This report describes the key findings in a project to create a detailed database of 1,293 small and large technology firms. The firms were chosen because they have at least 15 patents in the last five years in total, more than 1 million patents. The database was then used to highlight differences between the patent activity of small and large firms and to test several hypotheses about emerging technologies and industries.
The project, “SBA3,” extended previous studies of small business patenting activities conducted by the authors for the U.S. Small Business Administration (SBA), Office of Advocacy. The first two studies, SBA1 and SBA2, established the existence of a cohort of independent, nonbankrupt, for-profit small firms with 15 or more patents over a five-year period. Because small firms often find patenting too expensive and difficult, and thus make little use of the patent system, 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 being based on a sampling of a specialized patent set, or on the results of a survey.
In SBA3 the dataset again consists of all companies with 15 or more patents in the last five years. In addition to identifying the companies’ 15+ patents, numerous extensions are included in this project, such as a mapping to NAICS codes, the inclusion of the contractor’s (1790 Analytics) validated metrics, citation indicators, and emerging technology models.
Firms in emerging industries define America’s industrial future. Economists have studied emerging industries ever since Joseph Schumpeter first asked what accounts for the genesis of new industries. New industries are associated with entrepreneurial activities, which combine knowledge in new and novel ways. Most important, emerging industries provide the platform for future economic growth. The gales of creative destruction, which Schumpeter so colorfully described as driving economic growth, are in part attributable to the emergence of new industries.
There is great academic and policy interest in identifying and tracking emerging technologies and industries. However, by their very nature, emerging industries do not fit neatly into existing classification schemes, making it difficult to identify them. Instead, researchers often focus on industries favored with extensive media coverage, such as biotechnology, nanotechnology, and the Internet. Although consequential, these industries likely are atypical, and the understanding of how new industries emerge would be greatly enhanced if there were a systematic quantitative method of identifying groups of firms engaged in similar new businesses.
Based on these ideas and others that developed while producing SBA1 and SBA2, the authors proposed testing three hypotheses in this project:
Hypothesis 1: The number and percentage of small firms in the database will increase substantially beyond the 41 percent measured in SBA2.
Hypothesis 2: Small and large firms differ in the emerging technologies they pursue.
Hypothesis 3: NAICS codes will not satisfactorily represent the businesses of the serial innovators. In the differences between NAICS codes and custom classification will be found emerging industries.
This report explores each of these hypotheses in detail.
Contents
Executive Summary
- Overall Findings
Share of Small Firms in Database
Small Firm Participation in Emerging Technologies
Custom Classification of Small Firms
I. Introduction and Rationale
II. Overview of Small Business Patent Database
- A. Introduction
B. Method
C. Results
D. Conclusion
III. Share of Small Firms Compared with Previous Projects
- A. Introduction
B. Discussion
C. Conclusions
IV. Small Firm Participation in Emerging Technologies.
- A. Introduction
B. Summary
C. Method
D. Results
E. Conclusion
V. Identification of Emerging Industries by Classifying Firms
- A. Introduction
B. Method
C. About NAICS
D. Results
1. Standard Industry Codes
2. Categories Representing Potentially Emerging Industries
- E. Conclusion
VI. Closing Summary
Appendix A The Emerging Clusters Method
I. Hot Patent Methodology
- A. Key Concepts
B. Methodology Details for NIST Emerging Clusters Project
Appendix B Validation of the Hot Patent Method
Appendix C Fluid handling firms
Appendix D Unclassified Firms
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