The Milken Institute has published a report ranking every state according to 75 metrics, including the amount of venture funding local companies and universities received last year, the number of residents with doctorates, and the number of businesses that started or failed there.
The top performers in the institute's study — an update to the original in 2002 — were Massachusetts, California, Colorado, Maryland and Virginia. Kentucky, Arkansas and Mississippi performed the worst, while Texas slid the most — from 14th to 23rd place.
Texas attracted throngs of Internet startups during the late 1990s dot-com bubble, lured by the state's low real estate prices and big universities. But the downturn forced venture capital firms to shutter offices in Dallas and Austin, and telecommunications companies closed or laid off thousands of workers.
Ross DeVol, director of regional economics at the Santa Monica, Calif.-based Milken Institute, said he wasn't surprised Massachusetts and California led the pack, given the concentration of tech workers and venture firms in the Boston area and Silicon Valley.
But he warned politicians and business leaders there not to rest easy: Colorado, Maryland and Virginia were nearly tied for third place, and Rhode Island, Vermont, New Mexico and Tennessee showed the largest improvements.
DeVol encouraged regional planners to boost biotechnology and life sciences funding to universities and offer tax incentives and other deals to woo tech firms. He dismissed concerns about offshore outsourcing, the migration of white-collar jobs to relatively low-paid workers in India, China and other developing countries.
"If we're going to maintain our overall economic position and high standards of living, we continually have to move up the value chain," DeVol said. "Unless we're making these R&D investments and creating high-paying jobs, we'll lose the outsourcing battle."