BOX 7-1

Caveat on Data

Our analysis of the effect of the SBA’s venture ruling on the participation of firms in the NIH program, and on the program itself naturally reflects the limitations in the data that are available.

Biases in the data may well cause an underestimate of the impact of the ruling. While we have developed good estimates for the impact of the ruling on firms within the program as of 2002, it is not possible to know how many firms have since been discouraged from applying to the program as a result of the SBA ruling. Anecdotal evidence submitted by BIO and associated surveys suggest that this impact may be considerable, but the NRC survey we present in this report indicates that the impact of the SBA ruling has been limited in the absolute number of affected firms, but significant in terms of its impact on program commercialization. a (See the findings.) Applications for SBIR grants at NIH have declined substantially in recent years, falling by 14.6 percent in 2006 (see Figure 1-1), but previous NRC analysis indicates that this decline may be related to issues of increased competition, concern about selection procedures, and funding delays. Moreover, the number of new businesses participating in the program has also decreased to its lowest proportion in a decade, although this may reflect a growth over time in the pool of previous SBIR awardees.b

It is also important to remember that the analysis in this report relies on proxy indicators for important variables. Data on firms, information on their ownership structures, and the impact of the SBA ruling on their eligibility to participate in SBIR is difficult to obtain directly. Firms are often reluctant to share the proprietary data that is involved.

These caveats notwithstanding, the data assembled by the Committee are revealing, and they allow us to draw some initial yet significant conclusions.


aThe BIO survey may support the view that some firms have stopped promising work as a source because of the ruling. See Appendix E, which presents an analysis of the BIO report.


bSee National Research Council, An Assessment of the SBIR Program at the National Institutes of Health, Charles W. Wessner, ed., Washington, DC: The National Academies Press, 2009, Chapter 3.

  • Not all firms receiving venture funding are excluded as a result of the ruling: Current levels of venture funding for 3.2 percent of all Phase II recipients were insufficient meet the proxy indicators developed for this study that reflected breach of the SBA eligibility rules.

  • In short, between 4.1 percent and 11.9 percent of firms that won SBIR Phase II awards from NIH between 1992 and 2002 are excluded from the program as a result of the SBA ruling.4


See Table 3-4

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