Massachusetts leads in high-tech economic growth

Massachusetts is in the best position of any state in the US to achieve high-quality economic growth thanks to its vast array of technology and science assets, according to a new study by the Milken Institute, an independent think tank.

Massachusetts ranks first in the Milken Institute’s 2008 State Technology and Science Index, followed by Maryland and Colorado and California. According to the report, regional competition for technology industries has increased since the Index was last published, in 2004. Not only are states vying with each other for human capital and resources, but countries like China and India are increasing the competition on a global level.

At the same time, the decrease in the number of international graduate students coming to the US and flat or lower federal funding for research and development are putting pressure on states that are not making serious investments to build and retain 21st century industries.

“States that have a vision and a plan for building and retaining high-wage jobs and viable industries are finding ways to invest in their science and technology assets,” said Ross DeVol, director of Regional Economics at the Milken Institute, and lead author of the study. “The changes in this year’s Index give a good measure of who is ahead in the increasing competition for scarce human capital and other resources needed for a successful industry.”

Massachusetts’s dominance in the rankings is related to its established strength in world-class research institutions, cutting-edge firms and its ability to leverage these assets in attracting and retaining a skilled work force. Massachusetts scores well ahead of the competition in these areas.

Maryland moved up from fourth in this year’s ranking, thanks to strong positions across the many indicators used by the Institute. In particular, the report cited an improvement in the ability to attract business into the state and new projects that link research institutions with industry to produce the most advanced products.

Colorado held its position in third place. But California slipped from second place to fourth and, according to the report, shows signs of faltering in its efforts to capture federal funding and build its future work force. In particular, the report said the decline in “standardised test scores and a low proportion of its population with bachelor’s degrees” could significantly hamper the ability to provide a skilled work force to take advantage of its financial and industrial strength.

Several states made dramatic improvements in the update of the Index. North Dakota showed the greatest gains, moving up 14 positions to 31st. This rise is due in large part to a state initiative to develop “Centers of Excellence,” which was implemented in 2004. The state provides matching funds to universities and colleges that join the programme and commit to regional development in science and technology.

Other big movers are Hawaii, up 11 spots to 28th, and Alabama, which moved up seven positions. On the other hand, Mississippi has the dubious position of being ranked 50th again and West Virginia slid from 46th to 49th place.

Because states can no longer succeed with a low-skill, low-cost economic development formula, they must compete globally on the basis of new ideas, new products and new markets, along with superior productivity growth, the report states. The future will belong to those regions that can develop a thriving technology industry in a wide variety of fast-growing fields including biotech, clean technology, nanotechnology, communications and next-generation computer applications.

The Index takes an objective measure of just how prepared each state is to take advantage of these opportunities, looking at 77 indicators that are categorised 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.