From artificial hearts to unmanned aircraft to robotic vacuum cleaners, thousands of technologies have been developed and commercialized with the assistance of the federal government’s Small Business Innovation Research and Small Business Technology Transfer awards programs. Since the program’s start in 1982, small businesses have been awarded more than 150,000 SBIR awards amounting to $42 billion.
The SBA-run programs require the 11 federal agencies with extramural R&D budgets over $100 million to allocate 2.8 percent of their R&D budget to SBIR/STTR awards. The SBIR program has been so successful that it has been copied in 17 other countries. But without congressional reauthorization, it is set to expire in September 2017.
The Senate Committee on Small Business and Entrepreneurship held a hearing on “The Importance of Small Business Innovation to National and Economic Security” in Washington this week. Several witnesses testified in favor of making the programs permanent – in part due to their impact and due to the notoriously protracted and difficult reauthorization process.
Committee chairman David Vitter (R-La.) said the SBIR/STTR programs are “vital to the success of many small businesses and have ultimately helped create thousands of new jobs by fostering innovation and stimulating the economy through public-private partnerships.” He said, “The programs not only create jobs, but can also lead to a path for commercialization for many participating firms.”
Jere Glover, Executive Director of the Small Business Technology Council argued strongly in favor of an expanded and permanent SBIR program.
“While the SBIR/STTR program accounts for only 2.6 - 3.0 percent of the Federal extramural R&D budget over the last 4 years, it has created 22 percent of key innovations," Glover said.
He pointed to a recent Air Force Economic Impact Study that revealed that "every dollar spent on the SBIR program returns 3.6 dollars in sales, 50 cents of additional outside investment or venture capital, and resulted in over 400 mergers and licenses.” The same study, he said, “shows that the Phase II SBIR award winners had $14.7 billion in sales and added 234,000 jobs in America between 2000 and 2013 … more than Google, Apple, Cisco, and Microsoft combined.”
The number of SBIR/STTR firms that have been acquired – 1,975 according to one study, including 40 by L3 Communications, 13 by SAIC, 12 by General Electric, 11 by Raytheon, and 10 each by BAE and Lockheed Martin – is another indicator of the program’s wild success, Glover argued.
Not only is the small business sector the recognized leader in innovation, Glover said, but small businesses comprise:
- 99.7 percent of U.S. employer firms,
- 63 percent of net new private-sector jobs,
- 48.5 percent of private-sector employment,
- 42 percent of private-sector payroll,
- 46 percent of private-sector output,
- 37 percent of high-tech employment,
- 98 percent of firms exporting goods, and
- 33 percent of exporting value.
Still, Glover told the committee, “small business receives less than 5 percent of the total Federal R&D funding, the majority of which comes from the SBIR/STTR programs. Large firms, universities and government laboratories receive the remaining 95 percent of Federal funding.”
In 2015, he added, small and micro entities also accounted for almost 30 percent of all U.S. origin issued U.S. patents.
“If we don’t disrupt the status quo we’ll be sitting here in another 10 years saying, ‘We could have created a lot of jobs in America if we had made this program bigger and better,’” Glover warned. “It’s got to be done for America, for job creation.”