A widely watched Milken Institute survey on each state’s “innovation pipeline” finds that Washington’s R&D spending has fallen, and upstart Utah has taken its place as No. 5.
America’s technology powerhouses are locked in place. This is a truism that most of the nearly 240 localities that bid for Amazon HQ2 hoped to break.
They didn’t succeed and the cartel at the top of the tech pyramid remains largely in place. But competition never ceases, a lesson particularly important for Washington state.
This is a big take-away from the Milken Institute’s new State Technology and Science Index, a gold-standard report that comes out every two years.
In the new assessment, released today, Washington fell among the ranks of the top 10 states. Not far — one notch, to No. 6. But benchmarks matter and we should never take our luck and pluck for granted.
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The California-based economic think tank looks at many metrics to evaluate “a state’s innovation pipeline.” Being home to two of Big Tech’s top five isn’t enough to secure a dominant position, although it certainly doesn’t hurt Washington. Oregon, by contrast, ranks No. 10, up three spots from 2016.
The index is compiled by measuring research and development; risk capital and entrepreneurial infrastructure; human capital investment such as college degrees in proportion to population; science and technology workforce, especially the depth of “high-caliber talent,” and technology concentration and dynamism.
The top five states overall are Massachusetts, Colorado, Maryland, California and Utah.
The first four hold the same ranks as in the most recent previous report. Utah is a newcomer to the top five, jumping three spots from 2016.
At the bottom: Kentucky, Oklahoma, Arkansas, West Virginia and Mississippi.
Washington’s overall score actually increased from 2016, improving in four out of five categories — but not enough to fend off Utah’s ascendancy.
“The exception,” according to the report, is research and development, “where the state drops to tenth, a three-rank drop.”
The 18 R&D indicators measure federal, industry, academic and National Science Foundation spending. They also track federal awards aimed at small-business tech transfer and research.
On the other hand, in risk capital and entrepreneurial infrastructure (RCI), “Washington increases its rank by ten places, going from No. 15 to No. 5. The state’s improved performance on the RCI comes from a higher rate of business starts and more success attracting venture capital deals to fund the nanotech and clean tech sectors.”
We also rose from No. 5 to No. 2 in the tech and science workforce ranking, while moving up four notches to No. 4 in tech concentration.
Also noted: “Washington State has a competitive life science sector, reflected by its $15.87 in VC investment in biotech per $100,000 of gross state product (No. 6),” the report said. “In 2017, Frazier Healthcare Partners, which has headquarters in the state (Seattle), raised $419 million in life-science-focused investments.”
Rising high-tech funding also was called out, including the latest $300 million fund launched by Seattle-based Madrona Venture Group.
“However, the growth of ecommerce and cloud computing — major contributors to the size of the state’s high-tech sector — is largely driven by established firms like Microsoft and Amazon.”
That left us No. 1 in the share of private-sector wages and employment in the high-tech sector — nearly 20 percent of total state wages are in this category — but also dependent on two giants.
Utah lacks any Fortune 500 headquarters (Washington boasts 16). But to use boxing parlance, the Beehive State might be an up-and-coming “swarmer,” with strong attributes in R&D, startups, human capital and tech concentration.
(Would Washington be an “out-boxer” like Ali or a “slugger” like George Foreman? Sweet Science aficionados can decide.)
Milken reports that “Utah has seen the fastest employment growth in the high-tech sector in the nation, at 4.3 percent. Along with employment growth, Utah ranks third in the net formation of high-tech establishments.”
The state gets high marks for “building its knowledge economy (with) the University of Utah, which was the top school in the country for commercializing university R&D.” It also established a public-private partnership, Utah Pathways, to focus on workforce needs in aerospace, energy, life sciences and software.
Donald Trump won Utah in the 2016 election, making it an outlier in the blue states/tech players generality.
The one that ought to stick in our craw is Colorado, as much as I love Denver, one of my adopted hometowns. It’s less populous than Washington, lacks a Big Tech HQ and is known more for skiers than software nerds. In the top 10, yes, but No. 2?
But Colorado’s strengths include a very high rate of startups, robust angel and venture funding — the state operates two VC funds itself — and a high concentration of engineers. This includes aerospace engineers.
This is only one assessment, of course, even if an important one.
HQ2 winners New York and Virginia had overall rankings of 16 and 12 respectively. But many observers suspect the decision rested on location — close to America’s financial and political capitals — more than state dominance in tech and science.
• The labor-backed Economic Policy Institute released a study arguing that the T-Mobile/Sprint merger would lower wages for wireless retail workers and increase the combined entity’s market power. This comes on top of questions being raised about the ties between Sprint owner SoftBank and China-based Huawei Technologies, which U.S. officials suspect of espionage. No matter: A key federal security agency has reportedly greenlighted the merger.
• A prototype analysis of GDP for all U.S. counties is now available from the federal Bureau of Economic Analysis. For 2015, the most recent year available, King ranked first in Washington, followed by Snohomish and Pierce. Tiny Wahkiakum County in southwest Washington ranked last.