No. 225

 February 2003

SMALL BUSINESS

RESEARCH

SUMMARY

Small Serial Innovators: 

The Small Firm Contribution to Technical Change

by CHI Research, Inc.

2002. [32] pages. Haddon Heights, NJ 08035

under contract no. SBAHQ-01-C-0149

This Small Business Research Summary (ISSN 1076-8904) summarizes one of a series of research papers prepared under contracts

issued by the U.S. Small Business Administration’s Office of Advocacy. The opinions and recommendations of the authors of this study do

not necessarily reflect official policies of the SBA or other agencies of the U.S. government. For more information, write to the Office of

Advocacy at 409 Third Street S.W., Washington, DC 20416, or visit the office’s Internet site at www.sba.gov/advo.

Purpose

Prior research discovered that small firms find the

patent system to be problematic. The objective of

this study is to understand the role of small firm

patenting in the United States compared to large

firm patenting and to measure their share of patenting and contribution toward technical change in the

economy. This report examines technical change

through patenting. It is important to note that

patenting reflects invention or creation rather than

innovation, although they are closely related.

Overall Findings

Patents for small firms (businesses with fewer than

500 employees) are more technically important on

average than those for large firms, since a small

firm patent is more likely than a large firm patent to

be among the top 1 percent of most frequently cited

patents. In addition, small serial innovators are

younger than large patenting firms, but they are not

startups. The resilience of these firms makes them

serial innovators, hence they concentrate in newer,

science-based technologies such as biotechnology,

semiconductors, and pharmaceuticals.

Highlights

• Small firm patenting is very strong in health

technologies and gaming, and there are a large 

number of small firm innovators in parts of information technology.

Small Firm Share of Patenting by Top Technology Area

Technology Percent of Patents Number of Percent of Number of

Area from Small Firms Patents Small Firms Firms

Biotechnology 25 3,886 71 45

Pharmaceuticals 19 6,453 68 59

Medical Equipment 11 8,437 45 88

Unclassified 11 2,511 31 26

Medical Electronics 11 2,974 64 14

Chemicals 9 15,760 29 91

Agriculture 8 2,561 28 18

All Technologies 6 193,976 33 1,071

Source: Small Serial Innovators: The Small Firm Contribution to Technical Change by CHI Research Inc., under contract to the U.S. Small Business Administration, Office

of Advocacy, 2003.
• Small firms represent one-third of the most prolific patenting companies that have 15 or more U.S.

patents.

• Small firm innovation is twice as closely linked

to scientific research as large firm innovation on

average, and so substantially more high-tech or leading edge.

• Small firms are more effective in producing

high-value innovations—the citation index for small

firm patents averaged 1.53 compared to 1.19 for

large firms. 

• Seventy percent of patenting firms are manufacturing firms even though they represent only 6 percent of U.S. firms.

• Small patenting firms are roughly 13 times more

innovative per employee than large patenting firms.

• Small firms account for 6 percent of patents

issued to the 1,071 most innovative firms. When

ranked by citation index small firms account for 8

percent of the top 10 percent; 9 percent of the top 5

percent; and 14 percent of the top 1 percent.

• A small firm patent is at least twice as likely to

be found among the top 1 percent of highest-impact

patents as a patent from a large firm.

Scope and Methodology

A total of 1,071 firms with 15 or more patents issued

between 1996 and 2000 were examined. A total of

193,976 patents were analyzed. CHI created a database of these firms and their patents. This list

excluded foreign-owned firms, universities, government laboratories, and nonprofit institutions.

Assignees that were part of a firm with more than 45

patents in the five years ending in 2000 were eliminated. This required using CHI’s existing thesaurus

linking patent assignees and institutions, for institutions with 45 patents or more in the past five years.

CHI used FISonline, Who Owns Whom, CorpTech,

Dun & Bradstreet, the Internet and Edgar to determine whether the status of the assignees were independent firms or part of a larger firm. Information on

primary SIC of the firm, number of employees, and

revenues were collected.

Ordering Information

The full text of this report and summaries of other

studies performed under contract to the U.S. Small

Business Administration’s Office of Advocacy are

available on the Internet at www.sba.gov/advo/research.

Printed copies are available for purchase from:

National Technical Information Service

5285 Port Royal Road

Springfield, VA 22161

Tel. (800) 553-6847

TDD: (703) 487-4639

www.ntis.gov

Order number: PB2003-101301

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