KANSAS CITY, Mo., Feb. 27, 2007 – Massachusetts, New Jersey, Maryland, Washington and California top the list of states that are leading an economic transformation in adapting to an increasingly global-, knowledge- and innovation-based New Economy, according to The 2007 State New Economy Index, released today by the Ewing Marion Kauffman Foundation and the Information Technology and Innovation Foundation (ITIF) to mark EntrepreneurshipWeek USA.
The five states that have lagged the most in making the transition are, in reverse order, West Virginia, Mississippi, South Dakota, Arkansas and Alabama, according to the Index.
Regionally, the New Economy has taken hold most strongly in the Northeast, Mid-Atlantic, Mountain West and Pacific regions; 14 of the top 20 states are in these four regions. In contrast, 15 of the 20 lowest-ranking states are in the Midwest, Great Plains and Southern regions.
The Index is a state-by-state analysis of how state economies are transforming from an old industrial economic model based on “smokestack chasing” in which economic development success is measured by the number of big company relocations rather than in the creation and retention of high value-added, high-wage jobs.
The Index, which expands on two earlier reports issued in 1999 and 2002, uses 26 indicators from a variety of sources to rank each state on the extent to which their economies are structured and operate to effectively compete regionally as well as globally. It examines the degree to which state economies are knowledge-based, globalized, entrepreneurial, information technology-driven and innovation-based.
“The most distinctive feature of the New Economy is its relentless levels of structural economic change,” said Carl Schramm, president and CEO of the Ewing Marion Kauffman Foundation. “The magnitude, speed and reach of these changes have profoundly reshaped state economies over the past decade and will continue to drive change over the next. States that have adapted to these new realities will be in the best position to see strong growth in the standard of living for their residents.”
Perhaps the most important driver of the New Economy, according to the Index, is the information technology revolution that is transforming virtually all industries and driving increased productivity. The good news is that various industrial sectors such as health care, education, transportation, government, real estate and others are at the early stages of digital transformation, and as they transform, productivity promises to continue to grow.
On the other hand, technology has ushered in a new global competitive challenge to state economies. It has made it possible for more work to be done at a distance, prompting many developing nations to establish the infrastructure, skilled workforce and business climate to be attractive locations for this work, and at a much lower cost. For example, in the past t