Maine has dropped to 42nd place in a national report ranking states based on their technology and science capabilities.
The State Technology and Science Index, released by the Milken Institute on a biennial basis, seeks to track and evaluate each state’s tech and science capabilities and their success at converting those assets into companies and high-paying jobs. In essence, the index is meant to measure a state’s innovation pipeline.
Maine ranked 42nd in the country on the 2016 list, a drop of one spot from the state’s 41st rank in the 2014 index. (There’s a discrepancy between Maine’s 2016 rank in the report and on the website. One of the report’s authors informed me late on Friday that the report’s 42nd ranking is the correct one.) Maine’s best-ever showing in the rankings came in 2004 when the state ranked 33rd. The state has experienced a consistent slide in the rankings since then.
Catherine Renault, a consultant and former director of the Maine Office of Innovation, was not surprised by the state ranking 42nd.
“We’ve been in that neighborhod for as long as I’ve been looking at those things,” she said.
The reasons are two-fold, according to Renault, who also currently chairs the Maine Center for Entrepreneurial Development’s board. For one, the scale of investment Maine makes in its entrepreneurial ecosystem is so small that it’s not going to move the numbers that a report like this is looking at. I asked her if it’s just because Maine is investing too little in its entrepreneurial ecosystem, or whether we’re playing the long game and our investments just haven’t had time to bear fruit. The former, she responded.
“We’ve been in the long game for 20 years, so I’m not sure we can keep making that excuse,” she said.
The second reason is reports such as these look at technology and science using a Silicon Valley-centric model of what innovation looks like, Renault said.
“Our innovation economy is different than California’s, so we just don’t stack up in that way,” she said. For example, the Milken report doesn’t consider technological innovation in industries such as food production, aquaculture and natural resources when creating its rankings, she said.
While it might use a Silicon Valley model of innovation, California only ranked 4th on the list. Topping the list, as it has every year since the Milken Institute began producing the index in 2002, was Massachusetts. Rounding out the top five is Colorado (#2), Maryland (#3), and Washington (#5).
It’s true the index pits states like California and Massachusetts, which are strong across the board, with states like Maine that may only be strong in one or two areas, according to Minoli Ratnatunga, one of the report’s authors and associate director for research at the Milken Institute.
That may not feel like a useful comparison, she said, but it can be. After all, the point of using an index is to allow the comparison of things–in this case states—that may appear on the surface as apples and oranges.
“We think it can be a useful contribution to the policy discussions in states,” Ratnatunga said.
However, that doesn’t mean the comparison inherent in a report that ranks the states is meant to imply that all states should aspire to be the next Silicon Valley, she said. Instead, it’s meant to measure a state’s capacity for fostering innovation in the future. To that end, the index has widened its use of data points—such as the number of environmental engineers or agriculture and food technicians per 100,000 people—that don’t necessarily fit the Silicon Valley-centric idea of innovation.
“We do recognize that it isn’t just about how you do compared to Silicon Valley,” she said. “I think a lot of people waste their time not focusing on regional strengths and trying to reproduce something that’s very difficult to reproduce.”
Digging into the data
When you look at the individual data points that determine a state’s ranking, there are some areas where Maine did outperform other states.
The Milken researchers determined the state rankings by considering 107 individual indicators—data points such as federal R&D dollars per capita, venture capital investment, the number of new businesses being started, patent awards, the state’s number of Inc. 500 companies, density of software developers, etc. (A full list of the indicators can be found here.)
Those indicators are grouped into five equally weighted categories that each state is then benchmarked on. The five categories are Risk Capital and Entrepreneurial Infrastructure, Human Capital Investment, Research and Development Inputs, Technology and Science Workforce, and Technology Concentration and Dynamism.
Risk Capital and Entrepreneurial Infrastructure
A bright spot in the report—at least at first glance—is how Maine ranked in the Risk Capital and Entrepreneurial Infrastructure category, meant to measure “the environment for entrepreneurial success, including access to risk capital.” Maine jumped 10 spots in this category, moving from 41st place in 2014 to 31st in this most recent report.
This category consists of metrics such as the number of companies receiving VC investment, VC investment as percent of gross state product, number of business starts per 100,000 people, number of business incubators per 10,000 business establishments, etc.
Where Maine stood out among these indicators was “Total Venture Capital Investment Growth (2014-2015).” Nationally, Maine ranked 2nd in this indicator with 372% growth, according to the report, which used data from the MoneyTree Report, a quarterly tally of venture capital funding compiled by PricewaterhouseCoopers based on data from Thomson Reuters. Maine companies received roughly $18.7 million in venture capital funding in 2014, increasing to roughly $88.3 million in 2015.
(This is the metric that had an initial discrepancy, showing a 37,226.95% increase between 2013 and 2015. Ratnatunga informed me that the correct date range is 2014 to 2015 and that a website glitch caused the very large and very erroneous percentage increase.)
While impressive, the 372% increase does warrant a disclaimer. In a state with so few venture capital deals per quarter, just one or two large deals can skew the numbers. In this case, the 372% increase was a result of Vets First Choice closing a $52.3 million funding round during the third quarter of 2015.
Human Capital Investment
Maine ranked 34th in Human Capital Investment. Among the positive highlights in this category are Maine’s 5th place ranking in percentage of bachelor’s degrees granted in science and engineering, which is calculated by taking the number of bachelor degrees granted in a state for science- or engineering-related fields and dividing it by the total number of bachelor degrees granted in all disciplines.
On the other hand, a few indicators in this category highlight the challenges Maine faces in developing its talent pipeline.
The state ranked 49th in average math SAT scores, and dead last among states in the percent of graduate students in science, engineering and health; recent PhDs in science and engineering per 1,000 civilian workers; and science, engineering and health postdoctorates awarded per 100,000 people ages 25-34.
Research and Development Inputs
Maine ranked 38th in Research and Development Inputs. Highlights in this category include Maine’s 3rd place national ranking in the R&D expenditures on biomedical sciences, likely a result of R&D going on at The Jackson Laboratories in Bar Harbor, and an 8th place rank for Maine’s National Science Foundation proposal funding rate.
Technology and Science Workforce
Since the first report in 2002, the category where Maine has fallen the most is Technology and Science Workforce. It ranked 43rd this year, compared to 35th in 2002, a loss of eight spots. The Milken Institute’s webpage breaking down this category by indicator is still not displaying any data, but Ratnatunga provided me with some of the data points that measure various professions per 100,000 people. In the numerous categories that encompass some type of computer programmers, Maine ranked in the 30s and 40s. For example, Maine ranked 29th for the number of “network and computer systems administrators” (137.87 for every 100,000 people), 32nd for the number of “web developers” (34.7 per 100,000 people), 39th for the number of “computer programmers” (71.2 per 100,000), and 45th for the number of “software developers, systems software” (33.78 per 100,000).
Technology Concentration and Dynamism
Maine also ranked 43rd in the fifth category, Technology Concentration and Dynamism, which seeks to measure “the intensity and expansion of high-tech businesses.” That’s an improvement from a 47th ranking on 2014’s index.
While these type of national reports are worth considering and using to gain some big-picture perspective, they can also be volatile and misleading at times, Renault said. This report might offer a dim picture of Maine’s innovation pipeline, but she’s still confident the state is making progress, despite the sparse investment.
“You can feel the entrepreneurial energy building, but I’m not sure you can see it in the macro data,” she said.