A most improbable political battle is under way in Congress, pitting two favorite interest groups against each other: the nation's small businesses versus its major universities and research centers.

Small business won the first round resoundingly. In December, the Senate voted, 90 to 0, to take 1 percent of federal research money--about $400 million--away from the traditional academic recipients and give it instead to small research entrepreneurs seeking productivity and profits as much as the pursuit of truth.

Now the professors are fighting back. A more protracted struggle is beginning in the House, where a stronger proposal would set aside more than three times as much for small business research and development each year.

As Rep. Paul N. McCloskey Jr. (R-Calif.), one of the opponents of the legislation, has put it: "Anytime there's a unanimous vote, it means nobody took a careful look at it. If the Senate gives it a lick and a promise, sometimes we slow it down."

When it passed the Senate unanimously, this attempt to spur technological innovation in small commercial research firms looked like a motherhood-and-apple-pie proposal. Its proponents contend that it will boost the economy, shore up the sagging productivity rate, create new jobs and best of all, won't cost anything extra in terms of federal expenditures.

But, as the legislation undergoes additional congressional scrutiny, it is facing more controversy and the crossfire of competing interests. Division is even developing within the small business community.

Not surprisingly, the proposal has also aroused vigorous opposition from universities and research groups.

They warn that the legislation could set a serious precedent of special treatment and threaten the awarding of scarce funds on the basis of merit, particularly at the National Institutes of Health. Supporters counter that such special treatment is warranted because small businesses have been discriminated against in the past.

Under the Senate version, the research allocation for small business would rise over three years to an estimated $400 million annually, a 1 percent set-aside in five major agencies--the National Science Foundation, Defense Department, Health and Human Services, National Aeronautics and Space Administration and the Energy Department.

The House bill would increase the small business allocation over four years to more than $1.5 billion annually. This would amount to 3 percent being taken from 13 agencies' R&D budgets, each of which are more than $100 million.

The current federal R&D budget totals more than $40 billion.

Each agency would be required to set up a Small Business Innovation Research program and distribute the earmarked funds to projects of promise, following a model program already in operation at NSF.

University spokesmen admit that the bill was a "sleeper" they failed to take seriously until it had gathered steam and became unstoppable in the Senate.

A Republican freshman from New Hampshire, Sen. Warren Rudman, personally button-holed every senator, gained 86 cosponsors on the bill and successfully sheparded it to unanimous passage.

Rudman was also able to persuade the president to reverse the administration's previous opposition to the bill voiced by the science adviser's office and the affected agencies.

Rudman insists that the change was purely "on the merits" of the bill, but skeptical observers note that the administration reversal coincided with the White House lobbying campaign to win Senate votes for the AWACS sale to Saudi Arabia last fall. Rudman later declared his support for the sale of the aircraft.

Asked if there was any link between the two issues, Rudman said: "I find that personally insulting and offensive. It's absolutely preposterous. I don't link my vote to anything."

Others on Capitol Hill and in the Executive Branch, however, believe that the White House about-face was related to the plane sale. "I know absolutely that that . . . is true. The administration was chasing AWACS votes like mad," said one administration source. "Nobody wanted that bill. It is anti-Reagan."

Now, the Small Business Innovation Development Act crafted by Rep. John J. LaFalce (D-N.Y.) and others is making its way through the House, but not quite as smoothly as its supporters had hoped.

Although it easily gained the endorsement of the Committee on Small Business and has more than 180 cosponsors, the proposal has also been referred to four other committees with their own stake in authorizing research funds--a process guaranteed to open the legislation to debate and compromise.

Three committees--Science and Technology, Veterans' Affairs, and Energy and Commerce--have had hearings in recent weeks, and Armed Services will soon consider the question.

Both House and Senate sponsors present the same arguments on behalf of their side. "Uncontroverted facts show the need for such legislation," Rudman says, citing these points:

* Firms with 500 or fewer employes produced 87 percent of the new jobs in this country over the last decade.

* These small firms "produce up to 24 times more innovations per R&D dollar than larger companies and universities."

* A National Science Foundation experimental Small Business Innovation Research Program, budgeted at about $5 million annually, has been an "unqualified success."

* Only about 4 percent of the federal R&D research budget goes to the small business sector (a figure questioned by critics who note that small business captures 6.8 percent of federal contracts).

Rudman and his supporters believe that the record shows that only a "mandatory program" will force the federal agencies to give small business a fair share.

While the administration is on record as supporting the Rudman bill, recent testimony from the agencies affected by the bill still gives a clear impression that their support is grudging at best. And some small business groups have reservations, too.

Representatives from the American Electronics Association, whose members are mostly small high-technology firms, argued against such legislation. The association instead blames the "impenetrable morass of regulations" for discouraging small businesses from seeking government grants and contracts.

"They are trying to help us. We sincerely appreciate it, but please don't do it," urged Randy Knapp, chairman of Wespercorp, a small firm that makes computer parts.

Dr. Edwin Zschau, a California businessman and former professor, suggested that recent changes in the tax laws have already begun to help small businesses get needed capital from private sources.

He also questions whether small business is really doing as badly as it claims, noting that small, high-technology companies employ only about 5.5 percent of the nation's scientists and therefore already get their share of government funds.

Academic opposition has been led by Stanford University President Donald Kennedy, who believes that the legislation is "not good government" because it is "reallocating funds from one function, approved by regular appropriation, to another."

Some of the most vigorous opposition is coming from medical researchers, who have already convinced legislators of both parties to push for an exemption for the NIH. They argue that small businesses should compete on merit with everyone else.

"It would be a public scandal to support lower quality research when higher quality applications already in hand are not being funded," warned the Association of American Medical Colleges.

A key test will come before the House Armed Services Committee, where it is possible that an exemption for the Defense Department may come up. The Pentagon receives about half of all federal R&D money and already has a voluntary small business program going.

The growing debate has stirred emotions, with Rudman charging that academic researchers are already beneficiaries of the "largest set-aside program in the history of our country"--the NIH, which he calls a "slave to the 'old boy' network."

Opponents of the legislation complain about the hypocrisy of the small business firms and their supporters. "They say that what small business needs is to get government off our backs," one critic remarked. "Yet, they ask how can we get a bigger slice of the pie."

McCloskey, whose constituencies include Stanford and many small electronics firms, plans to fight the bill when it comes to the floor later this spring, but, he concedes, "It's a major problem to defeat any legislation that has the magic words 'small business' in the name."