Innovation is a principal driver of U.S. economic growth. In 2021, the U.S. will spend nearly $600 billion on research and development — more than any other country in the world and more than 25% of the world’s total — helping the nation rank third on the Global Innovation Index. According to the results of the ranking, knowledge and technology outputs are America’s particular strengths. Some of the biggest innovations the U.S. has produced recently are the COVID-19 vaccines, and the government spent $12 billion in 2020 on their development and distribution through Operation Warp Speed.
But certain states deserve more credit than others for America’s dominance in the tech era. These states continue to grow innovation through investments in education, research and business creation, especially in highly specialized industries.
In order to recognize the nation’s biggest contributors, WalletHub compared the 50 states and the District of Columbia across 22 key indicators of innovation-friendliness. Our data set ranges from share of STEM professionals to R&D spending per capita to tech-company density. Read on for our findings, commentary from a panel of experts and a full description of our methodology.
Most Innovative States
WalletHub State Innovation Index
|2||District of Columbia||75.16||1||5|
Note: With the exception of “WalletHub State Innovation Index,” all of the columns in the table above depict the relative rank of that state, where a rank of 1 represents the best conditions for that metric category.
To help struggling local economies become more like successful tech-centric cities, we turned to a panel of experts for advice on stimulating innovation. Click on the experts’ profiles to read their bios and thoughts on the following key questions:
- How can state policymakers encourage and facilitate innovation?
- What can policymakers do to assist those who may lose their jobs or otherwise be displaced by innovation across industries?
- What skills best prepare individuals to be competitive in a changing economic landscape?
- In evaluating the best states for innovation, what are the top five indicators?
- Have investments in innovation slowed during the pandemic? If so, why is that?
Ask the Experts
In order to determine the most and least innovative states, WalletHub compared the 50 states and the District of Columbia across two key dimensions, “Human Capital” and “Innovation Environment.”
We evaluated those dimensions using 22 relevant metrics, which are listed below with their corresponding weights. Each metric was graded on a 100-point scale, with a score of 100 representing the most favorable conditions for innovation.
We then determined each state’s weighted average across all metrics to calculate its “State Innovation Index” and used the resulting scores to rank-order our sample.
Human Capital – Total Points: 50
- Share of STEM Professionals: Double Weight (~14.29 Points)
- Share of Science & Engineering Graduates: Full Weight (~7.14 Points)
Note: This metric measures the percentage of science- and engineering-degree holders aged 25 and older per total degree holders in the same age group.
- Projected STEM-Job Demand by 2028: Full Weight (~7.14 Points)
Note: This metric measures the projected number of STEM jobs by 2028 per total jobs.
- Scientific-Knowledge Output: Full Weight (~7.14 Points)
Note: This metric measures the number of peer-reviewed articles published per $1 Million of Academic S&E research and development.
- Eighth-Grade Math & Science Performance: Full Weight (~7.14 Points)
- AP Exam Participation: Full Weight (~7.14 Points)
Note: This metric measures the percentage of public high-school students in the graduating class who completed one or more Advanced-Placement exams at any point in high school.
Innovation Environment – Total Points: 50
- Share of Technology Companies: Double Weight (~5.56 Points)
Note: This metric measures the number of technology establishments per total establishments.
- R&D Spending per Capita: Double Weight (~5.56 Points)
Note: “R&D” refers to research and development.
- R&D Intensity: Full Weight (~2.78 Points)
Note: This metric measures the ratio of total research and development (R&D) performed to state gross domestic product (GDP).
- Invention Patents per Capita: Full Weight (~2.78 Points)
Note: Data include utility, design, plant, and reissue patents per million of state population.
- Tech GSP as a Percent of Total State Product: Full Weight (~2.78 Points)
- Net Migration: Full Weight (~2.78 Points)
Note: This metric measures the net number of people moving to or from a state per 1,000 residents.
- Entrepreneurial Activity: Full Weight (~2.38 Points)
Note: This metric is based on data from the Kauffman Index of Startup Activity.
- Number of Startups “Accelerated" per Total Number of Start-ups: Full Weight (~2.78 Points)
Note: An important, if often controversial, factor of growth in the US technology ecosystem is its numerous incubators and accelerators, which support early-stage startups with investment often in exchange for 6 to 10 percent equity stakes.
- Tax-Friendliness: Double Weight (~5.56 Points)
Note: This metric is based on data from the Tax Foundation’s State Business Tax Climate Index.
- Venture-Capital Funding per Capita: Full Weight (~2.78 Points)
- Average Annual Federal Small-Business Funding per GDP: Full Weight (~2.78 Points)
- Industry-Cluster Strength: Full Weight (~2.78 Points)
Note: This metric is based on data from the U.S. Cluster Mapping Project. “Industry-Cluster Strength” refers to the level of high employment specialization of a cluster, which is defined by the U.S. Cluster Mapping Project as a “regional concentration of related industries in a particular location.”
- Open Roads & Skies Friendly Laws: Half Weight (~1.39 Points)
- Average Internet Speed: Full Weight (~2.78 Points)
- Share of Households with Internet Access: Full Weight (~2.78 Points)
- Adoption of K–12 Computer Science Standards: Half Weight (~1.39 Points)
Note: This is a binary metric. A state is considered to have K–12 CS standards if the standards meet all three of the following criteria:
We choose this metric because we consider that most innovation in the future is going to be tech enabled.
- cover elementary, middle, and high school
- are publicly accessible on the state’s website
- include CS content at all levels (elementary, middle, and high school)
Sources: Data used to create this ranking were collected from U.S. Census Bureau, Bureau of Labor Statistics, National Science Foundation, National Center for Education Statistics, United States Patent and Trademark Office, Ewing Marion Kauffman Foundation, Gust.com, Tax Foundation, Consumer Technology Association, U.S. Cluster Mapping Project, Projections Central – State Occupational Projections, The Computing Technology Industry Association, BroadbandNow, Code.org Advocacy Coalition and National Venture Capital Association.