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‘Innovation economy’ a Mass. boon

While much of the innovation economy in Massachusetts has been battered in the last year, the state has emerged as a ”supercluster” for medical, life sciences, and biotechnology companies, according to a survey being released today.

By Peter J. Howe, Boston Globe Staff

In its sixth annual survey of key industry sectors that drive the state’s economy, the Massachusetts Technology Collaborative, a quasi-public state agency, finds a few positive glimmers in a generally gloomy economic picture.

Massachusetts manufacturing exports fell 13.3 percent from 2000 to 2001, a steeper drop than any of six other leading high-tech states saw. The number of publicly traded ”fast growth” companies based in the state, meanwhile, fell to 86, the smallest number since 1995, as initial public offerings in start-ups virtually disappeared.

But the Bay State continues to far outpace high-tech rivals such as California, New York, and New Jersey in winning patents and collecting federal research funds. Research and development spending by publicly traded companies in the state jumped 25.1 percent between 2000 and 2001, to 21/2 times the level of 10 years ago.

Almost one of every 100 workers in Massachusetts has a doctorate in science or engineering, the highest percentage of any of the states surveyed and double the overall US percentage.

And, despite a 50 percent drop in total venture capital investment, Massachusetts increased its share of total US venture investment during 2001, with local companies drawing $1 of every $8 invested by venture capitalists.

”For the first time in the six-year history of our analysis, nearly all of the current economic indicators point to either unchanged or weakened performance in the Massachusetts economy,” said Mitchell Adams, executive director of the Westborough-based Tech Collaborative.

”However, we are much better prepared to weather this storm than we were in the early 1990s, and the fundamental strengths of the more diverse Massachusetts economy will help us get through this national cycle,” Adams said.

The study includes a large section focusing on the life sciences cluster in Greater Boston and comparing it to competing clusters in New York and northern New Jersey, Raleigh and Durham, N.C., and the three California life sciences hotbeds around Los Angeles, San Diego, and San Francisco-San Jose.

The Boston cluster accounted for 47,370 jobs, only about one-quarter the size of the Greater New York cluster and smaller than San Francisco and Los Angeles. But during 2001, Boston attracted the largest volume of National Institutes of Health research funding, $1.62 billion, and the area’s $835.4 million in 2001 venture investment in life-sciences start-ups ranked second only to San Francisco’s $1.36 billion.

Properly supported by state policy makers, the report says, the life sciences cluster could ”do for Massachusetts what defense did in the 1960s and 1970s, what minicomputers did in the 1980s, and what networking technologies and software did in the 1990s.”

”Massachusetts needs to seize this historic opportunity and ensure that it maintains the most hospitable atmosphere it can for life sciences industry growth in the state,” the report said. It called for financial assistance, tax breaks, and stepped-up efforts to find real estate for life sciences expansion outside of heavily developed East Cambridge and the Longwood Medical Area in Boston.

The report provides an annual overview of nine industry clusters that account for one of every four private-sector jobs in the state and nearly 40 percent of all wages. They include computers and communications hardware, defense contracting, financial services, health care technology, higher education, software, textiles and apparel, and other high-tech sectors grouped as ”innovation services” and diversified industrial support.

While only 7,400 net new jobs were created in Massachusetts between 2000 and 2001, more than three-quarters of them came from the nine sectors studied.

As in prior years, the report says two challenges for the state’s continued growth in these industries include high housing prices and slow population growth. The median single-family home in Massachusetts sold for $252,000 in 2001, the highest of the seven tech states after California.

The state’s population grew only 0.6 percent per year from 1991 to 2001, constraining the growth in the labor pool. About 20,000 people moved out of the state in 2001, more than double the 8,656 who left in 2000, but they were replaced by 20,000 immigrants from countries such as China, Haiti, India, and the Dominican Republic.

Patricia Flynn, an economics and management professor at Bentley College in Waltham who chairs the committee that oversees the study, said that ”it would be very valuable to get information on why 20,000 people left the state last year. We must address chronic problems such as high cost of housing and out-migration of skilled workers, to keep our competitive advantage and best position the state for the economic turnaround.”

Flynn added she is also concerned by numbers that show Massachusetts losing national market share in higher education, as states such as California, Colorado, and Minnesota experience much faster growth in private university enrollment.

Peter J. Howe can be reached at [email protected].

http://www.boston.com/dailyglobe2/336/business/_Innovation_economy_a_Mass_boon+.shtml

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