With the U.S. spending over $800 billion per year on R&D, the personal-finance website WalletHub today released its report on 2025’s Most & Least Innovative States, as well as expert commentary.
In order to give credit to the states that have contributed the most to America’s innovative success, WalletHub compared the 50 states and the District of Columbia across 25 key metrics. The data set ranges from the share of STEM professionals to R&D spending per capita.
Innovation in New York (1=Most Innovative, 25=Avg.):
- Overall Rank: 26th
- 30th – Share of STEM Professionals
- 45th – Projected STEM-Job Demand by 2030
- 37th – Eighth-Grade Math & Science Performance
- 27th – Share of Science & Engineering Graduates Aged 25+
- 23rd – Share of Technology Companies
- 14th – R&D Spending per Capita
- 5th – Venture-Capital Funding per Capita
Expert Commentary
How can state policymakers encourage and facilitate innovation?
“Number one on my list of recommendations is investing in education. Data consistently shows that states (and countries) most likely to have highly successful unicorn startup companies also have highly successful research institutions – California, Massachusetts, New York, etc. States can fund STEM programs, technical schools, and community colleges to develop a skilled workforce aligned with innovation-driven industries. The quality of the talent pool is one of the best predictors of the success of innovation activities in the state. Investing in education can also help the workforce displaced by innovation and equip them with the technical skills necessary for the new economy. State-level funding can play an increasingly important role in fueling education activities. The second recommendation is to create incentives such as tax credits or grants for businesses investing in research and development and establish government-funded innovation clusters and incubators. What works well and is relatively inexpensive is providing infrastructure and networking opportunities for startups and established firms to collaborate, share ideas, and develop new technologies. The future of innovation is on the interception between large corporations (like Microsoft) and innovative startups (like OpenAI) and the ecosystems created around them. State governments can help by providing free space, simplifying regulations, and offering free digital infrastructure to enable collaboration.”
Serguei Netessine – Senior Vice Dean for Innovation and Global Initiatives; Professor, University of Pennsylvania
“Traditional incentives like tax breaks and grants play a role, but they are not enough to create a sustainable innovation ecosystem. States must take a structural approach, building distributed innovation ecosystems where each node operates as a public-private partnership focused on a specific area of innovation. This is precisely how San Diego became an innovation hub for life sciences and biotech – by fostering interconnected hubs, not isolated initiatives. Within these ecosystems, incubators and accelerators should function as connectors, bridging academia, industry, and entrepreneurs rather than operating as standalone entities. Instead of relying on short-term grants, states should fund and operate accelerators as permanent infrastructure, ensuring long-term investment in early-stage innovation. Beyond funding, states must remove barriers to experimentation. I advocate for regulatory sandboxes – temporary, small-scale exemptions from restrictive regulations that allow startups to test ideas without immediate legal constraints (or with subsidized legal consultation and support). This is not traditional deregulation, which often benefits large incumbents, but rather a controlled environment where responsible innovation can flourish. By providing a structured transition from experimentation to compliance, policymakers can help startups move from concept to market without getting stuck in bureaucratic gridlock. Ultimately, a state that nurtures risk-taking and creativity rather than merely funding projects is the one that will consistently lead in innovation. Innovation is not about how much money is thrown at an industry; it’s about creating the conditions where entrepreneurs and researchers have the freedom to challenge the status quo.”
Kaveh Abhari, Ph.D. – Professor; Director of Digital Innovation Lab, San Diego State University
What skills best equip individuals to be competitive in a changing economic landscape?
“As an educator, I’d say the ability to learn rapidly and also be open-minded about new options/ careers. Adaptability and the willingness to re-tool oneself as needed is key.”
Sabith Khan, PhD – Program Director, MPPA; Associate Professor, California Lutheran University
“The core skills that define competitiveness today are the same ones that mattered centuries ago – such as integrity, creativity, resilience, and initiative. These qualities have always been valuable, but today, they are indispensable – even for technical roles. Why? Because AI is increasingly supplementing technical skills, making human-centric capabilities even more critical. From an educational perspective, the most critical skills fall into two categories: 1. Skills machines have not yet mastered – such as critical thinking, creativity, emotional intelligence, and ethical judgment. 2. Skills that guide machines to create value – including entrepreneurial and strategic thinking, systems analysis, and AI fluency. This is why I place entrepreneurial (or intrapreneurial) skills and mindset at the top of the skillset. Not because everyone must start a business but because the most competitive individuals are those who see opportunities, navigate uncertainty, and create value in evolving markets. Ultimately, technology is just a tool – the real advantage belongs to those who master it, direct it, and apply it toward solving meaningful human problems.”
Kaveh Abhari, Ph.D. – Professor; Director of Digital Innovation Lab, San Diego State University
What can policymakers do to assist those who may lose their jobs or otherwise be displaced by innovation across industries?
“Rather than attempting to ‘regulate’ innovation, policymakers could focus on workforce transitions, ensuring that displaced workers have access to new opportunities. Job displacement is not a failure of technology – it is a failure of workforce planning. States must establish a self-sustaining, innovation-driven reskilling mechanism, funded through a targeted business tax that reinvests directly into workforce development, ensuring that companies benefiting from automation and AI contribute to retraining displaced workers. A portion of this fund should be allocated to free or subsidized training programs at community colleges and technical institutions, allowing workers to retool without financial burden. For instance, there is always high demand for skilled trades, yet many factory workers laid off due to automation are not given clear pathways into these professions – jobs that would preserve both their dignity and income. Instead of imposing one-size-fits-all government retraining programs, I advocate for individual workforce vouchers with subsidized coaching, enabling workers to choose specialized programs that align with their career aspirations and emerging job markets. Moreover, states should incentivize companies to retrain employees rather than replace them by offering tax benefits to businesses that invest in internal upskilling. Workforce transitions should not be an afterthought – they should be a built-in component of economic development policies. The goal should not be just ‘saving jobs’ but creating sustainable career pathways that evolve alongside innovation.”
Kaveh Abhari, Ph.D. – Professor; Director of Digital Innovation Lab, San Diego State University