Press Release

Report Shows Innovation Economy Indicators Strong
But High Tech Job Creation Lags
8th Annual “Index” highlights need for increased investment in higher education

WESTBOROUGH, MA (November 29, 2004) – The state’s innovation indicators are strong, however, the conversion of innovation into the creation of new high tech jobs is lagging and the state’s median household income continues to dip, according to the Index of the Massachusetts Innovation Economy, a report released today by the Massachusetts Technology Collaborative.

The report shows that while the infrastructure is in place to create high tech jobs and improve the economy, jobs related to the innovation economy are not being created as quickly as they are in other Leading Technology States. Converting innovation into new job creation is critical, as well as seeking to accelerate the process of commercialization. The state also needs to raise the level of educational attainment by expanding access to and utilization of its investments in public higher education.

"Massachusetts needs to hit the accelerator and innovate its way back to strong job growth,” said MTC Executive Director Mitchell Adams. “Fortunately, the resources for innovation – scientific research, federal R&D funding and new patent awards – remain strong, perhaps stronger than ever.”

Among the positive signs for innovation in Massachusetts:

• Through 2002 (latest data available), federally-supported research and development in Massachusetts totaled $4.6 billion, up 10 percent from 1999 and second only to California among Leading Technology States.

• Patents awarded to Massachusetts inventors grew 8.3 percent in 2003, the highest among our competitor Leading Technology States, and far higher than the 1.1 percent growth across the U.S. as a whole.

• As the venture capital industry has recovered in the U.S., the Commonwealth’s ‘market share’ of venture capital invested in new U.S. firms has increased from approximately 11 percent to 14 percent (2003 and first two quarters of 2004); independent analysts suggest that non-venture capital private equity (i.e. angel capital investments) invested in Massachusetts may equal or exceed venture capital investment.

"We must continue to invest in new products and technologies if Massachusetts is to remain an innovation leader. For all our residents to benefit from the Innovation Economy, however, we need to do more in converting our creative ideas into good jobs,” said Patricia Flynn, PhD, Trustee Professor of Economics and Management, Bentley College, and Chairperson of the Index Advisory Committee.

Some of the less positive signs identified in the report include:

• Employment in the nine key industry clusters tracked by the Index fell 3.2 percent in 2003, and fell 10 percent from 2001-2003. The state’s Software & Communications Services industries lost over 9 percent of its jobs in 2003; total job losses in the Computer Software and Hardware clusters in the state total 28 percent since 2001, and year-to-date (2004) data from the state’s unemployment assistance agency suggests that Information Technology-related jobs in all industries continue to drop.
• Less than one in four Massachusetts workers are now working in the Innovation Economy, as MTC has defined it. Historically, wages within the state’s Innovation Economy industry clusters have averaged about a third higher than average wages in the state economy as a whole.
• Lagging job growth in the Innovation Economy comes amidst continuing declines in real median income in the state. Median household income in Massachusetts fell 3.2 percent in 2003. Independent studies from Northeastern University point to a 15-year pattern of decline in real household income in the state.

"Less than 25 percent of the state’s workforce is currently working in the Innovation Economy – the lowest level since we started publishing the Index in 1997,” said Adams. “As the Innovation Economy has contracted, a long-term decline in the state’s household incomes has accelerated. That’s not a recipe for sustainable economic growth in the Commonwealth.”

Other recent developments point toward the creation of highly innovative growth industries for the future. The signs include:

• In early 2004, new economic development legislation approved by the Governor and Legislature created the most extensive series of programs for science and technology-related economic development seen in the Commonwealth in many years.
• In 2005, the state is expected to undertake a re-evaluation of the size and scope of the state’s public university and college system. Enrollments in the state’s public universities have remained flat over the last several years, while enrollment in degree-granting programs at the state’s community colleges have declined, contrary to national trends.

The Index tracks nine industry clusters and 17 economic indicators that benchmark the state’s strengths and weaknesses against six Leading Technology States: California, Colorado, Connecticut, Minnesota, New Jersey and New York.