Useful Stats: U.S. Industrial R&D Performed per State by Company Size: 2004

Successful small technology businesses serve as integral components of a robust innovation-based economy. The novel products and services brought to market are often the result of these companies' R&D efforts. As a result, nearly every state has programs and policies in place to support the growth of small tech firms.

The importance of these small tech firms to state industrial R&D portfolios varies significantly across states, as measured by percentage of research expenditures conducted by firms with fewer than 500 employees, the Small Business Administration's general definition of a small technology business. Because of this variance, states may wish to review or adapt their TBED strategies.

For instance, if the percentage of industrial R&D performed by small businesses is low, a state may wish to implement strategies that encourage more research investment, perhaps in partnership with their research universities and larger industrial firms. A high percentage of total R&D conducted by small firms in a given state, on the other hand, may warrant more aggressive policies and programs that strive to ensure the localized commercial development of technologies resulting from small businesses' R&D investment.

SSTI has prepared a chart showing the percentage of industrial R&D performed by selected small business size ranges for each state and the U.S., using the National Science Foundation's 2004 Survey of Industrial R&D (latest year available).

For the U.S. as a whole, $208.3 billion of industrial R&D was performed in 2004. Businesses with fewer than 500 employees conducted 18.3 percent of the national total. The variance among the states however, is quite large. Michigan, with the research dominance of the Big Three automotive giants, has the lowest small business R&D figure at 6.4 percent. Small companies in Alaska, Hawaii and Montana, on the other hand, account for at least 60 percent of their respective state's industrial R&D performance. [It is important to note, industrial R&D expenditures in these three states is less than 1 percent of the total industrial R&D expenditures that occurred in Michigan that year.]

Further delineation of the small business employment cohorts may be even more helpful in understanding research activity in the small business community's R&D activities within a state. SSTI's chart presents the percentages of R&D performed by companies ranging between 5-24, 25-49, 50-99, 100-249, and 250-499 employees.

Companies with fewer than 25 employees (note that businesses with fewer than five employees were excluded from the NSF survey) performed only 3.0 percent of the total industrial R&D in 2004. The states with the largest percentage of industrial research performed by these smaller companies were Alaska at 37.1 percent, Wyoming at 26.1 percent, Hawaii at 17.6 percent, Louisiana at 16.4 percent, and Montana at 14.3 percent. [Note: figures at this level for the states of Rhode Island, Vermont, and Washington were suppressed.]

Alternately, the 5-24 employee cohort performed 1.3 percent of Michigan's total industrial R&D, 2.5 percent in California, 2.6 percent in Massachusetts, 3.6 percent in Texas and 4.8 percent in New Jersey.

SSTI's table can be found at: http://www.ssti.org/Digest/Tables/012109t.htm.

The National Science Foundation's Research and Development in Industry: 2004 can be accessed at: http://www.nsf.gov/statistics/nsf09301/.