How Small Businesses Innovate in Green Tech

This report describes the key findings from an ambitious project designed to highlight differences between the patent activity of small and large innovative firms in so-called “green” technologies and industries.

For this project, we created a detailed database of 1,279 small and large technology firms. The firms were selected because they have been granted at least 15 U.S. patents in the last five years. We refer to such firms as innovative firms, in order to highlight the fact that they are a special subset of U.S. firms that produce significant numbers of patents. In total, these firms have been granted more than one million patents.

This project extends previous studies of small business patenting activity conducted by the authors for the Office of Advocacy. We refer to the current project as SBA4. In SBA11 and SBA22 we established the existence of a cohort of independent, nonbankrupt, for-profit, small firms with 15 or more patents over a five-year period.

Since small firms often find patenting too expensive and difficult, and thus make little use of the patent system,3 few would even have guessed such firms exist. SBA1 and SBA2 were the first studies of small business patenting that were based on a large, rich, and well defined dataset that encompassed the universe of significant patenting companies, rather than being based on a sampling of a specialized patent set, or on the results of a survey.

In SBA34 the dataset again consisted of all companies with 15 or more patents in a five-year period (2002- 2006). That study showed that small firms were more active in emerging technologies than expected, and also that small firms had a higher percentage of emerging technology patents in their portfolios than do large firms.

Another finding examined patents per employee, where we extended an earlier result showing small innovative firms had 15 times as many patents per employee as large firms. This result was quantified in SBA3 to show that this is not a small-firm versus large-firm phenomenon, but is actually a firm size issue at all levels. In particular, even within the small innovative firm domain, companies with fewer than 25 employees were shown to have a higher patent-to-employee ratio on average than firms with 50 employees, which in turn have a higher patent-to-employee ratio than firms with 100 employees, and so on.