Are smaller Research and Development businesses more effective?

Andrey Kamenov

Andrey Kamenov, Ph.D. Probability and Statistics

As we saw in an earlier post, one of the industries instrumental to the growth in the professional services sector is research and development. The number of people employed in this sector has grown from 330,000 to almost 480,000. Even more impressive is the fact that it peaked at almost 600,000 in 2006:

rd_emp_est

As you can see, there was a surge in both employment and the number of establishments starting in 2002, but they both took a hit in 2007-2008. And while the number of establishments seems to have nearly recovered to pre-2008 levels, the total employment numbers are still relatively low, which implies that the average business size has decreased. It may well be one of the reasons for R&D jobs being the best-paid among professional services sector industries, with an average payroll 20 to 30 percent higher than similar industries including computer, engineering and technical services.

pay_by_sub

On the other hand, if we compare this to 2006 data we see that R&D industry payrolls have increased by 5.6 percent, which is nearly equal to the sector average of 5.5 percent. Thus, the decrease in average establishment size seems to have had no particular effect on payrolls.

Also worth noting is the fact that the geography of R&D jobs has changed somewhat significantly since 2004. As seen on the map below, the western states saw the most significant increase in employment numbers, with New Mexico experiencing the most impressive surge: 260 percent growth from 2004 to 2008.

Source: the US Census Bureau’s County Business Patterns data

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About Andrey Kamenov

Andrey Kamenov

Andrey Kamenov, Ph.D. Probability and Statistics

Andrey Kamenov is a data scientist working for Advameg Inc. His background includes teaching statistics, stochastic processes and financial mathematics in Moscow State University and working for a hedge fund. His academic interests range from statistical data analysis to optimal stopping theory. Andrey also enjoys his hobbies of photography, reading and powerlifting.

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