Policymakers in the United States and Germany share the recognition that innovation remains the key to international competitiveness in the 21st century. Moreover, policy makers in both countries increasingly recognize that equity-financed small firms are an effective means of capitalizing on new ideas and bringing them to the market.
Charles Wessner directs the National Academies’ Program on Technology, Innovation, and Entrepreneurship that includes the Board on Science, Technology, and Economic Policy’s study on Comparative Innovation Policies, Best Practice for the 21st century. He also directs the Academies’ major assessment of the Small Business Innovation Research Program. The author would like to recognize Dr Sujai Shivakumar many contributions to the preparation of this article.
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Notes
- 1.
OECD, Main Science and Technology Indicators, 2006.
- 2.
For an analysis of India’s economic potential compared to China, see Yasheng Huang and Tarun Khanna, “Can India Overtake China?” Foreign Policy, July–August, 2003. The authors argue that India’s development strategy, while initiated later than China’s and thus lagging China, is more sustainable because it is more strongly based on fostering bottom-up entrepreneurial capacity.
- 3.
National Research Council, India’s Changing Innovation System, C. Wessner and S. Shivakumar, eds., Washington, DC: National Academies Press, 2007.
- 4.
Tata’s takeover of Corus Steel is among a series of recent global acquisitions by Indian firms. Other Indian firms recently acquiring assets overseas include Bharat Forge, Ranbaxy, Wipro, and Nicholas Piramal. According to the Economist, Indian companies announced 115 foreign acquisitions, with a total value of $7.4 billion in the first 3 quarters of 2006. See Economist, “India’s acquisition spree,” October 12, 2006.
- 5.
France, for example, has allocated 1 billion euros towards a new Industrial Innovation Agency, following the release of the Beffa Report. Similarly, Japan is restructuring and making significant investments its innovation system. For a review of innovation policies around the world, see National Research Council, Innovation Policies for the 21st Century, C. Wessner, ed., Washington, DC: National Academies Press, 2007.
- 6.
Zoltan J. Acs and David B. Audretsch, Innovation and Small Firms, Cambridge, MA: MIT Press, 1990.
- 7.
Small Business Administration, Office of Advocacy, “Small Business by the Numbers,” June 2004.
- 8.
Ibid.
- 9.
Alexis de Tocqueville, Democracy in America, Translated by Henry Reeve, Esq. With an Original Preface and Notes by John C. Spencer. New York: Adlard and Saunders, 1838.
- 10.
Source: Gerald, Carlino, Satyajit Chatterjee, and Robert Hunt, Ferrara OECD Conference on IAVC, October 2005.
- 11.
See for example, recent reports by the President’s Council of Advisors on Science and Technology, “Sustaining the Nation’s Innovation Ecosystems,” January 2004; the Council on Competitiveness, Innovate America: Thriving in a World of Challenge and Change, Washington, DC, 2005; and the National Academy of Sciences, Rising Above the Gathering Storm, Energizing and Employing America for a Brighter Economic Future, Washington, DC: National Academies Press, 2005.
- 12.
The drop off in foreign students was largely self-inflicted. Following the 9/11 attacks, the US government imposed much tighter controls on foreign students without having the necessary procedures and adequate staff in place to implement them. The result was long delays, lengthy travel, and often arbitrary rulings. In the last few years, procedures have become relatively more stabilized and the US share of foreign students is again rising.
- 13.
National Research Council, Rising Above the Gathering Strom, 2005, op. cit.
- 14.
Ibid, p. ES-2.
- 15.
- 16.
Access at http://thomas.loc.gov/cgi-bin/query/D?c110:1:./temp/Ec110FrdsGL
- 17.
The Nobel Committee cited Spence’s contribution in highlighting the importance of market signals in the presence of information asymmetries. For his seminal paper on this.
- 18.
See National Research Council, SBIR and the Phase III Challenge of Commercialization, C. Wessner, ed., Washington, DC: National Academies Press, 2007.
- 19.
With regard to the challenges small firms face in obtaining funding, see Branscomb and Auerswald, Taking Technical Risks, op. cit. See also Josh Lerner, “Public Venture Capital,” in National Research Council, The Small Business Innovation Program: Challenges and Opportunities, C. Wessner, ed. Washington, DC: National Academy Press, 1999.
- 20.
Edwin Mansfield, “How Fast Does New Industrial Technology Leak Out?” Journal of Industrial Economics, Vol. 34, No. 2, pp. 217–224.
- 21.
The analyses carried out at the Academies on early stage finance programs have highlighted the importance of these challenges and helped policymakers appreciate the Valley of Death phenomenon. For an overview of the Academies’ analyses, see National Research Council, Government-Industry Partnerships for the Development of New Technologies, C. Wessner, ed., Washington, DC: National Academies Press, 2003. For an early articulation of this phenomenon, see Vernon J. Ehlers, Unlocking Our Future: Toward a New National Science Policy, A Report to Congress by the House Committee on Science (Washington, DC: GPO, 1998). Accessed at http://www.access.gpo.gov/congress/house/science/cp105-b/science105b.pdf
- 22.
See Tom Jacobs, “Biotech follows dot.com boom and bust,” Nature, Vol. 20, No. 10, p. 973, October 2002.
- 23.
“The goal of venture capitalists is to make a return for our investors – it is not to develop the economy.” Personal communication with David Morgenthaler, founder Morgenthaler Ventures and past President of the National Venture Capital Association.
- 24.
Branscomb and Auerswald, Between Invention and Innovation: An Analysis of Funding for Early-Stage Technology Development, NIST, 2002
- 25.
It is important to remember that these are estimates. The authors stress the “limitations inherent in the data and the magnitude of the extrapolations…” and urge that the findings be interpreted with caution. They note further that while the funding range presented for each category is large, these approximate estimates, nonetheless, provide “valuable insight into the overall scale and composition of early-stage technology development funding patterns and allow at least a preliminary comparison of the relative level of federal, state, and private investments.” For further discussion of the approach and its limitations, see Lewis M. Branscomb and Philip E. Auerswald, Between Invention and Innovation, An Analysis of Funding for Early-Stage Technology Development, Gaithersburg, MD: NIST GCR 02–841, pp. 20–24, November 2002.
- 26.
The growth and subsequent contribution of venture capital have begun to attract the serious study needed to illuminate the dynamics of high-technology firm evolution. See for example, the work of Jeffrey Sohl and colleagues and the University of New Hampshire’s Center for Venture Research, described at http://www.unh.edu/cvr
- 27.
A small business is defined in the US as having less than 500 employees, significantly larger than the 250 employee cap applied in Europe.
- 28.
These include the Department of Defense, the Department of Health and Human Services, the National Aeronautics and Space Administration, the Department of Energy, the National Science Foundation, the Department of Agriculture, the Department of Commerce, the Department of Education, the Department of Transportation, the Environmental Protection Agency, and, most recently, the Department of Homeland Security.
- 29.
This certification effect was initially identified by Josh Lerner, “Public Venture Capital,” in National Research Council, The Small Business Innovation Program: Challenges and Opportunities, C. Wessner, ed. Washington, DC: National Academy Press, 1999. For a similar concept from the Advanced Technology Program, see Maryann Feldman and Maryellen Kelly, “Leveraging Research and Development: The Impact of the Advanced Technology Program,” in National Research Council, The Advanced Technology Program, Assessing Outcomes, C. Wessner, ed., Washington, DC: National Academy Press, 2001.
- 30.
See National Research Council, The Small Business Innovation Research Program, Program Diversity and Assessment Challenges, Washington, DC: National Academies Press, 2004.
- 31.
See Public Law 106-554, Appendix I – H.R. 5667, Section 108.
- 32.
National Research Council, An Assessment of the Small Business Innovation Research Program, C. Wessner, ed., Washington, DC: National Academies Press, forthcoming.
- 33.
Paul A. Gompers and Josh Lerner, The Venture Capital Cycle. MIT Press, 1999. Lewis M. Branscomb and Philip E. Auerswald, Between Invention and Innovation: An Analysis of Funding for Early Stage Technology Development. Advanced Technology Program, National Institute for Standards and Technology (NIST), US Department of Commerce report, NIST GCR 02–841, November 2002; Bronwyn H. Hall, The Financing of Research and Development, Working Paper 8773, National Bureau of Economic Research (NBER), 2002. Branscomb and Auerswald (2002) report that overall, of $266 billion that was spent on national R&D by various sources in the US in 1998, substantially less than 14% flowed into early stage technology development activities. The exact figure is elusive, because public financial reporting is not required for these investments.
- 34.
A program that is comparable along a number of dimensions – although with important differences in objectives, award size, and its emphasis on partnering – is the Advanced Technology Program (ATP), administered by the National Institute of Standards and Technology at the Department of Commerce. While the ATP program similarly stresses the development of novel technologies, that program does not focus exclusively on small firms. Furthermore, award amounts in the ATP program are typically at a factor of 10 larger than the standard SBIR phase I award; and awards are not directly related to agency mission.
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Wessner, C.W. (2009). The Innovation Imperative and the Role of SBIR Innovation Awards. In: Welfens, P., Addison, J. (eds) Innovation, Employment and Growth Policy Issues in the EU and the US. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-00631-9_9
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