March 31, 2004 2:47 PM PST

California risks losing tech edge, study says

California retains much of its allure as a tech center, but other states are chipping away at its technology edge, a new report says.

Among the assets of the Golden State, home to Silicon Valley, are strong technology clusters, a venture capital foundation and an excellent higher-education system, while in the debit column is a declining ability to attract academic research funds, according to a study released Wednesday by The Milken Institute, based in Santa Monica, Calif.

A key setback for California was a drop in the number of business starts per capita. In that index of the Milken study, the state fell from sixth in the 2002 index to 13th in 2004. Also, the percentage of residents with a bachelor's degree or higher is dropping, the report said.

In the overall 2004 rankings, California was the No. 2 state, behind Massachusetts. Rounding out the top five were Colorado, Maryland and Virginia. Rhode Island made the biggest leap, from 21st in 2002 to 11th this year, while Texas had the biggest drop, from 14th to 23rd.

The report warned California policymakers to take action to keep the state's allure bright--especially by increasing funding of science and technology in its university systems, something other states have made a top priority.

"We must resolve the state budget crisis in a manner that does not restrict long-term investments in technology and science," Ross DeVol, director of regional economics at Milken, said in a statement. "If we consume our seed capital to fill short-term holes in our budget, we will have committed an egregious error."

Meanwhile, other states are buffing up their image. A government commission in Maryland, for instance, has created one of the most forward-looking plans for technology-based economic development in the country, the report said.

And top-ranked Massachusetts placed well above California in Milken's R&D index. The Bay State is also on top, in terms of total funds in industrial scientific research and development, and in venture capital dedicated to biotechnology and the medical-device industry.

The states were ranked on 75 separate measurements in five categories: R&D; risk capital and entrepreneurial infrastructure; human capital investment; technology and science work force; and technology concentration and dynamism.

 

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