Enhancing IP management by innovative SMEs

Aleck Ncube

THERE are various internal and external factors that may influence SMEs’ approaches to IP management, as well as the types of strategies they adopt to this effect to improve their IP management.

The main focus is on the protection of inventions and physical processes. Innovative SMEs represent an impactful category of SMEs. They have a high propensity to experiment and to generate new inventions and processes, and are concentrated in high technology sectors. Innovative SMEs have the potential over the long-term to contribute substantially to improvements in productivity, competitiveness, and technological progress in their sector and the economy as a whole.

Innovation helps individual firms to maintain their competitive edge, contributing to expansion of capacity and also generating additional capital investments, productivity, technological advancement, employment, and growth. The firm must also succeed in appropriating the value of its innovations.

If a firm is unable to appropriate, or capture the value of, its intellectual property, competitors may imitate its offerings without significant investment. This could eliminate its competitive edge, together with the incentive to continue to engage in risky innovative ventures. The main objective of IP management strategies is capturing the value of one’s ideas and investments in developing and bringing them to market.

In addition to this goal, sound IP management helps innovative SMEs achieve a range of objectives, including securing investment, identifying and attracting potential partners or buyers, deriving value from collaborations, and managing litigation risks. SMEs tend to work to a significant degree with external partners, inorder to fill gaps in their own resources and expertise and also because their niche expertise is attractive to established players.

Collaboration carries the risk of knowledge leakage to rivals and thus requires judicious management of intellectual assets. Given their limited resources, innovative SMEs need to develop strategies that are resource-effective to protect and manage their IP. The success of innovative SMEs is underpinned by effective exploitation of intellectual assets, active involvement in networks, and access to adequate finance.

In general, innovative SMEs exhibit a higher degree of flexibility than larger firms, which allows them to respond more nimbly to signals from the market.

They are relatively unhindered by the bureaucracy and inertia that may characterise larger firms, which can lead to slower information flows, less flexibility, and less creative thinking. SMEs may have an advantage in domains with rapid technological advancement and disruptive technologies. Innovative SMEs are often close to sources of technological knowledge such as universities or research centres and tend to do particularly well when innovation depends on being close to science.

Collaboration to intensify innovation and fill resource gaps

Innovative SMEs display proficiency in a specific niche field. Collaboration can be instrumental in bridging gaps in competence that may otherwise hinder an SME’s success. Collaborative innovation is particularly important for SMEs to overcome disadvantages linked to their relative lack of resources and scale, as well as gaps in business expertise. Innovative SMEs are encouraged to engage with entities with complementary assets.

SMEs and bigger firms alike benefit from flows of knowhow resulting from formal and informal interactions, which can accelerate product development, improve the innovative process, and hasten the commercialisation of new solutions.

Successful collaboration is underpinned by judicious management of IP to prevent unanticipated free-riding by partners or potential rivals. Networking among SMEs can help them to achieve economies of scale and to merge and integrate diverse and complementary technologies and competences. Within a network of several firms with complementary knowledge and expertise, an SME can benefit from the strengths of its partner firms, and the network can generate a greater total surplus than what each partner could generate separately.

In the context of collaborative innovation, attracting foreign technology partners can behighly valuable for SMEs. Export orientation, together with active engagement in innovation networks, is a key factor associated with rapid growth and success of innovative technology SMEs.

Exposure to the more intense competition in international markets can stimulate innovation among SMEs. International orientation for smaller firms is also positively associated with the movement of people and therefore of tacit knowledge. Know-how moves with individual entrepreneurs, who can be powerful accelerators of internationalisation and innovation.

Internationalisation also introduces challenges for innovative SMEs, such as the need to develop more sophisticated and often costly strategies for protecting intellectual assets across borders. Collaboration with customers is useful for innovative SMEs.

This type ofcollaboration can provide SMEs with access to advanced technology, as well as access toknowledge from downstream customers, such as insights about standards, best practices, and lean operating strategies. Integrating customers’ competences and their feedback into the innovation process can provide valuable input and feedback, enabling an innovative SME to fine-tune its offerings and ensure that products develop in the most strategic direction.

It can also help an SME integrate process innovations that enhance operational efficiency and productivity. Close relations with their clients and suppliers can help innovative SMEs to combine and share resources, adapt and improve offerings and processes, and enhance knowledge flows, contributing to organisational learning for all involved.

Cooperation with research centers and universities is similarly advantageous for innovative SMEs, particularly in the initial stages of technology development.

To engage with SMEs and other private companies, public universities and research institutes require adequate incentives and structures, as well as adequate funding for research, recruitment, and the establishment and operation of technology transfer offices, which are not always profitable. Institutional Intellectual Property Policies dealing with the patenting and licensing of public universities’ intellectual property can facilitate engagement with firms.

To summarise, innovative SMEs’ commercial success is often enhanced by collaboration with a range of public and private entities. Collaboration can reduce the time to innovate, increase the scope of innovation, and promote its diffusion in products and processes.The benefits of collaborative efforts are maximised when the parties are able to widely share information. However, the exchange of knowledge is not without considerable risk. In the next write up, I will look at Innovative SMEs’ IP Management Strategies.

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