The Government as Venture Capitalist: The Long‐Run Impact of the SBIR Program

Government programs to finance small firms have attracted little empirical attention. This article examines the largest U.S. initiative, the Small Business Innovation Research program. Using a unique database, the author shows that program awardees grew significantly faster than matched firms over a decade and were more likely to attract venture financing. The superior performance of awardees was confined to firms in regions with substantial venture capital activity and was pronounced in high-technology industries. Multiple awards did not increase performance. These results suggest that awards played an important role in certifying firm quality but also that distortions of the award process occur. Copyright 1999 by University of Chicago Press.