Well, fall is here and that is the season of rankings. The latest is from Entrepreneur magazine with its rankings of top cities for entrepreneurial development. Here is their top ten:
1 Phoenix-Mesa, AZ
2 Charlotte-Gastonia-Rock Hill, NC-SC
3 Raleigh-Durham-Chapel Hill, NC
4 Las Vegas, NV-AZ
5 Indianapolis, IN
6 Washington-Baltimore, DC-MD-VA-WV
7 Atlanta, GA
8 Nashville, TN
9 Austin-San Marcos, TX
10 Memphis, TN-AR-MS
As always, it is important to look behind the rankings and see what is actually being measured.
In this ranking they look at the percentage of businesses that are 4-14 years old and that employ at least 5 people. This is a measure of newness of businesses in the area. The reason that the businesses must be at least four years old is to capture only those that seem to be surviving.
This ranking then looks at growth rate of these businesses and creates an index of entrepreneurial activity.
This seems to be a pretty good measure of entrepreneurial activity. However, care must be taken when interpreting any study based on percentage data. For example, if a state or city had a very bad economic climate in the 1980s and 1990s, the odds are good that most of their businesses will be newer and it will rank higher.
An interesting case from this ranking is Hawaii, which ranked 10th overall in this study.
Hawaii was devastated by the collapse of the sugar and to a lesser degree the pineapple industries. Both had been propped up by failed governmental policies. Unemployment skyrocketed during this time. Very little of their traditional economic base, other than tourism, remained.
Eventually, entrepreneurial activity began to fill the void and the Hawaiian economy began to be rebuilt. This new entrepreneurial economy is, in fact, working remarkably well. Hawaii now has relatively low unemployment (2.6% compared to 4.9% nationally) due to the growth of new businesses.
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