The Multilevel Innovation Policy Mix: Three Essays on State SBIR Matching Programs

Lanahan, Lauren

The Multilevel Innovation Policy Mix: Three Essays on State SBIR Matching Programs Public Deposited

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March 19, 2019

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Lanahan, Lauren
- Affiliation: College of Arts and Sciences, Department of Public Policy

Abstract

In an effort to extend our understanding of public R&D, this study presents three essays that focus on state government R&D investment in small business innovation. Too often public support for R&D is conflated with federal policies and programs when in fact multiple levels of government have vested interest in innovation policy to strengthen the competitiveness of the economy and increase societal welfare. Taken together, these myriad sources comprise a multilevel innovation policy mix. The first essay identifies and classifies the portfolio of state programs designed to complement the federal Small Business Innovation Research (SBIR) program. It then employs a diffusion model to assess the antecedent factors associated with states adopting and maintaining an SBIR State Match program, which provides matching funds to the pool of federal Phase I recipients competing for the larger federal Phase II award. The second essay examines the efficacy of the SBIR State Match program through a state-level fixed effects model. The results indicate that the matching funds increase the Phase II success rates for firms participating in the National Science Foundation SBIR program. The third essay employs a difference-in-difference research design, examining outcomes for SBIR projects in neighboring states with and without the match program. This essay's analysis estimates the marginal effect of the matching funds on Phase II success rates by taking into account variations in the size of the state match. This study offers a new contribution to innovation policy by assessing the impact of R&D investments at the research project level rather than the firm. This study finds that the match is worth more when invested in projects whose firms have less experience with the SBIR program. The results point to a heterogeneous treatment effect; this suggests that states could be more strategic with their investments.

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