Two decades of the Small Business Research Initiative (SBRI)

This note provides insights into the performance of the UK Small Business Research Initiative (SBRI), nearly two decades after its creation, based on selected evaluations and studies. It also provides a brief comparison with the US Small Business Innovation Research (SBIR) and the Small Business Technology Transfer (STTR) programmes, and highlights key opportunity areas to enhance the impact of UK SBRI.

Executive Summary

The UK Small Business Research Initiative (SBRI) is a procurement programme that promotes innovation through providing firms with research contracts to develop solutions that address public-sector needs and societal challenges. SBRI was established in 2001 in the UK, inspired by the US Small Business Innovation Research (SBIR) programme. Since its inception, SBRI has awarded over £500 million in R&D contracts. SMEs account for around 70% of applicants and 60% of the awarded contract value. Approximately half of the applicants are located in the South of England, accounting for a similar proportion of contracted value.

An evaluation conducted in 2017 by the Manchester Institute of Innovation Research estimates that every £1 awarded through SBRI has produced a benefit of at least £2.4 to the UK economy. According to recent evaluations, the outputs and impacts of SBRI on companies’ performance include: increased turnover and employment; the creation of new firms; higher equity investment; accelerated introduction of new products; access to new markets; and skills development. For the government, benefits including access to new technologies, products and solutions, as well as efficiency savings, have been reported. However, evaluations have found that SBRI funding has not been as effective as expected in leading to the commercialisation of new products or technologies.

US SBIR was originally established in 1982 to address two identified shortcomings in the US funding landscape. The first shortcoming was the low participation rate of small businesses in federal R&D funding. The second was that federal government R&D needs were not being addressed by universities and large businesses. In 1992 a complementary programme was created, the Small Business Technology Transfer (STTR), seeking to foster technology transfer through cooperative R&D between small businesses and research institutions. In recent years, the SBIR and STTR programmes are often brought together under the brand “America’s Seed Fund”.

A distinctive characteristic of the US system is that, through the Small Business Innovation Development Act, participating federal agencies are obligated to commit a fixed proportion of their extramural R&D budget to SBIR and STTR. Agencies with a budget greater than $100 million per year are required to commit a minimum of 3.2% of their extramural R&D budget to SBIR awards. Agencies with a budget greater than $1 billion per year are required to commit 0.45% of their extramural research budget to STTR awards.

SBIR remains the largest innovation programme for small businesses in the United States, with a budget approximately seven times larger than that of STTR. In 2017, $2.7 billion was delivered through SBIR, while $368 million was delivered through STTR. US SBIR has inspired similar initiatives around the world, in countries including The Netherlands, Finland, Ireland and the UK.

Opportunity areas for SBRI

Based on the evidence reviewed, opportunity areas for UK SBRI were identified in four key dimensions: (i) policy goals; (ii) management and coordination; (iii) funding; and (iv) monitoring and evaluation.

i. Policy goals

• There appear to be opportunities to more clearly outline a process to define the policy goals for each public organisation using SBRI. Crucially, there is a need to clearly establish whether the programme is to be used to enable the development of new technologies (strategic goals) or to support existing technologies (general goals).
• As discussed in Sections 2 and 3, UK SBRI has primarily adopted a general approach, while US SBIR has adopted a more strategic approach to public procurement of innovation. In 2016, around two-thirds of SBRI contracts were estimated to have been directed at operational challenges and one-third at policy challenges.
• A more strategic approach might require translating identified innovation challenges into functional specifications (such as new or improved levels of technology performance) that would become the stretch goals of funded projects. Evidence suggests that this translation would require specialised technological expertise and markets that, if not available within government, could be gathered through focus groups and networks of experts.

ii. Management and coordination

• Although some flexibility is recommended in research procurement programmes to reflect the missions of each particular agency, recent evaluations have highlighted opportunities for SBRI to more systematically share effective practices in order to improve programme outcomes. Dialogue among procurement offices in different agencies, and coordination with those in charge of national innovation programmes and industrial strategies, could help to exploit complementarities.
• The impact of SBRI might be enhanced by complementing it with technical and advisory support. In the US, recent evaluations have highlighted that some federal agencies in the US have been able to enhance the effectiveness of SBIR by complementing it with: pre-proposal technical consultations, commercialisation assistance, mentoring, technology acceleration, incubator programmes and networking activities.
• The role of programme managers has been emphasised across evaluations. Managers with strong backgrounds in the commercialisation of technology and knowledge of other business support measures are found to be better positioned to support specific company outcomes and overall programme goals.

iii. Funding

• Adopting a strategic approach requires long-term funding. The 2017 independent evaluation by David Connell (Judge Business School, University of Cambridge) suggested the establishment of a centralised fund, including a Phase 3 award for commercialisation (as already provided by UK SBRI Healthcare) and agency management costs (as generally provided in US SBIR). Connell suggested that the fund should be overseen by a National SBRI Board comprising public and private actors.
• Increasing the value of Phase 2 contracts has been identified as an effective way to enhance companies’ achievements. US SBIR introduced this change in 2011, resulting in more favourable evaluations thereafter.

iv. Monitoring and evaluation

• In contrast with US SBIR/STTR, UK SBRI lacks a centralised database for the programme. Evaluations suggest that building a publicly available database containing standardised information from the different SBRI programmes could not only improve the transparency of the programme but also help to inform programme design and management.
• Recent studies of UK SBRI have emphasised the need for an improved evaluation framework. Monitoring and evaluation are also often mentioned in evaluations of US SBIR programmes as areas for improvement. In US SBIR evaluations, particular emphasis has been placed on the need to improve metrics and monitoring of long-term outcomes, such as commercialisation.

A key limitation of this note is that it has relied primarily on existing evaluations and studies rather than on primary research. Future work could focus on characterising projects funded by UK SBRI in terms of their technology focus areas and their contribution to particular innovation goals of funding agencies, in comparison with US SBIR. It would be interesting, for example, to better understand the extent to which research funded by SBRI in one technology has supported the scale-up of other technologies. Finally, future work could be undertaken to better understand the role of technology diffusion programmes, such as the Small Business Technology Transfer (STTR), in complementing and enhancing the impact of technology development programmes such as US SBIR and UK SBRI.