Patent protection has positive effect on SME profitability

Applying for patents for inventions is definitely lucrative for SMEs. Although it is often assumed that the advantages do not outweigh the disadvantages, patents have a positive effect on the profitability of SMEs. This has been revealed by research conducted by the University of Groningen and the KU Leuven.

Just as it does for large firms, patent protection enables SMEs to generate more revenues from new products or services, and thus realise significantly larger profit margins. The costs involved in applying for and renewing patent protection do not counteract the positive effects. Patents also stimulate the licensing activities of SMEs, but these activities do not contribute to profitability. These are the conclusions of Dries Faems, professor of Innovation and Organization at the University of Groningen, and Petra Andries of the O&O Monitoring Expertise Centre of the KU Leuven. They investigated a representative sample of 358 Flemish firms.

Different picture

The results of Faems and Andries, published in the international Journal of Product Innovation Management, contradict the reigning view that assumes that SMEs would be better off protecting their innovations in other ways, for example secrecy. SMEs apparently do not have sufficient resources to construct a sufficiently large patent portfolio, or to legally defend their patents against possible violations.

Increasing SME awareness

In comparison with large firms, SMEs make much less use of patent protection. Whereas 43% of the large firms examined used the patent procedure, only 17% of the SMEs did so! Faems and Andries say that SMEs should become more aware of the value of the patent procedure. The development of a joint EU patent, as approved by the European Parliament at the end of 2012, could possible remove some of the remaining barriers.

More information

Contact: Prof. Dries Faems

Article: Andries, P. and Faems, D., Patenting Activities and Firm Performance: Does Firm Size Matter? , Journal of Product Innovation Management.