Survey: Mass. losing anchor companies

Massachusetts has continued to become more and more of a "branch office" location for big companies based elsewhere, according to a survey released yesterday that shows the number of big companies headquartered here dropped by 14 percent last year.

Even before the pending takeovers of FleetBoston Financial Corp. by Bank of America Corp. of Charlotte, N.C., and John Hancock Financial Services Inc. by Manulife Financial Corp. of Toronto, the Bay State has already been losing anchor corporate headquarters, according to the annual "Index of the Massachusetts Innovation Economy" prepared by the Westborough-based quasi-public Massachusetts Technology Collaborative.

As of last year, Massachusetts hosted headquarters of 210 companies employing 500 or more people. That was down from 245 in 2001 and 238 in 2000. About three-fifths of the drop reflected companies still based here that cut their staff to below 500. But the state lost 10 companies who moved headquarters to lower-cost states such as North Carolina and Colorado.

Companies moving their main offices elsewhere is only one of several negative trends identified by the report as facing the state's "innovation economy," which has also seen employment drop and venture capital investment plunge.

But the index also shows Massachusetts holding steady in some key areas, including collecting leading shares of federal healthcare research dollars and patent awards. While overall venture capital invested in Bay State companies dropped by half between 2001 and 2002, to $2.3 billion, Bay State start-ups still collected nearly $1 of every $8 in US venture funding.

"Complacency could be a problem for us," said Mitchell L. Adams, executive director of the Technology Collaborative, which also runs a small technology office park and oversees the state's $160 million renewable energy trust fund. "The innovation system in Massachusetts has to be taken care of and nurtured."

As the loss of 10 significant corporate headquarters to other states shows, "There are other states out there that would like to eat our lunch," Adams said.

Patricia M. Flynn, a professor of economics and management and former dean at Bentley College in Waltham who chairs the advisory committee overseeing the index, said one potentially worrisome trend identified by the report was Massachusetts steadily losing "market share" to other states in providing higher education degrees.

From 1990 to 2000, enrollments in public degree-granting institutions in Massachusetts -- such as the UMass and state college systems -- dropped by 1.5 percent, compared to an 8.4 percent increase nationally. Enrollments at private institutions in Massachusetts grew 2.6 percent, well behind the national growth of 19.7 percent.

Flynn said what makes that trend problematic is that higher education is "one of our key strengths and a big export item for us," as well as a key way Massachusetts offsets the steady out-migration of college-educated people to less expensive states.

The study, which has been conducted since 1997, focuses on nine industries employing 25 percent of all non-government workers in America.

The nine industries are seen as key concentrations of talent and investment in Massachusetts and major drivers of its economic growth: software and communication services, financial services, higher education, computer and communications hardware, defense technology, healthcare technology, textiles and apparel, and two other clusters called "innovation services" and "diversified industrial support" that take in sectors such as consulting, engineering, and manufacturing of specialty high-tech chemicals and materials.

Between 2001 and 2002, total employment in these nine areas fell by 6.6 percent to 811,000 workers, the biggest year-to-year drop in five years. Overall state employment fell by 2.3 percent during the same period.

Among other findings in the report:

Gross royalties received by institutions for licensing technologies to manufacturers or product developers soared to $166 million in 2001, compared to $90 million in 2000, although officials cautioned that licensing revenues can fluctuate significantly year to year.

The four biggest recipients of such royalties were, in order, the Massachusetts Institute of Technology, Massachusetts General Hospital, Harvard University, and the University of Massachusetts.

The total of 26,770 business incorporations in Massachusetts in 2002 represented a 26.6 percent jump from 2001, the largest one-year increase in more than nine years.

Massachusetts garnered $1.7 billion in federal healthcare research and development awards in 2001, the most recent year for which data was available, ranking the state second after California's $2.2 billion.

At $403 per resident of the state, Massachusetts's federal health research aid led all of the so-called leading technology states, a group that includes Colorado, Connecticut, Minnesota, New Jersey, and New York.

Peter J. Howe can be reached at howe@globe.com.