Investing in small business

April 05, 2016

Key lessons from the USA on commercialising quality research to compete effectively in the global economy.

investing in small business

Featured image above: Charles W. Wessner is a distinguished scholar and research professor in Global Innovation Policy at Georgetown University, and director of the Technology, Innovation and Entrepreneurship program at the National Academies.

Innovation is recognised as a key to growing and maintaining a country’s competitive position in the global economy. Australian scientists produce top-quality research and punch above their weight in terms of peer-reviewed publications; however, Australia is much less successful in creating innovative products and processes based on research investment. If we want more innovation, university and government policies need to change.

Part of this change requires learning from the successes of other nations. Successful policy changes include increased support for universities and research centres, growing funding for competitively awarded applied research, sustained support for small businesses, and a focus on partnerships among government, industry and universities in bringing research ideas to market.

The USA is the land of free-market capitalism, but it is also an active entrepreneurial state. A highly effective US government initiative, for example, is the Small Business Innovation Research (SBIR) program, which has been in existence for 25 years and was recently renewed by Congress.

Instrumental in this renewal was an assessment by the National Academy of Sciences, which found the SBIR program “sound in concept and effective in operation”.

The program provides highly competitive, phased innovation awards to small businesses and start-ups to develop products that meet agency mission objectives or provide social value. The awards range from US$150,000 to more than US$1 million. The grants are often linked to the procurement process, for example in the case of military acquisition and support. In other fields, such as health and energy, grants provide a means to push good ideas to market.

SBIR has a strong track record. In recent years, it garnered 20–25% of the top 100 R&D awards for the US economy as a whole, and helped agencies like NASA address specific needs such as instruments for exploring Mars. SBIR doesn’t replace venture capital, but rather augments it by de-risking ideas to the point where private investors can step forward. Reflecting its success in the USA, SBIR has been adopted by a number of other countries.

While SBIR is a success, it is not a panacea. Effective innovation policy is multidimensional, and a supportive policy framework that encourages universities to commercialise new products and processes is required. Policies that facilitate start-ups and encourage small to medium-sized businesses are also needed.

Governments need to invest in places where researchers and companies can meet, learn, cooperate and grow. For example, science and technology parks near universities, incubators, accelerator programs, and innovation awards that facilitate collaboration.

Adopting pro-innovation policies does not guarantee instant success – but not adopting them guarantees long-term stagnation.

– Charles W. Wessner

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