Innovation Comes from Small Businesses

Innovation is proven to be the growth engine for the economy. American companies are spending more on research and development (R&D) than anywhere else in the world. With innovative products and services, U.S. companies are more competitive in the global markets. More than 65,000 U.S. companies, large and small, invested over $376 billion in R&D in 2013, the latest data reported by the National Science Foundation. The R&D expenditures of U.S. companies accounted for 2.8% of their global sales, ranging from 0.1% of utilities companies to 14.4% of semiconductor machinery manufacturing companies.

Recent data also shows small U.S. manufacturing and non-manufacturing businesses employ four times more R&D personnel than large ones -- small businesses added four R&D employees, for every $10 million in sales revenue, compared to only one R&D employee in large businesses. Consequently, the share of R&D personnel is three times in small business than in large ones -- 12 out of 100 workers are R&D employees in small businesses compared to 6 out of 100 employees in large businesses.

Small businesses take risks to incubate ideas to create new products and services which benefit the U.S economy. They are a workplace for millions of innovators such as software programmers, biotechnology research scientists, semiconductor engineers, and digital artists, just to name a few. To maximize the economic and social benefits, smart and efficient policies are needed to promote small businesses and protect their innovations.

 

Nam Pham is Managing Partner at ndp | analytics, a strategic economic consulting firm.