The Government as Venture Capitalist: The Long-Run Effects of the SBIR Program
Public programs to provide early-stage financing to firms, particularly high-technology companies, have become commonplace in the United States and abroad. The long-run effectiveness of these programs, however, has attracted little empirical scrutiny. This paper examines the impact of the largest U.S. public venture capital initiative, the Small Business Innovation Research (SBIR) program, which has provided over $6 billion to small high-technology firms between 1983 and 1995. Using a unique database" of awardees compiled by the U.S. General Accounting Office, I show that SBIR awardees grew significantly faster than a matched set of firms over a ten-year period. The positive effects of SBIR awards were confined to firms based in zip codes with substantial venture capital activity. The findings are consistent with both the corporate finance literature on capital constraints and the growth literature on the importance of localization effects.
Journal of Business, Vol. 72 (July 1999): 285-318.
Science, Vol. 287 (2000): 977-979 (condensed version, printed as "The Problematic Venture Capitalist").
Journal of Private Equity, Vol. 3 (Winter/Spring 2000): 55-78 (reprinted).