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Small business innovation: firm level evidence from Sweden

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Abstract

This paper examines innovation among very small firms and provides new insights into both internal and external determinants of patenting. Applying a non-linear panel data approach to about 160,000 observations on manufacturing firms in Sweden for the period 2000–2006, the following facts emerge: (i) in contrast to larger firms, innovation in micro firms with 1–10 employees is not sensitive to variation in internal financial resources, (ii) skilled labour is even more important for innovation among micro firms compared to other firms, (iii) affiliation to a domestically owned multinational enterprise group increases the innovation capacity of small businesses, (iv) small firms’ innovation is closely linked to participation in international trade and exports to the G7-countries, and (v) there is no statistically significant evidence that proximity to metropolitan areas, or presence in a specialized cluster, increases the innovativeness of the smallest firm.

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Notes

  1. The USPTO grants about 80% of patent applications, the European Patent Office grants about 70% of patent applications, and in Sweden the grant rate for applications from operating commercial firms is close to 70%.

  2. It should also be emphasized that the various propositions as regards the characteristics of innovating firms from the different strands of literature considered here are ‘open-ended’, such that the verification of hypotheses derived from one type of literature does not preclude hypotheses from the others.

  3. Scherer (1999) maintains that R&D outlays in large established firms are often of such magnitude that “…they can be financed through routine cash flow and, if need be, can resort to outside capital sources willing to provide funds on full faith and credit without detailed inquiry into the specific uses to which the funds will be put” (ibid. p. 72). He argues further that this is one reason why empirical studies of internal cash flow and R&D among larger firms do not find systematic relationships.

  4. MNEs have high ratios of R&D relative to sales, a large number of scientific, technical and other ‘white-collar’ workers as a percentage of their workforce, high value of intangible assets and large product differentiation efforts, such as high advertising to sales ratios (van Marrewijk 2002).

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Authors and Affiliations

  1. Centre of Excellence for Science and Innovation Studies (CESIS), Royal Institute of Technology, Stockholm, Sweden

    Martin Andersson

  2. Jönköping International Business School (JIBS), Jönköping, Sweden

    Martin Andersson

  3. Blekinge Institute of Technology (BTH), Karlskrona, Sweden

    Martin Andersson

  4. Division of Economics and CESIS, Royal Institute of Technology, Stockholm, Sweden

    Hans Lööf

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  1. Martin Andersson
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Correspondence to Martin Andersson.

Appendix

Appendix

See Table 8.

Table 8 Definition of the variables
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Andersson, M., Lööf, H. Small business innovation: firm level evidence from Sweden. J Technol Transf 37, 732–754 (2012). https://doi.org/10.1007/s10961-011-9216-9

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