Air Force SBIR/STTR ProgramEconomic Impact Analysis, 2015

Moderator

Ray Friesenhahn, TechLink

Speakers

James A. Sweeney III, Air Force SBIR/STTR Program

Dr. Will Swearingen, TechLink

Brian Lewandowski, U. of Colorado Boulder

National SBIR/STTR Conference, June 17, 2015

VIDEO

Purpose of Study

Examine economic outcomes and impacts from all Air Force SBIR/STTR Phase II awards completed during 2000-2013

$4 billion, 4,524 contracts, 1,750 companies

Quantify the Program’s overall contribution to the national economy and defense mission

Identify and highlight success stories

Significance of Study

First-ever study of the comprehensive economic impacts of a federal SBIR/STTR program

Enables Air Force SBIR/STTR Program to understand its impacts On national economy On defense mission

Policy implications for other SBIR/STTR programs

Timeline of Study

Phases Apr ‘14

May ‘14

Jun ‘14

Jul ‘14

Aug ‘14

Sep ‘14

Oct ‘14

Nov ‘14

Dec ‘14

Jan ‘15

Feb ‘15

Mar ‘15

Data Gathering

Data Analysis

Final Report

Data Gathering

Team of 4 market researchers contacted all AF SBIR Ph. II recipients with contracts completed 2000-2013

Basic questions:

Total sales, new products and services (including R&D) related to AF SBIR/STTR-developed technology?

Total military sales? Other sales? (Licensing income, sales by

licensees or spin-outs)

Other economic impacts? (Outside investments in company, sale of company)

Data-Gathering, cont.

High response rate: 96% of awards

Reasons: Purpose and value of study clearly communicated Official letter from Air Force SBIR/STTR Program Pledged confidentiality Concise survey Persistent researchers!

Commercialization Results

58% of SBIR/STTR Phase II contracts resulted in sales or other revenue

38% did not (yet) result in commercialization

4% of awards: No information (companies refused, were non-responsive, or no longer exist)

Sales by Category

Sales from Air Force SBIR/STTR Ph. II Contracts = $14.7 Billion

43.08%

29.86%

24.13%

2.95%

Commercial Product SalesMilitary Product SalesFollow-on R&D ContractsOther: Royalties, sales by licensees & spin-outs

Sales Figures Understated

Sales figures understate the economic impact:

Some companies wouldn’t respond, and some sales information unavailable: Company defunct, acquired, corporate memory lost, records no longer exist, etc.

Licensees and spin-out companies: Generally would not provide sales information

Inflation: Dollar in 2013 worth 35.3% less than a dollar in 2000

Other Economic Impacts

Independent validation of value of Air Force SBIR/STTR-developed technology…

Outside investments in company

= $1.9 B

217 companies received VC/Angel funding

Acquisitions of SBIR/STTR companies = 447

Based primarily on Air Force SBIR innovations

Other Economic Impacts, cont.

Alternative modes of commercialization: Technologies licensed to other companies

= 180

Spin-off companies launched = 125

Technologies commercialized by spinouts= 147

Commercialization success inversely related to # of awards (Tiers reflect all SBIR/STTR awards, any agency)

No. of Awards and Commercialization Success

Tier 1: 1-4 Awards

Tier 2: 5-9 Awards

Tier 3: 10-34 Awards

Tier 4: 35-99 Awards

Tier 5: 100+ Awards

$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

Average Sales per Contract

Top Tier

Tier 1 Companies (1-4 total SBIR/STTR awards, any agency)

• 4 of the “Top 5” companies in terms of sales• 10 of the 23 companies with more than $100M in

sales

SBA “Underserved States” most Successful

SBA “underserved states” had better track record of commercialization success

• SBA States: $4.1 M sales per award (28% better)

• Other States: $3.2 M sales per award

Underserved States, cont.

5 SBA underserved states among “Top 6” performers in Air Force SBIR/STTR Program (based on average revenues per award)

CON-NECTICUT

HAWAII SOUTH CAROLINA

KENTUCKY UTAH WEST VIRGINIA

$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

Underserved States, cont.

Despite commercialization success, companies from SBA underserved states won far fewer SBIR awards per capita

• On an equall per capita basis, underserved states would have received 2.5X more total SBIR/STTR awards

• Similarly, these states would have received 4X as many Air Force Phase II awards

Changes needed in SBIR outreach and awarding?

VIDEO

Economic-Impact Analysis

Business Research Division, Leeds School of Business, University of Colorado Boulder

Analyzed data using national IMPLAN model

Examined both $4B in R&D activity and $14.7 B in sales

Determined multiplier effects on national economy

• Total economic output, employment, labor income, value added

About IMPLAN

Well-established input-output model for studying changes in an economy

Based on Nobel Prize-winning economic research

Widely used by governments and academia to study economic impacts

Enables highly detailed analysis

Distinguishes between 536 industry sectors based on company NAICS codes

Each sector has distinct multipliers, based on industry patterns

IMPLAN updated annually with data from US government

Key Terms Defined

Economic OutputThe total gross value of production. Unlike value added, gross output includes intermediate goods and services.

Employment (job years)Equates to one job in one year

Labor IncomeTotal compensation of employees (wages and benefits) and sole proprietors (profits)

Value Added The contribution of an industry or region to total GDP; equals gross output minus intermediate input costs

Key Terms Defined, cont.

Direct EffectInitial economic activity (e.g., expenditures, sales) by a company or industry

Indirect EffectThe economic activity created by inter-industry purchases of materials and components in its specific supply chain

Induced EffectEconomic activity derived from workers spending their earnings on goods and services in the economy

Economic Impacts I

Economic Impact of AF SBIR/STTR Ph. II R&D Activity, 2000-2013

Impact TypeEmployment Employment Labor Income Labor Income Value Added Output(Job Years) (Av. Per Year) (In Billions) Per Job (In Billions) (In Billions)

Direct Effect 17,978 1,284 $1.64 $91,045 $2.07 $3.99Indirect Effect 17,806 1,272 $1.06 $59,609 $1.78 $2.85Induced Effect 23,931 1,709 $1.15 $48,163 $2.03 $3.67Total Effect 59,715 4,265 $3.85 $64,486 $5.88 $10.51

Economic Impacts II

Economic Impact of Subsequent Company Sales, 2000-2013

Impact TypeEmployment Employment Labor Income Labor Income Value Added Output(Job Years) (Av. Per Year) (In Billions) Per Job (In Billions) (In Billions)

Direct Effect 47,359 3,383 $4.6 $96,152 $6.79 $14.69Indirect Effect 55,312 3,951 $3.6 $64,933 $5.95 $11.60Induced Effect 72,124 5,152 $3.5 $48,169 $6.11 $11.07Total Effect 174,795 12,485 $11.6 $66,474 $18.85 $37.36

Total Economic Impacts

Impact TypeEmployment Employment Labor Income Labor Income Value Added Output(Job Years) (Av. Per Year) (In Billions) Per Job (In Billions) (In Billions)

Direct Effect 65,337 4,667 $6.19 $94,747 $8.86 $18.68Indirect Effect 73,118 5,223 $4.65 $63,636 $7.72 $14.44Induced Effect 96,056 6,861 $4.63 $48,167 $8.14 $14.74Total Effect 234,511 16,751 $15.47 $65,968 $24.73 $47.87

Total Economic Impact of AF SBIR/STTR Ph. II R&D Activity and Subsequent Company Sales, 2000-2013

VIDEO

Conclusions

Air Force SBIR/STTR Program has a significant national impact $12 economic impact for every SBIR/STTR Phase II

contract $1

Has helped stimulate the US economy, created jobs

Has resulted in innovative technologies widely used in US defense mission

Technology generated has saved tens of thousands of lives and improved everyday life for the US public

Total impacts continue to grow exponentially