School of Management researchers develop index to monitor innovative economic activity

February 4, 2008

DEARBORN / Feb. 4, 2008---Innovative economic activity in Michigan increased 2.8 percent from the middle of 2006 to the middle of 2007, according to a new “innovation index” developed by scholars at the University of Michigan-Dearborn School of Management.

The UM-Dearborn researchers developed the index to track accelerations and decelerations in economic innovation in Michigan based on calculations of employment of “innovation workers,” trends in venture capital, trademark registrations, incorporation activity, small business loans and gross job creation.

The “Innovation Index” is a new project of the school’s Center for Innovation Research, or iLabs. The UM-Dearborn researchers are planning to release the index quarterly to make it more useful for economic policy makers.

They released their first report, on data from the second quarter of 2007, on Feb. 4. “While our index fell in the second quarter of 2007 from the beginning of the year, it was 2.8 percent higher than the second quarter of 2006,” according to Lee Redding, associate professor of business economics and director of the Innovation Index.

On the positive side, federal data showed strong growth in the proportion of Michiganders working as scientists or engineers. “This indicator has improved for four consecutive quarters,” Redding noted.

Venture capital also increased in the state for the strongest quarter since the end of 2004, according to the UM-Dearborn index. And trademarks registered by Michigan companies in the second quarter of 2007 were the highest since the first quarter of 2006.

On the minus side, there were declines in the number of new incorporations in Michigan, in the number of loans arranged by the Detroit office of the Small Business Administration, and in the number of new jobs created in the state during the quarter, according to the UM-Dearborn report.

“Innovation is key to economic growth, and the University of Michigan -- Dearborn Innovation Index has been developed to evaluate innovation activity in the state,” Redding said. The UM-Dearborn index is different than other similar projects because it will be more timely.

“Many innovation studies rely on data from IRS or the census, with delays of two years or more,” Redding said. “We’ve identified a number of economic innovation variables that are available with relatively short delays, making it possible of us to calculate an innovation index for a given quarter five months after the end of the quarter.”

Redding collaborates on the project with Anne-Louise Statt, a lecturer in business economics at UM–Dearborn, and undergraduate student Gary Hein.

They plan to release their analysis of the third quarter of 2007 in March.



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