Companies, large and small are all over the board with their use of patent searches. Some major players in Silicon Valley I have worked with in the past do no patent searches at all. The implicit belief is that they know their field well enough they have minimal concerns that they will infringe … and of course, they have money to defend themselves.
Also note that in the case of cutting edge technology, patent applications relating to such technology may not even be published at the time of the search. Patent applications are generally published 18 months after filing, and some may not be published until a patent issues.
There is, no legal requirement for patent searches, per se. At most, performing such searches may have some limited use in defending against charges of willful infringement in the event you are actually sued for patent infringement.
Willful infringement is a tough charge to make stick. The other side needs to prove you knew about their patent, knew you infringed it, but you infringed it anyway. A patent search is (arguably weak) evidence, that you did not know about the other side's patent.
If you are filing a patent application on your invention, there is absolutely no requirement, or even any expectation you will do a search before filing the application.
That being said, it is a good business practice to do some level of searching for similar art in U.S. and international patent applications before investing significant funds in developing and manufacturing your invention for two reasons.
First, there is little sense in bring a product to market that clearly infringes another patent. Second, patents on similar inventions can guide you in developing technologies that are clearly distinguished from known products in the market.
How extensive a search? Novelty searches (i.e. is there anything very similar or identical?) by a professional search service run $300-$600. Non-infringement searches (does your in-vention infringe one or more patents?) can cost $5,000-$10,000. Whitespace analysis (what technologies have yet to be patented in a given field?) can cost $30,00-$50,000.
Its a business decision in the end analysis, upfront cost vs. backend risk. No matter how extensive the search is, however, there's never a guarantee that you won't end up infringing somebody's patent any more than there is a guarantee your technology will succeed in the market.
If you have any questions, feel free to contact me.