Economics and Policy of Innovation Article Summary Ewald, Helen Università degli studi di Trieste Prof. Vittorio Alberto Torbianelli |1

“To protect or not to protect?” Modes of appropriability in the small enterprise sector By Jörg Thomäa, Kilian Bizera, Göttingen, Institute of Small Business Economics at University of Göttingen |2

Content The German Economy Research Background The Role of Small and Medium Sized Enterprises (DeStatis) Innovation in Germany (BMBF) The Patent Regime in Germany (DPMA) Research Background Data and Empirical Analysis Additional Findings on the Four Modes of Appropriability Key Findings of the Article

The German Economy The Role of Small and Medium Enterprises Source: Statistisches Bundesamt (DeStatis 2014), 08.03.2017 © 2016 Economics and Policy of Innovation|4

The German Economy The Role of Small and Medium Enterprises Congruent with the sample used by the authors: ”Accordingly, our sample contains data on 1624 innovative small firms which have between 5 and 49 employees.” Source: Amtsblatt der Europäischen Union (2003), 08.03.2017 © 2016 Economics and Policy of Innovation|5

The German Economy Innovation in Germany Businesses https://www.bmbf.de/de/deutschland-als-standort-fuer-forschung-und-innovation-2016-2845.html Source: Bundesministerium für Bildung und Forschung (2016), 08.03.2017 © 2016 Economics and Policy of Innovation|6

The German Economy The Patent Regime Large companies hand in the most patent applications (national applications as of 2016) Source: Deutsches Patent- und Markenamt (2016), 08.03.2017 © 2016 Economics and Policy of Innovation|7

Content The German Economy Research Background Previous Key Findings Formal and Informal Protection Mechanisms Data and Empirical Analysis Additional Findings on the Four Modes of Appropriability Key Findings of the Article

The Research Background Previous Key Findings (Granstrand 1999): In theory, IPRs effective mechanism for resolving the appropriability problem of knowledge However, small firms often refrain from using registered IPRs Researchers suggest multiple reasons: (Leiponen and Byma 2009): SME disadvantaged by company size (Noteboom 1994): Knowledge in small firms tends to be tacit which might not be codifiable (Cohen 2000): Informal protection mechanisms, in most industries viewed as more effective (Kitching and Blackburn 1998, Leiponen and Byma 2009): Most SMEs prefer informal protection practices to IPR Found them familiar, cheaper, less time-consuming and more effective Concluded: policy attempts to remove barriers on IPR usage little impact on innovation by SMEs © 2016 Economics and Policy of Innovation|9

The Research Background Formal vs. Informal Protection Granted as exclusive rights on intellectual property for a certain period Types: Patents, Utility model, Industrial design, Trademark Copyright (etc.) Efforts by innovators to protect themselves against imitation Types: Secrecy Complexity of design Lead time advantages © 2016 Economics and Policy of Innovation|10

Content The German Economy Research Background Data and Empirical Analysis Cluster Analysis Part The Four Modes of Appropriability Additional Findings on the Four Modes of Appropriability Key Findings of the Article

The Research Background The Cluster Analysis Part I Empirical analysis rests on data provided by German Innovation Survey Constituted German part of fourth EU wide community innovation survey (reference period 2002-2004) Innovative company: If they had introduced/ were working on product/ process innovations Sample size: 1642 innovative small firms with 5-49 employees Cluster analysis to examine whether small firms form distinctive groups with respect to their overall appropriation strategy © 2016 Economics and Policy of Innovation|12

The Research Background The Cluster Analysis Part II 1251 © 2016 Economics and Policy of Innovation|13

The Research Background The Four Modes of Appropriability I © 2016 Economics and Policy of Innovation|14

The Research Background The Four Modes of Appropriability II 1. Informal Protection Group Highest scores in all three informal protection methods IPRs no relevance maintaining lead time advantage was most important 2. Patent Oriented Group Technical IPRs important for protection of innovation results Trademarks are also relevant 3. Copyright Oriented Group Copyright protection as important protection mechanism for these innovators Also: Trademark and industrial design 4. Non-Protective Group Most innovative small firms Made no conscious effort to protect their innovation during reference period Seemingly face lower risk of imitation or other factors are responsible © 2016 Economics and Policy of Innovation|15

Content The German Economy Research Background Data and Empirical Analysis Additional Findings on the Four Modes of Appropriability Cluster Analysis with more Variables Key Findings of the Article

Additional Findings Cluster Analysis with more Variables 1 Informal Protection Group 2 Patent-Oriented Group 3 Copyright-Oriented Group 4 Non-Protection Group © 2016 Economics and Policy of Innovation|17

Content The German Economy Research Background Data and Empirical Analysis Additional Findings on the Four Modes of Appropriability Key Findings of the Article Conclusion

Key Findings of the Article Conclusion I Innovative small firms can be divided into four distinct groups accordingly to their appropriation strategy For many small innovative firms, not whether they should use IPRs or not but whether to protect their innovations from imitation at all On average: Patents and other IPRs are of low importance for innovation protection purposes But, informal protection methods and non-protection mode play much more dominant role Additionally, formal and informal protection mechanisms should not be seen as mutually exclusive © 2016 Economics and Policy of Innovation|19

Key Findings of the Article Conclusion II Members of the patent-oriented group are much more innovative But, given relatively small size of the cluster: Patents might be less available for larger number of small firms as they are more likely to innovate incrementally Summing up: Study implies that use of IPRs by innovative small firms is highly selective IPRs can be a crucial factor in their appropriation strategy “[…]do not perceive IPRs to be important since they either forgo active protection efforts entirely or find alternative means of protection […]” © 2016 Economics and Policy of Innovation|20

Thank You For Your Attention! © 2016 Economics and Policy of Innovation|21