CHIPS+ and Its Consequences for Regional Innovation

By: Gregory Arcuri 

The CHIPS and Science Act, (CHIPS+) signed into law in August 2022, represents a significant bipartisan commitment to renew the nation’s innovation system. Along with the related investments included in the Bipartisan Infrastructure Law and the Inflation Reduction Act, Congress has signaled with this legislation, a new push to spur innovation-led economic growth and national security.

These policy initiatives also follow the American Rescue Plan Act of 2021, which includes $1 billion for Build Back Better Regional Challenge (BBBRC) grants that are designed to stimulate economic development in rural states and low-population regions. Taken together, a distinctive feature of this suite of legislation is the focus on connecting the nation’s regions—including in small towns and regional economies reliant on traditional economic activities—into the high-tech innovation economy.

Particularly consequential for regional innovation are two complementary provisions in Division B of the CHIPS and Science Act. These sections authorize funding for the NSF’s Regional Innovation Engines and the EDA’s Regional Technology and Innovation Hubs.

Funding Authorized for NSF’s Regional Innovation Engines

A key feature of CHIPS+ is that it authorizes dedicated funding for the National Science Foundation’s (NSF) Regional Innovation Engine program. Announced in March 2022, this is a marquee initiative of the new NSF Directorate for Technology, Innovation, and Partnerships (TIP).

The “regional innovation engines” (also known as NSF Engines) are loosely defined as “regionally-centered multi-sector coalition[s] of partners across industry, academic, government, non-profits, civil society and communities of practice, all working together in a topic area of regional relevance, as well as national and societal significance.” These engines are meant to “drive R&D innovation to achieve regional economic growth” and “build an inclusive innovation ecosystem that will thrive for decades to come.”

NSF encourages award applicants to describe their “region of service,” the stakeholders involved, and a chosen topic that they seek to address through translational research and development. Funding opportunities for NSF Engines are divided into Type-1 and Type-2 awards, corresponding to how “mature” the engine’s surrounding innovation ecosystem is determined to be.

Type-1 awards, which can be up to $1 million for up to two years, are designed to enable prospective engines to “lay the groundwork” for the development of a successful regional innovation ecosystem. This money is meant for strategy development, defining the exact structure and scope of the engine’s activities. As of this writing, NSF is currently evaluating proposals for Type-1 awards.

Type-2 awards are far more substantial: up to $160 million for up to ten years. These awards are meant to drive translational research and technological development utilizing the partnerships and connectivity infrastructure—including shared research commons and workforce pipelines—among participating stakeholders in service of the identified topic. In doing so, the program hopes to spur buy-in from other players within the region and externally to create a self-sustaining innovation ecosystem. The first set of full proposals for Type-2 awards are due at the end of January 2023.

Such partnerships could include, for example, a state university partnering with an international corporation and a locally headquartered small technology firm. The grants would go towards scholarships at the university for a curriculum tailored to the needs of the local firm, providing regional talent for their research, which the large corporation can develop at-scale.

CHIPS+ authorizes $6.5 billion from fiscal years 2023 to 2027 to be split between NSF’s Regional Innovation Engines and a Translation Accelerators program which is referenced in the bill. If appropriated, these funds would build out the scope of the NSF Engines program.

Department of Commerce Regional Technology and Innovation (RTI) Hubs

Acknowledging the need for broader participation in the U.S. innovation economy, Congress in CHIPS+ has amended the Stevenson-Wydler Act of 1980 to authorize $10 billion total from fiscal years 2023 to 2027 for a Regional Technology and Innovation Hub program. The program is to be carried out through the Department of Commerce’s Economic Development Administration (EDA) “in coordination with” the National Institute for Standards and Technology (NIST), although specific modalities of this cooperation are not described in the bill.

The CHIPS+ legislation calls on the Secretary of Commerce to designate no less than 20 “regional technology and innovation hubs,” which are public-private consortiums made up of universities, economic development organizations, industry, rural communities, state and local governments, and nonprofits concentrated within a geographic area.

The legislation includes language that seeks to ensure the geographic distribution of these hubs. It specifies minimum requirements for designating hubs in every EDA region and sets priorities for creating hubs in low-population and predominantly rural states. The CHIPS+ version of the program differs from the version included in the Senate’s U.S. Innovation and Competition Act in that it prioritizes the inclusion of underserved communities and groups historically underrepresented in STEM fields, including women, people of color, and Indigenous communities.

Grants for RTI hubs, like NSF Engines, are divided into two types: strategy development grants and strategy implementation grants.

Strategy development grants are designed to explore the workforce and connectivity needs of the prospective hub and to identify and grow regional partnerships. With $50 million authorized over four years Commerce is tasked with awarding at least 60 strategy development grants.

Strategy implementation grants are reserved for applicants who achieve an RTI hub designation. For these grants, Congress has authorized $2.95 billion for the first two fiscal years and $7 billion for the last two. Commerce may initially award up to $150 million to each hub, and no single hub may receive more than 10 percent of the aggregate amount of grants. These grants are meant to go towards a variety of different efforts, including workforce development programs, business development and entrepreneurial activities, collaborative research infrastructure, among others.

In awarding grants for the development and implementation of regional innovation strategies, CHIPS+ calls on Commerce to carry out a competitive, merit-review process, accepting applications from “eligible consortia” that explains how they will work to transform the area they serve into a locus for innovation and technological development.

Different Approaches and Implications for Regional Innovation

The RTI Hub Program differs from the NSF Engine Program in a variety of ways.
  1. Recipients of RTI Hub Program funds are not tasked with identifying a particular regional, societal, or national challenge to address through their work. Hubs are given a general objective of addressing “the intersection of emerging technologies and either regional or national challenges,” and must explain how they will advance research in a “key technology focus area or other technology or innovation sector critical to national security or economic competitiveness.” By comparison, NSF Engines must identify a challenge and focus efforts towards cultivating an innovation ecosystem that will work to address it.
  2. The RTI Hub Program makes no mention of the surrounding “innovation ecosystem,” a context that the NSF Engine Program frequently references. In fact, the NSF Engine awards are structured around the assessed maturity of the regional innovation ecosystem, an assessment made using an NSF-developed five-phase rubric with characteristics of ecosystems at varying levels of development. To receive strategy implementation grants, RTI hubs need only prove their necessity in their application to the Department of Commerce. While there is a required final report after the term of the grant, RTI hubs are not expected to achieve some predetermined level of maturity at the end, as NSF Engines are required to do.
  3. The RTI Hub Program has been authorized considerably more funding, corresponding to its larger mandate of generating broad-based innovative activity, which is beyond the task of the NSF Engine program’s role of stimulating translational research in service of an identified challenge.
While the two programs are meant to be complementary–with collaboration between the two programs encouraged in the text of CHIPS+–they each represent different approaches to stimulating regional economic development. The RTI Hub Program appears to envision larger investments in fewer, geographically dispersed communities with demonstrated existing infrastructure meant to enable general regional economic growth and technological excellence. NSF Engines may take the form of more numerous, smaller investments towards a specific goal and utilizing more tangible criteria for measuring progress.

Regardless of the logic behind their two approaches, their success will rely on prudent implementation and sustained federal support. Congress must still appropriate funding for NSF Engines and the RTI Hub Program, and the programs’ implementers still have time to gather information before a single dollar is awarded.

Moreover, the two programs represent a pair of significant policy experiments that must be given the chance to succeed. To renew the American innovation economy, it is essential that policymakers follow through with appropriated funding and ensure that the programs remain flexible and adaptive. Cultivating regional innovation is a long-term effort that requires sustained resources and strategic patience.

Gregory Arcuri is a research assistant with the Renewing American Innovation Project at the Center for Strategic and International Studies in Washington, D.C.

The Perspectives on Innovation Blog is produced by the Renewing American Innovation Project at the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
Gregory Arcuri
Program Coordinator and Research Assistant, Renewing American Innovation Project