U.S. States Outpace Most European and Latin American States in New Rankings of “Innovation Competitiveness”

WASHINGTON—The regional economies of U.S. states fare well in “innovation competitiveness” compared to states across Europe and Latin America, according to a pair of new rankings compiled by the Information Technology and Innovation Foundation (ITIF) in partnership with a consortium of other think tanks in the Global Trade and Innovation Policy Alliance (GTIPA).

ITIF and its GTIPA research partners analyzed three categories of economic indicators representing orientation toward knowledge work, adaptation to globalization, and capacity to innovate. In one study, the researchers benchmarked the 50 U.S. states alongside 71 European states in Austria, Germany, Hungary, Italy, Poland, and Sweden. In a second study, they benchmarked the 50 U.S. states alongside 132 states in Brazil, Chile, Colombia, Mexico, and Peru.

• Massachusetts and California posted the top overall scores in both rankings.
• In the Transatlantic ranking, U.S. states finished in 4 of the top 10 overall positions and 22 of the top 50 positions out of the 121 United States and European states studied. German states also showed strength, taking 3 of the top 10 overall rankings and 11 of the top 50 spots among the 121 states studied.
• In the Latin American ranking, U.S. states posted the top 47 overall scores among the 182 states studied, with Mexico City, Mexico and Sao Paulo, Brazil edging West Virginia for the 48th and 49th rankings, and Lima, Peru edging Mississippi, which finished 52nd out of the 182 states overall.

“Regional economies need robust innovation strategies to thrive in the fiercely competitive global marketplace,” said Stephen Ezell, vice president of global innovation policy at ITIF. “As is also true for national economies, sustained development and economic growth at the state level depends on the region’s ability to develop and transfer knowledge and technology, enhance productivity, and foster an adaptive, resilient place in global supply chains. U.S. states are comparatively strong in those regards—but with plenty of opportunities and challenges ahead of them.”

Both indices assess the United States’, European states’, and Latin American 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 Transatlantic study’s findings:

• U.S. states claim 4 of the top 10 overall positions (Massachusetts, 1st; California, 2nd; Washington, 4th; Maryland, 10th), but also 4 of the bottom 10 rankings (South Dakota, 114th; Arkansas, 115th; West Virginia, 119th; Mississippi, 121st).
• Germany boasts a trio of states in the top 10 (Baden-Württemberg, 3rd; Bavaria, 7th; Hesse, 9th), while its entire regional landscape ranks impressively in the top 80 out of 121.
• Three of the 7 Swedish regions rank in the top 10 (Greater Metropolitan Region, 5th; West Sweden, 6th; South Sweden, 8th) due to their strong knowledge and innovation capacity.
• While the best-performing Austrian region is not in the top 10 (Lower Austria and Vienna, ranking 14th), nearly all Austrian regions score above the median region.
• The best-performing Italian region scores better than those of Hungary or Poland, but the worst-performing Hungarian and Polish regions both score better than their Italian peers.

Among the Latin American study’s findings:

• The United States claims all the top 47 regions, with Massachusetts, California, and Washington ranking first, second, and third.
• Three states in the United States (Mississippi, Alaska, and West Virginia) rank below the best-performing Latin American regions.
• The five best-performing regions in Latin America are Mexico City, Mexico, at 48th; Sao Paulo, Brazil, at 49th; Lima, Peru, at 51st; Bogotá, Colombia at 54th; and Arequipa, Peru at 55th.
• Peruvian regions and many regions in Colombia, Brazil, and Mexico lag behind U.S. regions most visibly in broadband adoption. U.S. regions also excelled at venture capital and patent applications compared to their Latin peers.

Both reports provide 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 reports advise:

• Policymakers must open their regional innovation markets to both a continental and global scale to create internationally competitive ecosystems and accelerate development.
• Policymakers must boost local research and development (R&D), entrepreneurship, and patent applications for a resilient economy with cutting-edge development opportunities.
• Funding for initiatives advanced in the CHIPS and Science Act, such as the critically important regional innovation hubs program, should be fully advanced in Biden administration budget proposals and congressional budgeting reality.

“Policymakers should consider unique regional challenges and opportunities to craft region-specific approaches to bolster innovation competitiveness,” said Ezell. “By analyzing this index, policymakers can gain suggestions on the specific policies they should pursue, with special attention to underdeveloped or lagging regions.”

Read the Transatlantic Subnational Innovation Competitiveness Index 2.0.

Read the Latin American Subnational Innovation Competitiveness Index.