California is the capital of American business. One out of five companies on the New York Stock Exchange and the Nasdaq Stock Market hail from that state, according to my recent assessment of relevant data.

The figures show that when it comes to formation of public companies, the rich states are getting richer while the rest are in slow decline. Compiling data from public filings and adding in missing data from SDC Platinum and CRSP/Compustat, databases that track headquarters information, I examined where public companies had their headquarters from 1965 through 2013.

From 1965 through 1979, 10.07 per cent of public companies were based in California. The number has continued to grow, so that from 2000-13, 19.46 per cent of public companies had their headquarters in California. That’s an astounding number.

A state with 12 per cent of our population now accounts for a fifth of all public companies. (In the 1970s, California was about 10 per cent of the US population.)

Other states, meanwhile, are in decline. Ohio had 5.58 per cent and Pennsylvania had 5.9 per cent of public listings in the 1965-79 period. But from 2000 through 2013, Ohio had 2.58 per cent and Pennsylvania 3.78 per cent of public company headquarters.

Illinois’ decline was even starker, as it slid to 3.62 per cent from 6.42 per cent of public company headquarters. The reason for the decline may be obvious as the old manufacturing base went into decline. The appellation Rust Belt rings true to a large degree for these states as old companies disappear and are not replaced with new ones.

Yet the decline is not just in the industrial Midwest. New York and New Jersey also fell. New York fell to 8.31 per cent of public company listings from 11.32 per cent, while New Jersey slipped to 4.53 per cent from 5.62 per cent. Other states have had growth. Texas rose to 10.26 per cent of public companies from 8.38 per cent.

Massachusetts climbed to 5.12 per cent from 3.95 per cent. The state is home to technology and pharmaceuticals, two of the biggest growth industries in the US.

Still, the concentration of American corporate might is stark. Nearly 40 per cent of all public companies are in just four states: California, Massachusetts, New York and Texas. Three of them — California, New York and Texas — account for a third of the Fortune 500.

And the trend is accelerating. In the last 12 months, California, Massachusetts, New York and Texas accounted for 50 per cent of all initial public offerings by operating companies, according to Standard & Poor’s Global Market Intelligence.

The geographical shift reflects a changing world. The five biggest companies in the US by market value are all technology companies — Apple, Amazon, Facebook, Google and Microsoft — three of them with headquarters in California. Not one existed in 1965.

The tech phenomenon has benefited California more than all other states, a rise that seems to be unabated. The continued emergence of biotechnology as the other main growth engine of new public company formation appears to be helping California, Massachusetts and Texas, the three states that have long held the lead in this industry.

These three stand out as the winners. Why would three very different states perform so well? One might have expected that high-regulation, high-cost, high-tax states like California would decline over time as companies migrated.

Texas, of course, offers a different situation. Yet it is not alone among states offering lower taxes and lower regulatory costs. And then what is one to make of Massachusetts, a relatively small state that is punching above its weight? It has regulation and taxes, and yet also business competitiveness.

There is no special formula for states to be homes to companies. Instead, what appears to be going on is a winner-take-all system. California is a good example.

It is a state burdened with a high tax rate, significant regulation and extreme housing costs. It is the type of place that you would think would lose business.

But instead, California is winning at creating public companies. This may be because it already has a significant base of growth companies attracting yet more people to feed off the infrastructure and then create yet more new, big companies.

Similar arguments can be made about Massachusetts and the natural network that its biotechnology companies and universities create. Compare this with Texas, which is known for having good hospitals and generates companies in more divergent fields.

This may indeed be helped by a more business-friendly environment, but it is more likely a result of the centers that have developed in these fields.

New York is increasingly the home of finance companies with a sprinkling of health care companies. But its people skills are more associated with media, fashion, finance and consumer companies.

Gone are the days when any big corporation would make New York its home because that was the place to be. This is not to say that other states are not successful in business.

South Carolina and Alabama, for example, have successfully created manufacturing hubs by creating non-union, business-friendly environments. Nor does it mean that these states are entrepreneurial.

The Kauffman Index of Start-Up Activity tracks new business formation. It lists Texas, Florida, California, New York and Colorado as those with the most activity.

There is some overlap here, but entrepreneurial bent does not mean success at creating public companies. There needs to be more study of why certain states nurture and attract public companies.

For these states, the economic benefits are not just from those companies alone.

There are also secondary effects. The advisers to these companies — the lawyers, the bankers — will increasingly be pulled from their New York homes, particularly to the West Coast. As the new crop of unicorns — start-ups valued at more than $1 billion — goes public, even at reduced valuations, this pull will continue and the big services that are the specialisation of New York are likely to spread out even more to these other states.

The country is still going West, it seems.

New York Times News Service