June 23, 2021
Subcommittee on Underserved, Agricultural, and Rural Business Development Committee on Small Business U.S. House of Representatives
Prioritizing Small Undeserved and Rural Businesses in the SBIR/STTR Programs June 23, 2021
Invent Together appreciates the opportunity to submit a statement for the record for the House Committee on Small Business Subcommittee Underserved, Agricultural, and Rural Business Development (“the Subcommittee”) hearing on “Prioritizing Small Undeserved and Rural Businesses in the SBIR/STTR Programs.” One of the goals of the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs is to foster participation in innovation by women and socially or economically disadvantaged individuals.1 Assessing the programs’ progress toward this goal and considering policy changes to continue to advance diversity in innovation are important parts of the Committee’s work to reauthorize the programs before they expire in September 2022. We thank the Subcommittee and Committee Chairs for their attention to this important issue, and for the opportunity to offer diversity-related SBIR/STTR policy recommendations.
Invent Together is an initiative supported by organizations, universities, companies, and other stakeholders dedicated to understanding the gender, race, income, and other diversity gaps in invention and patenting and supporting public policies and private efforts to close them. Over the past five years, Invent Together has convened workshops with researchers and practitioners, supported the SUCCESS Act2 and the IDEA Act3, and participated in the National Council for Expanding American Innovation (NCEAI).4 In fall 2020, Invent Together launched a public website—www.inventtogether.org—to provide a new platform and additional tools for educating and informing stakeholders about diversity in invention and patenting and related public policy efforts.
Thanks to brilliant inventors, engineers, entrepreneurs, scientists, and creators, the United States is an innovation powerhouse. When we expand who invents and patents, we create jobs, grow businesses, increase the gross domestic product (GDP), close wage and wealth gaps, and improve our position as a global leader in innovation. We will also benefit from the creation of new and different inventions.
Expanding participation in invention and patenting—and building a strong economy— will require businesses, academia, and government to each do their part to embrace American diversity and ingenuity. Federal investments in research and development—and ensuring such investments are allocated equitably—are an important component of this effort. In this statement, we provide background on the diversity gaps in invention and patenting, describe common barriers to participation in innovation, and make recommendations for improvements to the SBIR and STTR programs to foster greater participation in innovation by women, people of color, and other underrepresented individuals.
PATENT DIVERSITY GAPS
Intellectual property (IP) is critical to the U.S. economy. The United States Patent and Trademark Office (USPTO) has estimated that IP-intensive industries generate over $8 trillion— more than one-third of U.S. GDP—and support 45.5 million jobs—more than one-third of U.S. employment.
Despite the enormous significance of IP to both the economy and to individual inventors, not all Americans share equally in the opportunity to invent and patent. The USPTO and leading researchers have found that women, people of color, and lower-income individuals patent inventions at significantly lower rates than their representation in the population:
- Less than 13 percent of all inventors who hold a U.S. patent are women. 5 Women hold only 5.5 percent of commercialized patents.6
- Patenting activity by Black inventors peaked in 1899 and has not recovered.7 Black and Hispanic college graduates patent at half the rate of White college graduates.8
- Children in families in the top one percent of income are ten times more likely to patent as adults than children in the entire bottom half of family income.9 These disparities impair economic growth and U.S. leadership in innovation and deny individual members of underrepresented groups the benefits and opportunities that patent ownership creates.
These disparities impair economic growth and U.S. leadership in innovation and deny individual members of underrepresented groups the benefits and opportunities that patent ownership creates.
Closing these gaps would have significant benefits for individuals and society as a whole. Increasing participation in invention and patenting by underrepresented groups would quadruple the number of American inventors10 and increase annual U.S. GDP by almost $1 trillion.11 Research also shows that inventors with patents consistently earn higher incomes on average than inventors without patents, controlling for occupation, migrant status, and other factors. Patents also help businesses—especially small businesses and startups owned by women and people of color—access capital, attract customers and licensees, and create jobs. For example, startups that obtain a patent employ an average of sixteen more new employees after five years, compared to startups that do not obtain a patent.12 Startups with patents also have a higher likelihood of obtaining venture capital funding and loan financing, which attract additional investment and help grow businesses and create jobs.
COMMON BARRIERS TO PARTICIPATION
Women, people of color, and other underrepresented groups face numerous barriers to equitable participation in the patenting of inventions, including a lack of exposure to innovation, access to invention education, mentorship opportunities, and capital, as well as entrenched cultural issues, such as discrimination and unconscious bias.
- Exposure: Lack of exposure to inventors inhibits invention and patenting. According to a study by Harvard researchers, “Children who grow up in areas with more inventors— and are thereby more exposed to innovation while growing up—are much more likely to become inventors themselves.” 13Indeed, children whose parents are inventors are nine times more likely to become inventors,14 and “children who grow up in a neighborhood or family with a high innovation rate in a specific technology class are more likely to patent in exactly the same class.”15 Children who attend research universities also tend to patent at similar rates, suggesting “that factors that affect children before they enter the labor market, such as childhood environment and exposure to innovation, drive much of the gaps in innovation.”16
- Access to high-quality invention education is critical to help people develop the mindset necessary to become inventors. Invention education “is a term that refers to deliberate efforts to teach people how to approach problem finding and problem solving in ways that reflect the processes and practices employed by accomplished inventors.”17 While STEM education helps students develop technical skills, invention education helps students develop problem-identification and problem-solving skills, as well as an invention mindset.
- Invention education can also help children uninterested in STEM disciplines see the value of STEM skills.18 Invention education draws on multiple disciplines, including but not limited to STEM, and students’ lived experiences.19 Many students lack access to invention education because “[f]ederal education standards in K–12 continue to emphasize instruction that maintains disciplinary silos. School finance mechanisms, K–12 accountability standards, and college entrance requirements reinforce the siloed, linear approach to teaching and learning found in today’s schools” and make it difficult to implement invention education.20
- Access to STEM education is also important for developing technical skills and interest in patent-intensive fields. In light of evidence that children who are not exposed to STEM before middle school are less likely to pursue STEM careers, STEM education in primary and secondary schools can play an important role in inspiring diverse students to pursue these fields.21
- It is important to note that disparities in STEM education are only part of the reason for the patent gaps. From 1977 to 2010, the percentage of STEM degrees awarded to women increased from 20.2 percent to 33.5 percent.22 Yet this increase in STEM-educated women has not led to greater equity in patenting. According to the Institute for Women’s Policy Research (IWPR), “[W]omen’s representation in key patent-intensive STEM fields (such as engineering) may play an even larger role than women’s representation in STEM overall.”23 Thus, even as women earn a higher share of STEM-related degrees, it is critical to continue encouraging members of underrepresented groups to pursue careers in patent-intensive fields.
- Social Networks and Mentorship: Social networks and mentorship play significant roles in encouraging patenting. Social networks are key to helping inventors “evaluat[e] whether it would be worthwhile to pursue a patent” in the first place since an inventor is likely to first seek advice from his or her own peers.24 Moreover, the relative “exclusion from STEM fields” of women, people of color, and other underrepresented groups has led to limited available mentorship opportunities and networks.25 Because inventors tend to seek mentors who share similar backgrounds, and there are fewer women and people of color in positions to act as mentors for inventors, it is harder for underrepresented inventors to find inventors to mentor them.26
- Capital: According to estimates, female founders receive only 1 percent of all venture capital (VC) funding, and Black founders receive less than 2 percent.27 This massive 4 funding gap penalizes women inventors and inventors of color, who are less likely to receive venture backing for their ideas than their White, male counterparts. Funding— including federal funding—helps inventors research and develop their ideas, and eventually bring them to market. Patents are also important assets for attracting private investment capital in potential businesses. Disparities in patent rates, therefore, lead to disparities in investment rates, and vice versa.
- Workplace Culture: Discrimination against women, people of color, and other underrepresented groups in the workplace, cultural inertia in academia and industry, and unconscious bias from gender and racial stereotypes all contribute to the patent gaps.
SBIR/STTR POLICY RECOMMENDATIONS
One of the ways the federal government helps to expand participation in innovation is by funding research and development with the potential for commercialization. The SBIR and STTR programs enable small businesses to explore the potential of their inventions. This opportunity is critical for small business owners, particularly women and people of color, without equitable access to other investment capital. Congress recognized this when it established the programs, and as Congress prepares to reauthorize the programs, it should consider new policies to continue to advance the SBIR/STTR program goals. To ensure innovation funding is allocated equitably and projects are commercialized, we recommend the following:
- Expand Outreach to Underrepresented Populations
- Congress should require that the SBA and all SBIR/STTR participating agencies develop outreach and education programs focused on expanding the participation of underrepresented populations.
- Building on the success of the SBIR Road Tour and Regional SBIR Weeks, these programs should include a regular “road tour” of SBIR/STTR program managers to minority-serving institutions, such as Historically Black Colleges and Universities, and other organizations that serve underrepresented entrepreneurs.
- SBA and SBIR/STTR participating agencies should recognize diverse awardees in success stories and other public communications
- Provide Greater Assistance for First-time and Underrepresented Applicants
- First-time and underrepresented SBIR/STTR program applicants at all participating agencies should receive “Phase 0” assistance similar to the support offered by the Department of Energy.
- SBA could administer this assistance to support agencies with smaller budgets and fewer program personnel.
- Engineer Bias Out of the Application Process
- For a more equitable application review, participating agencies should increase the diversity of application reviewer pools and conduct blind reviews of technical merit sections of applications when feasible.
- The National Academy of Science should study the SBIR/STTR program application and appeals processes, including the demographics of SBIR/STTR program applicants and awardees, to identify potential biases or barriers to participation and ways to mitigate them.
- Pass the RAMP for Innovators Act
- SBIR/STTR awardees should receive assistance with commercializing their projects. Congress should pass, and the President should sign, the bipartisan, bicameral Research Advancing to Market Production (RAMP) for Innovators Act.28 The RAMP for Innovators Act would require each participating agency to designate a Technology Commercialization Official to help awardees commercialize their projects and to conduct an annual commercialization impact assessment. It would also improve the flexibility of technical and business assistance, which may be used for IP protection, and require the SBA and USPTO to enter into an interagency agreement to help awardees with IP protection.
Thank you for the opportunity to submit this statement. Invent Together looks forward to continuing to work with the Subcommittee to improve diversity and inclusion in the SBIR and STTR programs.
- See About, SBIR/STTR, https://www.sbir.gov/about.
- See P.L. 115-273, the Study of Underrepresented Classes Chasing Engineering and Science Success (SUCCESS) Act, which required the USPTO to study and report on the available data on the number of patents applied for and obtained by women, minorities, and veterans, and to provide legislative recommendations for how to increase the participation of women, minorities, and veterans in patenting and entrepreneurship activities.
- See the Inventor Diversity for Economic Advancement (IDEA) Act, S. 632/H.R. 1723, 117th Cong. (2021), which would direct the USPTO to collect inventors’ demographic data on a voluntary basis and make this information available in the aggregate for research.
- The USPTO announced within the SUCCESS Act report that they would create a council for innovation inclusiveness. In September 2020, the USPTO launched the NCEAI, comprised of representatives from industry, academia, and government, to help the USPTO develop a comprehensive national strategy to build a more diverse and inclusive innovation ecosystem by encouraging greater participation in invention and patenting by underrepresented groups. The NCEAI has also solicited input from stakeholders and plans to release the national strategy in the summer of 2021. See National Council for Expanding American Innovation, USPTO, https://www.uspto.gov/initiatives/expanding-innovation/national-council-expanding-american-innovation (last visited Jun. 22, 2021).
- USPTO, PROGRESS AND POTENTIAL: 2020 UPDATE ON U.S. WOMEN INVENTOR-PATENTEES 2 (2020), https://www.uspto.gov/sites/default/files/documents/OCE-DH-Progress-Potential-2020.pdf.
- Jennifer Hunt et al., Why Don’t Women Patent 1 (Nat’l Bureau of Econ. Research, Working Paper No. 17888, 2012), https://www.nber.org/papers/w17888.
- Lisa D. Cook, Violence and Economic Growth: Evidence from African American Patents, 1870 to 1940, (Oct. 2013), https://lisadcook.net/wp-content/uploads/2014/02/pats_paper17_1013_final_web.pdf.
- INSTITUTE FOR WOMEN’S POLICY RESEARCH (IWPR), EQUITY IN INNOVATION: WOMEN INVENTORS AND PATENTS 5–6 (2016) (“EQUITY IN INNOVATION”), https://iwpr.org/wp-content/uploads/2020/12/C448-Equity-inInnovation.pdf.
- Alex Bell et al., Who Becomes an Inventor in America? The Importance of Exposure to Innovation (“Who Becomes an Inventor in America?”) 2 (Nov. 2018), http://www.equality-ofopportunity.org/assets/documents/inventors_paper.pdf.
- See Alex Bell et al., Who Becomes an Inventor in America?, at 34.
- See Lisa D. Cook, Economic and Social Implications of Racial Disparities (Jun. 8, 2020), https://bcf.princeton.edu/wp-content/uploads/2020/11/Combined-Slides-10.pdf.
- Joan Farre-Mensa et al., What is a Patent Worth? Evidence from the U.S. Patent “Lottery” 3 (Nat’l Bureau of Econ. Research, Working Paper No. 23268, 2018), https://www.nber.org/system/files/working_papers/w23268/w23268.pdf.
- ALEX BELL, COMMENTS BEFORE THE USPTO, SUCCESS ACT HEARINGS 7 (2019).
- See Alex Bell et al., Who Becomes an Inventor in America?, at 17–18.
- Id. at 1.
- ALEX BELL, COMMENTS BEFORE THE USPTO, SUCCESS ACT HEARINGS, at 8.
- STEPHANIE COUCH ET AL., RESEARCHING INVENTION EDUCATION: A WHITE PAPER (“RESEARCHING INVENTION EDUCATION”) 1 (2019).
- 3 Questions: Stephanie Couch on Invention and Inspiring Young People to Pursue STEM Education, MIT NEWS, https://news.mit.edu/2016/stephanie-couch-inspiring-young-people-to-pursue-stem-education-0601 (last visited Apr. 20, 2021).
- See STEPHANIE COUCH ET AL., RESEARCHING INVENTION EDUCATION, at 2.
- See id. at 57.
- See Talia Milgrom-Elcott, STEM Starts Earlier Than You Think, FORBES (Jul. 24, 2018), https://www.forbes.com/sites/taliamilgromelcott/2018/07/24/stem-starts-earlier-than-you-think/#1fbc0938348b.
- IWPR, EQUITY IN INNOVATION, at 8.
- Id. at 8. 7
- Id. at 22.
- See id. at 23.
- See id. at 22.
- See, e.g., Emma Hinchliffe, Female Founders’ Share of Venture Capital Funding Shrank to 2.2% in 2020, FORTUNE (Feb. 8, 2021), https://fortune.com/2021/02/08/female-founders-venture-capital-funding-2020/; James Norman, A VC’s Guide to Investing in Black Founders, HARV. BUS. REV. (Jun. 19, 2020), https://hbr.org/2020/06/avcs-guide-to-investing-in-black-founders.
- S. 2127/H.R. 3839, 116th Cong. (2019); see also H.R. 652, 117th Cong. (2021).