State Entrepreneurship Index: Finally, there’s a national ranking Kentucky can be proud of

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(Graphics by Troy Fedderson/UNL)

(Graphics by Troy Fedderson/UNL)


 

Fueled by its ongoing energy boom, North Dakota remains at the top of an annual list measuring states’ ability to create new businesses. But the bigger newsmaker might well be Kentucky, which climbed 45 places from its 2012 ranking to land in this year’s top five.
 

Kentucky’s rise from 49th in the 2012 index to No. 4 in 2013 also meant the state was the “biggest jumper” on the positive side. Pennsylvania claimed that distinction on the negative side, falling to No. 38 in 2013 after being ranked No. 7 in 2012.
 

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After several years of losing more businesses than it gained, Kentucky saw a 4.68 percent increase in its number of business establishments in 2013, according to a UNL press release. It’s seen a nearly 13 percent gain in number of patents per 1,000 people during the past two years and income levels for non-farm proprietors grew 6 percent in the past year.
 

“Its economy and entrepreneurs were having trouble adapting to the Great Recession,” said Eric Thompson, director of Bureau of Business Research and a co-author of the index. “But now businesses in Kentucky are bouncing back.”
 

Created by economists at the University of Nebraska-Lincoln, the State Entrepreneurship Index is a measure of states’ muscle when it comes to growing new enterprises. North Dakota has been at or near the top in each of the last four years. The latest index is based upon 2013 data from the U.S. Bureau of Labor Statistics, the U.S. Census, the U.S. Patent and Trademark Office and the Bureau of Economic Analysis in the U.S. Department of Commerce. To view the full report and to see state-by-state rankings, click here.
 

Developed by economists from UNL’s Bureau of Business Research and its Department of Economics in the College of Business Administration, the index is based upon five key components: a state’s net growth in business establishments, per capita growth in business establishments, business formation rate, number of patents per thousand residents and average income for non-farm proprietors. The combination is designed to reflect key elements of an entrepreneurial climate: business startups and failures compared to population, innovation and income.
 

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In addition to Kentucky and North Dakota, the rest of the 2013 top 10 are California, New York, New Hampshire, Connecticut, Texas, Utah, Oregon and Colorado.
 

Michigan was 50th. It is one of a swath of industrial Midwest states with comparatively low scores on the entrepreneurial index. Michigan has lost more than 106,000 people since 2008, but has lost businesses at a faster rate. However, in 2013, its population grew slightly.
 

“Michigan is turning things around and should eventually do better on the index,” Thompson said.
 

North Carolina was No. 49, preceded immediately by New Mexico, Indiana, Alabama, Arizona, Maine, Virginia, Ohio and Hawaii.
 

New York and New Hampshire both have been among the top 10 each of the past four years; Texas has been on it three times; Connecticut has appeared twice in the past four years. New York remains strong as a major population and finance center, while New Hampshire benefits from being a low tax state in a high-income region, Thompson explained.
 

“New Hampshire has a fantastic business environment — think very low taxes,” Thompson said. “It also benefits from the growth of the Boston metropolitan area and technology businesses located there.”
 

Entrepreneurial climate appears to be something that states can change: In 2011, for example, the top 10 entrepreneurial states were dominated by states in the clustered in the northeast and upper Midwest, Two years later, the top 10 included a mix from nearly every geographical region.
 

From University of Nebraska-Lincoln’s news service.

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