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.