The Top 10 State Tech Leaders

Technology comes and goes as a favorite of stock market investors, but regions are competing all the time or they just fall behind. You may be surprised who has been gaining and losing in this marathon.

A place to look for winners is the award list for federal grants for Small Business Innovation Research (SBIR). These SBIR grants bring research dollars to a state and help build a stable of ponies for venture-capital bets. It's not the only measure of state technological leadership, but it's a good one, because the agencies that keep score have a huge stake in giving the awards to the right people.

The two leaders for FY 2006 were California, with 725 SBIR grants, and Massachusetts, with 466. They were also in first and second place in FY 2005. People may forget how different it was a century ago, when the NYC area was by far the country's leading center for technological innovation, making a reality of the promise of the ideas and inventions of people like Alfred Beach, Alexander Graham Bell, Thomas A. Edison, Herman Hollerith and Guglielmo Marconi (not to mention upstate innovation in cities like Buffalo and Rochester). But Stanford and MIT took the lead in innovation under the leadership of Fred Terman and Karl Compton, by yoking the academic lab to new-business formation.

The news for NY State gets worse. It has lost out not only to these two frontrunner states, but to five others that would have been considered highly implausible 50 years ago: Virginia (221 SBIR grants in FY 2006), Texas (176), Colorado (173), Maryland (169) and Ohio (167). The strength of Virginia and Maryland on this list could reflect the proximity of their Beltway components both to agency grant-makers and to the Army and Navy research labs. Texas has invested heavily in technology and -- who knows? -- may have benefited from having its former governor in the White House for nearly six years.

But why do Colorado and Ohio rank higher than the Empire State? I am grateful to my friend David Hochman for helping me understand why these states have left NY State in the dust. Colorado doesn't have especially aggressive tech programs at the state level but it has several large Commerce Department (NIST and NOAA) and DOE labs, and in addition, for a range of historic reasons a really vibrant (high-density) tech community around Boulder and Longmont. Ohio has not only the Air Force labs and a significant NASA Center but also an unusual state program called the "Third Frontier" Project, a.k.a. the Ohio Research Commercialization Grant Program. This program, which has no direct parallel in NY State, provides aggressive support for institutions attempting to obtain federal grants.

Describing success helps highlight why NY State has failed to keep pace in the number of SBIR awards in FYs 2006 (163 SBIR grants) or 2005, when it also ranked eighth. The main problem is that NY State is big, and it takes a strategic sense to concentrate resources to build competitive centers of excellence. NYC's Silicon Alley is densely packed and there are promising hardware-oriented techspots up the Hudson Valley from Poughkeepsie to Albany, but much of the state's support for SBIR activities has been diffused.

A recent ITAC report makes something out of the fact that in the total number of tech jobs, the NYC metro area ranks ahead even of Silicon Valley and Greater Boston. The sheer size of the NYC metro area puts it ahead. It is true that having a lot of tech jobs in the NYC area is important in creating critical mass for future innovation. But NY State has lacked (1) density of both entrepreneurs and technological leaders that it had 100 years ago to generate serendipity and (2) a winning strategy for using state resources to encourage this density. Since Governor Eliot Spitzer was not in charge in FYs 2005 and 2006, these numbers do not reflect on his administration.

Looking in the rear-view mirror, at the bottom end of the top 10 states, Michigan dropped off the list (Detroit being in disarray because of the decline of the U.S. auto industry) and was replaced by Washington (home of Microsoft, 91 grants). In ninth place is Pennsylvania with 133 grants. If NY State doesn't pay more attention to what has been happening, it could be overtaken by Pennsylvania and follow Michigan off the top-ten tech list completely.