H. Stewart Parker, a pioneer in Washington’s life sciences industry, writes in today’s Seattle Times that our state risks falling behind in the competition for biotech investment.

Washington has a lot going for it business-wise, but we must not underestimate the competition for the life-sciences industry. The Washington state Legislature did not renew our industry tax incentives. Forty other states offer tax credits and other competitive incentives. To help ensure the next discoveries are “Made in Washington,” our representatives should create a tax policy that promotes growth.

A few years ago we published an economic profile of the life sciences sector, which has had an outsize impact on the state’s economy. Our research was used in a more comprehensive analysis by the University of Washington and Washington State University, Innovation and Impact, from which the following graph is taken.

Parker’s observation of the importance of R&D incentives to the industry echoes other tech industry experts.  We reviewed the literature last February in our policy brief, Supporting Research and Development with Responsible Tax Policy, and found that the state’s R&D credit and sales tax deferral programs should be renewed. The legislature, as Parker notes, chose to allow them to expire. Lawmakers will have an opportunity to change course next year. They should, as their counterparts in Texas did.

Our 2012 analysis, Washington Prosperity Depends on a Vibrant Tech Sector, takes a longer look at the state’s innovation cluster. Our conclusion:

Washington’s vibrant tech cluster has had a strong, positive effect on the state economy. The sector accounts for nearly two-thirds of Washington’s job growth since 1990 and more than half of the growth in employee compensation. Major tax revenues generated by the sector grew 318 percent, to $2.9 billion in 2011.

The tech industry mitigated the effects of the national recession here, showing relatively stable income and employment patterns, even during the sharpest economic downturn in more than half a century.

Other states and regions witness the success of states with strong innovation clusters and strive to replicate it. They offer incentives, make education and infrastructure investments that the sector finds essential, and provide start-up assistance in the form of incubators and accelerators.

While Washington’s cluster may appear secure, policymakers should not be complacent. The state has advanced several key initiatives important to the innovation economy, including tax incentives, STEM investment, and the Washington Opportunity Scholarship. These strategies, however, do not differentiate Washington from other states.

While Washington’s incentive programs are generally consistent with good tax policy, “good tax policy” does not always guide the actions of our competition. States focusing on long-term cluster strategies are often willing to forego tax revenues far in excess of expected short-term returns. And businesses will respond. Location decisions are driven by many factors, but profit-and-loss calculations are always important.

Washington has been fortunate. The state’s tech cluster has generated significant economic growth, created thousands of jobs, cushioned the recession, and spurred investment in critical infrastructure and higher education. The growth here not only has been consistent with good public policy, including tax policy, but it has also provided the intellectual and economic foundation to support an enhanced quality of life.

Parker’s timely op-ed is a good reminder of what’s at stake.