TRAVERSE CITY – Although Michigan hasn’t historically had an entrepreneurial economy, its state universities – their ability to market a niche for themselves and turn out new innovations – mean the state has great potential of turning its economy around, business professionals said Sunday at the National Governors Association Economic Development and Commerce Committee.

One of the biggest roadblocks to partnering with state universities in innovation, said Mark Peterson, director of external business development for Proctor & Gamble, is the time it takes to hammer out who will get the intellectual property rights once a new product or idea makes it to the market.

Granholm said that she thought the idea to focus higher education funding on those that turn out the most intellectual property is worth pursuing because “development of ideas creates jobs.”

To illustrate the problem without incentives, Peterson said in one recent case, it took two years for a partnership with a university to get hashed out. In that same amount of time, the company secured a much larger market share from companies in India without nearly as much hassle.

“The global competition is daunting,” Peterson said.

With all of the challenges that exist, he said, Michigan can be proud, as the University of Michigan holds the third place ranking, behind M.I.T. and Stanford, for getting ideas to the market place, as measured by royalties.

Rey More, chief quality officer for Motorola, Inc., said that if states could replicate the kind of synergy that exists at universities such as U-M and North Carolina, at their Center for Entreprenueralism, universities would be one of the top assets in the marketplace.

Another successful strategy for universities, said Robert Heard, managing director of Cimarron Capital Partners, an investment firm, is to brand a region by what the universities do best.

In Michigan, Granholm said, that means alternative energy research, as evidenced by Michigan State University and other educational leaders in the field.

“We intend to be the leader in alternative energy,” she said.

Granholm said that with the 21st Century Fund, an initiative she mentioned a lot as a move toward innovation, the state must rely on private investors to pick the best investments.

“What could you tell us about how choosing the best investments?” she asked the panelists.

Heard said that he recommends using experts in their fields to evaluate projects individually on their merits.

If they show interest, they could be possible investors, or the investment probably has potential, he said.

Besides partnering with private industry to evaluate investments, More said, the state could also use its business community to help it recruit more young people, women and minorities into the technology fields that will define future industries.

That idea – that technology is the future of industry – was echoed several times throughout the conference, including on Saturday by Google and AT&T executives.

Eric Schmidt, CEO of Google, said that schools should stop teaching memorization and start teaching interactively so that students interact with computers, their teachers and each other.

He challenged governors to set aside a percentage of their budgets for “real innovation, not just what’s lobbied” to them.

Again Granholm found the panelists’ ideas intriguing, saying that she’d like to look into targeting higher funding for universities that turn out more of the graduates in in-demand industries, as More suggested, and increasing grants for high schools that have robotics teams, which speakers said not only make kids tech savvy, but increase their self confidence.

GRANHOLM ON THE M.B.T, ECONOMY: While discussing regulatory environments for businesses, Granholm took an opportunity at the committee meeting to test out the Michigan Business Tax planning strategy on business members by touting the fact that she and lawmakers worked not only with the large employers of the state on drafting the tax, but also with the smallest companies.

Granholm was responding to a comment by Peterson that states need to work with businesses ahead of time, before they structure incentives and tax plans to anticipate their future needs.

“That way you can get out in front of the issues and find out not only their needs, but their goals,” he said.

Granholm said that it’s her hope that by working with not only the automakers, but with small businesses, she managed a business tax that will have just that effect.

She said she found the NGA conference “heartening” because the messages she heard aligned with her agenda.

“In almost every session, the policies Michigan has set in motion are those that the nation views as the standard best practices for a robust economy,” she told reporters later at roundtable for Michigan media.

“I wish members of the Legislature would be here to hear what business is telling governors in terms of what’s important in education and in diversifying our economy,” the governor said.

As for what’s most important in attracting companies, each of the three panelists agreed that while tax incentives are appealing, consistency in regulation and taxes is the most important factor in deciding where to locate their businesses.

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