Maybe we’re doing something right.
Rhode Island jumped 25 spots in the University of Nebraska-Lincoln’s newest State Entrepreneurship Index, described as “a nationwide analysis and ranking system that compares how states stack up in terms of business formation and innovation.”
The Ocean State rose from No. 48 in 2008 to No. 23 in 2010 by UNL’s measure. Only Oregon, Delaware and Kentucky posted a bigger gain than Rhode Island. Texas also rose 25 spots.
Here’s how the school’s economists describe their methodology:
The SEI combines five key components — a state’s percentage growth and per capita growth in business establishments, its business formation rate, the number of patents per thousand residents and gross receipts of sole proprietorships and partnerships per capita — to build its state-by-state rankings.
A state index for each component is assigned based on how much each state’s performance is above or below the average of all state data, which has a value of 1.0. For example, a component one standard deviation above the average 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.
Rhode Island scored a 1.16. Eric Thompson, an economics professor at UNL, told Bloomberg BusinessWeek why states in our neck of the woods tend to do better on these measures:
“The states where the traditional model of economic development has been starting companies — such as in the Northeast, such as California and other states in the Northwest — that tends to continue because they’ve got the investors, they’ve got a concentration of experienced entrepreneurs that allow them to create high-income entrepreneurship even in the difficult economic conditions,” he says. That’s not the case for other regions that have focused economic development more on attracting new branches of existing companies, he says.