| Click for the Finfacts Ireland Portal Homepage |

Finfacts Business News Centre

 Irish Economy
 EU Economy
 US Economy
 UK Economy
 Global Economy
 Asia Economy

Finfacts changes from 2015


How to use our RSS feed

Follow Finfacts on Twitter

Web Finfacts

See Search Box lower down this column for searches of Finfacts news pages. Where there may be the odd special character missing from an older page, it's a problem that developed when Interactive Tools upgraded to a new content management system.


Finfacts is Ireland's leading business information site and you are in its business news section.


Finfacts Homepage

Irish Share Prices

Euribor Daily Rates

Global Cost of Living

Irish Tax - Income/Corporate




Content Management by interactivetools.com.

News : Innovation Last Updated: Feb 13, 2015 - 2:33 PM

Young US firms in high tech down from 60% ratio in 1982 to 38%
By Michael Hennigan, Finfacts founder and editor
Feb 23, 2014 - 11:22 AM

Email this article
 Printer friendly page

There has been a big drop in recent decades in the rate of US startup business creation (firms with at least one employee) while the number of young (up to five years old) firms in the high tech sector has fallen from a 60% ratio in 1982 to 38% in 2011.

In 2011, the number of new US startup businesses was 131 per 100,000 individuals, down 29% from 186 in 1991, according to the Kauffman Foundation, a leading entrepreneurship think-tank and Census Bureau.

High tech firms represented just 4.1% of total US private-sector firms in 2011 while Apple, Amazon, Facebook and Google with a combined 190,000 employees in the United States, compared with General Motors' US payroll of 618,000 in 1979.

Enrico Moretti, an economics professor at the University of California, Berkeley, has said that the average tech position creates five additional jobs in various support industries, from doctors to hairdressers to dog walkers. However, the "multiplier effect" for manufacturing jobs is much lower: 1.6 instead of 5. Much of that, he added, was simply the result of the higher wages generally paid by tech jobs.

The big tech firms generally report net income as a ratio of sales of at least 20% and they are in the most aggressive sector for tax avoidance - - which is part of the Moretti multiplier that filters down to dog walkers and maids from Latin America.

The cash hoards accumulated by the giants -- last year we reported that the top 5 had cash troves of $515bn in June 2013 - - enables them to insource innovation by hoovering up young startups.

"The share of young firms in the high-tech sector has exhibited a more pronounced secular decline in the post-2002 period than in the rest of the economy," according to the Kauffman research.

Young firms are either acquired or grow fast to scale up.

In other words, a grow fast or get acquired landscape has emerged. "That's different than it was 20 years ago, when organic growth was prevalent," said Dane Stangler, vice president of research at the Kauffman Foundation.

The average employment level at new high-tech and ICT firms has been on a steady decline during the last three decades, peaking between six and nine employees in the early 1980s to reach about 4.5 employees on average in 2011. In other words, high-tech and ICT firms are starting smaller. The entire private sector, on the other hand, has held steady with about six employees on average at new firms.

However, the surviving young high-tech businesses add jobs at a rate twice that of all surviving young firms, and the rate of job creation is so robust that it offsets losses from early-stage failures - - something that is not true for young firms as a whole

The research shows that the number of young high-tech firms more than doubled between 1982 and 2007, to 97,836 from 45,959. For the private sector as a whole, young firms held steady throughout much of this period, even though the overall number of firms was growing substantially at the same time.

"The 1990s saw a particularly sharp rise in high-tech entrepreneurship coinciding with wide adoption of the Web and speculation around Internet-based companies (the dot-coms). This period of growth ends with the collapse of the dot-com bubble and instigates a steep decline in high-tech entrepreneurship in the late 1990s and early 2000s.

From about 2002, the number of high-tech young firms continues to decline, while there is a modest increase in the number of young firms overall. The impact of the Great Recession on entrepreneurship is evident after 2007, with sharp declines in the number of young businesses both in the high-tech sector and in the economy as a whole. The number of young high-tech firms fell to 79,034 in 2011, marking a 19.2% drop from 2007. By contrast, the number of young firms for the entire private sector fell by 18.3% during the same period."

Several Irish governments have banked on high tech as a potential jobs engine but any young firm in the sector with international potential is likely to be snapped up before the taxpayer gets any return for investment in the sector.

According to a US Bureau of Labor Statistics study, a high-tech industry is defined by the presence of four factors: a high proportion of scientists, engineers, and technicians; a high proportion of R&D employment; production of high-tech products, as specified on a Census Bureau list of advanced-technology products; and the use of high-tech production methods, including intense use of high-tech capital goods and services in the production process.

Howwever in Ireland, in for example the units  of Apple, Google and Facebook, most of the staff work in sales and general administration.

Kauffman Foundation

Toward America’s New Entrepreneurial Growth Agenda [pdf]

Declining Business Dynamism in the US High-Technology Sector [pdf]

Finfacts reports:

Irish Venture Capital: Call for pension investments; Government provides 40% of annual funding

Irish tech startups may create 1,850 jobs in 3 years; Zero past evidence presented

Facebook to acquire 55-employee WhatsApp for $19bn in cash and stock

Irish Innovation: US research debunks policy makers' myths in Ireland

Irish Innovation: No boom in STEM jobs in Ireland

Irish Innovation: Evidence of science policy failure mounts

Irish Medium-Term Economic Strategy 2014-2020: Innovation and entrepreneurs? - - Part 3

Check out our subscription service, Finfacts Premium , at a low annual charge of €25

Related Articles

© Copyright 2015 by Finfacts.ie

Top of Page

Latest Headlines
Digital Taylorism: Amazon's chief rejects depiction of "soulless, dystopian workplace"
Most surviving startups do not grow; Tiny number powers jobs engine
Despite euro dip China & US remain most competitive manufacturing nations
Business startup rates up in most OECD countries led by Australia and UK
NASA's Kepler mission has confirmed the first near-Earth-size planet
Energy subsidies at 6.5% of global GDP; Commodity prices to remain weak
US startups rely on personal savings, debt; Venture capital funds less than 1%
Europe produces 13 $1bn+ "unicorn" startups in one year; London is Europe's digital capital
Irish-based firms raised €120m in VC funding in Q1 2015; Some top recipients Irish for tax purposes
Ireland: Fourth highest 25-34 year old ratio of third-level graduates in developed world: So what?
Business dynamism/ employer firm startups in US secular decline
Innovation Union Scoreboard 2015: Sweden, Denmark, Finland and Germany are on top
Education systems failing to provide students with skills for success in 21st century
US, Switzerland, Denmark, Sweden, Finland have best higher education systems
Handbook of Service Innovation: Ireland moving up the value chain?
Switzerland revives silk industry that thrived for two centuries
Sales of Irish tech firms create 300 millionaires in 15 years and no scaleups
Apple warns of 'material' tax payments from EU's Irish tax investigation
Apple earnings surge 33% on higher price and iPhone sales jump in China
Big Pharma's internationalisation of R&D to China
The dangers of romanticising entrepreneurs despite key role
UK and Irish business R&D heavily reliant on foreign-owned firms
Silicon Valley and the development of the silicon microchip - Part 2
Ireland: Innovation with or without R&D/ scientific breakthroughs
UK government most open/ transparent in world; Ireland & Greece lowest ranking in Europe
10 questions about Switzerland's Solar Impulse aircraft – answered
Silicon Valley loses its silicon; Typical household income stagnates - Part 1
21st century skills are 18 century skills + a computer
Growing ICT sector in Europe accounts for 5% of employment
Should Ireland copy Singapore's scientific research investment plan?
Startups vs Scaleups: 4% of UK startups have 10+ employees 10 years later
Irish patent filings at European Patent Office fell in 2014
Facebook's maze of privacy settings maybe in breach of European law
Apple to invest €1.7bn in Irish and Danish data centres
Silicon Valley insider warns of dodgy $1bn valuations of private companies
Israel's Startup Nation not a jobs engine; Nor is Irish high tech
Established industries often beat new technology investment returns
Ireland: Noonan said EU to drop Apple tax case; Now expects court case
Irish R&D Tax Credit: No evidence of rising business innovation; Facts don't matter
Apple reports biggest profit of a public company in history