Idaho has dropped one spot since 1999 and four spots since 2002, and now stands at #24, in a regular survey of how well prepared states are for the “New Economy.”
The “New Economy” is defined as “a global, entrepreneurial and knowledge-based economy in which the keys to success lie in the extent to which knowledge, technology, and innovation are embedded in products and services,” in the 2007 State New Economy Index, produced jointly by The Information Technology and Innovation Foundation and the Kauffman Foundation, released last week.
While Idaho did score strongly in some areas, many of these are on a per-capita basis, which reflects Idaho’s low population, or per share of total worker earnings, which reflects Idaho’s low salaries.
In comparison, some neighboring states such as Utah (#12) and Oregon (#17) did better than Idaho, while others such as Montana (#42 ) and Wyoming (#43) did worse. Utah increased its rank by four points since 2002, after dropping since 1999; all the other states have decreased their rankings since 2002.
Idaho scored particularly low in areas such as immigration of knowledge workers (#45), foreign direct investment (#47), package exports (#42), “gazelle jobs” or jobs in firms with annual sales revenue that has grown 20 percent or more for four straight years as a share of total employment (#41), and particularly in manufacturing value-added, where Idaho scored dead last (#50). Idaho did score well in the dubious category of “job churning” or “The number of new start-ups and business failures, combined, as a share of the total firms in each state” (#6) as well as fastest-growing firms (#20). Out of major 12 categories, Idaho scored in the bottom 10 five times, and in the top 10 only once and in the top 20 only twice. For the remaining five scored, Idaho was in the 30s three times and in the 20s twice.
Idaho also ranks as the third-fastest mover, #12, in the number of IPOs offered since its ranking in 2002, when it scored #34. Idaho was also #5 in the number of entrepreneurs as a percentage of population – which reflects Idaho low base population. Other rural states also scored highly in this area, the report noted. “[W]ith fewer traditional employment opportunities, people in rural areas are more likely to engage in entrepreneurial activity.”
Idaho scored #6 in the area of “innovation capacity,” which is an aggregation of several other areas: share of jobs in high-tech industries, scientists and engineers as a share of the workforce, the number of patents relative to the size of the workforce, industry R&D as a share of worker earnings, venture capital invested as a share of worker earnings. Note, however, that all these areas are based on size of workforce or size of worker earnings, meaning that just a couple of major employers could have a disproportionate effect on the state’s rankings. The report itself, while discussing Idaho’s #1 rank in number of patents relative to the size of the workforce, notes “Idaho’s extremely high patent ratio – more than 4 times the national average – is likely owed to the presence of Micron, a major semiconductor firm located in what is a relatively small state.”
Idaho is also ranked as one of the fastest movers in share of jobs in high-tech industries since 2002, but stands only two places higher than it did in 1999, after which the state had a big drop. Similarly, Idaho is ranked as one of the fastest movers in scientists and engineers as a share of the workforce, which likely reflects the role that not only Micron and Hewlett-Packard but also the Idaho National Laboratory plays in the economy.
Other states were quick to trumpet their successes. New Jersey, for example, scored #2 overall, with top 10 scores in 9 of the 12 major categories.
“Georgia ranks as high as 6th in the category of ‘Fastest Growing Firms’ and 12th in ‘IT Professionals Score’ (Employment in IT occupations in non-IT industries as a share of total jobs) and ‘Entrepreneurial Activity’ (The adjusted number of entrepreneurs startting new businesses), and 14th in the overall category of ‘Globalization,’” bragged The Creative Coast, a Savannah-based blog. This accomplishment was particularly noteworthy when four of the five bottom states – West Virginia, Mississippi, Arkansas, and Alabama – are also located in the South. (The remaining laggard is South Dakota.)
“In both 1999 and 2002, Massachusetts topped the list,” said Dharmesh Shah, posting on Web Pro News. “This year, not only did Massachusetts top the list, but increased its lead over the other states.” Massachusetts was #1 in workforce education, high-tech jobs, and venture capital, he observed.
“We lead the country in global integration through export-oriented firms, employees and services,” crowed Senator Edward Kennedy, D-Mass. “We also lead in knowledge-based jobs with a strong concentration of software, hardware, and biotechnology firms that rely on our highly educated and talented workforce. We lead as well in innovation capacity, with some of the best colleges and universities continuing to develop new ideas and make new discoveries. We have the highest concentration of high-tech jobs, and scientists and engineers in the workforce. In addition, we lead in our ability to continuously generate new economic activity through entrepreneurship and funding opportunities, and in our adoption of the digital economy and our reliance on it.”
Texas, which ranked #14 overall, “placed No. 3 in the globalization category and ranked No. 6 in terms of the number and value of initial public offerings compared with other states,” according to the Houston Business Journal. “But the state lagged in areas like online population, or the number of Internet users as a share of the total population (No. 43), and online agriculture, the percentage of farmers with Web access using computers for business (No. 35),” the paper went on to say.
Some states that did not do as well took the report as an impetus to do better. The Indianapolis Star, noting the state’s “mediocre” #31 ranking, urged state legislators to take steps. “They have the opportunity in the current session to create a college scholarship program designed to retain top graduates and secure funding to attract top-of-their-field researchers to state universities. Both steps would help address Indiana’s deficits in the education of its work force and in the low number of patents.”
Wisconsin, which scored #30, was ahead of Indiana and Iowa but behind Minnesota, Illinois, Michigan, and Ohio in the Midwest, noted the Wisconsin Technology Network. “[L]ow rankings in categories like job churning (47th), export focus of manufacturing and services (42nd), and IPOs (41st) brought down Wisconsin’s overall score.” However, the state improved from its 2002 ranking of #37.
Colorado, which dropped from #3 in 2002 to #9 in 2007, attributed Colorado’s slippage on a lack of support for higher-education funding, according to the Rocky Mountain News. “’Other states have made major investments in expanding higher education, particularly research centers related to their state economies and specialties,” Robert Atkinson, president of the Information Technology and Innovation Foundation, told reporters in a teleconference. “My sense is that Colorado didn’t do that as much in the last decade,;” the paper quoted him as saying. Colorado has also failed to combine its quality of life, students, and high-tech companies with a policy that spurs innovation — one, for example, that boosts the role of colleges and universities in promoting innovation and growth, the paper said he went on to say.
Not all states agreed with the survey’s results. Illinois, which has moved from 22 in 1999 to 19 in 2002 and 16 this year, criticized some of the assumptions of the study, according to Crain’s Business News. The study placed a higher emphasis on companies that were moving away from manufacturing-based economies toward technology-based ones — a faulty criteria given the technological advances made by some manufacturers such as Caterpillar, said Paul O’Connor, executive director of World Business Chicago.