STATEMENT
of the
Honorable Nydia M. Velázquez, Chair
House Committee on Small Business
Full Committee Hearing: “Spurring Innovation and Job Growth: An Overview of the Small Business Innovation Research (SBIR) Program”
April 22, 2009, 1 p.m.

 

As Americans, we take great pride in our ability to innovate. Let’s not forget, it was our engineers who created the Model T, our scientists who sent the first man to the moon, and our tech entrepreneurs who created the world’s favorite new distraction -- yes, we can all thank Mark Zuckerberg for Facebook.com. From cyberspace to the healthcare sector, this country has an impressive track record of innovation. While the economy may be suffering, that pioneering spirit is still alive and well. This is largely thanks to our nation’s entrepreneurs.

If we’ve learned anything from the economic crisis, it’s that the policies of the past don’t work. We need to change the way that America does business, beginning with an increased focus on small firms. Those are the companies bringing fresh ideas to the table, and new products to market. In fact, entrepreneurs produce 13 times more patents per employee than big businesses. Much of that innovation is powered by research and development grants, the largest of which is the Small Business Innovation Research, or SBIR, program.

In today’s hearing, we are going to take a look at that initiative. We will also examine its role in spurring innovation, and discuss obstacles preventing SBIR from reaching its full potential.

First established in 1982, SBIR has helped launch tens of thousands of successful research projects. Every year, the program makes a $2.2 billion investment in small firms, an infusion that gets 1,500 new companies off the ground. It also serves as a driving force behind our most inventive businesses. As a result of SBIR, we have seen breakthroughs in everything from antivirus software to wireless technology for BlackBerrys. But the program doesn’t just spark new ideas-- it helps generate jobs, too.  

High growth startups-- the kind that receive SBIR grants-- are prolific job creators. In fact, the employment growth rate for these businesses is nearly 4 times that of bigger firms. Meanwhile, 40 percent of all high tech workers-- from engineers to computer programmers-- are employed by these kinds of companies.    

The only thing more impressive than the jobs created through SBIR are the products that come out of it. Year after year, SBIR-backed businesses account for a quarter of U.S. R&D winners. And yet it is clear that the initiative has not reached its full potential. The majority of products developed through the program never make it to market. There are a number of reasons for this, not least of all being a lack of capital.

Innovation is a resource intensive process. It takes time and money to carry a new product from the laboratory to the marketplace. As a result, entrepreneurs often struggle to bridge the gap. SBIR-backed firms should have access to all the tools they need, including venture capital. At a time when capital is increasingly hard to come by, it doesn’t make sense to limit funding options for small businesses.  It should be up to entrepreneurs themselves-- not Washington bureaucrats-- to decide how these firms are financed.

Last Congress, the House passed a bill to modernize and extend SBIR. Unfortunately, that legislation never made it out of the Senate. With people losing their jobs and businesses closing their doors, programs like SBIR need to be running at full capacity, especially considering the role that entrepreneurs play in economic recovery. These are the businesses willing to take risks and help rebuild the economy. With the necessary tools, they can lay the groundwork for a better, more innovative way of doing business.