Michigan?s SBIR Performance ? A Commentary

LANSING – I sincerely appreciated the recent comments by Marylyn Katz Pek, Biotechnology Business Consultants, regarding our assessment of Michigan?s SBIR performance in SBAM?s Michigan Entrepreneurship Score Card, writes Mark Clevey, Vice President for Entrepreneurial Development. As the primary contractor for the Michigan Economic Development Corporation, BBC?s job is to help Michigan small businesses win SBIR grants. Thus, the SBIR buck really does stop right at her desk.

Ms. Katz-Pek is correct about one thing: our Michigan Entrepreneurship Score Card data was collected and reported before the recent SBIR data was released by the U.S. SBA. This is an occupational hazard in the benchmarking businesses. Rest assured, criticism not withstanding, we will continue to track, benchmark and report this data over time and will be including the new SBIR data in our 2005/6 report.

What I really want to focus on, however, is this recent SBA data that Ms. Katz-Pek refers to. First of all, yes, Michigan is doing better in SBIR submission. However, while Michigan?s increase in SBIR activity was 54.7 percent, it trailed the national average by 24.1%. Moreover, from 2001 to 2004 almost every state in the nation increased their number of submitted SBIR Phase I grant proposals (a 78.3 percent increase nation wide). Many SBIR specialists attribute this increase to the efforts of the FAST Program (Federal and State Technology Transfer program). (In my humble opinion, the FAST program in Michigan is severely under funded by the MEDC).

Second, while the overall SBIR numbers are increasing on a national basis, comparing and ranking states on raw grant awards doesn?t really give a good picture of what is really going on. If we normalize the data by percentage, we get the following: (a) in 2001 2.77 percent of all proposals came from Michigan and 2.46 percent of the awards went to Michigan; (b) in 2002, 2.45 percent of all proposals came from Michigan and 2.12% of the awards went to Michigan; and (c) in 2004, 2.40 percent of all proposals came from Michigan and 2.10 percent of the awards went to Michigan. Another way to look at the data is the number of awards per 1,000 firms. On this basis, Michigan drops from 28th in 2001 to 26th in 2004. In one area Michigan did well. In 2004 Michigan won 13.8% of its proposals (the drop of -4.1 percent was better than the national average of -5.7 percent).

The bottom line is Michigan is not keeping up with the national average. Even more importantly, however, is the SBIR grant awards sited by Ms Katz-Pek as an indication of how well Michigan is doing is a measure of ?innovation,? not commercialization. None of this SBIR award data is tracking commercialization of SBIR per state ? the only measure that really matters from an economic development point of view.

In my opinion, the only SBIR grants worth having, or encouraging with State tax dollars, are those that have scientific, technical and, most importantly, commercial ?merit.? This is critically important given the recent report from the U.S. Small Business Administration and the Edward Lowe Foundation, called the ?Innovation- Entrepreneurship NEXUS,? that measures the relationship between innovation, entrepreneurship and regional economic growth and development.? The following are some of the key findings from this report:

Entrepreneurship is by nature an economic process and is a significant driver of regional economic growth. It?s not enough to just focus economic development on inventors and innovation. Entrepreneurs need to be cultivated as well, so that innovations can be turned into jobs and economic growth.

Innovative regions need entrepreneurship to more fully develop local economies. The commercializing activities of local entrepreneurs are necessary to convert a region?s innovation assets into long-term economic gain.

Developing strategies, policies and programs for leveraging the nexus between innovation and entrepreneurship, therefore, appears to be of vital importance to the competitiveness and vitality of regions. Regional development leaders are actively seeking policies and strategies that foster the nexus between innovation and entrepreneurship for their economic development portfolios.

I believe that the SBIR program is critically important and directly related to these findings. Thus, I look forward to the day when Michigan?s SBIR support program can once again be considered a ?model for the entire nation? and we become market leaders in both SBIR award and related commercialization. Ms. Katz-Pek was right about her criticism that citing data without offering suggestions for change is not helpful. Therefore, here are three suggestions that come directly from our Michigan Entrepreneurship Score Card:

(1) There needs to be a dramatic and measurable improvement in how Michigan entrepreneurs are created, retained, expanded and, most importantly, attracted;

(2) There needs to be a dramatic and measurable improvement in how Michigan entrepreneurs access capital for the research, development and/or commercialization of breakthrough technology, process and product innovations; and,

(3) There needs to be a dramatic and measurable improvement in the Innovation-Entrepreneurship NEXUS (i.e., how universities transfer the successful results of research to Michigan entrepreneurs).

Mark H. Clevey, MPA, Vice President, Entrepreneurial Development, Small Business Association of Michigan (SBAM), 222 N. Washington Square, Suite 100, Lansing, MI 48901-6158