How to Improve Support for Small Business Innovation, Research, and Technology

Small businesses can play a critical role in driving innovation by developing and commercializing high-risk, high-reward technologies. But they often lack early-stage capital to bring ideas to fruition. The federal government’s Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs address this need, channeling over $3.1 billion to nearly 3,600 firms in fiscal 2018 for technology development and commercialization. Having helped seed companies such as Apple, 23andMe, and Qualcomm, the programs are so effective that they have been copied by 17 countries around the world. But there are still opportunities to improve their structure and more effectively leverage federal funds. For instance, inflexible program requirements can prevent SBIR/STTR from attracting or selecting companies with promising ideas. Furthermore, awards are often obtained by companies that sustain themselves primarily on government grants for decades without an urgent focus on growth and commercialization. And importantly, program-wide funding uncertainties are a detriment to agencies’ long-term SBIR/STTR planning.

On September 26, 2019, ITIF hosted an expert panel discussion on Capitol Hill to mark the release of a new report discussing the future of these programs and how they can more effectively drive growth among innovative small businesses.

ITIF Senior Policy Analyst Robert Rozansky began the conversation by presenting the new report. While he noted the importance of small business innovation, he explained that small businesses often lack early-stage capital to bring new ideas to fruition. He recommended that the government can help fill the capital gap through its SBIR program. The objectives of the SBIR program include funding small businesses to help meet federal R&D needs and increasing private-sector commercialization of innovations. He also highlighted how 11 agencies award over $3 billion annually through their SBIR and STTR programs.

Rozansky highlighted how the National Science Foundation’s SBIR model can serve as a model for other agencies participating in the SBIR program. The NSF model prioritizes start-up companies and initiatives to enhance commercialization. Rozansky urged Congress to reform SBIR funding to grant agencies more autonomy, require agencies prioritize commercialization potential in funding decisions, allow awardees to use funds for commercialization activities, and increase federal funding for R&D.

Doug Rand, Senior Fellow and Director of the Technology and Innovation Initiative for the Federation of American Scientists, then spoke about the diverse approaches of the SBIR program participants. While 11 agencies participate, there is no one SBIR program; instead, there are a couple dozen that operate autonomously. Rand noted that, given the number of programs across agencies, it is challenging to gather data or implement reforms on a cross-program basis. He offered that some of the best SBIR innovations are happening at the granular level at different agencies.

Renée Bender, Senior Professional Staff Member for the Senate Committee on Small Business and Entrepreneurship, echoed similar concerns about the unique SBIR model. She discussed Chairman Rubio’s focus on how small businesses can contribute to U.S. global competitiveness, noting that the private sector will need to help fill this gap in support.

Meagan Sunn, Tech and Telecom Counsel for the House Committee on Small Business, then stressed the need for more research and coordination to improve the efficiencies and outcomes of SBIR programs. She noted that the House aims to improve SBIR's roadshow, application vouchers, and targeted outreach to disadvantaged communities in effort to increase diversity among participants.

Overall the panelists agreed that early-stage capital plays a critical role in the success of SBIR and STTR programs. Legislative support to allocate government grants and funds is essential to enable the sustainability of these programs and their leverage to ultimately promote growth and innovation for small businesses.

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