Top 10 states for entrepreneurs

NUMBER 10: New Hampshire - The Granite State improved from 14th in 2008 in the Entrepreneur Index of the University of Nebraska-Lincoln. New Hampshire does well in establishments per capita because it ranks 39th in population. Its sole proprietorships and partnerships also rank high in gross receipts per capita.
NUMBER 9: Texas - The Lone Star State made impressive gains to 9th place from 34th in 2008. A key measure is not merely business startups but a large positive number of new and and existing establishments minus firms that closed. Texas did well by this measure. Because it is the second most populous state, its establishments per capita wasn't as large as some other states.
NUMBER 8: Oklahoma - The Sooner State may benefit by the oil and gas boom in recent years. Its Entrepreneur Index ranking by the University of Nebraska-Lincoln improved seven spots from 2008.
NUMBER 7: Illinois - The Entrepreneur Index score of the Land of Lincoln and the Chicago Cubs didn't change that much from 2008, but other states fell off in the recession's aftermath, so Illinois improved from its 11th ranking.
NUMBER 6: Louisiana - Recovery from Hurricane Katrina that wiped out so many businesses boosted Louisiana's new-business formation as well as growth in the number of establishments per capita placed Louisiana 6th on the 2011 Entrepreneur Index of the University of Nebraska-Lincoln.
NUMBER 5: Oregon - The Beaver State made a huge leap to 5th place on this year's list from 45th in 2008 because of a large increase in the number of businesses as well as the number of establishments per capita. (Photo is Crater Lake, Oregon.)
NUMBER 4: New Jersey - Cuts in taxes and regulations in recent years helped increase new-business formation as well as the percentage growth in the number of establishments from 2008 on the Entrepreneur Index of the University of Nebraska-Lincoln.
NUMBER 3: Massachusetts - The presence of many world-class universities, such as Harvard (pictured) and MIT, boosts the Bay State because patents per 1,000 residents is one of five components by which states are ranked. Patents show innovation that is a significant part of entrepreneurship.
NUMBER 2: Washington - Not much change for Washington, which ranked 3rd on the Entrepreneur Index in 2008. The number of new businesses per capita as well as fewer business deaths during the period were better than most states. (Pictured is Seattle's Space Needle.)
NUMBER 1: New York - The Empire State continues to hold the top rank in the Entrepreneur Index of the University of Nebraska-Lincoln because of its strong performance in gross receipts per capita and substantial improvement in growth in businesses that have employees and in the number of establishments per capita.

By Jan Norman | Orange County Register

August 8, 2011 at 8:00 a.m.

California fell out of the top 10 states for entrepreneurs in the new States Entrepreneur Index by the University of Nebraska-Lincoln. But that’s a mild decline compared to Nevada’s 40-spot plunge in the ranking of states’ Business formation and innovation.

Click on the photo above to see the top 10 states for entrepreneurs on the university’s index.

While some state rankings look only at business startups, the UN-L index is compiled from 5 measures of business formation and innovation:

• percentage growth in number of business establishments

• per capita growth in number of businesses

• new business formation

• number of patents won per 1,000 residents

• gross receipts of sole proprietorships and partnerships per capita

“The (index) uses a broad group of indicators rather than just raw counts of business starts,” said Eric Thompson, director of the University’s Bureau of Business Research who developed the index with William Walstad in 2008. “This ensures that the index reflects sales and innovation among a state’s businesses as well as the business formation rate.”

By including population ratios for three of the five measures, the index removes the natural advantage that high-population states like California have.

The Index gives the state at the median a value of 1.0. The top-ranked state has an index value of 2.34; the lowest, 0.07.

“The number of startups is valuable, but we also wanted a net number of business births minus deaths (to show) states where businesses are better able to last.”

California’s ranking is helped by the number of patents awarded to its many research universities including the University of California and California Institute of Technology, Thompson said. It also does well in gross receipts per sole proprietorships and partnerships, which indicates the size of businesses in the state.

However, California suffered – as many states did this time – on business closures, or as the university’s report called it “substantial economic dislocation.”

Thompson said, “I think what happened was the California economy overall was weak and caused weaker businesses to close.”

In addition to Nevada’s 40-spot plunge, Arkansas fell 26 spots to 36th and Tennessee dropped 22 spots to 42nd on the latest index “due to a sharp decline in the growth of establishments and establishments per capita,” the report said, adding that those two measures accounted for most of the change in states’ ranking either up or down.

Thompson added, “Nevada’s gross receipts were down as that economy struggled.”

The data for the rankings came from the Bureau of Labor Statistics, IRS Statistics of Income Bulletin, U.S. Census Bureau, U.S. Statistical Abstract and the authors’ calculations.

Click here to read the report.

Contact the writer: 714-796-7927 or jnorman@ocregister.com

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