A study of Patent Thickets (1.31Mb) - UK Intellectual Property Office

36 A Study of Patent Thickets
The authors have to restrict analysis to the period 1986 to 1991 for their study due to changes
in methodology in the underlying data. The study is undertaken at the establishment level, but
firm level variables are taken into account in the econometric analysis. In 1986 there are 143,000
establishments in the data. Focus of the study is on exit rates, i.e. on survival. Similarly to the
US studies it is shown that the unconditional probability of survival declines with age. The decline
is greater for single establishments which are typically smaller establishments. Once the authors
condition on firms’ and establishments’ characteristics, they show that it is the firms’ initial size
that reduces the probability of exit significantly. This effect gets weaker with age. Overall the
study shows that in the UK as in the United States small firms are more likely to exit. However,
this study does not show whether the probability is disproportionately higher for smaller firms.
Also due to the econometric specification chosen it is hard to analyze the effects of age clearly.
The authors find that after five years 65% of new establishments exit. For establishments that
are part of multi-establishment firms this figure falls. Unfortunately the authors do not provide
information on the extent of the reduction for such establishments.
The study by Helmers and Rogers (2010) tracks the survival of a complete cohort of firms
registered in Britain in 2001. Of the 162,000 firms in this cohort, just over 30% of the firms have
exited after four years. The authors show that “IP active” firms (i.e. firms that have obtained
either a patent or a trade mark) are significantly less likely to exit than other firms. This is true
both in descriptive results provided and in results conditional on a large number of firm, sector
and location specific controls.
The papers reviewed here demonstrate that high rates of entry and exit are characteristic of
SMEs in the UK and elsewhere. The more recent literature notes that SMEs which survive
beyond the first five years often make an important contribution to job growth and productivity
improvements in an economy. Haltiwanger et al. (2010) also note the need for a better
understanding of the challenges faced by SMEs in these first five years. The literature on the
growth and patenting nexus discussed above suggest that firms’ decision to patent may
contribute to their growth success, especially so in the case of first-time patentees. It is against
this background that we analyze the effect of thickets on firms’ first-time patenting decision.