Innovative economic activity in Michigan fell from 99.7 in the second quarter of 2007 to 95.8 in the third quarter of 2007, according to an Innovation Index developed by scholars at the U-M-Dearborn School of Management.
“The decline was likely related both to the national economic problems and to the state business tax uncertainty at that time,” says Lee Redding, associate professor of business economics and director of the Innovation Index. “In particular, it looks as if investors were reluctant to put money on the table in the third quarter.”
The reading for the third quarter of 2007 also was lower than the 97.7 recorded in the same quarter of 2006.
The quarterly index is a project of the school’s Center for Innovation Research, or iLabs. The index was developed 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.
For the most recent quarter, declines in four components of the index outweighed improvements in two components, according to Redding.
The negative factors included “a partial reversal of the strong growth in science and engineering employment that occurred in the year leading up to the second quarter of 2007,” Redding says. The third-quarter drop, drawn from Bureau of Labor Statistics data, subtracted 2.5 points from the index.
In addition, after a strong second quarter, venture capital experienced a sharp drop in the third quarter of 2007 in Michigan, and the number of loans arranged by the Detroit office of the Small Business Administration continued to decline.
“Since peaking in the second quarter of 2006, that number has dropped in four of five quarters,” Redding says.
Incorporation activity also slowed from the second quarter of 2007 to the third quarter.
On the positive side, “trademark applications by Michigan entities continued a recent string of winning quarters,” Redding says. And state employers added approximately 239,000 new jobs in the second quarter of 2007. (Due to data availability, this item enters the Innovation Index one quarter delayed.) This number, the highest since the second quarter of 2006, added 2.9 points to the Innovation Index.
The fourth-quarter 2007 U-M-Dearborn Innovation Index will be released in early June. Redding collaborates on the project with Anne-Louise Statt, a lecturer in business economics at U-M-Dearborn, and undergraduate student Gary Hein.
