About Innovation 2.0

More than 50 new measures: Innovation 2.0 expands on the previous index by adding more than 50 new measures. These measures reflect contemporary research on understanding and measuring innovation. For example, the new version of the Innovation Index includes measures that take into account regional knowledge spillovers, technology diffusion and foreign direct investment. The index and its many components and building blocks have a significantly longer time series of data items than the previous index. With the new longitudinal data, there are several new measures of change over time.

An optional social capital index: Version 2.0 includes a “for the first time” index for social capital. Social capital has increasingly captured the attention of many academics and social scientists. Many social scientists hypothesize that social capital—a critical component of which is trust—helps provide the social relationships and networks that foster economic growth.

The Innovation Index provides a set of analytic tools that can help regional leaders reach a strong consensus on regional strategic direction. One can also use these data to see and understand a region’s weaknesses, strengths and potential. In this way, data and analysis can inform stakeholders’ collective action toward a common vision and can guide complex decision-making at a regional-level by analyzing a region’s assets or liabilities in detail.

The vast majority of the data items used in Innovation 2.0 are county-based and can be downloaded by county, MSA and other official statistical area. This tool makes it easy to download a vast quantity of data from multiple data sets in one fell swoop.

The headline Innovation Index is calculated from five major index categories (three based on innovation inputs and two based on innovation outputs). The structure and the calculation of the index is hierarchical, or built up, pyramid-like, from a large foundation of data to the single headline index.

The “headline” index—the one, high-level summary index—is comprised of five major categorical indexes organized thematically. Those five major indexes are built up from several core indexes that are built up from several measures that are also organized thematically along more precisely defined concepts.       

One of the new features in this version of the index is that users may also include the optional Social Capital Index in the calculation of the overall index.

An additional State Context category is displayed as part of the data output.  It is for reference only and not included in the calculation of the overall index because many regions, official or user-defined, cross state boundaries. It includes measures that are important but not available at the county level.

List of Measures by Category

• Human Capital & Knowledge Creation
• Business Dynamics
• Business Profile
• Employment & Productivity
• Economic Well-Being
• Social Capital
• State Context

The Innovation Index headline number combines the five major categorical indexes. Each index is weighted equally, by 20 percent each, if the Social Capital Index is not selected. If the Social Capital Index option is selected, the economic well-being and social capital indexes are each weighted 10 percent. There is a two-fold rationale for this:

1. Social capital is not as well developed as a concept and there is scholarly debate about how to its many facets.
2. The elements of economic well-being are not as directly related to innovation capacity or innovation outcomes as the other categorical indexes. For example, personal income can be augmented by government transfer payments and have nothing to do with a region’s dynamism. In addition, the index values for economic well-being across counties also tend to be higher than the other categorical indexes, largely because there is less dispersion in measures like poverty rate and average unemployment than there is among measures like high-tech employment or R&D expenditures among counties.

View the report for full documentation of all of the measures and their formulas »

Indexes attempt to present complex data simply, somewhat like a dashboard gauge. Understanding what the dashboard is showing may require interpretation. The headline, categorical and core indexes score a region or county relative to the United States on a continuous scale. Users may prefer to compare their regions of interest against other benchmark or peer regions that share characteristics like population density, access to transportation infrastructure or presence of federal research laboratories.

Additionally, the headline index has no simple, unambiguous definition because, at the time of this writing, there is no established statistical relationship between the indexes and desired outcomes. Rather, the headline index is a collection of measures—both input and output—baked into one at-a-glance number. The headline index is an aggregation of underlying major index categories for innovation inputs and outputs. Traditionally, inputs and outputs would not be combined into a single figure. One might suggest that higher levels of innovation inputs would result in higher levels of outputs—they would move together—but it should be acknowledged that the headline index is an aggregation of many contrasting parts that may or may not move in tandem.

The measures for inputs and outputs in the headline and major index categories are theoretically linked. The fact that the measures that measure innovation inputs and outputs in an earlier version of the index tend to move together offers statistical support for joining the two concepts into a single composite, headline index.

Innovation 2.0 uses counties as the primary geography and as the building blocks for regions, including metropolitan areas and economic development districts.