award, from private investors, or from the capital markets. The objective of this phase is to move the technology from the prototype stage to the marketplace.

Obtaining Phase III support is often the most difficult challenge for new firms to overcome. In practice, agencies have developed different approaches to facilitate SBIR grantees’ transition to commercial viability; not least among them are additional SBIR awards.

Previous NRC research has shown that firms have different objectives in applying to the program. Some want to demonstrate the potential of promising research but may not seek to commercialize it themselves. Others think they can fulfill agency research requirements more cost-effectively through the SBIR program than through the traditional procurement process. Still others seek a certification of quality (and the investments that can come from such recognition) as they push science-based products towards commercialization.5


The SBIR program approached reauthorization in 1992 amidst continued concerns about the U.S. economy’s capacity to commercialize inventions. Finding that “U.S. technological performance is challenged less in the creation of new technologies than in their commercialization and adoption,” the National Academy of Sciences at the time recommended an increase in SBIR funding as a means to improve the economy’s ability to adopt and commercialize new technologies.6

Following this report, the Small Business Research and Development Enhancement Act (P.L. 102-564), which reauthorized the SBIR program until September 30, 2000, doubled the set-aside rate to 2.5 percent.7 This increase in the percentage of R&D funds allocated to the program was accompanied by a stronger emphasis on encouraging the commercialization of SBIR-funded tech-


See Reid Cramer, “Patterns of Firm Participation in the Small Business Innovation Research Program in Southwestern and Mountain States,” in National Research Council, The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative, Charles W. Wessner, ed., Washington, DC: National Academy Press, 2000.


See National Research Council, The Government Role in Civilian Technology: Building a New Alliance, Washington, DC: National Academy Press, 1992, p. 29.


For FY2003, this has resulted in a program budget of approximately $1.6 billion across all federal agencies, with the Department of Defense having the largest SBIR program at $834 million, followed by the National Institutes of Health at $525 million. The DoD SBIR program, is made up of 10 participating components: Army, Navy, Air Force, Missile Defense Agency (MDA), Defense Advanced Research Projects Agency (DARPA), Chemical Biological Defense (CBD), Special Operations Command (SOCOM), Defense Threat Reduction Agency (DTRA), National Imagery and MapPhasing Agency (NIMA), and the Office of Secretary of Defense (OSD). NIH counts 23 separate institutes and agencies making SBIR awards, many with multiple programs.

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