1. Home
  2. Knowledge Base
  3. Small Business Innovation Research Act (SBIR) – Definition

Small Business Innovation Research Act (SBIR) – Definition

Small Business Innovation Research (SBIR) Act Definition

Small Business Innovative Research commonly known as SBIR, is a United States Government program initiated to assist certain small businesses to carry out research and development. The SBIR surfaced in 1982 after it was established by law under the Small Business Innovation Development Act of 1982. It was created to support scientific excellence and technological innovative ideas through the investment of federal research funds.

The main idea behind SBIR was to provide funds to some of the best early-stage innovation ideas. The end results of this program according to the US government, was to help build a strong national economy.

The funding provided is in the form of grants and is managed and coordinated by the US Small Business Administration. One of their duties is to direct agencies in implementing the SBIR. It is also mandated to review awardees progress and give the report to the Congress.therefore, they  are the main link to the program.

A Little More on What is Small Business Innovation Research Act (SBIR)

The original Act of 1982 of the SBIR  was created in order to address certain major primary goals. In the quest to achieve these goals,SBIR has strongly embraced the goals and at the same time maintaining administrative flexibility. This has allowed different federal agencies to use this program in addressing some of their important duties.

In fact,over 96% of the program’s fund is being utilized by five U.S  government agencies; Department of Defense, Health and Human Services, Energy, National Aeronautic and Space Administration, the National Science Foundation.The following goals were to be realized through the implementation of this program:

  • To inspire small business to stimulated technologies innovations.
  • To use small businesses to meet federal research and development needs
  • To adopt and promote participation by the socially and economically disadvantaged individuals in creating technological innovations in the private sector.
  • To increase commercialization and innovation of the federally funded research and development in order to increase competition, productivity and economic growth in the private sector.

SBIR Funding Criteria and Eligibility

SBIR funding is not for everyone. To be able to qualify for this funding, the recipient projects must demonstrate their potentiality of commercialization and must also meet specific US government research and development needs.

  • The business of the recipient must be located in the United States.
  • The business of the awardee should b
  • e organized as a for-profit concern
  • 51% of the business must be directly owned and controlled by an individual or individuals who are citizens or permanent residents in the United States.
  • The business should not have more than 500 employees and this includes associates (partners).
  • In the case of a joint venture, each party must meet the program eligibility requirement.

Biomedical Academic Entrepreneurship Through the SBIR Program

The emergence of industrial laboratories in the US pharmaceutical industry is a clear indication that the growth of this industry is related to the extent of local universities research enabled through the SBIR program.

The National Institute of Health (NIH) SBIR program has provided a mechanism of translating academic science into commercial discoveries. This has brought forth important information about biomedical revolution, and the NIH has used the SBIR program to take forward the revolution.

It has also brought a new useful view on how individual researches can move from university supported research grant towards the SBIR support. By implementing this new mechanism, it has been able to convert their academic science into useful products.

SBIR in Public/Private Technology Partnership

Based on case studies and methods of evaluation, there is evidence that the SBIR program is stimulating research development and as well as effort to commercialize. Small technology firms are productive innovators known as unique resources in the development of enabling technologies.

Also,It has helped in removing the deeply rooted old techniques and replaced them by creating new industries with advanced technology. According to studies, this would not have been possible without the presence of this program. Through it, the following technologies partnership benefits have been realised:

  1. In the health perspective, the program has been integrated into the overall scientific programs. This has benefited and enhanced partnership efforts among the SBIR and the research community.
  2. It has enabled small businesses to be flexible and to be able to respond quickly to the changing nature of technology in science. This has brought forth incentive for multidisciplinary technology approaches, which are necessities in addressing some of the complicated research questions.
  3. Through the enabled SBIR structure, most small companies are able to see the federal government as a transparent institution which motivates them to consider SBIR as an opportunity to align their technological competencies with the needs of the multiple agencies.

The Impact of SBIR on Creating Entrepreneurship Behaviour

Generally, since its inception, the SBIR programs has been used by 11 federal agencies to address their needs. The major focus of Congress on SBIR has been to champion its commercialization. However, the impact of this program has been questioned over the years since its inception.

Most reports have tried to quantify the economic impact of this program. A research carried out by the National Academies made the following observation regarding the SBIR’s impact:

  • There has been an increase in employment opportunities – The research revealed that more job opportunities were generated by those small businesses that received SBIR funding as compared to those that didn’t. In fact, for the businesses that did not receive, there was no significant employment creation.
  • An increase in revenue – There were more revenues from products based under the program. Comparison in revenue between the recipients, and non-recipients were done. The observation made revealed that the awardees’ sales grew significantly hence generating higher revenue compared to that of the matching firms of which its revenue remained static or went down.
  • Economic impact – There has been a higher rate of recipients’ firm surviving compared to those of non-recipient. Shifting of career paths towards entrepreneurship, and other sources that require serious financing and commercialization through local and private investment has also been realized.
  • Knowledge Impact- There has been creation of avenues for connecting basic knowledge to the marketplace through different institutions like a university-industry partnership. This is a valuable pathway to commercialize university-based research.
  • Building sustainable Innovative businesses – SBIR has provided a considerable number of funds that have enabled the growth and sustainability of businesses. Most business projects would not have started and succeeded without the program.
  • Market Accessibility – As per the findings, most businesses under the SBIR program were able to reach the market.

References for SBIR

Academic Research on Small Business Innovation Research

The government as venture capitalist: The long-run effects of the SBIR program, Lerner, J. (1996). National Bureau of Economic Research.

Public/private technology partnerships: evaluating SBIR-supported research, Audretsch, D. B., Link, A. N., & Scott, J. T. (2002).

The government as venture capitalist: the long-run impact of the SBIR program, Lerner, J. (2000). The Journal of Private Equity, 3(2), 55-78.

Standing on the shoulders of midgets: The US Small Business Innovation Research program (SBIR), Audretsch, D. B. (2003). Small Business Economics, 20(2), 129-135.

Biomedical academic entrepreneurship through the SBIR program, Toole, A. A., & Czarnitzki, D. (2007). Journal of Economic Behavior & Organization, 63(4), 716-738.

Government as entrepreneur: Evaluating the commercialization success of SBIR projects, Link, A. N., & Scott, J. T. (2010). Research Policy, 39(5), 589-601.

When does funding research by smaller firms bear fruit?: Evidence from the SBIR program, Gans, J., & Stern, S. (2003). Economics of Innovation and New Technology, 12(4), 361-384.

Exploring the relationship between scientist human capital and firm performance: The case of biomedical academic entrepreneurs in the SBIR program, Toole, A. A., & Czarnitzki, D. (2009). Management Science, 55(1), 101-114.

The impact of the SBIR on creating entrepreneurial behavior, Audretsch, D. B., Weigand, J., & Weigand, C. (2002). Economic Development Quarterly, 16(1), 32-38.

Purpose and performance of the Small Business Innovation Research (SBIR) program, Cooper, R. S. (2003). Small Business Economics, 20(2), 137-151.

Was this article helpful?