Federal research funding is less predictable now than any time in recent memory. For regions that have built innovation strategies around research dollars, that uncertainty raises a measurement question that was easier to avoid while the inputs were stable: how do you know whether your innovation economy is growing?
Most regional assessments answer a narrower question. They begin with R&D spending, patent filings, venture capital deployed, and STEM degree attainment. These indicators are useful, and they anchor much of ESI’s own innovation sector work. They also describe a smaller set of inputs than the one companies and workers actually weigh. Housing, transit, workforce systems, arts and culture, and the general quality of a place are part of what a region offers, and they may shape whether research activity turns into businesses that stay in the region and careers that grow locally.
What the Indices Measure
The Information Technology and Innovation Foundation’s (ITIF) 2026 Transatlantic Subnational Innovation Competitiveness Index benchmarks 213 regions across 14 indicators, weighted toward innovation capacity, knowledge economy, and globalization. The results track what most practitioners would expect: a 70.6-point gap separates Massachusetts from Mississippi, reflecting tangible differences in research infrastructure, educational attainment, and capital availability.
Massachusetts is a useful case because its ranking and broader appeal are difficult to separate. The state leads on research inputs, and it also offers significant institutions, transit, coastline, cultural amenities, and a labor market deep enough that a researcher can change jobs without changing cities. The index measures the research inputs. The performance reflects the bigger picture. ITIF’s observation that top performers tend to be areas with “strong urban hubs” points in the same direction: something about the place, and not only the spending, appears to be doing work.
The Rest of the Package
Place-based investments belong inside the input set rather than beside it. Our work at ESI frequently sits at this intersection, evaluating how public transit, housing, workforce development, arts and culture, and other amenities contribute to the returns communities expect when they invest in their economic development ecosystem. The same logic explains where a regional package becomes challenging. Massachusetts’ cost of living could become a threat to the retention its other assets produce, which is the kind of pressure a capacity-weighted index is not built to register.
So How Do You Know?
An index reports where a region stands against 213 peers. It does not say whether that region’s innovation activity is growing. Growth is a time-series question, measured against a region’s own baseline, and it has to account for the breadth that determines what each innovation dollar is worth once it arrives. Four categories, tracked over five years, cover most of what matters:
- Activity: R&D expenditure, NIH and NSF awards, venture capital deployed, patents granted.
- Conversion: business formation, five-year survival rates, follow-on rounds raised by locally headquartered firms, university licenses reaching market.
- Retention: headquarters retention among firms that scale, net migration of residents aged 25 to 44 holding a bachelor’s degree, wage premiums in innovation-adjacent sectors.
- Breadth and place: sector diversity across the regional employment base, local supplier share in innovation-sector procurement, business formation outside the innovation sectors, housing permits issued per new job.
Evaluated together, the four categories measure where a region is growing value rather than how much it holds. Capital rising while employment stays flat, or degrees granted climbing while young professionals leave, is usually viewed as a conversion problem inside the innovation sector. But perhaps it also points outward, to the breadth around it: the broader economic infrastructure, meaning the supporting industries, supply chain, and non-innovation workforce, may not be deep enough to hold the activity in place.
When that depth in the economy is missing, the dollar that pays a researcher leaves the economy more quickly. When there is depth across sectors, suppliers, contractors, and consumer businesses, the same dollar changes hands several more times before it leaves. The breadth of a region’s economic base shapes the multiplier on every innovation dollar it attracts, and a region growing that breadth is keeping more of what it already brings in.
This is also why the place-based layer keeps surfacing in the answer. Housing, transit, amenities, and small business pathways widen the base of activity that innovation spending can move through. They are not the benefit that a region enjoys once its innovation economy matures but rather are a necessary part of what makes the spending worth more on arrival. Regions that build that breadth tend to get more out of every dollar they attract (research or otherwise), which matters most at the moment those dollars become harder to count on.