news

For many years, America's innovative prowess has propelled our nation to become the world's preeminent economic power. Our economic dominance has, in part, been driven by federal investment in research and development. By prioritizing innovation, the federal government has financed inventions and discoveries that have benefited the economy and improved lives across the globe.

Innovations has also increased productivity, made American workers more efficient, and lowered the price of goods and services. Unfortunately, since the 1970's America has lost its footing as the world’s most innovative nation. In fact, in the 2021 Bloomberg Innovation Index, the U.S. fell outside of the top 10 entirely. This slowed pace of innovation has profound implications, leading middle- and low-income Americans to experience wage stagnation or outright wage reduction when adjusted for the cost of living.

High barriers to entry are also stifling our entrepreneurial ecosystem. Over the years, geographic and demographic gaps have formed, excluding many Americans from creating new products and starting new businesses. Where a person is located heavily influences their economic opportunities. Economic clustering has limited the ability of Americans living outside a handful of major metropolitan areas to develop new products.

Women and minority groups are also frequently at a disadvantage when it comes to launching a startup. On average, minority and female entrepreneurs have less access to capital and are more likely to rely on personal funds to finance their businesses. Minority entrepreneurs are approved for credit for their business at lower rates that their peers and are less likely to receive the full amount of their loan request.

It’s clear, that far too many Americans are being denied the opportunity to create a new business. Boosting innovation and making the innovation ecosystem more inclusive will be critical to rebuilding the post-pandemic economy. Achieving these goals will require a sustained federal investment in improving our innovative capacity.

The Congressional Budget Office (CBO) reports that federal investment can promote long-term economic growth. Yet, federal investment in research and development has been steadily declining from its peak of 30 percent of federal spending in the 1960's. Today, only a meager 12 percent of all federal spending and two percent of Gross Domestic Product (GDP) goes toward innovation. An investment in innovation is an investment in our country's future, so it's vital that we are spending adequately at the federal level.

It is also critical that we empower existing programs at SBA to better reach and serve startups and entrepreneurs. For example, SBA's Office of Investment and Innovation (OII) leads programs that provides high growth small businesses with access to capital and research and development (R&D) funding to develop their products.

These SBA programs are training entrepreneurs and providing them with the mentoring and technical assistance necessary to launch America's next great company. Funding from programs under OII's umbrella has helped develop successful companies like 23andMe, Qualcomm, Symantec, and Da Vinci Surgical Systems.

I hope that today's hearing allows us to examine that programs and find ways to improve SBA's innovation initiatives to help create more startups that will benefit Americans and support our economy. As our country recovers from COVID, boosting innovation will be vital to getting our economy back on track. By focusing on expanding innovation to underserved entrepreneurs, Congress can unleash economic potential that has long been untapped.