Annual Entry-Level Median Minimum Education Occupation’s Annual New Total Jobs Annual Annual Level Jobs in the Tech Jobs Available (in- Earnings Earnings Tech Sector, cluding New 2007 and Vacant Jobs) Engineers and Architects Architects, except landscape 524 599 606 70% 2 23 $32,614 $59,051 Bachelor’s degree and naval Electrical engineers 567 319 372 43% 5 30 $22,755 $76,752 Bachelor’s degree

Source: Economic Modeling Specialists, Inc. • 4/07

required to effectively sell a firm’s goods of managers. Combined, these four Administrative Support Occupations or services. While federal statistics occupations employed nearly 1,900 Last year, nearly 2,000 workers were suggest these jobs require about six workers last year in the technology employed in administrative support to 12 months of training, in reality, sector, representing just 5 percent of positions in the technology sector, companies indicate that they prefer all workers in these occupations across comprising 5 percent of all workers candidates that have at least two years of the state’s economy. In general, chief in these occupations across the state. postsecondary education, and frequently executives and general operations These jobs include general office clerks, may require a bachelor’s degree when managers must have a bachelor’s administrative assistants, secretaries, interviewing job candidates. Figure and data entry keyers. While firms in 29 highlights these occupations A key component for developing the technology sector added 347 jobs employment and wage trends and the Hawaii’s technology sector will be during the past five years, growth is minimum educational requirements. the emergence of a deeper pool of expected to slow to about 31 new professionals who have extensive jobs annually. The slowdown can be General Business and Office knowledge of both the business and attributed primarily to an expected Personnel science of their industry. decline in the required number of data Like many other growing industry entry keyers as technology continues to sectors, the technology sector also has degree with some experience. First-line transform administrative occupations. a significant demand for managers, supervisors of office personnel and other For many of these occupations, the supervisors, administrative personnel, managers tend to gain their positions jobs are available to high school and bookkeepers. A key component through work experience and may graduates with about one month to for developing Hawaii’s technology not always need a four-year degree to a year of training. Minimum training sector will be the emergence of a succeed. requirements for general office clerk deeper pool of professionals who have extensive knowledge of both Between 2002 and 2007, technology companies created about 182 new Across Hawaii, an estimated 9,300 the business and science of their business management positions will jobs for business managers. During the industry. As a result, these non-STEM need to be filled annually during the occupations cannot be overlooked. next decade, the Hawaii economy is coming decade, of which 596 will be Figure 30 provides data on the expected to create about 340 new jobs open in the technology sector. employment, wage and educational annually for business managers. Of that requirements for the key occupations total, about 22 new jobs are expected jobs can often be one month or less. related to business management, to be created in the technology sector. Technology companies are competing administrative support, and financial Including new and vacant jobs, the for administrative personnel workers management. number of opportunities for business managers is likely to total 9,300 annually in a much larger, statewide job market Business Management Occupations for the entire Hawaii economy during that is expected to create about 670 Business management personnel the next decade. Of those jobs, jobs per year during the next decade. in greatest demand include chief about 596 new and vacant positions Financial Management Occupations executives, operations mangers, first- are expected to be available in the Financial management personnel line supervisors, as well as other types technology sector. Figure 29: Key Technology Sales and Service Occupations within Hawaii’s Technology Industries

Description 2002 Jobs 2007 Jobs 2012 Jobs % of the Projected Avg Annual Entry-Level Median Minimum occupation’s Annual New total jobs annual annual Education Level jobS in the Tech Jobs available earnings Earnings tech sector, (incl. new and 2007 vacant jobs) Technology Sales and Services Representatives Customer service 426 508 560 7% 37 413 $20,467 $32,573 Moderate-term OJT representatives Sales representatives, 272 322 346 12% 191 33 $20,030 $43,742 Moderate-term OJT services, all others

Source: Economic Modeling Specialists, Inc. • 4/07

include accountants and bookkeepers. assortment of programs designed to agricultural and natural resources, life Representing about 3 percent of provide educational opportunities sciences, and physical sciences. These total employment, the technology for those interested in pursuing the degree programs are particularly sector employed 619 accountants careers identified in information and important to ensuring that technology and bookkeepers in 2007, adding computer technologies, engineering, companies have the skilled employees about 109 new positions since 2002. earth and ocean sciences, life sciences, they need, especially the key business Combined, tech companies expect and many other high demand fields. management and technical personnel to create 18 new accountant and This section taps data on degree required to lead technology companies. bookkeeper positions annually during program enrollment and completions Business and Office Management the next decade. But, each year, these to assess how well existing educational companies will need to fill an estimated infrastructure is positioned to deliver While not strictly tied to technology 306 bookkeeper vacancies and 211 required postsecondary degree and innovation, the business accountant vacancies (in total, new and programs in the most relevant administration and management replacement positions). Accountants, academic disciplines. 37 disciplines are particularly important of course, require a bachelor’s degree to a cluster of technology industries Based on the specific needs identified while bookkeepers require moderate- that are by definition relatively in the technology sector, this section term, on-the-job training in the financial small and entrepreneurial. Certainly, examines the degree programs and management field. the success of much of Hawaii’s completions from programs such as technology economy relies directly on business management, information Education Programs Most the business process—the effective Relevant to Hawaii’s Tech and communications technology, management of product development, Industry architecture and engineering, the efficient implementation of Much work is already underway to 37. Data was obtained from the National Center process improvements, and the critical prepare the next generation of workers on Education Statistics, Integrated Postsecondary management decisions associated for the needs of key technology Education Data System as reported by universities and community colleges. This data with organizing work and identifying industries. The state’s community is not exhaustive, but is thought to provide a commercial opportunities. Also, there colleges and universities have a wide representative sample.

Figure 30: Key General Business and Office Occupations within Hawaii’s Technology Industries

Description 2002 Jobs 2007 Jobs 2012 Jobs % of the Projected Avg Annual Entry-Level Median Minimum occupation’s Annual total jobs annual annual Education Level job in the New Tech available earnings Earnings tech sector, Jobs (incl. new 2007 and vacant jobs) General Business & Office Personnel Management (Subtotal) 1,098 1,334 1,568 6% 22 596 $35,052 $73,656 General & operations 439 541 653 6% 4 278 $42,349 $82,805 Degree plus work managers experience Managers, all other 362 424 509 6% 12 74 $30,035 $67,579 Work experience in a related field Chief executives 297 369 406 8% 6 144 $30,118 $67,226 Degree plus work experience Administrative support 1,623 1,960 2,319 5% 31 1,142 $20,810 $31,772 Office clerks, general 548 648 740 4% 15 527 $15,392 $23,442 Short-term OJT Executive secretaries & admin- 291 352 400 6% 8 176 $27,310 $40,539 Moderate-term OJT istrative assistants Secretaries, except legal, 284 350 438 4% 0 160 $20,800 $32,989 Moderate-term OJT medical, and executive First-line supervisors/manag- 280 328 365 4% 6 244 $26,686 $42,411 Work experience in a ers of office and administra- related field tive support workers Source: Economic Modeling Specialists, Inc. • 4/07

is a growing need for business leaders Computing and Information There is a growing need for Technologies to have a sound understanding of business leaders to have a sound key technologies and the innovation understanding of key technologies The defense/aerospace and the process, especially among the executives and the innovation process, information and communication and managers of tech companies. especially among the executives and technology commercial markets rely Since many of the most significant managers of tech companies. heavily on the technical competencies career opportunities in technology and of thousands of information innovation relate directly to business graduates from Hawaii Pacific University technology workers. Hawaii’s management roles, it is appropriate (HPU) and 68 from the University of higher education institutions have to incorporate a review of those Phoenix. At the master’s level, another implemented a number of computer educational programs in this analysis. 375 degrees were awarded in 2006. sciences, information technology, and As illustrated in Figure 31, Hawaii’s Among the largest advanced degree information management degree higher education institutions had business-related programs, UH Manoa’s programs in response to this and a 399 new graduates from business program in business administration broader need for these workers. administration, commerce, and related graduated 158 students and the Hawaii Degree programs are available at baccalaureate degree programs in 2006. Pacific University program in business/ all levels, but many of the largest These students graduated from several commerce graduated 178 in 2006. In programs are designed to provide relevant programs. Among the largest addition, UH Manoa also graduated four-year baccalaureate degrees. degree-granting baccalaureate-level 52 candidates from its Management Hawaii’s higher education institutions business degree programs were those Information Systems program in 2006, offer eight different but related at the University of Hawaii Manoa, reflecting the close ties between bachelor’s degree programs in West Oahu, and Hilo campuses (with information technology and business information sciences and related a combined total of 188 graduates in management in today’s economy. These disciplines. All total, in 2006, these 2006).38 Added to that total were 86 are the target business school programs programs graduated 286 students 38. Source: Data are from the National Center on that policy makers might wish to with baccalaureate degrees in Education Statistics as reported by EMSI. EMSI has influence to ensure that business leaders created a matrix of occupations related to each computer and information sciences, Classification of Instructional Program (CIP) code. are ready to succeed in technology- management information sciences, This matrix was created using data reported to intensive industries. and information technology. Brigham O*Net—an online database of occupations and curriculum programs data. Young University-Hawaii conferred the most degrees in any one program—44 bachelor’s degrees in Figure 31: Business and Office Management information sciences in 2006 followed by UH Manoa and HPU, which both Award if at least 1, but less than 2 academic years 2 graduated 40 students. In addition,

Associate’s degree 8 three more baccalaureate degree programs graduated students in Bachelor’s degree 26 management information systems. UH Business/Commerce, General Master’s degree 178 Manoa graduated 52 students from Award if at least 1, but less than 2 academic years 1 that program while HPU graduated 38

Associate’s degree 102 in 2006.

Admin & Mgmt. General Bachelor’s degree 370 At the master’s or higher degree level, the state’s higher education institutions Master’s degree 196 Business conferred 60 degrees to graduates Bachelor’s degree 3 Op. Mgmt.

from three different computer Associate’s degree 1 and information or management Master’s degree 1 information science programs in 2006. E-Commerce 0 50 100 150 200 250 300 350 The largest, at HPU, graduated 39 Number of Graduates, 2006 information sciences master’s students

in 2006. The University of Phoenix are employed in industries outside particularly large, but most degrees graduated 10 MIS students in 2006. Hawaii’s technology industries. In 2006, granted are baccalaureates and master’s UH conferred 62 baccalaureate and in zoology and microbiology. In 2006, Also in 2006, Hawaii institutions 16 master’s degrees to electrical and the university granted six doctoral conferred 194 associate-level degrees electronics engineering candidates. degrees in zoology, one in entomology, in 12 different programs in computer and one in human genetics. Meanwhile, and information technologies. These While occupational demand suggests riding the popularity of several television programs ranged from computer that the state may require only a series and movies, the forensic sciences and information science to Web few new architects in the coming have grown rapidly in many states. Not management. Heald College in decade, the number of programs surprisingly then, the UH graduated Honolulu graduated 80 students available in the state are quite small. almost as many forensic sciences in its computer and information Nine doctoral students in architecture students as zoology despite the fact that sciences-related programs. Honolulu graduated from UH in 2006 and only a few new jobs are created in the Community College had 27 graduates none at the baccalaureate or masters’ field each year. from its computer electronics and level. Honolulu Community College network technologies program. graduated 12 students from its Remington College and HPU had architectural computer-aided design Physical Sciences more than 20 graduates each in their (CAD) program and three others earned Hawaii’s unique geography and geology computer sciences programs. Kapiolani certificates in CAD. have driven interest in earth, ocean, and Community College also graduated space sciences research. Certainly, the 18 students from its information Life Sciences proximity to international observatories technology program. All of these and volcanic activity has helped to Hawaii’s life sciences industries will programs—from associate’s to master’s increase interest in many physical rely on graduates from a number of degree levels—will be critical in sciences, especially on Hawaii island. degree programs related to biology meeting the state’s rapidly growing All total, in 2006, Hawaii universities and biomedicine. Besides a small need for information technology graduated 75 baccalaureate degrees biochemistry major at Brigham Young workers. in the physical sciences—astronomy, University-Hawaii, all of the graduates of meteorology, geology, earth sciences, related programs earned their degrees oceanography, chemistry, and physics. Architecture and Engineering from UH. None of the programs are The state’s higher education institutions Engineers are critical requirements for tech companies. While the number Figure 32: Information and Communications Technology Programs of new engineering jobs created is relatively small, this pattern does not Award of less than 1 academic year 28 fully recognize that most successful engineers move from their first careers Award if at least 1, but less than 2 academic years 1 into project and business management and Info Sci. Associate's degree 166 tracks, leaving their former engineering Bachelor's degree 164 Master's degree 50 jobs vacant to be filled by the next Computer Networks, Electronics generation of trained engineers. Doctoral degree 1 Furthermore, newly minted engineers Associate's degree 1 typically operate as technicians at the Bachelor's degree 97 Mgmt. Info Master's degree 10

entry level, frequently developing the Systems, General Award of at least 1, but less than 2 academic years 2 expertise required to succeed through Associate's degree 21 on-the-job experience. The key issue Tech

Information Bachelor's degree 25 may be that, increasingly, engineers

Proc. Award of less than 1 academic year 16 require multidisciplinary engineering Data eb Associate's degree 6 W Mgmt. backgrounds that link electronics, 0 20 40 60 80 100 120 140 160 180 computing, and systems integration. Furthermore, many of these individuals

conferred 31 master’s degrees and 15 Figure 33: Architecture and Engineering doctoral degrees in these fields.

Astronomy and geology are particularly Award if at least 1, but less than 2 academic years 3 popular majors for baccalaureate Associate's degree 12 degrees conferred by the University of Hawaii in Hilo. In addition, Hawaii Pacific Bachelor's degree 0 University offers a baccalaureate degree Architecture Master's degree 0 in oceanography that eight majors completed in 2006. That same year, UH Doctoral degree 9 also conferred 10 new master’s degrees Bachelor's degree 62 in oceanography. These programs, combined with UH doctoral research in Master's degree 16

astronomy, geology, and oceanography anf Comm. Eng. Doctoral degree 5 will be particularly important sources Electrical, Electronics of talent for emerging technology and 0 10 20 30 40 50 60 Number of Graduates, 2006 innovation sectors in Hawaii.

Gaps and Opportunities not those required in all other parts of computer-related occupations that the economy.) The great majority of require a baccalaureate degree or This analysis focuses on key gaps these jobs require baccalaureate degrees higher in a related discipline. Those jobs and opportunities among the largest or higher, but the state’s institutions include programming, systems analysis, occupations. About half of the state’s graduated only 566 persons in 2006 software engineering, as well as network technology workforce was employed in related business management and administration and analysis. In 2006, 286 among its 23 largest occupations in finance fields. This suggests a potentially graduates earned degrees in computing, 2007. Those include management severe shortage of workers, especially management information systems, analysts, postsecondary researchers among those with four-year degrees and information technology, leaving a and teachers, a number of computer- and combined business and science shortage of at least 15 graduates to fill related occupations, engineers and backgrounds. the needs of tech companies—let alone architects, technology sales and service the needs of the rest of the economy. representatives, general business and Technology industry companies are Meanwhile, tech companies will need office personnel, as well as financial expected to require 301 new and about 128 new and replacement management workers. Many of these replacement workers in a variety of computer support and related specialists occupations require four-year degrees, but quite a few, including careers in Figure 34: Biological and Biomedical computing and business-related fields, can be accomplished with an associate’s Bachelor’s degree 8 or postsecondary career certification. Biomed Master’s degree 8 Biochem & ,

Almost all of these jobs, however, do Bachelor’s degree 13 require at least a high school degree. General Master’s degree 11 Microbiology

Bachelor’s degree 17

As an example of the gaps developing Master’s degree 10 in certain of these occupations, the Biology

Zoology/Animal Doctoral degree 6

fastest growing technology industry occupations will need about 751 Master’s degree 1 Doctoral degree 1 new persons each year to fill jobs as Entomology Master’s degree 4 management analysts, operations Human

Genomics Doctoral degree 1 managers, chief executives, and Physiology & Award of less than 1 academic year 6 ch Te accountants during the next decade. & 15 Forensic Sci.

(This number reflects only those 0 2 4 6 8 10 12 14 16 18 required for the technology industry, Number of Graduates, 2006

each year during the next decade. This offered through the state university and the total gap, but even without this represents only about 30 percent of community college systems.39 In fact, data, it is clear that there are growing the state’s total need, yet about 193 the state’s private universities appear gaps in several key areas—business people graduated from these programs to provide very few programs in the management, computer-related in 2006. This suggests that many more life or physical sciences, resulting in no occupations, and engineering, to name associate-level candidates (perhaps as graduates reported with specializations a few. many as 230 annually) are needed as in these disciplines. Certainly, the private To address these shortages, it will be well to meet industry needs. universities (such as Hawaii Pacific necessary to expand specific degree University and Chaminade University) In examining the gaps in engineering programs in areas related to business are making important contributions occupations, UH graduated a management, computing, and to helping the state meet its needs combined 88 new engineers (from its engineering, but this alone may not for workers by offering a wide array baccalaureate and advanced degree be sufficient to address the challenges of business management and finance programs) in 2006. At the same time, ahead, because many colleges and programs, but few appear to specialize all of the state’s companies and universities maintain that they cannot in integrating STEM knowledge as government entities (including those find students who are interested in and part of their business programs. It is outside the technology sector) annually adequately prepared for the technology unlikely that business graduates with need about 70 new engineers (and industry or related STEM careers. One way limited exposure to the STEM disciplines another 23 civil engineers) to fill just the to overcome this challenge is to better would fill the rapidly growing demand projected new jobs. Combined with integrate STEM education with other for workers in science and technology existing jobs, Hawaii may need as many academic disciplines, even those that did companies. as 150 new engineers to fill available not traditionally require such a technical job vacancies. Even assuming none of The demand for these and other education, including business and the current graduates leave the state to STEM workers in Hawaii is expected management degrees. Because the state’s find jobs (an unlikely possibility), Hawaii to continue rising. A more detailed private higher education institutions companies will have a gap of 60 new analysis of the state’s workforce (beyond are so important in helping to meet engineers that they must find from the scope of this report) would reveal the state’s need for more business and the Mainland each year to meet their management talent, these institutions workforce needs. 39. Data was obtained from the National Center must also be included in any statewide on Education Statistics, Integrated Postsecondary strategic effort to prepare the state’s next Almost all of the science and Education Data System, as reported by generation of science and technology technology programs are being universities and community colleges. This data is not exhaustive, but is thought to provide a workers. representative sample.

Figure 35: Physical Sciences

Bachelor’s degree 15 Master’s degree 6

Astronomy Doctoral degree 1 Bachelor’s degree 3 Master’s degree 1

Meteorology Doctoral degree 4

Bachelor’s degree 16 Master’s degree 8

Sci, General Doctoral degree 5 Geology/Earth , Bachelor’s degree 8 Master’s degree 10 Physical

Chemical & Doctoral degree 3 Oceanography

Bachelor’s degree 24 Master’s degree 2 Gen'l

Chemistr y, Doctoral degree 1 Bachelor’s degree 8 Master’s degree 4 Doctoral degree 1 Physics, Gen'l

0 5 10 15 20 25 30 Number of Graduates, 2006

55 Implications for Policy for Policy

Key Findings What is Unique about Tech Hawaii companies may need to consider In 2007, the Hawaii technology sectors Sectors in Hawaii? how they might work together as contributed about $3 billion to the Hawaii’s 1,900 private-sector technology collaborative networks to create the state’s economy or roughly 5 percent firms pose a particularly difficult challenge kind of presence and infrastructure to of the state’s $61 billion economy. for this kind of analysis, because so many compete for these global markets. Overall, Hawaii’s science and technology firms operate in many different industries companies and government entities and participate in a variety of value What Does the Technology generated a total of approximately chains. There are several reasons for Sector do for the State? 31,106 jobs, or 3.6 percent of the this diversity of interest among Hawaii Hawaii has a small, but important state’s employment. Private-sector tech companies. First, small technology technology sector. Relative to the rest technology-intensive businesses companies are often still in the midst of of the U.S., Hawaii does not have a generated about 23,985 jobs—a figure identifying their nich, so they tend to technology-intensive economy. While representing almost 77 percent of the operate in multiple markets, searching for 3.6 percent of all workers in Hawaii are state’s technology activity. Another 7,121 the most effective way to sell their goods employed in the state’s technology workers worked in the public-sector or services. sectors, 4.6 percent of U.S. workers are reflecting the large impact from the Many of the emerging technology employed in those same industries federal government and the UH system. companies in Hawaii are quite small and nationally. However, technology-related In 2007, these jobs had average annual the breadth of these firms’ activities can activities in the state are growing at a earnings of $63,623—a figure about be broad, since only a few companies rapid pace. Hawaii’s technology sector 38 percent higher than the state may operate in any particular market (including public- and private-sector average. That pay differential translated space. At this stage of the technology employees) grew at an annual rate of into roughly $1,500 per month in economy’s development, many of these 2.9 percent between 2002 and 2007. added benefits and wages above the companies have not yet matured (in an This outpaced the U.S. growth rate of 2.3 earnings of the average Hawaii worker. economic sense) sufficiently to specialize percent for these same industries. Hawaii’s Furthermore, those private-sector in a particular product or service line. This private tech companies did particularly companies generated an additional $2 is due in no small part to the limited size well between 2002 and 2007 and added billion of indirect economic activity in of Hawaii as a technology marketplace. jobs at a rate of 3.3 percent annually. By the form of purchases from suppliers Companies serving only the market comparison, the U.S. private-sector added and the goods and services consumed in Hawaii must be “jacks of all trades” jobs at a rate of 1.8 percent annually by technology company employees. to succeed. Even the largest Hawaii during the same period. These workers created sufficient technology companies tend to operate in The sector contributed significantly to economic activity to support more multiple, overlapping market segments. per capita income growth in the state. than 20,000 workers in other parts of However, the limited number of larger Although workers in the technology the economy. This suggests that the businesses suggests that only a very few sectors accounted for 3.6 percent of total technology sector has linkages well companies have developed the depth of employment in 2007, they generated beyond the core activities—impacting experience or expertise to compete on a 5.4 percent ($2.1 billion) of Hawaii’s total almost every other part of the economy. national or global scale. earnings. While the state has a relatively Furthermore, these industries are easy time attracting postsecondary The preponderance of small growing much more rapidly than the students, it also has a relatively difficult rest of the state’s economy and much companies suggests that only a very few have developed the depth of time retaining knowledge workers. of that growth is being driven by the experience or expertise to compete According to a recent study, the state entrepreneurial efforts of the state’s on a national or global scale. loses a net of 15 percent of its associate- small, emerging private technology degree holders and breaks even in companies. retaining bachelor’s-degree candidates. 40 Because many are so young, it is still unclear whether Hawaii-based 40. NCHEMS, “Investment in State Post-Secondary technology companies will develop to Education: Hawaii,” September 2007. Data is from 2001 to 2003 and from the 5 percent Public Use an extent that they can serve national Microdata Samples (PUMS) produced from the and global markets. In the short term, 2000 Census.

56 Implications for Policy

benefits than larger ones. In Hawaii, the companies are disinterested in exporting Statewide, Hawaii’s workers average technology firm—with 15.8 opportunities. A few export successes can earn about 94 percent of the U.S. employees—had about two-thirds the be found in Hawaii—companies seeking average, but the state’s private- workers of an average Hawaii firm. increased sales, licensing opportunities, sector technology workers earn 72 contracts beyond the state, or closer percent of the U.S. average for the At the same time, many Hawaii ties to larger Mainland corporations. same industries. technology companies prefer to However, many of these companies (or remain small. Some suggest that local corporate offices) still rely heavily on One important reason is that the state’s many companies intentionally do not serving the Hawaii market first. technology workers earn less than their seek market opportunities outside counterparts on the Mainland. Statewide, Hawaii because they prefer the lifestyle Taking advantage of these other market Hawaii’s workers earned about 94 percent associated with a smaller enterprise. Only opportunities will be vital to efforts of the U.S. average for all workers in a very few technology companies look aimed at minimizing the threat posed 2007, but the state’s technology workers outside the state for growth prospects. by any potential reduction in defense earned 77 percent of the U.S. average. Some maintain that their relative isolation spending in Hawaii. In 2007, the Defense This disparity was even greater for private- from the Mainland or Asia inhibits Department contracted with companies sector technology workers, who earned access to those markets. With a limited to provide $2.13 billion in goods and 72 percent of the U.S. average for the number of competitors, local companies services in Hawaii, representing 3.5 same industries. in some specialty areas do not need percent of the state’s gross domestic to aggressively compete for business. product. This amount also represented What Impedes the Sector’s Although there are exceptions, many an 11 percent increase in procurement Growth? companies in the technology sector tend from 2006 and a 25 percent increase to react to local needs but are seldom from 2004. With such a high rate of Hawaii firms often experience difficulty proactive in identifying and pursuing growth, it is easy to become dependent retaining skilled workers, particularly opportunities that may have global on Defense Department spending. those from the Mainland. As noted Should federal policy priorities shift above, wage differences are an important Hawaii companies may need to and defense spending decline in the reason, but that difference is further consider how they might work state, the economy could be severely exacerbated when Hawaii’s relatively together as collaborative networks impacted and the technology sector high cost of living is taken into account. to create the kind of presence and could be particularly hard hit. Lessening This difference could be explained—to infrastructure to compete for global this dependence will be easiest during some degree—by Hawaii’s relative market share. periods in which the national and state concentration of technology industries. economies are growing. In addition to For instance, sectors such as ocean growth implications for their firms. This defense-related activities, the state has sciences and agricultural biotech are local focus also tends to create a natural developed small niches in technology relatively lower-paying technology ceiling on the size to which Hawaii tech areas due in no small part to its unique sectors, but those sectors are more companies potentially grow employment. location, climate, and society. For instance, important in Hawaii than they are in Certainly, many of the technology the state has developed a cluster of other parts of the U.S. However, the pay challenges that Hawaii companies are companies in astronomy, renewable disparity holds through most of the exploring exist outside the state—such energy, and ocean sciences that has technology-intensive industries, with as finding alternative energy sources, evolved due to the Islands’ relative the possible exception of professional, addressing environmental remediation isolation from the rest of the world as well technical, and engineering services. needs, or developing customized as its unique geography and geology. In this one industry, the pay is nearly computing or networking solutions to at parity with the national average for Many suggest, however, that this same meet military needs. However, it seems engineering/professional services. tradition has impeded growth of the that few local companies have identified state’s technology sectors. Bottlenecks One reason for the pay disparity is how to pursue growth opportunities result during the land-use planning that Hawaii has more small firms as a outside the state. Fewer still have process and frequently they occur due proportion of all companies. Smaller firms successfully and effectively developed to a lack of clarity or transparency in the tend to offer lower wages and fewer outside markets. This is not to say that

57 Implications for Policy

development process. At the same time, culture will be critical as Hawaii’s as well as engineering. These rapidly inadequately structured development technology economy emerges as an growing occupations all require a approval processes make it difficult for increasingly instrumental part of the minimum four-year degree, often in a companies or investors to understand state’s future. STEM-related academic discipline. These with certainty whether or how long it occupations tend to offer wages and will take for state or local approvals to How Do the Neighbor Islands earnings that are well above average. occur. That said, Hawaii’s strengths in Participate in the Technology Shortages are likely to exist in the certain technology areas are also due Economy? number of new graduates from doctoral in part to its unique society. Whereas While about 28 percent of all workers programs in STEM-related fields, from many parts of the world rely on public were employed on the Neighbor baccalaureate and advanced physical regulatory policy to help drive markets, Islands last year, only 17 percent of all and life sciences degree programs, Hawaii can tap both its remoteness technology-related jobs were located as well as business degrees with as well as its societal respect for the there. Also, about 6 percent of public- supplementary background in STEM- land and sea as sources for driving sector technology-related jobs were related disciplines. In addition, there is a niche developments in environmental found on Hawaii, Maui, and Kauai documented shortage in the computer remediation and renewable energy combined. The Defense Department sciences for information technology resources. represents fully half of the state’s public professionals, especially those with baccalaureate degrees. In part, this lack of structure or clarity technology sector and that agency has is also directly tied to reticence concentrated the lion’s share of those Other jobs available do not necessarily among some in Hawaii about whether scientists, researchers, and engineers on require a four-year degree, but they technological change reflects true Oahu. Furthermore, defense procurement do demand knowledge and abilities human progress. As one interviewee also drives a significant portion of the involving STEM-related disciplines noted, “The host culture of Hawaii private-sector technology activity on often acquired in postsecondary career through the ages has been in the the island. In 2007, $1.924 billion (or 90 and technical education institutions. forefront of technological advancement percent of DOD procurement activity) in For instance, many technical sales for the land and people’s benefit. Hawaii occurred on Oahu. representative or customer service The wayfarer, the discoverer, the Even so, Hawaii and Maui Counties each managerial positions demand familiarity navigator, the healer, and the farmer accounted for about 1,900 technology- with STEM subjects. Successful were all intricate disciplines of society. related jobs and Kauai had another incumbents in these careers must Likewise, the land management 1,000 jobs in technology industries in understand and anticipate customer system—ahupuaa—made sure that 2007. Certainly, the astronomy-related needs and be able to identify potential all people from the mountains, forests, activities are important to the islands of technological solutions. That’s why these rivers, streams, deserts, and ocean Hawaii and Maui and defense-related occupations tend to pay relatively well, were providing for one another. The activities are critically important to Maui especially when compared to sales and Hawaiians were also fast to adapt, and Kauai. Even though these public service jobs in other industries. incorporating new language and the investments are relatively smaller on the Other jobs are more related to general written word.” In addition, it was noted Neighbor Islands, they still represent business management—especially that, in the 1880s, Hawaii was the most the nucleus around which technology targeted to entrepreneurial businesses literate nation in the world, and King activities are occurring there. in the technology areas. In those David Kalakaua had electricity installed companies, even fast-growing at Iolani palace before the White House. occupations in management, The king also asked Thomas Edison What Kinds of Jobs Are Being Created in the Technology administration, and finance require to explore ways to power Oahu with Economy? an understanding of the company’s geothermal energy from the volcano The state’s technology companies products and services and the unique on Hawaii Island. Understanding this are creating jobs in a number of key issues facing small technology perspective and aligning the goals of occupations, including management businesses. These business-related technology growth and development analysis (i.e., consultants), computer occupations also require successful with the ideals of Hawaii’s traditional networking and systems programming, workers to have a strong knowledge of, and familiarity with, the STEM disciplines.

58 Recommendations Recommendations

In synthesizing the findings of this and innovation among all Hawaii OTEC, etc.) license those technologies report into a cogent set of key firms. An integral part of this strategic to firms in other regions where they recommendations, it is notable that planning process should be the have commercial potential. the state’s relatively small science and validation of appropriate benchmark technology base has the potential indicators (developed from among the 3. Support existing trade and to become a significant player in metrics DBEDT has already identified as professional group efforts to driving the state’s economic future. well as others that reflect the concerns develop cluster networks that For Hawaii, the sector has depended and interests of key stakeholders). The support the key technology in no small part on public-sector purpose of tracking these indicators is market segments. investment, particularly federal to help guide strategy development Increasingly, companies will learn more resources. Consequently, future success as well as provide a mechanism for about market opportunities or potential 41 will likely rely on the state’s ability to tracking economic progress. partners to meet market needs leverage those federal R&D dollars through their relationships with other 2. Diversify the state’s technology in combination with an increasingly firms. The state has a number of small base by encouraging private knowledge- and information-driven industry networks designed to share investment in non-defense private-sector interest in science, information, but those nascent groups activities and by increasing technology, engineering, and math. require further support to realize their local commercialization of full potential. These networking groups This report provides a baseline of technology developed with DOD could help to bring together smaller Hawaii’s technology economy, profiles funding. its scope, depth, and important Hawaii companies to form collaborative characteristics, and identifies issues Defense-related spending has been arrangements that would allow them and challenges in facilitating its growth a significant stimulus to techsector to better compete with larger Mainland and development. The following growth in Hawaii, but if federal companies for federal contracts and recommendations are designed to funding decreases significantly an in private markets. In addition, these address some of those issues, but it overdependence on defense spending interrelationships are likely to result is not anticipated that they will be could prove problematic. Dual-use in more creative uses of existing comprehensive. Indeed, they should be strategies aim to help companies find technologies. commercial application and markets placed within the context of a strategic The state should begin to examine the for defense-related technologies, but a plan approach to fostering technology technology partnership networks— true diversification effort goes beyond as an integral element in the state’s focused on certain industries or clusters this strategy. Taken alone, a “dual-use” future economic growth. in which the state has a competitive strategy would focus on “technology advantage. One exemplary program 1. Develop and implement a push” efforts—finding market being implemented in Pennsylvania strategic plan, then monitor opportunities for existing products or supports local efforts to create “industry progress in achieving greater services. However, a balanced effort to partnerships” focused in selected development of technology diversify the economy would also use industry sectors. The Pennsylvania and innovation in the state, in a “technology pull” approach—finding networks are not tied to technology collaboration with private- and market opportunities and then sectors, but are focused on “organically public-sector stakeholders. developing or deploying technologies developing” groups of companies that to meet those needs. Those market The plan developed for Hawaii should come together to address common opportunities certainly may exist in review baseline information about the problems. Hawaii, but they also may be found technology economy presented in this anywhere in the world. For instance, In this proposed initiative, these and other reports with stakeholders, Hawaii-based firms that are developing partnerships would facilitate greater examine their concerns and create a energy-related technologies (algae, interfirm interaction and market consensus on state priorities aimed at collaboration. These collaborations fostering stronger growth in technology 41. For more information on indicators please see Technical Appendix Measuring Innovation at http://www.HISciTech.org/Information.

59 Recommendations

could result in increased joint proposals cycle—from pre-commercialization to This is especially important for Hawaii for federal, state, and private-sector company formation and expansion. To companies or research consortia research and development. Efforts do so, the state’s technology programs seeking to compete in markets outside should also continue to be made to must respond more systematically. For the state, build on existing technology build formal mentoring networks for instance, entrepreneurs frequently need strengths, as well as diversify the state’s prospective technology entrepreneurs. access to pre-seed and seed capital to current research base. These networks should connect prove that their ideas have commercial entrepreneurs with experts in merit as well as mezzanine and venture 5. Design a comprehensive developing business plans, pursuing capital to support the growth that technology workforce retention risk capital, identifying potential market would allow them to bring those strategy to reduce turnover and opportunities, and marketing their ideas to market. Many leading states keep talent in Hawaii. products. also make substantial and consistent Hawaii residents benefit from the resources available to support R&D opportunity to explore academic and 4. Assist with the formation of assets that represent the source for career opportunities in other places, risk capital at all levels and many new innovations. but this often means that the state continued private-sector loses some of its most talented workers investment in technology and The state should use its resources to to the Mainland. Rather than trying to innovation. leverage both existing investments eliminate out-migration, Hawaii should and leadership available in the public In conducting the research for this focus on targeted efforts to retain the and private-sectors within a defined report, companies and policy makers most talented of these individuals as strategic framework that results in a alike frequently cited the importance well as reinforce its efforts to bring public benefit as well as private growth. of public policy efforts in influencing Hawaii-born talent home and work to The most successful strategies balance business investment decisions. While attract world-class scholars to the state. the proposed public-sector investments capital formation is not the focus of this with significant, high profile private- One element of this strategy should report, private-sector representatives sector participation. Engaging the focus on the state’s labor market. frequently noted the value of current expertise and perspectives of those This strategy should use multiple state programs but also implied that taking entrepreneurial risks is vital to approaches developed in collaboration many operated on an ad hoc basis. success so Hawaii must do whatever it with businesses, government, and As the private-sector increasingly can to increase collaboration among employees. First, company executives moves to the forefront as a key driver of the state’s small technology companies note that it is easy to attract talent in technology development in the state, as well as enhance industry/university part because Mainlanders view their existing state programs intended to partnership opportunities aimed time in Hawaii as part of an extended encourage private-sector investment at solving applied, market-relevant vacation; but ultimately, the vacation —in terms of direct assistance as well problems. ends. As Hawaii implements its talent as tax incentives—must produce ever recruitment efforts (including the By coordinating resources and filling greater outcomes. One way to achieve Kamaaina Come Home™ initiative), it identified gaps, Hawaii could offer this success is to better integrate will be important to develop a more additional seed grants and loans existing programs into a more cohesive thorough understanding of what to complement existing programs and strategic financing mechanism motivates those individuals who and leverage greater private-sector, designed to leverage resources, but are initially attracted to careers in federal, and/or university research this must be done in the context of Hawaii. For instance, many employers dollars. This would entail that the enhanced demand for transparency indicated that their most committed state implement an intentional, and accountability. workers were those that had a strong thoughtful, and transparent tax policy affinity for the sea and the surf. With In particular, state efforts to promote aimed at promoting capital formation additional research, it might be possible capital formation must effectively supplemented with dedicated to develop more detailed profiles of address the needs that entrepreneurs matching grants aimed at leveraging personal interests that match with what encounter during the development life private participation and investment. Hawaii has to offer.

60 Recommendations

Second, business leaders must become overall economy, and especially companies about their innovation more aware of the wage disparities the state’s growth opportunities activities (including process, product, between similar occupations offered in global technology value and organizational plans), business in Hawaii and on the Mainland. In chains. growth challenges, workforce issues, technology jobs, workers are much and relevant policy impediments. This This report provides an overview and more likely to explore national or global research may involve the development framework for analyzing the state’s opportunities, so Hawaii companies and of new primary data collection technology economy, but it raises agencies must recognize that wages activities focused on providing deeper many questions about the dynamics and benefits must compare favorably understanding of the innovation of the companies in those key with those offered on the Mainland. activities across the entire economy. technology sectors. The study identifies In emerging industries of particular several industries that are growing importance to the state’s future, the 7. Assess how well the state’s rapidly—including defense, computer state may even want to consider tax entire business incentive systems design, and research and benefits to state residents who work portfolio has fostered private- development—and market segments in certain in-demand (or “critical”) sector investment in technology, with potential for growth—including occupations as a preventive strategy innovation, and related value defense/aerospace, information designed to keep Hawaii residents from chains. technology, and engineering. However, leaving the island for better-paying jobs much more in-depth qualitative and Like any state investment strategy, elsewhere. quantitative analysis could help better the state should devote resources to Finally, one theme that was highlighted understand the core drivers in each promoting technology growth using a by a number of newcomers to Hawaii of these market segments and related variety of approaches—including tax was that, while the people in the state core industries. Furthermore, this would policy, equity investment tools, and are very tolerant and welcoming, also help to better understand key information-sharing initiatives. these newcomers felt that it is very linkages to other parts of the Hawaii To make the link between the state’s difficult to become a part of the local economy. economic progress and the success community. This may be a residual This research defines the linkages of its investments, the state should effect from Hawaii’s transient culture. (discussed at length in Technical conduct an evaluation of how well Certainly, with so many travelers Appendix 3: Value Chains, on www. Hawaii’s entire portfolio of state (tourists and military personnel alike), HISciTech.org/Information ), but it technology development programs— it is not surprising that the state would should also be used to inform Hawaii including all tax incentives as well as have a difficult time developing a sense companies about existing and potential economic development investment of place for so many newcomers, but market opportunities, especially related programs—are doing in influencing their talent will be critical to sustaining to dual use for defense technologies, business investments. a growing technology sector. Social licensing of renewable energy and professional networks can play a 8. Enhance workforce programs technologies, and custom computing crucial role in helping these new Hawaii designed both to increase solutions that Hawaii tech firms might residents to feel part of the community. internships with technology offer companies in its broader economy One way to help establish these ties companies and provide (such as travel and tourism) or to to the state is through the support of information about STEM careers. market niches on the Mainland and existing and emerging formal networks, internationally. The Hawaii Workforce Development in the form of young professional Council, the High Technology groups, technology councils, or similar Work has already begun to identify the Development Corp., the Hawaii Science organizations established to provide key core industries, including scientific & Technology Council, and other social and professional links among research and development, computing partners (including Kamehameha newcomers with residents who have services, engineering, information Schools, the S.T.E.M. Hawaii Project, established Hawaii ties. management services, and technical the Women in Technology Project consulting. The research agenda on Maui, and others) should build 6. Monitor the contribution of the should include gaining insights from state’s technology sector to the their collaborative efforts to create

61 Recommendations

a comprehensive technology career Development Council and DBEDT 10. Develop a community consensus- internship and information program should conduct an in-depth building process designed to designed to match small tech assessment of the existing university establish greater understanding companies with current and future and community college programs, among technology advocates workers interested in STEM careers. In partnering with industry to determine and the state’s traditional particular, the partners should identify how they respond to industry needs in business leadership. and help create paid and non-paid the state. This analysis would examine One recurring issue that was raised by internship opportunities within Hawaii all academic degrees, continuing technology company executives, policy companies that target high school, education, and outreach programs to makers, and citizen leaders alike was the community college, and university determine their pertinence to Hawaii’s ongoing tension between rapid change students interested in computing, economic future. A key element of and tradition in Hawaii. This is illustrated engineering, information management, this assessment would be to explore in the form of interminable approval and scientific research. The program how well the state’s postsecondary processes for planned developments as might provide a supplemental stipend institutions are preparing students well as resistance to the placement of to help subsidize the hourly wage for careers in the STEM disciplines. larger telescopes on Haleakala, Mauna benefits that companies offer. An important element of this analysis Kea, or Mauna Loa. It is also illustrated in would include an assessment of how In addition, a special program would the disinterest by many Hawaii citizens well the academic programs are also be created for incumbent workers in the opportunities available from encouraging multidisciplinary research (with special emphasis on those many technology-related occupations. and teaching as well as the integration working in lower-wage industries) to The effort would build an ongoing of STEM into all curricula, particularly help Hawaii residents go back to school line of communication and provide a those related to business management. as well as gain exposure in relevant structure for dialogue that respects the Furthermore, the study would explore business management, researcher, opinions of all parties and develops the career paths of graduates, especially technician, and sales careers. The appropriate compromises to move the from STEM-related disciplines, as well as programs would be developed in state forward. Tapping leaders with the business community’s perceptions close collaboration with key industry varied perspectives, this group would of the quality of graduates. In addition, networks and initially focus on careers be assigned the task of balancing the the analysis should explore the role in fast-growing technology industries. need to respect Hawaiian culture with that private postsecondary institutions Special emphasis would be placed the desire to encourage economic play in attracting students and helping on helping to build relationships with prosperity for all. The initiative would to retain the state’s existing workforce. students or companies located on the also involve developing customized Ultimately, this analysis should go Neighbor Islands. training for public-sector officials, beyond the university’s efforts to development professionals, company 9. Systematically examine how enhance its research credentials. It executives, and community leaders two-year and four-degree should address the question of: How on more transparent government programs at UH and the private well are the state’s postsecondary processes that would allow for universities can better meet institutions preparing people to innovative, balanced progress while industry needs and expand or manage and work in Hawaii’s emerging also protecting key Hawaii priorities of develop new programs to meet technology-intensive economy? sustainability and tradition. those needs. Furthermore, how well is Hawaii preparing that workforce to foster The University of Hawaii system in innovation in traditional industries? collaboration with the Workforce

62 References

Atkinson, R. and Wial, H. “Boosting Hawaii Science & Technology Council. 2007. Bureau Federation (HFBF) and funded by Productivity, Innovation, and Growth Hawaii Science & Technology Industry the Hawaii Crop Improvement Association Through a National Innovation Foundation,” Sector List. (HCIA). Brookings Metropolitan Policy Program, Hawaii Science & Technology Council. 2007. Maui Economic Development Board. 2005 April 2008, p. 4. Building a Science & Technology Workforce. Hawaii Tech Industry Report. Brown, Nina, Finn, Rachel, Robinson, Rachel, Hawaii Science & Technology Council— National Center for Higher Education and Salsbery, Meredith. 2008. Diagnosis Information Center, 2008. Management Systems. 2007. Higher Draft: Hawaii’s Renewable Energy Cluster. Education and the Future of Hawaii. Hawaii Science & Technology Council, Department of Taxation State of Hawaii Presented to the Hawaii SB 1931 Work Hawaii Science & Technology Institute, 2007. Report on the Operations of Qualified Group. Industry Directory, www.HISciTech.org/ High Technology Businesses from 2002 Directory. Neumark, D., Wall, B., and Zhang, J. “Do Small Through 2006. Businesses Create More Jobs? New Evidence Hawaii Science & Technology Institute Board Enterprise Honolulu. 2005. A Strategic Plan from the National Establishment Time Series,” of Directors Meeting Minutes, March 7, 2008. for Hawaii’s Defense & Dual-use Tech Sector: NBER Working Paper No. 13818, Cambridge, A potential multibillion-dollar-high-tech County of Kauai Office of Economic Massachusetts, 2008. industry cluster for Hawaii. Presented at Development and Kauai Economic NCHEMS, “Investment in State Post- TechEnterprise 2005, June 14, 2005, Hilton Development Board, “Kauai’s Comprehensive Secondary Education: Hawaii,” September Hawaiian Village. Economic Development Strategy (CEDS) 2007. Data is from 2001 to 2003 and from Report, 2005-2015.” Gov. Linda Lingle’s State of the State the 5 percent Public Use Microdata Samples Address, January 22, 2008. Kauai Economic Development Board. (PUMS) produced from the 2000 Census. Strategic Plan, 2006-2011. Growing the Nation’s Bioscience Sector: Research Corporation of the University of State Bioscience Initiatives 2006. Lingle-Aiona Administration. 2007 Initiatives: Hawaii. Annual Report 2007. The Future Begins Today. Hammes, David. 2007. The Contribution Rota, Michael. 2007. An Inconvenient Reality: of the University of Hawaii to Hawaii’s LMI Government Consulting, “Transforming Workforce Preparation Challenges Facing Economy in 2006. University of Hawaii at the Way DOD Looks at Energy: An Approach Hawaii. Hilo, Department of Economics. to Establishing an Energy Strategy,” Report Science Technology Engineering and FT602T1, April 2007. Hawaii Institute for Public Affairs. 2008. A Mathematics (STEM) Leadership Conference: Strategic Plan for the Dual-Use Technology Loudat, T. and P. Kasturi. May 2006. “Hawaii’s Building a Framework for Action. 2007. Sector in Hawaii. Seed Crop Industry: Growth, Current and Tapping America’s Potential: The Education Potential Economic and Fiscal Contributions.” Hawaii Institute for Public Affairs. 2008. for Innovation Initiative. 2005. Report commissioned by Hawaii Farm Venture Capital in Hawaii: An Assessment of Terrell, N. “STEM Occupations,” Occupational Market Opportunities. Outlook Quarterly, U.S. Bureau of Labor Hawaii Life Sciences Council. 2005. Hawaii’s Statistics, Spring 2007. Life Sciences Road Map: Competitive Opportunities in the Global Economy.

References 63 Appendix 1: Stakeholder Participants

We wish to thank all the participants of Renewable Energy • Rick Hess, National Defense Center the interviews and focus groups, including • Warren Bollmeier, Hawaii Renewable of Excellence for Research in Ocean those we were not able to list here, for Energy Alliance Sciences (CEROS) sharing their insights and contributing to • David Leonard, Imperium Renewables • Liz Corbin, Department of Business, this study. Hawaii Economic Development and Tourism • Mawae Morton, Hawaii BioEnergy LLC (DBEDT) Agricultural Biotechnology: • Barry Raleigh, HR BioPetroleum • Stephanie Whalen, Hawaii Agriculture • John Ray, SunFuels Hawaii Engineering/Professional Services Research Center (HARC) • Michael Kaleikini, Puna Geothermal • Rick Smith, Westin Solutions • Cindy Goldstein, Pioneer Hi-Bred Venture • Todd Barnes, Army Corp of Engineers International • Joelle Simonpietri, Kuehnle Agrosystems • Curt Leonard, Oceanit • Gary Karr (formerly with) Oceanic Institute Environmental Research, Education and • Paul Koehler, Monsanto • Matthew Neal, Element Environmental Commercialization • Selena Tarantino, ReUse Hawaii • Kevin Kelly, University of Hawaii System Astronomy • Robert Bourke, Oceanit • Vassilis Syrmos, University of Hawaii • Rolf-Peter Kudritzki, UH Institute for System Astronomy (IFA) • Gary Ostrander, University of Hawaii Film/Digital Media • Mark McGuffie, Hawaii Economic System • Rick Galindez, Galindez Tjioe Development Board • Michael Hamnett, Research Corporation • J.D. Armstrong, University of Hawaii, of the University of Hawaii Institute for Astronomy (IFA) Information/Communication • Alexander Shor and Paul Bienfang, Technology School of Ocean & Earth Science and Biotechnology/Life Sciences • Dale Aiello (Association of Information Technology (SOEST), University of Hawaii • Michael Coy, Cellular Bioengineering Inc. Technology Professionals) and Gartner • Jo-Ann Leong, Hawaii Institute of Marine • Bruce Stevenson, Pacific Health Research • Lou Darnell, Hawaii Telecommunications Biology, University of Hawaii Institute (PHRI) Association and ComTel Inc. • Peter Crouch, Dean, College of • Brad Perkins, Tissue Genesis Inc. • Alan Yamashiro (Project Management Engineering, University of Hawaii Institute) and Project Professionals LLC. • Elliot Parks, Hawaii Biotech Inc. • Michael Rota and Cheryl Chappell- • Todd Lawson, Akimeka LLC Long, University of Hawaii, Community • Lianne Yoshida, Maui High Performance Colleges Defense/Aerospace Computing Center (MHPCC) • John Chock, (formerly with) Hawaii • Rick Holasek, NovaSol • Norman Johnson, Referentia Systems Inc. Strategic Development Corp., State of • Chuck Jones, Booz Allen Hamilton Hawaii • Tim Dolan, Raytheon Co. Ocean Sciences • Mark Ritchie, Enterprise Honolulu • Larry Lieberman and David Brauer, • Michael Cahinhinan (formerly with) • James Gaines, University of Hawaii Referentia Systems Inc. Oceanic Imaging Consultants Inc. System • Robert Lytle, Boeing LTS, Maui

64 Appendix 733 Bishop Street, Suite 2950 • Honolulu, HI 96813 • Phone: 808.536.4670 • Fax: 808.536.4680 www.HISciTech.org

October 2008