IT Engineers Leaving Big Tech to Join Startups: Does It Actually Help US Innovation?

"Decrease in Patent Applications More Pronounced in Large Corporations than Startups"

Big tech companies such as Google, Amazon, and Meta Platforms, the parent company of Facebook, have carried out large-scale layoffs, leading displaced technical workers to move to startups and non-technical companies that have been experiencing labor shortages. Although this economic crisis began due to the financial difficulties of big tech companies unable to bear costs, could this movement actually benefit innovation in the United States?

On the 9th (local time), The Wall Street Journal (WSJ) cited a recent paper titled "Where Have All the Creative Talents Gone?" by Upwork Aksigit, an economics professor at the University of Chicago, which confirmed that American inventors who come up with ideas capable of improving product quality and dominating the market tend to earn more money at large corporations than at startups but produce fewer innovative ideas.

This research result was based on an analysis of 760,000 patent-related data and U.S. Census Bureau data from 2000 to 2016. It analyzed the number of patents filed by inventors and their incomes. According to the findings, inventors who joined established large corporations earned 12.6% more income compared to those at startups, but the number of innovative outputs, i.e., patent applications, decreased by 6?11%.

Professor Aksigit and others analyzed that inventors at startups focus on product innovation, whereas at large corporations, they concentrate more on personal success such as promotions, which leads to a reduction in the generation of innovative ideas.

Noam Bardin, former CEO of the navigation application Waze, worked as a vice president at Google for over seven years after selling his company to Google. During that time, he felt the presence of "corporate bureaucracy." While startups quickly make decisions and adapt their work methods when something goes wrong, large corporations prefer complex solutions over simple ones with a cautious attitude, focusing more on promotions than on providing services to customers.

WSJ explained that this is "the reason why OpenAI, a startup with fewer than 400 employees, was able to release a useful AI chatbot ahead of large tech companies that had been working on AI-related tasks." It also reported that this phenomenon is occurring not only in the technology sector but also in finance, retail, and other industries.

Professor Aksigit evaluated that the large-scale hiring of inventors by big corporations would not significantly help innovation in the United States. According to the paper, the proportion of inventors employed by U.S. large corporations increased from less than 50% in 2000 to 58% in the late 2010s. He said, "One of the most typical problems in large corporations is the disconnect between research and development (R&D) and production departments," adding, "When a company is small, it knows what happens when developing new technologies or products, so it can respond relatively quickly with that in mind."

These research results are attracting attention as a potential catalyst for innovation momentum in the U.S. tech industry, coinciding with the recent large-scale layoffs of technical workers in Silicon Valley and their migration to startups and other companies.

Recently, technical workers in Silicon Valley have been moving from big tech companies to startups and non-technical companies. WSJ reported that in a situation where big tech companies prioritize efficiency through cost reduction, veteran technical workers are placing higher priority on job stability and personal value rather than working at famous companies.

Tim Herbert, Chief Research Officer (CRO) of CompTIA, a technology research and development company, said that the unemployment rate for technical workers remains low at 2.2%, meaning most are being absorbed somewhere else. He explained that they are moving from big tech companies to startups, cybersecurity firms, and technology consulting companies.

However, WSJ also reported research findings that suggest the startup market is not being harmed by the growth of big tech companies. Robert Atkinson, president of the Information Technology and Innovation Foundation (ITIF), which published a study in 2020 showing that startups with strong technology continue to emerge and grow rapidly, said that just because innovators join large corporations and file fewer patents does not mean it represents productivity. He added that large corporations can actually create innovation in larger business areas.

This content was produced with the assistance of AI translation services.