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Seeds in place for economic future

John Seelmeyer

The good news for northern Nevada in the much-publicized 181-page economic development agenda unveiled by Metropolitan Policy Program of The Brookings Institution and SRI International:

The region already shows strength in five of the seven economic sectors that researchers say are likely drivers of Nevada’s effort to free itself from the muck of the recession.

Even better news: The researchers say innovation will be among the key factors spurring recovery, and northern Nevada already is home to the bulk of research and innovation activity and investment in the state.

The bad news: Even with all this, the region’s economy remains unbalanced it’s only half as diverse as the national average and Reno, Sparks and Carson City have suffered what the researchers called “severe and protracted dislocations” during the recession.

Much of the report, which was commissioned by the state government to guide its restructuring of its economic-development effort, is focused on detailed recommendations that can be taken by the state and regional economic development authorities to build an infrastructure to encourage growth of the economy.

One of the cornerstones of the analysis is a close look at the seven sectors that hold particularly good potential to create new jobs and economic growth in the state. Five of the seven, researchers found, already thrive in northern Nevada:

* Clean energy, where the region’s abundant geothermal resources have the potential to be combined with manufacturing of equipment used in geothermal plants and professional expertise in engineering and law.

* Mining, materials and manufacturing, where a large number of companies many of them small could be better linked together to serve markets throughout the world.

* Logistics and operations, where the region’s location close to major Western markets provides a competitive advantage for an already thriving industry that could see further expansion.

* Aerospace and defense, a potential strong point because about 75 percent of the state’s aerospace and defense contractors already are located in northern Nevada, and they can rely on supporting infrastructure of manufacturers.

* Business information technology ecosystems, a sector that already has seen a high concentration of call centers, a growing number of e-commerce fulfillment centers and a substantial number of back-office and business-processing outsource companies.

The other two sectors identified as growth opportunities statewide are tourism, gaming and entertainment and health and medical systems.

Mark Muro, a senior fellow and policy director the Metropolitan Policy Program, said it’s critical for Nevada to move higher up the value chain in each of the targeted economic sectors.

In mining, for example, Nevada workers handle the challenges of extracting ores from the ground. Higher-value processing and even higher-value work such as mine finance often occurs in other states.

High-value, high-skill work will depend on the state’s ability to boost innovation, Muro said.

The Brookings-SRI report noted that Reno currently attracts 78 percent of the state’s total research and development funding and is home to three quarters of the laboratory space in Nevada.

The Desert Research Institute, the University of Nevada, Reno, and private companies also have built a strong record in winning federal research grants, researchers said.

But that may not be saying much.

“Nevada lags other states and the nation on every indicator of innovation and R&D activity included in this study,” the researchers said.

Investments in university research in Nevada, for instance, run less than half the national average. Federal research and development spending in the state is less than a third of national figures.

“An undeveloped innovation capacity results in fewer new products and processes being brought to market products and processes that, when commercialized by Nevada firms, could form a new base for growth in Nevada’s non-core industries and serve to diversify and strengthen the economy” the study said.

Among the answers, the researchers said, would be increased investment by the state in research at its university and a greater commitment to finding and financing commercial applications for new discoveries.