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ITIF’s long-running State New Economy Index issues 2020 state ranks

October 22, 2020

Utah and Maryland have climbed the ranks and moved into third and fourth place behind two long-standing leaders in the Information Technology and Information Foundation’s (ITIF) State New Economy Index. The index measures states’ structural capacity for successfully navigating a global economy that is increasingly driven by technological innovation. ITIF’s recent release of the updated 2020 index and state rankings provides a long-term picture of how several states have been strengthening their economies for the future. 

ITIF defines states that are well positioned to embrace the innovation-driven New Economy in terms of how closely the structures and makeups of their economies match the ideal economic structure for the New Economy. Specifically, ITIF uses 25 indicators spread across the following five weighted categories:

  1. Knowledge Jobs – Indicators measure employment of IT professionals outside the IT industry; jobs held by managers, professionals, and technicians; the educational attainment of the entire workforce; immigration of knowledge workers; migration of domestic knowledge workers; worker productivity in the manufacturing sector; and employment in high-wage traded services.
  2. Globalization – Indicators measure foreign direct investment (FDI), export orientation of manufacturing, and the share of each state’s output that goes to high-tech goods and services exports.
  3. Economic dynamism – Indicators measure the degree of business churn (i.e., the percentage of new business start-ups and failures); the number of fast-growing firms (businesses listed in the “Inc. 5000” index); the number and value of initial public stock offerings (IPOs) by companies; and the number of individual inventor patents granted.
  4. The digital economy – Indicators measure Internet and computer use by farmers; the degree to which state governments use information technologies to deliver services; adoption rates and speed of broadband telecommunications; and use of IT in the health care system.
  5. Innovation capacity – Indicators measure the number of jobs in high-tech industries such as electronics manufacturing, telecommunications, and biomedical industries; the number of scientists and engineers in the workforce; the number of patents granted; industry investment in research and development (R&D); non-industry investment in R&D; movement toward a clean-energy economy; and venture capital (VC) investment.

With the 2020 update, Massachusetts remained the top ranked state — a position it has held since the first ITIF New Economy Index report in 1999 — and was followed by California, which has now been ranked second for the fourth time.

The longer-term trendline for each state can be isolated by clicking on the state name in the interactive chart below. For example, clicking on Utah shows that the recent increase in its ranking is only part of the story. That is, Utah initially dropped in the rankings from sixth place in 1999 to 16th in 2002 — the next year ITIF published the report — and has since risen to its current place in third. Michigan increased the most, ranking 34th in 1999 and rising to 17th in 2020.

innovation index, states