With competition rising from abroad and federal funding increasingly scarce, states are looking to their own innovation assets as a way to grow and sustain a 21st century economy. Some states, including third-ranked Colorado, have successfully built and leveraged their science and technology resources through investment and long-term planning.
According to the Milken Institute's 2010 State Technology and Science Index, released in January 2011, these top-ranked states are the engines of economic growth in the knowledge economy. The index, as it has since 2002, tracks and evaluates every state's tech and science capabilities and their success at converting those assets into companies and high-paying jobs.
The top 10 (with previous index rankings in 2008):
1. Massachusetts (1)
2. Maryland (2)
3. Colorado (3)
4. California (4)
5. Utah (8)
6. Washington (5)
7. New Hampshire (9)
8. Virginia (6)
9. Connecticut (7)
10. Delaware (14)
"States that got a head start on building their tech and science assets prior to the economic downturn now have healthier, more diversified economic growth engines," said Ross DeVol, executive director of economic research at the Milken Institute and lead author of the report. "Looking into the subcomponents of the index, we see that competition is growing, however, as states vie for high-tech investment and human capital not just from other states but from around the world."
Movers and shakers:
- Ohio and Alaska tied for the biggest jump in the rankings since 2008. Ohio skyrocketed seven places, from 36th place to 29th, in part because of a dramatic increase in business starts and its ability to attract venture capital. Alaska leaped from 44th to 37th, gaining significant ground in the area of tech and science workforce.
- Massachusetts continues to rank strongly across the board, but it dropped from 15th to 38th in the number of business incubators per 10,000 business establishments, probably reflecting the mature nature of its high-tech business sector.
- South Dakota had a 200 percent increase in the growth of companies receiving venture investment subcomponent from 2008 to 2009, although it only gained three spots in the overall rankings to place 38th.
- For the second consecutive index, Utah leads in the area of new high-tech businesses, surpassing its last measure of 24 new entities per 10,000 business establishments to a high of 56.
- The 2010 index adds new measurements related to investment in green and clean tech to highlight that industry's importance to a region's high-tech economy. Wisconsin ranked first in total investment in green tech, followed by California.
Rising global competition:
Post-9/11 policies and the Great Recession have reduced the number of students who come to the U.S. to study and, more importantly, stay here for jobs and business opportunities. The index notes that while U.S. R&D spending continues to grow around 5 percent annually, it is growing at double, triple or even quadruple that pace in several Asian countries.
Focus on state funding and incentives:
The recent downturn has diminished both public and private R&D funding and incentives. Because of the emphasis on reducing the deficit, National Science Foundation awards, Small Business Innovation Research funds and other federal funding tracked by the index may not be as available to states as in the past. The report highlights the successful funding and incentive programs that the top 10 states have deployed on their own, including Massachusetts' 10-year, $1 billion Life Sciences Initiative, Maryland's InvestMaryland tax credit program and Utah's Energy Initiative.
"Many states are facing tough budget choices," DeVol said. "But we've seen by tracking these indicators in the index that long-term strategies and investments are absolutely necessary for any state that wants to successfully prepare its workforce and institutions to compete in a global, innovation-based economy."
The 2010 State Technology and Science Index looks at 79 unique indicators that are categorized into five major components: research and development inputs, risk capital and entrepreneurial infrastructure, human capital investment, technology and science work force, and technology concentration and dynamism. It is one of the most comprehensive examinations of state technology and science assets ever compiled.
Complete rankings (including interactive tables and maps) and the full report are available at www.milkeninstitute.org.