Enterprising States Report: Top Performers in Entrepreneurship and Innovation

June 19, 2012

This article is taken from Enterprising States, a study produced by the National Chamber Foundation. The study was released at the U.S. Chamber's annual Jobs Summit on June 13, 2012.

Innovation is the key to driving growth and prosperity. Economists estimate that up to 50% of U.S. annual GDP growth can be attributed to increases in innovation. There is widespread agreement that new companies are a potent force for creating jobs in the nation. For this reason, states are increasing their investments in entrepreneurship and small business programs. Often, states are directing their efforts and resources to emerging-growth companies (EGCs) or high-growth firms that account for a disproportionate share of net job creation. Similarly, states are giving increased attention to “economic gardening” initiatives that work with successful companies that have expansion potential.

States play a pivotal role in creating the platform for entrepreneurship and innovation through investments in postsecondary education, providing resources, capital and expertise to entrepreneurs and fostering and coordinating partnerships between businesses, universities and government.

Six measures are used to determine top entrepreneurship and innovation states:

  • Science, technology, engineering, and mathematics (STEM) occupation concentration
  • STEM job growth
  • High-technology businesses as a share of all businesses
  • Academic research and development activity
  • Birth rate of business establishments
  • Kauffman Foundation Index of Entrepreneurial Activity


In 2012, the top 10 states for entrepreneurship and innovation include:

1. Maryland – Maryland is this year’s top all-around performer in innovation and entrepreneurship, landing in the top 25 states in all six metrics and in the top three on three metrics. The state places first on the innovation list due to its high concentrations of high-tech activity and research. Maryland is the number-one state for academic research and development; and is the third best state in science, technology, engineering and mathematics (STEM) jobs and in the concentration of high-tech business locations. Maryland is in a prime location to serve growing demand for high-tech services in the Washington, DC region. Those high concentrations of technology workers and technology companies are a sign the state is excelling at translating its academic research to the private sector.

2. Colorado – Colorado is the number-two state for high-tech business, number three for business birth rate, number four on the Kauffman Foundation Index of Entrepreneurial Activity and is fifth in concentration of STEM jobs. Important high-tech industries in Colorado include telecommunications, electro-medical devices, software publishers, engineering services and computer-systems design.

3. Utah – Utah ranked no worse than 23rd in any innovation and entrepreneurship measure, highlighted by its second-place ranking in business birth rate, evidence the state is fertile ground for entrepreneurs. Utah is an emerging technology hub as the fourth-fastest-growing state for STEM occupations in the nation. The state has expanded its tech economy by 14% over the past decade and shows twice the national concentration of data processing, software and Internet publishing and web services.

4. Texas – Texas is a bastion of start-up business, ranking near the top in both measures of business creation: second in the Kauffman Index and sixth in business birth rate. Not all new jobs generated in the state are due simply to population growth, as the state ranks 13 th in tech business concentration, 17th in STEM job concentration and 12th in STEM job growth. The state added 30,000 computer and information technology jobs to its workforce since 2001, with a median hourly pay of $32.

5. Arizona – Arizona places fifth this year riding the wave of its entrepreneurial economy. The state is first in the Kauffman Entrepreneurial Index and fifth in business start rate. Arizona’s high-tech economy is also above average; it is 12th in high-tech business concentration and 20th in STEM job concentration. Arizona is home to a high concentration of high-tech manufacturing, notably semiconductors, search and guidance instruments and environmental controls.

6. Alaska – Alaska is strong in entrepreneurship and in technical jobs. The state’s energy- and natural resources-driven economy is driving the need for engineers and technicians, propelling to fifth in STEM job growth and ninth in STEM job concentration. The most prominent STEM jobs in Alaska include life scientists, life science technicians, physical scientists and engineers.

7. New Mexico – New Mexico is one of the nation’s strongest academic and federal research centers, ranking fourth in academic research and eighth in STEM job concentration. Home to Sandia and Los Alamos National Labs, state leaders work actively to help transfer research innovations in to private sector business ventures and jobs in the state.

8. Virginia – At the state level, Virginia is the number one state for high-tech concentration, ranking first in STEM job concentration and first in high-tech business concentration. Impressively, while the state already has the highest STEM job concentration, it’s adding STEM jobs at a rate ahead of all but two other states. Virginia has the second-highest concentration of mathematical scientists of any state and has added 23,000 computer specialists and 7,000 engineers to its workforce since 2001.

9. North Carolina – Known for its Research Triangle Region, North Carolina ranks fifth overall in academic research activity. A strong performer overall, the Tar Heel State lands no worse than 26th in any Innovation and Entrepreneurship measure. The fastest-growing STEM job categories in the state are life scientists (43%), social scientists (37%) and mathematical scientists (21%).

10. Georgia – Georgia has seen significant entrepreneurial activity in recent years, ranking tenth in business starts and 14th in entrepreneurial activity. The state is the ninth-most-concentrated high-tech business environment in the nation, due to its high concentrations in computer facilities management, software, custom programming and systems design.

This post is also available at Free Enterprise