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What's The Relationship Between Innovation And Long-Term Prosperity?

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What's The Relationship Between Innovation And Long-Term Prosperity?
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Is there a relationship between innovation and chances of long-term prosperity?

Intuition would lead one to think there has to be. But, does data support this assumption?

The results are more complicated than counterintuitive. By using three separate reports from WalletHub* and comparing the information on the best small and large cities to start businesses with that of the most innovative states in the U.S., innovation and prosperity's reciprocal relationship is explored.

Understanding Innovation

In an effort to single out the most and least innovative states in the U.S., WalletHub came up with 18 different metrics, including each state’s share of Science, Technology, Engineering, and Math (STEM) professionals; its proportion of science and engineering-degree holders; its numbers for academic research production; patents per capita; R&D spending; venture capital funding; and even internet speed.

These are the 10 most innovative states according to WalletHub:

Overall Rank

State

WalletHub State Innovation Index

‘Human Capital’ Rank

‘Innovation Environment’ Rank

1

District of Columbia

70.87

1

7

2

Maryland

69.82

2

1

3

Massachusetts

69.65

3

2

4

California

62.46

6

3

5

Colorado

59.33

7

5

6

Washington

57.44

5

8

7

Virginia

56.96

4

11

8

Utah

52.43

14

4

9

Connecticut

49.25

8

12

10

New Hampshire

48.43

19

6

Source: WalletHub

Innovation & Business

These are the 25 best small and large cities to start a business according to WalletHub’s study.

Rank

Small Cities

Large Cities

1

Holland, MI

Oklahoma City, OK

2

Carbondale, IL

Salt Lake City, UT

3

Springville, UT

Charlotte, NC

4

East Chicago, IN

Tulsa, OK

5

Jefferson City, MO

Grand Rapids, MI

6

Wilson, NC

Durham, NC

7

Enid, OK

St. Louis, MO

8

Rio Rancho, NM

Austin, TX

9

Clearfield, UT

Amarillo, TX

10

Cheyenne, WY

Sioux Falls, SD

11

Irondequoit, NY

Springfield, MO

12

Hobbs, NM

Raleigh, NC

13

La Vergne, TN

Lubbock, TX

14

Tonawanda, NY

Port St. Lucie, FL

15

North Chicago, IL

Laredo, TX

16

Superior, WI

Lincoln, NE

17

Deer Park, TX

Winston-Salem, NC

18

Big Spring, TX

Houston, TX

19

Maryland Heights, MO

Orlando, FL

20

Grand Island, NE

Fort Worth, TX

21

Minot, ND

Hialeah, FL

22

Deerfield Beach, FL

San Antonio, TX

23

Aberdeen, SD

Tampa, FL

24

Carlsbad, NM

Fort Lauderdale, FL

25

Ogden, UT

Corpus Christi, TX

Source: WalletHub

Surprisingly, there seems to be little correlation between how innovative is a state and a large city’s business–success potential. Among the 25 best large cities to start a business (the ranking considers the 150 most populated U.S. cities), only one, Salt Lake City, Utah, is situated in one of the 10 most innovative states.

Interestingly, Oklahoma, ranked fifth to last (No. 47) in the innovation list, has two of the top five large cities to start a business: Oklahoma City and Tulsa.

Among small cities, the pattern appears to repeat. Holland, Michigan, takes the first spot in the list of best small cities to start a business, even though Michigan ranks only No. 14 in terms of innovation. In fact, among large cities, the No. 5 spot is also occupied by a Michigander: Grand Rapids.

Yet again, Utah looks like the only state that actually supports the correlation hypothesis, with Springville ranking third in the small cities list. Actually, among the 25 best small cities to start a business, only three are situated in one of the 10 most innovative states, and all three are in Utah.

Explaining Complex Phenomena

“2017’s Most & Least Innovative study was conducted on state level, whereas 2017’s Best & Worst Small Cities to Start a Business was conducted on city level,” said Gonzalez in an interview with Benzinga. “The metrics were also vastly different.”

“We did not analyze the innovative nature of cities, just as we did not analyze the best and worst states to start a small business. In order to have an apples-to-apples comparison, the correlation should be analyzed from state level to state level, or from city level to city level,” she concluded.

Despite this, the fact that the best cities to start a business tend to be in less innovative states is, at least, a noteworthy fact.

Maybe innovation brings a more competitive landscape; maybe human resource availability becomes scarce as states climb up the innovation ladder; maybe office space and labor costs escalate quickly…

Needless to say, innovation is complicated and fascinating and is fostered by people first and foremost, not geography.

*Please note: As Gonzalez explained, in no way is this piece “supported or advised by WalletHub.”

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