The term "net formations" here refers to the difference between the number of business establishments that are formed in the indicated year and the number that ceased operations during the previous year. The U.S. Census Bureau tracks information on establishments, which it defines as single locations at which business is conducted or where services or industrial operations are performed. An establishment is not necessarily identical with a company or enterprise, which may consist of one establishment or more.

The ratio of the number of net establishment formations that occur in industries with high employment in science, engineering, and technology (SET) occupations to the number of business establishments in a state indicates the relative expansion or contraction of high SET employment industries in a state's economy.

The data on business establishments in high SET employment industries for the years 2003–08 are based on the establishments’ classification according to the 2002 edition of the North American Industry Classification System (NAICS). The data for the years 2009–12 are based on classification according to the 2007 edition of NAICS, and subsequent years use 2012 NAICS codes. See the State Indicators data tool technical notes for a description of how industries are defined as high SET employment. Data for years prior to 2003 are not directly comparable because of the switch to NAICS.

Changes in company name, ownership, or address are not counted as business formations or business deaths. Net business formations cannot be used to directly link the number of high SET employment business establishments in different years because the primary industry of some establishments may have changed during the period.

Data source: U.S. Census Bureau, special tabulations of the Business Information Tracking Series.