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Innovation drives . compete. Particularly as we look at the growth This is one of the most consistent findings in of both jobs and those macroeconomics, and it’s been true for occupations that require STEM-related skills, the centuries. America’s genius for innovation and pattern of growth is far more dispersed. This pattern entrepreneurial drive is well known—with our is best measured by tracking the trajectory of STEM openness and enthusiasm for practical innovation jobs, which cover technical skills but are deployed from the steam engine to the search engine—to across industrial sectors. be the primary reason for America’s economic preeminence. Economists have calculated that Indeed, despite the social media boom, California approximately 50% of U.S. annual GDP growth is ranked 6th in this year’s Enterprising States survey of attributed to increases in innovation. high-tech performance, behind five widely divergent states that span the entire country from Washington The states and that lead the transformation to Massachusetts. Much of the growth is from not to the knowledge- and technology-based only what we traditionally think of as “” but currently have enormous advantages. also a broader realm of industries extending from is likely to remain the leader for the foreseeable medicine, , and , to future, ensuring California’s tech status for the future. services. The ’s combination of a skilled workforce, available capital, infrastructure, and record of The future of America’s states—and their ability to successes makes it inconceivable the Valley will lose meet major economic, social, and environmental its primacy any time soon. challenges—rests largely on how they adapt to and take advantage of changes in technology. There was , public-private , and a time when state programs development across the world have focused only on implementing big-dollar tax attempted to emulate Silicon Valley for decades. incentives and recruiting huge employers from other Some of those efforts have paid off, as science, states or countries. In recent years, growing from technology, , and math (STEM) within by supporting expanding young employers employment has dispersed to many states across and assisting new startups has become a stronger, the nation. Although only a fraction of companies if not the primary, focus of job-creation efforts. around the world may consider themselves to be Many state-led strategies for business growth are in the technology business, the great majority now based on the assumption that innovation increasingly rely on technology to operate and and technology development drive growth and

1 competitiveness in a 21st-century global economy. “Technology-based economic development” is Technology is distinguished the approach employed by states to help create from other entrepreneurship types (such as social a business climate and to enable an environment entrepreneurship, small business , and where an economy based on innovation and self-employment) by collaborative experimentation technology can thrive. There is no single recipe and production of new products, assets, and their for successful tech-based development, yet there attributes, which can be intricately related to are critical ingredients. Based on the experience of advances in scientific and technological knowledge tech-based like Silicon Valley and North and the firm’s asset rights. “Innovation- Carolina’s Triangle (both now well over 50 driven enterprises,” which include a wider universe years long-standing) the following elements are the of entrepreneurial firms whose competitive essential, synergistic blocks for building advantage might be a process, , or business a tech-based economy, according to the State model, are also an important piece of the puzzle for Science and Technology Institute: states wanting to foster a more innovative economy. • a research base that generates new knowledge, Why do states target high-tech firms? Innovation- • mechanisms for transferring knowledge to the driven technology-intensive are viewed marketplace, favorably for their potential and disproportionate • sources of risk capital, impact on competitiveness, future economic growth, • a technically skilled workforce, and and prosperity because they often: • an entrepreneurial .

• create jobs that command above-average Each state has its own portfolio of and salaries; programs to build a more innovative, tech-based • pay a high percentage of their income to their economy; some states are focused on a small employees, rather than out-of-state capital number of initiatives targeted to a single stage equipment or out-of-state raw materials; of the business lifecycle or industry sector while • can be located almost anywhere because of the others have put in place a very comprehensive connective power of the and improved framework—an ecosystem approach—that aligns transportation systems, particularly air travel; policies, programs, and resources in a highly • create additional jobs that are not integrated system that encompasses the entire technology focused, both inside and outside research, development, demonstration, and the companies themselves; and serve markets process, that is, the five elements that are outside the state, thereby bringing new of a tech-based economy. wealth into the state.

2 State Initiatives in Innovation and Entrepreneurship that inhibit private sector investment and State-led and state-supported initiatives are often entrepreneurial activity implemented in cooperation with local or regional • State-operated or state-funded seed and venture development organizations and businesses, funds that focus on startups and expanding including the following: technology firms • Matching fund programs to leverage • Accelerator and incubator initiatives that focus or private sector funds, such as the on starting and growing technology firms federal government’s Small Business Innovation • Economic gardening initiatives that offer Research program specialized services to expanding existing firms • Crowdfunding laws that allow entrepreneurs to with strong growth potential raise modest amounts of capital from informed • Business ecosystem initiatives, with a regional investors or industry-specific (cluster) focus, which • Seed capital tax incentives for equity take a comprehensive approach to creating investments an environment that is highly conducive to • Coordination and support of angel fund technology startups and mature firms in a networks particular industry • programs for in-state, high-net-worth • Investments in research and in angel investors about equity investment advanced research and technology facilities or • Specialized training programs at technical specialized equipment colleges and for specific technology • Co-working spaces, collaborative lab spaces, or sectors and individual businesses maker space settings that encourage innovation • Expansion of STEM programs at the K–12 and through collaborative and development postsecondary levels to prepare students for and access to specialized equipment technology occupations and pursuits • Proof-of-concept funds to do early-stage • Workforce development initiatives that help evaluations of the commercial feasibility of a new technology companies connect with and train or improved , process, or service the talent they need to operate and compete, • Infrastructure investments that provide high- including the expansion of internship programs speed broadband service networking and for students who want to in technology collaboration initiatives that bring small careers businesses and entrepreneurs together with large companies and universities In the final analysis, state policies and programs • Mentoring programs that connect entrepreneurs that most effectively promote entrepreneurship, with experienced business professionals, innovation, technology development, and job including entrepreneur-in-residence programs creation are rooted in market reality. This means • International trade programs that help building on the existing core industries and businesses reach out to new global export technological advantages of a state while having the markets. foresight and wherewithal for pursuing opportunities • Incentive programs and tax abatements that in growing and emerging sectors. Building on and target specific technology sectors sustaining existing economic momentum remains • Fostering an enterprise-friendly business a key means of responding to the challenges of environment by cleaning up the DURT (delays, fostering growth in an increasingly competitive global uncertainty, , and taxes), modernizing economy and guaranteeing success in the future. government, and fixing deficiencies in the

3 4 Enterprising States is produced by Praxis Strategy The metrics are selected to capture the breadth of Group on behalf of the U.S. Chamber of each area as well as possible using the data Foundation. The report compares states using 35 that is readily available. Data for each measure metrics that measure overall economic performance, were collected for each state and normalized on and identifies the top ten states in five important a 1–100 scale. States were ranked according to policy areas for job growth and economic health. performance in each topic area, using a weighted The six policy categories are Economic Performance, index combining each set of metrics. In the High-Tech Performance, Transportation and Trade, Economic Performance category, metrics are Talent Pipeline, Innovation and Entrepreneurship, weighted to favor job growth and income measures and Business Climate. because employment and standard of living are the outcomes that define the rationale for state economic development efforts. Metrics in each of the other categories are equally weighted.

Harold Evans, with Gail Buckland and David Lefer, They Made America: From the Steam Engine to the Search Engine—Two Centuries of Innovators, Little Brown and Company, . 2004. Council on Competitiveness, Measuring Regional Innovation, 2005. Richard Gordon and Linda M. Kimball, “Industrial Structure and Changing Global Dynamics of Location in High Technol- ogy Industry,” Silicon Valley Research Group, Working Paper, No. 3, January 1986; http://www.wsj.com/articles/michael- malone-why-silicon-valley-will-continue-to-rule-the-tech-economy-1408747795 Greg Miller, “Pretenders to Silicon Valley’s Throne,” Los Angeles Times, March 8, 1998. Tony Bailetti, “Technology Entrepreneurship: Overview, Definition and Distinctive Aspects,” Technology Innovation Man- agement Review, February 2012. Bill Aulet and Fiona Murray, “A Tale of Two Entrepreneurs: Understanding Differences in the Types of Entrepreneurship in the Economy,” Ewing Marion Kauffman Foundation, May 2013.

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