Association for Public Policy Analysis & Management

This study aims to examine the technology transition efficiency of the U.S. Department of Defense (DoD) Small Business Innovation Research (SBIR) program. Through the program, technology-based small businesses (TBSBs) provide the DoD with solutions to technical problems that are critical in the national security. Specifically, TBSBs have an opportunity to transition their abstract ideas to concrete products or services that can be used by warfighters by identifying technical feasibility, conducting R&D, and commercializing R&D outcomes. For the program, the DoD is spending about one billion dollars annually which is almost half of total SBIR program budget and is supposed to increase with the passage of the reauthorization act. In terms of not only technological innovation and national security but also significant federal spending, it is important to examine the technology transition efficiency of the DoD SBIR program via DoD agencies (e.g., Air Force, Navy, and Army) that are participating in the program and DoD SBIR awardees that have won the DoD SBIR awards.

When measuring the efficiency, understanding input and output of production function is critical. Especially, given that the SBIR program has multiple objectives (i.e., stimulating technological innovation; using small businesses to meet federal R&D needs; fostering and encouraging participation by minority and disadvantaged people in technological innovation; and increasing private-sector commercialization of innovations derived from federal R&D) and technology transition may be represented by various output indicators (e.g., the amount of federal procurement contracts and the number of patent applications) and affected by a list of input variables, the methodology that can handle multiple input and output factors without any assumptions on functional form. Given that firms’ strategies are affected by not only internal capacity but also external environment, in addition, it is important to take contextual effects into account in exploring the innovation efficiency of firms. Since firms are situated in various industries and regions, and thus they are under different business environment and policy support, technological and spatial contexts particularly matter. For instance, industry-level technology lifecycle and state-level innovation/entrepreneurship policy support can contribute to the technology transition efficiency.

To address this issue, I employ two different methodologies, hierarchical linear modeling (HLM, parametric) and data envelopment analysis (DEA, non-parametric), sequentially. Applying HLM, first, I figure out significant firm-, industry-, and region-level variables that affect the transition of technologies created through the DoD SBIR program. Second, I use those selected variables for the subsequent DEA efficiency analysis. Additionally, I decompose selected variables into distinct components: microscopic (firm-level managerial efficiency) and macroscopic (industry/region-level structural efficiency). Through cluster analysis, lastly, I look into efficiencies of DoD agencies.

Drawing on the analysis results, I compare technology transition efficiencies of both DoD agencies and DoD SBIR awardees, identify what factors/components affect inefficiencies of them, and pull out policy recommendations to fix those inefficiencies.