TheTransatlanticSubnationalInnovationCompetitivenessIndex VIKTORLÁZÁR,IANCLAY,STEPHENEZELL,SHELBYLAUTER,AXELPLÜNNECKE,STEFANODAEMPOLI,LORENZOPRINCIPALI,MICHELEMASULLI, ANDAARONWUDRICK|NOVEMBER2022 Innovationecosystemsareincreasinglycomplexanddiverse,buttherearecommonmarkersofcorestrength.Inthisreport,theInformationTechnologyandInnovationFoundation,theGermanEconomicInstitute,theInstituteforCompetitiveness,andtheMacdonald-LaurierInstitutebenchmark96statesandprovincesacrossGermany,Italy,theUnitedStates,andCanada. KEYTAKEAWAYS Governmentsatalllevelsareintroducingstrategiestostimulatenationalandregionalinnovationcapacitytoimprovetheircompetitivepositionsintheraceforleadershipinthetechnology-andinnovation-drivenglobaleconomy. Basedon13indicatorsofstrengthinknowledge,globalization,andinnovationcapacity,thefivetop-rankedstatesareMassachusetts,California,Baden-Württemberg,Berlin,andWashington.ThebottomfiveareApulia,WestVirginia,Sicily,Calabria,andMississippi. GermanstatesgenerallyperformmuchbetterthanthoseoftheUnitedStates,Canada,andItaly;however,threeofthetopfiveareintheUnitedStates. Onknowledgeeconomyindicators,Americaoutperformspeersinhigher-educationattainment,andCanadaattractsthemostskilledimmigrantworkers,whileGermanyexhibitsstrengthinscientific,technical,andprofessionalemployment. Intheglobalizationcategory,Canada,followedbytheUnitedStates,leadsininwardforeigndirectinvestment(FDI),whileGermanyandItalyproducegreaterlevelsofhigh-techexportsrelativetoregionalgrossdomesticproduct(GDP). Inmeasurementsofinnovationcapacity,GermanyandtheUnitedStateshaveclearleadershipinresearchanddevelopment(R&D)intensityandventurecapital(VC),whileItalyperformswellinR&Dpersonnelandbusinesscreation. Governmentsshouldconsidertheseuniquestrengths,weaknesses,challenges,andopportunitiestocraftregion-specificpoliciestobolsterinnovationcompetitiveness. CONTENTS KeyTakeaways1 ExecutiveSummary3 Introduction4 TheTransatlanticSubnationalInnovationCompetitivenessIndex5 OverallScore6 KnowledgeEconomy13 HighlyEducatedPopulation15 SkilledImmigration16 Professional,Technical,andScientificEmployment18 ManufacturingLaborProductivity19 Globalization22 High-TechExports23 InwardFDI25 InnovationCapacity26 BroadbandAdoption28 R&DIntensity30 R&DPersonnel31 PatentApplications32 BusinessCreation34 CarbonEfficiency35 VentureCapital37 PolicyRecommendations38 Canada38 Germany40 Italy42 UnitedStates43 Conclusion44 Appendices45 AppendixA:CompositeandCategoryScoresMethodology45 AppendixB:IndicatorMethodologiesandWeights46 AppendixC:EstimationMethodologies47 AppendixD:FullDatasetandRankings49 Endnotes56 EXECUTIVESUMMARY Governments—atfederal,state,andevenregionalandcitylevels—arerealizingthattheymustdevelopinnovationstrategiestocompeteinanincreasinglyknowledge-,technology-,andinnovation-drivenglobaleconomy.Improvingbothnational-andstate-levelinnovationcompetitivenessentailsgovernmentsfosteringadvancedindustriesandincentivizingtheactivitiesthatleadtotechnologicalprogress,suchasR&Dandmakinginvestmentsinproductivity-enhancingtechnologies.Suchstrategiesarebecomingmorecommon,asexemplifiedbyGermany’s“Industry4.0”(2011)andChina’s“MadeinChina2025”(2015)aswellastheUnitedStates’passageoftheCHIPSandScienceActthisJuly(2022). Ascountriesdevelopeconomically,theyarelessabletorelyonsimple“catch-up”growthstrategiessuchastechnologyabsorptionfrommore-developedcountries.WhileITIFencouragesfurtherinvestmentsinadvancedcapitalequipment(e.g.,industrialrobotsformanufacturing),economiesatthetechnologicalfrontiermustalsobeabletodesignanddevelopnewtechnologies,products,andprocessestoboostproductivity,theultimatesourceoflong-termeconomicgrowth.Ratherthanbeing“MannafromHeaven”beyondthecontrolofeconomicactors,innovation-drivenproductivitygrowthissomethinggovernmentsandsocietycanandshouldactivelypromote. Thisreportbuildsonitspredecessor,theNorthAmericanSubnationalInnovationCompetitivenessIndex(NASICI),using13commonlyavailableindicatorstocomparetheinnovativecapacityandglobalcompetitivenessofthestatesandprovincesofCanada,Germany,Italy,andtheUnitedStates.Thereport’sgoalistoprovidepolicymakerswithacomparativeandevaluativetooltobetterunderstandwheretheirstatesrankamongpeersintermsofinnovationcapacityaswellashowtheycanimprove.1Asinthepredecessorofthisreport,Massachusettsranksfirstamongthe96statesevaluated,thankstoitsworld-leadingnetworkofuniversities,highlyeducatedpopulation,andconcentrationofbiotechnologyandotheradvanced-industryfirms.AlthoughMassachusettsholdsthetopspotandCaliforniacomesinsecond,GermanygenerallyoutperformstheUnitedStates.TheoverallscoreofthemedianGermanstateacrossallindicatorsis45.3,whilethatofthemedianU.S.stateis33.9.Germanyclaimsthesecond-best-performingstateinBaden-Württemberg,hometocompaniessuchasMercedes-BenzandSAP,aswellas4othersinthetop10.ThoughCanada’sbest-performingprovince(Ontario)scoreshigherthanItaly’s(Emilia-Romagna),andCanada’sworst-performingprovince(Saskatchewan)scoresbetterthanItaly’s(Calabria),themedianItalianstateactuallyoutperformsthemedianCanadianprovince.