Innovation Capacity

In the old economy, economic growth stemmed from increases in the supply of capital, labor, or natural resources. Growth in the New Economy stems from increases in knowledge and innovation and its widespread adoption. Technological innovation, in particular, is one of the fundamental drivers of growth in the New Economy. Studies show that technological innovation is responsible for over two-thirds of per-capita economic growth.23 States that score well on innovation indicators actually show lower rates of job growth between 1991 and 1996 (there is an overall correlation of -0.15 for the 50 states). However, they score much higher on rates of growth in per-capita income (a correlation of 0.24). In other words, the higher the score on innovation capacity, the faster the income of the residents went up. As a result, if states want to boost the incomes of their residents, embracing technological innovation is a key path.

The innovation capacity indicators in this section measure five things: 1) share of jobs in high-tech industries; 2) scientists and engineers as a share of the workforce; 3) the number of patents relative to the size of the workforce; 4) industry R&D as a share of GSP; and 5) venture capital invested as a share of GSP.

STATES BY RANK
Rank	State	Score
1	Massachusetts	16.25
2	California	12.99
3	Delaware	11.08
4	Colorado	10.97
5	New Hampshire	10.17
6	New Jersey	9.95
7	Connecticut	9.76
8	Washington	8.84
9	New Mexico	8.83
10	Minnesota	8.58
11	Vermont	8.37
12	Maryland	8.04
13	Idaho	7.79
14	Utah	7.66
15	Michigan	7.63
16	New York	7.31
17	Texas	6.72
18	Arizona	6.64
19	Illinois	6.60
20	Oregon	6.59
21	Pennsylvania	6.54
22	Rhode Island	6.40
23	Virginia	6.34
24	North Carolina	5.94
25	Ohio	5.31
26	Georgia	5.25
27	Missouri	5.11
28	Florida	4.89
29	Indiana	4.68
30	Wisconsin	4.68
31	Tennessee	4.64
32	Iowa	4.05
33	Kansas	4.02
34	South Carolina	3.84
35	Maine	3.71
36	Nebraska	3.66
37	Montana	3.57
38	Oklahoma	3.54
39	Alabama	3.48
40	South Dakota	3.46
41	Hawaii	3.09
42	Kentucky	3.09
43	North Dakota	3.03
44	Nevada	3.01
45	Alaska	2.90
46	West Virginia	2.66
47	Louisiana	2.39
48	Wyoming	2.17
49	Mississippi	1.90
50	Arkansas	1.90
	U.S. Average	6

ALPHABETICALLY
Rank	State	Score
39	Alabama	3.48
45	Alaska	2.90
18	Arizona	6.64
50	Arkansas	1.90
2	California	12.99
4	Colorado	10.97
7	Connecticut	9.76
3	Delaware	11.08
28	Florida	4.89
26	Georgia	5.25
41	Hawaii	3.09
13	Idaho	7.79
19	Illinois	6.60
29	Indiana	4.68
32	Iowa	4.05
33	Kansas	4.02
42	Kentucky	3.09
47	Louisiana	2.39
35	Maine	3.71
12	Maryland	8.04
1	Massachusetts	16.25
15	Michigan	7.63
10	Minnesota	8.58
49	Mississippi	1.90
27	Missouri	5.11
37	Montana	3.57
36	Nebraska	3.66
44	Nevada	3.01
5	New Hampshire	10.17
6	New Jersey	9.95
9	New Mexico	8.83
16	New York	7.31
24	North Carolina	5.94
43	North Dakota	3.03
25	Ohio	5.31
38	Oklahoma	3.54
20	Oregon	6.59
21	Pennsylvania	6.54
22	Rhode Island	6.40
34	South Carolina	3.84
40	South Dakota	3.46
31	Tennessee	4.64
17	Texas	6.72
14	Utah	7.66
11	Vermont	8.37
23	Virginia	6.34
8	Washington	8.84
46	West Virginia	2.66
30	Wisconsin	4.68
48	Wyoming	2.17

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The Progressive Policy Institute (PPI)
Technology, Innovation, and New Economy Project
600 Pennsylvania Ave., S.E., Suite 400, Washington DC 20003
Phone: (202) 546-0007
www.ppionline.org

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