What’s the best way to measure the strength of a state’s economy?
Job growth and unemployment rates are useful metrics, but researchers at the University of Nebraska’s Lincoln Bureau of Business Research emphasize the importance of “core measures” such as entrepreneurship, technical innovation, and business formation rates. For Eric Thompson and William Walstad then, their State Entrepreneurship Index provides a comprehensive way to measure and compare the economic performance of all 50 states.
For the second year in row, the Nebraska researchers have ranked New York State third in the nation on the State Entrepreneurship Index. North Dakota, the highest ranked state, largely owes it stature to the oil and gas boom in the Baaken formation. California, which holds the second spot, ranks highly in patents per thousand residents, due in part to the success of Silicon Valley. By contrast, New York State ranked above the median average for 4 of the 5 components on which the State Entrepreneurship Index is based.
According to Thompson and Waldstad, these five components are: percent growth in employer establishments, percent growth in employer establishments per person, business formation rate, patents per thousand persons, and average income per non-farm proprietor. Manufacturing metrics are absent from their calculations, however, and many of the leading states in the Nebraska study have not experienced significant changes in rank over several years.
Given that New York fares well across 80% of the study’s components, does this mean that the Empire State has a better-balanced economy than either North Dakota or California – states that are strongest in a more limited number of areas? If manufacturing metrics were included in the Entrepreneurship Index, would New York State capture the first or second position in this study? What about other leading manufacturing states, many of which are located in the Midwest and South?
Two recent announcements help to make the case that New York State deserves more than a bronze medal in the University of Nebraska Study. First, GlobalFoundries has announced plans to buy IBM’s Microelectronics Unit, which includes a chip factory in nearby Vermont. Second, SolarCity plans to build a solar panel factory on the site of an old steel foundry in South Buffalo. Once operational, SolarCity’s brand new plant will employ more workers than Republic Steel did during its heyday.
Manufacturing is vital to New York’s economy, but so is entrepreneurship. As initiatives like SolarCity’s Riverbend factory take root, opportunities for satellite industries could bloom. In addition to creating 3,000 jobs at its South Buffalo factory, SolarCity is expected to create another 2,000 jobs across the state for workers who provide other products and services. When the University of Nebraska’s Lincoln Bureau of Business Research publishes its next survey, look for another strong finish from the Empire State.
Top image: Courtesy of GlobalFoundries.
This piece first appeared in Manufacturing Innovation Blog.