AN ASSESSMENT OF THE SBIR PROGRAM AT THE DEPARTMENT OF DEFENSE
Charles W. Wessner, Editor
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NOTICE: The project that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the Councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competences and with regard for appropriate balance.
This study was supported by Contract/Grant No. DASW01-02-C-0039 between the National Academy of Sciences and U.S. Department of Defense, NASW-03003 between the National Academy of Sciences and the National Aeronautics and Space Administration, DE-AC02-02ER12259 between the National Academy of Sciences and the U.S. Department of Energy, NSFDMI-0221736 between the National Academy of Sciences and the National Science Foundation, and N01-OD-4-2139 (Task Order #99) between the National Academy of Sciences and the U.S. Department of Health and Human Services. The content of this publication does not necessarily reflect the views or policies of the Department of Health and Human Services, nor does mention of trade names, commercial products, or organizations imply endorsement by the U.S. Government. Any opinions, findings, and conclusions or recommendations expressed in this material are those of the author(s) and do not necessarily reflect the views of the National Aeronautics and Space Administration. Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the views of the organizations or agencies that provided support for the project.
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THE NATIONAL ACADEMIES
Advisers to the Nation on Science, Engineering, and Medicine
The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. Upon the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Ralph J. Cicerone is president of the National Academy of Sciences.
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Committee for Capitalizing on Science, Technology, and Innovation: An Assessment of the Small Business Innovation Research Program
Chair Jacques S. Gansler (NAE) Roger C. Lipitz Chair in Public Policy and Private Enterprise and Director of the Center for Public Policy and Private Enterprise School of Public Policy
University of Maryland
David B. Audretsch Distinguished Professor and Ameritech Chair of Economic Development Director,
Institute for Development Strategies Indiana University
Gene Banucci Executive Chairman
Jon Baron Executive Director
Coalition for Evidence-Based Policy
Michael Borrus Founding General Partner
Gail Cassell (IOM) Vice President,
Scientific Affairs and
Distinguished Lilly Research Scholar for Infectious Diseases
Eli Lilly and Company
Elizabeth Downing CEO
3D Technology Laboratories
M. Christina Gabriel Director,
Innovation Economy The Heinz Endowments
Trevor O. Jones (NAE) Founder and Chairman
Electrosonics Medical, Inc.
Charles E. Kolb President
Aerodyne Research, Inc.
Henry Linsert, Jr. CEO
Columbia Biosciences Corporation
W. Clark McFadden Partner
Dewey & LeBoeuf, LLP
Duncan T. Moore (NAE) Kingslake Professor of Optical Engineering
University of Rochester
Kent Murphy President and CEO
Linda F. Powers Managing Director
Toucan Capital Corporation
Tyrone Taylor President
Capitol Advisors on Technology, LLC
Charles Trimble (NAE) CEO, retired
Patrick Windham President
Charles W. Wessner Study Director
McAlister T. Clabaugh Program Associate
David E. Dierksheide Program Officer
Sujai J. Shivakumar Senior Program Officer
Adam H. Gertz Program Associate
Jeffrey C. McCullough Program Associate
University of Baltimore
Alan Anderson Consultant
Philip A. Auerswald
George Mason University
Vital Strategies, LLC
Robert Berger Consulting, LLC
University of Indiana South Bend
University of Leuven
Julie Ann Elston
Oregon State University
American Association for the Advancement of Science
David H. Finifter
The College of William and Mary
University of Portland
North Atlantic Research
Albert N. Link
University of North Carolina
University of California at Riverside
Paula E. Stephan
Georgia State University
George Washington University
POLICY AND GLOBAL AFFAIRS
Ad hoc Oversight Board for Capitalizing on Science, Technology, and Innovation: An Assessment of the Small Business Innovation Research Program
Robert M. White (NAE), Chair University Professor Emeritus
Electrical and Computer Engineering Carnegie Mellon University
Anita K. Jones (NAE) Lawrence R. Quarles Professor of Engineering and Applied Science
School of Engineering and Applied Science University of Virginia
Mark B. Myers Senior Vice President, retired
Today’s knowledge economy is driven in large part by the nation’s capacity to innovate. One of the defining features of the U.S. economy is a high level of entrepreneurial activity. Entrepreneurs in the United States see opportunities and are willing and able to take on risk to bring new welfare-enhancing, wealth-generating technologies to the market. Yet, while innovation in areas such as genomics, bioinformatics, and nanotechnology present new opportunities, converting these ideas into innovations for the market involves substantial challenges.1 The American capacity for innovation can be strengthened by addressing the challenges faced by entrepreneurs. Public-private partnerships are one means to help entrepreneurs bring new ideas to market.2
The Small Business Innovation Research (SBIR) program is one of the largest examples of U.S. public-private partnerships. An underlying thesis of the program is that small businesses are a strong source of new ideas and economic growth, but that it will be difficult to find financial support for these ideas in the early stages, thus the desirability for public-private partnerships in the small business, high-technology arena to encourage innovation and to help the government achieve its missions. Founded in 1982, the SBIR program was designed to encourage small business to develop new processes and products and to provide quality research in support of the many missions of the U.S. government. By
including qualified small businesses in the nation’s R&D (research and development) effort, SBIR grants are intended to stimulate innovative new technologies to help agencies meet the specific research and development needs of the nation in many areas, including health, the environment, and national defense.
As the SBIR program approached its twentieth year of operation, the U.S. Congress asked the National Research Council to conduct a “comprehensive study of how the SBIR program has stimulated technological innovation and used small businesses to meet federal research and development needs” and to make recommendations on still further improvements to the program.3 To guide this study, the National Research Council (NRC) drew together an expert Committee that includes eminent economists, small businessmen and women, and venture capitalists, led by Dr. Jacques Gansler of the University of Maryland (formerly Undersecretary of Defense for Acquisition and Technology.) The membership of this Committee is listed in the front matter of this volume. Given the extent of “green-field research” required for this study, the Committee in turn drew on a distinguished team of researchers to, among other tasks, administer surveys and conduct case studies, and develop and analyze statistical information about the program. The membership of this research team is also listed in the front matter of this volume.
This report is one of a series published by the National Academies in response to the congressional request. The series includes reports on the Small Business Innovation Research Program at the Department of Defense, the National Institutes of Health, the National Aeronautics and Space Administration, the Department of Energy, and the National Science Foundation—the 5 agencies responsible for 96 percent of the program’s operations. It includes, as well, an Overview Report that provides assessment of the program’s operations across the federal government. Other reports in the series include a summary of the 2002 conference that launched the study, and a summary of the 2005 conference on SBIR and the Phase III Challenge of Commercialization that focused on the transition issues face by program participants at the Department of Defense and NASA.4
The current assessment of the SBIR program follows directly from an earlier analysis of public-private partnerships by the National Research Council’s Board on Science, Technology, and Economic Policy (STEP). Under the direction of Gordon Moore, Chairman Emeritus of Intel, the NRC Committee on Government-Industry Partnerships prepared eleven volumes reviewing the driv-
ers of cooperation among industry, universities, and government; operational assessments of current programs; emerging needs at the intersection of biotechnology and information technology; the current experience of foreign government partnerships and opportunities for international cooperation; and the changing roles of government laboratories, universities, and other research organizations in the national innovation system.5
This analysis of public-private partnerships included two published studies of the SBIR program. Drawing from expert knowledge at a 1998 workshop held at the National Academy of Sciences, the first report, The Small Business Innovation Research Program: Challenges and Opportunities, examined the origins of the program and identified operational challenges critical to the program’s future effectiveness.6 The report also highlighted the relative paucity of research on the SBIR program.
Following this initial report, the Department of Defense (DoD) asked the NRC to assess the Department’s Fast Track Initiative in comparison with the operation of its regular SBIR program. The resulting report, The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative, was the first comprehensive, external assessment of the Department of Defense’s program. The study, which involved substantial case study and survey research, found that the SBIR program was achieving its legislated goals. It also found that DoD’s Fast Track Initiative was achieving its objective of greater commercialization and recommended that the program be continued and expanded where appropriate.7 The report also recommended that the SBIR program overall would benefit from further research and analysis, a recommendation subsequently adopted by the U.S. Congress.
SBIR REAUTHORIZATION AND CONGRESSIONAL REQUEST FOR REVIEW
As a part of the 2000 reauthorization of the SBIR program, Congress called for a review of the SBIR programs of the agencies that account collectively for 96 percent of program funding. As noted, the five agencies meeting this criterion, by size of program, are the Departments of Defense, the National Institutes of
Health, the National Aeronautics and Space Administration, the Department of Energy, and the National Science Foundation.
HR 5667 directed the NRC to evaluate the quality of SBIR research and evaluate the SBIR program’s value to the agency mission. It called for an assessment of the extent to which SBIR projects achieve some measure of commercialization, as well as an evaluation of the program’s overall economic and noneconomic benefits. It also called for additional analysis as required to support specific recommendations on areas such as measuring outcomes for agency strategy and performance, increasing federal procurement of technologies produced by small business, and overall improvements to the SBIR program.
On behalf of the National Academies, we express our appreciation and recognition for the insights, experiences, and perspectives made available by the participants of the conferences and meetings, as well as by survey respondents and case study interviewees who participated over the course of this study. We are also very much in debt to officials from the leading departments and agencies. Among the many who provided assistance to this complex study, we are especially in debt to Kesh Narayanan, Joseph Hennessey, and Ritchie Coryell of the National Science Foundation; Michael Caccuitto, Victor Ciardello, and John Williams of the Department of Defense; Robert Berger and later Larry James of the Department of Energy; Carl Ray and Paul Mexcur of NASA; and Jo Anne Goodnight and Kathleen Shino of the National Institutes of Health.
The Committee’s research team deserves major recognition for their role in the preparation of this report. Special thanks are due to Dr. Robin Gaster who stepped in to lead the DoD research team. Without his enormous energy, persistence, and productivity, this report would not have been completed. The DoD report and project as a whole are in debt to Peter Cahill, who made available his unparalleled knowledge of the program and its data. The important contributions made by Dr. Irwin Feller, who provided early, insightful, draft of the DoD study and conducted a large number of case studies are gratefully acknowledged. Paul Fowler also provided a valuable empirical perspective. Dr. Zoltan Acs carried out a number of case studies and contributed his valuable insights on the challenge of early-stage finance for innovative small businesses. Sujai Shivakumar also merits thanks for his careful review, edits, analysis, and written contributions, which were essential for the preparation of this report. Without collective efforts of these individuals, amidst many other competing priorities, it would not have been possible to prepare this report.
NATIONAL RESEARCH COUNCIL REVIEW
This report has been reviewed in draft form by individuals chosen for their diverse perspectives and technical expertise, in accordance with procedures ap-
proved by the National Academies’ Report Review Committee. The purpose of this independent review is to provide candid and critical comments that will assist the institution in making its published report as sound as possible and to ensure that the report meets institutional standards for objectivity, evidence, and responsiveness to the study charge. The review comments and draft manuscript remain confidential to protect the integrity of the process.
We wish to thank the following individuals for their review of this report: Robert Barnhill, Arizona State University; William Bonvillian, Massachusetts Institute of Technology; Bronwyn Hall, University of California, Berkeley; and Heidi Jacobus, Cybernet Systems Corporation.
Although the reviewers listed above have provided many constructive comments and suggestions, they were not asked to endorse the conclusions or recommendations, nor did they see the final draft of the report before its release. The review of this report was overseen by Robert Frosch, Harvard University, and Robert White, Carnegie Mellon University. Appointed by the National Academies, they were responsible for making certain that an independent examination of this report was carried out in accordance with institutional procedures and that all review comments were carefully considered. Responsibility for the final content of this report rests entirely with the authoring Committee and the institution.
Jacques S. Gansler
Charles W. Wessner