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3/31/2004
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Report: Massachusetts Tops In High Tech

A Milken Institute report says Massachusetts and California are the in the best position to take advantage of the high-tech economy as it bounces back from a downturn.

Massachusetts and California remain best-positioned to take advantage of the high-tech economy that's still emerging from a downturn, according to a study released Wednesday.

While most of the country's 50 states in the Milken State Technology and Science Index generally tracked the findings of a similar report by the Milken Institute in 2002, there were some big changes--Texas plunged from 14th in the rankings to 23rd and Rhode Island jumped to 11th from 21st in 2002.

"The engines that propel state and regional economies forward today differ dramatically from the engines of the past," the report said. "The new engine of regional economic prosperity is based upon how successful a given location is in attracting and expanding technology and science assets and leveraging them for economic development."

The report was welcome news in Massachusetts, where a recent study reported that the state was falling behind in the race to attract federal research money--a pillar in the development of the state's high tech economy over the years. California moved into second place passing Colorado, which slipped to third.

The study reported that Massachusetts has a firm grip on first place in measuring 75 metrics that were broken down into five major categories--R&D, risk capital, human capital, technology workforce, and technology concentration.

"I actually believe it's the human capital that makes the biggest difference," said Rob Koepp, an institute research fellow and co-author of the report. "People usually think it's things like research and development and capital that are most important. But the real building block for a high-tech economy is human capital. That's the place to start."

Koepp said budget difficulties at Massachusetts and California have caused both states to trim their education outlays and are "worrisome signs."

In the report, Massachusetts scored high in the research and development index, way ahead of any other state. Its position in venture capital was also at the top. Koepp, who's also the author of a new book entitled "Clusters of Creativity," (2004, John Wiley Publishers) said California's range of technology clusters represents a strength that is unique among the 50 states.

One surprise in the report was the drop of Texas. In addition to the hit taken by the state's telecommunications industry, Koepp said the Lone Star state appears to be encountering difficulties "generating home-grown" high-tech companies. While noting the obvious exception to the rule--Austin's Dell--Koepp said Texas has done well in attracting high-tech firms to relocate there, but hasn't been as successful with entrepreneurial firms. On the other hand, Rhode Island, which surged on the Milken index in two years, has been very successful in attracting new high-tech business to the state.

The report addressed the issue of "The New Economy"--a phenomenon it said is much misunderstood. "What economists really have been describing with growing frequency in recent years is the movement from a tangible-asset to an intangible-asset-based economy. In an intangible economy, concepts such as patents, copyrights, customer relationships, brand value...and their structural capital become ever more important to firms," the report stated. Most of that value is centered on human capital and the locations of that human capital.

Mississippi had the lowest ranking in the index.

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