hat is a state to do when it will never be in the running for a US$3.7- billion steel plant, like the one awarded to Alabama in May by ThyssenKrupp, or a comparably sized plant in some other heavy industry? States in the Rocky Mountain region realized years ago that the "New Economy" was an opportunity to generate economic prosperity without all the smokestacks anathema to the populace.
   Biotech, aerospace engineering, telecommunications and software development of all types have offered geeks with kayaks all they could possibly want in career development and outdoor recreational amenities for years now. But the Rocky Mountain states must compete for capital investment in these sectors – not just with each other, but with states throughout the union – just as southern states go head to head with each other and with other locations for auto plants.
   One measure of how well states are transforming from old, industrial economies to knowledge and innovation economies is The 2007 State New Economy Index: Benchmarking Economic Transformation in the States, released in February by the Ewing Marion Kauffman Foundation and the Information Technology and Innovation Foundation (ITIF). The study uses 26 indicators in five categories (knowledge jobs, globalization, economic dynamism, transformation to a digital economy and technological innovation capacity) to analyze and rank the states' adaptation to the New Economy.
   Only one of the five states considered in this report made the top 10, so as a region, the Rocky Mountain states are anything but a shoo- in for new investment. Colorado ranks 9th, with Utah not far behind at 12th. Idaho ranks in the top half, at 24th, but Montana and Wyoming place at 42nd and 43rd respectively. Topping the list are Massachusetts, New Jersey, Maryland, Washington and California.
   "The New Economy is IT driven, and information technology is a key component of all sectors," noted Dr. Robert Atkinson, president of ITIF and the primary author of the report at the release of the Index in late February. "It is also innovation driven," he adds, and the Index's 26 indicators are designed to measure those and other New Economy realities (see the bullet points listed in the sidebar). "They try to get at the actual structure of a state economy, and whether that economy was structured according to these core realities. The idea was if it was, it would likely have better long- term success than if it wasn't."
   Looking at the top 10 states and the bottom 10 (which includes two Rocky Mountain states), Atkinson points to one pattern.
   "The New Economy is most fully developed on the East Coast from Virginia up to New Hampshire, and on the West Coast, with California, Washington and Oregon, and some spots in between, including Colorado. Places lagging behind have historically not invested in education and infrastructure and skills – some of the southern and mountain states."
   Having said that, adds Atkinson, the main point of the report is not to assign states to the top or bottom of any ranking, but "to give governors, legislators and economic development officials a roadmap or a toolkit with which to better understand their economies." States in the bottom 10, he points out, may actually be doing quite well in certain indicators relative to states that did better overall.    A good example is the job- churning indicator, which measures the number of new start- ups and business failures combined as a share of the total firms in each state. "Almost 1 million jobs were added to the economy between 2002 and 2003, but that was after start- up firms had created 6.4 million jobs and failing firms had eliminated 6.1 million others," says the report. "This process of dynamic equilibrium is a result of the highly competitive reality of the New Economy. While such turbulence increases the economic risk faced by workers, companies and even regions, it also helps drive economic innovation and growth."
   In the job- churning ranking, Utah ranks 3rd nationally; western neighbor Nevada took first place, though it's not considered a Rocky Mountain state in this context. Idaho ranks 6th, and Montana is 10th.
   Also, Colorado, Montana and Idaho are second, fourth and fifth in entrepreneurial activity. Other strong performances by Rocky Mountain states in the Index indicators are these:

   • Colorado ranks 2nd in work- force education – a weighted measure of educational attainment of the work force.
   • Utah is tied for fourth place as the biggest mover in the ranking of states with managerial, professional and technical jobs as a share of the total work force; it moved up 11 slots since 2002.
   • Utah is the third- biggest mover in the ranking of states' export focus of manufacturing and services; it climbed 13 slots to 23rd since 2002.
   • Wyoming is the top mover in foreign direct investment, or percentage of the state's work force employed by foreign companies; it climbed 16 slots to 29th place since 2002.
   • Utah, Colorado and Idaho all made the top 10 for economic dynamism, at first, third and 10th place respectively.
   • Utah is fourth in the number of fastest- growing firms as a share of total firms.
   • Colorado is number two in initial public offerings; Idaho and Montana are the third and fourth biggest movers in that category, climbing 12 and 20 slots respectively since 2002.
   • Utah is second in inventor patents per 1,000 people; Idaho is first in patents issued to companies or individuals per 1,000 workers, and Colorado is second.
   • Utah also is third in Internet users as a share of the population; Wyoming is fifth. Utah ranks third in the number of Internet domain names per firm.
   • Utah is second in state governments' use of digital technologies.
   • Colorado ranks third in high- tech jobs, and Idaho is tied for fourth in largest mover since 2002, to 11th.
   • Colorado and Utah are fourth and fifth in venture capital invested as a share of worker earnings.

   For more on states' performance in the various indicators and more comprehensive definitions of the indicators, visit www.kauffman.org or www.innovationpolicy.org.