What Contributes Most to the Commercialization of SBIR-Funded NIH Projects?

SBIR Phase II awards with additional personal and/or internal business funding are more significant predictors of a technology reaching commercialization than SBIR awards with venture capital, external private equity or foreign investment, and funding from state and local governments or universities, new research shows.

In Bringing Science to Market: Commercializing from NIH SBIR Awards, Albert Link and Christopher Ruhm of the University of North Carolina at Greensboro present the results of their analysis, considering the long-term results of 405 National institutes of Health (NIH) SBIR Phase II awards over the 10-year period 1992-2001.

Of the 405 projects, which were taken from nearly 2,500 SBIR Phase II awards NIH funded during the period, 59 percent received some additional form of funding. Upon further examination, 74 percent of commercialized projects received some type of additional development funding at some point, whereas only 42 percent of the non-commercialized projects received funding.

Besides examining the source of funding, the researchers used additional control variables to predict if a project would reach the commercialization stage. The strongest predictor was if a business had previously been awarded Phase II awards for related research. Less important factors included if the awardees were female-owned and controlled businesses, were minority affiliated businesses, had performed research with universities, and had affiliations with particular separate research divisions within the NIH. Of their total sample of the Phase II projects, 51 percent eventually resulted in a commercialized product, process or service.

Link and Ruhm contend if increasing commercialization of projects is the intended outcome of the SBIR program, then it might be examined whether or not Phase II awards should be conditional upon obtaining internal matching funds.

Within the paper, the researchers also create an illustrative model to estimate the probability an SBIR-awarded project will reach commercialization based upon certain scenarios. In an example provided in the paper, if a project is not affiliated with a business with past SBIR Phase II experience, does not have internal funding, and does not have university involvement (with all other specified variables at the mean), the probability of commercialization is 26 percent. However, if this same project has internal funding at the average level of observed internal funding – all other variables remaining the same – the probability of commercialization increases to 57 percent. If all three of these variables – SBIR experience, internal funding, and university involvement are at the mean, then the probability increases to 77 percent.

Link and Ruhm further explain the caveats that exist within the working paper. First, the analysis is restricted to commercialization taking place rather than additional quantifiable information about the commercialization, such as the monetary amounts produced. Next, the data contain no information about when in each SBIR project’s lifetime it received additional funding. Finally, additional insight into the type of technology involved in each project is not provided; the researchers only indicate the technology is the recipient of an SBIR award from the NIH.

Bringing Science to Market: Commercializing from NIH SBIR Awards is available for purchase at: http://www.nber.org/papers/w14057

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