UM-Dearborn index of innovative economic activity in the state fell slightly during the second quarter of 2008

December 8, 2008

DEARBORN Dec. 8, 2008---Innovative economic activity in Michigan fell slightly during the second quarter of 2008, according to an “innovation index” developed by scholars at the University of Michigan-Dearborn School of Management. The index fell to 95.0 in the second quarter, down from 96.0 in the first quarter of the year.

Despite the drop, innovative activity in the state is still significantly higher than it was in the last quarter of 2007, when the index tallied 89.9.

The quarterly index, a project of UM-Dearborn’s Center for Innovation Research, or iLabs, provides a summary measure of economic innovation activity in the state of Michigan. The index tracks economic innovation in Michigan based on calculations of employment of “innovation workers,” trends in venture capital, trademark applications, incorporation activity, small business loans and gross job creation. Of the six indicators, three rose and three fell in the quarter.

“The Index began to show the effects of the national financial crisis in the second quarter,” according to Lee Redding, associate professor of business economics and director of the Innovation Index at the UM-Dearborn School of Management.

The positive indicators included venture capital, employment of “innovation workers,” and the number of trademarks applied for in the state.

“Venture-capital activity rose for the third straight quarter, adding 2.0 points to the Innovation Index,” Redding said. The proportion of “innovation workers,” or those employed in engineering or science fields, also grew slightly, according to data from the Bureau of Labor Statistics.

“Trademark applications also were marginally ahead of their first-quarter level and slightly ahead of the year-earlier number,” according to Redding. “The second quarter’s total was the highest since the first quarter of 2006 and added 0.3 points to the index.”

On the negative side, the number of loans arranged through the Detroit office of the Small Business Administration continued its decline. “This measure peaked in the second quarter of 2006 and has since dropped in seven of eight quarters,” Redding said.

The number of new incorporations, while higher than the year-ago numbers, “declined somewhat from the first quarter number” and subtracted 0.6 points from the index, Redding said.

The largest drag on the index was in “the reported number of new jobs created by new companies or companies adding jobs,” Redding said. While that number totaled 208,000 in the first quarter of 2008, that represents a significant decline from the 226,000 reported in the last quarter of 2007, causing a 2.4 point decline in the index.

(Due to data availability, this item enters the index calculation one quarter late.)

The Innovation Index for the third quarter of 2008 will be released in March.

Redding collaborates on the project with economist Anne-Louise Statt.

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