You are here

Key Concepts

California's Capacity to Innovate

An analysis of California's current capacity to support innovation begins with an understanding of existing attitudes and resources of stakeholders. California has a very diverse population of 38.3 million (11.5% of the US) speaking 232 languages and dialects. No ethnic group represents more than 50% of the population, however, the working age majority is comprised of individuals who classify themselves as Hispanic.  California is also home to a significant number of immigrants and is generally considered to have the largest immigrant population of any county's outside its borders.

The California economy is the ninth largest in the world and is the recipient of the largest amount of foreign direct investment (FDI) in the US, the US being the largest receiver of FDI in the world. California’s gross state product is $2.2 trillion, exporting $172 billion in goods in 2014, including computer products, entertainment, agricultural products, chemical production and aerospace. It is estimated that California contributes to 1.5 % of all greenhouse gas emissions in the world. California is also a growing market for sustainable products.

A significant driver of the California economy is small businesses (less than 100 employees), which represent nearly 98% of all businesses and 38% of all employment. California has more minority-owned businesses than any other state in the US.  California has a premiere public and private university system with world-class research capability, which has historically served as a catalyst for innovation whether working individually or collaboratively with other public and private institutions and businesses.  California is also the leading state for the filing of patents – 36,193 total patents were granted in 2013, with the next closest being Texas with 9,222 patents issued.

In looking forward, California’s innovation policy should include consideration of its diverse population and a heavy reliance on its research community, inventors, and owners and workers in small businesses. It must also reflect the opportunities and interests of the global community, where addressing the needs of key innovation players: Inventors and researchers (university and private sector), Investors, Businesses and distributors, and Consumers (private and public).  [more information]

Several of the most important financial tools governments have to target these players include: (a) corporate and personal tax rates, credits, deductions and depreciation schedules; (b) local site development incentives; and (c) grants, loans and rebates.  In addition, the state has a number of non-financial incentives including: (a) construction and design standards (performance v. technology); (b) contractor licensing standards; (c) regulatory streamlining; (d) legal disclosure requirements; (e) individual and aggregate purchasing options; and (f) standards and authorities for interconnections with existing technologies and facilities.  Both the federal and state governments have implemented new policies and programs to spur growth.  Here is a list of federal initiatives and here are links to more information on legislation and reports

The state also plays a pivotal role in providing appropriate physical infrastructure to support innovation and to grow future inventors and entrepreneurs. For California, this means increasing educational attainment, especially among ethnic-minority students as well as providing well-articulated career pathways between K-12 and higher education. California’s dramatic demographic shift in the past several decades will ultimately be one of its greatest strengths. As many developed countries begin to have significant imbalances between the number of working age persons versus those over 65, California’s diverse population includes many cultures which statistically have higher birth-rates than Anglo non-Latinos.

Copyright © 2011 State of California