Magazine article National Defense

Bridging the Gap

Magazine article National Defense

Bridging the Gap

Article excerpt

Small businesses unable to exploit research grants

For a majority of the small businesses that have received government funding for their high-risk research and development efforts, crossing the so-called "valley of death" to bring products to market remains a futile effort. Experts have suggested changes to the federal program to improve support for these endeavors and there are indications that a bridge may be in sight.

The federal governments small business innovation research program, established 25 years ago, provides up to $850,000 of funding to firms with fewer than 500 workers.

There are two award phases. In phase I, the government funds companies $100,000 to explore innovative concepts. If successful within six months, the company may apply for a two-year phase II grant of up to $750,000 to develop a prototype. At the end of the term, the firm is expected to obtain private funds to commercialize its product.

That is where many small businesses' problems begin. While the SBIR program has funded more than 90,000 projects with $19 billion through the years, analysts say many innovations slip through the cracks in the commercialization process and fail to reach the market-place.

In a congressional hearing on SBIR reauthorization, Jon Baron, former counsel to the House Small Business Committee, testified that as many as half of phase II awardees are unable to convert their SBIR awards into viable new products sold to commercial or government customers.

"These are companies which usually have strong research capabilities - which is why they win SBIR awards - but lack the entrepreneurial capabilities, and in some cases the motivation, to convert their research into successful new products," he said before the House subcommittee on technology and innovation. "Many of these companies find the commercialization process to be unfamiliar, outside their skill set, and daunting."

Federal agencies have recognized this as a problem and have attempted to ameliorate the situation through a variety of approaches, including awarding additional funding to SBIR applicants who obtain matching funds, providing training in commercializing technologies and involving acquisition program offices in the development of SBIR solicitation topics.

However, Baron said, none of these approaches has been studied for effectiveness. He proposed that Congress direct agencies to allocate 1 percent of their SBIR funds to conduct evaluations to determine which methods might improve commercialization.

The Defense Departments SBIR program, in particular, has experienced difficulty in transitioning research results for two reasons, testified Bruce Held, senior policy researcher for the Rand Corp. Management of the program has focused more on the process issues associated with executing the thousands of SBIR awards than applying the results of those awards, and most of the SBIR program is managed out of laboratories and research centers that have long development and transition cycles, he wrote in a report.

Held proposed increasing the participation of Defense Department acquisition program managers in managing SBIR projects and urging the departments officials to shift its process-based program to one that is outcome-oriented. To that end, funding of SBIR projects needs to be increased and managed more flexibly, he concluded.

The SBIR funding levels, comprising 2.5 percent of the federal research and development budget, have not budged since 1992. Almost all of the hearing's witnesses voiced support for increasing those levels to $150,000 for phase I awards and $1. …

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