Title: A comparison of the use and value of patents and trade marks in large and small firms
1A comparison of the use and value of patents and
trade marks in large and small firms
- by Mark Rogers, Christian Helmers and
Christine Greenhalgh - Harris Manchester College, Oxford University
- Wolfson College, Oxford University
- St Peters College, Oxford University
- and all associated with the
- Oxford Intellectual Property Research Centre
- Seminar at Melbourne Institute for Applied
- Economic and Social Research
The research was supported by the UK IP Office
and UK Trade and Investment.
2Intellectual Property and firm size
- Well known that IP is widely used by large firms
- Many studies of these large firms show benefits
of both patents and trade marks - One hypothesis concerning SMEs is that they may
do less innovation, so obtain less IP - SMEs may have a lower propensity to protect their
innovation, so again leads to less IP - Rather few studies have comprehensive data on IP
in SMEs - Notable exception is Jensen and Webster for
Australia see Economic Record, March 2006
3Some reasons for less IP in SMEs(full survey of
factors in Jensen and Webster)
- SMEs do less innovation investment as face higher
risk, e.g. bankruptcy, cannot diversify risk as
in large firm with many product lines for RD - Liquidity constraints affect ability to undertake
RD investment with long pay-back period - SME applies for less IP per innovation, as
lacking in information about procedures and
cannot afford an IP specialist in management team - Cost of IP application high in relation to
turnover and potential litigation costs also
high, so see less potential return to IP - All these factors would lead to lower IP
intensity (IP relative to size of firm) in SME
4Our objectives in this study
- Document for the first time for the UK the actual
IP use by SMEs and compare this with larger firms
and micro firms - Explore the determinants of IP intensity
(measured relative to assets) focusing on the
role of firm size - Analyse the comparative performance of IP active
and inactive firms to see if IP is good for SMEs - Performance to be investigated by analysis of
firm survival rates does IP help or hinder? - Also explore firm asset growth in years following
acquisition of new IP
5Definitions
- Small and medium enterprises (SMEs)
- 2m Euros lt total assets lt 43 million Euros
- 10 lt employment lt 250
- Euro 10m lt turnover lt 50m Euros
- Subsidiaries of large UK firms are not classed as
SMEs - Problem in that some SMEs have foreign parents of
unknown size we can exclude later - Micro firms have assets lt 2m or missing, but if
owned by an SME reclassified as an SME - Large firms have assets gt43m Euros
- MR calls this the Oxford Firm Level IP (OFLIP)
data
6UK companies in Fame database (actively trading
in 2005)
The FAME Dec 2006 data also contains 926,503
firms that are now classified as inactive. The
FAME database only removes inactive firms after
five years from dissolution so the record during
2001-2006 is complete.
7Matching these firms IP acquisitions
- Matching of patents and trade marks registered in
either (or both) the UK or in Europe - Matching conducted by company names recorded in
the IP application - Also matched IP for firms that existed during
2001 to 2005, but listed as inactive by 2006 - Inactive includes live but not trading, in
receivership, dissolved, and liquidated firms - Total sample approx. 3m firms of which 2.1m live,
but bulk of population is micro firms
8All SMEs and IP active SMEs 2001-2005
For comparison, during 2001-2005, 5.4 of large
firms and 0.8 of micro firms were IP active in
one or more IP types
9Benchmarking the matching outcome (IP
publications in 2003)
Not expecting 100 as official data is for UK
residents individual, corporate, university, or
government agency
10Numbers of IP assets by year and type
11Numbers of patents by year and class of firm
12Numbers of trade marks by year and class of firm
13The facts so far
- UK has a large number of SMEs and even larger
number of micro firms - A small but significant proportion of both
classes were actively seeking patents and trade
marks during 2001-05 - The absolute number of patents by SME plus micro
firms stands comparison in scale with the total
for all large firms over the period - By 2005 the within-year total for SME micro
patents exceeded that for large firms - The absolute number of trade mark applications by
SME plus micro firms exceeded that of large firms
in each year of the study
14 IP active SMEs and IP assets per firm (by
sector 2001-2005)
15Median IP intensity of firms without foreign
parents by size class(IP intensity per 1m
assets)
16Regressions of IP intensity (trimmed at 95th
ile)(include year, region and industry dummies)
17Conclusions so far
- SME and micro firms are more IP intensive
relative to their asset base than are large firms - Declining IP intensity with size is confirmed in
multivariate regressions controlling for many
firm characteristics (including industry and
region) - Older firms are more IP intensive
- Firms with foreign parents are more IP intensive
- Co-location with a university increases EPO
intensity (not strongly significant) - Regional dummies are insignificant once industry
dummies are included - No trends exist in IP intensity over 5 years
18What outcomes for SMEs in 2001 by 2004? Are they
related to IP activity?
19Survival outcomes depend on many factors
- Firm-level
- IP use, experience, strategy, human capital, etc
- Industry level
- stage of product cycle, competition, growth
rates, innovation, spillovers, etc - Regional and macro level
- Initially use probit analysis exit20041, 0
- Explanatory variables all from 2001
- IP dummies (0,1) e.g. did SME TM in 2001?
- Industry IP intensities
20Using IP to create industry variables
21Probit Exit 1, Survive 0
22IP and survival - interpretation
- Own IP activity in 2001 has some impact
- UK trade mark(s) reduces prob(exit) by 0.015
- Community mark(s) have impact for older firms
- Industry variables
- More trade marking by large firms tends to reduce
SME exit (1 sd ? ?0.004 prob) - More trade marking by SMEs increases exit (1 sd ?
? 0.003 prob) - SME industry patenting may imply spillovers (but
none from large firms) but crude method used
here (no proximity weighting)
23Asset growth of 2001 SMEs
Total assets available for 82 of initial
sample. All cross-tabs statistically
significantly different from non-IP active firms
24Turnover growth of 2001 SMEs
Turnover available for 28 of SMEs. Cor(growA,
growT)0.44 0.52 in Manu UK patent distribution
not statistically different from non-IP SMEs,
other IP types are different
25Modelling firm growth
- More intuitive and revealing to re-write
Asset growth mean55, median1,max193,000 Tur
nover growth mean75 , median3.7 IP active
firms have similar distributions . an example of
results
26(No Transcript)
27Growth summary
- OLS regressions sensitive to sample
- Robust regression and median least squares as
checks - Main results
- SME UK trade marking associated with increased
growth (3 to 6 p.a.) - No. with UKTM 1670 SMEs in 2001 (1.58 of
sample) - Some evidence of positive association with
Community trade marks - Patents mostly have little association with
growth, sometimes negative - Of course, only looking at growth in next three
years (and patents published), so maybe growth
long term - But, not encouraging for SME patent use (UK or
EPO)
28Conclusions about innovation and IP in SMEs
- Our evidence firmly refutes view that SMEs
innovate less than larger firms (pro rata) - (unless prepared to argue that large firms are
innovating more, but have lower patent and
trademark propensity!) - Findings on IP intensity support the view that
SMEs do perceive value of IP protection - Traditional view that SMEs are so disadvantaged
that they cannot use IP is firmly rejected - Cannot yet positively establish level playing
field in costs and returns compared with larger
firms
29Conclusions about IP and performance
- Exit probability of SMEs within three years of IP
activity is reduced in case of UK trade marks - Exit of older firms is reduced by Community trade
marks - Growth of assets and turnover in all SME firms
are enhanced by UK trade marks - Other types of IP use are not significant for
exit or growth over this short period - Seems likely that the returns to patents take
longer given that we observe similarly high
intensity of patents and trade marks in SMEs