Sept. 17, 2002 – Massachusetts bested California in a high-tech state-by-state comparison released today by an economic think tank, findings that may reflect changing dynamics among small tech’s leading regions. Although the analysis by the Milken Institute doesn’t focus on small tech specifically, certain categories used in the comprehensive analysis are particularly relevant to micron and nanoscale technologies and their potential to boost state economies.
DeVol, who analyzed the microsystems industry in the Southwest region in 2000, produced the broader high-tech report using rankings from the institute’s 2002 State Technology and Science Index, a compilation of five composite indexes derived from 73 components. The free report focuses on California’s ability to turn its science and engineering innovation into economic gain. But the data can be applied toward any state analysis, DeVol said.
In the overall index, Massachusetts was the leader with a score of 84.90, followed by Colorado, whose 80.58 score edged it past California’s 80.37 total. Many formal and informal reports have ranked California as the global leader in high tech.
A Small Times analysis of regions emerging as leaders in small tech found California’s Silicon Valley was dominate, with Southern California No. 2, Boston No. 3, the New York-New Jersey region No. 4, the Dallas-Houston-Austin corridor No. 5 and Chicago No. 6.
Economists argue that economic growth in advanced nations depends on converting what the report calls “knowledge assets” or innovation into products and services. In a knowledge-based rather than labor- and raw materials-based economy, science and technology are the foundation for creating new ideas that lead to innovations. To determine the innovation potential of a nation, state or region and the likelihood that innovation will be commercialized, economists look for meaningful indicators.
DeVol and his co-authors Rob Koepp and Frank Fogelbach selected five equally weighted categories they considered crucial for a high-tech development: research and development; risk capital and entrepreneurship; investment in human capital, which generally means education; the science and technology workforce; and technology concentration and dynamism, or the existing presence of the tech sector and how well the state encourages its growth. Each category includes variously weighted components; the human capital category, for instance, uses 20 individual components such as the percentage of the state population with doctorates, SAT scores and state appropriations for higher education.
The research and development and human capital categories hold particular value for small tech, DeVol said, which is a young industry closely dependent on top-tier science and engineering education and discoveries. “Nanotechnology is interdisciplinary,” he said. “You need to have broad-based education. California doesn’t rank as high as some people think on this basis.”
In the R&D category, Massachusetts placed first, followed by Colorado, Rhode Island and California. In absolute numbers, California generally shines, but the state’s large and diverse population dilutes its position, DeVol said. When population is factored in, California’s comparative weaknesses were apparent in components such as expenditures on the physical sciences, life sciences and engineering — the backbone for much of small tech. Massachusetts typically ranked five positions ahead of California in these areas, and placed second to California’s 17th showing in life sciences.
DeVol’s team gave its heaviest weighting to industrial R&D, where Massachusetts placed second and California seventh. Delaware, with its combination of a small population and headquarters for industrial giants such as DuPont, earned the No. 1 spot. DuPont is active in small tech R&D.
“Industrial R&D is focused on the applied aspect,” he said. “Most ends up in a viable product.”
Massachusetts pulled ahead of the pack in human capital, “the most important intangible economic asset of a region,” the authors wrote. In particular, the state capitalized from Harvard University, Massachusetts Institute of Technology and other universities and colleges in the Boston area. “When you’re developing a new technology, higher education will be more important,” he said. “You need (people in) math and the sciences.’
As the category leader, Massachusetts scored almost 10 more points than California, with Colorado and Maryland sandwiched in between. It scored first in eight of the 20 components, including a number of indicators specific to science and engineering.
California nabbed one first-place slot dealing with appropriations. California’s large and diverse population, with a segment being immigrants with language limitations, again worked against it, DeVol said. State fiscal constraints in the 1980s and late 1990s exacerbated the problem, he said.
Massachusetts’ investments and successes in education may position it to leapfrog other regions trying to develop small tech expertise. “Human capital is at the very high-end with your technology.” DeVol said, referring to small tech. “An emerging technology depends on high-end human capital.”
But California is far from fading into the background. In risk capital, entrepreneurship and workforce categories it remains strong. While Massachusetts and other states may be growing the first phase of small tech enterprises, California still is a powerful lure for the next step of building a business.
“Recent Ph.D.s see California’s institutions and industry as being dominant,” he said. They migrate to the state because they think their chances for employment are better, or will be better if they can boast some California credentials.
And many states have a chance of becoming significant if not power players in small tech, DeVol said. Their survival and ascension will depend on collaborations with other regional partners. “Many places don’t have the ingredients to be successful, especially the medium-size ones,” he said. “They have to plug gaps via collaborations.”