ITIF’s Competitiveness Index ranks Massachusetts, California, Ontario and Maryland highest among North American states and provinces

Canadian provinces are overrepresented in North America’s most competitive states in the innovation economy with Ontario ranked third, British Columbia ranked fourth and Quebec ranked ninth, according to a competitiveness index from the Information Technology and Innovation Foundation (ITIF). Massachusetts, California, Ontario and Maryland were named overall leaders in subnational innovation competitiveness.

Accounting for 28 percent of global economic output, North America contains diverse innovation ecosystems and forms one of the largest free trade zones in the world, which makes it a critical subject of study in regards to the innovation economy. The North American Subnational Innovation Competitiveness Index (NASICI) released this week by ITIF ranked North American states overall and used 13 indicators under three categories: knowledge-based workforce, globalization and innovation capacity, in order to rank innovation competitiveness.

The ITIF index found that the U.S. falls far behind Canada in terms of workforce education with just 35 percent of the U.S. workforce holding postsecondary education, as compared with 61 percent of the Canadian workforce. Further, Chihuahua, Baja California and Tamaulipas led all other North American states in a subcategory of globalization, as they were ranked highest in exports of high-tech products relative to GDP.

The first policy recommendation is expanding the R&D tax credit in the U.S. to become more competitive with Canada. The report argues that expanding the R&D tax credit would support more privately employed R&D personnel in U.S. states, make U.S. tax support for R&D on par with the rest of the developed research world, and grow the economy via increased innovation and productivity from an expansion of newly incentivized R&D.

Other policy recommendations include building more globally competitive North American supply chains, with U.S. and Canadian-based technology firms taking advantage of the proximity to Mexico to vertically integrate their complementary workforces, production and innovation capacities. The report also recommends promoting industry-university partnerships; expanding collaborative research between U.S. and Canadian leaders; embracing the United States-Canada-Mexico Agreement (USMCA) of 2020 to create a free-flowing North American digital economy; expanding national place-based development projects; and, improving economic indicator data availability among North American states.