This dissertation examines the role of public investments in inducing small firms to develop risky, early-stage technologies. It contributes to expanding our understanding of the consequences of research, innovation, and entrepreneurship policies and programs by investigating in more depth the effect of the Small Business Innovation Research (SBIR) program on the innovation effort, ability to attract external capital, and other metrics of post-entry performance of small business start-ups using a new sample and estimation approach. Unlike prior R&D subsidy studies that concentrated almost exclusively on European countries, this dissertation focused on small business start-ups in the United States using a new scientific survey of new firms. It integrated the Kauffman Firm Survey (KFS) from the Ewing Marion Kauffman Foundation with the SBIR recipient dataset from the U.S. Small Business Administration (SBA) and used advances in statistical matching to achieve better comparability between the treated and control groups of small business start-ups. The integrated KFS-SBA dataset, which contains both recipient and non-recipient small firms, and statistical matching allowed us to empirically construct the counterfactual outcomes of SBIR recipients. This dissertation balanced the pre-treatment characteristics of SBIR recipients and non-recipients through propensity score matching (PSM). It constructed the comparison sample by identifying non-recipients with nearly identical propensity scores as those of SBIR recipients. Consistent with the propensity score theorem, observations with the same distribution of propensity scores have the same distribution of observable characteristics. PSM made the comparison and treatment samples homogenous except in SBIR program exposure, making the fundamental assumption of ignorability of treatment assignment more plausible. Using the realized outcomes of observationally similar non-recipient start-ups as the counterfactual outcomes of SBIR recipients, we found empirical evidence of the input additionality effect of the SBIR program. Had they not applied for and granted SBIR R&D subsidies, recipient start-ups would have spent only $185,000 in R&D, but with SBIR their R&D effort was significantly increased to $663,000, on average. The treatment effects analyses also found a significant positive effect of SBIR on innovation propensity and employment. However, it appears that public co-financing of commercial R&D has crowded-out privately financed R&D of small business start-ups in the United States. A dollar of SBIR subsidy decreased firm-financed R&D by about $0.16. Contrary to prior SBIR studies, we did not find any significant "halo effect" or "certification effect" of receiving an SBIR award on attracting external capital. However, we discovered a different certification effect of the SBIR program: SBIR grantees are more likely to attract external patents. This finding also confirms that innovation requires a portfolio of internal and external knowledge assets as theorized by David Teece and his colleagues. This dissertation's empirical results may be relevant to the Small Business Administration, SBIR participating agencies, the U.S. Congress, other federal, state and local policymakers, small high-tech start-ups, and scholars in the field of science, technology, and innovation policy.

This dissertation examines the role of public investments in inducing small firms to develop risky, early-stage technologies. It contributes to expanding our understanding of the consequences of research, innovation, and entrepreneurship policies and programs by investigating in more depth the effect of the Small Business Innovation Research (SBIR) program on the innovation effort, ability to attract external capital, and other metrics of post-entry performance of small business start-ups using a new sample and estimation approach. This study integrated the Kauffman Firm Survey from the Ewing Marion Kauffman Foundation with the SBIR recipient dataset from the U.S. Small Business Administration and used advances in the micro-econometrics of program evaluation to empirically construct the counterfactual outcomes of SBIR recipients. We found empirical evidence of the input additionality effect of the SBIR program. The treatment effects analyses also found a significant positive effect of SBIR on innovation propensity and employment. However, it appears that public co-financing of commercial R&D has crowded-out privately financed R&D of small business start-ups in the United States. A dollar of SBIR subsidy decreased firm-financed R&D by about $0.16. Contrary to prior SBIR studies, we did not find any significant “halo effect” or “certification effect” of receiving an SBIR award on attracting external capital. What we discovered is a different certification effect of the SBIR program: SBIR grantees are more likely to attract external patents. This finding confirms that innovation requires a portfolio of internal and external knowledge assets as theorized by David Teece and his colleagues.

Of late, technology entrepreneurship has been receiving growing importance as a means of contribution to national economic growth, both from Empirical Researchers and Policy Makers. According to NASSCOM, India has emerged as the third largest base for high-tech start-ups in the world. Although there is a surge in start-up creation rates in India, very little is known about the vital factors that are required for these star-ups to survive, sustain and grow into large enterprises. This study reviews the entrepreneurial, firm-specific and external environment specific aspects that influence the key lifecycle stages of high-tech star -ups and identifies the key factors that influence each of the milestones. There are very few studies in this domain that have examined the unique features and influential factors of different lifecycle stages of start-ups in the context of emerging economies like India. This limited exploration on the structure, process and strategies adapted by high-tech start-ups has resulted in insufficient understanding about the high-tech start-up lifecycle. This study therefore, attempts to fill these gaps. Accordingly, the objectives of this study are to determine the factors that influence the creation, survival and growth of the high-tech start-ups operating out of India. Further, an examination of what factors influence and impact the entire lifecycle of high-tech start-ups is also carried out – to obtain an integrated perspective on the lifecycle of high-tech start-ups. Primary data gathered from 275 high-tech start-ups, operating at different stages of the lifecycle formed the basis of the present study. To obtain additional insights on the factors influencing the milestones of the high-tech start-up lifecycle, the available data are analyzed against three segments – based on the target market segment that these start-ups focused on (B2B or B2C), based on the region of operations of the start-ups and based on whether the founding team had transnational work or start-up exposure or not. Our findings indicate that age and technical education of the entrepreneurs (from entrepreneur-specific perspective), the R&D and financial capitalization capabilities of the start-ups (from firm-specific perspective) and the external ecosystem parameters such as a robust SDP growth rate, presence and occurrence of VC funded deals in the region of start-ups operations have an influence on the high-tech start-up lifecycle in India. The findings of the study formed the basis to derive implications for entrepreneurs, other ecosystem stakeholders and policy makers.