Business Oregon just released an update to their Innovation Index. This is an ongoing report that was first published back in 2004. This is the 7th update to the Index with the last version published in 2022. The goal of this report is to capture the entrepreneurial and innovative activity within all states and the District of Columbia. Eighteen different metrics were tracked that measured a diversity of economic activity that is largely tied to innovative economies. A full list of the metrics can be found later in this blog. And you can find the full report here if you are interested. Let’s unpack some of the highlights of the updated innovation index.

Oregon ranked 7th in the 2024 Innovation Index among the 50 states and the District of Columbia. The top performing states in the Innovation Index were our neighbors to the north, Washington, followed by Colorado, New Hampshire, California, Maryland, and the District of Columbia. The overall ranking in the Innovation Index was determined by looking at how each state performed in these 18 metrics. However, performance for each metric was measured in two ways. The first was each states relative performance in each metric compared to the national average. The second was the rate of change for each metric over the past five years. These two measures attempted to ask 1) How good is your state at each of these metrics? And 2) Is your state getting better or worse at these metrics? 

Oregon’s strong performance in the overall Innovation Index was largely a reflection of the relative performance rank, which was tied with New Hampshire for 4th overall. Oregon’s five-year change rank for these metrics was a notable weakness ranked 35th overall. Oregon was not unique to be ranked high in the relative performance for these innovation metrics but rank poorly for improvement in these metrics over the past five years. California, Massachusetts, North Carolina, and Texas all had a similar trend of scoring well in these metrics overall but posting relatively slow improvement or even declines in some of these metrics over the past five years.

When looking how Oregon ranked among each of the 18 metrics in the index, a few broad trends emerge. First, although Oregon’s overall rank in the Innovation Index was 7th, the state was rarely a leader in any of these metrics. The handful of exceptions were university licenses, patents, university start-ups, and exports, where Oregon was among the nation’s best.

If Oregon was not exceptional in more than a handful of metrics, then how did it rank so highly overall? The answer is that Oregon was roughly in the top 1/3rd of states for 14 of the 18 metrics. A good way to frame this is that Oregon was rarely the leader, but consistently among the highest performing states for most measures of innovation. Not too dissimilar from the adage, “jack of all trades, master of none.”

Another observation when looking at how Oregon ranked among each of the 18 metrics was the five-year change rank was routinely lower than the relative performance rank. Oregon ranked in the bottom 1/3rd for 8 of the 17 metrics where five-year change was available. This is a notable threat where Oregon’s competitive advantage may be slipping. Even if Oregon’s performance is ranked highly in a metric, a low five-year change rank can reflect the state losing market share in that metric.

What do we do with this information? The goal of this Innovation Index is to help identify areas of strength that we don’t want to jeopardize, areas of weakness that we need to lift, and areas where our competitive advantage is eroding and thus necessitating greater investment. Strengths, weaknesses, and threats. We can isolate where each of these innovation metrics land on that spectrum by using the relative performance and change ranks. 

The most notable strengths with both high relative performance and change ranks included university-licensed technologies, patents, university start-ups, and exports. Other metrics classified as strengths but not ranked as high, include university-licensed technology income, STEM workforce, and average wage. We do higher education well and our university partners help maintain Oregon’s innovative ecosystem by educating highly skilled workers, developing new technologies, and spinning off new businesses. 

Only two of the metrics were classified as weaknesses for Oregon—small business awards and invention disclosures. Invention disclosures are misleading as a weakness as it is largely connected to patents where Oregon has a distinct competitive advantage. That leaves small business awards as Oregon’s most notable weakness. These small business awards are funding from the federal Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs. These awards go to research and development for business technologies that have the potential for commercialization. Pursing greater investment and attention for companies doing research and development in Oregon can help boost these awards and potentially lead to new products coming to market from Oregon-based firms.

The remaining metrics were classified as threats. Areas of competitive advantage, but that advantage is eroding. These metrics include high-tech employment, manufacturing GDP, business growth, knowledge workers, educational attainment, research and development investments, entrepreneurship, and venture capital. That is a long list of areas where Oregon’s competitive advantage is eroding, and the state is not keeping pace. Threats are the most urgent to address as they point to a clear problem. We are good at this, but we are losing influence, market share, or competitive advantage. It is easy to ignore these threats since they are areas of strong relative performance. However, it is critical to continue to invest time and resources into these metrics to ensure that they do not become a weakness.

Overall, Oregon is an innovative state with distinct well-rounded strengths. A jack of all trades. However, this iteration of the Innovation Index points to a significant number of areas where Oregon’s strengths are being threatened and not keeping pace with peer states. The results from this index should open our eyes to the need for greater investment in commercialization and continued efforts to improve the quality of the business environment for our industries to stay competitive.

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7/31/2024
by Damon Runberg, Business Oregon Economist
https://www.oregon.gov/biz/aboutus/blog/Pages/default.aspx