United States

Bay Area Drops to No. 2 in Innovation: Report

The Bay Area is no longer the most innovative region in the U.S., according to a new report.

Boston has surpassed the Bay Area as the top region in terms of its readiness to capitalize on the next wave of the digital economy, according to a study titled "Innovation That Matters."

While the Bay Area remains the clear leader in entrepreneurial activity, its weakening quality of life has dropped it to the No. 2 overall spot in the rankings. The study was co-authored by 1776, Free Enterprise and the U.S. Chamber of Commerce Foundation.

The study ranked 25 cities in six categories: talent; capital; industry specialization; culture, such as quality of life and regulation; and ecosystem connectivity.

While the Bay Area was the clear leader across most categories, it also saw a dip in the area of connectivity, which suggests that the competitive nature of the region could be reducing collaboration among startups, government, corporations and institutions, the study says.

The Bay Area leads in number of startups and number of successful exits, but New York, Los Angeles and Boston are quickly gaining ground in that area. Cities need successful exits to recycle money back into the system to fund the next generation of startups, the study says.

And the high cost of living in the Bay Area likely was key factor to it ranking at the bottom of the culture category, as the experience of living in the city is considered an asset for entrepreneurs, the report says.

Rounding out the top five on the list are Denver; Raleigh-Durham, North Carolina; and San Diego. Los Angeles ranks seventh and New York is No. 10.

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