ITIF Releases 2010 State New Economy Index

Massachusetts remains the state best prepared to navigate the changing economy, according to the Information Technology and Innovation Foundation's (ITIF) 2010 State New Economy Index. ITIF uses 26 indicators in five categories to evaluate the economic structure of states and assess their capacity to drive innovation-based growth. Massachusetts ranked number one in economic preparedness by a wide margin, as it has since the first index was released in 1999. Other top states include Washington, Maryland, New Jersey and Connecticut. Overall, most states and the U.S. as a whole improved in most indicators between 2008 and 2010. Only three U.S. indicators showed a marked decline during that period: patents, non-industry R&D, and venture capital.

ITIF cautions that due to differences in methodology and indicators, changes in ranks between years cannot necessarily be used to evaluate state progress. Also, the indicators do not reflect absolute figures, but instead reflect the concentration of employment, investment and other metrics relative to the state's economy. Massachusetts, however, has kept its first place ranking throughout the last 11 years, and, in fact, increased its lead over other states. ITIF credits the state's remarkable performance to a high concentration of software, hardware and biotech firms, and an economy that was less affected by the recession than the rest of the country. Meanwhile, Washington rose to second place, up from fourth in 2007, on the strength of its aviation and software sectors, and strong entrepreneurial activity.

Other states excelled in individual performance metrics. Utah led the country in index scores for inventor patenting, the percentage of its population that was online and in state and local government use of information technology to deliver services. Virginia took the top spot for IT professionals outside of the IT industry. Delaware led in both employment in high-wage traded services and foreign direct investment.

The Index concludes by offering several recommendations to help boost the country's preparedness and help compete in the changing global economy. Federal and state policies should be revamped to limit zero-sum competition between and within states. In a competitive global environment, in which the U.S. no longer dominates worldwide innovation, states can no longer afford to engage in zero-sum competition. Cooperation could be improved through multi-state compacts, an end to financial incentives to firms to move away from other states, and a $2 billion federal fund to provide matching grants to states to support non-zero-sum economic development initiatives. States should be encouraged to develop win-win economic development policies, such as cluster-based strategies that support local innovation efforts.

Read The 2010 State New Economy Index at: http://www.itif.org/publications/2010-state-new-economy-index