Small Business

The Best States for Entrepreneurs

Technology Media Network
Chad Brooks, TMN
Boston skyline
Photo: Visions of our land | Getty Images

The entrepreneurial spirit is alive and well in Massachusetts, new research shows.

For the second year in a row, the Bay State tops the annual U.S. State Entrepreneurial Index, a comprehensive look at the levels of entrepreneurship in each state over the past year.

The research from the University of Nebraska-Lincoln measures five key components: a state’s percentage growth and per capita growth of business establishments, its business formation rate, the number of patents per thousand residents, and income per non-farm proprietor in each state.

Massachusetts scored well for its establishment growth, patent activity and income per proprietor.

The other states in the index's top 10 are:

  • North Dakota
  • California
  • New York
  • Minnesota
  • Oregon
  • New Jersey
  • New Hampshire
  • Texas
  • Illinois

Eric Thompson, associate professor of economics and director of the university's Bureau of Business Research and economics department, said to reach the top of the rankings, states had to do very well in at least four of the five categories.

"This year, those states tend to be clustered in the Northeast and the upper Midwest," Thompson said. "That’s not to say there is not significant action in other regions of the country, of course, but our data shows this year’s entrepreneurial activity has a definite northern flavor."

Utah was the highest climber in the rankings, moving from No. 44 last year to No. 21 this year. Ohio, which was No. 40 last year, moved up to No. 22, while Arizona, Maine, Maryland, North Carolina and Wisconsin also had double-digit improvements.

Louisiana and Michigan were at the bottom of this year's rankings. The research attributes that to a sharp decline in the number of business establishments in each state. It was a massive drop for Louisiana, which ranked fifth last year.

Other states that fell at least 10 spots from last year were Alaska, Idaho, Kentucky, Oklahoma, South Dakota and Washington.

The research was based on data from the Bureau of Labor Statistics, the IRS Statistics of Income Bulletin, the U.S. Census Bureau and the U.S. Statistical Abstract.