RALEIGH – The Triangle’s cities rank among the nation’s best for innovation, in part driven by ongoing demand for technology workers and a steady supply of technology jobs, according to the most recent Tech Innovation Index, released Wednesday morning by NC TECH.

In its second year, the Tech Innovation Index serves to benchmark North Carolina’s ten most populous metropolitan statistical areas against the top 100 most populous regions of the United States.

The Durham-Chapel Hill metropolitan statistical area ranked sixth overall for the second year in a row, and the Raleigh-Cary metropolitan statistical area ranked eighth overall.

But both regions ranked high in one subcategory: innovation.  Raleigh-Cary ranked second for innovation, and Durham ranked third, of the 110 metropolitan regions analyzed.

The research, conducted for NC TECH by Economic Leadership, was released on a virtual briefing held on Wednesday morning.  WRAL TechWire spoke with Ted Abernathy, the managing partner of Economic Leadership, about this year’s index.  A Q&A, lightly edited for clarity, appears below.

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Drivers of change

WRAL TechWire (TW): It would appear that both Triangle metros performed better on tech supply in this year’s rankings compared to last year’s rankings, moving up two spots.  What were the primary drivers in this change? Where could the region still improve, based on the data?

Ted Abernathy, managing partner, Economic Leadership (Abernathy): Yes, both Raleigh and Durham saw increases to their index values for tech supply in addition to the bump in rankings. This was driven by an increase in resident workers per capita (i.e. more workers living in the area). Durham bumped up in the rankings across most of the metrics in this group. This is a testament to the highly educated workforce present in both metros. One area for improvement is the tech worker diversity index. In both Raleigh and Durham the tech workforce is less diverse than the general adult population. Raleigh and Durham rank 73rd and 81st respectively on this metric.

TW: What’s driving job growth in these North Carolina markets?  

Abernathy: The majority of the job growth in these markets is being driven by increases in software developers. QA analysts and testers are also driving growth. We don’t have data and have not conducted research that shows occupation, age, and migration to prove this theory but anecdotally it could play a role.

TW: Where Raleigh and Durham MSAs ranked strongest – again this year – is in tech innovation, with #2 in Raleigh and #3 in Durham.  What is happening here that is driving innovation?

Abernathy: For the Triangle metros, the research and development happening at the universities is the strongest asset. There were also high levels of SBIR/STTR funding, meaning area startups are getting approved for federal funding.

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Where NC, NC metros can improve

TW: Raleigh ranked only 22nd for tech demand – and the report notes that NC metros “tended to have more worker churn, or turnover, in the tech workforce compared to other places in the country.”  Can you go more in depth as to what is happening here and perhaps explain why?  

Abernathy: Raleigh does have higher turnover rates compared to other metros. Sometimes in areas of with lots of opportunities, and new opportunities, we see the turnover rate is higher. The turnover rate in an area can also be dependent on the mix of job positions. Overall, tech jobs have some of the lowest rates of turnover compared to other types of positions. Workers come for a job opportunity or stay after school but may leave for their next opportunity.

One area for improvement is the tech worker diversity index. In both Raleigh and Durham, the tech workforce is less diverse than the general adult population. Raleigh and Durham rank 73rd and 81st respectively on this metric.

TW: The report recommends that outside of Triangle, state could foster more business R&D and entrepreneurship, or support more companies pursuing SBIR/STTR funding.  What other recommendations would you share for specific metros, based on the data?

Abernathy: Overall, the North Carolina metros did not score as high on the entrepreneurship metrics like business applications, patents, and business dynamism. The data would indicate entrepreneurship would improve their scores. Entrepreneurial ecosystems are complicated and involve everything from specifics in business climate like regulation and taxes to availability of affordable startup space, to risk capital and local acceptance of business failure. Since this was not an entrepreneurial study, it did not surface specific remedies.

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Placing rankings in context

TW: How did – if at all – the changing nature of the COVID pandemic or the macroeconomic conditions – affect this year’s rankings compared to last year’s rankings?

Abernathy: The tech industry has been one of the most stable parts of the economy in the last few years, but even still there have been trend changes within.

There were some increases in resident tech workers in several North Carolina metros, remote work and people moving to smaller metros may be playing a role there. The jump in the number of online postings across the board highlights the wave of job openings we’ve since in the reopening of the economy.

The rate of business applications is higher as many people initially impacted by closures are turning to entrepreneurship or consulting. The most notable change might be the increase in tech wages and because many North Carolina metros have a cost of living advantage, many of the North Carolina metros moved up in the adjusted wage metric.

TW: How would you describe North Carolina’s performance, overall, compared to other states? 

Abernathy: One way to look at it is this: among the top 30 tech metros nationally, there are three North Carolina metros, with two in the top 10.  California is the only other state that has three metros ranked in the top 30.  We look specifically at state performance in the State of Industry Report – NCSTIR – that will be released in early February 2023.

One of the key takeaways is that despite all the national turmoil and the roller coaster that tech has been on over the past two years that North Carolina’s metros have remained some of the most desirable for people with tech skills. The rankings didn’t change much, but the world was in flux, and North Carolina’s fundamentals remained strong.