What makes a state a champion of innovation? Is it the size of its tech workforce, the speed of its broadband connectivity, its willingness to protect and foster new business models? What is the essential mix of state-level policies and practices that make a state a leader in developing new businesses and fostering a more competitive U.S. economy?
Innovation is a driving force in job creation and economic growth. More, it offers each of us a path toward a more efficient, enjoyable and productive life. To identify the most innovation-friendly states, the Consumer Electronics Association (CEA) evaluated and graded the 50 U.S. states plus the District of Columbia on their 2014 pro-innovation policies and milestones, creating the first ever Innovation Scorecard.
We considered objective metrics – whether a state has right-to-work laws, its tax friendliness, the speed of its broadband connectivity – as well as more subjective metrics that get to the heart of a state’s innovation profile. What steps, for example, have state governments taken to expand their appeal to the tech community and foster forward-thinking start-ups, strong talent pools and venture funding?
After months of accounting and analysis, 10 states stand out as Innovation Champions – those top performers at the forefront of innovation and friendly business practices in America. The results may surprise you.
Think California would top the list, given its high concentration of tech start-ups? Think again. While California earned one of the highest overall grades for per capita venture capital investment in the U.S., its high corporate taxes and over-burdensome sustainability practices make it a tough state for tech firms to call home. As a result, the home state of Silicon Valley — as well as global innovators such as Google, Apple and Uber – earned the title of Innovation Adopter, only the third-highest tier among our four categories.
On the other hand, favorable employment laws, tax-friendly policies and strong business sustainability practices earned states such as Utah the top-tier Innovation Champion title. A competitive tax system lets businesses keep more of the money they make, drives job creation and boosts investment in research and development. Utah’s low-tax system has earned the state a new nickname: “Silicon Slopes.” Start-ups that call Utah home include Vivint, Qualtrics and Domo.
Here’s a closer look at some of the more surprising findings in our first-ever Scorecard.
Among the champions
The highest-achievers in our inaugural Scorecard – Delaware, Indiana, Michigan, North Carolina, South Dakota, Texas, Utah, Virginia, Massachusetts and the District of Columbia – are proven leaders in fostering legislative and regulatory climates conducive to innovation.
As a public accounting of best business practices for growth and innovation at the state level, the Scorecard ranks Virginia, Delaware and D.C. in the top tier for defending the sharing economy. In 2014, the D.C. City Council approved ridesharing services such as Uber and Lyft; Virginia Gov. Terry McAuliffe overturned the state’s Department of Motor Vehicle’s decision to halt operations of transportation networking companies; and Delaware Gov. Markell publicly supported sharing economy companies such as Airbnb. And D.C. is quickly becoming a start-up darling thanks to its young, highly-educated population and the presence of business incubators such as 1776 that connect start-ups with resources in the metropolitan Washington-area.
Texas’s model electronics-recycling laws build on the voluntary recycling initiatives of the consumer electronics industry, helping it earn the “Innovation Champion” moniker. Texas, which boasts the fastest job-growth rate in the country, also drew high marks in the start-up category: Austin and Dallas were named top cities for start-up funding.
Entrepreneurs looking for a move-in ready environment to launch their next business should consider North Carolina, a right-to-work state with a favorable tax system and more successful business start-ups per capita than most states. More, Catawba Valley Community College, in partnership with the Kauffman Foundation, is running a statewide initiative, Innovation Fund America, to promote tech start-ups.
Signs of modest innovation
At the bottom of the list are states that lack the foundation necessary to attract innovators, usually from a combination of poor policy choices, such as Mississippi, which has been aggressive toward tech companies such as Google, and poor tech infrastructure, such as Kentucky, which has marginal broadband connectivity.
Our advice to states that didn’t top the list? Follow the lead of these 10 Innovation Champions and actively support entrepreneurs and growing business, particularly tech companies and start-ups. The 2015 Scorecard is our first report; we will continue to monitor the state of innovation in America and update this scorecard as states change their policies, to regularly reflect whether they encourage innovation.
American growth and economic prosperity are most vibrant in states with policies and political climates that favor and unleash the entrepreneurial spirit and can-do attitude that are woven into the American DNA. Our hope is that states will use the Scorecard’s guideposts to enhance their pro-innovation policies.
Nothing less than our children’s and grandchildren’s futures depends upon our ability across all 50 states to innovate, solve problems, create jobs and move forward toward a better world.
Gary Shapiro is president and chief executive of the Consumer Electronics Association, the U.S. trade association representing more than 2,000 consumer electronics companies, and author of the New York Times best-selling books Ninja Innovation: The Ten Killer Strategies of the World’s Most Successful Businesses and The Comeback: How Innovation Will Restore the American Dream. His views are his own. Connect with him on Twitter: @GaryShapiro.