Association for Public Policy Analysis & Management

The purpose of this study is to explore the effect of firm-level network characteristics on the performance of transition of technologies created through the U.S. Department of Defense (DoD) Small Business Innovation Research (SBIR) Program, a federal R&D program for technology-based small businesses (TBSBs). Based on the result of analysis, I seek to suggest policy alternatives to DoD in capitalizing on the SBIR program by exploring what network characteristics of SBIR awardees facilitate the technology transition.

Technology transition, a knowledge flow from private to public sector, has been emphasized by DoD since private sector is developing cutting-edge technologies in many fields that are necessary for meeting warfighters’ technological needs. Of several vehicles for technology transition, the SBIR program specifically seeks to take advantage of innovation capacity of TBSBs. Through the program, TBSBs can provide alternative technology solutions to DoD not only as a subcontractor but also as a prime contractor. While enjoying their agility, flexibility and adaptability, mostly stemming from their small size, TBSBs have many disadvantages against large businesses in terms of available resources (e.g., financial or technological). Thus, TBSBs need to manage their networks more effectively and efficiently to address the lack of resources.

To tackle this policy problem, this study considers two types of networks at different innovation stage. In between idea generation and technology development, this study looks into the financial position of TBSBs in the social network consisting of SBIR funders and awardees. Since the resource flow is unidirectional (from funders to awardees) and there is no flow between awardees, this social network is analyzed with a 2-mode (or bipartite) characteristics. In between technology development and commercialization, this study examines institutional (relative to the government) and market (relative to other businesses) networks of TBSBs based on the technological position by employing the concepts of technological distance, specialization, and variety. Indicators for technological position are calculated by analyzing and comparing patent portfolio of SBIR awardees relative to DoD (including its laboratories) and major prime contractors (e.g., Lockheed Martin and Raytheon).

For the regression analysis, this study tracks 2,889 firms that have been awarded SBIR Phase II funding from the DoD from 2001 – 2010, and collects data on their SBIR awards, patent applications, and federal procurement contracts (FPC). Independent variables include centrality and structural equivalence measures of SBIR funding network, technological distance, specialization, and variety as well as firm-level demographics such as age and size. Dependent variables include the amount of federal procurement contracts and return on investment in order to assess both effectiveness and efficiency of technology transition.