The Michigan Innovation Index, compiled by the University of Michigan-Dearborn’s Center for Innovation Research, called iLabs, fell to 85.8 in the second quarter of 2010 from 89.0 in the first quarter. Researchers said a continued decline in gross job creation was the culprit.  

The Innovation Index tracks economic innovation in Michigan based on calculations of employment of “innovation workers,” trends in venture capital, trademark applications, incorporation activity, small business loans and gross job creation.

In the most recent quarter, two indicators rose while four declined and the Index remained above its year-ago level of 80.0, but still well below its pre-Great Recession numbers.

The Innovation Index was impacted by a strong rebound in venture capital funding in the second quarter to reach its highest level since 2008, which added 2.9 points. Other positive data included an increase in trademark applications, which added 0.7 points to the Index.

“The quarterly drop, which came after a modest increase last quarter, was due to a drop in job creation, which remains above last year’s figures but still reduced the index by 3.7 points,” said Lee Redding, associate professor of business economics and director of the Innovation Index at the College of Business. “This loss, combined with drops in incorporations and LLC filings, the small business loans awarded, and the number of workers employed in science and engineering, contributed to the overall dip in the Index.”

The next University of Michigan–Dearborn Innovation Index report, due out in early March, will contain a detailed report of third quarter activity, along with a preliminary indication for the fourth quarter of 2010.

“In looking at this data there is concern that the next report will show a further drop in innovative activity as the expiration of stimulus provisions continue to affect the Small Business Administration — and venture capital funding may not continue to increase,” said Redding.

Redding collaborates on the project with economist Anne-Louise Statt.

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