Kentucky leapfrogged Ohio in venture capital rankings for the first six months of 2004 and laid bare Ohio's worrisome slippage as a technological innovator. Ohio's $1 billion Third Frontier initiative is not spinning off the hoped-for bonanza of new entrepreneurial companies, not yet.

Ohio is not producing and holding on to innovative new companies at a fast enough rate to generate the new products and jobs to keep the state a technological leader. It should be among Ohio's highest priorities to invest in innovative startups and in higher education. We need to reverse Ohio's brain drain and build a high-salary, high-tech economy. Last November, voters rejected a $500 million bond issue to add to the state's Third Frontier fund.

The latest quarterly report of VentureOne, a firm that monitors venture capital investments, ranked Ohio 29th of 43 states that received venture capital in the first six months of 2004. That's down from 20th in 2003. Kentucky this year jumped to 21st place, with $52.5 million invested, mostly in health care deals. Xanodyne Pharmaceuticals in Florence received $20 million. In all of 2003, Kentucky attracted only $19.7 million. Gov. Ernie Fletcher is to be praised for making life sciences a top state priority.

Southwest Ohio also has made biomedical research a top strategy, yet despite more that $1 billion in venture capital funds here, the only venture capital investment in a Cincinnati firm this year was for $1.25 million. Cincinnati venture capital funds invest mostly out of state. A Toledo startup received Ohio's largest venture capital investment this year, $4 million, but it has since moved its headquarters to Massachusetts.

Ohio's loss of promising startups to states with a faster-growth, high-tech base has been a persistent problem. About 60 percent of Ohio State University graduates in computer or electrical engineering take jobs out of state. Ohio still has innovative, long-established companies such as Procter & Gamble and General Electric, and continues to add to its Edison Technology Centers with promising newcomers such as the University of Cincinnati's Genomic Research Institute. But they have yet to spawn waves of new successor companies to the state's corporate giants. The rap against this diversified but Rust Belt state is that it is risk-averse and a technological underachiever, given its solid manufacturing assets.

Venture capital and patents are key indicators of a state's innovation. Nationally, venture capital in recent years plummeted along with the economy, but now that such investment has rebounded to $10.4 billion on the half-year, Ohio's piece of that action plunged in the opposite direction. It slid to a lowly one-tenth of 1 percent. In 1980, Ohio commanded 1.2 percent of national venture capital.

Fund managers here report some Ohio deals are in the pipeline. Ohio's political, corporate and university leaders need to join in building a more risk-taking entrepreneurial culture here to compete in a global economy and attract the high-tech talent that it requires.