MA Continues to Lead U.S. in Progress Toward ‘New Economy,’ According to ITIF

Massachusetts continues to reign as the U.S. state best prepared to meet the challenges of the current and future global economy, according to the sixth edition of the Information Technology and Innovation Foundation’s (ITIF) State New Economy Index. The Index, which has been released periodically since 1999, ranks state economies using 25 indicators in five categories to evaluate the degree to which they are knowledge-based, entrepreneurial, globalized, IT-driven and innovation-based.  Delaware, California, Washington and Maryland round out the top five states.

ITIF uses its 25 indicators to assign states an overall score and ranks them according to the preparedness for what it calls the New Economy. Massachusetts received the highest overall score of any state, as it has in all six editions of the Index since 1999. The group attributes Massachusetts’ perennial top rank to the state’s combination of world-class universities and high-concentration of tech-focused firms. Delaware took second place, as it did in the 2012 edition, due to its business-friendly policies and globalized financial sector. California ranks near the top in many areas, particularly in the strength of its venture capital market, while Maryland and Virginia have excelled in building a highly skilled and tech-centered labor force.

The five indicator categories include:

• Knowledge Jobs – measuring the skills of the labor pool and technology focus of jobs;
• Globalization – measuring global connections in the local economy;
• Economic Dynamism – measuring job and business dynamism, entrepreneurship and firm growth;
• Digital Economy – measuring the incorporation of IT and broadband in the state economy; and,
• Innovation Capacity – measuring the importance of advanced technologies and research in the economy, along with the availability of venture capital.

While Massachusetts leads in the overall rank, there is more diversity at the category level.  Virginia performed as well as Massachusetts in the Knowledge Jobs category, having greatly expanded its base of high-tech workers over the past 15 years. The authors note that Virginia has the country’s highest concentration of IT workers in both IT and non-IT industries.  Delaware leads in Globalization, followed by Nevada and Texas. Nevada ranked 19^th in the category as recently as 2012, but has jumped to the top because of the export-focus of its manufacturing sector. Washington tied Massachusetts in Innovation Capacity, due to the importance of its aerospace and IT sectors.

At the regional level, a majority of the leading states in the Index are concentrated in the Pacific West, Mid-Atlantic, New England and the Mountain West. Only one Midwestern state, Minnesota, and one Southern state, Virginia, ranked among the Index’s top 15.

This year’s Index concludes with a number of policy recommendations from other countries that have employed technology-based economic development tools to move their national economies along the path toward the New Economy. These tools range from corporate tax incentives to university-industry research collaborations.

Download The 2014 State New Economy Index…