Raleigh, N.C.

North Carolina has clear potential to significantly grow its defense innovation economy with more strategic focus and improved state leadership, according to recommendations from the North Carolina Defense Innovation Task Force, a study group convened by the North Carolina Board of Science, Technology & Innovation (BSTI).

The task force’s new report—Advancing Defense Innovation: Increasing U.S. Department of Defense Funding for North Carolina Small Business Technology Development & Commercialization—finds that funding to North Carolina small businesses from the U.S. Department of Defense (DoD), through two well-established technology grant programs, currently ranks the state 20th in the nation, with 1.1% of the U.S. total.  However, the task force finds North Carolina’s ranking has significant room to grow, based on the state’s performance on several macro-economic factors related to innovation.

Federal Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) grants are the single largest source of early-stage technology and commercialization funding for small businesses in the United States, at more than $3.7 billion in 2019.  Among the federal agencies offering SBIR or STTR grants, the DoD is by far the largest funder, awarding $1.8 billion in 2019.

“The Board thanks the state’s distinguished task force for its assessment of the North Carolina opportunity,” said Michael Cunningham, Chair of the North Carolina Board of Science, Technology & Innovation. “As recommended in this report of state experts, we will work with the Governor and leadership of the General Assembly to recommend that they designate a member of the Council of State as the state champion for a multi-year initiative to expand the defense innovation economy in North Carolina and improve national awareness of our very considerable and high-quality defense innovation assets. With the right high-level commitment, we can and will accelerate new, geographically diverse, high-paying jobs and improve the health and sustainability of the state’s economy.”

While North Carolina has several support organizations that aid with the defense innovation economy, the task force finds that historically such assistance has been relatively small, intermittent, and not strategic in nature.  The task force recommends the state implement a well-funded, sustained, and strategic effort, focused on increasing awareness of the opportunity in North Carolina for entrepreneurs and with federal decisionmakers.

“With the 4th largest military footprint in the country and our active network of companies, universities, governments, and economic development organizations, North Carolina is becoming the Frontline of the Future in Defense Innovation,” said North Carolina Commerce Secretary Machelle Baker Sanders. “Taking decisive action to grow defense innovation will enable us to expand the innovation ecosystem of our state, which is fundamental to growing the economy, attracting new industry, expanding jobs, raising the tax base, promoting national security, and improving the quality of life of all North Carolinians.”

Recognizing the opportunity to grow defense innovation in North Carolina, the BSTI formed and convened the Defense Innovation Task Force last year.  The time-limited group of experts came together to define the current overall economic opportunity and impact, and to develop an actionable strategy with key performance measures and timelines. Based on detailed empirical research, a survey of support organizations located in the state, and interviews with support organizations in other states that perform well in DoD SBIR and STTR funding, it’s clear that growing defense innovation in North Carolina will not just happen on its own.  The task force finds that a strategic and sustained effort, led by a high-level champion in the state government, can provide the necessary coordination to jump start growth of the defense innovation sector in North Carolina.

Department of Defense officials agree. “North Carolina is a national leader in military basic and applied research,” said Stephen Lee, Senior Scientist at the Army Research Institute.  “The state has enormous potential to grow these capabilities, in the process supporting its small businesses through the SBIR and STTR programs. The proximity of premier universities and military bases provides a strong foundation for the state’s small businesses, along with support from the State of North Carolina.”

The report outlines four strategic recommendations and three tactical recommendations to enable North Carolina to maximize its potential in the defense innovation economy. The full text of the new report can be found online. More information about North Carolina’s Board of Science, Technology & Innovation can be found at nccommerce.com/about-us/boards-commissions/board-science-technology-innovation.

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