Intellectual property strategies and firm growth : evidence from Finnish small business data

Abstract

The goal of this study is to shed light on the relationship between intellectual property (IP) strategies and firm growth. In brief, IP strategies are means of capturing returns on innovation investments. Employment effects and sales growth effects of innovations have been studied extensively in both theoretical and empirical economic literature but prior research has seldom included IP strategies into the analysis. There is little knowledge, whether there exists growth rate differences among firms that use different IP strategies and do patenting firms effectively demonstrate stronger growth than their non-patenting counterparts. Present study considers IP strategies as potential firm growth determinants.

Available data enables studying relation between firm growth and four IP strategies (patents, secrecy, speed and complements) among innovative Finnish small businesses. The small business perspective is important because previous studies have suggested that the patent system favors large companies at the cost of smaller firms. The data consists of merged survey and financial statement data of 469 innovative Finnish small businesses. The surveys were carried out in the beginning of millennium and employment and turnover figures cover years 2001-2010 and 2001-2009 respectively.

Findings provide evidence that between 2001 and 2008 the turnover growth rates of sample firms differed statistically significantly between firms, which utilized different IP strategies. During the period patenting firms had statistically significantly higher turnover growth rates than firms relying on secrecy-based strategies and firms, which reported not to use any IP strategies. However, the difference in turnover growth rates between patenting firms and firms using “Open”-strategies (speed and/or complements) was not statistically significant. The results indicate that patenting may have provided competitive advantage for innovative small firms during 2001-2008 but the advantage was not significant in comparison to firms, which relied on speed and complements.