The State New Economy Index uses 26 indicators to measure the extent to which state economies are knowledge-based, globalized, entrepreneurial, IT-driven, and innovation-oriented.

Many jobs lost in the recession are never coming back and job creation is expected to be sluggish for years. This has created an imperative to develop new jobs, business models and industries. The states are on the front line of this effort and it is more important than ever for them to embrace innovation and the New Economy. In the 2010 State New Economy Index, ITIF shows how the states are doing in efforts to be competitive in the global, entrepreneurial, innovation- and knowledge-based New Economy. The report builds on previous reports that go back more than a decade, and uses 26 indicators to assess the states' efforts to succeed in the innovation economy.

Massachusetts, Washington, Maryland, New Jersey, and Connecticut are the top five states at the forefront of the nation’s movement toward a global, innovation-based new economy, according to report released by ITIF and the Ewing Marion Kauffman Foundation.

The bottom five states were unchanged from 2008. Mississippi and West Virginia have lagged most in making the transition to the New Economy. The other lowest-scoring states include, in reverse order, Arkansas, Alabama and Wyoming.

The State New Economy Index uses 26 indicators to assess states’ fundamental capacity to successfully navigate the shoals of economic change. It measures the extent to which state economies are knowledge-based, globalized, entrepreneurial, IT-driven and innovation-based – in other words, to what degree state economies’ structures and operations match the ideal structure of the New Economy. The 2010 Index builds on four earlier Indexes, published in 1999, 2002, 2007 and 2008.

Regionally, the New Economy has taken the strongest hold in the Northeast, mid-Atlantic, Mountain West and Pacific regions; 13 of the top 20 states are in these four regions. In contrast, 18 of the 20 lowest-ranking states are in the Midwest, Great Plains and the South.