government ought not to be funding private-sector activities, and also on the premise that it constituted a “raid” on more “legitimate” R&D activities. But when Roland Tibbets and others at the NSF evaluated the program, they found that it had delivered a huge return of approximately 30 times the government’s initial investment—a total of $9.1 billion. The 1990s, he said, confirmed to many federal policy makers that federal economic policy should be “at heart an innovation policy,” and that innovation was going to be the key to productivity gains and economic growth.

“It was not only a matter of changing the measures of capital and labor supply traditionally used by the economics profession,” he said, “but bringing an understanding that innovation can change the entire curve of growth and fundamentally affect societal well-being. The SBIR program fit with an emerging view of capitalism that I think we’ve begun to see clearly in the 1990s, a kind of creative destruction process.”3

SBIR as a “Stealth” Program

The SBIR program has really been a “stealth” program, he said. “It’s the least-known of the handful of federal government programs that are aimed at bridging what’s known as ‘the valley of death’ between the R&D and the venture-capital funding stages.” Its low profile was at least partly due to its decentralized nature and dispersion among many agencies. While this allowed flexibility and adaptation to the needs of different agencies, it had also resulted in a low level of oversight and evaluation. Thus there is little known about the following questions:

  • Commercialization: Is a sufficient degree of commercialization being achieved by the agencies supporting the program? Should the success of the program be measured by the ability of companies to commercialize their products, or is some degree of usefulness to government a sign of success?

  • Cost-sharing: Should there be more focus on obtaining cost-sharing or company participation by the companies participating in SBIR?

  • Multiple awards: Are there too many repeat awards to recipients that have not commercialized their products?

  • Program structure: Have the delays between Phase I and Phase II awards created a breakdown in program continuity and therefore a disincentive for program participation? Is there a need for a real “Phase III,” with a continuing role for government?


The term, “creative destruction” originates with Schumpeter, See Joseph Schumpeter, Capitalism, Socialism and Democracy, New York: Harper, 1975, (orig. pub. 1942), pp. 82-85. See also Richard Nelson (ed.) National Innovation Systems, Oxford: Oxford University Press, 1993.

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