Raleigh, N.C.

North Carolina continues to make progress in its overall innovation capacity, rising one place in its national ranking, but the state still needs to encourage more private-sector research and development activities, according to the latest edition of a closely watched report on innovation in North Carolina.

The 2021 Tracking Innovation report, the eighth edition in a long-running series first published in 2000, was released today by the North Carolina Board of Science, Technology & Innovation.  The report rigorously evaluates the state’s standing against other states in the country on 39 measures of innovation capacity and outlines ways to advance the state’s economy by encouraging and harnessing innovation. New in this year’s edition are additional data breakouts that summarize key measures at the North Carolina county level.

“Innovation is a critical force multiplier that raises the standard of living of our residents by helping to create new industries, keep existing ones globally competitive, drive future economic growth and well-being, and advance national security,” said North Carolina Commerce Secretary Machelle Baker Sanders. “This report confirms why North Carolina is a magnet for innovative companies and talent, but it also indicates where further improvement is needed to foster even more innovation across the state.”

“We are pleased with the improvement North Carolina has made that is reflected in the report; this is real, meaningful and significant progress.  But we also recognize we can and must do better to bring the full potential of the innovation economy to North Carolina and its citizens,” said Michael Cunningham, Chair of the North Carolina Board of Science, Technology & Innovation.  “Our effort includes ongoing Board programs to increase participation from early stage, small businesses.  We help more North Carolinians gain access by increasing the geographic reach and classes of entrepreneurs and industries that participate, such as the new opportunities we see in the defense innovation industry.  It’s clear a thriving innovation ecosystem will help produce even more high-paying jobs in North Carolina.”  

North Carolina now ranks 20th in the nation for innovation overall, up from its 21st place ranking in 2019.  Earlier, the state placed 23rd in ranking in 2017 and 2015 and saw a 24th place ranking in 2013.

Of the 39 measures evaluated, research & development (R&D) is the state’s best performing area, outpacing the U.S. average on every metric. The report also found impressive improvement on commercialization of this R&D, especially in the creation and funding of science and technology-based startup companies.

In addition to the overall ranking score, North Carolina sees gains on several key innovation measures in the new report:

  • Academic R&D, long a strength of North Carolina, remains strong with the state currently ranked 5th in the country as a share of state gross domestic product.
  • Business R&D as a share of gross domestic product increased more than twice the rate of the U.S. average between 2000 and 2019, currently ranking 11th.  While good news, the state still ranks below the national average on this measure, so increasing R&D activity in industry offers a significant opportunity to increase North Carolina’s overall innovation capacity.
  • Federal non-dilutive Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) funding for North Carolina early-stage tech companies has increased at a rate much faster than the U.S. average to now exceed the national performance rate for the first time since at least 2000.
  • The number of university-based startup companies formed in North Carolina as a share of academic science and engineering R&D expenditures has seen an upward trend since 2000, with a level well above the U.S. average and currently ranking 8th nationally.
  • Since 2000, the percentage of business establishments classified as high science, engineering and technology (SET) increased by 70 percent in North Carolina, more than twice the U.S. rate. Employment in those establishments has grown by almost five times the national average, currently ranking the state 10th nationally.
  • From 2003 to 2019, the percentage of the state’s workforce in science and engineering occupations increased significantly, by 50 percent, faster than the rate of increase for the U.S. overall and ranking above the U.S. average for the first time since at least 2000.
  • Average educational attainment of the state’s adult population has increased at a rate 30 percent faster than the U.S. overall, driven in part by a higher-than-average influx of college-educated adults.

The Tracking Innovation report does identify additional areas for improvement, particularly the need to build the state’s innovation capacity beyond the state’s current hotbeds, which are centered around North Carolina’s major research universities or population centers, as well as to broaden the state’s strengths to a more diverse set of high-tech sectors. Measures related to technology transfer and commercialization, particularly venture capital investments, also lag behind national averages, although the state has somewhat improved its standing over time on those rankings.

The full text of the new report can be found online. More information about North Carolina’s Board of Science, Technology & Innovation, which can be found at nccommerce.com/about-us/boards-commissions/board-science-technology-innovation.

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