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NEW: Rhode Island Ranks #19 In US For Entrepreneurship

Thursday, October 04, 2012


How entrepreneurial is Rhode Island? A new index takes a close look.

Rhode Island has been ranked the #19 state in the US for entrepreneurial activity, according to the latest US State Entrepreneurs Index compiled by the University of Nebraska-Lincoln. Nearby Massachusetts snagged top honors for the second year in a row.

The Bay State was followed by North Dakota, California, New York and Minnesota. Also in the Top 10 this year were Oregon, New Jersey, New Hampshire and Illinois. Texas, at #8, was the highest ranked southern state.

The State Entrepreneurship Index

Economists at UNL's Bureau of Business Research and Department of Economics developed the annual State Entrepreneurship Index by combining 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.

The result is a comprehensive look at the levels of entrepreneurship in each state over the past year, said Eric Thompson, UNL associate professor of economics and director of the bureau.

"To reach the top of the rankings, a state had to do very well in at least four of the five categories that made up the index," Thompson said. "This year, those states tend to be clustered in the Northeast and the upper Midwest. 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."

Rhode Island's performance

For 2011, the latest year for data, Rhode Island's score was 1.191 (compared to MA's 3.01). Rhode Island's performance varied across the Index's submeasures. In Percent Establishment Growth, the state dropped from #29 to #34; while in Growth in Establishments Per Person, RI moved up slightly, from #28 to #23. The state's best performance ranking was in Business Formation Rate, from #11 last year to #9 this year. In the area of Patents, the rate per thousand placed RI right at #20 both years running. Income for non-farm proprietors in RI dropped from #23 last year to #24 this year. 

A state index for each component is assigned based on how much each state's performance is above or below the median of all state data, which has a value of 1.0. For example, a component one standard deviation above the median gets a value of 2.0, while a component one below is assigned a value of zero. A state's overall SEI number is the average of the five index values.

The State Entrepreneurship Index combines detailed data from the Bureau of Labor Statistics, the IRS Statistics of Income Bulletin, the U.S. Census Bureau and the U.S. Statistical Abstract.

The report, which breaks down each state's individual index components in tabular form, is available at the bureau's website, http://bbr.unl.edu.


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