February 1, 2012 Forum

Spring Semester Forums Begin

Innovation as Job 1 got another showcase Feb. 1st at Georgia Tech’s Midtown campus with a presentation titled “Rethinking the SBIR Program.”  The Small Business Innovation Research program coordinated by the U.S. Small Business Administration, awards funds for proof of concept and for prototypes regarding novel technologies that meet the mission needs of diverse federal agencies.

The opening session of the spring semester’s innovation in economic development forum featured Charles W. Wessner, Ph.D., from the National Academies who began his remarks by noting that today’s “exciting times” demand innovation to address challenges such as climate change, global health issues, and new sources of energy.  Many countries such as Finland, Sweden, and France are investing substantial resources to create and attract industries, he said, adding that China, India, and South Korea lead the United States in this respect.  China aims to be an “innovation-driven economy” by 2020, and Singapore wants to be Asia’s top financial and high-tech hub, said Wessner.

Many of their strategies draw from successful U.S. policies and programs, but federal R&D investment as a percentage of GDP has been declining since the 1980s, according to Wessner, who pointed out that 90 percent of DoD spending goes to weapons development.  The U.S. exhibits complacency about its global competitive position and pays limited attention to the composition of the economy, including trade and investment policy.  We focus on current consumption and fail to pay sufficient attention to commercialization.

Small firms are key to bringing technology to market and to creating jobs, said Wessner, but he countered conventional wisdom about markets.  For example, capital is necessary to transform ideas into products, but “new” doesn’t always attract financial support.  Also, venture capitalists have limited information about new firms, show “herding” tendencies, and are moving to later-stage investments.  Seed-stage investments, he said, dropped by 48 percent in 2011.  Often, the initial money does not come from venture capitalists.

There is a role for government here, and one of the things that works is the SBIR program, according to
Wessner.  Established in 1982, it “provides money to jump-start innovation.”   The year 2010 saw more than 4,200 Phase 1 awards and 1,800 Phase 2 awards, he said, comparing that to 363 seed-stage venture deals in 2010.  Each year, one-third of the awards in the program go to new companies.

Among SBIR’s features are a growing budget, large scale, and operating in a decentralized, adaptive fashion.  An SBIR award, he added, “is a certification of quality”—in other words, it’s a good idea or technology—for consideration by other investors.  In addition, SBIR provides options for public procurement, and it links universities with industry and helps create spin-out firms, he said.  New enterprises shouldn’t quit if they don’t receive an award via their first application.  “Some try six or seven times before they get it,” he said.

The National Academies recently studied the SBIR program (more on the report), surveying 7,000 projects and conducting some 100 case studies.  The research, Wessner said, concluded that SBIR “is sound in concept and effective in practice.”  At an annual $2.5 billion, it’s the largest U.S. innovation partnership undertaking.  It leads to high-quality jobs; new products, patents, and licenses; and government mission success, he said, noting that SBIR has contributed to the success of companies such as QualComm, ATMI, Martek, and Luna.

The Academies recommended to Congress that the program be maintained and its flexibility preserved, Wessner said.  Among other things, it also suggested drawing on best practices, focusing on Phase 2 transition, adjusting award sizes for inflation, and shortening the cycle time from application to award.  Congressional reauthorization extends SBIR for six years (to 2017) and increases standard award sizes to $150,000 for Phase 1 and $1 million for Phase 2.  It also provides for shorter cycle times, sequential awards from different federal agencies, more technical assistance for small businesses, and incentives for DoD commercialization.

The evaluation continues, noted Wessner.  His organization is (1) doing follow-up surveys, (2) assessing efficacy of post-award commercialization programs, (3) exploring strategies to encourage minority participation, (4) studying university-industry partnering, (5) identifying new approaches to streamlining the application and grant/contract award processes, and (6) reviewing the role of complementary state and federal programs.  And innovation must continue, too, he advised.  “It’s not a hobby; it is core.”

EI2’s Julie Collins served as discussant at the session.  She heads up the seven-year-old SBIR assistance program for Georgia.  Last year, the program, supported by state and federal funds, helped 140 companies/individuals.  More than $9 million in Phase 1 and 2 awards went to Georgia firms that received assistance.  According to Collins, most firms her program works with are university-based spinoffs.

The program, she notes, has evolved through the years, with the current focus on minority-owned, women-owned, and non-metro Atlanta companies.  To reach a broader audience and provide consistent assistance, her group created “SBIR circles.”  Open to the public, these weekly events address a different topic each session, including the basics of applying for SBIR funding.

To learn more about SBIR in Georgia, contact Julie Collins at julie@atdc.org.  Interested parties also may subscribe to the group’s newsletter at http://eepurl.com/hX1GQ.

The Innovations in Economic Development Forum is presented each semester by Georgia Tech’s program in Science, Technology and Information Policy (STIP), a joint initiative of the university’s Enterprise Innovation Institute and School of Public Policy.  Free and open to the public, it brings together faculty, researchers, students, economic developers, and policymakers to discuss leading-edge ideas and practices in economic development and innovation policy.  For upcoming forums and videos and presentations from past forums go to the STIP website at stip.gatech.edu.