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Posted on Dec 12, 2011

New York State of Mind - Top State for Entrepreneurship


A University of Nebraska study found that New York led the country in the State Entrepreneurship Index, a metric designed to measure the friendliness of states to entrepreneurship.  The index, which is based on statistics compiled by the Bureau of Labor, Internal Revenue Service, U.S. Statistical Abstract and U.S. Census Bureau, uses five factors to determine which states are the best home for growth in business as well as growth in new technology.  These factors are the percent growth in employer establishments, the percent growth in employer establishments per capita, business formation rate, patents per thousand residents, and gross receipts of sole proprietorships and partnerships per capita.  These five components are then averaged and judged against the median state, which is assigned a value of 1.0.

In the 2010 index, New York led with a 2.34 score, reprising its position atop the original index in 2008.  It was followed, in order, by Washington, Massachusetts, New Jersey and Oregon.  The five worst states for entrepreneurship, according to the index, were Alabama, Arizona, Mississippi, Nevada and South Carolina.  While New York was on top both times, there were some significant changes from 2008 to 2010 among other states.  Oregon rose the most dramatically, from 45th to 5th, while Delaware had the second biggest jump, moving from 42nd all the way up to 14th.  Other states on the rise include Kentucky, Texas and Rhode Island.  Several states took big drops as well.  Nevada’s was the steepest, from 7th to 47th, while Arkansas fell from 10th to 36th, and Tennessee fell from 20th to 42nd.

The biggest reason for the shifts, the University of Nebraska found, was a change in just two of the factors accounted for in the index, the growth of establishments and the percent growth in employer establishments per capita.  These factors accounted improved dramatically in New York, and in the states which moved up in the index.   The State Entrepreneurship Index index is based on the work of Eric C. Thompson and William B. Walstad at the University of Nebraska in 2008.

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