Written by Haakon Thue Lie, IP Consultant in the Dehns Oslo office.
I just read a new report from IP Australia on high growth SMEs and how they use IPRs. First, the report finds that SMEs’ use of IPR is associated with high growth and higher wages. The conclusions align with what the EPO and EUIPO reported in their 2019 “High-growth firms and intellectual property rights.”
Interestingly, both reports point to how a mix of IPR – for example of patents, trademarks and designs – associates even more with high growth than having only a single type of rights. My favourite topic: The new Australian report does not mention how trade secrets could be a part of the mix – but the EPO/EUIPO report discusses this (see p. 19).
The reports are careful not to say that having IPRs causes high growth. We know that the SMEs holding IPRs are more likely to innovate, have high growth and become successful firms. Even if we cannot say anything about causation ( – it could be that the high number of IPRs are from the successful firms having more funds, for example), we can find other literature that explains how IPRs are favourable for SME’s growth.
One theory is “Profiting from Innovation” (PiF) by David Teece. His publications from 1986 and onwards show the impact of IP on competitive advantages and innovation. Another approach is the “complex adaptive system” (CAS) view, discussed in a brand new book “Intellectual Property as a Complex Adaptive System The role of IP in the Innovation Society”. (The first chapter is free online and gives a good overview.)
Both these perspectives can explain why there is no direct causation: You cannot file IPRs, which will cause success. However, having IP as a part of your business strategy and your business plan will increase the odds for high growth. Both PiF and CAS demonstrate how.
IP managers know not to put all eggs in one basket: Having more IPRs and more types may improve your odds because the IPRs interact with the different parts of the innovation system, with varying risk profiles over time. Say, patents and database rights may be essential to investors and for licensing, whereas the real strength of how your firm control innovation is the ability to keep secrets and involve collaborating firms.
So, this is another perspective, collaboration, that is important for understanding SMEs, high growth and IPRs: Most SMEs need to engage in open innovation, collaborating with others. I will briefly mention two interesting papers:
“The dynamics of intellectual property rights for trust, knowledge sharing and innovation in project teams” by Olaisen and Revang is a 2017 qualitative study that discusses how IPRs have a positive effect on collaboration. The context here is inter-organisational cooperation, not innovation, and creating new IP. However, the outcome should be the same for clarifying the background IP being brought into collaborative research. Then there is a paper by Bo Heiden and Ruud Peters called “IP and Open Innovation—Managing Technology Push and Pull”. They say as a pointed formulation: “In essence, open innovation is another name for advanced intellectual property management (IPM).” It is a good point: How can you collaborate if you do not know what your contribution is – and what you receive?
This paper is part of The Licensing Executive Society International (LESI) and the European Patent Office (EPO) 2020 special issue of “Les Nouvelles” – dedicated to the strategic use of IP by high-growth technology businesses. The special issue is free and is a good and recommended read. Then we are back again where we started: You may need a good mix of IPRs (including trade secrets) to foster a successful high-growth SME – and then advanced IP management comprises engagement in open innovation.