Informing State Economic Development Policy in the New Economy: A Theoretical Foundation and Empirical Examination of State Innovation in the United States

This study considers recent evidence of state innovation capacity in order to better understand where new economy–type economic development is likely to occur and, by extrapolation, where strategies geared toward such growth are more likely to succeed. The research focuses on data from the National Science Foundation’s State Science and Engineering Profiles, supplemented by data from other sources. Factor analysis was performed on this data set to observe underlying common factors that explain the variability of the original data in fewer dimensions. The resulting factor scores—human capacity and financial capacity—were used to classify states into four categories of new economy resource density: lagging, low, developing, and progressive. The scores for the two resulting factors were then used as independent variables in subsequent regression analyses, demonstrating positive correlations among innovation capacity resources, actual innovations, and overall state economic performance.