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Our thoughts on the 2010 Kauffman Index of Entrepreneurial Activity

June 29, 2010 by

The figure above, taken from the Kauffman Index of Entrepreneurial Activity, illustrates variation in entrepreneurial activity levels across the U.S., which, according to the report, is generally highest in Western and Southern states and lowest in Midwestern and Northeastern states.

This past Friday, June 25, the Omaha World-Herald published an article focusing on Nebraska’s second to last ranking in a recently released report from the Kauffman Foundation: the Kauffman Index of Entrepreneurial Activity, 1996-2009.

Titled Business startups lag, business reporter Ross Boettcher interviewed the author of the report, economics and finance professor Robert Fairli, as well as a local economics professor and three individuals involved in Omaha and Lincoln’s startup scene.

Business startups lag

Published Friday June 25, 2010

By Ross Boettcher World-Herald Staff Writer

A study that ranked Nebraska second to last in new business startups among all 50 states is cause for reflection but not hysteria, local economists and development experts said.

“Second to last is surprising,” said Creighton University economist Ernie Goss. “But on the flip side it’s not surprising, because a lot of new business formation […]

Read full article

Clearly, we here at Silicon Prairie News have an opinion and a stance on the matter. It should come as no surprise to anyone that a large part of what we do at Silicon Prairie News focuses on changing the perception of the region and encouraging people from all walks of life to start new ventures.

The figure above, taken from the Kauffman Index of Entrepreneurial Activity, shows the bottom 10 states ranked by levels of entrepreneurial activity, with 95 percent confidence intervals for each state.

With respect to our focus on perceptions, it is important to note that only two of the top 10 states currently have a reputation of a startup culture: Texas (Austin and Dallas) is ranked fourth and California (Silicon Valley) is tenth. Massachusetts (Boston), on the other hand, sits in the middle of the pack at 23. This says to me that there are different factors at play other than an “entrepreneurial climate.” In fact, South Dakota, a state which Silicon Prairie News covers, ranks one above California at position number nine.

That is not to say that it’s discouraging to be at the bottom (of any list). As Tom Chapman, director of entrepreneurship and innovation at the Greater Omaha Chamber of Commerce, previously pointed out in a guest post, venture capital dollars deployed in Nebraska rank far below comparable states. Other metrics, such as the amount of Small Business Innovation Research funding granted, are equally dismal. All we can do at this point is accept where we are and aim to improve across the board.

If you’re interested in more statistics showing how states stack up against each other for various entrepreneurial metrics, a great read is the 2008 State New Economy Index, also published by Kauffman. Whereas the Index of Entrepreneurial Activity only measures new company creation, the State New Economy Index measures and combines many indicators of a state’s entrepreneurial achievements. For instance:

  • Overall Score (Nebraska ranks 27)
  • Gazelle Jobs (Nebraska ranks 1) – Jobs in gazelle companies (firms with annual sales revenue that has grown 20 percent or more for four straight years) as a share of total employment.
  • Technology in School (Nebraska ranks 20) – A measure of three factors measuring computer and internet use in schools.

Regardless of the measure, there is much work to be done at all levels and in all areas. However, we certainly feel that as a community we’ve made huge strides over the past few years. It’s our sincere hope that this trend continues and that the momentum we collectively generate not only changes perceptions but also results in hard facts and figures such as those reported in this study. That is what success looks like.

You can download a full (PDF) copy of the report, or view an interactive version at the Kauffman Foundation website.

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