Massachusetts ranks No. 1 in ‘innovation’ industries

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BOSTON – Massachusetts outranks all other states in terms of its “Innovation Economy,” which has helped drive the Bay State’s standard of living higher than most others, according to the latest assessment from the Massachusetts Technology Collaborative in Westborough.

The Bay State’s innovative industries mostly thrived over the five years from 2009 to 2014, even as declines in the computer and telecommunications sector held back a better performance, the organization’s Innovation Institute reported Tuesday.

Over 2014, annual job growth from what the institute calls the Innovation Economy reached 2 percent between the first three months of 2014 and the first quarter of last year, exceeding the 1.7 percent rate produced by the rest of the economy, the organization said in its 2015 annual assessment. Annual average wages also rose in all innovation sectors except health care services, with the fastest increase in biotechnology and medical devices industries.

But employment has fallen more than 10 percent since 2009 among computer and telecommunications hardware companies, the institute said in its “2015 Annual Index of the Massachusetts Innovation Economy.” During the same period, California surpassed the Bay State in terms of the number of patents issued per state resident.

Software and communications services production increases were “the driving force” behind a $7.7 billion expansion in output from 2009-2014, the institute said in its report. Overall, innovation sectors produced almost $210 billion in economic output in 2014, up $25.6 billion from five years earlier.

Massachusetts remains at the top of all “leading technology states” in terms of workforce education levels, research and development spending and output per state resident in innovation sectors, according to the report. Average wage rates are also higher here in all but one industry segment.

The state “is a highly desired start up location due to the dense pockets of start-up networks and the ability to attract funding from investors at early stages in the growth process,” the report asserts. “Business establishment openings are at a 21-year high.”

But Massachusetts trails California in the number of startups tied to universities, hospitals, research institutions and technology investment firms, the institute said. The state also lags behind California in terms of overall research and development spending. While entrepreneurs in the Golden State attract more venture capital than Massachusetts, the Bay State remains “a top destination” for seed money from investors, with the largest amounts going to biotechnology and software startups.

From 2009 to 2014, venture investment in Massachusetts climbed 74 percent, with more than $1.8 billion dedicated to biotech firms and $1 billion for software companies, the institute said.

The other top 10 leading technology states are Texas, New York, New Jersey, Connecticut, Pennsylvania, Ohio, Illinois and Minnesota. Close behind are five more: North Carolina, New Hampshire, Rhode Island, Missouri and Wisconsin.

The institute’s assessment produced a result similar to a survey from Bloomberg Business, which recently named Massachusetts the “most innovative state,” the institute said. It also noted that the Consumer Technology Association named the state an “innovation champion” in a 2016 survey.

“Massachusetts is home to the most innovative economy in the United States, and it drives our economic development, job creation, and wage growth,” Jay Ash, the state’s secretary for Housing and Economic Development, said in a statement accompanying the report. “The Baker-Polito administration is committed to investing in our innovation ecosystem to help entrepreneurs bring their ideas to market, support successful startups as they grow and scale, and attract and retain world-class companies and talent.”

In terms of the concentration of innovation industries employment, Massachusetts ranks No. 1, according to the report. Health care services is the biggest, with almost 364,000 worker in 2014, followed by financial services with less than half as many. But financial services paid the highest average wage, at $139,500 in 2014, followed by biotech and medical devices at almost $132,000.

The state’s advanced materials industries employed the smallest number of people in 2014, at about 29,400, followed by computer and communications hardware, and both shed jobs from 2009 to 2014. But average annual wages for hardware company workers ranked fourth highest, at almost $112,000. Salaries for advanced materials workers, averaging about $67,200, ranked above only those in post-secondary education, at about $64,000, and health services, at $67,400.