The pandemic caused every industry to suffer and adjust their style of work to make sure their aims could be achieved. The result of the Covid-19 outbreak was many businesses innovating and adapting to the situation so they could succeed and get an edge over their competitors. Innovation is a principal driver of US economic growth. In 2021, the US will spend nearly $600 billion on research and development — more than any other country in the world and more than 25% of the world’s total — helping the nation rank third on the Global Innovation Index.
According to the results of the ranking, knowledge and technology outputs are America’s particular strengths. Some of the most notable innovations the US has produced recently are the covid-19 vaccines, and the government spent $12 billion in 2020 on their development and distribution through Operation Warp Speed. But certain states deserve more credit than others for America’s dominance in the tech era. These states continue to grow innovation through investments in education, research and business creation, especially in highly specialised industries.
To determine the most and least innovative states, WalletHub compared the 50 states and the District of Columbia across two key dimensions, “Human Capital” and “Innovation Environment.” It evaluated those dimensions using 22 relevant metrics. Its data set ranges from share of STEM professionals to R&D spending per capita to tech-company density. Each metric was graded on a 100-point scale, with a score of 100 representing the most favourable conditions for innovation with “Human Capital” and “Innovation Environment” being worth 50 points each. WalletHub then determined each state’s weighted average across all metrics to calculate its “State Innovation Index” and used the resulting scores to rank-order its sample.
All categories considered, these states (and District) were found to be the most innovative, with their State Innovation Index in brackets:
- Massachusetts (78.58)
- District of Columbia (75.16)
- Washington (69.83)
- Maryland (69.80)
- Virginia (68.88)
- Colorado (66.43)
- California (65.54)
- Delaware (58.57)
- Utah (56.31)
- New Hampshire (56.22)
WalletHub found that:
- The District of Columbia has the highest share of STEM professionals, 9.80%, which is 2.9% times higher than in Mississippi, the lowest at 3.40%.
- Virginia has the highest share of technology companies, 7.97%, which is 3.1 times higher than in North Dakota, the lowest at 2.56%.
- New Mexico has the highest research and development (R&D) intensity, 7.00%, which is 15.9 times higher than in Louisiana, the lowest at 0.44%.
- Florida has the highest share of public high-school students taking advanced-placement (AP) exams, 51.91%, which is 3.9% times higher than in North Dakota, the lowest at 13.22%.
To view each individual aspect that graded the State Innovation Index and to see the rankings of all 50 states, click here.
When asked about how policymakers encourage and facilitate innovation, Sherif A. Ebrahim, CEO of Strategic Management Group Inc., said, “Policymakers have many levers at their disposal. While regulation seems to be high in conversations lately, the truth is that innovations are borne through market inefficiencies.
“Innovations are developed when there is an unmet need or demand, and smart individuals or companies find a new way to address this gap in the market. The sustainable and successful path to foster innovation is to offer incentives in the form of tax credits, stimulus, training, education and simply having a more business-friendly tax policy.”
Gregory Stoller, a senior lecturer at the Questrom School of Business, Boston University reflected on the effects of the pandemic on investments in innovation saying, “necessity has become the mother of invention. If people have lost their jobs or seen their businesses contract, it has spurred entrepreneurs to think differently and either shake up the status quo or create something new from scratch.”
Stoller went on to list his top five indicators for evaluating the states’ innovation:
- Supportive local and state laws especially around entity formation, tax breaks, and hiring.
- Subsidies to key industry sectors (or newly emerging ones).
- Preferential terms for office space, equipment leasing, or purchasing.
- Support for lending practices (although most banks are generally federally regulated).
- Housing subsidies to attract and retain employees.