By: Steve Jordon
Omaha World Herald

Startups, patents, smart immigrants, high wages — even business failures — are some of the ways to predict success in what some economists call the New Economy.

On that scale, the latest ranking of states’ innovation preparedness shows Nebraska tied with Tennessee for jumping up the most spaces since 2014, according to the Information Technology and Innovation Foundation of Washington, D.C.

Even so, Nebraska ranks 27th, stuck in the middle when it comes to factors deemed important for future economic growth in the age of innovation.

“It’s great that Nebraska moved up, but you’ve got to keep making progress to keep from falling behind,” said Robert Atkinson, lead author of the report and president of the foundation. “Competition is very intense out there.

“No state can rest on its laurels and say it did a good job. It’s this relentless competitive pressure now. Everybody’s got to keep on top of their game.”

No matter whether a state’s forte is agriculture, finance, computers, tourism or something else, Atkinson said, future success will depend on innovative uses of technology to improve productivity and competitiveness.

On the foundation’s ratings for technology and innovation, Nebraska moved from 35th in 2014 to 27, passing Alaska, Idaho, Kansas, Maine, Missouri, Nevada, New Mexico and South Carolina. Iowa stayed steady at No. 37.

The latest list shows Massachusetts, California and Washington as Nos. 1, 2 and 3, with Wyoming, West Virginia, Arkansas and Mississippi at Nos. 47 through 50, in that order.

Omaha’s businesses most likely helped Nebraska move up on the list, Atkinson said. “Omaha’s a relatively large, thriving place, so it’s not surprising that its numbers would have improved.”

The states Nebraska passed are relatively good, Atkinson said. “It suggests that Nebraska is getting better,” but it’s hard to pinpoint exactly why.

Economist Nathan Kauffman, vice president of the Federal Reserve Bank’s Omaha branch, said he is encouraged that technology-based innovation is becoming a bigger factor in the Midwest rather than concentrated only on the coasts.

“Some of the playing field is being leveled a little bit more,” Kauffman said. For example, Omaha’s lower cost of living is one factor drawing “knowledge workers” — those with advanced skills, whether technicians, machinists, engineers, IT experts and others — to the state, where they are finding jobs that use the technology they develop and improve.

“We’re seeing people move to Omaha and Lincoln, but a lot of that movement is coming from within Nebraska,” Kauffman said. Although Omaha is gaining qualities that can attract entrepreneurs and knowledge workers from outside the state and from other countries.

The Midwest’s land-grant universities, such as the University of Nebraska-Lincoln, are an important anchor for new technology because they can find practical uses for new concepts, Kauffman said. The state’s long-standing industries, including agriculture, finance, health services and information processing, are tied in to new technologies.

Atkinson said states also must be aware that knowledge workers readily relocate for better jobs and lifestyle.

Such workers want to be in places with good schools, high-quality services, good entertainment and generally a good quality of life, he said, and may find those things lacking in states that cut costs “to the bone.”

Bringing knowledgeable immigrants into a state also is important, Atkinson said. About one-third of high-demand workers are foreign-born. Attracting skilled workers from other states also is important.

“Some states are on the receiving end of that, become almost a magnet for brain drain,” Atkinson said. “Other states are more having their brains drained, losing good students and young people who go to college and move away, put their talent in another place. That talent is an important engine of growth.”

Building up “clusters” of a certain type of business also attracts workers, since people can switch jobs without moving away and can find work for their spouses, too.

Atkinson said geography is a challenge for the Midwest because foreign investors tend to favor the coasts, partly for air travel reasons. That makes it harder to get direct foreign investment.

Out of 25 “success factors,” Nebraska ranked above-average in IT jobs, workforce education, in-country migration of knowledge workers, manufacturing value added, high-wage services, business churning, online agriculture, electronic government services and broadband telecom.

The state ranked 35th or worse in foreign direct investment, high-tech exports, high-tech jobs and industry investment in research and development .

What’s business churning?

That’s a combination of startups and failures, which Atkinson said correlates with job growth. An economy with lots of startups shows a dynamic set of entrepreneurs, even though some jobs fizzle.

“You want to have an environment where people are taking risks,” Atkinson said. “Sometimes those risks won’t pay off, but you don’t want an economy where everybody’s just stagnant, doing the same thing that they’ve always been doing, just slowly growing.

“It gets at how dynamic an economy is. Is it changing a lot?”

The study’s measure of economic dynamism also takes into account the number of fast-growing businesses listed in Inc. magazine, initial public stock offerings and the number of patents issued.

Innovation is not limited to software companies and computer-based startups, Atkinson said.

Long-established industries such as farming, mining, agriculture and professional services are evolving through cloud computing, broadband Internet service and other technologies.

As a result, the report said, “innovators create IT-enabled enterprises in virtually any connected small town or rural area they may choose.”

The group’s first report, in 1999, found that such factors were more concentrated in a few locations, including Boston; Silicon Valley in California; Austin, Texas; Seattle; and North Carolina’s Research Triangle Park.

Today, that notion is “way, way too narrow,” Atkinson said, although nonmetro areas must make sure they are solidly dialed into the world’s communications and computer networks.

“Lots of places around the country have the capabilities and expertise and real potential for the new economy,” Atkinson said.

Other key factors in the new economy, according to the report:

Knowledge jobs, including IT professionals employed outside the IT industry; education of the entire workforce; worker productivity in manufacturing; high-wage services and jobs held by managers, professionals and technicians.

Globalization, including foreign direct investment, export-oriented manufacturing and services, and the share of high-tech goods and services that are exported.

The state’s digital economy, including the use of the Internet and computers by farmers, IT use for government services, rates of adopting broadband telecommunications and IT use in the health care sector.

The capacity for innovation, including high-tech industry jobs, the number of scientists and engineers, the number of patents granted, R&D spending by industry and nonindustry, movement toward “clean energy” and venture capital investment.