Publications
Publications
- 2025
- HBS Working Paper Series
Small Business Innovation Applied to National Needs
By: Kyle Myers, Lauren Lanahan and Evan E. Johnson
Abstract
Small businesses have long supplied a disproportionate share of major innovations in the United States. We review a centerpiece policy on this topic: the U.S. Small Business Innovation Research (SBIR) program. We trace its legislative history and summarize program evaluations over the past four decades. Using newly matched data on SBIR awards and venture capital investments into small businesses, we show that, despite often being compared to venture-backed businesses, SBIR-backed businesses pursue very different strategies. We use simple economic theories to motivate the SBIR program as a vehicle for the government to invest in small-scale, well-defined, but risky technologies that have large externalities, and we highlight a number of case studies consistent with this framework. Because the motivating friction lies at the level of ideas, our perspective encourages future evaluations to determine how the SBIR program influences not just who does the inventing, but what gets invented. Looking forward we discuss how rising industrial concentration and the diffusion of artificial intelligence may reshape the program’s comparative advantage in the innovation policy toolkit.
Keywords
Small Business; Innovation and Invention; Government Legislation; Entrepreneurial Finance; Business and Government Relations
Citation
Myers, Kyle, Lauren Lanahan, and Evan E. Johnson. "Small Business Innovation Applied to National Needs." Harvard Business School Working Paper, No. 25-062, June 2025.