Five States Lead National Transformation to 'New Economy'

Five states -- Massachusetts, Washington, Maryland, Delaware and New Jersey -- are leading the United States' transformation into a global, entrepreneurial and knowledge- and innovation-based, or "new" economy, according to a new report (pdf) released this week from the Ewing Marion Kauffman Foundation and the Information Technology and Innovation Foundation.

The 2008 State New Economy Index found that Mississippi and West Virginia ranked lowest among the states in making the transition to the "new economy." The other lowest-scoring states include Arkansas, Alabama and Wyoming.

The report said the new economy has taken root in the Northeast, mid-Atlantic, Mountain West and Pacific regions. Fourteen of the top 20 states are in those regions. In contrast, 16 of the 20 lowest-ranking states are in the Midwest, Great Plains and Southern regions.

The index measures states' economic structures. Rather than measuring state economic performance or state economic policies, it focuses on a single question: To what degree does the structure of state economies match the ideal structure of the new economy?

The Kauffman Foundation also released a study measuring internationally comparable data on entrepreneurial activity in 18 countries in the Organization for Economic Cooperation Development. The report found that new European Union countries that underwent structural changes in their economies saw high entrepreneurial activity. Countries like Lithuania, Estonia, Latvia and the Slovak Republic created a greater number of firms with at least one employee and more high-growth firms than most other countries.

Lastly, in honor of Global Entrepreneurship Week, the foundation released new data on newly registered businesses in more than 100 industrial and developing countries suggesting that a strong business environment encourages entrepreneurial activity. The data showed that new firm creation is higher in countries where it's easier to start a business and in countries that have modernized business registries.

By Sharon McLoone |  November 21, 2008; 10:13 AM ET Data Points
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