Economy index puts La. 44th

BYLINE: GARY PERILLOUX; Advocate business writer;

When Ross Barrett returned to Louisiana to launch venture capital funds in 2004 - now $36 million and growing - he didn't meet skepticism from out-of-state investors as often as he did from in-state sources.

"I think words are important," Barrett said Tuesday, when the 2007 State New Economy Index ranked Louisiana 44th out of 50 states for success in moving to a knowledge-based economy. "I think sometimes Louisianians' worst enemy is their own perceived shortcomings. Having lived in Dallas and Washington, D.C., and New York, I can tell you Louisiana can hold its own as far as professionalism and entrepreneurship."

The state's challenge, based on the New Economy Index, is to reproduce those assets and build capital in a way that will push Louisiana to the forefront of creating technology jobs and innovative companies with high wages.

The playing field is highly competitive, and there are signs the United States as a whole is losing ground to other global economies, said Robert Atkinson, the author of the study funded by the Ewing Marion Kauffman Foundation.

"We tried to get at the actual structure of a state economy and whether that state economy was structured to these ... long-term realities," he said. "If it is, it's likely to do better in the new knowledge-based economy."

The 2007 index measures states' effectiveness on 26 indicators, ranging from the concentration of information technology professionals to the abundance of venture capital, technology in schools, the concentration of scientists and engineers, and the number of fast-growth companies - those that have doubled in size in four years.

Atkinson said the index doesn't tell states how effective their governors or legislatures are but how effective their economic system is. It can and should be used as a blueprint for progress, he said.

At No. 44, Louisiana landed in the same spot in 2002, though it's up from 47th in 1999.

Observers ranging from the study's author to investors and state economic officials agreed that Louisiana's recent multimillion-dollar investments in supercomputing capacity - the Louisiana Optical Network Initiative and the Louisiana Immersive Technologies Enterprise - and bioscience wet labs in Shreveport, Baton Rouge and New Orleans haven't existed long enough to create a sizable impact on the state's New Economy ranking.

"The thing that's important to recognize is that there are a limited number of high-tech firms out there," Atkinson said. "One of the strongest points we make in this study is that if you've got manufacturing in more traditional sectors, the real key question is: 'Are they world-class; are they global; are they investing in the most modern technology, have they re-engineered their shop floor?' The correct question is not if it's high-tech or low-tech: It's what you're doing with it."

Hence, Louisiana's recruitment of a state-of-the-art German steel mill in competition with Alabama, and Mississippi's landing a Toyota auto plant Tuesday are as valuable as ever, there are just fewer opportunities to find such deals.

The crux of the New Economy study comes in its strategy recommendations for states: "While developing nations use the strategy of cheap labor as a way to grow, states should instead ensure that their workers have better capital (equipment and skills) so their productivity is high enough to offset developing nations' lower costs."

In Baton Rouge, having the Pennington Biomedical Research Center in a position where it's turning away research for lack of space is a "good problem," Atkinson said, but one it needs to solve quickly.

"We completely agree with the Kauffman Foundation that (manufacturing opportunities) are likely to become fewer and fewer over time," said Stephen Moret, chief executive officer of the Baton Rouge Area Chamber. "I think we are heavily under-investing in research and development in this state, and Pennington is probably the best example. It's absolutely one of the best facilities of its kind in the world, if not the best, and it's going begging for a $25 million building to allow it to expand for years."

Moret said the chamber is exploring ways to link state quality job credits to federal research dollars and working to expand funding for research universities such as LSU, another recommendation of the New Economy study.

Barrett's Shreveport-based venture capital funds have participated in recent investments of several million dollars each in Esperance Pharmaceuticals of Baton Rouge and Embera NeuroTherapeutics of Shreveport, two spin-offs of state academic research.

"There's no better facility to do clinical research in the world than Pennington," said Barrett, but a significant amount of its diabetes research is occurring in other states. "We need to expand on their capabilities to allow us to target companies and say, hey, run your clinical trials here."

Some high-tech firms are finding their way to Louisiana.

Terry Jones of Baton Rouge-based Dean Capital recently helped recruit Alucid Solution from Atlanta to the Louisiana Business and Technology Center on LSU's South Campus. The company's high-tech tools help manufacturers make their appliances more user-friendly for consumers.

"I think there's already a lot of things in place, a lot of people hard at work, and it's been coming for years now," said Jones, whose firm manages the Louisiana Angel Network to match investors with startups. "All these investment efforts to improve the environment for entrepreneurs and raise their sophistication level improve the chances of success of all these businesses."

Don Pierson, the state's assistant secretary for economic development, said creating a technology infrastructure in a state of slightly more than 4 million is more challenging than doing so in California or Massachusetts, but Louisiana has made a dent in some key categories. Among them: Louisiana ranked 17th in broadband telecommunications and eighth in its manufacturing export strength.

Its in the bottom five for per-capita high-tech jobs and industry investment in research and development. The state created an R&D tax credit less than three years ago.

"The long and short of it is I think it's a positive for Louisiana that we have not been complacent about investing in the future," Pierson said. In the state's Louisiana 2020 strategic plan in 2001, it adopted the New Economy's recommendation that clusters of technology-driven firms be developed.

The state's National Advanced Manufacturing Center at NASA's Michoud facility in New Orleans and the LONI network linking the supercomputing capacity of state universities are examples that will yield many knowledge-based jobs, Pierson said.

New Economy states

In the 2007 State New Economy Index, these states are the best and worst at packing knowledge, technology and innovation into products and services.

BEST: Massachusetts

WORST: West Virginia

BEST IN SOUTH: Virginia, No. 8

WORST IN SOUTH: Mississippi, No. 49

LOUISIANA'S RANK: No. 44, up from 47 in 1999

BIGGEST GAINER: Michigan, from 34 to 19 since 1999

BIGGEST LOSER: Hawaii, from 26 to 41 since 1999

ONLINE: http://www.kauffman.org/neweconomy/

Source: Ewing Marion Kauffman Foundation