Thirteen years after state officials compiled their first report outlining North Carolina’s economic standing in innovation, the latest Tracking Innovation report finds the state’s economic measures are pretty much the same.

But by staying the same or even improving only slightly, North Carolina is falling behind. North Carolina’s $41,933 average annual wage, for example, is increasing over time viewed in the context of historical state wage data. But in the context of all states, North Carolina’s average annual wage is not keeping pace. Even as the state’s average annual wage rises, the average annual wage for the country is rising faster.

The Tracking Innovation report released Thursday follows North Carolina’s performance across 38 economic measures in an effort to gauge the state’s performance. No one single measure can provide a full economic picture of the state but in total, the measures give insight into how the state is doing supporting innovation and economic growth, said John Hardin, executive director of the Office of Science & Technology at the Commerce Department. The department has put together the report periodically since 2000. The 2013 report is the fourth such report.

The report lines up North Carolina is lined up against six comparison states: Massachusetts and California, because those states are leaders in technology and innovation measures frequently compared to North Carolina; Virginia and Georgia because they are southern states that North Carolina competes with; and Washington and Colorado because like North Carolina, those states are also “middle of the pack” states that are making strides.

Some findings, such as venture capital investment, might be misleading. In terms of venture capital disbursed, adjusting for a state’s gross domestic product, North Carolina ranks 10th. But as a percentage of dollars invested in the United States, North Carolina ranks low. That’s because the vast majority of venture capital dollars concentrates in Massachusetts and California, skewing comparisons to the other states.

R&D a strength

Some of North Carolina’s strongest rankings are in R&D measures. The Tar Heel State is fifth in academic R&D expenditures relative to the size of its economy. Maryland and Massachusetts were the top two states in that measure.

For all of the business R&D work occurring in the tech and life science sectors, particularly in the Triangle, the report finds that this work is not enough to sustain strong economic growth for the state. High tech work does offer good wages and job growth. But the report finds that “a large share of the state’s industries and employment is not high-technology in nature and has below-average levels of entrepreneurship.”

“North Carolina’s overall industry structure does not position the state, overall, to be a leader in innovation,” the report states.

While that finding strikes a dour economic note, Hardin has a “glass half full” view of North Carolina’s prospects. North Carolina may be average according to numerous economic measures. But unlike some states North Carolina has a lot of the ingredients needed to spur economic growth, he said.

“Not going backward”

“We’re not going backwards and we have a lot of the pieces in place to go forward,” Hardin said. “The report tries to lay out what are the pieces we need to go forward.”

As an example, Hardin points to the state’s institutions of higher education. R&D spending is a strength for the state and much of that R&D work happens in universities. But much of that work is also not aligned with industry needs. Hardin said partnerships between universities and industries could improve the state’s overall economic performance while filling industry needs. Corporations used to maintain large, internal R&D operations. While tech and life science companies haven’t abandoned R&D there’s an unmistakable shrinking of the resources they have devoted to internal research. Given that higher education is a North Carolina strength, it makes sense to leverage that strength to fill industry’s need to bring new products into their tech and pharmaceutical pipelines.

Findings from previous Tracking Innovation reports have sparked policy efforts to improve the state’s performance. For example, the 2003 report found that despite the strong R&D work happening in North Carolina, the state lagged when it came to securing federal grant money. A look at other states found that some of them had support programs to educate companies about grant programs, Hardin said. So North Carolina created a new position, a Small Business Innovation Research Specialist, to help entities learn about and find grant opportunities. The 2013 Tracking Innovation report found that North Carolina was one of the few states that has improved on the SBIR and Small Business Technology Transfer metric.

North Carolina not alone

Hardin acknowledged the report’s finding that technology growth by itself is not enough sustain the state’s economic growth. But he noted that North Carolina is not unique in this regard. No state has an economy comprised primarily of high technology. High tech represents just 7.8 percent of North Carolina’s economy, which ranks the Tar Heel State 24th.among all of the states. In the highest ranking state, Delaware, high tech represents just shy of 14 percent of total businesses.

Some 50 years ago, high tech would have represented closer to 2 percent of North Carolina businesses, Hardin said. The key is to grow technology over time and to do so across the entire state economy. Innovation is not limited to high tech companies. Hardin points to his former boss as an example. Former Secretary of Commerce Keith Crisco was president of Asheboro Elastics Corp. before he joined the Commerce Department. AEC’s products are used all over the world but elastics used in underwear do not immediately come to mind as innovation. Yet the company holds numerous patents for its processes of making elastics, innovation that grew the company. In turn, AEC’s growth spurs growth of other businesses that are linked to it, Hardin said. North Carolina’s economic growth will come from innovation across economic sectors.

“The goal is not for the entire economy to be high tech,” Hardin said. “The goal is generally to be innovative because innovation, at its core, is about change. It’s a dynamic, changing world. Companies that don’t innovate are those that will be left behind.”