The encyclopedia · R&D & Science · Strategic decision · 1982-2019
The U.S. SBIR mandate made agencies fund small-firm R&D
A 1982 U.S. law forced large agencies to set aside R&D money for small firms; a Navy/Air Force study found $6.25 bn of grants created $92.1 bn of impact.
U.S. Small Business Administration · 11 federal research agencies
the move
By the late 1970s small firms received a tiny share of federal R&D, even though advocates argued they were the likeliest source of category-creating inventions.
In 1982 Congress created the Small Business Innovation Research program: agencies with large extramural R&D budgets must set aside a fixed percentage and award it competitively to small businesses.
The set-aside grew from about 1.5% of an agency's extramural budget in the 1990s to about 3.2% by fiscal year 2018, funding roughly $2 billion a year of awards across 11 agencies.
Qualcomm, which developed a key wireless chip using SBIR grants, became a prominent example of the pipeline from a small-firm award to a large company.
why it works
- A mandated set-aside guaranteed small firms a seat at a table that otherwise went to large firms and universities.
- Competitive merit-based awards selected the best idea rather than the best-connected bidder.
- The three-phase structure moved an idea from feasibility to development to private commercialization.
- A study of the Navy and Air Force programs found $6.25 billion of SBIR funding produced $8.8 billion in tax revenue and $92.1 billion of overall economic impact.
what transfers
When a sector is excluded by a process, a mandated set-aside and a public merit-based competition can price and fund innovation the market would miss.
what came after
SBIR became the largest U.S. early-stage tech funding source outside venture capital; over its history it awarded well over $50 billion to small firms, and Congress kept reauthorizing it with a rising set-aside.
references
- Review of the SBIR and STTR Programs at the Department of Energy - Chapter 3
- Statement of the Hon. Jason Crow on SBA Programs Spurring Innovation
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