University of Albany's Kaloyeros helped persuade New York to put $900 million into a UAlbany operation that now employs 2,200 researchers

As staff at the College of Nanoscale Science & Engineering wait patiently in a conference room, a loud rumble shatters the silence. "Must be him," someone says. Alain E. Kaloyeros has just pulled into a parking lot at the State University of New York's Albany campus in his $220,000 black Ferrari F430 F1 Spider, the one with the "Dr. Nano" license plates. Minutes later, Kaloyeros, 52, the school's $696,000-a-year CEO, strides into the room talking into his BlackBerry and wearing a white long-sleeve cotton shirt and faded jeans. He apologizes for being late. "I can't understand why some people think they're saving money driving 15 miles an hour," he fumes.

Fast and flamboyant, Kaloyeros epitomizes a new breed of entrepreneurial public servant. He has helped persuade the state of New York to inject $900 million in taxpayer money into research and development facilities, including one of the world's most advanced clean rooms for making prototypes of next-generation chips.

Kaloyeros earns his high salary by running an operation that employs 2,200 researchers and has drawn $3.5 billion in R&D investment from the likes of IBM (IBM), Advanced Materials (ADMG), Tokyo Electron, and the government-industry chip-research consortium Sematech, for whom mastering materials at the atomic scale is vital for future products. The effort helped persuade IBM to build a plant nearby to make silicon wafers, the material used to manufacture chips. In October, struggling chipmaker Advanced Micro Devices (AMD) said it will build a $4.5 billion wafer facility near Albany with help from Abu Dhabi. New York is contributing $1.2 billion in tax breaks and cash rebates to help cover construction and equipment costs.

SUNY Albany's nanotech push marks a daring new direction in economic strategy sweeping U.S. states—one that is now being severely tested. States have lavished perks on private industry for decades. In recent years, though, some have brazenly crossed the line between the public and private sectors, designing strategies that look a lot like industrial policy. They have been targeting specific businesses and technologies and, alongside companies, investing big bucks in elaborate research centers, plants to test new technologies, and industrial parks whose occupants receive a special boost. States from Pennsylvania to Oregon have become increasingly important sources of early startup capital to technology companies.

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By Pete Engardio