The importance of the role of diversification processes in the economy has been recognized at least since Marshall classed it as ‘a chief cause of progress’ in the 1920s. (Marshall, 1962: 355, cited in Cohen and Malerba, 2001: 587). The relationship ‘the tendency to variation’ in innovative activities and economic progress is however harder to show. This chapter has explored at the diversification of innovative activities through the complementary lenses of the patent and trademark activity.
These lenses allowed us to focus on how different firm-types (size-groups, geographical locations, and industries) contribute differently to the differentiation of inventive activity (the patent lens) and the differentiation of commercialization activity (the trademark lens).
This exploration stands a novel approach to the question, which helps discover some patterns both in these aspects of the important diversification process as well as in the contribution of different firm-types to it. We note the general escalation in the overall levels of inventive and commercialization activity. Comparing the late 1990s with the early 2000s, the chapter illustrates the regional diversification of inventive and commercialization activity. Five areas where patenting intensity is high were identified. But we do not find signs of centralization activity: Oslo’s share domestic patenting fell slightly for example. The pattern is largely the same for firms involved in trademark activity.
The chapter took particular pains to look at changes in technological specialization of Norwegian patent applicants. The pattern here was relatively stable. We noted the relative emphasis among domestic applicants to patent in the field of machinery and equipment and consumer goods, while the level of patenting of pharmaceuticals was very low. We also looked at the industrial activities of different size-classes that are involved in inventive activity. This revealed the relatively broad spread of the majority of small firm patenting in areas such as instruments, ships, and electronics. A disproportionate percentage of small patentees however were found in the field of machines and machinery
Trademark-activity provides a different look at the diversification of economically important activity across firm-classes. The major difference is that it affords a look at the tendency of service based firms to diversify themselves in the eyes of the consumer. Trademark activity, like domestic patenting, increased through the period. Small firms are more prominent in the profile of Norwegian firms that apply for trademarks than in the profile for patenting firms in Norway. The chapter notes the large contingent of firms in wholesale and retail industries that use the trademark system. The level among other services, not least among ‘knowledge intensive firms’ in the area of financial services and consultancies, witnesses to a large degree of commercial diversification of small and
large firms across the country. But the activity is not isolated to the service sector, just as patenting extended beyond the manufacturing firms. This overall exploration thus indicates the extent of these two aspects of diversification for different sets of Norwegian firms.
64
65
Chapter 3:
‘The bearer of the mechanism of change’: Small-firm inventiveness and patenting in Norway.*
In the preceding chapter, small and medium-sized enterprises are shown to be involved in an increasing share of Norwegian patents in the period. In this light, chapters 3 and 4 complement each other as they both focus on small firm patenting: first at home and then abroad. The focus in this and in the following chapter is motivated by the observation that the role these firms play in knowledge generation— and the problems they meet— have implications for the working of the innovation system as a whole and for related policies. This harkens back to shift that Schmookler found in patenting in the 1950s in favor of larger manufacturing enterprises. The shift that is investigated here is in favor of smaller firms, not least in the knowledge intensive business sector.
Theme Questions
Essay 1: Knowledge formation and patenting What role does the patent system play in knowledge accumulation?
Essay 2: The diversification and specialization of IPR use in a small open economy
How does use of the IPR system reflect the innovative processes of different agents? What role is played by small firms in specialization and diversification of innovative activity?
Essay 3: The growing use of patents among small firms: areas of growth and challenges
If SME patenting is increasing (see last essay), what technological areas and market dimensions?
Do they face greater challenges than larger firms?
Essay 4: Small firm patenting and the transition to European Patent Office
How do Norwegian SMEs use the European Patent System? How the effects of this transition be measured?
Essay 5: Academic patenting and the transition to an institution-based patenting regime
To what degree do academic researchers already patent and will the introduction in Norway of Bayh-Dole-like legislation improve conditions for academic patenting?
Essay 6: The impact of patenting on research collaboration
Does patenting increase the probability for research collaboration? What role do other factors play?
This chapter was published in a book* about the modern relevance of Schumpeter and it takes its title from his early conjecture about small-firm innovation: “‘The bearer of the mechanism of change’: Small-firm inventiveness and patenting in Norway.” In line with the Schumpeterian conjecture, the chapter explores the contribution to overall inventive activity of small firms which it argues is especially important in small open economies like Norway where SMEs make up over 95%
of all firms.
*Publication Information: Iversen, EJ (2007) ‘The bearer of the mechanism of change’: Small-firm inventiveness and patenting in Norway. In E Carayannis & Ziemnowicz (eds), Rediscovering Schumpeter : creative destruction evolving into Mode 3. Palgrave Macmillan, 2007. - XXV, 500. Acknowledgements: I especially appreciate the comments from William Lazonick and from Olav Spilling on an earlier version. The usual disclaimer pertains.
66
3. ‘The bearer of the mechanism of change’: Small-firm inventiveness and patenting in Norway
Eric J. Iversen
1. Introduction
Firm-size is one of several variables within a larger system where technology, institutions, demand, strategic decisions and random processes play central roles in shaping overall economic outcomes.
(Sutton, 1998) This chapter starts from the premise that the participation of small and medium-sized enterprises (SMEs)— and the conditions for their participation—is especially important for small open economies like the Norwegian case where firm demographics are dominated by relatively small companies. The role these firms play in knowledge generation and the problems they meet have implications for the working of the innovation system as a whole and for policies that address these.
The chapter draws on some aspects the unresolved (-able?) small versus big debate which traces back to disparate positions taken by Schumpeter. In this controversy, we are not primarily interested in the headline issue of which size-classes may or may not contribute most to technological progress.
The purpose is to explore the role that different size classes play and to consider some implications to the working of the innovation system as a whole. We explore the contribution of the small firm to inventive activity in line with the Schumpeter’s early conjecture (Schumpeter, 1912; 1989), and consider problems this set of firms seem to face in managing their intellectual property in the growing 'market for technology'. (Arora, Fosuri, Gambardella, 2000)