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The Impact of the Patent System on SMEs

  • Hughes, A.
  • Mina, A.
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    The authors consider the theory and evidence on the propensity of small and medium-sized enterprises (SMEs) to patent their innovations. Drawing on UK, European and US literature and data sources, they show that small firms are less likely to use patents as a means of protecting their investment than other means such as confidentiality, secrecy or time to market. SMEs are also less likely than larger firms to use others' patents as a source of information for their own innovation activities, preferring customers, suppliers and trade fairs. Conversely, smaller firms are more likely than larger firms to put their patents to productive use or to licence out their technology, a pattern that is likely to reflect relatively higher cost and capacity pressures. Among the emerging trends, of particular interest for high tech SMEs is the role of patents as an increasingly important factor in obtaining financial backing by venture capitalists. A survey of UK and US small businesses conducted jointly by the Centre for Business Research (CBR) at Cambridge and the Industrial Performance Unit at the Massachusetts Institute of Technology provides data for further analyses which reveal that small firms in the United States are twice as likely as those in the UK to patent innovations, but are still much less likely to patent than larger US firms. The authors conclude with a general discussion of main findings from a UK and European perspective.

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    Paper provided by ESRC Centre for Business Research in its series ESRC Centre for Business Research - Working Papers with number wp411.

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    Date of creation: Sep 2010
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    Handle: RePEc:cbr:cbrwps:wp411
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    1. Malwina Mejer & Bruno van Pottelsberghe de la Potterie, 2012. "Economic incongruities in the European patent system," European Journal of Law and Economics, Springer, vol. 34(1), pages 215-234, August.
    2. Keld Laursen & Ammon Salter, 2005. "My Precious. The Role of Appropriability Strategies in Shaping Innovative Performance," DRUID Working Papers 05-02, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    3. Haeussler, Carolin & Harhoff, Dietmar & Mueller, Elisabeth, 2009. "To Be Financed or Not… - The Role of Patents for Venture Capital Financing," CEPR Discussion Papers 7115, C.E.P.R. Discussion Papers.
    4. Gaétan de Rassenfosse & Bruno Van Pottelsberghe, 2007. "Per un pugno di dollari: A first look at the price elasticity of patents," Working Papers CEB 07-022.RS, ULB -- Universite Libre de Bruxelles.
    5. Mazzoleni, Roberto & Nelson, Richard R., 1998. "The benefits and costs of strong patent protection: a contribution to the current debate," Research Policy, Elsevier, vol. 27(3), pages 273-284, July.
    6. Antonelli, Cristiano, 2001. "The Microeconomics of Technological Systems," OUP Catalogue, Oxford University Press, number 9780199245536.
    7. Ashish Arora & Marco Ceccagnoli, 2006. "Patent Protection, Complementary Assets, and Firms' Incentives for Technology Licensing," Management Science, INFORMS, vol. 52(2), pages 293-308, February.
    8. David D. Friedman & William M. Landes & Richard A. Posner, 1991. "Some Economics of Trade Secret Law," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 61-72, Winter.
    9. Harabi, Najib, 1994. "Appropriability of Technical Innovations: An Empirical Analysis," MPRA Paper 26267, University Library of Munich, Germany.
    10. Wesley M. Cohen & Richard R. Nelson & John P. Walsh, 2000. "Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms Patent (or Not)," NBER Working Papers 7552, National Bureau of Economic Research, Inc.
    11. Encaoua, David & Guellec, Dominique & Martinez, Catalina, 2006. "Patent systems for encouraging innovation: Lessons from economic analysis," Research Policy, Elsevier, vol. 35(9), pages 1423-1440, November.
    12. Haeussler, Caroline & Harhoff, Dietmar & Müller, Elisabeth, 2009. "To Be Financed or Not... - The Role of Patents for Venture Capital Financing," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 253, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    13. Joshua Lerner, 1994. "The Importance of Patent Scope: An Empirical Analysis," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 319-333, Summer.
    14. Lanjouw, Jean O & Schankerman, Mark, 2004. "Protecting Intellectual Property Rights: Are Small Firms Handicapped?," Journal of Law and Economics, University of Chicago Press, vol. 47(1), pages 45-74, April.
    15. Rosemarie Ham Ziedonis, 2004. "Don't Fence Me In: Fragmented Markets for Technology and the Patent Acquisition Strategies of Firms," Management Science, INFORMS, vol. 50(6), pages 804-820, June.
    16. Arundel, Anthony, 2001. "The relative effectiveness of patents and secrecy for appropriation," Research Policy, Elsevier, vol. 30(4), pages 611-624, April.
    17. Edwin Mansfield, 1986. "Patents and Innovation: An Empirical Study," Management Science, INFORMS, vol. 32(2), pages 173-181, February.
    18. Teece, David J., 1993. "Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy," Research Policy, Elsevier, vol. 22(2), pages 112-113, April.
    19. James Bessen & Eric Maskin, 2006. "Sequential Innovation, Patents, and Imitation," Economics Working Papers 0025, Institute for Advanced Study, School of Social Science.
    20. Andy Cosh & Alan Hughes, 2010. "Never mind the quality feel the width: University–industry links and government financial support for innovation in small high-technology businesses in the UK and the USA," The Journal of Technology Transfer, Springer, vol. 35(1), pages 66-91, February.
    21. repec:hal:journl:halshs-00177614 is not listed on IDEAS
    22. Macdonald, Stuart, 2004. "When means become ends: considering the impact of patent strategy on innovation," Information Economics and Policy, Elsevier, vol. 16(1), pages 135-158, March.
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