Innovation, intellectual property and informality: evidence from a study of small enterprises and some implications for policy

Abstract

The ways in which small and medium-sized enterprise(SME) owners protect (or neglect to protect) their innovations using theintellectual property rights framework are examined.Also investigated arewhether owners of innovative enterprises are more likely to use legal methodsto protect their assets than owners of less daring enterprises, as well aswhether the intellectual property rights system promotes or hampers innovationin small firms. These research questions were approached through a telephone survey of 389owner-managers of SMEs in the United Kingdom and by interviewing 99 of thoseowner-managers face-to-face.Respondents worked in at least one of foursectors (computer software, design, electronics, and mechanical engineering)and were asked to comment on perceived threats to confidential knowledge, themethods used to protect that knowledge (including legal action), and theirattitudes toward the influence of the legal framework on productdevelopment. Most owner-managers regard intellectual property rights as fairlyunimportant and prefer to use informal protection practices (such as high-trustrelationships with employees and suppliers and a lead time advantage ofcompetitors) instead of formal, legal methods.Highly innovativeenterprises, although more likely than less innovative firms to invoke theirproperty rights, generally prefer informal protection methodsalso.Because many firms regard the acquisition of formal rights as awaste of resources, policy-makers should consider offering more support to thedevelopment of new innovations rather than to the protection of existingones.(SAA)