Estimating Outcomes and Impacts from Innovation Programs: The Case of Air Force and Navy SBIR/STTR Programs

The Air Force and Navy recently commissioned economic impact studies of their Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs, which provide funding to U.S. small businesses to promote technological innovation. The studies focused on Phase II contracts completed during the 2000 to 2013 period. These were the first comprehensive economic impact surveys of any federal agency SBIR/STTR programs. The studies provided conclusive information on the outcomes of well over 90% of the Phase II contracts. IMPLAN software was applied to company survey results to estimate overall impacts on the U.S. economy. Analysis revealed that both programs have had impressive national economic impacts. However, these studies significantly understate their contribution to the national economy because a substantial portion of the total economic outcomes will occur in the future. This paper demonstrates a conservative, statistically based methodology for estimating the future sales that can be expected from already-funded Air Force and Navy SBIR/STTR projects after the date of the company surveys. Application of this methodology shows that, for projects that have not yet generated product sales, an estimated additional 10% will eventually result in commercial products. For projects with products that have already reached the marketplace, total product sales will eventually be 83% greater than the totals reported at the time of the surveys. With the addition of the missing future sales, the total economic impact from the Air Force and Navy programs will ultimately be 51% greater than was reported. The new analysis estimates that every dollar invested in Air Force and Navy SBIR/STTR Phase II projects will eventually return $22 in economic activity.