The Government as Venture Capitalist: The Long-run Impact of the SBIR Program, Issue 5753
Public programs to provide early-stage financing to firms, particularly high-technology companies, have become commonplace in the United States and abroad. The long-run effectiveness of these programs, however, has attracted little empirical scrutiny. This paper examines the impact of the largest U.S. public venture capital initiative, the Small Business Innovation Research (SBIR) program, which has provided over $6 billion to small high-technology firms between 1983 and 1995. Using a unique database" of awardees compiled by the U.S. General Accounting Office, I show that SBIR awardees grew significantly faster than a matched set of firms over a ten-year period. The positive effects of SBIR awards were confined to firms based in zip codes with substantial venture capital activity. The findings are consistent with both the corporate finance literature on capital constraints and the growth literature on the importance of localization effects.
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594 matching firms Accounting Office agencies analysis Ariel Pakes awardees Bureau of Economic Business Innovation Research capital constraints Change in Employment Change in Sales companies Corporate Technology Directory Database early-stage investments Early-Stage Venture Financing effects employment and sales entrepreneurs equity investments firms that received Gompers gopher at nber.harvard.edu high-technology firms http://nber.harvard.edu industry information asymmetries Innovation Research Program investors Josh Lerner LONG-RUN IMPACT Mark McClellan Massachusetts Michael Grossman National Bureau National Science Foundation NBER Working Papers Papers and Reprints partial subscriptions Percentile Phase II awards Private Equity publicly traded R&D spending received Phase received SBIR Phase received venture financing sample SBIR awards SBIR program set-aside SIC class SIC code significant Small Business Administration Small Business Innovation Standard Error Table three program cycles U.S. General Accounting U.S. Small Business venture activity venture capital activity venture capitalists Venture Economics venture funds venture investments venture organizations Washington zip code