INC.'s second report on the climate for small business in the tes begins on page 95. Of all the stories we publish each year, there is no doubt that this feature generates the most debate and controversy, particularly among politicians and government officials. In part, this results from the simple fact that any quantitative ranking system must have a first and a last place, and no one likes to be last or near the bottom. The American economy is in transition, and states and cities compete with increasing ferocity for a slice of the emerging postindustrial pie. So it is not surprising that cries of anguish emerged from states that scored near the bottom of last year's survey, and we can expect more of the same this time out.

Editors by nature shy away from attempting to define intangible qualities in precise numerical terms. So one might ask: Why do we publish this report in the first place? It is not because we expect or encourage all small companies to read our rankings and move, lock, stock, and barrel from Point A to Point B. As associate editor Bruce Posner points out in his introduction, small businesses are where they are for a variety of reasons, most of which have nothing to do with a sophisticated analysis of the level of institutional support available in their backyards.

Yet the "business climate" is real and differs widely from place to place. Parts of the climate are controllable, and it is to those elements that we have turned our attention in our second report. Small business activism is growing around the country, and we hope that our rankings, imperfect as they may be, help to spur small company owners to get involved in the process of fostering change in the attitudes and policies of local governments and state legislatures across the country. Since the White House Conference on Small Business in 1980, much progress has been made, as shown by the profiles beginning on page 100. But much remains to be done, and only active, thoughtful involvement by a large number of the people who will benefit -- at least in theory -- from newly adopted programs can ensure that properly tailored initiatives are begun and carried through.

Can such initiatives make a difference? My own experience suggests that the answer is yes. I grew up in Durham, N.C., a small city once dependent on, and still famous for, the manufacture of cigarettes and textiles. One industry is under increasing attack and the other is in decline in this country. Yet Durham and the cities close to it -- Raleigh and Chapel Hill -- are thriving, largely because of a 25-year-old state-sponsored initiative in the "Research Triangle" area formed by the three cities. Taking advantage of the presence of three universities -- Duke, North Carolina State, and the University of North Carolina's Chapel Hill campus -- the state has tirelessly emphasized that tobacco fields and forests can also be good homes for technology-based companies. The program has succeeded in persuading many large companies to locate major operations in the area, and a number of smaller, but equally sophisticated businesses have grown up to support the new wave.

North Carolina isn't the only state that has "reconceptualized" its business climate in recent years (a process that John Naisbitt, the subject of our cover story, talks about in more detail, beginning on page 45), but it shows what can be done. Change hasn't come overnight -- a fact small business activists ought to keep in mind as they go off to do battle -- but it has come. And the results have been impressive. We hope INC 's rankings help to spur other states to equally successful efforts.