Invented Here, Profited Elsewhere: The Texas Innovation Drain and McKennon's Strategy to Reclaim Our Economic Future

Texas has never lacked for ingenuity. From the integrated circuit designs that originated in Dallas laboratories to the pioneering telemedicine platforms developed in Houston's Texas Medical Center, this state has demonstrated a remarkable capacity to generate ideas that reshape entire industries. The troubling reality, however, is that the economic rewards of those ideas have an increasingly poor record of remaining within our borders. Technologies conceived by Texans, funded by Texas investors, and refined by Texas talent are routinely scaled into global enterprises whose manufacturing operations, executive headquarters, and tax obligations ultimately settle somewhere else.

This pattern represents more than a point of civic pride wounded. It constitutes a structural leak in the Texas economy—one that drains tax revenue, suppresses wage growth in high-value sectors, and gradually erodes the very talent ecosystem that makes innovation possible in the first place. McKennon has made closing that leak a cornerstone of his economic agenda, and understanding why it exists is the first step toward appreciating why his proposals deserve serious consideration.

The Anatomy of an Innovation Export

Consider the trajectory of a hypothetical but thoroughly representative Texas technology company. A team of engineers in Austin or Houston develops a software platform that streamlines logistics, automates a medical workflow, or delivers precision agricultural data. Seed funding arrives from local venture capital. The company hires aggressively from Texas universities. Early customers are Texas businesses. Then growth accelerates.

At that inflection point, a familiar sequence of decisions begins. A larger venture fund based in Silicon Valley or New York acquires a controlling stake and installs its own management preferences, which typically include proximity to coastal financial networks. Tax incentive packages from other states—or from foreign jurisdictions actively competing for corporate anchors—suddenly make relocation financially attractive. The company's Texas roots are celebrated in a press release, and then quietly left behind.

This is not a hypothetical. Texas-originated biotech firms have completed their most profitable growth phases under Delaware incorporation with California operational headquarters. Texas-developed energy software companies have transferred their core engineering talent to Colorado after acquisition by out-of-state conglomerates. Drone and autonomous systems technology incubated in Texas research universities has been commercialized largely by firms headquartered abroad, particularly in markets that moved faster to establish favorable regulatory environments.

The result is that Texas receives the costs of innovation—the public university infrastructure, the subsidized research grants, the workforce training programs—while other jurisdictions capture the compounding benefits.

Why Existing Policy Has Failed to Stem the Tide

Texas has not been indifferent to this challenge. The Texas Enterprise Fund and various university commercialization initiatives have attempted to bridge the gap between research and retention. But these tools were largely designed for a prior era, one in which physical manufacturing presence was the primary indicator of corporate commitment. In a knowledge economy, a company can extract enormous value from a state while maintaining only a nominal footprint there.

Furthermore, Texas has historically relied on its lack of a personal income tax as the dominant retention argument. That advantage remains real and meaningful, but it is no longer sufficient as a standalone proposition. When competing jurisdictions offer aggressive research and development tax credits, expedited regulatory approval pathways, and direct equity co-investment from state economic development authorities, the absence of a personal income tax begins to feel like a single chess piece defending an unprotected board.

McKennon's diagnosis is direct: Texas has been playing defense with yesterday's playbook while the global competition for innovation anchors has grown considerably more sophisticated.

McKennon's Framework for Keeping Growth Rooted in Texas

The policy architecture McKennon has outlined operates on several distinct levels, each addressing a different stage of the innovation lifecycle.

Commercialization Partnerships at the University Level. McKennon proposes expanding the mandate and funding of technology transfer offices at Texas A&M, the University of Texas system, and Texas Tech, with an explicit performance metric tied not merely to patents filed or licenses executed, but to the proportion of commercialized technologies that maintain Texas operational headquarters beyond their Series B funding round. State matching funds for commercialization would be conditioned on retention agreements with meaningful teeth.

Competitive R&D Tax Credits. Texas currently offers no dedicated research and development tax credit at the state level, placing it at a measurable disadvantage relative to states like California, Massachusetts, and Georgia, all of which deploy such instruments aggressively. McKennon advocates for a tiered R&D credit structure that rewards companies for maintaining their core engineering and product development functions in Texas, with enhanced credit rates for firms that source at least sixty percent of their technical workforce from Texas institutions.

Headquarters Retention Incentives Tied to Payroll Depth. Rather than awarding economic development subsidies based primarily on announced job numbers—a metric easily gamed through temporary hiring—McKennon's framework would tie incentive eligibility to sustained median wage thresholds and multi-year payroll commitments. A company that brings five hundred jobs paying forty thousand dollars annually receives a different calculus than one bringing two hundred jobs paying one hundred twenty thousand dollars annually. Depth of economic contribution, not headline employment figures, would govern the state's investment decisions.

Regulatory Sandbox Expansion for Emerging Technologies. One of the most powerful tools available to any jurisdiction seeking to anchor innovation is the regulatory environment itself. Texas has made progress in this area with financial technology and certain energy applications, but McKennon argues that a more systematic approach is needed. By establishing formal innovation sandbox frameworks for autonomous systems, biotech, and advanced manufacturing, Texas can become the preferred proving ground for technologies that require flexible regulatory space—making relocation to foreign markets with permissive frameworks far less attractive.

Strategic International Trade Offices Focused on Licensing, Not Departure. McKennon also recognizes that global markets represent opportunity, not merely threat. His proposal includes reorienting Texas trade offices abroad to actively facilitate licensing and royalty arrangements that allow Texas companies to monetize international markets without transferring operational assets offshore. The goal is to make Texas the home base from which global revenue flows inward, rather than the origin point from which value departs.

The Stakes Are Generational

The conversation about innovation retention is sometimes framed as a concern for the technology sector alone. That framing is far too narrow. The same dynamic that strips software profits from Texas also threatens to hollow out the next generation of energy technology, agricultural biotechnology, and advanced logistics—sectors in which Texas holds foundational competitive advantages that are neither guaranteed nor permanent.

Every high-wage engineering position that migrates out of Texas represents not only lost income tax revenue but a diminished signal to the next generation of Texas students about whether building a career here is a viable ambition. Talent follows opportunity, and opportunity follows retained prosperity.

McKennon's position is not that Texas should wall itself off from global markets or resist the natural movement of capital. It is that Texas has an obligation to compete for the economic fruits of its own creativity with the same tenacity it brings to every other arena. Strong leadership means recognizing when a structural problem demands a structural solution—and acting before the loss becomes irreversible.

Texas invented the future more than once. The challenge now is ensuring that future is built and sustained right here.