Useful Stats: Microbusinesses executed $6.1 billion of domestic R&D in 2021

In 2021, U.S. microbusinesses reported $8.1 billion in research and development (R&D) expenditures, of which the microbusinesses themselves performed 75% ($6.1 billion) The $6.1 billion in microbusiness-performed R&D represents an increase of 9% over the prior year and 17% since 2019. Microbusinesses are those with nine or fewer employees.

The Annual Business Survey (ABS), cosponsored by the National Center for Science and Engineering Statistics (NCSES) and the Census Bureau, collects data on U.S. microbusinesses that perform or fund R&D. ABS is a fairly new survey, with the first data year dating back to 2017, and has experienced changes to its methodology between certain data releases. Refer to the ABS methodology for more information.

The data used in this article should be interpreted cautiously, as some company count and R&D performance values may be excluded for certain years, and not others. This practice is often done to protect the identities of microbusinesses, but may cause the values calculated in this article to be higher or lower than reality. Please refer to ABS for more information.

This edition of Useful Stats will explore the current life of ABS data, exploring 3-year trends in the R&D microbusinesses conducted in-house from 2019 to 2021.

Microbusiness R&D performance

Microbusinesses have increased both in number and in R&D performed since 2019. In 2019, ABS captured 14,800 companies with over $5.2 billion in performed R&D, while in 2021, these values increased to over 15,300 and $6.1 billion (see Figure 1).

Figure 1: Count of domestic R&D performed by ABS captured microbusinesses from 2019-2021

State-level breakdown

During the 3 years of 2019-2021, the number of microbusinesses engaging in R&D captured by ABS increased by 3%. These same companies increased their R&D by 17%.

Twenty-seven states increased in the total number of microbusinesses captured by ABS, with the most added in West Virginia, Oklahoma, Wyoming, and Arkansas.

The remaining 23 states and D.C. all decreased, with the largest drops in Louisiana, North Dakota, South Dakota, and Hawaii.

Figure 2 below maps out the percent changes for all 50 states and D.C. from 2019-2021. Click on any of the three tabs below the title to change the data visualized.

Figure 2: Percent change in microbusinesses captured by ABS, 2019-2021

The ABS breaks these numbers down further into counts of microbusinesses with 1-4 employees and 5-9 employees. The number of microbusinesses with 1-4 employees increased in 26 states, while the number of microbusinesses with 5-9 employees increased in 23 states.

However, not all of these states overlap. For example, South Carolina’s microbusinesses increased 24% overall, but when broken down into the two employee counts, it is revealed that there was a 68% decrease in microbusinesses with 1-4 employees but a 380% increase in those with 5-9.

Similar trends occur in Montana, North Carolina, Iowa, and New Hampshire. Refer to Figure 2 for more trends.

Many of these microbusinesses grew the amount of R&D performed in-house. Twenty-nine states and Washington, D.C. increased in value, with 18 states and Washington, D.C. being double-digit and an additional seven states triple-digit.

Figure 3: Percent change in domestic R&D performed by microbusinesses, 2019-2021

The states with the largest increases in R&D from 2019-2021 are Wyoming, Oklahoma, West Virginia, Arkansas, South Carolina, Mississippi, and Michigan. All these states’ values increased for both microbusinesses with 1-4 and 5-9 employees. Arkansas and South Carolina’s growth was significantly higher for microbusinesses with 5-9 employees, while Mississippi and Michigan’s from their microbusinesses with 1-4 employees. The remainder were more even.

The remaining 21 states decreased, with the majority under -30%. Of these, 13 increased in at least one employee breakdown despite an overall decrease, with some (New Hampshire, North Carolina, and Nebraska) increasing by over 100% in one of the breakdowns. This result may be due to data having been withheld from the 2019 release but included in the 2021 release.

Note: Data from 2017 and 2018 was not included in this article due to 2017’s lack of distinction between total R&D and R&D performed by microbusinesses and 2018’s data excluding many states’ data points to prevent the identification of specific microbusinesses.