The National Science Foundation's Small Business Innovation Research program (SBIR) and the Defense Department's Small Business Advanced Technology program (DESAT), launched just this year, are similar in many respects. Both provide modest front-end financing of high-risk applied research projects undertaken by independent small businesses with no more than 500 employees. Neither program supports basic research. Indeed, the expectation is that the funded projects will lead to the development of marketable products or processes -- innovations.

The differences between the two programs reflect the difference between the two sponsoring agencies. The NSF has no mission beyond supporting and stimulating scientific and technological research. The DoD, on the other hand, is interested in research and innovation only to the extent that it contributes to national defense. So while both programs consist of three phases (described below), NSF funding stops at the end of Phase II -- research. But the DoD is prepared to fund full development costs of a project if it thinks it might want to buy the final product.

Another difference is in the form of the agreements made between the government and the small business undertaking the research. The NSF awards its money as a grant, which means that proprietary data developed by the grantee is accorded some protection from dissemination to potential competitors. But the arrangement with the DoD is in the form of a contract, which usually allows the government to disseminate that data as it pleases. One government procurement specialist warns that a company participating in the DoD program might eventually find itself bidding competitively against another company to produce its own proprietary product for the military. In both programs, however, commercial rights to patents belong to the developer, not to the government.