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Categories & Criteria for CNBC's Top States for Business 2012

Wednesday, 11 Jul 2012 | 8:08 AM ET

We scored all 50 states on 51 measures of competitiveness developed with input from business groups including the National Association of Manufacturersand the Council on Competitiveness, as well as the states themselves. States received points based on their rankings in each metric.

America's Top States For Business
America's Top States For Business

Then, we separated those metrics into 10 broad categories, weighting the categories based on how frequently they are cited in state economic development marketing materials, for a total of 2,500 points. That way, our study ranks the states based on the criteria they use to sell themselves.

Cost of Doing Business (350 Points)

Cost is a major consideration when a company chooses a state. We looked at the tax burden, including individual income and property taxes, as well as business taxes, particularly as they apply to new investments. Utility costs can add up to a huge expense for business, and they vary widely by state. We also looked at the cost of wages, as well as rental costs for office and industrial space (rental cost information furnished by CoStar Group).

Workforce (350 Points)

Many states point with great pride to the quality and availability of their workers, as well as government-sponsored programs to train them. We rated states based on the education level of their workforce, as well as the numbers of available workers. We also considered union membership. While organized labor contends that a union workforce is a quality workforce, that argument, more often than not, doesn’t resonate with business. We also looked at the relative success of each state’s worker training programs in placing their participants in jobs.

Quality of Life (350 Points)

The best places to do business are also the best places to live. We scored the states on several factors, including local attractions, the crime rate, health care, as well as air and water quality and pollution.

Infrastructure & Transportation (325 Points)

Access to transportation in all its modes is key to getting your products to market and your people on the move. We measured the vitality of each state’s transportation system by the value of goods shipped by air, land and water. We looked at the availability of air travel in each state, the quality of roads, and the time it takes to commute to work.

Economy (325 Points)

A solid economy is good for business. So is a diverse economy, with access to the biggest players in a variety of industries. We looked at basic indicators of economic activity, including growth, unemployment and the health of the real estate market. We measured each state’s fiscal health by looking at their credit ratings and outlook, as well as projected budget gaps (or surpluses) for the coming fiscal year. We also gave credit to states based on the number of major corporations located there.

Education (225 Points)

Education and business go hand in hand. Not only do companies want to draw from an educated pool of workers, they also want to offer their employees a great place to raise a family. Higher education institutions offer companies a source to recruit new talent, as well as a partner in research and development. We looked at traditional measures of K-12 education including test scores, class size and spending. We also considered the number of higher education institutions in each state and long-term trends for funding higher education.

Technology & Innovation (225 Points)

Succeeding in the new economy—or any economy—takes innovation. The top states for business prize innovation, nurture new ideas, and have the infrastructure to support them. We evaluated the states on their support for innovation, the number of patents issued to their residents, the deployment of broadband services, and the record of high tech business formation. We also considered federal health and science research grants to the states.

Business Friendliness (200 Points)

Regulation and litigation are the bane of business. Sure, some of each is inevitable. But we graded the states on the “friendliness” of their legal and regulatory frameworks to business.

Access to Capital (100 Points)

Companies go where the money is, and venture capital flows to some states more than others. We looked at the flow of capital to states in absolute terms as well as in proportion to the size of their economies.

Cost of Living (50 Points)

The cost of living helps drive the cost of doing business. From housing to food and energy, wages go further when the cost of living is low.

America's Top States For Business