State of Innovation

Patents and Innovation Economics

Do Individual Inventors and Start-ups Invent Anything Important?

According to the SBA report An Analysis of Small Business Patens by Industry and Firm Size,

Small firms have three times as many patents in emerging technologies as would be expected based on the overall percentage of patents for which they are responsible.  Specifically, small firms account for just 8 percent of all patents in the database (firms with 15+ patents), but 24 percent of the patents of U.S. firms in the emerging technology clusters.

In addition, the report states that small firms tend to patent in different areas of emerging technology than large firms.

But are small firms patents of high quality?  The report states:

Small firm patents outperform large firm patents on a number of impact metrics including growth, citation impact, patent originality, and patent generality. These metrics have been used for decades to measure the innovativeness of firms, labs, and agencies. The metrics have been validated and shown to correlate with increases in sales, profits, stock prices, inventor awards, and other positive outcomes. This suggests that the patents of small firms in general are likely to be more technologically important than those of large firms.

In addition, firms with fewer employees out patent firms per employee with more employees across all cross section firms.  Specifically,

Small firms obtain many more patents per employee than do large firms. This result is quantified to show that this is not a small-firm large-firm phenomenon, but is actually a firm size issue at all levels. In particular, even within the small firm domain, companies with fewer than 25 employees will have a higher patent-to-employee ratio on average than firms with 50 employees, which will in turn have a higher patent-to-employee ratio than firms with 100 employees, and so on.

Despite the fact that small firms and individual inventors are key drivers for technological innovation, Congress and the Supreme Court are trying to make our patent system less accessible for small inventors.  For instance, Congress is trying to change the patent laws from first-to-invent to a first-to-file system.  This would be similar to Europe’s system, which has proven to be very unfriendly to independent inventor and small firms.  The Supreme Court has made it harder for inventors to obtain an injunction (eBay decision) if their patent is violated and made it more uncertain and expensive to obtain a patent and uphold it validity (KSR decision).

January 8, 2010 - Posted by | Uncategorized | , , , , , ,


  1. […] companies innovate, on a per employee basis they are much less innovative see SBA report on point  In addition, the reason for our economic woes are not that the government has failed implement […]

    Pingback by WSJ: Big Business Creates Jobs Too « State of Innovation | January 8, 2010 | Reply

  2. Good post and this mail helped me alot in my college assignement. Say thank you you for your information.

    Comment by WP Themes | February 1, 2010 | Reply

  3. […] to the Kauffman Foundation.   They are also the biggest producer of emerging technologies – see Do Individual Inventors and Start-ups Invent Anything Important?.  Advances in technology are the only way to increase our real per capita income.  We need to […]

    Pingback by Invention – A Financial Analysis « State of Innovation | August 13, 2010 | Reply

  4. […] spending for all the same reasons that government spending is always wasteful.  A study by the Small Business Administration shows that most emerging technologies are invented by small entrepreneurial start-ups.  […]

    Pingback by Long Term Economic Predictions « State of Innovation | December 10, 2010 | Reply

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