Growth and Change Vol. 33, No. 2 (Spring 2002), pp. 173-195 How States Augment the Capabilities of Technology-Pioneering Firms MARYANN P. FELDMAN AND MARYELLEN R. KELLEY ABSTRACT State governments offer a variety of programs to assist technology intensive entrepreneurial firms yet there is a limited understanding of how firms use these programs. This paper provides a framework for categorizing state technology programs and uses detailed case studies to examine how these programs augment firms’ capabilities. It is concluded that firms made extensive use of state programs that provide access to university intellectual property and research facilities. In addition, firms participated in programs that provided incentives for faculty to conduct joint research with industry. Finally, state venture capital programs, though small relative to federal R&D grants or venture capital, appear to nurture firms’ development. Introduction fundamental question about economic institutions is how best to organize scientific and technological resources for commercial innovation and economic growth. While innovation is a complex process predicated on the actions of private firms, governments and public research institutions provide the scientific and technical infrastructure and other resources critical to firms’ success in their early-stage innovation efforts. Relative to other nations’ advanced economies, the U.S. system of innovation has become heavily dependent on new firms to develop new products and services from recent scientific and technical advances (Audretsch 1995; Klepper and Simons 2000). Despite their potential, these new small firms face formidable technical challenges complicated by a lack of internal scientific and financial resources (Kelley 1993). When located in a resource-rich institutional environment, innovative small firms have a greater chance of finding and utilizing the technical capabilities needed to augment their internal capabilities for innovation This research was funded by the U.S. Department of Commerce through the Advanced Technology Program (ATP) in the National Institute of Standards and Technology (NIST) and benefited from discussions with researchers in ATP’s Economic Assessment Office. We are also grateful to the managers of the companies who participated in this study, the state technology program officers, and ATP program managers for their time and willingness to share information with us. The opinions and conclusions expressed in this paper are those of the authors and do not necessarily reflect the views of the funding agency. Both authors equally contributed to this paper. Submitted Oct. 2000; revised Jan. 2002 © 2002 Gatton College of Business and Economics, University of Kentucky Published by Blackwell Publishing Inc. 350 Main Street, Malden MA 02148 US, and 108 Cowley Road, Oxford OX4 1JF, UK A