A study by Brazilian researchers in Science and Public Policy reports that since the mid-1990s, at least 20 countries have launched innovation-funding efforts modeled after the US Small Business Innovation Research (SBIR) program, an initiative created in 1982 to support the development of technology-intensive firms. As of 2021, SBIR—administered across 11 federal funding agencies—had channeled US$64 billion into 195,000 projects, with recent annual investments hovering around US$4 billion. Analogous programs in China, Germany, and South Korea have together backed more than 110,000 small-business projects. One of Brazil’s counterparts, the FAPESP Innovative Research in Small Businesses (PIPE) program, has supported roughly 4,000 projects from 2,000 companies across 166 municipalities in São Paulo State between its launch in 1997 and 2023, according to that year’s FAPESP Activities Report.
For economist Marcelo Pinho of the Federal University of São Carlos (UFSCar), the lead author of the study, SBIR marked a decisive shift in US technology policy, which had long focused research and development (R&D) funding on large corporations. “It recognized the important role small businesses can play—innovating with fewer resources and shorter time frames,” he says.
To understand how the SBIR model was replicated in different national settings, the researchers analyzed the US program alongside similar initiatives in seven countries: Germany, Brazil, China, South Korea, India, Japan, and the UK. “We found that programs like these have become a central, indispensable component of innovation policies in these nations,” says Pinho. Across most SBIR counterparts worldwide, companies engaged in R&D and innovation are offered nonrepayable grants structured in three phases. In phase 1, companies receive seed funding to test a technology’s feasibility; phase 2 moves into full development, and phase 3 progresses toward completion and, ideally, commercial rollout.
The study notes that each country has adapted the framework to suit its own priorities. “Innovation policies are rarely transplanted wholesale from one country to another. Even if they start that way, they are eventually shaped by local needs, and the programs evolve,” Pinho explains. The UK’s Small Business Research Initiative, for example, is closely tied to public procurement—a feature it shares with the US, where SBIR contracts often come from agencies like NASA and the Department of Defense, which commission targeted technologies and products. A unique feature in the British model is that companies sign agreements to develop solutions to specific technical challenges defined by the government. Another is that larger firms are eligible to compete for funds—and they have already drawn about 25% of the program’s budget.
In China, the US, and Brazil, SBIR-style projects are overseen by research funding agencies. In Japan and South Korea, this task falls to government bodies dedicated to supporting small and medium-sized enterprises. Germany stands apart: there, the program is run by the private sector. Budgets vary widely. Larger economies such as China, Germany, and Japan commit annual sums in the hundreds of millions of dollars. In the UK, India, and Brazil, the figures are far more modest. In countries with a strong tradition of industrial policy—like Japan, South Korea, and Germany—SBIR-inspired schemes are just one element in a much broader array of tools for fostering small-business innovation.
Around the world, countries have tailored SBIR-style programs to their regional needs
India’s Small Business Innovation Research Initiative, launched in 2005, focuses primarily on biotechnology startups. A distinctive requirement is that beneficiaries pay the operating agency—the Biotechnology Industry Research Assistance Council (BIRAC), under the Department of Biotechnology in the Ministry of Science and Technology—a 5% royalty on net sales of the product developed. The program also reserves the right to obtain compulsory licenses in cases of “projects of national importance.”
In the US, the original SBIR has helped launch companies that later became tech titans—including Apple, Intel, and Qualcomm. But as the program matured, it faced criticism and had to adapt. One issue was the emergence of “SBIR mills”—firms securing successive awards without delivering significant results or progressing to monetization. “At least one federal agency, the National Science Foundation, responded by imposing limits on the number of projects a single company could have approved,” Pinho notes. “But most agencies took a less restrictive approach, focusing instead on close scrutiny of firms with more than 15 funded projects over five years.”
Germany took a different approach: except for very small or young companies (under 10 years old), firms are limited to one award every three years. “There’s a built-in dilemma with the toughest restrictions,” the researcher notes. “They may discourage opportunistic behavior, but at the cost of potentially sidelining highly promising projects.”
The Science and Public Policy study drew on data from 81 scholarly articles and book chapters, along with official program documents, publicly available online, and evaluation reports. China’s Inno Fund ranks among the most impactful initiatives: it has funded 82 of the 273 companies now listed on the nation’s stock exchange—a venue typically used there for taking smaller firms public.
The paper grew out of a FAPESP-commissioned project comparing the outcomes and reach of São Paulo’s program with those of its counterparts abroad. “In Brazil, PIPE, launched in 1997, is the country’s longest-running and most consistently funded SBIR-inspired initiative,” Pinho says. In most nations, these programs operate at the national level; regional examples like PIPE are rare. The study did not examine another Brazilian effort—the Program to Support Research in Small Businesses (PAPPE)—launched by the Brazilian Funding Authority for Studies and Projects (FINEP) in the early 2000s, which has not issued a call for proposals in years.
FAPESP’s PIPE initiative remains one of the longest-running SBIR-inspired programs
“Several other nationwide initiatives—run by FINEP, the BNDES, and, most prominently, EMBRAPII—also target innovative firms, but through different channels. But historically, one of the biggest stumbling blocks for such programs in Brazil has been a lack of continuity,” says production engineer Ana Torkomian, a researcher at UFSCar and chair of the National Forum of Innovation and Technology Transfer Managers (FORTEC), who coauthored the Science and Public Policy paper.
In the research underlying the study, the team cataloged best practices from SBIR-inspired programs around the world. Chief among them was the need to track and document the trajectory of funded firms—ideally by building a dedicated database of grant activity. “That monitoring should continue even after a project ends, because in many cases, the results take time to materialize,” Torkomian notes. Another key practice is encouraging university participation, especially by supporting startups founded by faculty members and students. A third is fostering close, ongoing relationships between the funding agency and funded firms.
Paulo Schor, an ophthalmology professor at the Federal University of São Paulo (UNIFESP) and Innovation Manager at FAPESP, says the foundation closely reviews and incorporates findings from studies on PIPE. “They’ve helped us refine the program,” he explains. One recent change, for example, requires PIPE project leaders to include their entrepreneurial track record in the application’s credential summary. To gauge outcomes, Schor also searches for cases where companies have moved from prototype to market-ready product in a short time. Some of these firms have been featured at FAPESP events overseas. “It’s a way to spotlight success stories. We’ve also sought out scientific entrepreneurship fairs to showcase these companies,” he adds.
Economist Renato de Castro Garcia, of the University of Campinas (UNICAMP), who was not part of the Science and Public Policy study, analyzed the performance of PIPE-funded firms in a study commissioned by FAPESP. One of his key metrics was the number of patent applications filed with Brazil’s National Institute of Industrial Property (INPI). Garcia compared 1,476 PIPE-supported startups between 1999 and 2020 with 64,054 comparable firms that did not receive grants—a dataset totaling 65,530 businesses, representing 1% of all companies in São Paulo State and 5% of those with patent filings there. “On average, organizations that received PIPE grants doubled their patent counts,” he reports.
His analysis has been submitted to a journal, and some of the findings have been reported in a preprint coauthored with colleagues from UNICAMP and UNIFESP, posted in May 2024 on the Social Science Research Network (SSRN). Since the 2000s, Garcia notes, the research needed for innovation has become more complex, and startups have emerged as agile environments for pursuing it—often leveraging university labs and the work of undergraduate and graduate students. “Programs supporting small businesses have become a fundamental part of any nation’s innovation ecosystem,” he says.
The story above was published with the title “Inspiring innovation” in issue 353 of July/2025.
Projects
1. Regional innovation and co-invention networks in Brazil: An analysis based on patents (n° 22/01597-0); Grant Mechanism Regular Research Grant; Principal Investigator Veneziano de Castro Araujo (UNIFESP); Investment R$45,684.34.
2. Geography of innovation and the formation of innovation systems in Brazil: Conceptual foundations, empirical analysis, and policy implications (n° 21/02261-2); Grant Mechanism Regular Research Grant; Principal Investigator Renato de Castro Garcia (Institute of Economics – UNICAMP); Investment R$138,777.50.
Scientific articles
PINHO, M. et al. How much alike are Sbir-like programmes? Science and Public Policy. Apr. 2025.
GARCIA, R. et al. Unlocking Innovation: Assessing the Long-Term Impact of a SME-Oriented R&D Grants Program using the dose‒response approach. SSRN. May 2024.
