The Small Business Innovation Research Program An Assessment of the Department of Defense Fast Track Initiative (2000) / Chapter Skim
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Does the Small Business Innovation Research Program Foster Entrepeneurial Behavior? Evidence from Indiana
Does the Small Business Innovation Research Program Foster Entrepeneurial Behavior? Evidence from Indiana
Pages 160-193
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From page 160... ...
In particular, the case studies and survey helped to determine · the career background of the firm founder, · what led to the decision to commercialize knowledge, · why commercialization took the form of a new firm, · what would have happened in the absence of the SBIR program, · specific ways in which the founder's career path has been altered by SBIR. and · specific people who have been influenced by his/her experience and who have commercialized knowledge via a start-up firm.
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From page 161... ...
Incorporating greater variation in either the funding agency or the underlying science could help to identify how the impact of SBIR on influencing the entrepreneurial behavior of scientists differs across scientific fields and funding agencies.
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From page 162... ...
The first involves selection bias in that the SBIR program may give awards to firms that already have the characteristics needed for a higher growth rate and likelihood of survival. The second argues that a number of SBIR recipients would have followed the same commercialization process even in the absence of an SBIR award.
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From page 163... ...
We also have been able to identify the role that the SBIR program plays in influencing the career trajectories of some scientists and engineers, in particular, the role it plays in the commercialization process. The impact of SBIR on fostering science-based entrepreneurial behavior is likely to vary across industries, sciences, and technologies.
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From page 164... ...
In the absence of the SBIR program, at least some of the scientists and engineers contacted in this project would not have become involved in the commercialization process. These preliminary results based a limited sample size and context Indiana suggest that a larger-scale project should be undertaken to identify the impact that the SBIR has on changing entrepreneurial behavior.
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From page 165... ...
1994 NIH 3 Beard Industries, Inc. 1965 DOE 50 Terronics Development Corporation 1985 USDA 16 Focus Surgery, Inc.
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From page 166... ...
Jeff Alberts founded STAR on the basis of an SBIR award. The company currently has five employees and a Phase III SBIR Award to build hardware for animals to live in the Space Station.
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From page 167... ...
Peterson, and three other investors founded Genetic Models on a single rat model. In 1991, Joe Pesek and the other founders constructed their first laboratories for Genetic Models.
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From page 168... ...
Genetic Models has found that crossbreeding two models produces a very interesting end result of gene combinations. One of the models they use is a model for congestive heart failure developed by researchers at Ohio State University.
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Joglekar began conducting his postdoctoral research at Purdue University. While at Purdue, Girish and two other professors came up with the ideas for starting Batch Processing Technologies.
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From page 170... ...
in industrial engineering from Purdue University in 1994. While working on his Master's thesis at the Indiana University School of Medicine, Harry Smolen learned bout the SBIR program from one of the leaders of his research group.
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From page 171... ...
Last year, sales revenues increased by 20 percent compared to the previous year. Before founding Focus Surgery, Naren Sanghvi earned his M.S.E.E.
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SHOT had already successfully obtained several Phase I and Phase II SBIR awards. In July 1998, Jeff Alberts signed a contract for STAR to work with SHOT in a Phase III award.
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From page 173... ...
The firm has previously won SBIR awards for urology, hepatology, and bioengineering, all from NIH. Batch Processing Technologies Shortly after founding Batch Processing Technologies in 1983, Girish Joglekar applied for a Phase I SBIR award to develop simulation software for chemical engineering firms.
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From page 174... ...
While working on his Master's thesis at the Indiana University School of Medicine in 1994, Smolen learned about the SBIR program from one of the leaders of his research group. Beard Industries, Inc.
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IMPACT OF THE SBIR PROGRAM Table 5 provides a perspective of the influence of the SBIR award on the entrepreneurial behavior of the 12 firms that participated in the case studies. Specifically, the table shows the firms' responses (yes or no)
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From page 176... ...
: Would not have started the firm 2 10 Would not have continued the firm 5 7 Would have started the firm with money from an alternative source 2 10 Would have continued the firm with money from an alternative source 6 Would have commercialized the idea through an existing firm 4 8 Would have abandoned the idea Would have tried to start the firm with a different idea Would have tried to continue the firm with a different idea 2 Has your SBIR experience with starting a firm influenced the activities of any of your colleagues? 6 2 10 0 12 10 4 8 award influenced the start-up or continuation of their firms, what the firms would have done if they had not received the SBIR awards, and whether the firms' SBIR experiences had influenced any of their colleagues.
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From page 177... ...
Could they have found a venture capitalist? "Probably not," according to Joe Pesek, mostly because of conditions in financial markets; at the time Genetic Models considered an initial public offering (IPO)
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"Small businesses need to find their own way to continue their firms because the SBIR program is unreliable."
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From page 179... ...
According to Harry Smolen, the SBIR award did influence his decision to continue Medical Decision Modeling, but the SBIR experience did not lead any colleagues to express interest in starting their own firms. If he had not been awarded the SBIR funds, he would have continued the firm with money from an alternative source.
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From page 180... ...
Sanghvi would have either continued the firm with money from an alternative source or would have commercialized the idea through an existing ~rm. Focus Surgery works closely with other firms and research institutions, including Hitachi of Japan, Indiana University School of Medicine, Takai Medical School of Japan, University of Illinois, and University of Washington.
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From page 181... ...
If the firm had not been awarded the SBIR, the company founder(s) : Would not have started the firm Would not have continued the firm Would have started the firm with money from an alternative source Would have continued the firm with money from an alternative source 11 9 Would have commercialized the idea through art existing firm 4 16 Would have abandoned the idea 2 18 Would have tried to start the firm with a different idea 0 20 Would have tried to continue the firm with a different idea 5 15 Has your SBIR experience with starting a firm influenced the activities of any of your colleagues?
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From page 182... ...
Jeff Alberts, founder of STAR Enterprises, emphasizes what he considers to be a built-in deterrent to commercialization in the SBIR program. At least 50 percent of his time must be spent working for the company under Phases I and II.
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From page 183... ...
"Banks wouldn't invest in our product because the present value of the start-up costs are too high compared to the long-term benefits." "If value is found in intangible benefits, are there practical and prudent ways to prevent pork-barrel projects where people just throw our money? " The biggest concern that Peterson and Pesek have about the SBIR program is the review process.
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They also suggest that the SBIR program would benefit from better communication between the agencies and the firms. Ash Medical Systems, Inc.
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From page 185... ...
It was like the Phase II review board ignored our Phase I results and overlooked that we had met our Phase I goals." Hubbard offered the following suggestions for improving the SBIR program: . Before reviewing a Phase II proposal, the SBIR review board needs to track a firm' s success in meeting its Phase I goals.
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From page 186... ...
Joe Pesek and Dr. Peterson, cofounders of Genetic Models, also argue that it would not be possible to obtain financing from traditional financial institutions because the scientific content eludes the capabilities of evaluators in traditional financial institutions.
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The project has attempted to shed some light on the influence that the SBIR program has had on altering the career paths of scientists and engineers by facilitating the commercialization process by either starting a new firm or becoming involved in an existing small firm. The evidence provided here is of a preliminary nature, partially because of the small sample size consisting of 12 case studies and 20 firms responding to a survey instrument, but also because of the particular context within which the SBIR program operates in a state such as Indiana.
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From page 188... ...
Moreover, the SBIR awards may serve to attract students interested in research projects known to have attracted public funding through the SBIR program. The evidence from the broader survey generally confirms the findings from the case studies.
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From page 189... ...
However, on the basis of this preliminary evidence on the impact of the SBIR program on the entrepreneurial behavior and career paths of scientists in Indiana, such a large-scale study is warranted. ACKNOWLEGMENTS We are grateful for the helpful comments of Al Link, John Scott, Chuck Wessner, and the participants at the Workshop on Evaluating the SBIR and the Fast Track, sponsored by the National Academy of Sciences, Washington, D.C., May 5, 1999.
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during last year compared to the previous year (Please circle) UP Sales revenueslemployees; increase/decrease 5.
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From page 191... ...
DOES SBIR FOSTER ENTREPRENEURIAL BEHAVIOR? Characteristics of the founder What is the founder's age?
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SBIR: DOD'S FAST TRACK INITIATIVE 2. List dates and phases of SBIR awards.
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From page 193... ...
193 5. Has your SBIR experience with starting a firm influenced the activities or possible activities of any of your colleagues?
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