Report: Massachusetts, Colorado, Maryland and California States With Best Tech Environments

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For the last couple decades, states have shown an interest in boosting the biotech industry. Massachusetts and California are dominant in biotech startups, and recently Texas expressed its hopes of being a great “third coast” for biotech clusters.

New Hampshire, not a state one automatically thinks of in terms of biotech—or any tech, for that matter—recently ranked ninth in the Milken Institute’s 2018 State Technology and Science Index, boosted by biotech and engineering industries adding manufacturing jobs in the state. New Hampshire also ranked fifth for venture capital funding for the biotech sector, including “a $294 million investment to create the Advanced Regenerative Manufacturing Institute.”

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Here’s a look at the report. It’s important to note that the report largely lumps tech and biotech into the same categories.

The report uses 107 individual indicators that it breaks into five broad composites: research and development inputs (RDI); risk capital and entrepreneurial infrastructure (RCI); human capital investment (HCI); technology and science workforce (TSW); and technology concentration and dynamism (TCD).

The top 5 states and their scores are: Massachusetts (86.25), Colorado (80.08), Maryland (79.24), California (78.08) and Utah (75.27). The top four held the same spots in 2016 as well, but Utah jumped to number five from number 8.

Interestingly, New Jersey, which has long been a center of big pharma manufacturing, ranked 21 with a score of 55.12, having dropped four points from 2016’s number 17 spot. And, even though Texas may dream of becoming dominant in the sector, it dropped this year to number 20 (55.60) from 19 in 2016.

Massachusetts has held the top spot since 2002. The state ranks first on three of the five subcategories: R&D input composite, risk capital and entrepreneurial infrastructure, and human capital investment. It ranked third for technology and science workforce composite and for the technology concentration and dynamism composite.

Colorado coming in at the number 2 spot is a little surprising. It ranked third on the RDI, rose to number 2 for RCI, and dropped two spots to third for HCI. The report notes that, in the RCI, there are 12 indicators, and Colorado ranked in the top 5 for 5 of them, with the highest ranking for “rate of new business starts.” The report notes, “There are 12 programs in Colorado that provide incentives specifically targeting startups or small business. Of the state’s incentive programs, two are focused on R&D targeting early-stage proof-of-concept efforts of advanced industries.”

In particular, Colorado has a high concentration of engineers, likely associated with the presence of the aerospace and defense industries.

Maryland is very strong in the tech industry, particularly computer and information sciences, helped along by its proximity to the U.S. government and housing over 30 federal agencies, including the U.S. Cyber Command, the National Institutes of Health (NIH), and the National Security Agency.

In terms of California, the report notes that the Bay Area is still the high-tech capital of the world—Silicon Valley—although Los Angeles and San Diego are also major high-tech hubs. “California’s knowledge economy is diverse,” the report says, “with 18 of the 19 high-tech sectors more concentrated in the state than in the national economy.”

Utah. Utah? The report notes the state has the fastest employment growth in the high-tech sector in the country, 4.3 percent. It ranks third in the net formation of high-tech companies. Much of it is related to a growing concentration of computer and information science experts.

Although the report doesn’t make an in-depth breakout between the physical sciences, life sciences, and information technology, it does take a deep dive into some areas that do not routinely appear in these types of industry reports. For example, the report offers a case study of non-compete contracts and employee mobility, which for researchers deep into the area of biotech startups, would make for very interesting reading.

The report notes, “The creation of industry clusters depends in part on the movement and ideas between private firms through informal channels. While networking and social ties cultivated through geographic proximity can create these opportunities, so can the flow of workers between employers.”

Both the Boston/Cambridge and San Francisco Bay Area biotech and life science clusters are noted for proximity to talent and career mobility—both being home to universities such as Harvard, MIT, Stanford, and UCLA-Berkeley, just to name a few. But people working in a dynamic industry—and in terms of biotech startups, the word “volatile” should probably be used—the ability to move to another company next door or down the street can be a real plus.

But the study also notes that state-by-state variations on non-compete agreements also appears to have an effect. “By preventing a departing worker from joining a rival firm, non-competes aim to preclude a range of actions, including client poaching, employee raiding, and the use of knowledge of products in development or corporate strategy to inform competitors.”

The report notes, for example, that, “While California has a reputation for regulating the market more than other states, it is unusual in not enforcing non-compete clauses. Section 16600 of the California Business and Professions Code is taken to prohibit non-compete agreements outside of sales roles. This facilitates the movement of workers between competing firms and supports California’s entrepreneurial culture.”

This difference between California and Massachusetts is cited for why Silicon Valley boomed, but the so-called “Route 128” in Massachusetts lost momentum. On the other hand, Massachusetts is significantly higher than California on the report’s RDI, with a score of 92.93 compared to California’s 77.47. “However,” the report notes, “the gap between the two steps is narrowed in the next step in the commercialization process, and in previous years California outperformed Massachusetts on the RCI.”

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