Changing Landscape

Report on Innovation Economy Details Opportunities, Challenges

The state’s innovation economy is experiencing three new shifts that present both opportunities and challenges, including the growth of new sectors like robotics and ‘Big Data’ as major economic drivers, according to the annual Index of the Massachusetts Innovation Economy, recently released by the Innovation Institute at the Massachusetts Technology Collaborative (MassTech).

The index benchmarks the performance of Massachusetts in key innovation-economy sectors against nine leading technology states.

“Our innovation economy is both producing new opportunities and facing new challenges. The net outcome is that our innovation economy is growing and supporting our rebound from the economic downturn,” said Pamela Goldberg, CEO of the Massachusetts Technology Collaborative. “Most of our key innovation industries are adding jobs, and newer sectors like robotics and big data are growing at a remarkable pace. There is, however, work ahead to preserve our leadership status as a global hub for innovation.”

Almost 40% of the state’s employment is concentrated in the 11 key sectors of the innovation economy, and employment rose in 7 of the 11 key sectors in the first quarter of 2012. Meanwhile, average annual wages for all innovation industries increased from 2010 to 2011.

The three new shifts identified by the report are:

• New sectors, such as robotics and Big Data, that are growing and emerging as significant economic drivers. Employment in both areas has outpaced that of the entire Massachusetts economy as well as the 11 clusters identified as the innovation economy. Robotics generated substantial gains in employment between 2007 and 2010, and Big Data’s employment grew 21% in that same time period.

• A changing capital landscape. Massachusetts is also experiencing an increase in angel investment, which nearly doubled between 2009 and 2011. Many entrepreneurs are pursuing innovation with smaller capital requirements than in the past, due to factors such as virtualization of company functions. While Massachusetts retained its first-in-the-nation ranking for venture-capital investment per GDP, the dollar amount of venture-capital investment in the state is still below pre-recession levels.

• Competition. Massachusetts retains its position of strength as compared to other leading technology states, but this year’s index reveals that many other states are gaining ground. For example, while Massachusetts ranks second in industry funding of academic R&D per capita, three other leading technology states grew at a faster rate from 2005 to 2010. Analysis indicates that this trend in broad-based growth may be due to the democratization of innovation and entrepreneurship across the country and globe.

“Our innovation economy has become a global calling card for the Commonwealth, and the Patrick-Murray administration’s continued investments in innovation, technology, and life sciences will help keep Massachusetts at the head of the pack,” said Secretary of Housing and Economic Development Greg Bialecki. “The index shows why the administration has called for increasing investments in innovation, education, and infrastructure.”

Added Patricia Flynn, trustee professor of Economics and Management at Bentley University and chair of the Innovation Index Committee, “the index demonstrates the central role the innovation economy plays in jobs, incomes, and long-term economic growth in the state.” However, she noted, “this year’s index highlights why Massachusetts cannot afford to become complacent with its role as an innovation leader, and that now more than ever we need to invest in the state’s innovative people and assets.”

The new edition of the Innovation Index will feature a new, interactive web portal which provides the public with easier access to the information contained within the index, as well as additional charts and data. The web portal also allows for MassTech to update index data throughout the year.

“The index helps us assess where we are as a Commonwealth and informs the debate about where we are headed,” said Patrick Larkin, director of the Innovation Institute at MassTech. “This new index portal makes this data more accessible to all participants in the state’s innovation ecosystem.”

Other highlights from the Index include:

• As of the second quarter of 2012, Massachusetts had the fastest-growing computer and communications hardware sector employment out of the leading technology states, demonstrating the continued vitality of this key component of the state’s tech sector.

• Massachusetts had the highest number of patents per capita in the country for 2011, an increase of 5.4% from 2010.

• Massachusetts’ research institutions attract the largest share of the National Institutes of Health (NIH) extramural research funding per $1,000 GDP among leading technology states.

• Our total science and engineering talent increased 6% between 2000 and 2011, driven by a 33% increase among those who were born outside the U.S. and relocated to Massachusetts during the same period.

In partnership with the Patrick-Murray Administration, MassTech makes strategic investments that help create conditions for innovation to thrive. These include the Massachusetts Green High Performance Computing Center in Holyoke, which helps position Massachusetts as a global leader in Big Data; the Massachusetts Digital Gaming Institute at Becker College (MassDiGI), which supports the digital-gaming sector; a recent spotlight report on the Commonwealth’s manufacturing renaissance; and a new tech-sector internship program launching this spring to support talent retention.