Decades of lost potential in defense research and development

The Small Business Innovation Research (SBIR) program was established in 1982 to provide non-dilutive funding to American small businesses developing technologies critical to national interests. Designed as a pathway for innovation, the program funds early-stage concepts through Phase I and prototype development through Phase II, with the ultimate goal of transitioning technology into government use.

However, analysis of publicly available data suggests the program has increasingly drifted from its original purpose. A significant share of funding has been captured by repeat participants, often referred to as “SBIR mills,” which repeatedly secure awards while limiting opportunities for truly small and nontraditional firms to enter the federal market.

The article highlights concerns around outdated size standards, bureaucratic barriers to entry, and incentive structures that prioritise repeat awardees over commercialisation and real-world transition. It also explores proposed reforms, including stricter revenue thresholds, caps on lifetime Phase I and Phase II funding, and reserved opportunities for first-time entrants.

As debate continues around the future of the SBIR program following its lapse in September 2025, the discussion raises broader questions about how government innovation funding can better support competition, commercial growth, and national security outcomes.

Read more here.