Innovation and Entrepreneurship Report Card
Virginia Performs tracks a number of broad indicators of Virginia's economy, including employment and income. The Innovation and Entrepreneurship (I and E) Report Card is designed to enhance our understanding of the factors behind these and other key economy outcomes and to strengthen the foundations for future prosperity in the Commonwealth.
Entrepreneurship and innovation help drive economic competitiveness and figure prominently in economic development strategic planning. Innovation – the introduction of new ideas, processes, or products – helps create new businesses and spurs existing businesses to create more value for their customers. Entrepreneurs are the agents who capitalize on innovation to start and expand businesses.
This report card identifies many of the key drivers for both encouraging innovation and tracking its economic results. The report card also complements the information found in our Innovation and Entrepreneurship indicator and echoes some of the detailed performance assessment being done on the individual state agency level.
View a hi-res print version of this report card: print PDF
Report Card Goals
The Report Card identifies six goals important for innovation and entrepreneurship:
- Expand and enhance Virginia's high-quality, highly skilled workforce
- Increase support for the research and development activities that provide a foundation for high-tech growth
- Improve access to capital for new and expanding high-tech enterprises
- Accelerate the introduction and growth of new technologies and derived from research in Virginia
- Enhance Virginia's business climate for entrepreneurs and high-growth technology enterprises
- Accelerate technology-based capital investment and job growth
How Is Virginia Doing?
Virginia leads the nation on several Innovation and Entrepreneurship indicators. Among them are Fastest Growing Firms and High-tech Employment Share. The total number of Inc. 5,000 firms in Virginia rose from 276 in 2015 to 328 in 2016, the highest total since 2011. As a percentage of total employment, high-tech employment remained high at 13.4 percent in 2014, well above the national average of 7.3 percent. High-tech employment is considered an asset for at least two reasons: High-tech firms typically evince a high degree of innovation and churn, and high-tech jobs pay significantly higher wages and salaries than many other industries.
Traditionally, the Commonwealth has benefited from a positive net migration rate, with more college-educated workers moving to the state than leaving. However, in recent years that net migration rate of educated workers has turned negative, with rates of -1.9 percent and -1.1 percent in 2014 and 2015, respectively.
Research and development is a key input for innovation and in many cases can foster new business development. Virginia's State R&D Intensity — state R&D performed as a percentage of the state gross domestic product—ranks 21st among states at 2.3 percent in 2012. This falls below the national average of 2.7 percent and significantly lags behind leading state New Mexico (6.7%). In fact, R&D measures at every level of funding (federal, business, university, and non-profit) have worsened each year since 2008 -- even after the return in recent years to more upbeat economic environments.
The Report Card also tracks Federal R&D Spending, Corporate R&D Intensity, and Academic R&D Spending, all of which complement the State R&D Intensity indicator. Taken as a whole, these measures show mixed progress: Federal R&D spending in Virginia improved from 1.4 percent of Virginia's gross domestic product in 2013 to 1.6 percent in 2014. On the other hand, corporate R&D intensity declined to 1.2 percent of total private industry output, down from a 2011 peak of 1.6 percent. Academic R&D spending has remained stable at about 0.3 percent of the state's gross domestic product each year from 2011 to 2014.
In recent years, economic development efforts have focused on bringing research and development at our state universities to market through licensing and sales. Improvements are being made in the university environment for commercialization, with the number of student-founded startups increasing from 89 in 2015 to 114 in 2016 and the number of faculty-industry consulting relationships rising from 170 to 397 over the same time period.
For further discussion of these and the other metrics on the Innovation and Entrepreneurship Report Card, please visit the Center for Innovative Technology's Innovation and Entrepreneurship Measurement System (IEMS).
Changes in Performance this Quarter
Trend changes on the report card from the fourth quarter of 2016 are as follows:
Maintaining to Improving: Fast Growing Firms
Improving to Maintaining: Startups, R&D Tax Credits
Improving to Worsening: Establishment Churn, Public Sector Investment