Abstract
In order to observe a patent application at the firm level, two conditions need to be met: new products need to be of patentable quality, which depends both on the degree of novelty of innovations and on the total number (portfolio) of innovations; and the benefits of patents need to be higher than the costs of owning them. Analyzing the patent propensity of small and large UK firms using a novel innovation-level survey (the SIPU survey) linked to Community Innovation Survey data, we find that when we consider the whole innovation portfolio, smaller firms do patent less than larger firms. However, using data on individual innovations, we find that smaller firms are no less likely to patent any specific innovation than larger firms. We argue that size differences in the probability to patent relate primarily to the “portfolio effect,” i.e., larger firms generate more innovations than smaller firms, and therefore are more likely to create one or more which are patentable. As for the decision to patent a patentable innovation, we find that cost barriers, more than issues of innovation quality or enforceability, deter small firms from patenting specific innovations. Measures to address the costs of patenting for smaller—perhaps by considering patents as eligible costs for R&D tax credits—and/or subsidizing SMEs’ participation in IP litigation schemes may both encourage patent use by smaller firms.
Highlights
Innovation—the market introduction of new products, services or processes—can add value for producers and consumers and drive economic growth (Baumol, 2002)
We focus only on the most significant innovation, removing any portfolio effect (Table 5a, column 4), we find that there are no large differences among firms of different size, i.e., among the Survey of Innovation and Patent Use (SIPU) innovators, we find no evidence of size effects in the propensity to patent their most valuable invention
A first explanation of these results could be that, considering that patenting is a costly strategic decision taken by firms, financially constrained small firms will only apply for a patent when the value of their innovation is sufficiently high to motivate their investment
Summary
Innovation—the market introduction of new products, services or processes—can add value for producers and consumers and drive economic growth (Baumol, 2002). We argue that having a portfolio which includes patentable innovations is only a necessary condition for whether or not a firm will make a patent application This decision depends on the perceived benefit-cost ratio of patenting being positive—the sufficient condition for patenting by small firms. By linking the two databases, we obtain information on the extent to which firms use patents and, where applicable, their reasons for not patenting These data help us to see that most existing analyses of patenting by small firms confound the portfolio and propensity to patent effects. The arguments in this paper about the salience of cost barriers suggest that IP policy may need to develop measures which can reduce patenting costs for small firms These could take several forms but the most important is likely to be helping with the legal costs of patent enforcement.
Sign-in/Register to view highlights & summary Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
