Here’s an article in the Defense Acquisition Review Journal, Innovation Transition Success: Practice Doesn’t Make Perfect.
A SBIR project is considered successful when the product is commercialized. Commercialization occurs when a project progresses beyond seed funding through SBIR to longer term governmental or commercial funding. Transition into Phase III represents this commercialization; programs in Phase III transition into the broader Service branches or agencies that need them (Bresler, 2018). Air Force SBIR programs from 2015 to 2018, which represents our data set [n = 443], had a Phase II to Phase III transition rate of 8.8% (Blake, 2020; Rask, 2019).
… The primary finding of this article relates to small business size; smaller businesses have a statistically significant transition advantage over their larger counterparts. Firms with 31 or fewer employees (n = 217) had a transition rate 2.6% higher than firms with 32 to 499 employees (n = 215). Our second finding relates to experience: no evidence supports a hypothesis that experience working with the government improves a firm’s transition performance. Firms with an average of five contracts with the government (n = 217 contracts) had significant improvement in performance (commercialization) when compared to those with an average of 73 or more
contracts with the government (n = 215 contracts).
In the chart below, the authors summarize the results according to joint capabilities areas (JCA). I’m sure there’s hundreds of other breakouts the authors could have done but didn’t. In the chart, it looks like Force Support was more likely to transition and Command and Control less likely, but their observations were also so low that there wasn’t much statistical confidence.
Overall, I didn’t see any clear cut findings in the paper. However, the authors rejected their reasonable hypothesis that firms with more govcon experience would be better at transitioning into Phase III than inexperienced firms:
Our initial hypothesis was that small business commercialization rates will improve as firms gain experience working with the government. Our results did not support that hypothesis… Consistent with the literature, we find that smaller companies perform better than larger companies.
Maybe that make sense. Small companies who want to stay small and churn through small business contracts can be expected to stay in the sample pool for a long time. Other firms either make it or break it and so exit the pool. Looking at such a short window might impact these results.
Another point is that a Phase III award may not be indicative of commercialization. For example, a SBIR firm may have successfully sold to DoD as a subcontractor, which would not appear in SAM.gov data. Perhaps a third of SBIR awards are actually done by primes themselves, and I presume these contracts are excluded from the analysis.
Another thing that matters is the value or impact. Getting $100 from a program office in Phase III and then dropping out of govcon is different than getting a major Phase III and transition to recurring revenue at scale.
The authors were surprisingly opaque about what their dataset actually constituted, and whether it was received from SAM.gov, AFWERX, or otherwise. So, like any regression or descriptive analysis of complex data with few data points — take with a grain of salt.
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