North Carolina’s Innovation Performance Continues to Improve Ninth edition of the state’s ‘Tracking Innovation’ report points out additional ways more sectors and regions could improve

North Carolina continues to make progress in its overall innovation capacity, a key driver of economic vitality, and keeps pace with the U.S. overall. However, to increase the level of prosperity throughout the state, a larger share of the state’s economy must transition to embrace and drive innovation, according to the latest edition of a closely watched report on innovation in North Carolina.

The 2024 Tracking Innovation report, the ninth edition in a long-running series first published in 2000, was released today by the North Carolina Board of Science, Technology & Innovation. The report rigorously evaluates the state’s standing against other states in the country on 42 measures of innovation capacity and outlines ways to advance the state’s economy by encouraging and harnessing innovation. New in this year’s edition is the introduction of an additional metric to provide insight on how states compare to one another, a new method of classifying innovative industries, a measure of the formation rate of innovative businesses, two measures of gender and ethnic diversity in innovative industries, and a county-level digital divide index related to broadband access.

“Faced with a dynamic and competitive economy, the best approach is to shape it rather than be shaped by it. We must continue to innovate—to create and adopt new products, services, and business models that add value and improve economic well-being,” said North Carolina Commerce Secretary Machelle Baker Sanders. “This report confirms that North Carolina’s innovation capacity is stronger than ever, but it also shows where we must continue to improve to increase the level of prosperity throughout the state.”

“Technology and innovation are key ingredients of a high-productivity, high-employment, high-income, growing economy,” said Janet Cowell, Chair of the North Carolina Board of Science, Technology & Innovation. “As this report shows, North Carolina has achieved a leading role in the “basic” and early-stage “applied” research that forms the foundation for breakthrough innovations. But it also shows that we have room for improvement in scaling and converting those innovations to commercial uses and in ensuring that more sectors and regions of our state participate in and benefit from that activity.”

North Carolina sees continued strength or gains on several key innovation measures in the report:

• Academic R&D as a share of state gross domestic product, long a strength of North Carolina, remains strong, with the state currently ranked 6^th in the country.
• Business R&D as a share of gross domestic product increased at nearly twice the rate of the U.S. average since 2000, currently ranking 10^th. While good news, the state still ranks below the national average on this measure, so increasing R&D activity in industry offers a significant opportunity to increase North Carolina’s overall innovation capacity.
• Federal non-dilutive Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) funding for North Carolina early-stage tech companies has increased six times faster than the U.S. average since 2000, now exceeding the national performance rate and ranking 14^th among states.
• University academic license income and start-up company activity have improved to levels above the national average, but other innovation commercialization resources and activities, such as venture capital and patents, remain below average and must be stronger to realize the full economic and social benefits of that intellectual property.
• The percentage of business establishments classified as knowledge- and technology- intensive (KTI) increased by 97 percent in North Carolina since 2000, more than twice the U.S. rate, and they are increasing in employment and have wages that are above the national average for all industries. The state also has well above-average gender diversity and above-average ethnic diversity in KTI industries.
• The percentage of the state’s workforce in science and engineering occupations increased by 50 percent since 2003, faster than the rate of increase for the U.S. overall and ranking above the U.S. average. Employed science, engineering, and health (SEH) doctorate holders as a percentage of the workforce also increased faster and rank higher than the national average.
• Average educational attainment of the state’s adult population has increased at a rate faster than the U.S. overall, driven in part by a higher-than-average influx of college-educated adults.

The Tracking Innovation report does identify additional areas for improvement, particularly the need to build the state’s innovation capacity beyond the state’s current innovation hubs, which are centered around North Carolina’s major research universities or population centers, as well as the importance of broadening the state’s strengths to a more diverse set of high-tech sectors.

Elementary and secondary public school current expenditures also lag well behind national averages, and broadband access still remains below the U.S. average, with considerable variations in access levels across the state.

The full text of the new report can be found online, and requests for information or presentations should be directed to the Board of Science, Technology & Innovation Executive Staff. More information about North Carolina’s Board of Science, Technology & Innovation, can be found at commerce.nc.gov/about-us/boards-commissions/board-science-technology-innovation.