Innovation Propensity and Firm Size: Evidence from Manufacturing

Abstract

Digitalization has enabled the networking of production facilities and the interaction of all stakeholders across the value chain. Smart factories helped reversed the decline of manufacturing and increased its total value added. The resultant Fourth Industrial Revolution (4IR) has led to an explosion of innovation reflected in the exponential growth of related patents and other forms of intellectual property rights (IPR). IPR and protection mechanisms are presumed drivers of global innovation and the interrelationship between innovation, IPR and economic growth is well-established. This paper addresses the question of propensity of manufacturing firms for specific forms of IPR across firm sizes. Using data from a large swath of German manufacturing firms, a novel model is developed to predict the probability of any given firm registering a specific form of IPR depending upon its size and innovativeness.