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hat do California, Texas, New York, Florida, Virginia, Massachusetts, Illinois, Pennsylvania, New Jersey and Michigan have in common?
     They are, in order, the top 10 "cyberstates" in America, according to the Cyberstates 2005 report published earlier this year by the American Electronics Association.
     Ranked in order of high-technology employment, these 10 states have set the standard of technology-led economic development for the other 40, according to AeA. The report is updated annually to reflect the changing demographic patterns of employment nationwide in fields such as software development, electronics manufacturing and electrical engineering.
     The AeA report paints a vivid picture of the "clustering" effect of high-tech companies, which in turn leads to the development of spinoff and support companies that further fuel economic growth in these technology-rich states.
     Coupled with another timely study, the new report provides the best evidence yet that venture capital and access to well-funded university research and development are the driving factors behind the launch and location of high-tech employers.
     Moreover, the success of these states isn't limited to tech firms. According to the June 6 edition of BusinessWeek, four of the top 10 "hot growth" small companies in America are based in California, as are 30 of the top 100. In many instances, the rapid acceleration of high-tech employment is leading to the startup and growth of manufacturing and service companies in non-technology fields.
     There is also growing evidence that America may be in the midst of a new technology employment boom. "For the first time since 2000, both software services and engineering and tech services added jobs," said William T. Archey, president and CEO of AeA. "Each of these tech sectors added over 30,000 net new jobs to the economy in 2004. This is especially positive news because tech jobs pay 84 percent more than the average private-sector job."
     AeA's findings correlate closely with another report on technology-led economic development — Centers for Innovation in the United States — by Atlanta-based consulting firm Moran, Stahl & Boyer LLC.
     MSB found that the top 10 states in venture capital between the second quarter of 2003 and the second quarter of 2004 were, in order, California, Massachusetts, Texas, New Jersey, Georgia, Pennsylvania, Washington, New York, Colorado and North Carolina. The next five were Illinois, Virginia, Minnesota, Maryland and Florida.

SPACEHAB Inc. of Webster, Texas, recently sold this payload facility in Cape Canaveral, Fla., for $4.8 million to Tamir Silvers LLC of Miami. The transaction includes a leaseback of the 58,783-sq.-ft. (5,461-sq.-m.) facility to SPACEHAB for its payload processing operations. This deal, handled by NAI Realvest of Maitland, Fla., is indicative of the surging economic activity taking place in high-tech manufacturing in Central Florida.

     The largest industry beneficiary of venture capital was software development (20.9 percent), followed by biotechnology (18.4 percent), telecommunications (12.3 percent), networking equipment (8.9 percent), medical devices (8.7 percent) and semiconductors (6.4 percent).

     MSB noted the connection between "centers for innovation" and "major research university towns." For example, the report states that Davis and Santa Barbara, Calif., serve as major university R&D outlets for California's primary innovation centers of San Jose, the Bay Area, Los Angeles, Orange County and San Diego.
     The location requirements needed to support the "innovation commercialization process" include the following:

• an ability to hire technicians locally and an ability to attract scientists and engineers;
• the availability of college training for technical and support staff;
• reasonable air access, including access by investors and potential customers to the company facility;
• access to an interstate highway system;
• a progressive culture that embraces new ideas;
• R&D tax credits;
• state-of-the-art broadband;
• R&D park or large industrial campus;
• availability of low-cost and redundant power;
• water and sewer capacity and telecommunications services.

     The presence of these and other attributes is turning some non-traditional tech locations into thriving hubs of tech-led commerce, according to MSB. Among these locations are Tampa, Orlando and Melbourne, Florida; Buffalo, Rochester, Syracuse and Albany, N.Y.; and Cleveland, Dayton, Cincinnati and Columbus, Ohio.
     Other "Tier 2" communities that are on the rise include Gainesville and Tallahassee, Fla.; Charlottesville and Blacksburg, Va.; and Athens, Ga.
     MSB also notes that, "as the innovation commercialization process matures — from R&D to initial commercialization to full-scale business expansion — the location requirements change. During the R&D (corporate) phase, the ability to attract scientific and technical talent to the location is critical, along with having the right facilities and access to selected university research."
     This is why many college towns don't blossom as high-tech commercialization centers. Venture capitalists prefer business locations that provide the best chance for financial success. "The business expansion phase is typically driven by operating costs, logistics and labor resources," notes MSB.

     The most encouraging news in the AeA report, according to CEO Archey, is that several leading indicators point to a new round of technology-led investment in the U.S. Among other highlights, Cyberstates 2005 found that:

• Venture capital investment in the technology industry rose for the first time since 2000. High-tech venture capital investment totaled $11.8 billion in 2004, compared to $10.7 billion in 2003.
• U.S. high-tech employment totaled 5.56 million jobs in 2004.
• High-tech manufacturing industry employment fell nationwide by 2 percent in 2004, losing 31,900 jobs.
• The software services industry in the U.S. added 30,300 jobs in 2004.
• The engineering and tech services industry added more than 30,000 jobs in 2004.
• California (916,000 jobs), Texas (446,000), New York (305,000), Florida (259,000) and Virginia (244,000) led the nation in high-tech employment.
• Colorado led the nation in concentration of high-tech workers, with 91 per 1,000 private-sector workers, followed by Virginia.
• U.S. high-tech exports rose 12 percent to $191 billion in 2004, up from $171 billion in 2003.
• High-tech exports represented 23 percent of all U.S. exports in 2004.

     "These data further reinforce the idea that the technology industry has turned a corner, as both high-tech exports and imports are up," said Archey.