Innovation in Small Businesses: Drivers of Change and Value Use
The Office of Advocacy has funded several studies that examine the patent activity of small businesses (e.g., Breitzman and Hicks, 2008; CHI Research, 2002, 2004; and Eckhardt and Shane, 2006 to list a few). All show that small businesses outperform their larger counterparts in patent activity (issuance). Moreover, Breitzman and Hicks (2008) argue that small firms’ patents outperform large firms’ patents on a number of metrics including growth, citation, patent originality, and patent generality. This study is another installment in this discussion. It widens the scope of the existing debate by focusing on the effects of drivers of innovation (employee headcount, sales, and R&D expenditures) on small business value.
Innovation increases significantly as small businesses increase employee headcount. A one hundred-person increase in employee headcount raises innovative activity by 20 percent.
Based on industry, a 10 percent increase in R&D expenditures can lead to as much as a 3 percent increase in market value.
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