America’s two most innovative states share similar paths to success. For a second consecutive year, California and Massachusetts took the first and second spots in Bloomberg’s annual State Innovation Index.
The rankings use six equally weighted metrics: research and development intensity, productivity, clusters of companies in technology, STEM jobs, residents with degrees in science and engineering, and patent activity.
The success of California and Massachusetts dates back more than 150 years, to the creation of land-grant universities under the Morrill Act, said New York University economist Paul Romer.
The 1862 act helped boost higher education by granting states public land they could sell, using the proceeds to establish colleges. The Massachusetts Institute of Technology was among the earliest beneficiaries of the act, which served as the basis for many other institutions, including the University of California and Washington State University.
Such schools ‘‘created a new type of university with a new practical focus on problem solving that the world had never seen,’’ said Romer, co-recipient of the 2018 Nobel Memorial Prize in Economic Sciences. ‘‘The success of California and Massachusetts is a sign of the high level of investment that those states have made in their university and research systems.’’
California ranked first in the Bloomberg index for patent activity and second for both tech-company density and the concentration of holders of science and engineering degree. Its state university system and preeminence in research — along with private Stanford University — have been influential in building Silicon Valley, headquarters for Google and Apple and the breeding ground for many startups.
Last year, entrepreneurs there received more than $67 billion in venture-capital funding, according to PitchBook, more than three times what New York, the second-highest state for deal flow, got.
A report from PwC and CB Insights says the top five highest-valued private US tech companies are all California-based: JUUL Labs, Stripe, Airbnb, Space X, and Palantir Technologies.
Among US companies that went public last year, the five reaping the highest year-to-date returns also are in California: Zoom Video Communications, IT-service provider Fastly, and life-science specialty businesses Vir Biotechnology, Livongo Health, and IDEAYA Biosciences.
Massachusetts took the crown for tech-company density. General Electric, Raytheon, Thermo Fisher Scientific, and Biogen are headquartered in the state. Prior to the pandemic, Toast, a Boston restaurant-management platform, raised $400 million at a $4.9 billion valuation.
Rounding out the top five are number three Washington, number four Connecticut, and number five Oregon. Colorado is the only state in the top 10 that isn’t on the West or East coasts.
This is the third straight year California, Massachusetts, and Washington have lead the index. Romer noted the work being done to deal with the pandemic.
For example, Cambridge-based Moderna Therapeutics developed a vaccine, currently in human clinical trials, in 63 days. The US Biomedical Advanced Research and Development Authority awarded Moderna $483 million to begin producing it if it’s approved by the FDA.
Economic research shows that technological innovation is accelerated during recessions, so states that already have a strong foundation of R&D and tech investment may be best suited to adapt to a post-COVID-19 world.
Alabama was the biggest mover, rising five spots to number 41. Its research and development spending has increased by 68 basis points, and Huntsville, near the Tennessee border, recently appeared in other rankings as having a high percentage of STEM workers and people with science and engineering degrees. Known as Rocket City, Huntsville is home to the Redstone Arsenal, which houses NASA’s Marshall Space Flight Center and the US Missile Defense Agency.
The bottom five states are Kentucky, Louisiana, Arkansas, West Virginia, and Mississippi.