SBIR and the Phase III Challenge of Commercialization

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 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) program is the nation’s premier innovation partnership 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 so-


A growing body of evidence, starting in the late 1970s and accelerating in the 1980s indicates 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.

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