- What Role Does Small Business Play in S&E Job Creation?
- In Which Technology Areas are Small Businesses Especially Active?
- How Do Salaries of Recent Grads Employed by Small Business Compare With Those in Other Sectors?
- Does Firm Size Affect the Likelihood That S&E Grads Will Find Jobs Closely Related to Their Degree Fields?
- Are Women and Minorities Finding Employment in Small Business?
Most recipients of bachelor's degrees in science and engineering (S&E) enter the workforce full time after graduation: 72 percent of 1993 and 1994 bachelor's degree recipients held full-time jobs in 1995. Two-thirds of these jobs were in U.S. industry, with small businesses-those with fewer than 500 employees-employing as many of these new S&E graduates as larger firms. The remaining one-third of S&E bachelor's degree recipients were employed by educational institutions, government, and the nonprofit sector.
Comparable proportions of science baccalaureate recipients and engineering baccalaureate recipients entered small business jobs-34 and 35 percent, respectively. Engineering graduates, however, were much more likely than science graduates to work for medium-sized to large firms (50 percent versus 31 percent); they were less likely to work for nonprofit or educational institutions (figure 1). Employment sector differences are also apparent by degree field. For example, computer science and mathematics majors were more likely to work for larger firms than small (46 versus 30 percent); those with degrees in the social, life, or physical sciences were more likely to work in small firms (table 1).
What Role Does Small Business Play in S&E Job Creation?
Several studies have highlighted the important role of small business in job creation (Johnson and Packer 1987); as the employer of 53 percent of the Nation's private workforce (Oberlender 1996); and the source of about half the country's private gross domestic product (SBA 1997).
In 1991, firms with fewer than 500 employees accounted for 25 percent of the jobs in high-tech industries (BLS 1994). And more recent studies indicate that small business will likely lead medium to large business in future employment growth, especially in technology-intensive industries. For instance, the employment of full-time-equivalent research and development (R&D) scientists and engineers rose almost twice as fast between 1995 and 1996 at small companies as at larger ones-18 percent versus 10 percent-according to a 1997 national survey of R&D-performing firms (NSF 1998). Although the same survey projected that employment would grow somewhat slower in 1997, small businesses were expected to continue to expand their employment of R&D scientists and engineers faster than larger businesses. Another study of hiring at small emerging high-technology companies found employment rising by nearly 5 percent from August 1996 to August 1997, resulting in 118,000 net new jobs (CorpTech 1997). That study also projected job growth over the upcoming year (1998) of nearly 9 percent at technology companies with under 500 employees.
Many of the new technologies and industries that are very much a part of U.S. economic growth are closely identified with small business. They also tend to employ large numbers of scientists and engineers. (See box, "In Which Technologies Are Small Businesses Especially Active?") Biotechnology and computer software are good examples of industries built around new technologies that were often first commercialized by small business. Small businesses may have certain advantages over large businesses in commercial environments characterized by fast-moving technologies and rapidly changing consumer needs. A keen receptivity to new product ideas found outside their own operations characterizes this efficiency (Hanson 1991). More flexible operating procedures allow small businesses to change research directions more quickly than larger businesses-providing yet another advantage in today's marketplace (Wallsten 1998). These attributes combine to make small business a key sector to watch as new technologies are developed, adopted, and diffused.
The CorpTech database of small business entities identifies each company's primary business activity by technology area. It includes many new startups and private companies missed by other databases and is one of the most current sources of information on small, newly formed companies active in high-tech fields. In the major technology areas covered in its database, CorpTech estimates that it includes 99 percent of companies employing more than 1,000 employees, 75 percent of companies employing 250 to 1,000 employees, and 65 percent of companies with fewer than 250 employees. The version of the database used here (Rev. 12.3 1997) includes over 35,000 independently managed companies. These data are used to identify trends since 1960 in U.S. high-tech business startups by technology area (table 2).
More than half of all high-tech companies included in the database and operating in 1997 were formed after 1979. (Company mergers and acquisitions may affect these trends.) The proportion is even higher-about 70 percent-for computer-related companies (which include both computer hardware and software companies) and for biotechnology companies.
From a technological standpoint, the 1980s were the decade of the computer's rapid integration into the U.S. workplace. The 1990s will likely be known as the decade in which the computer completely revolutionized the ways in which we work, learn, and play. Trends in new company formation since 1980 reflect this revolution. According to CorpTech's database, about 40 percent of the new high-tech businesses formed since 1980 were computer-related companies. Among these, software companies accounted for the largest number.
The number of new software companies stands out not just in the computer-related category but also when compared with all other technology fields (figure 2). Software development and/or servicing is the primary business of 30 percent of the more than 18,000 existing high-tech companies formed since 1980. Other technology fields that showed higher than average new company formations in the first half of the 1990s are companies in the telecommunications, photonics, and biotechnology fields. Lately (from 1995 to June 1997), the relative growth in new telecommunications-related companies has eclipsed that for software companies.
How Do Salaries of Recent Grads Employed by Small Business Compare With Those in Other Sectors?
The median annual salaries paid to recent S&E baccalaureate graduates employed by medium-sized to large firms generally exceeded those paid by small firms. This held true for each of the major degree fields examined. The highest paid recent graduates in small firms were those with bachelor's degrees in engineering; the next highest paid had degrees in computer and mathematical sciences or the physical sciences. Graduates with the lowest median annual salaries working in small firms were those with degrees in life and related sciences. In medium-sized to large firms, the lowest salaries went to those with bachelor's degrees in the social sciences (figure 3 and table 3).
Does Firm Size Affect the Likelihood That S&E Grads Will Find Jobs Closely Related to Their Degree Fields?
In general, there do not appear to be significant differences by industrial employer size in the proportion of S&E grads who describe their jobs as being closely related to their degrees (table 4). The one exception to this conclusion is in the life sciences. Graduates with bachelor's degrees in life and related sciences who are working in industry are more likely to be in a job closely related to their college training if they are employed by a small business. The emergence and promise of new biotechnologies may have provided additional job opportunities for these graduates.
Opportunities for employment related to S&E degree vary by sector of employment and degree field. About half (between 49 and 53 percent) of those with degrees in engineering working in industry, in government, and at educational institutions described their jobs as closely related to their degrees. Only about 31 percent of engineering degree recipients working in the nonprofit sector reported working in jobs closely related to their degrees. Responses to the question by recent graduates with bachelor's degrees in science varied by field, although educational institutions generally offered more opportunities to work in jobs related to degree field (table 4).
Are Women and Minorities Finding Employment in Small Business?
Women with S&E bachelor's degrees are less likely than men to be employed by industry, both in small or medium-sized to large businesses. Women are far more likely to work for nonprofit organizations and educational institutions-sectors where salaries are generally lower for all employees (table 1 and figure 3).
Black and Hispanic bachelor's degree recipients were significantly less likely to work in small businesses (19 and 25 percent, respectively) than white graduates (36 percent). Black and Hispanic S&E graduates were employed by larger firms in roughly equal proportion to whites. Data on the employment of Asian S&E bachelor's degree recipients by small business are too sparse to allow any conclusions to be drawn.
Data presented in this report highlight the important role played by small business as an employer of recent graduates in science and engineering. As a group, small businesses hire as many recent S&E graduates as do larger ones, and also as many as all other sectors of the U.S. economy combined. Small businesses are also shown to be closely identified with many of the technical areas considered important to future economic growth. The rapid formation of new small companies in biotechnology, telecommunications, and computer-related technologies since 1980 underscores this connection. As the technology revolution gains momentum, it is likely that U.S. small businesses will continue to play an important role in the years to come as an employer of graduates with baccalaureate degrees in science and engineering. More research is needed to better understand the S&E labor needs of small business and the implications, if any, for the U.S. educational enterprise.
 These data are from the 1995 National Survey of Recent College Graduates, a survey sponsored by the National Science Foundation's Division of Science Resources Studies. For more information about the survey's design, implementation, and results, see the 1995 National Survey of Recent College Graduates Methodology Report on the SESTAT Web page (http://sestat.nsf.gov).
 These are defined as firms with 500 or more employees.
 In this study, "small" was defined as firms with fewer than 1,000 employees.
 The role of small business as a commercializer of new technologies is somewhat unique to the United States. See Mowery and Rosenberg (1993).
 It is important to note that the salaries paid to scientists and engineers as a group are heavily affected by the mix of scientists and engineers working in each sector of employment.
 These differences may reflect choices in degree field.