Firm Size and the Use of Intellectual Property Rights

There is some evidence that small European firms areless likely to patent their innovations than large firms. This studyinvestigates whether firm size affects the intensity of intellectual property(patents, trademarks, and registered designs) use in Australia. If there isunderinvestment in innovative activities by SMEs (small- and medium-sizedenterprises), an important source of creative potential in Australia's economyis possibly being neglected. Definitions of innovation, arguments for market failure in innovation, andwhy size-related issues affect a firm's ability to use intellectual propertyare first examined. Data on intellectual property applications and employment(as measure of potential innovativeness) for Australian industry from 1989 to2001 were collected. Examined were: (1) whether the SME sector has a lower rate of actual topotential innovation, and (2) whether the SME sector has a lower rate ofintellectual property usage to potential innovation. It was found, given theirinnovation potential, that SMEs are more likely to apply for patents,trademarks, and designs than large enterprises. This finding may indicate that the SME sector: (1) actually has a higherrate of innovation intensity than larger firms, and (2) SMEs have a greaterincentive than large firms to obtain intellectual property protection.(TNM)