Massachusetts Leads in `New Economy'

Source: The Kauffman Foundation and The Information Technology & Innovation Foundation's "The 2008 State New Economy Index," November 2008

Massachusetts once again leads all other states in moving its economy away from the old industrial "smokestack-chasing" model to one based on technology, creativity and innovation, a new report released Nov. 18 said.

Washington, Maryland, Delaware and New Jersey round out the top five states, while Mississippi and West Virginia ranked lowest in making the transition to the new economy, according to "The 2008 State New Economy Index," released by the Ewing Marion Kauffman Foundation and the Information Technology and Innovation Foundation , both nonpartisan groups that focus on innovation.

Other states scoring at the bottom include Arkansas, Alabama and Wyoming, according to the 88-page report that provides state-by-state rankings.

States at the top of the list tend to have a high concentration of workers in "knowledge jobs" that require at least a two-year college degree, are at the forefront of the information technology and Internet revolutions and have institutions and residents that embrace the digital economy, the report said. The groups used 29 indicators to rank each state on how well its economy is structured to compete regionally, as well as globally.

Massachusetts, which also topped the list in reports issued in 1999, 2002 and 2007, widened its lead over states, again largely because of its concentration of software, hardware and biotech firms supported by world-class universities, such as the Massachusetts Institute of Technology and Harvard.

Washington scores high thanks to its strength in software and aviation from its hometown companies of Microsoft and Boeing. Maryland comes in third because of its concentration of contractors and workers in the federal government. Delaware climbed from ninth in 2002 to fourth in 2008, in part because of its long-standing state policies to build a strong financial services industry. New Jersey's pharmaceutical industry, coupled with high-tech presence around Princeton, helped land it fifth place.

Robert D. Atkinson, president of the Information Technology and Innovation Foundation and primary author of the report, said that states on the lower end of the rankings tend to be "still stuck using the conventional model" that dangles tax breaks to lure big new plants to their states rather than creating an environment for entrepreneurship and innovation.

Sujit CanagaRetna, senior fiscal analyst for the Council of State Governments , said that while states are currently struggling with shrinking revenues and tight credit, focusing on creating new-economy jobs can help them recover through the downturn. "In this fiercely competitive global economy, creating broad-based economic opportunities that attract and retain high-tech, high-wage jobs can only come through pursuing the kind of new-economy jobs and professions enumerated in the report," he said.

Regionally, the new economy has taken the strongest hold in the Northeast, mid-Atlantic, Mountain West and Pacific regions; 14 of the top 20 states are in these four areas. In contrast, 16 of the 20 lowest-ranking states are in the Midwest, Great Plains and South. California and New York, two states hit especially hard by the tanking economy, rank eighth and ninth, respectively.

When she was chair of the National Governors Association in 2007, Arizona Gov. Janet Napolitano (D) made "Innovation America" her year-long initiative that prodded governors to move their states toward the new economy. Atkinson said he gives Napolitano credit for bringing a spotlight on the issue "but it hasn't sunk in as it should" among governors, he said.

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