The 2009 Index of the Massachusetts Innovation Economy benchmarks the performance of Massachusetts' innovation economy against other leading technology states. This year's Index shows that while Massachusetts is a world leader in research and development, some countries are increasing their R&D intensity faster. Key industry clusters in Massachusetts were less impacted by the economic downturn compared to other sectors, and the state's median household income remained higher than the US average. However, the Index also finds that Massachusetts high school students show less interest in STEM fields relative to their performance in math and science, and that more can be done to support new business formation throughout the state.

1. Index
00 of the
Massachusetts
Innovation
Economy

2. The Index of the Massachusetts Innovation Economy,
published annually since 1997, is the premier fact-based
benchmark for measuring the performance of the
Massachusetts knowledge economy.

3. Message from the Governor
Dear Friends:
It is my pleasure to introduce the 2009 Index of the Massachusetts
Innovation Economy. The Index, published annually by MTC’s John Adams
Innovation Institute, is the Commonwealth’s instrument to benchmark our
research and innovation enterprise against other leading technology states
and nations and better understand its impact on the state’s economy.
The Index highlights key trends and themes affecting the state’s Innovation
Economy and helps inform fact-based decision-making among Massachusetts’
policymakers, industry practitioners, and academic leaders. This year, as the global recession
continues to present challenges to people in communities throughout the state, we have become
more aware than ever of how the state’s research and innovation enterprise is a source of renewal
and resiliency in times of crisis.
This year the Index offers further evidence of our pride in being a world leader in research and
innovation. At the same time, it highlights areas of concern. The Index makes it clear, for example,
that many high school students in the state lack an interest in pursuing science, technology,
engineering and math (STEM) careers. In response to this challenge, last October we established
the STEM Education Advisory Council to help coordinate initiatives, resources and goals among
STEM advocates from the public and private sectors.
Like every year, the Index serves as a reminder of the need to engage in creative efforts to
expand the opportunities of the Innovation Economy to more communities and citizens across
the state. A promising initiative in this regard is the historic collaboration between leading
research universities, corporations, and state government to establish a Green High Performance
Computing Center in Holyoke. This initiative has the potential to catalyze a revival of that city’s
economy and transform the economic development trajectory of the Pioneer Valley.
I am encouraged by a renewed spirit of collaboration that is bringing together citizens and
leaders from industry, academia, and government. As the Commonwealth continues on the
road to sustainable prosperity, let us keep working together with confidence to strengthen
Massachusetts’ position as a global hub of research and innovation.
Sincerely,
Governor Deval Patrick
2009 Index of the Massachusetts Innovation Economy 1

4. The Massachusetts Technology Collaborative
The Massachusetts Technology Collaborative is a public economic
development agency chartered by the Commonwealth to
promote new economic opportunity and foster a more favorable
environment for the formation, retention, and expansion of
technology-related enterprises in Massachusetts.
MTC serves as a catalyst in growing the knowledge- and
technology-based industries that comprise the state’s Innovation John Adams Innovation Institute
Economy. It is working with major healthcare organizations to
implement e-health solutions that save lives and reduce costs.
The agency is aggressively pursuing federal funding to support As the economic development division of the Massachusetts
economic development in Massachusetts through the American Technology Collaborative, the Innovation Institute is the
Recovery and Reinvestment Act of 2009. MTC’s rich history of Commonwealth’s leading science, technology, and innovation
successfully managing complex projects that involve significant policy agent which fosters the vitality and capacity for self-renewal
public and private investment have positioned the agency to of the Massachusetts Innovation Economy. We work to ensure the
serve as an important conduit for infusions of funding into the health and vibrancy of the Massachusetts innovation ecosystem.
Commonwealth.
Working closely with academics, industry practitioners and
Working through its major divisions—the John Adams Innovation government officials, region by region and sector by sector, the
Institute, the Massachusetts e-Health Institute, and the Innovation Institute’s mission is to enhance the capacity of the
Massachusetts Broadband Institute—the agency is strengthening Massachusetts economy to sustain an ongoing flow of innovation
the innovation economy by supporting and expanding economic which is crucial to create, attract, and grow companies in emerging
clusters. and established industries.
To fulfill our purpose, the Innovation Institute partners and
invests with academic, research, business, government, and civic
organizations that share the vision of enhancing the Massachusetts
Innovation Economy.
Our main target areas for partnership and investment include:
• Organizing for Innovation
• Innovation Capacity
• Statewide Innovation Initiatives
• Understanding the Massachusetts Innovation Economy
2 John Adams INNOVATION Institute

5. Table of Contents
Message from the Governor ................................................................................................................................................................. 1
Introduction and Highlights ................................................................................................................................................................. 4
Massachusetts’ Performance at a Glance ............................................................................................................................................ 6
Massachusetts in the Global Economy
Introduction to the Special Analysis ............................................................................................................................................. 8
Why "Massachusetts in the Global Economy"? ......................................................................................................................... 10
Michael Greeley, Flybridge Capital Partners ...............................................................................................................................12
Pascal Marmier, swissnex Boston, Consulate of Switzerland .................................................................................................... 14
David Meeker, M.D., Genzyme Corporation .............................................................................................................................. 16
Harry West, Continuum ............................................................................................................................................................... 18
Bernd Widdig, Boston College .................................................................................................................................................... 20
The Massachusetts Innovation Ecosystem ......................................................................................................................................... 22
Indicators
Construction of the Indicators..................................................................................................................................................... 25
ECONOMIC IMPACT
1. Industry Cluster Employment and Wages .................................................................................................................... 26
2. Occupations and Wages ................................................................................................................................................ 27
3 Household Income ......................................................................................................................................................... 28
4. Productivity .................................................................................................................................................................... 29
5. Corporate Sales and Manufacturing Value Added...................................................................................................... 30
6. Manufacturing Exports.................................................................................................................................................. 31
INNOVATION ACTIVITIES
Research
7. Research and Development Performed ...................................................................................................................... 32
8. Corporate R&D Expenditures, Publicly Traded Companies ......................................................................................... 33
9. Academic Article Output ............................................................................................................................................... 34
10. Patenting ........................................................................................................................................................................ 35
Technology Development
11. University Technology Licensing ................................................................................................................................... 36
12 Small Business Innovation Research Awards ................................................................................................................ 37
13. Regulatory Approval of Medical Devices and Biotechnology Drugs ......................................................................... 38
Business Development
14. Business Formation ........................................................................................................................................................ 39
15. Initial Public Offerings and Mergers & Acquisitions ................................................................................................... 40
INNOVATION CAPACITY
Capital
16. Federal Funding for Academic, Nonprofit, and Health R&D .......................................................................................41
17. Industry Funding of Academic Research ...................................................................................................................... 42
18. Venture Capital .............................................................................................................................................................. 43
Talent
19. Education Level of the Workforce ................................................................................................................................ 44
20. K-16 Education ................................................................................................................................................................ 45
21. Public Investment in K-16 Education............................................................................................................................. 46
22. Science, Technology, and Engineering Career Choices and Degrees ......................................................................... 47
23. Information Technology Professionals in the Workforce ........................................................................................... 48
24. Talent Flow and Attraction............................................................................................................................................ 49
25. Housing Affordability .................................................................................................................................................... 50
Appendix A: Data Sources for Indicators and Selection of LTS ........................................................................................................51
Appendix B: Industry Cluster Definitions ......................................................................................................................................... 57
2009 Index of the Massachusetts Innovation Economy 3

6. Introduction and Highlights
Introduction
The Index of the Massachusetts Innovation Economy is When compared to countries around the world,
an annual opportunity to assess the Commonwealth’s Massachusetts comes out on top in terms of the amount
economic progress and its changing competitive of research and development performed as a percent
position. Through 25 indicators, the Index gives a of gross domestic product. However, many regions
comprehensive view of several dimensions of the around the world are quickly catching up. This is most
innovation ecosystem. Using a rich set of US-based notable in South Korea, where the R&D intensity
data sources, the Index benchmarks Massachusetts of the economy is growing at a rate higher than in
against nine Leading Technology States (LTS) to reveal Massachusetts. In 2004, South Korea surpassed the US
relative strengths and weaknesses. The nine LTS chosen average in R&D as a percent of GDP.
for comparison in the 2009 Index are California,
Connecticut, Illinois, Maryland, Minnesota, New Jersey, The key industry clusters of the Innovation Economy
New York, Pennsylvania, and Virginia. were less susceptible to the economic perturbations
caused by the financial crisis than other sectors of the
To gain the nuanced perspective that only practitioners Massachusetts economy.
can provide, the Index also hosts guest commentaries
from thought leaders working at the frontlines of Jobs in the key innovation industry clusters were lost
innovation throughout the Commonwealth. Through at about half the rate as in the economy as a whole.
the commentaries we also seek to highlight a subject Consequently, Massachusetts’ key clusters of the
matter of current relevance to decision makers Innovation Economy continued to rise as a share of
across the Commonwealth. This year the theme is total employment. They also provide a large portion of
Massachusetts in the Global Economy, taking up once the high-skill, high-wage jobs. In these ways, the core
again a subject first discussed in the 2007 edition. To clusters of the Innovation Economy have contributed to
further complement this perspective, the 2009 edition Massachusetts comparative economic stability among
includes international comparisons throughout the the states. In Massachusetts, there was a 6% decline
indicators where quality data are available. total wages and salaries paid in inflation-adjusted
dollars from the last quarter of 2007 to the second
quarter of 2009 – a smaller decline than the US or LTS
Highlights average.
The 2009 Index reveals a Massachusetts economy that Massachusetts shows no signs of a retreat from
is world-class by many measurements, leading in key innovation.
indicators and cushioning the Massachusetts economy
from some of the harshest effects of the current In this year’s Index, there is evidence of confidence
economic downturn. However, the Index also reveals in the research and innovation enterprise. Last year,
several weaknesses that suggest avenues for improving data raised concerns about declining performance
performance. across some measures of early-stage innovation
activity, particularly patents and pre-market regulatory
Massachusetts is a world leader in research and approvals of medical devices. However, this year’s Index
development (R&D); however, some countries are shows better performance on these measures. From
making large gains in this arena. 2007 to 2008, patenting held steady in Massachusetts
while patenting declined nationally. Massachusetts
R&D as a percent of GDP, international and companies also had more pre-market approvals of
Massachusetts, 2003–2007 medical devices than any of the other LTS in 2008,
more than making up for the absence of approvals in
6% 12% 2007. Other signs of confidence include a nearly 50%
5%
2002-2005 average J 10% rise from 2002 to 2007 in industry-performed R&D as
J Average Annual J a percent of private industry output, a record high in
4% 8%
Growth Rate ( AAGR) J J 2008 in corporate R&D expenditures by publicly-traded
2002-2005 average
3%
J 6% companies based in Massachusetts, and the lead among
AAGR
2%
J
4%
the LTS in R&D performed by academic and nonprofit
J J research institutes as a share of GDP. R&D at these
J J
1%
J J
2%
institutions totals $4.5 billion and rose 16% in inflation-
0% J 0% adjusted dollars from 2002 to 2007.
J J
-1% J J -2%
J
-2% -4%
MA
Israel
Sweden
Finland
Japan
Iceland
S. Korea
US
Denmark
Germany
Austria
Singapore
Australia
China
Montenegro
South Africa
India
Hong Kong
Source: United Nations Educational, Scientific and Cultural Organization (UNESCO)
and the National Science Foundation
4 John Adams INNOVATION Institute

7. New business formation is expected to be a critical Massachusetts’ score in attracting and retaining
element of economic recovery as Massachusetts population is the best it has been in a decade.
emerges from recession.
Enhancing the environment for new business formation Migration in and out of Massachusetts, top regions, 2006–2007
needs to be a key element of any strategy for economic
recovery. Historically, new business formation accounts TX GA
for 30-45% of all new jobs. The sharp increase in new ME CA
business formation in 2007 was consistent with other
indicators tracked in the Index which showed renewed
strength in many of Massachusetts’ key industry clusters VA NC
beginning in 2007 and going into the most recent
recession. The 2009 Index shows that Massachusetts
lagged behind most of the LTS in creating new IL MA NH
businesses and the resulting new jobs coming out of
the 2001 recession. While the Greater Boston area
has long been viewed as a hotbed for new business PA Abroad
formation, this data suggests the need to enhance
the entrepreneurial environment throughout the
Commonwealth coming out of the recession. NJ RI
NY CT
Total Venture capital (VC) flows have receded but
VC investment in startup and early-stage firms is the
highest it has been in years. Source: The Internal Revenue Service, based on exemption numbers
Venture capital investment by stage of financing,
Massachusetts, 2004–2009 In 2008, the number of people who relocated to
Massachusetts outnumbered those moving out for
600 the first time in six years, reaching levels comparable
Later Stage
Expansion to those attained in the mid to late 1990s. For years,
500 Early Stage Massachusetts had been doing well at attracting highly-
Millions of 2008 Q4 dollars
Startup/Seed educated people, but losing population overall.
400
High school seniors in Massachusetts express below
300 average interest in fields essential to the Innovation
Economy.
200
Despite above average scores in math and science
100
advanced placement tests, high school seniors in
Massachusetts express below average interest in
engineering, computer & information science and
0
health & biological science degrees. This is especially
2004-1
2005-1
2006-1
2007-1
2008-1
2009-1
2009-4
significant since Health; Life, Physical, & Social Sciences;
and Information Technology are among the fastest
Source: PricewaterhouseCoopers MoneyTree Report growing occupational groups in the state. Employment
growth was positive in these occupational groups from
2003 to 2008 and employment is growing faster in
Nationally, the dollar amount raised by venture funds
these groups than in the US and LTS on average.
dropped 57% in the last quarter of 2008 and remains
low. Not surprisingly, the amount of VC invested in
Massachusetts-based firms was 35% lower in 2009 than
in 2008. However, the amount of VC investment going
to startup/seed and early stage firms in Massachusetts
was higher in the last three quarters of 2009 than
in any quarter in over ten years. The 3rd quarter of
2009 stands out as the highest quarter of startup/seed
investments in recent history, at which time over $161
million was invested in new businesses.
2009 Index of the Massachusetts Innovation Economy 5

8. Massachusetts Performance at a Glance
US AVERAGE
1/ 10x 1x 10 x
The Index examines the Economic Impact
Massachusetts Innovation Industry Cluster Employment & Wages
% of employment in key clusters
Economy through 25 Average cluster wages
indicators. This chart provides
an overview of the direction
Occupations & Wages
of year-over-year change for
% of employment in life, physical, and social science
Massachusetts. % of employment in information technology
% of employment in education
Direction of Year-Over-Year % of employment in professional and technical
Change for Massachusetts
up Household Income
Median household income
down
Wages and salaries paid per worker
The chart also depicts
Massachusetts' performance Productivity
GDP per employee
on each indicator relative to Manufacturing value added per manufacturing employee
the performance of the
Leading Technology States Corporate Sales & Manufacturing Value Added
(LTS). The chart shows Corporate sales
Massachusetts' performance Manufacturing value added
as a fraction of the US
average. Manufacturing Exports
Manufacturing exports as % of GDP
All comparisons are per Research
Research and Development Performance
capita except where
R&D performed by hospitals, universities, & nonprofits
otherwise indicated. Private industry R&D intensity
MA and the LTS compared Corporate R&D Expenditures, Privately Traded Companies
to the US Average Corporate R&D intensity
LTS Range
MA Academic Article Output
Academic article output
Together these chart
elements reveal the complex Patenting
Patents
picture of Massachusetts’
Technology Development
performance. Massachusetts
University Technology Licensing
may rank at the top of the Licenses and options executed by hosp., univ., & nonprofits
LTS on an indicator, but still
have declined in the most Small Business Innovation Research Awards
recent year of data. Number of SBIR awards
Regulatory Approval of Medical Devices and Biotechnology Drugs
Med. device pre-market notifications
Med. device pre-market approvals
Biotech drugs in development
6 John Adams INNOVATION Institute

9. US AVERAGE
1/ 10x 1x 1 0x
Business Development
Business Formation & Job Creation
Net high tech business formation
University spin-outs
Initial Public Offerings and Mergers & Acquisitions
IPOs
M&As
Capital
Attraction of Federal Funding for Academic, Nonprofit, and Health R&D
Federally funded academic & nonprofit R&D
Industry Funding of Academic Research
Industry funding of academic R&D
Venture Capital
Venture Capital investment per capita
Talent
Education Level of the Workforce
Working age population with bachelor's or higher
K-16 Education
High school attainment of persons ages 19-24
Public Investment in K-16 Education
Investment in public K-12 per pupil
Investment in public higher education per pupil
Science, Technology, and Engineering Career Choices and Degrees
High school seniors interested in Engineering or CIS degrees
Bachelor's or higher granted in Engineering or CIS
High school seniors interested in Health or Biology degrees
Bachelor's or higher granted in Health or Biology
% of scores 3 or higher on science or math AP tests
Information Technology Professionals in the Workforce
% of workforce in IT occupations
Talent Flow and Attraction
Attraction of college educated adults
Housing Affordability
Rent affordability
Mortgage affordability
2009 Index of the Massachusetts Innovation Economy 7

10. Massachusetts in the
Global Economy
Introduction to the special analysis
ast year, the Index was This unwavering commitment to innovation
released amidst the worst has made of Massachusetts a vivid
economic downturn since example of what observers of economic
the Great Depression. In development refer to as the greatest
that context, we knew paradox of globalization: the emergence of
that the Index’s indicators sub-national regions as key economic units
did not yet capture the impact of the and engines of prosperity. One author has
recession on the innovation ecosystem. called successful regions the “locomotives”
So, we invited commentators to reflect of national economies. Two key insights
on the question: ”What can we do to that build on this observation assert that
preserve and strengthen the vitality of success in the global economy hinges on
the Massachusetts innovation ecosystem vibrant regional economies and, in turn,
even during tough economic times?” this success is enhanced when regional
Our motivation was straightforward: economies successfully insert themselves
this ecosystem sustains the self-renewal into global flows of capital, ideas, and
capacity of our economy and nurtures talented individuals.
the innovation-intensive companies,
universities, and hospitals that account for With this in mind, this year’s Index reopens
almost 40% of jobs in the Commonwealth. a conversation started three years ago in
its 2007 edition which advanced important
In response, our commentators conveyed understandings about Massachusetts in
an important message. To sustain the global economy. This conversation
innovation and the long-term viability echoes a current policy priority for the
of our economy, they said we need to Commonwealth. During the last few
accomplish three things. First, we need months, the state’s Executive Office of
to collaborate more. Second, we need to Housing and Economic Development
continue investing in innovation. Third, and has spearheaded an effort to better
most importantly, we need to maintain our understand and leverage the state’s
optimism, confidence, and distinctive focus resources to implement a strategic policy
on the future. approach for the internationalization of
the Massachusetts economy.
This year, the context of the Index is
a fragile and uncertain recovery with This year, the Index offers a global
widespread and continued hardship for perspective in two ways. First, we take
Massachusetts’ citizens and businesses. steps to incorporate international
No sector of our economy or society has comparisons within individual indicators.
been spared and the state’s government In doing so, we have had the following
is reckoning with a revenue crisis. And, as question in mind: If Massachusetts were
highlights in this publication’s pages show, a country, how would it perform in key
the performance of the Massachusetts measures of the innovation ecosystem
Innovation Economy is mixed: it includes when compared against top international
many measures with impressive results that performers? We were able to answer
place Massachusetts at the top nationally this question with precision only where
and internationally, but there are also comprehensive and comparable data were
clear signals that are cause for concern and available which occurs in six of the twenty-
careful review. five indicators.
Looking back since the release of last The second way in which this year’s Index
year’s Index, the research, innovation offers a global perspective is by inviting
and entrepreneurship communities in reflection from those who work on the
Massachusetts have responded to the crisis frontlines of innovation. We are privileged
as commentators suggested, with more
collaboration, a sustained commitment to
innovation, and most importantly, with
optimism and confidence.
8 John Adams INNOVATION Institute

11. to host commentaries from individuals All of them, without exception, highlight
who bring a truly global perspective and the concentration of some of the
are themselves living examples of a global brightest men and women from all over
spirit in Massachusetts. Michael Greeley the world as one of Massachusetts’
was born in New York but grew up in Hong greatest strengths. It is also here
Kong. Pascal Marmier is a Swiss diplomat. that some express concerns. Michael
David Meeker writes from the perspective Greeley wonders whether non-compete
of an actively globalizing company. After agreements make some entrepreneurs
attending graduate school in the United chose California over Massachusetts, and
States, both Harry West of Great Britain expresses disappointment at the ability of
and Bernd Widdig of Germany chose to Massachusetts start-ups to retain talented
stay in Massachusetts. men and women due to limitations in
federal visa policies. Bernd Widdig speaks
We approached these individuals with the for more awareness and more investment
following questions to invite reflection: to expand the reach of the international
Through your eyes, what is the place of education experience. Students need to be
Massachusetts in the global economy? better prepared to work in an environment
What are the strengths and weaknesses of in which “the spirit of innovation knows no
the Massachusetts innovation ecosystem national boundaries”. Harry West calls on
for enhancing our place in the world? Massachusetts to showcase its assets and
compete forcefully to attract the world’s
Each commentator views the world best design-minded people. In his words:
through a unique lens and addresses a “Massachusetts can and must compete as
different segment of the landscape of our a place where the most precious of natural
innovation ecosystem: venture capital, resources—energetic, creative people—
diplomacy, medicine, design, and higher want to be.”
education. But, within the uniqueness
of their perspectives, there is a common The response to the recession has called
thread. Each of them speaks of the ways in on everyone in the United States and
which the global and the local aspects of the Commonwealth to take a hard look
innovation and competitiveness are deeply within. But as the economy turns around,
and synergistically intertwined. there will be new opportunities for
prosperity, many of which will be realized
First, we learn from all of them that the through the full and strategic embrace of
most forward-looking innovation remains our global potential. This year’s Index is
a profoundly localized phenomenon an invitation to join a conversation and
even in the phase of globalization. to work together to better understand
For Massachusetts, this means that Massachusetts’ place in the global
the strengths and weaknesses of our economy. How can we amplify, accelerate
innovation ecosystem both enable and and leverage the self-organizing capacity
constrain the ability of individuals and in our innovation ecosystem to better
organizations in the Commonwealth to pursue the economic opportunities that
operate in the global economy. Second, globalization affords? ■
together they tell us that for individuals
and organizations alike operating in the
global economy requires an understanding
of the societies and the cultures where
individuals and organizations work and
the ability to work across geographic,
cultural and disciplinary boundaries.
Finally, we hear once again that openness,
connectedness, and collaboration enhance
the ability of individuals, groups, and
organizations to innovate.
2009 Index of the Massachusetts Innovation Economy 9

12. Why "Massachusetts in
the Global Economy"?
Carlos Martinez-Vela, Director of Innovation Policy, MTC's John Adams Innovation Institute
hroughout the 40% of graduate students and 10% of
Commonwealth’s history, undergraduates were foreign nationals
waves of immigrant during the 2008-2009 academic year.
entrepreneurs from a wide Moreover, scientific research has never
array of nations joined conformed to traditional boundaries
arrivals from the British Isles be they organizational, regional, or
to enable Massachusetts’ emergence as national. This connectedness of the
an industrial and economic powerhouse. Commonwealth’s research and innovation
In the 18th century, immigrants from enterprise is magnified today by the global
mainland Portugal, the Azores, and Cape scope and impact of some of the world’s
Verde were inextricably linked to New most pressing challenges and promising
Bedford’s dominance in whaling. In the opportunities. The imagination of students,
19th century, Lowell’s destiny as a textile scientists, and innovators everywhere is
industry hub was built upon the work of being captured by problems ranging from
French Canadians, Eastern Europeans, energy and climate to national security,
Greeks, Portuguese, and many others at from stubborn diseases to the alleviation of
the mills. Today, Lowell is home to one of poverty.
the United States largest concentrations of
Cambodian immigrants. Like many other The same is true of our business
towns and cities today, Lowell and New community. For Massachusetts-based
Bedford are called home by many of Latin corporations, expanding and competing
American origin and descent. Both cities globally and operating in foreign markets
are among Massachusetts’ twenty-four has long been a necessary focus for growth
“Gateway Cities” because they continue and, increasingly, for innovation. Perhaps
to be entry points into the social and less known are the many start-ups and
economic promise of Massachusetts for young companies that are equally global in
many immigrants. scope. Consider also the magnetic power of
the Massachusetts Innovation Economy as
In the two hundred years since Lowell’s a whole, evinced by the location decisions
entrepreneurs helped launch the of some of the world’s most prominent
Industrial Revolution in the United innovation-intensive businesses. Many
States, Massachusetts reputation as a continue to choose Massachusetts as a
revolutionary and global epicenter of location for R&D facilities. Examples include
innovation has only been strengthened. the Novartis Institutes for Biomedical
Now, rather than whaling or maritime Research (biopharmaceutical, Swiss), the
trade, it is the intensity and quality of Schlumberger-Doll Research Center (oilfield
our innovation ecosystem that makes services, Dutch), the Nokia Research Center
Massachusetts a hub in the global (telecommunications, Finnish), and a
networks of capital, knowledge, and branch of Vestas Technology R&D Americas
people. The Massachusetts Innovation (renewable energy, Danish).
Economy attracts—and contributes—a
disproportionate share of the global It is no coincidence that many foreign
flows of investment, ideas, and talented governments maintain a formal presence in
individuals who fuel innovation. Massachusetts with specialized personnel
devoted to building bridges with the
Consider our research universities, now state’s research and innovation enterprise,
among the most global of enterprises. including Canada, France, Germany, Japan,
For decades they have increasingly Norway, South Korea, Spain, Switzerland,
become magnets that attract some of the and the United Kingdom. These countries
brightest men and women from around are here partly because they want to join
the world. At MIT, for example, about the innovation conversation, to be plugged
10 John Adams INNOVATION Institute

13. in to our Innovation Economy, and to build strategically attract to the Commonwealth,
bridges of mutual understanding and in a highly selective and targeted way,
collaboration. They want to learn what it those functions (i.e. research, prototyping,
means to build a research and innovation manufacturing) and business segments
enterprise that is also a centerpiece of that are likely to enhance innovation and
economic prosperity. competitiveness on an industry-specific
basis. To ensure job creation as part of this
Businesses, universities, government, and strategy, we need to understand better
communities across the state are now the labor-intensity of each segment of an
more deeply aware than ever of the place industry’s value chain to set expectations
of innovation, regionalism, and industry right. We also need to be attentive to the
clusters as cornerstones of economic natural tendency of some corporations
growth. This inner strength also gives and other institutions to bring their
the Commonwealth its prominent place R&D operations to Massachusetts or to
in the global economy. It enhances the partner with Massachusetts institutions
ability of Massachusetts-based companies for research and innovation. There may
to compete globally by providing close be ways to accelerate and amplify these
and immediate access to the creativity of processes and extend them beyond R&D
the best people and their best ideas. It for greater job creation.
drives the location decisions of foreign-
owned corporations when they decide to As vital as research and innovation are for
establish R&D outposts in Massachusetts. our economy, we face an imperative to
It motivates the research, innovation, and figure out how to improve the capturing
entrepreneurship communities from all of “downstream economic benefits”—
over the world to partner with and invest including, but not ending, with jobs—
in Massachusetts. It inspires men and from research and innovation and to do
women to be here. so more equitably across regions of the
Commonwealth beyond Greater Boston.
But we must not allow any of this to
be taken for granted. Competition is To be sure, the effects of economic
intensifying as regions and countries development are always local and manifest
around the world pursue innovation as an themselves one person, one business, one
economic development strategy. Others community at a time. But this reality can
are striving to create their own innovation either tempt or mislead many to isolate
ecosystems and competing for a share of and retreat from globalization. The
the same capital, the same entrepreneurs, history of innovation in the Massachusetts
the same businesses, and the same economy and the voices in the pages
talented individuals that today choose ahead show that today, perhaps more
Massachusetts. Thus, it is vital to remain than ever before, the prosperity of the
committed to strengthening the research Commonwealth remains profoundly linked
and innovation enterprise while thinking to the global economy while standing
strategically about how to leverage its upon the strength of our Innovation
connectedness to increase its magnetic Economy. ■
power in the global economy.
This can be accomplished only with
deep, empirical knowledge of how the
Massachusetts Innovation Economy
works, industry by industry. We need a
better sector-by-sector understanding of
value chains in order to identify gaps and
2009 Index of the Massachusetts Innovation Economy 11

14. Investing in Innovation
Michael Greeley, General Partner, Flybridge Capital Partners
assachusetts is one of the Sixty years after its founding, ARDC’s
leading global centers legacy continues. Over 100 venture capital
of innovation. Twelve firms now call Massachusetts their home.
research universities with From 1970 to 2008, venture capitalists
over 25,000 graduate worldwide invested $50.4 billion in 2,764
students, a plethora of Massachusetts companies. In 2008 alone,
research institutes, leading multinational 346 companies in Massachusetts received
corporations and service providers (lawyers, $3 billion in venture capital – at $460 per
accountants, consultants), an abundance capita, well ahead of all other states.
of technical talent, and numerous start-
ups are concentrated here. In 2006, the While Massachusetts retains a prominent
total expenditures on R&D performed in place in the venture capital marketplace,
Massachusetts reached $20.6 billion. In its leadership is being challenged.
2007, federal, state, industry, academic, Massachusetts’ $3 billion in venture
and nonprofit organizations attracted $6.7 investments in 2008 is a distant second
billion in federal funds for R&D. Companies to California’s $14.3 billion. Both states
in Massachusetts invested another $13.2 continue to attract venture capital
billion. investments at almost four times the rate
of the nation as a whole, but the California
Importantly, Massachusetts has a long- share of all venture capital investments
established culture of entrepreneurship rose from 38% in 1998 to over 50% in
that has fueled the formation of clusters of 2008. The share of venture investing
new industries, including the well-known going to Massachusetts companies during
life sciences sector. Cloud computing, online the same period grew only from 9.6%
video, marketing technologies, gaming to 10.5%. And according to the National
and businesses at the intersection of IT and Venture Capital Association (NVCA), there
life sciences place us at the forefront of were 3,192 companies which attracted
innovation in digital technology. It is also, venture investments in 2008, but only 11%
arguably, the most active robotics region in were in Massachusetts.
the world.
In the $197 billion US venture capital
A strong venture capital industry remains industry, the top five states in the US
an essential part of the Massachusetts represented nearly 82% of all venture
innovation ecosystem and one of our key capital managed in 2008. Local venture
assets in the global economy. According to capital firms managed $36 billion in
the Organization for Economic Cooperation 2008, or 18%. So, while local companies
and Development, the US accounted for face tough competition to get investor
49% of total venture capital investments attention, a meaningful portion of the
in OECD countries (the UK was a distant venture capital industry is still managed in
second with 10%). Within the United States, Massachusetts. However, only $3.5 billion
Massachusetts companies alone attracted of the $27.9 billion of new commitments
11% of the US share. to venture funds in 2008 (or 12.5%) were
made to Massachusetts-based venture
The venture capital model as we know capitalists.
it was invented in Massachusetts. In
1946, a group of business and university The composition of the venture investment
leaders founded the American Research portfolio in Massachusetts has changed
& Development Corporation (ARDC), a significantly in recent years. Once heavily
new mechanism to fund and nurture new oriented toward digital technology, it is
businesses. With the economy struggling now concentrated in the biotech sector,
to recover from the Great Depression and accounting for 31% of all venture capital
the demise of traditional New England invested in Massachusetts companies. The
industries, these visionaries had a larger software, medical devices, and IT services
ambition: to revitalize the New England sectors followed with 20%, 9% and 7%
economy and its scientific and technological respectively.
expertise to create new industries.
12 John Adams INNOVATION Institute

15. Future industry commentators will look affect our own start-up environment.
back on 2009 as the year when the broader Many investors are also disappointed
venture capital industry was fundamentally with federal visa policies: Massachusetts
redefined by global economic crisis and educates some of the most talented
unprecedented volatility in global capital students from around the world, but
markets. The US venture capital industry struggles to retain them upon graduation,
raised only $13 billion for new investment, limiting the talent pool to staff local start-
less than half of what it had raised in 2008. ups quickly and efficiently.
Nationwide, the industry is confronting It is important that limited partners
a number of significant issues, many of continue to recognize that Massachusetts
which stem from the lack of predictable has a vibrant, early-stage business
and meaningful opportunities for liquidity community. This past year has seen
events. The venture capital model is a resurgence of start-up activity and
predicated on both the ability of portfolio the emergence of entrepreneurial and
companies to attract new investors as networking events like Mobile Mondays,
these companies mature, as well as to be Xconomy, Stay In Massachusetts, and
sold in a vibrant M&A auction or taken TechStars to name a few. Importantly, we
public in an IPO. Years ago, there were a have seen the return of angel investors
number of structural reforms which largely and the emergence of new investment
dismantled Wall Street’s ability to take and mentoring models such as Founders
smaller, private venture-backed companies Collective, Launch Capital, Start@Spark,
public. These reforms have impaired the and CRV QuickStart.
ability of venture capital firms to generate
liquidity for their limited partners, in turn Innovation does not conform to geographic
dramatically reducing venture capital borders and can occur anywhere. The last
firms’ investment returns. As a result, decade saw the exportation of the venture
many limited partners have reduced capital model to emerging international
their overall allocations to venture funds, markets like India and China. Despite
which is further driving the rapid industry this, many firms continue to view venture
consolidation we are witnessing today. investing as a local business, best practiced
The era of billion dollar venture funds is close to home. The next decade is likely to
effectively over. Average fund sizes will see further retrenchment of the venture
be more in line with the $50 million per capital industry in historic centers of
investment partner metric or $150 to $400 excellence like Silicon Valley and Boston
million of capital per fund. as the industry consolidates further. A
future successful venture capital model
These developments have now triggered will continue to work best when all of the
debate as to what the successful venture required ingredients of the entrepreneurial
capital model will be going forward. How ecosystem are in place. This certainly
these debates evolve will undoubtedly remains the case in Massachusetts. ■
have consequences for Massachusetts. But
looking to our history, we see a venture
capital industry in Massachusetts with a Michael A. Greeley is the founder and
remarkable ability to re-invent itself when general partner of Flybridge Capital
confronted with headwinds. Partners, a leading early stage venture
capital firm based in Boston. He is the
Today, Massachusetts has a few unique Chairman of the New England Venture
factors which influence limited partners’ Capital Association and a director on the
perceptions of the local investment climate. board of the National Venture Capital
Many analysts focus on the impact of Association.
“non-compete” agreements which are
not recognized in California. It is time to
examine objectively how non-competes
2009 Index of the Massachusetts Innovation Economy 13

16. Connecting the Dots
Pascal Marmier, Director/Consul, swissnex Boston, Consulate of Switzerland
or nearly a decade, swissnex Over the years, I’ve encountered a
Boston has been building fascinating array of pacesetters with
bridges of knowledge expertise on commercializing technologies
exchange between and building organizations that maximize
Switzerland and New the potential of new products. These
England—“connecting the innovators evince the truly collaborative
dots” among individuals, organizations spirit of Boston. It is this spirit that makes
and universities in science, technology and our location viable and valuable. I can’t
innovation. Yet when we opened our doors count the number of people who have
in 2000, it was unclear what would emerge come into our office, volunteered their
from our small, loft-style office at 420 time, and enlightened our guests—ranging
Broadway in Cambridge. from entrepreneurs and students, to
corporate executives and government
Given our location, we imagined that local representatives.
students and scholars would enjoy sharing
in our panels, conferences, exhibits and Yet, given that the world has become so
discussions. What we did not anticipate complex, finding new ways to collaborate
was the process—and the many activities— is essential. Indeed, those who master the
that this first attempt to create a “science art of searching for, finding and combining
consulate” put in motion. Today, we’ve complementary assets, regardless of
engaged in far larger circles than expected location, are at an advantage. In the
and have partnered with numerous future, technology might become a
organizations interested in providing combination of different fields and the
support and ideas to build connections to research taking place at various universities
other innovation centers. worldwide, and its commercial success
might depend on a joint effort from even
As we plan our ten-year anniversary on more people.
October 10, 2010, we recognize that our
location in Massachusetts and Greater Consequently, the first step to mastering
Boston, the “brain hub” of New England, this art is to help people meet each other
has redefined how the Swiss government to start connecting the dots. In this regard,
and our stakeholders think, act and plan swissnex Boston regularly hosts seminars
for innovation. We also recognize that and workshops in collaboration with
we have become part of the fabric of the our Swiss and American industrial and
region’s innovation ecosystem, and that we academic partners. Most recently, we’ve
contribute to its connectedness and global focused on the new trends of innovation
spirit. partnerships in a troubled economy.
Knowing the ‘software’ Offering world-class contacts and
support to our Swiss partners is what
It is easy to discover the “hardware” of Boston has allowed us to do. To this end,
the Boston area’s innovation economy. we’ve catalyzed successful partnerships
Any website can list the unparalleled among universities, companies and
sources of new ideas and technology other organizations active in science and
here (universities, hospitals, research technology on both sides of the Atlantic.
institutions), the abundant financial For example, a collaborative platform on
resources available for entrepreneurs to nanotechnology started after discussions
transform ideas into products, and the among Swiss and Boston-area scientists
companies that move these inventions to held at swissnex Boston. Additionally,
the marketplace. Yet such a list does not executives from Swiss pharma companies
offer an understanding of the “software”: traveling to Boston often contact us to
the people and organizations bringing this arrange workshops where they can connect
innovation economy to life. to the leaders in their field.
14 John Adams INNOVATION Institute

17. One of our key annual programs—a Measuring success
two-week “boot camp” that brings Swiss
entrepreneurs to Massachusetts—has Despite tangible achievements, however,
significantly benefited from the expertise we are often asked: “How do you really
of local technology and business experts know that you’re successful?” This has been
who have shared their knowhow in a recurrent challenge. At swissnex Boston,
marketing innovative products. In hosting we track several metrics that measure our
this yearly boot camp, we’ve created a visibility and collaboration. For instance,
well-connected alumni community of our mailing list boasts more than 5,000
venture leaders who can now share their members, and we organize or co-host
expertise with each other and bring to more than 70 events annually, ranging
Switzerland an added value from their stay from delegation visits of Swiss universities
in the USA. The boot camp even provides to concerts on the Charles River.
contacts and builds relationships for
startups seeking to site their activities here. It stands to reason, however, that
innovation is so multifaceted that numbers
Massachusetts also benefits from these are seldom sufficient to illustrate success.
connections. Dialogue and collaboration Indeed, the innovation economy is fueled
are at the heart of what we do at swissnex by intangibles. So, for us, the value of the
Boston and, as Massachusetts Housing and conversations we trigger—conversations
Economic Development Secretary Gregory that lead to enduring relationships and
Bialecki recently said, these are the kinds knowledge transfer, and ultimately to the
of discussions that ensure Massachusetts building of a transatlantic community—is
remains well-connected to places where incalculable.
other brilliant minds operate. Our efforts
in promoting Swiss universities and Learning from our experiences, we are
universities of applied sciences, especially ready to accompany the next generation of
in Engineering and Business, have led leaders in the challenges of the knowledge
to partnership agreements with local economy. Innovation is about change,
schools. And apart from supporting start- and that is why swissnex Boston has made
ups, we are delighted with our increasing the strategic decision to be flexible and
connections to small and medium-sized opportunistic. This allows us to explore
enterprises thanks to the newly established new topics and pursue opportunities that
Boston chapter of the Swiss American are calling for collaboration and which
Chamber of Commerce. demand our attention as they emerge.
Apart from these pursuits, the area’s As we celebrate our tenth anniversary,
collective knowledge and collaborative we are proud to have promoted Swiss
spirit have benefited our unique business innovation and higher education for nearly
model. A science and technology consulate a decade, and we are pleased to contribute
such as ours found its natural home in the to the global spirit and connectedness of
New England ecosystem. We are fortunate Greater Boston. ■
that visiting scientists and entrepreneurs
take the time to stop at our office and
“connect the dots” with others. Our Pascal Marmier is the Director and Consul
network of “scientific diplomacy” has of Switzerland at swissnex Boston, a unique
grown, and the model born in Boston private-public partnership dedicated to
nine years ago has been exported to other facilitating collaboration between New
strategic hubs of science and technology England, Eastern Canada and Switzerland
such as San Francisco, Shanghai, Singapore in all fields related to science, technology
and recently Bangalore. and innovation.
2009 Index of the Massachusetts Innovation Economy 15

18. Bringing Massachusetts
Innovation to Patients Worldwide
David Meeker, Executive Vice President and Chief Operating Officer, Genzyme Corporation
enzyme is a health care Our international expansion began with
company dedicated to the acquisitions of two UK companies
developing and delivering made within the first year of our founding
innovative solutions for in Boston in 1981. The purchase of
unmet medical needs. Whatman Biochemicals Ltd. brought
From the beginning, we Genzyme manufacturing facilities and
understood the responsibility of any marketed products that served as the basis
company producing a unique, potentially for the company’s business in diagnostic
life saving therapy to make that therapy products. Through the acquisition of Koch
accessible to patients in need around the Light Laboratories, Genzyme established
globe. However, health is not simply a a presence in Haverhill, UK, where we
global issue, it is also a highly personal now manufacture Renvela and Renagel,
matter. In working to reach patients Genzyme’s leading therapies for kidney
worldwide, we sought to do so in a way disease patients. In 1987, prior to the
that allowed us to truly understand approval of our first product, we became
the health care needs of different local the first US-based biotech company to
populations and serve them accordingly. open an office in Japan. Over the last two
decades, we have continued to expand
We have done this by establishing our global presence, and now have more
ourselves in countries around the world, than 85 locations in over 40 countries. We
not through satellite offices staffed by have continued to pursue this strategy,
Americans, but by hiring local talent establishing a strong commercial presence
that understands the health care system in Russia, India and China. Our Chinese
and the regulatory and governmental investment includes the building of a $100
environments that need to be navigated in million R&D center in Beijing, where we
order to ensure the best possible service to recently laid the corner stone for the new
patients. We have structured ourselves in a facility.
way that gives each country organization
the independence and flexibility to adapt We established an early global presence
to varying health care dynamics, to truly because we understood that developing
be “French in France,” and “Brazilian in potentially life saving therapies carries
Brazil.” with it the responsibility to ensure
that the treatment is made available
In establishing ourselves as an international to everyone who can benefit from it,
corporation, as opposed to a US company regardless of where they live or their
with international offices, we facilitated economic circumstances. In creating
drug development through our ability access, we seek to partner with local
to more effectively run international health care authorities to optimize the
clinical trials, establish scientific ties health outcomes of their citizens. Local
with researchers around the globe investments in the countries where we do
and build relationships with patient business strengthen these partnerships. We
organizations in many countries. This have built and/or expanded manufacturing
has helped differentiate Genzyme from facilities in the UK, Ireland, France and
other biotechnology and pharmaceutical Belgium in addition to establishing R&D
companies, and has been the foundation facilities in the UK and the planned site in
for our global success. China. These locations also provide access
16 John Adams INNOVATION Institute

19. to favorable business environments, lower Genzyme now has about 4,700 employees
costs, strong government cooperation, and in Massachusetts.
access to a highly trained workforce and
potential partners. In addition to the highly valued links
to the life sciences community, we
Importantly, Genzyme’s success in building appreciate state and local recognition of
a global health care company links our contributions to the area’s economy
directly to the advantages afforded by the and support for our expansion efforts.
Massachusetts life sciences community. We encourage the state to continue to
This state is uniquely positioned to support education and training programs
facilitate success in the life sciences, with that will allow companies to recruit the
its wealth of universities, hospitals and right people for manufacturing and other
research institutions. These world-class functions associated with the life sciences.
organizations attract the best physicians Genzyme is currently building another key
and scientists from around the globe, manufacturing facility in Framingham.
which creates an environment capable of State support for infrastructure
fostering innovation and development. The improvements there has enabled this and
Massachusetts life sciences community is a future projects by other companies to
leader in the global health care community move forward.
and consequently it is no accident that
so many biotech and pharmaceutical Having a strong foundation in
companies have placed research facilities Massachusetts along with a well-developed
here. global presence puts Genzyme in a unique
position to connect this state with the rest
Although we appreciate the value of our of the world. Genzyme and others in the
global investments, we built our first and Massachusetts life sciences community
most important manufacturing facility are making new medical advances every
here in Allston, Massachusetts, because day that hold the promise to transform
we recognized, given the challenges of patients’ lives. As we continue to grow, we
biologic manufacturing processes, the look forward to helping the state maintain
advantages of having a highly skilled work its leadership in this area, and bringing
force and close proximity to the scientists more Massachusetts-grown innovations to
who developed those processes. We patients around the world. ■
have continued to expand our presence
in Massachusetts over the years, most
notably in Framingham. Of Genzyme’s David Meeker, M.D., is Executive Vice
12,000 employees, approximately 2,200 President and Chief Operating Officer
are in Framingham, where we have key at Genzyme. Dr. Meeker is responsible
R&D and manufacturing operations. Along for Genzyme's commercial organization,
with our headquarters in Cambridge’s overseeing the company's business units,
Kendall Square, and other Cambridge, country management organization, and
Waltham, and Westborough locations, global market access functions. He works
to maximize the potential of the company's
broad portfolio of products, most of which
are in their growth phases.
2009 Index of the Massachusetts Innovation Economy 17

20. Designed in Massachusetts
Harry West, CEO, Continuum
ne of Massachusetts best- neighborhood, the company began to
kept secrets is its world- grow. At its foundation, Continuum was
class cluster of excellence part of an ecosystem of companies in
in design. Our company, places like Lexington, Bedford, Boston,
Continuum, belongs to an Maynard, Canton and Newton where other
ecosystem of 40,000 – 50,000 companies were forming and flourishing,
architects, graphic designers, product or failing and thereby providing the
designers and other creative professionals. resources for new companies to emerge.
How does a cluster of excellence get When Gianfranco and Jerry needed
started? The essential qualities of a place, talent, they were able to recruit from
its geography, its legal environment, other companies in the area that had
and its human capital matter a great passed the peak of their business cycle
deal. Often, the particular genius of an or were reengineering to be more
individual is a driving force. Sometimes efficient. Those other companies, like
government plays a catalyzing role. mature trees falling in a forest, made
But the process is generally emergent space and provided resources for new
and its evolution is difficult to predict. growth to emerge. Similarly, Continuum
In retrospect, sometimes you can trace hired talented designers and engineers
back the story of its creation and almost from the computer industry, which was
convince yourself that it was inevitable going through a period of decline in
given the presence of the right ingredients. Massachusetts as it was being eclipsed by
However, once this cluster of excellence technologies and companies on the West
has emerged like a rare orchid, what does Coast.
it take for it to persist and grow, rather
than fade away again? Continuum’s story A critical moment in our history was
of growth towards global prominence is Reebok’s bold decision to hire Continuum
an example of the many factors that come to help them take on Nike. In a creative
into play. leap, Continuum invented the Reebok
Pump, which went on to be one of the best
An innovation design consulting company selling athletic shoes of all time. When we
headquartered in West Newton, look back we call this “innovation”, but
Continuum was founded in 1983 as a at the time it was simply the creative idea
collaboration between Gianfranco Zaccai, of a design company steeped in medical
whose primary training was in industrial technology putting what was essentially
design and architecture, and Jerry Zindler, a blood pressure cuff in a shoe. That is
a physicist and engineer. They built the innovation: uncovering valuable ideas and
company around the idea that by working capabilities that no one has thought of
together they could improve upon the old before, then developing those ideas so
model of designers and engineers working that they can be profitability realized and
separately and “throwing ideas over the utilized.
wall” at each other. They were right. But
the success of Continuum as a company The Pump spurred a pivotal moment in
is the result not just of this idea; it is also Reebok’s history, making them bigger
a result of the fact that the company was than Nike for a few years. It was also a
located in a state with a ready source of turning point in the history of Continuum:
talent and customers. it propelled the firm towards being a
global consumer innovation design firm.
From the vision of two men in a small, The company developed the broad range
rented space in Boston’s South End, which of capabilities needed to be a creative
at the time was shoestring-budget-friendly leader working across the world in global
consumer research, strategy, brand and
service design.
18 John Adams INNOVATION Institute