Fast Facts on California's Innovation Economy

Innovation by the Numbers

California’s economy is one of the 8th largest in the world with a 2013 gross state product (GDP) of $2.2 trillion.  New technologies and constantly evolving systems are a cornerstone of California's global competitiveness.  California's performance on key innovation indicators has consistently ranked the state within the top nations in the world.  As the state emerges from the global recession, there is a need to re-evaluate the state's innovation strengths and shore up areas of weakness.  Below is a current innovation profile of California.

California's Global Economy

In 2013, California's total GDP was $2.2 trillion, as compared to the U.S. total GDP of $16.8 trillion.

If California were a country, its 2013 GDP would be ahead of both the Russian Federation and Italy for 8th in the world.  Worldwide GDP ranking are as follows: United States ($16.80 trillion), China ($9.2 trillion), Japan ($4.9 trillion); Germany ($3.6 trillion); France ($2.7 trillion); United Kingdom ($2.5 trillion); Brazil ($2.2 trillion); California ($2.2 trillion); Russian Federation ($2.1 trillion); Italy ($2.1 trillion); India ($1.9 trillion), Canada ($1.8 trillion); Australia ($1.5 trillion); Spain ($1.3 trillion); and Mexico ($1.2 trillion).

Key Innovation Concepts

The Innovation Economy has four key elements: expertise as in new discoveries, knowledge and insights; interaction in the form of exchange of ideas and surfacing of synergy that creates new business models, marketing plans, or products; diversity to enable the mixing of perspectives to create newer, more robust ideas; and the application of these ideas to proof their value in commercialization.

The next frontier of innovation will require the broader application of "pull" capabilities, where customers can choose and then apply technology to meet their unique needs.   There will also be less reliance on traditional "push" systems where customers have limited choice of end products.  As customer demand becomes more and more difficult to forecast, push systems increasingly fail to deliver.  Other key concepts include:

  • Companies that do best coming out of a recession maintain their commitment levels to innovation, by not cutting back on advertising, training, marketing, and IT. Unfortunately, only 5% of the companies fit this description.

  • New concerns about pollution and climate change will create new opportunities for California’s green technology producers and service providers.

  • A national survey of state responses to innovation found that states are: Building expertise by building strong research capabilities and attracting world-class talent; orchestrating interaction by cultivating strong networks, well-designed research facilities and compact geographical areas; bringing people from diverse knowledge fields and cultures together; making the application or commercialization of research by requiring university-industry partnerships and peer review prior to making investments.

California and the Rest of the Nation

California is ranked 3rd among the 50 states in the 2014 State New Economy Index, an index that evaluates a state’s economy based on factors related to innovation- and knowledge-based industries.  Among other factors, the index reported on:

  • Hi-Tech Jobs: California is 11th in the nation with 6.0% of all jobs in the state being in a hi-tech industry. Other state rankings: Virginia (1st), Washington (2nd), Delaware (3rd), Massachusetts (4th), New York (15th), and Texas (17th).  
  • Fast-Growing Firms: California ranks 2nd among the 50 states in an index that measures the percentage of firms within a state that experience high revenue growth. Other state rankings: Massachusetts (1st ), California (2nd) Virginia (3rd), Maryland (4th), Utah (5th).

Other key data related to California's Innovation and Knowledge-based economy includes:

  • Online Population: California ranks 35th in the nation with 73.5% of households having at least one member of the household using the internet from their home.  This is slightly less than the national average of home internet users of 74.7%.  Other state rankings for home internet users include:  Virginia (1st ), Washington (2nd), Delaware (3rd ), Massachusetts (4th), New York (15th), and Texas (17th).   For accessing the internet either in their home or somewhere else in the community, California ranks 22nd in the nation, with 81.3% of households having home access.  Rankings for other states where users access the internet from either within their home or elsewhere, New York ranks 23rd and Texas falls in at 47th
  • Entrepreneurial Activity: California is 4th in the nation with 0.40% of the population starting a new business, over one-third higher than the national average of 0.28%.  Other states in the ranking include:  1st - Montana (0.61%), 2nd - Alaska (0.47%), 3rd - South Dakota (0.41%), 5th – Colorado (0.38%), 6th – Wyoming (0.37%), 7th – Kentucky 0.36%, 8th - Florida/Hawaii/New Mexico (0.34%), and 9th - North Carolina/Texas/Utah (0.32%).
  • Venture Capital: California far outpaces the rest of the nation in venture capital investment. In 2012, 41% of the 3,143 companies in the U.S. that received venture capital were located in California.  Combined, these firms received over $14.4 billion in venture capital investment, roughly 53% of the $26.7 billion in total venture capital investments made in 2012.  Over half of the venture capital invested into California startups came from California-based venture capital firms.
  • Best Preforming Metro Areas:  Four California metro areas rank in the top 25 cities an index designed to identify the nation's best performing cities including San Francisco-San Mateo-Redwood City (3rd); San Jose-Sunnyvale-Santa Clara (4th); Bakersfield-Delano (19th); and San Luis Obispo-Paso Robles (25th).  The top metro areas in the nation was Austin-Round Rock-San Marcos, TX.

  • High-Tech Growth:  One of the key indications in the Best Preforming Cities Index 2013 is the growth of GDP associated with high-tech firms.  California top 25 ranked large metro areas include:  San Francisco-San Mateo-Redwood City (2nd); San Luis Obispo-Paso Robles (36th); San Jose-Sunnyvale-Santa Clara (49th); and Bakersfield-Delano (118th).  Other rankings among the largest metro areas include Holland-Grand Haven, Michigan (4th); Corpus Christi, Texas (9th); Portland-Vancouver-Hillsboro, Oregon-Washington (13th); Austin-Round Rock-San Marcos, Texas (18th); and San Antonio-New Braunfels, Texas (28th).

  • Patents:California ranks 1st among states in the total number of patents (39,139).  California is 2nd in the nation in patents granted to independent inventors per 1000 workers, at over double the national average. In 2013, there were 302,962 with 147,666 filed in the U.S. and 155,296 filed outside the U.S.

Immigrant Contributions to U.S. Innovation

At least one of the key founders of 25% of technology and engineering companies from 1995 to 2005 was an immigrant.

Over the past decade, immigrants founded venture funds created 450,000 jobs and represented market capitalization of roughly $500 billion.  Five additional jobs are created for every high-skilled VISA (H-B1) due to the high proportion of immigrants working in R&D and exports.

Immigrant inventors are responsible for many international patents including 72% of QUALCOMM's patents, 65% of Merck's patents, 64% of GE's patents, and 41% of government patents.

Foreign Investment & U.S. Based Subsidiaries

California has the highest rate of employment (636 million)by U.S. subsidiaries of foreign companies.

The top 5 regions with the highest foreign owned and affiliated businesses are Gateway Cities (796 establishments), South Bay-LAX (741 establishments), San Fernando Valley (725 establishments), San Gabriel Valley (698 establishments), West Side (415 establishments).

The top 5 cities with the highest concentration of foreign owned and affiliated businesses are Los Angeles (1591 establishments), Torrance (310 establishments), Long Beach (212 establishments), Santa Monica (134 establishments), Pasadena (127 establishments).

California Trade and Foreign Investment Activity

California exported $174 billion in products in 2014 as compared to $168 billion in 2013 and $162 billion in 2012.

California's largest export market is Mexico, where the value of exports totaled $25.4 billion in 2014. After Mexico, California's top export markets in 2014 were: Canada ($18.2 billion); China ($16.1 billion); Japan ($12.3 billion); South Korea ($8.6 billion); Hong Kong ($8.5 billion); Taiwan ($7.5 billion); Germany ($5.4 billion); the Netherlands ($5.4 billion); and India ($5.3 billion).

California's top five exports in 2014 were: Computer & Electronic Products ($42.7 billion); Transportation Equipment ($18.7 billion); Machinery, Except Electrical ($14.9 billion); Miscellaneous Manufactured Commodities ($14.6 billion); and Chemicals ($14 billion).

China is the largest source of imports into California.  The 2013 value of Chinese imports was $130 billion, followed by Japan ($38.3 billion); Mexico ($36.2 billion); and Canada ($26.3 billion).


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