Patents, Entrepreneurship and Performance

This paper provides an overview of a new database that uses intellectual property data to track the innovative activity of firms in the UK. The paper looks at the extent and nature of patenting activity, focusing on micro firms and SMEs. Over the period 2000 to 2007, SME patenting has increased whereas large firm patenting has fallen and micro firm patenting has been roughly con- stant. Most micro and SMEs patent while relatively young (aged ten or less) and this tendency is becoming more pronounced over time. The paper provides a descriptive analysis on micro firms and SMEs that become high growth firms (defined as having greater than 20 percent growth per annum). Overall, 28.0 percent of young micro and SMEs achieve high growth (over 2002 to 2007). In comparison, 29.4 percent of young micro or SMEs that patent achieve high growth. This difference is much greater for firms in the high-tech industries. Moreover, the analysis shows that due to the skewed nature of the firm-level growth distribution, standard conditional mean estimators may fail to uncover important differences in the association between patenting and firm growth across the conditional growth distribution.