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Gender and innovation at the US National Institutes of Health

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Abstract

This paper presents a systematic empirical study of covariates associated with the success of NIH Phase I SBIR-funded research projects, where success is defined in terms of the small, entrepreneurial firm conducting the Phase I research subsequently receiving a follow-on Phase II research award. We find that women-owned firms are especially disadvantaged in this regard. Our findings suggest that SBIR program managers consider recommendations to overcome these disadvantages. Our recommendations could enhance the rate at which follow-on Phase II research projects are funded and possibly the rate at which the developed technologies are commercialized.

Plain English Summary

Women entrepreneurs who are awarded Small Business Innovation Research Phase I Awards are less likely than male entrepreneurs to receive follow-on Phase II Awards. We investigate whether women-owned small, entrepreneurial firms, funded through Phase I Small Business Innovation Research awards, are more or less successful than male-owned firms in obtaining follow-on Phase II funding. From an empirical examination of 2059 National Institutes of Health (NIH) funded Phase I research projects, of which 12% are in woman-owned firms, woman-owned firms are less likely to receive follow-on Phase II research funding. In response, we suggest that woman-owned firms increase the diversity of their research base through a research partnership with a university. Thus, the principal finding of this study is our policy recommendations for how NIH can improve the Phase I to Phase II success rate of its funded research to small firms.

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Notes

  1. https://hbr.org/2013/08/how-women-drive-innovation-and

  2. https://www.nih.gov/about-nih/what-we-do/nih%E2%80%A6turning-discovery-into-health%C2%AE

  3. The USPTO report (2019, p. 3) goes on to state: “Recent research from Opportunity Insights, a research team based at Harvard University, shows disparities in opportunity across gender, race, and income. The researchers find that women are among the “lost Einsteins” — people who would contribute valuable inventions had they had early exposure to innovation and inventor role models.”

  4. Relatedly, Amoroso and Audretsch (2022) found that women-founded European firms are less research and development (R&D) intensive than their counterparts.

  5. We have written about the Small Business Act of 1953, the 1982 Act, and the SBIR program many times; thus, some duplication of text is inevitable. See, for example, Link and Van Hasselt (2023).

  6. See Leyden and Link (2015).

  7. Congress’ legislative emphasis in response to the productivity slowdown was not entirely focused on small firms. As explained in detail by Leyden and Link (2015), Congress focused on several sectors of the economy by initiating the Bayh-Dole Act of 1980, the Stevenson-Wydler Act of 1980, the R&E tax credit of 1981, and the National Cooperative Research Act of 1984.

  8. The following institutional description of the SBIR program draws directly from https://www.sbir.gov/about and from Link and Van Hasselt (2023).

  9. See https://seedfund.nsf.gov/fastlane/definitions/. “A member of any of the following groups: Black Americans, Hispanic Americans, Native Americans, Asian-Pacific Americans, Subcontinent Asian Americans, other groups designated from time to time by the Small Business Administration (SBA) to be socially disadvantaged, and any other individual found to be socially and economically disadvantaged by SBA pursuant to Sect. 8(a) of the Small Business Act, 15 U.S.C.; 637(a).”.

  10. See https://www.sbir.gov/about. “Phase I. The objective of Phase I is to establish the technical merit, feasibility, and commercial potential of the proposed [research] efforts and to determine the quality of performance of the small business awardee organization prior to providing further Federal support in Phase II. SBIR Phase I awards are generally $50,000 – $250,000 for 6 months (SBIR) or 1 year. Phase II. The objective of Phase II is to continue the R/R&D efforts initiated in Phase I. Funding is based on the results achieved in Phase I and the scientific and technical merit and commercial potential of the project proposed in Phase II. Typically, only Phase I awardees are eligible for a Phase II award. SBIR Phase II awards are generally $750,000 for 2 years.” A discussion of the award criteria is at https://grants.nih.gov/grants/policy/review-guidelines/R41-R42-R43-R44-guide-for-reviewers.htm and https://grants.nih.gov/grants/policy/review-guidelines/1R44-SBIR.htm. See footnote 14.

  11. See https://www.sbir.gov/about. “Phase III. The objective of Phase III, where appropriate, is for the small business to pursue commercialization objectives resulting from the Phase I/II [research] activities. The SBIR programs do not fund Phase III. At some Federal agencies, Phase III may involve follow-on non-SBIR funded R&D or production contracts for products, processes or services intended for use by the U.S. Government.”

  12. While there has been research on characteristics of SBIR-funded firms that have successfully commercialized their new technology, that is, firms that were successful in transitioning their Phase II technology to a commercialized innovation (e.g., Link and Ruhm, 2009; Link and Scott, 2010; Link and Van Hasselt, 2023), there is a conspicuous void of information about the characteristics of firms that have successfully moved from Phase I to Phase II research. In other words, the existing SBIR program empirical literature is limited; it is conditioned on the Phase I to Phase II process being successful.

  13. Eleven public-sector agencies and organizations currently participate in the SBIR program. They are (alphabetically): the Departments of Agriculture (USDA); Commerce (DOC); Defense (DOD); Education (ED); Energy (DOE); Health and Human Services (HHS) of which the National Institutes of Health (NIH) is a part; Homeland Security (DHS); Transportation (DOT); the Environmental Protection Agency (EPA); National Aeronautics and Space Administration (NASA); and the National Science Foundation (NSF). The other agencies studied by the NRC were DOD, DOE, NASA, and NSF.

  14. As referenced in Gallo (2021, p. 5), the 2019 Small Business Innovation Research (SBIR) Program Policy Directive “provides agencies with the authority to issue an award that exceeds this amount by as much as 50% … [A]gencies may request a waiver from the SBA [Small Business Administration] to exceed the Phase II award [and Phase I award] guideline by more than 50% for a specific topic. In general, the period of performance for Phase II awards is not to exceed two years, though agencies may allow for a longer performance period for a particular project. Agencies may make a sequential Phase II award to continue the work of an initial Phase II award. The amount of a sequential Phase II award is subject to the same Phase II award guideline and agencies’ authority to exceed the guideline by up to 50%. Thus, agencies may award up to $3 million, adjusted for inflation, in Phase II awards for a particular project to a single recipient at the agency’s discretion, and potentially more if the agency requests and receives a waiver from the SBA.” As of January 5, 2022, NIH may exceed the normal maximum funding amounts ($275,766 for Phase I awards and $1,838,436 for Phase II awards) for projects on special topics. See https://grants.nih.gov/grants/guide/notice-files/NOT-OD-22-043.html.

  15. Although not mentioned in Senator Ehlers’ report, the SBIR program was previously initiated as part of the Small Business Innovation Development Act of 1982 (hereafter, the 1982 Act), Public Law 97–219, to assist specifically small firms cross the Valley of Death. See Wessner (2005).

  16. See https://commonfund.nih.gov/diversity.

  17. Currently the NRMN is focused on “developing a national network of mentors and mentees from all biomedical disciplines relevant to the NIH mission to provide mentorship, professional development, mentor/mentee training, networking and resources to individuals from the undergraduate to early career faculty levels.” See https://commonfund.nih.gov/diversity.

  18. See footnote 10 and the related text.

  19. See https://www.nsf.gov/statistics/randdef/.

  20. We thank John Jankowski, Director of the R&D Statistics Program at NSF, for sharing with us his professional view that proof of concept research probably “falls in the end of the applied research spectrum.” For reference, the OECD’s Frascati Manual does not define proof of concept research.

  21. See www.sbir.gov.

  22. As discussed below, of those awards, the number of employees in the funded firm, which is a proxy for the human capital embodied in the firm, information was available for 2059 awards. We thank Farhat Chowdhury for assembling these employment data.

  23. We do not have information on firms that completed a Phase I project and then applied for a Phase II award but did not receive funding within the time period of our data. Also, a limitation of our dependent variable is that PhaseIIAward = 0 could refer to a firms applying for a Phase II award and not receiving that award, or a firm that did not apply for a Phase II awards. Data are not available to make such a distinction.

  24. The SBA database does not provide information on the number of owners of the firm. The Phase I award information is “yes” or “no” under the heading “Woman Owned.”.

  25. A firm might use a portion of its Phase I award to add additional researchers to its employee base, but such information is not available in the SBA database.

  26. The number of control variables is delimited by available Phase I project information in the SBA database.

  27. See footnote 10.

  28. See footnote 14.

  29. NIH issues Notices of Special Interest (NOSI) to “stimulate grant-supported research in high-priority and high-opportunity areas of science.” See https://www.niaid.nih.gov/research/notice-special-interest-nosi-sop.

  30. As noted in Table 1, PhaseIAwardAmt and Employ enter the model as natural logarithms to account for any nonlinearly as well as for diminishing returns.

  31. The study of the probability of commercialization from SBIR Phase II awards by Link and Scott (2010) reports no statistical relationship between that probability and the amount of the Phase II award.

  32. These results are available on request from the authors.

  33. These countries are South Africa in 1993, Turkey in 1995, Australia in 1996, Korea in 1998, Japan in 1999, Taiwan in 1999, UK in 2001, The Netherlands in 2005, and New Zealand in 2012. See Link and Van Hasselt (2023).

  34. Menter (2022) showed that gender diversity positively affected innovative activity at German universities.

  35. Link (2015) showed that over 35% of Phase II research project that included a university research partner did so to build their human capital (i.e., the university involvement included faculty members and graduate student researchers). Assuming rationality on the part of such Phase II researchers, this strategy might also be relevant for Phase I research projects.

  36. Such advice might have an immediate application. Hardin et al. (2020) report that as of 2019, 25 states have programs to match a Phase I SBIR award to a firm in the state in an effort to increase the probability of it receiving a Phase II award. The SBIR Phase I Matching Funds Program in North Carolina, for example, was authorized in 2005. The purpose statement of the North Carolina program, which is similar to matching grant programs in other states, was (Hardin et al., 2020, p. 5): “… to foster job creation and economic development in North Carolina by increasing the competitive position of North Carolina small businesses in attracting SBIR grant funding, and to provide an incentive for Phase I award-winning firms to participate in the more substantial Phase II program. The goals of the Matching Program [include to] increase the intensity of the research conducted under Phase I, making North Carolina small businesses more competitive for Phase II funding.” Thus, state program managers might think in terms of a minimum critical employment level when advising small firms to apply for a Phase I award, or they might take into account such a metric when allocating state matching funds.

  37. We thank an anonymous reviewer for urging us to emphasize this point.

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  1. Department of Economics, University of North Carolina at Greensboro, Greensboro, NC, USA

    Farhat Chowdhury, Albert N. Link & Anne Beeson Royalty

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  1. Farhat Chowdhury
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Chowdhury, F., Link, A.N. & Royalty, A.B. Gender and innovation at the US National Institutes of Health. Small Bus Econ 61, 1543–1553 (2023). https://doi.org/10.1007/s11187-023-00740-y

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