States Engage to Power Advanced Industries

Presentation by Bruce Katz:

With economic recovery still spotty, states and regions are taking matters into their own hands. Determined to master a challenging moment, the nation’s “laboratories of democracy” are drilling down to design, deliver, and finance serious economy-shaping initiatives at a moment of worrisome federal drift. 

In many instances, states and regions are acting as true innovators.

Two examples of this new assertiveness are provided by Colorado and Tennessee, whose pragmatic governors John Hickenlooper (D) and Bill Haslam (R) (respectively) will participate in a post-partisan dialogue Thursday at Brookings.

Hickenlooper and Haslam have a lot to talk about, particularly in terms of reigniting growth through a focus on their states’ high-value export sectors. Most notably, both governors have done their homework and locked onto what the Metro Program and its pro bono associates at McKinsey & Co. call “advanced industries.” (See a new framing paper on this subject here.)

Advanced industries (AIs)—the nation’s most strategic innovation and STEM (science, technology, engineering, and math) worker intensive industries—range from appliance manufacturing to medical devices, software, and “big data,” and are prime movers of regional and national prosperity. By themselves, these industries conduct 80 percent of the nation’s private-sector research and development, employ millions of high- and middle-skill workers, and account for one-third of U.S. exports. In addition, the sector’s impact radiates far beyond its 23 constituent industries to drive productivity in other industries, support long supply chains, and stimulate local economies.

In Colorado and Tennessee, nationally significant AIs anchor growing regional economies and represent key opportunities for these ambitious states to counteract national drift.

In Colorado, the threat of last year’s federal budget sequestration prompted a serious strategy-setting exercise for the state’s space/aerospace sector, a classic AI. Industry and government leaders were concerned about reduced spending on critical government market segments, a looming skills shortage, and new customer demands and competitors. Tennessee, meanwhile, was faced with the rise of Mexico’s low-cost auto industry and a heightened innovation imperative. How could the state’s sizable auto industry maintain the pace of its recent efficiency gains and move up the value chain in disruptive times?  

This is where the states’ governors stepped in, in partnership with key industries. Both governors are systematic, strategy-minded, and focused on high-quality economic development, and both availed themselves of Brookings analysis and strategic advice to study a key AI, assess its strengths and vulnerabilities, and set private- and public-sector agendas for maintaining and extending competitiveness.  

And, in each case, the governors acted on their agendas. Embracing aspects of the Brookings “Launch!” strategy, Gov. Hickenlooper named a chief innovation officer and Colorado’s first aerospace and defense industry “champion” after securing passage of a 10-year ($15 million per year) Advanced Industries Accelerator Act to provide financial support to applied research collaborations and technology commercialization. Gov. Haslam (informed by the Brookings report “Drive!”) is moving to name a dedicated automotive “project manager” and strengthen Tennessee’s auto manufacturers association; better align the state’s education and training systems with industry needs; and commit to innovation at all levels of the supply chain. Most notably, Haslam announced a bold plan earlier this month to provide two years of community college training free to high school graduates. These two deliberative, data-driven states have converged around a similar style of economy-shaping that focuses intensely on the need for vibrant and synergistic supply chains, smart workers, and continuous innovation.

All of this should add interest to Thursday’s cross-state, cross-party chat. In developing state- and industry-specific strategies for growing signature AIs, Govs. Hickenlooper and Haslam may well be working out an agenda for national economic revival.