Small Firms Play Big Role in R&D Performance

The impact of small business on the development of new technologies in industries likely to be important to future economic development continues to grow.  A new report from the National Science Foundation indicates that small business is performing increasing shares of US Industrial R& D, while devoting large shares of company revenues to R&D and employing large numbers of scientists (relative to total company employment).   

Between 2003 and 2007, R&D spending at U.S. small businesses increased by 38.8 percent and the share of U.S. R&D done by firms with fewer than 500 employees increased from 17.9 percent to 18.7 percent. R&D intensity at small firms also increased from 3.1 percent of company sales revenues to 8.6 percent. And small businesses accounted for approximately one quarter of the 1.1 million scientists and engineers employed. 

Data for the smallest category, microfirms (those with 5-24 employees) indicate an even greater pattern of growth and emphasis on R&D than even larger companies within the small-business category. 

It seems without the organizational barriers that often impede risk taking at larger companies, small businesses produce many of the radical innovations that lead to groundbreaking new products and even new industries. 

For more, see the report for NSF