Recent studies have confirmed that where you start and run your business has a proven impact on the potential for your success. The findings have been reported in two exhaustive studies: the State Entrepreneurship Index published by the University of Nebraska-Lincoln and the 2010 State New Economy Index , produced by the Ewing Marion Kauffman Foundation and the Information Technology and Innovation Foundation. Not surprisingly, the current recession has been a major factor for entrepreneurs in some of the lower-performing states, with sectors in the mid-west struggling at all-time lows for new business formation and startup success. However, the traditional model of economic development seems to be going strong in states that have long been associated with the entrepreneurial spirit, like the Northeast and California. These regions have been able to maintain their startup potential because they've got the investors already in place and also possess a high concentration of experienced entrepreneurs, allowing them to create high-income entrepreneurship despite the negative impacts suffered in poor economic conditions.
Both reports focus on a similar set of benchmark factors, including percentage growth in business establishments, per capita growth in business establishments, business formation rate, patents per thousand residents and the gross receipts of sole proprietors and partnerships per capita. However, there are some notable differences between the two.
While researchers at the University of Nebraska factored raw business starts into their study, the State New Economy Index uses an additional 26 indicators to assess the basic capacity of a state to successfully navigate the ups and downs of economic change. In addition, it considers the extent to which state economies focus on knowledge, globalization, entrepreneurial spirit and IT-driven and innovation-based ventures. In doing so, they've been able to determine with relative accuracy to what degree a state's economy and operations allow for the ideal structure in which a new venture will thrive.
How they rankedRegionally, both studies found the strongest entrepreneurial rate of success in the Northeast, mid-Atlantic, Mountain West and Pacific regions. Within these regions, 13 of the top 20 entrepreneurial states are located. Just the opposite is true of the bottom-ranking states, with 18 of the 20 lowest-ranking currently situated in the Midwest, Great Plains and the South.
With crossover seen between the two indexes on the west coast, data indicates that Seattle, Portland and other areas in the Pacific Northwest continue to support new business. Possibly due to the tech industry, these areas have weathered the recession better than most and also have a base of investors and related capital built up from decades of similar ventures.
Depending on the study, the top five states for successful entrepreneurship are:
State Entrepreneurship Index
- New York
- New Jersey
State New Economy Index
- New Jersey