Report calls Mass. a new-jobs laggard `Technology states' offer tough rivalry

BYLINE: Robert Weisman Globe Staff

Massachusetts remains a magnet for research funds and venture capital, but it's become an underperformer in job creation.

And while the state continues to lead in many categories of research and development, other technology-oriented states are closing the gap.

Those were some of the conclusions from the 10th annual Index of the Massachusetts Innovation Economy, set to be released today by the Massachusetts Technology Collaborative's John Adams Innovation Institute, a state-chartered group focused on the knowledge economy.

Like indexes published in past years by the Westborough organization, the new report warns that Massachusetts lags in restoring high-wage jobs lost in the technology bust early this decade in key industry sectors. It also suggests that migration out of the state is undermining the size and quality of the high-technology workforce - leaving Massachusetts poorly equipped to capitalize on new technologies.

But there were also some hopeful signs, notably a pickup in employment in computer software and other fields that have experienced job losses this decade.

While the state's average annual growth rate fell 6.2 percent between 2001 and 2005 in software and communications services, a critical sector during the 1990s technology boom, it edged up 2 percent, or about 2,300 jobs, last year.

"Having come through the dot-com bubble, we do see some resilience in the economy," said Pat Larkin, director of the Innovation Institute. "We see some recovery in software, we see some recovery in computer hardware. But we're still seeing softness in job creation."

Massachusetts also faces increasingly tough competition from other "leading technology states": California, Connecticut, Illinois, Minnesota, New Jersey, New York, North Carolina, Pennsylvania, and Virginia. All have aggressively courted high-tech companies and industries.

Perhaps the most discouraging element of the new index was a five-year comparison of average annual employment growth in key clusters: diversified industrial support, healthcare technology, financial services, and software and communications services. Massachusetts lost ground in all four sectors and trailed all of its rival technology states.

At the same time, the state's mix of research programs and entrepreneurial start-ups has narrowed, with life sciences and defense technology gaining funding, but other traditionally strong fields like computer software and information technology lagging, Larkin said.

Still, research and development represented 4.97 percent of gross state product in Massachusetts in 2002, the most recent year for which statistics were available, a higher share than in any other state.

Massachusetts ranked at or near the top in innovation categories such as patents, technology licenses, and research articles, but it's been unable to convert that into significant employment gains.

"There's no easy answer," said Patricia M. Flynn, an economics and management professor at Bentley College in Waltham who chaired the advisory committee overseeing the index.

"Some of the jobs are leaving because Massachusetts is a high-cost producer, and it's just time in the economic cycle for them to leave. But we're not getting enough new jobs on the front end of the cycle - in research and development, science and engineering - to make up the difference."

Flynn called the current housing slump a "temporary lull," unlikely to trim the cost of doing business in the state.

Massachusetts has kept its unemployment rate low largely because of a net loss of more than 84,000 residents since 2001, according to the index. But with many college graduates moving to other states, Massachusetts must boost its education and retraining efforts, especially in math and science, to capitalize on emerging industries, Flynn said.

"We need everyone at their full potential," she said.

Robert Weisman can be reached at weisman@globe.com.