Small Firms Outperform Large Firms In Technology Innovation

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Small firms and technologySmall innovative firms are 16 times more productive than large innovative firms in terms of patents per employee, according to a study conducted for the Office of Advocacy of the U.S. Small Business Administration. In ?green? technologies, while four times as many large as small innovative firms have at least one green patent, small firms are more likely than larger firms to have green technology as a core part of their business, the study shows.

The study, ?Analysis of Small Business Innovation in Green Technologies,? was made available in October. It is the fourth covering the patenting activity of small businesses to be funded by the Office of Advocacy. ?There is great academic and policy interest in identifying and tracking green technologies and industries. To our knowledge, however, nobody has previously studied the contributions of small firms versus large firms in green technologies,? researchers Anthony Breitzman and Patrick Thomas say.

Breitzman and Thomas are principals of 1790 Analytics, a Haddonfield, N.J., provider of patent analysis and intellectual property evaluation techniques. Their three earlier studies established ?the existence of a cohort of independent, for-profit innovative small firms with 15 or more patents over a five-year period? and showed that these firms had a higher percentage of emerging technology patents in their portfolios than their larger counterparts. Small innovative firms had 15 times as many patents per employee as large firms.

Moreover, ?even within the small innovative firm domain, companies with fewer than 25 employees were shown to have a higher patent-to-employee ratio on average than firms with 50 employees, which in turn have a higher patent-to-employee ratio than firms with 100 employees, and so on,? the researchers said.

These findings were a surprise, they said, because small firms generally make little use of the patent system, deeming it too expensive and difficult to navigate. Yet, small-business patent activity is increasing, even with a logjam of more than a million pending applications at the U.S. Patent and Trademark Office.

The average processing time of three years ? two years to obtain an initial ruling and one more before the patent is issued ? keeps inventors, including African-Americans, in limbo, unable to launch their products or businesses. Some of the most current information on African-American patent holders can be found in the ?Index of Black Inventors By State or Country of Residence, 1834-2008,? compiled by Margaret J. Collins, a library program specialist at the Patent and Trademark Depository Library of Illinois State Library.

Last year, applications flooded the Patent Office at the rate of 2,000 a day, up from 950 a day in 1997. President Obama, a staunch advocate of innovation, says modernizing the federal Patent and Trademark Office is crucial to ?winning the future.?

In their new study, Breitzman and Thomas analyze 532 small innovative firms representing the following ?green? technologies: batteries, clean coal, smart grid/smart metering/electric grid infrastructure, fuel cells, geothermal energy, generic green technology, hybrid electric vehicle systems, hydro power, solar energy, and wind energy.

In addition to the findings mentioned above, the study shows that:?

*? Of the 1,279 U.S. firms granted 15 or more U.S. patents each between 2005 and 2009, 42 percent (up from 33 percent, 41 percent and 40 percent, respectively, in the 2003, 2005 and 2008 studies) are small firms;

? Green patents form a higher percentage of the portfolios of small firms with at least one green patent (20 percent on average) than of the large firms? portfolios (1.5 percent);

? While small firms account for about 8 percent of all U.S. patents in the U.S. innovative firm database, they account for 14 percent of green technology patents. Small firms account for more than 32 percent of the patents in both smart grids and solar energy, and 15 percent of patents in batteries and fuel cells.

?We also found that the small firms in the study outperformed large firms in patent generality, originality, and patent growth,? Breitzman and Thomas said.