Small Business in South Carolina

Caron St. John, PhDClemson University

Purpose

• Small business in the US economy

• Small business in SC

• Small business and innovation

• Technology-based SC companies

Small Business• Definition: U.S. government defines a small business as any company

with fewer than 500 employees

• There are 24.7 million businesses in the US

• Of those, 5.7 million have employees; 18.6 million do not

• Only 17,000 businesses in the US have more than 500 employees

• 99.7% of all employer- firms are “small”

• Small firms employ over 50% of the private sector workforce, pay 45 percent of total private payroll.

Firms in the United States

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

Sole Proprietor

Employer Firms

Small Business in South Carolina…

• Number of firms that employ others increased from 70,600 in 1990 to 91,000 in 2003

• In 2002-2003, SC ranked 13th in the nation on growth in number of employer-firms

• In 2002-2003, SC ranked 24th nationwide in rate of new employer-firm formation, 39th in terminations.

• In 2002-2003, self-employment grew from 108,000 to 120,000, which ranks 11th in the nation.

Source: US SBA: Small Business Economic Indicators, 2003

SC firms with Employees

010,00020,00030,00040,00050,00060,00070,00080,00090,000

100,000

1990 1995 2000 2001 2002 2003 2004

Numb

er of

Firm

s Large Employer Firms

Small Employer Firms

Firms and Employment in South Carolina(By Employment Size of Firm)

Total 0-19 <500 500+Firms 77,996 66,900 75,789 2,207Employees 1,596,385 264,144 745,967 850,418

Number of SC Firms, by SizeNumber of SC firms, by size

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

1990 1995 2000 2001 2002

Year

<20

20-99

100-499

>500

SC Firm Payroll

05,000,000

10,000,00015,000,00020,000,00025,000,00030,000,00035,000,00040,000,00045,000,00050,000,000

1990 1995 2000 2001 2002

Dol

lars Large Firm Payroll

Small Firm Payroll

Employees per firm

0

50

100

150

200

250

300

350

400

450

1990 1995 2000 2001 2002

Nu

mb

er

of

em

plo

yees

Employees per largefirm

Employees per smallfirm

New firms and job growth…

Between 1990 and 2000, the U.S. economy created approximately 15 million new jobs.

– Over 1/3 were created by ~ 6.4 million new firms formed during those same years.

– Together, on average, year after year, new and expanding small firms accounted for over 75% of all new job creation in the country.

In 2000-2001, small business created ALL net new jobs: 1.1 million. Large employers had net job loss of over 150,000.

Sources: Small Business Economic Indicators 2000, U.S. Small Business Administration Office of Advocacy, 2001: Global Entrepreneurship Monitor, 2000

SC Firm Employment

0200,000400,000

600,000800,000

1,000,0001,200,000

1,400,0001,600,0001,800,000

1990 1995 2000 2001 2002

Num

bers

of E

mpl

oyee

s

Employees in LargeFirms

Employees in Small Firms

Small Firms and Innovation

Innovation and small firmsSmall technical firms, on average:

• Produce 13-14 times more patents per employee than large patenting firms

• Patent more technically significant inventions than larger firms, – These patents are twice as likely as large firm patents to be among

the 1% most cited.

• Participate in innovations that are more leading edge – early stage

• Play an essential role in advancing new technologies in the economy

Source: CHI Research Inc. , (February, 2003) “Small Serial Innovators: The Small Firm Contribution to Technical Change.” Small Business

Administration Office of Advocacy

Lead in bringing innovations to market…

• Small entrepreneurial ventures responsible for – more than 67% of inventions and – 95% of all radical innovations

..since WWII

• Examples – Air conditioning, airplane, artificial skin, frozen foods, heart valve, heat sensor, helicopter, hydraulic brake, personal computer, safety razor, soft contact lens….

AUT

BIO

CHECOM

DEF

ENR

ENV

MAN

MAT

MED

PHA

PHO

SOF

SUB

TAM

TEL

TRNNON

0

20

40

60

80

100

120

1

AUT

BIO

CHE

COM

DEF

ENR

ENV

MAN

MAT

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PHA

PHO

SOF

SUB

TAM

TEL

TRN

NON

Technology Companies in South Carolina -- 2005

Corptech Directory of High Technology Companies, 2005

SBIR and STTR Awards

97 98 99 00 01 02SBIRAwards 8 10 8 19 20 25Dollars 1.3 1.2 1.7 3.8 4.8 6.2Rank 45 37 42 35 30 32STTRAwards 3 4Dollars .8 .8Rank 20 26

SBIR Awards in South Carolina

0

5

10

15

20

25

30

1997 1998 1999 2000 2001 2002

Awards

$MM

Summary

• Small firms critical to growth and innovation in the economy

• SC has strong record of new firm creation and small business growth

• Firms in key technology areas

• Increased participation by small technology firms in federal funding programs