US Trails Germany in States’ “Innovation Competitiveness,” Despite Mass., Calif. Ranking 1, 2 in New Transatlantic Index

November 14, 2022

WASHINGTON—Competitiveness in the global economy hinges on innovation, and on that score the median German state is outpacing the median U.S. state, according to a new ranking produced by the Information Technology and Innovation Foundation (ITIF) in collaboration with the German Economic Institute (IW), the Institute for Competitiveness (I-Com) in Italy, and the Macdonald-Laurier Institute (MLI) in Canada.

The new “Transatlantic Subnational Innovation Competitiveness Index” examines the innovation ecosystems of 96 states, provinces, and subnational regions across the United States, Canada, Germany, and Italy using 13 indicators of competitive strength in 3 categories—the knowledge economy, globalization, and innovation capacity.

Massachusetts and California stand first and second in the ranking, and Washington State is in the top five, but the median German state outperforms the median U.S. state. Meanwhile, Italy’s median region edges Canada’s median province.

“Governments at all levels are waking up to the fact nations, states, and municipalities need innovation strategies to compete in a global economy that is increasingly driven by knowledge, technology, and innovation,” said Stephen Ezell, vice president of global innovation policy at ITIF, who co-authored the report. “For any developed economy, competitiveness hinges on having a vibrant innovation ecosystem, because innovation drives productivity, growth, and capital investments.”

The index assesses North American and European states’ relative strength on 13 economic indicators divided into three categories:

1. Knowledge economy, with indicators encompassing immigration of knowledge workers; workforce education; professional, scientific, and technical employment; and manufacturing gross value added per worker.

2. Globalization, including inward foreign direct investment and high-tech exports.

3. Innovation capacity, with indicators covering broadband Internet adoption, R&D expenditures, R&D personnel, patents, business creation, decarbonization, and venture capital investment.

Among the study’s findings:

▪ Overall, out of the 96 states represented in the four-country ranking, the top five are: Massachusetts, California, Baden-Württemberg, Berlin, and Washington. The bottom five overall are: Apulia, West Virginia, Sicily, Calabria, and Mississippi.

▪ In the knowledge economy category, the top five states are: Berlin, Hamburg, Massachusetts, New Jersey, and Maryland. The bottom five are: Newfoundland and Labrador, Apulia, Mississippi, Calabria, and Sicily.

▪ U.S. states outperform their peers in higher-education attainment, with Massachusetts, Colorado, and New Jersey holding the top three rankings, and in manufacturing labor productivity, where Louisiana, Wyoming, and California are ranked first, second, and third. Canada attracts the most skilled immigrant workers, on average; and Germany exhibits strength in scientific, technical, and professional employment.

▪ In the globalization category, the top five states are: Lombardy, Bavaria, Ontario, Baden-Württemberg, and Hesse. The bottom five are: Saskatchewan, Molise, Montana, Hawaii, Calabria.

▪ Canadian provinces lead in inward foreign direct investment, followed by U.S. states, while German and Italian states produce greater levels of high-tech exports relative to the size of their regional economies.

▪ In the innovation capacity category, the top five states are: Baden-Württemberg, Massachusetts, Washington, California, and Berlin. The bottom five are: South Dakota, Mississippi, Alaska, Louisiana, and West Virginia.

▪ Germany and the United States have clear leadership in research and development (R&D) intensity—with New Mexico, Washington, Massachusetts, and California holding the top four rankings—and in venture capital, where California and Massachusetts are ranked one and two.

The report provides a series of policy recommendations to bolster the innovation competitiveness of enterprises and industries in regional economies. Among the recommendations for federal and state policymakers in the United States, the report advises:

▪ Promote industry-university partnerships that support both R&D and STEM education.

▪ Focus on accelerating international collaborations.

▪ Implement a free trade agreement with the United Kingdom.

▪ Advance high-standard digital trade rules that enable global data flows and limit barriers to cross-border data flows, such as data localization policies.

▪ Ensure the U.S.-Canada-Mexico free trade agreement partners fully adhere to the new stronger digital trade rules.

▪ Fully appropriate the R&D funding elements of the CHIPS and Science Act to follow through with a landmark investment in U.S. innovation and competitiveness.

▪ Increase R&D tax credit generosity.

▪ Use federal investment to build up economic attractiveness for underperforming states.

“Policymakers should take account of unique regional challenges and opportunities to craft region-specific approaches to bolster innovation competitiveness,” said Ezell. “But there are no shortcuts. All of the foundational areas this index examines are important.”

Table 1: The Transatlantic Subnational Innovation Competitiveness Index: Rankings and Scores

Overall Rank	Region	Country	Overall Score	Knowledge		Globalization		Capacity
Overall Rank	Region	Country	Overall Score	Rank	Score	Rank	Score	Rank	Score
1	Massachusetts	USA	95.1	3	87.4	12	70.7	2	93.2
2	California	USA	86.9	6	77.4	42	43.0	4	91.6
3	Baden-Württemberg	DEU	84.9	19	54.4	4	83.1	1	95.2
4	Berlin	DEU	80.3	1	95.1	46	40.5	5	78.2
5	Washington	USA	80.1	14	61.6	68	29.9	3	92.6
6	Hamburg	DEU	73.5	2	93.5	13	69.4	10	62.2
7	Bavaria	DEU	71.6	20	53.6	2	90.4	6	74.6
8	Hesse	DEU	66.1	15	61.6	5	81.2	8	63.6
9	Maryland	USA	62.8	5	77.4	64	31.3	12	59.6
10	Bremen	DEU	58.9	10	64.5	47	40.2	11	60.5
11	New Jersey	USA	57.9	4	82.3	80	23.5	19	50.5
12	Oregon	USA	57.9	30	46.1	33	49.9	7	65.4
13	Connecticut	USA	54.7	9	65.4	24	56.5	22	47.6
14	Colorado	USA	53.9	12	62.3	21	60.8	20	49.3
15	Delaware	USA	53.0	21	52.4	36	48.3	15	56.4
16	Ontario	CAN	51.9	8	65.4	3	86.5	35	40.3
17	Emilia-Romagna	ITA	50.2	48	35.1	9	74.2	14	56.5
18	New Hampshire	USA	49.9	39	40.5	18	66.3	16	54.1
19	Michigan	USA	49.0	37	40.9	59	34.5	13	57.4
20	North Rhine-Westphalia	DEU	48.6	27	47.1	19	63.5	21	49.2
21	Minnesota	USA	48.6	23	50.9	40	43.9	18	51.1
22	Utah	USA	48.1	31	46.0	38	47.1	17	51.9
23	New York	USA	47.7	16	60.1	35	48.6	31	41.2
24	New Mexico	USA	47.2	51	33.6	70	27.4	9	63.1
25	Virginia	USA	46.1	7	75.2	32	50.1	53	32.4
26	Illinois	USA	45.7	18	58.3	22	58.4	37	40.0
27	Texas	USA	45.6	13	62.1	15	68.3	50	33.3
28	Lombardy	ITA	44.9	35	41.8	1	94.8	33	40.8
29	Lower Saxony	DEU	44.6	33	42.7	39	44.9	23	47.1
30	British Columbia	CAN	44.3	17	58.8	17	66.7	45	36.1
31	Rhineland-Palatinate	DEU	43.7	41	40.0	31	50.4	24	46.6
32	Saxony	DEU	43.3	40	40.4	23	56.6	28	43.6
33	Saarland	DEU	42.1	46	36.0	14	69.4	26	44.2
34	Quebec	CAN	40.6	28	46.8	28	52.8	36	40.2
35	Piedmont	ITA	40.0	63	29.4	6	78.2	27	43.7
36	Lazio	ITA	39.9	29	46.2	44	42.9	30	41.6
37	North Carolina	USA	39.6	24	50.7	82	20.8	40	39.2
38	Pennsylvania	USA	39.1	26	47.2	52	37.9	42	37.6
39	Friuli-Venezia Giulia	ITA	38.2	69	27.2	11	71.1	29	43.2
40	Arizona	USA	37.5	38	40.8	48	39.8	39	39.4
41	Thuringia	DEU	37.1	49	34.2	30	50.8	41	38.7
42	Idaho	USA	36.1	74	24.6	54	36.6	25	46.5
43	Missouri	USA	35.6	47	35.7	8	74.5	52	32.6
44	Wisconsin	USA	35.5	61	29.4	25	56.3	38	39.8
45	Rhode Island	USA	34.9	43	38.0	37	48.1	46	35.6
46	Alberta	CAN	34.6	11	64.4	51	38.6	64	24.1
47	Veneto	ITA	34.4	73	24.7	20	62.1	34	40.5
48	Schleswig-Holstein	DEU	33.4	50	34.2	43	42.9	47	35.0
49	Ohio	USA	32.8	45	37.6	55	36.6	48	33.9
50	Tuscany	ITA	32.2	71	26.7	49	39.7	32	40.8
51	Indiana	USA	30.0	55	32.0	75	24.9	44	36.6
52	Liguria	ITA	29.8	59	30.3	34	48.9	49	33.6
53	Mecklenburg-Vorpommern	DEU	29.8	56	31.7	62	32.5	56	30.4
54	Kansas	USA	29.1	36	41.4	65	31.1	61	27.5
55	Georgia	USA	28.3	34	42.3	79	23.7	59	28.0
56	Florida	USA	27.3	32	43.3	81	23.0	63	24.3
57	Marche	ITA	26.2	85	19.2	63	32.2	43	37.2
58	Abruzzo	ITA	25.6	77	23.6	27	53.6	58	29.7
59	Maine	USA	25.3	64	29.1	7	75.5	84	19.6
60	Vermont	USA	25.1	58	30.5	16	67.5	76	21.3
61	Wyoming	USA	25.0	25	48.7	86	16.0	83	19.8
62	Brandenburg	DEU	24.7	42	39.4	85	16.0	60	27.7
63	Trentino	ITA	24.3	53	32.4	57	35.3	51	32.8
64	Umbria	ITA	23.8	76	23.7	66	30.6	54	31.6
65	Saxony-Anhalt	DEU	23.1	60	29.8	77	24.9	79	20.2
66	Iowa	USA	22.6	68	27.3	83	19.9	57	30.4
67	Tennessee	USA	22.2	52	32.9	72	27.1	70	22.6
68	Nebraska	USA	22.0	44	38.0	74	25.5	80	20.1
69	Kentucky	USA	21.5	78	23.3	10	71.9	85	18.2
70	Nevada	USA	21.1	70	27.2	67	30.6	69	22.7
71	Prince Edward Island	CAN	21.1	81	21.5	26	56.3	67	23.0
72	Manitoba	CAN	21.0	57	31.0	53	37.3	72	21.8
73	Nova Scotia	CAN	21.0	65	28.9	50	38.9	68	22.7
74	North Dakota	USA	18.8	72	26.1	69	29.6	75	21.6
75	South Carolina	USA	18.2	67	28.1	78	23.9	74	21.7
76	Campania	ITA	17.5	90	12.5	84	17.8	55	31.2
77	Louisiana	USA	17.3	22	52.2	87	15.6	95	8.6
78	Alabama	USA	16.3	75	24.0	91	13.3	65	23.4
79	Aosta Valley	ITA	15.4	84	19.2	76	24.9	71	22.4
80	Montana	USA	15.2	54	32.0	94	9.4	87	17.2
81	Basilicata	ITA	15.1	87	16.3	41	43.2	78	20.3
82	Oklahoma	USA	14.9	79	23.0	58	35.1	86	17.5
83	New Brunswick	CAN	14.4	80	22.9	60	32.8	88	17.0
84	Newfoundland and Labrador	CAN	13.7	92	12.1	61	32.5	73	21.8
85	Hawaii	USA	13.4	66	28.3	95	8.9	90	15.0
86	Molise	ITA	13.2	91	12.4	93	13.0	62	25.8
87	Saskatchewan	CAN	12.8	62	29.4	92	13.1	89	15.2
88	Sardinia	ITA	12.2	89	12.8	90	14.6	66	23.1
89	South Dakota	USA	11.9	88	16.1	45	40.8	92	13.4
90	Alaska	USA	11.6	82	20.4	73	26.5	94	11.3
91	Arkansas	USA	9.0	86	17.3	71	27.2	91	14.2
92	Apulia	ITA	8.6	93	7.7	88	14.9	77	20.8
93	West Virginia	USA	8.2	83	19.3	29	51.5	96	4.8
94	Sicily	ITA	7.0	96	4.9	89	14.8	81	20.0
95	Calabria	ITA	5.8	95	5.2	96	5.2	82	20.0
96	Mississippi	USA	4.9	94	6.2	56	36.0	93	11.4
30	Median German state		44.1	37	41.5	31	50.6	24	46.9
47	Median U.S. state		33.8	41	39.3	56	36.3	51	32.9
61	Median Italian region		24.9	77	23.7	53	37.5	53	32.2
72	Median Canadian province		21.1	60	30.2	51	38.8	68	22.8
28	Average German state		50.4	32	49.9	34	53.5	28	51.1
47	Average U.S. state		35.6	44	41.9	53	39.3	51	36.1
60	Average Canadian province		27.5	50	38.1	44	45.6	64	26.2
62	Average Italian region		25.2	73	22.6	52	40.6	51	32.8

▪ Read the report.

▪ Explore a data visualization.

▪ Download the data. (XLSX)

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The Information Technology and Innovation Foundation (ITIF) is an independent, nonprofit, nonpartisan research and educational institute focusing on the intersection of technological innovation and public policy. Recognized by its peers in the think tank community as the global center of excellence for science and technology policy, ITIF’s mission is to formulate and promote policy solutions that accelerate innovation and boost productivity to spur growth, opportunity, and progress.