High Growth SMEs in Europe: EPO study shows IP based benefits for high-potential companies in Europe
Small and medium-sized enterprises (SMEs) are the backbone of Europe’s economy. According to the European Commission, SMEs constitute 99% of EU businesses, employ two out of every three employees, and produce nearly 60% of the Union’s GDP. Reason enough to examine the relationship between IP activity and the growth prospects of European SMEs in a joint study from the European Patent Office and the European Union Intellectual Property Office: “High-growth firms and intellectual property rights”. As shown in the study, these high-potential SMEs often turn towards the EPO and EUIPO to secure such IP protection. SMEs and individual entrepreneurs represent 20% of applications filed from Europe at the EPO, and an even higher share of the trademark applications and design registrations filed with EUIPO. Like universities (9%), they are a major element of the European innovation ecosystem.
SMEs provide the foundation of the European economy. However, a large proportion of their contribution to growth and job creation is in fact generated by a small fraction of SMEs, the high-growth firms (HGFs). They include start-ups, as well as more conventional SMEs, some of which may become Europe’s future industry champions. Compared to other SMEs, their success frequently stems from investment in innovation and intellectual assets, and their growth typically involves international development.
Formal intellectual property rights (IPRs) such as patents, trademarks and industrial designs, can be instrumental for these innovative SMEs to appropriate the value of their ideas and secure a return on their investments in intangible assets. Small businesses can leverage IPRs to secure higher margins, license technology, establish collaboration agreements, and attract investors. They can also depend on IPR protection in foreign markets to scale up their activities and compete with large, established enterprises in those markets.
This study aims to determine the importance of IPR activities for HGFs in Europe. To this end, it assesses whether SMEs that make more frequent use of IPRs are more likely to become HGFs. It also examines the particular ways in which HGFs shape their IPR strategies prior to experiencing high growth.