Since the past half century we observe a growing importance of Intellectual Property (IP) which is often associated with a shift towards a knowledge-based economy. In knowledgebased
economies, IP protection and management have become the highly important element for business success. Intellectual Property is everywhere: it is embedded in daily-needs
products, high-tech equipment, technology, as well organizational routines. Having become crucial in modern world, Intellectual Property and knowledge capital, more than physical
capital, drive economies of different countries. About 70% of business assets today are intangibles.1
Not less important for economy are small and middle-sized enterprises (SMEs). This strategic sector covers the whole spectrum of economic fields and is a very important
contributor to sustainable economic development. Representing over 90% of all business establishments and about half or more of GDP and export shares SME sector is often
associated with a ‘backbone’ of most national economies.2
Intellectual Property is increasingly regarded as a valuable resource for individuals, firms and nations, and as a source of competitive advantage.3 Nowadays, companies are
exploiting IP rights not only for protection and security of return purposes; they increasingly use them due to strategic reasons. Numerous studies and literatures4 recognized SMEs as an
important contributor to innovation. However, there is still a little understanding of how SMEs manage their IP. Existing studies have focused mainly on large firms and,
particularly, on patenting activity, and there are still few attempts to bridge all three together: SMEs, Intellectual Property and IP management. The aim of this paper is an analysis of SME’s performance in innovation and the state of
SMEs in IP system. For this reason two main questions were formulated: ‘How do SMEs manage their IP?’ and ‘Are SMEs really disadvantaged by their size in the use of IP rights?’
In order to answer the first question, the following aspects were examined: a way of usage different protection methods by SMEs, the reasons why they apply for IP protection and
what obstacles SMEs may face in their exploitation of IP system.
Table of Contents
1. The world of Intellectual Property
1.1. What is Intellectual Property?
1.1.1. Nature of Intellectual Property: knowledge and innovation assets as important basis of IP
1.1.2. Features of Intellectual Property: uncertainty, inappropriability and indivisibility
1.1.3. The determinants of investments in Intellectual assets: Technology-push and Demand-pull
1.2. What are Intellectual Property Rights?
1.2.1. Definition and primary forms of IP protection
1.2.2. An analysis of IP rights from the economic perspective: Resource-based view
1.2.3. The importance of IP protection to the firm
2. Introduction to SME
2.1. Characteristics and classification of SME
2.2. The role of SMEs in the economy
3. Small and middle-sized enterprises in IP System
3.1. Innovation in the SME world
3.1.1. Strengths and weaknesses of SMEs in innovation process
3.1.2. Intellectual assets of SMEs: key influences on the innovative potential of SMEs
3.1.3. Pattern of innovation in SMEs
3.2. Formal and informal mechanisms used by SMEs
3.2.1. Formal protecting instruments
3.2.2. Informal IP rights
3.3. Reasons for using formal IP rights by SMEs
3.4. Perceived and real barriers faced by SMEs in exploitation of IP rights
3.5. Combination of IP right instruments
4. Toward good practices
4.1. Case studies on SMEs in IP system
4.2. Recommendations for SME
Research Objectives and Key Topics
The primary objective of this thesis is to analyze the innovative performance of small and middle-sized enterprises (SMEs) and their engagement with the Intellectual Property (IP) system, specifically investigating how they manage their IP and whether they face genuine disadvantages due to their size.
- Analysis of formal versus informal IP protection strategies in SMEs.
- Investigation of the role of SME size in the effective utilization of IP systems.
- Exploration of motivations for adopting formal IP rights, such as incentive, reputation, and blocking motives.
- Examination of perceived and real barriers to IP exploitation, including costs and lack of awareness.
- Synthesis of best practices through case studies and strategic recommendations for SMEs.
Excerpt from the Book
1.1.2. Features of Intellectual Property: uncertainty, inappropriability and indivisibility
IP is usually based on knowledge and information. Unlike to physical goods, intellectual capital has the features of a public good: it is inherently non-rivalrous and non-excludable. The former means, that one person’s use of the good does not reduce another’s use. For example IP in form of a computer program or certain technical idea might be owned, used and enjoyed by several users. Non-excludability of IP means that nobody can be excluded from using this good without authorization. Indeed, if innovative creation is valuable and can be copied easily or used by others, there may be an incentive of free riding on someone’s investment. This problem can lead to lower incentives to innovate and invest in R&D. Therefore, it is in the interests of society to provide defined property rights on innovations, which create the legal protection and prevent others from accessing them.
Comparing intangible assets with physical goods, theory affirms that generating and sale of knowledge and Intellectual Property is subject to market failure with its three classical attributes: uncertainty, innapropriability and indivisibility. Production of intellectual assets is very often accompanied with uncertainty attribute. Uncertainty comes from situations, which are unlike past cases that it is not possible to estimate ex ante the outcome of the R&D processes. Some analysts note that a risk of unsuccessful outcome can be reduced through pooling many projects together; however, it cannot eliminate uncertainty.
With regard to the second failure, many scholars argue that knowledge is very inappropriate, due to its feature to be easily replicated at minimal costs. This has a negative impact on the inventors’ ability to extract quasi-rent and benefit from their invention. Appropriability of IP is the broadly discussed topic by numerous studies. This concept is associated with the ability to reap the benefits from the holding of IP that allows the IP owner to recoup the investment expenditures made in innovation. Appropriabilty is an essential factor influencing the company’s choice to invest in a certain creative idea.
Summary of Chapters
1. The world of Intellectual Property: This chapter defines Intellectual Property as a foundational element of the knowledge-based economy and discusses its core economic attributes and the drivers of investment.
2. Introduction to SME: This section provides definitions and classifications of SMEs and highlights their significant role as the backbone of national economies.
3. Small and middle-sized enterprises in IP System: This chapter bridges innovation, SMEs, and IP protection, analyzing formal and informal mechanisms, reasons for usage, and barriers faced by these firms.
4. Toward good practices: This concluding thematic section presents case studies to illustrate effective IP management and offers practical recommendations for SMEs to improve their IP strategy.
Keywords
Intellectual Property, SMEs, IP Rights, Innovation, Appropriability, Patenting, Trademarks, Informal Protection, Secrecy, Lead Time Advantage, Resource-based View, Technology-push, Demand-pull, IP Management, Innovation Strategy
Frequently Asked Questions
What is the core subject of this research paper?
The paper examines the intersection of SMEs, Intellectual Property (IP), and innovation, specifically exploring how small firms manage their IP and whether their size puts them at a competitive disadvantage.
What are the primary themes discussed in the work?
The central themes include the economic nature of IP, the classification of SMEs, their innovative potential, the contrast between formal and informal protection mechanisms, and the strategic barriers to IP adoption.
What is the main research question of the thesis?
The paper addresses two core questions: 'How do SMEs manage their IP?' and 'Are SMEs really disadvantaged by their size in the use of IP rights?'
Which scientific methodology is employed?
The research relies on a comprehensive review of existing empirical studies, survey data from institutions like the OECD and Eurostat (CIS data), and qualitative analysis of case studies provided by organizations such as WIPO and the EPO.
What is covered in the main body of the text?
The main body covers the theoretical definition of IP, the specific characteristics of SMEs, the patterns of innovation in SMEs, and a detailed breakdown of formal versus informal protection strategies, followed by barriers and practical case studies.
Which keywords best characterize this work?
Key terms include Intellectual Property, SMEs, IP Rights, Innovation, Appropriability, Patenting, Informal Protection, and IP Management.
How do formal and informal IP protection strategies differ in the context of SMEs?
Formal methods (like patents) provide legal protection but are often seen as costly and complex, whereas informal methods (like secrecy or lead-time advantage) are perceived as more accessible and better suited to the daily operational realities of many SMEs.
Why might SMEs prefer informal protection over formal IP rights?
SMEs often cite high costs of registration and enforcement, limited internal resources (e.g., lack of IPR specialists), and a fear of disclosing technical information as reasons to prioritize informal strategies.
How does the 'Resource-based view' contribute to the analysis of IP in SMEs?
The Resource-based view (RBV) helps identify Intellectual Property as a critical firm resource that, if effectively managed, can contribute to Sustainable Competitive Advantage (SCA) for SMEs by making their unique knowledge difficult to imitate.
What specific conclusion does the author draw regarding the 'size disadvantage' of SMEs?
The author concludes that while traditional statistics may suggest a disadvantage, once the data is analyzed on an 'IP rights per employee' basis and supplemented with case study evidence, it becomes clear that many innovative SMEs are actually very active and effective users of the IP system.
- Quote paper
- Zhanar Sakieva (Author), 2009, The use of Intellectual Property by Small and Middle-sized enterprises, Munich, GRIN Verlag, https://www.grin.com/document/130308
