NRC An Assessment of SBIR Program - National Defense Industrial ...

An Assessment of the Small Business Innovation Research Program
http://www.nap.edu/catalog/11989.html
PREPUBLICATION COPY
Chapter 1: Introduction
Small businesses are a major driver of high-technology innovation and economic growth in
the United States, generating significant employment, new markets, and high-growth
industries. 1 In this era of globalization, optimizing the ability of innovative small businesses
to develop and commercialize new products is essential for U.S. competitiveness and
national security. Developing better incentives to spur innovative ideas, technologies, and
products—and ultimately to bring them to market—is thus a central policy challenge.
Created in 1982 through the Small Business Innovation Development Act, the Small
Business Innovation Research (SBIR) is the nation’s largest innovation program. SBIR offers
competition-based awards to stimulate technological innovation among small private-sector
businesses while providing government agencies new, cost-effective, technical and scientific
solutions to meet their diverse mission needs. The program’s goals are four-fold: “(1) to
stimulate technological innovation; (2) to use small business to meet federal research and
development needs; (3) to foster and encourage participation by minority and disadvantaged
persons in technological innovation; and (4) to increase private sector commercialization
derived from Federal research and development.” 2
A distinguishing feature of SBIR is that it embraces the multiple goals listed above, while
maintaining an administrative flexibility that allows very different federal agencies to use the
program to address their unique mission needs.
SBIR legislation currently requires federal agencies with extramural R&D budgets in excess
of $100 million to set aside 2.5 percent of their extramural R&D funds for SBIR. In 2005,
the 11 federal agencies administering the SBIR program disbursed over $1.85 billion dollars
in innovation awards. Five agencies administer over 96 percent of the program’s funds.
They are the Department of Defense (DoD), the Department of Health and Human
1 A growing body of evidence, starting in the late 1970s and accelerating in the 1980s indicated that small
businesses were assuming an increasingly important role in both innovation and job creation. See, for example,
J.O. Flender and R.S. Morse, The Role of New Technical Enterprise in the U.S. Economy, Cambridge, MA: MIT
Development Foundation, 1975, and David L. Birch, “Who Creates Jobs?” The Public Interest, 65:3-14, 1981.
Evidence about the role of small businesses in the U.S. economy gained new credibility with the empirical
analysis by Zoltan Acs and David Audretsch of the U.S. Small Business Innovation Data Base, which
confirmed the increased importance of small firms in generating technological innovations and their growing
contribution to the U.S. economy. See Zoltan Acs and David Audretsch, “Innovation in Large and Small
Firms: An Empirical Analysis,” The American Economic Review, 78(4):678-690, Sept 1988. See also Zoltan Acs
and David Audretsch, Innovation and Small Firms, Cambridge, MA: The MIT Press, 1990.
2 The Small Business Innovation Development Act (PL 97-219).
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