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Index00   of the     Massachusetts     Innovation     Economy
The Index of the Massachusetts Innovation Economy,published annually since 1997, is the premier fact-basedbenchmark for me...
Message from the GovernorDear Friends:It is my pleasure to introduce the 2009 Index of the MassachusettsInnovation Economy...
The Massachusetts Technology Collaborative    The Massachusetts Technology Collaborative is a public economic    developme...
Table of Contents Message from the Governor .................................................................................
Introduction and Highlights        IntroductionThe Index of the Massachusetts Innovation Economy is                       ...
New business formation is expected to be a critical                                              Massachusetts’ score in a...
Massachusetts Performance at a Glance                                                                                     ...
US AVERAGE                                                                          1/ 10x       1x       1 0x   Business ...
Massachusetts in the    Global Economy    Introduction to the special analysis                   ast year, the Index was  ...
to host commentaries from individuals        All of them, without exception, highlight               who bring a truly glo...
Why "Massachusetts in     the Global Economy"?     Carlos Martínez-Vela, Director of Innovation Policy, MTCs John Adams In...
in to our Innovation Economy, and to build    strategically attract to the Commonwealth,               bridges of mutual u...
Investing in Innovation     Michael Greeley, General Partner, Flybridge Capital Partners                    assachusetts i...
Future industry commentators will look          affect our own start-up environment.               back on 2009 as the yea...
Connecting the Dots     Pascal Marmier, Director/Consul, swissnex Boston, Consulate of Switzerland                   or ne...
One of our key annual programs—a                  Measuring success               two-week “boot camp” that brings Swiss  ...
Bringing Massachusetts     Innovation to Patients Worldwide     David Meeker, Executive Vice President and Chief Operating...
to favorable business environments, lower       Genzyme now has about 4,700 employees               costs, strong governme...
Designed in Massachusetts     Harry West, CEO, Continuum                   ne of Massachusetts best-           neighborhoo...
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  1. 1. Index00 of the Massachusetts Innovation Economy
  2. 2. The Index of the Massachusetts Innovation Economy,published annually since 1997, is the premier fact-basedbenchmark for measuring the performance of theMassachusetts knowledge economy.
  3. 3. Message from the GovernorDear Friends:It is my pleasure to introduce the 2009 Index of the MassachusettsInnovation Economy. The Index, published annually by MTC’s John AdamsInnovation Institute, is the Commonwealth’s instrument to benchmark ourresearch and innovation enterprise against other leading technology statesand nations and better understand its impact on the state’s economy.The Index highlights key trends and themes affecting the state’s InnovationEconomy and helps inform fact-based decision-making among Massachusetts’policymakers, industry practitioners, and academic leaders. This year, as the global recessioncontinues to present challenges to people in communities throughout the state, we have becomemore aware than ever of how the state’s research and innovation enterprise is a source of renewaland resiliency in times of crisis.This year the Index offers further evidence of our pride in being a world leader in research andinnovation. At the same time, it highlights areas of concern. The Index makes it clear, for example,that many high school students in the state lack an interest in pursuing science, technology,engineering and math (STEM) careers. In response to this challenge, last October we establishedthe STEM Education Advisory Council to help coordinate initiatives, resources and goals amongSTEM advocates from the public and private sectors.Like every year, the Index serves as a reminder of the need to engage in creative efforts toexpand the opportunities of the Innovation Economy to more communities and citizens acrossthe state. A promising initiative in this regard is the historic collaboration between leadingresearch universities, corporations, and state government to establish a Green High PerformanceComputing Center in Holyoke. This initiative has the potential to catalyze a revival of that city’seconomy and transform the economic development trajectory of the Pioneer Valley.I am encouraged by a renewed spirit of collaboration that is bringing together citizens andleaders from industry, academia, and government. As the Commonwealth continues on theroad to sustainable prosperity, let us keep working together with confidence to strengthenMassachusetts’ position as a global hub of research and innovation.Sincerely,Governor Deval Patrick2009 Index of the Massachusetts Innovation Economy 1
  4. 4. The Massachusetts Technology Collaborative The Massachusetts Technology Collaborative is a public economic development agency chartered by the Commonwealth to promote new economic opportunity and foster a more favorable environment for the formation, retention, and expansion of technology-related enterprises in Massachusetts. MTC serves as a catalyst in growing the knowledge- and technology-based industries that comprise the state’s Innovation John Adams Innovation Institute Economy. It is working with major healthcare organizations to implement e-health solutions that save lives and reduce costs. The agency is aggressively pursuing federal funding to support As the economic development division of the Massachusetts economic development in Massachusetts through the American Technology Collaborative, the Innovation Institute is the Recovery and Reinvestment Act of 2009. MTC’s rich history of Commonwealth’s leading science, technology, and innovation successfully managing complex projects that involve significant policy agent which fosters the vitality and capacity for self-renewal public and private investment have positioned the agency to of the Massachusetts Innovation Economy. We work to ensure the serve as an important conduit for infusions of funding into the health and vibrancy of the Massachusetts innovation ecosystem. Commonwealth. Working closely with academics, industry practitioners and Working through its major divisions—the John Adams Innovation government officials, region by region and sector by sector, the Institute, the Massachusetts e-Health Institute, and the Innovation Institute’s mission is to enhance the capacity of the Massachusetts Broadband Institute—the agency is strengthening Massachusetts economy to sustain an ongoing flow of innovation the innovation economy by supporting and expanding economic which is crucial to create, attract, and grow companies in emerging clusters. and established industries. To fulfill our purpose, the Innovation Institute partners and invests with academic, research, business, government, and civic organizations that share the vision of enhancing the Massachusetts Innovation Economy. Our main target areas for partnership and investment include: • Organizing for Innovation • Innovation Capacity • Statewide Innovation Initiatives • Understanding the Massachusetts Innovation Economy2 John Adams INNOVATION Institute
  5. 5. Table of Contents Message from the Governor ................................................................................................................................................................. 1 Introduction and Highlights ................................................................................................................................................................. 4 Massachusetts’ Performance at a Glance ............................................................................................................................................ 6 Massachusetts in the Global Economy Introduction to the Special Analysis ............................................................................................................................................. 8 Why "Massachusetts in the Global Economy"? ......................................................................................................................... 10 Michael Greeley, Flybridge Capital Partners ...............................................................................................................................12 Pascal Marmier, swissnex Boston, Consulate of Switzerland .................................................................................................... 14 David Meeker, M.D., Genzyme Corporation .............................................................................................................................. 16 Harry West, Continuum ............................................................................................................................................................... 18 Bernd Widdig, Boston College .................................................................................................................................................... 20 The Massachusetts Innovation Ecosystem ......................................................................................................................................... 22 Indicators Construction of the Indicators..................................................................................................................................................... 25 ECONOMIC IMPACT 1. Industry Cluster Employment and Wages .................................................................................................................... 26 2. Occupations and Wages ................................................................................................................................................ 27 3 Household Income ......................................................................................................................................................... 28 4. Productivity .................................................................................................................................................................... 29 5. Corporate Sales and Manufacturing Value Added...................................................................................................... 30 6. Manufacturing Exports.................................................................................................................................................. 31 INNOVATION ACTIVITIES Research 7. Research and Development Performed ...................................................................................................................... 32 8. Corporate R&D Expenditures, Publicly Traded Companies ......................................................................................... 33 9. Academic Article Output ............................................................................................................................................... 34 10. Patenting ........................................................................................................................................................................ 35 Technology Development 11. University Technology Licensing ................................................................................................................................... 36 12 Small Business Innovation Research Awards ................................................................................................................ 37 13. Regulatory Approval of Medical Devices and Biotechnology Drugs ......................................................................... 38 Business Development 14. Business Formation ........................................................................................................................................................ 39 15. Initial Public Offerings and Mergers & Acquisitions ................................................................................................... 40 INNOVATION CAPACITY Capital 16. Federal Funding for Academic, Nonprofit, and Health R&D .......................................................................................41 17. Industry Funding of Academic Research ...................................................................................................................... 42 18. Venture Capital .............................................................................................................................................................. 43 Talent 19. Education Level of the Workforce ................................................................................................................................ 44 20. K-16 Education ................................................................................................................................................................ 45 21. Public Investment in K-16 Education............................................................................................................................. 46 22. Science, Technology, and Engineering Career Choices and Degrees ......................................................................... 47 23. Information Technology Professionals in the Workforce ........................................................................................... 48 24. Talent Flow and Attraction............................................................................................................................................ 49 25. Housing Affordability .................................................................................................................................................... 50 Appendix A: Data Sources for Indicators and Selection of LTS ........................................................................................................51 Appendix B: Industry Cluster Definitions ......................................................................................................................................... 572009 Index of the Massachusetts Innovation Economy 3
  6. 6. Introduction and Highlights IntroductionThe Index of the Massachusetts Innovation Economy is When compared to countries around the world,an annual opportunity to assess the Commonwealth’s Massachusetts comes out on top in terms of the amounteconomic progress and its changing competitive of research and development performed as a percentposition. Through 25 indicators, the Index gives a of gross domestic product. However, many regionscomprehensive view of several dimensions of the around the world are quickly catching up. This is mostinnovation ecosystem. Using a rich set of US-based notable in South Korea, where the R&D intensitydata sources, the Index benchmarks Massachusetts of the economy is growing at a rate higher than inagainst nine Leading Technology States (LTS) to reveal Massachusetts. In 2004, South Korea surpassed the USrelative strengths and weaknesses. The nine LTS chosen average in R&D as a percent of GDP.for comparison in the 2009 Index are California,Connecticut, Illinois, Maryland, Minnesota, New Jersey, The key industry clusters of the Innovation EconomyNew York, Pennsylvania, and Virginia. were less susceptible to the economic perturbations caused by the financial crisis than other sectors of theTo gain the nuanced perspective that only practitioners Massachusetts economy.can provide, the Index also hosts guest commentariesfrom thought leaders working at the frontlines of Jobs in the key innovation industry clusters were lostinnovation throughout the Commonwealth. Through at about half the rate as in the economy as a whole.the commentaries we also seek to highlight a subject Consequently, Massachusetts’ key clusters of thematter of current relevance to decision makers Innovation Economy continued to rise as a share ofacross the Commonwealth. This year the theme is total employment. They also provide a large portion ofMassachusetts in the Global Economy, taking up once the high-skill, high-wage jobs. In these ways, the coreagain a subject first discussed in the 2007 edition. To clusters of the Innovation Economy have contributed tofurther complement this perspective, the 2009 edition Massachusetts comparative economic stability amongincludes international comparisons throughout the the states. In Massachusetts, there was a 6% declineindicators where quality data are available. total wages and salaries paid in inflation-adjusted dollars from the last quarter of 2007 to the second quarter of 2009 – a smaller decline than the US or LTS Highlights average.The 2009 Index reveals a Massachusetts economy that Massachusetts shows no signs of a retreat fromis world-class by many measurements, leading in key innovation.indicators and cushioning the Massachusetts economyfrom some of the harshest effects of the current In this year’s Index, there is evidence of confidenceeconomic downturn. However, the Index also reveals in the research and innovation enterprise. Last year,several weaknesses that suggest avenues for improving data raised concerns about declining performanceperformance. across some measures of early-stage innovation activity, particularly patents and pre-market regulatoryMassachusetts is a world leader in research and approvals of medical devices. However, this year’s Indexdevelopment (R&D); however, some countries are shows better performance on these measures. Frommaking large gains in this arena. 2007 to 2008, patenting held steady in Massachusetts while patenting declined nationally. MassachusettsR&D as a percent of GDP, international and companies also had more pre-market approvals ofMassachusetts, 2003–2007 medical devices than any of the other LTS in 2008, more than making up for the absence of approvals in 6% 12% 2007. Other signs of confidence include a nearly 50% 5% 2002-2005 average J 10% rise from 2002 to 2007 in industry-performed R&D as J Average Annual J a percent of private industry output, a record high in 4% 8% Growth Rate ( AAGR) J J 2008 in corporate R&D expenditures by publicly-traded2002-2005 average 3% J 6% companies based in Massachusetts, and the lead among AAGR 2% J 4% the LTS in R&D performed by academic and nonprofit J J research institutes as a share of GDP. R&D at these J J 1% J J 2% institutions totals $4.5 billion and rose 16% in inflation- 0% J 0% adjusted dollars from 2002 to 2007. J J -1% J J -2% J -2% -4% MA Israel Sweden Finland Japan Iceland S. Korea US Denmark Germany Austria Singapore Australia China Montenegro South Africa India Hong KongSource: United Nations Educational, Scientific and Cultural Organization (UNESCO)and the National Science Foundation4 John Adams INNOVATION Institute
  7. 7. New business formation is expected to be a critical Massachusetts’ score in attracting and retainingelement of economic recovery as Massachusetts population is the best it has been in a decade.emerges from recession.Enhancing the environment for new business formation Migration in and out of Massachusetts, top regions, 2006–2007needs to be a key element of any strategy for economicrecovery. Historically, new business formation accounts TX GAfor 30-45% of all new jobs. The sharp increase in new ME CAbusiness formation in 2007 was consistent with otherindicators tracked in the Index which showed renewedstrength in many of Massachusetts’ key industry clusters VA NCbeginning in 2007 and going into the most recentrecession. The 2009 Index shows that Massachusettslagged behind most of the LTS in creating new IL MA NHbusinesses and the resulting new jobs coming out ofthe 2001 recession. While the Greater Boston areahas long been viewed as a hotbed for new business PA Abroadformation, this data suggests the need to enhancethe entrepreneurial environment throughout theCommonwealth coming out of the recession. NJ RI NY CTTotal Venture capital (VC) flows have receded butVC investment in startup and early-stage firms is thehighest it has been in years. Source: The Internal Revenue Service, based on exemption numbersVenture capital investment by stage of financing,Massachusetts, 2004–2009 In 2008, the number of people who relocated to Massachusetts outnumbered those moving out for 600 the first time in six years, reaching levels comparable Later Stage Expansion to those attained in the mid to late 1990s. For years, 500 Early Stage Massachusetts had been doing well at attracting highly-Millions of 2008 Q4 dollars Startup/Seed educated people, but losing population overall. 400 High school seniors in Massachusetts express below 300 average interest in fields essential to the Innovation Economy. 200 Despite above average scores in math and science 100 advanced placement tests, high school seniors in Massachusetts express below average interest in engineering, computer & information science and 0 health & biological science degrees. This is especially 2004-1 2005-1 2006-1 2007-1 2008-1 2009-1 2009-4 significant since Health; Life, Physical, & Social Sciences; and Information Technology are among the fastestSource: PricewaterhouseCoopers MoneyTree Report growing occupational groups in the state. Employment growth was positive in these occupational groups from 2003 to 2008 and employment is growing faster inNationally, the dollar amount raised by venture funds these groups than in the US and LTS on average.dropped 57% in the last quarter of 2008 and remainslow. Not surprisingly, the amount of VC invested inMassachusetts-based firms was 35% lower in 2009 thanin 2008. However, the amount of VC investment goingto startup/seed and early stage firms in Massachusettswas higher in the last three quarters of 2009 thanin any quarter in over ten years. The 3rd quarter of2009 stands out as the highest quarter of startup/seedinvestments in recent history, at which time over $161million was invested in new businesses.2009 Index of the Massachusetts Innovation Economy 5
  8. 8. Massachusetts Performance at a Glance US AVERAGE 1/ 10x 1x 10 xThe Index examines the Economic ImpactMassachusetts Innovation Industry Cluster Employment & Wages % of employment in key clustersEconomy through 25 Average cluster wagesindicators. This chart providesan overview of the direction Occupations & Wagesof year-over-year change for % of employment in life, physical, and social scienceMassachusetts. % of employment in information technology % of employment in educationDirection of Year-Over-Year % of employment in professional and technicalChange for Massachusetts up Household Income Median household income down Wages and salaries paid per workerThe chart also depictsMassachusetts performance Productivity GDP per employeeon each indicator relative to Manufacturing value added per manufacturing employeethe performance of theLeading Technology States Corporate Sales & Manufacturing Value Added(LTS). The chart shows Corporate salesMassachusetts performance Manufacturing value addedas a fraction of the USaverage. Manufacturing Exports Manufacturing exports as % of GDPAll comparisons are per Research Research and Development Performancecapita except where R&D performed by hospitals, universities, & nonprofitsotherwise indicated. Private industry R&D intensityMA and the LTS compared Corporate R&D Expenditures, Privately Traded Companiesto the US Average Corporate R&D intensity LTS Range MA Academic Article Output Academic article outputTogether these chartelements reveal the complex Patenting Patentspicture of Massachusetts’ Technology Developmentperformance. Massachusetts University Technology Licensingmay rank at the top of the Licenses and options executed by hosp., univ., & nonprofitsLTS on an indicator, but stillhave declined in the most Small Business Innovation Research Awardsrecent year of data. Number of SBIR awards Regulatory Approval of Medical Devices and Biotechnology Drugs Med. device pre-market notifications Med. device pre-market approvals Biotech drugs in development6 John Adams INNOVATION Institute
  9. 9. US AVERAGE 1/ 10x 1x 1 0x Business Development Business Formation & Job Creation Net high tech business formation University spin-outs Initial Public Offerings and Mergers & Acquisitions IPOs M&As Capital Attraction of Federal Funding for Academic, Nonprofit, and Health R&D Federally funded academic & nonprofit R&D Industry Funding of Academic Research Industry funding of academic R&D Venture Capital Venture Capital investment per capita Talent Education Level of the Workforce Working age population with bachelors or higher K-16 Education High school attainment of persons ages 19-24 Public Investment in K-16 Education Investment in public K-12 per pupil Investment in public higher education per pupil Science, Technology, and Engineering Career Choices and Degrees High school seniors interested in Engineering or CIS degrees Bachelors or higher granted in Engineering or CIS High school seniors interested in Health or Biology degrees Bachelors or higher granted in Health or Biology % of scores 3 or higher on science or math AP tests Information Technology Professionals in the Workforce % of workforce in IT occupations Talent Flow and Attraction Attraction of college educated adults Housing Affordability Rent affordability Mortgage affordability2009 Index of the Massachusetts Innovation Economy 7
  10. 10. Massachusetts in the Global Economy Introduction to the special analysis ast year, the Index was This unwavering commitment to innovation released amidst the worst has made of Massachusetts a vivid economic downturn since example of what observers of economic the Great Depression. In development refer to as the greatest that context, we knew paradox of globalization: the emergence of that the Index’s indicators sub-national regions as key economic units did not yet capture the impact of the and engines of prosperity. One author has recession on the innovation ecosystem. called successful regions the “locomotives” So, we invited commentators to reflect of national economies. Two key insights on the question: ”What can we do to that build on this observation assert that preserve and strengthen the vitality of success in the global economy hinges on the Massachusetts innovation ecosystem vibrant regional economies and, in turn, even during tough economic times?” this success is enhanced when regional Our motivation was straightforward: economies successfully insert themselves this ecosystem sustains the self-renewal into global flows of capital, ideas, and capacity of our economy and nurtures talented individuals. the innovation-intensive companies, universities, and hospitals that account for With this in mind, this year’s Index reopens almost 40% of jobs in the Commonwealth. a conversation started three years ago in its 2007 edition which advanced important In response, our commentators conveyed understandings about Massachusetts in an important message. To sustain the global economy. This conversation innovation and the long-term viability echoes a current policy priority for the of our economy, they said we need to Commonwealth. During the last few accomplish three things. First, we need months, the state’s Executive Office of to collaborate more. Second, we need to Housing and Economic Development continue investing in innovation. Third, and has spearheaded an effort to better most importantly, we need to maintain our understand and leverage the state’s optimism, confidence, and distinctive focus resources to implement a strategic policy on the future. approach for the internationalization of the Massachusetts economy. This year, the context of the Index is a fragile and uncertain recovery with This year, the Index offers a global widespread and continued hardship for perspective in two ways. First, we take Massachusetts’ citizens and businesses. steps to incorporate international No sector of our economy or society has comparisons within individual indicators. been spared and the state’s government In doing so, we have had the following is reckoning with a revenue crisis. And, as question in mind: If Massachusetts were highlights in this publication’s pages show, a country, how would it perform in key the performance of the Massachusetts measures of the innovation ecosystem Innovation Economy is mixed: it includes when compared against top international many measures with impressive results that performers? We were able to answer place Massachusetts at the top nationally this question with precision only where and internationally, but there are also comprehensive and comparable data were clear signals that are cause for concern and available which occurs in six of the twenty- careful review. five indicators. Looking back since the release of last The second way in which this year’s Index year’s Index, the research, innovation offers a global perspective is by inviting and entrepreneurship communities in reflection from those who work on the Massachusetts have responded to the crisis frontlines of innovation. We are privileged as commentators suggested, with more collaboration, a sustained commitment to innovation, and most importantly, with optimism and confidence.8 John Adams INNOVATION Institute
  11. 11. to host commentaries from individuals All of them, without exception, highlight who bring a truly global perspective and the concentration of some of the are themselves living examples of a global brightest men and women from all over spirit in Massachusetts. Michael Greeley the world as one of Massachusetts’ was born in New York but grew up in Hong greatest strengths. It is also here Kong. Pascal Marmier is a Swiss diplomat. that some express concerns. Michael David Meeker writes from the perspective Greeley wonders whether non-compete of an actively globalizing company. After agreements make some entrepreneurs attending graduate school in the United chose California over Massachusetts, and States, both Harry West of Great Britain expresses disappointment at the ability of and Bernd Widdig of Germany chose to Massachusetts start-ups to retain talented stay in Massachusetts. men and women due to limitations in federal visa policies. Bernd Widdig speaks We approached these individuals with the for more awareness and more investment following questions to invite reflection: to expand the reach of the international Through your eyes, what is the place of education experience. Students need to be Massachusetts in the global economy? better prepared to work in an environment What are the strengths and weaknesses of in which “the spirit of innovation knows no the Massachusetts innovation ecosystem national boundaries”. Harry West calls on for enhancing our place in the world? Massachusetts to showcase its assets and compete forcefully to attract the world’s Each commentator views the world best design-minded people. In his words: through a unique lens and addresses a “Massachusetts can and must compete as different segment of the landscape of our a place where the most precious of natural innovation ecosystem: venture capital, resources—energetic, creative people— diplomacy, medicine, design, and higher want to be.” education. But, within the uniqueness of their perspectives, there is a common The response to the recession has called thread. Each of them speaks of the ways in on everyone in the United States and which the global and the local aspects of the Commonwealth to take a hard look innovation and competitiveness are deeply within. But as the economy turns around, and synergistically intertwined. there will be new opportunities for prosperity, many of which will be realized First, we learn from all of them that the through the full and strategic embrace of most forward-looking innovation remains our global potential. This year’s Index is a profoundly localized phenomenon an invitation to join a conversation and even in the phase of globalization. to work together to better understand For Massachusetts, this means that Massachusetts’ place in the global the strengths and weaknesses of our economy. How can we amplify, accelerate innovation ecosystem both enable and and leverage the self-organizing capacity constrain the ability of individuals and in our innovation ecosystem to better organizations in the Commonwealth to pursue the economic opportunities that operate in the global economy. Second, globalization affords? ■ together they tell us that for individuals and organizations alike operating in the global economy requires an understanding of the societies and the cultures where individuals and organizations work and the ability to work across geographic, cultural and disciplinary boundaries. Finally, we hear once again that openness, connectedness, and collaboration enhance the ability of individuals, groups, and organizations to innovate.2009 Index of the Massachusetts Innovation Economy 9
  12. 12. Why "Massachusetts in the Global Economy"? Carlos Martínez-Vela, Director of Innovation Policy, MTCs John Adams Innovation Institute hroughout the 40% of graduate students and 10% of Commonwealth’s history, undergraduates were foreign nationals waves of immigrant during the 2008-2009 academic year. entrepreneurs from a wide Moreover, scientific research has never array of nations joined conformed to traditional boundaries arrivals from the British Isles be they organizational, regional, or to enable Massachusetts’ emergence as national. This connectedness of the an industrial and economic powerhouse. Commonwealth’s research and innovation In the 18th century, immigrants from enterprise is magnified today by the global mainland Portugal, the Azores, and Cape scope and impact of some of the world’s Verde were inextricably linked to New most pressing challenges and promising Bedford’s dominance in whaling. In the opportunities. The imagination of students, 19th century, Lowell’s destiny as a textile scientists, and innovators everywhere is industry hub was built upon the work of being captured by problems ranging from French Canadians, Eastern Europeans, energy and climate to national security, Greeks, Portuguese, and many others at from stubborn diseases to the alleviation of the mills. Today, Lowell is home to one of poverty. the United States largest concentrations of Cambodian immigrants. Like many other The same is true of our business towns and cities today, Lowell and New community. For Massachusetts-based Bedford are called home by many of Latin corporations, expanding and competing American origin and descent. Both cities globally and operating in foreign markets are among Massachusetts’ twenty-four has long been a necessary focus for growth “Gateway Cities” because they continue and, increasingly, for innovation. Perhaps to be entry points into the social and less known are the many start-ups and economic promise of Massachusetts for young companies that are equally global in many immigrants. scope. Consider also the magnetic power of the Massachusetts Innovation Economy as In the two hundred years since Lowell’s a whole, evinced by the location decisions entrepreneurs helped launch the of some of the world’s most prominent Industrial Revolution in the United innovation-intensive businesses. Many States, Massachusetts reputation as a continue to choose Massachusetts as a revolutionary and global epicenter of location for R&D facilities. Examples include innovation has only been strengthened. the Novartis Institutes for Biomedical Now, rather than whaling or maritime Research (biopharmaceutical, Swiss), the trade, it is the intensity and quality of Schlumberger-Doll Research Center (oilfield our innovation ecosystem that makes services, Dutch), the Nokia Research Center Massachusetts a hub in the global (telecommunications, Finnish), and a networks of capital, knowledge, and branch of Vestas Technology R&D Americas people. The Massachusetts Innovation (renewable energy, Danish). Economy attracts—and contributes—a disproportionate share of the global It is no coincidence that many foreign flows of investment, ideas, and talented governments maintain a formal presence in individuals who fuel innovation. Massachusetts with specialized personnel devoted to building bridges with the Consider our research universities, now state’s research and innovation enterprise, among the most global of enterprises. including Canada, France, Germany, Japan, For decades they have increasingly Norway, South Korea, Spain, Switzerland, become magnets that attract some of the and the United Kingdom. These countries brightest men and women from around are here partly because they want to join the world. At MIT, for example, about the innovation conversation, to be plugged10 John Adams INNOVATION Institute
  13. 13. in to our Innovation Economy, and to build strategically attract to the Commonwealth, bridges of mutual understanding and in a highly selective and targeted way, collaboration. They want to learn what it those functions (i.e. research, prototyping, means to build a research and innovation manufacturing) and business segments enterprise that is also a centerpiece of that are likely to enhance innovation and economic prosperity. competitiveness on an industry-specific basis. To ensure job creation as part of this Businesses, universities, government, and strategy, we need to understand better communities across the state are now the labor-intensity of each segment of an more deeply aware than ever of the place industry’s value chain to set expectations of innovation, regionalism, and industry right. We also need to be attentive to the clusters as cornerstones of economic natural tendency of some corporations growth. This inner strength also gives and other institutions to bring their the Commonwealth its prominent place R&D operations to Massachusetts or to in the global economy. It enhances the partner with Massachusetts institutions ability of Massachusetts-based companies for research and innovation. There may to compete globally by providing close be ways to accelerate and amplify these and immediate access to the creativity of processes and extend them beyond R&D the best people and their best ideas. It for greater job creation. drives the location decisions of foreign- owned corporations when they decide to As vital as research and innovation are for establish R&D outposts in Massachusetts. our economy, we face an imperative to It motivates the research, innovation, and figure out how to improve the capturing entrepreneurship communities from all of “downstream economic benefits”— over the world to partner with and invest including, but not ending, with jobs— in Massachusetts. It inspires men and from research and innovation and to do women to be here. so more equitably across regions of the Commonwealth beyond Greater Boston. But we must not allow any of this to be taken for granted. Competition is To be sure, the effects of economic intensifying as regions and countries development are always local and manifest around the world pursue innovation as an themselves one person, one business, one economic development strategy. Others community at a time. But this reality can are striving to create their own innovation either tempt or mislead many to isolate ecosystems and competing for a share of and retreat from globalization. The the same capital, the same entrepreneurs, history of innovation in the Massachusetts the same businesses, and the same economy and the voices in the pages talented individuals that today choose ahead show that today, perhaps more Massachusetts. Thus, it is vital to remain than ever before, the prosperity of the committed to strengthening the research Commonwealth remains profoundly linked and innovation enterprise while thinking to the global economy while standing strategically about how to leverage its upon the strength of our Innovation connectedness to increase its magnetic Economy. ■ power in the global economy. This can be accomplished only with deep, empirical knowledge of how the Massachusetts Innovation Economy works, industry by industry. We need a better sector-by-sector understanding of value chains in order to identify gaps and2009 Index of the Massachusetts Innovation Economy 11
  14. 14. Investing in Innovation Michael Greeley, General Partner, Flybridge Capital Partners assachusetts is one of the Sixty years after its founding, ARDC’s leading global centers legacy continues. Over 100 venture capital of innovation. Twelve firms now call Massachusetts their home. research universities with From 1970 to 2008, venture capitalists over 25,000 graduate worldwide invested $50.4 billion in 2,764 students, a plethora of Massachusetts companies. In 2008 alone, research institutes, leading multinational 346 companies in Massachusetts received corporations and service providers (lawyers, $3 billion in venture capital – at $460 per accountants, consultants), an abundance capita, well ahead of all other states. of technical talent, and numerous start- ups are concentrated here. In 2006, the While Massachusetts retains a prominent total expenditures on R&D performed in place in the venture capital marketplace, Massachusetts reached $20.6 billion. In its leadership is being challenged. 2007, federal, state, industry, academic, Massachusetts’ $3 billion in venture and nonprofit organizations attracted $6.7 investments in 2008 is a distant second billion in federal funds for R&D. Companies to California’s $14.3 billion. Both states in Massachusetts invested another $13.2 continue to attract venture capital billion. investments at almost four times the rate of the nation as a whole, but the California Importantly, Massachusetts has a long- share of all venture capital investments established culture of entrepreneurship rose from 38% in 1998 to over 50% in that has fueled the formation of clusters of 2008. The share of venture investing new industries, including the well-known going to Massachusetts companies during life sciences sector. Cloud computing, online the same period grew only from 9.6% video, marketing technologies, gaming to 10.5%. And according to the National and businesses at the intersection of IT and Venture Capital Association (NVCA), there life sciences place us at the forefront of were 3,192 companies which attracted innovation in digital technology. It is also, venture investments in 2008, but only 11% arguably, the most active robotics region in were in Massachusetts. the world. In the $197 billion US venture capital A strong venture capital industry remains industry, the top five states in the US an essential part of the Massachusetts represented nearly 82% of all venture innovation ecosystem and one of our key capital managed in 2008. Local venture assets in the global economy. According to capital firms managed $36 billion in the Organization for Economic Cooperation 2008, or 18%. So, while local companies and Development, the US accounted for face tough competition to get investor 49% of total venture capital investments attention, a meaningful portion of the in OECD countries (the UK was a distant venture capital industry is still managed in second with 10%). Within the United States, Massachusetts. However, only $3.5 billion Massachusetts companies alone attracted of the $27.9 billion of new commitments 11% of the US share. to venture funds in 2008 (or 12.5%) were made to Massachusetts-based venture The venture capital model as we know capitalists. it was invented in Massachusetts. In 1946, a group of business and university The composition of the venture investment leaders founded the American Research portfolio in Massachusetts has changed & Development Corporation (ARDC), a significantly in recent years. Once heavily new mechanism to fund and nurture new oriented toward digital technology, it is businesses. With the economy struggling now concentrated in the biotech sector, to recover from the Great Depression and accounting for 31% of all venture capital the demise of traditional New England invested in Massachusetts companies. The industries, these visionaries had a larger software, medical devices, and IT services ambition: to revitalize the New England sectors followed with 20%, 9% and 7% economy and its scientific and technological respectively. expertise to create new industries.12 John Adams INNOVATION Institute
  15. 15. Future industry commentators will look affect our own start-up environment. back on 2009 as the year when the broader Many investors are also disappointed venture capital industry was fundamentally with federal visa policies: Massachusetts redefined by global economic crisis and educates some of the most talented unprecedented volatility in global capital students from around the world, but markets. The US venture capital industry struggles to retain them upon graduation, raised only $13 billion for new investment, limiting the talent pool to staff local start- less than half of what it had raised in 2008. ups quickly and efficiently. Nationwide, the industry is confronting It is important that limited partners a number of significant issues, many of continue to recognize that Massachusetts which stem from the lack of predictable has a vibrant, early-stage business and meaningful opportunities for liquidity community. This past year has seen events. The venture capital model is a resurgence of start-up activity and predicated on both the ability of portfolio the emergence of entrepreneurial and companies to attract new investors as networking events like Mobile Mondays, these companies mature, as well as to be Xconomy, Stay In Massachusetts, and sold in a vibrant M&A auction or taken TechStars to name a few. Importantly, we public in an IPO. Years ago, there were a have seen the return of angel investors number of structural reforms which largely and the emergence of new investment dismantled Wall Street’s ability to take and mentoring models such as Founders smaller, private venture-backed companies Collective, Launch Capital, Start@Spark, public. These reforms have impaired the and CRV QuickStart. ability of venture capital firms to generate liquidity for their limited partners, in turn Innovation does not conform to geographic dramatically reducing venture capital borders and can occur anywhere. The last firms’ investment returns. As a result, decade saw the exportation of the venture many limited partners have reduced capital model to emerging international their overall allocations to venture funds, markets like India and China. Despite which is further driving the rapid industry this, many firms continue to view venture consolidation we are witnessing today. investing as a local business, best practiced The era of billion dollar venture funds is close to home. The next decade is likely to effectively over. Average fund sizes will see further retrenchment of the venture be more in line with the $50 million per capital industry in historic centers of investment partner metric or $150 to $400 excellence like Silicon Valley and Boston million of capital per fund. as the industry consolidates further. A future successful venture capital model These developments have now triggered will continue to work best when all of the debate as to what the successful venture required ingredients of the entrepreneurial capital model will be going forward. How ecosystem are in place. This certainly these debates evolve will undoubtedly remains the case in Massachusetts. ■ have consequences for Massachusetts. But looking to our history, we see a venture capital industry in Massachusetts with a Michael A. Greeley is the founder and remarkable ability to re-invent itself when general partner of Flybridge Capital confronted with headwinds. Partners, a leading early stage venture capital firm based in Boston. He is the Today, Massachusetts has a few unique Chairman of the New England Venture factors which influence limited partners’ Capital Association and a director on the perceptions of the local investment climate. board of the National Venture Capital Many analysts focus on the impact of Association. “non-compete” agreements which are not recognized in California. It is time to examine objectively how non-competes2009 Index of the Massachusetts Innovation Economy 13
  16. 16. Connecting the Dots Pascal Marmier, Director/Consul, swissnex Boston, Consulate of Switzerland or nearly a decade, swissnex Over the years, I’ve encountered a Boston has been building fascinating array of pacesetters with bridges of knowledge expertise on commercializing technologies exchange between and building organizations that maximize Switzerland and New the potential of new products. These England—“connecting the innovators evince the truly collaborative dots” among individuals, organizations spirit of Boston. It is this spirit that makes and universities in science, technology and our location viable and valuable. I can’t innovation. Yet when we opened our doors count the number of people who have in 2000, it was unclear what would emerge come into our office, volunteered their from our small, loft-style office at 420 time, and enlightened our guests—ranging Broadway in Cambridge. from entrepreneurs and students, to corporate executives and government Given our location, we imagined that local representatives. students and scholars would enjoy sharing in our panels, conferences, exhibits and Yet, given that the world has become so discussions. What we did not anticipate complex, finding new ways to collaborate was the process—and the many activities— is essential. Indeed, those who master the that this first attempt to create a “science art of searching for, finding and combining consulate” put in motion. Today, we’ve complementary assets, regardless of engaged in far larger circles than expected location, are at an advantage. In the and have partnered with numerous future, technology might become a organizations interested in providing combination of different fields and the support and ideas to build connections to research taking place at various universities other innovation centers. worldwide, and its commercial success might depend on a joint effort from even As we plan our ten-year anniversary on more people. October 10, 2010, we recognize that our location in Massachusetts and Greater Consequently, the first step to mastering Boston, the “brain hub” of New England, this art is to help people meet each other has redefined how the Swiss government to start connecting the dots. In this regard, and our stakeholders think, act and plan swissnex Boston regularly hosts seminars for innovation. We also recognize that and workshops in collaboration with we have become part of the fabric of the our Swiss and American industrial and region’s innovation ecosystem, and that we academic partners. Most recently, we’ve contribute to its connectedness and global focused on the new trends of innovation spirit. partnerships in a troubled economy. Knowing the ‘software’ Offering world-class contacts and support to our Swiss partners is what It is easy to discover the “hardware” of Boston has allowed us to do. To this end, the Boston area’s innovation economy. we’ve catalyzed successful partnerships Any website can list the unparalleled among universities, companies and sources of new ideas and technology other organizations active in science and here (universities, hospitals, research technology on both sides of the Atlantic. institutions), the abundant financial For example, a collaborative platform on resources available for entrepreneurs to nanotechnology started after discussions transform ideas into products, and the among Swiss and Boston-area scientists companies that move these inventions to held at swissnex Boston. Additionally, the marketplace. Yet such a list does not executives from Swiss pharma companies offer an understanding of the “software”: traveling to Boston often contact us to the people and organizations bringing this arrange workshops where they can connect innovation economy to life. to the leaders in their field.14 John Adams INNOVATION Institute
  17. 17. One of our key annual programs—a Measuring success two-week “boot camp” that brings Swiss entrepreneurs to Massachusetts—has Despite tangible achievements, however, significantly benefited from the expertise we are often asked: “How do you really of local technology and business experts know that you’re successful?” This has been who have shared their knowhow in a recurrent challenge. At swissnex Boston, marketing innovative products. In hosting we track several metrics that measure our this yearly boot camp, we’ve created a visibility and collaboration. For instance, well-connected alumni community of our mailing list boasts more than 5,000 venture leaders who can now share their members, and we organize or co-host expertise with each other and bring to more than 70 events annually, ranging Switzerland an added value from their stay from delegation visits of Swiss universities in the USA. The boot camp even provides to concerts on the Charles River. contacts and builds relationships for startups seeking to site their activities here. It stands to reason, however, that innovation is so multifaceted that numbers Massachusetts also benefits from these are seldom sufficient to illustrate success. connections. Dialogue and collaboration Indeed, the innovation economy is fueled are at the heart of what we do at swissnex by intangibles. So, for us, the value of the Boston and, as Massachusetts Housing and conversations we trigger—conversations Economic Development Secretary Gregory that lead to enduring relationships and Bialecki recently said, these are the kinds knowledge transfer, and ultimately to the of discussions that ensure Massachusetts building of a transatlantic community—is remains well-connected to places where incalculable. other brilliant minds operate. Our efforts in promoting Swiss universities and Learning from our experiences, we are universities of applied sciences, especially ready to accompany the next generation of in Engineering and Business, have led leaders in the challenges of the knowledge to partnership agreements with local economy. Innovation is about change, schools. And apart from supporting start- and that is why swissnex Boston has made ups, we are delighted with our increasing the strategic decision to be flexible and connections to small and medium-sized opportunistic. This allows us to explore enterprises thanks to the newly established new topics and pursue opportunities that Boston chapter of the Swiss American are calling for collaboration and which Chamber of Commerce. demand our attention as they emerge. Apart from these pursuits, the area’s As we celebrate our tenth anniversary, collective knowledge and collaborative we are proud to have promoted Swiss spirit have benefited our unique business innovation and higher education for nearly model. A science and technology consulate a decade, and we are pleased to contribute such as ours found its natural home in the to the global spirit and connectedness of New England ecosystem. We are fortunate Greater Boston. ■ that visiting scientists and entrepreneurs take the time to stop at our office and “connect the dots” with others. Our Pascal Marmier is the Director and Consul network of “scientific diplomacy” has of Switzerland at swissnex Boston, a unique grown, and the model born in Boston private-public partnership dedicated to nine years ago has been exported to other facilitating collaboration between New strategic hubs of science and technology England, Eastern Canada and Switzerland such as San Francisco, Shanghai, Singapore in all fields related to science, technology and recently Bangalore. and innovation.2009 Index of the Massachusetts Innovation Economy 15
  18. 18. Bringing Massachusetts Innovation to Patients Worldwide David Meeker, Executive Vice President and Chief Operating Officer, Genzyme Corporation enzyme is a health care Our international expansion began with company dedicated to the acquisitions of two UK companies developing and delivering made within the first year of our founding innovative solutions for in Boston in 1981. The purchase of unmet medical needs. Whatman Biochemicals Ltd. brought From the beginning, we Genzyme manufacturing facilities and understood the responsibility of any marketed products that served as the basis company producing a unique, potentially for the company’s business in diagnostic life saving therapy to make that therapy products. Through the acquisition of Koch accessible to patients in need around the Light Laboratories, Genzyme established globe. However, health is not simply a a presence in Haverhill, UK, where we global issue, it is also a highly personal now manufacture Renvela and Renagel, matter. In working to reach patients Genzyme’s leading therapies for kidney worldwide, we sought to do so in a way disease patients. In 1987, prior to the that allowed us to truly understand approval of our first product, we became the health care needs of different local the first US-based biotech company to populations and serve them accordingly. open an office in Japan. Over the last two decades, we have continued to expand We have done this by establishing our global presence, and now have more ourselves in countries around the world, than 85 locations in over 40 countries. We not through satellite offices staffed by have continued to pursue this strategy, Americans, but by hiring local talent establishing a strong commercial presence that understands the health care system in Russia, India and China. Our Chinese and the regulatory and governmental investment includes the building of a $100 environments that need to be navigated in million R&D center in Beijing, where we order to ensure the best possible service to recently laid the corner stone for the new patients. We have structured ourselves in a facility. way that gives each country organization the independence and flexibility to adapt We established an early global presence to varying health care dynamics, to truly because we understood that developing be “French in France,” and “Brazilian in potentially life saving therapies carries Brazil.” with it the responsibility to ensure that the treatment is made available In establishing ourselves as an international to everyone who can benefit from it, corporation, as opposed to a US company regardless of where they live or their with international offices, we facilitated economic circumstances. In creating drug development through our ability access, we seek to partner with local to more effectively run international health care authorities to optimize the clinical trials, establish scientific ties health outcomes of their citizens. Local with researchers around the globe investments in the countries where we do and build relationships with patient business strengthen these partnerships. We organizations in many countries. This have built and/or expanded manufacturing has helped differentiate Genzyme from facilities in the UK, Ireland, France and other biotechnology and pharmaceutical Belgium in addition to establishing R&D companies, and has been the foundation facilities in the UK and the planned site in for our global success. China. These locations also provide access16 John Adams INNOVATION Institute
  19. 19. to favorable business environments, lower Genzyme now has about 4,700 employees costs, strong government cooperation, and in Massachusetts. access to a highly trained workforce and potential partners. In addition to the highly valued links to the life sciences community, we Importantly, Genzyme’s success in building appreciate state and local recognition of a global health care company links our contributions to the area’s economy directly to the advantages afforded by the and support for our expansion efforts. Massachusetts life sciences community. We encourage the state to continue to This state is uniquely positioned to support education and training programs facilitate success in the life sciences, with that will allow companies to recruit the its wealth of universities, hospitals and right people for manufacturing and other research institutions. These world-class functions associated with the life sciences. organizations attract the best physicians Genzyme is currently building another key and scientists from around the globe, manufacturing facility in Framingham. which creates an environment capable of State support for infrastructure fostering innovation and development. The improvements there has enabled this and Massachusetts life sciences community is a future projects by other companies to leader in the global health care community move forward. and consequently it is no accident that so many biotech and pharmaceutical Having a strong foundation in companies have placed research facilities Massachusetts along with a well-developed here. global presence puts Genzyme in a unique position to connect this state with the rest Although we appreciate the value of our of the world. Genzyme and others in the global investments, we built our first and Massachusetts life sciences community most important manufacturing facility are making new medical advances every here in Allston, Massachusetts, because day that hold the promise to transform we recognized, given the challenges of patients’ lives. As we continue to grow, we biologic manufacturing processes, the look forward to helping the state maintain advantages of having a highly skilled work its leadership in this area, and bringing force and close proximity to the scientists more Massachusetts-grown innovations to who developed those processes. We patients around the world. ■ have continued to expand our presence in Massachusetts over the years, most notably in Framingham. Of Genzyme’s David Meeker, M.D., is Executive Vice 12,000 employees, approximately 2,200 President and Chief Operating Officer are in Framingham, where we have key at Genzyme. Dr. Meeker is responsible R&D and manufacturing operations. Along for Genzymes commercial organization, with our headquarters in Cambridge’s overseeing the companys business units, Kendall Square, and other Cambridge, country management organization, and Waltham, and Westborough locations, global market access functions. He works to maximize the potential of the companys broad portfolio of products, most of which are in their growth phases.2009 Index of the Massachusetts Innovation Economy 17
  20. 20. Designed in Massachusetts Harry West, CEO, Continuum ne of Massachusetts best- neighborhood, the company began to kept secrets is its world- grow. At its foundation, Continuum was class cluster of excellence part of an ecosystem of companies in in design. Our company, places like Lexington, Bedford, Boston, Continuum, belongs to an Maynard, Canton and Newton where other ecosystem of 40,000 – 50,000 companies were forming and flourishing, architects, graphic designers, product or failing and thereby providing the designers and other creative professionals. resources for new companies to emerge. How does a cluster of excellence get When Gianfranco and Jerry needed started? The essential qualities of a place, talent, they were able to recruit from its geography, its legal environment, other companies in the area that had and its human capital matter a great passed the peak of their business cycle deal. Often, the particular genius of an or were reengineering to be more individual is a driving force. Sometimes efficient. Those other companies, like government plays a catalyzing role. mature trees falling in a forest, made But the process is generally emergent space and provided resources for new and its evolution is difficult to predict. growth to emerge. Similarly, Continuum In retrospect, sometimes you can trace hired talented designers and engineers back the story of its creation and almost from the computer industry, which was convince yourself that it was inevitable going through a period of decline in given the presence of the right ingredients. Massachusetts as it was being eclipsed by However, once this cluster of excellence technologies and companies on the West has emerged like a rare orchid, what does Coast. it take for it to persist and grow, rather than fade away again? Continuum’s story A critical moment in our history was of growth towards global prominence is Reebok’s bold decision to hire Continuum an example of the many factors that come to help them take on Nike. In a creative into play. leap, Continuum invented the Reebok Pump, which went on to be one of the best An innovation design consulting company selling athletic shoes of all time. When we headquartered in West Newton, look back we call this “innovation”, but Continuum was founded in 1983 as a at the time it was simply the creative idea collaboration between Gianfranco Zaccai, of a design company steeped in medical whose primary training was in industrial technology putting what was essentially design and architecture, and Jerry Zindler, a blood pressure cuff in a shoe. That is a physicist and engineer. They built the innovation: uncovering valuable ideas and company around the idea that by working capabilities that no one has thought of together they could improve upon the old before, then developing those ideas so model of designers and engineers working that they can be profitability realized and separately and “throwing ideas over the utilized. wall” at each other. They were right. But the success of Continuum as a company The Pump spurred a pivotal moment in is the result not just of this idea; it is also Reebok’s history, making them bigger a result of the fact that the company was than Nike for a few years. It was also a located in a state with a ready source of turning point in the history of Continuum: talent and customers. it propelled the firm towards being a global consumer innovation design firm. From the vision of two men in a small, The company developed the broad range rented space in Boston’s South End, which of capabilities needed to be a creative at the time was shoestring-budget-friendly leader working across the world in global consumer research, strategy, brand and service design.18 John Adams INNOVATION Institute

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