Summary

Created in 1982 through the Small Business Innovation Development Act, the Small Business Innovation Research (SBIR) program remains the nation’s single largest innovation program for small business. The SBIR program offers competitive awards to support the development and commercialization of innovative technologies by small private-sector businesses. At the same time, the program provides government agencies with technical and scientific solutions that address their different missions.

Adopting several recommendations from the 2008 Academies study of the SBIR program, Congress reauthorized the program in December 2011 for an additional 6 years. In addition, Congress called for further studies by the Academies. In turn, the National Science Foundation (NSF) requested the Academies to provide a subsequent round of analysis, focused on operational questions with a view to identifying further improvements to the program.

This study therefore seeks to understand how the NSF SBIR program—which pioneered the SBIR program—is currently working and how it could work even better in the future. Drawing on the methodology developed in its previous study, an ad hoc committee issued a revised survey of SBIR companies, revisited some case studies and developed new ones, and interviewed agency managers and other stakeholders to provide a second snapshot of the program’s progress toward achieving its legislative goals. Survey instruments and case studies are found in the report appendixes. Case studies provide a rich description of the program from the user’s perspective.

This study recognizes that the NSF SBIR program is relatively unique in terms of scale, integrity, and mission focus. Therefore, it focuses on the SBIR program at NSF, and it does not purport to benchmark the NSF SBIR against

SBIR programs at other agencies or non-SBIR programs in the United States or abroad. Further, the study does not consider if the NSF SBIR should exist or not; rather, it assesses the extent to which the SBIR program at NSF has met the Congressional objectives set for the program, examining the extent to which recent initiatives have improved program outcomes, and providing recommendations for further improving the program to meet its objectives.

FOCUS ON LEGISLATIVE OBJECTIVES

The SBIR programs are unique efforts designed by Congress to provide funding via government agencies in pursuit of four objectives¹:

1. Stimulate technological innovation;
2. Use small business to meet Federal research and development needs;
3. Foster and encourage participation by minority and disadvantaged persons (including woman owners of small business) in technological innovation; and
4. Increase private-sector commercialization innovations derived from federal research and development.

It is important to note at the outset that this volume—and this study—does not seek to provide a comprehensive review of the value of the SBIR program, in particular measured against other possible alternative uses of federal funding. This is beyond the study scope. Our work is focused on assessing the extent to which the SBIR program at NSF has met the Congressional objectives set for the program, to determine in particular whether recent initiatives have improved program outcomes, and to provide recommendations for improving the program further.

Thus, this study does “not to consider if SBIR should exist or not”—Congress has already decided affirmatively on this question, most recently in the 2011 reauthorization of the program. Rather, the committee is charged with “providing assessment-based findings of the benefits and costs of SBIR . . . to improve public understanding of the program, as well as recommendations to improve the program’s effectiveness.

KEY FINDINGS

Based on this research, the Committee finds that with one exception the NSF SBIR program is meeting its overall legislative and mission-related goals. The exception is the important legislative goal to foster and encourage participation by women and minorities, which has not been met. Key findings with regard to the legislative goals of the SBIR program are highlighted and cross referenced below. Chapter 7 of this report lists the Committee’s findings in full.

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¹Pub. L. 97–219, § 2, July 22, 1982, 96 Stat. 217.

• Commercialization
  • SBIR projects at NSF commercialize at a substantial rate. According to the responses to the 2011 Survey, about 70 percent of Phase II projects reported some sales and an additional 19 percent anticipated future sales. (Finding I-A)
  • NSF’s Phase IIB program supports the accelerated commercialization of SBIR-funded research. Information from surveyed recipients and from case studies strongly suggests that the program serves as a catalyst, attracts additional funding, and has a positive effect on company activities and outcomes. (Finding V)
• Participation by Women and Minorities
  • Levels of participation by underserved groups are low and not rising. (Finding II-A) Data from NSF indicate that the success rates of minority owned small businesses (MOSB) applicants are strikingly lower than those of non-MOSB applicants. Woman-owned small businesses (WOSBs) and minority-owned small businesses (MOSBs) not only submit fewer proposals but also have lower success rates than non-WOSB and non-MOSB groups. WOSBs and MOSBs received approximately 6 percent and 4 percent of awards, respectively. These percentages have not increased during the past decade.
  • In the 2011 Survey, companies reported that 11 percent of Principal Investigators (PIs) were minority (the same as the 2005 survey). However, further analysis indicates that only 1 percent of PIs were Hispanic, and less than 0.5 percent were African American, and none were Native American. (Finding II-A)
  • NSF’s efforts to “foster and encourage” the participation of woman-owned and minority-owned small businesses have not been effective. (Finding II-B)
• Stimulating Technological Innovation and Meeting Agency Mission Needs
  • The NSF SBIR program supports the development and adoption of technological innovations. Selection of topics and individual projects for funding maintains a strong focus on technological innovation. (Finding III-A)
  • The NSF SBIR program continues to connect companies and universities in a variety of ways. Nearly 60 percent of survey respondents reported a link to a university. About 35 percent of projects involved university faculty (not as principal investigator [PI]), 30 percent of projects employed graduate students, and almost 25 percent of projects had universities serving as subcontractors. (Finding III-B)
  • NSF SBIR projects generate substantial knowledge-based outputs. More than 70 percent of survey respondents reported filing at least one patent related to the surveyed project. About 80 percent of survey

• respondents reported at least one resulting peer-reviewed publication. (Finding III-C)

• Fostering Innovative Companies
  • Forty-five percent of survey respondents indicated that the company was founded entirely or in part because of the SBIR program. (Finding IV-A)
  • Thirty-five percent of survey respondents indicated that the NSF SBIR program had a “transformative” effect on the company. Another 54 percent reported a “substantial positive long-term effect.” (Finding IV-C)

KEY RECOMMENDATIONS

The Committee’s key recommendations are highlighted below:

• NSF should immediately enhance efforts to address the clear Congressional mandate to foster the participation of underserved populations in the SBIR program (one of the four major goals of the program as stated in Chapter 1).
  • NSF should not develop quotas for the inclusion of selected populations in the SBIR program. Such an approach is not necessary to meet Congressional intent and is likely to reduce program effectiveness. (Recommendation I-A)
  • NSF should develop new benchmarks and metrics. Measures of the participation of socially disadvantaged groups should be disaggregated by race/ethnicity, and attention should be focused on the clear Congressional intent to support “minority” participation. (Recommendation I-B)
  • NSF should undertake an investigation to understand better why its efforts to date to expand the participation of underserved populations have been largely unsuccessful. (Recommendation I-C)
• NSF should continue to operate the Phase IIB program. (Recommendation III-A)
  • NSF should consider expanding the size of the Phase IIB program. The strongly positive impact suggests that further projects would benefit from Phase IIB funding. (Recommendation III-B)
• NSF should improve its efforts in data collection, assessment, and reporting.
  • NSF should improve current data collection methods and standardize key questions to improve program evaluation. This data collection effort should address the entire range of congressionally mandated outcomes, not just commercialization. (Recommendation IV-A)
  • NSF should provide a comprehensive annual report to Congress and the public on its SBIR/STTR program operations. (Recommendation IV-D)