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Bloomberg: California and Massachusetts are the most innovative U.S. states

June 25, 2020

For the second consecutive year, California and Massachusetts have taken the first and second spots, respectively, in Bloomberg’s annual State Innovation Index.

According to a report by The Boston Globe, the ranking is based on six equally weighted metrics: research and development intensity, productivity, clusters of companies in technology, STEM jobs, residents with degrees in science and engineering, and patent activity.

California and Massachusetts’ success dates back more than 150 years ago with the creation of land-grant universities under the Morrill Act, according to New York University Stern School of Business economist Paul Romer.

The Morrill Land Grand Act of 1862 helped boost higher education in America by granting states public land. That land could be sold and the proceeds earned could be used to establish colleges. Massachusetts Institute of Technology was among the earliest recipients of the act, which served as the basis for many other institutions, including the University of California and Washington State University.

These schools “and their counterparts in every state created a new type of university—distinguished by a practical focus on problem solving that the world had never seen,” Romer, co-recipient of the 2018 Nobel Memorial Prize in Economic Sciences, said in a telephone interview with The Boston Globe.. “The success of California and Massachusetts is a sign of the high level of investment that those states have made in their university and research systems.”

California ranked number-one in the Bloomberg index for patent activity and second for both technology-company density and concentration of science- and engineering-degree holders. Its state university system and pre-eminence in research—along with private Stanford University—have been influential in building Silicon Valley headquarters for established tech companies and budding startups.

Last year, entrepreneurs there received more than $67 billion in venture-capital funding, according to data from PitchBook. That’s more than three times New York, the second-highest state for deal flow.

According to a joint report from PwC and CB Insights, the top five highest-valued private U.S. tech companies are all California-based: JUUL Labs, Stripe, Airbnb, SpaceX and Palantir Technologies.

In addition, among U.S. companies that went public last year, the five reaping the highest year-to-date returns also are in California: Zoom Video Communications, IT-service provider Fastly and life-science specialty businesses Vir Biotechnology, Livongo Health and IDEAYA Biosciences.

Second place Massachusetts took the crown for tech-company density. General Electric, Raytheon, Thermo Fisher Scientific and Biogen are headquartered in the Northeastern state. Prior to the pandemic, Boston-based Toast—a restaurant-management platform— was a venture-capital favorite. The startup raised $400 million at a $4.9 billion valuation in February.

Rounding out the top five are number three, Washington State; number four, Connecticut; and Oregon, which jumped two spots to number five.

Research contact: @BostonGlobe