An Analysis of Small Business Patents by Industry and Firm Size

This report was developed under a contract with the Small Business Administration, Office of Advocacy, and contains information and analysis that was reviewed and edited by officials of the Office of Advocacy. However, the final conclusions of the report do not necessarily reflect the views of the Office of Advocacy. Advocacy: the voice of small business in government ww w.sba.gov/advo This contract was developed under a contract with the Small Business Administration, Office of Advocacy, and contains information and analysis that was reviewed and edited by officials of the Office of Advocacy. However, the final conclusions of the report do not necessarily reflect the views of the Office of Advocacy. Background This study is the third in a series that examines small business patent activity. The authors created a database of 1,293 technology firms with 15 or more patents issued between 2002 and 2006. These firms are designated as innovative firms because of their high level of patent activity. Using this database, the authors analyze the relative strengths of small and large technology businesses, including information such as the industry and technology within which the firm patents and the importance of the patent. The results demonstrate that small businesses that innovate are indeed special and that the technology they create helps define the cutting edge in a number of industries. The report presents a convincing case that small firms in emerging industries are one of the greatest engines of American economic growth. Small firms are a significant source of innovation and patent activity. Small businesses develop more patents per employee than larger businesses, with the smallest firms, those with fewer than 25 employees, producing the greatest number of patents per employee. Furthermore, small firm patents tend to be more significant than large firm patents, outperforming them in a number of categories including growth, citation impact, and originality. Finally, small firms tend to specialize in high tech, high growth industries, such as biotechnology , pharmaceuticals, information technology , and semiconductors. Highlights Of the 1,293 firms reviewed in this study, 504 • had 500 or fewer employees, 760 had more than 500 employees, and no size information could be obtained for 29 firms. That is, 40 percent of the firms with 15+ patents in the period are small firms. This compares favorably with the 33 percent figure from a previous study by the authors in 2003, and is just slightly below the …