#121. The New Economy – The Top States, Conclusion

Posted on | The Agurban
The New Economy – The Top States, Conclusion

The past two Agurbans have focused on The New Economy, What It Is and the Formula for Success in The New Economy. This week we will conclude our series with which states rank the highest in New Economy scores according to The Information Technology and Innovation Foundation and the Ewing Marion Kauffman Foundation report entitled The 2007 State New Economy Index – Benchmarking Economic Transformation in the States.

Bur first a recap of the structure of The New Economy. The New Economy is a global, entrepreneurial and knowledge-based economy in which the keys to success lie in the extent to which knowledge, technology and innovation are embedded in products and services.

The state farthest along the path to the New Economy is Massachusetts, which boasts a concentration of software, hardware and biotech firms that are supported by world-class universities such as MIT and Harvard in the Route 128 region around Boston. New Jersey and Maryland came in second and third, respectively. New Jersey has a strong pharmaceutical industry, coupled with a high-tech agglomeration around Princeton and an advanced services sector in Northern New Jersey. Maryland scores high, in part, because of its high concentration of knowledge workers, many employed in the suburbs of the District of Columbia and in federal laboratory facilities or companies related to them. Washington state comes in at fourth in part on its strength in software (in no small part due to Microsoft), but also because of the entrepreneurial hotbed of activity that has developed in the Puget Sound region and the very strong use of digital technologies by all sectors.

Rounding out the top ten are California, Connecticut, Delaware, Virginia, Colorado and New York. These states tend to have a high concentration of managers, professionals, and college-educated residents working in “knowledge jobs” (jobs that require at least a two-year degree). Typically their manufacturers tend to be more geared toward global markets. All of these states also show above-average levels of entrepreneurship. Most are at the forefront of the IT and Internet revolution, with a large share of their institutions and residents embracing the digital economy. Many have high levels of domestic and foreign immigration of highly skilled knowledge workers seeking good employment opportunities and a good quality of life.

One specific indicator that used to measure the states’ progress on the path to The New Economy that caught our eye is Entrepreneurial Activity, which is calculated as a percentage of entrepreneurs within the population. The top five, all very rural, were Vermont (0.46%), Colorado (0.44%), Oklahoma (0.43%), Montana (0.41%) and Idaho (0.41%). The national average is 0.30%. Another indicator that caught our eye was the top five states that are online are also largely rural: Alaska (72%), New Hampshire (70%), Utah (70%), Minnesota (69%) and Wyoming (68%). The national average is 59%.

The IT revolution gives companies and individuals more geographical freedom, making it easier for businesses to relocate, or start up and grow in less densely populated states farther away from existing agglomerations of industry and commerce. Moreover, metropolitan areas in many of the top states suffer from increasing costs (largely due to high land and housing costs) and near gridlock on their roads. Both factors will make locating in less congested metros, especially those with a high quality of life, like our Agurbs.

The challenges facing states in a few years could well be different than the challenges today. But the keys to success in the New Economy now and into the future appear clear: supporting a knowledge infrastructure – world-class education and training; spurring innovation – indirectly through universities and directly by helping companies; and encouraging entrepreneurship. In the past decade, a new practice of economic development focused on these three building blocks has emerged. The challenge for states will be to adopt and deepen these practices and continue to generate New Economy policy innovations and drive the kinds of institutional changes needed to implement them. State with leaders who challenge their institutions and businesses and who follow through with bold new policies focused on innovation, learning, and constant adaptation – will be the ones that succeed and prosper.