Time to Get Serious About Reinvigorating the Mass. Tech Economy?

Mass Insight releases a report today, produced by McKinsey & Co., on how Massachusetts can remain a leader in the IT, communications, and defense industries.

(I wrote a short sidebar in the report, focusing on what we can do to build a bridge between college students and the innovation economy here.)

From the executive summary:

Despite the success of the technology sector, there are troubling trends that need to be addressed for Massachusetts to maintain and enhance its leadership position in high-tech and defense. First is growth, which fell to 4.3 percent annually between 2001 and 2006, only one-third the rate of the previous 5 years. Moreover, virtually all the growth over the last 10 years was productivity-driven: since 2001, information technology, communications and defense companies in Massachusetts shed a net 64,000 jobs, about a 3.5 percent drop in sector employment and nearly double the rate of job loss across the overall U.S. ITCD sector. The largest losses have been among high-value-added workers, including engineers and managers, suggesting an erosion of the Commonwealth’s tech leadership.

Indeed, more alarming than slowed growth is the state’s declining influence in the global high-tech sector. The time when Route 128 held an equivalent position to Silicon Valley in public perception is fading from memory. Through mergers, acquisitions and attrition, the roster of Fortune 1000 tech companies headquartered in Massachusetts has fallen from nine to six since 2002. In the same period, California saw a net gain of three, bringing its total to forty-two. Massachusetts has also fallen behind in the creation of new tech companies, with the relative number of company births declining from 11.4 percent of all ITCD establishments in 2002 to 9.9 percent in 2004. While California, New York and Washington have seen increases in high-tech venture investments since 2002, VC investment in Massachusetts has continued its drop from the dot-com bubble, particularly in early-stage companies.

The report has some suggestions for new strategies... some of which you may agree with (or not). Very much worth a read if you're interested in our state's continued competitiveness.