2020 Vision: the South Dakota Science and Innovation Strategy

2020 Vision: The South Dakota Science and Innovation Strategy

SD EPSCoR REACH Committee April 2013

SD EPSCoR REACH Committee ______

David C. Link Thomas R. Loveland REACH Committee Chair USGS/EROS Executive Vice President Sanford Health Systems Gary Archamboult SBIR Coordinator Curt Hage Small Business Development Center REACH Committee Vice-Chair CEO, Home Federal Bank, Retired Mel Ustad Director of Commercialization James A. Rice SD Governor’s Office of Economic Development Executive Director, SD EPSCoR South Dakota State University Pat Lebrun SD Science & Technology Authority James W. Abbott President, University of South Dakota Melody Schopp SD Dept. of Education David Chicoine President, South Dakota State University Jason Dilges SD Bureau of Finance and Management Duane Hrncir Acting President, South Dakota School of Mines & Kirby Mellegard Technology Manager, Materials Testing, RESPEC

Laura Jenski Pat Costello Vice President for Research, USD SD Governor’s Office of Economic Development

Kevin Kephart Brad Wheeler Vice President for Research, SDSU Wheeler Manufacturing

Ronald White Paul Batcheller Vice President for Research, SDSMT PrairieGold Venture Partners

Georgia Hackett Eddie Sullivan Vice President of Institutional Relations Sanford Applied Biosciences Sinte Gleska University Scott Morgan Jack R. Warner Sisseton Wahpeton College Executive Director South Dakota Board of Regents Hannan LaGarry Oglala Lakota College Paul D. Turman System Vice President for Research and Donald L. Endres Economic Development, SD Board of Regents Glacial Lakes Capital, LLC

Kathryn Johnson Christine Hamilton South Dakota Board of Regents Christiansen Land & Cattle, Ltd.

Senator Phyllis Heineman Whitney Robertson Dir. of Commercialization, Sanford Health Senator Jeff Haverly Sherri L. Rotert Representative Susan Wismer Attorney, Novellus Law, P.C.

Senator Corey Brown Ed Duke Director, SD NASA EPSCoR

Table of Contents Executive Summary 1 Preface 2 List of Tables & Figures 3 2020 Vision 4 Why South Dakota Needs This Plan 4 The Approach 5 The South Dakota Innovation Equation 5 A Bird’s-Eye View: The Strategy Blueprint 7 The Target Sectors 8 1. Value-Added Agriculture and Agribusiness 8 2. Energy and Environment 9 3. Materials and Advanced Manufacturing 9 4. Human Health and Nutrition 9 5. Information Technology/Cyber Security/Information Assurance 10 How the Target Sectors Match the Criteria 10 The 2020 Vision Strategy 12 The 2020 Vision Strategy Map 12 Strategy Area: IDEAS 14 Resources and Assets 14 The Ideas Strategy 17 Strategic Investment in Research Areas and Assets Aligned with Target Industry Sectors 17 Animating the Next South Dakota Economy: The 2020 Vision New Value Project 19 1. Senior Faculty Science and Innovation Professorships 19 2. University/Industry Research and Innovation Centers 20 3. Target Sector Advisory Councils 22 4. Invigorate the On-Campus Innovation Orientation 22 Strategy Area: TALENT 23 Create a Culture of Entrepreneurship on the Campus 24 Faculty Release Time for Entrepreneurial Ventures and Commercialization Activities 24 Entrepreneurs in Residence within South Dakota’s Colleges and Universities 24 Implement Policies, Training, and Systems within Higher Education that Inform Faculty and Facilitate their Involvement in Entrepreneurship, Commercialization and Intellectual Property Development Activities 25 Promote Science, Technology, Engineering, and Math (STEM) Study at All Educational Levels 25 Expand Successful Middle and High School STEM Activities Creating Greater Exposure for Students Around the State 26 Build Stronger Foundations that Ease the Movement of Students with STEM Interest Between All of the Postsecondary Institutions in the State – The Regental Institutions, the Private Colleges and Universities, the Tribal Colleges and the Technical Institutes 26

Develop Incentives to Encourage Students to Pursue STEM Degree Programs, and Reward Institutions for Graduating Students in These High Need Areas 27 Refining the Role of Postgraduate Higher Education within The 2020 Vision Strategy 28 A Note on Postgraduate Education and the Target Industry Sectors 28 Guidelines for Aligning Higher Education within This Science and Innovation Strategy 29 Master’s Degrees: The Attractive, Expedient, Cost-Effective Option 30 The Ph.D. Degree 32 Strategy Area: COMPANIES 33 Access to Very Early Stage Capital and to Growth Financing: Filling the Gaps 33 Early Stage Funding Initiative 33 Addressing the Moderate Risk/Moderate Return Gap 34 Fostering Growth Management Experience in High Impact Companies 34 Design-Centered Manufacturing and Product Development Capacity 35 Establish Center(s) for Industrial Design that Reach Across College Disciplines and Functions 35 Assist Small and Medium-Sized Companies to Incorporate Higher Levels of Design into Existing and New Products 36 Create and Embed Improved Design and Creativity Curricula into Technical Programs at the State’s Four Technical Institutes and the Three Tribal Colleges, such as Engineering Technology, and Applied Design into Arts Programs 36 Management Matters 36 Organizing, Funding and Delivering Science and Technology-Based Innovation Services at the State Level to Enable Regional Economies 36 Tracking 2020 Vision Progress and Impact 37 The 2020 Vision Global Indicators: Overall Prosperity 38 Strategy Area: Ideas 38 Strategy Area: Talent 39 Strategy Area: Companies 42 2020 Vision Implementation Notes 43 2020 Vision Management 43 Strategy Area: Ideas 43 Strategy Area: Talent 45 Strategy Area: Companies 47 Appendix A 49 Calibrating South Dakota’s Innovation Capacity 49 Appendix B 52 Development of Target Industry Sectors 52 How the Target Industry Sectors in South Dakota were Selected 52 Target Industry Sector Criteria 53 The Target Industry Sectors 54 Target Sector Relationships 86 How the Target Sectors Match the Criteria 87 Appendix C 90 Indicator Descriptions ENDNOTES 98

Executive Summary The goal of 2020 Vision: The South Dakota Science and Innovation Strategy is to build science and technology capacity in South Dakota that will promote innovation, foster knowledge-based companies, generate higher wage jobs and build the capacity to sustain the prosperity they create.

The South Dakota economy is in great shape by most accounts and that has been true for some time. From 2006-2011, during a period including the worst economic decline since the Great Depression, the state still managed to add 16,000 jobs, a 3% increase, while national employment was stagnant. However, in an era where robust economies are driven by talent that generates new ideas that create new value, there are some alarm bells sounding in the not-so-far distance. While South Dakota has the third lowest unemployment rate in the country, its median household income ranks 33rd; its workers earn, on average twenty-five percent less than their counterparts throughout the country; and the state ranks 49th in the U.S. in the number of high technology establishments as a percent of all business establishments.

South Dakota’s state government, education, and private sector communities have recognized that to thrive in a knowledge-based economy change is needed and there are signs that this change has begun. But this recognition is tempered with the realization that there is more that needs to be accomplished. To provide a coordinated framework to launch the next stage of the state’s economic growth the SD EPSCoR Advisory Committee (REACH Committee) proposes 2020 Vision: The South Dakota Science and Innovation Strategy to address this challenge.

The 2020 Vision Strategy is, at its core, a collaborative venture between the state’s public and private sectors to build the capacity to produce and grow the new ideas, the talent and the companies that will power South Dakota’s future innovation-rich, higher value economy. The strategy does this in two steps. First, through careful analysis it identifies the existing and emerging industry sectors that are best positioned to drive a robust future South Dakota economy. Second, it proposes eight initiatives that are defined by actions that will build the solid base of science, technology, engineering and math (STEM) knowledge and know-how needed to support and grow these target industry sectors over the next several decades.

The 2020 Vision Initiatives 1. Strategic Investment in Research Areas and Assets Aligned with Target Industry Sectors 2. The 2020 Vision New Value Project: Building academic innovation capacity and leveraging research strengths within university/industry multidisciplinary centers to support new value creation and growth within the target industry sectors 3. Create a More Entrepreneurial Culture on Campus 4. Promote Science, Technology, Engineering, and Mathematics (STEM) Study at All Educational Levels 5. Refine the Role of Postgraduate Higher Education within The 2020 Vision Strategy to Provide Talent and Knowledge to the Target Industry Sectors 6. Access to Early Stage Capital and Growth Financing: Filling the Gaps 7. Fostering Growth Management Experience in High Impact Companies 8. Design-Centered Manufacturing and Product Development Capacity

Preface South Dakota has recognized that science, technology, engineering, and mathematics (STEM) research, an educated and skilled workforce, and an entrepreneurial business environment are the foundation of the state’s competitiveness in a global economy. If South Dakota is to effectively integrate a robust science and technology (S&T) strategy into the broader state economic development enterprise, the process of developing that strategy must be inclusive of all stakeholders: citizens, industry, public, private and tribal postsecondary education, K-12 education, economic development organizations and state government.

From this perspective, Governor Dennis Daugaard tasked the SD EPSCoR Advisory Committee with the responsibility of developing a state-wide science and technology strategy to help guide and focus infrastructure development investments. This document, “2020 Vision: The South Dakota Science and Innovation Strategy” represents a year-long effort by the Committee and community economic development stakeholders identified on the back cover. The partnership that resulted assessed the state’s existing research and STEM industry strengths, and looked to the future to identify areas where emerging research and industry sectors have the potential to achieve leadership positions.

Using this assessment, the 2020 Vision proposes a set of South Dakota-specific strategies for strengthening basic and applied STEM research, aligning workforce development activities with these research strengths and continuing to grow the entrepreneurial culture that is the hallmark of a knowledge-based 21rst-century economy.

James A. Rice Director, SD EPSCoR

LIST of FIGURES

Figure 1. The 2020 Vision Strategy Blueprint p. 7 Figure 2. 2020 Vision Strategic Initiative and Action Plan p. 13 Figure 3. 2020 Vision Implementation Plan Summary p. 48 Figure A-1 Academic Science and Engineering R&D per $1,000 of GDP p. 51 Figure B-1 Employment Growth in Value-Added Agriculture and Agribusiness p. 56 Figure B-2.Employment Growth in Energy and Environment p. 63 Figure B-3 Employment Growth in Materials and Advanced Manufacturing p. 70 Figure B-4 Employment Growth in Human Health and Nutrition p. 77 Figure B-5 Employment Growth in IT/Cyber Security/Information Assurance p. 82 Figures B-6 and B-7: Interaction Between Target Sectors p. 86

LIST of TABLES

Table 1. Target Sector Criteria Characteristics p. 11 Table 2. Translational Research Innovation Infrastructure Target Industry p. 16 Sector Alignment

Table 3. Economic Sectors and Professional Science Master’s Degree p. 31 that Could Stimulate Development of a Workforce Contributing to Economic Development in the South Dakota Higher Education Table A-1 Innovation Capacity Indicators p. 50 Tables B-1 to B-5 pp. 57-61 Tables B-6 to B-10 pp. 64-68 Tables B-11 to B-15 pp. 71-75 Tables B-16 to B-20 pp. 78-80 Tables B-21 to B-25 pp. 83-85 Table B-26 Target Sector Criteria Characteristics p. 88 Table B-27 Target Sector Criteria Measures p. 89

2020 Vision

The goal of 2020 Vision: The South Dakota Science and Innovation Strategy is to build science and technology capacity in South Dakota over the seven-year period from 2013 to 2020 that will promote innovation, foster knowledge-based companies, generate higher wage jobs and build the capacity to sustain the prosperity they create. Why South Dakota Needs This Plan The South Dakota economy is in great shape by most accounts and that has been true for some time. From 2006-2011, during a period including the worst economic decline since the Great Depression, the state still managed to add 16,000 jobs, a 3% increase, while national employment was stagnant. The unemployment rate within the state remains at just over half the national figure - 4.4% versus 7.7% in November 2012.1

However, in an era where robust economies are driven by talent that generates new ideas that create new value, there are some alarm bells sounding in the not-so-far distance. While South Dakota has the third lowest unemployment rate in the country:

• Its median household income ranks 33rd;2 • Its workers earn, on average, twenty-five percent less than their counterparts throughout the U.S.;3 • It ranks 40th among the states in the share of its workforce that is employed in science and engineering occupations;4 and • It ranks 49th in the U.S. in high technology establishments as a percent of all business establishments.5

See Appendix A for more information on South Dakota’s ranking among the 50 U.S. states and within a group of 9 other benchmark states for various innovation capacity indicators.

South Dakota’s state government, higher education and private sector communities have recognized that change is needed to thrive in a knowledge-based, higher value-added, innovation-rich economy. Fortunately, there are signs that this change has begun. From 2000 to 2009 the state’s levels of academic science and engineering R&D per $1,000 of Gross Domestic Product more than quadrupled {Appendix A, Figure A-1} gaining much ground on the overall U.S. level. This is in part a reflection of the state’s investment in its Governor’s Research Centers, in Ph.D. programs and in facilities like the Sanford Underground Research Facility (SURF). But this recognition is tempered with the realization that there is more that needs to be accomplished. To provide a coordinated framework to launch the next stage of the state’s economic growth the SD EPSCoR

1 Bureau of Labor Statistics, Local Area Unemployment Statistics, Unemployment Rates for States, December 2012. 2 U.S. Census Bureau, Current Population Survey, 2010, 2011, and 2012 Annual Social and Economic Supplements. 3 Bureau of Labor Statistics, Occupational Employment & Wage Estimates & Local Area Unemployment Statistics. 4 National Science Foundation, National Center for Science and Engineering Statistics, State Science and Engineering Profile, 2012. 5 Ibid.

4 framework to launch the next stage of the state’s economic growth the SD EPSCoR Advisory Committee (REACH Committee) proposes 2020 Vision: The South Dakota Science and Innovation Strategy to address this challenge. The Approach The primary goals of this science and innovation strategy are to build the capacity to create and grow knowledge-based companies, produce better-paying jobs and generate more opportunity for all South Dakota’s citizens. This approach is founded on the belief that the state’s colleges and universities will play a crucial role in the success of the strategy because of 1) the scientific knowledge, technological know-how, and R&D capacity they bring to the innovation process in South Dakota and 2) the talent, knowledge and character of the thousands of students that they graduate each year. It explicitly recognizes that the state’s workforce development system and the knowledge and know- how within its workforce will govern the fortunes of the companies that will determine South Dakota’s economic future.

The analytical approach and its findings that inform the strategy and its recommended actions seek to answer three basic questions:

1. What high growth and what core industry STEM-oriented sectors (target industry sectors) are the most likely candidates to drive a robust, higher value future South Dakota economy?

2. What translational research infrastructure and what STEM-related innovation infrastructure should be in place to propel these sectors?

3. What strategies and actions are needed to produce the talent to do all of this?

The South Dakota Innovation Equation

For the purposes of this science and innovation strategy, “innovation” is defined as something newly put to use in markets and as the actual process of transforming new ideas into value in the marketplace. In developed economies, a solid base of science, technology, engineering, and mathematics (STEM) knowledge and know-how is required to conceive and develop the new ideas that in turn produce value-intensive technology and the products, processes, and services in which it is embodied. A regional economy’s capacity to innovate and create new value is the key to sustaining an improving quality of life and a vibrant economy. Over the long run, this capacity is what distinguishes thriving communities from those that struggle just to stay in place.

The 2020 Vision Strategy is expansive; it seeks to carve out a big space for South Dakota in the U.S. innovation economy. Over the last three decades there have been numerous and increasingly complex visual representations of the elements and activities that define the innovation process.

This strategy employs a simple model to address three elements that capture the essence of the innovation process and then adopts these three elements as its basic strategy areas.

In this model innovation is both a process and an output and is governed by three key elements and their interactions: Ideas, Talent and Companies.

• Ideas = the ability and capacity to generate new ideas and transform them into value in the marketplace. • Talent = producing, nurturing and attracting talent to generate new and valuable ideas and start and grow the companies. • Companies = the innovation implementation vehicle where the new ideas, the new value and the talent come together.

Within the plan each one of these basic strategy elements contains a set of general strategic initiatives that address key area objectives designed to create real economic impact within a group of carefully selected target industry sectors. In turn, each of the strategic initiatives is defined by a series of actions to realize each of these objectives.

A Bird’s-Eye View: The Strategy Blueprint Figure 1 presents a visual representation of this science and innovation strategy and its relation to the target industry sectors as described in detail in the body of this report and its appendices. It is intended as a blueprint that offers a bird’s eye view of the linked core strategy elements (shown as interlocking gears in the diagram) and their place and role within a unified concept and plan that promotes innovation, fosters knowledge-based companies, generates higher wage jobs and builds the capacity to sustain the prosperity they create. The plan’s basic strategic initiatives are listed within each element area.

Figure 1. The 2020 Vision Strategy Blueprint

Value-Added Agriculture IDEAS and

Initiatives:! Agribusiness Strategic Investment in Research Areas and Assets Aligned with Target Industry Sectors Energy and Boost Innovation Capacity and Leverage High Value Research Strengths Through University/ Environment Industry Centers COMPANIES

Initiatives: Advanced Access to Early Stage Capital and Growth Financing Manufacturing

Fostering Growth Management and Materials TALENT Experience in High Impact Companies

Initiatives:! Design-Centered Manufacturing Create a Culture of and Product Development Human Entrepreneurship On-Campus Capacity

Promote STEM Study at all Health and Education Levels Nutrition Refine the Role of Postgraduate Higher Education Information

Technology

Source: RTS, 2013.

The Target Sectors What high growth and what core industry STEM-oriented sectors are the most likely candidates to drive a robust, higher value future South Dakota economy?

The analysis linked these four basic criteria together as a lens through which to view South Dakota’s economic sectors and identify the strategy’s target industry sectors. A detailed explanation of the criteria and analysis are described in Appendix B.

1. The sectors show critical mass and/or demonstrable momentum as a statewide strategic choice from an economic development policy standpoint including consistency with the adopted targets of the state and its regions.

2. The sectors demonstrate potential impact across the state including urban, rural, and Native American areas.

3. The target sectors demonstrate strong or very promising showings in South Dakota within a prescribed series of economic measures.

4. The sectors are built on a portfolio strategy that balances levels of risk and reward associated with mature industries with a long history with the state’s economy, industries that have established themselves in the last few decades, and emerging industries that are still small but demonstrate long-term potential.

Based on the analysis of the state’s economy and the criteria enumerated above, the following five sectors were presented to and adopted by the REACH Committee at its October 18, 2012 meeting.

1. Value-Added Agriculture and Agribusiness

The value-added agriculture and agribusiness target industry sector’s size, presence across the state, historical importance, and strong relationship to the state’s university system and the Agricultural Experiment Station render it a viable target industry sector. In addition to its historical economic importance, the sector will be important in the future in view of its potential role in renewable energy production, value-added manufacturing, and bioscience applications. It is important to note that 1) even within what are considered “traditional” subsectors such as crop production or farm management, the level of technology and knowledge intensity are often very high and 2) this sector should have significant overlap with the other four target sectors (including even information technology).

2. Energy and Environment

Energy and environment covers the broad range of renewable and non-renewable energy production relevant to South Dakota today and into the future. Renewable energy refers to the technologies of solar, wind power, geothermal power, hydropower (dams), and biofuels. Non-renewable energy in South Dakota includes coal and the potential for significant future oil and gas production. Energy and environment also includes manufacturing and energy processing industries and the electrical energy grid. Finally, this target industry sector definition also includes companies that are engaged in creating a safe and secure supply of renewable and non-renewable energy needed to power the U.S. economy. The broad range of specific subsectors across the energy and environment industry sector means that, like value-added agriculture and agribusiness, this target has economic impacts and presents economic opportunities in all areas of the state.

3. Materials and Advanced Manufacturing

The materials and advanced manufacturing industry sector includes a broad range of manufacturing subsectors along with emerging materials development activities that play a role in a number of industries including energy and health care. South Dakota exhibits a remarkable strength within this industry and its continued success is expected. Higher levels of investment in plant and equipment, embedded advanced technology, and the need for production, technical and management workers with significant STEM skills characterize this industry sector. This target industry is well distributed across the state with much of the employment distributed in more urbanized areas. It is expected to continue its strong growth performance into the future with wages well above the state average.

4. Human Health and Nutrition

The sector includes firms that are conventionally defined as bioscience or biotech as well as the various components of the overall health care industry. When analysts look at the health care industry within regional and state economies, they usually describe the industry as a local or supporting industry in that it simply provides health care services to those who live within the region and does not bring in dollars from outside the region unlike base industries such as manufacturing. But in some economies, human health and nutrition is a true base industry as it brings in dollars, income and wealth from outside the regional economy. This occurs when a region provides health care to people outside the region as a health care hub. This is the case in South Dakota, which boasts several significant base or export-oriented sectors within human health and nutrition broadly defined, especially in the I-29 corridor surrounding Sioux Falls and in the Rapid City area. There are other segments within human health and nutrition distributed across the state as well.

The employment and earnings growth for the human health and nutrition target industry sector has outpaced the overall U.S. performance in recent years and is expected to continue to surpass the overall U.S. growth performance well into the future.

5. Information Technology/Cyber Security/Information Assurance

Information Technology/Cyber Security/Information Assurance (hereafter IT) is the smallest of the target industry sectors but has the potential to be a strong performer, especially in term of medium- and long-term employment growth, for three reasons:

• the research and technology strength within the university system. • the large banking industry within the state that has significant need for enhanced security. • there is an increasing need for protection of electronic medical records within human health.

It can be seen as an emerging sector within the portfolio strategy criteria described at the beginning of this section. During the 2006-2011 period when nearly all industry sectors in the economy lost employment within the state and the nation, the IT sector instead grew by 20.3% in South Dakota and 8.4% in the U.S. That growth is expected to continue within South Dakota and also continue to outpace national growth.

How the Target Sectors Match the Criteria

A summary description of how each of the target industry sectors measured up against the four selection criteria is presented in Table 1. The five target sectors represent a strong portfolio that balances mature and emerging industries, sectors that are strong in different areas of the state, and moderate to high growth sectors. For more information on how the target industry sector portfolio was developed please refer to Appendix B.

Table 1. Target Sector Criteria Characteristics

Growth Size Competitiveness Technology Concentration Mature/ Target Sector (2011 Statewide (Location Wages 2011-2016 Performance Match Emerging Employment) (Momentum) Quotient)

Value-Added 50,280 Yes Slow Yes Yes 2.9 $35,301 Agriculture & Mature Highest in Below Agribusiness Very Large 0.20% Moderate Strong Very high Central State

19,626 Yes Good Yes Yes 1 $54,356 Energy & Established Environment Well Above Moderate 14% Moderate Strong Similar to U.S. Distributed State

Materials & 16,645 No Strong Yes Yes 2.5 $52,566 Advanced Established Above Manufacturing Moderate Most in East 28% Strong Strong Very High State

24,935 Yes Good Yes Yes High $52,072 Human Health Established & Nutrition Strongest in Above Large 11% Moderate Strong 1.24 East State Information 12,223 Yes Strong Yes Yes Low $56,121 Technology/ Cyber Emerging Security/ Well Above Small 30% Strong Strong 0.51 Information Distributed State Assurance Source: RTS, 2013.

The 2020 Vision Strategy

The remainder of this document presents the initiatives and actions that define South Dakota’s 2020 Vision Strategy. The plan is organized around the three basic strategy elements that drive the innovation process. Each strategy element contains a set of general strategic initiatives that:

• Address key area objectives designed to create real economic impact within the target industry sectors. • Define a series of actions to realize each of these objectives. • List key outcomes and performance tracking metrics for each of the strategy initiatives.

The 2020 Vision Strategy Map

A summary view of the plan is presented in Figure 2. The plan serves as an avenue to view the entire strategy as a whole piece and as a framework for the more detailed plan description that follows.

Figure 2. 2020 Vision Strategic Initiative and Action Plan

Source: RTS, 2013.

Strategy Area: IDEAS

Objective: Boost STEM-oriented capacity to generate research outcomes and technological opportunities that can translate into applications within the group of target industry sectors that are positioned to drive a robust South Dakota economy into the future.

Innovation begins with ideas that have the capacity to actually generate new value in the form of new or improved products, processes and services and the technologies and designs that enable their usefulness.

The Ideas strategy area focuses on actions to build on and leverage existing translational research capacity and innovation infrastructure. For the purposes of this strategy, “translational research assets” are defined as those public and private, non-profit entities and programs whose mission is to generate research outcomes that will produce value in the marketplace. “Innovation infrastructure” is defined as the public and non-profit systems, services and facilities that directly enable innovation. To this end, the focus of this strategy area is on the roles of universities, non-profit research organizations and the public sector in moving new ideas and knowledge through the value creation process – new value that will reside in South Dakota companies. It is important to note that the current translational research asset base represents only a small part of the overall public and private research enterprise, which can feed the innovation process in South Dakota. However, from this strategy’s perspective translational research assets are at the “point of attack.” If research can’t be translated into market applications then this strategy will fail.

Resources and Assets

In addition to a growing research effort within its university system, South Dakota has a substantive STEM-oriented innovation infrastructure that will serve as a resource base for this strategy area. A representative listing of the elements that comprise this infrastructure are listed below.

Since 2004 South Dakota has been investing in the development of translational research centers through its Governor’s Research Center Program. Though they are small, virtually every active center is pursuing applications within this strategy’s target industry sectors and several centers have spun out companies and licensed technology within these sectors. For the purposes of this strategy, the state’s research organizations with primary and explicit translational research missions are at the vanguard of the STEM-oriented innovation infrastructure. Information on these various centers and their alignment with the target industry sectors is presented in Table 2. The group includes all Governor’s Research Centers plus two major private, non-profit translational research entities, Sanford Research and Avera Research Institute. All of these organizations exist to generate research outcomes that will translate into application and value in the marketplace. In all cases the potential applications from their research agendas align with the target industry sectors. Also shown in Table 2 are two major innovation infrastructure assets – the Sanford Underground Laboratory at Homestake and the USGS Earth Resources Observation and Science Center in Sioux Falls. Both operations are world-class facilities 14 whose research activities include translational research with 2020 Vision target industry sector applications.

In addition to the group of existing translational research centers that are aligned with the target industry sectors, the South Dakota STEM-oriented innovation infrastructure features a group of substantive innovation enabling assets within the Ideas strategy area including:

• An impressive array of applied research facilities located at University of South Dakota (USD), South Dakota School of Mines & Technology (SDSM&T), Dakota State University (DSU) and South Dakota State University (SDSU) include:

o The Post Traumatic Stress Disorder and Traumatic Brain Injury Research Program and the Catalysis Group at USD

o The Animal Disease Research and Diagnostics Lab, the Seed Technology Center and the Geographic Information Science Center of Excellence at SDSU

o The Composites and Polymers Engineering Lab, the Additive Manufacturing Laboratory, Arbegast Materials Processing and Joining Laboratory and the Center for Friction Stir Processing at SDSM&T

o The Center for Technology Security and the Center for the Advancement of Health Information Technology at DSU

• Important concentrations of exemplar companies, particularly in the Rapid City, Sioux Falls and Brookings areas. Generating the new value that enables the creation and growth of knowledge-based, innovation-rich South Dakota companies and jobs is the aim of the Ideas strategy. These knowledge-intensive companies offer a solid foundation on which to build. Endnote-A

Table 2. Translational Research Innovation Infrastructure Target Industry Sector Alignment

Source: RTS, 2013.

The Ideas Strategy

The Ideas strategy builds upon existing university and non-profit research strengths that have the potential to produce high impact economic outcomes within the target industries. This strategic investment goal has two objectives: 1) develop robust translational research conduits between the R&D activity within the research community and the target industry sectors and sub-sectors that will power South Dakota’s future economy and 2) boost valuable idea generation and new value-creating capacity by fostering a stronger innovation culture within the academic research community.

Strategic Investment in Research Areas and Assets Aligned with Target Industry Sectors

Action: Research and development-related grants, investments and initiatives intended to build innovation capacity or yield commercially promising outcomes should focus on the following distinctive South Dakota high value R&D areas and innovation enabling assets: 1. Advanced Manufacturing and Materials 2. Energy and Environment 3. Human Health and Nutrition (including Medical Technology) 4. Information Technology/Cyber Security/Information Assurance 5. Plant and Animal Bioscience 6. Underground Science and Engineering 7. Visualization (from the molecular level to global systems)

The South Dakota academic research enterprise has well established and distinctive profiles in the 2020 Vision high value research areas that are well positioned to generate applications in markets within the strategy’s target industry sectors. In the case of the human health and nutrition area, solid strengths in a number of academic research domains are significantly expanded and amplified through a non-profit sector that features very substantive translational health research missions and programs from Sanford Research and Avera Research Institute.

It is important to note that these high value research areas are presented and described as academic research domains whose output, if strategically focused, can advance the growth and prosperity of the five target industry sectors. The seven areas above represent groupings of research activity that can serve the knowledge-based dimensions within each of the five target industry sectors. For instance, research outcomes in the plant and animal bioscience area may produce market applications within the valued-added agriculture and agribusiness, energy and environment or human health and nutrition sectors. In some cases the name of the research areas and the names of the industry sectors are the same and some cases they are not.

The strategic investment focus also includes two internationally recognized innovation- enabling research assets with the capacity to generate high value research outcomes and applications that cut across all target industry sector markets – the Sanford Underground Research Laboratory (Sanford Lab) at Homestake and within the Visualization domain, the United States Geological Survey's National Center for Earth Resources Observation and Sciences (EROS) in Sioux Falls.

Sanford Lab, a world-class multidisciplinary underground science and engineering research facility located in the Black Hills of South Dakota, provides an environment free from cosmic radiation disruption to conduct extremely sensitive experiments. Experiments now installed nearly a mile underground, protected by a thick layer of rock from cosmic noise, could yield answers to some of the deepest mysteries of modern physics in the next few years. In addition to its basic research and education outreach efforts, the facility features the capacity to enable R&D with the potential to generate applications across the target industry sectors. In that regard, Sanford Lab is home to South Dakota’s Governor’s Research Center for Ultra Low Background Experiments (CUBED), which, among other activities, is pursuing materials purification and crystal growth research with applications in advanced manufacturing and materials, human health and nutrition, and energy and environment target industry sectors. The facility is also engaged in applied research on the use of exotic “extremophile” life forms that could boost production of biofuels. Fourteen research collaborations are active at the Sanford Lab and they include nearly 1,000 scientists from throughout the United States and Europe. Endnote-B

EROS is a unique resource because it is the largest civilian repository of remote sensing data in the U.S. and is recognized as a global leader in applied earth systems science. As an interdisciplinary innovation-enabling asset, EROS features strong collaborative research capacity in geographic information systems, digital mapping, and geostatistics domains with the potential to generate high value applications in the plant and animal bioscience, human health and nutrition, and energy and environment industry sectors. In addition, EROS is a participant in a joint collaboration with SDSU in the Geographic Information Science Center of Excellence (GIScCE).

Animating the Next South Dakota Economy: The 2020 Vision New Value Project

Action: Implement The 2020 Vision New Value Project over a seven-year period beginning in 2013. The New Value Project will boost the innovation orientation within high value research areas. It will consolidate and leverage existing high value research strengths through multidisciplinary university/industry South Dakota Research and Innovation Centers (SDRICs). SDRICs are designed to support new value creation and growth within the strategy’s target industry sectors. (Table 1).

As shown in Figure 2, The 2020 Vision New Value Project is defined by four specific actions:

1. Science and Innovation senior professorships with accompanying research enrichment funds within the 2020 Vision high value research areas and individuals of national prominence in both science and knowledge-based commercial development; 2. Multidisciplinary university/industry South Dakota Research and Innovation Centers (SDRICs) to support the target industry sectors; 3. Target sector advisory councils to provide guidance on links to and collaboration with research centers, other infrastructure investments, and workforce development; and 4. Invigorating the on-campus innovation orientation through creating an Industrial Partnering function within the state’s colleges and universities, establishing incentives and rewards for licensing technology to South Dakota companies, and designing and implementing new program guidelines to guide some portion of the South Dakota EPSCoR-related projects toward technological innovation opportunities.

1. Senior Faculty Science and Innovation Professorships Acting in an oversight capacity as “managing partner” for The 2020 Vision Strategy and in close coordination with the Board of Regents and the Governor’s Office of Economic Development, the REACH Committee should lead the effort to create and fund five Science and Innovation Senior Professorships over a seven-year period. These positions should be filled with individuals of national prominence in both science and knowledge-based commercial development. The senior faculty professorships should be established as university positions or joint appointments and each position should be tightly linked to the mission and the research agenda of a specific SDRIC. The objective is 1) to create a cadre of faculty that combine entrepreneurial accomplishment with R&D excellence in strategic high value research domains that drive the SDRICs and feed the target industry sectors and 2) to do this in a way that builds a culture on-campus that rewards and recognizes these activities.

The Science and Innovation Professorships will be funded through a state matching program. In addition to salary, the budget for each professorship should include funding for equipment and core facilities needs associated with each position. The research support components of the budget for each Science and Innovation Professorship will be an important asset in the recruiting process for these senior faculty positions.

2. University/Industry Research and Innovation Centers The South Dakota Governor’s Office of Economic Development’s Office of Commercialization, in close coordination with the REACH Committee and the Board of Regents, should design and implement a program to establish five multidisciplinary university/industry South Dakota Research and Innovation Centers (SDRICs) to function as robust translational research conduits between the R&D activity within the research community and the target industry sectors and sub-sectors that will power South Dakota’s future economy.

The five recommended SDRICs are listed below. As indicated by the name, each SDRIC is designed to support one of the five target industry sectors. However, it is anticipated that each SDRIC’s research agenda and its research outcomes will often include commercially viable applications within the other target industry sectors. For example, the plant and animal bioscience SDRIC is primarily tasked with supporting science- and technology- intensive innovation opportunities within the valued-added agriculture and agribusiness target industry sector. However, its research agenda should include commercially viable applications within the other target industry sectors, especially human health and nutrition.

It should also be noted that the information technology-oriented SDRIC is designed to focus on the cyber security and information assurance domains where there is strong higher education R&D capacity.

Recommended South Dakota Research and Innovation Centers:

1. Advanced Manufacturing and Materials 2. Cyber Security and Information Assurance 3. Energy and Environment 4. Human Health and Nutrition (this includes medical devices and instruments and human bioscience therapeutics and diagnostics applications) 5. Plant and Animal Bioscience

The implementation effort for each SDRIC should begin with the preparation of an operating plan that spells out the mission, structure, objectives, programs and activities, financing plan, staffing, industry roles and participation, as well as risks

20 and intended outcomes for the participating universities and industry partners and intended economic development outcomes.

Science and Innovation Professorships and the SDRICs As mentioned earlier, it is recommended that these senior faculty professorships be established as university positions or joint appointments and that each position be tightly linked to the mission and the research agendas of a specific SDRIC. To this end, the qualifications for recruitment candidates should feature strong science and innovation profiles that fit within the mission of a specific SDRIC and upon hiring these individuals should have a formal affiliation with the SDRIC through joint appointment and/or board and advisory committee seats.

However, these professorships are designed as senior faculty positions to allow the individual to perform research, generate innovation opportunities and train talent within their scientific domain without regard to industrial application boundaries. For instance, a biopolymer scientist may be producing research outcomes with very promising applications in food packaging, biofuels, pharmaceuticals and wound healing.

The Governor’s Research Center Program and the SDRICs The Governor’s Research Center (GRC) program should become an integral part of the larger scale SDRIC program. The GRC program is producing translational research outcomes at the project level, and commercializeable intellectual property in some instances, and has even resulted in several companies (see Table 2 for alignment of these centers with the target industry sectors). However, these centers are operating at a modest scale, with sporadic industry support and the strategic focus has been diffused across the eight currently active centers without a unified vision or strategy to boost their sustainable operating scale and effectively integrate them into the broader South Dakota economic development enterprise.

The Governor’s Research Center Program is well positioned to support the SDRICs and its currently active centers are well suited to function as robust translational research programs within the SDRIC group. To this end, the SD EPSCoR Office, the SD Board of Regents, and the SD Governor’s Office of Economic Development jointly issued a South Dakota Research Infrastructure Center Programs’ Request for Proposals (RFP) in October of 2012 that invited submissions for two new center-type programs that advance The 2020 Vision Strategy mission. First, the South Dakota Research and Innovation Center Program specifically ties the SDRICs to the state’s NSF EPSCoR Research Infrastructure Improvement Track 1 program and solicited proposals for the establishment of SDRICs as described in The 2020 Vision Strategy. Second, the Governor’s Research Center Program invited proposals that refocus the existing program on applied, translational research and education initiatives that meet specific and significant industry knowledge and workforce development needs in the state’s targeted research sectors.

SDRIC Design Considerations As plans are drafted and the SDRICs’ development paths begin to take shape, it is recommended that several design elements and issues that address private sector participation and scope and scale of activities be carefully considered. For a description of Endnote-C these design considerations see Endnotes at the conclusion of this document.

3. Target Sector Advisory Councils Working in concert with the REACH Committee, the Governor’s Office of Economic Development should establish 2020 Vision Target Industry Sector Advisory Councils to provide guidance on links to and collaboration with research centers, other infrastructure investments, and workforce development. The Target Sector Advisory Councils will provide input into the SDRIC research and development agendas. Each council should be comprised of nine to fifteen members and should include representatives from industry, academia and government. However, as the councils are designed to deliver the industry perspective on research needs and opportunities and on competiveness issues, the private sector presence should represent a supermajority with two-thirds of the members coming from industry.

4. Invigorate the On-Campus Innovation Orientation As shown above, the first three elements of The 2020 Vision New Value Project define a strategy and vision for linking university research and higher education and non-profit translational research assets to the industry sectors that will drive future economy. This final element focuses on advancing the on-campus innovation orientation through two actions.

Establish New Program Guidelines to Guide Some Portion of the SD EPSCoR-Related Projects Toward Technological Innovation Opportunities The objective of this action is to craft process and establish a practice to, when appropriate, guide EPSCoR’s research outcomes toward and connect them to intellectual property creation and technological innovation opportunities. SD EPSCoR is currently designing such an approach.

Establish Industry Partnering Functions within South Dakota’s Colleges and Universities Built on a Business Model that Emphasizes Responding to Company/Industry Needs The objectives for the College and University Industrial Partnering Function are 1) to expand the operations of existing university sponsored research or technology transfer offices to establish an on-campus presence that helps investigators work with private industry to advance commercialization opportunities and to encourage industry- sponsored research and 2) to formally establish and support an on-campus presence to address private industry education, training and workforce development needs and issues.

Strategy Area: TALENT

Objective: Increase the capacity and the ability of the state to produce the talent needed to fulfill the needs of the target sectors and more broadly to develop the

talent to continually rebuild and reinvent the economy of South Dakota.

The 2020 Vision Talent strategy focuses on building, nurturing and retaining the state’s STEM talent base while promoting an entrepreneurial culture and innovation mindset. It is defined by three initiatives: 1) creating a culture of entrepreneurship in higher education, 2) promoting the study of STEM at all educational levels, and 3) refining the role of postgraduate education.

Simply put, in today’s global economy talent trumps everything. Without talent and the ability to continually re-invigorate that talent, the U.S. and South Dakota will not be able to compete in a knowledge-based global economy. To this end, the 2020 Vision Talent strategy adopts a comprehensive approach to STEM education by providing a quality basic education and STEM knowledge from K-12 through higher education graduate and postgraduate programs. It includes providing tools to facilitate life-long learning so that people can adapt to the inevitable changes in occupational skill needs (especially within the 2020 Vision target industry sectors) and pursue good careers as opposed to jobs. This strategy also focuses on producing the entrepreneurial talent both inside and outside academia that is necessary to rapidly innovate in today’s global economy.

South Dakota has both positives and negatives in its ability to respond to these challenges. The state has a strong K-12 system. According to the most recent National Science Foundation data, 92% of the state’s residents aged 25-44 have high school degrees, ranking the state 8th in the country. The state’s K-12 system does well on measures like 8th grade math proficiency. South Dakota also produces significant numbers of science and technology-oriented degrees at the baccalaureate level and compares favorably to other states. At the graduate level South Dakota’s science and engineering degree production lags behind other states. The South Dakota economy employs relatively fewer degreed individuals at every level and particularly, in the sciences and engineering (see Appendix A, Table A-1 for the state’s ranking). When compared to its counterparts nationally, South Dakota higher education is also behind the curve in developing an on-campus entrepreneurial culture and innovation mindset. Much greater emphasis has been placed on on-campus entrepreneurship support and training in recent years so the system has begun to gain some ground but there is still considerable room for growth to achieve national best practice levels.

A series of initiatives and actions is presented to produce the STEM-related talent required to propel South Dakota’s future innovation economy in general and, in support of this strategy’s target industry sectors.

Create a Culture of Entrepreneurship on the Campus

Action: Build infrastructure to encourage entrepreneurship and commercialization activities among undergraduate, graduate students and faculty to generate a culture of innovation throughout South Dakota higher education.

The objective of this initiative is to develop and infuse an entrepreneurial talent base into faculty, staff and student populations that will generate ideas, products and services that create companies and employment opportunities in South Dakota. The on-campus entrepreneurship culture initiative includes the three elements described below.

Faculty Release Time for Entrepreneurial Ventures and Commercialization Activities South Dakota higher education should implement and promote policies for faculty release time specifically for entrepreneurial ventures and commercialization activities. Design considerations for this element are offered in the strategy’s concluding Endnotes section. Endnote-D

Entrepreneurs in Residence within South Dakota’s Colleges and Universities The REACH Committee, working closely with all of South Dakota’s colleges and universities and the GOED Office of Commercialization, should take the lead in establishing an “Entrepreneurs in Residence” program.

Many entrepreneurs feel a need to give back to the communities that supported their efforts. This is particularly true of alumni who feel a strong connection to their university and state. In addition, entrepreneurs, particularly serial entrepreneurs, are often looking for that next idea. Academic environments with an innovation orientation can serve as fertile fields for growing these ideas.

Effective Entrepreneurs in Residence programs lead by example and serve as models of behavior to faculty, staff, and students. Universities use their Entrepreneurs in Residence programs in different ways. Entrepreneurs in Residence can serve as mentors to faculty who are just beginning to think about company creation and innovation, teach classes or serve as guest lecturers. Depending on their backgrounds they can become part of a research program. They can also lead and evaluate entrepreneurial contests for faculty and staff and provide awards or financing to winning proposals.

Implement Policies, Training, and Systems within Higher Education that Inform Faculty and Facilitate their Involvement in Entrepreneurship, Commercialization and Intellectual Property Development Activities Under the REACH Committee auspices, it is recommended that the Board of Regents, individual college and university research offices or their technology transfer function and the GOED Office of Commercialization work together to design, implement and promote a system-wide program to inform and train faculty in policies, practices and institutional goals related to entrepreneurship, commercialization and intellectual property and facilitate their involvement in the activities.

This action is designed to increase the scope and speed at which university-originated technological advances are commercialized within South Dakota. While its scope is relatively modest when compared to the New Value Project actions, it is every bit as important because it is the bridge to the private sector. This action item should also be viewed as an opportunity to develop uniform and clear policies and practices that can be easily understood by private sector partners.

Promote Science, Technology, Engineering, and Math (STEM) Study at All Educational Levels

Action: Create programs to encourage the study of science, technology, engineering, and math (STEM) at all educational levels in order to drive innovation and build a stronger workforce and economy.

In today’s knowledge-based economy, states are required to think aggressively about the role of STEM education and the potential impact it can have on fostering innovation. STEM education and the skills it promotes, including those that require less than a four-year degree, is needed to some extent in almost every occupation. In addition, STEM educational opportunities also foster the soft skills that are so highly valued by employers in survey after survey – critical and creative thinking, problem-solving skills, and the ability to work collaboratively. As a state, South Dakota has failed to generate an adequate number of STEM graduates due largely to the fact that many students either fail to recognize the alignment these skills have with high paying careers, or they are inadequately prepared to engage in the curriculum required for these programs. The 2020 Vision Strategy addresses this South Dakota STEM education challenge in three ways. First, it expands middle/high school efforts to interest students in STEM-related education, activities and careers. Second, it seeks to build stronger foundations that ease the movement of STEM students between all postsecondary institutions in the state – the regental institutions, the private colleges and universities, the tribal colleges, and the technical institutes. Third, it develops incentives to encourage students to pursue STEM degrees and rewards institutions for graduating those students.

Expand Successful Middle and High School STEM Activities Creating Greater Exposure for Students Around the State South Dakota has a number of innovative and effective programs that seek to help middle and high school teachers develop and use STEM teaching resources that are designed to renew student interest in science and technology. These include the PROMISE program at Sanford, the Title II Improving Teacher Quality State Grants, and the work being conducted by the Department of Education to aid teachers as they work to align their classroom content with the National Common Course Standards and assessments that are forthcoming. Specific to students, the Sanford Underground Research Facility (SURF) and GEAR Up each provide a variety of innovative programs designed to serve students (especially Native American students) interested in science and engineering. To foster student interest in health programs and research, the South Dakota Department of Health’s Scrubs Camp program teams educators and health care professionals to provide high school students with a glimpse of the vast career opportunities in the health care field.

Three limitations exist that minimize the impact for these initiatives. First, distances within the state serve as a barrier limiting involvement only to those students and teachers who are in close proximity to postsecondary institutions or who already have the financial resources that are necessary to participate. Second, like in most states, the programs in South Dakota are not integrated or managed systematically resulting in a series of disparate and potentially duplicative initiatives. Finally, many of these programs take an orientation-based approach when continued/lasting exposure creates an opportunity for solidifying teacher pedagogical practices and student interest. To address these limitations the state should facilitate efforts to collaborate across these activities to create a unified focus and leverage the investments the state and school districts have already made by expanding the “Classroom Connections” distance learning initiative. For instance, the South Dakota Legislature considered legislation during the 2012 session to establish a Math and Science Academy; however, the program lacked critical support due to the fact that it was limited to students in the Sioux Falls area. A similar proposal that expands the “Classroom Connections” program could create the necessary synergy for expanding STEM learning for all South Dakota students.

Build Stronger Foundations that Ease the Movement of Students with STEM Interest Between All of the Postsecondary Institutions in the State – the Regental Institutions, the Private Colleges and Universities, the Tribal Colleges and the Technical Institutes Under the auspices of the REACH Committee, it is recommended that a working group be formed to address postsecondary transition issues and opportunities for students with STEM interest from the perspective of the students and all the relevant education and training institutions. The objective is to build on the considerable body of existing articulation work to craft an effective, unified and clear approach to promote the pursuit of STEM programs and fields and to encourage and facilitate the movement of these STEM students across these institutions and into careers and/or more advanced STEM education levels.

Articulation agreements have grown significantly over the past decade, but the number of students taking advantage of these programs has been limited. Generating greater numbers

26 of students who use the STEM-related postsecondary education and career paths illuminated by these agreements is an important component of this strategy. This is particularly true within rural, Native American and other under-served populations where tight collaborations between postsecondary institutions will provide a win-win environment where the higher education institutions within the Board of Regents system can help technical institutes and tribal colleges prepare their students to enter STEM educational programs.

Examples of actions that might be considered include jointly developed and expanded 2+2 programs between regental institutions and technical institutes and the development of certificate programs that would allow current degree holders to expand their opportunities for becoming employed in STEM-based fields.

Develop Incentives to Encourage Students to Pursue STEM Degree Programs, and Reward Institutions for Graduating Students in These High Need Areas This action features two elements, one that addresses a modification of the South Dakota Opportunity Scholarship Program to target students pursuing STEM fields and another element that seeks to help all postsecondary institutions improve retention and completion of all students in STEM fields.

1. The state should modify the guidelines and funding levels for the South Dakota Opportunity Scholarship (SDOS) program to increase the scholarship awards by $500 a year for the four-year period for qualified students entering STEM-related degree programs that support the targeted industries.

The Opportunity Scholarship program has proved to be a successful mechanism for attracting and retaining South Dakota students. Endnote-E A total of 9,695 South Dakota high school graduates have established initial eligibility in the scholarship program since the first cohort began during the Fall 2004 semester. While the program works well in attracting and retaining South Dakota students, only about 32% of the recipients currently pursue degree programs in STEM-related fields. At present, Opportunity Scholarship recipients receive $5,000 over four years with $1,000 awarded for each of the first three years of attendance and $2,000 the fourth year of attendance. This recommended action would boost the award level to $7,000 over four years of attendance for students entering programs in these targeted STEM areas. In addition, since the first cohort took advantage of the SDOS eight years ago, the buying power of the $1,000 scholarship has decreased by 20.3% (U.S. Inflation Calculator, 2012). As a result, students are provided approximately $797 in actual purchasing power toward college expenses. A targeted effort on behalf of the state could leverage a needed increase in this successful scholarship program that also increases the number of STEM majors.

2. The state should incentivize higher education STEM degree production in fields that are aligned with the targeted industry sectors and STEM fields in general.

While changes to the funding structure for the Opportunity Scholarship program may be an initial step toward growing the number of STEM graduates, postsecondary institutions should also be encouraged to improve retention and completion of other STEM-interested students. State level work on the implications for a performance funding pool may be 27 useful for achieving this goal. During the 2012 legislative session, the regental system was awarded $3 million in one-time funds that were intended for distribution across the six campuses based on increases in the number of graduates. A model was developed where graduates were classified according to one of four possible degree levels: associate’s, bachelor’s, master’s/specialist’s, and doctorate/first professional, and according to one of two possible field types: regular or premium. Premium fields represent key workforce development priorities for the state. For example, a graduate from a premium field – such as engineering – was valued at an amount 3.00 times higher than an analogous graduate from a regular field. Using this approach, funds were allocated to the campuses and each institution was asked to invest these funds into initiatives that would further improve graduate production and rates. A similar approach may be useful by either targeting only STEM degree production, or rewarding institutions at a greater level for premium fields that are aligned with traditional STEM degrees. Consideration should also be given to higher-level awards for producing graduates in premium STEM fields that are aligned with the target industry sectors.

Refining the Role of Postgraduate Higher Education within The 2020 Vision Strategy

Action: At the system level, align, expand and create higher education postgraduate programs as needed to provide knowledge and talent to the target industry sectors.

This initiative is designed to provide knowledge and talent to the target industry sectors by focusing and considering expanding postgraduate programs currently producing target industry relevant degrees, by establishing new master’s level career path options to support growth in target sectors, and by developing an approach to tracking, assessing and modifying this alignment on a continuous basis.

A Note on Postgraduate Education and the Target Industry Sectors Within The 2020 Vision Strategy, South Dakota’s higher education institutions and the SDRICs will play a critical role in the production of the talent that will be responsive to target industry sectors growth and prosperity. For South Dakota postgraduate education to fulfill its role within this strategy it must accomplish three things.

1. It must have the capacity to produce graduates with the skill sets and knowledge that are aligned with what target industry sector employers need and value right now. 2. It must track, assess and modify this alignment on a continuous basis to support the target industry sectors on an on-going basis in a very dynamic economic environment. 3. Within this approach it needs to consider new educational options that allow students to see an immediate connection to these jobs and lifelong careers.

Guidelines for Aligning Higher Education within This Science and Innovation Strategy The Board of Regents in close coordination with the REACH Committee and other higher education institutions should consider approaches for realigning and expanding master’s and doctoral curricula and degrees to support the target industry sectors and their associated SDRICs and for tracking, assessing and modifying this alignment on a continuous basis. Because this initiative addresses a strategic focus on postgraduate education in support of the target industry sectors, it is recommended that the approach include discussions from all the stakeholders. The group should be anchored by 2020 Vision’s Target Industry Councils but should also include those in the academic and research institutions, those in state agencies, and those in business and commercial enterprises that will ultimately employ graduates and provide economic growth.

The following basic guidelines are suggested as a potential starting point.

Strategic planning The strategic planning necessary to ensure alignment between academic programs across the state should be closely tied to the expectations and achieved growth within the economic sectors. The 2020 Vision Target Industry Councils will be important participants in these discussions.

Assess the Current State of Higher Education Recognize the core missions of universities - Not all institutions in the state have the same roles in supporting the growth of the five economic sectors.

Review Courses and Curricula • Identify under-enrolled programs – Information generated through the Board of Regents’ annual program productivity review process may identify targets for realignment actions. • Peripheral programs - Some courses and curricula that are peripheral to the five economic sectors may be targets for redirection. • Continued emphasis should be placed on increasing investment in existing, relevant programs - Those academic programs that directly support the five target sectors may receive increased investments to support increasing numbers of institutions, faculty members, and the scope of activities. • Create new academic programs – If the current statewide curricula, even with redirection of some existing academic programs, are not capable of supporting the necessary growth of the five target sectors, new academic programs may be necessary.

Monitor Progress • The production of graduates should be compared with targets set in the strategic planning process. • Track employment and impacts on socio-economic growth - Placement and career paths of graduates should be tracked and information collected to calculate the return on investment in academic programs. 29

• Adjust - If graduation production and return on investment targets are not attained, the data will reveal academic programs that need adjustments.

Master’s Degrees: The Attractive, Expedient, Cost-Effective Option For the purposes of The 2020 Vision Strategy, it is recommended that the South Dakota Board of Regents, working closing with the REACH Committee, consider creating or expanding master’s degree programs that allow students to swiftly acquire new skills and perspectives in fields directly related to economic growth. Master’s programs of three types – research-based master’s degrees, project-based master’s degrees and professional science master’s (PSM) degrees may be an effective way to further support growth in the target sectors.

1. Research-based master’s degrees. Research-based master’s degrees typically include a mixture of graduate level course work and thesis research. The time to completion of a research-based master’s degree is typically 2 – 4 years, ending in a thesis. Students finishing a research-based master’s degree have the option to move directly into careers, or into research positions, such as those at research centers connected with or businesses in the targeted economic sectors. Students will also have the option of continuing their education by entering doctoral programs.

2. Project-based master’s degrees. Students finishing project-based master’s degrees take graduate level courses and work on projects that can include elements of research, or lead to products, such as computer models, management plans, or a prototype of a device. The project does not lead to a thesis. Students typically finish project-based master’s degrees in 2 – 3 years, are not likely to pursue a doctoral degree, and are immediately ready for the work place in the target industry sectors.

3. Professional Science Master’s degrees. Professional science master’s (PSM) degrees are a relatively new curricular tool, and allow students with interests in science and technology to complete academic programs that are similar in approach to a MBA degree. More than 60 universities across the country have created more than 90 PSM degrees. The 2020 Vision Target Industry Councils should be included in the planning process for the PSM programs.

Many PSM degrees that currently exist in other states are directly related to The 2020 Vision Strategy’s five target industry sectors (Table 3). These examples of PSM degrees, along with new degrees created specifically for the state provide a simple, cost-effective way to quickly produce curricula needed to support economic sectors.

The National Professional Science Master’s Association helps connect those from universities with stakeholders in business and government to create graduate degrees to fill specific needs of students seeking careers, and businesses seeking a larger work force. PSM degrees are designed to feed specific economic sectors, such as those target sectors identified within this strategy. Additional information on developing PSM programs is available. Endnote-F

Table 3. Economic Sectors and Professional Science Master’s Degree that Could Stimulate Development of a Workforce Contributing to Economic Development in the South Dakota Higher Education

Energy and Health and Advanced Agriculture and Information Environment Nutrition Materials Biotechnology Technology

Solar Eng. & Biomedical Nanoscience Biotechnology IT Security Commercialization Engineering

Electric Power Information Pharmacology Material Science Bioinformatics Engineering Systems

Pharmacology Computer Biofuels Composite Materials Genomics Engineering Networks

Adv. Energy Fuel Manufacturing Bioprocess Epidemiology Analytics Management Commercialization Engineering

Environmental Media Bioenergy Polymers Biomanufacturing Health Networking Geographic Environmental Crystal Nutrition Trade & Economics Information Science Manufacturing Systems Energy Economic & Metal Applied Food Safety Policy Manufacturing Statistics

Fossil Fuel Films & Membranes Technologies

Renewable Energy

Technologies

Battery Technology

Source: RTS, 2012. NOTE: PSM degrees listed include those existing in other states (italics), and traditional master’s degrees that exist in South Dakota (Bold). All the potential degrees are in STEM disciplines, and contribute directly to economic sectors with emerging research centers (adopted from the National PSM degree lists, 2012).

The Ph.D. Degree Vibrant Ph.D. programs are important signatures for a university system. As with all degrees in higher education, the creation of new Ph.D. degrees fosters academic progress and scholarship. Creating new university degrees at all levels occurs as the natural evolution of higher education and it is important to recognize that Ph.D. programs in South Dakota exist to accomplish goals other than aligning higher education with the five target sectors identified as a key to statewide economic growth. However, for the purposes of the analysis that informs this strategy, the roles of existing and potential Ph.D. degree programs are viewed in light of their likely capacity to support the innovation base and talent demands as the target sectors grow and develop.

It is recommended that the state consider the following strategies to enrich and expand its Ph.D. degree offerings to support the expansion of target industry sectors and the SDRICs.

New Ph.D. Degrees The Board of Regents, working in tandem with the REACH Committee, should continue to investigate opportunities to affiliate with the research infrastructure at other locations when considering new STEM Ph.D. programs. 2020 Vision Target Industry Council representatives from companies or subsectors with strong or emerging R&D needs and programs should be included in the Ph.D. degree enrichment planning discussions.

It is important to keep in mind that for new programs under the best of circumstances those contributions are at least ten years in the future. One option to consider that would lower the risk and accelerate the timing of contributions from new STEM Ph.D. programs is to use the South Dakota system to create the Ph.D. level courses, but to use research infrastructure at other locations. For example, the U.S. DOE National Laboratories, such as Oak Ridge National Laboratory, provide numerous fellowships for Ph.D. students who do their thesis research using Oak Ridge facilities. Even though the National Laboratories provide fellowships, the universities must provide the coursework, grants, and academic infrastructure necessary to attract the top faculty members and graduate students in the field.

Assess Modifications in Ph.D. Degree Programs The Board of Regents, working closely with the REACH Committee to link to advanced research and talent-related target industry sector needs and opportunities, should review the existing Ph.D. degree programs across institutions. The South Dakota Board of Regents system offers a number of related Ph.D. degrees in closely related fields, some of which are relatively new programs and each with small numbers of graduates. Aggregating these degrees into single degrees operated in a joint-campus framework may optimize use of resources, increase enrollments, create critical mass and visibility, and enhance communication and cooperation across the institutions.

Enhance Existing Ph.D. Degrees The Board of Regents and the individual higher education campuses, working with the REACH Committee and the GOED to connect to private sector support, should craft a program development plan to expand activity within existing Ph.D. degree programs.

Focused efforts to increase activity in existing degrees can be cost effective. Such efforts might include: 1) better marketing for the programs; 2) increased financial aid for students including providing health insurance as a graduate student recruitment tool; 3) hiring new faculty members to support the development of courses and research; 4) improving curricula; 5) working with the 2020 Vision Target Industry Councils to create research and development options with the private sector; and 6) working with the 2020 Vision Target Industry Councils to connect academic programs to internships in the private sector. Strategy Area: COMPANIES

Objective: Increase capacity to start and grow knowledge-based companies and help existing knowledge-based companies prosper and remain in South Dakota.

High impact, knowledge-based companies generate better paying jobs at faster rates than other companies. They are often the wealth generating engines within regional economies and are responsible for a disproportionate share of income and employment growth. They are the limiting factor in a successful economic strategy. These companies must start, grow and prosper in South Dakota for The 2020 Vision Strategy to work.

This strategy area completes The 2020 Vision Strategy’s innovation formula. It focuses on companies in which the new value and talent reside and addresses three needs: 1) access to capital, 2) fostering growth management experience in high impact companies, and 3) building design-centered manufacturing and product development capacity.

Access to Very Early Stage Capital and to Growth Financing: Filling the Gaps

Action: Implement an approach for providing greater access to capital within two well-defined market gaps – very early stage (pre-seed and proof of concept) and expansion stage for high growth, insufficiently collateralized companies.

Early Stage Funding Initiative Under the auspices of the Research and Commercialization Council within the Governor’s Office of Economic Development, a Risk Capital Steering Committee should be organized to develop and manage public/private partnerships to provide proof-of- concept funding for university-associated technological opportunities and pre-seed funding for qualifying very early stage companies.

The Proof of Concept Early Stage Funding Initiative should include the following elements:

• The funds should focus on innovation opportunities within the state’s universities, the SDRICs and the target industry sectors. • The funds should be awarded as investments, rather than grants, with fund repayment, equity or royalty-based return provisions to help replenish the fund over time. • The initiative should be designed to support South Dakota companies that have received SBIR Phase I or Phase II awards helping them to efficiently commercialize research results. • This funding should be available to universities, non-profit research institutions, private sector technology companies and entrepreneurs. • The key success indicator for these funds should not be financial return to the state. Instead, it should measure to what extent these investments boost the resource levels of their targets. This public investment is intended to produce a public good for South Dakota. In this case the goal is to build the capacity to compete in the knowledge-based, STEM-oriented economy. An indicator for this can be captured in a single measure – follow-on funding.

Addressing the Moderate Risk/Moderate Return Gap The Research and Commercialization Council’s Risk Capital Steering Committee should also be charged with developing a plan to provide financing to companies that are expanding in South Dakota but do not qualify for a traditional bank loan.

Most knowledge-based companies in South Dakota will not meet conventional venture capital investment criteria, which will limit their ability to grow and create good wage jobs for STEM graduates. If and when these companies need to expand and require working capital, their financing options are extremely limited. As part of its overall responsibilities, the GOED and Risk Capital Steering Committee should explore approaches to developing new programs to boost private sector capacity to make working capital loans for expansion of these high growth potential knowledge-based businesses.

Fostering Growth Management Experience in High Impact Companies

Action: Build teams of experienced mentors and student interns to assist companies – especially startup and early stage companies with high growth potential.

This action advances the overall strategy in three important ways.

1. It connects emerging companies with emerging talents. 34

2. It addresses the entrepreneurial culture issue within universities. 3. It will begin to build a base of scientific and technical entrepreneurs with high growth company experience. The program would capitalize on the success of the Dakota Roots and Dakota Seeds programs. The Dakota Roots program, which has successfully connected to former South Dakotans interested in returning to South Dakota, will be expanded to connect experienced entrepreneurs and business people as mentors with high growth potential South Dakota businesses and entrepreneurs. Dakota Seeds interns with appropriate skills and interests should be included as part of the team to provide not only valuable human capital but develop the entrepreneurial and management skills of the student intern. This program should provide a grant to employers that will cover one-half the internship for up to one year. The first placement priority would be STEM students enrolled in entrepreneurship courses. The initiative and teams should be integrated into the “proof of concept” investment program and business accelerator programs managed by business incubators throughout South Dakota. Its goal should be to develop ten to twenty mentor, intern and high growth business teams each year.

Design-Centered Manufacturing and Product Development Capacity

Action: Develop and launch South Dakota Innovation in Design – a statewide manufacturing and product development initiative.

Strengthening South Dakota’s design capacity represents an under-recognized and undervalued opportunity that will increase the competitiveness of South Dakota products, increase innovation and generate new business opportunities. Endnote-G

Because this design-focused product innovation initiative entails collaboration among private sector companies, all levels of postsecondary education, and state government, it is recommended that the implementation effort be guided by a steering subcommittee managed by the REACH Committee. The steering subcommittee should be comprised of individuals from private sector design-intensive firms and manufacturing companies, the South Dakota Board of Regents, the South Dakota Manufacturing Extension Partnership (MEP) Center (Manufacturing & Technology Solutions) and appropriate representatives from the universities, tribal colleges, and technical institutes. This initiative is comprised of three elements.

Establish Center(s) for Industrial Design that Reach Across College Disciplines and Functions The center or centers would be outward-focused in terms of engaging and serving companies but also transform educational programs by creating new curricula, establishing internships, and identifying design projects for teams of students. The state’s universities offer much underlying capacity here including USD’s College of Fine Arts, digital arts and design at DSU, graphic arts and design and manufacturing engineering

35 technology (for design-centered manufacturing) at SDSU and the strong advanced manufacturing orientation at SDSM&T. The state’s three tribal colleges should also factor into this initiative on the workforce side both in terms of design-centered manufacturing and product design.

Assist Small and Medium-Sized Companies to Incorporate Higher Levels of Design into Existing and New Products This may include the Manufacturing & Technology Solution partnering with universities, tribal colleges and technical schools to (1) apply “extension style” outreach to identify and work with firms; (2) help find opportunities to improve both product design and product presentation that will result in increased sales and new market niches; and/or (3) organize design networks among firms interested in developing new design capabilities. Networking among businesses will make design more accessible and affordable to smaller firms and spur innovation.

Create and Embed Improved Design and Creativity Curricula into Technical Programs at the State’s Four Technical Institutes and the Three Tribal Colleges, such as Engineering Technology, and Applied Design into Arts Programs The goal is to generate a pipeline of creative workers more adept at good design and with entrepreneurial skills for those who want to become independent designers or start small firms. Activities include: • Establishing innovation/design internships in small and medium-sized enterprises with high growth potential

• Organizing workshops and seminars to increase companies’ awareness and capacity to innovate, including beyond production and into marketing (packaging, web sites, etc.)

Management Matters

The goal of The 2020 Vision Strategy is to build science and technology capacity in South Dakota that will promote innovation, foster knowledge-based companies, generate higher wage jobs and build the capacity to sustain the prosperity they create. Realizing this goal will require focus, discipline and careful management of public resources.

Organizing, Funding and Delivering Science and Technology-Based Innovation Services at the State Level to Enable Regional Economies

While there is a system that is already at work in South Dakota, The 2020 Vision Strategy offers a plan to make this system work better – to focus its resources on a common goal and connect the existing programs and services at the state level to produce real impact in South Dakota’s regional economies and to build the capacity to do this on a continuous basis.

Action: Create a statewide alliance to advocate for funding and to manage The 2020 Vision Strategy on an ongoing basis.

The State of South Dakota should assign the task of promoting The 2020 Vision Strategy and monitoring its implementation to the South Dakota EPSCoR Advisory Committee (the REACH Committee). As the plan’s creator, the REACH Committee is well positioned to guide the strategy implementation effort. The committee has a statewide presence and is comprised of private sector, education, and government leaders committed to building and sustaining a more prosperous South Dakota in a knowledge-based, innovation-rich global economy. Given its mission, make-up and history, the REACH Committee is well positioned to become the managing entity for the plan and its wide array of services and resources over the seven-year period. Tracking 2020 Vision Progress and Impact

The goal of The 2020 Vision Strategy is to build science and technology capacity in South Dakota to promote innovation, foster knowledge-based companies,

generate higher wage jobs and build the capacity to sustain the prosperity they create.

Within a very dynamic economic environment, the ongoing capacity to 1) track progress toward objectives and gauge impact for each of the initiative’s objectives and 2) adjust programs and shift resources based on this information will play a large role in realizing this goal. Over the last two decades as states have grappled with implementing and evaluating their own knowledge-based economic development strategies, various assessment approaches for tracking this work also have continued to evolve. As a result, a range of metrics, indicators, indices, and rankings are now available from multiple sources (the National Science Foundation, the Information Technology and Innovation Foundation, the Milken Institute, etc.) for states to track progress and impact and their position relative to the U.S. as a whole and to other states.

The 2020 Vision Strategy proposes a simple and direct assessment approach. This section of the report offers a series of targeted outcomes and associated progress indicators for the overall strategy and for the initiatives within 2020 Vision’s three major strategy areas – Ideas, Talent and Companies.

This group of outcomes and indicators is intended as a starting point for a 2020 Vision Assessment function that should be incorporated into the ongoing implementation and management effort and then adjusted as more experience is gained.

The 2020 Vision Global Indicators: Overall Prosperity

Targeted Outcomes Indicators Source

U.S. Department of Commerce, Bureau of Economic Analysis, Per Capita Personal Regional Data. Increasing Incomes Income http://www.bea.gov/iTable/iTable.cfm?ReqID=70&step=1& isuri=1&acrdn=4.

U.S. Census Bureau, Current Population Survey, Annual Rising Standard of Median Household Social and Economic Supplements. Living for Families Income http://www.census.gov/hhes/www/income/data/statemed ian/.

U.S. Department of Commerce, Bureau of Economic Analysis, Per Capita Real Gross More Value Produced Regional Data. Domestic Product by the State Economy http://www.bea.gov/iTable/iTable.cfm?ReqID=70&step=1& (GDP) by State isuri=1&acrdn=1.

Strategy Area: Ideas

Strategic Investment in Targeted Research Areas and Assets

Targeted Outcomes Indicators Source

Growth in Academic Academic Science and National Science Foundation, Center for Science and Engineering Article Engineering Statistics, Science and Engineering Indicators Science and Output per $1 Million 2012. Engineering Research of Academic S&E R&D http://www.nsf.gov/statistics/seind12/c8/c8s5o49.htm.

Growth in Academic Academic Science and National Science Foundation, Center for Science and Science and Engineering R&D per Engineering Statistics, Science and Engineering Indicators Engineering Article $1,000 of Gross 2012. Production Domestic Product http://www.nsf.gov/statistics/seind12/c8/c8s4o46.htm.

The New Value Project: Innovation Capacity

Targeted Outcomes Indicators Source

R&D Activities: Business-Performed National Science Foundation, Center for Science and Growth in Private R&D as a Percentage of Engineering Statistics, Science and Engineering Indicators Industry R&D Private-Industry 2012. Endnote-H Output http://www.nsf.gov/statistics/seind12/c8/c8s4o45.htm. Non-Industry R&D Activities: Investment in R&D as a The 2012 State New Economy Index, Information Technology Growth in Non- Percentage of Gross and Innovation Foundation. http://www2.itif.org/2012-snei- Industry R&D State Product (State master-tables.pdf. (Federal, State, and Non-Profit) GDP) Growth in Patenting Patents Awarded per Activity Relative to 1,000 Individuals in National Science Foundation, Center for Science and Engineering Statistics, Science and Engineering Indicators Private Sector Science Science and 2012. and Engineering Jobs Engineering http://www.nsf.gov/statistics/seind12/c8/c8s5o51.htm. (New Product Innovation Occupations Indicator - General) Average Annual Growth in Innovation Federal Small Business National Science Foundation, Center for Science and Intensive Small Innovation Research Engineering Statistics, Science and Engineering Indicators Business Funding per $1M of 2012. (New Product Innovation Gross Domestic http://www.nsf.gov/statistics/seind12/c8/c8s6o55.htm. Indicator - Small Companies) Product

Strategy Area: Talent

Create a Culture of Entrepreneurship on Campus

Targeted Outcomes Indicators Source Academic Patents Growth in Academic National Science Foundation, Center for Science and Awarded per 1,000 Intellectual Property Engineering Statistics, Science and Engineering Indicators Science and Development 2012. Engineering Doctorate http://www.nsf.gov/statistics/seind12/c8/c8s5o50.htm. Activities Holders in Academia

Promote STEM Study at all Education Levels

Targeted Outcomes Indicators Source The Proportion of a School: State's Eighth Grade National Science Foundation, Center for Science and Higher Levels Math Students in Public Engineering Statistics, Science and Engineering Indicators and Science Proficient Schools that Has Met 2012. Students in Middle or Exceeded the http://www.nsf.gov/statistics/seind12/c8/c8s1o6.htm. School Proficiency Standard in Mathematics Bachelor's Degrees in National Science Foundation, Center for Science and Science and Engineering Statistics, Science and Engineering Indicators Engineering Conferred School: 2012. per 1,000 Individuals Greater Numbers and http://www.nsf.gov/statistics/seind12/c8/c8s2o17.htm. 18–24 Years Old More Emphasis on Bachelor’s Degree in Science and National Science Foundation, Center for Science and Engineering Degrees Science and Engineering Statistics, Science and Engineering Indicators as a Percentage of Engineering 2012. Higher Education http://www.nsf.gov/statistics/seind12/c8/c8s2o19.htm. Degrees Conferred

Work: National Science Foundation, Center for Science and Technical Workers as a Growing Share of Engineering Statistics, Science and Engineering Indicators Percentage of the Technical Workers 2012. Workforce within the Workforce http://www.nsf.gov/statistics/seind12/c8/c8s3o38.htm. Work: Growing Share of Individuals in Science National Science Foundation, Center for Science and People Employed in and Engineering Engineering Statistics, Science and Engineering Indicators Science and Occupations as a 2012. Engineering Percentage of the http://www.nsf.gov/statistics/seind12/c8/c8s3o33.htm. Occupations within the Workforce Workforce

Refining the Role of Postgraduate Higher Education within The 2020 Vision Strategy

Targeted Outcomes Indicators Source

Science and National Science Foundation, Center for Science and Engineering School: Engineering Statistics, Science and Engineering Graduate Students Greater Numbers and Indicators 2012. per 1,000 Individuals http://www.nsf.gov/statistics/seind12/c8/c8s2o21.htm. More Emphasis on 25–34 Years Old Advanced Science and Engineering Advanced Science National Science Foundation, Center for Science and and Engineering Degrees Engineering Statistics, Science and Engineering Degrees as a Indicators 2012. Percentage of S&E http://www.nsf.gov/statistics/seind12/c8/c8s2o22.htm. Degrees Conferred

School: Science and National Science Foundation, Center for Science and More Emphasis on Engineering Doctoral Engineering Statistics, Science and Engineering Science and Degrees as a Indicators 2012. Engineering Doctoral Percentage of S&E http://www.nsf.gov/statistics/seind12/c8/c8s2o24.htm. Degrees Degrees Conferred Employed Science National Science Foundation, Center for Science and and Engineering Engineering Statistics, Science and Engineering Work: Doctorate Holders as Growing Share of Indicators 2012. a Percentage of the http://www.nsf.gov/statistics/seind12/c8/c8s3o34.htm. Employed Science Workforce and Engineering Science and Doctorate Holders Engineering National Science Foundation, Center for Science and within the Workforce Doctorates Conferred Engineering Statistics, Science and Engineering per 1,000 Employed Indicators 2012. S&E Doctorate http://www.nsf.gov/statistics/seind12/c8/c8s5o47.htm. Holders*

*This indicator represents the rate at which the states are training new S&E doctorate recipients for entry into the workforce. High values indicate relatively large production of new doctorate holders compared with the existing stock of employed doctorate holders. States with relatively low values may need to attract S&E doctorate holders from elsewhere to meet the needs of local employers.

Strategy Area: Companies

This strategy area features the following initiatives:

• Access to Very Early Stage Capital and to Growth Financing: Filling the Gaps • Fostering Growth Management Experience in High Impact Companies • Design-Centered Manufacturing and Product Development Capacity

All three initiatives are designed to produce the following outcomes:

Targeted Outcomes Indicators Source

Greater Numbers and a High-Technology National Science Foundation, Center for Science and Larger Share of High Establishments as a Engineering Statistics, Science and Engineering Indicators Technology Companies Percentage of all 2012. within the South Business http://www.nsf.gov/statistics/seind12/c8/c8s6o52.htm. Dakota Economy Establishments

Net High-Technology National Science Foundation, Center for Science and A Higher Rate of High Business Formations Engineering Statistics, Science and Engineering Indicators Tech Business as a Percentage of all 2012. Formation Business http://www.nsf.gov/statistics/seind12/c8/c8s6o53.htm. Establishments

A Larger Employment Employment in High- National Science Foundation, Center for Science and Base within the South Technology Engineering Statistics, Science and Engineering Indicators Dakota Economy Establishments as 2012. Generated by Growing Percentage of Total http://www.nsf.gov/statistics/seind12/c8/c8s6o54.htm. High Tech Companies Employment More High Technology Venture Capital Deals National Science Foundation, Center for Science and South Dakota as a Percentage of Engineering Statistics, Science and Engineering Indicators Companies Receiving High-Technology 2012. Venture Capital Business http://www.nsf.gov/statistics/seind12/c8/c8s6o57.htm. Funding Establishments *This Indicator Represents the Extent to Which High-Technology Companies in a State Receive Venture Capital Investments.

2020 Vision Implementation Notes This section of the plan addresses the timing, sequencing, and responsibilities for implementing the recommendations within the eight major strategic initiatives that define The 2020 Vision Strategy. While the information presented here will no doubt be modified each year that the plan is in effect as it adapts to real events and developments, it is intended as the starting point for organizing and launching the implementation effort.

2020 Vision Management

Assign formal responsibility for promoting The 2020 Vision Strategy and managing the overall implementation effort to the South Dakota EPSCoR Advisory Committee (the REACH Committee).

Primary Responsibility: South Dakota Governor’s Office Timing: First Meeting, March 2013

Strategy Area: Ideas

Ideas Initiative 1: Strategic Investment in Research Areas and Assets Aligned with Target Industry Sectors Research and development-related grants, investments and initiatives intended to build innovation capacity or yield commercially promising outcomes should focus on the following distinctive South Dakota high value R&D areas and innovation enabling assets:

• Advanced Manufacturing and Materials • Energy and Environment • Human Health and Nutrition (including Medical Technology) • Information Technology/Cyber Security/Information Assurance • Plant and Animal Bioscience • Underground Science and Engineering • Visualization (from the molecular level to global systems)

Primary Responsibility: Board of Regents Collaborators: South Dakota colleges and universities: President, Vice President for Research Timing: Beginning June 2013 and continuing throughout the 2013 – 2020 period. As this initiative calls for an on-going strategic emphasis applying for and obtaining grants, making and receiving investments, and launching initiatives in the seven high value areas, this activity should formally commence for all areas as soon as the REACH Committee is organized to monitor the effort.

Ideas Initiative 2: 2020 Vision New Value Project Senior Faculty Science and Innovation Professorships For planning purposes, twelve to eighteen months is used as the time period to establish, fund and recruit for the position and procure funding for associated core facilities and equipment needs. Primary Responsibility: The REACH Committee Collaborators: Board of Regents and Governor’s Office of Economic Development (GOED) Timing: Preparation for the first position scheduled to begin in June 2013 with preparations for the four subsequent professorships beginning at six-month intervals.

South Dakota Research and Innovation Centers (SDRICs) In view of the planning needs (beginning with the 2013 SD Research Infrastructure Center Program Request for Proposal (RFP)) and the funding requirements, for the purposes of this implementation effort the first three SDRICs are sequenced in over a five-year period. Primary Responsibility: Governor’s Office of Economic Development Collaborators: REACH Committee, the Board of Regents and the associated Target Industry Advisory Council Timing: Three SDRICs over a five-year period. This implementation period may be expanded or compressed once the process for establishing the centers has been vetted. The order in which the SDRICs are established may be decided through an RFP process or otherwise be determined by the Governor’s Office of Economic Development, REACH Committee, Board of Regents planning group.

Target Sector Advisory Councils Establishing the Target Sector Advisory Councils does not need to be synchronized with the establishment of the SDRICs. In addition to providing input into the SDRIC research and development agendas, the Target Sector Advisory Councils are also designed to deliver the industry perspective on competiveness issues to the economic development community, government, workforce development actors as well as sector-specific research needs and opportunities to the university community. In view of the above and in view of the importance of the target industry sectors to the state’s economic future, the Advisory Councils should be established as soon as possible. Primary Responsibility: Governor’s Office of Economic Development Collaborators: REACH Committee Timing: Beginning in June 2013, form and convene a council for its first meeting every 60 days. All five councils will be up and running by the end of the first quarter of 2014. The sequence should be established by the GOED and coordinated with SDRIC development plans.

On-Campus Innovation Orientation wNew EPSCoR Program Guidelines for Technology Innovation Opportunities Primary Responsibility: South Dakota EPSCoR Program Collaborators: REACH Committee Timing: June 1, 2013 – September 1, 2013 wIndustry Partnering Functions within South Dakota Colleges and Universities Primary Responsibility: Each South Dakota college and university Collaborators: Governor’s Office of Economic Development, REACH Committee Timing: June 1, 2013 – January 1, 2014

Strategy Area: Talent

Talent Initiative 1: On-Campus Entrepreneurial Culture Faculty Release Time for Entrepreneurial Ventures Primary Responsibility: Each South Dakota college and university Collaborators: Board of Regents Timing: June 1, 2013 – September 1, 2013

Entrepreneurs in Residence Primary Responsibility: REACH Committee Collaborators: Governor’s Office of Economic Development, participating universities, Target Industry Advisory Councils Timing: September 1, 2013 – June 1, 2014

On-Campus Polices, Training and Systems to Facilitate Entrepreneurship, Commercialization, and Intellectual Property Development Primary Responsibility: Participating universities Collaborators: Board of Regents Timing: June 1, 2013 – January 1, 2014

Talent Initiative 2: Promote STEM Study at All Educational Levels Expand Successful Middle and High School STEM Activities Primary Responsibility: Department of Education Collaborators: A REACH Committee subcommittee comprised of stakeholders throughout the state Timing: Ongoing function beginning September 1, 2013

Stronger Links Among All Postsecondary Institutions to Ease Transition for STEM Interested Students Primary Responsibility: Board of Regents Collaborators: A REACH Committee subcommittee comprised of stakeholders from the regental institutions, private colleges and universities, the tribal colleges and the technical institutes as well as students Timing: September 1, 2013 – January 1, 2014

Incentives to Encourage Students to Pursue STEM Degrees and Rewards to Institutions for Producing Graduates in High Need Areas Primary Responsibility: Board of Regents Timing: Targeted Increased Opportunity Scholarship Funding – March 1, 2013 – September 1, 2014; Expanding Performance Funding Pool to Target STEM Degree Production – June 1, 2013 – February 1, 2014

Talent Initiative 3: Refine the Role of Postgraduate Education On-Going Approach for Aligning Higher Education within this Science and Innovation Strategy Primary Responsibility: Board of Regents Collaborators: The REACH Committee Timing: September 1, 2013 – January 1, 2014

Consider Role of Master’s Degree Programs to Produce Talent as Target Industry Sectors Expand Primary Responsibility: The Board of Regents Collaborators: REACH Committee Timing: Recommendations and Plan for First Phase – September 1, 2013 – January 1, 2014

Explore Modifications in Ph.D. Degree Programs with Small Numbers of Graduates in Closely Related Fields Across Institutions Primary Responsibility: Board of Regents Collaborators: REACH Committee Timing: Recommendations and Plan for First Phase – September 1, 2013 – January 1, 2014

Enhance Activity in Existing Ph.D. Programs Primary Responsibility: The Board of Regents and the individual higher education campuses Collaborators: REACH Committee Timing: Program Development Plan – September 1, 2013 – January 1, 2014

Strategy Area: Companies

Companies Initiative 1: Access to Capital Early Stage Funding Initiative Primary Responsibility: Governor’s Office of Economic Development Timing: Operating Plan Prepared by Risk Capital Steering Committee – June 1, 2013 – October 1, 2013

Addressing the Moderate Risk/Moderate Return Growth Financing Gap Primary Responsibility: Governor’s Office of Economic Development Timing: Operating Plan Prepared by Risk Capital Steering Committee – June 1, 2013 – October 1, 2013

Companies Initiative 2: Fostering Growth Management Experience in High Impact Companies Primary Responsibility: Governor’s Office of Economic Development Timing: New Program Operating Plan – June 1, 2013 – October 1, 2013; Program Launch, June 1, 2014

Companies Initiative 3: Design-Centered Manufacturing and Product Development Capacity Primary Responsibility: Innovation in Design REACH Committee Subcommittee Collaborators: Board of Regents, Manufacturing Technology Solutions (SD MEP Center), appropriate representatives from the universities, tribal colleges, technical institutes and private sector design-intensive firms and manufacturing companies Timing: Development of a Design in Industry Operating Plan that Integrates All Three Elements, May 1, 2013 – January 1, 2014

Establish Center(s) for Design in Industry that Reach across College Disciplines and Functions Timing: Design in Industry Center Begins Operations, January 1, 2015

Assist Small and Medium-Sized Enterprises (SMEs) to Incorporate Higher Levels of Design into Existing and New Products Timing: Launch of SME Design Assistance Program, June 1, 2014

Create and Imbed Improved Design and Creativity Curricula into Technical Programs at the State’s Four Technical Institutes and the Three Tribal Colleges Timing: Launch of Technical Program Design and Creativity Curricula, September 1, 2014

Figure 3: 2020 Vision Implementation Plan Summary

Source: RTS, 2013.

Appendix A

Calibrating South Dakota’s Innovation Capacity

The information presented in Table A-1 offers a bird’s-eye view of South Dakota’s innovation capacity position within the U.S. and relative to a group of benchmark states. The table’s eight elements as a group and individually are not intended to represent a comprehensive innovation capacity statement for South Dakota; but rather a series of focused innovation capacity “soundings” to deliver a sense of where the state stands within a national context.

The states that comprise the benchmark group were selected for diverse but specific reasons. Colorado, Iowa, Kansas, Nebraska, North Dakota, and Wyoming are all in the same Economic Development Administration (EDA) region. Within that group, Iowa, Nebraska, and North Dakota share a border with South Dakota and are often included in other peer group comparisons. Wyoming also shares a border with South Dakota. Its economy is substantially different from South Dakota because it is dominated by extraction industries; however, it represents an interesting data point for comparison purposes because it is the least populated state in the country. Kansas is included as a Great Plains state with a long-standing state investment profile in science and technology- based economic development. Arkansas and Kentucky are included as relatively poor rural states with several decades of state-based science and technology-based investment history and with newly minted state science and technology strategies. North Carolina is included as an example of a poor rural state with per capita and median income rankings at the very bottom that used strategic investments in science and technology-based economic development and higher education to transform a large portion of its economy and, over a period of several decades, substantially boost its median and per capita income ranking among the states.

National rankings among the fifty states for these nine states plus South Dakota for eight innovation capacity indicators are presented in Table A-1. As mentioned above, these specific indicators were selected to deliver a sense of where the state stands within a national context. Together they can be viewed as at least part of a baseline from which The 2020 Vision Strategy impacts can be assessed over the coming years. The eight indicators that define this innovation capacity profile include three different normalized R&D related measures – support for Academic R&D on the higher education side, Industry R&D as a Percent of Private Industry Output, and Average Annual SBIR Funding on the private sector side. The bundle includes two different intellectual property creation views as measured by patent production. One view, Patents per 1,000 Individuals in Science and Engineering Occupations, is from the private sector perspective. The other view, Patents per 1,000 Science and Engineering Doctorate Holders in Academia, is from the higher education perspective. The profile also includes two measures of the presence of knowledge-based activity and capacity within the South Dakota economy – Individuals in Science and Engineering Occupations as a Percent of the Workforce and High Tech Establishments as a Percent of All Business Establishments. The final indicator in the profile is perhaps the most basic and most important measure – Median Household Income. 49

Table A-1: Innovation Capacity Indicators

Average*Annual* Patents*per* Patents*per* Individuals*in* HighATech* Academic*R&D* Industry*R&D*as* Federal*SBIR* 1,000* 1,000*Science*&* Science*&* Establishments* per*$1000*of* Percent*of* Funding*per* Individuals*in* Engineering* Engineering* Median* as*Percent*of*All* State State*Gross* PrivateA $1M*of*State* Science*&* Doctorate* Occupations*as* Household* Business* Domestic* Industry* Gross*Domestic* Engineering* Holders*in* Percent*of* Income*(2011) Establishments* Product*(2009) Output**(2008) Product*(2008A Occupations* Academia* Workforce* (2008) 2010) (2010) (2008) (2010) Arkansas 43 41 28 46 13 44 49 31 Colorado 19 19 3 23 28 4 8 2 Iowa 20 27 44 17 14 37 24 48 Kansas 28 25 45 26 47 26 35 22 Kentucky 30 36 33 31 25 41 44 43 Nebraska 15 33 39 39 10 29 17 45 North*Carolina 5 20 21 18 16 17 40 24 North*Dakota 3 30 32 33 40 33 18 50 South*Dakota 40 44 49 42 48 40 33 49 Wyoming 48 47 38 32 42 34 16 20

*Private-industry output is the portion of state gross domestic product contributed by state businesses. Sources: National Science Foundation, National Center for Science and Engineering Statistics, State Science and Engineering Profile, 2012; U.S. Census Bureau, Current Population Survey, 2010, 2011, and 2012 Annual Social and Economic Supplements.

As shown above, the Median Household Income ranking is well above the other rankings for the other indicators, pointing to the health of South Dakota’s current economy. However, South Dakota’s rankings are consistently in the 40s for those “lean forward” indicators that are typically held to provide clues for the strength of the state’s future innovation capacity – normalized measures of academic and industry R&D, Small Business Innovation Research (SBIR) funding levels, patents, presence of STEM-related occupations and of high tech businesses within the economy.

On the positive side of the ledger, when South Dakota’s academic science and engineering R&D expenditures are examined over the 1998-2009 period a much brighter trend emerges.

As depicted below in Figure A-1, academic science and engineering R&D in South Dakota has surged since 2000. Although the state has a way to go before it reaches the national level, it has gained a good bit of ground. In this very dynamic national R&D support environment just about every state has a science and technology plan and strategy. South Dakota will need to be very strategic about support for graduate education and research if these activities are to be funded at a level that will allow them to get to national norms and to generate large-scale economic impact.

Figure A-1. Academic Science and Engineering R&D per $1,000 of GDP

Notes: Academic R&D reported for institutions with R&D over $150,000. GDP reported in current dollars. Source: National Science Foundation, National Center for Science and Engineering Statistics, Academic Research and Development Expenditures (various years); Bureau of Economic Analysis, Gross Domestic Product data.

Appendix B

Development of Target Industry Sectors

Included in this appendix is the analysis of the South Dakota economy used to determine a set of target sectors. These sectors are examined in relationship to the higher education system and its research assets, the EPSCoR program process, and the sector’s place in the South Dakota economy.

How the Target Industry Sectors in South Dakota were Selected

The targeting of specific industry sectors or economic clusters is a fundamental part of economic development policy within the United States and virtually every state, including South Dakota, has an officially recognized set of targets. This analysis acknowledges and considers the state targets as well as targets that have been set by regions and metropolitan areas within the state. The different purposes of this report mean that there is an amplified focus on technology, postgraduate education, and STEM-related sectors and industries as opposed to a broader set of targets.

As a point of comparison, the state’s current targets 6 are:

o Bioscience o Advanced Manufacturing o Financial Services o Value-added Agriculture o Professional Business Services o Renewable Energy o Shooting, Hunting & Outdoors

It should be noted that the definition of sector used in this report is broad in that it includes the various supply chain inputs into the final product. For example, value-added agriculture will include various supplies used on farms, the supply chain for farm equipment, and the equipment and sectors used in processing raw agricultural products into higher value-added products. This is somewhat similar to the definition used in economic cluster analysis. It may be helpful to think of the target sectors more as industries that include a number of sectors.

6 Governor’s Office of Economic Development; “Key Industries”; http://www.sdreadytowork.com/industries.aspx (accessed January 7, 2013).

Target Industry Sector Criteria

The analysis started with the development of criteria that are used in filtering sectors. The criteria were used as a guide, not as an artificial and automatic screening system. Instead, professional judgment was also used to balance the findings on the various criteria with the broad goals of the project. The objective was to answer the following question: “What high growth and what core industry STEM-oriented sectors are the most likely candidates to drive a robust, higher value future South Dakota economy?”

Criteria

2. The sectors demonstrate potential impact across the state including urban, rural, and Native American areas.

3. The target sectors demonstrate strong or very promising showings in South Dakota in various economic measures:

o Sector Employment Levels - Is the sector a significant economic engine within the state? o Sector Employment Growth - Has the sector experienced employment growth? o Sector Competitiveness - Has the sector shown relative competitiveness in the state? Shift share analysis is employed as a competitiveness measure to adjust employment growth by overall national employment growth and national employment growth within the sector to see if the sector in the state outperformed expectations.7 o Sector Employment Concentration – Using location quotients, this analysis determines if the sector in South Dakota is relatively more concentrated than in the nation. For example, the film industry in Los Angeles and the financial sector in New York City are strongly concentrated relative to the rest of the country. South Dakota is similarly concentrated in agriculture.8

7 “Shift share is a standard regional analysis method that attempts to determine how much of regional job growth can be attributed to national trends and how much is due to unique regional factors. Shift share helps answer why employment is growing or declining in a regional industry, cluster, or occupation.” http://www.economicmodeling.com/2011/12/05/understanding-shift-share-2/ 8 This analysis scans the regional economy for “above average” concentrations of employment or establishments in a particular industry or industry segment. At the regional level these measures, which are called location quotients, can indicate relative areas of specialization within the economy. Location quotients are typically calculated on the basis of employment concentrations or numbers of establishments. If employment is used as the relevant variable, the location quotient is calculated by measuring the percentage of a region’s total employment that is found within a particular industry, compared to (divided by) the same ratio for the nation as a whole. If the resulting ratio is greater than one, it can be assumed that the industry is relatively specialized in that industry. The higher that number, the greater the location quotient, and the more significant the regional specialization.

o Sector Technological Focus - Is the sector based on technology and value-added processes? o Sector Wages - Does the sector have higher than average wages compared to the overall economy?

4. The sectors are built on a portfolio strategy that balances levels of risk and reward:

o Mature industries that have a long history within the state’s economy such as agriculture o Established industries that are significant parts of the South Dakota economy such as financial services o Emerging industries that are still small but demonstrate long-term potential such as information technology

The Target Industry Sectors

Based on the analysis of the state’s economy and the criteria defined above, the following five sectors were presented to and adopted by the REACH Committee at its October 18, 2012 meeting:

o Value-Added Agriculture and Agribusiness o Energy and Environment o Materials and Advanced Manufacturing o Human Health and Nutrition o Information Technology/Cyber Security/Information Assurance

A Note on Bioscience and the Target Industry Sectors: The bioscience and biotechnology industry, much like information technology, has become ubiquitous. Bioscience applications function as enabling technology or are integrated into products, processes and services across a multitude of industrial sectors throughout the U.S. In order to advance a tightly defined strategic focus, this analysis elected to concentrate on industry application and to subsume the many and varied bioscience applications within the above listed target industry sectors. Often when “bioscience” is identified as a target industry the focus is dominated by human therapeutics and diagnostics. In South Dakota’s case, while this is very important, there are numerous other current and potential applications in the other four sectors. From this strategy’s perspective, it is easier and more effective to address the role of bioscience knowledge and technology within a specific segment within a specific sector; for instance, crop resiliency in value-added agriculture, biofuels within the energy and environment sector, biometric technologies for personal identification and security within the information technology sector, tissue healing with human health target industry sector and so on. The target industry sector analysis, based on the most recent available data, is presented below.9

9 The economic analysis presented in this section uses a data system developed by Econometric Modeling Specialists International, (EMSI). The system combines employment data from the federal Quarterly Census of Employment and

Value-Added Agriculture and Agribusiness South Dakota has long relied on a very strong and globally competitive agricultural sector driven by climate, location, transportation, and other advantages. The agricultural and agribusiness industry has changed dramatically over the years and the state’s industry has successfully responded to those changes.

As noted above, the full range of businesses that are part of the sector are included-from wholesale providers of equipment, seed and fertilizers through production to processing and distribution. Of the target sectors, value-added agriculture and agribusiness is the most broadly distributed across the state. This is truly a statewide industry.

Figure B-1and Tables B-1 through B-5 display data on the 2006-2011 performance of the industry and projections through 2016. The data demonstrate that the industry is large and highly concentrated, as measured by location quotient,10 and is distributed across the state. It should also be noted that employment declined from 2006-2011 and is not expected to rebound from 2011-2016. In general, earnings are also relatively low at $35,300, below the state average of $37,600; however, there are numerous subsectors (6 digit NAICS codes), especially in processing and manufacturing-related activities that are much higher than the state average.

The value-added agriculture and agribusiness sector’s size, presence across the state, historical importance, and strong relationship to the state’s university system render it a viable target industry sector. In addition to its size and historical economic importance, the sector will be important in the future in view of its potential role in renewable energy production, value-added manufacturing, and bioscience applications. Other potential sources for economic growth within the sector are presented below. It is important to note that 1) even within what are considered “traditional” subsectors such as crop production or farm management the level of technology and knowledge intensity is often very high and 2) this sector should have significant overlap with the other four target sectors (including even information technology).

o Supply chain opportunities § Pre- and post-crop production § Farm machinery manufacturing o Technical services § Farm management § Environmental, scientific and technical services

Wages (QCEW) produced by the Department of Labor with total employment data in Regional Economic Information System (REIS) published by the Bureau of Economic Analysis (BEA), augmented with County Business Patterns (CBP) and Nonemployer Statistics (NES) published by the U.S. Census Bureau. Projections are based on the latest available industry data, 15-year past local trends in each industry, growth rates in statewide and (where available) sub-state area industry projections published by individual state agencies, and (in part) growth rates in national projections from the Bureau of Labor Statistics. The system is continuously updated by EMSI. 10 As previously mentioned, a location quotient (LQ) is a ratio measure of the concentration of a sector or occupation in a regional economy compared to the national economy. A LQ above 1 indicates that the region has a higher concentration than the nation as a whole. For example a LQ=2 means the state has double the concentration found in the U.S. economy.

o Small-scale manufacturing § Breweries and wineries § Specialty foodstuffs – cheese, etc. o Renewable energy feedstock

Figure B-1. Employment Growth in Value-Added Agriculture and Agribusiness 2006- 2016

Source: Economic Modeling Specialists International, (EMSI), 2012.

Table B-1. Value-Added Agriculture and Agribusiness NAICS Codes Sorted by 2011 Employment Levels

2011& NAICS& Competitive& Most& Change& %&Change& 2011& Description 2006&Jobs 2011&Jobs 2016&Jobs Location& Code Effect&11<16 Competitive* 11<16 11<16 Earnings Quotient 112000 Animal&Production 21,081 20,683 19,834 &(707) <3% &(849) &(4%) 5.62 $30,379 111000 Crop&Production 11,102 7,908 7,158 &(326) <4% &(750) &(9%) 1.76 $26,357 311611 Animal&(except&Poultry)&Slaughtering 3,345 3,715 3,782 37 1% 67 2% 8.17 $48,861 424510 Grain&and&Field&Bean&Merchant&Wholesalers 1,738 2,048 2,092 42 2% 44 2% 12.61 $53,892 424910 Farm&Supplies&Merchant&Wholesalers 1,342 1,895 2,152 223 12% 257 14% 5.37 $54,329 423820 Farm&and&Garden&Machinery&and&Equipment&Merchant&Wholesalers 1,570 1,815 2,031 209 12% 216 12% 5.87 $59,244 424520 Livestock&Merchant&Wholesalers 1,153 1,151 1,072 20 2% &(79) &(7%) 17.67 $14,785 115115 Farm&Labor&Contractors&and&Crew&Leaders 1,047 1,129 1,227 60 5% 98 9% 1.37 $17,380 311612 Meat&Processed&from&Carcasses 776 1,125 1,403 215 19% 278 25% 3.21 $37,053 115210 Support&Activities&for&Animal&Production 761 940 1,037 20 2% 97 10% 2.88 $28,000 115112 Soil&Preparation,&Planting,&and&Cultivating 591 863 1,000 11 1% 137 16% 3.91 $35,008 325193 Ethyl&Alcohol&Manufacturing 521 734 889 13 2% 155 21% 22.29 $70,050 311513 Cheese&Manufacturing 602 695 830 105 15% 135 19% 5.31 $48,968 333111 Farm&Machinery&and&Equipment&Manufacturing 705 678 643 &(16) <2% &(35) &(5%) 3.60 $48,107 114210 Hunting&and&Trapping 464 529 633 82 16% 104 20% 10.84 $4,351 115114 Postharvest&Crop&Activities&(except&Cotton&Ginning) 264 471 618 89 19% 147 31% 1.63 $17,472 311615 Poultry&Processing 611 453 477 17 4% 24 5% 0.65 $40,607 311821 Cookie&and&Cracker&Manufacturing 498 447 469 57 13% 22 5% 4.46 $49,745 113310 Logging 298 261 283 36 14% 22 8% 0.79 $36,777 311412 Frozen&Specialty&Food&Manufacturing 303 245 224 &(26) <11% &(21) &(9%) 1.36 $57,689 311119 Other&Animal&Food&Manufacturing 329 233 184 &(39) <17% &(49) &(21%) 2.24 $60,970 311111 Dog&and&Cat&Food&Manufacturing 146 204 204 &(5) <2% 0 0% 3.06 $53,381 115113 Crop&Harvesting,&Primarily&by&Machine 168 202 215 14 7% 13 6% 4.09 $23,897 311511 Fluid&Milk&Manufacturing 208 180 164 &(13) <7% &(16) &(9%) 1.09 $55,188 115116 Farm&Management&Services 83 176 224 35 20% 48 27% 2.02 $18,649 311812 Commercial&Bakeries 313 153 78 &(71) <46% &(75) &(49%) 0.36 $57,565 333112 Lawn&and&Garden&Tractor&and&Home&Lawn&and&Garden&Equipment&Manufacturing 112 147 202 65 44% 55 37% 2.58 $53,962 312111 Soft&Drink&Manufacturing 148 146 147 1 1% 1 1% 0.61 $56,643 311811 Retail&Bakeries 128 141 146 10 7% 5 4% 0.57 $13,340 114111 Finfish&Fishing 0 117 112 5 4% &(5) &(4%) 0.92 $2,941 115310 Support&Activities&for&Forestry 108 99 100 &(2) <2% 1 1% 0.90 $18,628 311222 Soybean&Processing 52 87 92 21 24% 5 6% 4.28 $55,918 311941 Mayonnaise,&Dressing,&and&Other&Prepared&Sauce&Manufacturing 29 80 122 40 50% 42 53% 1.76 $58,032 312130 Wineries 43 79 102 11 14% 23 29% 0.48 $27,583 311999 All&Other&Miscellaneous&Food&Manufacturing 39 66 65 4 6% &(1) &(2%) 0.72 $35,684 311991 Perishable&Prepared&Food&Manufacturing 49 56 53 &(11) <20% &(3) &(5%) 0.48 $26,852 311514 Dry,&Condensed,&and&Evaporated&Dairy&Product&Manufacturing 47 46 <10 &(44) <96% << << 1.03 $45,719 312113 Ice&Manufacturing 40 45 47 2 4% 2 4% 1.57 $35,888 311330 Confectionery&Manufacturing&from&Purchased&Chocolate 31 42 49 9 21% 7 17% 0.40 $16,319 424590 Other&Farm&Product&Raw&Material&Merchant&Wholesalers 52 23 20 &(2) <9% &(3) &(13%) 0.74 $66,833 113210 Forest&Nurseries&and&Gathering&of&Forest&Products 12 23 21 &(4) <17% &(2) &(9%) 1.57 $34,328 325311 Nitrogenous&Fertilizer&Manufacturing 15 22 29 6 27% 7 32% 0.89 $327,336 311340 Nonchocolate&Confectionery&Manufacturing <10 21 28 9 43% 7 33% 0.37 $29,903 311919 Other&Snack&Food&Manufacturing 26 19 12 &(8) <42% &(7) &(37%) 0.17 $28,032 325314 Fertilizer&(Mixing&Only)&Manufacturing 22 19 25 5 26% 6 32% 0.68 $79,081 311421 Fruit&and&Vegetable&Canning 14 19 20 2 11% 1 5% 0.09 $25,755 311830 Tortilla&Manufacturing 0 18 15 &(5) <28% &(3) &(17%) 0.31 $77,918 312120 Breweries 0 11 17 7 64% 6 55% 0.12 $64,543 Total 51,273 50,280 50,357 201 0% 88 0% $35,293 Source: EMSI and RTS, 2012. Note: Sum of columns does not necessarily match total due to suppressed data at the sector level. *As percentage of 2011 employment.

Table B-2. Value-Added Agriculture and Agribusiness by Percent Change of Jobs, 2011-2016

NAICS& Change& %&Change& Description 2006&Jobs 2011&Jobs 2016&Jobs Code 11;16 11;16 312120 Breweries 0 11 17 6 55% 311941 Mayonnaise,&Dressing,&and&Other&Prepared&Sauce&Manufacturing 29 80 122 42 53% 333112 Lawn&and&Garden&Tractor&and&Home&Lawn&and&Garden&Equipment&Manufacturing 112 147 202 55 37% 311340 Nonchocolate&Confectionery&Manufacturing <10 21 28 7 33% 325311 Nitrogenous&Fertilizer&Manufacturing 15 22 29 7 32% 325314 Fertilizer&(Mixing&Only)&Manufacturing 22 19 25 6 32% 115114 Postharvest&Crop&Activities&(except&Cotton&Ginning) 264 471 618 147 31% 312130 Wineries 43 79 102 23 29% 115116 Farm&Management&Services 83 176 224 48 27% 311612 Meat&Processed&from&Carcasses 776 1,125 1,403 278 25% 325193 Ethyl&Alcohol&Manufacturing 521 734 889 155 21% 114210 Hunting&and&Trapping 464 529 633 104 20% 311513 Cheese&Manufacturing 602 695 830 135 19% 311330 Confectionery&Manufacturing&from&Purchased&Chocolate 31 42 49 7 17% 115112 Soil&Preparation,&Planting,&and&Cultivating 591 863 1,000 137 16% 424910 Farm&Supplies&Merchant&Wholesalers 1,342 1,895 2,152 257 14% 423820 Farm&and&Garden&Machinery&and&Equipment&Merchant&Wholesalers 1,570 1,815 2,031 216 12% 115210 Support&Activities&for&Animal&Production 761 940 1,037 97 10% 115115 Farm&Labor&Contractors&and&Crew&Leaders 1,047 1,129 1,227 98 9% 113310 Logging 298 261 283 22 8% 115113 Crop&Harvesting,&Primarily&by&Machine 168 202 215 13 6% 311222 Soybean&Processing 52 87 92 5 6% 311615 Poultry&Processing 611 453 477 24 5% 311821 Cookie&and&Cracker&Manufacturing 498 447 469 22 5% 311421 Fruit&and&Vegetable&Canning 14 19 20 1 5% 311811 Retail&Bakeries 128 141 146 5 4% 312113 Ice&Manufacturing 40 45 47 2 4% 311611 Animal&(except&Poultry)&Slaughtering 3,345 3,715 3,782 67 2% 424510 Grain&and&Field&Bean&Merchant&Wholesalers 1,738 2,048 2,092 44 2% 312111 Soft&Drink&Manufacturing 148 146 147 1 1% 115310 Support&Activities&for&Forestry 108 99 100 1 1% 311111 Dog&and&Cat&Food&Manufacturing 146 204 204 0 0% 311999 All&Other&Miscellaneous&Food&Manufacturing 39 66 65 &(1) &(2%) 112000 Animal&Production 21,081 20,683 19,834 &(849) &(4%) 114111 Finfish&Fishing 0 117 112 &(5) &(4%) 333111 Farm&Machinery&and&Equipment&Manufacturing 705 678 643 &(35) &(5%) 311991 Perishable&Prepared&Food&Manufacturing 49 56 53 &(3) &(5%) 424520 Livestock&Merchant&Wholesalers 1,153 1,151 1,072 &(79) &(7%) 111000 Crop&Production 11,102 7,908 7,158 &(750) &(9%) 311412 Frozen&Specialty&Food&Manufacturing 303 245 224 &(21) &(9%) 311511 Fluid&Milk&Manufacturing 208 180 164 &(16) &(9%) 113210 Forest&Nurseries&and&Gathering&of&Forest&Products 12 23 21 &(2) &(9%) 424590 Other&Farm&Product&Raw&Material&Merchant&Wholesalers 52 23 20 &(3) &(13%) 311830 Tortilla&Manufacturing 0 18 15 &(3) &(17%) 311119 Other&Animal&Food&Manufacturing 329 233 184 &(49) &(21%) 311919 Other&Snack&Food&Manufacturing 26 19 12 &(7) &(37%) 311812 Commercial&Bakeries 313 153 78 &(75) &(49%) 311514 Dry,&Condensed,&and&Evaporated&Dairy&Product&Manufacturing 47 46 <10 ;; ;; Total 51,273 50,280 50,357 88 0% Source: EMSI and RTS, 2012. NOTE: Sum of columns does not necessarily match total due to suppressed data at the sector level.

Table B-3. Value-Added Agriculture and Agribusiness by Most Competitive, 2011 Jobs

NAICS& Competitive& Most& Description 2006&Jobs 2011&Jobs 2016&Jobs Code Effect&11<16 Competitive* 312120 Breweries 0 11 17 7 64% 311941 Mayonnaise,&Dressing,&and&Other&Prepared&Sauce&Manufacturing 29 80 122 40 50% 333112 Lawn&and&Garden&Tractor&and&Home&Lawn&and&Garden&Equipment&Manufacturing 112 147 202 65 44% 311340 Nonchocolate&Confectionery&Manufacturing <10 21 28 9 43% 325311 Nitrogenous&Fertilizer&Manufacturing 15 22 29 6 27% 325314 Fertilizer&(Mixing&Only)&Manufacturing 22 19 25 5 26% 311222 Soybean&Processing 52 87 92 21 24% 311330 Confectionery&Manufacturing&from&Purchased&Chocolate 31 42 49 9 21% 115116 Farm&Management&Services 83 176 224 35 20% 311612 Meat&Processed&from&Carcasses 776 1,125 1,403 215 19% 115114 Postharvest&Crop&Activities&(except&Cotton&Ginning) 264 471 618 89 19% 114210 Hunting&and&Trapping 464 529 633 82 16% 311513 Cheese&Manufacturing 602 695 830 105 15% 312130 Wineries 43 79 102 11 14% 113310 Logging 298 261 283 36 14% 311821 Cookie&and&Cracker&Manufacturing 498 447 469 57 13% 424910 Farm&Supplies&Merchant&Wholesalers 1,342 1,895 2,152 223 12% 423820 Farm&and&Garden&Machinery&and&Equipment&Merchant&Wholesalers 1,570 1,815 2,031 209 12% 311421 Fruit&and&Vegetable&Canning 14 19 20 2 11% 311811 Retail&Bakeries 128 141 146 10 7% 115113 Crop&Harvesting,&Primarily&by&Machine 168 202 215 14 7% 311999 All&Other&Miscellaneous&Food&Manufacturing 39 66 65 4 6% 115115 Farm&Labor&Contractors&and&Crew&Leaders 1,047 1,129 1,227 60 5% 312113 Ice&Manufacturing 40 45 47 2 4% 114111 Finfish&Fishing 0 117 112 5 4% 311615 Poultry&Processing 611 453 477 17 4% 115210 Support&Activities&for&Animal&Production 761 940 1,037 20 2% 424510 Grain&and&Field&Bean&Merchant&Wholesalers 1,738 2,048 2,092 42 2% 325193 Ethyl&Alcohol&Manufacturing 521 734 889 13 2% 424520 Livestock&Merchant&Wholesalers 1,153 1,151 1,072 20 2% 115112 Soil&Preparation,&Planting,&and&Cultivating 591 863 1,000 11 1% 311611 Animal&(except&Poultry)&Slaughtering 3,345 3,715 3,782 37 1% 312111 Soft&Drink&Manufacturing 148 146 147 1 1% 115310 Support&Activities&for&Forestry 108 99 100 &(2) <2% 333111 Farm&Machinery&and&Equipment&Manufacturing 705 678 643 &(16) <2% 311111 Dog&and&Cat&Food&Manufacturing 146 204 204 &(5) <2% 112000 Animal&Production 21,081 20,683 19,834 &(707) <3% 111000 Crop&Production 11,102 7,908 7,158 &(326) <4% 311511 Fluid&Milk&Manufacturing 208 180 164 &(13) <7% 424590 Other&Farm&Product&Raw&Material&Merchant&Wholesalers 52 23 20 &(2) <9% 311412 Frozen&Specialty&Food&Manufacturing 303 245 224 &(26) <11% 311119 Other&Animal&Food&Manufacturing 329 233 184 &(39) <17% 113210 Forest&Nurseries&and&Gathering&of&Forest&Products 12 23 21 &(4) <17% 311991 Perishable&Prepared&Food&Manufacturing 49 56 53 &(11) <20% 311830 Tortilla&Manufacturing 0 18 15 &(5) <28% 311919 Other&Snack&Food&Manufacturing 26 19 12 &(8) <42% 311812 Commercial&Bakeries 313 153 78 &(71) <46% 311514 Dry,&Condensed,&and&Evaporated&Dairy&Product&Manufacturing 47 46 <10 &(44) <96% Total 51,273 50,280 50,357 201 0% Source: EMSI and RTS, 2012. NOTE: Sum of columns does not necessarily match total due to suppressed data at the sector level. *As percentage of 2011 employment.

Table B-4. Value-Added Agriculture and Agribusiness by Location Quotient 2011

2011& NAICS& Description 2006&Jobs 2011&Jobs 2016&Jobs Location& Code Quotient 325193 Ethyl&Alcohol&Manufacturing 521 734 889 22.29 424520 Livestock&Merchant&Wholesalers 1,153 1,151 1,072 17.67 424510 Grain&and&Field&Bean&Merchant&Wholesalers 1,738 2,048 2,092 12.61 114210 Hunting&and&Trapping 464 529 633 10.84 311611 Animal&(except&Poultry)&Slaughtering 3,345 3,715 3,782 8.17 423820 Farm&and&Garden&Machinery&and&Equipment&Merchant&Wholesalers 1,570 1,815 2,031 5.87 112000 Animal&Production 21,081 20,683 19,834 5.62 424910 Farm&Supplies&Merchant&Wholesalers 1,342 1,895 2,152 5.37 311513 Cheese&Manufacturing 602 695 830 5.31 311821 Cookie&and&Cracker&Manufacturing 498 447 469 4.46 311222 Soybean&Processing 52 87 92 4.28 115113 Crop&Harvesting,&Primarily&by&Machine 168 202 215 4.09 115112 Soil&Preparation,&Planting,&and&Cultivating 591 863 1,000 3.91 333111 Farm&Machinery&and&Equipment&Manufacturing 705 678 643 3.60 311612 Meat&Processed&from&Carcasses 776 1,125 1,403 3.21 311111 Dog&and&Cat&Food&Manufacturing 146 204 204 3.06 115210 Support&Activities&for&Animal&Production 761 940 1,037 2.88 333112 Lawn&and&Garden&Tractor&and&Home&Lawn&and&Garden&Equipment&Manufacturing 112 147 202 2.58 311119 Other&Animal&Food&Manufacturing 329 233 184 2.24 115116 Farm&Management&Services 83 176 224 2.02 111000 Crop&Production 11,102 7,908 7,158 1.76 311941 Mayonnaise,&Dressing,&and&Other&Prepared&Sauce&Manufacturing 29 80 122 1.76 115114 Postharvest&Crop&Activities&(except&Cotton&Ginning) 264 471 618 1.63 312113 Ice&Manufacturing 40 45 47 1.57 113210 Forest&Nurseries&and&Gathering&of&Forest&Products 12 23 21 1.57 115115 Farm&Labor&Contractors&and&Crew&Leaders 1,047 1,129 1,227 1.37 311412 Frozen&Specialty&Food&Manufacturing 303 245 224 1.36 311511 Fluid&Milk&Manufacturing 208 180 164 1.09 311514 Dry,&Condensed,&and&Evaporated&Dairy&Product&Manufacturing 47 46 <10 1.03 114111 Finfish&Fishing 0 117 112 0.92 115310 Support&Activities&for&Forestry 108 99 100 0.90 325311 Nitrogenous&Fertilizer&Manufacturing 15 22 29 0.89 113310 Logging 298 261 283 0.79 424590 Other&Farm&Product&Raw&Material&Merchant&Wholesalers 52 23 20 0.74 311999 All&Other&Miscellaneous&Food&Manufacturing 39 66 65 0.72 325314 Fertilizer&(Mixing&Only)&Manufacturing 22 19 25 0.68 311615 Poultry&Processing 611 453 477 0.65 312111 Soft&Drink&Manufacturing 148 146 147 0.61 311811 Retail&Bakeries 128 141 146 0.57 312130 Wineries 43 79 102 0.48 311991 Perishable&Prepared&Food&Manufacturing 49 56 53 0.48 311330 Confectionery&Manufacturing&from&Purchased&Chocolate 31 42 49 0.40 311340 Nonchocolate&Confectionery&Manufacturing <10 21 28 0.37 311812 Commercial&Bakeries 313 153 78 0.36 311830 Tortilla&Manufacturing 0 18 15 0.31 311919 Other&Snack&Food&Manufacturing 26 19 12 0.17 312120 Breweries 0 11 17 0.12 311421 Fruit&and&Vegetable&Canning 14 19 20 0.09 Total 51,273 50,280 50,357 Source: EMSI and RTS, 2012. NOTE: Sum of columns does not necessarily match total due to suppressed data at the sector level.

Table B-5. Value-Added Agriculture and Agribusiness by Earnings, 2011

NAICS& 2011& Description 2006&Jobs 2011&Jobs 2016&Jobs Code Earnings 325311 Nitrogenous&Fertilizer&Manufacturing 15 22 29 $327,336 325314 Fertilizer&(Mixing&Only)&Manufacturing 22 19 25 $79,081 311830 Tortilla&Manufacturing 0 18 15 $77,918 325193 Ethyl&Alcohol&Manufacturing 521 734 889 $70,050 424590 Other&Farm&Product&Raw&Material&Merchant&Wholesalers 52 23 20 $66,833 312120 Breweries 0 11 17 $64,543 311119 Other&Animal&Food&Manufacturing 329 233 184 $60,970 423820 Farm&and&Garden&Machinery&and&Equipment&Merchant&Wholesalers 1,570 1,815 2,031 $59,244 311941 Mayonnaise,&Dressing,&and&Other&Prepared&Sauce&Manufacturing 29 80 122 $58,032 311412 Frozen&Specialty&Food&Manufacturing 303 245 224 $57,689 311812 Commercial&Bakeries 313 153 78 $57,565 312111 Soft&Drink&Manufacturing 148 146 147 $56,643 311222 Soybean&Processing 52 87 92 $55,918 311511 Fluid&Milk&Manufacturing 208 180 164 $55,188 424910 Farm&Supplies&Merchant&Wholesalers 1,342 1,895 2,152 $54,329 333112 Lawn&and&Garden&Tractor&and&Home&Lawn&and&Garden&Equipment&Manufacturing 112 147 202 $53,962 424510 Grain&and&Field&Bean&Merchant&Wholesalers 1,738 2,048 2,092 $53,892 311111 Dog&and&Cat&Food&Manufacturing 146 204 204 $53,381 311821 Cookie&and&Cracker&Manufacturing 498 447 469 $49,745 311513 Cheese&Manufacturing 602 695 830 $48,968 311611 Animal&(except&Poultry)&Slaughtering 3,345 3,715 3,782 $48,861 333111 Farm&Machinery&and&Equipment&Manufacturing 705 678 643 $48,107 311514 Dry,&Condensed,&and&Evaporated&Dairy&Product&Manufacturing 47 46 <10 $45,719 311615 Poultry&Processing 611 453 477 $40,607 311612 Meat&Processed&from&Carcasses 776 1,125 1,403 $37,053 113310 Logging 298 261 283 $36,777 312113 Ice&Manufacturing 40 45 47 $35,888 311999 All&Other&Miscellaneous&Food&Manufacturing 39 66 65 $35,684 115112 Soil&Preparation,&Planting,&and&Cultivating 591 863 1,000 $35,008 113210 Forest&Nurseries&and&Gathering&of&Forest&Products 12 23 21 $34,328 112000 Animal&Production 21,081 20,683 19,834 $30,379 311340 Nonchocolate&Confectionery&Manufacturing <10 21 28 $29,903 311919 Other&Snack&Food&Manufacturing 26 19 12 $28,032 115210 Support&Activities&for&Animal&Production 761 940 1,037 $28,000 312130 Wineries 43 79 102 $27,583 311991 Perishable&Prepared&Food&Manufacturing 49 56 53 $26,852 111000 Crop&Production 11,102 7,908 7,158 $26,357 311421 Fruit&and&Vegetable&Canning 14 19 20 $25,755 115113 Crop&Harvesting,&Primarily&by&Machine 168 202 215 $23,897 115116 Farm&Management&Services 83 176 224 $18,649 115310 Support&Activities&for&Forestry 108 99 100 $18,628 115114 Postharvest&Crop&Activities&(except&Cotton&Ginning) 264 471 618 $17,472 115115 Farm&Labor&Contractors&and&Crew&Leaders 1,047 1,129 1,227 $17,380 311330 Confectionery&Manufacturing&from&Purchased&Chocolate 31 42 49 $16,319 424520 Livestock&Merchant&Wholesalers 1,153 1,151 1,072 $14,785 311811 Retail&Bakeries 128 141 146 $13,340 114210 Hunting&and&Trapping 464 529 633 $4,351 114111 Finfish&Fishing 0 117 112 $2,941 Total 51,273 50,280 50,357 $35,293 Source: EMSI and RTS, 2012. NOTE: Sum of columns does not necessarily match total due to suppressed data at the sector level.

Energy and Environment

The broad range of specific subsectors across the energy and environment industry sector means that, like value-added agriculture and agribusiness, this target has economic impacts and presents economic opportunities in all areas of the state.

This industry sector can also be understood within the framework of an overall strategy to build a safe and sustainable energy future. This future envisions creating a safe and secure supply of renewable and non-renewable energy needed to power our economies. Safe energy means safe in all dimensions, from extraction, distribution, and use (including consideration of greenhouse gas effects). Sustainable energy includes the wise use of fossil fuels, including safe procedures for domestic extraction. Secure means independence from oil produced by volatile countries and from domestic terrorism. Secure also means consistent supply and pricing.

Energy and environment as defined here also includes the electric power grid and the requirements for converting dumb buildings and the grid into smarter buildings and smart grid. The conversion will produce many opportunities for new devices, materials, analytics, and social sciences necessary to promote adoption of these technologies.

Figure B-presents data on this industry sector that includes both established elements as well as emerging economic opportunities. The sector grew strongly from 2006-2011 during the recent recession adding 12.7% in employment compared to 6.7% in the nation. That strong performance is projected to continue with a 14.4% employment increase from 2011-2016 - nearly double that of the nation. The industry is relatively well paid at $54,300 in annual earnings. Note that national average annual earnings are $72,200. This significant difference in state versus national earnings will be repeated throughout this sector analysis.

Figure B-2. Employment Growth in Energy and Environment, 2006-2016

Source: EMSI, 2012.

Tables B-6 – B-10 show employment change data for select sectors within the overall target. Two elements jump out, the size and growth in various technology services and the growth and concentration (location quotients) within the manufacturing sectors relevant to Energy and Environment. An analysis of the sector and the state’s strengths suggests opportunities to grow energy and environment in the following areas: o Supply chain opportunities § Regional management offices § Professional, technical and engineering services § Renewable and non-renewable energy-related manufacturing o Oil & gas exploration opportunities in north central and western South Dakota o Advanced materials in green construction and renewable energy o Renewable energy feedstock o Energy transmission

Table B-6. Energy and Environment NAICS Codes Sorted by 2011 Employment Levels

2011& NAICS& Competitive& Most& Change& %&Change& 2011& Description 2006&Jobs 2011&Jobs 2016&Jobs Location& Code Effect&11<16 Competitive* 11<16 11<16 Earnings Quotient 541990 All&Other&Professional,&Scientific,&and&Technical&Services 2,200 2,066 2,035 &(154) <7% &(31) &(2%) 0.61 $24,906 541330 Engineering&Services 1,620 1,790 2,296 319 18% 506 28% 0.56 $66,667 333120 Construction&Machinery&Manufacturing 1,412 1,334 1,383 98 7% 49 4% 6.27 $58,273 221122 Electric&Power&Distribution 1,191 1,258 1,127 &(202) <16% &(131) &(10%) 1.84 $86,487 541690 Other&Scientific&and&Technical&Consulting&Services 881 1,045 1,547 120 11% 502 48% 0.95 $62,721 211111 Crude&Petroleum&and&Natural&Gas&Extraction 823 968 1,362 95 10% 394 41% 0.45 $13,826 332710 Machine&Shops 758 891 928 64 7% 37 4% 1.00 $43,480 237110 Water&and&Sewer&Line&and&Related&Structures&Construction 719 873 1,196 281 32% 323 37% 1.54 $51,614 333412 Industrial&and&Commercial&Fan&and&Blower&Manufacturing 548 802 927 205 26% 125 16% 23.04 $50,194 325193 Ethyl&Alcohol&Manufacturing 524 734 889 13 2% 155 21% 22.29 $70,050 423610 Electrical&Apparatus&and&Equipment,&Wiring&Supplies,&and&Related&Equipment&Merchant&Wholesalers 521 618 749 111 18% 131 21% 1.38 $64,998 326199 All&Other&Plastics&Product&Manufacturing 487 598 601 102 17% 3 1% 0.72 $43,388 333923 Overhead&Traveling&Crane,&Hoist,&and&Monorail&System&Manufacturing 476 592 570 39 7% &(22) &(4%) 15.35 $63,621 237130 Power&and&Communication&Line&and&Related&Structures&Construction 468 574 606 8 1% 32 6% 1.21 $62,805 332410 Power&Boiler&and&Heat&Exchanger&Manufacturing 457 500 676 170 34% 176 35% 6.88 $58,562 333611 Turbine&and&Turbine&Generator&Set&Units&Manufacturing 411 410 666 211 51% 256 62% 4.65 $42,663 321113 Sawmills 384 403 464 117 29% 61 15% 1.54 $44,671 334418 Printed&Circuit&Assembly&(Electronic&Assembly)&Manufacturing 353 382 255 &(113) <30% &(127) &(33%) 2.31 $48,764 424710 Petroleum&Bulk&Stations&and&Terminals 327 349 461 141 40% 112 32% 3.40 $58,859 333612 Speed&Changer,&Industrial&High

Source: EMSI and RTS, 2012. NOTE: Sum of columns does not necessarily match total due to suppressed data at the sector level. *As percentage of 2011 employment.

Table B-7. Energy and Environment by Percent Change of Jobs, 2011-2016

NAICS& Change& %&Change& Description 2006&Jobs 2011&Jobs 2016&Jobs Code 11;16 11;16 333611 Turbine&and&Turbine&Generator&Set&Units&Manufacturing 411 410 666 256 62% 333999 All&Other&Miscellaneous&General&Purpose&Machinery&Manufacturing 67 96 144 48 50% 334513 Instruments&and&Related&Products&Manufacturing&for&Measuring,&Displaying,&and&Controlling&Industrial&Process&Variables 38 48 72 24 50% 541690 Other&Scientific&and&Technical&Consulting&Services 881 1,045 1,547 502 48% 335931 Current;Carrying&Wiring&Device&Manufacturing <10 15 22 7 47% 332322 Sheet&Metal&Work&Manufacturing 68 122 177 55 45% 334515 Instrument&Manufacturing&for&Measuring&and&Testing&Electricity&and&Electrical&Signals 239 292 416 124 42% 211111 Crude&Petroleum&and&Natural&Gas&Extraction 823 968 1,362 394 41% 237110 Water&and&Sewer&Line&and&Related&Structures&Construction 719 873 1,196 323 37% 213112 Support&Activities&for&Oil&and&Gas&Operations 54 78 106 28 36% 221119 Other&Electric&Power&Generation 15 33 45 12 36% 332410 Power&Boiler&and&Heat&Exchanger&Manufacturing 457 500 676 176 35% 213111 Drilling&Oil&and&Gas&Wells <10 20 27 7 35% 541620 Environmental&Consulting&Services 227 208 277 69 33% 424710 Petroleum&Bulk&Stations&and&Terminals 327 349 461 112 32% 541330 Engineering&Services 1,620 1,790 2,296 506 28% 325193 Ethyl&Alcohol&Manufacturing 524 734 889 155 21% 423610 Electrical&Apparatus&and&Equipment,&Wiring&Supplies,&and&Related&Equipment&Merchant&Wholesalers 521 618 749 131 21% 221121 Electric&Bulk&Power&Transmission&and&Control 243 313 372 59 19% 333912 Air&and&Gas&Compressor&Manufacturing 123 175 204 29 17% 333412 Industrial&and&Commercial&Fan&and&Blower&Manufacturing 548 802 927 125 16% 333922 Conveyor&and&Conveying&Equipment&Manufacturing 232 237 275 38 16% 332420 Metal&Tank&(Heavy&Gauge)&Manufacturing 143 186 216 30 16% 332911 Industrial&Valve&Manufacturing <10 19 22 3 16% 321113 Sawmills 384 403 464 61 15% 541380 Testing&Laboratories 238 282 311 29 10% 541360 Geophysical&Surveying&and&Mapping&Services 99 127 138 11 9% 237130 Power&and&Communication&Line&and&Related&Structures&Construction 468 574 606 32 6% 486210 Pipeline&Transportation&of&Natural&Gas 27 36 38 2 6% 333120 Construction&Machinery&Manufacturing 1,412 1,334 1,383 49 4% 332710 Machine&Shops 758 891 928 37 4% 532412 Construction,&Mining,&and&Forestry&Machinery&and&Equipment&Rental&and&Leasing 93 124 128 4 3% 326199 All&Other&Plastics&Product&Manufacturing 487 598 601 3 1% 541990 All&Other&Professional,&Scientific,&and&Technical&Services 2,200 2,066 2,035 &(31) &(2%) 333911 Pump&and&Pumping&Equipment&Manufacturing 35 44 43 &(1) &(2%) 333923 Overhead&Traveling&Crane,&Hoist,&and&Monorail&System&Manufacturing 476 592 570 &(22) &(4%) 332312 Fabricated&Structural&Metal&Manufacturing 194 201 192 &(9) &(4%) 221122 Electric&Power&Distribution 1,191 1,258 1,127 &(131) &(10%) 333612 Speed&Changer,&Industrial&High;Speed&Drive,&and&Gear&Manufacturing 302 328 286 &(42) &(13%) 486910 Pipeline&Transportation&of&Refined&Petroleum&Products <10 30 23 &(7) &(23%) 334418 Printed&Circuit&Assembly&(Electronic&Assembly)&Manufacturing 353 382 255 &(127) &(33%) 221112 Fossil&Fuel&Electric&Power&Generation 90 124 78 &(46) &(37%) 237120 Oil&and&Gas&Pipeline&and&Related&Structures&Construction 25 35 20 &(15) &(43%) 335311 Power,&Distribution,&and&Specialty&Transformer&Manufacturing 217 207 66 &(141) &(68%) 221111 Hydroelectric&Power&Generation 54 49 <10 ;; ;; Total 17,410 19,626 22,459 2,829 14% Source: EMSI and RTS, 2012. NOTE: Sum of columns does not necessarily match total due to suppressed data at the sector level.

Table B-8. Energy and Environment by Most Competitive, 2011 Jobs

NAICS& Competitive& Most& Description 2006&Jobs 2011&Jobs 2016&Jobs Code Effect&11<16 Competitive* 335931 Current

Table B-9. Energy and Environment by Location Quotient, 2011

2011& NAICS&Code Description 2006&Jobs 2011&Jobs 2016&Jobs Location& Quotient 333412 Industrial&and&Commercial&Fan&and&Blower&Manufacturing 548 802 927 23.04 325193 Ethyl&Alcohol&Manufacturing 524 734 889 22.29 333923 Overhead&Traveling&Crane,&Hoist,&and&Monorail&System&Manufacturing 476 592 570 15.35 333612 Speed&Changer,&Industrial&HighSSpeed&Drive,&and&Gear&Manufacturing 302 328 286 8.04 332410 Power&Boiler&and&Heat&Exchanger&Manufacturing 457 500 676 6.88 333120 Construction&Machinery&Manufacturing 1,412 1,334 1,383 6.27 333611 Turbine&and&Turbine&Generator&Set&Units&Manufacturing 411 410 666 4.65 221121 Electric&Bulk&Power&Transmission&and&Control 243 313 372 4.07 424710 Petroleum&Bulk&Stations&and&Terminals 327 349 461 3.40 333912 Air&and&Gas&Compressor&Manufacturing 123 175 204 2.75 335311 Power,&Distribution,&and&Specialty&Transformer&Manufacturing 217 207 66 2.68 333922 Conveyor&and&Conveying&Equipment&Manufacturing 232 237 275 2.66 334418 Printed&Circuit&Assembly&(Electronic&Assembly)&Manufacturing 353 382 255 2.31 334515 Instrument&Manufacturing&for&Measuring&and&Testing&Electricity&and&Electrical&Signals 239 292 416 2.20 332420 Metal&Tank&(Heavy&Gauge)&Manufacturing 143 186 216 2.00 221111 Hydroelectric&Power&Generation 54 49 <10 2.00 541360 Geophysical&Surveying&and&Mapping&Services 99 127 138 1.89 221122 Electric&Power&Distribution 1,191 1,258 1,127 1.84 237110 Water&and&Sewer&Line&and&Related&Structures&Construction 719 873 1,196 1.54 321113 Sawmills 384 403 464 1.54 423610 Electrical&Apparatus&and&Equipment,&Wiring&Supplies,&and&Related&Equipment&Merchant&Wholesalers 521 618 749 1.38 486910 Pipeline&Transportation&of&Refined&Petroleum&Products <10 30 23 1.38 237130 Power&and&Communication&Line&and&Related&Structures&Construction 468 574 606 1.21 221119 Other&Electric&Power&Generation 15 33 45 1.14 332710 Machine&Shops 758 891 928 1.00 541690 Other&Scientific&and&Technical&Consulting&Services 881 1,045 1,547 0.95 332312 Fabricated&Structural&Metal&Manufacturing 194 201 192 0.79 333999 All&Other&Miscellaneous&General&Purpose&Machinery&Manufacturing 67 96 144 0.76 326199 All&Other&Plastics&Product&Manufacturing 487 598 601 0.72 541990 All&Other&Professional,&Scientific,&and&Technical&Services 2,200 2,066 2,035 0.61 541380 Testing&Laboratories 238 282 311 0.57 541330 Engineering&Services 1,620 1,790 2,296 0.56 333911 Pump&and&Pumping&Equipment&Manufacturing 35 44 43 0.51 532412 Construction,&Mining,&and&Forestry&Machinery&and&Equipment&Rental&and&Leasing 93 124 128 0.50 541620 Environmental&Consulting&Services 227 208 277 0.47 211111 Crude&Petroleum&and&Natural&Gas&Extraction 823 968 1,362 0.45 486210 Pipeline&Transportation&of&Natural&Gas 27 36 38 0.41 332322 Sheet&Metal&Work&Manufacturing 68 122 177 0.40 221112 Fossil&Fuel&Electric&Power&Generation 90 124 78 0.38 334513 Instruments&and&Related&Products&Manufacturing&for&Measuring,&Displaying,&and&Controlling&Industrial&Process&Variables 38 48 72 0.26 332911 Industrial&Valve&Manufacturing <10 19 22 0.25 335931 CurrentSCarrying&Wiring&Device&Manufacturing <10 15 22 0.15 237120 Oil&and&Gas&Pipeline&and&Related&Structures&Construction 25 35 20 0.10 213112 Support&Activities&for&Oil&and&Gas&Operations 54 78 106 0.09 213111 Drilling&Oil&and&Gas&Wells <10 20 27 0.07 Total 17,410 19,626 22,459 Source: EMSI and RTS, 2012. NOTE: Sum of columns does not necessarily match total due to suppressed data at the sector level.

Table B-10. Energy and Environment by Earnings, 2011

NAICS& 2011& Description 2006&Jobs 2011&Jobs 2016&Jobs Code Earnings 221119 Other&Electric&Power&Generation 15 33 45 $104,596 221121 Electric&Bulk&Power&Transmission&and&Control 243 313 372 $103,773 221112 Fossil&Fuel&Electric&Power&Generation 90 124 78 $100,595 486910 Pipeline&Transportation&of&Refined&Petroleum&Products <10 30 23 $97,677 486210 Pipeline&Transportation&of&Natural&Gas 27 36 38 $92,887 221111 Hydroelectric&Power&Generation 54 49 <10 $91,576 237120 Oil&and&Gas&Pipeline&and&Related&Structures&Construction 25 35 20 $89,401 221122 Electric&Power&Distribution 1,191 1,258 1,127 $86,487 334515 Instrument&Manufacturing&for&Measuring&and&Testing&Electricity&and&Electrical&Signals 239 292 416 $71,172 325193 Ethyl&Alcohol&Manufacturing 524 734 889 $70,050 333912 Air&and&Gas&Compressor&Manufacturing 123 175 204 $69,419 332420 Metal&Tank&(Heavy&Gauge)&Manufacturing 143 186 216 $69,056 541330 Engineering&Services 1,620 1,790 2,296 $66,667 423610 Electrical&Apparatus&and&Equipment,&Wiring&Supplies,&and&Related&Equipment&Merchant&Wholesalers 521 618 749 $64,998 541360 Geophysical&Surveying&and&Mapping&Services 99 127 138 $64,617 333923 Overhead&Traveling&Crane,&Hoist,&and&Monorail&System&Manufacturing 476 592 570 $63,621 333922 Conveyor&and&Conveying&Equipment&Manufacturing 232 237 275 $62,840 237130 Power&and&Communication&Line&and&Related&Structures&Construction 468 574 606 $62,805 541690 Other&Scientific&and&Technical&Consulting&Services 881 1,045 1,547 $62,721 424710 Petroleum&Bulk&Stations&and&Terminals 327 349 461 $58,859 332410 Power&Boiler&and&Heat&Exchanger&Manufacturing 457 500 676 $58,562 333120 Construction&Machinery&Manufacturing 1,412 1,334 1,383 $58,273 335311 Power,&Distribution,&and&Specialty&Transformer&Manufacturing 217 207 66 $55,784 333999 All&Other&Miscellaneous&General&Purpose&Machinery&Manufacturing 67 96 144 $54,746 237110 Water&and&Sewer&Line&and&Related&Structures&Construction 719 873 1,196 $51,614 333412 Industrial&and&Commercial&Fan&and&Blower&Manufacturing 548 802 927 $50,194 541380 Testing&Laboratories 238 282 311 $49,694 334418 Printed&Circuit&Assembly&(Electronic&Assembly)&Manufacturing 353 382 255 $48,764 332312 Fabricated&Structural&Metal&Manufacturing 194 201 192 $47,899 321113 Sawmills 384 403 464 $44,671 333612 Speed&Changer,&Industrial&High\Speed&Drive,&and&Gear&Manufacturing 302 328 286 $44,295 332710 Machine&Shops 758 891 928 $43,480 326199 All&Other&Plastics&Product&Manufacturing 487 598 601 $43,388 333611 Turbine&and&Turbine&Generator&Set&Units&Manufacturing 411 410 666 $42,663 332322 Sheet&Metal&Work&Manufacturing 68 122 177 $40,049 532412 Construction,&Mining,&and&Forestry&Machinery&and&Equipment&Rental&and&Leasing 93 124 128 $38,442 333911 Pump&and&Pumping&Equipment&Manufacturing 35 44 43 $38,371 541620 Environmental&Consulting&Services 227 208 277 $37,415 335931 Current\Carrying&Wiring&Device&Manufacturing <10 15 22 $36,038 334513 Instruments&and&Related&Products&Manufacturing&for&Measuring,&Displaying,&and&Controlling&Industrial&Process&Variables 38 48 72 $35,343 332911 Industrial&Valve&Manufacturing <10 19 22 $33,230 213111 Drilling&Oil&and&Gas&Wells <10 20 27 $29,436 213112 Support&Activities&for&Oil&and&Gas&Operations 54 78 106 $25,852 541990 All&Other&Professional,&Scientific,&and&Technical&Services 2,200 2,066 2,035 $24,906 211111 Crude&Petroleum&and&Natural&Gas&Extraction 823 968 1,362 $13,826 Total 17,410 19,626 22,459 $54,351

Source: EMSI and RTS, 2012. NOTE: Sum of columns does not necessarily match total due to suppressed data at the sector level.

Materials and Advanced Manufacturing The materials and advanced manufacturing industry sector includes a broad range of manufacturing subsectors along with emerging materials development activities that play a role in a number of industries including energy and health care. South Dakota exhibits a remarkable strength within this industry and continued success is expected. Advanced manufacturing is characterized by higher levels of investment in plant and equipment, embedded technology, and the need for production, technical and management workers with significant STEM skills. This target industry is well distributed across the state though the eastern half of the state has the strongest base and much of the employment tends to be in more urbanized areas.

Figure B-3 shows that the advanced manufacturing sectors survived and actually grew some during the recent recession that led to a loss of 1 in 10 manufacturing jobs in the U.S. After a substantial decline in 2008-2009, the state’s advanced manufacturing has grown substantially and that growth is expected to continue with rapid growth for 2011-2016. Wages are well above the state average at $52,600 but less than wages in the same industries nationally.

Tables B-11 – B-15 present data on select sectors within materials and advanced manufacturing for 2011 and projected through 2016. Significant employment increases are expected and virtually all of the increase is explained by competitiveness within South Dakota. The strength of automotive and transportation is obvious. Much of this employment is found in specialty manufacturing that is supplying niche markets such as vehicles for installing and maintaining wind energy equipment. Note the high employment concentration within most of the sectors.

An analysis of the sector and the state’s strengths within this highly competitive and fast growing industry suggests opportunities to expand materials and advanced manufacturing in the following areas:

o Supply chain opportunities § Regional management offices § Machine shops, plastics manufacturing, paint and coating manufacturing o Energy related manufacturing, renewable and nonrenewable o Advanced materials in medical devices, green construction, renewable energy o Defense, ammunition, firearms

Figure B-3. Employment Growth in Materials and Advanced Manufacturing, 2006-2016

Source: EMSI, 2012.

Table B-11. Materials and Advanced Manufacturing NAICS Codes Sorted by 2011 Employment Levels

2011& NAICS& Competitive& Most& 2011& Description 2006&Jobs 2011&Jobs 2016&Jobs Change %&Change Location& Code Effect&11<16 Competitive* Earnings Quotient 339950 Sign&Manufacturing 2,668 2,540 4,205 1,190 47% 1,665 66% 7.66 $50,914 333120 Construction&Machinery&Manufacturing 1,620 1,334 1,383 98 7% 49 4% 6.27 $58,273 811310 Commercial&&&Industrial&Machinery&&&Equipment&(except&Automotive&&&Electronic)&Repair&&&Maintenance 1,250 1,200 1,315 100 8% 115 10% 1.55 $37,097 336212 Truck&Trailer&Manufacturing 1,084 1,013 1,212 276 27% 199 20% 11.71 $56,753 332710 Machine&Shops 881 891 928 64 7% 37 4% 1.00 $43,480 333412 Industrial&&&Commercial&Fan&&&Blower&Manufacturing 719 802 927 205 26% 125 16% 23.04 $50,194 336399 All&Other&Motor&Vehicle&Parts&Manufacturing 632 690 997 274 40% 307 44% 1.90 $50,073 333111 Farm&Machinery&&&Equipment&Manufacturing 705 678 643 &(16) <2% &(35) &(5%) 3.60 $48,107 333923 Overhead&Traveling&Crane,&Hoist,&&&Monorail&System&Manufacturing 468 592 570 39 7% &(22) &(4%) 15.35 $63,621 332410 Power&Boiler&&&Heat&Exchanger&Manufacturing 238 500 676 170 34% 176 35% 6.88 $58,562 322211 Corrugated&&&Solid&Fiber&Box&Manufacturing 504 468 498 91 19% 30 6% 1.59 $61,205 326113 Unlaminated&Plastics&Film&&&Sheet&(except&Packaging)&Manufacturing 431 467 550 158 34% 83 18% 3.80 $49,074 333611 Turbine&&&Turbine&Generator&Set&Units&Manufacturing 54 410 666 211 51% 256 62% 4.65 $42,663 334413 Semiconductor&&&Related&Device&Manufacturing 258 405 561 207 51% 156 39% 0.67 $52,277 323112 Commercial&Flexographic&Printing 428 391 466 81 21% 75 19% 3.81 $58,630 333612 Speed&Changer,&Industrial&High

Source: EMSI and RTS, 2012. NOTE: Sum of columns does not necessarily match total due to suppressed data at the sector level. *As percentage of 2011 employment.

Table B-12. Materials and Advanced Manufacturing by Percent Change of Jobs 2011-2016

NAICS& Description 2006&Jobs 2011&Jobs 2016&Jobs Change %&Change Code 327310 Cement&Manufacturing 98 109 198 89 82% 332510 Hardware&Manufacturing 413 230 417 187 81% 333518 Other&Metalworking&Machinery&Manufacturing 28 59 105 46 78% 339950 Sign&Manufacturing 2,668 2,540 4,205 1,665 66% 336211 Motor&Vehicle&Body&Manufacturing 193 283 471 188 66% 333611 Turbine&&&Turbine&Generator&Set&Units&Manufacturing 54 410 666 256 62% 336120 Heavy&Duty&Truck&Manufacturing 125 156 247 91 58% 334220 Radio&&&Television&Broadcasting&&&Wireless&Communications&Equipment&Manufacturing 506 274 429 155 57% 336991 Motorcycle,&Bicycle,&&&Parts&Manufacturing 74 123 186 63 51% 333999 All&Other&Miscellaneous&General&Purpose&Machinery&Manufacturing 68 96 144 48 50% 332322 Sheet&Metal&Work&Manufacturing 93 122 177 55 45% 336399 All&Other&Motor&Vehicle&Parts&Manufacturing 632 690 997 307 44% 333514 Special&Die&&&Tool,&Die&Set,&Jig,&&&Fixture&Manufacturing 165 148 213 65 44% 334413 Semiconductor&&&Related&Device&Manufacturing 258 405 561 156 39% 325920 Explosives&Manufacturing 149 185 258 73 39% 333112 Lawn&&&Garden&Tractor&&&Home&Lawn&&&Garden&Equipment&Manufacturing 112 147 202 55 37% 332410 Power&Boiler&&&Heat&Exchanger&Manufacturing 238 500 676 176 35% 332992 Small&Arms&Ammunition&Manufacturing 151 152 205 53 35% 332313 Plate&Work&Manufacturing 200 214 276 62 29% 333992 Welding&&&Soldering&Equipment&Manufacturing 95 114 146 32 28% 333319 Other&Commercial&&&Service&Industry&Machinery&Manufacturing 244 223 279 56 25% 327410 Lime&Manufacturing 142 140 170 30 21% 332999 All&Other&Miscellaneous&Fabricated&Metal&Product&Manufacturing 88 101 122 21 21% 336212 Truck&Trailer&Manufacturing 1,084 1,013 1,212 199 20% 323112 Commercial&Flexographic&Printing 428 391 466 75 19% 326113 Unlaminated&Plastics&Film&&&Sheet&(except&Packaging)&Manufacturing 431 467 550 83 18% 333912 Air&&&Gas&Compressor&Manufacturing 194 175 204 29 17% 333412 Industrial&&&Commercial&Fan&&&Blower&Manufacturing 719 802 927 125 16% 333922 Conveyor&&&Conveying&Equipment&Manufacturing 232 237 275 38 16% 332420 Metal&Tank&(Heavy&Gauge)&Manufacturing 217 186 216 30 16% 811310 Commercial&&&Industrial&Machinery&&&Equipment&(except&Automotive&&&Electronic)&Repair&&&Maintenance 1,250 1,200 1,315 115 10% 322211 Corrugated&&&Solid&Fiber&Box&Manufacturing 504 468 498 30 6% 333120 Construction&Machinery&Manufacturing 1,620 1,334 1,383 49 4% 332710 Machine&Shops 881 891 928 37 4% 333618 Other&Engine&Equipment&Manufacturing 131 110 113 3 3% 332912 Fluid&Power&Valve&&&Hose&Fitting&Manufacturing 313 252 253 1 0% 332994 Small&Arms&Manufacturing 124 98 98 0 0% 333923 Overhead&Traveling&Crane,&Hoist,&&&Monorail&System&Manufacturing 468 592 570 &(22) &(4%) 333111 Farm&Machinery&&&Equipment&Manufacturing 705 678 643 &(35) &(5%) 333612 Speed&Changer,&Industrial&High^Speed&Drive,&&&Gear&Manufacturing 353 328 286 &(42) &(13%) Total 16,454 16,643 21,284 4,641 28%

Source: EMSI and RTS, 2012. NOTE: Sum of columns does not necessarily match total due to suppressed data at the sector level.

Table B-13. Materials and Advanced Manufacturing by Most Competitive 2011 Jobs

NAICS& Competitive& Most& Description 2006&Jobs 2011&Jobs 2016&Jobs Code Effect&11<16 Competitive* 332510 Hardware&Manufacturing 413 230 417 228 99% 333518 Other&Metalworking&Machinery&Manufacturing 28 59 105 48 81% 336211 Motor&Vehicle&Body&Manufacturing 193 283 471 203 72% 327310 Cement&Manufacturing 98 109 198 73 67% 336120 Heavy&Duty&Truck&Manufacturing 125 156 247 94 60% 336991 Motorcycle,&Bicycle,&&&Parts&Manufacturing 74 123 186 72 59% 334220 Radio&&&Television&Broadcasting&&&Wireless&Communications&Equipment&Manufacturing 506 274 429 156 57% 333999 All&Other&Miscellaneous&General&Purpose&Machinery&Manufacturing 68 96 144 52 54% 333514 Special&Die&&&Tool,&Die&Set,&Jig,&&&Fixture&Manufacturing 165 148 213 77 52% 333611 Turbine&&&Turbine&Generator&Set&Units&Manufacturing 54 410 666 211 51% 334413 Semiconductor&&&Related&Device&Manufacturing 258 405 561 207 51% 339950 Sign&Manufacturing 2,668 2,540 4,205 1,190 47% 333112 Lawn&&&Garden&Tractor&&&Home&Lawn&&&Garden&Equipment&Manufacturing 112 147 202 65 44% 336399 All&Other&Motor&Vehicle&Parts&Manufacturing 632 690 997 274 40% 332322 Sheet&Metal&Work&Manufacturing 93 122 177 44 36% 332410 Power&Boiler&&&Heat&Exchanger&Manufacturing 238 500 676 170 34% 326113 Unlaminated&Plastics&Film&&&Sheet&(except&Packaging)&Manufacturing 431 467 550 158 34% 333992 Welding&&&Soldering&Equipment&Manufacturing 95 114 146 38 33% 333922 Conveyor&&&Conveying&Equipment&Manufacturing 232 237 275 66 28% 325920 Explosives&Manufacturing 149 185 258 51 28% 336212 Truck&Trailer&Manufacturing 1,084 1,013 1,212 276 27% 333412 Industrial&&&Commercial&Fan&&&Blower&Manufacturing 719 802 927 205 26% 332999 All&Other&Miscellaneous&Fabricated&Metal&Product&Manufacturing 88 101 122 25 25% 332992 Small&Arms&Ammunition&Manufacturing 151 152 205 36 24% 333319 Other&Commercial&&&Service&Industry&Machinery&Manufacturing 244 223 279 50 22% 332313 Plate&Work&Manufacturing 200 214 276 45 21% 323112 Commercial&Flexographic&Printing 428 391 466 81 21% 322211 Corrugated&&&Solid&Fiber&Box&Manufacturing 504 468 498 91 19% 333912 Air&&&Gas&Compressor&Manufacturing 194 175 204 31 18% 327410 Lime&Manufacturing 142 140 170 22 16% 332420 Metal&Tank&(Heavy&Gauge)&Manufacturing 217 186 216 23 12% 333618 Other&Engine&Equipment&Manufacturing 131 110 113 12 11% 332912 Fluid&Power&Valve&&&Hose&Fitting&Manufacturing 313 252 253 24 10% 811310 Commercial&&&Industrial&Machinery&&&Equipment&(except&Automotive&&&Electronic)&Repair&&&Maintenance 1,250 1,200 1,315 100 8% 333120 Construction&Machinery&Manufacturing 1,620 1,334 1,383 98 7% 332710 Machine&Shops 881 891 928 64 7% 333923 Overhead&Traveling&Crane,&Hoist,&&&Monorail&System&Manufacturing 468 592 570 39 7% 333111 Farm&Machinery&&&Equipment&Manufacturing 705 678 643 &(16) <2% 333612 Speed&Changer,&Industrial&High

Source: EMSI and RTS, 2012. NOTE: Sum of columns does not necessarily match total due to suppressed data at the sector level. *As percentage of 2011 employment.

Table B-14. Materials and Advanced Manufacturing by Location Quotient, 2011

2011& NAICS& Description 2006&Jobs 2011&Jobs 2016&Jobs Location& Code Quotient 333412 Industrial&&&Commercial&Fan&&&Blower&Manufacturing 719 802 927 23.04 333923 Overhead&Traveling&Crane,&Hoist,&&&Monorail&System&Manufacturing 468 592 570 15.35 336212 Truck&Trailer&Manufacturing 1,084 1,013 1,212 11.71 327410 Lime&Manufacturing 142 140 170 10.45 325920 Explosives&Manufacturing 149 185 258 8.11 333612 Speed&Changer,&Industrial&HighVSpeed&Drive,&&&Gear&Manufacturing 353 328 286 8.04 339950 Sign&Manufacturing 2,668 2,540 4,205 7.66 332410 Power&Boiler&&&Heat&Exchanger&Manufacturing 238 500 676 6.88 333120 Construction&Machinery&Manufacturing 1,620 1,334 1,383 6.27 333611 Turbine&&&Turbine&Generator&Set&Units&Manufacturing 54 410 666 4.65 332992 Small&Arms&Ammunition&Manufacturing 151 152 205 4.53 323112 Commercial&Flexographic&Printing 428 391 466 3.81 326113 Unlaminated&Plastics&Film&&&Sheet&(except&Packaging)&Manufacturing 431 467 550 3.80 333111 Farm&Machinery&&&Equipment&Manufacturing 705 678 643 3.60 332510 Hardware&Manufacturing 413 230 417 3.01 332994 Small&Arms&Manufacturing 124 98 98 3.01 333912 Air&&&Gas&Compressor&Manufacturing 194 175 204 2.75 333922 Conveyor&&&Conveying&Equipment&Manufacturing 232 237 275 2.66 333992 Welding&&&Soldering&Equipment&Manufacturing 95 114 146 2.63 336991 Motorcycle,&Bicycle,&&&Parts&Manufacturing 74 123 186 2.62 333112 Lawn&&&Garden&Tractor&&&Home&Lawn&&&Garden&Equipment&Manufacturing 112 147 202 2.58 327310 Cement&Manufacturing 98 109 198 2.55 332912 Fluid&Power&Valve&&&Hose&Fitting&Manufacturing 313 252 253 2.43 333518 Other&Metalworking&Machinery&Manufacturing 28 59 105 2.27 332420 Metal&Tank&(Heavy&Gauge)&Manufacturing 217 186 216 2.00 336120 Heavy&Duty&Truck&Manufacturing 125 156 247 2.00 336399 All&Other&Motor&Vehicle&Parts&Manufacturing 632 690 997 1.90 336211 Motor&Vehicle&Body&Manufacturing 193 283 471 1.90 322211 Corrugated&&&Solid&Fiber&Box&Manufacturing 504 468 498 1.59 811310 Commercial&&&Industrial&Machinery&&&Equipment&(except&Automotive&&&Electronic)&Repair&&&Maintenance 1,250 1,200 1,315 1.55 332313 Plate&Work&Manufacturing 200 214 276 1.48 333319 Other&Commercial&&&Service&Industry&Machinery&Manufacturing 244 223 279 1.39 334220 Radio&&&Television&Broadcasting&&&Wireless&Communications&Equipment&Manufacturing 506 274 429 1.35 332710 Machine&Shops 881 891 928 1.00 333618 Other&Engine&Equipment&Manufacturing 131 110 113 0.80 333999 All&Other&Miscellaneous&General&Purpose&Machinery&Manufacturing 68 96 144 0.76 333514 Special&Die&&&Tool,&Die&Set,&Jig,&&&Fixture&Manufacturing 165 148 213 0.70 334413 Semiconductor&&&Related&Device&Manufacturing 258 405 561 0.67 332999 All&Other&Miscellaneous&Fabricated&Metal&Product&Manufacturing 88 101 122 0.53 332322 Sheet&Metal&Work&Manufacturing 93 122 177 0.40 Total 16,454 16,643 21,284

Source: EMSI and RTS, 2012. NOTE: Sum of columns does not necessarily match total due to suppressed data at the sector level.

Table B-15. Materials and Advanced Manufacturing by Earnings, 2011

NAICS& 2011& Description 2006&Jobs 2011&Jobs 2016&Jobs Code Earnings 327410 Lime&Manufacturing 142 140 170 $107,885 333618 Other&Engine&Equipment&Manufacturing 131 110 113 $81,677 327310 Cement&Manufacturing 98 109 198 $70,396 333912 Air&&&Gas&Compressor&Manufacturing 194 175 204 $69,419 332420 Metal&Tank&(Heavy&Gauge)&Manufacturing 217 186 216 $69,056 333923 Overhead&Traveling&Crane,&Hoist,&&&Monorail&System&Manufacturing 468 592 570 $63,621 332313 Plate&Work&Manufacturing 200 214 276 $62,896 333922 Conveyor&&&Conveying&Equipment&Manufacturing 232 237 275 $62,840 322211 Corrugated&&&Solid&Fiber&Box&Manufacturing 504 468 498 $61,205 323112 Commercial&Flexographic&Printing 428 391 466 $58,630 332410 Power&Boiler&&&Heat&Exchanger&Manufacturing 238 500 676 $58,562 333120 Construction&Machinery&Manufacturing 1,620 1,334 1,383 $58,273 336211 Motor&Vehicle&Body&Manufacturing 193 283 471 $57,344 336212 Truck&Trailer&Manufacturing 1,084 1,013 1,212 $56,753 336120 Heavy&Duty&Truck&Manufacturing 125 156 247 $55,574 333514 Special&Die&&&Tool,&Die&Set,&Jig,&&&Fixture&Manufacturing 165 148 213 $55,490 332510 Hardware&Manufacturing 413 230 417 $54,971 333999 All&Other&Miscellaneous&General&Purpose&Machinery&Manufacturing 68 96 144 $54,746 325920 Explosives&Manufacturing 149 185 258 $54,146 333112 Lawn&&&Garden&Tractor&&&Home&Lawn&&&Garden&Equipment&Manufacturing 112 147 202 $53,962 334413 Semiconductor&&&Related&Device&Manufacturing 258 405 561 $52,277 339950 Sign&Manufacturing 2,668 2,540 4,205 $50,914 333319 Other&Commercial&&&Service&Industry&Machinery&Manufacturing 244 223 279 $50,879 334220 Radio&&&Television&Broadcasting&&&Wireless&Communications&Equipment&Manufacturing 506 274 429 $50,872 333412 Industrial&&&Commercial&Fan&&&Blower&Manufacturing 719 802 927 $50,194 336399 All&Other&Motor&Vehicle&Parts&Manufacturing 632 690 997 $50,073 333992 Welding&&&Soldering&Equipment&Manufacturing 95 114 146 $49,673 336991 Motorcycle,&Bicycle,&&&Parts&Manufacturing 74 123 186 $49,579 326113 Unlaminated&Plastics&Film&&&Sheet&(except&Packaging)&Manufacturing 431 467 550 $49,074 333111 Farm&Machinery&&&Equipment&Manufacturing 705 678 643 $48,107 332992 Small&Arms&Ammunition&Manufacturing 151 152 205 $46,249 332994 Small&Arms&Manufacturing 124 98 98 $45,271 332912 Fluid&Power&Valve&&&Hose&Fitting&Manufacturing 313 252 253 $45,187 333518 Other&Metalworking&Machinery&Manufacturing 28 59 105 $44,954 333612 Speed&Changer,&Industrial&High^Speed&Drive,&&&Gear&Manufacturing 353 328 286 $44,295 332710 Machine&Shops 881 891 928 $43,480 333611 Turbine&&&Turbine&Generator&Set&Units&Manufacturing 54 410 666 $42,663 332322 Sheet&Metal&Work&Manufacturing 93 122 177 $40,049 811310 Commercial&&&Industrial&Machinery&&&Equipment&(except&Automotive&&&Electronic)&Repair&&&Maintenance 1,250 1,200 1,315 $37,097 332999 All&Other&Miscellaneous&Fabricated&Metal&Product&Manufacturing 88 101 122 $34,934 Total 16,454 16,643 21,284 $52,566

Source: EMSI and RTS, 2012. NOTE: Sum of columns does not necessarily match total due to suppressed data at the sector level.

Human Health and Nutrition When analysts look at the health care industry within regional and state economies, they usually describe the industry as a local or supporting industry in that it serves only local demand. In other words, the industry simply provides health care services to those who live within the region and does not bring in dollars from outside the region unlike base industries such as manufacturing. Health care is seen similarly to retail sales, most services, and restaurants.

But in some economies, human health and nutrition is a true base industry sector as it brings in dollars, income, and wealth from outside the regional economy. This occurs when a region provides health care to people outside the region as a health care hub. It also includes health care treatment research and drug development, highly specialized services, and manufactured products used in health care. Bioscience and biotech-related subsectors are usually export-oriented (outside the state or internationally) as well.

Within South Dakota there are several significant base or export-oriented subsectors within human health and nutrition broadly defined especially in the I-29 corridor surrounding Sioux Falls and to a lesser extent in the Rapid City area. There are other segments within health and human nutrition across the state as well.

Figure B-4 shows the impact of the recent recession in this target sector was minimal within the 2006-2011 period with significant growth in the state and strong but slower growth within the nation. Recent trends and the aging population explain continued increases over the 2011-2016 period with South Dakota expected to outpace the U.S. As in the other target sectors, except for value-added agriculture and agribusiness, there is a large difference in the average earnings in the state, $58,100, and in the U.S., $75,900.

Tables B-16 – B-20 present select subsectors within the overall human health and nutrition industry sector. Of special note is the high concentration within several of the subsectors. This verifies that this is a base or export industry within South Dakota. The strength of the sector’s performance is strongly supported by the competitive effect that explains a significant portion of the projected employment growth.

The analysis suggests that there are promising subsectors within the target sector that could lead to greater impacts within the state.

o Supply chain opportunities § Regional headquarters and management § Manufacturing: pharmaceuticals, chemicals, devices, instruments and materials § Professional and technical services o R&D in Physical, Engineering, and Life Sciences o R&D in Biotechnology o Medical records and security

Figure B-4. Employment Growth in Human Health and Nutrition, 2006-2016

Source: EMSI, 2012.

Table B-16. Health and Human Nutrition by NAICS Codes Sorted by 2011 Employment Levels

2011& NAICS& Competitive& Most& Change& %&Change& 2011& Description 2006&Jobs 2011&Jobs 2016&Jobs Location& Code Effect&11<16 Competitive* 11<16 11<16 Earnings Quotient 622110 General&Medical&and&Surgical&Hospitals&(Private) 17,843 20,582 22,479 347 2% 1,897 9% 1.48 $55,952 339113 Surgical&Appliance&and&Supplies&Manufacturing 1,353 1,400 1,576 150 11% 176 13% 4.42 $78,005 622310 Specialty&(except&Psychiatric&and&Substance&Abuse)&Hospitals&(Private) 701 976 1,213 66 7% 237 24% 1.50 $45,690 325193 Ethyl&Alcohol&Manufacturing 521 734 889 13 2% 155 21% 22.29 $70,050 541712 Research&and&Development&in&the&Physical,&Engineering,&and&Life&Sciences&(except&Biotechnology) 199 296 415 80 27% 119 40% 0.20 $65,095 541380 Testing&Laboratories 239 282 311 18 6% 29 10% 0.57 $49,694 621511 Medical&Laboratories 214 207 236 &(6) <3% 29 14% 0.37 $140,021 334510 Electromedical&and&Electrotherapeutic&Apparatus&Manufacturing 135 118 154 22 19% 36 31% 0.62 $31,098 541711 Research&and&Development&in&Biotechnology 69 106 150 32 30% 44 42% 0.22 $57,529 311222 Soybean&Processing 52 87 92 21 24% 5 6% 4.28 $55,918 339112 Surgical&and&Medical&Instrument&Manufacturing 21 64 94 25 39% 30 47% 0.17 $59,665 325311 Nitrogenous&Fertilizer&Manufacturing 15 22 29 6 27% 7 32% 0.89 $327,336 325314 Fertilizer&(Mixing&Only)&Manufacturing 14 19 25 5 26% 6 32% 0.68 $79,081 339114 Dental&Equipment&and&Supplies&Manufacturing 27 15 17 0 0% 2 13% 0.29 $45,162 325199 All&Other&Basic&Organic&Chemical&Manufacturing 13 10 10 1 10% 0 0% 0.10 $51,888 Total 21,470 24,935 27,702 778 3% 2,767 11% $58,072 Source: EMSI and RTS, 2012. NOTE: Sum of columns does not necessarily match total due to suppressed data at the sector level. *As percentage of 2011 employment. *The employment in biotechnology is underestimated based on the known companies within the industry. This discrepancy is due to how companies and employees are classified under the national NAICS system.

Table B-17. Health and Human Nutrition by Percent Change of Jobs 2011-2016

NAICS& Change& %&Change& Description 2006&Jobs 2011&Jobs 2016&Jobs Code 11;16 11;16 339112 Surgical&and&Medical&Instrument&Manufacturing 21 64 94 30 47% 541711 Research&and&Development&in&Biotechnology 69 106 150 44 42% 541712 Research&and&Development&in&the&Physical,&Engineering,&and&Life&Sciences&(except&Biotechnology) 199 296 415 119 40% 325311 Nitrogenous&Fertilizer&Manufacturing 15 22 29 7 32% 325314 Fertilizer&(Mixing&Only)&Manufacturing 14 19 25 6 32% 334510 Electromedical&and&Electrotherapeutic&Apparatus&Manufacturing 135 118 154 36 31% 622310 Specialty&(except&Psychiatric&and&Substance&Abuse)&Hospitals&(Private) 701 976 1,213 237 24% 325193 Ethyl&Alcohol&Manufacturing 521 734 889 155 21% 621511 Medical&Laboratories 214 207 236 29 14% 339113 Surgical&Appliance&and&Supplies&Manufacturing 1,353 1,400 1,576 176 13% 339114 Dental&Equipment&and&Supplies&Manufacturing 27 15 17 2 13% 541380 Testing&Laboratories 239 282 311 29 10% 622110 General&Medical&and&Surgical&Hospitals&(Private) 17,843 20,582 22,479 1,897 9% 311222 Soybean&Processing 52 87 92 5 6% 325199 All&Other&Basic&Organic&Chemical&Manufacturing 13 10 10 0 0% Total 21,470 24,935 27,702 2,767 11% Source: EMSI and RTS, 2012. NOTE: Sum of columns does not necessarily match total due to suppressed data at the sector level. *The employment in biotechnology is underestimated based on the known companies within the industry. This discrepancy is due to how companies and employees are classified under the national NAICS system.

Table B-18. Health and Human Nutrition by Most Competitive, 2011 Jobs

NAICS& Competitive& Most& Description 2006&Jobs 2011&Jobs 2016&Jobs Code Effect&11<16 Competitive* 339112 Surgical&and&Medical&Instrument&Manufacturing 21 64 94 25 39% 541711 Research&and&Development&in&Biotechnology 69 106 150 32 30% 325311 Nitrogenous&Fertilizer&Manufacturing 15 22 29 6 27% 541712 Research&and&Development&in&the&Physical,&Engineering,&and&Life&Sciences&(except&Biotechnology) 199 296 415 80 27% 325314 Fertilizer&(Mixing&Only)&Manufacturing 14 19 25 5 26% 311222 Soybean&Processing 52 87 92 21 24% 334510 Electromedical&and&Electrotherapeutic&Apparatus&Manufacturing 135 118 154 22 19% 339113 Surgical&Appliance&and&Supplies&Manufacturing 1,353 1,400 1,576 150 11% 325199 All&Other&Basic&Organic&Chemical&Manufacturing 13 10 10 1 10% 622310 Specialty&(except&Psychiatric&and&Substance&Abuse)&Hospitals&(Private) 701 976 1,213 66 7% 541380 Testing&Laboratories 239 282 311 18 6% 325193 Ethyl&Alcohol&Manufacturing 521 734 889 13 2% 622110 General&Medical&and&Surgical&Hospitals&(Private) 17,843 20,582 22,479 347 2% 339114 Dental&Equipment&and&Supplies&Manufacturing 27 15 17 0 0% 621511 Medical&Laboratories 214 207 236 &(6) <3% Total 21,470 24,935 27,702 778 3% Source: EMSI and RTS, 2012. NOTE: Sum of columns does not necessarily match total due to suppressed data at the sector level. *As percentage of 2011 employment. *The employment in biotechnology is underestimated based on the known companies within the industry. This discrepancy is due to how companies and employees are classified under the national NAICS system.

Table B-19. Health and Human Nutrition by Location Quotient, 2011

2011& NAICS& Description 2006&Jobs 2011&Jobs 2016&Jobs Location& Code Quotient 325193 Ethyl&Alcohol&Manufacturing 521 734 889 22.29 339113 Surgical&Appliance&and&Supplies&Manufacturing 1,353 1,400 1,576 4.42 311222 Soybean&Processing 52 87 92 4.28 622310 Specialty&(except&Psychiatric&and&Substance&Abuse)&Hospitals&(Private) 701 976 1,213 1.50 622110 General&Medical&and&Surgical&Hospitals&(Private) 17,843 20,582 22,479 1.48 325311 Nitrogenous&Fertilizer&Manufacturing 15 22 29 0.89 325314 Fertilizer&(Mixing&Only)&Manufacturing 14 19 25 0.68 334510 Electromedical&and&Electrotherapeutic&Apparatus&Manufacturing 135 118 154 0.62 541380 Testing&Laboratories 239 282 311 0.57 621511 Medical&Laboratories 214 207 236 0.37 339114 Dental&Equipment&and&Supplies&Manufacturing 27 15 17 0.29 541711 Research&and&Development&in&Biotechnology 69 106 150 0.22 541712 Research&and&Development&in&the&Physical,&Engineering,&and&Life&Sciences&(except&Biotechnology) 199 296 415 0.20 339112 Surgical&and&Medical&Instrument&Manufacturing 21 64 94 0.17 325199 All&Other&Basic&Organic&Chemical&Manufacturing 13 10 10 0.10 Total 21,470 24,935 27,702 Source: EMSI and RTS, 2012. NOTE: Sum of columns does not necessarily match total due to suppressed data at the sector level. *The employment in biotechnology is underestimated based on the known companies within the industry. This discrepancy is due to how companies and employees are classified under the national NAICS system.

Table B-20. Health and Human Nutrition by Earnings, 2011

NAICS& 2011& Description 2006&Jobs 2011&Jobs 2016&Jobs Code Earnings 325311 Nitrogenous&Fertilizer&Manufacturing 15 22 29 $327,336 621511 Medical&Laboratories 214 207 236 $140,021 325314 Fertilizer&(Mixing&Only)&Manufacturing 14 19 25 $79,081 339113 Surgical&Appliance&and&Supplies&Manufacturing 1,353 1,400 1,576 $78,005 325193 Ethyl&Alcohol&Manufacturing 521 734 889 $70,050 541712 Research&and&Development&in&the&Physical,&Engineering,&and&Life&Sciences&(except&Biotechnology) 199 296 415 $65,095 339112 Surgical&and&Medical&Instrument&Manufacturing 21 64 94 $59,665 541711 Research&and&Development&in&Biotechnology 69 106 150 $57,529 622110 General&Medical&and&Surgical&Hospitals&(Private) 17,843 20,582 22,479 $55,952 311222 Soybean&Processing 52 87 92 $55,918 325199 All&Other&Basic&Organic&Chemical&Manufacturing 13 10 10 $51,888 541380 Testing&Laboratories 239 282 311 $49,694 622310 Specialty&(except&Psychiatric&and&Substance&Abuse)&Hospitals&(Private) 701 976 1,213 $45,690 339114 Dental&Equipment&and&Supplies&Manufacturing 27 15 17 $45,162 334510 Electromedical&and&Electrotherapeutic&Apparatus&Manufacturing 135 118 154 $31,098 Total 21,470 24,935 27,702 $58,072 Source: EMSI and RTS, 2012. NOTE: Sum of columns does not necessarily match total due to suppressed data at the sector level. *The employment in biotechnology is underestimated based on the known companies within the industry. This discrepancy is due to how companies and employees are classified under the national NAICS system.

Information Technology/Cyber Security/Information Assurance Information Technology/Cyber Security/Information Assurance (hereafter IT) is the smallest of the target industry sectors but is quite intriguing for medium- and long-term employment growth for three reasons. First is research and technology strength within the university system. Second is the large banking industry within the state that has significant need for enhanced security. Third is the increasing need for protection of electronic medical records within human health. IT can be seen as an emerging sector within the portfolio strategy criteria described at the beginning of this section.

During the 2006-2011 period when nearly all industry sectors in the economy lost employment within the state and the nation, the IT sector instead grew by 20.3% in South Dakota and 8.4% in the U.S. (Figure B-5). That growth is expected to continue within South Dakota and also continue to outpace national growth. On the other hand average earnings of $56,100 are only 65% of the national average.

Tables B-21 – B-25 show the strong expected performance of the IT sector over the 2011- 2016 period, an expected 30% growth in employment. The strength of the sector’s performance is strongly supported by the competitive effect that explains a significant portion of the projected employment growth. The emerging nature of the industry is reflected in the low concentration numbers.

The fast growth within the IT industry along with the low employment concentrations suggests that some of the growth is occurring from import substitution. Import substitution occurs when an economy begins to produce a good or service internally instead of importing it from outside the economy. This is positive sign for the economy but the real impact of the IT will occur when the state’s IT industry begins to generate net exports, bringing jobs, income and wealth. Some of the promising subsectors listed below may be able to bring South Dakota to a net exporter of IT goods and services.

o Supply chain opportunities

§ Computer facilities management

§ Computer systems design, custom programming

§ Data center development

§ Engineering & other scientific & technical services

o R&D in Physical, Engineering, and Life Sciences

o R&D in Biotechnology

o Cyber security applications and training in finance, defense and medical industries

Figure B-5. Employment Growth in IT/Cyber Security/Information Assurance 2006- 2016

Source: EMSI, 2012.

Table B-21. Information Technology/Cyber Security/Information Assurance NAICS Codes Sorted by 2011 Employment Levels

2011& NAICS& Competitive& Most& Change& %&Change& 2011& Description 2006&Jobs 2011&Jobs 2016&Jobs Location& Code Effect&11<16 Competitive* 11<16 11<16 Earnings Quotient 517110 Wired&Telecommunications&Carriers 2,733 2,617 3,021 500 19% 404 15% 1.24 $64,391 541330 Engineering&Services 1,412 1,790 2,296 319 18% 506 28% 0.56 $66,667 541611 Administrative&Management&and&General&Management&Consulting&Services 766 1,349 1,785 56 4% 436 32% 0.49 $42,274 541512 Computer&Systems&Design&Services 638 1,126 1,525 167 15% 399 35% 0.40 $57,300 541690 Other&Scientific&and&Technical&Consulting&Services 476 1,045 1,547 120 11% 502 48% 0.95 $62,721 541511 Custom&Computer&Programming&Services 782 935 1,237 140 15% 302 32% 0.34 $47,036 334413 Semiconductor&and&Related&Device&Manufacturing 258 405 561 207 51% 156 39% 0.67 $52,277 541712 Research&and&Development&in&the&Physical,&Engineering,&and&Life&Sciences&(except&Biotechnology) 199 296 415 80 27% 119 40% 0.20 $65,095 517911 Telecommunications&Resellers 301 292 521 268 92% 229 78% 0.99 $48,906 611430 Professional&and&Management&Development&Training&(Private) 298 274 316 &(12) <4% 42 15% 0.70 $21,820 511210 Software&Publishers 239 271 258 &(47) <17% &(13) &(5%) 0.29 $63,533 517210 Wireless&Telecommunications&Carriers&(except&Satellite) 267 267 273 4 1% 6 2% 0.47 $63,951 518210 Data&Processing,&Hosting,&and&Related&Services 189 242 319 41 17% 77 32% 0.24 $35,479 334290 Other&Communications&Equipment&Manufacturing 101 242 405 119 49% 163 67% 3.32 $78,035 541620 Environmental&Consulting&Services 123 208 277 22 11% 69 33% 0.47 $37,415 541618 Other&Management&Consulting&Services 111 200 329 98 49% 129 65% 0.43 $74,463 541614 Process,&Physical&Distribution,&and&Logistics&Consulting&Services 125 149 170 &(15) <10% 21 14% 0.34 $21,550 541519 Other&Computer&Related&Services 95 132 127 &(2) <2% &(5) &(4%) 0.27 $30,580 519130 Internet&Publishing&and&Broadcasting&and&Web&Search&Portals 87 107 151 17 16% 44 41% 0.22 $45,328 541711 Research&and&Development&in&Biotechnology 69 106 150 32 30% 44 42% 0.22 $57,529 541720 Research&and&Development&in&the&Social&Sciences&and&Humanities 38 82 104 20 24% 22 27% 0.39 $23,110 541513 Computer&Facilities&Management&Services 31 66 84 21 32% 18 27% 0.30 $16,182 517919 All&Other&Telecommunications 32 17 14 &(6) <35% &(3) &(18%) 0.13 $27,865 Total 9,371 12,223 15,887 2,150 18% 3,668 30% 0.51 $56,121 Source: EMSI and RTS, 2012. NOTE: Sum of columns does not necessarily match total due to suppressed data at the sector level. *As percentage of 2011 employment.

Table B-22. Information Technology/Cyber Security/Information Assurance by Percent Change of Jobs, 2011-2016

NAICS& Change& %&Change& Description 2006&Jobs 2011&Jobs 2016&Jobs Code 11;16 11;16 517911 Telecommunications&Resellers 301 292 521 229 78% 334290 Other&Communications&Equipment&Manufacturing 101 242 405 163 67% 541618 Other&Management&Consulting&Services 111 200 329 129 65% 541690 Other&Scientific&and&Technical&Consulting&Services 476 1,045 1,547 502 48% 541711 Research&and&Development&in&Biotechnology 69 106 150 44 42% 519130 Internet&Publishing&and&Broadcasting&and&Web&Search&Portals 87 107 151 44 41% 541712 Research&and&Development&in&the&Physical,&Engineering,&and&Life&Sciences&(except&Biotechnology) 199 296 415 119 40% 334413 Semiconductor&and&Related&Device&Manufacturing 258 405 561 156 39% 541512 Computer&Systems&Design&Services 638 1,126 1,525 399 35% 541620 Environmental&Consulting&Services 123 208 277 69 33% 541611 Administrative&Management&and&General&Management&Consulting&Services 766 1,349 1,785 436 32% 541511 Custom&Computer&Programming&Services 782 935 1,237 302 32% 518210 Data&Processing,&Hosting,&and&Related&Services 189 242 319 77 32% 541330 Engineering&Services 1,412 1,790 2,296 506 28% 541720 Research&and&Development&in&the&Social&Sciences&and&Humanities 38 82 104 22 27% 541513 Computer&Facilities&Management&Services 31 66 84 18 27% 517110 Wired&Telecommunications&Carriers 2,733 2,617 3,021 404 15% 611430 Professional&and&Management&Development&Training&(Private) 298 274 316 42 15% 541614 Process,&Physical&Distribution,&and&Logistics&Consulting&Services 125 149 170 21 14% 517210 Wireless&Telecommunications&Carriers&(except&Satellite) 267 267 273 6 2% 541519 Other&Computer&Related&Services 95 132 127 &(5) &(4%) 511210 Software&Publishers 239 271 258 &(13) &(5%) 517919 All&Other&Telecommunications 32 17 14 &(3) &(18%) Total 9,371 12,223 15,887 3,668 30% Source: EMSI and RTS, 2012. NOTE: Sum of columns does not necessarily match total due to suppressed data at the sector level.

Table B-23. Information Technology/Cyber Security/Information Assurance by

Most Competitive, 2011 Jobs

NAICS& Competitive& Most& Description 2006&Jobs 2011&Jobs 2016&Jobs Code Effect&11<16 Competitive* 517911 Telecommunications&Resellers 301 292 521 268 92% 334413 Semiconductor&and&Related&Device&Manufacturing 258 405 561 207 51% 334290 Other&Communications&Equipment&Manufacturing 101 242 405 119 49% 541618 Other&Management&Consulting&Services 111 200 329 98 49% 541513 Computer&Facilities&Management&Services 31 66 84 21 32% 541711 Research&and&Development&in&Biotechnology 69 106 150 32 30% 541712 Research&and&Development&in&the&Physical,&Engineering,&and&Life&Sciences&(except&Biotechnology) 199 296 415 80 27% 541720 Research&and&Development&in&the&Social&Sciences&and&Humanities 38 82 104 20 24% 517110 Wired&Telecommunications&Carriers 2,733 2,617 3,021 500 19% 541330 Engineering&Services 1,412 1,790 2,296 319 18% 518210 Data&Processing,&Hosting,&and&Related&Services 189 242 319 41 17% 519130 Internet&Publishing&and&Broadcasting&and&Web&Search&Portals 87 107 151 17 16% 541511 Custom&Computer&Programming&Services 782 935 1,237 140 15% 541512 Computer&Systems&Design&Services 638 1,126 1,525 167 15% 541690 Other&Scientific&and&Technical&Consulting&Services 476 1,045 1,547 120 11% 541620 Environmental&Consulting&Services 123 208 277 22 11% 541611 Administrative&Management&and&General&Management&Consulting&Services 766 1,349 1,785 56 4% 517210 Wireless&Telecommunications&Carriers&(except&Satellite) 267 267 273 4 1% 541519 Other&Computer&Related&Services 95 132 127 &(2) <2% 611430 Professional&and&Management&Development&Training&(Private) 298 274 316 &(12) <4% 541614 Process,&Physical&Distribution,&and&Logistics&Consulting&Services 125 149 170 &(15) <10% 511210 Software&Publishers 239 271 258 &(47) <17% 517919 All&Other&Telecommunications 32 17 14 &(6) <35% Total 9,371 12,223 15,887 2,150 18% Source: EMSI and RTS, 2012. NOTE: Sum of columns does not necessarily match total due to suppressed data at the sector level. *As percentage of 2011 employment.

Table B-24. Information Technology/Cyber Security/Information Assurance by Location Quotient, 2011

2011& NAICS& Description 2006&Jobs 2011&Jobs 2016&Jobs Location& Code Quotient 334290 Other&Communications&Equipment&Manufacturing 101 242 405 3.32 517110 Wired&Telecommunications&Carriers 2,733 2,617 3,021 1.24 517911 Telecommunications&Resellers 301 292 521 0.99 541690 Other&Scientific&and&Technical&Consulting&Services 476 1,045 1,547 0.95 611430 Professional&and&Management&Development&Training&(Private) 298 274 316 0.70 334413 Semiconductor&and&Related&Device&Manufacturing 258 405 561 0.67 541330 Engineering&Services 1,412 1,790 2,296 0.56 541611 Administrative&Management&and&General&Management&Consulting&Services 766 1,349 1,785 0.49 517210 Wireless&Telecommunications&Carriers&(except&Satellite) 267 267 273 0.47 541620 Environmental&Consulting&Services 123 208 277 0.47 541618 Other&Management&Consulting&Services 111 200 329 0.43 541512 Computer&Systems&Design&Services 638 1,126 1,525 0.40 541720 Research&and&Development&in&the&Social&Sciences&and&Humanities 38 82 104 0.39 541511 Custom&Computer&Programming&Services 782 935 1,237 0.34 541614 Process,&Physical&Distribution,&and&Logistics&Consulting&Services 125 149 170 0.34 541513 Computer&Facilities&Management&Services 31 66 84 0.30 511210 Software&Publishers 239 271 258 0.29 541519 Other&Computer&Related&Services 95 132 127 0.27 518210 Data&Processing,&Hosting,&and&Related&Services 189 242 319 0.24 519130 Internet&Publishing&and&Broadcasting&and&Web&Search&Portals 87 107 151 0.22 541711 Research&and&Development&in&Biotechnology 69 106 150 0.22 541712 Research&and&Development&in&the&Physical,&Engineering,&and&Life&Sciences&(except&Biotechnology) 199 296 415 0.20 517919 All&Other&Telecommunications 32 17 14 0.13 Total 9,371 12,223 15,887 0.51 Source: EMSI and RTS, 2012. NOTE: Sum of columns does not necessarily match total due to suppressed data at the sector level.

Table B-25. Information Technology/Cyber Security/Information Assurance by Earnings, 2011

NAICS& 2011& Description 2006&Jobs 2011&Jobs 2016&Jobs Code Earnings

334290 Other&Communications&Equipment&Manufacturing 101 242 405 $78,035 541618 Other&Management&Consulting&Services 111 200 329 $74,463 541330 Engineering&Services 1,412 1,790 2,296 $66,667 541712 Research&and&Development&in&the&Physical,&Engineering,&and&Life&Sciences&(except&Biotechnology) 199 296 415 $65,095 517110 Wired&Telecommunications&Carriers 2,733 2,617 3,021 $64,391 517210 Wireless&Telecommunications&Carriers&(except&Satellite) 267 267 273 $63,951 511210 Software&Publishers 239 271 258 $63,533 541690 Other&Scientific&and&Technical&Consulting&Services 476 1,045 1,547 $62,721 541711 Research&and&Development&in&Biotechnology 69 106 150 $57,529 541512 Computer&Systems&Design&Services 638 1,126 1,525 $57,300 334413 Semiconductor&and&Related&Device&Manufacturing 258 405 561 $52,277 517911 Telecommunications&Resellers 301 292 521 $48,906 541511 Custom&Computer&Programming&Services 782 935 1,237 $47,036 519130 Internet&Publishing&and&Broadcasting&and&Web&Search&Portals 87 107 151 $45,328 541611 Administrative&Management&and&General&Management&Consulting&Services 766 1,349 1,785 $42,274 541620 Environmental&Consulting&Services 123 208 277 $37,415 518210 Data&Processing,&Hosting,&and&Related&Services 189 242 319 $35,479 541519 Other&Computer&Related&Services 95 132 127 $30,580 517919 All&Other&Telecommunications 32 17 14 $27,865 541720 Research&and&Development&in&the&Social&Sciences&and&Humanities 38 82 104 $23,110 611430 Professional&and&Management&Development&Training&(Private) 298 274 316 $21,820 541614 Process,&Physical&Distribution,&and&Logistics&Consulting&Services 125 149 170 $21,550 541513 Computer&Facilities&Management&Services 31 66 84 $16,182 Total 9,371 12,223 15,887 $56,121 Source: EMSI and RTS, 2012. NOTE: Sum of columns does not necessarily match total due to suppressed data at the sector level.

Target Sector Relationships

From the above discussion, tables, and figures, it is clear that most of the target industry sectors are related in some way – as an input, a service or producer of a product in another target. These relationships and interactions provide potent synergy for sector and product development. The relationships and interactions also generate additional value-added for research and innovation within the targets – suggesting potential payoffs for focused research efforts.

The materials and advanced manufacturing and IT sectors demonstrate the most robust of these relationships. Figures B-6 and B-7 show how the two sectors fit into a broader economic development picture.

Figures B-6 and B-7: Interaction Between Target Sectors

Source: RTS, 2013.

How the Target Sectors Match the Criteria

Before selecting the target industry sectors, all sectors at the six-digit NAICS level (the most granular level within the federal employment data system) were examined. All sectors that were not relevant to the task at hand were removed, such as government, education, and local support industries such as grocery stores, restaurants and retail trade. Remaining were sectors that sell goods and services outside the state and therefore support the broader economy and bring wealth and income into the state. These sectors are referred to as base industries.

Once the database was reduced to base industry sectors, 6-digit sectors were rated based on the criteria described earlier in this section. Sectors that were of a reasonably significant size were growing and competitive, and had high concentrations, and above average wages were targeted. These criteria broke the sectors into four groups. The top two groups were examined and the sectors were collected into broader industries, for example, advanced manufacturing. Once the sectors were identified, they were compared to the technological strengths within the university and the private sector to see if they were relevant to the scope of work and the desired outcomes of the project. Other criteria were applied, such as impact across the state and building a portfolio of targets that balances risk and reward. Table B-26 summarizes the information from each of the previously presented target sector analyses to show how the criteria fit the target sectors.

Not all sectors met all the criteria. For example, value-added agriculture and agribusiness is not expected to grow significantly and has lower average wages than the other targets, but it has a very high concentration, especially in the central part of the state that has fewer economic opportunities than the more urban eastern and western areas. Its significance, history, employment and consistency with university strengths are compelling. The Information Technology/Cyber Security/Information Assurance is fairly small and has a low concentration in the state but it presents opportunities to build on university research and the banking and health industries that rely on data assurance. The five targets represent a strong portfolio that balances mature and emerging industries, sectors that are strong in different areas of the state, and moderate to high growth sectors.

The data demonstrating the match of the criteria to the target sectors are shown in Table B-27.

Source: RTS, 2013. Environment Advanced& Security/& &&Nutrition Information& Human&Health& Materials&&& Energy&&& Value=Added& Target'Sector Cyber& Information& Technology/& Agriculture&&& Assurance Agribusiness Manufacturing

Employment) Very'Large Moderate Moderate 12,223 24,935 16,645 19,626 50,280 Large (2011' Small Size''''''''' Strongest'in' Most'in'East Distributed Distributed Statewide Highest'in' Central Well' Well' Table B East Yes Yes Yes Yes No - (Momentum) 26. Target Sector Criteria Characteristics 2011<2016 Growth'' Strong Strong 0.20% Good Good Slow 30% 11% 28% 14% ' Competitiveness' Performance Moderate Moderate Moderate Strong Strong Yes Yes Yes Yes Yes Technology' Strong Strong Strong Strong Strong Match Yes Yes Yes Yes Yes Concentration' Similar'to'US

Very'High Very'high Quotient) (Location' High 0.51 Low 1.24 2.5 2.9 1 Established Established Established Emerging Emerging Mature/' Mature $56,121' $52,072' $52,566' $54,356' $35,301' Wages Above' Above' Above' Above' Below' State State State State State

Cyber)Security/) Nutrition Information) Information) Human)Health)and) Materials)and) Energy)and) Value&Added) Target'Sector Assurance Agribusiness Technology/))))))) Manufacturing Agriculture)and) Environment Advanced) Source: RTS, 2013.

2011'Jobs 12,223 24,935 16,643 19,626 50,280 Table B.27. Target Sector Criteria Measures Competitive' 201182016 2,150 4,665 2,019 Effect''''' 778 201 Competitive* 18% 28% 10% Most' 3% 0% %'Change 30% 11% 28% 14% 0%

Quotient Location' 2011' 0.51 1.24 2.47 0.96 2.89 Earnings $56,121' $58,072' $52,566' $54,351' $35,293' 2011'

Appendix C

Indicator Descriptions (In Order that they Appear)

Personal Per Capita Income Per capita income is the average income computed for every man, woman, and child in a particular group. The Census Bureau derived per capita income by dividing the total income of a particular group by the total population in that group (excluding patients or inmates in institutional quarters) (http://www.census.gov/cps/about/cpsdef.html).

Median Household Income Median income is the amount which divides the income distribution into two equal groups, half having incomes above the median, half having incomes below the median. The medians for households, families, and unrelated individuals are based on all households, families, and unrelated individuals, respectively. The medians for people are based on people 15 years old and over with income (http://www.census.gov/cps/about/cpsdef.html).

Per Capita Real Gross Domestic Product (GDP) by State Real GDP by state is an inflation-adjusted measure of each state's gross product that is based on national prices for the goods and services produced within the state. Real GDP by state is measured in chained (2005) dollars.

Per capita real GDP by state is calculated by dividing the real GDP for a state by the resident population of the state. In its calculation, BEA uses the Census Bureau's annual midyear population estimate.

Per capita real GDP indicates the trend in output as it relates to population. Although it does not indicate whether the rate of growth in real GDP can be sustained, it suggests the ease with which the economy can continue to support its local population (http://www.bea.gov/regional/definitions/nextpage.cfm?key=Per%20capita%20real%2 0GDP%20by%20state).

Academic Science and Engineering Article Output per $1 Million of Academic S&E R&D This indicator represents the relationship between the number of academic S&E publications and the amount of money expended for academic R&D. Academic institutions include 2-year colleges, 4-year colleges or universities, medical schools, and university- affiliated research centers. Publication counts are based on the number of articles that appear in a set of journals tracked by Thomson Reuters in the Science Citation Index and Social Sciences Citation Index. Academic article output is based on the most recent journal set; data for earlier years may differ slightly from previous publications due to changes in the journal set. Articles with authors from different institutions were counted fractionally.

For instance, for a publication with authors at N institutions, each institution would be credited with 1/N of the article (http://www.nsf.gov/statistics/seind12/c8/c8s5o49.htm).

Academic Science and Engineering R&D per $1,000 of Gross Domestic Product This indicator represents the ratio of S&E R&D expenditures at a state's colleges and universities to the size of the state's economy. Academic R&D performers account for a little over half of the U.S. basic research, about a third of total research (basic plus applied), and roughly 10% of all R&D conducted in the U.S. Academic R&D can be a valuable basis for future economic development.

Data on academic R&D are provided by the National Center for Science and Engineering Statistics and represent S&E R&D at U.S. colleges and universities with over $150,000 in R&D expenditures.

Data for the value of gross domestic product (GDP) by state and for R&D expenditures are shown in current dollars (http://www.nsf.gov/statistics/seind12/c8/c8s4o46.htm).

Business-Performed R&D as a Percentage of Private-Industry Output This indicator represents the role of R&D in a state's business activity. The business sector is the largest performer of U.S. R&D. It accounts for more than half of all U.S. applied research funding and a significant portion, over 80%, of all development funding. A high value for this indicator indicates that the businesses within a state are making a large investment in their R&D activities.

Private-industry output is the portion of state gross domestic product contributed by state businesses. Data are presented in current dollars (http://www.nsf.gov/statistics/seind12/c8/c8s4o45.htm).

Non-Industry Investment in R&D as a Percentage of Gross State Product (State GDP) State agency R&D data and other non-industry data are summed and then expressed as a ratio to gross state product for the final score (http://www.itif.org/publications/2012- state-new-economy-index).

Patents Awarded per 1,000 Individuals in Science and Engineering Occupations This indicator represents state patent activity normalized to the size of its S&E workforce, specifically employees in S&E occupations. Only U.S.-origin patents are included. People in S&E occupations include engineers and computer, mathematical, life, physical, and social scientists. Managers, technicians, elementary and secondary schoolteachers, and medical personnel are not included.

Data on individuals in S&E occupations come from a survey of workplaces that assigns workers to a state based on where they work. Estimates do not include self-employed persons and are developed by the Bureau of Labor Statistics. Faculty teaching in S&E fields are not included as workers in S&E occupations. Estimates for states with smaller populations are generally less precise than estimates for states with larger populations (http://www.nsf.gov/statistics/seind12/c8/c8s5o51.htm).

Average Annual Federal Small Business Innovation Research Funding per $1 Million of Gross Domestic Product Funds awarded through the federal Small Business Innovation Research (SBIR) program support technological innovation in companies with 500 or fewer employees. Awards are made to evaluate the feasibility and scientific merit of new technology (Phase 1–up to $150,000) and to develop the technology to a point where it can be commercialized (Phase 2–up to $750,000). The total award dollars include both Phase 1 and Phase 2 SBIR awards.

Because of year-to-year fluctuations, this indicator is calculated using 3-year averages. The 3-year average annual SBIR award dollars won by small businesses in a state are divided by the 3-year average annual gross domestic product for the same period. All data are expressed in current dollars. A high value indicates that small business firms in a state are doing cutting-edge development work that attracts federal support (http://www.nsf.gov/statistics/seind12/c8/c8s6o55.htm).

Academic Patents Awarded per 1,000 Science and Engineering Doctorate Holders in Academia This indicator relates the number of academic-owned utility patents to the size of the doctoral S&E workforce in academia and is one approximate measure of the degree to which results with perceived economic value are generated by the doctoral academic workforce. Academia includes 2-year colleges, 4-year colleges and universities, medical schools, and university-affiliated research centers. .

S&E doctorates include those in computer sciences; mathematics; biological, agricultural, or environmental life sciences; physical sciences; social sciences; psychology; engineering; and health fields. Data for S&E doctorate holders are presented by employment location regardless of residence (http://www.nsf.gov/statistics/seind12/c8/c8s5o50.htm).

The Proportion of a State's Eighth Grade Students in Public Schools that Has Met or Exceeded the Proficiency Standard in Mathematics

This indicator represents the proportion of a state's eighth grade students in public schools that has met or exceeded the proficiency standard in mathematics. The National Assessment Governing Board sets performance standards that provide a context for interpreting National Assessment of Educational Progress (NAEP) results. The standards define "proficiency," as well as "advanced" and "basic" accomplishment. For the eighth grade, the proficient level (scores 299–332) represents solid academic performance and demonstrates competency over challenging subject-matter knowledge. The advanced level (333–500) signifies superior performance. The basic level (262–298) denotes partial mastery of knowledge and skills that are prerequisite for proficient work (http://www.nsf.gov/statistics/seind12/c8/c8s1o6.htm).

Bachelor's Degrees in Science and Engineering Conferred per 1,000 Individuals 18– 24 Years Old Educational attainment varies by several demographic characteristics including age. The cohort 18–24 years old was chosen to approximate the age range of most students who are pursuing an undergraduate degree. This indicator represents the extent to which a 92 state provides bachelor's level training in S&E fields, controlling for the size of its college- age population.

The number of bachelor's degrees awarded in S&E fields is based on an actual count provided by the National Center of Education Statistics. Estimates of the population ages 18–24 years are provided by the U.S. Census Bureau. Small differences in the indicator value between states or across time generally are not meaningful (http://www.nsf.gov/statistics/seind12/c8/c8s2o17.htm).

Science and Engineering Degrees as a Percentage of Higher Education Degrees Conferred This indicator represents the extent to which a state's higher education programs are concentrated in S&E fields. S&E fields include the physical, life, earth, ocean, atmospheric, computer, and social sciences; mathematics; engineering; and psychology. Counts of both S&E degrees and higher education degrees conferred include bachelor's, master's, and doctoral degrees; associate's degrees are not included.

Degree data reflect the location of the degree-granting institution, not the state where degree-earning students permanently reside. The year indicates the end date of the academic year. For example, data for 2009 represent degrees conferred during the 2008– 09 academic year. All degree data are actual counts (http://www.nsf.gov/statistics/seind12/c8/c8s2o19.htm).

Technical Workers as a Percentage of the Workforce Technical workers include managers in the areas of computer and information science, engineering, or the natural sciences; computer programmers; drafters working in architecture, civil engineering, electronics, or mechanical engineering; and technicians in a wide variety of technical fields. Individuals who work as scientists and engineers are not included in this indicator.

Data on workers' occupations come from a survey of workplaces that assigns workers to a state based on where they work. Estimates are developed by the Bureau of Labor Statistics (BLS) from data provided by state workforce agencies and do not include self-employed persons. Data on the size of the state workforce are BLS estimates and represent the employed component of the civilian labor force (http://www.nsf.gov/statistics/seind12/c8/c8s3o38.htm).

Individuals in Science and Engineering Occupations as a Percentage of the Workforce S&E occupations are defined by standard occupational codes. They include engineers and computer, mathematical, life, physical, and social scientists. Managers, technicians, elementary and secondary schoolteachers, and medical personnel are not included.

Data on individuals in S&E occupations come from a survey of workplaces that assigns workers to a state based on where they work. Estimates do not include self-employed persons and are developed by the Bureau of Labor Statistics (BLS) from data provided by state workforce agencies. Data on the size of the workforce are BLS estimates and 93 represent the employed component of the civilian labor force. In these estimates, workers are assigned to a state based on where they live (http://www.nsf.gov/statistics/seind12/c8/c8s3o33.htm).

Science and Engineering Graduate Students per 1,000 Individuals 25–34 Years Old Graduate students are counted on the basis of their university enrollment and include state residents, residents of other states, and noncitizens. The cohort includes all state residents ages 25–34 and was chosen to approximate the age of most graduate students.

Data on S&E graduate students are counts obtained from all academic institutions in the United States that offer doctoral or master's degree programs in any S&E field, including the physical, life, earth, ocean, atmospheric, computer, and social sciences; mathematics; engineering; and psychology. Graduate students enrolled in schools of nursing, public health, dentistry, veterinary medicine, and other health-related disciplines are not included. Estimates of the population ages 25–34 years old are provided by the U.S. Census Bureau (http://www.nsf.gov/statistics/seind12/c8/c8s2o21.htm).

Advanced Science and Engineering Degrees as a Percentage of S&E Degrees Conferred This indicator represents the extent to which a state's higher education programs in S&E are concentrated at the graduate level. S&E fields include the physical, life, earth, ocean, atmospheric, computer, and social sciences; mathematics; engineering; and psychology. Advanced S&E degrees include master’s and doctoral degrees. Total S&E degrees include bachelor's, master's, and doctoral degrees but exclude associate's degrees.

The indicator value is computed by dividing the number of advanced S&E degrees by the total number of S&E degrees awarded by the higher education institutions within the state. The number of degrees are actual counts provided by the National Center of Education Statistics (http://www.nsf.gov/statistics/seind12/c8/c8s2o22.htm).

Science and Engineering Doctoral Degrees as a Percentage of S&E Degrees Conferred S&E fields include the physical, life, earth, ocean, atmospheric, computer, and social sciences; mathematics; engineering; and psychology. Total S&E degrees conferred include bachelor's, master's, and doctoral degrees but exclude associate's degrees.

The indicator value is computed by dividing the number of doctoral degrees awarded in S&E fields by the total number of S&E degrees awarded by the higher education institutions within the state. The number of degrees are counts provided by the National Center of Education Statistics (http://www.nsf.gov/statistics/seind12/c8/c8s2o24.htm).

Employed Science and Engineering Doctorate Holders as a Percentage of the Workforce Data on employed S&E doctorate holders include those with doctoral degrees in computer and mathematical sciences; the biological, agricultural, or environmental life sciences; physical sciences; social sciences; psychology; engineering; and health fields. S&E doctorate data exclude individuals with doctorates from foreign institutions and those 94 above the age of 75. S&E doctorate holders are assigned to a state based on where they work.

Employed workforce data are developed by the Bureau of Labor Statistics, which assigns workers to a state based on where they live. Workforce data represent annual estimates of the employed civilian labor force; estimates are not seasonally adjusted (http://www.nsf.gov/statistics/seind12/c8/c8s3o34.htm).

Science and Engineering Doctorates Conferred per 1,000 Employed S&E Doctorate Holders (Rate at which the State is Training New S&E Doctorate Recipients for Entry into its Workforce) This indicator represents the rate at which the states are training new S&E doctorate recipients for entry into the workforce. High values indicate relatively large production of new doctorate holders compared with the existing stock of employed doctorate holders. States with relatively low values may need to attract S&E doctorate holders from elsewhere to meet the needs of local employers.

Data on doctorates conferred and on employed doctorate holders include those with doctoral degrees in computer and mathematical sciences; the biological, agricultural, or environmental life sciences; physical sciences; social sciences; psychology; engineering; and health fields. Both sets of data exclude individuals with doctorates from foreign institutions. The employed doctorate data also excludes those above the age of 75. Data for doctorates conferred are presented by the location where the doctorate was earned; employment data for S&E doctorate holders are presented by employment location regardless of residence. Estimates for states with smaller populations of employed doctorate holders are generally less precise than estimates for states with larger populations.

The indicator does not take into account any postgraduation mobility of recent S&E doctorate recipients to their place of employment. Doctorate recipients with temporary visas may decide to return home after graduation to begin their careers. The indicator also does not cover individuals with non-U.S. S&E doctorates who are working in the United States (http://www.nsf.gov/statistics/seind12/c8/c8s5o47.htm).

High-Technology Establishments as a Percentage of all Business Establishments This indicator represents the portion of a state's business establishments that are classified as being part of high-technology industries. High-technology industries are defined as those in which the proportion of employees in technology-oriented occupations is at least twice the average proportion for all industries. High-technology occupations include scientific, engineering, and technician occupations that employ workers who generally possess in-depth knowledge of the theories and principles of science, engineering, and mathematics at a postsecondary level.

This indicator does not take into account establishment size. Each establishment with an employer identification number is counted without regard to the number of its employees.

The data pertaining to establishments for the years 2003 and later are based on their classification according to the 2002 edition of the North American Industry Classification System (NAICS) (http://www.nsf.gov/statistics/seind12/c8/c8s6o52.htm).

Net High-Technology Business Formations as a Percentage of all Business Establishments The business base of a state is constantly changing as new businesses form and others cease to function. The term net business formations refers to the difference between the number of businesses that are formed and the number that cease operations during any particular year.

The ratio of the number of net business formations that occur in high-technology industries to the number of business establishments in a state indicates the changing role of high-technology industries in a state's economy. High positive values indicate an increasingly prominent role for these industries.

The data on business establishments in high-technology industries are based on their classification according to the 2002 edition of the North American Industry Classification System (NAICS).

Changes in company name, ownership, or address are not counted as business formations or business deaths. Net business formations cannot be used to directly link the number of high-technology business establishments in different years because the primary industry of some establishments may have changed during the period (http://www.nsf.gov/statistics/seind12/c8/c8s6o53.htm).

Employment in High-Technology Establishments as Percentage of Total Employment This indicator represents the extent to which a state's workforce is employed in high- technology industries. High-technology industries are defined as those in which the proportion of employees in technology-oriented occupations is at least twice the average proportion for all industries. High-technology occupations include scientific, engineering, and technician occupations that employ workers who generally possess in-depth knowledge of the theories and principles of science, engineering, and mathematics at a postsecondary level.

The data pertaining to establishments are based on their classification according to the 2002 edition of the North American Industry Classification System (NAICS). Data on total employment and NAICS industry establishment employment are provided by the Census Bureau and differ from workforce data provided by the Bureau of Labor Statistics. Total employment refers to all U.S. business establishments with paid employees, but does not include crop and animal production, rail transportation, the postal service, public administration, or most government employees (http://www.nsf.gov/statistics/seind12/c8/c8s6o54.htm).

Venture Capital Deals as a Percentage of High-Technology Business Establishments (This Indicator Represents the Extent to Which High-Technology Companies in a State Receive Venture Capital Investments) This indicator represents the extent to which high-technology companies in a state receive venture capital investments. The value of the indicator is calculated by dividing the number of venture capital deals by the number of companies operating in high-technology industries in that state. High values indicate that high-technology companies in a state are frequently using venture capital to facilitate their growth and development. In most cases, a company will not receive more than one infusion of venture capital in a given year.

Venture capital data measure cash-for-equity investments by the professional venture capital community in private emerging companies in the United States. Data exclude debt, buy-outs, recapitalizations, IPOs, and other forms of private equity that do not involve cash.

Data on business establishments operating in high-technology industries for the years 2003 and later are based on their classification according to the 2002 edition of the North American Industry Classification System (NAICS) (http://www.nsf.gov/statistics/seind12/c8/c8s6o57.htm).

ENDNOTES

Endnote-A Generating the new value that enables the creation and growth of knowledge- based, innovation-rich South Dakota companies and jobs is the aim of the Ideas strategy. It is important to note that existing concentrations of these exemplar companies, such as those in the Rapid City, Sioux Falls, and Brookings areas, offer a solid foundation on which to build. v Rapid City – This concentration includes technology intensive Department of Defense contractors and material science companies such as RPM Associates, H.F. Webster, Dakota Power LLC, and Lakota Industries; SBIR/STTR recipient companies including Bamboo LLC, Innovative Materials and Processes LLC, and MEMSense LCC; a group of incubator tenant early stage technology companies that includes Zyvex Performance Materials, Alces Technology, Innovative Systems, Blue Sugars Corporation, ReforceTech, and Sports Buzzard.Com LLC; as well as larger incubator tenant companies or company divisions including RESPEC (Information Technology, Natural Resources, Mining and Energy) and CHR Solutions, Raven Industries and Caterpillar (engineering, design and technical assistance support operations). A common thread that runs through many of the companies is the relationship to SDSM&T through research and faculty relationships and through graduates employed by these companies.

v Sioux Falls – The area has significant concentrations of advanced technology- based firms – especially in two areas, bioscience and information technology. The bioscience company roster includes companies such as Hematech, Alumend, PharmaCline, Permara, TetherX, OmegaQuant, AlphaGenix and PetMedicus Laboratories. On the information technology side, the Sioux Falls area group includes Augusta Systems, Certus (now part of Cajana), CFGear.com, Chenega Logistics, Classified Verticals, Dakota Retail Technologies, DocuTAP, Meta Payment Systems, and DataSync.

v Brookings – The area boasts advanced technology company concentrations in five areas.

o Agriculture and Plant Science. Businesses: Syngenta, Pioneer, International Plant Nutrition Institute, SGS Midwest Seed Service, Millborn Seeds, Foundation Seed, Prairie Aqua Tech, and Innovative Wheat Genetics. o Green Energy. Businesses: Valero Renewables, U.S. Bioenergy, GHP Systems, American Science and Technology, Radiance Technologies, GAEA, Cyanosun Energy, Northern Plains Power Technologies, and Energy Management Technologies. o Advanced Manufacturing and Manufacturing Services. Businesses: Daktronics, Midwest Microtek, Star Circuits, Falcon Plastics, Great Plains Rapid Prototyping, Royal Plastics, eTenum, American Science and

Rapid Prototyping, Royal Plastics, eTenum, American Science and Technology, Predictive Analytic Solutions, Line Worker Safety Products and Integrid Technologies. o Human Health. Businesses: Protein Nanoparticle Science & Techology (PNST), Sterling Technologies, Identify Genetics, SCSA Diagnostics, Chronix Biomedical, and Tranzderm Solutions. o Animal Health. Businesses: Rural Technologies, Inc., Alltech, Biogenetics, DairyNet, Brookings Biomedical, VST dba Medgene Labs.

Endnote-B The state-owned Sanford Underground Research Facility (Sanford Lab) in Lead, S.D. is building South Dakota’s capacity for advanced research and technological innovation. Sanford Lab is a world-class facility for sensitive physics experiments that require protection from the cosmic radiation that bombards the surface of the earth. Experiments now installed nearly a mile underground, protected by a thick layer of rock from cosmic noise, could yield answers to some of the deepest mysteries of modern physics in the next few years. The facility also hosts applied research, such as a project to improve the commercial production of ultra-pure germanium crystals and the use of exotic “extremophile” life forms that could boost production of bio-fuels. Fourteen research collaborations are active at Sanford Lab, and they include nearly 1,000 scientists from throughout the United States and Europe. Planning for Sanford Lab began in 2000, when Homestake Mining Co. announced it would close its giant gold mine in Lead. The closure was a blow to the community, but with 370 miles of tunnels, 14 shafts and 7,700 acres of excavated underground space, Homestake also offered a resource to scientists—not just physicists, but also biologists, geologists and engineers. The company donated the mine to South Dakota in 2006, and Sanford Lab was established in 2007. The state leveraged its own investment of $30 million to attract more than $261 million in other funding—including a $70 million donation from philanthropist T. Denny Sanford and more than $190 million in federal funds for research and STEM education.

Today Sanford Lab employs a staff of nearly 130. Most of them are highly skilled professionals in higher wage, knowledge-based jobs. They include scientists, engineers, technicians, educators and others. Sanford Lab’s $8.5 million annual payroll is a major component of the economy of the northern Black Hills. Sanford Lab has spent more than $115 million in South Dakota, much of it for high-technology products and services. In addition, the Lab’s Education Department has reached more than 500 teachers, 2,000 students and 4,000 members of the general public with pilot educational programs. They include teacher trainings, scholarship programs, hands-on STEM activities for students and an annual science festival. Planning is also underway for a Sanford Center for Science Education, funded in part by a portion of the donation from T. Denny Sanford.

Going forward, large, long-term experiments proposed for Sanford Lab could continue until 2040 and beyond, and the Sanford Center for Science Education will be a permanent facility in Lead that will serve students and teachers throughout South Dakota and the region.

Sanford Lab is poised to become one of the leading physics laboratories in the world, and 13 of the 14 research groups at the laboratory include scientists from South Dakota universities. However, South Dakota can position itself to take better advantage of this world-leading facility. A new physics doctoral program and better opportunities for graduate students will expand research opportunities for South Dakota students. Sanford Lab will help build the intellectual capital necessary for South Dakota to thrive in an innovation-rich economy.

Endnote-C As plans are drafted and the SDRICs’ development paths begin to take shape, the following design elements and issues should be carefully considered.

• Launch of a SDRIC should be predicated on target industry sector participation in the design of the center, on collaborative university/industry education, training, outreach and research efforts within the center, and on securing significant private sector financial support. In the latter case, each SDRIC would be expected to show an increasing level of private sector funding annually with a goal of 50% of the operating budget being met by the private sector by project year five.

• The SDRICs should be designed to function at a scale that will generate significant benefit for its industrial partners as defined by those partners (access to students, talent, cutting edge research, new technology, improved products and processes, etc.) and significant economic impact for the state (company revenue, earnings and employment growth, scores of new companies, hundreds, if not thousands, of new or higher paying jobs, etc.).

• The existing Governor’s Research Centers (and public and private funding streams) should be incorporated into the SDRICs.

• The SDRICs’ missions and programs should cross higher education institutional lines with the intent of getting all relevant translational research assets and programs linked and working toward common goals on behalf of its industry partners and the economic health of the target industry sector.

• Based on prior higher education technology transfer and university/industry partnership best practice analyses123, the SDRICs should seek to engage in the following activities: o Industry Research Partnerships o Technology Transfer o Technical Assistance o Entrepreneurial Development o Industry Education and Training Partnerships o Career Services and Placement o Formal Partnerships with Economic Development Organizations 1 Louis G. Tornatzky et al., Innovation U.: New University Roles in a Knowledge Economy (Research Triangle Park: Southern Growth Policies Board, 2002).

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2 Louis G. Tornatzky et al., University-industry Technology Transfer: Models of Alternative Practice, Policy and Program (Research Triangle Park: Southern Growth Policies Board, 1999). 3 Louis G. Tornatzky et al., Outlaws or Heroes? Issues of Faculty Rewards, Organizational Culture, and University-Industry Technology Transfer (Research Triangle Park: Southern Growth Policies Board, 2002).

• In addition to providing benefits to their industrial partners, the SDRIC operations should include a strong entrepreneurial component. To this end, the center should establish partnerships with small business incubator facilities to house its spin-offs as well as forge strong links to proof-of concept and/or pre- seed funding providers.

• In view of their scope and scale there should be no virtual centers. The SDRICs should have a physical presence, though depending on the operating plan, they may vary from centers with a few offices that fund, manage and/or link activities across campuses to centers with hub operations and multiple satellite sites to larger centers with their own dedicated lab and training facilities.

• Cost parameters for core operating and administrative budgets independent of external funding will vary according to the SDRIC business model. For initial planning purposes a core budget range of $500,000 to $3,500,000 a year should be anticipated.

Endnote-D Release time and sabbatical programs can be designed in a number of ways but they should include policies, procedures and support:

o Programs should provide faculty with the time needed for an entrepreneurial venture preferably at least one year. o Programs should be flexible in how the sabbatical time is structured. Is it full- time, half-time, etc.? o Entrepreneurial sabbaticals should include student involvement. Students need to see the process, the problems and solutions, the successes and failures. o Sabbaticals should require a connection to the private sector and financing. o Sabbatical programs should be weighted to the target sectors though flexibility should be given to exceptional proposals outside of the targets. o Tracking mechanisms should be established upfront so that adjustments can be made to the programs. o There should be an expectation that faculty who take entrepreneurial sabbaticals will become mentors for the next generations of campus entrepreneurs.

o Finally the sabbatical programs should be part of a broader campus and system entrepreneurial initiative that includes effective technology transfer, entrepreneurial technical assistance, commercialization and business launching

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classes for students and faculty and more comprehensive efforts to bring the private sector into the campus innovation process.

Endnote-E An important component of the dialogue surrounding the growth of degree holders in STEM fields is the impact that a college preparatory curriculum can have on ensuring students are qualified to complete the necessary coursework in these disciplines. The South Dakota Department of Education (SDDOE) established criteria in 2010 requiring that all students complete three years of math and science coursework to graduate from a South Dakota High School. Additionally, the South Dakota Opportunity Scholarship (SDOS) program was created in 2004 to provide merit based funding to: 1) encourage students to take a college preparatory curriculum; 2) remain in the state for their postsecondary experience; with the intent that they 3) seek employment in the state upon graduation. This preparatory curriculum, which includes four years of math and science coursework, has helped the state remain above the national average in the percentage of students meeting ACT college readiness benchmarks. Student retention has been higher (almost 8%) when compared to similar caliber students prior to the time the program was in place, and more than 80% of these recipients are employed or enrolled in graduate programs in South Dakota one year after graduation (compared to only 70% of non-Opportunity Scholarship recipients). A total of 9,695 South Dakota high school graduates have established initial eligibility in the scholarship program since the first cohort began during the Fall 2004 semester. A total of 828 recipients became eligible during the first semester, and the program has experienced a 48% increase in enrollments during the past eight years. While this program has proved to be a successful mechanism for attracting and retaining South Dakota students, roughly 32% of the recipients currently pursue degree programs in STEM related fields. While 34% are pursuing careers in Nursing, Education or Health related fields (also representing critical workforce needs for the state), a sizable number of recipients have chosen to major in the Social Sciences or Humanities despite having the high school curricular background that would prepare them for the successful completion of a STEM-based degree. In an effort to further encourage students to pursue STEM- related degree programs, the state should consider offering students in designated programs additional funding. National data indicate that the rate of inflation has increased by an average of 2.5% over the past eight years. More specifically, since the first cohort took advantage of the SDOS eight years ago, the buying power of the $1,000 scholarship has decreased by 20.3% (U.S. Inflation Calculator, 2012). As a result, students are provided approximately $797 in actual purchasing power toward college expenses. A targeted effort on behalf of the state could leverage a needed increase in this successful scholarship program, while also serving to increase the number of STEM majors.

Endnote F Developing a PSM involves identification of an expanding economic sector, and engaging both faculty members and representatives of the economic sector to jointly plan the courses and curricula. The inclusion of stakeholders in discussions of courses and curricula ensures the program is both rigorous with high academic standards and also relevant to an economic sector. Students seeking a PSM degree come from two streams; some students come directly from their bachelor’s degree programs, while other students have careers but seek a graduate

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degree to advance their careers. Although students do not complete either a thesis or a project, they do an internship for academic credit that helps connect them to their future career.

Students can complete a PSM degree in 1 – 2 years, and be immediately ready for employment. The PSM degree often includes courses in a technical area and courses related to business and management skills, such as human relations, accounting, and business administration. In some cases, a PSM degree can be created with existing courses, assembled into a new curriculum. In other cases a few new courses may be necessary for an effective PSM degree.

Endnote G While there are no simple responses to globalization, it is evident that manufacturers and production services must find new competitive advantages that are based on competencies that cannot be so easily imitated, on products that are customized and/or associated with place and cannot be easily replicated, and on tight networks within regional creative enterprise clusters that permit levels of responsiveness and trust that cannot be easily matched. Despite higher costs, some companies do continue to manufacture competitively onshore, especially large items but even these increasingly rely on imported high value added parts. Many of these companies make products or services that require quick responses to customer demand and short runs, or products and services that provide consumers with a valued connection to a local culture, artist, brand, or experience.

Moving into design-intensive production will be somewhat similar to the successful efforts in the ‘80s and ‘90s to modernize industry, which relied on companies learning about and adopting new technologies and acquiring new skills. Introducing design will also require companies to learn about and adopt new concepts, which may be even more foreign to them than technology. The U.S. did not even have an industrial classification for design until 1995. Recent optimistic reports on the future of manufacturing in the U.S. recognize the futility of recapturing much labor-intensive mass production and they see the potential for customized production yet they never make the connection to design. The U.S. does not license or otherwise recognize industrial designers.

In addition, the role of design, especially digital design, within knowledge-based companies is flourishing. In the continuing economic evolution of Silicon Valley, designers who founded startups are often referred to as the “new secret weapon,” albeit, one that is in short supply. Venture firms are hiring their own designer in-house to help with startups. An angel fund has been formed to invest in design-driven startups. The role of design in innovation is really just beginning to gain recognition within the education and training community with new design programs popping up in Sanford as well as highly regarded art schools such as the School of Visual Arts in New York and the California College of the Arts.

Endnote H In much of the literature examining industrial performance, the terms Innovation and R&D are used interchangeably. While these two terms are clearly connected, they are not synonymous. Innovation is a concept, while R&D is a measurable, observable activity.

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Not all firms or industries engaging in R&D are innovative. It’s certain, however, that any firm or industry that is successfully reaping the benefits of innovation is investing in research and development.

Because it is directly tied to productivity growth and competitive advantage, industrial R&D is one of the best indicators of a region’s capacity to innovate. Industry performs over 75% of all R&D in the U.S. and funds 65% of all R&D. The private sector also funds 85% of industrial R&D. {The Dynamics of Technology-Based Economic Development: State Science and Technology Indicators (Office of Technology Policy, Technology Administration, U.S. Department of Commerce, 2000)}; The 2012 State New Economy Index, Information Technology and Innovation Foundation.

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The following organizations supported the development of the 2020 Vision: The South Dakota Science and Innovation Strategy

Printed December 2013