Chapter 6: Science & Engineering Indicators 93

Trends in New U.S. High-Tech Business Startups

The rapid formation of new high-tech companies observed during the second half of the 1970s and the early 1980s was followed by a sharp decline in such formations in the late eighties. (See appendix table 6-28.) That declining trend appears to be continuing into the early 1990s with the number of annual company formations averaging only about one-third of that seen in the slower second half of the 1980s. Still, nearly half of all U.S. high-tech companies operating in 1993 were formed in just the last 14 years. That proportion is even higher (around 60 percent) for computer-related companies and for companies whose main business involves biotechnology.

Technologically, the 1980s mark the decade of the computer and its rapid integration into America's daily life. By the mid-eighties, it was hard to find a modern office that did not use a personal computer (PC), a new car that did not include computerized functions, or a child that did not have access to a PC in elementary school. The trends in new company formations among the various fields of technology reflect this revolution. For example, about half 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 to all other technology fields. According to the CorpTech database, software development and/or servicing is the primary business for 34 percent of the 10,000 new high-tech companies formed since 1980 and in existence in 1993. However, the large number of new software companies started in the early 1980s (1980-84) was not duplicated in the second half of the decade, with the number of new software startups dropping nearly 45 percent. Thus far in the 1990s, software technology continues to create the greatest number of small business startups among the eight technology fields examined, but not at the pace set during the previous decade. (See figure 6-26.)

Other technology fields that exhibited relative share growth in the early 1990s are companies in the biotechnology, advanced materials, and photonics and optics fields. Biotechnology was the only technology field that exhibited produced steady relative share growth during the 1980s and into the early 1990s.

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