To seize future, state must seize innovation

Switch, with its state-of-the-art “colocation” data center, is one. So is the hot social media tracking company Banjo. And, yes, the state’s newest “it” company, Tesla Motors, is one, too.

What are they? All of these Nevada companies are part of what we at the Brookings Institution call the advanced industries sector — a swath of industries that, where present, contributes uncommonly to regional and national prosperity. Last week, we discussed these industries at a Brookings Mountain West event at the University of Nevada, Las Vegas because we believe they matter intensely to Southern Nevada’s economic future.

Composed of some 50 research- and development-intensive industries that employ high numbers of science, technology, engineering, and mathematics (STEM) workers, the advanced industries sector anchors innovation, generates disproportionate economic value, pays inordinately well and supports extensive supply chains and other multiplier effects for regions and the nation.

Southern Nevada’s relatively few advanced industry companies already employ nearly 31,000 workers and contribute $6 billion in gross domestic product — and their significance is growing. From 2010 to 2013, advanced industry employment in Las Vegas grew by 9 percent and advanced industry output increased by 8 percent. In some advanced services industries, the growth story is even more impressive. Output in the small but dynamic data processing and hosting industry increased by 156 percent from 2010 to 2013, and employment grew by 61 percent. Las Vegas’ larger computer systems design industry increased output by one-third and added nearly 500 jobs during that same period.

Why does this growth matter so much? It matters because these hot industries align precisely with regional and state strategies for economic diversification, which we helped inform in 2011. Those strategies recognize that the state and Southern Nevada absolutely must complement their gaming and tourism base with a set of innovation-driven growth clusters that devise new products and sell them globally.

Although metropolitan Las Vegas has a toehold in this critical sector, these high-tech, high-value, high-export industries support only 3.6 percent of all jobs. This ranks the region 98th among the 100 largest metro areas in the country. No region can truly prosper with so thin a presence of these high-powered sources of output.

And so the region should pile onto the work of expanding its advanced industries. To that end, the region’s business, civic and political leaders must unite behind three major strategies to build out Las Vegas’ advanced industry advantage.

First, the region and its leaders should commit to innovation. This means expanding basic and applied research capacity at UNLV and deepening research specializations there in fields aligned with the region’s advanced base. A sustained drive to secure Tier One status or Carnegie Research Very High status for UNLV’s research enterprise is precisely the right push.

Second, the state must upgrade its STEM talent pipeline to provide the technically trained workers — whether with two-year or professional credentials — who are critical to advanced industry competitiveness. To do this, leaders must set a strong vision of STEM’s importance to the future prosperity of Las Vegas, invest in industry-aligned regional skills initiatives and address the state’s K-12 basic-education proficiency crisis. Without such an advanced industry “people” strategy, the region will falter.

Finally, private-sector leaders and the region can strengthen emerging advanced industries by focusing on bottom-up economic development. By aiding and abetting the emergence of local clusters with more and richer networking and collaboration hubs, for example, public, private, and civic leaders can enable the sort of cross-fertilization that is the trademark of advanced industries-led innovation. The entrepreneurial ferment and collaborative exchanges now taking place downtown and at the Innevation Center represent two emerging nodes.

The way forward is clear. Although real estate and visitation will always be important to Las Vegas, so is diversification. Regional leaders must begin to assemble the innovation, skills and resources necessary for the advanced industry economy to grow and thrive in Southern Nevada.

Mark Muro is the co-director of Brookings Mountain West and a senior fellow at the Metropolitan Policy Program at Brookings. Kenan Fikri is a senior policy analyst at the program.