National Academies Press: OpenBook

The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative (2000)

Chapter: An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects

« Previous: IV. Papers: Fast Track: Is It Speeding Commercialization of Department of Defense Small Business Innovation Research Projects?
Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×

An Assessment of the Small Business Innovation Research Program in New England: Fast Track Compared with Non-Fast Track Projects*

John T. Scott

Dartmouth College

EXECUTIVE SUMMARY

This paper provides case studies for 14 research and development projects funded in 13 New England companies by the Department of Defense Small Business Innovation Research (SBIR) program. The performance of the six Fast Track projects, each conducted by a different company, is compared with the performance of eight non-Fast Track projects. The primary conclusions from the study of the New England cases are

  • The collection of 14 New England SBIR projects studied here exhibited, at the outset of Phase I, high risk—both technical and market risk, high capital costs, and often expectation of a long-time before commercialization of the resulting technology.

  • In the absence of the SBIR funding, the research projects would not have been undertaken in the same way or at the same pace. Outside investors, at the outset of Phase I, would have required too high a rate of return to make it possible for the project to proceed with only private financing.

  • On the whole, the projects, both Fast Track and non-Fast Track, met both the funding agency’s mission and the company’s strategy. All fit the general scenario for socially valuable research projects that would have been underfunded in the absence of the SBIR program. In particular, the projects appear to be ones for which the private rates of return in the absence of SBIR funding would have fallen short of the private hurdle

    *

    This paper was prepared for presentation at the National Academy of Sciences Symposium on the Assessment of the SBIR Fast Track Program, May 5, 1999.

Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×

rate required by outside financiers to whom the small businesses would have had to turn for financial support. Yet the social rates of returns to the projects are large and exceed the hurdle rates. The funding from the SBIR program changes the ordering of rates of return anticipated at the outset of Phase I. With the SBIR program providing funds, the expected private return relative to just the private portion of the total project costs is sufficient to move the private rate of return above the hurdle rate, and then the socially valuable research investment is undertaken.

  • Taken as a group, the Fast Track projects show higher prospective lower-bound social rates of return—a measure that is based upon expected profits to the innovator and other producers benefiting from the innovation.

  • The average duration of additional development beyond Phase II and before commercialization is somewhat less for the Fast Track projects, suggesting that at least on average they are somewhat closer to commercialization at the end of Phase II than the non-Fast Track projects.

  • The respondents were unanimous in their appreciation of the SBIR program and in their belief that the program generally works well. They did have several recommendations to improve the working of the program, and those recommendations are listed in this paper. Among other things, the respondents cautioned that the Fast Track program is often simply not useful for companies pursuing socially valuable high-risk research, because at the end of Phase I, such projects often do not yet have the characteristics of projects that allow outside private investors to be attracted.

  • In summary, the SBIR program has funded innovative projects with high social rates of return that would not have been undertaken in the absence of the program. Further, the non-Fast Track as well as the Fast Track projects appear to be quite valuable, although the non-Fast Track projects typically do not exhibit private commercial potential as quickly as the Fast Track ones.

Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
INTRODUCTION

As part of a National Academy of Sciences study of the Department of Defense (DoD) Small Business Innovation Research (SBIR) Program, six SBIR Fast Track projects from six companies in New England are studied here along with SBIR non-Fast Track projects from different New England companies matched by similarity of location, size, and project duration. A total of seven projects from six non-Fast Track companies are studied—one project for each of five companies and two for the sixth. Additionally, the study includes a non-Fast Track project of a thirteenth company, Foster-Miller, which is much larger than the other companies in the sample and has been successful with an unusually large number of SBIR awards. In all, the study covers 14 projects at the 13 firms shown in Table 1. All of the SBIR projects studied were awarded both Phase I and Phase II funding. The goal of the study is to describe the SBIR projects and compare the Fast Track projects with the non-Fast Track projects, determining the effect that Fast Track has had on SBIR performance and firm behavior.

The 14 projects are high-risk research projects performed by small businesses, or with Foster-Miller in the sample, what the technology literature calls SMEs—small and medium-sized enterprises. The study finds that these risky SBIR-funded projects have high prospective, expected social rates of return. The social rates of return are calculated as lower bounds based solely on anticipated innovative investment profits for companies rather than on the sum of those profits (producer surplus) and consumer surplus (economists’ measure of the value above and beyond what they actually pay that consumers receive from a product or service). Thus, the study’s finding that the Fast Track projects as a group have

TABLE 1 The Firms

Company Name

Date Founded

Initial Sizea

Brock-Rogers Surgical

1995

3

Cape Cod Research

1982

18

Foster-Miller, Inc.

1956

260

Hyperion Catalysis International

1982

20

Lithium Energy Associates, Inc.

1989

3

Materials Technologies Corp.

1986

5

Mide Technology Corp.

1989

3

Optigain, Inc.

1991

8

QSource, Inc.

1982

3

SEA CORP (Systems Engineering Associates Corp.)

1981

93

Spectra Science Corp.

refounded 1997 (originally 1989)

7

Synkinetics, Inc.

1994

8

Yardney Technical Products, Inc.

1940

155

aEmployees at the time of application for Phase I.

Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×

higher social rates of return supports the perception that their prospects for generating profits for innovating firms are especially good. However, some non-Fast Track projects have higher lower-bound expected social rates of return than some Fast Track projects, despite the fact that consumer surplus is not measured. Fast Track and non-Fast Track projects alike have lower-bound social rates of return exceeding the private rates of return in the absence of SBIR funding. Each of the studied projects is the type of research project in which the market would fail to invest in a socially valuable innovation in the absence of SBIR or similar public funding. For the 14 New England SBIR projects studied, the average value of the lower bound for the prospective (i.e., at the start of Phase I) expected social rate of return is estimated to be 60 percent. The estimate would be much higher if consumer surplus could be measured.

HISTORY OF THE FIRMS AND THE PROJECTS

Table 2 provides some background information about the 13 companies as a group. The sampled firms have similar histories in the ways reviewed in the table, except that the Fast Track respondents are less likely to have had a previous SBIR award. Not surprisingly, the companies are not Advanced Technology Program (ATP) award winners; the ATP projects require substantial contributions of private funds from the outset of the projects. As seen in Table 2, the sampled companies are typically small businesses facing severe capital constraints for internal financing of research. Somewhat more than half of the respondents indicated locational advantages. A variety of other competitive advantages were cited; representative examples include “large patent base,” “patented core tech-

TABLE 2 History of the Firms. (The number of respondents indicating each category)

Characteristic

Fast Track

Non-Fast Track

Locational advantages

 

Near universities

2

3

Near corporate research centers or research parks

1

2

Previous SBIR awards prior to Phase I of current award*a

 

Yes

3

6

No

3

1

Previous or current ATP Aawards

 

Yes

0

0

No

6

7

a One company discussed the details of two awards. For purposes of this table, the two awards are considered as one award; their periods of performance are essentially concurrent, and both are non-Fast Track projects.

Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×

nologies,” “small and lean,” “twenty five years experience in the underlying technology,” “trade secrets and know-how.”

As discussed in detail later, the research projects on the whole are characterized by both high technical risk and high market risk. At the outset of Phase I, there is considerable uncertainty about whether the research will resolve outstanding technical problems. Furthermore, the acquisition plans of DoD are not typically firm at the outset of the research, and although the potential for spillovers to the nonmilitary commercial sector is present, many uncertainties remain about the form of the nonmilitary applications and about the market success of those applications.

Table 3 lists the companies along with the titles of the SBIR projects studied in this paper and their Fast Track status. The following paragraphs are brief overviews of the technologies being created by the sampled SBIR projects, along with discussion about the relationship of the project to the mission of the funding agency and to the strategy of the company.

TABLE 3 The Projects

Company

Project Title

Fast Track Status

Brock-Rogers Surgical

Development of a Force-Reflecting Laparoscopic Telemanipulator

Fast Track

Cape Cod Research, Inc.

Multilayer Capacitors Based on Engineered Conducting Polymers

Non-Fast Track

Foster-Miller, Inc.

Tunable Sting Net

Non-Fast Track

Hyperion Catalysis International

Ultracapacitors Based on Nanofiber Electrodes

Fast Track

Lithium Energy Associates, Inc.

Lithium Copper Chloride Inorganic Electrolyte Battery for More Electric Aircraft Systems

Non-Fast Track

Materials Technology Corp.

Life Prediction of Aging Aircraft Wiring Systems

Non-Fast Track

Mide Technology Corp.

Development of Distributed Area Averaging Sensor

Non-Fast Track

Optigain, Inc.

Single Longitudinal Mode Distributed Feedback Fiber Optics Laser

Non-Fast Track

QSource, Inc.

Multiple Rectangular Discharge CO2 Laser

Fast Track

SEA CORP (Systems Engineering Associates Corp.)

Rapid Prototype Portable Combat and Launch System

Non-Fast Track

 

Second project also discussed: Modular Gas Generator Launch Canister

Non-Fast Track

Spectra Science Corp.

Quantum Dots: Next Generation of Electronic Phosphors

Fast Track

Synkinetics, Inc.

High Precision Gimbal System

Fast Track

Yardney Technical Products, Inc.

Low Cost, Lightweight, Rechargeable Lithium-ion Batteries

Fast Track

Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×

Brock-Rogers Surgical. Development of a Force-Reflecting Laparoscopic Telemanipulator. Fast Track. The technology merges electronics, mechanics, computer networking and software to create a telerobot to be used for surgery. The technology allows the surgeon to feel as if he or she were one inch tall and inside the patient. DoD is interested in such computer-augmented remote connections to allow medical personnel to operate on the front lines from remote locations. Beyond the military applications, such technology will change the face of surgery. A deep infrastructure technology is being created—a sophisticated electronic, mechanical, software-networked machine. In that sense, the technology is an enabling one with wide applications outside of medicine. The robot no longer needs to “see”—recognition and reception problems are handled by the human controlling the process.

Cape Cod Research, Inc. Multilayer Capacitors Based on Engineered Conducting Polymers. Non-Fast Track. The technology uses electrically conductive polymers to store energy to power electric cars. The project involves the development of novel and useful materials, and it provides the funding agency with improved energy storage for a variety of applications.

Foster-Miller, Inc. Tunable Sting Net. Non-Fast Track. The technology is the latest in a line of “NETS”—nonlethal entanglement technology systems—developed as SBIR projects by Foster-Miller in response to DoD’s interest in funding research about capture mechanics. The family of nets developed by Foster-Miller are compact, light-weight, far-ranging, fast, and can be fired from conventional weapons. The “Sting Net” delivers a remotely controlled electric charge for use with especially aggressive targets and is anticipated to have military applications only. Less physically active versions range from nets that simply entangle to nets using pepper irritant powder to subdue more dangerous targets. The less harsh nets will have use in nonmilitary police operations. The Sting Net project fits with Foster-Miller’s highly successful corporate strategy of inventing and licensing patented technologies, and spinning off subsidiary companies to manufacture and market the innovations. Numerous SBIR projects have contributed to that strategy, although the company gets only about 20 to 25 percent of its revenues from the SBIR awards.

Hyperion Catalysis International. Ultracapacitors Based on Nanofiber Electrodes. Fast Track. Electrochemical capacitors, sometimes called ultra-capacitors or supercapacitors, are being developed for potential applications in hybrid electric vehicles and other automotive electronic and military systems. To be cost- and weight-effective compared to batteries, these “supercaps ” must have adequate energy and power with a long life cycle and must meet cost targets. Hyperion has a proprietary line of nanofibers that have desirable properties and a cost advantage over competing materials. During Phase I, the Hyperion nanofibers showed great promise regarding their power and now in Phase II the nanofibers are being used to design, fabricate, and test electrochemical capacitors. Hyperion would make the nanofiber electrodes and sell them to the manu-

Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×

facturers of supercaps. Beyond the potential for a large commercial market for supercaps and the fact that the military has specialized needs for them that explain the DoD funding of the research, there are other potential applications including uses in boom boxes, electric motor starters, defibrillation medical devices, and in cell phones in combination with batteries where power from a small supercap can allow the use of a smaller battery and a better product than results using a large battery alone.

Lithium Energy Associates, Inc. Lithium Copper Chloride Inorganic Electrolyte Battery for More Electric Aircraft Systems. Non-Fast Track. The batteries developed by Lithium Energy Associates are rechargeable and have high energy density and extraordinary low-temperature performance. They have military applications in small, light-weight, remote-controlled reconnaissance aircraft equipped with TV cameras and in solar planes that fly to high altitudes, charge during the day, and then keep flying at night. The batteries have other military applications as well; for example, after using conventional power to get equipment to a battlefield, the engines could be turned off and the batteries could reposition vehicles quietly and without infrared detection. The batteries will have applications for a variety of military electronics applications such as radios. The low-temperature performance of the batteries also makes them the potential power source for applications in space, such as powering robot stations on the moon or Mars, and research in progress will push the low-temperature capabilities of the batteries into the range making them suitable for lunar or Mars missions. Customers, apart from DoD and NASA, should include original equipment manufacturers of military electronics or civilian police equipment.

Materials Technology Corporation. Life Prediction of Aging Aircraft Wiring Systems. Non-Fast Track. The technology allows safe, accurate, and efficient diagnostic tests of the wiring in airplanes to ensure that the wiring is defect free. With the current technology the inspector opens a panel door and examines bundles of wires with the naked eye. If the 12- to 18-inch section of wire that can be seen looks okay, then the entire wire is judged to be safe. In some cases, the inspector may use a mirror to try to look at the back side of the wires, but because of visibility and space limitations it is rare that the back side is inspected well. The wires themselves are rarely a problem; instead, the insulation on the wires is what degrades; becoming brittle with age, it begins to crack. The plasticizer vaporizes and, over time, the insulation degrades, becomes brittle, and begins to fall apart, exposing bare wire; if two wires are exposed, a short circuit is possible.

The new technology developed by Materials Technology Corporation is the first approach to inspecting for damaged insulation of wiring that allows viewing of all sides of the wiring and does not risk damaging the wires as typically occurs if the wires are bent or disturbed in trying to examine their back side. The technology uses embedded optical sensors in a device that can be put around the bundle of wires and used to get a 360-degree view of the wires. The information

Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×

gathered by the handheld device is signaled to a computer that pinpoints and displays precisely where on the 360-degree surface a crack is located. New optical imaging technology is used. With the press of a button the image can be recorded and the data transported for use at other sites. It is expected that the system will allow the entire wiring history of the aircraft to be stored on a zip drive that will be carried in the aircraft. Planes will not have to return to a home base to be inspected and repaired. Historical data, supplemented with a visible image, will allow the inspector to see what the wiring looked like at the last inspection and calculate the progression of changes. In addition to examining aircraft wires and cable, the technology can be used to examine the connections and to detect corrosion more generally in aircraft and other objects.

There are many applications beyond those for military and commercial aircraft. The optical scanning procedure is expected to be relevant for dealing with vision problems caused by macular degeneration. And, of course, what is good for aircraft inspection is also good for inspecting bridges and other infrastructure.

Mide Technology Corporation. Development of Distributed Area Averaging Sensor. Non-Fast Track. The technology eliminates harmful vibrations in structures by use of active materials that respond to stimuli; for example, if voltage is applied, the active material expands or contracts. The vibrations of structures have several natural frequencies, and the technology developed by Mide Technology Corporation uses shaped sensors to filter out noise, focusing on a desired frequency to eliminate the associated vibrations. The area averaging sensor simplifies a higher-dimension multi-input/multi-output information problem to a lower-dimension control system that characterizes more simply the necessary information about the natural frequencies causing vibrations, despite a complex set of underlying information. The frequencies that really transmit the noise through the structure of interest can be isolated using a control system with active fiber composite actuators; the smart material is used to simplify the control problem and, ultimately, to allow the elimination of the vibrations from the structure.

The immediate application of the technology is to protect launch satellites from damage from structural vibrations. Alternatively, one could protect the launch satellite with blankets—thin ones to protect against high-frequency noise, and thick ones to protect against lower-frequency noise. The Mide technology is the active way of dealing with the problem. Commercial potential extends beyond the protection from vibration of components in space launch vehicles. The commercial potential comes from using area average sensors with flexible circuitry, and Mide has four commercial products using that technology. The products range from generic technology such as sensors on a flexible circuitry for signal conditioning, a high-voltage amplifier to drive active fiber composites, and sensors connected in various ways on a small matrix board, to a specific application that uses sensors on a the shaft of a golf club to detect club head speed and provide feedback. The generic applications range from military uses such as protecting the launch of a spacecraft or quieting torpedoes in a submarine to

Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×

nonmilitary commercial uses such as vibration control for the blades of a gas turbine or in air-conditioning ducts. Anything that vibrates and has a dynamics problem with the vibration and noise can potentially benefit from the technology.

Optigain, Inc. Single Longitudinal Mode Distributed-Feedback Fiber Optics Laser. Non-Fast Track. Optigain’s technology provides a fiber version of a signal source that is similar to a semiconductor laser. Optigain ’s fiber laser is a distributed laser induced in a fiber rather than a semiconductor. Transmission systems need a high-quality signal source, and Optigain’s technology provides a narrow, high-quality low-noise laser that can potentially capture some of the market for semiconductor lasers used in communications markets. The company ’s strategy is to develop various fiber-based devices, and the product here is a fiber-based component that can be put into other systems. Several lasers, each a different wavelength, have been developed, and communications markets where Optigain’s fiber-based laser will be preferred over the semiconductor lasers are being sought. The superior performance of the fiber-based laser is in the linewidth of the laser and its spectral purity, which should lead to applications in sensor markets as well.

Regarding the relationship between the project and the mission of the funding agency, in this case the agency was quite open about different topics, with awards going to further technology for high-speed communications networks quite generally. The goal of the funding was to enable new technologies for such networks, and the concern was with the overall strength of the solutions rather than a specific set of narrow requirements.

QSource, Inc. Multiple Rectangular Discharge CO2 Laser. Fast Track. QSource’s CO2 laser technology generates high power and efficiency and has specialized military uses. There are also nonmilitary commercial applications with large market potential. QSource’s laser features higher power, smaller size, and an advantage in cost. CO2 lasers are used in laser radar to bounce a pulse off an object, its high sensitivity allowing detailed information to be obtained about a tank or an aircraft many miles away. The laser system along with a DC battery source can be built in the size of a small suitcase. The CO2 laser has very high efficiency, transmitting substantial distances with very little power loss; it is compact, uses a simple gas, and is very efficient.

The technology is dual use. For example, the basic transmitter unit in the laser radar has applications for heating, cutting, and trimming, for example, in conjunction with one of the lasers used in eye surgery that was developed initially in another DoD SBIR project trying to track objects at great distance. The laser is inherently sterile, and so, it is ideal for cutting tissue. It can be used for cutting teeth, working on teeth, and as a mechanical drill. It is more expensive than a drill, but it eliminates the risk of transmitting hepatitis or other viruses. A laser dental system has a detachable head in the optical system that delivers the laser and is easy to clean. The surgery is painless; there is no need for anesthesia. The dental market alone over the next 10 years is projected to sell 100,000 dental laser

Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×

systems once the procedure for hard tissue is approved. A CO2 laser dental system will sell for about $20,000. The energetic CO 2 lasers that QSource technology improves upon should have a market of $2 billion in the dental market alone. The medical therapeutic uses include the dental applications, skin resurfacing, and microsurgery in the ear. Further markets have been identified for sealed CO2 lasers in materials processing and various research applications.

There are a large number of CO2 lasers available and, over the past decade, they have become more functional. The cost of producing them in terms of dollars per watt is not great, but more than half of that cost is in the basic power source needed to energize the laser (i.e., powering the basic laser itself, not the entire system). The big advance provided by QSource technology is to reduce the cost of the power supply. Some of the older technology can achieve the same level of efficiency as the new QSource rectangular discharge laser, but those technologies result in products that are very big and not very sturdy.

SEA CORP (Systems Engineering Associates Corp.). Rapid Prototype Portable Combat and Launch System. Non-Fast Track. The technology is a software based-fire control system that allows a submarine to fire various types of torpedoes. Modern submarine systems are not compatible with all types of torpedoes. SEA CORP has created a system in a suitcase that can be plugged in and will allow the submarine to use different types of torpedoes.

Modular Gas Generator Launch Canister. Non-Fast Track. This second technology developed by SEA CORP is a launcher for torpedoes that uses automotive air-bag technology rather than a conventional gas system. It is modular, environmentally friendly, and uses a commercial off-the-shelf item to meet a specialized military purpose. Other commercial applications of both technologies are being considered, and the technologies will allow SEA CORP to diversify its activities into profitable new lines of business that are very different from its historical focus.

Spectra Science Corporation. Quantum Dots: Next Generation of Electronic Phosphors. Fast Track. The technology centers on better phosphor that results in a brighter image on large-screen projections. The technology combines the three core technologies of Spectra Science. First, the company has laser paint technology using disordered lasers. Conventional lasers use mirrors as the gain source, but laser paints use scatters such as titanium particles. So, a composite system is used to create the gain source; the laser excites the material and the feedback is from materials rather than from mirrors. The laser paint technology is used for identification or authentication, for example, via a label on a fabric or in a document.

The second core technology came from Phase I of this SBIR award. In that research, Spectra developed the ability to make smaller phosphor particles with surfaces for the composite systems that could exhibit gain and could be used in a laser paint. The difficulty to be surmounted was that the surfaces of the particles have a large number of defect sites, which trap light, preventing its emission.

The third core technology is the focus of the SBIR project’s Phase II. It is a

Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×

combination of the first two technologies. Phase I resulted in development of quantum dot phosphors for display applications—better phosphors that could be driven harder with the result of a brighter image. Phase II then shifted gears and focused on developing what had been discovered. Spectra Science has merged its work on display technologies and materials for laser paints to develop a lasing projection system. With previous technologies, large-screen projections can be viewed only in the dark. With Spectra Science’s new technology, the phosphors are excited and emit higher energies than previously, overcoming this limitation. DoD’s SBIR award here meets their mission in terms of improved images for large-screen projection systems. That goal remained the same even when Phase II was refocused, and the project clearly satisfies Spectra Science’s strategic mission of seeking potential applications for its core technologies.

Synkinetics, Inc. High Precision Gimbal System. Fast Track. The Synkinetics technology is an innovative system of gears that provide cost-effective, sturdy, precision devices for positioning and pointing armaments. Such devices are used, for example, in missile control systems. Synkinetics’s new speed conversion technology improves current high-precision pointing and positioning transmission equipment at a reasonable cost. The technology features flat-plate cam gears in an in-line mechanism that combines the rolling aspects of bearings with the transmission aspects of gears to obtain a versatile, robust, compact, reduced-weight, high-precision, efficient, and cost-effective drive mechanism. The technology is generic and has countless applications. The transmissions will have uses for pointing and precision positioning of various payloads for industry and the military. Applications of reliable, low-cost, and low-maintenance precision positioners are expected in the medical, electronics, marine, mobile satellite communications, and aerospace industries.

Yardney Technical Products, Inc. Low Cost, Lightweight, Rechargeable Lithium-Ion Batteries. Fast Track. Yardney has developed the battery using the prismatic cell technology identified in Phase I of the project and plans to deliver a prototype to its sponsoring agency. The battery has a 25 percent improvement in capacity compared to the battery that the military now uses and would represent a major jump in performance for the DoD uses for the particular style of battery. The market for the lithium-ion battery has grown rapidly from nothing in 1990 to current sales of $1.2 billion. Currently, the market is growing at 30 percent a year, and there is much opportunity for new technologies. The technology will be useful to other governments; with approval, sales to armies of U.S. allies are expected. Nonmilitary commercial applications are expected as well.

COMPANIES’ EXPECTATIONS FOR SBIR PROJECTS AND REASONS THAT SBIR SUPPORT WAS NEEDED

As Table 4 shows, the SBIR awards made possible research that otherwise would not have been undertaken or would have been done on a smaller

Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×

TABLE 4 The SBIR Award and the Company’s Strategy (The number of respondents indicates the total for the category)

Impact of SBIR Award

Fast Track

Non-Fast Track

Expected an increase in company size (sales or employment) or more diversified product line

6

7

Would the company have undertaken the research without the SBIR award?

 

No

5

6

On a lesser scale

1

1

Yes

0

0

scale at a slower pace. The awards are expected to expand the businesses of the SBIR winners.

In answer to the question of whether the company would have undertaken the research without the SBIR award, representative comments included the following ones paraphrased from the interviews.

No. To support our Phase I project, we tried to find support from other companies and venture capitalists. The venture capitalists want too high a rate of return and want returns too quickly. Joint ventures don’t work either. You need their money, so they want lots of rights. You must sell your soul to them. These partner companies are providing capital basically and sometimes distribution networks.

No. Working on a particular DoD program enabled us to do further work on our technology and gain insight into commercialization. The SBIR project is an incubation period of sorts to new start-up companies with new technology, an innovative way of approaching a problem. After the SBIR project, the development work that remains is a reorientation of the technology, looking at how to manufacture and commercialize for nonmilitary applications, to come up with a low-cost way to mass produce for less sophisticated requirements. But at the outset, the SBIR award is the lifeblood of new entrepreneurial ventures when new technology is to be advanced. We came up with something worthwhile for DoD, but we also advanced our own technology to another level without going crazy looking for outside investors. The lessons learned in the SBIR project provide the database that allows us to extrapolate intelligently and succeed in nonmilitary, commercial applications of our technology.

We would have devoted some resources to the project, but it is questionable whether we would have gotten this far. We would have sought assistance from other companies and from universities. We would have proceeded on a smaller scale and sought a partner down the road.

Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×

No. There is no guarantee that such high-risk research will pan out. And the SBIR program understands that, and it therefore requires not necessarily a commercial product, but instead a good effort. It understands that in many cases the value will be to prove the technological approach taken is not the right path. So the [funding agency within DoD] will not go down that path again. In fact, in the case of our award, [the funding agency] gave two awards. So, it spends $1.5 million on two projects running parallel, and the probability of at least one success is increased. We’ll have a cookoff . . . with the other company to see which box is the better one to go with.

Probably not. We have no means of acquiring capital except through loans or from investors. But being honest with them, we could not raise the necessary funds—at least not at the outset of the SBIR projects. DoD does not select its highest priority acquisition projects to develop through the SBIR program. Instead, it uses projects that are interesting and have great potential value and the possibility for acquisition. But they are lower priority, high-risk projects. It is difficult to attract outside investment for such projects. These are projects for which we could not show an outside investor definite acquisition plans. If we could, DoD would not use the SBIR program to fund the projects. The SBIR projects are ones for which the acquisition plans are fuzzy.

No. We would not have done the project without the SBIR award. We devote about 6 percent of our income to research. This would not have been a project to get those funds. Without SBIR help, our research would have been more near-term and less challenging.

Table 5 shows the reasons why the SBIR funding was needed. The projects entailed substantial technical and market risks, and the projects required substantial amounts of capital from the perspective of the small businesses doing the research. Clearly, many respondents are concerned about the possibilities for opportunistic behavior by sources of external financing in the early stages of the research that the SBIR program funds. On the other hand, once the small business can finance its early-stage research and has moved beyond the initial research and development (R&D) stage, the company is, on the whole, comfortable with the degree to which it can protect its property rights. Whether from patent protection or from carefully negotiated licensing agreements, despite the fact that the firms typically do not anticipate capturing all of the profits that their research will create, they do expect to capture a sufficient amount of those profits to make their investments worthwhile. Table 5 focuses on the reasons that the companies would not have been able to carry out the research without public funding. Although of course the SBIR program is not expected to change the technical risk or opportunistic behavior, as explained later, it does increase the private expected rate of return above the private hurdle rate. With public funding, despite the risks, the firm will undertake the research.

In addition to their comments accompanying Table 4, respondents offered further insights about their needs for SBIR funding when discussing the list of

Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×

TABLE 5 Reasons SBIR Funding Was Needed: Why the Company Would not Have Done the Research, or Would Have Delayed the Research, or Would Have Done It on a Lesser Scale, Without SBIR Funding

Reasona

Number of Respondents Indicating the Reason

Rank-Weighted Scoreb

Fast Track Companies

1. High technical risk

6

43

2. High capital costs

5

35

3. Long time to market

4

27

4. Spillovers to multiple markets

1

1.5

5. Uses technologies in different industries

2

9

6. Property rights

2

8

7. Compatibility and interoperability

1

4.5

8. Opportunistic behavior

2

11

Non-Fast Track Companies

1. High technical risk

3

23

2. High capital costs

5

35.5

3. Long time to market

4

28.5

4. Spillovers to multiple markets

0

0

5. Uses technologies in different industries

1

7

6. Property rights

2

9

7. Compatibility and interoperability

1

3

8. Opportunistic behavior

4

22

aDetailed descriptions for the reasons: (1) High technical risk associated with the underlying research, (2) high capital costs to undertake the underlying research, (3) long time to complete the research and commercialize the resulting technology, (4) underlying research spills over to multiple markets and is not appropriable, (5) market success of the technology depends on technologies in different industries, (6) property rights cannot be assigned to the underlying research, (7) resulting technology must be compatible and interoperable with other technologies, (8) high risk of opportunistic behavior when sharing information about the technology. Reasons are based on Tassey (1997) and Link and Scott (1998).

bIf a respondent ranks a reason first, that counts for 8 points, second implies 7 points, and so on down to eighth which would count 1 point. However, if a respondent ranks, say, only three reasons, then only those three reasons would receive any rank-weighted score—they would receive 8, 7, and 6 points, respectively, while all other reasons would receive 0 points. Thus, if 10 respondents ranked the first reason most important, and 2 ranked it second, and 1 respondent ranked it fourth, the rank-weighted score for the first reason would be (8 × 10) + (7 × 2) + (5 × 1) = 99. Ties split evenly the points assigned for the number of tied reasons. For example, if two reasons tied for first for a respondent, then each would receive scores of 7.5. Finally, note that the rank-weighted scores for the sample of six Fast Track companies should be multiplied by 7/6 to make them comparable with the rank-weighted scores from the sample of seven non-Fast Track companies.

Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×

reasons in Table 5. For example, the difficulties faced by small businesses when raising funds from large corporations or venture capitalists are reflected in the following comments that were made when discussing opportunistic behavior.

In one of our earlier SBIR projects, after we had used Phase I for risk reduction we became convinced that the technology would work, but then only after we had a patent were we willing to approach the large companies for a partnership. A small business needs to have a patent in hand in our area of technology. The big companies, in our area, will say: “We do not sign nondisclosure agreements with small companies.”

The eighth reason, opportunistic behavior is also important. It is what kills Fast Tracks. The outside partner wants to claim rights to the technology. That is what killed our Fast Track. It did not fly because our partner wanted more complete rights. The outside partner would provide one-third of the money but wanted over one-half of the rights.

The second of the two comments is different from the first. The first comment reflects the concern that the outsider will steal the small business’s intellectual property and use it for its own purposes. The second comment reflects the fact that because the SBIR projects are high-risk projects, outside investors demand very high expected rates of return. Many comments like the second comment were made when the interviews turned explicitly to discussion of outside finance, and those comments are reported later.

THE COMPANIES’ PLANS FOR FUTURE SBIR PROPOSALS

Because of the barriers to complete private funding of small business innovation research that are emphasized in Table 5, all of the small businesses plan to apply for SBIR awards in the future to support additional high-risk research. Table 6 shows that fact and also notes the range of responses to the question of whether previous awards were important for winning the current award. There are two issues here. One is a substantive issue of whether the technology pursued in the present award has evolved from technology developed in previous awards. For some firms, past awards were not directly relevant to the present one, but for others the current award was for further development of technology developed with earlier SBIR awards. A second issue is a procedural one: Would the fact that SBIR awards were won previously have affected the chances, ceteris paribus, for winning the current award? There was no general perception among many of the respondents that their chances were affected one way or the other by having won previous awards, apart from the substantive benefits when the technologies were linked and evolving sequentially through time as new SBIR projects were begun. However, a couple of respondents expressed views that previous awards sometimes can reduce a company’s chances for winning subsequent awards.

Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×

TABLE 6 Plans for SBIR Awards (The number of respondents indicates the number in the category)

 

Fast Track

Non-Fast Track

Previous awards were important for winning current award

 

Yes

0

2 (reduced chances)

 

3 (increased chances)

No

1

1

Planning applications for SBIR awards in future

 

Yes

6

7

No

0

0

Responses about the impact of earlier awards include the following comments illustrating views about positive and negative effects.

Yes. Previous success is a very, very negative factor. Managers of the SBIR program at the highest levels are frustrated by what they perceive as the lack of “success” stories from their program. They have difficulty accepting that their definition of success (commercialization of products from an SBIR program) is an extremely unlikely outcome given the structure of the SBIR program. Thus, there is a built-in bias to award Phase IIs to small companies who already have in place commercial successes not supported by the SBIR program and for which they can take credit. These companies are very rare because they normally do not participate in the SBIR program.

With the Fast Track Program, there is a two-tier standard favoring firms new to the SBIR program, with 25 percent cost-sharing for a new company and 100 percent cost-sharing for companies like us.

Previous awards helped us; we learned what the funding agencies’ needs were. We learned that to have a successful proposal, we need to understand what is wanted by the agency. Previous SBIR awards helped us learn how to have a successful proposal.

Responses to the question about future applications for SBIR awards (Do you anticipate applying for SBIR awards in the future? Why?) include the following and reflect the reasons that innovative small businesses are enthusiastic about the SBIR program..

Yes. Although the developments for the military from the SBIR awards will not be directly applicable for nonmilitary, commercial products, indirectly the non-military technology is being advanced. While coming up with something worthwhile for DoD, we also advance our own nonmilitary commercial technology to a higher level without going crazy looking for outside investors. The lessons learned in these SBIR projects provide the data base that allows us to extrapolate intelligently. The SBIR program makes it possible for us to learn and develop our technology. The program is fantastic for young vibrant entrepreneurs.

Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×

Yes. It’s the only way to keep the lights on, given the high risk and high capital costs for the research we are doing as we try to get into a different technology. Our existing line of business generates very little revenue and we cannot fund R&D ourselves. For the type of research we are doing, neither venture capitalists nor large companies will work as sources of outside funding. Both the venture capitalists and the large companies want too high a rate of return—too many rights to the future returns relative to the investment they would make in our company.

Yes, because we have created an efficient infrastructure to generate prototypes in response to requests for Phase I and Phase II proposals.

Yes. The SBIR program is the way to get funds for truly innovative high-risk small business projects that cannot effectively be financed by outside private funds, given the opportunistic behavior by companies or lack of understanding of the technology by venture capitalists.

Yes. We like the challenge and broad scope of the topics.

Yes. Our DoD customers have identified several areas where our technology can be developed further and applied to their needs.

Had it not been for this Phase I, neither we nor the [sponsoring agency] would have been at this stage. We believe we can make similar breakthroughs with future SBIR awards.

Yes. The SBIR awards help us research new technologies, given technical risk and the risk of opportunistic behavior by large companies if we go to them with our ideas before they are developed.

Yes. SBIR awards let us accept the risk of good projects.

Yes. The SBIR program has been very successful for us. It has allowed us to develop a product line for eventual commercialization and growth of our company. The new product line will be more profitable than our existing product lines. We understand the SBIR program is a start-up program, not intended to be used over and over. But it allows us to do high-risk research with commercial potential and to expand our business into new product lines.

THE COMPANIES’ COMMERCIALIZATION PLANS

Table 7 shows the ranges of responses about commercialization plans across the projects. Also shown is the range of responses regarding the use of patents and scientific papers that help to disseminate technology as well as protect rights to intellectual property. The patents, of course, can help to create and protect intellectual property rights, while the papers disseminate information and may even bolster the effectiveness of patent rights by making ancillary nonpatented materials common knowledge that cannot be the basis for competing patents. Finally, discussion revealed that the respondents see their SBIR-funded research in a different light from their other technologies with commercial potential. On the whole, the projects are different, entailing more technical and market risk, and they are not generally the sort of research projects that the companies would have pursued without SBIR support. Not surprisingly, then, the respondents report that commercialization plans are different than what would have been the case without SBIR support. On the other hand, given that the SBIR project has proven the commercial potential for what was an extraordinarily risky project at the start of Phase I, the firms often report that with the commercial potential now established, the commercialization plans look very much as they would for any project that had reached the stage of making prototypes and gearing up for production. Nonetheless, it is also true that in many cases the respondents are in the position of needing a “Phase III” to provide the bridge from highly promising technology with great commercial potential to successful development of the manufacturing technology and the final product for the market.

Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×

TABLE 7 Commercialization Plans (The number of projects for the indicated category)

Plan

Fast Track (6 projects for 6 firms)

Non-Fast Track (8 projects for 7 firms)

Expected time until commercialization

 

≤ 1 year

4

4

> 1 year and ≤ 2 years

1

2

> 2 years and ≤ 3 years

1

0

> 3 years and ≤ 4 years

0

1

> 4 years and ≤ 5 years

0

1

> 5 years

0

0

Anticipating strategic alliances for production

 

No

0

4

Yes

5

4

Uncertain

1

0

Patents

 

Yes or expected soon

5

5

No

1

3

Scientific papers

 

Yes

4

1

No

2

7

and scientific papers that help to disseminate technology as well as protect rights to intellectual property. The patents, of course, can help to create and protect intellectual property rights, while the papers disseminate information and may even bolster the effectiveness of patent rights by making ancillary nonpatented materials common knowledge that cannot be the basis for competing patents. Finally, discussion revealed that the respondents see their SBIR-funded research in a different light from their other technologies with commercial potential. On the whole, the projects are different, entailing more technical and market risk, and they are not generally the sort of research projects that the companies would have pursued without SBIR support. Not surprisingly, then, the respondents report that commercialization plans are different than what would have been the case without SBIR support. On the other hand, given that the SBIR project has proven the commercial potential for what was an extraordinarily risky project at the start of Phase I, the firms often report that with the commercial potential now established, the commercialization plans look very much as they would for any project that had reached the stage of making prototypes and gearing up for production. Nonetheless, it is also true that in many cases the respondents are in the position of needing a “Phase III” to provide the bridge from highly promising technology with great commercial potential to successful development of the manufacturing technology and the final product for the market.

Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×

Of course, as seen in Table 4, without the SBIR program, the research projects typically would not have been as close to commercial results, because the projects would not have been undertaken or would have proceeded in a different way. However, here the respondents commented further not only about the delay that might have resulted, but also about the remaining difficulties that they faced as they looked for financial support for additional periods of development before commercializing their technology.

Respondents’ comments here about the impact of the SBIR award on commercialization plans included the following.

I was an academic. I never, never would have done this commercialization research without the SBIR program. The SBIR program spawned a development that would not have happened in the same time frame, and the development will result in commercialization.

We never would have gotten this far; we would not have taken the $100K look [in Phase I]. We would have put this project aside to work on something else. The SBIR award allowed us to take a six-month look at a promising idea. We got some good results, and we can now justify a million dollar investment ourselves.

Without the SBIR program, we would have, at a slower pace, tried to bring the technology along so far, to a point, and then we would have tried to generate interest to bring in a partner. But without the SBIR award, we would not have been so far along.

The SBIR program let us develop our own technology while we created something worthwhile for DoD. We will be able to use the understanding and data we developed in significant ways to further our commercial, nonmilitary technology.

We would not have done the project without SBIR, but if we had done the project, our commercial plans would be the same.

The SBIR program put us in a position to develop this new product.

Assuming that we could have gotten to this point without SBIR, our commercialization plans would have been the same. But we could not have gotten to this point without SBIR. The technology was too unproven. The SBIR program was willing to take the risk when alternative sources of investment funding were not available.

COMPANIES’ PERCEPTIONS OF THE RELATIONSHIP BETWEEN THE SBIR AWARD AND PRIVATE THIRD-PARTY FINANCING

Table 8 shows that the Fast Track program does address what most respondents see as a difficult period for SBIR projects—namely, the gap between Phase I and Phase II funding. Both Fast Track and non-Fast Track respondents emphasize the difficulties created by the gap: Employees must be paid and the project

Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×

TABLE 8 Financing and External Partners (The number of respondents indicating the category.)

 

Fast Track

Non-Fast Track

Expressed difficulties bridging a gap in time between Phase I and Phase II

 

Yes

0

4

No opinion expressed

6

3

Did the SBIR award facilitate the attraction of outside investors?

 

Yes

4

1

No

1

6

No opinion expressed

1

0

kept afloat and progressing from the Phase I stage; yet many small businesses, for the reasons discussed above, find it very difficult to acquire financing while waiting for a Phase II award. The effectiveness of the Fast Track program in this regard is clear from Table 8, because the Fast Track winners did not report “gap” difficulties on their Fast Track projects. Table 8 also shows that winning an SBIR award (for our sample of projects that all won Phase II awards) facilitated the attraction of outside financing to further commercialize the technology developed under the SBIR project, in the perceptions of most Fast Track respondents. With one exception, the non-Fast Track respondents did not find that the SBIR award helped them to secure outside funds. This reflects the difference in prospects for commercialization early in the SBIR-funded research of Fast Track projects as compared with non-Fast Track projects.

Comments of the respondents about the financing issues and their relationship to the SBIR award included the following.

One Fast Track respondent reported: During Phase I, there was full funding by the government, but beyond that we have had one-to-one matching. Although we did not use the SBIR award as a marketing tool to attract outside funding, when we went to an investor, the award was part of the whole package. The matching funds to go with the outside investor’s funds were there, so yes, that helped.

Another Fast Track respondent said: Yes, the SBIR award was used as leverage, as a marketing tool. That is when it is most helpful. Having the SBIR Fast Track award and the financing that it helped attract served as a bridge between Phase I and Phase II; the gap between Phase I and Phase II was eliminated.

A non-Fast Track respondent observed: There was an eight-month delay [between Phase I and Phase II]. This allowed our competitors . . . to take our work and get a head start on improvements. This left us in a difficult position when Phase II was eventually awarded.

Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×

The same non-Fast Track respondent said: Personal friends seem the best source of outside financing for us. The SBIR award is not a useful marketing tool because most investors do not wish to have copies of proposals, Phase I final reports and Phase II progress reports wandering over the desks of unknown reviewers. Some agencies use outside reviewers who take the best ideas and have their graduate students pursue them. This practice is not supposed to happen, but is the rule rather than the exception.

Another non-Fast Track respondent said: After Phase I ends, you have trained people and your staff is waiting around. You are holding your breath until Phase II begins and the needed funds are available.

Another non-Fast Track respondent commented about the gap between Phase I and Phase II in this way: Considering the public’s $750,000 investment, the rights demanded are acceptable; the processing takes a little longer than it should; by the time reports are submitted for Phase I, four months go by. That gap is not a problem for a large corporation, but for us a gap that lasts well over a quarter, and probably six months in the end, is a problem. But overall the process works well.

Another non-Fast Track respondent stated: We used internal funds only. We did not consider using Fast Track. That would have required an outside investor. But the project is a high-risk project and DoD ’ s acquisition plans are not yet clear. It is highly unlikely that we could get the outside investors required for Fast Track. At the end of Phase II, it would be possible to get outside investors, but not at any time prior to that and not even now. Fast Track is a good idea in theory, but in execution there is a problem. At the end of Phase I, a company typically has just a concept. Later when there is a prototype, then you can do something with outside investors.

Another non-Fast Track respondent said: In a small business setting, we are wrapped up in technological issues and production issues and decisions about how to market our product. It would not be productive to get into the specialized activity of fundraising, given the circumstances. There must be somebody willing to put money into the project. Plenty of people will give lip service to the idea and take your time. But the probability of actually getting the money is less than 5 percent. To spend 80 percent of the time for the 5 percent chance of financial support is not a good use of our time.

COMPANIES’ VIEWS ABOUT ADMINISTRATION OF THE SBIR PROGRAM

The respondents report that they are highly satisfied with the SBIR program; they are overwhelmingly positive in their overall impressions of the program, as shown in Table 9. The responding companies believe that the SBIR program made it possible for them to do significant research that they otherwise would have been unable to do. They clearly believe that the research has furthered not only their company’s strategy but the mission of the sponsoring DoD agency as well.

Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×

TABLE 9 SBIR Program Administration: Overall Impressions (The number of respondents indicating the category.)

Impression

Fast Track

Non-Fast Track

Favorable

6

7

Unfavorable

0

0

Nonetheless, the companies offered many suggestions for improving the SBIR program. The suggestions for improvement and the general concerns that were expressed include the following from the Fast Track companies.

I have no recommendations to improve the program itself, but one recommendation could be made based on the success of my company. I did the technical work, but I brought in others to do the accounting and business administration. The SBIR program could promulgate information about how to proceed: Small business principals should recognize their strengths and weaknesses, and they should bring someone in to do the administrative work rather than having the scientist have to do it all. The SBIR program could encourage small businesses to bring in outside expertise to ensure competence in business administration to go along with the competence in the scientific work.

I want to promote the SBIR concept. It provides a wonderful opportunity for us to develop our own technology and at the same time do something worthwhile for DoD. SBIRs are the lifeblood of new entrepreneurial ventures when new technology is to be advanced. We are all appreciative and thankful and grateful that there is this highway that allows us the opportunity to develop our technologies. However, one must remember that there is a dichotomy between requirements of the armed forces and requirements of nonmilitary commercialization. Typically, there is very little direct overlap. The military development will often have very costly requirements for high precision, and the results will not often be directly applicable for nonmilitary commercial use, although indirectly the nonmilitary technology is being advanced. One sees a correlation from the program itself into a commercial project, but the commercial project typically will not need to be as sophisticated, as accurate, as costly. It won’t need the special materials. One cannot take the thing developed for military use and say it is a commercial product. And, if there are no direct commercialization results, one cannot say the SBIR project failed to pay off. The merits of the SBIR program should not be defined and based on commercialization. There is a gray area here. There may ultimately be commercial products that might not be obvious. The procedure and testing and designing for DoD is a bulwark for the work that follows in the nonmilitary commercial market, work that follows in nonobvious ways. When and where the experience pays off commercially is not always clear.

The SBIR award did not really help us find our outside financing. We have a sister company that uses the same venture capitalist as the one we have brought

Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×

into the project, and the coincidence of the venture capitalist interests in the sister company and the research we are pursing allowed us to attract the third-party investment. So we were lucky getting the Fast Track designation and priority for a Phase II award. The company with equally good research prospects but no luck finding a financial partner will have lower priority. Why should we have priority just because we were lucky finding a partner for third-party investment. The advantage of a Fast Track is that it almost guarantees that you get a Phase II award. Getting a leg up on Phase II is very attractive to us. But there is a problem here if worthwhile projects get low priority because they are either unlucky in seeking outside funding or because they entail research that is not at a stage allowing the small business to attract third-party funds.

I like the SBIR program. It’s easy to use. You get early warning on the web. It works. The problems are in the implementation, not the program itself. Some RFPs are so detailed, they are clearly written for one firm. Some RFPs no one can understand. Some are simply silly, asking for something that is not doable. But, overall, there is no real problem with the SBIR program. It works well.

Fast track is a great innovation. One of the lessons, I think, can be discovered by looking at the solicitations. Projects solicited will include at times requests for work on a very specialized technology that already is in existence and for which an upgrade is solicited. I’m not sure why an upgrade should be needed in many of these cases, but in any case why does such a thing appear under the SBIR program? It looks as if the DoD is using SBIR to get little companies to handle what used to be done with routine R&D and procurement at big companies. Now those companies are out of the defense-related business and their former employees are in little companies. It looks like the DoD program solicitation is designed to get the little companies to do what used to be done with DoD procurement. The little companies are perhaps easier to drive a good bargain with, but such projects are not an appropriate use of the SBIR pool of dollars. Fast Track is a great innovation because it takes money out of that pot and puts it into truly innovative small business projects with a high chance of commercialization. The money should be going to finding people with great ideas; lots will crash and burn, but the technology goes into our U.S. technology data bank, and that’s where our good jobs come from. Fast Track makes good scientific industrial policy based on innovation and technology. It can find the truly innovative projects. The success here comes from experts reviewing proposals for DoD and making judgments better than cigar-chomping venture capitalists who know nothing about technology. Fast Track takes money out of the general pot of dollars and gets it away from procurement and to truly innovative people. Fast Track helps the SBIR program work as it should.

It is not clear how to structure the Fast Track partnerships so that they fly. A third party is dumping in hundreds of thousands of dollars, and the partnership includes that third party, the government, and us. It becomes very difficult to negotiate the deal. One suggestion might be for the SBIR program to incorporate a Phase III focused on manufacturing technology. When Phase II is successfully completed, there is an interesting product. But it is then up to us to get

Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×

the money for equipment. A Phase III for developing manufacturing technology, for ramping up for production, might be quite helpful given the difficulties negotiating the third-party investments.

The prospects for commercialization could be improved if the SBIR program provided funding for a Mentor/Consultant as a part of Phase II. The SBIR firm would identify in the Phase II proposal a large corporation or marketing consulting firm that would work with the SBIR firm during Phase II and provide expertise about commercializing the technology. The small firm knows the technology, but the larger firm would act as a mentor during Phase II and would be able to help the small firm understand how to market the technology. The big company with the marketing channels and capabilities needed would look at the small company’s innovative device and advise it on how to proceed. It would watch the small company and see what was going on and make recommendations and guide the small company, so that at the end of Phase II the small company is not left wondering what to do next. The funding for the Mentor/Consultant need not be an overly large amount. A cross section of the mentoring company would be needed. Someone from marketing, someone from engineering, someone from administration, finance, and management. Three or four people, maybe 100 hours each, to oversee and mentor the small company so that at the end of Phase II they have a direction and a good feel for the market potential and what to do. The SBIR program is now open ended; it is not realizing the fruits of what the program’s projects are developing. Providing the opportunity of mentoring from and consulting with a large corporation could improve the prospects for commercialization of SBIR results.

The critical comments from the non-Fast Track respondents were as follows but, again, these are all comments made in the context of an overwhelmingly favorable impression of the SBIR program. The respondents were simply offering these thoughts as ideas that might be used to make a fine program even better.

We participated in earlier versions of the SBIR program. Fast Track is not useful for us. If we had technology in house during the first few weeks of the Phase I (which we never do), we would not go through the SBIR system at all.

The SBIR program is administered at the top by hard-working and well-meaning people who are really trying to improve our national technology base. As a suggestion, they might rethink how to best go about this task. We need improvements in certain key technology areas and there is widespread agreement as to which areas. However, we do not need uncoordinated Army, Navy, Air Force, DoE, NSF, and NIH SBIR programs, each trying to achieve the same broad goals. These key technology need areas should be assigned a lead agency that should fund all proposals in this area.

Of the 25 pages in the application, only about 5 are needed for technical evaluation. The other 20 could be filed separately, electronically, and be used only in the event the application is being considered for award. This would greatly reduce the complexity of the application process.

Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×

The original concept of Phase I followed by Phase II, and then Phase II leading to commercialization is probably flawed. I would recommend revising that concept. The SBIR program could help to complete the process of commercialization. From a successful Phase II project, the SBIR project could go to a stage where the Phase II success is developed further. The SBIR program could support such a bridge to commercialization. The SBIR program now is aimed at establishing technical feasibility, not commercial feasibility. A stage subsequent to Phase II, with government and the company sharing the costs of continuing development work, would be a good policy. Note that it is such sharing of cost for development work that the ATP projects entail. If big companies feel the government needs to help them with such projects, then small businesses need such support too. The Fast Track program is flawed because the end of Phase I is too soon to be ready to establish commercial potential. Fast Track will drive things more toward implementation rather than toward research. Such projects in themselves are fine as long as there is a limit on the amount of the SBIR program that goes to support that sort of effort. I would recommend setting a limited percentage of the SBIR funds that could go to Fast Track projects.

One of the biggest problems we have faced is that our program managers are not able to travel to us because of a lack of funding. Along with the funding, include 30K to 50K for the project monitor to do his job with the specific program for which he is the project manager. It would be easier to interact with the DoD manager if the manager could travel to our location. Also, we can spend the funds for Phase II in two years, but to physically accomplish all of our goals takes time. It would help if there were the latitude to make the Phase II projects three or four years in length rather than just two years.

We thought about Fast Track, but it was not right for us. It was too soon in our research to go to outside investors. We’re too inexperienced for Fast Track. To use Fast Track, a company must be in a position to negotiate. Then there is a substantial cost for lawyers.

I recommend that the SBIR program ensure that the technical monitor is involved in the project. When the technical monitor is involved, things go much better than when the technical monitor is not involved.

There is a conceptual problem with Fast Track. The typical SBIR project will not be to the point by the end of Phase I to allow a commitment from an outside investor. Rarely would a venture capitalist think of funding a project unless the research is already done. Such research gets done during Phase II.

Overall the program works very well; things move fairly smoothly.

We did not consider using Fast Track. That would have required an outside investor. But the project is a high-risk project and DoD ’s acquisition plans are not yet clear. It is highly unlikely that we could get the outside investors required for Fast Track. At the end of Phase II, it would be possible to get outside investors, but not at any time prior to that and not even now. Fast Track is a good idea in theory, but in execution there is a problem. At the end of Phase I, a company typically has just a concept. Later, when there is a prototype, then you can do something with outside investors.

Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
ESTIMATION OF LOWER-BOUND SOCIAL RATES OF RETURN FOR THE SBIR PROJECTS

The data gathered during the interview with the 13 respondents allowed estimation of the private and social rates of return for the 14 projects discussed. The procedure is explained in much greater detail by Link and Scott (1998, 1999). Here, let me simply emphasize that these are prospective expected rates of return, even though the estimates of the investment costs are gathered subsequent to the beginning of Phase I (and arguably reflect what would have been the rational expectations for the costs when the project began). That is, the expected rates of return are, by the logic of the approach used to calculate them, estimations of the expectation of the rates of return at the time that Phase I began. At that time the SBIR projects were extraordinarily risky; they had upside potential, but also extraordinary downside risk. That is not only because the projects had great technical risks, and not only because of the market risk—even DoD procurement plans are not clear at the beginning of a Phase I SBIR project, but also because of the issues that make it difficult for small businesses to finance innovative investment. Impacted information, moral hazard, potential for opportunistic behavior on both sides of the financial transaction —all combine to result in a market failure. Indeed, we expect an incomplete market here.

The expected rate of return required by the potential outside investor exceeds the rate that the small business is willing to promise for the project and, as a result, the small businesses in our samples would not have proceeded with their innovative investments without the support of the SBIR program. Regarding the difficulties of raising outside financial capital, the respondents made the following observations.

We would not agree to sell our souls to the venture capitalists or a large company.

. . . the project is a high-risk project and DoD’s acquisition plans are not yet clear. It is highly unlikely that we could get the outside investors required for Fast Track.

We would not agree to an arrangement where we would lose control of our company and our intellectual property.

The outside investors wanted half of the rights to profits in return for providing one-third of the financing.

For the type of high-risk research funded by the SBIR program, a small company cannot go to the large companies with an interest in the projects because in our area of technology the large companies will not sign nondisclosure agreements with small companies. Only after the technical risk has been reduced and a prototype and a patent are in hand would the small company have the ability to negotiate a partnership.

We came up with something worthwhile for DoD, but we also advanced our

Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×

own technology to another level without going crazy looking for outside investors.

There must be somebody willing to put money into the project. Plenty of people will give lip service to the idea and take your time. But the probability of actually getting the money is less than 5 percent. To spend 80 percent of the time for the 5 percent chance of financial support is not a good use of our time.

. . ., to support our Phase I project, we tried to find support from other companies and venture capitalists. The venture capitalists want too high a rate of return and want returns too quickly. Joint ventures don’t work either. You need their money, so they want lots of rights. You must sell your soul to them. These partner companies are providing capital basically, and sometimes distribution networks.

We cannot use large companies or venture capitalists to fund our research. We protect our intellectual property with trade secrets rather than patents. We must stay out of the grips of the venture capitalists in order to protect our intellectual property.

Thus, at the outset of the SBIR project, the required rate of return for outside financing is not met. Had the expected rate of return exceeded the rate of return required to secure outside financing, the deal for outside financing could have been struck. However, uniformly, the respondents explain that, at the outset of the SBIR, such funding could not be obtained. The SBIR award allows the SBIR project to proceed and ensures that socially valuable research is not lost because of imperfect financial markets, incomplete appropriability, and substantial downside risk. The required rate of return for the outside investors is simply not expected at the outset of the project. Now, as Phase II draws to an end for the sampled projects, upward of a million dollars or much more has been spent to resolve uncertainties —technical and market uncertainties and also uncertainties about the small business doing the research. Now, after Phase I and Phase II, the logic of our construction of the expected cash flows below would not necessarily hold. We have estimated prospective rates of return at the outset of Phase I, and these show the market failure and show the reason for the SBIR awards. Without the SBIR funding, socially valuable research would not be undertaken because the required rate of return for outside private investors could not be expected to be achieved, and the small business would not have been able to finance the research itself.

The calculation of the lower bound for the social rates of return uses the information summarized in Table 10; the information was developed from the interviews that were conducted with the SBIR award winners. Some of the information is also available in the DoD files; however, the information was verified with the respondents and updated to reflect any changes from the DoD files. Variables for duration, total costs, and SBIR funding were combined into one figure for both Phase I and Phase II of the project. Typically, there is an extra period of development after Phase II is completed and during which further work with prototypes and initial production lines is done. The length of that additional development period and the extra costs that the company would incur were obtained in the interviews.

Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×

TABLE 10 Definition of Variables for Determining the Prospective Expected Social Rate of Return

Variable

Definition

d

Duration of the SBIR project in years

C

Total cost of the SBIR project

A

SBIR funding

r

Private hurdle rate

z

Duration of the extra period of development beyond Phase II in years

F

Additional cost for the extra period of development

T

Life of the commercialized technology in years

L

Lower bound for average expected annual private return to investing firms

U

Upper bound for average expected annual private return to investing firms

v

Proportion of value appropriated

period of development after Phase II is completed and during which further work with prototypes and initial production lines is done. The length of that additional development period and the extra costs that the company would incur were obtained in the interviews.

Companies cannot expect to appropriate all of the value created by their innovations. First, the innovations will generate consumer surplus that no firm will appropriate, but that society will value. Our estimates of the social rate of return are conservative because we do not attempt to estimate the value of consumer surplus generated by the SBIR projects. Second, some of the profits generated by the innovations will be captured by firms other than the innovators. Larger companies, for example, will observe the innovation and some will successfully imitate it and produce the commercial product in competition with the small business innovator. Respondents were asked to estimate the proportion of the returns generated by their anticipated innovation that they expected to capture. Then, in an extended conversation, other possible applications of the technology developed during the SBIR project were explored. The respondent was then asked to estimate the multiplier to get from the profit stream generated by the immediate applications of the SBIR project’s technology to the stream of profits generated in the broader applications’ markets that could reasonably be anticipated. Finally, the responding company estimated the proportion of the returns in those broader markets that it anticipated capturing. From the discussion, we were then able to estimate the proportion of value appropriated by the innovating SBIR award winner.

The lower bound L for the average annual private return is found by solving Eq. (1) for L, because that will be the value for L such that the private firm just barely earns the hurdle, or required, rate of return on the portion of the total investment that the private firm must finance. The firm would not invest in the SBIR project unless it expected at least L for the average annual private return.

Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×

(1)

To find the upper bound U for the average annual private return, solve Eq. (2) for U, because any expected annual return greater than U would imply that the rate of return expected by the private firm would be more than its hurdle rate in the absence of SBIR funding, and therefore SBIR funding would not be required for the project.

(2)

Our estimate of the average expected annual private return to the firm is (L + U)/2. The average expected annual private return to the firm equals v times the average expected annual return that will be captured by all producers using the technology (producer surplus). Knowing the average expected annual private return is (L + U)/2 and knowing the portion of producer surplus that is appropriable, v, then we find that the total producer surplus equals (L + U)/2v and hence this value is a lower bound for the average expected annual social return. It is a lower bound because consumer surplus has not been measured.

The private expected rate of return without SBIR funding would be the solution to i in Eq. (3):

(3)

The lower bound on the social rate of return is found by solving Eq. (4) for i:

(4)

Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×

The private expected rate of return with SBIR funding would be the solution to i in Eq. (5):

(5)

Table 11 provides the various prospective expected rates of return for the New England projects as a group and for the Fast Track and the non-Fast Track projects. Table 12, Table 13, and Table 14 provide the summary statistics for the data.

It seems clear that the Fast Track cases are much different from the non-Fast Track cases. Although they begin with a Phase I where a small business needs outside support, they exhibit sufficient commercial potential to attract outside funding quickly, and as a result these are likely to be projects that, relative to non-Fast Track projects, have higher lower bounds for social rates of return (recall that the social rates of return measure only producer, not consumer, surplus). Furthermore, because there will be more of the project investment cost paid by private funds, the private rates of return given SBIR support will be lower for the Fast Track projects.

CONCLUSIONS

In all, the collection of 14 New England SBIR projects studied here exhibited high risk at the outset of Phase I—both technical and market risk, high capital costs, and often a long expected time before commercialization of the resulting technology. Comments suggest fairly substantial appropriability problems for some projects, even within the narrower applications of the technology. Appropriability problems typically are greater when broader potential applications are considered. Uniformly, in the absence of the SBIR funding, the research projects would not have been undertaken in the same way or at the same pace.

TABLE 11 Prospective Expected Rates of Return (ROR) for New England SBIR Projects

Region

Number of Cases

Private ROR Without SBIR (prvnosbr)

Social ROR, lower bound (soclwrbd)

Private ROR with SBIR (prvsbr)

New England

14

0.31

0.60

0.58

Fast Track

6

0.33

0.68

0.53

Non-Fast Track

8

0.30

0.55

0.61

Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×

TABLE 12 Data for New England Observations (Fast Track and Non-Fast Track)

Variable

Obs

Mean

Std. Dev.

Min

Max

d

14

777,857

0.3833893

2.17

3.5

C

14

1,285,053

692,912.4

717,873

3,450,000

A

14

785,715.6

144,072.6

507,873

1,099,966

T

14

16.32143

8.111263

5

30a

z

14

1.535714

1.456442

−0.375b

5

F

14

1,063,929

2,597,688

0

1.00e+07

rc

7

0.3821429

0.1222312

0.2

0.5

v

14

0.3053929

0.1992511

0.025

0.6

L

14

1,009,056

1,185,032

79,185

4,486,450

U

14

2,370,090

2,174,385

413,400

8,666,330

prvnosbr

14

0.31

0.0689481

0.19

0.43

soclwrbd

14

0.605

0.1754445

0.28

0.82

prvsbr

14

0.5757143

0.2172455

0.21

1.03

aOne company responded that T would be several decades, and another reported that T would be forever. In both cases, T was conservatively entered as the value 30 years. However, because the relevant discount rates are so high, the difference between 30 years and “forever” is not significant. In the integrals, the term with T entered negatively as an exponent would become zero, but with a large value of T, the term is very small in any case.

bThis observation has a negative value because commercial returns started before the end of Phase II.

cHalf of the respondents were uncomfortable estimating the private hurdle rate that outside financiers would apply to their projects at their outset. For those, the average value of r was used in the calculations.

TABLE 13 Data for the New England Fast Track Observationsa

Variable

Obs

Mean

Std. Dev.

Min

Max

d

6

2.578333

0.3279888

2.17

3.17

C

6

1,659,609

926,636.1

850,000

3,450,000

A

6

855,436.5

170,450.7

598,700

1,099,966

T

6

18.75

9.585145

7.5

30

z

6

1.208333

0.7486098

0.25

2.5

F

6

500,000

411,096.1

100,000

1,000,000

r

3

0.4

0.0901388

0.325

0.5

v

6

0.2379167

0.1296767

0.1575

0.5

L

6

971,784.8

673,530.7

533,085

2,237,640

U

6

1,962,022

654,443.7

1,125,230

3,036,360

prvnosbr

6

0.3266667

0.0388158

0.3

0.4

soclwrbd

6

0.6783333

0.1553598

0.44

0.82

prvsbr

6

0.53

0.1749286

0.35

0.86

aSee notes to Table 12.

Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×

TABLE 14 Data for the New England Non-Fast Track Observationsa

Variable

Obs

Mean

Std. Dev.

Min

Max

d

8

2.9275

0.3693527

2.5

3.5

C

8

1,004,136

260,581.3

717,873

1,419,895

A

8

733,424.9

102,491.9

507,873

820,000

T

8

14.5

6.907553

5

25

z

8

1.78125

1.838028

−0.375

5

F

8

1,486,875

3,454,596

0

1.00e+07

r

4

0.36875

0.1546165

0.2

0.5

v

8

0.356

0.2342849

0.025

0.6

L

8

1,037,010

1,510,587

79,185

4,486,450

U

8

2,676,142

2,867,886

413,400

8,666,330

prvnosbr

8

0.2975

0.0856488

0.19

0.43

soclwrbd

8

0.55

0.1784857

0.28

0.78

prvsbr

8

0.61

0.2503141

0.21

1.03

aSee the notes to Table 12.

Not surprisingly, then, respondents reported that outside investors, at the outset of Phase I, would have required too high a rate of return to make it possible for the project to proceed with private financing. For example, one respondent reported that the outside investor wanted one-half of the rights to the profits for contributing one-third of the investment cost. Another reported that the outside financiers wanted so much of the company that he would have lost control of the company and ultimately of its intellectual property. Many other comments along those lines are provided in detail earlier in this paper.

The projects on the whole met both the funding agency’s mission and the company’s strategy. All fit the general scenario for socially valuable research projects that would have been underfunded in the absence of the SBIR program. In particular, the projects appear to be ones for which the private rates of return in the absence of SBIR funding would have fallen short of the private hurdle rate required by outside financiers to whom the small businesses would have had to turn for financial support. Yet the social rates of returns to the projects are large and exceed the hurdle rates. The funding from the SBIR program changes the ordering of rates of return anticipated at the outset of Phase I. With the SBIR program providing funds, the expected private return relative to just the private portion of the total project costs is sufficient to move the private rate of return above the hurdle rate, and then the socially valuable research investment is undertaken.

In the foregoing ways, the Fast Track and non-Fast Track projects are essentially similar. Nonetheless, taken as a group the Fast Track projects show higher prospective expected lower-bound social rates of return—just as we would expect, because the measure includes only expected profits to the innovator and

Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×

other producers, rather than including consumer surplus as well. Thus, the Fast Track projects have higher expected private profits, and we expect that to be the case because these are the projects that attracted outside investors at an early stage in the research. Furthermore, the average duration of additional development beyond Phase II is somewhat less for the Fast Track projects, suggesting that at least on average they are somewhat closer to commercialization at the end of Phase II than the non-Fast Track projects.

The respondents and the rate-of-return calculations make clear that although the Fast Track program selects projects that are different from SBIR projects more generally, projects that do not qualify for the Fast Track designation are typically no less deserving of SBIR support, but rather are high-risk projects with potentially great social value that would go unfunded in the absence of the SBIR program. The respondents suggest that, typically, the Fast Track program is simply not useful for companies pursuing socially valuable high-risk research because at the end of Phase I, most such projects do not yet have the characteristics of projects that attract outside private investors.

Finally, two things must be emphasized in conclusion. First, the high social rates of return estimated and reported for the SBIR projects are very conservative, lower-bound estimates because they do not include consumer surplus in the benefit stream. Consider, for example, the non-Fast Track innovation of Materials Technologies that will allow safe, accurate, and efficient diagnostic tests of the wiring in airplanes. The profits that will be generated by the technology are obviously a tiny proper subset of the social benefits that the technology will generate, but the estimation method used measures only the returns in the form of profits to the innovator and to other producers of the technology. Second, some readers will be skeptical about the SBIR award recipients’ earnest belief that without SBIR funding the projects would not have been undertaken or at least would not have been undertaken to the same extent or at the same speed. With the SBIR program in place, certainly the pursuit of SBIR funding would perhaps be a path of least resistance. However, if the research would have occurred without the public funding, the estimated upper bound and hence the average of the upper and lower bounds for expected private returns would be too low, and the actual lower bounds for the social rates of return would be even higher than we have estimated. Further, the gap between the social and private rates of return would remain, although that would not in itself justify public funding of the projects.

To summarize in a concise manner, Table 15 offers a comparison of costs and benefits of Fast Track and non-Fast Track projects over the same time frame.

Other differences between the Fast Track projects and non-Fast Track Projects in the New England comparison groups include the following:

  • A smaller proportion of Fast Track companies have had previous SBIR awards (3 of 6 vs. 6 of 7).

Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×

TABLE 15 Fast Track and Non-Fast Track Projects: New England Comparison Groups

 

Averages for Timeline of Costs and Benefits

Variable

Fast Track

Non-Fast Track

Total SBIR project cost

$1.7 million

$1.0 million

SBIR funding

$0.9 million

$0.7 million

Additional period of development

1.2 years

1.8 years

Costs for additional development

$0.5 million

$1.5 million

Lower bound rate of return to society (including benefits to SBIR firm and its investors and also to other firms)

68%

55%

  • A smaller proportion of Fast Track companies expressed difficulties bridging a gap in time between Phase I and Phase II (0 of 6 vs. 4 of 7).

  • A larger proportion of Fast Track companies said that the SBIR award facilitated the attraction of outside investors (4 of 6 vs. 1 of 7).

  • Fast Track projects show commercial potential earlier and, by the end of Phase I, outside third-party investors are found.

  • Fast Track projects have a higher lower bound for the social rate of return (based on the benefits for the collection of firms using the technology created by the SBIR project).

Similarities between Fast Track and non-Fast Track projects in the New England comparison groups include the following:

  • Barriers to investment (such as high technical risk and high capital costs) imply the need for partial public funding to carry out the SBIR projects.

  • None of the companies has received ATP awards.

  • All of the companies expect long-run strategic benefits from the SBIR award in the form of increased company size (sales or employment) or a more diversified product line.

  • The SBIR projects are socially valuable: The social rate of return is greater than the rate of return needed for a worthwhile project.

Respondents in the New England comparison groups expressed concerns about and recommendations for improving the SBIR program. From the Fast Track project respondents came the following:

  • Small businesses should be encouraged to acquire expertise to ensure proper business administration to go along with the competence in scientific work.

Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
  • Nonmilitary commercialization should not be the defining basis for the merits of the SBIR program because many valuable projects develop information with narrow applications within DoD.

  • The Fast Track program may cause worthwhile projects to have a low priority for Phase II awards simply because they entail research that does not by the end of Phase I reach the stage that attracts outside funding.

  • Some SBIR projects appear to be the sort of routine R&D and procurement that used to be done at large companies. Fast Track is a great innovation because it puts money into truly innovative small business projects with a high chance of commercialization.

  • A Phase III for developing manufacturing technology, for ramping up production, might be quite helpful given the difficulties in negotiating the third-party investments.

  • Funding should be provided for a Mentor/Consultant as a part of Phase II, with the SBIR firm identifying in the Phase II proposal a large corporation or marketing consulting firm that would work with the SBIR firm during Phase II and provide expertise about commercializing the technology.

From non-Fast Track project respondents came these observations:

  • Fast Track is not useful when the SBIR funding is needed to support high-risk research that does not result in a commercially viable technology before Phase II. Without having such an early result, attraction of outside funding is not possible in time for a Fast Track award.

  • Key technology areas should be assigned to a lead agency, which would fund all proposals in that area. There is agreement that improvements are needed in certain key technology areas. However, better coordination of the efforts of various agencies administering SBIR awards, each trying to achieve the same broad goals, is needed.

  • Of the 25 pages in the application, only about 5 are needed for technical evaluation. The other 20 could be filed separately, electronically, and would be used only in the event the application is being considered for an award.

  • The SBIR program could help to complete the process of commercialization. Continuing support for a successful Phase II project, the SBIR program could support a bridge to commercialization. The SBIR program now is aimed at establishing technical feasibility, not commercial feasibility.

  • Phase II funding for the DoD project monitor to travel to our location and interact with us should be provided. This would ensure that the technical monitor is actively involved in the project.

  • Phase II awardeed should be allowed to spend funds over three or four years instead of just two years.

Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×

TABLE 16 Fast Track and BMDO-Matching Projects Compared with Others in the New England Samplea

 

Averages

Type of Projectb

d (years)c

z (years)d

soclwrbd (%)e

F

2.43

1.00

69

B

2.72

2.04

67

Both F & B

2.72

1.42

67

Neither

3.05

1.62

48

aSample consists of 14 New England projects; 3 F, 3 B, 3 F & B, 5 neither F nor B.

bF denotes Fast Track and B denotes BMDO-matching.

cd is the duration of the SBIR project (Phase I + Phase II) without including the gap between the two phases and hence d is the duration of performance.

dz is the length of the additional period of development beyond the end of Phase II and until commercialization.

esoclwrbd is the lower bound rate of return to society, including benefits to the SBIR firm and its investors as well as to other firms.

Table 16 provides additional insight by distinguishing the projects of the Ballistic Missile Defense Office (BMDO), where matching funds are required although, unlike Fast Track, the matching funds can come from the SBIR company itself. Fast-Track and BMDO-Matching SBIR projects are of shorter duration than other projects, even ignoring the gap between Phase I and Phase II. The additional period of development beyond the end of Phase II and until commercialization is less for Fast Track projects than for BMDO-matching projects. The lower-bound rate of return to society (including benefits to the SBIR firm and its investors and also to other firms) is greater for Fast Track and BMDO-matching projects. In sum, Fast Track Projects take less time to reach commercialization; both Fast Track and BMDO-matching projects have more commercial potential in the sense that they are expected to generate greater returns to the SBIR firm and its investors and also to other firms. Further investigation, available on request from the author, showed that the qualitative differences among the projects remain the same when controls for technology categories are added in a regression model.

The conclusion is that the SBIR program has funded innovative projects with high social rates of return that would not have been undertaken in the absence of the program. Further, the non-Fast Track as well as the Fast Track projects appear to be quite valuable, although the non-Fast Track projects typically do not exhibit private commercial potential as quickly as the Fast Track projects.

ACKNOWLEDGMENTS

I would like to thank the following individuals for generously giving of their time for the interviews underlying the study. David Brock of Brock-Rogers Sur-

Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×

gical; Myles Walsh of Cape Cod Research; Adi Guzdar of Foster-Miller, Inc.; Bob Hoch of Hyperion Catalysis International; Frederick Dampier of Lithium Energy Associates, Inc.; Yogesh Mehrotra of Materials Technologies Corporation; Marthinus C. van Schoor of Mide Technology Corporation; Steven P. Bastien of Optigain, Inc.; Peter Chenausky of QSource, Inc.; David Miller, Larry Willner, and Gregory Lane of SEA CORP (Systems Engineering Associates Corp.); Timothy J. Driscoll of Spectra Science Corp.; Frank Folino of Synkinetics, Inc.; and Grant M. Ehrlich of Yardney Technical Products, Inc. I am grateful to David B. Audretsch, William L. Baldwin, Albert N. Link, and Nancy A. Scott for helpful comments and suggestions.

REFERENCES

Link, Albert N., and John T. Scott. 1998. Overcoming Market Failure: A Case Study of the ATP Focused Program on Technologies for the Integration of Manufacturing Applications (TIMA). Draft final report submitted to the Advanced Technology Program. Gaithersburg, MD: National Institute of Technology. October.

Link, Albert N., and John T. Scott. 1999. “Estimates of the Social Returns to SBIR-supported Projects,” this volume.

Tassey, Gregory. 1997. The Economics of R&D Policy ( Westport, Conn., and London: Quorum Books.

Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
Page 104
Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
Page 105
Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
Page 106
Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
Page 107
Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
Page 108
Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
Page 109
Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
Page 110
Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
Page 111
Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
Page 112
Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
Page 113
Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
Page 114
Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
Page 115
Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
Page 116
Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
Page 117
Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
Page 118
Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
Page 119
Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
Page 120
Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
Page 121
Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
Page 122
Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
Page 123
Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
Page 124
Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
Page 125
Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
Page 126
Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
Page 127
Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
Page 128
Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
Page 129
Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
Page 130
Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
Page 131
Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
Page 132
Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
Page 133
Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
Page 134
Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
Page 135
Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
Page 136
Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
Page 137
Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
Page 138
Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
Page 139
Suggested Citation:"An Assessment of the Small Business Innovation Research rogram in New England: Fast Track Compared with Non-Fast Track Projects." National Research Council. 2000. The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative. Washington, DC: The National Academies Press. doi: 10.17226/9985.
×
Page 140
Next: Patterns of Firm Participation in the Small Business Innovation Research Program in Southwestern and Mountain States »
The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative Get This Book
×
Buy Hardback | $80.00 Buy Ebook | $64.99
MyNAP members save 10% online.
Login or Register to save!
Download Free PDF

In 1992, Congress for the first time explicitly directed the federal agencies making SBIR grants to use commercial potential as a criterion for granting SBIR awards. In response, the Department of Defense developed the SBIR Fast Track initiative, which provides expedited decision-making for SBIR awards to companies that have commitments from outside vendors. To verify the effectiveness of this initiative, the DoD asked the STEP Board to assess the operation of Fast Track. This volume of original field research includes case studies comparing Fast Track and non-Fast Track firms, a large survey of SBIR awardees, and statistical analyses of the impact of regular SBIR and Fast Track awards. Collectively, the commissioned papers and the findings and recommendations represent a significant contribution to our understanding of the SBIR program.

  1. ×

    Welcome to OpenBook!

    You're looking at OpenBook, NAP.edu's online reading room since 1999. Based on feedback from you, our users, we've made some improvements that make it easier than ever to read thousands of publications on our website.

    Do you want to take a quick tour of the OpenBook's features?

    No Thanks Take a Tour »
  2. ×

    Show this book's table of contents, where you can jump to any chapter by name.

    « Back Next »
  3. ×

    ...or use these buttons to go back to the previous chapter or skip to the next one.

    « Back Next »
  4. ×

    Jump up to the previous page or down to the next one. Also, you can type in a page number and press Enter to go directly to that page in the book.

    « Back Next »
  5. ×

    Switch between the Original Pages, where you can read the report as it appeared in print, and Text Pages for the web version, where you can highlight and search the text.

    « Back Next »
  6. ×

    To search the entire text of this book, type in your search term here and press Enter.

    « Back Next »
  7. ×

    Share a link to this book page on your preferred social network or via email.

    « Back Next »
  8. ×

    View our suggested citation for this chapter.

    « Back Next »
  9. ×

    Ready to take your reading offline? Click here to buy this book in print or download it as a free PDF, if available.

    « Back Next »
Stay Connected!