New Study Finds Massachusetts Business Formation Has Plummeted Despite National Surge

The Commonwealth had the nation’s lowest net business formation rate from 2020 to 2024, losing more than 17,000 employer businesses over nine consecutive quarters 

BOSTON – Once a national leader in entrepreneurship, Massachusetts has fallen to the back of the pack in generating new businesses — a reversal that is weakening job growth, slowing the economy, and accelerating the state’s loss of young talent, according to a new study published by Pioneer Institute. 

From January 2020 through September 2024, Massachusetts posted the lowest average quarterly net business formation rate of any state. The Commonwealth recorded net-negative business formation for nine consecutive quarters from September 2022 to September 2024, losing a net total of 17,549 employer businesses during that period. 

“Massachusetts entered the pandemic as one of the country’s most innovative economies, with rates of entrepreneurship among the highest in the country. However, that momentum proved to be fragile,” said Aidan Enright, author of Massachusetts at Risk: Business Formation Plummets Despite Surge in Growth Nationwide. “While nearly every other state has seen business formation climb since 2020, the Bay State’s rate has collapsed. That is a warning sign the state cannot afford to ignore.” 

The decline marks a sharp break from Massachusetts’ recent past. Between January 2010 and December 2019, the Commonwealth had the second-highest average quarterly net business formation rate (derived from the rate of both business births and deaths in a state during that period) in the country, trailing only Utah. Even during the Great Recession, Massachusetts exceeded the national average. 

Today, the picture looks very different. From January 2020 to September 2024, every other New England state outperformed the 50-state average of 0.60 percent in net business formation, including Connecticut (0.94 percent), Rhode Island (0.86 percent), Maine (0.78 percent), New Hampshire (0.78 percent), and Vermont (0.75 percent). Massachusetts registered just 0.05 percent. Competitor states such as Florida (0.90 percent), North Carolina (0.84 percent), and Texas (0.59 percent) also dramatically outpaced the Commonwealth. 

Measured by total establishment growth, Massachusetts ranked ninth lowest in the country from January 2020 to September 2025, growing by just 13.0 percent — less than half the rate of key competitors like North Carolina (31.1 percent), New Hampshire (25.4 percent), and Florida (21.5 percent). Idaho, which has led the country in regulatory reduction, grew its establishment base by 58.1 percent during the same period. 

Among Enright’s policy recommendations are a suite of targeted tax reforms drawn from Pioneer Institute’s broader competitiveness agenda. These include eliminating or simplifying the non-income measure of the corporate excise tax, reforming the “sting tax” on S-corporations by raising and indexing thresholds that have not been updated since 2008, exempting rolling stock from the personal property use tax, raising the estate tax threshold to the federal level, and eliminating the $456 minimum corporate excise tax that applies even to unprofitable firms. 

Taken together, the report argues, these reforms would lower barriers to entry, reduce fixed costs on early-stage firms, and help Massachusetts retain capital and entrepreneurial talent that is increasingly heading elsewhere. 

The slowdown has hit some of Massachusetts’ signature industries hardest. From January 2022 to September 2025, the state lost nearly 1,800 establishments in education and healthcare — even as that sector grew 16.2 percent nationally. Professional, scientific, and technical services, which include the life sciences, grew by 10.2 percent in Massachusetts, well below the 16.9 percent national rate and far behind neighboring Connecticut (35.6 percent) and New Hampshire (30.7 percent). 

Leading indicators suggest the trend may continue. From 2019 to 2025, Massachusetts’ rate of total business application growth (37.0 percent) was more than a third below the national rate (60.5 percent). High-propensity business applications — those most likely to become employer firms — grew just 20.9 percent in Massachusetts, ranking 39th nationally. 

Firms are also leaving. In 2023, Massachusetts lost a net 70 firms to other states, its worst year on record dating to at least 1994. From 2020 to 2023, the Commonwealth lost a net 149 firms — the fifth-largest loss of any state — with many migrating to lower-cost, more tax-competitive destinations like Florida, Texas, and North Carolina. 

“Massachusetts dramatic decline in business formation strongly suggests that investors and entrepreneurs are choosing not to build here,” said Pioneer Executive Director Jim Stergios. “That loss in investment is driving the state’s negative job growth – an area where Massachusetts now ranks at the very bottom nationally. Without tax reform and a serious response to our housing crisis, an entire generation of entrepreneurs will build their companies elsewhere.” 

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About the Author: Aidan Enright is an Economic Research Associate at Pioneer Institute, where he focuses on state economic competitiveness, business formation, labor markets, and fiscal policy.