Innovation Index

Texoma Innovation Index & Analysis

Economic innovation is multifaceted concept that is a vital component for economic growth and long term economic health. The Economic Development Administration (EDA) recently sponsored the creation of an Innovation Index that compares regional performance to the United States. Measuring regional innovation can be tricky and this follow information should be reviewed as one of many perspectives and snapshots that describe Texoma. The Innovation Index is a composite of many sub-measures that ultimately help to provide a better understanding of the economic health and vitality of the region. No single measure in the Innovation Index is likely to explain the complex relationships and causalities among other measures. The Innovation Index seeks to provide understanding by creating a composite of broad categories of measurable outcomes that logically lead to an innovative cultural economy.

JUMP STRAIGHT TO TEXOMA’S INNOVATION SCORE

Innovation Index

Innovation Index

Innovation Index Components

This index is structured to reflect the dynamics of four broad areas of innovation: human capital, economic dynamics, productivity and employment, economic well-being. These subcategories are inputs to the overall calculated Innovation Index Score. The weight for each subcategory is 30 % human capital, 30% economic dynamics, 30% productivity and employment, and 10% economic well-being. The data used in each subcategory was derived from varied sources: both official government statistical agencies and several private sources, including Moody’s economy.com, Innovation Economy 360, and Economic Modeling Specialists, Inc. (EMSI).

In updated research using a descriptive cross-sectional regression model, the research team found that the following indicators have a positive and significant relationship to increases in GDP per worker:

  1. Change in high tech employment share
  2. Average small establishments per 10,000 workers
  3. Percent of population, ages 25-64, with some college or an associate’s degree
  4. Population growth rate for ages 25-44

*per 10,000 Workers

The Innovation Index is designed to highlight factors that indicate a region is more or less ready to participate in the knowledge economy. The index is not by itself intended to directly guide decisions about investments in the region as the data used to calculate the analysis may not be the latest available and, therefore, unable to reflect recent events in Texoma.

Analysis

Interpreting the Innovation Index (also referred to as the portfolio index) can get complex given its broad, multi-metric nature with both innovation inputs and outputs. In order to identify those specific factors with the greatest influence on economic growth, while controlling for some non innovation factors, the Innovation Index research team statistically analyzed the innovation input data. Interpreting the results is simpler than the portfolio approach because there is only one output measure–economic growth (i.e., GDP per worker growth).

Innovation Index

Texoma’s Innovation Index score is 86.6 and scores higher than the State of Oklahoma but lower that the State of Texas. The U.S. Innovation Score sets the curve for relation on all state and regional index scores. These scores are shown in the above graph. A closer look at the four sub components of the index helps explain areas of strength and weakness that affect the overall Texoma economy’s innovation index score.

Human Capital Sub-Component

Human Capital measures those characteristics that describe the ability of the population and labor force to innovate. The human capital measurement is comprised of figures on regional educational attainment, population growth rate, an analysis of six chosen technology based knowledge, occupation clusters, and lastly, high tech employment in areas that highlight the region’s capacity to generate innovative products and processes or the ability to augment local innovative capacity by attracting new firms and new talent.

Texoma’s human capital sub-component is fairly comparable to regions in Texas. Texoma’s strengths in human capital are in the areas of educational attainment and high tech employment share. Educational attainment has a significant impact on per capita GDP of region and a large number of Texomans have at least some college and an associate’s degree when compared to state and national averages. 35 percent of Texoma residents have some college or associate’s degree while Texas and U.S. averages are 29 percent.

The high-tech employment measurement is of note in this analysis. As a region, Texoma almost exactly matches state trends in high-tech employment from 1997-2006. Although the nine-year average is above the nation’s average, Texoma and Texas alike are experiencing a decline in high tech employment share. Between 2002 and 2006, the average high tech employment share dropped to 4.3 percent, while the national share remained constant. The nine year average reflects the fact that employment share was much higher in Texoma between 1997 and 2001 when the region had 5.9 percent of employment in the defined technology-based fields.

Economic Dynamics

Economic Dynamics measures local resources available to county entrepreneurs and businesses that encourage innovation close to home. The economic dynamics of Texoma are gauged by measuring inputs that encourage innovation close to home. Texoma’s economic dynamic score of 79.9 is derived from the region’s research and development activity, venture capital investments, broadband density, the region’s ‘churn‘ rate (a measurement of firm’s growth and contractions and number of births and deaths), and business sizes. Texoma does not lag far the state in economic dynamics, indicating that local business conditions and resources available to entrepreneurs and businesses are present and being utilized.

Productivity and Employment

Productivity and Employment describes economic growth, regional desirability, or direct outcomes of innovative activity. Variables in this sub index suggest the extent to which local and regional economies are moving up the value chain and attracting workers seeking particular jobs. Texoma scored 83.5 on the productivity and employment sub-index based upon the region’s high-tech employment share growth, job growth-to-population growth ratio, patent activity, and gross domestic product calculated using the level of each county’s current-dollar GDP per worker
and the growth in the value over the past decade.

Although Texoma is faring well in this measurement of productivity and employment when compared to Oklahoma and relatively well compared with the state, there are areas of concern highlighted by the factors measured in this sub-index. The percent change in high-tech employment between 1997 and 2006 declined at a much higher percentage than the other compared geographic areas. Texoma experienced a 5.8 percent decline in high-tech employment share during this period while Texas and the US only saw a 2.0 percent and 0.7 percent decline respectively. Since 2006, this trend has continued with major high-tech employers, such as MEMC and Texas Instruments, announcing facility closures or workforce reductions over the last few years. Such a decline has significant effects on the region’s GDP per worker growth, an important measure of regional innovation in this study.

Economic Well-Being

Economic Well-Being is a measurement of the outputs associated with innovative economies that cause residents to earn more and have a higher standard of living. Decreasing poverty rates, increasing employment, in-migration of new residents and improvements in personal income signal a more desirable location to live and point to an increase in economic well-being.

Positive indicators present in Texoma’s Economic Well-Being score of 99.4 include the region’s relatively low poverty rate and high average net migration. Texoma has a lower poverty rate than the state of Texas and Oklahoma between 2003 and 2005. Although this is a positive sign for regional equity, growth in compensation is lagging behind Texas and Oklahoma. The change in average proprietor’s income between 1997 and 2006 was only 2.7 percent in Texoma while Texas and Oklahoma experienced a 7.3 percent and 4.9 percent growth during the same period.