A Couple of Cautionary Notes

An important aspect of all indices, regardless of their geographic orientation, is that each is created with a different purpose or goal in mind. As a result, each index has an inherent or implicit bias toward the data collected, the manner in which the data is manipulated and presented, and the conclusions drawn or policy recommendations made.

When considering the various indices that have been prepared, it is important to be aware that differences do exist and not to think all the indices are interchangeable. Indices will have some common elements and measurements to them; however, subtle and substantial differences may also exist.

For instance, since California holds one-quarter of the nation's population, it can be expected to be number one among the states in most categories that use raw values such as population, gross state product, number of business starts, number of college graduates, etc. If the goal is to present California in such light or to highlight the difference between California and another state with less population, then use of raw numbers can be very powerful. Only using raw numbers does, however, open the index to considerable criticism.

A technique that paints a stronger and usually more useful picture is to standardize the raw values. Looking at a comparison of the percentage of college graduates in the state's workforce, the proportion of the gross state product that is represented by R&D investments, or the ratio of business starts to business failures can provide a more meaningful starting point for interpreting the results and outlining a policy of corrective action.

Indices also can include or exclude use of a weighting system within and across categories. The purpose of the weights is to recognize the relative importance of a particular metric or category toward the region's or state's technology-based economic development goals.

For instance, is the number of SBIR awards received by small businesses in a state in a given year as important to the state's economy as the increase in total technology employment? Is an area's median income equal to the total research funding received per scientist or engineer?

These are obviously subjective matters. As a result, weighting systems, or lack thereof, can account for substantial differences in the results between two otherwise similar indices. Weighting systems in themselves can be arbitrary and less useful than desired. When looking at indices, it is important to note the method used to arrive at the indicators included in the study and the manipulation of the data once included.