The Best (and Worst) States for Entrepreneurship

By Karen Axelton, recently featured on

Are you considering moving your business to a new location, or just want to see how your state stacks up in comparison to others? The University of Nebraska-Lincoln’s Bureau of Business Research and Department of Economics recently released its State Entrepreneurship Index (SEI). This nationwide analysis and ranking system compares how states measure up in terms of business formation and innovation.

Developed by economists at the University, the SEI measures more than just raw business starts. It combines five key components: a state’s percentage growth in business establishments; its per capita growth in business establishments; its business formation rate; the number of patents per thousand residents and the gross receipts of sole proprietorships and partnerships per capita.

Each state is assigned a state index for each component based on how much each state’s performance is above or below the average of all state data, which has a value of 1.0. A state’s overall SEI number is the average of the five index values.

What are the best entrepreneurial states? Nationally, New York kept the top spot from the last SEI in 2008, with an index score of 2.34. Close behind were Washington (2.17), Massachusetts (2.04), New Jersey and Oregon (both at 1.93) to fill out the top five.

How about the worst states? South Carolina, with an index of 0.07, was No. 50. Arizona (0.11) was No. 49, behind Mississippi (0.32), Nevada (0.33) and Alabama (0.41).

As for the biggest movers on the list, the big winner was Oregon, which rose 40 spots (to number 5) compared to its ranking of 45 in 2008. Biggest loser? Nevada dropped 40 spots to number 47 compared to its rank of number 7 in 2008.

The SEI combines detailed data from the Bureau of Labor Statistics, the Internal Revenue Service Statistics of Income Bulletin, the U.S. Census Bureau and the U.S. Statistical Abstract.

Of course, moving your business shouldn’t be a decision based on one ranking, but indexes like the SEI can give you insights into what states are thriving—or struggling—in today’s economy.

The views expressed here are the author’s alone and not those of Network Solutions or its partners.
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