Canadian SMEs: innovation and IPR

Here are a couple of interesting factoids from a recently released report on Canadian SMEs: Survey on Financing and Growth of Small and Medium Enterprises, 2011. The study of companies between 2009 and 2011 indicated that 38% introduced at least one type of innovation. Product innovation was the most common at 24% of the companies. Marketing innovation occurred at 17%, organizational innovation at 15% and process at 15%. The detailed tables show that larger companies were more likely to innovate that smaller companies. Only about 30% of companies with 1 to 4 employees were innovators whereas 56% of companies between 100 and 499 employees were.
While those numbers may seem good, it means that 62% of Canadian SMEs engaged in no innovation during the time period. Almost 75% of the companies that were not innovators said that innovation was not important. 50% of the non innovators (31% of the total) responded yes to the question that their “Business doesn’t need to innovate/ innovation is not part of the business plan.” Another 25% of the non-innovators (15.5% of the total) said “Market doesn’t require new product/process.” That over 46% of the companies think innovation is not important is rather shocking. And the result was relatively constant across different sized companies and industry types. Most shocking is that 50% of “knowledge-based industries” were non-innovators and over 77% of them (38.5% of all “knowledge-based industries”) said either their business or the market didn’t need innovation.
When it comes to protecting those intangible assets, 16% of the SMEs held some type of intellectual property protection. Non-disclosure agreements where used by 9% of the companies, trademarks by 8% and trade secrets by 4%. Only 1.5% of the SMEs held patents and 1% held registered industrial designs. Not surprisingly, the results varied greatly by size and industry type. Only 11% of 1-4 person companies had some form of intellectual property, mostly trademarks or non-disclosure agreements. One the other hand, 45% of companies between 100 and 499 employees had some intellectual property, again mostly trademarks and non-disclosure agreements. In these larger SMEs there is much greater use of patents and trade secrets. This is understandable given the additional costs of patenting and formally protecting trade secrets. Not surprisingly, knowledge-based industries have the highest use of intellectual property protection (42%), mostly non-disclosure agreements. Manufacturing is next at 36% with a mix of trademarks and non-disclosure agreements. Manufacturing has the highest level of patenting at 6.5%. Interestingly 4.2% accommodation and food services SMEs had patents.
This means that 84% of the SMEs had no formal IP protection. Of those, 83% (almost 70% of the total number of SMEs) believed that intellectual property protection was not relevant to their business. This finding of non-relevance by non-IP holders was relatively constant across company size and types of industries.
In other words, it is not barriers that prevent companies from formally protecting their IP – it is a perceived lack of relevance. This points to a public policy of education as the most important step — rather than “fixing the system.”
[Note: the survey gets in to more detail about how companies formally protect their IP, where they get advice on IP protection and other related issues.]
On financing, there is one interesting point. That data indicates that in almost 10% of the cased for company over 100 employee, the lender ask for some form of intellectual property as loan collateral. Unfortunately the data is too thin to do any more detailed analysis.

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