aside 2.5% of the extramural R&D budgets of the largest federal science agencies for funding R&D by small businesses; it currently runs at over $1 billion per year.² Table EL-1 shows the overall trend. SBIR encompasses three phases: feasibility, development, and commercialization. SBIR has been reviewed and evaluated a number of times over the course of its existence.³ The National Research Council is currently undertaking a new assessment of the program.⁴

STTR was established in 1992 to encourage small businesses to partner with research institutions in R&D and commercialization.⁵

Although there has been debate over the years about the impacts of these programs and the appropriate evaluation metrics, past assessments have been positive overall. Political support also has been very strong, with a number of technical changes having been recommended and enacted over the years.

Possible federal actions to improve and extend these programs include the following:

• Bridge the funding gap between phase I and phase II awards provided by the SBIR program.⁶

• Increase the number of phase II SBIR awards at the expense of phase I awards.⁷

• Regularly assess SBIR program results and compare with the Department of Defense (DOD) Fast Track results, and assess the costs and benefits of better integrating SBIR awards in the development of “clusters” around universities and technology parks.⁸

• Create a National Institute of Innovation that would provide venture capital for innovative startup companies to smooth the peaks and valleys of private-sector venture-capital flows.⁹ A similar idea, called the Civil-