Michigan rates far better today than nearly two decades ago for having a knowledge-based economy.
That’s according to a think tank president who sees the “next wave of innovation” as favoring industrialized states.
Embedding I.T. into manufacturing and products — think smart vehicles that drive themselves and smart household appliances — represents a major opportunity for Michigan and other states in the industrial Midwest to further transform their economies, said Robert Atkinson, president of the Washington, D.C.-based Information Technology & Innovation Foundation.
“The next wave of innovation, I would argue, is going to be a little bit more mechanically-based. It’s not just going to be software companies,” Atkinson said. “Mechanical things are going to be much more software and digitally driven. That ought to be a space for Midwestern entrepreneurs to be able to capitalize on. They’re building on something they already know.
“If I was in the Midwest and involved in economic policy, that is what I would be doubling down on.”
The state has been preparing for that future, said Jeff Mason, CEO of the Michigan Economic Development Corp. He specifically cites as an example the October launch of the PlanetM Landing Zone, a business incubator for mobility startups formed through a partnership with the Detroit Regional Chamber of Commerce. The incubator aims to work on innovations and technologies for automakers developing autonomous vehicles.
“There’s kind of that convergence between what’s commonly referred to as traditional manufacturing and this intersection with I.T., big data and artificial intelligence,” Mason said. “That speaks well to the opportunities for the state.”
Michigan has already made significant progress since the late 1990s in adapting to the so-called “New Economy,” according to a November report by the Information Technology & Innovation Foundation.
Michigan ranked 15th nationally as of 2016 in a new economy index that includes knowledge jobs, innovation capacity, globalization, the digital economy and what’s termed “economic dynamism.” The 2016 results compare to a ranking of 18th two years earlier, 22nd in 2002 and 34th in 1999 when the foundation first prepared the bi-annual report.
The change in Michigan’s ranking is “pretty good given the fact that there’s a lot of tough competition” across the nation, Atkinson said.
The progress comes in part from the greater focus by state and local economic developers to transition to a more tech-based economy as the internet age emerged and took hold in the mid 1990s, Atkinson said.
In Michigan and elsewhere, “there’s a lot more interest and sophistication with regards to economic development” around high-growth entrepreneurship with business accelerators, angel networks, college-level entrepreneur training, and university tech transfer and commercialization offices. All of those services help to transform economies, he said.
“The ecosystem has gotten better,” said Atkinson, noting that the younger generation that grew up with the internet also drives the growth in the number of tech-based startups.
“In some ways, it’s more culturally favorable to do now. For people in your 20s or 30s, there’s a buzz around it,” he said. “These companies are creating a fair number of very good jobs and they’re paying very high wages.”
Atkinson also attributes a part of Michigan’s upward movement in the foundation’s rankings over the years to the amount of technology embedded in automobiles. He cites as an example the new Jeep Cherokee that he purchased.
“This is a smartphone on wheels,” Atkinson said. “There’s an incredible amount of I.T. in these cars now.”
Elsewhere in the Midwest, Illinois ranked 16th in the new economy index, Ohio was 29th, Wisconsin was 30th, and Indiana was 38th. Each ranked higher than in prior years, although Michigan made greater movement in the index, according to the Information Technology & Innovation Foundation.
In a separate report issued last month, the foundation said the number of tech-based startups across the U.S. grew 47 percent from 2007 to 2016. Michigan ranked at the national median with tech-based startups accounting for 2.4 percent of total firms in the state. Simultaneously, Michigan ranked below the national median of 0.9 percent for the percentage of tech-based jobs in the state.
Only about 0.7 percent of jobs in Michigan are tech-based, according to the report. The state in 2016 had 4,231 tech-based startups across 10 technology sectors, and those companies employed more than 30,000 people.
The largest sector in Michigan for tech-based startups was computer systems design and related services, with 2,631 firms that employed more than 11,000 people. Next was R&D services with 923 firms with 4,900 employees.
Stats from the MEDC show the formation of 286 tech startups in 2017 that employ nearly 2,500 people, Mason said. He believes Michigan is “positioned well” with the growth in angel investors and venture capital, the formation of business incubators and other activities to support further growth in tech entrepreneurs.
“I think we’ve created a really strong entrepreneurial ecosystem that is now really starting to produce results,” Mason said. “Our level of sophistication has grown significantly and we’re seeing the fruits of that labor.”