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Sunday, 16 December 2012 23:22

Michigan Innovation Index trends flat

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MICHIGAN — Slow activity in venture capital funding and business starts and weak employment in the sciences and engineering put downward pressure on an index that track’s Michigan’s environment for innovation.

The iLabs Innovation Index, which reached a four-year high in the first quarter of 2012, fell in the second quarter, continuing a relatively flat overall trend that began in the end of 2010.

According to the report prepared by iLabs, a branch of the University of Michigan-Dearborn College of Business, the fall from 95.2 to 92.8 was largely driven by drops in venture capital funding, incorporations and LLC filings, and the number of workers employed in science and engineering. While the index remains below its initial benchmark level of 100 from 2007, it is higher than the levels of the index during the worst of the financial crisis in late 2008 and early 2009.

The iLabs Innovation Index Report is prepared on a quarterly basis and is comprised of six indicators that measure the innovation activity in Michigan: Small Business Administration (SBA) loans, gross job creation, trademark applications, incorporations and LLC filings, venture capital (VC) funding and the percentage of innovation workers in the workforce as measured by those employed in science and engineering.

The factor that was primarily responsible for the fall of the index was the percentage of innovation workers, which are estimated from Bureau of Labor Statistics data. The percentage fell below both the levels from the previous quarter and previous year.

Of the three factors that fell, the drop in incorporations and LLC filings was expected since they are traditionally strong in the first quarter, and typically drop off in the second. In spite of the drop, the number of incorporations and LLC filings was 18,987 filings higher than in the same period last year, according to the iLabs report.

VC funding levels are based off reports from Pricewaterhouse Coopers and the National Venture Capital Association. Although VC funding activity dropped as compared to the first quarter of 2012, it still remained above the levels from a year earlier.

SBA loans rose slightly in the second quarter to levels similar to the second quarter of 2012. Gross job creation, which enters the index at a one-quarter delay, likewise rose slightly in the first quarter of 2012. Trademark applications were stagnant.

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