Small Business Innovation Applied to National Needs

Kyle Myers, Lauren Lanahan and Evan Johnson

No 33945, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Small businesses have long supplied a disproportionate share of major innovations in the United States. We review a centerpiece policy on this topic: the US Small Business Innovation Research (SBIR) program. We trace its legislative history and summarize program evaluations over the past four decades. Using newly matched data on SBIR awards and venture capital investments into small businesses, we show that, despite often being compared to venture-backed businesses, SBIR-backed businesses pursue very different strategies. We use simple economic theories to motivate the SBIR program as a vehicle for the government to invest in small-scale, well-defined, but risky technologies that have large externalities, and we highlight a number of case studies consistent with this framework. Because the motivating friction lies at the level of ideas, our perspective encourages future evaluations to determine how the SBIR program influences not just who does the inventing, but what gets invented. Looking forward we discuss how rising industrial concentration and the diffusion of artificial intelligence may reshape the program’s comparative advantage in the innovation policy toolkit.

JEL-codes: O30 O32 O38 (search for similar items in EconPapers)
Date: 2025-06
New Economics Papers: this item is included in nep-ent, nep-sbm and nep-tid
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Forthcoming: Small Business Innovation Applied to National Needs , Kyle R. Myers, Lauren Lanahan, Evan E. Johnson. in Entrepreneurship and Innovation Policy and the Economy, volume 5 , Jones and Lerner. 2025

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